Gruber v. Baker , 20 Nev. 453 ( 1890 )

Caroline Gruber, A. A. Pollard, and Fred Oest owned the Oest mine as tenants in common, and worked it as copartners. They were engaged in the partnership business for some time prior to the ore discovery, and until the sale to Munckton. The business was unprofitable. The relations of the Bay Brothers, who were Mrs. Gruber's brothers, and who represented her interest in the mine and partnership, were unfriendly with Mr. Oest, the principal owner; and Mrs. Gruber had offered her interest for sale. In this condition of affairs, and on the night of the twentieth of November, 1887, the rich ore was struck. All information of the discovery was withheld from Mrs. Gruber and her brothers and from Pollard, by direction of Oest, for the purpose, as he declared, of getting rid of the Bays. Subsequent explorations made for the purpose of ascertaining the extent and value of the ore body were conducted pursuant to this plan. The rich ore was not mined, but low grade and unprofitable ores were worked for the purpose of discouraging the plaintiff and inducing her to sell. Munckton received early information of the discovery from Oest, and, at his request, from Neighley, the foreman; and defendant Baker, a brother-in-law of Neighley, was allowed to examine the mine, and shown the discovery. Negotiations entered into at first for the purpose of purchasing only Mrs. Gruber's interest resulted in the purchase of her interest and Pollard's as well. A joint deed was made by them to Munckton — Baker's interest being concealed; and afterwards Munckton conveyed to him one-half of the interest acquired. Pollard was the superintendent, but gave little personal attention to the workings of the mine. He and the other owners relied upon the reports of its condition made to them by Neighley, the foreman. During the period between the strike and the sale, and while the negotiations were pending, both Pollard and the plaintiff, by her agent, inquired of Neighley concerning the condition of the mine. He stated that no change had taken place and that there was nothing new to report. Relying upon these statements, and with no suggestion to the contrary, plaintiff sold her one-quarter interest for four thousand dollars, and Pollard a like interest for two thousand dollars. The ore discovered yielded in gross one hundred and twelve thousand dollars, of which sum, fifty-six thousand dollars were profits, one-half of which, or twenty-eight thousand dollars, defendants received.

Leaving out of consideration the acts of Oest, Neighley was bound to truthfully report to the plaintiff or her agent and to Pollard. Instead of stating the truth, he concealed it. If Munckton had been ignorant of this concealment and dealt at arms-length with the sellers, it might well be argued that he was under no obligation to inform them of the value of their property. But it is manifest that he knew of the fact and purpose of the concealment. Upon this point the learned judge before whom the cause was tried, says: "But all the evidence and the circumstances taken together, convince me that Munckton and Baker, knew the plaintiff and Pollard had not learned of the discovery of ore, and knew of the means by which the knowledge had been kept from them." And again: "Munckton knew of it; and if he had thought that Pollard and the Bays also knew it (as he certainly would if he did not know to the contrary,) he would certainly have mentioned it in the course of the negotiations, defeating the whole scheme." The discovery greatly enhanced the value of the mine. It was the inducement to defendants to purchase, and if the sellers had known of it they naturally would have used the fact for what it was worth. But plaintiff asked no more for her interest than the price she had offered it at before the strike, and Munckton conducted his negotiations so as not to disclose the fact of the discovery. From these facts the district court must have concluded that Munckton's conduct was inconsistent with ignorance of the concealment. They are sufficient, in connection with the fact that knowledge of the strike was concealed from plaintiff and Pollard, and communicated to Munckton, in order that he might purchase, to support the finding of the district court upon this point. The scheme to defraud did not originate with Munckton. Others set it on foot and bore a more active part than he in the perpetration of the fraud, but he consummated it by purchasing with guilty knowledge of the general plan. He cannot, therefore, retain the avails of the scheme. The decree of the district court directs a cancellation of the deed of conveyance to the defendants, requires a reconveyance, and that they repay to the plaintiff the profits acquired from the mine.

Appellants claim that the measure of damages should have been the difference between the market value of plaintiff's interest and the value she received. In an action at law, when a plaintiff affirms a contract and seeks only damages caused by fraudulent representation, the difference between the actual value and the price paid may afford compensation. But this is not a case of that character. Plaintiff does not affirm, but repudiates, the contract, and seeks a rescission of it. Under the rule invoked, she would receive one thousand dollars damages — that sum. being the difference between the price paid and the market value — while the profits upon the ore — amounting, for the one-half interest, to the sum of twenty-eight thousand dollars — would inure to the benefit of the defendants. The injustice of this view is clear, and it is equally clear that the court, in placing the plaintiffs, so far as it could, as if no fraud had been practiced, adopted the only rule of damages that could afford adequate relief.

