Covenants in a contract between individuals who control a
corporation, in regard to disposition of its outstanding stock
construed in this case to import a personal responsibility on the
parties and not on the corporation.
In this case, the cause of action being not on the contract
alone, but also upon alleged fraudulent conduct, evidence as to
oral declarations of the defendant was admissible to show the
misrepresentations alleged as basis for the claim of fraudulent
inducement to make the contract and fraudulent use of the property
entrusted to the defendant thereunder.
Notice to either of joint contractors is notice to both.
A written paper offered and admitted as evidence of a demand and
not objected to as coming too late is not inadmissible because it
contains other matter. The proper course for the party objecting is
to ask an instruction limiting the effect of the paper to the
demand or else to base the objection on its coming too late.
A contract, providing that, in a specified contingency, the
interest of the parties surrendering control to the other party
shall revest in them in the same proportion and ratio as they held
on the making of the contract, was properly construed as
contemplating that
Page 233 U. S. 274
the surrendering parties be restored to the same proportionate
interest in the property as they held prior to the making of the
agreement. In affirming the judgment of the Supreme Court of the
Territory of Arizona which has been reduced by remittitur, this
Court does not necessarily hold that the rulings of the court below
were indubitably correct, and it also takes into consideration
Rev.Stat. Arizona 1901, par. 1588, providing in substance that the
trial court shall not be reversed for want of form if there is
sufficient matter of substance in the record to enable the Supreme
Court to decide the case upon the merits, and that excessive
damages may be remitted pending the appeal.
This Court is not lightly disposed to disturb the decision of a
territorial Supreme Court turning, as it does in this case, largely
upon local practice.
13 Ariz. 282 affirmed.
This action was brought by defendants in error against Tevis and
McKittrick, two of the plaintiffs in error, in a district court of
one of the counties of the then Territory of Arizona. The trial
resulted in a verdict and judgment in favor of plaintiffs below for
$132,000. On appeal, the supreme court of the territory held that,
because of error affecting the amount of the damages, $64,564.63 of
the verdict ought to be remitted, and that, upon the filing of a
remittitur, judgment should be entered in favor of plaintiffs below
for the remaining sum of $67,435.37. 13 Ariz. 120. Both parties
filed petitions for a rehearing, with the result that the court
adhered to its former view. 13 Ariz. 282. Plaintiffs having filed
the remittitur, judgment was entered in their favor for the
last-mentioned sum, and the present writ of error was sued out.
The controversy arises out of the following transactions. In the
year 1902, plaintiffs and defendants were stockholders in an
Arizona corporation known as the Turquoise Copper Mining &
Smelting Company, which owned mining properties in Cochise County,
Arizona. The stock consisted of 100,000 shares, of the par value of
$10 each, of which the Ryans together owned four
Page 233 U. S. 275
sevenths and Tevis and McKittrick owned three sevenths. The
Ryans were in control of the board of directors. About $160,000 had
been expended towards the development of the mines, and this had
been contributed by the respective parties in proportion to their
holdings of stock, plaintiffs having contributed about $90,000,
defendants about $70,000. One Bryant had secured a judgment and
levied execution upon the property of the company, under which the
mines had been sold on July 30, 1902, to one McPherson, subject to
redemption on or before January 31, 1903. In this situation of
affairs, plaintiffs met the defendant McKittrick in Wilcox,
Arizona, on November 29, 1902, and, after some negotiation, a
written contract was drawn up and by them signed. Defendant Tevis
was not present at this meeting, and the agreement was made
contingent upon his signing, as he did a few days later. It reads
as follows:
"This agreement, made and entered into this 29th day of
November, 1902, by and between W. S. Tevis and W. H. McKittrick of
Bakersfield, California, parties of the first part, and Jepp Ryan,
T.C. Ryan, and E. B. Ryan, of Leavenworth, Kansas, parties of the
second part,"
"Witnesseth, that, whereas the parties above mentioned represent
all the stock in the Turquoise Copper Mining & Smelting
Company, a corporation organized and existing under the laws of the
Territory of Arizona, and doing business in Cochise County,
Arizona, and"
"Whereas, the parties of the first part now own and control
three sevenths of the capital stock of the said corporation, and
the parties of the second part four sevenths of the capital stock
thereof; and"
