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Alger v. Brighter Days Mining Corporation, a Corp.

Supreme Court of Arizona

June 25, 1945

MARY JANE ALGER, Surviving Wife of S.W. Alger, Deceased, CARL C. KATLEMAN and MAURICE KATLEMAN, Appellants,

Page 347

APPEAL from a judgment of the Superior Court of the County of Mohave. J. W. Faulkner, Judge.

Judgment affirmed.

Mr. Carl D. Hammond, for Appellants.

Mr. Nicholas Martini, of Passaic, New Jersey, and Mr. Charles P. Elmer, of Kingman, Arizona, for Appellee Brighter Days Mining Corporation.

Mr. Charles P. Elmer, for Appellees George M. Mitchell, Jr., and William Hemingway.

Morgan, J. Stanford, C. J., and LaPrade, J., concur.


Morgan, J.

Page 348

[63 Ariz. 137] Plaintiffs were stockholders in Samoa Gold Mines Corporation. They brought this action on behalf of the corporation and its stockholders. The individual defendants constituted the board of directors of the Samoa Corporation. Defendants Mitchell, Hemingway and MacEvoy organized and were directors and officers of the Brighter Days Corporation. Both corporate defendants are Delaware corporations and were qualified to transact business in Arizona. They will be referred to as Samoa and Brighter Days respectively. The former corporation was organized about the year 1931, acquired and was until 1938 the legal owner of and in possession of three patented and seven unpatented mining claims [63 Ariz. 138] in Mohave County. During the year 1937, in a lien proceeding instituted by the plaintiff Alger, all of the property of Samoa was bought in by him at sheriff's sale. On February 9, 1938, he assigned his sheriff's certificate of sale to Tarr, McComb and Ware Commercial Company at Kingman. This concern was a creditor of Samoa and entitled to redeem from the Alger sale. The sheriff's deed was delivered to the Commercial Company which then became the legal owner of the property. It executed and delivered to Samoa an option providing for monthly payments beginning March 21, 1938, with eight per cent interest per annum on unpaid balances. Only one payment was made by Samoa, that of March 21st. The Commercial Company gave notice of forfeiture which became effective not later than July 13, 1938.

The corporation was without funds to either take up the option or to continue with the development of the mining property. It owed $ 7,500 to the Schroeder Trust Company of New York. The directors, the individual defendants, informally got together and agreed that under the circumstances it would be well to form a new corporation to take over the property. All of the stockholders in the old company who had paid cash, or its equivalent, for stock, were to be taken care of in the new company. Pursuant to this agreement, arrangements were made whereby one Allen J. Benz, Jr., a New Jersey lawyer, purchased the property from the Commercial Company, taking title in his name by deed executed July 19, 1938. During that month the defendants Mitchell, Hemingway and MacEvoy caused to be organized Brighter Days, its corporate structure

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being the same as Samoa, 1,500,000 shares, par value one dollar per share. On October 4, 1938, Benz deeded the property to Brighter Days for a consideration of 1,000,000 shares. The final disposition of this stock was not disclosed. Part of the issue, the amount not shown, was assigned to [63 Ariz. 139] Mitchell, Hemingway and MacEvoy, who were at that time respectively president, vice president and secretary of that concern and a majority of the board of directors. The company sold a considerable amount of stock, took possession of all of the property, and began operations thereon which apparently continued up to the time when this action was instituted. Some stock in the new company was issued to stockholders of the old corporation. The charter of Samoa was forfeited for nonpayment of taxes or fees by the state of Delaware about April 1, 1938.

The object of the action was to declare the deed to the Brighter Days to be void, and the defendant Samoa to be the owner of the property with the right to possession thereof. Damages were sought against Brighter Days and against defendants Mitchell, Hemingway and MacEvoy for ...

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