The San Francisco call. [volume] (San Francisco [Calif.]) 1895-1913, 1895-12-10
THERE WAS NO FRAUD
Judge Seawell Has Decided
the Theodore Fox
Suits.
HIS OPINIONS FILED.
Judgment Rendered for the
Defendants in Both
Actions.
CASES INVOLVING MILLIONS.
There Was No Evidence to Show
Conspiracy or Fraudulent
Dealings.
CASES INVOLVING MILLIONS.

has been rendered in favor of defendants.
The suits were brought by Theodore
Fox, a stockholder in the defendant min
ing company for an accounting OF the al
fairs between the defendant coru pany and
the Comstock Milling and Mining Com
pany, also a defendant in the suit for an
accounting. The other is a suit for an ac-
counting of $50, 900, alleged 20 have been
fraudulently paid by the mining company
TO W. f. Berry, acting for W. ii. Patton.
The opinions tell the story in each case.
They are as follows:
One of the defendants in this action is the Con-
solidated California and Virginia Mining Com
pauy For the sake of brevity il will be desIg-
mated in this opinion as the nIning company
The Comstock Mill and Mining Company, q cor
poration organized under the laws OF Nevada, Is
also named as defendant but has neither, APP
peared nor been served with process. 1t will be
designated the mi company.
The action is brought by patntlf as stock
PENDANTS John w Mackay, John p Jones and the
mill company. to account to the mining company
for the moneys received by the mill company from
the mining company for the reduction and milling
OF its ores II being alleged that the result OF
a conspiracy between the other defendants the
mill company paid eXorbitant price for
such service and that the board of directors of
the mining company is controlled by Defendant
Nackav.
The mining company was incorporated October
:, 1884, and was formed by consolidation OF two
corporations, known respectively as the California
Mining Company and the Consolidated Virginia
Mining Company 10 all the assets and property OF
which the mining company succeeded The capt
tai stock OF the mining company is divided into
2l6UOO shares, of which the time OF The COM
mencement of this action the plaintiff was the
owner OF five shares. standing in his name the
books of the company.
At or before the time OF the consolidation above
mentioned the California Mining Company owned
a mine at Virginia City, known the California
mine,'' and the Consolidated Virginia Mining Com
pany owned a mine adjoining the other, known
as the CONSOLIDATED Virginia mine"
Prior to November 20, 1888, these mines had
yielded large quantity OF gold ana silver, but at
that time The working OF them had ceased TO be
profitable. The mines were also in bad condition;
the shafts had become decayed: the hosting works
chinery. The mines had caved badly and required
retinbering. In the opinion OF some OF the most
competent ludg.s the mines had been practical
exhausted.
In this condition OF the mines the defendant
Jones proposed 10 the Consolidated Virginia Min
ing COMPANY and California Mining Company,
spectiveiy, 10 reopen and work that portion of
their mines above the 1880 level. This PROPOSE
tion resulted in the making on November 20, 1883,
of an agreement by and between said Jones and
the Consolidated Virginia Mining Company, the
terms OF which were, in substance. as follows:
said company employed Jones to mine and mill
al the ores which should be extracted by him
from that portion OF the Consolidated Virginia
mine above the 1850 level tor the term of three
years and said Jones agreed to explore for, mine,
extract, transport and mill said ores and account
TO the company for 10 per cent, in bullion, OF the
assay value of all such ores. The bullion was to
be solo and the proceeds distributed in the follow
ing order viz. First 10 the payment OF ire Sutro
tunnel royalty; second, 10 the payment 10 the
company of so cents per ton for all ore mined and
milleo by Jones; third, 10 the payment of all min
ing expenses incurred by Jones; fourth, to the
payment 10 Jones of 50 per ton Tor the transpor-
taton and milling of ores; fifth. to the payment TO
the company OF any balance remaining after pay
ment of the other items.