"Whereas, the parties of the first part are desirous of securing
the controlling interest of the said capital stock of the said
corporation, and thereby obtain the full management of the affairs
of the said corporation;"
"Now therefore in consideration of, that the capital
Page 233 U. S. 276
stock of the said corporation shall be changed from its original
capitalization to one million shares of the par value of one dollar
each share, and that 240,000 of said shares of said capital stock
shall be placed in the treasury of the said company, to be sold in
whole or in part by the said parties of the first part at such
price or prices as the board of directors of said corporation may
deem advisable, and the moneys received from such sale or sales
shall be used as follows: first, to pay off and liquidate a certain
judgment held by T. B. McPherson, of Omaha, Nebraska, or his
assigns, against the said corporation, in the amount of about
$25,532.47 dollars. Second, to use the next $20,000 received from
the sale of said stock to develop the claims now owned and
controlled by this company; the parties of the second part hereby
agree to and with the parties of the first part, that the officers
in the said corporation now representing the interest of the
parties of the second part shall resign from said office or
offices, and allow the parties of the first part to appoint or
elect such officers in their place and stead as they may desire,
said second parties agree to give the parties of the first part as
their interest in the said company, a total of 280,500 shares of
the capital stock thereof, and the parties of the second part shall
receive as their portion 279,500 shares of capital stock of the
said company. That the remaining 200,000 shares shall be divided
between the parties hereto in the proportion of 101,000 shares to
the first parties, and 99,000 shares to the parties of the second
part; said 200,000 shares shall be issued to W. H. McKittrick, as
trustee for the parties hereto. All of the parties hereto agree to
use their best endeavors to sell as much of the said last-mentioned
shares as possible at not less than par value, and the proceeds of
any of such sales of said block of stock shall be divided
pro
rata among the parties hereto, until they have been fully
reimbursed for the money they now have expended upon this
property,
Page 233 U. S. 277
amounting to about $160,000, when the remaining shares shall be
divided equally among them, according to their respective
interests, in the ratio aforesaid."
"It is further understood and agreed between the parties hereto
that they shall not be allowed to sell any of their individual
holdings of stock in this company until the block of 200,000 held
in trust for all shall have been sold or apportioned, as above set
forth. The parties of the second part shall not be liable for any
expense connected with the operation of this company, excepting the
expense of selling the stock held in trust for the parties hereto.
The parties of the first part shall have a term of two years in
which to comply with all the requirements of this contract. Should
they fail or refuse to comply with all the agreements and
stipulations herein mentioned within the period aforesaid, then
this agreement shall become null and void and of no effect,
otherwise to remain in full force and effect. Should this contract
be annulled by any failure of the parties of the first part to do
any and all things herein required of them, then the interest of
the second parties shall reinvest in them in the same proportion
and ratio as they held and were possessed of at the signing of this
agreement."
"It is further understood and agreed by and between the parties
hereto that W. S. Tevis, not being present upon the signing hereof,
that ten days' time be allowed him in which to sign and ratify the
same. Should he fail or refuse to do so within the period above
mentioned, then this instrument shall be null and void in respect
to all parties hereto. All erasures and changes and interlineations
were made prior to the signing of this instrument."
"Witness our hands, the day and year first above mentioned."
In accordance with the agreement, a reorganization of the
company was effected, the Ryans resigned as directors, control of
the directorate passed to Tevis and McKittrick,
Page 233 U. S. 278
and the capital stock was changed so as to consist of 1,000,000
shares, of the par value of $1 each, which were allotted as
prescribed by the contract,
viz.:
To Tevis and McKittrick . . . . . 280,500 shares
To the Ryans. . . . . . . . . . . 279,500 "
To McKittrick as trustee. . . . . 200,000 "
Treasury stock. . . . . . . . . . 240,000 "
-------
Total . . . . . . 1,000,000 "
The mines of the company were redeemed from the sheriff's sale
with $30,000 loaned for the purpose by Tevis upon the company's
note. This note, with others given by the company for the interest
upon it, was transferred by Tevis to the Western Company of
California, a corporation controlled by him.
