157 F. 506 | 8th Cir. | 1907
This was a bill in equity brought by the executor and sole devisee under the will of John J. Mastín, deceased, to set aside a lease and deed made by the testator in his lifetime to two of the defendants, Ellen O. Schmuck and Robert O. Kirby, conveying to them 15 acres of mineral land in Galena, Kan., and for an accounting concerning the rents, usufruct, and profits thereof. The lease was made September 1, 1894, for a term of 10 years, for the consideration of $5,000 paid on delivery, as well as for royalties reserved, and conferred upon the lessees an option to purchase the land outright at any time during the first year of their tenancy by paying an additional sum of $5,000. It was charged in the bill that defendant Noble was the testator’s confidential agent, and possessed more knowledge of the character, quality, and value of the land in question than was possessed by his principal; that, while he was acting as such agent, he combined and conspired with the above-named defendants through their agent, the defendant Gabriel Schmuck, to defraud his principal by inducing him to dispose of the land on the terms stated, when in truth and in fact it was worth much more; that in the execution of their purpose complainants’ agent was at the outset corrupted by the other defendants by a promise on their part in whose name the title was to be taken to give him, Noble, one-fourth interest in the land for the exercise of his influence with his principal to bring about the sale; that pursuant to such iniquitous compact and understanding the agent falsely represented that the tract of land in question contained only 10 acres, when in fact it contained 15, depreciated and understated to his principal the value of the land, and in .other ways actively and effectively persuaded him to make the conveyance. The defendants denied all forms of combina
The reference to the special master to find the facts and conclusions of law was not made by consent of the parties. Accordingly his report is not clothed with that presumption in its favor which-attends reports made on reference by consent. The trial court could not of its own motion abdicate its proper function or delegate it to-any other person. The report, therefore, could be treated, as the record clearly shows the Circuit Court did treat it, as advisory only. Kimberly v. Arms, 129 U. S. 512, 523, 9 Sup. Ct. 355, 32 L. Ed. 764;. Oteri v. Scalzo, 145 U. S. 578, 12 Sup. Ct. 895, 36 L. Ed. 824; Davis v. Schwartz, 155 U. S. 631, 15 Sup. Ct. 237, 39 L. Ed. 289; Blythe v. Thomas (D. C.) 45 Fed. 784. However this may be, we cannot overlook the intrinsic and persuasive value of the report. It shows unusual attention and thoroughness of consideration, and doubtless-was of considerable aid to the court. The record also shows that the trial judge patiently heard the case de novo on exceptions to the report, and reached an independent judgment on the proof. There was no pro forma action on his part. We have, then, the deliberate-judgment of the trial court on the disputed facts of the case. Under w-ell-settled authority, this must be taken as presumptively correct, and should be followed, unless an obvious error has occurred in the application of law, or a serious and important mistake has been made in the consideration of the proof. Warren v. Burt, 7 C. C. A. 105,. 58 Fed. 101; Stearns-Roger Mfg. Co. v. Brown, 52 C. C. A. 559, 114 Fed. 939; Hussey v. Richardson-Roberts Dry Goods Co., 78 C. C. A. 370, 148 Fed. 598, and cases cited.
Another well-established general rule governing courts of equity in-cases of this kind which should be borne in mind is that the evidence adduced to set aside a written instrument for fraud must be clear, unequivocal, and convincing. Atlantic Delaine Co. v. James, 94 U. S. 207, 24 L. Ed. 112; Maxwell Land-Grant Case, 121 U. S. 325, 380, 7 Sup. Ct. 1015, 30 L. Ed. 949; United States v. Budd, 144 U. S. 154, 12 Sup. Ct. 575, 36 L. Ed. 384; Chicago, St. P., M. & O. Ry. Co. v. Belliwith, 28 C. C. A. 358, 83 Fed. 437. In the first of these cases the Supreme Court said:
“Canceling an executed contract is an- exertion of the most extraordinary power of a court of equity. The power ought not to be exercised except in. a clear case, and never for an alleged fraud, unless the fraud be made clearly to appear, never for alleged false representations, unless their falsity is certainly proved." ■ ■
The fundamental question, therefore, is whether Noble, the vendor’s agent, was to have an undisclosed personal interest in the land purchased. If so, his interest was in conflict with his duty, and the sale made by him to his codefendants was constructively fraudulent. Ellen Schmuck and Mr. Kirby were brother and sister, and will be referred to as the main defendants. They lived one in Ohio and one in Illinois. Gabriel Schmuck was brother-in-law of Ellen, and lived in Galena, Kansas, and acted as agent for the defendants, and Noble resided in Galena and acted as agent of the testator. Noble and Gabriel had been for some time before the events of this case close and intimate friends. They had occupied the same office, had been engaged in several business enterprises together, and had held real and personal property in common. In some instances title had been held in the name of Noble for both. Some time before the lease was executed the main defendants visited Gabriel at Galena, were shown over the land in question, and authorized Gabriel to secure a lease for them. He secured the lease, bearing date September 1, 1894, for the consideration of $5,000 paid down and certain royalties to accrue, and with it an option to purchase the land at any time within a year upon the payment of the further sum of $5,000. While this lease and option were taken in the name of the main defendants, there was an understanding that Gabriel might have one-half interest in both by paying one-half of the cost price. After September 1st Gabriel took possession as agent for his relatives, and began exploring for lead and zinc. This work resulted in the discovery of a •valuable pocket of ore and the determination to exercise the option
Gabriel offered one of the deeds to Noble, but the latter declined to accept it. During these 2% years the mines had been worked so successfully as to produce a net result of $83,000 and during that period Noble, who was conducting mining operations for his principal, and Gabriel, who was conducting like mining operations on che land in controversy, occupied the same office and continued as before on intimate terms both in a social and business way. Noble, before 1894, at a time when Gabriel was unsuccessful and poor, had befriended him in many ways, and from time to time had loaned him money for exigent needs. After 1894, when both were conducting business in the same office, Gabriel from time to time advanced Noble small sums of money for temporary convenience. In March, 1897, Gabriel turned over to Noble a check for $7,528 which he had recently received as the purchase price for lead ores sold from the mine. This is claimed by complainants’ counsel to be approximately one-fourth of a dividend of $40,000 then recently declared after deducting the $5,000 paid by Noble for his interest. Before this suit was brought, complainants had instituted two other suits of kindred character— one in Cherokee county, Kan., and one in Cincinnati, Ohio. While that litigation was pending, depositions of all the defendants were taken. It is claimed by complainants that contradictory statements were found in them, and particularly that Mrs. Schmuck and Mr. Kirby both testified that Noble was to have and did have an interest in the mine. The foregoing reference to important phases of the evidence is deemed sufficient to enable us to intelligently discuss the claims of the respective parties.
