CASCADEN v. DUNBAR et al., 191 F. 471

WOLVERTON, District Judge (after stating the facts as above). Numerous objections and exceptions were taken to the findings of the court, as to both the fact and the law; but the objections here are reduced practically to three. These are; .First, as it respects the measure of distribution of the proceeds of the claim. Second, the manner of giving judgment against Dunbar, Manley, and Rice; the same being severally instead of jointly and severally. Third, awarding the First National Bank of Fairbanks one-third "of the funds in court under a mortgage and assignment admittedly paid and discharged.

Before entering upon a discussion of these objections, the legal title should be settled. This was practically done when the case was here before. The plaintiff was declared to be the owner of an undivided one-half interest in the mining claims involved. This left in Scott and Dunbar an undivided one-half; but, they having conveyed to Manley and Rice an undivided one-third of their interest, which would be an undivided one-sixth of the whole, an undivided one-third was left in their right. The judgment as to the title of these mining claims should therefore be for the parties in proportion as thus indicated.

It subsequently appears that Scott has sold his interest to Dunbar, and that Dunbar and Rice have made some conveyances to Bonnifield; but as the pleadings are not in this record, and it does not appear that any supplemental pleading has been filed showing the title of Bonnifield and praying judgment therefor, none can be rendered in his favor. Bonnifield is not made a party in any way to the suit. The only capacity in which he has ever acted or appeared is as custodian of royalties, and to protest against the order of the court directing and requiring him to pay the deposits into the court.

The contention, as it pertains to the first objection, is that plaintiff is entitled to judgment for the gross product of the mine, instead of for the royalties received upon the leases only. This depends upon the acts and conduct of plaintiff with respect to the leasing to Humes Bros, and other lessees by Dunbar, Scott, Manley, and Rice. It appears from the findings of fact that Humes Bros, acquired their lease on the lower half of the mine during the month of September, 1904, and Riley, O’Malley, and Donnelly acquired theirs on the upper half on October 20, 1904.

As to this latter lease, the plaintiff expressly.agreed with the lessees, by a written contract of even date with the lease, not to disturb them by injunction or otherwise, in the cause then pending for a determination as to the ownership of the mining claims during the continuance of their lease, and, if successful, plaintiff further agreed to continue the lease until the end of the three years term, namely to October 20, 1907.

This contract recites, among other things, that: “In consideration of said parties of the second part (the lessees) undertaking so to extract the gold, minerals, and precious metals from said premises, so that the person or persons entitled thereto, as may be determined in -said action at law, may have the benefit thereof, the party of the first

part covenants,’’ etc., thus indicating that the plaintiff was agreeable to the lessees’ entering into the contract of leasing with Dunbar and others. Under this lease, Riley, O’Malley, and Donnelly extracted, prior to the time a custodian was selected, $92,466.61, and the entire royalties to that time were appropriated by Dunbar and other lessors. Plaintiff’s counsel claims that the amount of gold extracted in that time was in excess of $100,000; but we think the finding of the court in that respect is about as nearly correct as can be determined.

The finding furthermore that there was extracted under the Humes lease 'gold to the value of $69,596.20 we deem to be in accordance with the weight of the testimony. Later, on September 15, 1905, the plaintiff applied for an injunction to restrain Dunbar, Scott, Manley, and Rice from further extracting the gold from the mine, which was duly issued. On the same date, however, at the suggestion of the court, plaintiff and defendants agreed to the appointment of a custodian, with authority to receive the royalties and hold them for the parties in the suit entitled thereto.

An agreement to the receipt of the royalties or rentals by the cust odian for the parties interested was tantamount to an agreement that the lessees should have all the gold extracted except the royalties for their services in extracting the same. This was in effect a ratification of the leases, at least from that time forward. Otherwise plaintiff should have insisted that the gross amount he paid into the hands of the receivers, instead of the royalties only.

Beyond this evidence of plaintiff’s assent to the leasing, plaintiff testifies that Humes- Bros, told him of their lease at the time they procured it from Dunbar and others, and the percentage of the output they were to receive, and that he took no steps to stop them. It further appeared that plaintiff, during the time, was living in a cabin by the side of the claim, and was about the mining operations from time to time, and saw the cleanups "quite frequently,” and never made protest in any way.