The reorganized Turquoise company did not prosper. Defendants
sold 32,000 shares of the treasury stock at 25� per share,
netting $8,000, and the remaining 208,000 shares at 3/4� per
share, netting $1,560. This money was spent in operating the mines
and in paying for a diamond drill, for patents, and for attorneys'
fees. In May, 1905, the Western Company secured judgment against
the company in a California court for the amount of the notes and
interest, aggregating $44,078.05, and an action was brought on this
judgment in Cochise County, Arizona, resulting on July 20, 1905, in
a judgment for $44,549.43. On this same day, McKittrick secured
judgment against the company for $9,975 for services as general
manager from May, 1903, to June, 1905. The following day (July 21,
1905), execution was levied against the mining properties to
satisfy the judgments of McKittrick and the Western Company, and on
July 11, 1906, the property was sold by the sheriff to that
company. A few days later, defendants, with others, organized the
Tejon Mining Company under the laws of Arizona, and two years
afterwards the Western Company conveyed the mining properties
Page 233 U. S. 279
formerly of the Turquoise Company to the Tejon Company.
The present action was commenced November 30, 1906, and, after
repeated modifications of the pleadings, came on for trial upon a
complaint which, besides setting up the above facts, averred that,
after two years from the 29th day of November, 1902, had elapsed,
and after plaintiffs were informed that defendants had failed to
sell the 240,000 shares of the Turquoise Company for sufficient
funds to pay the money advanced by them to redeem the property of
the company from the sheriff's sale, and before the action of the
Western Company against the Turquoise Company was commenced in the
California court, to-wit, on February 15, 1905, plaintiffs informed
defendants that they desired to be reinvested with their interest
in the property of the Turquoise Company, and to be restored to
their interest therein the same as before November 29, 1902, and
informed defendants that they were then ready, able, and willing to
pay defendants four sevenths of the sum of $25,262.60 paid to
redeem the property from the sale of July 31, 1902, and that
defendants ignored said request. There were allegations of
fraudulent conduct, in support of which certain evidence was
introduced, but these allegations seem to have been abandoned; at
least the trial judge submitted the case to the jury solely upon
the ground of a breach of the contract.
MR. JUSTICE PITNEY delivered the opinion of the Court.
The trial judge, in submitting the case to the jury,
Page 233 U. S. 280
adopted the following construction of the contract of November
29, 1902: That it provided for a general scheme to be carried out
within the period of two years; that control of the Turquoise
Company was to be given to defendants McKittrick and Tevis, and
with a board of directors of their own choosing they were to carry
on the business of the company, and within two years were to carry
out the plan for the rehabilitation of the company according to the
stipulations of the agreement; that they did not guarantee
successful results, but were simply to use their best endeavors to
carry out the plan; that, if there was a failure on their part to
do the things contemplated within the two years, this of itself did
not raise any legal obligation on their part to the plaintiffs; but
that if, at the end of the two years, the scheme contemplated by
the contract had not been accomplished, then defendants agreed to
reinvest plaintiffs with the interest they had at the time of
entering into the contract, provided plaintiffs demanded that
reinvestment. The jury were instructed that they should first
determine whether, at the expiration of the two years specified in
the contract, the situation was such that defendants were obligated
to reinvest plaintiffs with the four-sevenths interest in the
company that they formerly held. That if so, the next question was
whether plaintiffs ever demanded that they should be so reinvested,
for if there was no demand, there was no liability on the part of
defendants; but that, if plaintiffs did make such demand within a
reasonable time after the expiration of the two years, it was the
duty of defendants to comply with it; that certain evidence
introduced to show a written demand made at a time in the summer of
1906 should be rejected because such demand, if made, came too
late; but that, if the jury should find [as, in fact certain other
evidence tended to show] that a demand was made on defendants by
plaintiffs a few months following the expiration of the
Page 233 U. S. 281
two years, and in the early part of 1905, that was a reasonable
time in which to make the demand. The further instruction was that,
if there was a breach of the agreement by defendants in failing to
reinvest plaintiffs as they ought to have done, the next question
was the amount of the damages, and, as to this, that what
defendants agreed to do was to put plaintiffs back as nearly as
might be in the situation they were in when the contract was made;
that, at that time, the property was about to be foreclosed, and
subsequently money was raised to redeem it from the judgment, and
the money thus used became a debt against the company, and this
should be considered by the jury, because plaintiffs ought not to
be put back in possession of their interest in the property free
and clear of any such encumbrance as stood upon it when the
contract was made.
