Clarke v. Eureka County Bank , 123 F. 922 ( 1903 )

HAWLEY, District Judge.

This is an action to recover the sum of $15,000 damages for the alleged wrongful conversion of 1,000 shares of the Rocco-Homestake Mining Company, with dividends and accumulations. The case was tried before the court, a jury having been waived by stipulation of the parties. It is admitted that the value of the shares of stock at the time of the alleged conversion thereof was $6,000, as alleged in the complaint, and that the dividends thereon amounted to $4,300, as stated in the answer.

It appears from the testimony that in 1899 Robert M. Clarke, an ■attorney at law, since deceased, claimed an undivided interest in the Homestake mine, situate in White Pine county, Nev. That the claim of Clarke had its origin in a deed from Mrs. Irene M. Robinson, conveying to him this interest in the Homestake mine in consideration of his legal services rendered her in the suit of Robinson v. Kind, 23 Nev. 330, 47 Pac. 1, 977; Id., 25 Nev. 261, 59 Pac. 863, 62 Pac. 705. That during the year 1899 negotiations were carried on by the RoccoHomestake Mining Company for the purchase of the interest claimed by Clarke, which resulted in an agreement that Clarke would convey his interest in the property to the corporation for 1,000 shares of the capital stock of the company, said stock to be placed in escrow until it was determined that he owned the interest claimed in the property. That on May 2, 1899, in pursuance of this agreement, Clarke made a conveyance to the company of his interest in the mine, and three days thereafter the instrument designated as the “escrow agreement” or “receipt” was signed and executed. It reads as follows:

“Received of Robert M. Clarke, one thousand shares of the capital stock of the Rocco-Homestake Mining Company, of San Francisco, California, to be delivered to the order of the said Robert M. Clarke, together with the profits or dividends accrued and accruing thereon, when it is finally determined that said Robert M. Clarke owned the undivided one-twelfth of the Homestake mine, situate in Swansea Canon, White Pine county, Nevada, ■conveyed by the said Robert M. Clarke to the said Rocco-Homestake Mining Company, on the 2nd day of May, A. D. 1899. Should it be determined that the said Robert M. Clarke was not the owner of the said one-twelfth interest in the said Homestake mine, then and in that ease, the said Robert M. Clarke releases and relinquishes any and all claims to the said 1,000 shares of stock and authorizes the delivery of the same to the order of the RoccoHomestake Mining Company of San Francisco, California.

“The Eureka County Bank,

“By Oscar J. Smith, President.

“Eureka, Nevada, May 5, 1899.

“For and in consideration of the sum of one dollar, to me in hand paid, the receipt whereof I do hereby acknowledge, .and for other valuable considerations, I hereby agree and consent to all the terms of the above and foregoing. Robt. M. Clarke.”

That after the execution of this instrument the one thousand shares of stock in controversy in .this action were delivered into the possession of the defendant, and have ever since remained in its possession, together with the accumulated dividends on said shares.

In regard to the execution of this instrument, there is some controversy as to whether or not Clarke was competent to execute the paper, and as to where it was executed. Mr. Oscar J. Smith, who was at the time of the execution of the receipt the president of the defendant, and also president of the Rocco-Homestake Mining Company, and is one of the attorneys for the defendant in this- action, was called as a witness on behalf of plaintiff, and testified as follows:

“The receipt was written out at my office at Reno, or General Clarke’s-office and my own—he had his office with me at Reno at that time—by General Glarke and myself. 1 did the typewriting, and the receipt was made out by the two of us; I representing the bank and the mining company, and: he representing himself. It was made and signed by myself for the bank, and General Clarke for himself, there in that office. * * * General Clarke-dictated part of it, and I wrote part of it. I did the typewriting. * * * I think he went back the next day, but as to that I would not be sure, and furthermore I think it was the last time he was ever there to attend to any business.”

