Hanley v. Federal Mining & Smelting Co.

• Decision Date: 22 July 1916
• Parties: HANLEY v. FEDERAL MINING & SMELTING CO.
• Court: U.S. District Court — District of Idaho

235 F. 769

HANLEY v. FEDERAL MINING & SMELTING CO.

United States District Court, D. Idaho, Northern Division.

July 22, 1916

John P Gray, of Coeur D'Alene, Idaho, Cullen Lee & Matthews, of Spokane, Wash., and W. F. McNaughton, of Coeur D'Alene Idaho, for plaintiff.

Featherstone & Fox, of Wallace, Idaho, and James E. Babb, of Lewiston Idaho, for defendant.

DIETRICH District Judge.

The litigation relates to the Skookum mining claim, in Shoshone county, Idaho. In a suit between the plaintiff and the defendant's predecessor, terminating in the year 1907, it was adjudged that the plaintiff was the owner of an undivided one-eighth interest, and that the defendant's predecessor was the owner of the other seven-eighths interest, and upon an accounting plaintiff was awarded a large sum. It is alleged that in 1906 the defendant abandoned the extraction of ores, although there was an understanding between it and the plaintiff that it might continue to operate the entire claim and account to him for his share of the net proceeds that in July, 1906, the plaintiff's one-eighth interest was sold to Shoshone county for the taxes of 1905, and in July, 1907, it was again sold to the county for the taxes of 1906; that thereafter negotiations were entered into between the defendant and the county for the purchase by the former of the latter's tax title, and that in 1911 this sale was consummated. It is further charged that as a matter of fact the defendant company agreed to operate the claim, and to pay the taxes and other expenses, and to account to the plaintiff for the profits upon the one-eighth interest, but in violation of the promise it willfully permitted the property to lie idle, and made default in the payment of the taxes, for the purpose of wrongfully depriving the plaintiff of his title, by permitting a sale to be made for delinquent taxes, and procuring the title from the purchaser at such sale. The prayer, in substance, is that the plaintiff be adjudged to be the owner of the one-eighth interest, and that defendant be required to account for the profits of operation.

I shall not attempt in detail to review the evidence upon the issues of fact. In the main I am unable to sustain the plaintiff's contentions. It is not thought that the evidence is sufficient to warrant a finding of a fraudulent purpose or intent on the part of the defendant. Furthermore, I am unable to find that it ever agreed to pay the taxes upon the plaintiff's interest. It is to be noted that the conversations which the plaintiff testifies he had with the defendant's manager, evidencing, as it is claimed, some sort of an understanding that the defendant would take care of the taxes, did not occur until after the tax sale in 1906, and probably not until after the tax sale in 1907. Whatever might be said as to the reasonableness of the plaintiff's assumption that the taxes thereafter were to be paid out of the proceeds of the operation of the mine, if the defendant company was expected to discharge taxes which had become delinquent, especially where sales had already taken place, some reference would doubtless have been made thereto in the conversations or correspondence between the parties. The testimony is not at all satisfactory as to the alleged letter of February 10, 1909, from the plaintiff to the defendant's manager. It is difficult to see why such a letter should have been written just at that time, but aside from that consideration there are circumstances which convince me that it was prepared at a later date. The plaintiff testifies that both it and the one of January 30, 1909, were dictated to and written by Miss Wilson, a public stenographer at the Spokane Hotel. Her direct testimony is corroborative of this claim, but it is inherently improbable that she would have retained any distinct recollection of the writing of such letter. Besides, she testified that she used only one typewriter, and the evidence is conclusive that the two letters were not written upon the same machine. She further testified that she uniformly used a certain kind of paper for carbon copies, but when confronted with the fact that these two sheets are entirely different in color and texture she hesitated to say that both are carbon copies. But if it be assumed that the earlier letter as introduced in evidence is the original, and if we thus account for the difference in paper, we have the further fact that apparently the signatures to the two letters were not made at approximately the same time. It is possible, of course, to explain the discrepancy in this respect; but in the absence of such explanation the inference is natural, if not unavoidable, that the signature to the letter of February 10th is of a later date. It indicates great feebleness on the part of the writer, and is suggestive of the malady from which the plaintiff was suffering at the time his deposition was taken. Without going further into details, I am satisfied that the letter of which the exhibit dated February 10, 1909, purports to be a copy, was never received by the defendant.

