Bayne v. Whistler

MOORE, District Judge. The following facts stand undisputed by the evidence: (1) Bayne’s ownership of undivided half interest in the Wonder creek claim. (2) Purchase by Whistler of undivided half of Bayne’s interest in Dahl creek fraction for $1,000, of which $260 was paid in cash, with full knowledge of existing mortgage on the whole of property and other property. (3) The close social intimacy and the deference of Bayne to Whistler’s judgment in business matters; the general management of Bayne’s interests by Whistler and his reliance upon Whistler’s experience. (4) Eeases by Whistler of Wonder creek claim during Bayne’s absence; signature to lease to Stipek and others of Bayne “by Whistler”; prospecting of claim in winter of 1904 — 05 under said leases; discovery of some values; receipt of royalty of $30 from the lessees who operated the claim that winter; no disclosures to Bayne of the facts of leasing, prospecting; discovery of values, or receipt of royalties. (5) Aggregate of over $144,000 derived from No. 6 on Wonder creek. (6) Continued holding by Whistler of the interest conveyed by Bayne. — 20 — (7) Ignorance by Bayne until fall of 1907 of the McDonald-Whistler litigation and of the judgment rendered therein. The disputed facts at the trial are the following: (1) The giving of the power of attorney from Bayne to Whistler. (2)' The time of the insertion of the alleged consideration of $260 in the deed. (3) The substance of the conversation immediately prior to the passing of the deed. (4) The character of the notice whereby defendant appears to claim plaintiff was put upon inquiry. The plaintiff’s evidence is explicit that he gave a written power of attorney to the defendant in 1904, and he gives the details of the time, place, and circumstances of its preparation and delivery. His testimony on this head is corroborated by that of attorney Geo. D. Campbell, who says that-in the winter of 1904-05 Whistler told him he had Bayne’s power of attorney. W. H. Sturtevant also testified that, when he was lessee of Bayne and Whistler’s Dahl creek fraction, Whistler more than once told him that he had Bayne’s general power of attorney. This testimony, combined with the notable fact that Whistler assumed to act and did act as Bayne’s agent in giving a lease, gives such force to the evidence of the plaintiff on this particular point that the defendant’s denial of his having a power of attorney cannot commend belief, and I find that issue in.favor of the plaintiff. I do not deem that the time of the insertion of the words and figures “two hundred and sixty dollars ($260)” in the deed an element of great importance in the decision of this controversy, since both parties agree that the words were actually inserted before the delivery of the deed. In respect to Bayne’s account of what took place prior to the signing of the deed at Bayne’s Steadman avenue cabin, Bayne is supported by the witness Leonard. The decided weight of the testimony on this point is on the side of the plaintiff. ' The testimony as to the extent and the character of notice of Whistler’s operations on the claim in dispute in the winter — 21 — of 1904 — 05 all comes from the mouths of plaintiff’s witnesses, and when brought together, item by item, simply shows that Bayne paid but little heed to what his friends Fell and Sturtevant told him of the reports about the claim, and that, despite these reports, he held to the belief that his friend Whistler had not betrayed his confidence. On the part of Whistler, at all times after Bayne’s return from Seattle in 1905, there was a studied failure to even make a single mention of the lease of the claim he had given in the winter of 1904-05 to Stipek and others, or of the lease subsequently given by him to Hansen, Olsen, and Warner in April, 1905, upon the surrender of the St-ipek lease, and of the developments made by the last-mentioned lessees, and of the money extracted by them from the claim, and of his having received royalty from them amounting to $30. So, also, there is an entire absence of any testimony tending to prove that any information, from which Bayne could have gathered these facts for himself, was given directly or otherwise to Bayne by Whistler. Why, then, was Whistler thus silent ? The answer to the question can only be that he feared that, if he enlightened Bayne concerning his giving of the leases and the result of the operations of the lessees, Bayne would resolve to refuse the conveyance of his interest in the claim. The relation of principal and attorney in fact or agent having still subsisted between the parties, it was the duty of Whistler, before taking the conveyance from Bayne, to make full disclosure to Bayne of the giving of the two leases and of the amount of gold produced from the claim by the lessees under both leases, and to report, as such attorney in fact, whether or not the lessees were willing to continue their working of the ground, and what promise the leased