SNOW et al. v. HAZLEWOOD et al., 157 F. 898

PARDEE, Circuit Judge. This is a suit 'brought by the complainant and appellant Mrs. Annie E. Snow to set aside and cancel a deed made by her to W. F. Casey, dated November 6, 1901, and delivered about November 13, 1901, to all her interest and estate in the John A. Veatch survey in Jefferson county, Tex., and for an accounting. The disputed matters involved are so largely questions of fact that it is unnecessary to state the lengthy and somewhat argumentative pleadings, or to set out the evidence further than as hereinafter given.

The case shows that oil had been discovered and developed in large quantities on the Veatch survey in Jefferson county, Tex. Mrs. Snow had a claim to a life estate in one undivided eighteenth of said survey. Hazlewood, Beaty, and Gordon discovered this claim, and, finding Mrs. Snow in California, informed her of her rights and her prospective wealth, and procured from her a power of attorney to promote and prosecute the claim, reserving for themselves a full half interest in the proceeds. Armed with this authority, they instituted an action at law in the proper court to establish Mrs.

Snow’s legal title, and also brought a suit in equity against all parties producing oil in the territory for an accounting for Mrs. Snow’s share of oil produced. This suit, after preliminary hearing and an intimation of favorable action by the judge, was discontinued, and another against fewer parties was brought, and in this suit an application for a receiver was pending, and on November 10, 1901, the application for receiver was favorably acted upon. The claim of Mrs.

Snow was a cloud upon all the titles to the oil territory in the Veatch survey, and, if upheld in the courts, it was of enormous speculative value. Even while pending it was a club in the hands of Mrs. Snow’s attorneys and promoters to force compromises and settlements. It is a fair inference from the evidence in the case that through compromises and settlements the attorneys of Mrs. Snow expected to get large returns, but up to November 1, 1901, although Hazlewood and Beaty, as they say, had spent most of their time from June 1st in endeavoring to procure settlements, there was no favorable result.

The actual value of Mrs. Snow’s claim depended, first, on her ability to establish her title against adverse claimants; and, second, upon her lease on life and the continued supply of oil on the Veatch survey. Beaty says he thought it would take a long time to bring substantial results, and had doubts as to complainant’s good title. According to Hazlewood, he doubted and feared as to the title, Mrs. Snow’s living long enough, and as to the continued flow or supply of oil. . Gordon admits that he thought Mrs. Snow’s title was good, and would be upheld in the courts. When Mrs.

Snow’s son, John Allen Veatch, came on, he soon became imbued with the pessimistic views of his mother’s claim expressed by Hazlewood, and unquestionably became anxious for his mother to sell out. The Hogg-Swayne Syndicate was a voluntary association of a number of speculators who had acquired title in the Veatch. survey to 15 acres on the so-called “Spindle-Top” heights. There were a number of adverse claims, more or less serious, among them the Snow claim.

Judge Brooks, a leading member of the syndicate, testifies: “Yhe Hogg-Swayne Syndicate had previous to November 1,1901, made a preliminary contract with the representative of the English company for the sale and development of a large portion of their holdings on Spindle-Top, and we had arranged.!» meet said representative of said English company in New York about the 10th of November, 1901, at which time we were to submit to the attorneys for said representative our abstracts of title to the land under contract, to be passed upon by the attorneys for said English company, and, if same were found to be satisfactory, we were to finally close said contract, and we expected to leave for New York equipped with abstracts of title and the opinion of local attorneys of the English company as to our title to the land under contract. * * * The adverse claims of title to the 15 acres claimed by the Hogg-Swayne Syndicate had not seriously affected the sales by the Hogg-Swayne Syndicate of. their property up to November 1, 1901.

