Summerlin v. Fronteriza Silver Min. & Mill. Co.

• Decision Date: 06 February 1890
• Citation: 41 F. 249
• Court: U.S. District Court — Western District of Texas
• Parties: SUMMERLIN et al. v. FRONTERIZA SILVER MINING & MILLING CO. et al.

41 F. 249

SUMMERLIN et al. v. FRONTERIZA SILVER MINING & MILLING CO. et al.

United States Circuit Court, W.D. Texas.

February 6, 1890

This action was brought by R. L. Summerlin and George F. Lupton against the Fronteriza Silver Mining & Milling Company, C. E Lyman, George M. Wakefield, and R. C. Russell. The bill alleges the following facts:

'(1) Robert L. Summerlin and George F. Lupton, of San Antonio Tex., and citizens of the state of Texas, bring this, their bill of complaint, against the Fronteriza Silver Mining &amp Milling Company, a corporation duly organized and operated under the laws of Colorado, and a citizen of the state of Colorado, having a branch office at San Antonio, Bexar county, Tex., and doing business thereat, and C. E. Lyman, George M. Wakefield, and R. C. Russell, citizens of the state of Wisconsin.

'(2) And thereupon your orators, R. L. Summerlin and G. F. Lupton, complain and say that on or about the . . . day of . . ., A.D. 1885, an agreement was made by and between certain persons hereinafter named, to form and organize a corporation for the purpose of buying, selling, bonding, developing, and operating mines and mining property, and for smelting, reducing, preparing, refining, and selling the products thereof, and for buying and selling minerals; and in pursuance of said agreement, and on or about the 31st day of August, A.D. 1886, the following persons, to-wit, G. W. Angle, R. H. McCracken, Joseph W. Maddox, Robert L. Summerlin, A. A. Alexander, George F. Lupton, and Charles W. Ogden, formed and organized a corporate body, under the laws of Colorado, named and known as the 'Fronteriza Silver Mining & Milling Company,' the articles or certificate of which corporation were duly filed in the office of the secretary of state of the state of Colorado on the 17th day of September, 1886, A.D. at 9 o'clock A.M. of said day, and recorded in book 14, page 601. All of which will more fully appear, as well as other matters and things herein alleged, in a correct copy of the articles of incorporation of said corporation annexed to the original bill, and marked 'Exhibit A,' and prayed to be considered a part hereof.

'(3) Your orators further complain and say that subsequently, to-wit, on or about the . . . day of September, A.D. 1886, the members of said corporation, as aforesaid, convened in San Antonio, Tex., and in accordance with the provisions of said articles of incorporation, adopted a code of by-laws to regulate the method of conducting the business of said corporation. All of which will more fully appear by reference to a correct copy of said by-laws annexed to the original bill, marked 'Exhibit B,' and prayed to be taken as a part of this bill of complaint.

'(4) Your orators further complain and say that at the meeting of the members of said corporation held in San Antonio, Tex., the following officers were elected in accordance with the charter and by-laws of said corporation, to-wit: Geo. W. Angle, president; Charles W. Ogden, vice-president; A. A. Alexander, treasurer; R. H. McCracken, superintendent; and S. M. Johnson, secretary.

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'(7) Your orators further complain and say that when the contract for the purchase of the said Fronteriza silver mine was made and completed the corporation, as aforesaid, was formed and organized as hereinbefore alleged, and it was agreed at a regular meeting of said corporation that the capital stock of $1,000,000, as provided by the articles of incorporation, should be allotted and divided, and was allotted and divided, by a resolution of the board of directors, as follows: 33,000 shares were to be reserved as a treasury fund, for the payment of the accruing purchase money for said Fronteriza silver mine as it became due and payable, and for the purchase and erection of machinery for working the said Fronteriza silver mine; 13,000 shares were allotted to said G. W. Angle; 13,000 shares to said R. L. Summerlin; 13,000 shares to said J. W. Maddox; 13,000 shares to said R. H. McCracken; and 15,000 to said G. F. Lupton. It was also agreed at the said regular meeting of the said corporation that the said G. W. Angle, R. L. Summerlin, J. W. Maddox, and R. H. McCracken should each contribute 1,250 shares out of their individual allotments, making an aggregate of 5,000 shares, for the use and benefit of Charles W. Ogden, who was the attorney and legal adviser of the said mining corporation, and the same was accepted by said attorney for all legal services rendered or to be rendered. And it was also agreed at the said meeting of the said mining corporation that if the proceeds of the sale of the said treasury stock should not be exhausted in the payment of the purchase money for the said silver mine, and for the procurement and placing of said machinery to be used as aforesaid, the residue thereof was to be equally divided among the members of the said mining corporation, share and share alike.