In the second amended complaint, verified by the plaintiff, he alleges that about the fall of 1909 the defendant entered into negotiations with the county, without first consulting him, to procure from it such title as it had acquired by reason of the tax sales of 1906 and 1907, from which no redemption had been made, and that thereupon he made objection, as a result of which the defendant was at the time unsuccessful in its efforts, but that thereafter, namely, in 1911, it acquired the county's interest. Inconsistently, I think, it is now his contention that he did not concern himself with the taxes, because he understood it was the duty of the defendant company to pay them, and further because that company, through its officers, had expressly agreed so to do. Upon having his attention called to the fact that he was aware that, upon the expiration of the period of redemption, the county was advertising for sale the title which it claimed to his one-eighth interest, he admitted that he may have had actual notice of such advertisement and contemplated sale; but, as he says, it was all right (with him) for the defendant to buy it, because it was protecting him in the matter, and he depended on it, and further that it did not bother him if the company did buy the county's title, because it was doing that for his protection, according to the agreement which he had with Mr. Miller, its manager. And still he protested against the defendant's acquisition of the title. In this connection it may be significant that one Bacon had recovered a judgment against the plaintiff in June, 1909, for over $50,000, and a levy had been made on execution of the judgment against the plaintiff's interest in the claim. This judgment has never been satisfied, and it is to be inferred from the testimony of Mr. Cullen, who was attorney for Bacon, and who is also one of the attorneys for the plaintiff in this case, that the present action is in reality brought in the plaintiff's name for the use and benefit of Bacon. The fact that the plaintiff was in 1909 being pursued by a large creditor may, in a measure at least, account for his apparent apathy in the matter of the tax proceedings. It is not improbable that he thought that if he rescued his interest from the county it would at once be seized and sold by the execution creditor; whereas, if he permitted title to accrue to the county, and if thereupon the defendant purchased it, he might, through a voluntary conveyance from the company, again acquire title, or he might succeed in one of the contentions which he here makes, namely, that the tax is invalid, or that the defendant, being a co-owner, could not, by purchasing the outstanding interest, deprive him thereof.

There is an apparent contention, though not very clearly defined, that, having in its hands funds of the plaintiff arising from the operation of the mine, the defendant used the same to buy in the outstanding tax title, and therefore, under a familiar principle of equity, it necessarily holds such title in trust for the benefit of the plaintiff. There is no attempt to trace any specific fund belonging to the plaintiff into the purchase price of the property. It is claimed only that upon a fair accounting it would appear that the defendant did not from time to time turn over to the plaintiff the entire one-eighth of the net proceeds of operation, and this unaccounted for balance was in excess of the amount paid for the tax title. But, passing the consideration that such fund, if it existed, is not identified with the purchase price, let us analyze the claim that the defendant at any time had in its hands moneys belonging to the plaintiff. In the suit already referred to, involving the question of the plaintiff's ownership of the one-eighth interest, an accounting was ordered and had, as a result of which the defendant made payments to the plaintiff aggregating several hundred thousand dollars, the last payment being made in 1907, at which time the controversy was finally closed and fully settled. From time to time in the course of the hearings in the present suit a question has incidentally arisen as to the fairness of that accounting, and it is to be conceded that certain testimony offered tends to show error; but such a question is wholly beyond the present issue, and at this juncture the accounting had in the former suit and the settlement made pursuant thereto must be regarded as conclusive upon both parties.

It is further shown that the defendant extracted no ores from the Skookum claim from 1906 up to the fall of 1909; the property was idle; it is so alleged in the bill. Manifestly therefore, the defendant had no funds belonging to ...