Objection was taken that Adam Bay was not made a party plaintiff. Appellants urge that he was the real owner of a one-quarter interest in the mine, standing in the name of the plaintiff at the time of the sale; that, although the legal title was in the plaintiff, she was in fact a mortgagee. I will not consider the testimony upon this point. Defendant Munckton had purchased his interest and that of Baker from her, and was in possession under her deed. They were, therefore, estopped to deny her title. This view renders it unnecessary to consider the objection to the ruling of the court excluding the testimony of Mr. James A. Stephens, the attorney who drew the deed from Adam Bay to Mrs. Gruber, and by whom defendants offered to show that it was intended as a mortgage.

Further objection is made to the character of proof by which plaintiff's case was established. Neighley, the foreman above mentioned, and who actively participated in the perpetration of the fraud, was plaintiff's principal witness, and as such detailed the means by which the fraud was accomplished. It is said that he stood before the court precisely as an accomplice in crime who confesses his own participation in it. Concede this, and yet upon all material points the testimony of the witness was corroborated.

Appellants also contend that the transfer by Pollard to Mrs. Gruber was simply the transfer of a law suit, and is void as savoring of maintenance. Maintenance is defined by Blackstone as "an officious intermeddling in a suit that no way belongs to one, by maintaining or assisting either party, with money or otherwise, to prosecute or defend it." And champerty is defined as "a species of maintenance, * * * being a bargain with a plaintiff or defendant campumpartire, to divide the land or other matter sued for between them if they prevail at law." (4 Bl. Comm. 134.) "The doctrine of the common law as to champerty and maintenance," says Judge Story, "is to be understood with proper limitations and qualifications, and cannot be applied to a person having an interest, or believing that he has an interest, in the subject in dispute, and bona fide acting in the suit, for he may lawfully assist in the defense or maintenance of that suit." (2 Story Eq. Jur. Sec. 1048a.) Applying these principles to the facts, the agreement between Pollard and Mrs. Gruber does not come within the rules of maintenance, nor within the reason of laws upon that subject. Each had an equal interest in the mine, and had alienated it under a similar state of facts. If either had brought suit to annul his or her deed, the other had such interest in the subject of the litigation as would sustain an agreement for the prosecution of the suit. (Call v. Calef, 13 Metc. 362;Finden v. Parker, 11 Mees. W. 675.) And, in order that relief for both could be obtained by one suit, Pollard conveyed to Mrs. Gruber. This tended to reduce the expenses of the litigation, and could not have prejudiced appellants. There is an entire absence of officious intermeddling by maintaining or assisting another to prosecute the suit; the agreement expressly providing that they shall divide the expenses of the litigation — in other words, each shall pay in proportion to his or her interest.

The case of Prosser v. Edmonds, 1 Young C. 481, is relied upon by appellants in support of their contention. In that case a debtor had been fraudulently induced to make certain deeds of conveyance. Subsequent creditors, to whom the debtor afterwards assigned his interest in the property, brought a suit in equity to annul the first conveyance. The debtor made no complaint, and refused to be made a party plaintiff to the suit. It was held that the second assignment could not be sustained. The distinction between that case and this is, there the debtor made no complaint; here the transferrer is, in effect, a suitor maintaining his share of the expenses of the suit. The class of cases to whichProsser v. Edmonds belongs, holds that an assignment or transfer will not be upheld when it is, in effect, the transfer of a lawsuit to be prosecuted at the expense of the assignee, or transferree. The decisions are placed upon two grounds: (1) that such transactions involve the offenses of maintenance or champerty, or lead to their mischievous consequences, and are, therefore, repugnant to the policy of the laws upon these subjects; and (2) they are contrary to the common law, which forbade the transfer of a disputed title to real property by a party out of possession, upon the principle that such transfers savored of maintenance. As to the first ground, the agreement set forth involves none of the ingredients of the offenses named, and, as to the second, a statute of this state expressly permits the transfer interdicted by the common law. (Gen. Stat. 2603.) The reasons, therefore, which have required courts to disregard the transfer of disputed rights do not exist in the present case. I will not consider whether plaintiff is the real party in interest within the meaning of section 4 of the civil practice act, as this ground was not relied upon by appellants. As opposed, however, to the view expressed in the opinion of Mr. Justice Murphy, Prof. Bliss, in discussing similar statutes requiring actions to be brought in the name of the real party in interest, says most of the courts have held that, in actions brought by the transferee, it does not concern the defendant for what purpose the transfer was made, and he cannot object unless he has some defense, or holds some claim, against the real owner. (Bliss Code Pl. Sec. 51.) I think the judgment should be affirmed in all respects.