Reed v. Munn

• Decision Date: 16 November 1906
• Docket Number: 2,319,1,713,1,890,2,320.
• Citation: 148 F. 737
• Parties: REED v. MUNN et al. IBEX MINING CO. v. MUNN et al. MUNN et al. v. IBEX MINING CO. (two cases).
• Court: U.S. Court of Appeals — Eighth Circuit

148 F. 737

REED v. MUNN et al.

IBEX MINING CO. v. MUNN et al.

MUNN et al. v. IBEX MINING CO. (two cases).

Nos. 1,713, 1,890, 2,319, 2,320.

United States Court of Appeals, Eighth Circuit.

November 16, 1906

[Copyrighted Material Omitted]

The above-entitled causes grow out of one controversy, and are so allied that they may be considered and disposed of in one opinion. The controversy grows out of the claim of N. A. Munn and R. G. Munn to an alleged equitable interest in what is termed the 'Independence Lode,' or mining claim located at Leadville, Colo. For convenience the said Munns will be designated in this statement and the discussion as the complainants, and the other parties to the litigation as the defendants. In 1878 the complainants, by discovery and location, became the owners of an undivided one-half interest in said mine. J. S. Brown, Jr., and Charles Johnson were the like owners of the other half, in the proportion of one-fourth each. This location was soon checkered over with other conflicting claims, and became the prolific source of strife and litigation, rendering the development and operation of the mine, if not impracticable, of little certainty and profit; so that in 1879 the complainants executed to one Cartwright a full power of attorney acknowledged and recorded, authorizing him to sell and convey their interest therein, under an oral agreement that for his services in effecting such sale he should account to them for one-half of the proceeds. Afterwards, in the same year, Cartwright, under said power, conveyed this interest to one James Henshall in fee simple for the expressed consideration of $1,000, receipt of which was acknowledged. This deed was duly acknowledged and recorded. Thus the record title stood until 1881, when on account of the complications and litigation growing out of the various conflicting claims, the parties in interest by deed conveyed to one Clinton Reed their respective claims, including said Henshall; and in September, 1881, entered into what is termed the 'Archer Consolidation Agreement,' which included some other contiguous allied properties not involved in this litigation. The parties to that agreement were as follows: Clinton Reed, party of the first part, and trustee for said parties of the second part, to wit: John B. Stone, J. P. Van lice, A. L. Ordeen, James Henshall, James B. Belford, Lewis C. Rockwell, James S. Brown, J. B. Bissell, Thomas L. Darby, Jacob Mack, John Powell, Daniel Powell, John Slattery, Patrick Sullivan, John W. O'Brien, Michael Finnerty, C. Donnelly, John Fox, Peter Hanrahan, R. E. Goodell, William Gilman, Leonard S. Ballau, David A. Gage, Alexis M. Lay, and Newton B. Lord. The agreement witnesseth:

'That whereas, said parties of the second part have conveyed to said party of the first part, as trustee for the purposes hereinafter stated, the following lode mining claims, to wit, the Archer lode, the Independence lode, the San Jose lode, the Little Stella lode, the General Shields lode, the Burlington lode, the Winnemuch No. 2 lode, and the Uncle Sam lode. And whereas, said parties of the second part have made such conveyances to said Reed for the purpose of consolidating all of said claims and said interests in one property, to be owned by said parties of the second part, as follows: All of said claims are to represent in said consolidation and to be valued for the purposes of such consolidation at the sum of two hundred and sixty-eight thousand three hundred and thirty-three ($268,333) dollars. Of said sum the Archer, the Independence, and San Jose lodes are each valued at forty thousand dollars, the Little Stella and General Shields lodes are each valued at twenty thousand dollars, the Burlington, and Winnemuch No. 2 lodes are each valued at the sum of twenty thousand ($20,000) dollars, and the Uncle Sam lode is valued at the sum of sixty-eight thousand three hundred and thirty-three dollars, of which several sums the several owners of said several claims own an interest proportionate to their several shares or interest in the several claims, and, if said trustee shall sell or dispose of the said claims under the direction of two-thirds in value of the owners thereof, he shall pay to the several and undivided owners sums proportionate to their interests, upon the above basis. And the said party of the first part, as such trustee, shall be governed in the sale and disposal of said consolidated property, and in the holding thereof, by the directions of two-thirds in value of the owners thereof, and shall, whenever called upon by such two-thirds in value of the owners thereof, convey said premises or take such steps in reference thereto as they may direct, such direction to be in writing, signed by the said two-thirds in value; it being expressly understood and declared that said property shall be held, disposed of, or sold upon such terms and in accordance with the direction and authority of two-thirds in amount of the owners of said property, and that the amount of interest that each of the several owners have in said several claims shall be determined by what is shown by the records of Lake county to be the interest of such owner in the premises. And it is expressly understood and agreed and this trust is executed upon the condition, that the said trustee shall be bound to act upon the direction of said two-thirds, notwithstanding any objections of the minority.'

