HEINZE et al. v. BUTTE & BOSTON CONSOLIDATED MIN. CO. et al., 126 F. 1

GILBERT, Circuit Judge.

The questions presented for consideration on this appeal are: First, whether the amended bill for partition was defective, for the reason that it contained no allegation that the appellee the Butte & Boston Consolidated Mining Company was in possession of the premises sought to be partitioned; second, whether the decree should be reversed for the reason that the trial court proceeded to a trial of the issues presented on the cross-bill of the appellants after it was disclosed that the title of the complainant in the amended bill was in dispute; third, whether the court erred in appointing a receiver over the disputed interests, and subsequently in extending such receivership over the= whole of the property sought to be partitioned, and in directing the receiver to operate and mine the same; fourth, whether the court erred in its findings of fact upon the issues presented by the cross-bill.

The Montana statute gives the remedy of partition to co-tenants “who hold and are in possession of real property as joint tenants or tenants in common,” etc. Code Civ. Proc. § 1340. We think that the possession which the law imputes to the holder of the legal title is sufficient to maintain partition, under this statute. The statute is said to have been taken from

section 1535 of the Code of Civil Procedure of New York. In construing that

section in Bender et al. v. Terwilliger et al. (Sup.) 63 N. Y. Supp. 270, subsequently affirmed by the Court of Appeals in 166 N. Y. 590, 59 N. E. 1118, the court said, “The possession therein referred to does not mean an actual physical possession, but that possession which follows the title.” In Wainman v. Hampton, 110 N. Y. 429, 433, 18 N. E. 234, 235, the court said, “A constructive possession such as the law draws to the title is sufficient for the maintenance of the action.” In Weston v. Stoddard, 137 N. Y. 119, 128, 33 N. E. 62, 65, 20 L. R. A. 624, 33 Am. St.

Rep. 697, the court said, “What is here meant is not a strict pedis possessio, but a present right to the possession.” The complainant alleged in its amended bill that it owned in fee simple an undivided one-half of the Snohomish claim; and an undivided two-thirds of the Tramway claim. It alleged that the defendants in the bill owned the remaining interests in both claims as its co-tenants. The answer to the amended bill which was filed by Daniel W. Connole, Catherine Sullivan, and Patrick N.

Sullivan, and the answer which was filed by John McNamara, Bridget McNamara, and Joseph Connole, denied, on information and belief, “that the complainant is now or ever was the owner in fee simple or otherwise of an undivided one-half interest, or any interest, in the Snohomish lode claim, or of an undivided two-thirds interest, or any interest, in the Tramway lode claim.” These answers were filed respectively on December 1, 1897, and December 30, 1897. On March 21, 1898, F. Augustus Heinze, having obtained leave to intervene, filed a cross-bill, alleging that on October 16, 1897, he had purchased from Daniel W.

Connole, Catherine Sullivan, and Patrick N. Sullivan, her husband, John McNamara, Bridget McNamara, his wife, and Joseph Connole, their undivided one-half interest in the Snohomish claim, and their undivided one-third interest in the Tramway claim. The sole object and purpose of his cross-bill was to set forth his interest in the property which was sought to be partitioned, and to obtain a decree protecting his right therein, and distributing to him his proportion of the proceeds of the same in case of a sale. The cross-bill also denied, upon information and belief, the title of the complainant in the bill.

In none of the pleadings so far filed in the case was any defect or infirmity in the complainant’s title alleged, nor was it asserted that any of the parties had adverse claims against the alleged title of the complainant, or adverse possession of the property sought to be partitioned. All the information that was conveyed by the pleadings at that date was that the complainant alleged a title in fee simple, and that the defendants and the intervener all denied, on information and belief, that the complainant* was the owner of the interest which it asserted in its bill.

In other words, by their answer they said to the court, “We own an undivided one-half, of one claim, and an undivided one-third of the other, but we deny, on information and belief, that the complainant owns the other interests.” While the pleadings were in that condition, on April 30, 1898, Heinze, the intervener, and the defendants who had answered, moved for an order directing a stay of proceedings until the complainant should establish its right in an action at law. This motion, in view of the state of the pleadings, was denied.

