JOHN HARPER, Appellant, v. J. T. SLOAN et al., Respondents, 177 Cal. 174

SLOSS, J. The plaintiff appeals from a judgment of dismissal entered upon the sustaining of a demurrer to his amended complaint, without leave to amend. The demurrer was based upon both general and special grounds. The court put its ruling upon the single ground that the complaint failed to state facts sufficient to constitute a cause of action, and, in effect, gave this as its reason for refusing leave to amend. We shall, therefore, limit our consideration to the question actually decided by the court below. The complaint states these facts: On December 24, 1898, James McGregor and B. B.

Lewis were the owners of the Diadem Quartz Claim, an unpatented lode mining claim in Sierra County. On that day they made a written contract with the plaintiff, wherein it was agreed that Harper should take possession of the property, and should have the privilege of working and developing the same, such work, the extent of which was defined, to commence on or before May 1, 1899. Harper was to have the privilege of purchasing the property for six thousand dollars, of which three thousand dollars was to be paid on or before November 1, 1899, and three thousand dollars on or before May 1, 1900.

Upon payment of the purchase price in full, Lewis and McGregor agreed to convey the property to Harper. Harper’s rights under the contract were to cease in case he should fail to do the work agreed upon or to make the payments.

Upon the making of such contract the plaintiff took possession of the claim, and commenced negotiations with.the defendants, Sloan and Dwyer, whereby said defendants “became jointly and equally interested with plaintiff in the said contract and promised to engage with plaintiff in actually working said property and extracting the mineral therefrom.” On February 9, 1899, and following the said negotiations, a written contract was made between plaintiff and said Sloan and Dwyer.

This agreement, after referring to the contract of December 24, 1898, between Harper, Mc-Gregor, and Lewis, went on as follows: “Whereas the party of the first part [Harper] wishes to transfer tf> the parties of the. second part [Sloan and Dwyer] two-thirds of his interest in and under the aforesaid contract between himself and James McGregor and B. B.

Lewis, shall pass to and vest in the said parties of the second part, and the parties of the second part agree that they will, on or before the first day of March, 1899, pay to the party of the first part, the sum of four thousand dollars (4,000) and the sum of three thousand (3,000) dollars on or before the first day of June, 1899, and if, in the opinion of the parties of the second part, it should be necessary, the further sum of three thousand (3,000) dollars, on or before the first day of September, 1899.

That the whole of the money so paid by the parties of the second part with the exception of the expenses of the party of the first part shall be used in the development and working of the aforesaid Diadem Quartz Claim, which the party of the first part shall direct and control; and if the development and working of the Diadem Quartz Claim should be permanently abandoned by the party of the first part, and any money paid by the parties of the second part should be unexpended, the party of the first part shall return the same to J. T. Sloan, one of the parties of the second part. “That if James McGregor and B. B.

Lewis should, according to the terms of their contract of December 24th, 1898, convey the Diadem Quartz Claim to the party of the first part herein, the party of the first part will, within a reasonable time thereafter, make a conveyance to the parties of the second part of two-thirds thereof; and it is further agreed that thereafter the party of the first part shall have the man • agement and control of the operating of the said mine, for which he shall be paid an adequate compensation.” The complaint goes on to allege that, upon the malting of this agreement, plaintiff, on behalf of himself and said defendants, continued in the possession of the said property, and actually engaged in working the same, and commenced to extract the mineral therefrom, and that plaintiff and said defendants actually engaged in the working and development of said claim and extraction of the mineral therefrom, and ever since have continued in the actual working of said claim, and then became and ever since have been mining partners.

The defendants, Sloan and Dwyer, paid plaintiff the sum of four thousand dollars on or before March 1, 1899, and the sum of three thousand dollars on or before June 1, 1899, all of which was expended in the actual working of the property. The payment of the further sum of three thousand dollars on or before the first day of September, 1899, became necessary for the working of the property, and plaintiff requested payment of said sum from Sloan and Dwyer, but they refused to make, said payment.

Plaintiff and said defendants continued in the possession of the claim, the plaintiff managing and actually working the same for the partnership until plaintiff had expended on the.claim all of the said seven thousand dollars, and more than two thousand dollars additional, advanced by himself.