In talking of another lease given while the receivers were in charge, to which he was asked to assent, though refusing his assent, he said in effect that he had made no trouble with respect to the other leases, and would make none as to this. It is further to be remarked that J. Donnelly, the first custodian of the royalties, agreed upon by plaintiff, was one of the lessees from Dunbar, Scott, Manley, and Hice, and Alexander, the second custodian, was one of the successors to Humes Bros, under their lease, and was selected while such lessee.

Beyond this, plaintiff, with the defendants, agreed with the successive receivers that they should act without compensation. From all which it would seem that, if the plaintiff did not consent in the first instance to the making of these leases, he subsequently ratified them, and was willing to accept the royalties only, as his proper share of the gold extracted from the mine. He ottght not, therefore, to be now heard to claim one-half of the gross amount of gold extracted from the mines, however fraudulently Dunbar, Scott, Manley, and Rice may have acted in appropriating the royalties.

It is very true that, where the trespass is willful and unlawful, and property is appropriated, the approriator should be held for its gross value. Sweeney v. Hanley, 126 Fed. 97, 61 C. C. A. 153. But in this case there is such an implied assent to and ratification of the leasing by plaintiff as to preclude him from claiming the gross.

Advancing to the next contention of counsel for appellant, which is that the judgment should have been given jointly and severally against Dunbar, Manley, and Rice, it is clear from the foregoing considerations that these parties are subject to an accounting for only the rents and royalties received by them beyond their proportionate share. “It is well settled by all the authorities,” say the authors of the American and English Encyclopedia of Law ([2d Ed.] vol. 17, p. 693), “that where one tenant leases the common property to a third person and receives the rents, he is liable to account to his co-tenants for their proportionate share.” See, also, Tarleton v.

Goldthwaite’s Heirs and Adm’r, 23 Ala. 346, 58 Am. Dec. 296; McCaw v. Barker et al., 115 Ala. 543, 22 South. 131; Gedney v. Gedney, 160 N. Y. 471, 55 N. E. 1; Howard v. Throckmorton, 59 Cal. 79. It must follow that one tenant could not be held to account to another for more than the share received by him above that which he is proportionately entitled to.

It being ascertained, therefore, the proportionate amount of the rents and royalties received by Dunbar, Scott, Manley, and Rice, the court below was right in entering a sev-i eral judgment for the amount each received above his own appropriate share; but it should not have given a joint and several judgment against Dunbar and Scott. It is next contended that the court erred in awarding to the First National Bank of Fairbanks one-third of the funds in court; they being the accumulation of royalties on leases of the mine after the selection of custodians by the parties litigant.

The First National Bank claims through Dunbar’s mortgage of the mine, and his assignment of his interest in the gold dust in custody of the receiver to Barnette, Barnette’s assignment to Bonnifield, and the latter’s assignment to the bank. It will be necessary to go into these transactions e. little more minutely than has been done as shown by the findings of the court for a clear exposition of the situation. On August 30, 1905, Scott deeded his entire interest in the mine to Dunbar. On August 20, 1906, Dunbar executed to E. T.

Barnette a mortgage on the mine, with other property, to secure the payment of a joint note of $30,000 made and delivered to Barnette by Dunbar and J. C. Kellum,. On the same date Dunbar assigned to E. T. Barnette, trustee, all his interest in three pokes of gold dust, further described as “now on deposit' with the First National Bank, of Fairbanks, Alaska,” whereby Dunbar stipulated as follows: “Said gold dust is field by the said First National Bank pending a lawsuit now on appeal to the Circuit Court of Appeals wherein David and John Cascaden are plaintiffs and Manley, Rico, and Dunbar are defendants.

And I hereby authorize the said E. T. Barnette, or agent, when said suit is settled or when said gold dust is released, to take said gold dust from said First National Bank, and apply the same on a mortgage given by me on this date to the said E. T. Barnette for the sum of thirty thousand dollars.” On August 27,' 1907, Barnette made this assignment of the gold dust to Samuel A. Bonnifield, namely: “I hereby assign and set over all my right, title, and interest in and to the gold and gold dust described on the reverse side of this sheet of paper unto Samuel A.

Bonnifield, his executors, administrators, and assigns.” On September 19, 1906, Barnette, for value, assigned to Samuel A. Bonnifield the mortgage of August 20th given on the mine. On September 9, 1907, Dunbar assigned to Bonnifield all his right, title, and interest in the gold dust then in the hands of Bonnifield as trustee in pursuance of the stipulation entered into between the parties in the case of Cascaden v. Dunbar and others, pending in the Circuit Court of Appeals.

