Davis v. Gemmell

Robinson, J., delivered the opinion of the Court. This is a bill by the appellees, as stockholders of the North Branch Company, to restrain the collection of a judgment of $15,000, recovered by William A. Brydon against the Baltimore and Ohio Railroad Company, and to have the entry of said judgment to the use of Henry G. Davis .& Co. stricken out, and the judgment itself declared to be the property of the North Branch Company. This Company Ayas chartered in 1861, with a capital stock of $100,000, divided into 1000 shares. The appellees now hold certificates for 498 shares, and the remaining shares are held by William A. Brydon, the President of the Company.

Although the holders of the certificates of stock, the appellees, it is contended, are not bona fide oAvners of the stock for value, and this is the first, and in our view, the main question in the case. As Sinclair is claiming under Gemmell, his title will be considered as depending on the title of Gemmell. The whole capital stock of the North Branch Company, it is admitted, was paid for, not in money, but by the conveyance to the Company of a tract of land called “ Llangollan,” afterwards knoAvn as the “Bloomington ³⁵⁹ property,” and later still as the “ North Branch Mine,” containing two hundred and fifty acres. This property, according to Brydon’s testimony, was bought by him of the Gouverneurs, in May, 1864, for $4600, hut owing to some difficulty about the title he did not get a deed till October following, at which time he paid $1000, and gave a mortgage for $3600, the balance of the purchase money, and which still remains unpaid.

He was, at the time of the purchase, the superintendent of the Hampshire and Baltimore Coal Company, and Gemmell was its president, living in New York. Some time in the summer of 1864, Gemmell, while on a visit to the Hampshire Mine, went with Brydon to look at the Llangollan purchase, and after a careful examination of the coal, expressed himself as being pleased with its quality, and said he should like to buy for himself some of the six foot vein coal jjroperty. Brydon then told him that the Smoot and Miller property adjoining was for sale, and, at his request, Brydon promised to make an effort to secure for him the option of purchase. In August of the same year Gemmell went to England, and on his return in the latter part of January, 1865, he made a second visit to the Hampshire Mine, and during this visit Brydon informed him that he had been unable to make any arrangement for the purchase of the Smoot and Miller tract.

After some further conversation, Brydon, at Gemmell’s request, agreed that he should have a joint interest in the Llangollan property, upon condition that he should pajr one-half of the purchase money, and also contribute one-half of the money necessary to open and develope the mine. In pursuance of this agreement, the Savage and North Branch Company was in a few few weeks afterwards organized, with a capital stock of $250,000, and Brydon conveyed to it the Lian ³⁶⁰ gollan tract, with the exception of fifty acres reserved hy him for a dwelling-house, and some lots reserved for building purposes. Immediately upon the organization of the Company, they began to open and develope the mine, and by January, 1866, no less than $11,000 had been expended in mine improvements. Brydon further testifies, that Gemmell has never paid any thing, either towards the purchase money, or towards the moneys expended in improving the property.

On the other hand, Gemmell testifies, that the Llangollan mine was purchased by Brydon of the Gouverneurs on the joint account of Brydon and himself, with the view of organizing a coal company; and that the Savage and North Branch Company was incorporated, and the property conveyed to it by Brydon in pursuance of this agreement. And, further, that he has fully paid not only half the purchase money, hut also one-half of all the expenses incurred in its’improvement, and that his interest in the property, and his title to the stock now held by him, and the stock transferred to Sinclair, were never questioned by Brydon till after the recovery of the judgment of $75,000 against the Baltimore and Ohio Railroad Company. If the case rested here, there might be some difficulty in getting at the real merits of this controversy. But, fortunately, we are not obliged to decide this case upon the conflicting testimony of the parties themselves, taken after this litigation had begun.

