Leete v. Pacific Mill & Mining Co.

88 F. 957, 1898 U.S. App. LEXIS 2863

• Court: U.S. Circuit Court for the District of Nevada
• Decided: July 5, 1898
• Docket: No. 651
• Status: Published

Opinion

HAWLEY, District Judge

'after stating the facts as above). From the foregoing facts the question arises, which of the parties is entitled to the money repaid by the government after the cancellation of the entry for the Eagle Salt Works, and after the purchase of the property by the plaintiff from the defendant? The case is unique. It is sui generis. It stands alone, without any direct precedent or guide. The general principles of law, as announced in the authorities cited by tiie respective counsel, do not reach the pivot of the scales by which the case is to be weighed and determined. Each party is confident, but neither has been able to make the case clear. The court enters upon the discussion with a mind free from any impression as to the merits of the case, — with the hope, however, that some beacon light as to the facts, or recognized principle of law, will be found to guide it to a correct conclusion.

The plaintiff seems to have been of the impression that he was en-titk-d to at least one-half of the money paid to the land office of the government on account of the reservation in his deed to his brother. But it is apparent that this reservation cannot possibly be construed as having any relation whatever to that money. It had reference solely to the money and accounts in the hands of the receiver of the property, who had been appointed in a suit in the state court, concerning the partnership between the plaintiff and Van Gorder. The application for the patent had not been canceled at that time, and it was not then known or suspected that it would he. If a patent had been issued after the plaintiff had conveyed his interest in the property, it would have inured to the benefit of his grantee. The cancellation of the entry was not made until 1890. At the time of the cancellation the defendant had the possessory title to the property. The plaintiff had no interest therein, or any claim thereto.

The statute authorizing the money, upon cancellation of the entry, to be repaid, provides as follows:

"Sec. 2. In all cases where homestead or timber-culture or desert land entries or other entries of public lands have heretofore or shall hereafter he canceled for conflict, or where, from any cause, the entry has been erroneously allowed and cannot he confirmed, the secretary of the interior shall cause to be repaid to the person who made such entry, or to his heirs or assigns, the fees and commissions, amount of purchase money, and excesses paid upo-n the same upon the surrender of the duplicate receipt and the execution of a proper relinquishment of all claims to said land, whenever such entry shall have been duly canceled by the commissioner of the general land office.” 1 Supp. Rev. St. 1874-81, p. 565.

If application had then been made by the defendant for the repayment of the money, it would doubtless have been paid to it, as will fully appear by reference to the letters of the commissioner of the general land office. If application had been made by the plaintiff at that time, payment would have been refused. Secretary Noble, in a letter to Comptroller Matthews in the Case of Adolph Emert, held rhat the only person qualified to apply for repayment under section ¿ of the act of June 16, 1880, is the one in whom the title to the land is vested at the date of the cancellation of the entry, or the heirs of such party. He said:

•‘It is clear tliat after the cancellation of the entry the entryman has no right to the land that ho can sell or dispose of. It is equally clear that, on the cancellation of an entry under the conditions prescribed in the statute, a claim against the government for the repayment of the purchase money and fees and commissions is created, and the statute declares that said payment shall be made to the entryman, or his heirs or assigns; but it is clear that the statute contemplated as assigns only those who became such while she entryman had an interest in the land, or, in other words, assigns prior to the date of the cancellation of the entry.” In re Emert, 14 Land Dee. Dep. Int. 101.

