Raht v. Union Consol. Mining Co. of Tenn.

• Court: Tennessee Supreme Court
• Writing for the Court: JORDAN STOKES
• Citation: Raht v. Union Consol. Mining Co. of Tenn., 73 Tenn. 1 (Tenn. 1880)
• Decision Date: 31 March 1880
• Parties: JULIUS E. RAHT v. THE UNION CONSOLIDATED MINING COMPANY OF TENNESSEE.

73 Tenn. 1

JULIUS E. RAHT

v.THE UNION CONSOLIDATED MINING COMPANY OF TENNESSEE.

Supreme Court of Tennessee.

March Term, 1880.

FROM POLK.

Appeal from the Chancery Court at Benton. W. F. COOPER, Ch., presiding by interchange.

A. S. COLYAR, P. B. MAYFIELD and S. P. GAUT for complainant.

JNO. L. T. SNEED and JOHN & W. M. BAXTER for defendant.

JORDAN STOKES, Sp. J., delivered the opinion of the court.

It is apparent from a careful examination of the record that the parties have spared no labor or pains in the preparation of the case in the inferior court. They have furnished us with a large mass of proof, both oral and documentary, upon all the issues in the pleadings, as well as a large amount which lies outside of any issue legitimately presented. The arguments of learned counsel on both sides have displayed great ability and legal learning and research, and have been full and exhaustive upon all the questions of law and fact. Nothing has been left undone by either the parties or their counsel which could aid the court in arriving at an accurate and satisfactory conclusion. We have given to the case as a whole and in detail the consideration which its interest and magnitude seem to demand, and have, upon careful examination and deliberate reflection, arrived at a conclusion which meets with the unanimous approval of the court.

The issues presented in the pleadings involve the dealings and transactions between a large mining company and its general superintendent and agent, extending over a period of some seventeen years, and consisting of a vast number and variety of items. A brief history of the company and of the agency will be useful, if not essentially necessary, to a clear and complete understanding of the matters in litigation. We are furnished with ample and most reliable materials and facts for this brief history in the minutes of the company's board of directors and of the stockholders at their annual meetings, the correspondence between the superintendent and agent and the officers of the board, and the admissions and concessions of the parties.

It appears that defendant company was incorporated by an act of the Legislature of this State, passed on the 1st day of March, 1854, under the name of the “Union Consolidated Mining Company of Tennessee,” for the purpose, as expressed in the charter, “of exploring and mining for copper and other ores and minerals, and for working, smelting, manufacturing and vending the same.” The capital stock was not to be less than five hundred thousand dollars and was not to exceed five millions of dollars, based alone upon money or mineral property. It was incorporated with a view of consolidating a number of other mining companies and properties into one corporate body. The incorporators held their first meeting under the act on the 23d January, 1858, in the county of Polk in this State, and organized the company by fixing the capital stock at the sum of two millions two hundred thousand dollars, electing a board of directors and accepting a subscription of stock in mining properties, valued at two millions and fifty thousand dollars. It does not appear that the residue of capital stock, being one hundred and fifty thousand dollars, was ever subscribed much less paid in.

A majority of the directors elect met on the 13th April, 1858, in the city of New York, and organized by the election of a president and other officers, and located the business office of the company and the place of its own meetings in that city, where it has continued to hold its meetings and transact the business of the company ever since. At the next meeting, the board directed the issuance and sale in the market of two hundred and fifty thousand dollars in shares of the capital stock, based on the mining properties already conveyed to the company, one half of the proceeds to be applied to the liquidation and extinguishment of prior liens on the property, and the other half to be used as a working capital to carry on the business of the company; but it does not appear that anything was realized for the latter purpose from this source. It is quite clear the mines were thought to be very valuable in the beginning, and promised to be much more so when they should be fully explored and developed. The stockholders and directors, elected from year to year, seem to have entertained this opinion; but, for some reason not satisfactorily explained in the record, they did not display any disposition to embark their private means in the enterprise, not even to an amount sufficient to place the operations of the mines and works upon a safe and permanent basis. In consequence of the failure to provide a working capital, the directors were from time to time forced to resort to temporary loans and the use of mortgage bonds of the company; but, during most of the time, they engaged persons of great wealth and known credit to furnish the necessary capital, submitting to stipulations as to liens on the personal property, sales of the products of the mines and works and rate of interest on monthly balances, which were highly injurious alike to the operations and profits of the company's business.