On the contrary, all through the eight hundred pages of this record, is to he found the correspondence between Brydon and Gemmell, in reference to the purchase of this property, and their respective rights and interests in it, beginning as far hack as June, 1864, before the Gouverneur deed to Brydon, and coming down to May, 1875, when the coal contract with the Baltimore and Ohio Railroad Company was made, for the breach of ³⁶¹ which the judgment was recovered; and in addition to this, we have exhibits and statements in regard to the dealings and transactions between them, all in the handwriting of Brydon himself, made years ago, when there could be no object to misrejsresent, which show beyond question, that Gemmell was not only a joint purchaser of the Llangollan tract, but that he has paid, and more than paid, his one-lialf of the purchase money, and one-half of all the moneys expended in opening and developing the mine. The statement now made by Brydon, that he bought the Llangollan property of the Gouverneurs in May, 1864, on his own account, and that he never agreed to let Gemmell have an interest in the purchase till January, 1865, is not consistent with his written declarations made at the time. In a letter to Gemmell, dated 3rd of June, 1864, nearly six months before he got the Gouverneur deed, referring to the trouble about the title to the property, Brydon says, “ The son (Gouverneur’s son) who, as you are aware, has a half interest in the property, finding, as I suppose, that I have got the best of the old man, is making himself troublesome. ‘ If I find the young man obstinate, I have got a tack which may run them ashore, if I am driven to it.” . Ten days afterwards, June 11th, he writes again, “ My visit to Frederick was not altogether a success.

The true title is in Thomas Devecmon as trustee. All Devecmon has to do is his duty as Gouverneur’s trustee and my lawyer, and all must come right.” In August following Gemmell went to England, and in a letter to him dated 26th of September, 1864, Brydon says, “I have still been unable to close this Blooming-ton property (the Gouverneur property). The son manifests the most obstinate nature possible, but I have got Devecmon at last fully alive to the necessities of my case. I feel confident that he will shape things to our wishes.” ³⁶² Now, the agreement for the purchase was made in May, 1864, and from that time in letter after letter, Brydon keeps Gemmell fully advised as to the trouble about the title to the property, and the steps taken by him to overcome the objections made by Gouverneur’s son; and in September, just before he got the deed, he expresses himself as being confident that Devecmon “will shape things” not according to my wishes, but according “to our wishes.” And in corroboration of these letters, Gemmell says, before leaving for England, he had some conversation with Brydon in reference to the purchase of a coal cutting machine to be used in the mine.

Now, in a letter to Gemmell after his arrival in England, dated 23rd of October, 1864, Brydon says: “Remember if the machine proves a success here, from the location, including the depot right toe own, and remembering the revolutionary state of things it would produce at the North Branch, would render our property ten fold the estimated present value. * * * Should the expected suspension of coal business take place it would give us a considerable lift in opening our mines.” On the 26th October three days after the above letter, referring to Gemmell’s proposition to convey a one-half interest in the property in return for a one-half interest in the new coal-cutting machines, Brydon says “I have given the subject in regard to our contemplated company’s affairs much of my mind since my letter from Baltimore. What do we get in return for one-half of our property, is simply a single machine, &c.” In these letters all written in 1864, before and immediately after the execution of the Gouverneur deed, he speaks of the property as “our property,” the depot right as one “we own,” “the lift in opening our mines” and “the subject of our contemplated company’s affairs.” And now he testifies that Gemmell never ³⁶³ had any interest in the Gouverneur purchase till after his return from England in January, 1865. So much, then, for the corespondence between the parties prior to the organization of the Savage and North Branch Company. This company was incorporated in February, 1865, and Brydon says Gemmell never had any stock of his own in this company.

And yet in a letter to Gemmell dated 2nd of February, 1865, in reference to an arrangement which they were entering into with the Messrs. Rieman & Co. for the sale of coal from the Savage and North Branch Mine, Brydon says, “On my return to Baltimore, I saw Messrs. Rieman & Co.,” and “entered into what I regard, taking into consideration their character and influence, an exceedingly favorable and advantageous arrangement for hauling our coal. As I found Mr. R. possessing quite a stock mania, as a sugar plum I promised him 300 to 400 shares of our stock.” And on the next day, Feh. 3rd, “ I write this second edition to inquire if you have any, and if so, what objection, to me selling, if I can accomplish the sale, of one-half of the stock of our company, to Rieman & Co. for say $50,000 cash?” In the meantime Gemmell, as president of the Hampshire Company, it seems, had made a contract with Rieman & Co. to supply them with Midland Coal from a mine belonging to that company; and in a letter to Gemmell, February 13th, Brydon speaks of Gemmell’s having sacrificed secondary to primary interest, and says that he (Brydon) must either sell out or become the absolute owner of,the company.