There is nothing in the language of the deed to furnish any light upon the transaction. There can be no question as to the legal right of the plaintiff to recover herein if from the facts it appears, either by operation of law, or by contract or agreement of the parties, that the money was to be collected by him, or by the defendant for his use and benefit. He would be entitled, if the money belonged to him, to recover it, regardless of the question whether any privity of contract existed between the parties pr not, under the general principle that, in order to support an action of this character, there need be no privity of contract, except that which results from one man having another’s money, which he has no right to keep. In such cases the ■law implies a promise that he will pay it over. Bank v. Sadler, 19 Nev. 98, 103, 6 Pac. 941, and authorities there cited; Bank of Metropolis v. First Nat. Bank of Jersey City, 19 Fed. 301, 303; Gaines v. Miller, 111 U. S. 395, 397, 4 Sup. Ct. 426; Wilson v. Turner, 164 Ill. 398, 403, 45 N. E. 820 ; 2 Enc. Pl. & Prac. 1017, and authorities there cited. If, however, the money did not in law belong to the plaintiff, from the mere fact that he had, in an effort to procure the title to the Eagle Salt Works, paid the same under his application for the patent, then he can only recover by showing that there is a privity of contract between him and the defendant, and that by virtue of such contract he is entitled to the money collected by the defendant. It appears from the facts that the conveyance made by the plaintiff to his brother, and by his brother to the corporation, after the money had been paid to the government, was absolute, except as to such moneys and accounts as were then in the hands of the receiver. It cannot, therefore, be legally said that the money paid to the government in the event of the cancellation of the entry should have been paid to him, simply by virtue of the fact that, he had originally paid the money to the government, because, as before stated, he had in the meantime conveyed his interest in the land, without any reservation of his claim or right to this money.. To enable him to recover it from the defendant, the duty devolves upon him to show that there was' an agreement or contract with the defendant that he should have the money if it could be recovered from the government. What was the understanding or agreement of the respective parties in regard thereto at the time of the execution of the deed by the defendant to the plaintiff, in 1895? Was the right to the recovery of this money an element of the consideration of the sale and purchase of the land? These questions must be answered by a construction of the language of the correspondence between the parties. The correspondence commenced in the fall of 1894. In the spring of 1895 the plaintiff asked that the price for which the defendant was willing to sell the property should be named. Mr. Lyman stated generally that he thought the property could be purchased for $6,000, with certain conditions as to the delivery of salt at a certain price. This was not considered by the plaintiff as a desirable investment, at the price named, and resulted in the suggestion that the plaintiff should name the price he was willing to give, and then ior the first time a reference is made by Mr. Lyman to the money which is the subject-matter of this action:

‘•I liave advised Messrs. Mackay and 1’lood '[who were the principal stockholders ot the defendant corporation] to sell the property for six thousand dollars; knowing the money paid the government for the land can he recovered, and assuming that the Eagle Salt Works property, with its supplies, salt on hand, etc., is worth at least three thousand dollars.”

