Kennedy v. Lonabaugh

Citation19 Wyo. 352,117 P. 1079
Decision Date06 October 1911
Docket Number659
PartiesKENNEDY v. LONABAUGH
CourtUnited States State Supreme Court of Wyoming

ERROR to the District Court, Sheridan County; Hon. CARROLL H PARMELEE, Judge.

The material facts are stated in the opinion.

Affirmed.

Enterline & LaFleiche, for plaintiff in error.

It is clear from the pleadings filed by Lonabaugh that he is indebted to Kennedy in the sum of $ 2,500. There is nothing in the record showing Lonabaugh to be entitled to anything on account of the 50,000 shares of stock held by Kennedy. Whatever support there may be for the judgment dismissing the action on the ground that the contract between the parties was contrary to public policy and illegal must be found in the pleadings, or in the contract set out in the second defense and cross-petition of Kennedy. The illegality of the contract was not raised by the pleadings, nor urged by either party, and it must be conceded that the parties did not understand their contract to be in any way unlawful. Each party seems to have been willing to base his rights upon the contracts. If it could be said upon the record that Lonabaugh had entered into an agreement to procure qualified persons to make dummy entries on coal lands for the exclusive use and benefit of Holbrook and McCarthy, or some other persons contrary to law, or this had been made to appear by the evidence, or the admission and pleadings, then there might have been a valid reason for the court to take judicial notice of such facts and enter the decree that was entered. But we do not understand that any such condition of affairs is shown by the record to have existed. On the contrary, it appears that Lonabaugh had entered into an agreement to acquire these lands by purchase, after patent, if he could giving Holbrook and McCarthy an option to purchase the same at a stipulated price; that in effect these plans were thereafter consummated; and such a contract does not seem to be within the inhibition of the federal statutes, or any local law, so as to make the same contrary to public policy, and therefore void. For the reason that neither of the parties have pleaded, claimed or relied upon any such construction of the contract as that placed upon it by the trial court, and no such question has been raised by anyone except the court, and that we believe that the record is not susceptible of the interpretation given to it by the trial court, we contend that the judgment should be reversed, and that Kennedy is entitled to a judgment against Lonabaugh for the sum of $ 2,500 claimed in his cross-petition.

D. C. Wenzell, for defendant in error.

A court is bound to refuse its aid in the enforcement of a contract which is void, as in violation of law or contrary to public policy, although its invalidity may not have been specially pleaded. (Oscayan v. Arms Co., 103 U.S. 261; Morrill v. Nightingale, 27 Am. St. 207; Claflin v. U. S. Credit Co., 52 Am. St. 528.) It will therefore be conceded that if the contract and transactions shown by the evidence are contrary to law or against public policy, then the decision of the trial court in refusing relief to either party was right and the judgment should be affirmed. The government strictly enforces the limitations contained in the laws controlling the disposition of public coal lands. (U. S. v. Trinidad C. & C. Co., 137 U.S. 160; U. S. v. Keitel, 211 U.S. 370; U. S. v. Allen, 180 F. 855; U. S. v. Portland C. & C. Co., 173 F. 566.) The cases cited sustain the decision of the court that the contract and scheme of the parties to this action were contrary to law and null and void.

If, notwithstanding the cases cited, it should here be held that the transactions of these parties were not within the prohibition of the U. S. Statutes, then the defendant in error, Lonabaugh, would be entitled to judgment as prayed for in his petition. A partner cannot stipulate for his private advantage. (Story on Partnership, (7th Ed.) Secs. 174, 175; Mechem on Agency, Secs. 454-456, 469.) When Kennedy secretly arranged for the issuance to him of 50,000 shares of the capital stock of the company which had taken over the coal lands, he placed himself in a position where he could not deal fairly with his partner.

SCOTT, JUSTICE. BEARD, C. J., and POTTER, J., concur.

OPINION

SCOTT, JUSTICE.

This action was commenced by Lonabaugh against Kennedy for an accounting. Kennedy by way of counter claim and cross-petition sought to recover from Lonabaugh $ 2,500 and interest thereon from October 12, 1903. The case was tried to the court without the intervention of a jury. The court upon due consideration and of its own motion dismissed the case upon the ground "that the transaction upon which are based the claims of both plaintiff and defendant was and is contrary to public policy and illegal and can not be made a basis of recovery by either party." Both parties bring error.

