89 F. 125 | U.S. Circuit Court for the District of Colorado | 1898
The application which has been made in each of the above-entitled cases for an injunction and the appointment of a receiver for the Little Johnny lode mining claim is based upon bills of c'omplaint which contain collectively the following allegations: About the year 1880, Thomas J. Kelley and others located the Little Johnny mining claim, on Breece Hill, near Leadville, Colo. Thereafter, in November, 1886, Thomas J. Kelley died, seised of an undivided one-sixth interest in said claim, which interest, upon his death, became the property of the complainants in case No. 3,265, who were his heirs at law. John Curran was also one of the locators of said mining claim, and he also died on August 19, 1890, seised of another undivided one-sixth interest in said claim, which became the property of the complainants in case No. 3,298, who were his heirs at law. The defendants Boettcher, Campion, Hunter, and some other persons wrongfully acquired possession of said Little Johnny mine in January, 1883, and retained such possession until March, 1891, during which period they worked said mine successfully, and appropriated all the net proceeds thereof, which amounted to not less than $5,000,000, over and above all operating expenses. In January, 1891, the defendants Boettcher, Campion, Hunter, and others organized the Ibex Mining Company, and thereupon turned over the possession of the aforesaid mine to said mining company, of which they, were directors and managers. When the mine was thus turned over to /the Ibex Mining Company, it was a valuable gold mine, worth from $25,-000,000 to $50,000,000, which had already yielded gold ore worth $5,000,000; and, since it has been in the possession of the Ibex Mining Company, it has continued to produce not less than $300,000 per month, all of which the defendants, including said Ibex Mining Company, have wrongfully and fraudulently appropriated to their own use. The Ibex Mining Company was organized by the individual defendants above named, not in good faith, but for the sole purpose of using the same as a means of defrauding the heirs of Kelley and Curran, and depriving them of their rightful interests in the Little Johnny mining claim. In execution of such fraudulent purpose, the defendants, in November, 1892, employed one Charles C. Reger as their agent, to negotiate for the purchase of the interest of the Kelley heirs in said claim. Reger visited Galena, 111., where said Kelley heirs resided, and succeeded in buying all the right, title, and interest of said heirs in and to said mining claim for the sum of $1,000. The conveyance of said interest was made by the Kelley heirs to the defendant Boettcher on January 16, 1893, and was induced by false and fraudulent representations of said Reger, to the effect that the Little Johnny mining claim was of no value; that no ore of any consequence had ever been discovered in the claim; that the shafts which had been sunk thereon were then filled with water; that no one could examine the mine because of the water; that it would cost an immense sum to drain the property; and that the property had never paid expenses. When these representations were. made, the mine was in fact of
■The defendants have each filed lengthy answers to the respective bills, in wdiich they deny, under oatli and in detail, all charges of fraud and collusion therein contained. In support of the bills and answers, numerous affidavits have been read by the parties, all of which have received careful attention. As a. result of such examination of Ihe moving papers, one general conclusion may be announced at the outset, namely, that the allegations made by the complainants in their respective bills touching the output and value of the Little Johnny mine are grossly exaggerated and misleading, and that other statements therein .contained concerning the time and manner in which the defendants first acquired possession of the property in controversy are without foundation in fact. The testimony heard in support of the motions satisfies the court that none of the defendants had any connection with the Little Johnny mine, or interest therein, until about March 15, 1891. The evidence shows, and there is no proof to the contrary, that Thomas J. Kelley, John Curran, and other locators of the Little Johnny claim, entered into a contract for the sale of a five-sixths interest therein to one Henry M. Dunning and others, some time in the year 1880; that the purchase price was to he paid by Dunning and his associates only out of the net profits which they might derive from working and developing the claim; that Kelley and Curran and the other locators of the claim turned over fhe possession thereof to Dunning and his associates when the contract of sale was executed, by whom and their successors in interest the mine was worked at intervals until about March 15, 1891; and
