Migliaccio v. Continental Mining & Milling Co.

• Decision Date: 07 May 1952
• Docket Number: No. 4348.,4348.
• Citation: 196 F.2d 398
• Parties: MIGLIACCIO v. CONTINENTAL MINING & MILLING CO.
• Court: U.S. Court of Appeals — Tenth Circuit

196 F.2d 398 (1952)

MIGLIACCIO v. CONTINENTAL MINING & MILLING CO.

No. 4348.

United States Court of Appeals Tenth Circuit.

April 11, 1952.

Rehearing Denied May 7, 1952.

H. A. Rich, Salt Lake City, Utah (K. K. Steffensen, Salt Lake City, Utah, on the brief), for appellant.

J. Grant Iverson, Salt Lake City, Utah, for appellee.

Before PHILLIPS, Chief Judge, and HUXMAN and MURRAH, Circuit Judges.

MURRAH, Circuit Judge.

This is an appeal from a judgment of the District Court of Utah, rescinding a lease and option agreement for the purchase of mining claims in Emery County, Utah, by the appellee from the appellant, and awarding the appellee compensatory damages. The lease and option agreement was entered into on April 8, 1950, to supersede a sale and mortgage of the same property signed by the parties on January 9, 1950.

The lease and option provided in substance that the appellant would convey all of his right, title and interest in and to Vanadium King Claims 1 to 7, situated in Emery County, Utah, in consideration of the sum of $250,000.00, $5,000.00 of which was to be paid upon delivery of the said lease and option, the remainder to be paid in stipulated installments. The agreement recited that the appellant holds and controls the described mining claims, subject to the paramount title in the United States, and also subject to certain adverse claims and demands of Frank Davis in an action entitled "Migliaccio v. Frank Davis" (referred to in the trial and here as the Davis case); and various other adverse claims or pretended claims of both the plaintiffs, and certain of the defendants in an action then pending in the District Court of Emery County, entitled "Frank Hanson, Moroni Hunt, Loran Hunt, Elma E. Hunt and John Burton, plaintiffs vs. Jessie Bitterbaum, F. B. Hammond, et al., defendants," (referred to in trial and here as the Hunt case). As a part of the consideration for the lease and option, appellee agreed "to take over, handle, conclude, prosecute and/or defend to final determination all legal matters affecting said mines, mining claims and mining properties, at its own cost and expense" and also to reimburse the appellant for all sums, not to exceed $10,000.00, to which he might become indebted to Frank Davis on an accounting sought by him in the Davis case, said sums when paid to be credited on the purchase price.

The gist of this suit to cancel the lease and option is that appellant made certain false representations concerning the interest owned and conveyed in the lease agreement, upon which the appellee relied. In particular, it was alleged that the appellant represented to the appellee that he owned the mining claims in question, subject only to the judgment in favor of Frank Davis in the Davis case, and the adverse claims of the plaintiffs and certain defendants in the Hunt case, both of which appellee undertook to prosecute and defend to final determination. It is alleged that on or about February 2, 1950, before the lease and option was consummated, the officers of appellee were informed that counsel for the appellant's predecessors in title had, on May 5, 1942, in an action pending in the District Court of Emery County, Utah, "C. A. Gibbons et al. vs. J. B. Davis et al." (referred to in the trial and here as the Gibbons case), entered into a stipulation, under the terms of which the appellant's predecessors in title, Davis et al., had agreed to accept an undivided 5 per cent interest in and to the claims in question in compromise of the litigation between the parties in that case over the title to the claims; that when asked about this stipulation, appellant falsely represented to the appellee's officers that he knew of his own knowledge that the plaintiffs in the Gibbons action had abandoned the mining claims, and the suit was therefore without foundation; that in any event, the stipulation on behalf of his predecessors in interest by their attorney of record was entered into without authority. It is said that relying upon this representation, they entered into the lease and option agreement to learn soon thereafter that a judgment had been entered in the Gibbons case upon the stipulation, under the terms of which the appellant could have only 5 per cent interest in the claims covered by the lease. A recitation of the history of the litigation is essential to a proper consideration of the question involved.

