author: Pitístey) Y. C.

text:
    Calvin O. Geer v. Amalgamated Copper Company.
    I. Submitted May 11th, 1901.
    Decided May 16th, 1901.
    Filed June 4th, 1901.]
    A stockholder in a mining corporation sought to restrain the company from purchasing the stock of two other companies located in the same district, averring that the price at which the stock of such companies was to be absorbed was grossly excessive; that the companies were engaged in numerous and heavy litigations involving many millions of dollars; that some of the officers and directors in defendant company were largely interested in the other companies. Affidavits were presented by complainant as to the value of the stock of such companies, to show the oxcessiveness of the price to be paid for the stock; but such affidavits gave no lists of the properties owned by either of the companies, or any estimates of the amount of ores therein. Defendant company presented affidavits showing that the properties were especially valuable to it, and that the stocks of such companies had a market value greater than that at which it was alleged they were to be purchased, and the companies paid regular dividends. The director's alleged to bo interested in the companies were without power to purchase the stock without the consent oí the stockholders in defendant company. Complainant owned a small fraction of the stock of the company, and the majority of the stockholders did not object to the proposed purchase.— Held, that an injunction to restrain the proposed purchase should be denied.
    On bearing on order to show cause why injunction should not issue. Heard on bill and affidavits, and answer and affidavits.
    ilir. Isaac 8. Taylor, Mr. J. Flavel McGee and Mr. Franklin Bien (of the New York bar), for the complainant.

      Mr. Richard V. Lindalury, Mr. Charles L. Gorlin and Mr. John A. Garver (of the New York bar), for the defendant.
   Pitístey) Y. C.

The complainant, Calvin 0. Geer, is the owner of one hundred and four shares, of $100 each, of the capital stock of the defendant, the Amalgamated Copper Company, and, by his bill, filed April 25th, 1901, seeks to restrain the said company from purchasing any of the capital stock of two mining companies, namely, the Boston and Montana Consolidated Copper and Silver Mining Company, a body corporate of the State of Montana, and usually designated as the Boston and Montana company, and the Butte and Boston’Consolidated Mining Company, a corporation of the State of New York, commonly known as the Butte and Boston company.

The allegation of the bill is that the defendant company contemplates purchasing a large quantity, two-thirds at least, of the stock of each of the said last-mentioned companies, at an extravagant price, and paying therefor either in cash or by issuing therefor its own capital stock.

The statement of the bill is that the authorized stock of the Boston and Montana company consists of one hundred and fifty thousand shares, of the par value.of $25 each, making a total of $3,750,000, all of which has been issued, and that the authorized capital stock of the Butte and Boston company is two hundred thousand shares, of the par value of $10 each, making a total of '$2,000,000, all of which has been issued, and that the intention on the part of the defendant company is to purchase the Boston and Montana stock at $375 a share, which is equivalent to one thousand and five hundred per cent, of its par .value, or fifteen to one, and the Butte and Boston at the rate of $92.50 per share, which is at the rate of nine hundred and twenty-five per cent., or nine and a quarter to one.

It then proceeds to state the value of these two stocks as follows: That, by a printed and published report of the Boston and Montana company, dated December 31st, 1900, its whole cash assets were $5,666,000, and that its outstanding bonded indebtedness was $600,000, leaving a net total of valuation of a little over five million dollars; and that the price at which the defendant proposes to purchase it is $56,000,000.

It then states that the company is involved in numerous and •heavy litigations in the State of Montana, and that, in one case, the amount involved is between three and four million dollars, besides other litigations in that state.

The bill further states that it is noticeable that, by its report of December 31st, 1900, there is no mention among its assets of any real estate,

“and your orator is not informed as to whether or not the said company claims ownership of any mines or mining tracts or merely operates mines of other parties—but it is nevertheless a fact, that it has come to the complainant’s knowledge”

that it has been prevented, by injunctions, from operating several of the mines which it had previously operated. And then ■follows the allegation that the purchase of the stock of the Boston and Montana company, on the basis of its being worth $375 a share, would be grossly excessive, and would be an unconscionable expenditure, without any even approximate value to be received therefor, and would be unwarranted by any reasonable care or conservation of the rights and interests of the stockholders of the Amalgamated Copper Company, and would, in fact, be in actual fraud thereon, and especially so as to those stockholders of the defendant company who are not stockholders of the said Boston and Montana company.

With regard to the Butte and Boston company, the bill alleges that it owns, or claims to own, mining rights or properties in the State of Montana, but to what extent or actual value the complainant is not specifically informed, but that it was formerly capitalized at $5,000,000; that in 1897 its capital was reduced to $2,000,000, which reduction was made after it had passed through the hands of a receiver, and after its entire properties had been sold by the receiver and bought in by a reorganization committee for the sum of $1,000,000; that no additions to its holdings or properties since that time have been made, as far as complainant is informed and believes to be true, unless it be one or a very few inconsiderable and unprofitable additions of doubtful value.

That the company has never paid any dividends, except one dividend in December, 1900, of $1,000,000, or fifty per cent, on its capital stock, which dividend was evidently never earned.

“That the properties, of the said company are largely in present litigation—or rather the alleged title or rights of the said company in and to the mining properties operated by it in Montana are in litigation, and that the said company is now involved in numerous and heavy lawsuits which threaten the tenure of said properties by the said company.”

That the smelting works of said company, in Montana, are poorly located and arranged, and not adapted to the proper handling of ores economically or profitably. That $2,000,000 cash for new stock has been paid in, which has been largely dissipated in unsuccessful efforts to locate and open up new mines or new bodies of ore. That the company has a bonded indebtedness of $1,000,000. The bill then makes the same allegation of the grossly excessive and unconscionable expenditure which would be involved in paying this company at the rate of $92.50 per share, namely, $18,500,000, that it makes with regard to the Boston and Montana proposed purchase; and then is added, that the acquisition of the stocks of the two companies would inevitably involve the Amalgamated Copper Company in all of the uncertain, desperate and costly litigations in which the said two companies are now involved.

The defendant company was organized in April, 1899, and its certificate of organization authorizes the issue of $75,000,000 of stock, divided into seven hundred and fifty thousand shares, all of which has been issued. The certificate of organization is libera] and comprehensive, authorizing the company to engage in almost every possible enterprise; but it has heretofore been exercised only in the direction of, and its business, past and present, is the buying and holding the shares of stock of certain mining companies engaged in the mining of copper ore in or near Butte, Silver Bow county, Montana. Through the ownership of these stocks it controls the operations of those companies. It sufficiently appears that it controls the stock of several large and prosperous companies owning mines located near each ether and near the mines of the Boston and Montana and the Butte and Boston companies, in or near the city of Butte.

The further allegation of the bill is that three of the officers and directors of the defendant company, to wit, Henry H. Rogers, William G-. Rockefeller and Albert C. Burrage, are also directors and officers in the Butte and Boston company, and are personally interested as large stockholders of the latter company and also of the Boston and Montana company, in promoting and carrying through the piirchase by the defendant company of the capital stock of those companies.

In support of the allegation of intention found in his bill, the complaint sets out a communication dated April 15th, 1901, addressed to the directors of the Butte and Boston company, signed by Kidder, Peabody & Companjq bankers and brokers, of Boston, Massachusetts, in which they state that they have been requested to undertake to formulate and carry out a plan for the exchange of shares of the Butte and Boston company for those of the Amalgamated Copper Company upon some equitable basis; that it will be necessary, in order to accomplish this result, to have one hundred and thirty-five thousand shares of the Butte and Boston company deposited with them. Then it states the proposition to be that in the exchange the Butte .and Boston stock is to be rated at $92.50 per share. This communication was forwarded by the officers of the Butte and Boston company to its stockholders.

In addition to the circular just referred to, the complainant’s bill sets out another circular issued to the stockholders of the Boston and Montana company by its president—a Mr. Bigelow —and directors, in which they state that they have received from Kidder, Peabody & Company a statement that they are about to undertake to formulate and carry out a plan for the exchange of shares of the Boston and Montana company for those of the defendant company on some equitable basis, and that the proposition is to count the Boston and Montana stock as worth $375 per share.

These circulars were set out at length, and it was argued by complainant that they amount to a cash offer by Kidder, Peabody & Company of the prices named, if the aggregate amount of stock was deposited; and hence it was argued, Kidder, Peabody & Company must have been assured by the defendant corporation that their offer would be accepted by it. But a careful reading of the document does not, in my judgment, support such construction and interference.

Two affidavits were annexed to the bill: one made by the complainant himself, stating that he saw a notice of the proposition of Kidder, Peabody & Company, which was dated and issued on the 15th of April in a newspaper published in Boston, of the issue of April 20th; and that he had received no notice whatever as a stockholder of the Amalgamated Copper Company of any such proposed purchase.