On July 4, 1899, Mr. Smith called at the family residence in Carson, Nev., and conversed with Mrs. Clarke as to the chances of Mr. Clarke recovering from his illness. Both were of opinion that his condition, was very critical, and that the probabilities were that he would pass away within a very few days. Mr. Smith then suggested the propriety of having the stock in question conveyed to her for her protection, and stated that, anticipating the conditions they had discussed, he had prepared a bill of sale conveying Mr. Clarke’s interest in the shares of stock to her. There is- some controversy as to who prepared the bill of sale which Mr. Clarke signed, but, inasmuch as Mrs. Clarke’s-interest is admitted, it is wholly immaterial who prepared the document. A copy of this bill of sale was introduced by plaintiff. It conveys to Mrs.. Clarke all his “right, title and interest in and to one thousand shares of the capital stock of the Rocco-Homestake Mining Company, a corporation, now held in escrow under certain conditions by the Eureka County Bank, Eureka, Nevada.” Clarke died February 11, 1901. On March 12, 1902, counsel for plaintiff made a demand upon the defendant for the delivery of this stock and the accumulated dividends.

Among other things, it is claimed by the defendant “that no demand has ever been made, as disclosed by the evidence, that would entitle this plaintiff to sue for damages for conversion.” The correspondence between the parties to this suit with reference to the demand is set out at length in the statement of facts, reference thereto being here-made. The contention of counsel depends entirely upon the question whether or not the conditions in the escrow agreement had been complied with at the time of the demand for the shares of stock. Has the condition of the escrow agreement that the stock is to be delivered “when it is finally determined that said Robert M. Clarke owned the undivided one-twelfth of the Homestake Mine” been complied with ? This condition is in the nature of a condition precedent, and, if the case rests upon the escrow agreement, it must be shown that it has been determined that Clarke owned the interest in the mine which he copveyed to the Rocco-Homestake Mining Company. Soderberg v. Crockett, 17 Nev. 409, 415, 30 Pac. 826; Inda v. McInnis, 25 Nev. 235, 240, 59 Pac. 3. The condition in the escrow agreement is vague, uncertain, and indefinite. How was it to be “finally determined” that Clarke owned this interest? The manner in which it was to be determined is not stated. Whether an independent suit was to be brought to determine the question, or whether it was to be determined by arbitration, or by the courts, or by agreement of the parties, or in any other manner, is left upon conjecture merely. The reading of the escrow agreement does not, of itself, throw any light on this subject. This being true, it becomes the duty of the court to inquire into the circumstances and conditions which existed at the time of the negotiations between Gen. Clarke and the Rocco-Homestake Mining Company for the purchase of his interest in the Homestake mine, which resulted in depositing the shares, of stock in question with the defendant, subject to the conditions named. This is necessary in order to bring the language in the “escrow agreement” 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. The rule is universal that 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. Leete v. Pacific Mill & Mg. Co. (C. C.) 88 Fed. 957, 967; Wolff v. Wells, Fargo & Co., 115 Fed. 32, 35, 52 C. C. A. 626; Accumulator Co. v. Dubuque St. Ry. Co., 64 Fed. 70, 74, 12 C. C. A. 37; Salt Lake City v. Smith, 104 Fed. 457, 463, 43 C. C. A. 637. This rule has been applied in a great variety of cases. In Kauffman v. Raeder, 108 Fed. 171, 175,47 C. C. A. 278, 54 L. R. A. 247, where, in order to decide the contention there raised as to the right of a party who had accepted and retained the benefits of an agreement substantially performed by the other party, to enjoy those benefits, and still rescind the agreement which he had stipulated he would perform, the court deemed it necessary, before deciding the question, to obtain a clear idea of the relations of the parties to the agreement, and the moving considerations which induced the parties to sign it, and said:

“This conception must he secured by the light of the fundamental rule that the situation of the parties when the contract was made, its subject-matter, and the purpose of its execution are material to determine the intention of the parties and the meaning of the terms they used, and that when these are ascertained they must prevail over the dry words of the stipulation.”