"So, if you should come to this question of damages at all, you
should ascertain the damages in this way: you should ascertain the
value of this mining property -- this property that was owned by
the Turquoise Copper Mining & Smelting Company -- at the time
the demand of the Ryans to be reinvested was made, if any such
demand was made at all -- ascertain first the value of that
property. Then deduct from that value the amount of this claim of
the Western Company which loaned this money, with interest, which
at that time amounted to at least $39,000. Then take that balance,
if there is any -- the value of the property, from which deduct the
$39,000, and if there is any balance left -- that belongs to the
plaintiffs and defendants in the proportion that they owned the
property -- that is, the Ryans four sevenths and Tevis and
McKittrick three sevenths. So the Ryans would be entitled to four
sevenths of the balance after you deduct from the value of the
property the amount of this Western Company's claim -- this
$39,000. And, of course, it follows that, if the value of the
property was not so much as $39,000, they would not be entitled to
anything. "
Page 233 U. S. 282
There were no requests for particular instructions, and no
specific objection to the instructions as given.
In the supreme court of the territory, the principal question
raised was as to the correctness of the instruction respecting the
measure of damages. In passing upon this, the appellate court
interpreted the contract as binding defendants (in the event of the
failure of the scheme, and a demand made for reinvestment) to turn
over to plaintiffs, not a four-sevenths interest in the mining
property, but a four-sevenths interest in the capital stock of the
company. At the same time, it was held that the trial court, in
apparently adopting as a measure of damages the four-sevenths
interest in the property of the corporation, did not actually
construe the reinvesting clause to extend to the property or the
mines of the corporation, but that the instruction was tantamount
to an instruction that plaintiffs were entitled to the value of
four sevenths of the capital stock, which was the equivalent of,
and was to be ascertained by determining from the evidence the
value of, four sevenths of the net assets of the corporation. And
the appellate court held, as to this, that the result was right,
and hence the judgment ought not to be reversed, though the
instruction as given might be open to criticism as to its form, and
even though the jury might have based their verdict upon an
incorrect theory.
But it was held that the measure of damages as applied by the
trial court was erroneous in failing to deduct from the valuation
of the four sevenths a proper allowance for the 279,500 shares of
stock of the Turquoise Company that had been retained by the Ryans
under the terms of the contract, and were still owned by them.
The court overruled certain minor contentions on the one side
and on the other, and, finding that the proximate damage resulting
from the breach of the contract was the loss of the value of the
stock that was agreed to be returned, and that the loss of the
value of the 279,500 shares
Page 233 U. S. 283
retained (attributed, as it was, to subsequent mismanagement of
the company by Tevis and McKittrick) was only a remote and indirect
consequence, and not such as was in contemplation at the time of
the making of the contract as a probable result of such breach,
held that there was error (and error only) in including in the
allowance of damages the loss of the value of the retained shares.
The court further found that the evidence and the verdict of the
jury afforded a basis for computing the correct sum to be awarded,
in that the jury, by its verdict, found in effect that the value of
the entire capital stock of 1,000,000 shares of the Turquoise
Company at the time of the breach of the contract was $231,000
(four sevenths of this sum being $132,000, the amount of the
verdict). Taking four sevenths of the entire number of shares (or
571,428 shares) and deducting the 279,500 shares retained by the
plaintiffs, there remained 291,928 shares, which, computed upon the
basis afforded by the verdict of the jury, yielded $67,435.37 as
the proper amount of the recovery. And under the provisions of
paragraph 1588 of the Revised Statutes of 1901 and the practice
approved in
Kennon v. Gilmer, 131 U. S.
