Smith v. Nevada Copper Min., Mill. & Power Co.

• Decision Date: 12 January 1926
• Docket Number: 19525.
• Citation: 137 Wash. 317,242 P. 367
• Court: Washington Supreme Court
• Parties: SMITH et al. v. NEVADA COPPER MINING, MILLING & POWER CO. et al.

242 P. 367

137 Wash. 317

SMITH et al. v. NEVADA COPPER MINING, MILLING & POWER CO. et al.

No. 19525.

Supreme Court of Washington

January 12, 1926

Department 2.

Appeal from Superior Court, Pierce County; Card, Judge.

Action by Henry Smith and others against the Nevada Copper Mining Milling & Power Company, E. L. Messinger and G. H. Reed as directors and trustees, and others, and the Tacoma Savings Bank & Trust Company. Judgment for plaintiffs, and all except last-named defendant appeal. Affirmed.

G. A McElroy, of Los Angeles, Cal., F. M. Bottorff, of Berkeley Cal., and Harmon & Keyes, of Tacoma, for appellant.

W. H Pratt, of Tacoma, for respondent.

MITCHELL, J.

This action, commenced in August, 1924, was brought by Henry Smith, Canalise Smith, and H. M. Grinnell and all other stockholders of the Nevada Copper Mining, Milling & Power Company, a corporation, who are similarly situated, as minority stockholders, against the Nevada Copper Mining Milling & Power Company, a corporation, and E. L. Messinger and G. H. Reed as directors and trustees of said corporation, and Tacoma Savings Bank & Trust Company, a corporation, under the laws of the state of Washington. The purpose of the action was to obtain relief from the alleged oppression and fraud of the majority stockholders of the corporation. More particularly stated, the action was for an order temporarily restraining the corporation and the defendant trustees and directors from holding any meeting for the purpose of passing any resolution, or from passing any resolution, further extending an option agreement given by the corporation to one E. F. Gray and by him assigned to the Gray Mining Company, a corporation, and restraining the Tacoma Savings Bank & Trust Company from delivering certain title papers covering the property of the corporation; also, for a permanent injunction to the same effect; and for a decree compelling the Gray Mining Company to pay to the plaintiffs that which is alleged to be their proportionate share of the option price of the property involved, and that upon failure of the defendants to do so plaintiff's be adjudged to be the undivided owners of the property covered by the option agreement in proportion to the amount of capital stock they held in the corporation. A temporary restraining order was issued upon the commencement of the action. Upon the hearing of the case, on issues completed, no judgment was given against the Gray Mining Company, manifestly for the reason that it was not a party to the action and was at all times a foreign corporation doing no business in this state.

Findings of fact and conclusions of law in favor of the plaintiffs were made and entered, and an interlocutory decree was entered on November 19, 1924, in accordance with the theory of the complaint, to the effect that unless plaintiffs were paid their proportion of the amount due under the option as represented by their stock within 90 days from the date of the decree, then and in that event the court would issue a permanent restraining order permanently and perpetually enjoining and restraining the defendants as trustees and directors of the Nevada Company and the corporation from holding any meeting or taking any action whatsoever toward further extending the option agreement in any manner or from issuing any new option agreement, deed, or transfer, or agreement of any kind to E. F. Gray or the Gray Mining Company or any one for them or either of them or on their behalf, and also restraining the Tacoma Savings Bank & Trust Company from delivering the deeds and papers in its possession.

The findings of fact, in substance, are: That the Nevada Company is a corporation organized and existing under the laws of Arizona having its principal place of business at Phoenix and having, as provided by its articles of incorporation and by-laws, a place of business in Tacoma, Wash. That the Tacoma Savings Bank & Trust Company is a Washington corporation doing business in Tacoma. That since the organization of the Nevada Company in 1905, the plaintiffs have been and are now owners of stock in that company as follows: Henry Smith 291,742 shares, Canalise Smith 947 shares, and H. M. Grinnell 3,334 shares. That the Nevada Company was organized with capital stock of $1,500,000 shares of the par value of $1 each, and aside from its treasury stock of 238,233 shares and that held by the plaintiffs as above stated, its capital stock is held as follows: Gray Mining Company 904,666 shares, E. F. Gray 1 share, E. L. Messinger 1 share, G. H. Reed 1 share, and other small stockholders 52,073 shares. That on September 23, 1918, the Nevada Company entered into an option agreement with E. F. Gray for the sale of all the property of the company consisting of certain mining claims and personal property situated in Elko county, Nev. (a description of the property being given in the option agreement introduced in evidence). That under the terms of the option, Gray, to be entitled to the property, was to pay $250,000 as follows: $25,000 to be expended in development of the property within one year, $25,000 cash to be paid the second year, and $200,000 to be paid at the end of three years. That the development work was done, but that none of the cash payments have been made, and that the interest of the plaintiffs as represented by their stock in the Nevada Company is $58,612.55 together with interest on their proportion at 6 per cent. per annum from the date such payments should have been made under the terms of the option agreement.

'VIII. That under said option agreement said Nevada Copper Mining, Milling & Powerranty said Nevada Copper Mining, Milling & Power deed and a bill of sale to the said E. F. Gray of all of the property covered by said option agreement, and deposited the same in escrow with the defendant Tacoma Savings Bank & Trust Company of Tacoma, Wash., to be delivered to the said E. F. Gray upon payment of the purchase price as provided by said option agreement, and said instruments of transfer still remain in escrow with the said defendant Tacoma Savings Bank & Trust Company.'

That at the date of the option agreement the Nevada Company had assets of at least $250,000 and owed nothing. That immediately upon taking the option E. F. Gray organized the Gray Mining Company, under the laws of the state of Delaware, with 100,000 shares of capital stock of no par value, and immediately E. F. Gray assigned the option agreement to the Gray Mining Company. That at the date of the option agreement the original stockholders of the Nevada Company held a majority of its stock, and E. F. Gray and the Gray Mining Company held none of it, but since that date certain stockholders including the personal defendants herein have exchanged their stock for stock in the Gray Mining Company, each retaining one share of stock to qualify him as a director in the Nevada Company, and at the present time the Gray Mining Company holds practically three-fourths of the capital stock of the Nevada Company and 'E. F. Gray personally is a holder of a majority of the stock of the Gray Mining Company and is therefore now in control as a majority stockholder of both of said companies.'

'XII. That practically no mining has been done by the said defe

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