Here is a clear statement that the defendant’s agent and officer knew that the money could be collected. According to Mr. Lyman’s judgment, the Eagle Salt Works, with its supplies and salt on hand, was worth at least $3,000. The plaintiff, in reply, with reference to the value of the Eagle Salt Works property “depending on the recovery of the purchase money,” said “that whoever recovers from the government must deed to the government, and abandon all claim to the land,” and intimated that no one would be likely to do that. He then said that when he deeded the land to his brother he reserved all moneys and accounts. “If I ever owned one-half of that money, I own it now.” The defendant was then put upon notice that the plaintiff claimed to be the owner and entitled to one-half of that money whether he bought the property or not. This is all that was ever said, in the correspondence, about the money. The offer that was thereafter made, and the acceptance thereof, which was satisfactory to both parties, did not make any mention of this money. The terms of the contract, in so far as this money was involved as an element of the consideration, are therefore left in an uncertain and unsatisfactory condition. Both parties had equal knowledge in regard thereto. The plaintiff claimed it, or at least one-half of it. The defendant did not deny his claim. ■ It kept silent upon the subject. There was no specific agreement, in writing or otherwise, in regard thereto. It is apparent, however, that the plaintiff, when he made the offer of $3,500, must have understood that there was some other element of consideration besides the real value of the Eagle Salt Works and the personal property connected therewith, because he offered more than the price placed upon the property by defendant’s superintendent and agent. When a man states to a prospective purchaser that certain property is worth at least $3,000, he does not expect that such person is going to offer him any more for it. The inference would seem to he that it might be purchased for a less sum. What legitimate conclusion, then, can the court draw with reference to this other element of consideration which the correspondence suggests? When Mr. Lyman explained why he advised Mackay and Flood to sell the property for $6,000, he must have meant that whoever bought the property would be entitled to receive this money from the government. This was the reason he advised the defendant to sell the property at that price. It was also an inducement to the plaintiff to offer a larger sum than the mere value of the land, and salt on hand, etc. The plaintiff, in reply, in effect said: “You are mistaken about this money. One-half of it belongs to me, whether I purchase the Eagle Salt Works property or not.” This was the reason that he was unwilling to give $6,000, but was willing to give §3,500. With this understanding between ihe parties, the recovery of the $3,200 from the government must have been in the minds of the parties as an element of consideration which induced the plaintiff to make the purchase. But it may be said that the difference in the price first asked and the price actually accepted tends to show that such was not the understanding of the parties. If, as suggested by Mr. Lyman, all this money would go to the purchaser, the price would reach $6,200. But he had previously offered to sell it for $6,000. If only one-half of it was to be considered, as suggested by the plaintiff, this would reduce the amount to $4,400. The collection of this money would doubtless involve expense in the employment of counsel, which would materially reduce the amount to be received. As the attorneys asked 20 per cent, to collect the money, this must be considered as a reasonable price, and would reduce the amount to $4,080. This, after deducting other expenses that had to be incurred in order to get the money from the government, would leave but a slight margin between the price first asked by Mr. Lyman and the price offered and paid by the plaintiff.

Now, with reference to the value of the Eagle Salt Works property: It appears from the testimony that the defendant was principally interested in securing for itself the delivery of salt at special rates. If this could be done, it would be willing to dispose of the property on reasonable terms, as it “had done very little” business lately, and had commenced winding up its affairs, as its officers “had lost most all interest in it.” In connection with the negotiations as expressed in the correspondence, it is not difficult to see that about-the only advantage to the defendant which the Eagle Salt Works property was, was that by its ownership therein it was enabled to ■procure salt for its own mills at four dollars per ton. True, there were “875 tons of salt on the premises, more or less”; but to realize any money from the sale and delivery of this salt by the plaintiff involved the expense of employing men to load the salt “free on board the cars,” and the money was to be received in driblets, at odd times, whenever needed, within five years. The defendant, through its superintendent, said, “We do not obligate ourselves to order or to take any stated quantity of such salt.” It needs no mathematical calculation to figure out the real value of this part of the contract to the plaintiff. It was more valuable to the defendant than to the plaintiff. It really constituted, as before stated, the principal value of the property to the defendant. If there was any demand for salt by other parties, it would have been of value to the plaintiff.

Take all the testimony, sift it, weigh it, test it in all of its legitimate bearings, and it becomes evident that the $3,500 was not paid by plaintiff or received by the defendant upon the understanding of either party that all that was to be received by the plaintiff was the land and salt on hand. So far as the plaintiff was concerned, he claimed one half of the money; and it must have been his understanding that, if he purchased the property from the defendant, he would be entitled to the other half. But did the other party so understand it? Did their minds meet on this proposition? So far as the express language of the letters can be construed, it is evident that both parties were trying to drive the best bargain they could. The defendant wanted to get the highest price obtainable. The plaintiff was figuring to get the property at the lowest notch possible. From all the evidence it may be urged that neither party fully understood their respective legal rights in the premises as to the money. It is true that the court is not authorized to construe the contract so as in any manner to do violence to the language used by the parties, or to the principles oí law applicable thereto: but it can and ought to give such a construction to all the negotiations as will bring the contract as near to the intention and actual meaning of the parties at the time of its execution as the words which they saw fit to employ, and rules of law, will permit. It is the duty of the court, where the language used is not clear, positive, and certain, to consult the conditions, situation, and motives of the respective parties, for the purpose of ascertaining their intention. In Rockefeller v. Merritt, 22 C. C. A. 613, 76 Fed. 909, 915, the court said:

“One of the most satisfactory tests to ascertain the true meaning of a contract is made by putting: ourselves in the place of the contracting' parties when it was made, and then considering, in view of ail the facts and circumstances surrounding them at the time of its execution, what the parties Intended by the terms of their agreement.”

