Hotchkiss v. Bon Air Coal & Iron Co.

• Decision Date: 28 February 1911
• Citation: 78 A. 1108,108 Me. 34
• Parties: HOTCHKISS v. BON AIR COAL & IRON CO.
• Court: Maine Supreme Court

78 A. 1108

108 Me. 34

HOTCHKISS

v. BON AIR COAL & IRON CO.

Supreme Judicial Court of Maine.

Feb., 1911.

Syllabus by the Court.

Exceptions from Supreme Judicial Court, Kennebec County.

Action by Charles W. Hotchkiss against the Bon Air Coal & Iron Company. Verdict for plaintiff, and defendant moves for a new trial, and brings exceptions. Overruled.

Action for money had and received to recover the sum of $100,000 paid by the plaintiff to the defendant for an option to purchase certain coal and iron properties in the state of Tennessee, with interest on said sum from March 13, 1906, the date of said payment. Plea, the general issue.

Argued before EMERY, C. J., and SAVAGE, PEABODY, SPEAR, CORNISH, KING, and BIRD, JJ.

Page, Crawford & Tuska, A. M. Goddard, and H. D. Howe, for plaintiff.

T. M. Steger, Heath & Andrews, and Charles C. Treube, for defendant.

SAVAGE, J. This is an action for money had and received, in which the plaintiff seeks to recover $100,000 which he paid to the defendant, a Maine corporation, for an option to purchase certain iron and coal lands which the defendant owned, and certain other iron and coal lands which the defendant agreed to acquire and convey to the plaintiff. The plaintiff did not exercise the option. And he claims now to recover back the money paid on the ground that he was induced to take the option and pay the money therefore by the fraudulent misrepresentations of the defendant, or its authorized officers and agents. The plea was the general issue. The verdict was for the plaintiff. And the case comes before us on the defendant's exceptions and a motion for a new trial.

In the year 1905 the attention of the plaintiff, who lived in Chicago, was attracted to the iron and coal properties of the defendant, which were situated in Tennessee, by one Fall, who at that time or later had some sort of an option upon them, or upon a majority of the stock in the defendant corporation. The plaintiff was president of a railroad company, whose road run into Chicago. He wished to increase the business of his company, and to that end, in part at least, he wished to purchase coal lands, the coal of which would produce coke suitable for smelting iron ore, and he hoped to supply that coke to the Chicago market. During the year 1905 certain somewhat general examinations were made by the plaintiff and his agent and representative, Potter, of the properties which were afterwards included in the option. The defendant was then operating its mines on these properties, and had been doing so more or less from some time in the year 1903. Its iron mines were widely separated, but its coal mines, the Bon Air, the Ravenscroft, and the Eastland, were situated within a radius of from 10 to 20 miles from one another. The latter was on the Sewanee vein, so called. The others were not.

On March 13, 1900, the parties entered into what is called in the case an "option contract." By this contract the defendant agreed to sell to the plaintiff its coal lands, some 44,000 acres, on which three mines were then being operated, and its iron ore lands, amounting to a little over 80,000 acres, on which were two blast furnaces where it manufactured iron from its own ore. By the contract the defendant also agreed to acquire on or before May 1. 1900, certain other lands that it might be able to transfer them to the plaintiff under the option. These other lands were coal lands, adjacent to the defendant's coal lands, and are called in the case the "North American lands" and the "Steger lands." The Sewanee vein above referred to, runs through these lands. The North American lands, about 35,000 acres, were then owned by the North American Coal & Coke Company, one-tenth of whose stock was owned by the general manager of the defendant company, and the other nine-tenths by persons not connected with these proceedings. The Steger lands, about 25,000 acres, were owned by a syndicate made up almost wholly of men who were either directors or stockholders of the defendant company.

By the contract the defendant agreed to execute a mortgage for $1,500,000, which would be a first mortgage on the North American and Steger lands, and a second mortgage on the defendant's own lands, which were already mortgaged for $765,000. Of the bonds secured by the new mortgage $1,000,000 could be used in the acquisition of the North American and Steger lands, while the remaining $500,000 could be sold only at par, and the proceeds could be used only for the improvement and development of the North American and Steger lands.

