Johnston v. Standard Mining Co.
148 U.S. 360 (1893)

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U.S. Supreme Court

Johnston v. Standard Mining Co., 148 U.S. 360 (1893)

Johnston v. Standard Mining Company

No. 133

Argued March 10, 1893

Decided March 27, 1893

148 U.S. 360

Syllabus

The mere institution of a suit does not, of itself, relieve a person from the charge of laches, and if he fail in its diligent prosecution, the consequences are the same as though no action had been begun.

Where a question of laches is in issue, the plaintiff is chargeable with such knowledge as he might have obtained upon inquiry, provided the facts already known to him were such as to put the duty of inquiry upon a man of ordinary intelligence.

The duty of inquiry is all the more peremptory when the thing in dispute is mining property, which is of an uncertain character and is liable to suddenly develop an enormous increase in value.

In this case, it is clear that the plaintiff did not make use of that diligence which the circumstances of the case called for.

This was a bill in equity to establish the ownership of the plaintiff in one-fourth of a mining claim known as the "J. C. Johnston Lode," and for a decree that the defendant be required to execute a deed of the same, and to account to plaintiff for one-fourth of the net proceeds of the mine. The bill, which was originally filed in the state court against the Standard Mining Company, Isaac W. Chatfield, and other defendants, was subsequently removed to the circuit court of the United States upon the petition of the Standard Mining Company as a suit involving a separate controversy between itself and the plaintiff Johnston.

The bill averred in substance that on September 14, 1880, plaintiff, being then the owner and in possession of an undivided half of the J. C. Johnston lode mining claim, situated in the Roaring Fork Mining District, Pitkin County, Colorado, executed a certain title bond whereby he agreed to sell and convey to the defendant Chatfield an undivided one-fourth interest in such mining claim, with other property, for a consideration of $1,200; that on October 12, 1880, plaintiff executed to Chatfield a deed of his entire interest in such mining claim for a nominal consideration of $1,200; that his interest at the time

Page 148 U. S. 361

was an undivided half, and that such conveyance was in pursuance of said bond as to a one-fourth interest covered by said bond, and, as to the remaining one-fourth interest, such conveyance was in trust that Chatfield, with Charles I. Thomson and Daniel Sayre, who were his legal advisers, and who were also made defendants, would defend Johnston's title to this claim against another, known as the "Smuggler Claim No. 2," with which these parties represented to him that it was in conflict, and would perfect plaintiff's title to the J. C. Johnston claim by obtaining a patent therefor, and would thereupon convey to plaintiff an undivided one-eighth interest in the property, free and clear of all costs and expenses of the patent proceedings, and of the threatened litigation with the Smuggler No. 2 claim, and of all charges, encumbrances, and assessments, and would hold the remaining one-eighth of said title for Thomson and Sayre as compensation for their legal services, and for the costs of litigation,

"but it was expressly agreed and understood that if said services should not be necessary and should not be performed, said Thomson and Sayre should receive nothing, and that the said remaining one-eighth should be reconveyed to plaintiff."

The bill further averred that upon the solicitation of these parties, plaintiff was induced to employ Thomson and Sayre upon these terms, and thereupon executed the deed to Chatfield of all his interest in the claim, and in pursuance of such agreement a contract in writing was drawn up and signed by Chatfield and plaintiff whereby the former agreed, upon perfecting the title to the claim, to convey to plaintiff an undivided one-eighth free and clear of all expenses and of the proposed litigation, that plaintiff did not retain a copy of this contract, but that the same was left in the possession of Thomson and Sayre, who promised to have the same recorded, but failed to do so.