Now in all this correspondence Gemmell’s interest in the Gouverneur purchase, and his rights as a stockholder in the Savage and North Branch Company are admitted and recognized by Brydon in the most explicit and unqualified terms. But this is not all. Immediately upon the organization of the new company, they began to open the ³⁶⁴ mine, and by the 1st January, 1866, they bad expended about $11,000 in mine improvements. All the money thus expended was advanced by the Hampshire Company, and in part settlement of this indebtedness, the Savage and North Branch Company gave to the Hampshire Company, its note for $5440.88, and the balance of the $11,000 was paid to the Hampshire Company,as we shall hereafter see, by Henshaw & Co., and charged to Brydon and Gemmell, one-half each, both of whom were members of that firm.

The efforts, however, to operate the mine proved unsuccessful, and being unable to pay its debts, the Savage and North Branch Company, with the consent of all parties in interest, and with the view of organizing a new company made an assignment of its property to Messrs. Kean and Devecmon for the benefit of its creditors. On the 6th April, 1861!, all its property was sold to E. R. Brydon brother of William A. Brydon for the nominal sum of $10,000. In the audit of the trust estate William A. Brydon filed an account of $11,000, being the amount expended in improving the Savage and North Branch Mine, and being the sole creditor, the entire proceeds of sale were audited to him.

On the 26th February, 1868, the entire property of.the company was conveyed to E. R. Brydon, and on the same day, he conveyed it to the North Branch Company, which had been organized as the successor of the Savage and North Branch Company, with a capital stock of $100,000 divided into 1000 shares. On the same day, E. R. Brydon subscribed for 994 shares of the stock of the new company, all of which were issued to him as full paid shares, in consideration of the property thus conveyed by him to the company — the remaining six shares being distributed among the six incorporators named in the charter. Of the 994 shares thus issued to E. R. Brydon, he on the 2nd May trans-. ³⁶⁵ ferred 487 shares to William A. Brydon, and 487 shares to Gemmell, and .10 shares to Alexander Gemmell. It thus appears, that the whole capital stock of the North Branch Company was paid for by the conveyance to it, of the property of the Savage and North Branch Company, and its stock was issued to E. R. Brydon, and by him transferred to William A. Brydon and Gemmell, who were in fact the real purchasers of the Savage and North Branch Mine.

In all these proceedings Gemmell is fully recognized as joint owner of the stock of the Savage and North Branch Company, and when that company wen.t out of existence and the North Branch Company, its successor, was incorporated, 487 shares of its stock was issued to him as full paid shares with the knowledge and consent of William A. Brydon. And yet, in the face of all this, Brydon now testifies that Gemmell never paid a dollar on account of the purchase of the Savage and North Branch Mine, nor on account of its improvement, and that he considered Gemmell as having forfeited all right to be considered as joint owner of the property, as far back as January, 1866. But further than this, in a letter to Gemmell 5th May, 1868, only three days after the 487 shares of stock had been transferred to him, Brydon says, “On examination I am now fully satisfied that your views in regard to the notes, &c., are perfectly correct. E. B.

(E. R. Brydon) simply deeded the property unincumbered to the company for $10,000, receiving as it were the 994 shares of stock at that valuation. As the money was paid by us, he, of course, transferred, the stock to us.” Here, then, is an unqualified admission by him that the 487 shares of stock of the North Branch Company were transferred to Gemmell and himself, in consideration of the payment by them of the purchase money of the property which E. R. Brydon had conveyed to that company. ³⁶⁶ But this is not all, in a letter to Gemmell, 30 April, 1861, Brydon says: “Judge Hammill yesterday requested me to say to you that he would give you $1000 cash in hand for your half interest in the Warnock property. Now, as I stated to you that in consideration of the reservation in the Bloomington property (the Gouverneur purchase,) made for the benefit of myself, I gave you a]] the interest in this transaction I had acquired hy the payment of $825.” Now if Gemmell had forfeited all right to he considered as joint owner of the Gouverneur purchase in January, 1866, hy reason of his failure to pay anything either towards the purchase money, or towards improving the property, and Brydon was himself the sole owner, we cannot understand why in 1861, more than a year aftewards, he should treat Gemmell as owner of the Warnock property, which Brydon had agreed to give him in consideration of the fifty acres reserved hy Brydon in the deed of the Gouverneur tract to the Savage and North Branch Company. If Gemmell had forfeited all interest in the stock of that company, he had forfeited all interest too in the Warnock property.

