McCaffrey v. Day

• Decision Date: 05 January 1920
• Docket Number: 3295.
• Citation: 262 F. 80
• Parties: McCAFFREY et al. v. DAY et al.
• Court: U.S. Court of Appeals — Ninth Circuit

262 F. 80

McCAFFREY et al. v. DAY et al.

No. 3295.

United States Court of Appeals, Ninth Circuit.

January 5, 1920

Graves Kizer & Graves, of Spokane, Wash., for appellants.

W. W Zent, of Spokane, Wash., Isham N. Smith, of Seattle, Wash John H. Wourms, of Wallace, Idaho, and C. B. Nolan and William Scallon, both of Helena, Mont., for appellees.

Before GILBERT, ROSS, and HUNT, Circuit Judges.

ROSS Circuit Judge.

A careful examination of the record in this case satisfies us of the correctness of the judgment of the court below denying the rescission of the contract between the parties, sought by the suit. The bill was based upon the alleged failure and refusal of the appellee Day to comply with the terms of the contract, and upon the allegation that such refusal by him was arbitrary and in bad faith, and 'not in the exercise of his judgment, or of any discretion conferred upon him by the agreement.'

The contract related to certain mining property situated in Lincoln county, Mont., consisting of the Heron lode mining claim, the Cabinet lode mining claim, the Galena lode mining claim, and a mill site known as the Cabinet mill site situated on Callahan creek, in Troy mining district. In 1910 the property belonged to a corporation called Big Eight Mining Company, and during that year it was leased to the appellant R. C. McCaffrey (one of the complainants below) by the company, with an option to purchase the same within a certain stated time for $50,000; deeds therefor being placed in escrow with Northwestern Loan & Trust Company, to be by it delivered to the purchaser upon the payment of the purchase price. The lessee entered into possession of the property under the lease and commenced working the ground, in which undertaking he was joined by his son and co-complainant below, Edward McCaffrey, during the progress of which work they shipped a number of cars of lead and zinc ore; the appellant Edward McCaffrey, who was a plumber, having invested in such work a considerable amount of money out of his business, stated to be from $15,000 to $20,000. His father was a prospector and miner. The appellee J. D. Finley (a defendant below) was vice president and a director of the Exchange National Bank of Spokane, Washington, of which bank Day was also a director, and he was a friend of the McCaffreys, and acted for them in their dealings regarding the property here in question. As the time approached for the exercise of the option to purchase the property, the McCaffreys, through Finley, opened negotiations with an eastern corporation called Grascelli Chemical Company for the advance of the necessary $50,000 with which to make the purchase, and for the development of the property, which negotiations were pending at the time Finley, for the McCaffreys, applied to Day with the same end in view; Finley preferring the latter for the reason, particularly, that he was an experienced and competent mining man, as well as one of abundant means. That he was experienced and competent is sufficiently shown by the fact that he had been the manager of the large and important Hercules mine of that section of the country.

The evidence shows that Finley knew nothing about mining, but that he was himself able to advance the $50,000 with which to effect the purchase of the property, and told Day, as well as the younger McCaffrey, that he was willing to do so if necessary, but, being anxious to interest Day, for the reason that has been stated, went with him in the fall of 1912 to see the property. While no one, we think, can justly claim from the evidence in the case that the property had been sufficiently opened up to be called a mine, Day, according to his own testimony, regarded it as a good prospect-- so good, indeed, that he said he would, with Finley, advance, in certain proportions, the necessary $50,000 to make the purchase and $50,000 more for the development of the property. But when it came, as it did, according to the evidence, to the proposition that such purchase money be so advanced upon an assignment of the lease and bond, Day, after an examination of the papers by one of his attorneys, and consultation with him, refused the proposition. Thereafter, time being of the essence of the escrow agreement, haste became necessary, and Day, having then gone to Spokane, summoned his attorney, Mr. Wourms, there, who arrived at Spokane on the morning of the 15th of January, 1913, when, according to his testimony, Day handed him the abstract of title to the property and requested him to examine it as expeditiously as possible and advise him respecting it; that about the time of Wourms' completion of the examination of the abstract Finley and the younger McCaffrey came to the room of the hotel where he and Day were, and that he informed them that, while there were some minor defects in the abstract, it was sufficient, but that he wished to see the deeds that were in escrow, and which were to be delivered upon the payment of the money, and that he and McCaffrey then went to the Northwestern Loan & Trust Company to see the deeds, where the cashier of the bank allowed him to examine them, but said that they had been notified by the Big Eight Mining Company not to deliver them; that he and McCaffrey then returned to the hotel, where they found Finley and Day, to whom he reported the result of the visit to the Trust Company, including his report that the deeds were sufficient, and--

'advised them that the thing to do was to prepare deeds, immediately, make a tender. That seemed to appeal to all the gentlemen present, and they began to discuss for some little time as to the interest that each one was to have. I was interested,' said the witness, 'in Mr. Day's interest. Mr. Day insisted on 55 per cent., and there was some talk backward and forward, and the one remark that I recall that Mr. McCaffrey made was that that would only give himself and his father 25 per cent.; that they had spent two years on the property and that wasn't enough. Mr. Day then suggested that 51, what he wanted was control, and he wouldn't go in unless he did get control, and 51 per cent. was just as good for control as 55; that he was willing to reduce his demand to 51 per cent. That was agreed upon, and I immediately proceeded to prepare a deed from the McCaffreys to Mr. Harry L. Day. I completed that deed; as I recall it Mr. McCaffrey and Mr. Finley went away.'

The witness further testified that he and Finley then went to the bank to get the money, and that on the way Finley told him that he might just as well prepare a deed for him also, which the witness did before going to the bank. The deeds so prepared by Wourms were from the McCaffreys to Day and Finley for 51 and 14 per cent., respectively, in the property, to pass to and through the McCaffreys from the Big Eight Company. The witness further testified that immediately after he had prepared the deed for Finley the two proceeded to the Exchange National Bank, where Day directed that he be given $50,000 in money which was done, and, it being heavy, he and the younger McCaffrey took it in a taxicab to the Northwestern Trust Company and made the necessary tender. The witness further testified that the next morning, January 16th--

'Mr. Finley came to our rooms at the hotel, that we used as a kind of a workshop, and informed me that he thought that Mr. Day and himself ought to enter into an agreement for the purpose of putting up the money; that the McCaffreys were not able to advance any money to amount to anything in the development of the property; and as I recall it I told Mr. Finley that I didn't see any need of it; that the mining partnership law of the state of Montana was sufficient for all purposes, and Mr. Finley then went away. Mr. Day came to the room a short while afterwards, and informed me that he had seen Mr. Finley, and that they had agreed that they would enter into an agreement with the McCaffreys for the purpose of advancing some money, and requested me to put their agreement, as he narrated it to me, into form. I proceeded to do so, and it was discussed backward and forward, and several drafts made of it that morning by Mr. Day and Mr. Finley and myself.

'Q. That would be on the morning of the 16th? A. On the morning of the 16th.

'Q. Of January? A. On the morning of the 16th of January, as I recall it; and finally w...