It was not again renewed, nor was'the court at any subsequent stage of the proceedings requested to stay the action of partition. The motion was properly denied. No issue had been raised as to the complainant’s title or possession. The equity doctrine is well expressed by Chancellor Williamson in Lucas v. King, 10 N. J. Eq. 277, where he said: “I do not understand, however, that the bare denial of the complainant’s title is any obstacle to the court’s proceeding.

The defendant must answer the bill; and if he sets up a title adverse to the complainant, or disputes the complainant’s title, he must discover his own title, or show wherein the complainant’s title is defective. If, when the titles are spread before the court, upon the pleadings, the court can see that there is no valid legal objection to the complainant’s title, there is no reason why the court should not proceed to order the partition.” In Jenkins v.

Van Schaack, 3 Paige, 242, the court said: “If there had been an actual ouster of the complainant by his co-tenant, or if the land was held adversely, it might be necessary to regain the actual seisin by ejectment before a suit for partition of the premises could be sustained either at law or in equity.” In Appeal of Wistar, 115 Pa. 241, 8 Atl. 797, the court said: “The defendants must point out some defect in the petition, or aver their own title or adverse possession, to justify the court to refuse to proceed in the partition.” Of similar import are Overton’s Heirs v.

Woodfolk, 6 Dana, 374; Appeal of Welch, 126 Pa. 297, 17 Atl. 623; Hooper v. De Vries, 115 Mich. 231, 73 N. W. 132. The reason of the rule applies with added force to a case such as this, where the answering defendants made no adverse claim as against the interest asserted by the complainant. On July 20, 1898, some three months after the motions to stay the suit were interposed, James Larkin, by his guardian ad litem, intervened and filed his answer to the amended bill, and filed his cross-bill thereto. In the answer, it was alleged that Larkin was insane, and had been insane for five years.

The answer denied, on information and belief, that the complainant owned the interest which it claimed to own in the .two mining claims, and alleged, on information and belief, that the said James Larkin was at the time of the commencement of the suit, and still was, the owner thereof. The answer contained no allegation, however, that the complainant claimed title through James Larkin, or as his grantee. The prayer of the answer was that the suit be stayed, that the complainant take nothing thereby, and that the same be dismissed. James Larkin died on August 4, 1898, and on October 31, 1898, F.

Augustus Heinze, administrator of his estate, and Clara A. Larkin, his only child and heir at law, by leave of the court filed their answer and their cross-bill to take the place of the answer and the cross-bill filed on behalf of James Larkin by his guardian ad litem.

In their answer they denied, upon information and belief, that the complainant is or ever was the owner of an undivided one-half of the Snohomish claim, or of an undivided two-thirds of the Tramway claim; anti, upon information and belief, they alleged that while James Larkin was insane, and laboring under such mental derangement as to render him. incompetent to make any contract or conveyance of his property, the complainant’s grantor, by fraud, duress, and undue influence, induced him to sign the deed under which the complainant claims to have acquired an interest in said property, and that the said Heinze, as administrator of James Larkin’s estate, and the said Clara A.

Larkin, were and are entitled to the possession of the same. The prayer of the answer was that the complainant take nothing by the action, and that it be decreed that it has no right, title, or interest in said claims, and that the interests which it claims therein belong to the estate of James Larkin, deceased, and that said Heinze, as administrator, is entitled to the possession thereof.

Their cross-bill alleged substantially as it was alleged in James Larkin’s cross-bill, viz., that during the year 1893 James Larkin, deceased, was the owner of the interests in the Snohomish and Tramway lode claims which are claimed by the complainant in this suit; that he was insane and was mentally incompetent to manage his property; that the complainant’s grantor contrived to unjustly deprive him thereof, and induced him to sign and deliver a deed thereto for a very inadequate and unjust consideration; that the deed ought to be canceled by a decree of the court, and the- legal title to said property reinvested in the estate of said James Larkin and his heir at law.

The cross bill alleged, further, that the complainants therein are entitled to have the complainant in the partition suit declared a trustee of such title for them, and that they are entitled to a decree of the court requiring the complainant to convey its right, title, and interest to them — the said F. Augustus Heinze, administrator, and the said Clara A. Larkin.