However, under our contract with the English company for the remainder of said 15 acres, we were to furnish abstracts showing clear title. We procured these abstracts and secured the opinion of local attorneys of the English company as to the Hogg-Swayne Syndicate title, but they were unwilling to state that the abstract showed clear title, because of the pendency of the ‘Snow’ claim, or a settlement of the same in some way, prior to our attempting to close up the contract with the English company in New York.” The sale of Mrs.

Snow’s right, title, and interest to the Hogg-Swayne Syndicate was negotiated and carried through by her attorneys, to wit, Messrs. Hazlewood, Gordon & Beaty, who held Mrs. Snow’s power of attdrney, which authorized them to make all such compromises and settlements concerning the suits to be instituted and prosecuted as to them might seem just, and by her son John Allen Veatch, who was representing his mother under verbal instructions to rely upon and follow the advice of Hazlewood. The sale made was one covering Mrs. Snow’s interest, but the attorneys, Hazlewood, Gordon & Beaty, retained their interest.

The evidence is that the syndicate declined to buy the attorneys’ interest oh the terms proposed. Mrs. Snow knew nothing of the negotiations leading up to the sale. She executed and forwarded the deed of her interest on receipt of the following telegrams: “22 Paid. “Received at-. Nov. 5, 1901. “Dated Beaumont, Ter., Nov. 5, 1901. “To B. H. Snow. “Avoid service on mama. Send her Lower Lake immediately until advice from me. Do you approve settlement ten thousand net to you. Veatch.” “31 Paid 4:16 P. M. 11-6-1901. “Houston, Tex. “T. H. Snow. “Register me immediately yours and mothers deed John A.

Veatch head-right survey Jefferson County favor W. E. Casey have certificate acknowledgment according Texas statutes continue avoid service until I write you. “John Allen Veatch.” These telegrams were written or dictated by Hazlewood. The evidence is conflicting as to whether or not John Allen Veatch, who signed the agreement to sell, actually knew and understood that the proposition was for his mother to sell out her interest while the attorneys retained theirs; but there is no dispute, no claim even, that Mrs.

Snow knew, or was in any wise advised by any of her agents and attorneys at the time, that the attorneys were to retain their interest. while hers was to be sold. Hazlewood for Mrs. Snow and Campbell for the Hogg-Swayne Syndicate negotiated the sale. The agreement to sell was dated November 5, 1901, the deed of Mrs. Snow delivered and the money paid over to her son on November 11, 1901. Within three weeks from the delivery of the deed the Hogg-Swayne Syndicate, the purchaser of Mrs. Snow’s interest, transferred to Hazlewood one-half of the interest on and for the same consideration which was paid to Mrs.

Snow, and this without her knowledge or the knowledge of any of her attorneys, or the public generally. In the meantime, and thereafter, Hazlewood continued to represent Mrs. Snow in the same and other litigation, obtaining from her deeds, powers of attorney, etc., as the exigencies of the situation seemed to require, sedulously concealing his acquired interest, while assuring his client that her sale was a good one, and otherwise trying to quiet her discontent. Under these circumstances, there are some very good reasons for holding the sale and transfer of Mrs.

Snow to the Hogg-Swayne Syndicate as void on the ground of public policy. See White & Tudor’s Leading Cases in Eq. (H. & W. Notes) vol. 1, pt. 1 (Ed. of 1876) p. 232, and vol. 2, pt. 4, pp. 1216, 1225. However this may be, the authorities and the reason of the case require the sale to be held prima facie fraudulent and void, thus putting the burden of proof upon the defendants to establish the good faith of Hazlewood in advising and negotiating the sale by Mrs.

Snow, and to the extent of showing that the transfer by the Hogg-Swayne Syndicate to Hazlewood was not only subsequent to, but was not contemplated by the parties until after, the sale from Mrs. Snow to the Hogg-Swayne Syndicate had been completed. More especially we may say that the burden is on Hazlewood to show his good faith advising Mrs. Snow of all the facts and circumstances attending and bearing on the transaction likely to affect or persuade her action in selling her interest, and on the Hogg-Swayne Syndicate to show that they dealt with Mrs.