Another affidavit is that of Mr. Stanley Gifford, who swears that he is a mining engineer by profession, is acquainted in a general way with the property of the Montana and Boston and the Butte and Boston mining companies situate in Montana, and- that he is well informed as to the value of mining rights in Butte and its vicinity. And, as to the Boston and Montana company, he swears in a general way that it is involved in numerous and heavy litigations in the State of Montana, involving title to a large part of its property and to pecuniary claims against it to a large amount. He does not make any statement of the mining properties claimed by it, or their respective or collective values, nor does lie state what has been its earnings or earning capacity; .but says that by a. printed repiort of the condition of the company, dated December 31st, 1900 (that before.referred to), it appears that the total.balance of assets.at that date,of that company was, in round figures, $5,666,000, and that its outstanding bonded indebtedness was $600,000. He further, says, as to the Butte and Boston company, that it was reorganized in 1897, in which a sale of all the property and assets of the old company was made at the sum and price of $1,000,000, and bought by the chairman of the reorganization committee of the new company; and that it has paid only one dividend, namely, in the month of December, 1900, $1,000,000, or fifty per cent. He does not give any statement of its mining properties, or their value, but says that the property of that company is very much in litigation. He says the smelting works of the company are poorly located and arranged, and cannot serve their purpose, and therefore are not adapted to the most economical or profitable service. He says that the Butte and Boston company has a bonded indebtedness of $1,000,000. Further, that he knows of no advantage to the stockholders of the Amalgamated Copper Company who are not stockholders of the other two companies which could be gained by acquisition of the stock of the other two companies. The affidavit proceeds as follows:

“Deponent further says that $92.50 per share for the stock of said Butte and Boston Consolidated Mining Company—or $18,500,000 for its entire capital stock—is a most excessive and grossly exorbitant price or valuation for the same, and that the price of three hundred and seventy-five dollars per share for the stock of the Boston and Montana Consolidated Copper and Silver Mining Company—or $56,250,000 for the whole of the stock of said company—is a most excessive and grossly exorbitant price or valuation for the same, and that neither of said prices or valuations for said respective stocks can in the opinion of deponent be justified.
“Deponent further says that the proposition that the Amalgamated Copper Company should take over or acquire the stock of the said two other companies at the figures above stated, or at any figures in approximation thereto is, in his opinion a most preposterous proposition, and in fact incredible without the assumption of fraudulent motives.”

■ • Upon presentation of- the bill and those affidavits, ■ an order to show cause, with interim restraint,- was made, returnable on May 6th, with leave to the complainant to-serve other affidavits not later than the 1st day of May.

- Acting under that leave, the complainant- served" on the defendant certain supplemental affidavits, by one of. which it appears that a circular had béen issued by Kidder, Peabody & Company stating that ninety per cent, of the stock of both companies had been already deposited with them under the terms of their circular of April 16th, 1901, and that they had extended the time for depositing shares until the 2d of May.

Another affidavit so served is that of Mr. Franklin Bien, a counsellor-at-law of New York, who appeared also as counsel for the complainant herein at the hearing, in which he swears that he is well acquainted with the property of the two mining companies in Silver Bow county, Montana, and with the character of their titles. But he does not give any list or statement of them or their values, or productive capacity. He sets out at length a series of litigations which are being carried on against those companies and also the defendant in Montana.

Another affidavit so served is that of Mr. Roberts, clerk of the district court of the second judicial district of Montana, giving a list of some ten or a dozen suits pending in that court against .the Boston and Montana and the Butte and Boston companies, all but one against the Boston and Montana company.

The bill prayed for answer in this wise:

“To the end that the said Amalgamated Copper Company may according to law full, true and perfect answer make to all and singular the matters and things hereinbefore stated, and that as particularly as if the same were here again repeated, and the said company, its officers and directors or either of them thereunto interrogated, paragraph by paragraph.”

On May 6th, the return day of the order, the ■ defendant 'company answered under the seal of the company, attested by the vice-president, Henry IT. Rogers, and the secretary, William G-. Rockefeller; and the answer was taken first before Walter E. Livingston, a notary public of Few York, and next before Charles L. Corbin, master in chancery of Few Jersey, and to it is appended this affidavit:

“Henry H. Kogers, being duly sworn, on bis oath, says: I am vice president and acting president of the defendant company. I have read the foregoing answer, and the matters and things therein set forth, so far as they relate to my own acts and the acts of the said company, are true, and as far as they relate to the acts of others, I believe them to be true.”

The effect of the answer is that the officers of the defendant company are of the opinion that it is to their advantage, for reasons therein set forth, that they should buy a controlling interest in the stock of the Butte and Boston and the Boston and Montana companies, if it can be done at a fair price; but the answer denies that the officers were responsible in any way for the circular sent out by Kidder, Peabody & Company, and it denies that they have ever made any offer to Kidder, Peabody & Company, or authorized them to make any offer for the stock of the two" companies, at any price whatever.

It denies that the defendant, or its officers or directors, have formed any definite plan, or any plan whatever, for absorbing or taking over the stock or properties of either the Boston and Montana company or the Butte and Boston company, by the payment of the sum of $375 per share for the stock of the Boston and Montana and $92.50 per share for the stock of the Butte and Boston company, or any other sum, either in cash or in stock; or that the proposals to the stockholders of the said two companies made by Kidder, Peabody & Company show a willingness on the part of the defendant company to pay the said amounts, respectively, or any other amount or amounts.

It denies that the acquisition of the stocks of those companies at the price named would be excessive or would be an unconscionable expenditure, and denies that it would not be an approximate value to be received therefor, or that it would be unwarranted by any reasonable care or conservation of the rights and interests of the stockholders of the defendant company, as alleged in the bill.

The answer avers that the market value of the stock of the Boston and Montana company is now, and for a considerable time has been, greater than $375 per share, and that it is now selling on the New York and Boston Exchanges at $450 a share, or thereabouts, and has not, since April 1st, 1901, sold for less than $350 per share on the Boston Exchange (where if is listed) in large quantities; and that it paid to its stockholders in dividends out of its net earnings, during the year 1899, $6,150,000, and during the year 1900, $6,450,000, and that on the 20th of February of the present year it paid its first quarterly dividend for the present year, amounting to $1,500,000, and that the mere physical property and assets of the company, leaving out of account good will and intangible assets of all kinds, have an intrinsic and market value of at least $56,250,000.

The answer says of the printed report of the Boston and Montana company, dated December 31st, 1900, mentioned in the. bill, showing assets of only $5,666,000, that said report only shows, and only purports to show, the balance of its cash and quick assets, and does not includej and does not purport to include, its mines and mining rights, smelters and other properties, which are of the value of many million dollars.

The disingenuousness in this respect of the allegations of the bill and affidavits annexed thereto is clearly shown by an extract set forth in one of the defendant’s affidavits taken from the very report upon which the complainant bases his allegation in that behalf, and that extract is this:

“Stockholders should bear in mind that the surplus of over $5,000.000 does not include any value for the mines and plant, Great Falls Smelting Plant, or stock in process, and that these are most substantial items.”

Of its bonded debt the answer says that it is paying it as fast as it has a right to do by the terms of the bonds themselves, and could easily pay them all off at any moment if it was in the power of the company so to do.

Of the Butte and Boston company the answer says that it is the successor to the mining rights and properties of the 'old Butte and Boston mining company, whose property was sold at receiver’s sale in 1897, and bought by a committee represeating the security holders of. the said company, which com!mittee .thereupon organized .the present company -tfith a capital stock of $2,000,000. The.price paid for the property of the. former company, was $1,000,000, but that price-was a mere nominal one,- as. the reorganization committee .represented all the security holders of the former companj^, and no one was in a position to bid against them at the sale.- That the present capital stock of $2,000,000'was paid in in cash at the time of the.organization, of the company in 1897,- and neither the whole nor..any part of it has been dissipated, as-alleged in the bill; on the contrary, that the company has ■ expended -a large part of its capital in the acquisition of- new properties and in the material development of the mines ■ acquired at the receiver’s sale, as well as. in .the construction- of a valuable smelting plant at Butte,' Montana, which is modern,in its appliances, and instead of-being -poorly located- and not adapted to the proper handling of ores, economically and profitably, as alleged in the bill, is one of the best located and most modern smelting-plants in all respects in the State -of Montana.

The answer denies that the dividend of $1,000,000; paid by the Butte and Boston ■ company, in December, 1900, was paid out of capital; says--that it was paid out of the net-earnings of the company; and that -the net earnings of the company thus far during the year 1901- have been largely in excess of those of 1900 during the same period.

The answer denies that the acquisition of the stock- of the Butte and Boston company at present for the sum of $18,500,000 would be excessive or an ilnconscionable expenditure, or that it would be in fraud of the stockholders of the defendant company, whether they are holders of the stock of the Butte and Boston company or not; and avers, in substance, that the property of the company is of great value and warrants the price named.

It admits that Rogers, Rockefeller and Burrage, three -of the seven directors of. the defendant company, are also -directors in the Butte and Boston company, and that some of the present board of directors of the .defendant are personally interested as stockholders in 'the Boston and Montana company, and others in the Butte and Boston company. ■' ■

But’it denies that there is a scheme on foot to unload'upon' the defendant company or to compel it to accept and pay-for the stock of the said two Boston companies at exorbitant and excessive figures, established and'fixed in fraud'of the stockholders of the defendant company, without submission-'of the project to the stockholders of the defendant company. It denies that its directors have any intention of purchasing either of the stocks in question without first laying the scheme b'efore its stockholders for consideration and determination by them. The language used in that respect is this:

“And although, from information obtained, the defendant’s officers are of the opinion that the stock of the said companies is worth the amount mentioned in said circular letters, nevertheless the defendant would not and will not make any 'contract whatever with Kidder,'Peabody &■ Go., or with anyone else, for the acquisition of the said stocks, without further and careful inquiry into their actual value, and into the.actual value of the properties which they represent; nor will it, upon any consideration, purchase the said properties at any price in excess of their intrinsic'or fair market valué, or without the approval of its stockholders at a meeting called for that purpose.”