See, also, Fox v. Tyler, 109 Fed. 258, 260, 48 C. C. A. 356; Rock Island Ry. Co. v. Rio Grande Railroad, 143 U. S. 596, 609, 12 Sup. Ct. 479, 36 L. Ed. 277; Winona & St. Peter Land Co. v. Minnesota, 159 U. S. 526, 531, 16 Sup. Ct. 83, 40 L. Ed. 247; Mayer v. Goldberg (Wis.) 92 N. W. 556, 558.

What were the conditions which created the adverse interest or cloud upon the interest claimed by Clarke? Was there any adverse interest held by any other person? If so, by whom? Is it possible from the evidence in this case to determine what the parties meant when they said that the stock was not to be delivered until Clarke’s claim was finally determined ? What were the existing facts in regard to this title?

We glean from the voluminous documents in evidence in this case that in 1892 Mrs.. Irene M. Robinson, who was the heir at law of her deceased husband, Eugene N. Robinson, claimed to own an interest in the Homestake mine; that she conveyed one-twelfth thereof to R. M. Clarke, as hereinbefore stated, and the balance of her interest to the R.occo-Homestake Mining Company. It must have been with reference to the title or claim thus acquired that the negotiations were had between the corporation and Clarke for the purchase of his interest. It appears that, previous to the execution of the deeds last referred to, Mrs. Robinson had instituted a suit in the state district court of Eureka county against Henry Kind and Eugene Howell to set aside a trust deed made by her to Kind, as trustee—to secure the payment of certain sums due Howell, etc.—of the Homestake mine, on the ground that Mrs. Robinson was not of sound mind and memory when the trust deed was executed. The trial of this suit resulted in a judgment in her favor. Kind and Howell appealed to the Supreme Court, and this appeal was pending in that court at the time of the execution of the escrow agreement. Do not these undisputed facts clearly show, beyond question, that it was with reference to this litigation that the escrow agreement was executed, and that the words we have so frequently quoted had reference thereto ? If Mrs. Robinson won the suit, the result would be that Clarke’s title was determined thereby. There is no pretense that there was any adverse interest to Clarke’s claim, except that raised in the suit of Robinson v. Kind. When that case was decided upon appeal in the Supreme Court, the judgment of the lower court was reversed, and a petition for rehearing was denied. Robinson v. Kind, 25 Nev. 269, 291, 59 Pac. 863, 62 Pac. 705. Thereafter the venue of said suit was transferred, by an order of the district court of Eureka county, to the district court of Ormsby county, Nev., in pursuance of a stipulation of the parties, which provided, among other things, that the cause might be heard and determined by the district court in Ormsby county “upon this stipulation and agreement, and upon the evidence, oral and documentary,” taken and admitted at the trial of the cause in Eureka county, and “contained in the defendants’ statement on motion for new trial.” The case was regularly placed on the docket and calendar of the district court of Ormsby county, and set for hearing on July 27, 1901, and the hearing thereof was continued from time to time, and on December 20, 1901, the following minute entry was made in said court:

“The trial of the above-entitled action came on to be heard at this time, Alfred Chartz, Esq., appearing on part of plaintiff; and, after reading pleadings and stipulation in said action, all of the papers, testimony, and evidence of the two preceding trials of this action were submitted to the court for his consideration, and asked that the court render his decision thereon. Court thereafter took matter under advisement, and all of said papers for reading.”

On January 6, 1902, the court convened and made the following order;

“In the above-entitled action, court ordered that judgment be entered in favor of plaintiff in accordance with the stipulation on file herein; that she was non compos mentis at the time of execution of deeds.”

No appeal has been taken from said judgment.

