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.
MR. JUSTICE BROWN, after stating the facts in the foregoing
language, delivered the opinion of the Court.
The bill was dismissed in the court below upon the ground of
laches, and the correctness of its ruling in that particular is the
first question presented for our consideration.
The gist of the plaintiff's bill is the alleged fraud of
Chatfield in failing to carry out his contract of October 12, 1880,
wherein he agreed that, in the event of succeeding in certain legal
proceedings to be instituted by him for vesting the legal title to
the Johnston claim in the plaintiff, he would convey to plaintiff
an undivided one-eighth interest in the lode, free and clear of all
expenses incidental to the litigation, plaintiff, upon his part,
agreeing to pay an undivided one-eighth of the expenses which
should accrue in the developing and opening of the lode. The lode
in question had been located on the preceding 4th of August by
Johnston, as owner of one-half; Joseph W. Adair, as owner of
one-fourth, and George A. Crittenden, as owner of the remaining
fourth. It seems there was a conflict between this and another
mining claim, known as "Smuggler No. 2," and the agreement with
Chatfield was made for the purpose of contesting this claim.
It also appeared that plaintiff was one of the parties who had
located the Smuggler No. 2 claim; that, early in the year
Page 148 U. S. 365
1880, plaintiff and entered into what is known as a "grubstake"
contract with one Acheson, individually and as agent and attorney
in fact of Edward Dunscomb and James E. Seaver, whereby plaintiff
agreed to locate mining claims on behalf of himself and these
parties, in consideration of which they agreed to furnish all the
supplies and pay all the expenses which should be required in
prospecting, locating, and developing such mining claims; that, in
pursuance of such agreement, plaintiff found indications of a
silver-bearing lode on Smuggler Mountain, in the Roaring Fork
Mining District, and on April 15, 1880, located Smuggler No. 2
mining claim upon this vein; that such location was made in the
joint names of plaintiff, owner of one-fourth, and the wives of
Dunscomb and Seaver, each claiming three-eighths; that after such
location, and before the discovery of any vein within the limits of
the Smuggler claim, the other parties abandoned such claim, failed
to furnish the necessary supplies and money to the plaintiff, who
continued to develop and work the ground on his own account and at
his own expense; that on August 4, 1880, plaintiff discovered
within the limits of said Smuggler claim a vein or lode, and
thereupon duly located the same as the J. C. Johnston lode mining
claim, for the use of himself, Crittenden, and Adair, as above
stated; that, upon learning of such discovery and location,
Acheson, Dunscomb, and Seaver negotiated with Crittenden and Adair
for the purchase of their interests in the Johnston claim, and on
August 10, 1880, purchased the same for $1,000; that at the same
time they negotiated with plaintiff, and agreed to purchase his
one-fourth interest, but failed to do so.
Plaintiff further contended that these facts respecting the
location of the two claims, and the negotiations with Acheson,
Dunscomb, and Seaver, were known to Chatfield, Thomson, and Sayre,
who still insisted that there were certain parties who, as grantees
of Dunscomb and Seaver, claimed title under the Smuggler location
adversely to plaintiff's interest in the Johnston claim, and that
legal proceedings had already been, or were about to be, commenced
to enforce said claims; that Chatfield, Thomson, and Sayre
represented that it was desirable
Page 148 U. S. 366
to perfect the title of the Johnston claim by obtaining a patent
therefore, and to this end they had secured, or would secure, a
conveyance from the owners of the other half of the Johnston claim.
They further represented to him that for the better management of
the property, they proposed to organize a stock company, and to
that end they had secured the other half interest in the Johnston
claim, and that the defendants were then associated together, and
had agreed to organize a stock company for that purpose, and that
the Fulton Mining Company was shortly thereafter incorporated by
them. These conflicting claims with regard to the ownership of the
property within the limits of these two claims was evidently the
foundation of the agreement of October 12, 1880, whereby Chatfield
agreed to clear up the title to the property, and to convey
one-eighth to the plaintiff.
Most of the testimony was directed to the relative merits of the
Smuggler No. 2 and the J. C. Johnston locations, apparently upon
the assumption by the defendant that the plaintiff was bound to
prove that the owners of the Johnston lode had the better title.
Plaintiff, however, contends that the contract of October 12, 1880,
and the other conveyances made about the same time, when read in
the light of the surrounding circumstances, are conclusive evidence
of the following: first, that the interest actually purchased by
Chatfield in the Johnston mine was a quarter interest, and that the
remaining fourth of Johnston's interest in the property, which he
deeded to Chatfield, was in trust; second, that this fourth
interest was the interest referred to in the contract as being
claimed adversely to Chatfield by certain persons; third, that the
defendants Thomson and Sayre were employed to institute the "legal
proceedings" mentioned in the contract, and were to receive as a
contingent fee for their services in that behalf an eighth of the
Johnston mine, in case those proceedings were successful; fourth,
that in such case Johnston was to receive the remaining eighth of
this contested quarter; fifth, that the "legal proceedings"
mentioned contemplated and included an application for letters
patent, and the acquisition of the government title, as well as a
suit of some kind.