The bill further averred that on December 14, 1880, Chatfield conveyed to the Fulton Mining Company, also made a defendant, all his interest in such claim; that such conveyance was made before the incorporation of the Fulton Mining Company, and therefore that it acquired no title by said conveyance; that the incorporators of said Fulton Mining Company

Page 148 U. S. 362

were the defendants in this suit, including Chatfield, Thomson, and Sayre, and the same defendants were all directors of such company for the first year of its existence, and that all of them had, before such conveyance by Chatfield to the company, full knowledge and actual notice of the uses and trusts upon which Chatfield held plaintiff's title as aforesaid; that in February, 1881, the Fulton Mining Company made application for letters patent for the J. C. Johnston mining claim, and that letters patent were issued to said mining company, bearing date February 21, 1884, but that plaintiff did not learn of the issuance of said patent until February, 1885; that, upon learning of the same, plaintiff immediately made demand upon Chatfield, individually and as manager of the Fulton Mining Company, for a conveyance of his interest in the property according to plaintiff's contract with Chatfield, which demand was refused.

The bill further charged that from time to time after the execution of his contract with Chatfield and until he learned of the issuance of the letters patent to the Fulton Mining Company, he frequently inquired of Chatfield as to the progress that was being made to perfect the title to the J. C. Johnston claim, and that Chatfield always answered such inquiries that the patent had not been received, but that application had been made therefor, and that everything would be all right; that he had implicit confidence in said Chatfield, and, knowing also that the issuance of United States patents for mining claims was usually attended with long delays, plaintiff never suspected that anything was wrong until he learned of the issuance of the patent, and until his demand was refused as aforesaid. It was further charged that no bona fide suit or proceeding was ever brought or threatened by the claimants of Smuggler No. 2 claim, as was represented by Chatfield, Thomson, and Sayre; that the only such suit ever brought by any claimants of Smuggler No. 2 was begun in the circuit court of the United States in May, 1881; that a demurrer to the complaint was filed on July 20, and no further proceedings were taken until December 18, 1882, when the cause was dismissed by stipulation of

Page 148 U. S. 363

the parties, but that such proceedings were taken without the knowledge or consent of the plaintiff; that such suit was without foundation or merit, and that said Thomson and Sayre caused the same to be brought only that they might appear to defend the same, and thereby apparently perform the services for which they were to receive one-eighth share of said Johnston claim. Plaintiff further averred that he did not discover the fraud practiced upon him by the said Thomson and Sayre until April, 1885, when he was informed of the same by his attorney, who at his request investigated and reported the facts in relation thereto.

The bill further averred that the Fulton Mining Company conveyed the claim to one William J. Anderson, who was made a defendant, by deed dated July 5, 1886, for a consideration of $125,000, and that Anderson attempted to convey the same to the Standard Mining Company, now the sole defendant, by deed dated June 17, 1887, for a consideration of $2,500,000, but that all of said parties had full knowledge and actual notice of the plaintiff's interest in the property, and the trusts upon which Chatfield took title thereto, and that such conveyances were fraudulent and void as to plaintiff, and made with special intent to defraud and hinder him.

He further averred that the several defendants had mined large quantities of ore from the claim, and prayed that he be adjudged to be the owner of one-fourth of such claim; that the defendant be decreed to execute a deed of the same to him, and be required to account to him for the proceeds of the ore; and, in case such relief could not be granted, for a personal judgment against Chatfield for the value of an undivided one-eighth of such mine, and against Thomson and Sayre for the value of another one-eighth, and for an accounting from them personally for the ores mined.

The Standard Mining Company filed its answer to this bill in the federal court, and upon the issue formed between the parties testimony was taken, the case heard by the district judge, and on March 1, 1889, an interlocutory decree entered substantially in accordance with the prayer of the bill, and an accounting ordered. The defendant immediately applied for

Page 148 U. S. 364

a rehearing, and the case was reheard without reference to the grounds relied upon in the petition for rehearing, which did not raise the question of laches, and the case was again taken under advisement, when the court delivered a second opinion, dismissing the bill upon the ground of laches. Thereupon plaintiff filed a petition for a rehearing upon this question, which was denied by the court without argument. Plaintiff thereupon appealed to this Court.

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