ground gave of yet better returns when further explored. This duty Whistler wholly violated by purposely, as his acts clearly indicate, leading Bayne to make the conveyance in ignorance of the true condition and value of his interest in the claim conveyed, and upon discovery of the fraud, and within a reasonable time thereafter, it was the right of Bayne at his option to avoid the transaction. — 22 — Having in view the duty of an agent who, under any kind of agreement with his principal, receives any part of the property which is the subject of his trust, Pomeroy in his Equity Jurisprudence, §§ 958, 959, says: “The mere fact that a reasonable consideration is paid, and that no undue advantage is taken, is not of itself sufficient. Any unfairness, any underhanded dealing, any use of knowledge not communicated to the principal, any lack of the perfect good faith which equity requires, renders the transaction voidable, so that it will be set aside at the option of the principal.” Whistler concealed from Bayne the fact that he had in his possession as royalty $30, of which one-half was Bayne’s received under a lease still in life at the date of the deed to Whistler and not to expire for many months thereafter. It is maintained by Whistler that he paid $260 for the interest, but the evidence does not support the contention. The sum of $260 had been paid to Bayne by Whistler for a one-half interest in the Dahl creek fraction, and, when the property was sold under execution upon a mortgage binding the fee, Whistler lost his interest in the fraction by the sale. There does not appear from the evidence to have been any contract, at any time after the purchase of this fraction, that Bayne was to indemnify Whistler for the loss of the $260, though it is said by Whistler in his evidence that Bayne subsequently agreed to reimburse to Whistler the $260 out of the steamer Research which was attached by the United States government and lost to its owner. These facts create no legal obligation on the part of Bayne to pay Whistler $260, the consideration inserted in the deed for Bayne’s interest in No. 6 Wonder creek. Even if Bayne had been legally liable to Whistler for the payment of the $260, under the citation from Pomeroy above quoted, the remedial right of Bayne asserted in this action in no wise would be affected by the indebtedness. By Whistler’s undisputed assumption of authority to act as Bayne’s agent in respect to the very property involved in this suit, he incurred the responsibilities of an agent, and must be so regarded. — 23 — “Where an unequivocal act of agency by a party is shown, whether it is by actual employment of the parties or as a volunteer can make no difference as to his responsibilities growing out of that relation.” Dennis v. McClagg, 32 Ill. 429; 31 Cyc. 1244b. The part taken by Whistler in the principal transaction presented by the evidence raises a presumption of wrong, and brings his acts within one species of constructive fraud, and throws on him the burden of proving his innocence and the absence of fault. Pomeroy’s Eq. Jur. § 922. The principles governing that species of constructive fraud “extend to all persons who occupy a position of trust and confidence, of influence and dependence, in fact as well as in law.” Pom. Eq. Jur. § 963 and notes; Kyle v. Perdue, 95 Ala. 579, 10 South. 103; King v. Remington, 36 Minn. 15, 29 N. W. 359; Cannon v. Gilmer, 135 Ala. 302, 33 South. 659. The defendant held a position, not only of trust and confidence, but, on account of his forceful character and his long association with the plaintiff, he stands out in the evidence as having acquired a degree of dominance over the plaintiff. The rights of the parties to be adjudicated, therefore, spring out of both these relations, and, as already indicated, the deed in question should be avoided and canceled, unless the plaintiff has lost his right to the remedy sought by the action because of his ratification of the deed, or by his acquiescence in the rights acquired by means of said deed, or by his laches or delay in adversely asserting his rights to the interest conveyed by the deed. The defendant in his amended answer alleges as a defense facts from which it may be inferred that these defenses are relied on to defeat the action. These are the defenses, also, that were upheld at the trial. The burden of proving knowledge of the fraud and the time of its discovery rests upon the defendant. Pence v. Langdon, 99 U. S. 582, 25 L. Ed. 420. Under the facts and circumstances of this case, it was not incumbent on the plaintiff to rescind, or take steps to rescind, the deed until he gained actual knowledge of the fraud practiced on him. “It is not enough to show that he might have known or suspected it from data within his reach.” Pence v. Langdon, supra, 99 U. S. 581, 25 L. Ed. 420. — 24 — The defense of ratification of the deed by the plaintiff is wholly devoid of merit because it involves a deliberate act intended to renew