The former assignment of gold dust to Barnette was referred to in this latter assignment/ and Bonnifield was authorized and empowered “to take of the gold and gold dust that has been deposited since the time of said assignment to the said E. T. Barnette with him as trustee, or which has come into his hands as trustee,” such amount as,was sufficient to pay two certain notes one of date September 18, 1906, for $4,320, and the other of date May 17, 1907, for $6,000, and to apply the balance of the trust fund upon the $30,000 mortgage given to Barnette.

By the same instrument, Dunbar assigned and transferred “all gold and gold dust” that might be thereafter taken from No. 12a until the money" he owed to Bonnifield should have been paid in full. “This assignment,” concludes the document, “is to transfer at once all of my title in and to the gold dust now on deposit with the said S. A.

Bonnifield and held by him as trustee, and, also, all dust that has been extracted from said claim No. 12a below Discovery on Cleary Creek, and which has come into his hands as trustee, and also .all future gold that may be mined and extracted from said property which shall similarly be deposited with him.” On April 11, 1909, Bonnifield sold, assigned, and set over unto the First National Bank all of his right, title, and interest in and to that certain fund described as “now on deposit with the clerk of the District Court for the Third Division of the Territory of Alaska, in that certain action entitled Cascaden v.

Dunbar et al., being numbered 165.” and empowered the bank to institute such proceedings in his name as might be necessary to enforce the payment. This constitutes the bank’s chain of title from Dunbar, based upon the mortgage and assignment of the fund to secure the payment of the $30,000 obligation, in so far as it is traceable from the record. It absolutely confers no title to the mine, and in reality none to the mortgage on the mine. There seems to be a complete chain of assignment as it pertains to the fund, and it is by this right, we presume, that the bank claims title thereto.

Furthermore, it is shown by the testimony of C. J. Hurley, president of the bank at the time he testified, that the $30,000 mortgage has been paid in full and wholly discharged, and that Kellum paid it. This in itself should preclude the bank from further claim upon the mine or the fund by virtue of the mortgage or the pledge, for, if the obligation which they were given to secure is paid, the mortgage and pledge should be discharged.

But, to proceed: There has been some intimation that Kellum was a surety on the note only, and that he was entitled to be subrogated to the mortgagees and his assignees’ position with reference to the security; but there is no pertinent testimony to support the claim, and Kellum has not been made a party to the suit. The first assignment of the gold dust on deposit, which was by way of pledge, was made by Dunbar to Barnette August 20, 1906. This assignment recognizes the fact that the gold dust was held by the bank pending the lawsuit here now being prosecuted by this second appeal.

This was then a recognition by Barnette, the pledgee, that the fund was held in trust for a specific purpose. Further, Barnette was only authorized to apply the gold dust to the payment of the mortgage when the suit was settled. Thus he knew he was not entitled to the gold dust until the interests of the parties to the litigation were sub-served, and it was practically so stipulated.

At that date, it is true, Bonnifield was not the custodian of the fund, but he was such custodian when Barnette assigned the pledge to him on August 27, 1907, and must be held to have fully known the conditions under which he held such fund.

The fund was, from the time of the selection of the first custodian, September 15, 1905, and at that time — the time of the assignment of the pledge to Bonnifield — in custodia legis to subserve the several interests of the parties litigant according to their superiority of right. ' Some suggestion has been made that Donnelly, Alexander, and Bonnifield were merely the custodians by selection of the parties, and were not appointees of the court in such a sense as made them the officers of the court, and that the fund was never, until paid into the hands of the clerk, in the custody of the court or the law.

This view cannot be sustained. The very inception of the agreement of the parties to the selection of a custodian was by application to the court to impound the royalties, and the agreement to the selection of the custodian was made at the -suggestion of the court. The order entered on the application was that the royalties received by the custodian “be held subject to the order of this court.” Furthermore, the custodians or receivers were all deemed to be subject to the orders and directions of the court at tall times.

Alexander, it appears from the findings, upon application of the parties, was discharged by order of the court, and Bonnifield. was agreed to and named in his stead, and ultimately Bonnifield turned the funds over to the clerk by order of the court. In short, the fund was always, from the time of its impounding, treated as within the custody of the court, and was'in reality, and in legal effect, in custodia' legis. At the time when the gold dust began to be impounded, Dunbar, Scott, Manley, and Rice had appropriated of Cascaden’s proportion of the royalties $28,932.75.

