Hanley v. Beatty

• Decision Date: 12 May 1902
• Docket Number: 820.
• Citation: 117 F. 59
• Parties: HANLEY v. BEATTY, District Judge.
• Court: U.S. Court of Appeals — Ninth Circuit

117 F. 59

HANLEY v. BEATTY, District Judge.

No. 820.

United States Court of Appeals, Ninth Circuit.

May 12, 1902

John R McBride and M. A. Folsom, for petitioner.

W. B Heyburn and E. M. Heyburn, for respondent.

Before GILBERT, ROSS, and MORROW, Circuit Judges.

MORROW Circuit Judge.

The case of Kennedy J. Hanley, complainant, against Charles Sweeny, F. Lewis Clark, and the Empire State-Idaho Mining &amp Development Company, a corporation, defendants, was a suit in equity, brought in the circuit court of the United States for the district of Idaho, Northern division, on the 18th day of March, 1899. The suit involved complainant's claim to the ownership of eleven twenty-fourths of certain mining ground described as the 'skookum Mining Claim,' located in the Yreka mining district, in the county of Shoshone, in the state of Idaho. The complainant's right to eight twenty-fourths, or an undivided one-third interest in the Skookum mining claim, was based upon certain proceedings which complainant claimed amounted to a purchase of that interest from one Cunningham the administrator of an estate, who sold the interest in settling up the estate in the course of probate proceedings in the state court of Idaho; but the administrator had conveyed this interest to a mining company, which also claimed to be a purchaser from the administrator, and had received a deed of conveyance of this interest in the course of such probate proceedings, and had conveyed the same to the defendant the Empire State-Idaho Mining & Development Company. Complainant's title to the remaining three twenty-fourths, or an undivided one-eighth, interest in the Skookum mining claim was derived through mesne conveyances from the original grantee by patent from the government of the United States. This latter title had been conveyed by the complainant to the defendants Charles Sweeny and F. Lewis Clark by deed dated April 30, 1898, deposited on that day in the Exchange National Bank of Spokane, in the state of Washington, in escrow, to be delivered to the defendants Sweeny and Clark upon certain stipulated conditions. Complainant claimed that the defendants Sweeny and Clark had obtained possession of this deed wrongfully and contrary to the terms of the escrow agreement. It appears from the bill of complaint that on the 30th day of April, 1898, the complainant was the owner of 100,000 shares of the capital stock of the Chemung Mining Company and his one-third and one-eighth interests in the Skookum mining claim; that complainant offered to sell to Clark and Sweeny his 100,000 shares in the Chemung Mining Company, at 20 cents a share, or $20,000; that he also offered to sell his one-third and one-eighth interests in the Skookum mining claim at the rate of $30,000 for the whole claim; this would have amounted to $13,750 for his two interests in that claim. The complainant claimed that in these negotiations he receded from the latter proposition, and agreed to take $10,000 for his one-third and one-eighth interests in the Skookum claim, but adhered to his proposition to sell his 100,000 shares in the Chemung Mining Company for $20,000. He claimed that both of these offers were accepted by Clark and Sweeny, and that at their request he made two separate deeds for his one-third and one-eighth interests in the Skookum claim; that the 100,000 shares of the Chemung Mining Company for $20,000. He claimed that both of these offers were accepted by Clark and Sweeny, and that at their request he made two separate deeds for his one-third and one-eighth interests in the Skookum claim; that the 100,000 shares of the Chemung Mining Company stock were to be placed in one envelope under an escrow agreement of sale, and the two deeds for one-third and one-eighth interests in the Skookum claim in another envelope, also under an escrow agreement to sell, and both of these envelopes were to be deposited with the Exchange National Bank at Spokane, Wash., to be taken up at specified dates and upon the conditions therein names. He claimed that the final agreements under which the deeds of his two interests in the Skookum claim and the 100,000 shares of stock in the Chemung Mining Company were deposited in escrow were that he should sell, and Clark and Sweeny would purchase, his 100,000 shares of the Chemung mining stock for $20,000, and his one-third and one-eighth interests in the Skookum claim for $10,000, making two separate and distinct transactions. He claimed that accordingly the 100,000 shares of stock were placed in escrow in one envelope, to be delivered to Clark and Sweeny on the payment of $20,000, and the two deeds for his interests in the Skookum claim were placed in escrow in another envelope, to be delivered to Clark and Sweeny upon the payment of $10,000. Clark and Sweeny, on