Snow’s agents at arms’ length, without secret agreements of any kind affecting the transaction. To meet this burden, we have the evidence of Hazlewood to his good faith, and that there was no agreement or understanding express or implied that he should be or was interested as a purchaser, and we have the evidence of Campbell that there was no understanding or agreement that Hazlewood should have an interest in the purchase from Mrs. Snow.

The evidence of Judge Brooks is: “The sale to Hazlewood by the syndicate was not made in compliance or furtherance, or in carrying out any previous agreement or understanding with said Hazlewood on my part. I, of course, cannot speak as to other persons, but it was not done in pursuance of any agreement with any other person, or with the Hogg-Swayne Syndicate, so far as I know or have reason to believe.” And the evidence we have of the other members of the syndicate who testified on the subject is to the same purport.

It is significant to note that, while Hazlewood concealed the transaction from his associates, Campbell did not communicate the same to his colleagues until it was an accomplished fact. On the hearing before the master, evidence was offered tending to show the fraudulent schemes and conduct of Hazlewood in conducting other matters and litigation about the time of, but mainly subsequent to, the Snow purchase. The master rejected the evidence. The court below admitted this evidence, and we find no motion in this court to suppress the same.

The admissibility and probative effect of this class of evidence is considered in Wigmore on Evidence, §§ 304, 325, 340, and cases there cited. Its effect here, if considered, goes beyond showing a system or intent, and to the extent of tainting, if not absolutely destroying, Hazlewood’s evidence in his own behalf. It is impossible to read the letters and evidence of Hazlewood, and retain any confidence in his good faith and fair dealing with his clients when his own interests are affected.

Whether or not Hazlewood had an implied interest in the purchase from his client depends upon the effect to be given the evidence of Campbell, who negotiated the affair for the Hogg-Swayne Syndicate, and Campbell swears positively and unequivocally that Hazlewood had no such interest. Campbell is negatively corroborated by other members of the syndicate; that Is to say, they knew of no such understanding, which is probably true as Campbell managed the affair himself. Against him is his interest in the case, and, to some extent, the circumstances.

According to Judge Brooks, the syndicate had to have control of, or a release from, the Snow claim to successfully carry through the sale of their remaining properties to the English capitalists. They had been negotiating for a release since October, and it is to be presumed that the syndicate was ready to meet the ex-actions within reasonable financial bounds of the persons who controlled the Snow claim, and Hazlewood was in control to fix terms. The syndicate claims that it only bought the Snow claim to secure a release therefrom as to its 15 acres. The syndicate emphasizes this position.

When the syndicate offered to sell the Snow claim to outside parties, it was always coupled with a release of the 15 acres. When one-half interest in the claim was transferred to Hazlewood, there was no release of the 15 acres, but Hazlewood was put in exactly the same position as if he had been an equal partner with the syndicate in the purchase, and the syndicate practically loaned him the money to pay his part of the purchase. Why ? It may be answered that the amount the syndicate was to pay for a release of its holdings from the Snow, claim had been agreed upon at the time of the agreement to purchase.

November 11, 1901, the day before the delivery of Mrs. Snow’s deed, Hazlewood wrote Campbell (letter signed Hazlewood, Beaty, Gordon) that the amount was agreed upon, but not naming the same, and this shows there was a secret agreement with Campbell; and Beaty says that, about November 10th or 11th, “I understood from him [Hazlewood] that this settlement was agreed upon at the time that the Hogg-Swayne- people agreed to purchase the Snow interest.” It may be remarked that this agreement to compromise with the syndicate was not communicated to Gordon, nor to John Allen Veatch, nor to Mrs.