The prayer of the said cross-bill was that “the cross-bill be heard at the same time as the complainant’s amended bill of complaint herein, and that one decree be entered, adjudging and determining your orator’s rights, as well as those of all other parties herein; • that said deeds of conveyance heretofore mentioned, and all of them, be declared null and void in so far as they relate to or affect the said Snohomish and Tramway lode claims; and that the same, and the record thereof in that respect, be by order of this court canceled”; and that the complainant be declared to be a trustee of the legal title to said interests in such property for the complainants therein, and be decreed to convey to them the said title, and all rights, claims, and interests therein.

It will be observed that neither in their answer nor in their cross-bill do the appellants allege an adverse possession of the premises in controversy, or of the interests claimed by the appellee corporation. By filing their cross-bill the appellants made their election to try the question of title in equity.

Without making an application to the court to stay the suit in order to require the corporation appellee to try its title by an action at law, they went into equity and filed their cross-bill, which is in effect an original suit, praying the court to set aside the deed under which the corporation appellee claims, and to have that corporation declared to be a trustee for them of the legal title.

They based their claim to equitable relief not only on the ground that the grantor of the corporation appellee was insane at the time when the deed was made, but on the further ground that he had been overreached and induced to part with his title for a grossly inadequate consideration. Only the first of these grounds could have been tried in a legal action. They could all be united in a suit in equity.

The appellants having deliberately chosen to resort to equity, and the appellees having waived any objection they might have interposed to that proceeding, no reason is perceived why the trial court could not proceed to a determination of the issues so raised. Said the court in Read v. Huff, 40 N. J.

Eq. 233: “Where a defendant in a partition suit in chancery sets up an equitable title to the entire estate in the premises, or impeaches the complainant’s title on equitable grounds, there is no need to suspend the partition suit until the title shall be settled.” Although there was no further application for a stay, and no order was made staying the partition suit pending the trial of the matters presented on the cross-bill, that suit was in fact stayed, and necessarily so, until all the issues raised upon the cross-bill were adjudicated.

What ground is there, for holding that the decree should now be set aside? At what point in the proceedings did the court err? There is another view of the case on which the decree may be sustained, which is this: The cross-bill was in the nature of an original bill to remove a cloud from the appellants’ alleged title, to declare a trust, and to set aside a conveyance. It contained all the necessary averments of an original bill seeking affirmative relief. It presented a case of equitable jurisdiction. It would have sustained a decree if the complainant’s bill had been dismissed.

It was before the court for disposition as an original suit. Waring v. Smyth, 2 Barb. Ch. 128, 47 Am. Dec. 299; Holgate v. Eaton, 116 U. S. 33, 6 Sup. Ct. 224, 29 L. Ed. 538; Chicago & A. R. R. v. Union Rolling Mill Co., 109 U. S. 702, 3 Sup. Ct. 594, 27 L. Ed. 1081; Lowenstein v. Glidewell, 5 Dill. 329, Fed. Cas. No. 8,575; Markell v. Kasson (C. C.) 31 Fed. 104.

The prayer of the cross-bill was that the cross-bill be heard at the same time as the complainant’s amended bill of complaint, and “that one decree be entered, adjudging and determining your orators’ rights, as well as those of all other parties herein.” That prayer is, in substance, a prayer for partition. After the court had determined the questions raised by the cross-bill upon the issues tendered by the appellants, there was no obstacle to its further proceeding to partition the property.

In Freeman on Co-Tenancy & Partition, § 499, it is said: “Henee, when a suit is rightfully in equity, and from the adjudication there made it appears that the parties are co-owners and entitled to partition, a decree for such partition may be made, irrespective of the question whether the complainant is seised or disseised.” In 21 Enc. of Law (2d Ed.) 1149, it is said: “So, if the plaintiff’s disputed title is an equitable one, or partly equitable and partly legal, a court of equity may determine the titles of the respective parties, and decree partition in accordance therewith.” This doctrine is well sustained by the decisions.