Prior to 1940, a group referred to throughout the trial as the Gibbons-Bitterbaum Group, located twenty-eight mining claims in Emery County, Utah. In January, 1941, John B. Davis and others located seven mining claims, known as the Vanadium King Claims 1 to 7. These claims overlapped some of the Gibbons-Bitterbaum Claims, and after the filing of the Vanadium King Claims, the Gibbons-Bitterbaum Group instituted a quiet title action against John B. Davis and his associates. On May 15, 1942, Therald Jensen and Duane Frandsen, representing the Gibbons-Bitterbaum Group, and F. B. Hammond, representing Davis et al., entered into a stipulation, under the terms of which the Gibbons-Bitterbaum Group agreed to accept an undivided 85 per cent interest in the 28 mining claims, and Davis and his associates agreed to accept 7½ per cent. The other 7½ per cent was set over and given to A. L. Tomlinson. This stipulation covered all of the Gibbons-Bitterbaum Claims, including the 7 Vanadium King Claims. Hammond received 2½ per cent interest in Davis' 7½ per cent and 2½ per cent of Tomlinson's interest. A journal entry of a judgment upon this stipulation was signed on the same day, May 15, 1942, but it was not filed of record and apparently no formal judgment was entered at that time. The date of the journal entry was later changed to August 11, 1948, and finally filed of record on April 18, 1950. Meanwhile, on May 27, 1942, Davis having acquired the interest of his associates by quitclaim, quitclaimed all of his interest to the appellant. There was testimony to the effect that after acquiring Davis' interest in the property, appellant collaborated with attorneys Jensen and Hammond in an effort to sell the mining claims, and that from the execution of the stipulation until 1948, all notices of intention to hold the mining claims covered by the stipulation were filed by attorney Jensen for the purpose of protecting the interest of all the parties, including the appellant as successor in interest to John B. Davis; that the appellant otherwise recognized and ratified the stipulation and the interests provided therein by agreeing to a lease of the property to other parties who operated it in 1948; and that he took a sublease from these lessees on certain of the claims and operated the properties thereunder during the year 1948. In 1948, the Hansen-Hunt Group filed claims over the claims in question, and then instituted an action to quiet title against all of the parties to the Gibbons suit, and in addition, made the appellant a party defendant. The latter case is referred to as the Hunt case in the lease and option agreement, and one which appellee undertook to defend.

A third suit was instituted by appellant against Frank Davis, who claimed some interest in the property through his brother, John B. Davis, from whom appellant also derives his title. This suit resulted in a judgment decreeing Frank Davis to be the owner of 37½ per cent interest in the Vanadium King Claims, and the appellant 62½ per cent interest. This case is referred to as the Davis case, and one which the appellee specifically undertook to prosecute in the Supreme Court of Utah.

The lease and option agreement did not mention the Gibbons suit, which resulted in the stipulation, and the gist of the claimed fraud revolves around the representations made by the appellant respecting the force and effect of this particular stipulation, under which appellant, as successor to John B. Davis, ultimately received an undivided 5 per cent interest in the claims in question.

As to this matter, the trial court found that when confronted with the stipulation on February 2, 1950, appellant falsely represented to the appellee that it was entered into by counsel of record without authority; that the Gibbons-Bitterbaum Group had abandoned the claims; and that he further falsely represented that he had been in continuous possession of the claims since 1942, had performed exploration work thereon, and had resumed possession of the claims and actively developed them since 1948. The court further found in effect that from the appellee's examination of data available to it, it had a right to rely upon such representations, and did so; that instead of getting a lease on claims subject only to the Davis and Hunt litigation, it got a lease on only 5 per cent of such claims in accordance with the stipulation, to which the appellant was in privy, and which he had recognized and ratified. After rescinding the lease, the court awarded appellee damages for the $5,000.00 paid under the terms of the lease agreement, and $3,263.54 expended by appellee in connection with defense of the lawsuits mentioned in the lease option agreement. Thereafter appellee filed a partial satisfaction of judgment for $1,013.54, as not being supported by the evidence.

On appeal, appellant concedes that no reference was made in the option agreement to the Gibbons litigation, or to the stipulation therein. He does earnestly suggest, however, that the appellee, through its president, secretary-treasurer and legal counsel, had actual and constructive knowledge of the stipulation, and was therefore chargeable with all of the facts bearing upon it and its legal consequences as well. He does not deny discussing the stipulation with appellee's officers before entering into the option agreement. He does strenuously deny that they relied upon any representations he made concerning it, and says that having knowledge of the stipulation, they made an independent investigation concerning it...