Court Opinion

ID: 3985685
Source: CourtListenerOpinion
Date Created: 2016-07-06 10:41:55.647171+00
Date Added: 2024-06-11T14:18:16.767682
License: Public Domain

I concur for the reasons herein stated.
I agree with the view of the prevailing opinion that the contracts by which New Quincy Mining Co., hereinafter referred to as New Quincy, purported to sell 100,000 shares of its treasury stock to each of Hintze, and the Empire Canyon Mining Co., hereinafter referred to as Empire, were part of a          2 fraudulent scheme on the part of the Johnson group to retain control of New Quincy, by securing to themselves the voting power of an additional 200,000 shares of stock. This conclusion is based mainly upon the following factors, all of which are pointed out in the prevailing opinion:
(1) The transaction was proposed to the New Quincy board of directors only 10 days before the annual stockholders' meeting for the election of officers was scheduled to take place, and the agreements were not consummated until three days before that meeting.
(2) The trustee, who was Johnson's brother and was a stockholder and member of the Johnson group, was to retain the control and the voting power of the full 200,000 shares of stock, although 100,000 shares (50,000 shares to each of the two purchasers) was purportedly fully paid for. There is no apparent legitimate reason why the trustee should retain the control and voting power of that stock which was fully paid for nor why he should not be a neutral party free from partisanship. Yet the contract expressly provided that the trustee should make no distribution of the stock within one year, and from the other provisions of the contract it is apparent that he would retain control for a *Page 331 
considerably longer time than one year, as is pointed out in the prevailing opinion.
(3) In case the trustee appointed by the terms of the stock purchase agreements for any reason failed or refused to serve, the purchasers were to have no voice in the appointment of the successor trustee, that right being reserved exclusively to New Quincy.
(4) At the time of the stockholders' meeting, when the votes were being counted, the stock-ledger record of the sale of the 200,000 shares was not in the stock-ledger, but was on a separate page in one of the desk drawers. Furthermore, this page was not produced by Mr. Erikson, the representative of the Johnson group, until after the checking was completed, and it was apparent that without the 200,000 shares, the Johnson group would lose the election. Moreover, there is the testimony of Mr. Glenny, the representative of the Floor group in the tallying of the votes, that during the course of the counting, J.C. Johnson came in the room and handed to Erikson a paper, and at the same time gave him oral instructions that he was not to use it unless he had to.
These factors, together with the other facts pointed out in the prevailing opinion, are, I believe, when considered together, sufficient to sustain the trial court's findings and conclusions as to the fraudulent nature of the contracts. And since the contracts were fraudulent, the trial court properly ordered canceled and set aside the 200,000 shares of stock thus issued. This I think is determinative of the case.
It is stated in the prevailing opinion that:                 1
"The ouster of the Johnson group and declaration that the Floor group members were elected is not the paramount relief sought. It is only incidental to a cancellation of stock fraudulently issued, and outstanding."
As to this conclusion, I have grave doubts. It appears to me that the ultimate purpose of this suit by the Floor group *Page 332 
was to gain control of the company. However, in order for them to accomplish this result it was necessary to have set aside the sale of the 200,000 shares of stock, and this could be accomplished only through equity proceedings. And equity, having properly obtained jurisdiction, will retain jurisdiction to administer complete relief, although the incidental relief might ordinarily be granted in a court of law. I agree, therefore, that there was no error in the ruling of the court below on the objections raised by defendants to the supplemental relief prayed for by plaintiff in his complaint.
The prevailing opinion reaches the conclusion that under Article XIII of the Articles of Incorporation of New Quincy, only stock "duly paid for and issued" was votable, and further concludes that under the terms of the contracts for sale of the 200,000 shares of stock, none of the 200,000 shares were duly paid for or issued. In reaching this conclusion, Mr. Justice PRATT construes the option agreement contained in paragraph 4 of the contract between New Quincy and Empire (set forth in the prevailing opinion) as being applicable to the entire 100,000 shares of stock sold, although a block of 50,000 shares was purportedly fully paid for. The same reasoning would also be applicable to the Hintze contract. I freely admit that the terms of these contracts are very ambiguous, but my interpretation would be that the option agreements in the contracts did not apply to the 50,000 shares purportedly fully paid for by the down payments, but only to the other 50,000 shares, or portion thereof that might have been paid for. The option itself is of a peculiar nature permitting the purchasers, after default, not to buy, but to take stock up to the amount paid for at 10c a share. However, that is a question about which we need not seriously concern ourselves here. Having found that the contracts were fraudulent and that they must be set aside and the stock issued pursuant thereto cancelled, I see no reason for considering what the proper interpretation *Page 333 
of such contracts would be if they were valid. I merely note here my exception to that portion of the prevailing opinion which attempts to interpret and construe the option clause of the contracts.