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In view of these admissions, it is obvious that the statements which are said to have been made to the Kelley and Curran heirs by Reger and Dale in the years 1892 and 1893, to induce them to part with their interests in the mine, were false and misleading, and operated as a fraud if the complainants were in fact influenced by such representations to part with their interest in the property. The chief questions,' therefore, to be considered on the present occasion, are these: Were the alleged representations in fact made by Reger and Dale to induce the conveyance of the complainants’ interests in the mine, and were Reger and Dale acting ah the time as agents of the defendants or either of them in making the purchase? As the case is now before the court on a motion for the appointment of a receiver, it would be manifestly improper to prejudge the case by a definite finding upon either of these issues of fact. A sound rule which ought to be observed on such preliminary hearings is that the court should determine whether it is probable that on the final hearing of the case the allegations of the bill will be made good by competent proof, and whether the character and situation of the property is such that it ought to be taken into judicial custody in the meantime,
Proceeding in accordance with these views, it is to be observed that the defendants, in their several answers, have denied under oath, but on information and belief, that either Reger or Pale made the false representations which are set for Hi in the two bilis of complaint. This denial of the alleged fraud is supported by the affidavits of Reger and Dale, in which they respectively deny under oath, and in positive and direct: terms, that they made the alleged false statements and representations which are attributed to them in the bills of complaint. Moreover, the defendants have denied under oath, both by answer and affidavit, that either Reger or Dale acted as their agent in purchasing the interests of the Kelley and Curran heirs in the'Little .Tolmny mine; the contention of the defendants being that these interests were purchased, by Beger and Dale on their own account, as a private speculation, after they had ascertained by conversations with linn ter and Campion at what price the interests of said heirs could be resold if (hey succeeded in buying them. In other words, the defendants deny under oath all accountability for the acts of Reger and Dale, whatever they may have been, on the ground that they never employed or authorized them to purchase the interests of (.he Kelley and Campion heirs in their name or on their account. It may be conceded, on the other hand, that the complainants have filed a few' affidavits which give some additional weight to the charge contained in the bills that Reger and Dale made the representations 1 herein alleged to induce the complainants to sell their interests in the mine; but the court is not able to say that they have produced any additional proof that, in making the purchase, either Reger or Dale was acting as agent for the defendants, or either of them. The charge that they were so acting is supported simply by the averments of the bills and such inferences as may possibly be drawn from the manner in which the conveyances of those interests were executed. The court is of opinion, therefore, that a comict conclusion touching the charge of fraud-which is contained in the bills can only be reached
In view of this fact, it will be well to refer briefly to the present situation of the property, as disclosed by the evidence. The complainants charge in their bills, and support the charge, possibly, by one or more affidavits, that the defendants are making vigorous efforts to exhaust the mine, and conceal the products thereof, before a final determination of the case can be reached. On the other hand, the defendants have filed affidavits of persons who are doubtless entirely familiar with the past and present output of the mine and its present condition, showing that the total net product of the mine for the two years preceding September 8, 1898, has not exceeded $36,000; that no ore has been shipped or mined from the Little Johnny lode for the past six months; that the great bulk of ore heretofore taken from the lode which paid smelter charges ran from $15 to $30 per ton; that the cost of mining the same was somewhat in excess of $9 per ton; that the highest of the smelter returns from ore ever taken from the lode was $197.04 per ton; that the mine is what is known as a “wet mine,” requiring constant pumping by a large and expensive pumping plant to keep it free from water and prevent its destruction; and that the pumping plant by which said mine and several other mines in the immediate vicinity are now, and for some years past have been, kept free from water, is located on one of said other claims, known as the Uncle Sam lode mining claim. It furthermore appears that the Ibex Mining Company and the individual defendants as well are entirely solvent, and able to respond for the value of such ores as may in future be extracted from the property in controversy, and that they have made no effort to conceal or remove their property, or any of it, beyond the jurisdiction of the court. In view of these sworn statements, which the court on the present showing sees no reason to distrust, the conclusion is inevitable that it would not be warranted in appointing a receiver or granting an injunction* Such action on the part of the court, if taken, might well be characterized as an abuse of judicial discretion. In the opinion of the court, adequate relief will be afforded to the complainants by requiring the defendants to file in court, for inspection by the complainants, a map or plat showing all of the present underground workings of the Little Johnny mine, and also requiring them to file within the first 15 days of each month, beginning with October, 1898, a sworn statement made by the superin