270 F. 971 | E.D. Ky. | 1919
This cause was submitted before me on testimony previously taken, consisting mainly of depositions, and in part of oral testimony introduced- at the preliminary hearing before Judge Cochran, with various documentary exhibits. I have had no opportunity to hear the witnesses testify or to observe their demeanor on the witness stand. I have, however, carefully considered all the evidence, and the arguments and briefs of counsel. The volume of evidence and its various ramifications as applicable to the many disputed questions of law and fact, is such that it is not practicable, within the reasonable limits of a written opinion, to state the evidence in detail, with justice to the contentions of ether side. I shall hence merely state, without elaboration, the general conclusions of law and fact which, after careful study, I have reached in reference to the various controlling matters in issue.
3. The S. G. Reid patent, issued in 1872, now in issue, being the 55,000 acre tract referred to' in the option, purported to grant, by its outer boundaries, 68,800 acres in Perry County, less 13,800 acres of prior patented land included therein and deducted therefrom; that is, it purported to grant 55,000 acres, or almost 86 square miles, a little less than one-fourth of Perry County, according to the census of 1910. Its boundary line came within about a mile of Hazard, the county seat. It contained, in 1912, a population, of several thousand people, was traversed by many public roads, contained many school houses, some of which were used as churches, and several school districts and voting precincts; and was in large part, an old settled country, with much cleared land, and many old buildings and with a large number of mining and timber corporations and individuals in possession of many and large portions, embracing apparently by far the greater part of its outer boundaries.
The proof shows that in fact, at the time of its issuance, at least 61,-800 acres within its outer boundaries had been prevously granted under earlier and paramount patents, and that it actually conveyed title from the State to not more than six or seven thousand acres, which lay in scattered and detached portions. It was one of the series of similar blanket patents issued by Kentucky, from/ 1872 to 1874, which conveyed title to only a small portion of their outer boundaries; and it bore in Perry County the reputation of a “wild cat” patent conveying title to but little land. By reason of the comparatively small and scattered acreage to which it conveyed title, as well as the large number of later patents, covering about 60,000 acres, under which many adverse possessions were held, and the enormous expense of locating and settling the prior patents and the adverse possessions of squatters, it was, in spite of the large acreage value of those portions to which title could be established, of comparatively little value, as a whole, and worth nothing like the price of $178,500 at which Sears had given the option to Smith. Sears did not then even own this patent, but held an option on it himself at the price of $2,500; having obtained an option on this and other similar blanket patents from Coldwell, the purchaser at tax sales, for speculative purposes merely.
Sears was an habitual speculator in this class of specious and flimsy titles, was thoroughly familiar with the general situation, and unques
Harkins & Harkins were thoroughly competent lawyers, familiar with Kentucky land titles and land law, and with the general nature of the blanket patents issued by Kentucky in the 1870’s; the younger Harkins, though of less general experience than his father, having had special experience in the investigation of land titles in Perry County. I am constrained to conclude from all the surrounding circumstances that they both knew the general character of the Reid patent, and were fully aware that in all probability it only conveyed title to a small part of the 55,000 acres of paramount title which it purported to include, embracing a vastly larger acreage of prior patents than the 13,800 acres excluded on its face and conveying title to a small comparative acreage merely.
4. While the letters of Murray, Prentice & Howland were somewhat loosely worded, due apparently to their lack of familiarity with the abnormal -system of land titles prevailing in Kentucky, it nevertheless sufficiently appears from the entire correspondence that Harkins & Har-kins were employed to give an opinion, for the benefit of their clients, on the ultimate question whether, if they purchased from Sears, they would acquire “good title” to the land bought; and not merely whether they would acquire a valid tax title to the Reid patent, for whatever it might be worth, as a basis for subsequently acquiring a good title to the land itself by buying up the superior patents and valid possessory titles; and this, I am constrained to find, Harkins & Harkins thoroughly understood.