Scott v. Guernsey, 60 Barb. 178; Dameron v. Jameson, 71 Mo. 97; Lucas v. King, 10 N. J. Eq. 277; Obert v. Obert, Id. 102; Hopkins v. Grimshaw, 165 U. S. 342, 358, 17 Sup. Ct. 401, 41 L. Ed. 739. It remains to be considered whether on this appeal it should be held that the order appointing a receiver, and the order subsequently extending the receivership, must be reversed, for the reason that they exceeded the powers of the trial court. On January 20, 1899, F. Augustus Heinze conveyed to Arthur P. Heinze an undivided one-half of the interests which he had acquired from Daniel W.

Connole and others' on October 16, 1897. On July 13, 1899, a receiver was appointed of the interests in the mines which were in dispute. He was authorized to receive from the mining co-tenants in possession one-half of the ores produced from the Snohomish claim, and two-thirds of the ores from the Tramway. He was also authorized to- carry on mining operations in both claims in such portions thereof as were not in the actual occupation of the mining co-tenants.

As a matter of fact, the receiver under this order never undertook any mining operations, but received only the proportion of the output of the mines belonging to the interest therein which was in dispute, and the order is here to be considered as if that feature of it had not been included. It is one of the powers of a court of equity iri a partition suit to appoint a receiver to receive rents or otherwise protect the interests of co-tenants.

In Beach on Receivers (2d Ed.) § 497, it is said: “Whenever it appears during the progress of a suit in partition between tenants in common or joint tenants that a receiver is necessary to protect the interests of all the parties, the court will, upon proper application, appoint a receiver of the property.” In Holmes v.

Bell, 2 Beav. 298, Lord Langdale, the Master of the Rolls, said: “But in this case the defendants are tenants in common, and the one who is before the court is in possession of the whole rents; and, under the circumstances, I think that a receiver of the whole rents ought to be appointed.” In Duncan v. Campau, 15 Mich. 415, Judge Campbell said: “It comes, then, to the simple inquiry whether a receiver can be appointed over tenants in common. I think the precedents permit this in some cases.” In Ames et al. v. Ames et al., 148 Ill. 321, 340, 36 N.

E. 110, 115, the court said: “The appointment of a receiver in a partition proceeding is not of frequent occurrence. But pending litigation we think the law is well settled that the court has ample power, upon proper showing, to make the appointment.” In Gooddale v. 15th District Court, 56 Cal. 26, the court, after citing numerous cases of English and American authority, sustained the doctrine that it was competent for the court in a partition suit in some cases to grant a receiver.

It is to be borne in mind that the appointment in this case did not extend to the whole property, but only to the interests that were in dispute. The possession, and the mining operations of the co-tenants in possession of the mine, were in no way disturbed or hampered. The order simply directed the receiver to receive and hold the ores belonging to the disputed interests in his hands until, by the decision of the court on the case made by the cross-bill, it should be determined to whom they belonged.

In making such an order, it is clear, upon the authorities, that the court did not exceed its powers, or abuse the discretion which was vested in it. On February 26, 1900, the appellee filed its written application for an extension of the receivership to the whole of the said Tramway and Snohomish lode claims, and in support thereof filed the affidavit of its manager, stating, in substance, that since the appointment of the receiver the mining operations had been so conducted by said F. Augustus Heinze and Arthur P.

Heinze as to render it impossible for the receiver to receive the shares of the ores of the mines to which he was entitled under the order appointing him such receiver, and alleging fraudulent acts and practices of the said Heinzes in operating the extraction of ores from said mines; stating that they had, by their employes, clandestinely removed from the mines large quantities of first-class ore by covering the tops of the cars containing the same with waste and dirt, and hoisting the same to the surface, pretending that it was waste, thereby deceiving said receiver and his employés; that, in order to watch the mining operations of said mining co-tenants, and to obtain any reasonable proportion of the ores to which he was entitled, the receiver had been compelled to employ a large number of inspectors, at an expense of about $2,000 per month.

