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(Circuit Court of Appeals, Ninth Circuit. October 1, 1917.)

No. 2831.


Minority shareholders of a corporation, which owned property valuable for copper mining, cannot, the property having been sold to defendant, attack the sale on the ground that defendant company was acquiring mines with the intention of securing a monopoly of the copper industry, in violation of Sherman Anti-Trust Act July 2, 1890, c. 647, 26 Stat. 209, for the act created a new offense, and cast upon designated officers the duty of enforcing its provisions.




In a suit by minority shareholders to set aside a conveyance of the entire corporate property, evidence held to sustain a finding that the consideration was inadequate.



That stockholders, whose stock was nonassessable, were of ample means to pay assessments, does not deprive the directors of power to dispose of corporate property, on the theory that assessments necessary to carry on the business could not be levied.



At common law the board of directors of a private corporation could sell or otherwise dispose of the corporate property, subject to the limitation that it could not sell or dispose of the entire property.



A Utah mining company, whose charter authorized it to buy, sell, lease, hold, and operate mining claims, and to buy, lease, and exchange ores, etc., and do all kinds of business incident to the management of a general mining business exhausted the profitable silver ore in its mine. The treasury was depleted, the corporation was indebted, and the stock was nonassessable. A Utah act of 1905 (Comp. Laws 1907, § 322), declares that any corporation now existing or hereafter organized for the purpose of mining may purchase, lease, or otherwise acquire mining property, and, in case the articles of incorporation do not provide for the sale or other disposition of the property of the corporation, their disposition by the board of directors shall not be valid or binding upon the corporation until confirmed by the majority in amount of the stock outstanding, at a meeting of the stockholders called to consider the action of the board, but that, when the articles of incorporation authorize the sale of corporate property by the directors or stockholders, sales made in accordance therewith shall be binding upon the corporation. Held that, though all of the property of a private corporation cannot be disposed of, unless authorized by statute or charter, or unless the stockholders unanimously consent, or unless disposition by the directors is necessary because the corporation is in failing circumstances or insolvent, etc., the directors of the Utah mining company were authorized to dispose of its entire property with consent of a majority of the stockholders, though the corporation's property was worth far more than its debts.



A sale of all of the property of a corporation does not necessarily terminate its corporate existence, for corporations may exist without prop


For other cases see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes 245 F.-15


Under Comp. Laws Utah 1876, p. 232, subsequently made Const. Utah, art. 12, § 1, which authorized the amendment, alteration, or repeal of the statute under which a mining company was incorporated, the directors of a mining company are, under the act of 1905 (Comp. Laws 1907, § 322), enacted after incorporation, entitled to dispose of the entire corporate property with the consent of a majority of the shareholders; the by-laws of the company as originally organized providing for the acquisition and disposition of mining property.



Contracts between corporations having common directors, while not prohibited, are voidable; and the burden rests on those seeking to sustain them to show clearly that they were entirely fair and free from wrong. 9. CORPORATIONS 519(3)-CONTRACTS-EVIDENCE-ACTIONS.

In a suit by minority stockholders to set aside a contract whereby the entire property of a mining company was sold to defendant, where the president of the mining company was a director of defendant, evidence held insufficient to clearly show that the contract was entirely fair and free from wrong.



Where authorized by statute, a minority of the shareholders cannot prevent dissolution in accord with the will of the majority.



Minority shareholders cannot complain of the sale of corporate property to defendant corporation, in which the majority shareholders were interested, where defendant offered the highest bid; the minority shareholders being only entitled to have the property sold free from any unfair combination on the part of the majority stockholders and defendant.


Where a sale of all the property of the corporation, which could sell without unanimous consent of its stockholders, to another corporation, which had common directors, was for an inadequate price, the sale will not be unconditionally set aside; but a public resale will be ordered, the property to be struck off to the highest bidder if thereby a greater amount should be realized, but otherwise the sale to remain undisturbed, for a majority of the shareholders, who consented to the sale, are in that event entitled to be protected.

Ross, Circuit Judge, dissenting in part.

Appeal from the District Court of the United States for the District of Montana; Geo. M. Bourquin, Judge.

Suit by Peter Geddes and others against the Anaconda Copper Mining Company and others. From the decree denying part of the relief sought (222 Fed. 129), complainants appeal. Affirmed.

Walsh & Nolan and T. J. Walsh, all of Helena, Mont., for appellants.

L. O. Evans, of Butte, Mont., W. B. Rodgers, of Anaconda, Mont., and D. Gay Stivers, of Butte, Mont., for appellees.

Before GILBERT and ROSS, Circuit Judges, and WOLVERTON, District Judge.

