The sun. [volume] (New York [N.Y.]) 1916-1920, 1919-10-25
|6IL PROMOTER WINS
A,oOO,oOo VERDICT
A B. Leach & Co.. Must Pay
Bic sum to Charles T.
Brown.
FREEZE OUT Is CHARGED
Richmond lowering SEQ. In
yolved in Handling Of Mex
lean Well Case.

Assuming that the profits made by
r. Leach & Co., dealers in investment
,.,urities at Sc Cedar street. out Of their
srapcing OF Island Oil and Transports
aim Corporation amounted to more than
u.5OO. 900, as alleged. the f1rm must
nav Charles T. Brown, an intermediary
/, the deal nearly 100000 as his
share, under a decision given yesterday
BY the Appellate Division Of the Supreme
Court The court says that Brown. is
eh;..led to one-thlrd the profits. 1t d.
reefs that judgment be entered reauir-
Inc Leach & Co. to account for this pro-
portion and that referee be appointed
70 take the account and report to the
court at a special term.
Brown. who was formerly lawyer in
Denver and later with Henry L. Doherty
4 Co In this city. sued Leach last year.
John Ford, Supreme Court Justice, heard
tho case without a jury and decided in
isyor Of Leach. The Appellate Division
las now reversed Justice Ford. It's opin-
pn was written by Justice Page and con-
cured in by all the other members of
the court. The case, having been de-
cded unanimously, cannot be taken to
he Court Of Appeals without the con-
sent Of the Appellate Division.
Leach & Co. Signed Agreement.
The story Of the controversy, as told
10 Justice Pages written opinion, begins
on June ~, 1917, when A. b. Leach K
Co. signed an agreement with Richmond
Levering & Co., oil developers, OF 12O
Broadway, to finance the 100000
Island Oil and Transportation Corpora
ton. lowering & Co. owned all the Is
sued stock. Of s22, 10000 par value, and
had valuable properties In Mexico, in
Guiding the Tepetate well No. Q and a
concession for running pipe line from
the well to the coast. The well was pro-
tucing from 10000 to 100000 barrels Of
oil daily. Brown. after lending the cor
poration $4,000 to protect its property,
suggested a scheme for financing the
great project and was authorized by
Levering TO do SO.
Unable to get loans from the Equi-
table or the Empire Trust Company,
Brown introduced lowering to Arthur
b Leach. The Ieach-Levering agree
inent was then made. Leach & Co.
agreed to advance $4,000 in exchange
for the Island Oil corporations note for
100000, secured by 81 per cent. of the
.rock and $4,000 face value Of the
corporation's debentures. Within thirty
days Leach & Co. were to advance $780,
900 more, or such part as was required,
and were to have the privilege of in
yestlgation in Mexico. Another pro-
vision was that Leach & Co. were to
have sixty days option on making
further advances. and II they decided to
exercise the option they were to receive
'll,5O0,000 par value of the stock. Two
thirds Of the profits of the transaction
were to go to Leach 6 Co. and one
third to Brown.
Discount Agreed To.
Leach and Brown agreed to discount
note for 100000. but as Brown had
diifculty In arranging this, Leach pro-
posed that instead of one note for $780,
600 there should be two notes, one of
them for $500. 900. which Leach would
take. the other for 100000, which
Leach would indorse and for whose Sc
curity he would furnish from the COM
mon fund such collateral as might be
needed. Brown arranged to have a
trust company discount the 500. 900
note, but, says Justice Page, Leach de-
clinel to indorse it Leach offered to
iAdorse 1t In the name of his recently
Incorporated copartnership, but the
trust company refused to accept this, as
a corporation would have no power to
become an accommodation indorser
Later the courts opinion says, Leach
demanded that Brown advance the $780,
wv. which Brown could not do.
Meanwhile favorable report on the
OIL property was received, except that
uhe pipe line would cost more than was
esumated. Leach then demanded, &C.
eo!d'ng to the court. that Brown reduce
MS snare Of the profits from SO Ia to s
per cent When Brown refused Leach
ulered TO go on with the enterprise IL
Brown would accept ~ per cent. Upon
Browns further refusal. Leach gave no.
u'e mat he would not exercise his op-
non to continue the corporations
hnancing, and wrote Brown that they
were now free TO act separately. Brown
wrote Leach on August 20, 1917, that ne
would not permit Leach TO eliminate him
ohd then avail himself. for his sole
FRONT, Of the informatio introductions
ana suggestions which Brown said he
mad given Leach.
me court also says that Levering rep
resented to Brown that Leach 4 Co. were
eehnitely out of the negotiations. and,
veneV.ng this. Brown was induced to re-
,ssse Leach & Co. from all obligations to
am On August 80, 1917. Leach and
covering made contract for financing
we oil corporation on substantially the
S4lne basis as the Leach Brown contract.
brown having been eliminated, all the
"outs were to go to Leach & Co.
Publication Charged.
Justice Page says that I.evering falsely
represented that Leach 4 Co. were cefi-
says: mo"
!, II Is my opinion that A. b. Leach
~. hot observe that good faith with the
mS'hun tBrown) that the law requires
W oo-sdyenturers. and that with full
AloNledge OF the conditions and with the
soIe design Of excluding the plaintlff from
Yatucipation in the profits OF the enter
~ So which the reports Of the engineer
ro"ed 10 be reasonably certain. he os-
i,.sIoly withdrew from the enterprise.
:, Hto"ihg full well not alone that without
80. assistance the plaintiff could not
S'y out the contract of June 81, 1917,
~ 50 mat IN the limited time between
~ ,ol'ncation OF his withdrawal and
rr'o Gay "nen large payments must be
IN upon the properties OF tho Island