The affidavit further set forth the means adopted by said mining co-tenants to defraud the receiver. Upon that affidavit a hearing was had, and on March 15, 1900, an order was made extending the receivership to the whole of said mines, and authorizing the receiver to operate and mine the same, and to deliver to the said mining co-tenants, F. Augustus Heinze and Arthur P. Pleinze, their proportion of the ores extracted by the receiver.

From an affidavit filed in behalf of the corporation appellee, suggesting a diminution of the record, it appears that a large portion of the evidence taken before the court on the hearing which was had on the application to extend the receivership, and which occupied the time of the court from March 7 to March 15, 1900, was oral testimony, not reduced to writing, and affidavits and exhibits now missing from the files of the court.

It is stated in the affidavit, and it is not contradicted in the counter affidavit of the appellants, that among such exhibits was a certified copy of the complaint, petition for the appointment of a receiver, and order appointing a receiver in a suit for partition brought in the District Court of Montana for Silver Bow county by Clara A. Larkin and Burdette O’Connor, to whom it was alleged Clara A. Larkin had deeded an interest, as plaintiffs, against F. A. Heinze and Arthur P.

Heinze and the Butte & Boston Consolidated Mining Company, from which it appeared that on March 3, 1900, said district court for Silver Bow county appointed E. PI. Wilson receiver over the interests of said F. Augustus Heinze and Arthur P. Pleinze, with instructions to operate the said mining property. The affidavit stated, and it is not denied, that said exhibits formed part of the record upon which the Circuit Court acted in making its order extending the receivership.

It is not disputed that the petition upon which the state court appointed the receiver alleged distinctly that it was for the best interests of all concerned in said properties that the same should be continued to be operated and mined. It is claimed on behalf of the corporation appellee that there was sufficient in that record to show to the Circuit Court that the suit in the state court, and the appointment of a receiver therein, was collusive between the said Heinzes and Clara A.

Larkin, and was instituted and assented to by said parties for the purpose of divesting the Circuit Court of jurisdiction to extend the receivership. It appears, also, that, at the time of the hearing of the application in the court below to extend the receivership, F. Augustus Heinze asserted that he and the said Arthur P. Heinze had been, and at said time were, in the possession of said mining claims, and engaged in mining the same, and that they claimed such right under the provisions of

an act of the Legislative. Assembly of Montana entitled “An act to amend

section 592 of the- Code of Civil Procedure of Montana,” which provided: “If any person shall assume and exercise exclusive ownership over, or take away, destroy, lessen in value, or otherwise injure or abuse any property held in joint tenancy or tenancy in common, the party aggrieved shall have his action for the injury in the same manner as he would have if such joint tenancy or tenancy in common did not exist: provided, that nothing herein contained shall prevent one co-tenant or joint tenant, or any number of co-tenants or joint tenants acting together less than all, from entering on the common property at any point or points not then in the actual occupancy of the non-joining co-tenants or joint tenants and enjoying all rights of occupancy of the property, without waste; and in the case of mining property,«from mining the same in a minerlike manner, and extracting, milling, ’and disposing of the ore from the common property, paying its or their own expenses, and subject to accounting to the non-joining co-tenant or joint tenant for the net profits of such mining operations, if any made.” Laws 1899, p. 134.

The remainder of the statute is not material to the questions here involved. Under this act of the Legislature, which by all the parties to the suit appears to have been conceded to be valid and in full force and effect, the Heinzes contended that they could not be enjoined from mining or operating the mining property.

It is true that in February, 1901, the Supreme Court of Montana declared the act unconstitutional, but it is nevertheless true that the act was relied upon by the Heinzes as affording them immunity from injunction, and was cited to show that the Circuit Court had no power to enjoin them from mining operations pending the suit. All these matters were before the court on the hearing of the application for the extension of the receivership, together with other matters that are not before us on the record.

If it were true that the methods of the mining operations of the tenants in possession were such that the receiver was defrauded of his just share of the ores, and that he was powerless to protect himself against such fraud and deceit, and that the appellants relied upon the action of the state court in the suit brought by Clara A.