Page 148 U. S. 367
Upon the basis of the fifth and last proposition above stated,
the plaintiff contends that it would follow that a cause of action
did not accrue to him until a patent had been issued by the
government, which did not take place until July, 1884, and that as
plaintiff was not informed of this fact until sometime in 1885, and
as he filed his first bill against Chatfield in the United States
court on August 1, 1885, he insists that he fulfilled all the
requirements of the law with respect to diligence, and that the
defense of laches is not sustained. We think this position,
however, is founded upon a somewhat strained interpretation of the
contract in question. It provides that
"in the event of the party of the first part [Chatfield]
prevailing and succeeding in certain legal proceedings about to be
instituted and commenced by the party of the first part for the
vesting of the legal title in the party of the first part, against
persons who claim adversely to him an interest in the following
described property, . . . that the party of the first part, upon so
acquiring the title, legal and equitable, to the said mine, by
means of the legal proceedings so about to be commenced, doth
hereby covenant and agree to and with the said party of the second
part [Johnston] to convey to the said party of the second part an
undivided one-eighth interest in and to the said above-described
lode, which shall be free and clear from all expense incidental to
the litigation incident to said contemplated suit."
A compliance with this contract on Chatfield's part evidently
required the commencement within a reasonable time, and the
diligent prosecution of, a suit for the establishment of his title
to the property, since the question of adverse claims could not be
determined by the mere application for a patent without the
institution of a suit or the compromise of these conflicting
claims. That this was the construction put upon it by Chatfield
himself is evident from the fact that, three days after this
contract was made, he executed a quitclaim deed to Thomson and
Sayre of an undivided one-eighth interest in the Johnston lode for
a nominal consideration of $500. It is admitted, however, that no
money consideration was paid for this conveyance, and Chatfield
testifies that the actual consideration for this deed to
Thomson
Page 148 U. S. 368
and Sayre was the legal services which they were to perform in
and about the "legal proceedings" mentioned in the contract, and he
further testifies that those services were never performed. This is
all that Chatfield appears to have done at this time in the
performance of his contract. Whether, if suit had been begun and
prosecuted to a successful termination, a bill would have lain
before the patent was issued it is not necessary to decide, since
it is clear that the failure of Chatfield to institute legal
proceedings within a reasonable time was a breach of his contract,
and entitled plaintiff to treat it as at an end.
There were also significant facts occurring thereafter which
should have put plaintiff upon inquiry and stimulated him to
activity in asserting his rights. As he was one of the original
locators, both of the Smuggler No. 2 and the Johnston claims, he
must have known that in any controversy between them he would have
been an important witness, and the very fact that he was not called
upon indicated that the suit was not being prosecuted, and
strengthened the inference, derivable from all the testimony, that
the claim was not then considered of sufficient value to warrant
the institution of a suit. That he was accessible as a witness is
evident from his own testimony that he was in Thomson and Sayre's
office in 1881, and was working at that time for Chatfield on a
subcontract. The incorporation of the Fulton Mining Company in
1880, and the conveyance by Chatfield, Crittenden, and Adair of the
entire property to the mining company by deeds put upon record,
were wholly inconsistent with the spirit, if not with the letter,
of the contract, and were circumstances calculated to arouse
suspicion, since they divested Chatfield of his interest in the
mine, disabled him from instituting legal proceedings in his own
name, and put the ownership of the mine in the shape of capital
stock, which was liable at any time to pass into the hands of
purchasers who might be entirely ignorant of the plaintiff's
interest. It is but just, however, to say in this connection that
plaintiff seems to have been apprised of the fact that these
parties were about to associate themselves together in forming a
stock company, and that the advantages of such a
Page 148 U. S. 369
corporation were urged upon him, and in his first bill he
averred that it was understood that the company would convey and
transfer to him stock in such company to the amount of his interest
in the lode, and that Chatfield would hold his interest in trust
for the plaintiff until his title to the location had been
established. If he assented to the formation of the corporation,
and to the transfer of the mine to it, he clearly waived his right
to reclaim an interest in the mine itself. It is also a
circumstance proper to be considered, as bearing upon the equities
of this defense, that at the time of the institution of this suit,
a large proportion, if not a majority, of the stock in this company
had passed into the hands of purchasers who had not been connected
with the formation of the company, and were entirely ignorant of
the Johnston-Chatfield contract.
