13 F. 59 | U.S. Circuit Court for the District of Colorado | 1882
This important case has been exhaustively re-argued by eminent counsel upon a petition for rehearing, based (1) upon the record as it stood at the former hearing, and (2) upon' alleged newly discovered evidence. The questions raised, some of them now, for the first time, have been carefully considered, and the conclusions reached are as follows:
First—On the former hearing it was held, as will be seen by the opinion then announced, that an attorney at law cannot purchase from his client the subject matter of litigation in which he is employed and acting, if, as a part of his negotiations for the purchase, he advises his client as to the probable outcome of the litigation, and its effect upon the value of the property he is seeking to purchase. Counsel for respondents, both upon the former hearing and upon the re-argument, have insisted that such is not the law, and that if, under such circumstances, the attorney can show that he gave honest and sound advice concerning the pending litigation, and otherwise discharged the duties imposed upon him by fully disclosing all his knowledge of the value, etc., the sale is valid. There are certainly some respectable authorities holding that a purchase by an attorney from his client of the subject matter of the litigation pendent lite, is void, not only for champerty, but also on ground of public policy. West v. Raymond, 21 Ind., 305; 4 Kent’s Com., 10th Ed., 530; Simpson v. Lamb, 40 Eng. Law & Eq., 59; Hall v. Hallett, 1 Cox, 134; Wood v. Downes, 18 Vesey, 120.
I will assume, however (without deciding) that the rule is the other way, and that an attorney may purchase from his client the subject matter of the suit in which he is employed and acting, provided, before the negotiations are opened, the relation of attorney and client is ended, or, at least for the time being, suspended, and the client placed in a position to deal with the attorney upon terms of perfect equality. It may be conceded that such is the rule, and still the doctrine heretofore announced in this case may be perfectly sound.
“ The general interests of justice requiring it to be destroyed in every instance, and no Court is equal to the examination and ascertainment of the truth in much the greater number of cases.” Hawkley v. Cramer, 4 Cowen; 737.
“Where fidelity is required, the law prohibits everything which presents 'a temptation to betray the trust. The orison which deprecates temptation is the offspring of infinite wisdom, and the rule of law in accordance with it rests upon most substantial foundations.” Henry v. Raiman, 25 Penn. St., 359.
“ Where the law creates fiduciary relations, it seeks to prevent the abuse of confidence by ensuring the disinterestedness of its agents. It holds the relations of judge and party, of buyer and seller, to be entirely inconsistent. The temptation to the abuse of power for selfish purposes is so great, that nothing less than incapacity is effectual, and thus a disqualification is wrought by the mere necessity of the case. Fullness of price, absence of fraud, and fairness of purchase are not sufficient to countervail this rule of policy. To give it effect, it is necessary to recognize a right in the former owner, to set the sale aside in all cases on repayment of the money advanced.” Armstrong v. Huston's heirs, 8 Ohio, 554.
Upon this branch of the case, after full reconsideration of the question, 1 am constrained to adhere to the rule announced upon the former hearing.
Third—It is insisted that complainant has not shown that she ever had a valid title to a share in the mine, or that the re
Fourth—It is insisted that the respondent, the Robert E. Lee Mining Company, is a bona fide purchaser for value and without notice. Upon the consideration of this part of the defense, some very important questions may arise respecting the rights of the corporation, and as to how far and under what circumstances notice to the incorporators, stockholders or directors will constitute notice to the corporation. The further consideration and final determination of these questions may well be postponed until the final hearing.
Fifth—It is insisted that complainant should be denied relief on the ground of laches. As at present advised, I should be inclined to hold that the complainant’s delay in bringing-suit, and her failure promptly, upon discovering the fraud, to give notice of her purpose to rescind the contract of sale, are fatal to her right of recovery, at least as against the respondents, who are not named in the original bill. I shall, how
Sixth—Some of the material allegations of the bill are not denied by the answer, and the question is made, whether such allegations stand admitted or must be proved. Upon re-examination of the authorities, 1 have reached the conclusion, that, in cases where the answer neither admits nor denies the allegations of the bill, they must be proved upon the final hearing. Young v. Grant, 6 Cranch., 51; Brown v. Pierce, 7 Wall., 211; Brooks v. Byam, 1 Story, 297.
Seventh—It is insisted that the complainant has not shown that Marshall secretly purchased on behalf of Howbert and his. associates. The conclusion reached upon the former hearing, that Howbert, Sigafus, Crowell and Humphrey were secretly interested in the purchase made by Marshall, was based partly upon the pleadings and the failure of the respondent? distinctly to deny the allegations of the bill upon this subject, and partly upon the evidence and the facts and circumstances, which, in the judgment of the Court, clearly pointed to this conclusion. Leaving out of view any consideration of the pleadings in the case, I am still inclined to adhere to the conclusion originally announced. As, however, it may not be entirely clear that all of the defendants here named were advised of Marshall’s intended purchase, and promised an interest therein before it was consummated, I am disposed to leave this question open for further consideration upon the final hearing.
Eighth—The application for rehearing upon the ground of newly discovered evidence is next to be considered. The affidavits filed in support of this application show that the newly discovered evidence is directed mainly, if not wholly, to the following questions:
1. What was the actual value of the complainant’s interest in the mine at the time of her sale to Marshall ?
2. Was there actual fraud or concealment practiced by Marshall in making said sale?
3. Did the relation of attorney and client exist between complainant and Marshall at that time?
Upon all of these points the proposed testimony, even if newly discovered and material, is only cumulative. These
The application for rehearing upon the questions above stated, on the ground of newly discovered evidence, is overruled.
The result of the foregoing views is, that the interlocutory decree heretofore rendered must be set aside, and that the case must be considered as reopened for further hearing upon the following questions only:
1. Whether the complainant must fail in this action upon the ground that she had no title to the one-third interest in the mine which she sold and conveyed to Marshall?
2. Whether the respondent, the Robert E. Lee Mining Company, is, as against the complainant, an innocent purchaser for value and without notice?
3. Whether the complainant must fail in this action upon the ground of laches ?
The respondents may amend their answer on or before the September rules, by making any allegations proper to put in issue the matters of defense above stated, and the complainant may reply instanter, or under the rules. Both parties are at liberty to take further testimony upon the points here indicated.