It was because of these misappropriations and failure to account, no doubt, that Cascaden finally concluded to seek the appointment of a receiver, and the purpose was that he might be reimbursed the amount theretofore appropriated by these parties, as well as to secure a just distribution of the royalties thereafter to be paid into the hands of the custodian. It was only fair and equitable, in view of the conduct of Dunbar, Scott, Manley, and Rice, that such a disposition should be made of these royalties and of those subsequently to accrue in the hands of the custodians.

Whoever, therefore, dealt with this fund in court, dealt with it subject to the just rights and equities of Cascaden to be reimbursed and secured his rightful proportion, of the accumulated royalties arising from the leases made by Dunbar, Scott, Manley, and Rice.

While Dunbar assigned his interest in the three pokes of gold dust in the bank to Barnette prevous to Bonnifield’s becoming custodian of the fund, Bonnifield had no right, after his selection, to deal with the fund in any other manner than as trustee, and of course he was charged with notice of the condition of the fund and the rights of the respective parties litigant thereto and the bank, dealing with him, could acquire no better or superior right than he had.

We conclude, therefore that the conclusion of law of the District Court that the First National Bank was entitled to one-third of the money and gold dust on deposit with the clerk was error. It should have .been that the bank was entitled to such one-third interest subject to the right of Cascaden to be reimbursed out of it for that proportion of Cascaden’s royalties that Dunbar and Scott appropriated.

Fcmr other matters are yet to be considered, namely: The mortgage given by Dunbar to Bonnifield on the mining claim No. 12a, executed April 6, 1907, to secure payment of two notes one for'$6,-000 and the other for $4,320, each given by Dunbar to Bonnifield on the 18th clay of September, 1906; the deed from A. C.

Rice to Bounifield of date July 1, 1907, to the former’s interest in the mine; the assignment by Rice to Bonnifield of the same date of all Rice’s interest in the royalties then in custody of the receiver and deposited in the First National Bank; and the direction of Manley to Bonnifield to apply the former’s interest in the gold dust then in the latter’s custody to the payment of a claim which Manley owed to Bonnifield. As it relates to the mortgage, it is claimed that but $2,000 has been paid on the notes, and that the balance remains unpaid.

We do not find that the bank has ever come into the title to this mortgage. But, however that may be, Bonnifield was trustee at the time he took and accpted this mortgage, and was custodian of the royalties then in his hands for the purposes of the trust, and the fund could not in any way be affected by it to the detriment of Cascaden. As to the Rice deed, Bonnifield does not appear by the record to have parted with what title he thus acquired to Rice’s interest in the mine, and the transfer would seem to have no particular relation to this controversy.

Bonnifield’s interest in the fund acquired by the assignment from Rice, whatever it was, passed, we presume, to the bank under Bonnifield’s assignment of the fund to the bank of date April 11, 1909, above noticed. So of Manley’s interest in the fund acquired by 'direction to apply to the payment of his debt to Bonnifield. But as Bonnifield, being trustee of the fund, could not thus have acquired any interest from Rice detrimental to the rights of Cascaden, the bank could not acquire any greater right from Bonnifield.

Furthermore, the bank is chargeable with adequate knowledge of the conditions existing relative to the fund, Bonnifield being its president, and undeniably it cannot claim as an innocent purchaser. So it is not in a position to deny the rights of Cascaden in the fund, being the accumulated royalties arising from the leasing of the mine. The District Court was therefore in error in adjudging that the bank was entitled to one-third of the money and gold dust on deposit with the clerk of the court. We further conclude as follows: 1.

That the royalties received from the leasing of the mine prior to the selection of a custodian were $57,865.50. 2. That Cascaden is entitled to one-half of these royalties, amounting to $28,932.75. 3. That Dunbar should account to 'Cascaden for one-third of this sum, or $9,644.25, for which Cascaden is entitled to judgment against him. 4. That Scott should account to Cascaden for a like amount, and the latter is entitled to judgment therefor. 5. That Manley should account for one-sixth, or $4,822,125, to Cascaden, for which the latter should have judgment. 6.

That Rice should account for a like amount, for which also Cascaden should have judgment. 7. That Cascaden is entitled to one-half of the royalties, including the moneys as well as the gold dust now in the hands of the clerk and in the registry of the court, as his rightful proportion thereof. 8. That Cascaden should receive from the other half of the fund in court the sum of $28,932.75. 9. That the First National Bank of Fairbanks is entitled to the balance, or whatsoever remains of such fund after the payment of plaintiff. 10.

Plaintiff is entitled to his costs and disbursements against defendants, including the bank. The decree of. the court below will be modified to conform to this opinion.