Phillips Petroleum Company, a Corporation v. Rock Creek Mining Company, a Corporation

MEMORANDUM OPINION

Rock Creek Silver-Lead Company (RCSL) was a closely held corporation which owned 36 lode mining claims in a rich mining district in Idaho. J. H. Christman owned 36% of its shares and Forrest Messer held 33%; thus, between them they held more than % of all outstanding shares. Each served as an officer and director of the company. When not attending to the affairs of the company, Messer, a retired miner, worked in a railroad shop and Christ-man was employed as a salesman. Neither was experienced in corporate management.

In 1964, the RCSL Board of Directors composed of Christman, Messer and Richard Pierce, authorized Christman to seek out interested companies which might want to acquire and develop the Idaho mining claims. After some negotiations, an agreement was reached with Phillips Petroleum Company (Phillips) whereby that company was to pay $15,-000.00 for an option to lease the claims and received the right to work them for a period of 15 months. The stockholders of RCSL approved the directors’ action and the agreement with Phillips at a meeting called for that purpose.

This first agreement eventually expired by its own terms. After the passage of several…