In pursuance of said trust arrangement, on the request and direction of the required two-thirds in amount of the owners said Reed made a lease of said consolidated properties, and on the 28th day of June, 1890, on like request of the beneficiaries, including said Henshall, Reed made a lease thereof to one Campion, for a term of three years, with an option to purchase the same at any time during the term at the stipulated price of $75,000. This lease and option was, on the 18th day of March, 1891, duly assigned by said Campion to the Ibex Mining Company, a corporation organized about the 7th day of March, 1891, which, in the exercise of the right of said option, on the 5th day of February, 1894, elected to make the purchase; and thereupon said Reed pursuant to the terms of said trust, executed and delivered to the company a deed of conveyance to all of said property. To correct some error in said deed Reed, on the 27th day of June, 1894, made a second deed to the company. The said company by mesne conveyances also acquired said lease of said J. S. Brown and Charles Johnson. Through the efforts of the parties to said consolidation agreement other than said Henshall, patents were obtained to the various mining properties involved, and these titles vested in the Ibex Mining Company. Under said leases the said properties were worked and developed until 1893-94, so that the properties which, prior to the Archer consolidation agreement, had been of little worth, proved to be very valuable and promising. In this condition of affairs, on the 13th day of July, 1894, the complainants, as citizens of the state of Texas, filed their bill of complaint against the Ibex Mining Company, George W. Trimble, Charles Cavender, A, V. Hunter, and J. T. Campion, as directors thereof, and Clara M. Richardson and James Henshall. This bill, after setting forth the discovery and location of the Independence Mining lode and the making of the power of attorney to said Cartwright, charged that, in disregard of his trust, Cartwright, without their knowledge, in July, 1879, entered into some arrangement or agreement with said Henshall, the nature and conditions of which were to them unknown, alleging the fact to be that Cartwright never sold or disposed of their said interest in said mine, and that if he did make a deed to Henshall it was not the sale of their interest in said property, and that no consideration passed to them; that they had believed that Henshall was only a co-owner with them in the Independence lode, not derived from them; that Henshall in 1882-83 told them that he never held their interest in said mine, and they believed their interest therein remained intact in their name on the records of Lake county until about April 15, 1884, when they learned that the defendants other than Henshall were in possession and taking ore from said claim. Knowledge of the rights and claim of the complainants was charged against the defendants. The prayer of the bill was that the complainants be declared to be the owners and entitled to the possession of an undivided one-half in the Independence mine, and that the defendants account for the ore mined therein. This bill having been held bad on demurrer, the complainants on March 20, 1895, filed an amended bill, in which they took the position that Cartwright, being unable to dispose of and sell said claim, relinquished his interest therein, and entered into an arrangement on their behalf with Henshall in writing, whereby Henshall, for an interest of one-fourth of said claim, agreed to defray all the expenses, to defend and prosecute adverse suits respecting said claim, and to perfect the title thereto; and, in the event he failed to perfect said title, the conveyance from Cartwright should be void and of no effect. It was further alleged that Henshall entered into the Archer consolidation agreement with the consent of the complainants, and that Reed leased the properties to one Campion under the terms of said Archer consolidation trust with their knowledge and consent. Demurrer was filed to this bill, but without action thereon the complainants, on the 3d day of July, 1895, filed a second amended bill, in which said Clinton Reed was joined as a defendant. In this amended bill they, in effect, allege that they, in connection with said J. S. Brown and Johnson, entered into an...