After such expenditure he had extracted from the claim not more than eight thousand dollars gross, out of which he paid the purchase price of the claim to McGregor and Lewis, and on December 8, 1899, said McGregor and Lewis conveyed the claim to plaintiff “in trust for himself and for said defendants Sloan and Dwyer as provided for in said contract.” The plaintiff undertakes in his complaint to excuse his failure to make a deed of the two-thirds of the mine to Sloan and Dwyer. For reasons that will appear hereinafter, we need not detail the facts relied on in this behalf.

The plaintiff alleges that he has always been ready and willing to execute a deed or deeds to the persons entitled thereto, and ever since the execution of the deed by McGregor and Lewis to him he has held two-thirds of the property in trust for the parties entitled thereto. With the consent of the defendant Sloan, the plaintiff continued the work until the partnership became indebted in the sum of about two thousand dollars during the year 1900.

To meet this indebtedness the plaintiff was compelled to mortgage the property to one Sayles, and thereafter, in order to satisfy the Sayles mortgage, to execute a new mortgage to F. W. Sharon, to secure the sum of $2,250, and further sums. Plaintiff has continued in the possession of the property, and has made the annual expenditure of one hundred dollars necessary under the laws of the United States; he has also devoted considerable time to the management and control of the mine, the reasonable compensation for which would be the sum of $2,418. He has also paid taxes on the property aggregating $229.67.

Including the sum due to Sharon, the mortgagee, the advances and obligations thus made and incurred aggregate the sum of $6,665.30, no part of which has been paid or contributed by the defendants, or either of them. Finally, the complaint, in order to anticipate a possible plea of the statute of limitations, alleges that Sloan and Dwyer were out of the state for the greater part of the time intervening between the making of the contract and the commencement of the action.

The prayer is for a decree that plaintiff holds the property in trust to the extent of one-third for himself and two-thirds in Sloan and Dwyer, or their successors; that an accounting be had of the affairs of the partnership and of said trust; that plaintiff have judgment against the defendants for their proportion of the said indebtedness and advances of plaintiff, that such sum be adjudged a lien on the property, and that the property be sold to satisfy the same.

The theory of the complaint is that the agreement between the plaintiff, Sloan, and Dwyer, and the transactions had under it, created a mining partnership between the three, and that plaintiff is entitled to an accounting of the affairs of such partnership, together with the incidental relief which would follow such accounting. The main contention of the respondents is that no such partnership was ever created. Under

section 2511 of the Civil Code, “a mining partnership exists when two or more persons who own or acquire a mining claim for the purpose of working it and extracting the mineral therefrom actually engage in working the same. ’ ’ The respondents contend that there was no such partnership, because at the date of the agreement between Harper, Sloan, and Dwyer the parties thereto did not own, nor had they then acquired, the mining property, and that they did not “actually engage in working” the claim. It is true that when the contract was made, title was still in Lewis and McGregor.

It is not necessary, however, to the existence of a mining partnership that the property which is to be operated be owned in fee by the partners. Under his contract with McGregor and Lewis, Harper was entitled to the possession of the property, and had the right, on complying with certain conditions, to acquire its ownership.

This gave him an interest in the property, and such interest could well form the subject of a mining partnership. (3 Lindley on Mines, 3d ed., sec. 798.) The agreement between Harper, Sloan, and Dwyer was, we think, designed to pass to Sloan and Dwyer air undivided two-thirds of such interest. That agreement reads, in part, as follows: “Whereas, the party of the first part [Harper] wishes to transfer to the parties of the second part [Sloan and Dwyer] two-thirds of his interest in and under' the aforesaid contract between himself and James McGregor and B.

B: Lewis, shall pass to and vest in the said parties of the second part ...” It is evident that, through inadvertence, there was an omission of some words which should have been inserted after the name “Lewis.” The clause “shall pass to and vest,” etc., is left without a subject. It is followed by a declaration that the parties of the second part agree to certain things. It seems reasonable to assume that the missing words were intended to set forth the reciprocal obligation of Harper, i. e., that the two-thirds interest shall pass to and vest in the parties of the second part.

If thus completed, the agreement would read, in substance, as follows: “Whereas, Harper wishes to transfer to Sloan and Dwyer two-thirds of his interest in the contract between himself and McGregor and Lewis, Harper agrees that such two-thirds shall pass to and vest in Sloan and Dwyer, and Sloan and Dwyer agree that they will pay to Harper” the sums stated. This mode of supplying the ellipsis is entirely in accord with the language preceding and following the omission, and indicates, we think, the meaning which the parties designed to express in their agreement.