The judgment in that suit, in its legal effect, determined that Clarke was the owner of the interest in the Homestake mine which he conveyed to the corporation, and in consideration of said deed the corporation issued to him the 1,000 shares of stock, which was deposited with the defendant. The condition in the escrow agreement having been determined, the demand made by plaintiff for the stock was a legal demand, and the refusal of defendant to deliver the stock was an unlawful conversion thereof, and entitled plaintiff to maintain this action for damages.

But in addition to the proceedings had in the state court, it appears that in May, 1899, the Rocco-Homestake Mining Company, by Robert M. Clarke and Oscar J. Smith, its attorneys, brought suit in this court against Henry Kind and Eugene Howell to quiet its title to the Home-stake mine. The defendants answered separately. Kind set up his title under the trust deed, hereinbefore mentioned, from Mrs. Robinson, and Howell alleged that he was “the owner of said two-thirds interest in said mining claim.” The cause came up regularly for trial January 10, 1900, at which time the respective parties to the suit stipulated that, for a valuable consideration received by the defendants, all the differences existing between the parties had been compromised, settled, and adjusted, and, as a part of said compromise and settlement, “it is by said defendants, Henry Kind and Eugene Howell, stipulated and agreed that the said complainant have a decree herein quieting its title to the premises mentioned in the bill of complaint and hereinafter described, viz., that certain mine, mining claim, and mining location located by Rocco Kranaze, E. N. Robinson, and Frank Paul, October 12, 1886, as the ‘Homestake Mine,’ and situated in Swansea Cañón, near Shermantown, in the White Pine mining district, White Pine county, state of Nevada.” A decree was duly entered in pursuance of this stipulation in favor of complainant. This decree quieted the title of the corporation against the adverse claim of Kind and Howell to the Homestake mine, and established and finally determined that Clarke owned the interest which he had conveyed to the corporation ; that his deed, as well as the deed of Mrs. Robinson, to the corporation, was valid.

Various objections were made at the trial as to the admissibility and legality of the proceedings had in the state and United States courts. This court declines to review the proceedings had in the state courts. The parties had their day in court, and, if they did not avail themselves of all the defenses they might have made, it was their fault; and the errors, if any existed therein, cannot be availed of by this defendant or by the Rocco-Homestake Mining Company. Nor can they, or either of them, avail themselves of any irregularities or defects, if any, in the proceedings had in the matter of the estate of Eugene N. Robinson, or of the steps taken by Mrs. Robinson in acquiring her interest in the Homestake mine.

There are several other matters alluded to in the arguments of counsel, that, in the light of the conclusions reached, need not be referred to.

The truth is that the defendant has no valid defense to this action. It had no right to the stock. It was a mere custodian thereof. Its only interest was to protect itself against the claim and demand which it alleges was made upon it by the Rocco-Homestake Mining Company to deliver the stock to it. The ordinary course was for the defendant to have deposited the stock in court, in order that proper steps might thereafter have been taken by the respective parties to establish their claim to the shares of stock. The defendant, however, chose to become a partisan on behalf of the Rocco-Homestake Mining Company, and set up a defense for it which is. wholly without merit.

What amount of damages should, under the facts and circumstances of this case, be awarded to the plaintiff?. No special damages were alleged or proven. The general allegation in the complaint is that she has been damaged in the sum of $15,000. She is, of course, entitled to recover the value of the shares of stock, with the accumulated dividends thereon at the time of her demand, which amounts to $10,300. I am of opinion that she is entitled to recover as damages not only the value of the property and accumulated dividends, but also a sum equal to legal interest on the same from the time of conversion. 1 Sedg. on Dam. (8th Ed.) § 316; New Dunderberg M. Co. v. Old, 97 Fed. 150, 153, 154, 38 C. C. A. 89, and numerous authorities there cited. Adding the legal interest, to wit, $951.75, to the sum above stated, makes a total of $11,251.75, which plaintiff is entitled to recover. Eet judgment be entered in her favor for that amount, with costs and interest.