In May, 1881, plaintiff went to the office of Thomson and Sayre,
in Leadville, asked how the case was, and was informed that it was
compromised. He then told them he would like to take the papers and
copy them. They gave them to him. He took them and looked them
over; went down to have them copied, but found it would cost too
much, and did not have it done. These papers were the contracts
between Chatfield and himself, Crittenden, Adair, and himself, and
the original grubstake contract between Dunscomb, Seaver, and
himself. He must then have been informed of the fact that the
contract of October 12, 1880, had not been recorded, although
Thomson and Sayre promised him it should be. In 1882, it seems that
he spoke to Chatfield, and said that he thought he ought to be
entitled to his interest in the property; that they should have
gone on and contested the case; to which Chatfield replied that
they had found that there was "no shadow of a ghost to maintain his
case." Even then he did not act.
It was not until April, 1885, more than a year after the Fulton
Mining Company had obtained a patent to the property, that he made
a formal demand upon Chatfield, and on August 1, 1885, filed his
first bill in the circuit court of the United States to establish
his title to a quarter interest in the lode. This suit does not
seem to have been prosecuted with
Page 148 U. S. 370
much diligence, since it was allowed to linger for nearly a
year, and was then dismissed, apparently for a want of jurisdiction
appearing upon the face of the bill. It has been frequently held
that the mere institution of a suit does not of itself relieve a
person from the charge of laches, and that if he fail in the
diligent prosecution of the action, the consequences are the same
as though no action had been begun.
Hawes v. Orr, 10 Bush
437;
Erhman v. Kendrick, 1 Metc. (Ky.) 149;
Watson v.
Wilson, 2 Dana 406;
Ferrier v. Buzick, 6 Ia. 258;
Bybee v. Summers, 4 Or. 361.
On the 19th of August, 1886, a second suit was brought in the
state court which, after some delay, caused in part by the death of
the plaintiff's counsel, was dismissed because of a defective
summons under the state practice.
While there is no direct or positive testimony that plaintiff
had knowledge of what was taking place with respect to the title or
development of the property, the circumstances were such as to put
him upon inquiry, and the law is well settled that where the
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 by him were such as to put upon a man of
ordinary intelligence the duty of inquiry. This principle was
applied at the present term of this Court in
Foster v.
Mansfield &c. Railway, 146 U. S. 88, to a
case where a stockholder in a railway company sought to set aside a
sale of the road which had taken place ten years before, when the
facts upon which he relied to vacate the sale were of record, and
within easy reach.
See also Wood v. Carpenter,
101 U. S. 135,
101 U. S. 141;
Kennedy v. Green, 3 Myl. & K. 722;
Buckner v.
Calcote, 28 Miss. 432;
Cole v. McGlathry, 9 Me. 131;
McKown v. Whitmore, 31 Me. 448.
The duty of inquiry was all the more peremptory in this case
from the fact that the property, of itself, was of uncertain
character, and was liable, as is most mining property, to suddenly
develop an enormous increase in value. This is actually what took
place in this case. A property which, in October, 1880, plaintiff
sold to Chatfield upon the basis of $4,800 for
Page 148 U. S. 371
the whole mine is charged in a bill filed October 21, 1887, to
be worth $1,000,000, exclusive of its accumulated profits. Under
such circumstances, where property has been developed by the
courage and energy and at the expense of the defendants, courts
will look with disfavor upon the claims of those who have lain idle
while awaiting the results of this development, and will require
not only clear proof of fraud, but prompt assertion of plaintiff's
rights.
Felix v. Patrick, 145 U.
S. 317,
145 U. S. 334;
Hoyt v. Latham, 143 U. S. 553,
143 U. S. 567;
Hammond v. Hopkins, 143 U. S. 224;
Great West Mining Co. v. Woodmas Mining Co., 14 Colo.
90.
The language of Mr. Justice Miller in
Twin Lick Oil Company
v. Marbury, 91 U. S. 587,
91 U. S. 592,
with regard to the fluctuating value of oil wells is equally
applicable to mining lodes:
"Property worth thousands today is worth nothing tomorrow, and
that which today would sell for a thousand dollars at its fair
value may by the natural changes of a week, or the energy and
courage of desperate enterprise, in the same time be made to yield
that much every day. The injustice therefore is obvious of
permitting one holding the right to assert an ownership in such
property to voluntarily await the event and then decide, when the
danger which is over has been at the risk of another, to come in
and share the profit."
We think it is clear that the plaintiff did not make use of that
diligence which the circumstances of the case called for, and the
decree of the court below, dismissing his bill, is therefore
Affirmed.
