Southern Development Co of Nevada v. Silva

• Decision Date: 19 March 1888
• Citation: 8 S.Ct. 881,31 L.Ed. 678,125 U.S. 247
• Parties: SOUTHERN DEVELOPMENT CO. OF NEVADA v. SILVA
• Court: U.S. Supreme Court

125 U.S. 247

8 S.Ct. 881

31 L.Ed. 678

SOUTHERN DEVELOPMENT CO. OF NEVADA v. SILVA.

March 19, 1888.

Wm. M. Stewart, A. T. Britton, and A. B. Browne, for appellant.

J. P. Langhorne and John H. Miller, for appellee.

LAMAR, J.

This is a bill in equity to rescind a contract of purchase of a silver mine on the ground of fraudulent representations, and to recover the consideration paid. The suit was commenced originally in the superior court of Inyo county, Cal., on the 8th of May, 1884; but on account of the diverse citizenship of the parties, the plaintiff being a corporation organized under the laws of Nevada, and the defendant a citizen of California, it was removed into the United States circuit court. Demurrers to the original bill and to an amended bill having been sustained, the present 'second amended' bill of complaint was filed. Answer was filed by defendant, replication by complainant, and issue was joined. Testimony was taken, and the case was heard, resulting in a decree dismissing the bill on the 14th of March, 1887. It appears from the record that on the 15th of March, 1884, the appellant (who was the complainant below) purchased from the defendant a mining claim, known as the 'Sterling Mine,' together with other mining property, all situated in Inyo county, Cal., paying him therefor the sum of $10,000. On the 8th of May, 1884, the original bill of complaint was filed, charging, in substance, that complainant was induced to purchase said mine and mining property solely upon the representations made by Silva as to its condition, extent, and value; that such representations were made to H. M. Yerington, the president of said complainant company, and to one Forman, a mining expert in his employ, in January, 1884, when an examination of said mine was made by them; that said representations were false and fraudulent, and were well known to the defendant at the time to be such; and that said representations were, in substance and in a somewhat different order, as follows: (1) That there were 2,000 tons of ore in the mine; (2) that the bottom of what is called the 'Ore Chamber' was solid ore, as good as the ore exposed on the sides of the chamber; (3) that there were not less than 500 tons of ore in and about the said ore chamber; (4) that the mine was worth $15,000; and (5) that, after going through the mine, the defendant represented to said Yerington and Forman that he had shown them all the work which had been done in or about the mine that would throw any light upon the quantity of ore therein.

The answer of the defendant is direct, positive, and unequivocal in its denials of the allegations of the bill; and, as an answer on oath is not waived, unless these denials are disproved by evidence of greater weight than the testimony of one witness, or by that of one witness with corroborating circumstances, the complainant will not be entitled to a decree; ant this effect of the defendant's answer is not weakened by the fact that the equity of the complainant's bill is the allegation of fraud. Vigel v. Hopp, 104 U. S. 441; 2 Story, Eq. Jur. § 1528; 1 Daniell, Ch. Pr. 844. The burden of proof is on the complainant; and unless he brings evidence sufficient to overcome the natural presumption of fair dealing and honesty, a court of equity will not be justified in setting aside a contract on the ground of fraudulent representations. In order to establish a charge of this character the complainant must show, by clear and decisive proof—First, that the defendant has made a representation in regard to a material fact; secondly, that such representation is false; thirdly, that such representation was not actually believed by the defendant, on reasonable grounds, to be true; fourthly, that it was made with intent that it should be acted on; fifthly, that it was acted on by complainant to his damage; and, sixthly, that in so acting on it the complainant was ignorant of its falsity, and reasonably believed it to be true. The first of the foregoing requisites excludes such statements as consist merely in an expression of opinion or judgment, honestly entertained; and, again, (excepting in peculiar cases,) it excludes statements by the owner and vendor of property in respect to its value.

