Miller v. Preston

Sloan, J., delivered the opinion of the Court. The plaintiff, appellant, C. Wilbur Miller, sued Richard M. Preston, James Bruce, Henry E. Treide, and G. Ridgely Sappington, who are the appellees here and the only defendants summoned, and six other persons, and four nonresident corporations, upon whom there was no service of summons. The declaration charges the appellees and Sir Auckland C. Geddes, William Sequine, Albert H. Wiggin, John N. Buchanan, Thomas Robbins, and John J. Watson, and Rio Tinto Company, Ltd. (of England), the Pyrites Com ³⁰⁴ pany, Inc. (of Delaware), the Chase National Bank, a national bank (of New York), and the Continental Illinois Bank & Trust Company (of Chicago, 111.), corporations, with “wrongfully and unlawfully” combining, confederating, and conspiring “each with the other to destroy, wreck, ruin, and impoverish the plaintiff financially and the plaintiff’s financial standing and status, his reputation for ability, and his credit in the financial world; to cause him to lose his fortune, estate and property in order that they might eliminate and destroy him as the controlling Executive and Managing President and ■Director of the Davison Chemical Company” and of the Silica Gel Corporation, a subsidiary of the Davison Chemical Company, and wreck and ruin both corporations, “with the view, object and purpose of acquiring them or a controlling and dominating interest in them for the Rio Tinto Company, Ltd., * * * and in the furtherance, prosecution and execution of said unlawful combination, confederacy and conspiracy the defendants did destroy, wreck, ruin and impoverish the plaintiff financially and the plaintiff’s financial standing and status, and his reputation for ability, and his credit in the financial world, and did cause him to lose and did deprive him of his fortune, estate, and property, and his property and investments in, and his position as the President and Executive head of the Davison Chemical Company and its various subsidiaries * * * whereby the defendant, Rio Tinto Company, Ltd., and the other defendants have wrecked and ruined the Davison Chemical Company and its many and various associated corporations, including the Silica Gel Corporation,” etc. The four defendants who were summoned demurred to the declaration, and, the demurrer having been sustained without leave to amend, the plaintiff appealed. The declaration, which covers twenty-nine printed pages of the record, is so full of details and generalties, in its narrative of the business transactions between the plaintiff and defendants, upon which the plaintiff relies for recovery of damages, that a brief, succinct, a clear ³⁰⁵ connected statement of the incidents and offenses relied on to show a conspiracy, would be no easy task.

Whether, on a trial of the facts, the plaintiff could sustain his allegations, we are not called on to, nor could we, express an opinion. By interposing a demurrer the defendants assume that he could prove them, but question their legal sufficiency. At this stage of the proceedings, the guilt or innocence of the defendants, the truth or falsity of the allegations, are not involved. It appears that in 1927 the defendants Geddes and Preston, chairman and managing director, respectively, of the Rio Tinto Company, visited Baltimore and the plaintiff’s home, the result of which was that “a plan was evolved whereby the Davison Chemical Company exchange 90,000 shares of Davison Chemical Company stock for 1000 shares of the defendant the Pyrites Company, Inc. (a wholly owned subsidiary of the Rio Tinto Company), with an agreement on the part of the defendant, the Rio Tinto Company, to purchase concurrently the said Pyrites Company stock at a figure equal to the market price at which the 90,000 shares of Davison Chemical Company stock was then selling on the market, or approximately $35.00 per share, rhaking a total purchase price of $3,150,000.” But when the transaction was ready for completion the Davison Chemical Company was notified to put only 35,000 shares in “the name of the Rio Tinto Company and 25,000 shares in the name of a nominee of said Rio Tinto Company, and to relieve the Rio Tinto Company of itself taking the 30,000 shares, and to permit said 30,000 shares to be disposed of to and through New York bankers.” The shares rose rapidly on the market to $65 per share, and Geddes, Preston, and Buchanan, the last-named financial director of the Rio Tinto Company, were charged with having made a personal profit of $20 per share out of 20,000 of the 25,000 shares “which they appropriated for themselves instead of for the Rio Tinto Company.” It then went on to say that these defendants Geddes, Preston, and Buchanan, through investment trusts in which they were ³⁰⁶ interested, had purchased so many shares of the Davison Company that, with the 35,000 shares held by the Rio Tinto Company, they held and controlled 100,000 shares of the Davison Company, or twenty per cent, of its stock, an amount equal to that of the plaintiff, so that their position in the Davison Company was equal to his.

