United States v. California Midway Oil Co.

Ninth Circuit

United States v. California Midway Oil Co.

279 F. 516, 1922 U.S. App. LEXIS 1579

CourtCourt of Appeals for the Ninth Circuit

DecidedFebruary 20, 1922

DocketNo. 3682

StatusPublished

Cited by7 cases

This text of 279 F. 516 (United States v. California Midway Oil Co.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Ninth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook

United States v. California Midway Oil Co., 279 F. 516, 1922 U.S. App. LEXIS 1579 (9th Cir. 1922).

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Opinions

GILBERT, Circuit Judge

(after stating the facts as above). [1] It is the contention of the government that the makers of the power of attorney and McMurtry intended to circumvent the law, and that their action was in effect the result of a conspiracy to violate the statute. The bill alleges that the location was made for the use and benefit of McMurtry, or some person other than the persons named in the location notice. The court below held that the question thus presented was one of fraud, and that fraud must be established by clear, unequivocal, convincing proof, and that the evidence did not measure up to the requisite degree of proof. As we regard the case, there was evidently no conspiracy between McMurtry and the makers o f the power of attorney. The case for the government must stand or fall upon the bona iides of the location which was made. It seems clear that there was no fraudulent intent upon the part of the signers of the power of attorney at the time when they signed it, and that they had no thought that it was to be used illegally, or that they were doing, or authorizing McMurtry to do, an unlawful act. If, however, the power of attorney was procured and used by McMurtry for the purpose of acquiring oil land in violation of the statute, it follows that the location was fraudulent.

We have no means of knowing what was in McMurtry’s mind when he procured the power of attorney, other than what may he inferred from his subsequent acts in pursuance thereof. But those acts are not sufficient in themselves to establish fraud, although the facts and cir[520]*520cumstances seem to indicate that after locating the claim McMurtry came to regard as negligible tire rights of the locators, and the interests acquired by them. It further appears that he had no agreement with them as to what he should get out of the venture, and that without consulting them he determined what his own share should be. The locators had from him no information of any kind until nearly three years after they signed the power of attorney. Then they were asked to sign a receipt and release to him all interest in the located mining claim upon the payment of $250 to each of them. Prior to that time McMurtry had realized in cash out of the land so located $10,000, and had taken title to himself in his individual name of 40 acres of the claim. He made no report to the locators of these facts, nor did he explain to them the source of the $250 he was paying to each of them. It seems probable that he considered his relation as attorney in fact for them to have been closed by their signatures to the receipt and release, and that they no longer had an interest in the claim, and that subsequent events led him to reinstate his fiduciary relation and to issue to the locators each the 1,000 shares out of the 1,000,000 shares of the corporation which had taken the property over. He admitted that it was he who decided how much stock they should have. They were not consulted. Later he bought their shares from them upon payment of $250 to each.

[2] There is much' to indicate that the issuance of the stock to the locators and the payment of a small dividend to them was an afterthought, which had its source in McMurtry’s desire to fortify title to the claim, and to forestall adverse litigation upon the part of the government. But, assuming it to be true that he grossly abused the trust of the locators, and took advantage of them at every turn, it was after all their own affair. Such conduct on his part would not of itself render the location illegal, nor does it follow therefrom that the location was fraudulent at the time when it was made. The case should be viewed in the aspect it would have, if the suit had been brought against the locators prior to the time when McMurtry disregarded their rights and took advantage of their confidence. Nothing that McMurtry could do after that time could operate to make the location fraudulent as against them. It was substantially upon this view of the case that the court below rendered judgment, after a careful and .painstaking review of all the testimony. We are not convinced that there wals error in that conclusion. .

The decree is affirmed.

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GILBERT, Circuit Judge

(after stating the facts as above). [1] It is the contention of the government that the makers of the power of attorney and McMurtry intended to circumvent the law, and that their action was in effect the result of a conspiracy to violate the statute. The bill alleges that the location was made for the use and benefit of McMurtry, or some person other than the persons named in the location notice. The court below held that the question thus presented was one of fraud, and that fraud must be established by clear, unequivocal, convincing proof, and that the evidence did not measure up to the requisite degree of proof. As we regard the case, there was evidently no conspiracy between McMurtry and the makers o f the power of attorney. The case for the government must stand or fall upon the bona iides of the location which was made. It seems clear that there was no fraudulent intent upon the part of the signers of the power of attorney at the time when they signed it, and that they had no thought that it was to be used illegally, or that they were doing, or authorizing McMurtry to do, an unlawful act. If, however, the power of attorney was procured and used by McMurtry for the purpose of acquiring oil land in violation of the statute, it follows that the location was fraudulent.

We have no means of knowing what was in McMurtry’s mind when he procured the power of attorney, other than what may he inferred from his subsequent acts in pursuance thereof. But those acts are not sufficient in themselves to establish fraud, although the facts and cir[520]*520cumstances seem to indicate that after locating the claim McMurtry came to regard as negligible tire rights of the locators, and the interests acquired by them. It further appears that he had no agreement with them as to what he should get out of the venture, and that without consulting them he determined what his own share should be. The locators had from him no information of any kind until nearly three years after they signed the power of attorney. Then they were asked to sign a receipt and release to him all interest in the located mining claim upon the payment of $250 to each of them. Prior to that time McMurtry had realized in cash out of the land so located $10,000, and had taken title to himself in his individual name of 40 acres of the claim. He made no report to the locators of these facts, nor did he explain to them the source of the $250 he was paying to each of them. It seems probable that he considered his relation as attorney in fact for them to have been closed by their signatures to the receipt and release, and that they no longer had an interest in the claim, and that subsequent events led him to reinstate his fiduciary relation and to issue to the locators each the 1,000 shares out of the 1,000,000 shares of the corporation which had taken the property over. He admitted that it was he who decided how much stock they should have. They were not consulted. Later he bought their shares from them upon payment of $250 to each.

[2] There is much' to indicate that the issuance of the stock to the locators and the payment of a small dividend to them was an afterthought, which had its source in McMurtry’s desire to fortify title to the claim, and to forestall adverse litigation upon the part of the government. But, assuming it to be true that he grossly abused the trust of the locators, and took advantage of them at every turn, it was after all their own affair. Such conduct on his part would not of itself render the location illegal, nor does it follow therefrom that the location was fraudulent at the time when it was made. The case should be viewed in the aspect it would have, if the suit had been brought against the locators prior to the time when McMurtry disregarded their rights and took advantage of their confidence. Nothing that McMurtry could do after that time could operate to make the location fraudulent as against them. It was substantially upon this view of the case that the court below rendered judgment, after a careful and .painstaking review of all the testimony. We are not convinced that there wals error in that conclusion. .

The decree is affirmed.

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279 F. 516, 1922 U.S. App. LEXIS 1579, Counsel Stack Legal Research, https://law.counselstack.com/opinion/united-states-v-california-midway-oil-co-ca9-1922.

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