the other hand, claimed in their answer that the agreement was that Hanley was to sell his 100,000 shares in the Chemung Mining Company and his one-eighth interest in the Skookum claim for $20,000, and his one-third interest in the Skookum claim for $10,000; that two envelopes were accordingly prepared, and the deeds and stock placed therein in escrow, in accordance with the terms of the agreement as understood by Clark and Sweeny. The complainant claimed that this arrangement of these two agreements in escrow was without his knowledge and was a fraud upon him. When the terms of this escrow expired, the complainant found that Clark and Sweeny had paid the $20,000, and taken up the escrow agreement for the 100,000 shares of stock in the Chemung Mining Company, and the deed for the one-eighth interest in the Skookum claim, and had left the deed for the one-third interest in the Skookum claim in the other envelope; this latter deed not having been accepted by Clark and Sweeny because in the meantime litigation respecting this one-third interest had proceeded so far that Clark and Sweeny considered that complainant's claim to that interest was of no value. It was alleged in the bill of complaint that the defendants Clark and Sweeny procured the agreement from complainant to sell his interests in the Skookum mine by covin and fraud, the particulars of which were set forth in the bill. It is alleged that the said Skookum mine had been reached for working purposes by certain workings known as 'Last Chance,' which were in the exclusive control of the defendants Clark and Sweeny; that they had declared at the time of the making of the agreement by which they took the option to purchase complainant's interests that the workings of the Last Chance mine had penetrated to the said Skookum claim, and that they knew the ground was of little value and contained no ore. It was alleged that they had stated that they desired to purchase complainant's interest in the Skookum claim, not because the claim was of any value for ore, but because it was surrounded by other claims which were of value, and would be useful for them for combining it for working purposes with the said other ground, and give breadth, bulk, and character to their plan to put the consolidated land on the market. It was alleged that the complainant had no means of personal knowledge as to the value of said ground except its situation with reference to other claims of which he had some knowledge; and, relying upon these representations made by the defendants Clark and Sweeny that they had not in their workings penetrating the said claim found any ore or ore body, and that they had no more information about the same than the complainant had, he fixed the price of his entire interest in said Skookum claim at $10,000. It was alleged that the actual facts were that the defendants' works penetrating said Skookum ground had disclosed an immense body of ore of great value, and that the said Clark and Sweeny had willfully falsified and misstated the facts to the complainant, that they might procure said contract with him and defraud him into making the agreement to sell the said interests, well knowing that he was ignorant of the truth. It was further alleged that the ores contained in the Skookum mine were of such value that there has been taken out from such body then disclosed ore to the value of not less than $150,000 net, over and above the cost of mining, treating, extracting, and marketing the same. It was alleged, further, that the defendants had given out and asserted that they owned the Skookum claim and that complainant had no interest therein; that they had many millions of dollars' worth of ore in sight, and intended to take the same to their own use. The complainant alleged, further, that the said property was of no value except for the ores contained therein, and that the defendants were rapidly exhausting the same, to the utter destruction of complainant's rights. The bill further alleged that the defendants Clark and Sweeny organized the corporation defendant under the laws of the state of New York, and since the 15th day of May, 1898, the said corporation defendant has been engaged in working the ores contained in the said Skookum claim, under the general supervision and direction of the said defendants, who were alleged to be the officers of the said corporation and the owners of the majority of the capital stock thereof. The relief prayed for in the bill was that the conveyance by the complainant to the defendants Clark and Sweeny be set aside and declared null and void from its date; that the defendants be held to account for the complainant's share of the proceeds of the said Skookum mine taken therefrom by the defendants after the time the escrow deeds were made and prior to the filing of the bill of complaint; that the defendants should be required to set forth the nature of their claim to said premises, and that all adverse claims thereto...