The plaintiff here complains that “a great deal was being done by * * * Geddes, Buchanan and Preston behind closed doors, and that the cards were not on the table.” To this point we do not find that the defendants Rio Tinto, Geddes, Buchanan, and Preston did anything unlawful. If the plaintiff’s financial condition in 1927 was as good as alleged, he did not have to sell, and the defendants Rio Tinto, Geddes, Buchanan, and Preston were not obliged to buy, but, when they did buy, their position in the Davison Company was equal to the plaintiff’s, according to a statement in his declaration. The chief subsidiary of the Davison Company was the Silica Gel Corporation, the story of which appears in Miller v. Pyrites Co., (C. C. A.) 71 Fed. 2nd, 804, in the development of which the plaintiff alleges the Davison Company expended approximately $5,000,000. The plaintiff charges that in 1928 the defendants Geddes and Buchanan and the Rio Tinto Company suggested that Rio Tinto take over the development of silica gel in Europe and form a foreign company, to which would be allocated one-half of the advances theretofore made to Silica Gel by the Davison Company.

It is not necessary to detail the facts regarding this proposal, but the negotiations finally failed, with the result that “nearly $750,000 were thus imposed upon, and unavoidably borne, by the parent Silica Gel corporation.” The said “breach of faith upon the part of the said defendants began to shake the confidence of the plaintiff in said defendants’ English associates.” If the plaintiff suffered any damage personally from this transaction, it was as a stockholder of the Silica Gel Corporation, but that is another kind of case, which will be considered later in this opinion. ³⁰⁷ The next charge in the declaration ¡is that the defendant Thomas Robbins, described as an agent of the Rio Tinto Company, who was a frequent visitor at the plaintiff’s home, “was acting as a spy for and on behalf of the defendants” Geddes, Buchanan, Preston, the Rio Tinto Company, and the Pyrites Company, “with reference to the plaintiff’s private interests and affairs and the business concerns” of Davison and Silica Gel, and was transmitting information “relating to said matters to said defendants.” There is no charge that he committed any unlawful act or relayed to his principals any false or untrue information. Meanwhile Geddes and his associates were strengthening their position by a “constant accumulation of the shares of stock of the Davison Chemical Company.” A few months previous to the stock market crash of 1929, the plaintiff had on a negotiation for sale of the Davison Company to another large industrial corporation in the United States, and, while it was in progress, a Baltimore broker approached the plaintiff with an offer to buy control of the Davison Company, a purchase which would have involved an outlay in cash of from twenty-five to thirty million dollars, A meeting was later held at the office of Hallgarten & Company, in New York, when the plaintiff said he would have to know the name of the purchaser, suspecting that it came from abroad. The identity of the prospective purchaser was not disclosed, but later the broker advised him that the offer had come from the Rio Tinto company. Nothing came of it, so nobody was hurt; no one benefited.

Later, in the fall of 1929, Geddes plied the plaintiff with a number of personal questions for the purpose of ascertaining his stockholdings in the Davison Company and his financial obligations. In the summer of 1930, the Davison Realty Company, a subsidiary of the Davison Chemical Company, offered to the public, through bankers not named, its notes to the amount of $2,000,000 with an option for 30,000 shares of Davison Chemical stock at $30 per share. Miller v. ³⁰⁸ Hockley, (C. C. A.) 80 Fed. 2nd, 980. On the day of the public Offering, Geddes and Buchanan arrived in New York, “and became very indignant that said options had been granted the bankers without having been first offered to them.

They came to Baltimore and saw the plaintiff at the Davison Chemical Company office.” They “returned to New York and went to the banking house of the defendant, The Chase National Bank, and poured out their spleen against the plaintiff to the officers of that institution, where the Davison Chemical Company had banked for quite a number of years.” If they thought they had been ill treated by their associate in the Davison Chemical Company, in which they were as heavily interested as he, they may' have been indignant and may have given expression to their displeasure, but that would not prové anything unlawful or denote a conspiracy. Complaint is made of the consolidation of four New York Banks, “shortly after said Robbins returned to London,” namely the Chase, Park, and Seaboard Banks and the Equitable Trust Company, into the Chase National Bank. The Davison Company had an open line of credit with the four banks of $5,000,000, of which $2,000,000 was with the Chase Bank. James Bruce, one of the defendants, had been a vice president of the Park Bank, and on the consolidation became a vice president of the Chase Bank.

The plaintiff naturally was anxious about the effect the merger of the banks would have on the credit of the Davison Company, but “the defendant Bruce repeatedly assured the plaintiff that he need not worry about the Chase National Bank; that they would take care of him; but he was always evasive as to the amount.” In'the spring of 1931, Bruce came to Baltimore as president of the