5. In the light of all the evidence and surrounding circumstances, I am likewise compelled, though reluctantly, to conclude and find from all the circumstances, that at some time before Harkins & Harkins gave their report on the title to the Reid patent, and probably prior to July 16th. they, at the instance of Sears, entered into a secret agreement with him that, for a money consideration to be paid to them by him, they would not disclose the real condition of the Reid title to their clients, but would give them an untrue, fraudulent and deceptive report as to the title, misleading and concealing its real condition, as a means of inducing the purchase of the Reid patent at the extravagant price at which Sears had given the option. I further find that, without making any real or substantial effort to ascertain the true condition of the title, especially as to the number and extent of the older and paramount patents — -the most crucial matter affecting the validity of the patent— they gave to Murray, Prentice & Howland, for their clients, the written opinion, dated August 24, 1912. This report, “concerning the matter of the investigation of title to 55,000 acres of land situated in Perry County, Kentucky,” after setting forth that the land in question purported to have been granted to S. G. Reid by patent dated June 12, 1872. for 68,800 acres, proceeded:
“From this patent there is excluded for prior claims, 13,800 acres, leavingthe net number of acres, granted by said patent 55,000 acres. These exclusions are referred to in gross and are undefined and were made because of previously patented land within the exterior boundary of said patent. These*976 previously patented lands constituting tlie 13,800 acres were located principally along the streams and branches and were evidently made to include lands which were suited for agricultural purposes at the time they were made and did not extend very far on to the hillsides where the lands are chiefly valuable for coal deposits and timber.” '
After setting forth at length various mesne conveyances from and after Reid by which the property was acquired by the Kentucky Union Company, and the sale made for defaulting payment of taxes at which Coldwell became the purchaser, and an extended discussion of the proceedings under the tax sale and the Kentucky statutes and decisions relating to such sales, the report continued:
“It [the Reid patent] is younger than the Smith & Baum and De Groot patents, and to the extent of the conflict, the Smith & Baum and De Groot surveys will hold that part of the land covered by them. As to the older patents covering the land, it will be necessary to have the property actually surveyed and each of the patents older in date in this section of Perry County located before we can give an estimate as to the prior patented acreage.
“We feel, safe in assuming, however, based upon experience with land titles throughout Eastern Kentucky and particularly in Perry County, that the 13,806 acres excluded from said patent would probably represent the correct number of acres of previously patented lands, for the reason that the surveyors making the survey had access to and were the custodians of the surveyors’ books of - the county and probably correctly estimated the acreage in the-patents older than the Stephen G. Reid survey. However, they are susceptible of being made certain by compiling a list from the landofflce at Frankfort, Kentucky, and having them run out and located on the map within the exterior boundary lines given of the Stephen G. Reid survey.
“The foregoing report is based upon a personal inspection of the records and deeds and patents of the Perry County Court and the land office at Frankfort, Kentucky, and the records of the Circuit Court of the United States for the District of Kentucky at Louisville, which have been carefully considered by us, and attention is called that some of the deeds and mortgages herein referred to were not mentioned in the abstract of title furnished to us by you.
“Summarizing, we are of the opinion that at the time the land was surveyed under the S. G. Reid patent, there was contained within the exterior boundary thereof 68,800 acres, 13,800 acres of which was previously patented land, and therefore did not pass by the grant, but that there was within said patented boundary to S. G. Reid, 55,000 acres of vacant and unappropriated land. It is our opinion that the title passed from said Stephen G. Reid in the manner hereinbefore set out by the sundry mesne conveyances and was vested in the Kentucky Union Company at the time the same was» assessed for taxation in the year 1905. * * * Under the laws of Kentucky as affecting tax sales now and as interpreted by the Court of Appeals, the presumption is indulged that the officers did their duty and it would be incumbent upon the claimant or owner of the property, in any endeavor which he might make to-set the sale aside, to show that the proceedings were irregular. This the Kentucky Union Company did not attempt to do, and it is our opinion, in so far as the title of the' Kentucky Union Company is concerned, that its title passed .under said sale and vested in the purchaser, Sam Coldwell.
“Of course, under the sale and conveyance to Sam Coldwell, he took no greater title than the Kentucky Union Company had, and the question of adverse possession could not be determined from the record. It is a question of" fact which' may be proven in part by record and in part orally. * * *
“Should your clients elect to purchase this pnoperty, we would recommend they acquire the 13,800 acres of land, or if they are not able to acquire it in fee, then to acquire the coal, oil, gas and mineral rights in, on and underlying the same, with full and ample rights of way for the purpose of developing not only the 13,800 acres, but for the purpose of developing all the remainder of this outlying property. * * * Our idea for this recommen*977 dation is to solidify and make into one ownership all of the land that is-described within the exterior lines of the Stephen G. Held patent, including the previously patented lands. It is not only valuable for the purpose of making it one body, and enlarging the acreage, but it gives access to the balance of the land included in the Stephen G. Reid patent to the extent of its outer boundary.”
