Woldson v. Richmond Mining, Milling & Reducing Co.

Parker, J. The plaintiff, Woldson, commenced this action in the superior court for Spokane county, seeking specific performance of a contract entered into with — 249 — the defendant company for the sale to him hy it of 100,000 shares of its treasury stock at ten cents per share. Trial upon the merits resulted in findings and judgment in favor of the plaintiff, awarding him damages in the sum of $15,000 against the defendant, the trial court being of the opinion that, while he was entitled to recovery, he was entitled to damages only, measured by the difference between the contract and market value of the stock at the time he was entitled under the contract, as viewed by the court, to have the sale thereof consummated. From this disposition of the cause, the defendant company has appealed to this court, contending that the plaintiff is not entitled to any recovery, either by way of specific performance or damages. The plaintiff also has appealed to this court, contending that he is entitled to a more favorable judgment, but since we conclude he cannot have any recovery, we shall refer to him as respondent, and to the defendant mining company as appellant. Appellant is a corporation organized and existing under the laws of the state of Washington, having its principal place of business in Spokane. In August, 1916, appellant owned and was engaged in developing and operating its mine known as “The Richmond Mine,” which mine, it may be assumed, it has continued to own and operate ever since. On August 15, 1916, appellant had in its treasury some 300,000 shares of its capital stock which it was holding in trust for its stockholders. This stock was placed at the disposal of the officers of the corporation with a view to selling it as might become necessary to raise funds to defray the cost of the development of the mine. A by-law of the company authorized its board of directors to sell this stock as in their judgment the best interests of the company might require, at not less than ten cents per share. On August 15,1916, the company had developed — 250 — its mine to a considerable extent. While its development work np to that time had uncovered some ore of some apparent value, the policy of the company had been to prosecute development work rather than attempt to mine and market the ore already uncovered. The company was then indebted about $3,000 for development work. On that day, at a meeting of the board of directors of the company, the following proceedings were had: “The matter of financing the further development of the company’s property was discussed, and on motion it was resolved. “Resolved, That an option on one hundred thousand shares of the treasury stock of the company be given to Martin Wolds on at the rate of ten cents per share, to be taken and paid for in such sums and amounts as may be required in the prosecution of the work of the development of the company’s property, Martin Wold-son to have the right to throw up said option at any time on reasonable notice so as not to leave this company in debt for any work contracted. Stock to be issued as each payment is made at the rate of ten cents per share.” At that time respondent was a member of the board, and was also the president of the company. This resolution was adopted, however, by the vote of the other members of the board and without the necessity of respondent’s vote, in so far as its lawful adoption was concerned. This was done, however, in response to an offer made by respondent to purchase 100,000 shares at ten cents per share to further the development work of the mine and to complete such purchase from time to time as stated in the resolution. Respondent thereupon orally agreed to the terms of the resolution as evidencing a contract between himself and the company. Immediately thereafter the respondent became the general manager of the company and its affairs, — 251 — as well as its president, having in charge the operation and development of the mine. About two weeks following the entering into of this contract, work was done in the mine rendering it evident that there was valuable ore uncovered such as would be profitable to’ mine and market. Thereupon, instead of pursuing development work, respondent caused the work to be changed to that of mining, shipping and marketing the ore. This was pursued under respondent’s management of the mine with such success that the indebtedness owing at the time of entering into contract with respondent was paid off, together with all indebtedness incurred in the mining and marketing of ore, all of which was paid wholly from the proceeds of the ore so mined. It thereupon became apparent that no money was needed from other sources in order to make the mine a profitable working mine. At the beginning of September, 1916, this condition of the mine became so apparent that the market value of the shares of stock of the company was at least twenty-five cents per share, and a short • time thereafter increased very much more in market value. About this time respondent ceased to be president and manager of the company, and thereafter, on December 6, 1916, respondent tendered to the company $10,000 as the purchase price of the sale to him of the stock mentioned in the contract evidenced by the resolution of August 15, 1916, and demanded the delivery of the whole of the 100,000 shares of stock, then claiming the right thereto under that contract. This demand the officers of the company refused to comply with, the board adopting a resolution in effect declaring that it was under no further obligation under the contract made with respondent on August 15,1916. Up to that time neither the corporation nor any one representing it ever made any demand upon respondent to complete — 252 — the purchase of any portion of the stock so that the money could be used “in the prosecution of the work of development of the company’s property”; nor, up to that time, did the respondent, though the president, and manager of the company at all times since the making of the contract of August 15,1916, ever tender or even suggest to the other officers of the company that he receive any portion of the 100,000 shares of stock and pay therefor, or that the money was needed for the development of the mine. Indeed, the very management of the mine by respondent himself demonstrated that no money was ever ‘ ‘ required in the prosecution of the work of the development of the company’s property” in order to make it a profitable working mine. On December 6,1916, all of the debts and obligations of the company were paid, it had a substantial bank balance, and its mine was being profitably worked without the aid of funds other than was being produced by the mining and marketing of the ore taken therefrom. The words “development of the company’s property,” as used in the resolution and contract of August 15, 1916, we think plainly have reference to this particular mine. These facts, we think, are proven by the evidence all but conclusively; indeed, they are, for the most part, admitted. This, it seems to us, is one of those cases which finds, its correct determination in a plain statement of its controlling facts and has little need of argument to demonstrate what the rights of the parties are in the premises. This was not a contract for an outright, unconditional sale of stock by the company to respondent, but it was plainly a conditional sale to be consummated in part or in whole as the need for raising funds to prosecute the development of its mine might arise; nor was it an option open to acceptance by the respondent for an unlimited time in the future, though there — 253 — was no specified time for the consummation of the sale. It seems to us unnecessary to look beyond the plain terms of the contract and the conditions attending its making to render it plain that the need for the money to be derived from the purchase price of the stock was to be the controlling fact determinative of what amount, if any, of the hundred thousand shares of stock should ultimately be sold to respondent. • Respondent himself, by his own actions in the management of the mine and the company’s affairs, so construed and acted upon the contract up until the time for the need of the money for the purposes contemplated had wholly ceased. Looking to the contract and all the surrounding circumstances, nothing could seem plainer than that there was no intent that the contract should have any binding force upon either the respondent or appellant after the mine should become a profitable working mine. Respondent not having sought to consummate the purchase of any portion of the stock under the contract until after the mine had become a profitable working mine and the need for the money for development work from that source had ceased, we are of the opinion that respondent cannot now have either specific performance of the contract or damages. Suppose the mine had suddenly, following the'making of the contract, yielded ore worth millions, as sometimes happens in the mining world, and the need of development money from the purchase price of the sale of stock under respondent’s contract had thereby ceased, is it possible that respondent could thereafter enforce the contract and acquire the stock at the nominal price therein specified? The mere asking of such a question.gives its own answer contrary to respondent’s contentions; yet the principle here controlling is the same as in the supposed case. It is sug-' — 254 — gested that the contract with respondent for the purchase of the stock was, in effect, a loaning of his credit to the company enabling it to proceed with the work of development. Plainly, we think, the contract had no such effect. There is no evidence that any workman or creditor ever contracted with the company relying upon or even having knowledge of this contract. The judgment is reversed and the action dismissed. Appellant mining company shall recover costs in this court. Ellis, C. J., Mount, Holcomb, and Chadwick, JJ., concur.