Many transactions between Gabriel and Noble look suspicious and are consistent with co-operation and co-ownership of the mine by them, but an explanation is made of them by defendants’ evidence, which, if it does not clearly and beyond question reconcile them with defendants’ contention, leaves their significance in grave doubt and uncertainty. Noble and Gabriel, who alone knew anything about the first transaction referred, to, testified in unequivocal terms that Noble signed Gabriel’s notes given for the purchase price of the latter’s in
The testimony of Mrs. Schmuck and Mr. Kirby given in their depositions taken in the Cincinnati case, to the effect that Gabriel and Noble were each to have a one-fourth interest in the mine, is explained by them in their depositions afterwards given in the Kansas case and before the master in this case. They affirm that their sole information upon which they predicated their testimony was the re
Whether the court below erred in excluding, so far as all of the defendants except Noble were concerned, the testimony of witnesses Huff and Wood concerning what Noble had, prior to the time of the alleged conspiracy in question, said to them about his dealings and relationship with Mastin’s property, is not of much practical consequence. The testimony as admitted, so far as cue of the defendants is concerned, is all preserved in the record, and is before us for our consideration. This is as it should be. Blease v. Garlington, 92 U. S. 1, 23 L. Ed. 521; Dowagiac Mig. Co. v. Lochren, 74 C. C. A. 341, 143 Fed. 211. Giving to their testimony all the probative force which in any view it is entitled to, it does not in our opinion supplement the other evidence so as to substantiate complainants) case. We therefore find no occasion for dwelling long on its admissibility.
It is contended by complainants’ counsel that there is such proof of spoliation and destruction of contemporaneous records of kmsactions (such as old letters, old notes and canceled checks) betwen Noble and Gabriel and between Gabriel and his principals that umr the familiar maxim, “Omnia pnesumuntur contra spoliatorem, evd presumption should be indulged against the defendants and m favc of the complainants. The rule expressed by the maxim just quoted is well recognized and salutary when applied to;a case of fraudulent and unexplained destruction of evidence; but, in view of the proof in this case, we think it inapplicable here. The transactions between Gabriel and Noble were not transactions which are ordinarily made the subject of book account. They were in the nature of occasional and infrequent personal accommodations, and no record of them was, in fact, made except in the form of duebills given by the borrower
In Drosten v. Mueller, 103 Mo. 624, 15 S. W. 967, the inference in question is referred to as a presumption of fact, and it is there said:
“The presumption arising from the spoliation of documents must be applied with judgment and sound discretion. * * * We see no intention on her part [in destroying the paper] to commit a fraud on any one.”
In The Pizarro, 2 Wheat. 227, 241 (4 L. Ed. 226), Mr. Justice Story, in referring to the concealment and spoliation of papers in a prize case, says:
“It is undoubtedly a very awakening circumstance, calculated to excite the vigilance, and justify the suspicions of the court. But it is a circumstance open to explanation, for it may have arisen from accident, necessity, or superior force; and, if the party in the first instance fairly and frankly explains it to the satisfaction of the court, it deprives him of no right to which he is otherwise entitled.”
That the element of intentional fraud or wrongful conduct must be involved to make the rule against the spoliator applicable, see Lawson on Presumptive Evidence, 203; 2 Wharton on Evidence, § 1264; Pomeroy v. Benton, 77 Mo. 64, 85, et seq., and cases cited; Warren v. Crew, 22 Iowa, 315.
Other facts and questions of law have been ably discussed by counsel. To all of them, including the voluminous testimony found in the record, we have given patient and careful consideration, but do not deem it profitable to extend this opinion by further detail. The result is inevitable. _ The proof is not so dear, unequivocal, or convincing as to warrant us in granting the relief prayed for. While, as already said, there are suspicious circumstances, they have been explained with such positive testimony on the part of all the defendants that we must in effect adjudge them guilty of perjury if we fail to accept the explanation. Their age, their character, their standing in the community, and the intrinsic nature of the transactions involved all forbid that we should do so. The conclusion reached by the court below manifestly and clearly was not the result of an obvious error in the
For.both the reasons just stated, the decree of the court below must be affirmed; and it is so ordered.