Maas v. Lonstorf

• Citation: 194 F. 577
• Decision Date: 05 March 1912
• Docket Number: 2,132,2,133.
• Parties: MAAS v. LONSTORF. LONSTORF v. MAAS et al.
• Court: U.S. Court of Appeals — Sixth Circuit

194 F. 577

MAAS v. LONSTORF.

LONSTORF v. MAAS et al.

Nos. 2,132, 2,133.

United States Court of Appeals, Sixth Circuit.

March 5, 1912

In No 2,132:

A. C Dustin and Young & Bell, for appellant.

D. H Ball and A. B. Eldredge, for appellee.

In No 2,133:

D. H. Ball and A. B. Eldredge, for appellant.

A. C. Dustin (Hoyt, Dustin, Kelley, McKeehan & Andrews and Young & Bell, of counsel), for appellees.

Before WARRINGTON, Circuit Judge, and McCALL and SANFORD, District judges.

PER CURIAM.

This bill was filed for the purpose of compelling Maas, one of the defendants below, to convey to Mrs. Lonstorf, the complainant below, an undivided interest in certain mineral properties alleged to have been acquired by him as the proceeds of explorations for iron ore conducted for the joint benefit, and to account for her proportion of the rents and royalties received therefrom.

The Circuit Court, after a hearing upon the pleadings and proof, entered a decree requiring Maas to convey to her a one-sixth interest in the properties therein described and referring the cause to a special master for an accounting. An appeal by Maas from this decree was dismissed by this court on the ground that it was not a final decree, and the cause remanded for further proceedings. Maas v. Lonstorf, 166 F. 41, 91 C.C.A. 627. Thereafter the cause was heard on exceptions to the special master's report, and a final decree was entered describing the lands and mineral interests in which Maas was directed to convey a one-sixth interest to Mrs. Lonstorf, subject to a mineral lease made by Maas to his codefendant, the Cleveland-Cliffs Iron Company, together with an interest in a certain Race Course property not set forth in the interlocutory decree; adjudging that there was a balance due to Mrs. Lonstorf from Maas of $12,099.94; and decreeing that the Cleveland-Cliffs Company attorn to Mrs. Lonstorf as the owner of an undivided one-sixth interest in the lands covered by its lease and pay her one-third of all royalties accrued thereunder since January 20, 1910. From this final decree both Mrs. Lonstorf and Maas have appealed to this court; the Cleveland-Cliffs Company not appealing.

The main facts are these: Mrs. Lonstorf is a resident of Milwaukee, Wis. The defendant Maas is her nephew; his mother, Mrs. Maas, being her sister. Maas and his mother reside at Negaunee, Mich. In 1898 Mrs. Lonstorf and Mrs. Maas were each the owners of an undivided one-third interest in a valuable iron ore mine at Negaunee, known as the Negaunee mine, which was leased to a mining company under a lease which would expire in 1903. The defendant Maas being familiar with the ore formation and somewhat experienced in exploring for mineral properties, and believing that the drift in the Negaunee mine pointed to the northwestward, secured, at some expense in time and money, options for mining leases on two farms, known as the Corbit and Martel tracts, lying northwestwardly from the Negaunee mine, and the promise of a similar option on another tract. Subsequently, after a preliminary correspondence between Maas and George J. Lonstorf, the complainant's son, who acted as her agent in the matters involved in this suit, Mrs. Lonstorf and Maas on November 25, 1898, entered into a written contract which is the foundation of this suit. By the terms of this contract Maas assigned and transferred to Mrs. Lonstorf a one-third interest in the options for lease on the Corbit and Martel tracts, and in the leases of said premises, if taken, and agreed to give the benefit of his skilled labor and knowledge and the use of his drilling outfit in the exploration of said lands; Mrs. Lonstorf agreeing on her part to pay one-half of the actual expenses of exploring for iron ore on said premises. This contract contained the following clause, concerning which this controversy chiefly relates, namely:

'Said first party (Maas) further agrees in case he secures options on lands in vicinity of the above-described premises that said second party (Mrs. Lonstorf) shall have a one-third (1/3) interest therein.' Maas also made a similar oral agreement with his mother; but she is not a party to this suit, and her rights are not involved herein.