22,
131 U. S. 29,
plaintiffs were put to their election to either remit the excess
beyond that amount or submit to a new trial, with the result
mentioned in the prefatory statement.
It is now contended by plaintiffs in error that the
interpretation of the contract adopted by the trial court, and
followed by the appellate court, respecting the question of
liability, is unwarranted by anything in the language of the
instrument. It is said that Tevis and McKittrick did not agree, as
the trial court held they did, that they personally would use their
best endeavors to do the things that were in contemplation. It is
said that the directors of the corporation were to fix the price of
the treasury stock, and to use the money derived from its sale in
the manner indicated; that Tevis and McKittrick were to be
merely
Page 233 U. S. 284
the agents of the board of directors (if that board should so
determine), without authority to fix the price of the stock, pay
the judgment, or use the money to develop claims, or in any other
way for the company's benefit; that, if the directors should fail
to hive such authority, Tevis and McKittrick could do nothing; that
they did not covenant or agree that the stock would sell for any
particular price, much less that it would sell for $20,000 more
than the amount of the judgment; that the terms of the agreement
show merely the expectations of the parties, which, as the event
befell, were not realized, and that the agreement and all its
stipulations were conditional upon the sale of the stock for a
sufficient price to meet the purposes indicated. The insistence is
that the Ryans simply sold and transferred a controlling interest
in the stock in consideration of a future authority to sell the
treasury stock for a price in nowise fixed, and that there was no
agreement that Tevis and McKittrick were to contribute or pay
anything to the company; that, as between the corporation and the
shareholders, the 240,000 shares of treasury stock were contributed
outright to the corporation, which, by the terms of the agreement,
had the right to sell it, and that Tevis and McKittrick did not
undertake to bind the company to return or pay for this stock.
The gist of the argument seems to be that Tevis and McKittrick
incurred no personal liability except possibly to see to it that
the capital stock of the company was changed from its original
capitalization (100,000 shares, of the par value of $10 each) to
1,000,000 shares, of the par value of $1 each, that 250,000 of the
new shares were placed in the treasury of the company, and that the
board of directors of the corporation fixed a price for the sale of
these shares.
The agreement shows on its face that it was not prepared by a
skilled person, and it requires construction. But we think it was
binding upon defendants at least to
Page 233 U. S. 285
the extent that the decision of the territorial supreme court
gave effect to it.
The argument for plaintiffs in error attributes too little force
to what is referred to as the "reinvestment clause,"
viz.:
"The parties of the first part shall have a term of two years in
which to comply with all the requirements of this contract. Should
they fail or refuse to comply with all the agreements and
stipulations herein mentioned within the period aforesaid, then
this agreement shall become null and void and of no effect;
otherwise to remain in full force and effect. Should this contract
be annulled by any failure of the parties of the first part to do
any and all things herein required of them, then the interest of
the second parties shall reinvest in them in the same proportion
and ratio as they held and were possessed of at the signing of this
agreement."
This imports at least that, if the project for rehabilitating
the company, in contemplation of which the Ryans divested
themselves for the time of the majority interest and control of the
company, should come to naught, they should be reinvested with the
same proportion of the stock of the company that they had held
before. But the company was not named as a party to the agreement,
and, even if treated as a party by implication, could hardly be
supposed to covenant for a transfer of the outstanding stock.
Hence, the covenant quoted could bind Tevis and McKittrick only,
who themselves were to be placed in control of the company, and of
the very stock that would need to be retransferred in order to
fulfill the stipulation. Consequently, it imports a personal
responsibility on their part to see to it that the Ryans were
"reinvested" in accordance with the terms of the covenant.
It is insisted that, if certain declarations of McKittrick, said
to have been made during the negotiations that immediately preceded
the signing of the contract, be eliminated, there is nothing in the
terms of the instrument
Page 233 U. S. 286
or in the circumstances under which it was made to warrant the
interpretation adopted. In this view we do not concur, for reasons
already indicated.