'(8) Your orators further complain and say that it was mutually understood and agreed that each and every one of the corporate members of the Fronteriza Silver Mining & Milling Company was authorized and empowered to sell the stock reserved for a treasury fund, or hypothecate the same, for the common purpose of successfully promoting the enterprise; and it was also agreed that the stock allotted to individual members of the said mining corporation, as hereinbefore proportioned and distributed, or agreed to be distributed, should not be sold or disposed of in any way without the consent of all the original members of the said corporation.

'(9) Your orators further complain and say that in September, A.D. 1886, the said corporation, by and through its board of directors, determined and agreed to dispose of a portion of the said treasury stock for the purpose of creating a fund to pay current expenses, and to procure additional machinery for operating and working the said Fronteriza silver mine more successfully; and in furtherance of these objects the said silver mine was examined and inspected by Dr. N. T. Lupton, and the facilities for working the same were accurately ascertained, and assays of ore made, in order to profitably dispose of the said treasury stock, as will more fully appear from Exhibit C to original bill, etc; and that the first payment of the purchase money for said silver mine was made on or about the 19th day of October, A.D. 1886, when the said corporation began working and operating the said silver mine, and have continued to work and operate the same until the present time.

'(10) Your orators further complain and say that the said corporation, through its officers and agents, represented to your orators that certain investments in the said silver mine would be made if said investors were allowed representation, and the same could be had and obtained, on the board of directors, and thereupon your orators were requested to resign their positions as directors, and were assured that their interests would not be jeopardized, but would remain the same; and upon this assurance and promise, having faith and confidence in the said representations of the officers and agents of the said corporation, and for the purpose of furthering the interests thereof, your orators placed their resignations as members of the board of directors of said corporation in the hands of the president thereof.

'(11) Your orators further complain and say that some time in 1887 the said corporation was in need of funds to successfully promote its interests, and thereupon the complainant R. L. Summerlin made arrangements with certain capitalists to supply the required funds as needed for the uses and purposes of the said corporation, which arrangements were made after the resignations aforesaid; and, for the purpose of thwarting and destroying the said arrangement, was procured and secretly exhibited and read to the said capitalists, for the purpose, and with the corrupt design, of deterring them from investing in the same; and your orators charge that the said corporation had positive knowledge that the said pretended report upon the said Fronteriza silver mine was false, and was designed for the fraudulent purpose of deceiving and misleading the said capitalists, and breaking up the said arrangements for procuring funds, and for preventing your orators from engaging in the business affairs of said corporation, and for defrauding them out of their just and legal rights as members of the said corporation.

'(12) And your orator, R. L. Summerlin complains and says that in the formation and organization of said corporation, and in furthering its interests, he has expended much time and labor, and has used his knowledge and information to promote the same, besides various sums of money expended in behalf of said corporation, amounting to about three thousand dollars, ($3,000;) that he has never received a dollar in return for his services, skill, and money, and, in violation of all agreements, and contrary to his rights as a charter member of said corporation, he has not received a single share of the stock allotted to him, although he has often requested and demanded his apportionment, under the allotment agreed upon between the corporate members of said corporation; and that he was entitled to receive his distributive share of stock when the said corporation was organized, and after the said stock had been set apart for the working capital or treasury fund, which was on or about the . . . day of . . ., A.D. 1886.

'(13) Your orator G. F. Lupton complains and says that he has expended much time and labor in advancing the interests and business of the said corporation, besides expending various sums of money, to-wit, one thousand dollars, ($1,000,) for the report made by Dr. N....