a transaction known to be voidable. No such deliberate intention entering into the act of the plaintiff can be inferred from the evidence. “Acquiescence and waiver,” says Justice Swayne in Pence v. Langdon, 99 U. S. 578, 25 L. Ed. 420, “are always questions of fact. There can be neither without knowledge; * * * one cannot waive or acquiesce in a wrong while ignorant that it has been committed. Current suspicion and rumor are not enough. There must be knowledge.” Here no actual knowledge that defendant concealed facts which he should have disclosed is shown other than that gained from the hearsay talk of Fell and Sturtevant at Nome. The defendant does not contend that any report from which the plaintiff could infer Whistler’s wrongdoing reached the plaintiff from any other source than Fell and Sturtevant, and in the summer of 1905 no work was being done on the Wonder creek claim. Work on the claim was not resumed until November, 1905, after Bayne had again left Nome for the winter. I hold, therefore, that the plaintiff’s action was not barred by acquiescence on his part in the wrong suffered by him. Next, what say the authorities concerning the defense of laches? In an action to set aside a deed made between parties standing in a confidential relation with each other, the defense of laches is not regarded with favor. Ross v. Payson, 160 Ill. 349, 43 N. F. 399; Sears v. Hicklin, 13 Colo. 143, 21 Pac. 1022; Gardner v. Crockett, 58 Ga. 603. “Laches in legal significance is not mere delay, but delay that works a disadvantage to another. So long as parties are in the same condition, it matters little whether one presses a right promptly or slowly within limits allowed by law.” 6 Oyc. 301. The condition of Whistler, it cannot be said, has changed in any manner to his prejudice as a result of any act of Bayne. Much has been made of the fact that Whistler was made defendant in an action brought by McDonald and Carter to compel Whistler to convey the two-thirds of his interest in the Wonder creek claim to them. He was put to the expense — 25 — of defending this action, it is true, but Bayne was not a party to it. Whistler, in defending the action, was working, not in Bayne’s interest, but to retain as his own as much of the gold produced from the claim as possible. His warfare with the parties to that action was waged by him in his own interest. As it is, Whistler spent in his own defense a part of the money which Bayne was entitled to. It is difficult to see how Bayne.should meet defeat in this action because Whistler, in defending the McDonald action, upheld an interest as his own. which in fact belonged equitably to Bayne. Whistler has been put to no expense for preserving the title to the ground under the mining laws. He has, however, collected royalty from the lessees, and thus far has failed to account to Bayne for the small sum in his possession at the very day he induced Bayne to execute the deed for his interest in the claim. As to the dispatch with which a party to a contract affected by the fraud of the other party to the contract shall, after being apprised of the fraud, move to obtain a rescission of the contract, Justice Swayne, in Pence v. Langdon, supra, again says: “When fully advised he must decide and act with reasonable dispatch, * * * but the wrongdoer cannot make extreme vigilance and promptitude conditions of rescission. It does not lie in his mouth to complain of delay.” See, also, Sears v. Hicklin, supra, 13 Colo. 143, 21 Pac. 1022; Arkins v. Arkins, 20 Colo. App. 123, 77 Pac. 256; Thompson v. Marshall, 36 Ala. 504, 76 Am. Dec. 328. From a careful review of the testimony I conclude that the plaintiff is chargeable with knowledge of the imposition practiced on him from the date of his receiving information from Fell and Sturtevant of the suit against Whistler brought by McDonald and Carter to impress a trust in their favor on Whistler’s interest in the Wonder creek claim. I discover no lack of vigilance and diligence on the plaintiff’s part in protecting his interests after that date, and that he is innocent of the laches imputed to him by the respondent in this suit. While I find the issues of fact raised by the pleadings mainly in favor of the plaintiff, I cannot find from the evidence — 26 — that the defendant, when he procured the deed from the plaintiff, well knew that the Wonder creek claim was very valuable. The evidence shows the total value of the gold taken from the claim by the lessees hereinbefore named to be $144,120. Findings in accordance with this decision will be signed by the court. The court will further decree that an accounting be made by the defendant at a future hearing by the court, and, after the hearing had, will further direct the defendant to deliver up the deed for cancellation, and that it be canceled. The relief by injunction prayed for will not be granted, unless, upon a further showing made by the plaintiff of grounds therefor, an injunction may be deemed just and proper.