It is admitted in the pleadings that in the spring of 1903 Kennedy and Lonabaugh entered into a co-partnership by which they proposed to acquire control of certain coal lands, a part of which was then patented, and a portion public coal lands, title of which was then in the United States, and interest capital in the development of the lands and the opening of a coal mine thereon, and to share equally in the profits and losses of such venture. In accordance with this agreement, 160 acres of patented land was acquired, the title being taken in Kennedy's name. Lonabaugh and his friends and relatives separately filed coal declaratory statements under the United States laws on six separate tracts of coal land, each of which contained 160 acres and aggregated 960 acres so filed on. The tract of patented land and the 960 acres so filed on was made the subject of a contract, in form an option, dated June 13, 1903, by and between Lonabaugh who signed the same individually but acting for the co-partnership consisting of himself and Kennedy and running to Holbrook and McCarthy wherein and whereby it was stipulated and agreed that for the consideration of $ 5,000 in cash and the transfer to him of stock of a company to be incorporated to take over the land by Holbrook and McCarthy of the par value of $ 5,000, and the payment by the latter of the sum of $ 2,000 dollars for the 160 acres deeded land referred to as the Drombaskie tract and $ 100 to said Lonabaugh for the use and benefit of each and every coal claimant; $ 500 on or before June 20, 1903, to apply on matters connected with the option and as consideration therefor. It is admitted that final proof was thereafter made upon the lands so filed upon, that the lands were deeded to Holbrook and McCarthy, who in turn deeded them to the company which was organized by them, and that Lonabaugh received the $ 5,000, and 20,000 shares of stock in the corporation which was created. It is also alleged in the petition that Kennedy received 50,000 shares of the company's stock, half of which Lonabaugh claims under the contract of co-partnership between him and Kennedy, but which the latter alleges was issued to him as a bonus in connection with his salary from Holbrook and McCarthy as their superintendent in opening up the mine.

It is thus apparent that Lonabaugh bases his right to an accounting with reference to the 50,000 shares of stock issued to Kennedy on the ground that they were partnership assets growing out of their contract of co-partnership and the contract of June 13, 1903, with Holbrook and McCarthy. On Oct. 12, 1903, they made the following memorandum of agreement, to-wit:

"Memorandum of an Agreement, Made and entered into this 12th day of October, A. D. 1903, by and between E. E. Lonabaugh, the first party, and Stewart Kennedy, the second party,

WITNESSETH

Whereas, said first party is the owner of $ 20,000.00 of the capital stock of the Wyoming Coal Mining Company, a Corporation organized under the laws of the State of Wyoming, and,

Whereas, said second party has loaned said first party the sum of $ 2,500.00, for the term of two years, with interest thereon at the rate of eight per cent per annum, payable when due.

Now, therefore, in consideration of the premises, said first party covenants, promises and agrees to and with said second party to sell, transfer and convey unto said second party, his heirs and assigns, within two years from this date, $ 10,000.00 of the said capital stock of said Company, and the remainder of said capital stock shall be conveyed to said second party as collateral to said loan.

It is mutually stipulated and agreed that said first party shall have the right or option, upon the maturity of said indebtedness either to pay the same and redeem said stock to the amount of said $ 10,000.00 or otherwise to deliver said stock absolutely to said second party in full payment, satisfaction and release of the said indebtedness and of all interest thereon, and in the event that said first party elects to surrender said stock and thereby pay said indebtedness, said second party covenants and agrees to accept said stock in full payment of said debt and to surrender the note representing said indebtedness to said first party.

WITNESS the hands of the parties hereto this the day and year first above written.

E. E. LONABAUGH,

STEWART KENNEDY."

It is admitted by the pleadings that subsequent to this agreement and in February, 1904, the shares mentioned were issued to Lonabaugh and the $ 5,000 therein referred to was paid to him as the consideration for the contract of June 13, 1903; that the $ 2,500 or one-half of the cash so paid upon the contract was never turned over to Kennedy; that no note was ever given by Lonabaugh to Kennedy therefor; that the agreement was an attempted adjustment of the profits to accrue out of the contract of ...

To continue reading

Request your trial
24 cases
  • State Bank of Wheatland v. Bagley Bros.
    • United States
    • United States State Supreme Court of Wyoming
    • May 10, 1932
    ...v. Bayley, 5 Ore. 343, 352; Armstrong v. Henderson, (Ida.) 102 P. 361, 364; Anderson v. Carkins, 34 L.Ed. 272, 135 U.S. 483; Kennedy v. Lonabaugh, 19 Wyo. 352, 359; Groome's Estate, (Cal.) 29 P. 487. There is no evidence of record that these homesteads were conveyed to the partnership. The ......
  • Hoge v. George
    • United States
    • United States State Supreme Court of Wyoming
    • August 5, 1921
    ......Hoge. was undoubtedly the agent of Ross, and moreover bore a close. relation of personal friendship to him. Kennedy v. Lonabaugh, 19 Wyo. 352 does not sustain the contentions. of plaintiff in error as to confidential relations. The true. principle is set forth ......
  • Hodgkiss v. Consolidated
    • United States
    • United States State Supreme Court of Montana
    • March 31, 1937
    ...the profits it enforces the contract which is illegal.’ McMullen v. Hoffman, 174 U.S. 639, 19 S.Ct. 839, 43 L.Ed. 1117;Kennedy v. Lonabaugh, 19 Wyo. 352, 117 P. 1079, Ann.Cas.1913E, 133. In proving a case a party must make a full and fair disclosure of all the facts governing the transactio......
  • Hodgkiss v. Northland Petroleum Consol.
    • United States
    • United States State Supreme Court of Montana
    • March 31, 1937
    ...the profits it enforces the contract which is illegal.' McMullen v. Hoffman, 174 U.S. 639, 19 S.Ct. 839, 43 L.Ed. 1117; Kennedy v. Lonabaugh, 19 Wyo. 352, 117 P. 1079, Ann.Cas.1913E, In proving a case a party must make a full and fair disclosure of all the facts governing the transaction; h......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT