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Consolidated Tungsten Mines, Inc. v. Frazier

Supreme Court of Arizona

January 20, 1960

CONSOLIDATED TUNGSTEN MINES, INC., an Arizona corporation, Appellant,
H. FRAZIER, George W. Denton, Lon A. Fuller, Clint Camp and J. M. Cobb, Appellees.

Rehearing Denied Feb. 24, 1960.

Page 735

[87 Ariz. 129] Palmer C. Byrne, Prescott, for appellant.

Edward B. Ashurst, Wichenburg, for appellees.

PHELPS, Justice.

[87 Ariz. 130] This is an appeal from a judgment in favor of defendants and against plaintiff in an action instituted by plaintiff-appellant against defendants-appellees to quiet title in and to certain mining claims located in the Eureka Mining District, Yavapai County, Arizona. The judgment entered decreed that plaintiff-appellant take nothing by its complaint, ordering the dismissal thereof and that title be quieted in defendants-appellees on their counterclaim. The parties will be hereinafter designated as plaintiff and defendants respectively.

Defendants in their answer to plaintiff's amended complaint have denied it in part and affirmatively alleged that they lawfully located the mining claims involved here at a time when they were open to location, and are now the owners thereof. In addition thereto they filed a counterclaim in which they sought to quiet title in Payday claims 1 to 6 inclusive. Their original notices of location covered ten claims designated as Payday 1 to 10 inclusive, which involved the same area covered by plaintiff's claims but defendants thereafter filed a disclaimer of any and all interest in Payday claims 7, 8, 9 and 10.

In answer to defendants' counterclaim plaintiff alleged in a separate and affirmative defense thereto that J. M. Cobb, a stockholder in plaintiff corporation and managing director of its business and mining operation, and in complete control thereof, did with intent to cheat and defraud plaintiff induce one W. R. Daugherty, then residing at Clovis, New Mexico, to enter upon the claims of plaintiff on July 1, 1954 with instructions to him to relocate said claims in his name; that he informed Daugherty that said claims would be open for location on that date because of the failure of plaintiff to do the assessment work for the year July 1, 1953 to July 1, 1954; that he and some men in Texas were interested in said claims but that none of them intended to 'mess' with them any more and he was unable to do any further work thereon; that Cobb then and there knew that such statements were false and made them for the purpose of depriving plaintiff of its lawful interest in said claims. It further alleged upon information and belief that Cobb and defendants had entered into a conspiracy to perpetrate a fraud upon the other stockholders in plaintiff corporation. Plaintiff then prayed that, upon the ground of fraud, defendants' counterclaim be dismissed or in the alternative that the legal title to said claims be decreed to be held in trust by defendants for the benefit of plaintiff.

The facts are that plaintiff was incorporated in 1951 by J. M. Cobb and his Texas associates and the claims here involved were conveyed to it under the direction of Cobb subject to the paramount title of the

Page 736

United States. It continued to be the owner thereof until July 1, 1954 and of course is still the owner unless the location of said [87 Ariz. 131] claims by Daugherty on that date terminated said ownership. During the year 1952 plaintiff was actively engaged in mining, taking out what was classified as tungsten ore of undetermined value. The expenditures made in this work was far in excess of the annual labor required in the form of assessments for the year July 1, 1952 to July 1, 1953. However, no affidavit was filed with the County Recorder of Yavapai County showing such work had been performed.

During this period of time J. M. Cobb was, as alleged in plaintiff's answer to defendants' counterclaim, one of the incorporators and a stockholder in plaintiff corporation and manager thereof, and had been given complete charge of its business and mining operation by the Board of Directors of said corporation. He had expended eightly to one hundred thousand dollars furnished him in large part by his Texas associates in the operation of said mine and the purchase of equipment, construction of bunkhouses, etc. However, the assessment work for the year July 1, 1953 to July 1, 1954 was not performed nor was any affidavit filed with the County Recorder of Yavapai County within three months after July 1, 1954 showing said work had been performed prior to July 1, 1954. An affidavit was filed however by one Garth Brown, an employee of plaintiff, purporting to show that the required amount of work had been done upon said claims on behalf of plaintiff between the 1st of July, 1954 and the first day of September 1954. Thirty-five hundred dollars were sent to Cobb during 1953, amply sufficient to do the assessment work, but was used by Cobb prior to June 1953 for paying debts, according to his testimony. During the same period he sold machinery of plaintiff purchased the year previously for approximately $2,000, which he testified was also used for paying debts, including his expenses. Cobb made no accounting to plaintiff at any time for the money spent by him and did not turn over the books of account to plaintiff.

