United States v. Bennett

• Decision Date: 08 November 1944
• Docket Number: No. 302.,302.
• Citation: 57 F. Supp. 670
• Parties: UNITED STATES v. BENNETT et al.
• Court: U.S. District Court — District of Washington

57 F. Supp. 670

UNITED STATES v. BENNETT et al.

No. 302.

District Court, E. D. Washington, N. D.

November 8, 1944.

Edward M. Connelly, U. S. Atty., B. H. Ramsey, Joseph L. Thomas, and Ernest Falk, Sp. Attys., United States Department of Justice, Lands Division, all of Spokane, Wash., for petitioner.

L. H. Brown and L. E. Gandy, both of Spokane, Wash., for defendant M. G. Swanson et al.

John T. Raftis, of Colville, Wash., for defendants Spokane Portland Cement Company and Charles E. Bennett for the W. N. Bennett Estate.

George W. Young, of Spokane, Wash., for Howard C. Price Estate and heirs.

Edward J. Crowley, of Spokane, Wash., for defendants Richard C. Parnell and Thelma S. Parnell.

SCHWELLENBACH, District Judge.

This proceeding is to determine the persons entitled to the compensation to be awarded in this action in which the petitioner is condemning 340 acres of land in Stevens County, Washington. The land is being condemned for use as a dolomite quarry. The declaration of taking was filed November 16, 1942, and on that date a deposit of $10,000 was made with this Court. 40 U.S.C.A. § 258a. The principal controversy involves tract 3 of the condemned property on which the dolomite is located. By agreement between all parties involved, extended hearings looking to a decision of the question of title have been held prior to the jury trial on the question of value.

Tracts 3 and 4 are a part of a large ranch which, sometime prior to 1938, was acquired by W. G. Wrenn, of Kansas City, Missouri. On September 7, 1938, Wrenn sold the property to the defendant M. G. Swanson. Swanson gave Wrenn some stock in a company operating at Deer Park, Washington, and also gave him a purchase money mortgage in the principal sum of $30,000. Swanson paid nothing on the mortgage, either principal or interest, and paid no taxes. On July 31, 1941, Wrenn traded his mortgage to the defendant Parnell, who sent one Bennett here as his agent under an oral agreement that Bennett would get half out of whatever he could secure from the sale or the working out of the mortgage.

The defendant Spokane Portland Cement Company (hereafter called the Cement Company) had for many years operated a lime quarry on nearby property. In April, 1941, Swanson was taken to the psychiatric ward of the St. Luke's Hospital and kept under observation for seventeen days. Swanson, on August 31, 1939, executed a deed to one-half interest in the property to the defendants Price and Crary. In December, 1941, Bennett, on behalf of Parnell, employed Mr. Raftis, an attorney at Colville, to foreclose the Swanson mortgage. In the foreclosure action, which was started December 9, 1941, Parnell and his wife were plaintiffs by virtue of an assignment of the note and mortgage dated December 3, 1941, although the acknowledgment of the assignment of the mortgage was dated December 11, 1941, and was filed for record December 17, 1941. Process was served upon the Swansons on December 9, 1941. Defaults were entered against the Swansons and Prices and Crarys in that action. Judgment and decree of foreclosure were entered on March 13, 1942. The plaintiff bid in the full amount of the mortgage with interest and costs in the sum of $36,586.33. The certificate of sale to Parnell and his wife was issued April 22, 1942. The sale was confirmed on September 18, 1942.

On December 15, 1941, Bennett agreed with the Cement Company to sell certain ties to be produced from timber on the ranch and got an advance from the Cement Company of $500. On December 16, 1941, he used $200 of this money to secure from the Swansons a quit claim deed to Mrs. Bennett to the mortgaged premises. It was stipulated here by the Cement Company that the sole purpose of the quit claim deed was to secure for the Bennetts the possession of the property during the pendency of the foreclosure proceedings and that no wider application of the quit claim deed should be made. A few days thereafter Bennett received from Parnell $200. Upon receipt of the latter, he told Parnell that he had used the money to obtain the quit claim deed. He did not mention the securing of the $500 from the Cement Company and he asked for and received from Parnell further money with which to pay the laborers for getting out the ties. This was only one of a number of instances where Bennett solicited and received money from Parnell under a misrepresentation. Shortly after that, Parnell entered the military service and was stationed at Fort Snelling, Minnesota.