The evidence in the case shows that in the development of this mine a tunnel, called the 'Sterling Tunnel,' had first been dug. At a distance of about 140 feet along the line of this tunnel, from its mouth, there are branches running easterly and westerly. About 60 feet from the main tunnel, in the eastern branch, winze No. 1 starts down. About 38 feet below the level of the tunnel, a level, known as the '38-feet level,' starts off from this winze, and at the bottom of the winze, a distance of about 82 feet vertical below the main tunnel, there is another level, known as '82-feet level.' In the easterly branch of the tunnel, about 30 feet from winze No. 1, there is another winze starting downward, inclining to the southeast as it goes down. This winze is numbered 2, and is connected with the 38-feet and the 82-feet levels. Intermediate between these levels is another level, known as the '55-feet level,' which opens out to the eastward of winze No. 2 into a chamber about 15 feet long and about 8 feet wide. In the south-east corner of this chamber was a little hole or shaft, extending down ward a few feet only. In sinking winze No. 2, Silva struck an ore body at a point opposite the 38-feet level. It was irregular in shape, dipping at an angle of about 45 degrees. Commencing at a point, comparatively speaking, it increased gradually as it descended, and was in form somewhat like a pyramid. At its base it measured 4 or 5 feet across, and it was about nine feet long. The surface of this inclined pyramid formed the floor or bottom of the chamber. There was, however, a small space between the base and opposite foot-wall, which is called the 'bottom' of the chamber by complainant's witnesses, and it is the 'bottom' spoken of in the bill. The ore comprising this pyramid was carbonate, and, being friable, had slacked down over the face of the pyramid to the bottom, partially covering it, and partially filling up the little hole or shaft in the south-east corner.

As to the first alleged representation, as classified above, viz., that there were 2,000 tons of ore in sight in the mine, and that Yerington relied upon such statement when he made the purchase,—the proof utterly fails to establish either that Silva made the statement, as a statement of fact, or that Yerington relied upon such statement, even had it been made. Silva, both in his answer and in his testimony, denies ever having made the statement, and the testimon of Yerington himself is to the effect that Silva's statement was qualified by the phrase 'in his judgment.' This, then, is shown to have been nothing more than an expression of opinion on the part of Silva as to the quantity of ore in sight in the mine. But, even if Silva had made the statement imputed to him in the bill, there is abundant evidence to show that Yerington did not rely upon it in the purchase of the mine. Yerington's own evidence, on this point, is against him. He testifies that he did not believe that there were more than 1,000 tons of ore in the mine, and that Forman agreed with him on that point. And he further testifies that, valuing this ore at 32 ounces of ore and 45 per cent. of lead per ton, (which it appears was its approximate value, as determined by several assays,) and calculating that there would be 1,000 tons of ore there, the mine would be worth $10,000,—the sum he actually gave for it. This lacks much of coming up to the rule that the complainant must have been deceived, and deceived by the person of whom he complains. Atwood v. Small, 6 Clark & F. 232; Pasley v. Freeman, 3 Term R. 57. Besides, the quantity of ore 'in sight' in a mine, as that term is understood among the miners, is at best a mere matter of opinion. It cannot be calculated with mathematical, or even with approximate, certainty. The opinions of expert miners, on a question of this kind, might reasonably differ quite materially. In the case of Tuck v. Downing, 76 Ill. 71, 94, the court say: 'No man, however scientific he may be, could certainly state how a mine, with the most flattering outcrop or blow-out, will finally turn out. It is to be fully tested and worked by men of skill and judgment. Mines are not purchased and sold on a warranty, but on the prospect. 'The sight' determines the purchase. If very flattering, a party is willing to pay largely for the chance. There is no other sensible or known mode of selling this kind of property. It is, in the nature of the thing, utterly speculative, and every one knows the business is of the most fluctuating and hazardous character. How many mines have not sustained the hopes created by their outcrop!' We approve the position of the court below, that 'Yerington and his expert, Forman, were as competent to judge how much ore there was 'in sight' as Silva was. They were no novices in matters of that kind. This misrepresentation, if such it be, does not contain either the first, fourth, or fifth element stated by Pomeroy as essential elements in a fraudulent misrepresentation.'

As stated above, the substance of the allegation of the bill is that Silva represented that the bottom of this ore chamber, which was covered with loose ore slacked down from the pyramid, was composed of ore as good as that exposed on the sides of the chamber. Silva, in his answer, expresly denies ever having made such statement. Forman testifies that with a little prospecting pick he had with him he raked through the dirt and loose ore that had slacked down, to see if it would reach the bottom of the ore chamber, but that it would not. he further says: 'I asked Silva how the bottom was; if he had sunk below there. He said, 'No.' I said, 'How is the bottom. You, as a miner, know it is a suspicious...