It says that the reason why no notice has been given to the stockholders of the proposed purchase was, and is, because it was the judgment .of the directors of the defendant company that it was not worth while to buy any more stock than it already owned of the two companies in question unless it could get a majority of each; that it was not to their interest to buy a majority of one stock unless they could get the majority of the other, for reasons presently to be stated; that the reason why they did not call the matter to the attention of the stockholders was that they thought it was not worth while to do so until Kidder, Peabody & Company had obtained control of the necessary majorities of both of the stocks.

The answer also deals with the allegations of the bill with regard to litigations; sets them out at length, and shows that nearly all have been promoted by the officers or employes of a corporation known as the Montana Ore Purchasing Company, or by that company itself, of which E. Augustus Heinze and Arthur P. Heinze, John MacGinnis and Stanley Gifford (who made an affidavit annexed to the bill) are officers, and that Geer, the complainant herein, is a clerk in the employ of Heinze; and the allegations of the answer in general are that the litigations, although very annoying and expensive, have been, in the main, up to date, decided in favor of the defendants, the Butte and Boston company, the Boston and Montana company and the defendant herein, find against the plaintiffs therein.

I may stop here to say that this part of the answer is sustained by the affidavits; and it appears plainly enough that the present suit is one of a series promoted by the persons last named.

In addition to the verification of the answer made by Mr. Rogers, as vice-president, there was read at the hearing a special affidavit made by him, in which he says that he has been its principal executive officer since the death of Mr. Marcus Daly, of Montana, who was the president of the company, and that the directors are the same as when it was organized in 1899, except that William G. Rockefeller has been elected in place of Mr. Daly, and that A. R. Elower has been elected in the place of the late Governor Elower, of New York, who was an original director. His affidavit verifies the allegations of the' answer in showing that no offer has ever been made by the defendant to acquire any of the stock of either of the companies, except ten thousand shares bought some time ago; that no meeting of the'board of directors or executive committee of the defendant has ever been held to consider the advisability of making such offer, and no offer has been made by him individually or as vice-president, or by any one on behalf of the Amalgamated company to acquire stock of the Boston companies, or either of them. That he had an interview in April of this year with Mr. Winsor, of the firm of Kidder, Peabody & Company, in which Mr. Winsor suggested the advisability of acquiring the controlling interest in the two Boston companies, and that he told Mr. Winsor he would not advise the purchase unless they could have a majority of the stock of each company; but that he did not agree with him, on his own behalf or on behalf of anyone else, to purchase any of the said stocks, either for cash or in exchange for stock of the Amalgamated company, or upon any terms whatever; nor did he suggest to him or to anybody else the price at which the company would be willing to purchase; and that he had no intention and would not think of such a thing as purchasing or mailing any contract unless he thought it would be approved by a large majority of the stockholders of the defendant company; that he would not do it without obtaining the approval of a majority of the stockholders.

This' special affidavit of Mr. Rogers is supported by the affidavit of Mr. Winsor, of the firm of Kidder, Peabody & Company.

Another affidavit read at the hearing was made by Mr. Frederick P. Addieks, who is the assistant treasurer of the Butte and Boston company, in which he sets out how the property of the old company was purchased for the nominal sum of $1,000,000, and that the present stock of $2,000,000 was issued for cash, and that by the purchase it acquired extensive copper mining properties for a barely nominal consideration; that a large part of the $2,000,000 of capital, which was paid in in cash, was spent in improving and developing its property, and that it erected new smelting works near its mines, at a very large expense, which it is now operating, not merely in treating ores extracted from its own mines, but also in treating the ores of independent miners and operators.

He further, in this affidavit, denies that the smelting works of the Butte and Boston company are poorly located or badly arranged, and swears that they are of the best character and have the most modern improvements. He says that the dividend of fifty per cent, paid in December, 1900, was paid exclusively out of surplus earnings, after paying all expenses and for improvements, and that, as a matter of fact, since January 1st, 1901, the net earnings of the company have largely exceeded the net earnings for the same period in 1900. He says that the capital stock of the Butte and Boston company is listed on the Boston Stock Exchange, and is there dealt in very largely, and that since the organization of the company, in 1897, there has been a definite and well-recognized market value for the stock; that it has been widely distributed, and much of it is held for trust ’estates and by persons' acting in a’ fiduciary capacity, and that it is recognized throughout New England as'a prudent and conservative investment'stock ; that it-is also bought and sold in New York'.City, though it is not. listed on the New York Stock Exchange. He gives the average quotation-for the week ending May 2d, 1901, as $115 a share; that in-1899 the stock-was quoted as high as $108 a share; in 1900 the highest quotation of i't was $96.50 a share, at which price it'was sold’ in November' of-that year, it having'risen to: that figure from the decline which took place in December, 1899, -when there was an-acute and widespread financial panic, which caused a violent break in the market price of all stocks dealt in on the' exchanges; that during the past six months the market price of the Butte and Boston stock has been steadily rising, and its average price for- April, 1901, has exceeded $110 a share.' And he verifies the 'allegation of the answer - which gives the various fluctuations of the stock, running, from $76 per share-to $119 per share.

Another affidavit' is made by Mr. Hyams, who is a metal* lurgist and mining engineer and' the general manager of the works' of the Boston 'and Montana company, and he 'explains and sustains the reasons set forth in-the answer'why it is to the advantage of "the defendant company to'become the owner of a majority of the stock of each of'the Boston companies; and with his affidavit'is a'map of the locations of mining rights in the neighborhood' of Butte. Those reasons are as follows: The'United States Mining laws permit'mining rights to be located on lands of the United States without the' acquisition of the title from the United'States, under certain rules. The location must be not more than so many feet long and so many feet wide. It has what is termed end'lines and side lines, or, to use the language of the witness:

“Mining claims, when located, are laid out in the-form of a quadrangle, end lines being parallel to each other and being limited in length, by the Revised Statutes of the United States, to 600 feet, though they need not- be of the same length. The owner of the apex of a vein is limited laterally by the end lines of his claim; but-if the vein passes through his claim from one end line to the other, he has the privilege .of following the incline .of the vein through the side lines and down under the, prop? erties of others indefinitely. Even if the .vein passes through .one end of the claim and out at a side line, the owner of the apex can still follow its incline through the side lines, though, in this case, he is confined to the -space between the end line and a line drawn parallel to-it from the point where the vein intersects the side, line.” '

The result of this is the liability to great. conflict, and, in practice, to actual conflict, between mine-owners; and the questions arising are exceedingly difficult of determination and very expensive, owing (to use the language of the witness)

“to the fact that, among other things, much work in the nature of underground cross cuts, drifts and raises had to be done to expose the-formation and direction of the veins for the information of the courts,-and inclependent expert mining engineers.had-to be employed for this purpose.”

The map, verified by this witness, shows the locations a,nd extent of the mining claims of the Boston and Montana and the Butte and Boston. companies, and of those other, mining companies the majority of the stock of which is already owned' by the defendant herein, and shows plainly the liability of conflict between those companies of the character above stated, and the desirability that their ownership should be, measurably at least, consolidated, so that these conflicting claims can be settled upon an equitable basis without the enormous expense involved in a judicial investigation. . ,

Mr. Hyams further, in his affidavit, shows his knowledge of the different litigations referred to in the affidavit of Mr, Bien and in the affidavit of Mr. Roberts, the clerk of the court; and he shows, as I have already remarked, that they are, almost all of them, promoted by the gentlemen in whose employ the complainant herein is and by those who have made the affidavits sustaining the bill. These suits are directed mainly against the Boston and Montana and the defendant herein, and. only one or two against the Butte an.d Boston..

He also proves the value of the smelting plant of the Butte and Boston company. He also .sustains the. allegations of the answer with regard to .the market price of the shares of the two Boston companies, and shows, as one reason for their high price, the great increase in the value of copper, which for a number of years prior to 1899 averaged between nine and a half and eleven and a half cents a pound, and has, within two or three years, risen to seventeen cents a pound; and that, by reason of the great demand for copper for the conveyance of electricity and for interior decoration and trimming, in the shape of brass and bronze, the price is likely to be maintained, and that the discovery of new copper lodes is not keeping up with the demand for the metal. He states, as another reason for the increased value of their mines, that there has been a great improvement in the methods of extracting and treating the ores, which has largely reduced the cost of production, and which tends to increase the value of the mines from which they are taken. He swears that the dividends paid on the Boston and Montana stock since 1888 have aggregated $22,475,000, and that, besides that, they have spent at least twenty million dollars in the development and improvement of its mines. And he supports the answer in the allegation that the report of the situation of the company showing only $5,600,000 of assets does not include anything more than the available cash assets over and above all fixed property.

With regard to the increased value of copper, amounting within two or three years to nearly one hundred per cent., it is apparent that the result of such a rise might render a mining plant of great value which, under the lower price, was of no value whatever. This consideration alone' is sufficient to account for the great increase in the value of the Butte and Boston stock.

Another affidavit is by Mr. Clarence King, a geologist and mining engineer, apparently of great repute, who has made a study of the mines in Montana, but is not employed by either of these companies, and who swears that from the breaks and irregularities in the veins of copper ore, in the district of Butte, serious questions as to title are liable to arise at any time among the owners of adjacent and neighboring claims, and such questions will be most difficult of judicial’settlement, and are likely to involve great cost and indefinite suspension of production pending litigation. He swéars that he has been in the principal mines- of the Boston and Montana and the Butte and Boston companies and examined the veins of ore therein, and that, from his knowledge of their character and of the value of copper ores and the probable world supply of the same, and from the facts disclosed in the affidavits of Mr. Hyams and Mr. Addieks, he is of opinion that a ten years’ life of the two properties is to be relied on as a fair mining certainty, and that, in view of their relation to the mines of the Amalgamated Copper Company, the defendant herein, a purchase thereof by the Amalgamated company, at a price not exceeding seventy-five million dollars, would be a wise and conservative act.