But passing from these admissions and declarations on the part of Brydon, we come to the letters of Gemmell to Brydon, after the incorporation of the North Branch Company. From the time of its organization in 1868 down to 1814, no further efforts were made to work the mine. In the latter year however, the Baltimore & Ohio Railroad Company was induced to try the use of the six foot vein coal of the North Branch mine. And in a letter to Brydon, 21st of July, 1814, Gemmell says: “I think money can he made by the working of the mine if it is managed in a systematic and economicnl manner.

I will give you my ideas and state what I expect to he done as owner of nearly a moiety of the stock.” He then goes on to say: “Regular ³⁶⁷ and accurate accounts must be kept," &c., and that “we must not think of using any of the company’s funds for our personal purposes till we get the company squarely on its legs." He makes Sinclair his representative, and expresses a wish in this letter, that he shall be consulted in all matters connected with the operating of the mine. In the meantime Gemmell transfers 200 shares of North Branch stock to Sinclair, and in August 1814, Brydon, as president, issues new certificates of stock to both Gemmell and Sinclair, and this, too, upon the request of Gemmell in a letter distinctly claiming the ownership of the stock. Again in a letter to Brydon dated 26th of September, 1814, Gemmell says: “In starting the mine now, it is absolutely necessary that you start right in the matter of accounts, and I, as owning about half the stock, claim it as due to me." We might refer to quite a number of other letters containing like admissions and declarations, both on the part of Brydon and Gemmell, but this we deem unnecessary. All of this correspondence between them took place years ago, and at a time when there was no motive to misrepresent the facts in regard to the rights and interests of the parties in the Gouverneur purchase,’ and in the stock of the Savage and North Branch, and the North Branch Companies; and it shows how utterly groundless is the contention now set up by Brydon.

It shows not only his own repeated admissions of Gemmell’s interest in the original purchase of the Gouverneur tract, and his rightful ownership of the stock transferred to him, but also the demand on the part of Gemmell to advise and direct the management of the mining property on the ground of his ownership of one-half of the stock of the company. In addition to this, the memoranda and statements made out by Brydon himself show the payment by Gemmell of his one-half of the purchase money of the Gouv ³⁶⁸ erneur property, and of the money expended in its improvement. To understand these it is necessary to refer briefly to some facts about which there is no dispute. In 1862, a co-partnership was formed between Brydon and Gemmell and E. R. Brydon for the purpose of carrying on a' general merchandise business.

This firm lasted one year, and a new firm was formed under the name of “W. E. Henshaw,” the partners being W. A. Brydon and Gemmell — Henshaw being merely employed as manager of the store. This partnership lasted till September, 1865, when a new one was formed under the name of “W. E. Henshaw & Co.,” with Brydon and Gemmell and Henshaw all as equal partners, and which continued till 1868, when it was dissolved by the withdrawal of Brydon. During the whole period of these several partnerships, Gemmell was president of the Hampshire Company and lived in New York and Baltimore, and Brydon was its superintendent living at- Bloomington, Avhere the store was carried on. Now the Savage and North Branch Company gave to the Hampshire Company, as we haAre seen, its note for $5440.80, in part settlement of the $11,000 advanced by that company for mine improvements.

The amount due on this note was subsequently reduced by credits to $3180, and this sum was secured by a mortgage on the property of the North Branch Company, and which still remains un]3aid. And the question is, how was the balance of the $11,000, amounting to between five and six thousand dollars, paid to the Hampshire Company? This, the balance sheet of Henshaw & Co. made out by Brydon himself in- May, 1868, shows was paid by that firm, and charged to the accounts of Brydon and Gemmell. This balance sheet shows that Brydon had spent his entire capital, and Avas indebted to the firm $801165, and among the debits ³⁶⁹