The Wallace miner. [volume] (Wallace, Idaho) 1907-current, 1918-01-03
Supreme Court of New York Sustains
Ore Contract Between Federal Company
and American Smelling and Refining Co.

York, appellate division, in the case
of Sidney Norman and others, appel.
ants, VS.. Federal Mining 4 Smelling
company and American Smelling q
Refining company, brief reference tc
which was made in The Miner last
week:
The Decision.
The plaintiffs, as stockholders OF
the Federal Mining d Smelling com
pany, Hereinafter referred to as the
Federal company have brought this
action to set aside a contract dated
October 49, 1905, entered into between
said Federal company and the Ameri-
can Smelling & Refining company
hereinafter referred to as the Smelt-
ing company, whereby the Federal
company sold to the smelling company
all the lead silver ores, shines and
concentrates that might be produced
> from it's properties, for a period of Il
years from August 81, 1909 Plaintiffs
represent holding of~p24 of the com
mon stock of the Federal company and
.0O48 of it's preferred stock; or a hold
The action is based upon allegations
of fraud and bad faith upon the part
OF the smelling company, its officers
and agents. and the officers and di-
rectors of the Federal company who
participated in the making and ratfi-
cation of the contract. and upon fur
Their allegations that the individual
defendants now constituting the board
OF directors OF the Federal company
In Office at the time of the commence
ment of the suit were continuing the
fraud. 1t was further alleged that the
approval of the contract in question
was done at the behest OF the smelt-
ing company and contrary to the in
terests of the Federal company and
with the intent to give an unfair and
undue advantage to the smelling COM
pany. which it is claimed dominated
and controlled the Federal company.
The record discloses the following
facts: Both the corporations in ques
ton are foreign corporations--the
Federal company being incorporated
under the laws of the state of Della
ware and the smelling company under
those of New Jersey. The Federal
company soon after its organization
in 1908 acquired certain mines in the
Occur dAlene district in the northern
~.
duced ores containing lead and sill
yer, the output of it's mines const
tuting from 40 to As per cent of the
total output of the mines in that dis
trict. The custom of the mining
companies in that territory was not 20
smelt their own ores nor to market
the mineral contents thereof, but to
sell their output to smelling compan-
les with whom they made the most
favorable contract possible. AS there
was no one smelling company, at that
time, large enough to take the entire
output from any one large NINE 1t
was customary to provide in the con-
tracts tonnage limit upon the
amount of ore which the smelling
company was obliged to take. This
had the effect of keeping down the
output from the mines. Since 1908
the smelling company has been the
only one of it's kind large enough to
handle the entire output of the Fed
eral company the combined capacity
of the other smelling companies in the
United States not being large enough
to handle so per cent thereof; as the
result of this 1t was necessary for the
Federal company to deal with the
smelling company If it desired to dis
pose of its entire output. On Novem-
Der 80. 1903, the Federal company
made a contract with the smelling
company by which 1t sold to the lat
ter for a period of six years from Sep
TENDER !. 1908, its entire output con-
sisting of ores, shines and concen-
trates. at prices therein provided and
upon certain terms and conditions. !
The good faith of this contract is in
no way attacked and at the time 1t !
WIS Hldue tueTe WAS no community Oh .
Interest between the Federal COM
pany and the smelling company. nor |
any domination OF the former by the ,
latter. either through official or stock !
control. In June, 1905, the Federal ,
company was negotiating for the pur-
chase of the Morning mine involving !
an investment of 100000 and Chas.
Sweeny, the president of the Federal
company in August, 1905, went to
London and there arranged for the
sale to Benson & Co. of that amount /
)f stock wherewith to purchase the !,
nine, Benson & Co. desired to know
hat the Federal company had con-
racts sufficiently long and certain to
AXE care of its output. The desira-
,ility Of an extension of the contract
With the smelling company for per-
cd of 25 years in view of the exist ,
ng conditions, and the necessity for
suitable market for the mine output, ,
lad already been submitted to the 9
,oard of directors of the Federal COM :
ANY by Mr.. Sweeny in June, 1905, In
nd referred to the executive COM c
nittee. That executive committee on I
october 10. 1905, unanimously approx 1
d form of contract between the two 4
m, pupiaS ub ,bn oo,t,on. ,,,oJa