Curtis v. Lakin

• Decision Date: 10 April 1899
• Docket Number: 1-1898,106-1898.
• Citation: 94 F. 251
• Parties: CURTIS et al. v. LAKIN et al.
• Court: U.S. Court of Appeals — Eighth Circuit

94 F. 251

CURTIS et al. v. LAKIN et al.

Nos. 1-1898, 106-1898.

United States Court of Appeals, Eighth Circuit.

April 10, 1899

The bill in this case was filed by M. J. Curtis and A. D. Bowley the appellants, against Josiah S. Lakin and the Sacramento Gold Mining Company, the appellees, on November 13, 1897, and was subsequently amended on March 8, 1898. In the original and amended bill the following facts were alleged, in substance: On February 1, 1892, Josiah S. Lakin, A. D Bowley, and M. J. Curtis associated themselves together 'for the purpose of locating, developing, and operating mines in the states of California, Nevada, and such other states and territories or mining districts that may come to their notice. ' By the agreement, which was signed on said date at Sacramento, in the state of California, each of said parties agreed to 'deposit into one general fund the amount of $500, to be drawn upon for the purpose of paying any and all expenses that shall accrue in locating developing, and operating such mines as may come into the hands of said Lakin, Bowley, and Curtis. ' They further agreed that, in addition to the general traveling expenses that might be allowed, there should also be allowed not less than one hundred dollars per month for the time occupied by either of the parties to the agreement in locating developing, and operating mines, or in other business connected therewith, which sum was to be paid out of the general fund. While prospecting under said agreement, Lakin, on March 14, 1892, located two mining claims in Tooele county, Utah, called the 'Sacramento' and 'Excelsior' claims, which were located, as it was alleged, by Lakin in his own name, contrary to the intent and purpose of the aforesaid agreement. After making these locations, Lakin returned to California in June, 1892, and traveled through that state and the state of Nevada, prospecting for mining claims which was done at an expense of several hundred dollars, the expenses being paid out of 'assets furnished by said partnership.' He did not return to Utah until March, 1894, and prior to his return he consulted with Curtis and Bowley, the complainants, about filing notices, as an act of congress provided might be done, in lieu of doing the usual assessment work on said Sacramento and Excelsior claims. Before returning to Utah, Lakin called upon the complainants, and also advised with them as to the expedience of selling the aforesaid claims for the sum of $7,500, saying, in substance, that a party in Utah had offered that sum for the claims. The complainants advised against such sale; nevertheless Lakin returned to Utah, and on July 27, 1894, sold an undivided one-sixth interest therein for $5,000. On the same day, July 27, 1894, he contracted to sell an additional one-third interest in the claims for $10,000, which latter sale was subsequently consummated, and the money was received by Lakin. The complainants did not hear of the sales aforesaid until the year 1895, when they were informed of the fact, and at the same time heard that the sales had been made by Lakin to obtain funds to develop the property, and that he was developing it. Subsequent to July 27, 1894, the claims were so developed, by Lakin and others to whom he had sold altogether a one-half interest therein, as to make them self-supporting, but when they became self-supporting was not stated. The amount of expenses incurred in developing the claims did not exceed $30,000, of which sum Lakin contributed not more than one-half. The development consisted in part in the construction of a mill of the value of $15,000. Lakin never made any demand on the appellants to furnish money for the development and operation of said claims, although the complainants have always been ready to respond to any such demands; neither has he rendered any statement of his expenditures, or made any report of his transactions, with respect thereto. On March 6, 1896, the persons to whom Lakin had sold an undivided one-half interest in said claims associated themselves with Lakin, and formed a corporation known as the 'Sacramento Gold Mining Company' (one of the appellees), to which corporation the Sacramento and Excelsior claims, together with some others, were conveyed in exchange for its capital stock. Said corporation issued 1,000,000 shares of stock, of the par value of $5 each, and Lakin and his wife together received one-half of the stock, or, in the aggregate, 500,000 shares, in exchange for a one-half interest in the Sacramento and Excelsior claims. Lakin became the president of said company when it was organized, and also a director therein. The complainants had no knowledge of the action of said Lakin in forming said company 'until about one year before the bringing of this suit. ' When they acquired such knowledge, the alleged partnership agreement of February 1, 1892, had been misplaced, and could not be found, and for that reason the complainants believed that they could not successfully maintain a suit to recover their alleged interest in the claims. The agreement was found, however, in the summer of 1897. The value of the Sacramento and Excelsior claims now exceeds $200,000, and ores have been extracted therefrom of a value exceeding $50,000. In view of the allegations contained in the bill, which have been stated, in substance, the complainants prayed for the dissolution of the alleged partnership; for an accounting, both as against Lakin and the Sacramento Gold Mining Company, with respect to all transactions concerning the aforesaid claims; that the Sacramento Gold Mining Company be deemed to have accepted a conveyance of a one-half interest in the Sacramento and Excelsior claims with knowledge of the complainants' equities; and that it be decreed to hold 333,333 shares of its capital stock in trust for the complainants, and that it be compelled to issue to them the usual certificates for that amount of stock. The circuit court sustained a demurrer to the bill, and eventually ordered that it be dismissed.