It has always been deemed permissible for the court to consider the conduct and acts of the contracting parties, and the interpretation which they placed upon their agreement, at the time of, or contemporaneously with, its execution, as an aid to ascertain its meaning. In Chicago v. Sheldon, 9 Wall. 50, 54, the court said:

“In cases where the language used by the parties to the contract is indefinite or ambiguous, and hence of doubtful construction, the practical interpretation by the parties themselves Is entitled to great, if not coni rolling, influence. The interest of each generally leads him to a construction most favorable to himself, and when the difference has become serious, and beyond amicable adjustment, it can be settled only by the arbitrament of the law.”

See, also, Topliff v. Topliff, 122 U. S. 121, 131, 7 Sup. Ct. 1057; Thomas v. Railway Co., 81 Fed. 911, 919; Lumber Co. v. Stump, 30 C. C. A. 260, 86 Fed. 574, 578; St. Louis Gaslight Co. v. City of St. Louis, 46 Mo. 121, 127; Mathews v. Danahy, 26 Mo. App. 660, 662; Vermont St. Church of Quincy v. Brose, 104 Ill. 208; Coal Co. v. Schneider, 163 Ill. 393, 396, 45 N. E. 126.

In Sanders v. Munson, 20 C. C. A. 581, 583, 74 Fed. 649, 651, the court said:

“Ambiguities in the terms of a contract are often dispelled by the construction which the parties themselves have placed upon the terms before con-troversy bas arisen, and courts frequently give effect to this construction, and adopt the meaning which the parties have assumed to be correct.”

As the references made to this money in the correspondence are to some extent uncertain, indefinite, and doubtful, I am of opinion that the subsequent acts and conduct of both parties, in so far as the same tend to shed light upon the transaction leading up to, and culminating in, the execution of the deed, is admissible in evidence, and should be considered by the court, — not as creating a new contract, but as tending to show what the-contract and understanding of tbe parties were at the time of the delivery of the deed. From the subsequent acts and conduct of the parties, it is made perfectly clear that at the time of the execution of the deed the defendant did not assert any claim to this money. Moreover, the defendant, acting through its directors, at a regular meeting authorized the execution of a power of attorney in favor of plaintiff’s attorneys for the express purpose of aiding the plaintiff to get this money for himself. And it was not until it was advised from the correspondence from the land department that the plaintiff could not collect, and whs not entitled to, the money, that it made any claim thereto. Upon being advised as to the rulings of the land department, it revoked its power of attorney to Britton & Gray, and authorized another attorney to act for it, who obtained the money for the defendant. The law undoubtedly protects parties acting in ignorance of their rights from imposition and deceit. But the question constantly presents itself, from all the facts herein, whether this claim thus made is one that would justify the court in holding that the defendant acted in ignorance of the facts. It seems to me that under the testimony the defendant had such knowledge of the facts before the deed was executed as required it to make inquiry as to its legal rights in the premises, and that it ought to be considered as acquiescing in the claim made by the plaintiff that he was entitled to the money, and that such was its understanding at the time the deed was executed; otherwise it would have refused to execute the power of attorney in favor of plaintiff’s attorney for the purpose of enabling him to get the money. Having executed and delivered the deed to the plaintiff, and accepted the $3,500 from him, with the understanding that the plaintiff could collect, and was entitled to, this money, it ought not now be allowed to keep it on the ground that it believed at that time that the statement of the plaintiff as to his legal rights was true. In other words, while it might have been entitled to avoid the contract if there had been any misrepresentations by the plaintiff as to the material facts, by which it had been misled to its injury, it should not be permitted to do so upon the ground that it was not at the time of the execution of the deed fully advised as to the law, but acted under the belief that the plaintiff’s understanding thereof was correct, especially in view of the undisputed testimony that he notified it of all the facts upon which he based his claim. It did not, after this correspondence, at any time before the execution of the deed, claim that all or any part of this money, if it made the sale, belonged to it. There was no fraud in the transaction. There was a misrepresentation as to the legal rights of the plaintiff, which the defendant accepted as true without investigation. Under these circumstances, the parties must be bound by their understanding at the time the contract was executed. The modus operandi by which the money from the government was to be obtained cannot control the transaction. It has nothing to do with it. When the sale was made, it was the understanding of the parties that the plaintiff was entitled to this money, as between the plaintiff and the defendant. The fact that it after-wards transpired — what the parties ought to have known before— that the money could, only -be obtained upon the application of the defendant does not have the1 effect to in any manner change the contract made by the parties.