The declarations referred to are also said to have been
erroneously admitted. They were made by McKittrick in the absence
of Tevis at the interview of November 29, 1902. Jepp Ryan, one of
the plaintiffs, being called as a witness and asked to state the
conversation between McKittrick and himself, testified:
"He went out and had an agreement made and brought it up into
our room. 'Now,' he says, 'Boys, Mr. Tevis is a multimillionaire
and rich and influential, and by putting him in control of this
property, or giving us control of the property, we will try to
handle it so each of us can get all our money back.' I says,
'Captain, suppose you don't handle it, where do we come in.' He
says, 'If we don't sell the stock, we will return to you the
property the same as it is today.'"
It appeared that this was after the contract was drawn up and
before it was signed. A motion was made to strike it out "because
the contract speaks for itself." This, the only objection, was
overruled. Each of the other plaintiffs was permitted, over the
like objection, to give evidence of a similar import.
If the action had been based alone upon the written instrument,
there would be force in the objection to the introduction of parol
evidence of previous promises inconsistent with the terms of the
writing. But the action was not so limited. The pleading upon which
the parties went to trial (the third cause of action in the third
amended and supplemental complaint) relied not upon the contract
alone, but also upon alleged fraudulent conduct, beginning with
representations of the abundant means and property of the
defendants, on the strength of which, as was said, the plaintiffs
entered into the written agreement, and followed by alleged
fraudulent use of the control of the company that was turned over
to Tevis and McKittrick
Page 233 U. S. 287
in pursuance of the terms of the agreement. The evidence of the
oral declarations of McKittrick was admissible upon this question,
and the fact that the allegations of fraud were afterwards
abandoned, or were held by the trial court not to be sufficiently
supported, does not render erroneous the previous rulings upon the
admissibility of the evidence referred to.
For like reasons, we find no error in the testimony to show that
the Ryans were not notified until long afterwards that suit had
been brought by the Western Company against the Turquoise Company
in California, or that suit had been brought upon this judgment in
Cochise County, Arizona. Assuming for argument's sake that
defendants were under no duty to keep plaintiffs informed in regard
to the status of the company, and that the contract did not require
that they should do so, it nevertheless was a circumstance of more
or less significance upon the question of fraud that events of such
consequence to the company were not communicated to parties who
held legal and equitable rights such as the Ryans concededly
held.
It is contended that the appellate court erred in holding that
there was sufficient evidence to show a demand for reinvestment
made by plaintiffs upon defendants. The complaint alleged two such
demands, one on February 15, 1905, the other on August 26, 1906.
Plaintiffs introduced testimony in regard to an oral demand claimed
to have been made in May, 1905, and it was upon this alone that the
trial court permitted the case to go to the jury. It is contended
that this demand was insufficient because not made in proper form
nor made in a proper place, and made only upon McKittrick, and not
upon Tevis also. Assuming, as both courts held, that a special
demand was necessary, it seems to us that the oral demand referred
to is not open to the objections made to it. McKittrick and Tevis
were joint contractors, so that notice to either was
Page 233 U. S. 288
notice to both. And there is no doubt that it was sufficiently
specific to fairly warn defendants that they were called upon to
perform their engagement under the reinvestment clause.
Objection is made to the trial court's ruling, sustained by the
appellate court, admitting in evidence a written demand served by
plaintiffs upon defendants, marked Exhibit "K." This was a letter,
undated, but apparently written after July 11, 1906, and stated to
have been served upon defendants in September of that year. Its
admission was not objected to on the ground that it did not
evidence a proper demand (this, indeed, was admitted), nor on the
ground that the demand came too late, but only because of other
matters contained in the letter. The trial court having refused to
exclude it as evidence, subsequently instructed the jury that as a
demand it came too late to furnish a proper support for plaintiffs'
cause of action. The contention now is that, because of
self-serving declarations contained in it, Exhibit K ought to have
been excluded entirely from the consideration of the jury, and that
it was likewise inadmissible because it contained veiled charges of
fraud on the part of the defendants, and also offers of compromise
made by the plaintiffs. But we have already pointed out that the
action was in part based upon fraud, and we are not prepared to say
that the fact that Exhibit K contained insinuations attributing
fraud to defendants, coupled with the fact that defendants did not
respond to it, would not in some degree tend to support this
charge. It is sufficient, however, to say that the paper was
introduced as evidence of a demand, and was admissible for that
purpose (in the absence of objection based on the time of its
delivery), since it contained a notice that plaintiffs insisted
that defendants should comply, as well as might then be done, with
the provisions of the agreement. The fact (if it were a fact) that
it also contained matters irrelevant to the demand would not
Page 233 U. S. 289
render the document inadmissible. The proper course would have
been for defendants to request an instruction limiting the effect
that should be given to it by the jury, or, if intending to insist
that it came too late to constitute a proper demand, then to
exclude the paper from consideration. The present objection was not
properly raised at the trial.