At the hearing on the 6th of May the complainant offered, and was permitted, against defendant’s objection, to read three additional affidavits, namely, two made by Josiah H. Trerise and one made by George H. Robinson. That by George II. Robinson was made on April 27th; and had I observed the date I probably would not have admitted it, because it might have been received here in time to be served on the defendant prior to May 6th. Its purport is that the affiant is a mining engineer at Butte, Montana, and is familiar with the mining properties there; and it gives another resume of the various litigations over the mining claims, not only of the Butte and Boston and the Boston and Montana, but of other mining companies, the majority of whose stock is owned by the defendant herein.

One of the two affidavits made by Mr. Trerise was verified on April 30th, and is substantially a copy of that just referred to made by Mr. Robinson. The second affidavit by Mr. Trerise was made on May 1st, and in it he also swears, as do the others, of personal inspection of several of the mines owned or controlled by either the defendant herein or by the Butte and Boston and Boston and Montana. It closes by swearing that he is acquainted generally with the mining properties of the Butte and Boston, and that, in his opinion, the value of all its properties at the present time is not in excess of $1,500,000, which, after deducting the debt of $1,000,000, would leave its value at $500,000. But this affidavit resembles the other affidavits already referred to in that it gives no statement or list of the properties owned by either of the .mining companies, or any • estimate of ■ the amount of ores therein, or of the mining capacities of either.

This witness is shown to be in the employ of the Montana Ore.Purchasing Company.

The estimate just given is .the only estimate of value made by any of the affiants on the part of the complainant, and it is palpably based upon an estimate by this witness of the depreciating effect- of the various litigations referred to in the affidavits of Mr. Trerise and in the pleadings and other affidavits submitted upon the value of the property.

I expressed the opinion at the hearing, and I still adhere to it, that I cannot permit the value of the properties of these corporations to be- affected by a mere parol statement of suits brought. and maintained against them, except so far as they have actually interfered with the possession and working of the mines. Eo record of any suit was produced, and it would, in my judgment, be highly improper to permit the fact of pending litigation, proven in the way that it was attempted to be done in this cause, to be used for the purpose here intended. Besides, the affidavits on the part of the defendant tend to show, that while the litigations have been very expensive and annoying, yet, so far as they have been finally decided, the result has been favorable to the defendants in the various suits. And the defendant argues that notwithstanding the two Boston companies—and particularly the Boston and Montana, which is much the richer of the two and been subjected to a greater number of suits—have been prevented, by injunctions, from working some of their mines for the last two years, they have still made great earnings and been able to pay large dividends.

I have said that no detailed statement of mining claims or estimate of the values of each was given by the complainant, although their witnesses swear that they were familiar with them.

The defendant, by the sworn-map which -is introduced, shows the extent of the claims of the two Boston companies; and judging from that, in comparison with the size of other claims spread thereon, they are quite extensive and cover a large territory, that of the Boston and Montana being, however, considerably- larger than that of the Butte and Boston.. The map shows the interlacing, so.to speak, .of the different claims, and

■ the importance of. a .consolidation of their rights, in order to avoid the complications arising out of the following of the veins outside of the limits of the original locations. ■ ■ •

- With regard to values, the defendant mainly relies .upon the fact that all these litigations—which really form the gravamen of the attack by the complainant upon the value to the several corporations of these properties—are perfectly well known to the public and to the stockholders; and that, notwithstanding their existence, not only have large dividends been made out of the actual earnings, but the confidence of the public in the value of the stocks has been maintained, as shown by the prices which they have commanded. And I may say here, that there is not the least evidence in the cause indicating that the market for the stocks of these mines has been manipulated, or, to use the phrase of counsel, "rigged,” for the purpose of maintaining them at an unnatural and forced price. It may be said, in general, that the price at which a stock sells on the market is not always an indication of its intrinsic value; yet the. fact remains that the stock does command a certain ¡nice, and that persons who purchase stocks for the purpose of investment, as is sworn to here, do inquire, to a greater or less extent, into the intrinsic value of the stocks. Then we have the dividends actually paid. And against'the assertion, unsupported by any affidavit on the part of the complainant, that one of the dividends, that of the Butte and Boston, was not paid out of the earnings, we have, on the other side, the affidavits of the officers of the company that the dividend was fairly and actually earned, and that the earnings have continued since the 1st of January at a rate greater than the dividends indicated by the previous year.

On the subject of the values of the Boston and Montana, I should mention that the affidavit of Mr.. Bien, the counsel for the complainant here, shows that an action was instituted in the supreme court of Few York by Forrest and MacGinnis, stock-

■ ■ holders of the Boston and Montana company, against the Boston and Montana company,- a corporation -of Montana (whose stock is proposed to be purchased), and against the Boston and Montana company, a New York corporation, and against Lewisohn Brothers, a New York corporation, and against the defendant herein, for an accounting, and asking for the appointment of a receiver of property which, it is claimed in that suit, was fraudulently diverted from the Montana corporation to the New York corporation. It appears by affidavits on the part of the defendant that the complainant in that action was verified on information and belief by Mr. Bien on April 30th, the very day on which he malees an affidavit for the complainant herein, and the allegation in the complaint in that suit is that the Boston and Montana company is a very rich company, earns large dividends, and that the property of the company is of the value of more than thirty million dollars.

Another action was brought against the defendant herein and other companies in the supreme court of New York, on or about April 29th, by MacG-innis and Lamm, in which the complaint was also verified by Mr. Bien, and in which the value of the properties owned by the Boston and Montana company is estimated at $60,000,000.

After a careful examination of all the affidavits and the map, I am clearly of opinion that it is quite impossible to say, upon the case made before me, that a valuation of the property of the Boston and Montana company of $56,000,000 would be excessive, or its purchase at that price imprudent.

The case of the Butte and Boston company presents more difficulty. The ease shows that the mining engineers who made affidavits for complainant were entirely familiar with the extent of the mining claims of the Butte and Boston company, and the probable amount of mineral found under each claim, and might well have given a statement of the same, and their valuations of each claim, but have not done so. There is, however, as we have seen, one affidavit-—-that of Mr. Trerise—which values its property at only $1,500,000; but that affidavit, standing alone, for reasons already stated, produces little or no. effect upon my mind. The defendant has not presented any statement of the value of the properties of the Butte and Boston, but relies upon the market value of its stock and the opinion of Mr. King, and upon its earnings for the last year or two. And it also relies upon the fact that the control of its stock would be of great value to the defendant for the purpose of preventing the clash of rights arising out of the Mining laws of the United States; and it is this which accounts for that portion of the affidavit of Mr. Rogers in which he says that he would not advise the defendant company to purchase the majority of the 'stock of either company unless he could have that of both. And it may well be that the value of the stock of both companies to the defendant would be greater than is indicated by the value of either to be operated separately as independent properties. It may well be that the defendant corporation, controlling, as it does, by the ownership of a majority of stock, substantially all the other mining claims at Butte, could afford to pay for the control of both the Butte and Boston and the Boston and Montana companies a sum which, in the aggregate, is greater than the valué of either of those properties if they are to be operated as independent concerns. And it must be observed that it is the value to the defendant corporation, the proposed vendee, which is to govern here, and not the value of their properties to the vendors.

It was urged by the defendant that the recent case of Donald v. American Smelting and Refining Co., 48 Atl. Rep. 771, 786, known as the Smelting Case, and which was almost precisely similar to the present, established the pule that the burden was on the complainant to show that the property proposed to be purchased was not worth the price to be given for it. The language used by Mr. Justice Dixon, in speaking in that case for the court of errors and appeals, is as follows: “The defendants insist that the complainants have not borne the burden cast upon them by law, of proving that these items are not worth that sum; and certainly we would be unwilling now to adjudge that such a negative is established. But it must be remembered that the cause is yet in a preliminary stage; that the complainants have shown the value of everything which they could reasonably be expected to discover before instituting their suitj that the directors are their trustees, and are intending a very large issue of stock for property which they have not seen fit hitherto to define. Under these circumstances, the legal rule imposing the burden of proof on the complainant should not be rigorously applied. Indeed, as these trustees are seeking to exercise a specially delegated power, which can be justly exercised only in accordance with a prescribed standard, it is not entirely clear that a burden does not rest, on them, when challenged beforehand, to vindicate their proposed action. But assuming the burden to be on the complainants, we think, fo'r the present purposes, it is sustained.”-

There, it will be seen, the learned judge remarks upon the circumstance that the complainants have shown the value of everything which they could reasonably be expected to discover before instituting their suit, and that, under these circumstances, the legal rule of imposing the burden of proof upon the complainants should not be rigorously applied. There, as-here,, the complainants were stockholders of the purchasing company, but it did not appear, as I understand the language of the judge, that they had any special opportunities of ascertaining the value of the property to be sold.