James M. Denny, for appellants.

Hiram E. Booth (E. O. Lee and Morris L. Ritchie, on brief), for appellees.

Before CALDWELL, SANBORN, and THAYER, Circuit Judges.

THAYER Circuit Judge, after stating the case as above.

The bill of complaint is disingenuous, in that it fails to state certain facts with that degree of fullness and accuracy which a court of chancery has a right to expect in a case of this character and magnitude, and in that it fails to give information concerning the plaintiffs' conduct in certain respects and on certain occasions, which obviously might have been given had the pleader been disposed to make a frank disclosure of all the material facts and circumstances touching the transactions out of which the controversy arises, and on which the plaintiffs' right to equitable relief depends. For example, the bill does not state the amount of money or property which the plaintiffs advanced to create the general fund which was to be used for the benefit of the alleged partnership, the allegation in that respect being simply that they 'contributed to the assets of said co-partnership by furnishing Lakin with money and supplies to travel,' etc. It fails to show whether the plaintiffs ever made any complaint to Lakin, in person, because he located the Sacramento and Excelsior claims in his own name or whether they ever demanded a conveyance to themselves of their alleged interest therein. It fails to allege at what time during the year 1895 the plaintiffs ascertained that Lakin had sold an undivided one-half interest in said claims for the sum of $15,000, or from what source the plaintiffs derived such information; and what is of more importance, perhaps, the bill does not show that the plaintiffs ever communicated with Lakin after being advised of the sale, or that they attempted to do so, for the purpose of obtaining an account of his stewardship, or of ascertaining what he proposed to do with the mining claims in future, although the sale appears to have been contrary to their wishes, and was made as early as July 27, 1894. The bill does not disclose that the plaintiffs have communicated with their alleged partner in any form, or he with them, at any time since March, 1894, when he left Sacramento for the purpose of going to Utah; while it appears that they waited for about one year before bringing this action, after they were advised that the mining claims in controversy had been conveyed by Lakin and his associates to a corporation, and were therefore aware that the stock of the corporation was liable to be placed upon the market, and pass into the hands of innocent purchasers at any moment. It is not even averred that the stock issued to Lakin which the plaintiffs seek to recover is still in his hands, or that any efforts were made prior to the filing of the bill to prevent him from disposing of the same for value to third persons. Besides, the excuse which is given in the bill for waiting a year or more after the mining claims were conveyed to the corporation, before bringing a suit or taking any other steps to preserve their right to the property, is unsatisfactory, and therefore insufficient. It is somewhat remarkable, to say the least, that an agreement, upon which the plaintiffs' right to a large interest in a mine, supposed to be of great value, depended, should have been misplaced, and not found for a year, and that intelligent business men should have supposed that the loss of the agreement would necessarily prevent them from establishing their right to an interest in the Utah claims, and that no effort was made in the meantime to obtain from their alleged co-partner other recognition of their interest in the property. In short, the allegations of the bill, in...