Under this contract Mrs. Lonstorf from time to time furnished moneys to Maas, as required, for her part of the expenses of the exploration. He proceeded diligently in the work, and placed at first a test hole on the line between the Martel and Corbit tracts, and, later, test holes on other lands more to the southwestward, as the tests indicated that the ore extended in a more westwardly direction from the Negaunee mine than at first supposed. In the light of these developments he took from time to time options for lease on various other tracts in the vicinity, and from time to time renewed various of the options. In March, 1900, he bought outright for $300 an undivided mineral interest in a tract known as the Race Course property. In October, 1900, however, instead of thereafter extending all the options for lease or endeavoring to obtain options for lease on other tracts which the explorations indicated to be desirable, he commenced to take options for the purchase of various tracts or mineral rights. In some instances these purchase options were taken at the expiration of the lease options on the same tracts, and in others, before such expiration; in some, at the same time with the renewal of lease options on the same tracts, and in others, on tracts on which he had not obtained lease options. On November 1, 1900, after taking some of these purchase options, he wrote Lonstorf, without mentioning that any purchase options had been taken, stating that he had decided to sell the exploration and asking authority to sell their lease options or the leases which they might take by virtue thereof, for not less than $300,000, to be equally divided between Mrs. Lonstorf, Mrs. Maas and himself; to which Lonstorf gave his mother's consent. Maas thereafter continued the taking of purchase options instead of lease options, including an option for the purchase of a part of the original Corbit tract, with an extension of the lease option on the entire tract, and an option for the purchase of a part of the original Martel tract, on which the lease option had expired.

In December, 1900, Maas visited Mrs. Lonstorf at her home in Milwaukee, and had various conversations with her, her son George, and another son. He had with him a map showing the various tracts on which he held options for lease and for purchase. Maas states that he pointed out to them the different properties on which he held these options and told her that he had increased the territory by getting a great many options for purchase, but that she and his mother 'would share alike in the benefits of the lease from all these properties'; that if he sold he would add the properties he had for purchase to the other, and extend the scope of the lease they were interested in under the contract and treat it as if the lease covered all the properties; to which he states she made no reply and seemed to be satisfied. The weight of the evidence, however, as was found by the learned trial judge, is that Maas not merely pointed out the various tracts on which he held options for purchase and lease, but that he stated that while he could not continue to get lease options he would hold those which he had as a lever to force purchase options, and that he referred to all the options for purchase and lease as 'their' property, and stated that Mrs. Lonstorf was interested in all this property.

On January 14, 1901, Maas held purchase options on 11 tracts and mineral interests in the vicinity of the Negaunee mine, including portions of the Corbit and Martel tracts and other tracts on which he had previously held lease options, and two tracts, known as the Barabe and Stewart tracts, on which he also held lease options. He also held lease options on two so-called Cemetery tracts, on which he had no purchase options. Under his several purchase options the amount to be paid the various vendors in order to acquire the 11 properties aggregated about $290,000.

On this date, Maas, by written contract with the Cleveland-Cliffs Company, granted it an option, 'not divisible,' of purchasing and acquiring from him, within five months thereafter, an undivided half interest in the 11 options for purchase, with a mining lease from him on the other half interest in these properties, at a specified tonnage royalty and minimum annual royalty which were to be doubled after 2,000,000 tons had been mined. The consideration to be paid by the company, if it elected to purchase, was to be $600,000, plus such sum, not exceeding $10,000, as Maas might be required to pay for certain option extensions. Of this, $300,000, or so much thereof as necessary, was to be used in paying the original vendors the prices fixed under the eleven purchase options; the remainder to be paid to Maas in cash or in notes secured by mortgage. The deeds to the 11 properties were then to be taken in the name of Maas and the company jointly, an undivided half interest in each, and Maas was to lease his half interest therein to the company. This contract further provided that if the company should elect to purchase, Maas should, without further consideration, also assign and transfer to it his lease options on the two Cemetery tracts and release all claim thereto. Under this contract, however, Maas did not agree to sell the company any interest in the lease options on the Barabe and Stewart tracts, the purchase options on these tracts being alone mentioned; and these two lease options were subsequently allowed to expire.

It also appears that in the preliminary negotiations Maas stated to...