Whittle v. Vanderbilt Mining 25padc289& Milling Co.

• Citation: 83 F. 48
• Decision Date: 14 September 1897
• Docket Number: 647.
• Court: U.S. District Court — Southern District of California
• Parties: WHITTLE v. vanderbilt MINING & MILLING CO. et al.

83 F. 48

WHITTLE v. vanderbilt MINING & MILLING CO. et al.

No. 647.

United States Circuit Court, S.D. California.

September 14, 1897

Clarence A. Miller and Miller, Wynne & Miller, for complainant.

W. J Hunsaker and Wm. Chambers, for defendants.

H. C Dillon, for receiver.

Gardiner Harris & Rodman, Anderson & Anderson, Hatch, Miller & Brown and E. R. Annable, for interveners.

WELLBORN District Judge.

This is a suit in equity for the enforcement of a trust and an accounting thereunder. The admissions of the pleadings, together with the evidence adduced orally in open court on final hearing, show the following facts:

On the 21st of March, 1892, Samuel King, R. C. Hall, and James K. Patton were the owners of eight mining claims, situated in the Vanderbilt mining district, California, described as follows: The 'Gold Bar,' the 'Gold Bar Extension,' the 'Gold Bronze,' the 'Gold Bronze Extension,' the 'Eighty-Foot Claim,' the 'Chippy,' the 'Lookout,' and the 'Valley.' On that day said King, being ill and in expectancy of early death, conveyed his undivided one-third interest in said mines to said James K. Patton and Joseph P. Taggart; and at the same time said Patton and Taggart executed two instruments, of the same tenor and effect (Patton executing one, and Taggart the other), describing said Patton and Taggart as 'parties of the first part,' and said King as 'party of the second part,' and containing among other provisions expressive of the consideration for said conveyance, the following:

'In case of said second party's death before any reconveyance to him as herein provided, said first parties agree to account to the nephew of said second party, named, to wit, Henry King Whittle, for the gross profits or proceeds (whether derived by sale, working, or otherwise) of one-half (1/2) of said one-third interests in said mines; it being understood that first parties will pay all expenses connected with the working and care of said mines, and will not charge said expenses, or any proportion thereof, against the said gross proceeds to go to said Henry King Whittle as aforesaid.'

Samuel King died April 2, 1892, without any reconveyance of said mines having been made to him. Within a few days thereafter the above facts were communicated by mail to the mother of complainant, Mrs. F. L. Whittle, at Birmingham, Ala., in a letter written by Diehl & Chambers, attorneys at law, then representing said Joseph P. Taggart and James K. Patton; and afterwards, about the month of March, 1893, other parties wrote to complainant, with a view of purchasing his interest in said mining properties. On the 8th day of February, 1893, said Hall, Patton, and Taggart, pursuant to a sale previously made, conveyed to one William S. Lyle the Gold Bar and Gold Bar Extension Mines, receiving as the consideration therefor the sum of $40,000; and afterwards, on the 21st day of February, 1893, said Hall, Patton, and Taggart conveyed the said Eighty-Foot Claim to said William S. Lyle, receiving as the consideration therefor the sum of $300. Between April 3, 1892, and February 25, 1893, said Hall, Taggart, and Patton, and after last-mentioned date, and until the 27th day of December, 1893, said James K. Patton and Joseph P. Taggart, extracted from said mines minerals and ore, from which the bill alleges said Joseph P. Taggart and James K. Patton received more than $50,000. Said Patton and Taggart deny that they received from said sources any sum greater than $20,000, and allege that said $20,000 was all used in paying the expenses of mining, shipping, and selling said ore. Afterwards, and prior to the 27th day of December, 1893, the legal title to two of the above-mentioned mines, the Gold Bronze Mine and the Gold Bronze Extension Mine, became vested in James K. Patton and Annie M. Taggart (wife of Joseph P. Taggart), subject, however, to whatever equitable rights complainant may have at any time theretofore had in the mines. The legal title so vested in Annie M. Taggart was merely nominal; her husband, Joseph P. Taggart, being the real owner. On said last-mentioned date said Patton and Annie M. Taggart conveyed said mines to the Vanderbilt Mining & Milling Company, a corporation organized under and by virtue of the laws of California by James K. Patton and Joseph P. Taggart for the sole purpose of aiding them in the management of said mining property, with a capital stock of 1,000,000 shares, of the par value of $1 each, owned at the date of the aforesaid conveyance to said company as follows: James K. Patton, 499,998 shares; Annie M. Taggart, 499,998 shares; Henry T. Hazard, 1 share; William Chambers, 1 share; Samuel T. Godbe, 1 share; Henry C. Dillon, 1 share,-- the directors of said corporation being James K. Patton, Annie M. Taggart, Henry T. Hazard, William Chambers, and Samuel T. Godbe. Joseph P. Taggart was the real owner of the shares standing in the name of Annie M. Taggart. William Chambers was an attorney at law, and a witness to the instrument or declaration of trust executed by Joseph P. Taggart, and a member of the firm of Diehl & Chambers, hereinbefore mentioned. The bill, among other things, alleges:

'That the said Anna M. Taggart, Henry T. Hazard, William Chambers, and Samuel T. Godbe at the time of said conveyance were not bona fide stockholders and directors in said corporation, and that they had no interest therein, but were only nominal stockholders and directors therein for the purpose of carrying out the plans and subserving the individual interests of the said Joseph P. Taggart and said James K. Patton, and had no interest in the management and conduct of the affairs of said corporation, except as the implements of the wills of said Joseph P. Taggart and James K. Patton, and that all of said directors at the time of the execution of said deed were entirely governed and controlled by the said James K. Patton and Joseph P. Taggart for the accomplishment of their individual purposes, and that all of the contracts, acts, and things leading up to, and forming a part of, the agreement and conveyance of said property and mining claim to said Vanderbilt Mining & Milling Company, were done, performed, and carried out by said James K. Patton and Anna M. Taggart (who, as your orator is informed and believes, was but the agent and instrument of said Joseph P. Taggart) as the managing agents and director of said Vanderbilt Mining & Milling Company.'

The bill alleges also that the conveyance by defendants Patton and Taggart to the said Vanderbilt Mining & Milling Company was without consideration, and that said company accepted said conveyance with full knowledge of the interest of the complainant in the property so conveyed. The answer of said corporation is silent as to the allegation that the conveyance was without consideration, but expressly alleges:

'That said corporation never had any notice of the equities or contracts of the complainant herein, or that said complainant had any claim in or to or upon said mining property, or in the production of the same, until this action was brought.'

After said two last-mentioned mines were conveyed to the Vanderbilt Mining & Milling Company said corporation proceeded with and continued the working of said mines, until the appointment of the receiver herein, June 15, 1895. During the time that said company was engaged in working the mines, it incurred large indebtedness; and its creditors, none of whom are shown to have any notice of complainant's claims upon said mines have intervened, asking sale of the company's property, and distribution of the proceeds among themselves according to their respective priorities. The creditors so intervening, with the amounts of their debts and dates of their liens, are as follows: John Hughes, $818.23. Alexander McKenzie, $381.08. Ned Kinney, $53.75. Thomas Phillips, $148.85. James P. Cummings, $79.50. John Phillips, $91.47. S. L. Ferguson, $1,187.96. John Hopkins, $384.98. (The last eight named parties having laborers' liens, which date from January 10, 1894, and were foreclosed in one action, October 22, 1895, in the county of San Bernardino, state of California; the costs of the action being nine dollars.) A. J. Boone, $286; costs, $17, with laborer's lien from February 10, 1894, and foreclosed April 11, 1895; Hall & Stillson Company, a corporation, balance due, $5,325.86; judgment obtained in the superior court of the county of San Bernardino, Cal., on June 15, 1895, with judgment lien from June 15, 1895. R. S. Seibert, $1,347.41; costs, $10; judgment obtained in the superior court of the county of Los Angeles, Cal., on July 20, 1895; the lien thereof fixed by record of transcript in San Bernardino county, Cal., August 1, 1895. Arthur Woods, $4,892.89; costs, $7; judgment recovered in the superior court of the county of Los Angeles, Cal., on July 31, 1895; lien thereof fixed by record of transcript in the county of San Bernardino, Cal., August 3, 1895. Charles Kelly, $221.50; costs $6; judgment recovered in the justice's court of Needles township, San Bernardino county, Cal., on November 14, 1895; the lien thereof fixed by record of judgment in the county recorder's office of said San Bernardino county March 20, 1896. There is also a petition in intervention, filed by Jones Taylor May 1, 1897, resisting the trust, which complainant seeks to enforce against the Vanderbilt Mining & Milling Company. Said Taylor is the owner of 500,001 shares of the stock of said company, one- third of which he purchased in April, 1894, and the balance in the fall of the same year, paying for the same $25,000. As to whether or not he knew at the times of his purchases of the contract between Samuel King and Joseph P. Taggart and James K. Patton, there is a conflict...