The defendant accordingly issued its bonds for $1,500,000 secured by mortgage as agreed. It acquired the North American and Steger lands in accordance with the contract, paying its own bonds for them. And it performed every other contract condition precedent.

The option was to run until March 1, 1907. The full contract price was to be $5,000,000 for the property the defendant then owned, and that which it agreed to acquire, subject to the mortgages. For the option to purchase this property during the life of the option the plaintiff paid $100,000, which was to be credited as a part of the purchase price if he elected to purchase.

Coincident with the option contract, the plaintiff subscribed for $250,000 of the improvement bonds above referred to, and agreed to take them on or before August 1, 1900, but this subscription was rescinded in the following September.

On February 16, 1907, the plaintiff in writing rescinded the option contract, alleging fraudulent misrepresentations on the part of the defendant, and on March 7, 1907, six days after the option would have expired by limitation, he brought this suit, alleging in his specifications certain fraudulent misrepresentations which it is claimed were a part of the inducement to take the option and pay the $100,000.

During the year 1906 the plaintiff caused the books of account and other books and papers of the defendant to be examined by expert accountants, with a view to ascertain the cost of mining coal and its selling price, the cost of mining iron ore and manufacturing it, and its selling price, the monthly profits, past and present, and the past and present annual profits of the defendant company. The plaintiff also caused an examination and tests to be made on the North American and Steger tracts to ascertain the probable quantity and the quality of the coal deposited there.

While the plaintiff in his specifications claimed other fraudulent misrepresentations, three only were submitted to the jury, and it is only necessary to consider these.

First. The plaintiff claims that it was represented to him that the Bon Air, North American, and Steger lands were an almost unbroken tract, and, in effect, that there were no interferences, or at least no prejudicial "interferences," and that the North American and Steger lands were in fact, an unbroken tract. In mining parlance an interference exists where within the boundaries of the lands sold, or partially within those boundaries, there are other lands owned by other parties. And it is a prejudicial interference when the intervening lands are so situated as to interfere with the operation and use of the lands sold, and thereby affect their value.

It should be observed that in the option contract the lands were described as consisting of many parcels, each separately described in terms or by reference to the registry of recorded deeds, and not as one solid tract embracing all within specified external boundaries.

The plaintiff contends that the representations as to the North American and Steger lands were untrue, and that they were material as affecting the value of the lands to be sold.

Secondly. The plaintiff claims that the defendant fraudulently misrepresented the coking qualities of the coal on the North American and Steger tracts, with respect to the quantity of sulphur contained in it. It is conceded that, when the sulphur content exceeds 1 per cent., it cannot be used in the manufacture of iron or steel.

Thirdly. The plaintiff claims that the defendant made fraudulent misrepresentations to him as to the cost of mining coal and its selling price, the cost of mining iron ore and manufacturing it, and its selling price, and the monthly and annual profits of the defendant, both past and present, and he claims that such misrepresentations were material and are actionable.

Upon these propositions of fact the defense generally and broadly stated is that the defendant did not make the representations alleged; that such representations as were made were true; that, if the defendant made the representations alleged, they were merely expressions of opinion and were so understood by the plaintiff; that the representations which were made were not relied upon by the plaintiff, and, as to some of the representations, that they were not material. But it is admitted that such representations as are alleged to have been made respecting the coking qualities of the coal on the North American and Steger tracts were material, and, if untrue, actionable.

Some of the representations now relied upon by the plaintiff it is claimed were made by Mr. Williams, the president of the defendant corporation, and some by Mr. Overton, its general manager. It is conceded that the representations of either of these gentlemen bound the corporation. And for convenience we shall refer to the representations of either of them as the representations of the defendant. It is claimed that some of these representations were made to the plaintiff personally and some to Mr. Potter, his representative and agent, who afterwards communicated them to the plaintiff. And it is claimed that representations relating to the same subject-matter, but differing somewhat in terms, were made at different times during the negotiations by Williams or Overton to the plaintiff or Potter or both. The defendant contends that it is not bound to answer for the...