In contrast with the circumstances of that case, the complainant here shows, by his engineers, that he was entirely familiar with all the property of the corporations the value of whose stock is in question. His bill and affidavits do not show any great disposition to display the details of Ms knowledge' before the court, so as to enable the court to observe whether the opinions as to value are based on fgcts. He has relied, as I have observed, mainly upon the fact that the properties of the corporations are seriously in litigation. In the Smelting Case the property proposed to be purchased was one upon which a definite value could be placed. It consisted of a series of smelting plants, the cost of duplicating which could be shown with considerable accuracy. Here the-property which creates the value of the stocks proposed to be purchased consists of mines in the ground, and no one but persons who had familiarized themselves with the property could judge of its value; and, at last, after thorough inspection, it is of uncertain value, owing to the fact that the veins may suddenly pinch out and come to an end, or may expand and prove to be of unexpected value. It is eminently a case where the' value .of .the opinion of a witness as to value depends quite as much upon his being disinterested as upon his having opportunities to judge. Upon the matter of mere opinion we have, on one side, Mr. Trerise, who is shown to be substantially in the employ of the complainant, and, on the other side, Mr. King, who appears to be entirely disinterested and to have knowledge of the mines in question equal to that of Mr. Trerise.

Upon the whole case, then, and without casting any great burden of proof upon the complainant, I come to the conclusion that he has failed to show such a lack of value as to induce the court to continue the restraint.

I have dealt with the question of value in the first place, without noticing the arguments of counsel on either side based on other grounds.

The complainant puts his case on two grounds, which support, each other—first, the deficiency in value, and second, the fact that three of the officers of the' defendant corporation are also officers of the Butte and Boston company, and are largely interested, as stockholders, in both that company and the Boston and Montana company, and therefore in a position to use their influence with the directors, and, if necessary, with the stockholders of the defendant company, to bring about the purchase and sale complained of. They do not, however, in support of that notion, allege or prove that the officers in question are the owners of a controlling or even very large interest in the defendant corporation. But the fact that they are so interested and so situated as probably to be able to exert an influence of the kind mentioned, is a fact not to be ignored by the court., The bill is based upon the idea that it is within the power of the three gentleman named—Messrs. Rogers, Rockefeller and Burrage—under the certificate of organization and the by-laws of the defendant company, to, of themselves, without consulting the stockholders or even the directors, complete the purchase by a payment of cash. But the intention and ability to do this is distinctly denied by the defendant, and its denial is supported by the fact that it seems to be quite impracticable for the defendant corporation to proceed and purchase all this property by the payment of cash. They might, indeed, pledge the stocks of the two Boston companies for a part of the purchase-price; they might pledge some other property, and borrow the money for that purpose. But such a plan is not so feasible or so likely to be adopted as to seriously arrest the attention of the court. The plan proposed by the circulars of Kidder, Peabody & Company is to issue stock of the defendant corporation, and that cannot be done, under the statute, without a meeting of the stockholders; and all the parties interested deny that they intend to purchase except with the consent of the stockholders of the Amalgamated Copper Company.

Recognizing, then, the peculiar ability which the three directors now have to impress their views upon the stockholders of the defendant corporation, I cannot find in it a sufficient reason, in view of the conclusion I have come to as to values, to induce me to continue the restraint.

On the other hand, the defendant makes two points in addition to the one of value. One is that the suit is not prosecuted by the complainant in good faith for the preservation of his rights as a stockholder in the defendant company, but for the purpose of aiding the Iieinze Brothers.in their series of litigations with the corporations involved herein (and of this fact I am satisfied), and that this court ought, on general equitable principles, to refuse him relief. This position is supported by citations of authority of great weight, and has received respectful consideration, but I deem it unnecessary, in the conclusion I have reached as to value, to discuss at length the question or the authorities cited.

It is proper in this connection to say that of the $75,000,000 of stock, held by a great number of persons, only the complainant, with one hundred and four shares, and the O. H. Venner Company, with one hundred shares (purchased by it on May 2d, and who applied for leave and were permitted to come in as party complainant on May 3d), have come forward to ask for relief. The two hundred and four shares thus represented constitute but a small fraction of one per cent, of all the stock of the defendant; and the failure of any other stockholders to come forward indicates, as I have said, that they are not dissatisfied with the proposed purchase.

■ Another point made by the defendant is that the bill discloses no contract made, and no real ground of belief that a contract will be made, and that the intention to make a contract, without the consent of the stockholders is distinctly and positively denied, under the seal of the defendant company and the affidavit of its president, and is thereby entirely demolished; and counsel claim that the rule that where the allegations of the bill upon which the issuing of the injunction is based are completely denied by the answer the injunction will be dissolved, applies here. I feel constrained to say that the rule invoked is not of general application. Without stopping to examine the authorities in each case in which it has not been followed, to show that this case is not within it, it is, in my judgment, enough to say that there is enough disclosed in the pleadings and affidavits in this case to satisfy me that there is a danger that the plan proposed by Kidder, Peabody & Company will be carried through, but not without the consent of the majority of the stockholders of the defendant company.

I will advise that the order be discharged, with costs,


source: Caselaw Access Project

author: Pitney, Y. 0.

license: Public Domain

text:
    Emma Collier Grant v. Anne Grant Baird et al.
    [Submitted May 21st, 1901.
    Decided May 24th, 1901.
    Filed June 4th, 1901.]
    Where a mother, at the time of making a voluntary settlement for her' daughter, did not understand that the deed was so drawn that she could not revoke it at pleasure, and did not understand the practical effect and consequences of all the provisions thereof, she was entitled, as against the daughter and her children, also beneficiaries under the settlement, to a decree annulling the deed, except so far as it had been acted on in good faith to such an extent that the parties could not be placed in statu quo.

    On final hearing on pleadings and proofs taken before a master.

      The object of the bill is to procure a decree of the court annulling a voluntary settlement made by the complainant, Emma Collier Grant, upon her daughter, the defendant Mrs. Anne Grant Baird and her children, in the year 1890.
    The bill assigns two grounds for the intervention of the court—first, that at the time of making the settlement the complainant supposed that she had, and had retained, the power and right to alter and revoke the same at her pleasure; whereas, upon an inspection of the document, it is found to contain no power of revocation, and second, that the provisions of the deed, when given practical effect, produce results quite different from what the settler supposed they'would produce when she executed the deed, and that such results are quite contrary to her real wishes.
    The settlement provides a fund for the use of the daughter for life, and at her death to go to her three children, only one of whom was born at the time the deed was executed, and, in certain contingencies, mentioned in the deed, a portion of the fund was to go to certain benevolent societies, and two trustees were appointed.
    The children appear by their guardian, and the trustees also appear and answer and submit themselves to the jurisdiction of the court. The benevolent institutions, though properly brought into court, have not answered, and a decree pro confesso has been taken against them.

      Mr. Sherrerd Depue, for the complainant, cited the following authorities:

      Garnsey v. Mundy, 9 C. E. Gr. 243; Villers v. Beaumont, 1 Vern. 100; Everitt v. Everitt, L. R. 10 Eq. 405; Wollaston v. Tribe, L. R. 9 Eq. 44; Coutts v. Acworth, L R. 8 Eq. 558; Prideaux v. Lonsdale, 1 De G. J. & S. 433; Hall v. Hall, L. R. 14 Eq. 365; Toker v. Toker, 3 De G. J. & S. 487, 489; Forshaw v. Wellsby, 30 Beav. 243; Huguenin v. Baseley, Lead. Cas. Eq. 406; Cooke v. Lamotte, 15 Beav. 241; Sharp v. Leach, 31 Beav. 491; Phillipson v. Kerry, 32 Beav. 628; Mulock v. Mulock, 4 Stew. Eq. 594; Anderson v. Ellsworth, 7 Jur. (N. S.) 1052, 3 Giff. 154; Houghton v. Houghton, 15 Beav. 278; Toker v. Toker, 81 Beav. 644; Lister v. Hodgson, L. R. 4 Eq. Cas. 30;

      Van Houten v. Van Winkle, 1 Dick. Ch. Rep. 380; Martling v. Martling, 2 Dick. Ch. Rep. 122; Russell's Appeal, 75 Pa. St. 269.

      Mr. John R. Hardin, for the infant grandchildren, supported the views of the complainant.
    No one appeared for any other defendant.
   Pitney, Y. 0.

Both the grounds upon which the complainant asks relief are fully sustained by the proofs. The case is free from any trace of undue influence or imposition. The settler’s disappointment is due entirely to oversight and inadvertence. Nevertheless, I think she is clearly entitled to the relief prayed for.

I deem it unnecessary to go through the exhaustive list of authorities cited at the argument. They fully sustain the complainant’s position, and I have only to refer, in addition, to Hall v. Otterson, 7 Dick. Ch. Rep. 522, which seems to be somewhat in point, and White v. White, 15 Dick. Ch. Rep. 104.

I put my decision upon the ground that the settler did not understand that she could not revoke the deed of settlement at her pleasure, and, further, “did not understand and realize its practical effect and consequences in all directions.”

I will advise a decree annulling the deed, except so far as it has been already acted upon in good faith and to such an extent as that the affair cannot be restored to its former condition.


author: Reed, V. C.

text:
    Biddle Hiles, receiver, &c., v. Thomas Dunn et ux. et al.
    [Filed February 11th, 1901.]
    The receiver of a partnership cannot file a bill to cancel a deed made by a member of the firm conveying his individual property to defraud the firm creditors.