Ear kin and Burdette O’Connor to appoint a receiver therein, with instructions to operate the mining property, the purpose of which receivership in said state court was to divest the Circuit Court of all jurisdiction over the mining operations of the mines, and that they also denied the power of the court to enjoin the mining operations of the appellants under the state law, we think a case may have been made, under which, in the exercise of sound discretion, the court was authorized to extend the receivership, and to include therein an order directing the operations of the mines, and that the appellants, by reason of their acts and their attitude taken at the time, cannot now assert that the court exceeded its powers in so doing.

It may have been true, also, as was argued by counsel for the corporation appellee, that the controlling consideration which induced the court to direct the receiver to operate the mines was the anxiety of the appellants that the mining operations should not be interrupted.

If it be true that such was the attitude of the appellants, and that they had assented to the appointment of a receiver by the state court, and to an order in which that court took their interests in the property under its receivership, and directed that mining operations, therein continue, they must be held to have admitted by their conduct that the situation was such as to justify the order of the trial court herein, so far as the operation of the mines was concerned. In Waterworks Company v. Barrett, 103 U. S. 516, 26 L.

Ed. 523, the court said: “The record shows that the appointment of the receiver was made by consent of parties, the attorneys of appellants being in court at the time. However other parties may complain of this act — and there were other parties, none of whom have appealed — the present appellants are bound by their consent in this court, as well as in the court below, and cannot be heard to object to what they'then agreed to.” The appellants, although they moved to vacate the receivership, never applied to the lower court to direct the receiver to cease his mining operations.

The only application of that nature that was ever made was presented to this court in September, 1902, after the cause had been brought here on appeal. This court allowed the application, and directed that the mining operations cease, but made no order setting aside the extension of the receivership. During the period between the time when the receivership was so extended, March 15, 1900, and the time when the order of this court was made, in September, 1902, the appellants regularly received each month from the receiver their proportion of the output of the mines so operated by him.

There is authority for holding that such acceptance from the receiver of the product of the receivership should estop the appellants from questioning the validity of the order under which the receiver acted. Said the Supreme Court of Missouri in Greely v. Providence Savings Bank et al., 15 S. W. 429, 431: “The exceptor, having accepted the dividends from time tp time from the hands of the receiver, and having thus recognized the validity of his appointment during all that time, cannot now change front and deny the validity of that appointment.

He is clearly estopped from so doing.” Citing Bigelow on Estoppel (5th Ed.) § 687. An appellate court will not reverse the order of a lower court in appointing a receiver or in directing his action, unless it appears that the discretionary power of the court “has been so improvidently and improperly exercised as to bring its action clearly within the meaning of the term ‘abuse of power.’ ” Beach on Receivers, § 118; Sanders v. Slaughter, 89 Ga. 34, 14 S. E. 903; Nimocks v. Shingle Co., 110 N. C. 230, 14 S. E. 684; Beaumont v. Beaumont, 166 Pa. 615, 31 Atl. 336; Fluker v. City Railway Co., 48 Kan. 580, 30 Pac. 20.

In the case last cited the court said: “Unless a very strong showing is made, or this court is satisfied that the discretionary power has not been properly exercised, the conclusion below will not be disturbed.” We adhere to the views expressed by this court in Tornanses v. Melsing, 106 Fed. 775, 45 C. C. A. 615, that the ore in a mine is of the very substance of the estate, and that its extraction by a receiver is not to be permitted, except upon convincing proof of the necessity of such mining operations.

What we hold in this case is that, the record does not show that under all the circumstances and the evidence which was presented to the trial court, that court so abused its discretion as to entitle the appellants to a reversal of its orders, especially in view of the fact that the appellants have regularly accepted and received, and still retain, their proportion of the product of the mine while so operated by the receiver.

We have carefully inspected the evidence presented in the voluminous record which is before us on the question of the sanity of James Larkin, and the other issues of fact raised upon the cross-bill, and find no ground to disturb the findings of fact made by-the court below. The findings of fact of the trial court will not be disturbed unless the appellate court can clearly see that they are opposed to the weight of the evidence, or unless some error is clearly shown. Lilienthal v. McCormick, 117 Fed. 89, 34 C. C. A. 475, and cases there cited. The decree of the Circuit Court will be affirmed.