Snow; and it seems that, if there was anything in it, it was a secret agreement or understanding affecting the sale of the Snow interest. The fact is (under the evidence) that the release of the syndicate holdings from the Snow claim was not finally agreed upon by all parties in interest until December 4, 1901, when Hazlewood influenced Beaty and both influenced Gordon, and the settlement was effected, and at this time Hazlewood was confessedly the owner of the one-half of the interest purchased by the syndicate from Mrs. Snow, and this interest was concealed from both Beaty and Gordon.

In fact, the concealment continued up to about the time this suit was instituted. About and before the time this suit was filed, Hazlewood was frequent and persistent in alleging that the sale to him was six months after Mrs. Snow’s deed. Campbell told George Greer that it was some time afterward, and he referred to Hazlewood’s having gone to Kentucky and returned before it was consummated. Hazlewood says he went to Kentucky some time in March, and returned to Beaumont in April, 1902. Hazlewood in his answer alleges that the sale to him was between the 28th of November and the 3d of December, 1901.

Campbell in answer says it was about 20 days after Mrs. Snow’s deed. When Hazlewood’s private box in the partnership safe was surreptitiously ravished, the note of Hazlewood given for the consideration fell into the hands of complainants’ solicitors, and was photographed, and returned with certain photographers’ earmarks. This note was dated November 8, 1901, was indorsed on the back without date in the handwriting of Campbell, and signed by Hazlewood as follows: “It is hereby agreed that the one-fourth interest in the Snow claim, being one-half that of Mrs. Annie Snow purchased by W. T.

O. and held in the name of W. F. Casey is security for this obligation.” This note fixes the date of the transfer on November 8, 1901, but Hazlewood and Campbell explain, and in their explanation they are corroborated by Marshall, vice president of the bank where the note was drawn and made payable and then a member of the syndicate, that the note was dated back to the date syndicate put up the money to buy Mrs. Snow’s claim to avoid the calculation of about 20 days’ interest on the amount thereof. Attacking this explanation, complainant points out that the money for Mrs.

Snow’s interest was put up November 5th, and that on the 28th of November the Snow interest w.as not held in the name of W. F. Casey, but in the name of Swayne, the regular trustee of the syndicate. It is thus seen that, while there are strong presumptions that there was an understanding between Campbell and Hazlewood that the latter might acquire an interest in the Snow claim after it should be purchased by the syndicate, there is room for grave doubts as to whether, in fact, Hazlewood did not acquire such interest pending the negotiations and before Mrs. Snow’s deed was actually delivered.

There are many other circumstances shown by the evidence, some bearing in favor of the syndicate’s contention that the sale of the one-half interest in the Snow claim to Hazlewood was an afterthought, and others tending to show the contrary; but it would unnecessarily air the chicanery and general shortcomings of the wealth hunters of all trades and professions infesting the Texas oil fields when the “boom was on,” with which the record teems, if we should review all the evidence. It was the duty of Hazlewood, Beaty, and Gordon to advise Mrs.

Snow of the situation and of all circumstances, propositions, .and actions taken bearing on the value- of her interest and affecting the desirability of selling the same. Beaty appears to have been aware of this, for he insisted that Mrs. Snow’s son, John Allen Veatch, should be informed that the attorneys were going to. retain their interest.

But informing John Allen Veatch was not enough; for, while he enjoyed his mother’s confidence, he had no agency or credentials, save his relationship, while Hazlewood, Beaty, and Gordon had a full power of attorney, authorizing them to compromise and settle in their judgment. As to Hazlewood’s agreement with the syndicate fixing the amount to be paid for a release of the syndicate holdings and made before the sale by Mrs. Snow was consummated, there is no pretensa that either Mrs. Snow or her son was a.dvised of the same. It was the duty of the Hogg-Swayne Syndicate to deal openly and above board with Mrs.

Snow’s agents, and to prove in this case that the sale was concluded on their part without secret understandings of any kind. The evidence is that there was a secret understanding between Campbell and Hazlewood as to the price of the release of the Snow claim on the 15 acres of the Hogg-Swayne Syndicate; and whether there was a secret understanding as to the interest to be acquired by Hazlewood in the purchase of the Snow claim rests upon the evidence of Hazlewood and Campbell. Hazlewood’s evidence we eliminate.