But, if it should be conceded that the defendant did not understand the contract as above interpreted, there is still another view of the case which would perhaps be binding upon the defendant, and reach the same result. It is evident from all the facts that plaintiff did so understand it. His claim to the money was not based on legal grounds; but he claimed it, and his conduct shows he was acting on the belief that he would get not only one-half of it, but, if he purchased the property mentioned in the deed, he would get it all. That was his understanding, and was a part of the consideration that induced him to offer, and, upon the acceptance of his offer, to pay, to the defendant the sum of $8,500 upon the execution and delivery of the deed to Mm. The defendant knew that this was his understanding, and, having accepted the $8,500 without any denial of the plaintiff’s right to recover the money then in the hands of the government, it ought not to be allowed now to retain this money because the government declined to pay the money upon the application of the plaintiff, and did pay (he money to it upon its own application therefor. In Cunningham v. Patrick, 136 Mo. 621, 632, 37 S. W. 817, which involved the construction of ceriain letters, as to whether or not the parties had adjusted the accounts between them, and agreed upon a certain sum which was to be paid by the defendant to the plaintiffs iu settlement of the same, the court, instead of confining itself to the proposition that the correspondence clearly showed that both parties fully understood that the amount sued for upon the adjustment was the amount agreed upon by them as expressed in their letters, as it might well have done, treated the language of defendant’s reply to plaintiffs’ letters as being so qualified or indefinite as not to justify the statement that the minds of the parties met, discussed the effect of all the negotiations, and came to the conclusion that all the evidence clearly manifested what the plaintiffs’ understanding of the agreement of settlement was, and that defendant having induced the plaintiffs to forbear bringing suit, upon having, as understood by them, a contract for a fixed and definite sum, the defendant should not be allowed to say that there was no such contract. In the course of the opinion the court said:

“The books abound with authority that when one of two parties has a perfect understanding of the understanding of the other as to the meaning of the terms of a contract or proposition of settlement that may be doubtful, the one knowing the understanding of the other, =:: * * and allowing that other to act on that understanding to his loss or injury, will be estopped from denying there was such an understanding or agreement between them, or that the minds of the two did not meet. In such cases the understanding of one, with the knowledge of that understanding by the other, will be treated as the understanding o£ both.”

See, also, Goulding v. Hammond, 49 Fed. 443, 446; Garrison v. U. S., 7 Wall. 688.

In view of all the facts, the situation and knowledge of the parties, their surrounding circumstances, the objects which they had in view, their conduct and acts immediately after as well as before the execution of the deed, as herein interpreted, it follows that the doubts existing in my mind as to the true meaning of the contract as exhibited by the correspondence have been solved; and my conclusion is that the money collected by the defendant from the government belongs, by virtue of the contract between the parties, to the plaintiff. Let judgment be entered in his favor, with costs.