The Wallace miner. [volume] (Wallace, Idaho) 1907-current, 1918-01-03

abandoned and the appellants stand
upon the claim Of constructive fraud
In that the domination and control Of
the Federal company by the smelling
company led to the making Of the con-
tract In question, Ia which the smelt-
ing company was guilty Of breach
of an equitable duty and took an I'M
conscionable advantage which
amounted to fraud. because 1t put up
on the board of the Federal company
its officers and employees to represent
III in the making Of this contract. AS
matter OF fact, while the executive
committee of the Federal company,
after the purchase of the stock of Mr..
Guggenheim, and its transfer to the
American Shelters Securities COM
pany was controlled by officers or
employees of the smelling company, at
no time were more than six members
OF the board of directors officers or
employees Of the smelling company.
The appellants criticise the decision
and opinion OF the learned trial court
upon the ground that they deal with
the case as though the burden was
upon the plaintiffs to show that the
contract was unfair to the Federal
company. OF course, IL plaintiffs were
seeking to establish actual fraud, the
burden Of proof was upon them; but
they contend that in view of the proof
they have made as to the relationship
of the two corporations and the In
PRODUCTION into the board of directors
executive committee and official posi-
| tons of the Federal company. OF Of
flcers and employees of the smelling
company, which was the result of the
control of the common stock (Which
alone had voting power) of the Fed
eral company by the smelters Secur-
| ity company, (Which in turn was con-
trolled by the smelling company up
on proof of these facts relationship
was established which called for the
exercise of good faith in the making
of this contract by the smelling COM
pany and the execution of contract
which was fair to both, which would
not inure to the detriment Of the Fed
eral company and which was neither
improvident, inequitable nor unjust.
Assuming that such a burden existed
of showing affirmatively the fairness
and good faith of the contract in
question. the findings of the trial
court establish that the defendants
have borne and discharged that bur-
den and in my opinion the proof alb
solutely demonstrates that the con-
tract in question was made in good
faith upon both sides, with due re-
gard for the interest of the Federal
company, was desirable contract I'M
der the conditions which then existed
and was an asset and of benefit to the
Federal company and not detrimental
to it. The contract was not only a
fair and desirable one to be made, but
there was no concealment then or at
any other time about its terms and
provisions and it's very period of dur
alton, which Is now complained of,
was. at the time deemed most advan-
tageous for the Federal company and
no one thought of questioning its
fairness or good faith or calling it
fraudulent, wasteful or improvident
until the disappearance of the defend
ants from the Federal company. The
inability of that company to pay div
idends is not shown to have been in
any way due to the making or per-
Torrance Of this contract, but, on the
contrary, 1t fairly appears to be the
result of diminution in the produce
ton of ores by the Federal company
and of decrease in the contents of
metal in its ore bodies. both as to lead
and silver.
An effort is made to attack the in
dependence of action and good faith of
Charles Sweeny. the president of the
Federal company at the time of the
transactions complained Of But the
proof establishes that he was never in
any way connected with the smelling
company, either officially or financial
ly. He was an experienced mining
man, thoroughly acquainted with the
Occur d'Alene district and it's mining
operations and whose activities in that |
region extended over a period Of near |
ly 20 years. He appears upon this rec
ord to have inteligently and honestly |
represented the Federal company in
its contractual relationship with the /
company, and to have acted I
in the best interest of the former
His evidence shows the /
of the Federal company 1
In smelling operations on its
own account (Which no one then /
ieemed advisab le) nor is it suggested
where the s12.0O0,0OO could be procur-
I'd which would be required to estab-
ish suitable plant for its operations.
Though he sold his common stock to
Daniel Guggenheim at 1920 per share, /,
lie bought back into the Federal COM |
,any, paying as high as $3.50 per
hare for some of the common stock
md bought considerable quantities of
10Th common and preferred stock,
fter the making of the contract in +,
question, his account of purchases and {
ales OF both classes OF stock being in
violence down to April |, 1907. be-