We do not consider that Campbell is corroborated in this particular respect — that is, all that his associates testify may be true, and yet the secret understanding may have existed — and, when we consider the acts and circumstances which speak so much louder than mere words and declarations, we are forced to the conclusion that such understanding did exist, and therefore find that the defendants have not relieved themselves of the burden of proof justly put upon them by the admitted facts in the case. The contention that Mrs.

Snow received full value for her claim is not supported by the evidence and the admitted results. The evidence shows that just after the sale by Mrs.

Snow, and before the affirmative decision of the Circuit Court of Appeals was rendered, Withers was offered one-sixth interest and the perspective receivership for $30,000, Underwood was offered one-half interest in the Snow claim with the syndicate holdings released for $25,000, and that, after several compromises had been effected and he had received the proceeds thereof, Beaty sold his one-sixth interest for $10,000, and, further, that within six months in settlements and compromises the parties received on account of Mrs. Snow’s interest many times $10,000. That Mrs.

Snow’s claim was of doubtful right, and would not have been eventually upheld by the courts, the defendants are equitably estopped from asserting in this suit. . In reaching our conclusion, we have not overlooked the sworn answers of Hazlewood and Campbell to the interrogatories of the bill, to the effect that there was no agreement nor understanding between them prior to the sale that Hazlewood was to have any interest whatever in the purchase from Mrs.

Snow; nor have we been unmindful of the general equity rule that, where the defendant on complainant’s requirement has answered under oath interrogatories propounded by, the plaintiff, the answers are to be taken as true, unless contradicted by two witnesses or one witness supported by strong corroborative circumstances.

We find that the answers of Hazlewood and Campbell are not only contradicted by admitted documentary evidence which unexplained is conclusive on the subject-matter of the answers, but by so many facts and circumstances that we may well apply the exception to the above-mentioned equity rule announced in Clark’s Executors v. Van Riemsdyk, 9 Cranch, 153, 3 L. Ed. 688, approved in Bowden v. Johnson, 107 U. S. 262, 2 Sup. Ct. 255, 27 L. Ed. 386, where it is said: "This ease, on the whole, is brought within the principle aserted by Mr. Chief Justice Marshall, speaking for this court, in Clark’s Executors v.

Van Riemsdyk, 9 Cranch, 153, 3 L. Ed. 688, as a case where the evidence arising from circumstances is stronger than the testimony of any single witness.

Greenleaf states, as a rule, that the sufficient evidence to outweigh the force of an answer may consist of one witness, with additional and corroborative circumstances, which circumstances may sometimes be found in the answer itself ; or it may consist of circumstances alone, which, in the absence of a positive witness, may be sufficient to outweigh the answer even of a defendant who answers on his own knowledge. 3 Greenleaf on Evidence, § 289.” It follows from our conclusions that the decree of the Circuit Court should be reversed, and the complainant given relief canceling the deed to Casey of November, 1901, the power of attorney to Hazlewood of date November 25, 1901, and the deed executed thereunder June 18, 1902, to Campbell and S wayne, trustees, and recorded in Jefferson county, Tex. (vol. 65, pp. 62-64), except so far as the rights of innocent purchasers are concerned, and ordering an accounting of all sales and releases and settlements made by the defendants based on complainant’s rights in the Veatch survey; and, on such accounting, that the complainant should have such relief against the several defendants as equity and good conscience may require, all conditioned upon the complainant’s paying into the court for the benefit of the Hogg-Swayne Syndicate the $10,000 as tendered in the twenty-fourth paragraph of the bill.

The decree of the Circuit Court is reversed, and the cause is remanded, with instructions to enter a decree in favor of complainant as above indicated, and otherwise proceed in accordance with the views herein expressed and as equity may require.