It is insisted that the court erred in holding that plaintiffs,
under the averments of the complaint, were entitled to recover the
value of a four-sevenths interest in the stock of the company. The
basis of the objection is that such a recovery was inconsistent
with the cause of action set forth in the complaint, which, it is
said, sought a recovery of a four-sevenths interest in the property
of the Turquoise Company, and not the value of four sevenths of its
share stock. This is a mere question of pleading, and is
sufficiently disposed of in the opinion of the appellate court
below.
It is contended that there was error in sustaining the trial
court's instruction that the measure of plaintiff's damages was
four sevenths of the value of the mining company's property, minus
the indebtedness to the Western company. As already shown, however,
the appellate court did not sustain this interpretation of the
contract, but in terms rejected it, at the same time holding that
the trial court, in referring to the value of a four-sevenths
interest in the property of the corporation as a test for the
measure of damages, in effect reached a correct result through the
employment of inaccurate phraseology, and that, although the jury
may have found their verdict upon an incorrect theory, the error
was harmless and the judgment should not be reversed, because,
under the evidence, the rule adopted made no substantial difference
in the result, saving as to the 279,500 shares, and as to this the
error was easily cured by applying the proper correction, as above
mentioned.
Page 233 U. S. 290
Finally, the point is made that, assuming the alleged error of
the trial court could be cured by a remittitur, the ruling of the
supreme court and the remittitur as entered accounted only for the
279,500 shares that were retained by the Ryans under the contract,
and it is insisted that the 200,000 shares of trust stock to which
McKittrick held the legal title, with the 240,000 shares of
treasury stock, the legal title to which was in the company, and
over which defendants had no control except in their capacity as
directors of the company, should have been deducted from the entire
share capital of 1,000,000 shares, and the plaintiffs allowed only
the value of four sevenths of the difference, less the 279,500
shares that they retained. Without spending further time in
discussion, we will simply say that, in our opinion, the view
suggested is inconsistent with the terms of the covenant, which
were that, in the contingency provided for, "the interest of the
second parties shall reinvest in them in the same proportion and
ratio as they held and were possessed of at the signing of this
agreement." This, we think, contemplated that they should be
restored to the same proportionate interest that they held prior to
the making of the agreement.
In affirming the judgment, we are not to be understood as
holding that the rulings of the court below were indubitably
correct. In dealing with the instructions of the trial court
respecting the mode of ascertaining the damages, and in permitting
the filing of a remittitur, and affirming the judgment for the
residue of the verdict, the supreme court of the territory acted
under Revised Statutes of Arizona 1901, paragraph 1588, which
provides in substance that there shall be no reversal on an appeal
or writ of error for want of form provided sufficient matter or
substance be contained in the record to enable the court to decide
the cause upon its merits, and also provides for remitting
excessive damages pending the appeal. The record in the present
case came fairly within the purview of
Page 233 U. S. 291
this provision. And we are not disposed to lightly disturb the
decision of a territorial supreme court turning so largely, as this
does, upon the local practice.
Phoenix R. Co. v. Landis,
231 U. S. 578,
231 U. S. 579;
Work v. United Globe Mines, 231 U.
S. 595,
231 U. S. 599;
Montoya v. Gonzales, 232 U. S. 375,
232 U. S.
376.
We have dealt with all the questions that appear to have been
raised in the supreme court of the territory. Others we need not
notice.
Gila Valley Ry. Co. v. Hall, 232 U. S.
94,
232 U. S.
98.
Judgment affirmed.