ROSS, Circuit Judge. This suit was brought by certain minority stockholders of the appellee Alice Gold & Silver Mining Company,

For other cases see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes

a corporation organized in 1881 under the laws of the then territory of Utah, to procure a decree annulling a deed of all of its property to the appellee Anaconda Copper Mining Company, a corporation, made in consideration of a transfer of 30,000 shares of the capital stock of the latter company to the Alice Company-the grounds upon which the relief is sought being, first, that neither the board of directors nor a majority of the stockholders of the Alice Company was authorized to sell or dispose of all of its property against the protest of any of its stockholders; second, that the Alice Company had no authority to acquire the stock of the Anaconda Copper Mining Company; third, that the parties who negotiated and carried out the sale and the parties who negotiated and carried out the purchase were substantially the same, all being controlled by John D. Ryan, who was at the time a director of both companies and the president of the Alice Company, and that the consideration upon which the transaction was based was inadequate; fourth, that the purpose with which the purchase was made was to monopolize the production of copper in the Butte district of Montana, where the property is situate, and the sale of the same in the markets of the world, in violation of the federal AntiTrust Act known as the Sherman Act.

[1] While the last point mentioned has been very ably and elaborately argued by counsel on both sides, we find it unnecessary to consider it, for the reason that, as we understand the recent decision of the Supreme Court in the case of Wilder Manufacturing Co. v. Corn Products Refining Co., 236 U. S. 165, 35 Sup. Ct. 398, 59 L. Ed. 520, Ann. Cas. 1916A, 118, it is not available to the appellants. That case involved the construction of the Anti-Trust Act and the effect of a profit-sharing contract of the Refining Company and those dealing with it exclusively, and the right of that corporation to recover for goods sold by it to the Manufacturing Company. The court, in denying the defense interposed by the purchaser, based upon the claim that the Refining Company had no legal existence, as it was a combination composed of all the manufacturers of glucose or corn syrup in the United States, illegally organized with the object of monopolizing all dealings in such products, in violation of the Anti-Trust Act

Congress, and had further sought to perpetuate its monopoly by devising a certain profit-sharing scheme, based its ruling upon two grounds, the second of which is as follows:

"In the second place, the proposition is repugnant to the Anti-Trust Act. Beyond question re-expressing what was ancient or existing, and embodying that which it was deemed wise to newly enact, the Anti-Trust Act was intended in the most comprehensive way to provide against combinations or conspiracies in restraint of trade or commerce, the monopolization of trade or commerce, or attempts to monopolize the same. Standard Oil Co. v. United States, 221 U. S. 1 [31 Sup. Ct. 502, 55 L. Ed. 619, 34 L. R. A. (N. S.) 834, Ann. Cas. 1912D, 734]; United States v. American Tobacco Co., 221 U. S. 106 [31 Sup. Ct. 632, 55 L. Ed. 663]. In other words, founded upon broad conceptions of public policy, the prohibitions of the statute were enacted to prevent, not the mere injury to an individual which would arise from the doing of the prohibited acts, but the harm to the general public which would be occasioned by the evils which it was contemplated would be prevented; and hence not only the prohibitions of the statute, but the remedies which it provided, were coextensive with such conceptions. Thus the statute expressly cast upon the Attorney