      On demurrer to a bill.
    The bill sets out that the complainant, on the application of Charles Lawson, one of the partners in the firm of T. Dunn & Company, was appointed receiver of the said firm by this court; that the claims against the firm exceeded the assets, and that Mr. Lawson has no individual property. On February 12th, 1894, Thomas Dunn, who then owned real estate, conveyed the same through intermediaries to his wife for a pretended consideration, in fraud of the creditors of the firm of T. Dunn & Company.. The purpose of the suit is to annul the said deed.
    The grounds assigned in the demurrer are, first, that the bill fails to set out that it was filed by leave of the court; second, that it fails to show the conditions which call for the appointment of the receiver, and third, that the bill shows that the complainant was appointed receiver of the property of the firm, and not of the individual property of the members of the firm, and that he has no right to follow the property of the defendant as an asset of the firm.

      Mr. William T. Hilliard, for the complainant.

      Mr. Clement H. Sinniclcson, for the defendants.
   Reed, V. C.

The important question arises under the third point taken in the demurrer:

Has a receiver, appointed to take charge of the property of a partnership which is insolvent, a right to file a bill in respect of the property which belonged to a member of the firm and which has been assigned by him to defraud the creditors of the firm ?

The question is not whether such a receiver can file a bill to reclaim firm property which has been fraudulently assigned or conveyed by one of the members of the firm.

There is no doubt that an assignee for the benefit of creditors, or the receiver of an insolvent corporation, can file a bill to cancel fraudulent conveyances or assignments of the property of the assignor, or of a corporation of whose property the receiver is trustee. But to extend this doctrine to the property which is the subject-matter of this suit it must appear that the present receiver is a trustee of the property. The receiver in this case was appointed under the general equity power of this court, and has no statutory authority. Insolvency of the firm was not a jurisdictional condition essential to his appointment. As receiver he is the curator of the property of the firm. His-duty is to keep the property, to gather in the assets and hold, the property of the firm as an officer of the court. His primary duty is to hold the property intact until the matters between the partnership shall be adjusted and wound up. A duty towards the creditors, as well as towards the partners themselves, may arise by the insolvency of the firm; but the duty is only to manage the firm assets in the interest of all these parties. His duty to the creditors, as well as to the partners, is executed when he executes his trust in respect to the assets of the firm. The individual property of the partners is not an asset of the firm. It may, indeed, be reached by the creditors of the firm after judgment and execution, but that fact does not make them firm assets.

It is to be observed that the right of the receiver to file this bill to cancel these conveyances of the property of the partner implies a right in the receiver to take possession of the property when recovered, and the same right if it had never been conveyed. It implies that every receiver of the property of a firm, by force of his appointment, becomes a curator of all the property of each partner. Such a view has never received countenance in any case, and is opposed to any sensible theory of the receiver’s functions. In the well-considered case of Wallace, Receiver, v. Milligan, Assignee, 110 Ind. 498, it was held that the right of a receiver of a partnership to take possession of property is confined to the firm assets, and that the individual liability of a partner to the creditors of the firm is not a firm asset, and cannot be enforced by the firm’s receiver.

It is perceived that it is only upon an assumed right- of a receiver to enforce the partner’s individual liability to the firm creditors that the right to follow the individual property of such partner can arise.

There must be a decree for the demurrant.


author: Reed, Y. C.

text:
    Mary E. Schlicher et al. v. Henry H. Keeler et ux. et al.
    [Filed February 15th, 1901.]
    Where a grantor delivers a deed to a stranger as agent of the grantee, to hold till the grantor’s death, with no power of control reserved by the grantor, there is a valid delivery, though the grantee had not empowered the stranger to act for him in holding the deed.

      Mr. William M. harming, for the complainants.

      Mr. Erwin E. Marshall and Mr. Robert 8. Woodruff, for the defendants.
   Reed, Y. C.

Charles Keeler, the father of the four complainants, died October 21st, 1900, leaving seven children. On October 18th he made a deed to his son Henry of a farm, which deed was left in the hands of the scrivener who drew it, and this deed was recorded the day after the grantor’s death. Henry conveyed a one-half interest in the property to his brother George. The bill is filed to compel the defendants to' deliver up this deed for cancellation. It charges fraud in procuring the deed and non-delivery thereof.

On the trial counsel for the complainants confined his right to relief to the single ground of non-delivery of the deed. The facts concerning the execution and custody of this deed are few, and substantially undisputed.

On the morning of October 18th last George Keeler, a son of Charles Keeler, the grantor, called upon Mr. Chamberlain, a-lawyer in Trenton, and told him that his father wished him to come up and execute a deed that had been prepared in the office. Mr. Chamberlain, accompanied by George Keeler, went up in the afternoon. They found Charles Keeler sick, in a second-story room. In the presence of Mr. Chamberlain and his sons Lewis and George, Charles Keeler signed the deed. The deed was mainly typewritten, with a blank for the name of the grantee. This blank was' filled, by the direction of the grantor, with the name of Henry H. Keeler. After the name had been inserted, Charles Keeler signed his name to the deed and acknowledged it. Mr. Chamberlain says that he handed Mr. Keeler the deed, and told him that he wanted him to make delivery to him (Chamberlain). He says he’handed the deed and said to Mr. Keeler, “I want you to deliver this deed to me, as the agent of Henry, the grantee.” Mr. Keeler, he says, had the deed, and handed it to him and said, “You will hold it or keep it until the last day.” And I said, “I will.”

Mr. Devlin (1 'Devi. Deeds (11th ed.) § 280) uses the following language:

“Where a grantor executes a deediand delivers it to a third person, to hold until the death of the grantor, the latter parting with all dominion over it, and reserving no right to recall the deed, or alter its provisions, it seems to be settled, by the weight of authority, that the delivery is effective, and the grantee, on the death of the grantor, succeeds to the title. A delivery of this kind may be considered, in effect, an escrow, but differs from that in the fact that a delivery in escrow is dependent on the performance of some event, and not upon the lapse of time.”

A large number of cases are quoted by Mr. Devlin in support of the text.

According to Mr. Chamberlain, there was no condition coupled with the delivery to him, no power to recall the deed was reserved by the grantor. By the words used at' the time of the delivery of the deed to Mr. Chamberlain the latter took possession, as the agent of the grantee, and not, as in Peck v. Rees, 7 Utah 467, as agent of the grantor. Nor did it matter whether Henry had, or had not, empowered Mr. Chamberlain to act for him in holding the deed. The delivery to Mr. Chamberlain, with no power of control reserved by the grantor, raised a presumption of acceptance by the grantee. The leading case in England upon this kind of delivery is Garnons v. Knight, 5 Barn. & C. 671. Wynn made a mortgage to Garnons, whom he owed. He delivered the mortgage to his niece, saying, “Here, Bess, keep this, it belongs to Mr. Garnons.” He again took the mortgage from Bess, but again returned it to her, saying, “Here, put this by.” Garnons knew nothing of this. Wynn died.- In an action of ejectment, brought by the mortgagee, the question whether there had been a delivery of the mortgage was found in favor of the mortgagee. It came before the court of king’s bench on rule to show cause why a new trial could not be granted. In his opinion, delivered in the case, Mr. Justice BayJey proceeded to say: “Sheppard, who is particularly strict in requiring that the deed should pass from the possession of the grantor, lays it down that delivery to the grantee will be sufficient, or delivery to anyone he has authorized to receive it, or delivery to a stranger, for his use and to his behalf.”

Again, he says: “2 Rol. Abr. (K) 24 pl. 7; Taw v. Bury, Dyer 167; Alford v. Lea, 2 Leon. 110, and 3 Coke 27, are clear authorities that on a delivery to a stranger for the use, or on the behalf of the grantee, the deed will operate instanler, and its operation will not be postponed till it is delivered over to or accepted by the grantee.” The passage of Rol. Abr. is this:

“That if a man make an obligation to T and delivers to ‘B,’ if T get the obligation, he shall have action upon it, for it shall be understood that ‘B’ took the deed for him as his servant. 3 H. 6, 26.”

The rule so laid down by the court of king’s bench was approved by Mr. Justice Yan Syckel, in his opinion delivered in the case of Jones v. Swayze, 13 Vr. 279. To the same effect is the law of the State of New York (Church v. Gilman, 15 Wend. 656; Hatheway v. Payne, 34 N. Y. 92; Fisher v. Hall, 41 N. Y. 421; Munoz v. Wilson, 111 N. Y. 295, 303; Rosseau v. Bleau, 131 N. Y. 171, 183) and in Massachusetts. Wheelwright v. Wheelwright, 2 Mass. 447, 452; Foster v. Mansfield, 3 Metc. 412; Moore v. Hazelton, 9 Allen 102; Regan v. Howe, 121 Mass. 424

The bill must be dismissed.


text:
    James A. Kline, administrator of Jane V. Sheppard, v. John H. Grannis and Calvin Corle et al.
    [Filed March 7th, 1901.]
    To prove that a judgment creditor knew of the existence of a prior mortgage, it was shown that he had held the note representing the judgment debt for several years; that, when the debtor purchased the property covered by the mortgage, it was generally understood that he bought it on credit, and the judgment creditor had reason to believe that the debtor had no money to pay for the property, and was making inquiries respecting a mortgage, and expressing wonder that there was none on record, and he stated to one witness that he presumed that a mortgage was given, from what he knew of the debtor’s financial condition, one witness testified that he mentioned te the creditor the fact of a mortgage having been given, but the creditor testified that he had no recollection of such conversation.—Held, to show knowledge putting the creditor on inquiry as to the existence of the mortgage.
    This bill is filed to foreclose a mortgage given to Jane Y. Sheppard by Louis H. Schenek on March 8th, 1892.
    The question in the case is in respect to the relative priority of this mortgage and a judgment recovered against Louis H. Schenck on July 20th, 1892.