The agreement further provided for periodical
accountines and settlements, and Also contained
other provisions for the protection of the company
one OF which required Jones to save the company
harmless from all liens or other claims and to exc
Ifn VIII
$4,000 for the faithful performance of that stipu
lation.
made agreement with Jones containing the
same provisions in reference TO the California
mine as were in the agreement Just mentioned in
reference to the Consolidated Virginia mine.
Mr.. Jones, upon the execution OF the agreements
Just mentioned Immediately entered upon their
performance. He expended considerable money
In the purchase Of machinery and material and in
working and developing the mines. No question is
made as TO the fidelity with which the agreements
were carried out on his part.
On December H. 1885, Jones presented to the
board of directors OF the mining company writ
ten communication in which he proposed TO sur
render the agreements of November, 20, 1888, aud
release the company therefrom, condition that
the company would employ him exclusively for the
period OF five years from January /. 1885, trans
mort and mill all of the ores raised from its mines at
the of 81 per the yield therefrom TO equal
10 per cent of the pulp assay, but that the mining
company should not be under any obligation to ex-
tract or deliver any ore which would not pay the
cost of mining and milling.
In the communication inst mentioned Mr. Jones
tracts he would be entitled to receive from the
products of the ore then in sight a sum exceeding
$4,000, which he had failed 10 make out OF the
ore already worked that he was fully provided
with all the facilities necessary for carrying out the
contract and was not seeking release from any of
his obligations, but that circumstances existed
which tended 10 bring about misunderstanding
arising from the fact thar the mine the
same time under two distinct arrangements and
that IL would be advantageous to the company to
have the full and unrestricted control of the whole
of its mine and of all the underground workings.
hnord NJ ne ripirlt
the same meeting. held December II, 1885 passed
a resolution that the company make and enter
tion and reduction of all the ores raised from its
mine during the period OF three years from Janu-
ury g. 1885 at the rate of So per ton, and provd-
ing that the ore should be taken at the company's
dump and transported and milled in the usual
manner, and should produce yield equal to 10
per cent Of the pulp assay that pulp assays should
be taken daily and reported to the mining COM
pany's office in Virginia City; that the mining
company might Keep an agent in any mill where
the being worked to take samples and OBJ
serve the working OF the ore: that the company
should not be Obliged to take out any the yield
OF which would not pay the cost of mining milling
and transportation: that the company would not
place any ore in the dump which would Weld less
than Sc per ton and if it should do so such ore
might be removed at its expense. but il Jones
TOOK any such ore and worked il he should only
receive the yield as his compensation for the
transportation and milling The president and
secretary OF the mining company were by said
TO enter into an agreement with Jones embodyng
the stipulations contained in said resolution, end
mining company on December %, 1885.
March 6, 1886, the agreement last mentioned
was assigned by Jones TO the mill company. The
mill company was incorporated January 8, 1885,
under the laws of Nevada, and its capital stock
divided into $500 shares. of which Jones
owned Sl313 shares, John w. Mackay owned
S3313 shares and J. G. Flood owned S331lo shares
Upon its incorporation three mills were trans
ferred 10 the mill company, viz. the Morgan, me
Eureka and the California Ever since January g.
1856, the ores of the mining company have been
reduced at these mills BY Jones and the mill COM
paDy respectively.
On December "a, 1886, the mill company by
Jones as its president, sent TO the directors OF the
IN lining company written Communication, in
which he requested such modification of the
late the compensation of the mill company for
Transporting and working the according TO the
grade OF the ores. In This communication the mill
company stated that AT the time of making the
agreement OF December 23, 1885, the in the
mines OF the mining company was of poor quality
and low grade and did not yield more than
$l3 per ton, and that the rate of compensation
fixed that agreement at $6 per ton
in view Of the value Of the ore then In the mine
and upon the suppostion that all the ore
10 be worked would not, TO any considerable
amount exceed that value: that since the making
of said agreement discoveries had been made
higher grade required more time and greater
quantity of quicksilver and that for these
the expense of working was increased in "a very
sensible degree and the milling company could not
work such with any profit to itself at the rate
fixed, that while the mill company was required