General of the United States the responsibility of enforcing its provisions, making it the duty of the district attorneys of the United States in their respective districts, under his authority and direction, to act concerning any violations of the law. And in addition, evidently contemplating that the official unity of initiative which was thus created to give effect to the statute required a like unity of judicial authority, the statute in express terms vested the Circuit Court of the United States with 'jurisdiction to prevent and restrain violations of this act,' and besides expressly conferred the amplest discretion in such courts to join such parties as might be deemed necessary and to exert such remedies as would fully accomplish the purposes intended. Act July 2, 1890, c. 647, 26 Stat. 209. It is true that there are no words of express exclusion of the right of individuals to act in the enforcement of the statute, or of courts generally to entertain complaints on that subject. But it is evident that such exclusion must be implied for a twofold reason: First, because of the familiar doctrine that 'where a statute creates a new offense and denounces the penalty, or gives a new right and declares the remedy, the punishment or the remedy can be only that which the statute prescribes.' Farmers' & Mechanics' National Bank v. Dearing, 91 U. S. 29, 35 [23 L. Ed. 196]; Barnet v. National Bank, 98 U. S. 555 [25 L. Ed. 212]: Oates v. National Bank, 100 U. S. 239; Stephens v. Monongahela Bank, 111 U. S. 197 [4 Sup. Ct. 336, 28 L. Ed. 399]; Tenn. Coal Co. v. George, 233 U. S. 354, 359 [34 Sup. Ct. 587, 58 L. Ed. 997, L. R. A. 1916D, 685]. Second, because of the destruction of the powers conferred by the statute and the frustration of the remedies which it creates, which would obviously result from admitting the right of an individual as a means of defense to a suit brought against him on his individual and otherwise inherently legal contract to assert that the corporation or combination suing had no legal existence, in contemplation of the Anti-Trust Act. This is apparent, since the power given by the statute to the Attorney General is inconsistent with the existence of the right of an individual to independently act, since the purpose of the statute was, where a combination or organization was found to be illegally existing, to put an end to such illegal existence for all purposes and thus protect the whole public-an object incompatible with the thought that such a corporation should be treated as legally existing for the purpose of parting with its property by means of a contract of sale, and yet be held to be civilly dead for the purpose of recovering the price of such sale, and then, by a failure to provide against its future exertion of power, be recognized as virtually resurrected and in possession of authority to violate the law. And in a twofold sense these considerations so clearly demonstrate the conflict between the statute and the right now asserted under it as to render it unnecessary to pursue that subject further. In the first place, because they show in addition how completely the right claimed would defeat the jurisdiction conferred by the statute on the courts of the United States-a jurisdiction evidently given, as we have seen, for the purpose of making the relief to be afforded by a finding of illegal existence as broad as would be the necessities resulting from such finding. In the second place, because the possibility of the wrong to be brought about by allowing the property to be obtained under a contract of sale without enforcing the duty to pay for it, not upon the ground of the illegality of the contract of sale but of the illegal organization of the seller, additionally points to the causes which may have operated to confine the right to question the legal existence of a corporation or combination to public authority sanctioned by the sense of public responsibility, and not to leave it to individual action prompted it may be by purely selfish motives. As from these considerations it results, not only that there is no support afforded to the proposition that the Anti-Trust Act authorizes the direct or indirect suggestion of the illegal existence of a corporation as a means of defense to a suit brought by such corporation on an otherwise inherently legal and enforceable contract, but, on the contrary, that the provisions of the act add cogency to the principles of general law on the subject, and therefore make more imperative the duty, not directly or indirectly to permit such a defense to a suit to enforce such a contract, we put that subject out of view and come to the only remaining inquiry, the alleged effect of the previous ruling in the Continental Wall Paper Case [212 U. S. 227, 29 Sup. Ct. 280, 53 L. Ed. 486], supra."

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So far as the point above alluded to is concerned, the only difference between the case cited and this is that in that case a private corporation undertook to avoid the payment of money due from it under a contract with another private corporation on the ground that the latter was an illegal monopoly, and therefore had not the power to make the contract because of the Anti-Trust Act, while here the contention is that the Copper Company was without power to make a certain purchase from another private corporation because of the same actwhich is, in principle, as we conceive, no difference at all.

The articles of incorporation of the Alice Company define its powers as follows:

"The business and pursuit of the corporation shall be to buy, sell, lease, hold, own, and operate mines, mining claims, mills, mill sites, furnaces and reduction and refining works, to buy, sell, and exchange mineral ores and bullion: to buy, lease, construct, and operate roads, tramways, and freight and transportation routes; to facilitate the business of the company; to appropriate, buy, and sell water, water rights, and ways for conducting the same; and generally to do all kinds of business incident to, connected with, or convenient for the management of a general mining business, in the territories of Utah, Montana, Idaho, and in any state or territory of the United States."

The record shows that the property consisted of about 140 acres of mining ground on the hill north of the city of Butte, and is contiguous to some of the properties of the Anaconda Company; that through it runs for more than three-quarters of a mile a great silver-bearing lode called the Rainbow lode, carrying some gold, upon which lode the company commenced work about 1881, sinking a shaft 1,500 feet, and running drifts of the aggregate length of about 10 miles, and from which lode it extracted a large amount of ore, out of which it paid its stockholders, commencing March 15, 1881, and ending April 27, 1898, $1,075,000—there having, however, been no dividends paid between November 23, 1891, and December 31, 1896. While that work, according to the evidence, disclosed very large bodies of zinc-lead ore, it left available no more silver ore. The zinc-lead ore being peculiarly refractory, and there not being then, nor yet, according to the evidence, any known process by which it could be worked at a profit, and the silver ore being the only kind in the mine then, or yet, according to the evidence, known that could or can be worked at a profit, work upon the mine by the company was suspended prior to 1894. From time to time thereafter it was worked in a small way under leases-the company receiving a royalty on such ore as the lessees were able to work. Water was allowed to rise in the mine, first to the 100, and afterwards to the 700, foot level, when, about 1899, the mill, which was upon one of the claims, was closed, and the company ceased operations. In 1902 the shaft house burned, but the company erected a new hoist, by which the lessees, also called in the record "tributors," could hoist the ore they desired to take out. While the leases were in operation, the royalties received by the company were insufficient to meet its necessary expenditures for insurance, taxes, and watching the property, and also proving unprofitable to the lessees, the leases were abandoned, and all work ceased. The indebtedness of the company, of course, gradually increased, and at the time of the sale in question amounted

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