The subject matter of the transfer mentioned in the agreement was two-thirds of Harper’s interest under the McGregor and Lewis contract, and the parties looked to a present passing of such two-thirds. The respondents argue that the subsequent clause, requiring Harper to make conveyance to them of two-thirds of the property, if he should obtain a conveyance from McGregor and Lewis, shows that their interest and any partnership relation were to arise only when Harper should thus have made a deed to them. We cannot agree to this

interpretation of the contract. The parties were contracting at a time when Harper could not transfer a legal title to the defendants, because he had not yet acquired it. Under the agreement, the defendants bound themselves to pay seven thousand dollars before Harper should become entitled to a deed from McGregor and Lewis. It is not to be supposed that they were undertaking to make such payments without acquiring any interest in such rights as Harper then had.

The provision for a conveyance, when Harper’s interest should ripen into a legal title, did not prevent the present passing of two-thirds of Harper’s existing rights under his contract with McGregor and Lewis. The provision for a return to Sloan of unexpended moneys does not require a' different

interpretation. It merely prescribed a basis of settlement in the event, which did not take place, of an abandonment of the enterprise by Harper. Clearly, the parties were dealing with the contingency of an abandonment by Harper before the exercise of his right to claim a conveyance from McGregor and Lewis. He was not, even during the period preceding his election to abandon or to pay the purchase price, operating the property for himself alone. He was to “direct and control” the development and working, with the money furnished for that purpose by Sloan and Dwyer.

The agreement contemplated that, until Harper should exercise his option, or abandon the development, the property should be worked for the common interest of the three. If the operations during this period had resulted in large profits, and Sloan and Dwyer had, after Harper had obtained his deed, demanded a share of such profits, a court of equity would not have listened with much patience to a plea, on the part of Harper, that there was no partnership because he had not conveyed to his associates the interest in the claim to which they were entitled.

But, if it be said that there was to be no partnership until the defendants had become the owners of two-thirds of the claim, the -result would not be different.

It is alleged that the defendants paid the seven thousand dollars which constituted the full -consideration for their acquisition of two-thirds. (The complaint does not show any default in the payment of the third installment of three thousand dollars, which was to be paid only if, in the opinion of Dwyer and Sloan, it should be necessary.) Upon the payment of the full purchase price, therefore, Dwyer and Sloan became the equitable owners of two-thirds- of the property, and such equitable ownership was a sufficient basis for the existence of a partnership, after the date when Harper obtained his deed from McGregor and Lewis.

It is unnecessary, therefore, to inquire whether the facts set up by Harper in explanation of his failure to convey to the defendants were sufficient to excuse his omission. It is further contended that, under the code

section already cited, the alleged partners must “actually engage in working the mine.” While the complaint avers that plaintiff and the defendants continued in the possession of the claim, and actually engaged in working the same, the pleading, read as a whole, shows plainly enough that the work was being done by the plaintiff alone. The contract between the parties provides that the seven thousand dollars to be p'aid by the defendants is to be used in the development and working of the claim, and it is alleged that this sum was actually so expended.

We do not' understand that it is essential to a mining partnership that each of the partners shall actually perform physical work upon the claim. Where one of them supplies money which is to be used in working the claim, he is engaged in such work as truly as is the one who devotes his own labor to the enterprise. (3 Lindley on Mines, 3d ed., sec. 798; Lyman v. Schwartz, 13 Colo. App. 318, [57 Pac. 735].) The cases cited by the respondents are not in point.

They have to do with agreements whereby one is to work for another in a mine, receiving as compensation a share of the proceeds, or providing for the mere acquisition of an interest in a mine. If, then, there was a mining partnership under which the plaintiff expended money and labor, he is entitled to an accounting in order to settle the relative rights of himself and Ms copartners. If, by virtue of any later transactions disclosed by the complaint, the partnership was dissolved or abandoned, there still remains the right to an accounting of the transactions prior to such dissolution or abandonment.

The plaintiff’s delay in seeking relief is not a consideration which can arise upon a general demurrer to the complaint. If he was guilty of laches, it is a matter of defense. Nor need we inquire on this appeal-whcther the plaintiff was entitled to charge the defendants with all of the items of expenditure or indebtedness set up in the complaint. He may in his pleading have sought to charge the defendants with more than they are liable for, but this does not justify the dismissal of his action upon the sustaining of a demurrer for want of facts. The judgment is reversed.

Shaw, J., Lawlor, J., and Angellotti, C. 'J., concurred.