Commencing as early as November 27, 1941, general discussion ensued in this area concerning the possibility of the establishment at Spokane of a plant in which magnesium would be manufactured from dolomite through the use of an electrometallurgical process. There were introduced in evidence a number of newspaper clippings from Spokane papers dated between November 28, 1941, and May 1, 1942, devoted to the discussion of the possibility of the establishment of such a plant. It was clear from the beginning and a matter of general knowledge in Spokane that two of the factors that caused the area to be considered for the establishment of such a plant were the available supply of electric power plus the supply of dolomite located in Stevens County. In February, 1942, representatives of the electrometallurgical company went to Stevens County in company with officers of the Cement Company to make investigations of the property here involved. Core drillings were later necessary before final determination as to acquisition of the site. During this time, the officers of the Cement Company and Bennett both knew of the existence of a substantial dolomite deposit upon this property. They did not then know of the facts later ascertained and testified to by the Cement Company's assistant manager, Fosseen, that the deposit, over a period of years, would have a value to the Cement Company of between five hundred thousand and a million dollars. They must have known, however, that substantial value existed if the development of magnesium from dolomite was developed as a permanent industry in the Spokane area. The Cement Company officials knew at the time that Parnell owned this mortgage. Despite that fact, on March 24, 1942, the Cement Company took an option from Bennett for the purchase of the 160 acres including the dolomite site. It agreed to pay Bennett $10,000. Of that sum, the $500, which the Cement Company officers testified had been paid for ties December 15, 1941, was considered as the first advance on the option; the Company loaned Bennett $1,500 on the date of the execution of the option and agreed to pay him the additional $8,000, at the rate of $600 per month during the first seven months following the acceptance of the option and $100 per month until Bennett was paid in full. The Company was allowed four months to make core drillings before being called upon to exercise its option. During the months of February, March, and April, 1942, the Cement Company paid Bennett $864.05 for ties. It then proceeded to advance him monies on the option despite the fact that the core drillings had not been completed so that, by May 26, 1942, it had advanced an additional $7,600. For these advances, it took back Bennett's personal notes. On May 21, 1942, the option and agreement to purchase was extended to May 21, 1943. During April, 1942, the Cement Company officials and Bennett believing that Parnell was about to be sent overseas, Bennett went to Parnell's army camp and procured from him an assignment to him of the certificate of sale. The Cement Company advanced $275 for the expenses of his trip. The evidence shows that, while Bennett may have told Parnell that he had a deal on with the Cement Company, he did not tell him of the option for $10,000 nor did he tell him of the peculiar potentialities of the property in view of the new interest in its use for the production of dolomite.

During May, 1942, the Cement Company made an effort to purchase the equity of redemption from Swanson and Price and Crary. A number of meetings were held between the individuals and the company officials and the lawyers, and, at some of these meetings, the local representatives of the Defense Plant Corporation, a subsidiary of the R. F. C., attended. The amount demanded by Price and the terms exacted by him were impossible and nothing came of these negotiations. On July 13, 1942, the Bennetts entered into a separation agreement and property settlement under which Grace Bennett assigned to Bennett all of her interest in the option agreement and this property. In the latter part of October, 1942, Bennett was taken to St. Luke's Hospital for alcoholism. The Cement Company paid his hospital and nursing bills and on November 11, 1942, Bennett assigned to the Cement Company that portion of the certificate of sale applicable to the involved property. He then committed suicide on November 21, 1942. On April 28, 1943, the assignment from the Parnells to Bennett and the partial assignment from Bennett to the Cement Company were filed of record and thereupon the Bennett estate received the sheriff's deed for the remainder of the property and the Cement Company received the sheriff's deed to tract 3.

In these proceedings, the Cement Company claims the right to receive the entire award by virtue of its sheriff's deed. Swanson's son filed an affidavit asserting that his father was mentally incompetent and could only be represented by a guardian ad litem. Consequently, I appointed Mildred Swanson Soderberg, a daughter of Swanson, as the guardian ad litem. She contends that the Swansons are entitled to receive that portion of the award which might exceed the amount of the mortgage. She attacks the mortgage foreclosure on the ground that Swanson was insane at the time and that no guardian was appointed for him in the foreclosure proceedings and on the further ground that Wrenn's assignment to Parnell was not acknowledged until after...