      Mr. Bichard 8. Euhl, for the complainant.

      Mr. Alvah A. Ciarle, for the defendant Corle, judgment creditor.
   Reed, Y. C.

The mortgage was a purchase-mpney mortgage, given to secure $2,500, as consideration for a sale of real estate made by Jane Y. Sheppard to Louis TL Schenck cotemporaneously with the execution of the mortgage on March 8th, 1892.

The mortgage was not recorded until August 26th, 1892. At the time the deed and mortgage were executed, Calvin Corle held a note made by Senator Schenck, of which note Louis H. Schenck was a surety. This note was made by the Mnssrs. Schenck on April 1st, 1885, payable one year after date to the order of Elijah C. Hough. Mr. Hough sold the note to Mr. Corle some time before July 1st, 1886. .After Louis H. Schenck got title to the Sheppard property, Mr. Corle, finding that, so far as the record showed, it was unencumbered, began a suit upon the note, and obtained a judgment against the Messrs. Schenck on July 20th, 1892. His judgment is entitled to priority over the then unrecorded mortgage, unless, at the time it was entered, he knew of the existence of the unregistered mortgage.

On the part of the mortgagor it is insisted that Mr. Corle had knowledge of its existence. The testimony shows that when Louis H. Schenck bought this property those who knew his circumstances assumed that he had bought it on credit. Mr. Corle had held his note for several years. He did not imagine that Mr. Schenck had the cash to pay for the property. He talked the matter over xyitlu his friend, Mr. Cortelyou, and both wondered that there was no mortgage—what they meant was that it was strange that no mortgage- had appeared at the clerk’s office for registration. Mr. Corle was obviously expecting its appearance, for he made inquiries respecting it at every one of his quite frequent visits to the clerk’s office. This mental condition of expectation is what Mr. Corle alluded to when talking with the witness Sheppard, to whom he said, according to Mr. Sheppard’s testimony, “that he presumed that a mortgage was given from what he knew of Mr. Schenck’s financial condition.”

Apart from this general knowledge of Mr. Louis H. Schenck’s circumstances possessed by Mr. Corle, there is in evidence a conversation alleged to have occurred between Mr. Mellhanney and Mr. Corle in the spring of 1892. Mr. Mellhanney says that in that conversation with Mr. Corle he mentioned the fact that his mother-in-law, Mrs. Sheppard, had sold this property to Mr. Schenck, and had taken a mortgage for $2,500, and that Mr. Schenck was to put $1,000 in improvements on the property, which would make the mortgage a good one. Mr. Corle says he has no recollection of such a conversation or of speaking about the matter to anyone, except Mr. Cortelyou and the county clerk.

I believe Mr. Corle implicitly when he says he has no recollection of the conversation, and the question is one of probability as to the likelihood of its occurrence. Eight years have elapsed since the occurrence of the alleged conversation, and over live years had elapsed since it was discovered that the conversation was important. Nevertheless, I think that it is more probable that this talk occurred, and that Mr. Corle has forgotten it, than that Mr. Mcllhanney is entirely mistaken as to its occurrence and as to the substance of the conversation. The transfer of the property was something of an event in the neighborhood, and was undoubtedly frequently discussed by Mr. Corle and ■others, and this conversation may have been one of many on the same subject between him and other parties. Although it has now faded from his memory, it then probably added to his wonder why such a mortgage had not been produced for registration. If he had intended to purchase the property for a new •consideration, I do not think he would have thought of doing so without assuring himself of its existence. He could have so .assured himself by inquiry of Mr. Schenck or Mrs. Sheppard. But the only question being one of expense in entering judgment, his concern was not so much whether a mortgage existed, .as it was whether a judgment upon his note could be recovered before its registration. He was in a position where he .did not wish to inquire, for fear of finding that for which he inquired. 'This condition of mind was equivalent to notice. Wade Not. §§ 9, 11; 1 Jones Mort. § 545; Notes to Le Neve v. Le Neve, 2 White & T. Lead. Cas. (4th Am. ed.) 122.


text:
    Margaret Valentine v. Thomas Valentine et al.
    [Filed March 29th, 1901.]
    Decedent was a marine engineer, and invested all of his earnings in property in New Jersey, where he stayed most of the time when on shore, and where his wife resided, but he also had a room and spent a part of his time in New Orleans. In 1893 he and his wife separated, and decedent informed his relatives that he was going to New Orleans until he could make enough to pay the separation expenses. He was never taxed in New Orleans, and refused to vote there because he did not wish to become a resident, and described himself in deeds and in his will as of New Jersey, but informed the colored woman who kept house for him in New Orleans that he would buy a lot and build if she would stay with him, but failed to find a lot to suit him, and in 1897 returned north.— Held, that the evidence was not sufficient to show that decedent ever acquired a domicile in New Orleans.
    The complainant is the widow of William M. Valentine, who died November 2d, 1897, while on board the steamship “S. Oteri,” near Bocos Del Térro, in Central America. He died the owner of about five thousand dollars of personal property, leaving a will, in which he gave all his property to his brothers and sisters, and named his sister Margaret his executrix. She offered the will for probate, and it was proven in the county of Camden, in this state. She has stated her account, showing a balance of $4,483.85, and it has been passed.
    The bill sets up that Margaret Wise, the executrix, intends to distribute this balance among the five legatees without allowing complainant anything. It charges that William M. Valentine, the deceased husband, was, at the time of his death, domiciled in New Orleans, Louisiana; that, by the law of that state, she is entitled to one-half of the personal property of which her; husband died possessed.

      The answer denies that the testator was domiciled in Louisiana at the time of his death, hut asserts that Ms domicile was in the city of Camden.
    The answer further asserts that complainant and the testator executed articles of separation on July 24th, 1893, in accordance with which the testator conveyed to the complainant certain real estate in Camden, and complainant joined with the testator in the conveyance of other property of the testator. The answer claims that the terms of the articles of separation, coupled with the conveyance of property to the complainant, operated to release all the property of testator from any claims of the complainant during his life or after Ms death.

      Mr. Henry I. Budd, for the complainant.

      Mr. Norman Grey and Mr. Lewis Starr, for the defendants.
   Reed, Y. C.

The bill in this ease is modeled after that in Harrall v. Wallis, 10 Stew. Eq. 458; S. C., 12 Stew. Eq. 279. By it the complainant asserts her right to the one-half of the personal property left by the testator, under the Community law of the State of Louisiana, upon the assumption that the domicile of the testator, at the time of his death, was in that state.

The testator was a marine engineer. The vessels upon which he was employed plied between American ports in Worth and South America. In 1870 his‘boat, the steamship “Pioneer,” was plying between Wilmington, 'Worth Carolina, and Philadelphia. In that year he made the acquaintance of the complainant in Wilmington, at a party, and, as she swears, he married her in that city on March 16th of the same year. Soon thereafter he took her to Philadelphia, where she lived at different places—he paying her board or room rent and staying with her when on shore. Then she went to her sister’s in Savannah, Georgia, where he visited her, his boat then running between Philadelphia and Savannah. After about a year she returned to Philadelphia for a time. Then she went to Wew Orleans, as testator’s boat was then running between that place and Hon-i duras. Then she came north and went to Camden, took board ut Sixth and Chestnut streets, where her husband visited her ■once before he went to Scotland to build a ship. Then she .went to Jackson street, Camden, where he visited her once on a •visit''from New Orleans. Then she thinks she went to Savannah again to her sister, and afterwards returned to Camden, where, she says, they bought property. She explains the purchase of property thus:

“Mr. Valentine told me to see if I could see any cheap property to buy ..it as he wanted a home, and I saw a small house X thought I would like. .He sent me the money to buy the house.”

' This house was 317 Atlantic avenue, Camden. She moved 'into the house, she thinks, in 1882. Her husband was still running between New Orleans and Honduras. He visited her every year and invested his money in Camden property until, in 1893, there were seventeen properties in the joint names of husband . and wife.

On November 30th, 1892, she filed a bill in this court against "her husband for alimony. This action upon her part seems to have been induced bjr the conduct of her husband in directing the agent who had charge of their joint properties not to pay any more of the rents to his wife. In this proceeding Mr. Yalentine seems to have been arrested. It also appears, incidentally, that, in answer to the application for alimony, he ■ denied that she was his legal wife. This matter of difference seems to have been settled, and the testator returned and lived with her in Camden until about July 24th, 1893, on which date •there were executed the articles of separation.

On account of the question which had been raised as to their -marital status, their attorneys advised them to be, and they ■were, remarried. Then they conveyed three of the properties to the wife and the remainder of the properties to Mrs. Wise, a ..sister of the husband. Then the husband went to Philadelphia for a time, staying.with his sister. Having received a letter from his late employer in New Orleans, he again went south, entered into the old service and ran a boat from New Orleans to various South American ports.

Previous to the execution, of the articles of separation, in 1893, his domicile was in the city of Camden. His wife had lived there for over ten years. He had invested all his earnings in Camden real estate. His wife lived in one of their houses, and there he lived with her whenever he came north, staying with her for several months previous to their final separation. In every deed made to them they were described as of Camden. In his will the testator described himself as of Camden. The same residential description is in the articles of separation, in the deeds for the division of their property and in the marriage certificate. Although he had a room in Hew Orleans, where he slept when on shore, he had no property there, and had explicitly refused to vote there, because he did not wish to become a citizen.