On the 30th of June, 1858, the board appointed Samuel Congdon general agent of the company, giving him “the general superintendence of the business at the mines and of the transportation and sale of the products of the same,” which position he held for something less than a year, and then left the mines and settled permanently in the city of New York. About the time Congdon was made general agent, complainant Raht was employed as superintendent of the mines, and upon Congdon's retirement was made general agent and superintendent of the company's mining and smelting operations, which position he continued to hold without interruption down to the beginning of the present litigation. In the month of July, 1866, the board engaged Jenneson Eager, one of its own members, as sales agent for the period of one year, he undertaking to furnish in money or raise by acceptances of the company's drafts the necessary working capital, and the board agreeing to allow him two and one-half per cent. on all sales of refined copper and five-eighths of one per cent. as brokerage, with interest at the rate of seven per cent. per annum on monthly balances in his favor. Mr. Eager being disinclined to renew the contract of sales agency for another year, the president of the board wrote to complainant Raht on the subject and urged him to take the agency upon the same terms and conditions, with like compensation and interest, for the services, risks and advances of money. With some hesitation Raht accepted the agency for one year, and entered into a written contract with the company embodying the terms and conditions of the agency and the compensation and rate of interest to be allowed the agent. By way of security and indemnity, the board gave him a lien on the personal property of the company, including the ores taken from the mines and the products of the smelting and refining works, and admitting an existing indebtedness to him of $36,943.47. This contract of the sales agency was renewed, without material change or alteration, from year to year until the year 1873, the board adding in May, 1868, to the indemnity and security of the agent a lien on one hundred and fifty thousand dollars of the company's bonds secured by a first mortgage on its mines, works and other real estate. In the month of September, 1873, Raht, by special agreement with the board of directors, surrendered the sales agency, and the board agreed to and did in fact pay him the sum of twelve thousand dollars in commutation of his profits for the unexpired term of the contract, which was to extend to the end of the year 1874.

It is admitted that Raht made out and forwarded to the board of directors during the whole period of his superintendency and agency, excepting three years during the civil war, monthly statements of his accounts, showing with great minuteness of detail the expenditures for labor, materials, hauling, etc., for the preceding month. These statements gave every item of expenditure, the names of the employees and the amount paid to each, the number of bushels of charcoal bought and the price paid for it per bushel, the number of cords of wood bought, as well as the number of cords cut on the lands of the company, and the price per cord paid in each instance, and the amount and price paid per hundred pounds for hauling from the mines and works to Cleveland and from Cleveland back to the mines and works. No complaint was ever made before the commencement of this litigation that these statements were not sufficiently full and minute in their detail of items. On the 8th of July, 1872, the board appointed a committee from its own members to examine the books and securities of the company, and to suggest improvements, if any were needed, in the mode of keeping the accounts. This committee gave the subject of the mode and manner of keeping and reporting the accounts a careful and thorough examination, and made the single recommendation to the effect that the pay-rolls should, in addition to what appeared in them as previously kept and made out, “group the different classes of labor.” It appears to have been the uniform custom of the board of directors to appoint a committee of its own members to examine into and report upon the correctness of these monthly statements soon after they came to hand, and to appoint a like committee to examine all the statements for the current fiscal year, in order to prepare the annual report of the board for the information and action of the stockholders at their annual meetings. Considering the immense number of items and the complication of the company's business, it is very remarkable that but one error was ever found in the monthly statements, and that one consisted in giving the company a wrong credit for several...