I further find that this report was deliberately fraudulent in its failure to call the attention of their clients to the fact that they had not in fact examined the records for the purpose of ascertaining, even tentatively, the number or extent of the prior patents, or to call their attention to the real and substantial nature of the blanket patent to Reid, the
6. I further find that the plaintiff, probably with the concurrent advice of Murray, Prentice & Howland, whose lack of experience in land titles of this character easily lead to their deception, relied upon this report as a statement from Harkins & Harkins, in effect, that the purchase of the Reid patent through the Cold well tax title, would, in their opinion, convey title to approximately 55,000 acres of prior un-patented lands embraced within the boundary of the Reid patent, subject only to diminution by ascertaining the exact boundaries of the 13,-'800 acres of prior patents, and of the possessory titles that had been subsequently acquired by squatters; that in reliance upon the opinion expressed in this report and the inference drawn and intended to be drawn therefrom, the plaintiff, through Smith, purchased the Reid patent from Sears on September 9, 1912, taking a deed therefor to Smith dated September 6, 1912; and that at the time of the delivery of this •deed the plaintiff, by certified check delivered to Sears by Harkins & Harkins, paid to him, as part of the purchase price, the sum of $95,500, and on or about the same date paid as part of said purchase price, the further sum of $4,500 to one O. D. Jackson in behalf of Sears, as a commission.
7. And I further find that on the same day on which the payment of $95,500 was made to Sears, he, secretly and surreptitiously, in fulfillment of his prior agreement with Harkins & Harkins, paid to them, in money drawn by him from the bank, the sum of $12,500, in consideration of the fraudulent opinion given by them in reference to title to the property and the aid thereby given by them in bringing about and inducing the purchase of the land from him; and that even if the younger Harkins at the' time executed and delivered to Sears an option of purchase on 41,000 acres of land which he claimed under a tax title, of whose validity Sears then knew practically nothing, this was not the true consideration of such cash payment, but a mere pretense and sham to cover up the real nature of the transaction.
And Sears thereupon attempted, as expeditiously as practicable to cover up in the name of other persons that portion of the purchase price which he had himself retained.
I find no precise authority in support of this conclusion; but think it is not only sound in principle but also finds strong support in the well settled rule that similar statutes in reference to the doing of business within a state by foreign corporations do not prevent such non complying foreign corporations from maintaining, even in the courts of the State, actions ex delicto. Delaware & A. Telegraph & Telephone Co. v. Pensauken Tp. (C. C.) 116 Fed. 910, 911; Louisville Property Co. v. Nashville, 114 Tenn. 213, 215, 84 S. W, 810; 19 Cyc. 1304, and cases cited in note 35. In Delaware & A. Telegraph & Telephone Co. v. Pensauken Tp. (C. C.) 116 Fed. 910, supra, the court said that the prohibition against a foreign corporation from transacting business “does not subject its property to wanton destruction.” So an agent who has collected and retains property of his principal is, on grounds of„public policy, estopped, when sued by his principal therefor, from relying upon the non compliance of his principal with the foreign corporation statutes ¡of the State as a defense to such action. Insurance Co. v. Kennedy, 96 Tenn. 711, 716, 36 S. W. 709; Packet Co. v. Agnew, 132 Tenn. 265, 271, 177 S. W. 949, L. R. A. 1916A, 640. In like manner I am of opinion that one who has induced a foreign corporation by fraud to enter into a contract with it, is, on grounds of public policy, estopped, when sued by the foreign corporation for rescission of such contract, from relying up■on its non compliance with the foreign corporation statute of the State as a defense to such action. Such statute does not subject it to being ■deprived of its property by fraud any more than by other tortious act. The instant case is in this respect clearly distinguishable from Fruin-
16. A decree will accordingly be entered sustaining so much of the bill as relates to the rescission of the purchase of the Reid patent from the defendant Sears, and awarding the plaintiff a recovery against all the defendants for the $100,000 paid to and for Sears as part of the purchase price, with interest on portions thereof against the different defendants, as hereinabove provided; cancelling its note for $87,500,
The decree of sale to enforce the lien will be reserved until the amount of the expenses for which the defendants are liable has been determined.