He had therefore, in my judgment, an acquired domicile in the city of Camden on July 30th, 1893.

The perplexing question is, did he change that domicile between that date and Hovember 2d, 1897, to the city of Hew Orleans? Most of the material portion of the testimony attempts to reproduce declarations of the testator to show his domiciliary intention. The property in Camden which had been put in the name of his sister (Mrs. Wise) was evidently, as between him and her, regarded as still his, and he occasionally returned to Camden to see after this property.

David Dean says that he was there in 1895, and that, in a conversation between Yalentine and witness, Yalentine said, “Well, I am going to leave Camden. I expect to go south to stay there, making that my dominant home or whatever you call it. He said that he had no property here now; his sister had charge of the property and he had nothing to tie him here.” Although the witness says that this conversation took place in 1895, he follows it by saying that Yalentine was living at 315 Chestnut street and Mrs. Yalentine was living with him. It is entirely clear that the Yalentines never lived together after 1893. However, the matter of the conversation seems to indicate that it took place after the marital separation. This witness also swears to a conversation with the testator near 1887, six years before the separation, in which the testator then said that he did not consider Camden his home; that he was longer at Eew Orleans than there.

William H. Stevenson swears that- Valentine came to his house just before Christmas in 1895 to get the witness to do some work on a' house. He says that Valentine told witness, who is a colored man, that there was a better chance for colored men in Eew Orleans than in Camden. He told him that his (Valentine’s) home was broken up; that his sister would employ witness to do the work on certain portions of the property that she had under her charge; that he would not be down there any more, and it would be the last time h.e would see him; that Camden was not his real home; he was oftener away than here.

Patrick H. Kelly, a boilermaker, living in Eew Orleans, says that, in 1892, Valentine spoke of purchasing a tugboat on the river, if witness would use his influence to get him the towing of the garbage boats. Witness said to him:

“You don’t vote with the gang, you are a Republican. Valentine replied that he was a resident here; that he had lived here off and on for twenty-five years; that he had made his home here off and on for twenty-five years; that he would be a Democrat here on account of the different kind of people and would like to get registered here, but he never got time.”

He never bought the tugboat. This witness also says that, when Hancock and Garfield were running for the presidency, Valentine said that if he were a voter he would vote for Garfield. Valentine also told witness that he would never live north any more in winter; that he went north sometimes; that this was the year of the World’s Fair, or the following year, when he told him that he could not live north.

Henry Bannon says that he lived with Valentine at Fannie Johnson’s five or six years prior to his death. In a conversation, in 1895, Valentine stated that he intended to make Eew Orleans his permanent home, and that he intended to buy a lot . in Eew Orleans and build a house upon it, if he could find one to suit him. Witness says that Valentine looked for a lot, but could' not find one to suit him.

Fannie Johnson, a colored woman, in whose house Yalentine had a room, says that, about three years ago, Yalentine returned from the north, and said that he had troubles on his mind, and was going to settle in New Orleans; that he intended to buy a lot and build upon it, if witness would stay with him until, he died. She consented, and Yalentine looked for a lot, but did not find one to suit him.

In addition to this testimony of conversations, it also appeared that he was made a Mason in a lodge in New Orleans, and that, by a rule of the Grand Lodge of Louisiana, one of the conditions of membership was a local residence of one year; but it also appears that in the application of Yalentine the blank left for the statement of applicant’s residence is unfilled.

The foregoing, with the testimony regarding the length of time Yalentine was in port between the trips of his steamship, constitutes the material part of complainant’s testimony.

On the part of the defendants, Thomas Yalentine, a brother of testator, says that, in the fall of 1893, after the separation, he saw his brother, who said that he had got a letter from the steamship-owner and expected to go down to New Orleans; that he liked Camden as a pleasant place to live, and as 'soon as he accumulated enough money to pay for what he had gone through (the expenses) he intended to remain at 317 Atlantic avenue, Camden. The witness also says that his brother told him, in 1893, that he had never voted in New Orleans, because he never intended to become a citizen there. He also says that, in 1897, he wrote from Norfolk to testator about coming to New Orleans, and that testator replied that he would not be in New Orleans long; that he was coming back to Camden, to stay there, and that, if witness should come down there, the testator would probably not be there.

Margaret Wise, a sister of the testator, to whom he had Conveyed the remainder of his property, says that he both told and wrote to her that ho was going to New Orleans to make a little money to take care of himself when he got old, and was coming back to live at 317 Atlantic avenue. She says that he sent her about five thousand dollars from New Orleans, • which she was to put away for him; she spent some of it upon the property.

Henry B. Fullmer, an engineer, worked with testator for two years before his death. He says that testator told him that, when he made that last trip, that it was going to be his last, and that he was coming back to his home in Camden. He told him that all his property was in Camden, and that he would never vote in Louisiana. He said he would not vote when Prior was running for mayor about four years ago; that he never had voted and never would vote.

William Walden, a marine engineer, worked with testator for six or eight years prior to his death. He says that Valentine told him that his home was in Camden; that he had his property there. Walden accompanied Valentine on his last trip, and swears that Valentine said that he made that trip because he was afraid he would be quarantined—he meant if he went north. He advised the witness to stay by the ship; that he (Valentine) was going home, and witness would get promoted.

Matthew F. Boland, of Hew Orleans, says that he was a candidate for the legislature about eight years ago, and asked Valentine to vote for him, and Valentine said he could not, for he was a resident of Camden, and was not registered here. He spoke to witness of being tired of the kind of work he was doing; that he had money enough to keep him, and spoke of going back to Camden. It appears also that the property he had in Hew Orleans was a trifling amount of money in bank. The above is the material part of the testimony for the defendants. ■

The question propounded is, whether the testimony shows that the testator had, in addition to a residence in Hew Orleans at any time after his return there in 1894, an intention to remain there.

The question is not, whether he intended to abandon Camden, for he might have entertained such an intention, and yet not have acquired a domicile in the city of Hew Orleans. Such an intention would shift his domicile from Camden, but it would be to the domicile of origin. Dic. Dom. 92.

There is nothing to show that Hew Orleans was his domicile of origin.

If, however, he, for an instant, while having a residence, in fact, in the city of Hew Orleans, had also an animus manendi, his domicile was there, until he changed it. Cadwallader v. Howell, 8 Harr. 145.

Nor need the intention to remain in New Orleans have been an intention to remain there until he died. He may have had! a floating intention to return to Camden, or some other place-in the north, at some time, and yet his intention to remain im New Orleans, for an indefinite period, might have been sufficient to fix his domicile at that place. 10 Am. & Eng. Encycl. L. (2d ed.) 19.

Nor would a subsequent intention to return to Camden, unless followed by an actual change of residence, affect his New Orleans domicile, for there must be the fact of residence as. well as the intent to remain combined.

The general rule in respect to the acquisition of a new domicile is, that after a person has abandoned his domicile of origin, or his acquired domicile, his domicile will be considered to be-in that place in which he has voluntarily fixed his habitation,.' not for a special or temporary purpose, but with a present intention of making it his home, unless, or until, something which, is uncertain or unexpected should happen to induce him to adopt some other permanent home. Harral v. Harral, 12 Stew. Eq. 279, 285; Firth v. Firth, 5 Dick. Ch. Rep. 137.

In view of these well-settled rules the facts are to be viewed,, and they are not free from perplexing features.

On the one hand, it is apparent that his relations with the city of Camden, after his separation from his wife in 1893,. were entirely changed. Before 1893 the fact that he had a family living in Camden would have been very important—I think a controlling factor—in fixing his domicile there. After his separation the residence of his wife there would be of no-significance whatever; indeed, his separation from the wife,. under the conditions mentioned, would lead to the inference, when he left the place, he intended to abandon her.

On the other hand, his residence in New Orleans after 1893' had no greater physical indications of permanency than before-1893. He was a seafaring person, whose boat was his home,, except when in port, and he occupied a room, when on shore,. after, as he had before, his separation. He had refused to vote in New Orleans before, and lie never did vote there after 1893. His talk about buying a tugboat was before 1893. The most ‘important testimony is his declaration of intention, as testified to by Henry Bannon and Fannie Johnson, already detailed. But if this is an accurate statement of what he said in 1895, it is capable of two inferences—either that he then intended to make New Orleans his home, or that he intended to make it his home if he could find a lot to suit him to build upon. ’ The testimony in respect to his declaration at the time he went south, after his marital difficulties, are conflicting. That he intended, in 1897, to leave New Orleans permanently and go north is, I think, proved. While this does not show a change of domicile, if it had once existed in New Orleans, it is important as a pointer in discovering his purpose of going there—whether it was to make a home there, or was, as his brother testifies, to get enough money to pay for what he had gone through, and then return to Camden.

As already remarked, the strong point for the complainant is the testator’s return to New Orleans after his severance of his marital relations in Camden.

The strong point'of the defendants’ position is that the testator seems to have carefully avoided doing anything to indicate an intention to fix his permanent residence in New Orleans. It does not appear that he was taxed there; it does not appear that he studiously refused to vote there.

He left the place of residence in his application to the Masonic lodge unfilled. All his earnings he sent north to his sister. All his property was in the north, for there can be no doubt that the real estate in Camden, in the name of his sister, was understood to be his. In view of these facts, in connection with the .fact that New Orleans was his residence only when in port, I cannot say it is proven that he ever intended to make New Orleans his home.

The bill should be dismissed.