We are presented with eight assignments of error by plaintiff. Assignment No. 1 charges that the Court erred in denying its motion for a new trial giving as its reason therefor that the evidence shows that plaintiff had not done its assessment work for the year July 1, 1953 to July 1, 1954. Plaintiff contends that the evidence conclusively shows that such assessment work was performed by it. There is no evidence whatever to support this claim. The affidavit filed by plaintiff in support of this claim shows that the assessment work was done between July 1, 1954 and September 1, 1954. The law is clear that this work had to be done on or before July 1, 1954. There are no decisions to the contrary. The statute is clear on the point. Its only value is that if Cobb had notified his Texas associates of the imperative need [87 Ariz. 132] that plaintiff's assessment work on its claim be performed prior to July 1, 1954, they probably would have done their assessment work prior to July 1, 1954, instead of doing it after that date.

Assignments No. 2 and 4 are to the effect that the Court committed reversible error in not admitting a typewritten statement bearing on October date purporting to show that a compressor was rented by one Edgar Kellis to Cobb, and delivered to him at the mine October 1, 1954, which, if true, would indicate defendants did not complete their location work within ninety days after locating the claims involved. Such a writing constitutes no part of a bookkeeping entry which entitles it to be admitted into evidence under the provision of A.R.S. ,s 12-2262; 16 A.R.S. Rules of Civil Procedure, Rule 44(q). Mr. Kellis took the witness stand and on cross-examination testified to the date the compressor was delivered. The typewritten statement could have been prepared at any time. It added nothing whatever to the testimony of Kellis. It was not error to reject its admission.

Page 737

Assignment No. 3 based upon an alleged failure of consideration for the quitclaim deed from Daugherty to defendants for which he, at the time of delivery, received a note from defendants for $10,000 is wholly without merit. The fact that Daugherty attempted to repudiate the deal and return the note does not alter the fact that the note constituted a valuable consideration for the delivery of the quitclaim deed.

The Court will next consider assignments No. 7 and 8 and later revert to assignment No. 6. With reference to defendants' instruction No. 6 given by the Court, which forms the basis of assignment No. 7, we hold the instruction correctly states the law in every particular. It assumes no fact for its basis as claimed by plaintiff. The record clearly shows that no assessment work was done during the year July 1, 1953 to July 1, 1954, but does clearly show that the only assessment work done by plaintiff was done during the year between July 1, 1954 and September 1, 1954, and as the Court correctly instructed the jury, it did not have the effect of reviving any legal rights of plaintiff in and to such claims which it had under its original location if Daughtery's locations were valid. Frazier v. Consolidated Tungsten Mines, 80 Ariz. 261, 296 P.2d 447. Title 30, U.S.C.A. § 28, clearly provides that:

'* * * The period within which the work required to be done annually on all unpatented mineral claims located since May 10, 1872, including such claims in the Territory of Alaska, shall commence at 12 o'clock meridian on the 1st day of July succeeding the date of location of such claim.'

[87 Ariz. 133] It therefore necessarily ends on June 30 of that year.

Assignment No. 8 was abandoned by counsel for plaintiff during the course of argument and will therefore not be considered by the Court.

Assignment No. 5 presents a more serious question. It is claimed by plaintiff that the Court committed reversible error in striking from its answer to defendants' counterclaim the defense of fraud alleged to have been committed by J. M. Cobb, organizer of plaintiff corporation, a stockholder therein and managing director of its business and mining operation from its organization up to and sometime in 1954. The fraud alleged is hereinabove set out in detail.

It will be necessary to carefully examine the evidence bearing upon the subject in order to determine whether the ruling of the Court in striking plaintiff's defense of fraud from its answer to defendants' counterclaim constitutes reversible error, and, of course, it must be considered most favorably toward sustaining the judgment of the trial court.

We should perhaps first observe that Mr. Cobb's testimony is not entirely consistent. He was asked the questions:

'q. In other words, you had complete charge of the mining operations on this group of claims? A. I did.

'Q. And how long did you continue as Managing Director in charge of complete mining operations on these claims? A. Could still be Managing Director today. I have never been notified of any other charge.

'Q. You are still Managing Director? A. Just orally sometime during the year of, latter part of '53, I heard orally, and I don't remember who that was from that I was out of the company, that they had reorganized.

'Q. Have you at any time ever submitted your resignation as Managing ...

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