PATTERSON et al. v. STROECKER, 245 F. 732

GILBERT, Circuit Judge (after stating the facts as above). The appellee asserts that the question for decision is whether or not the deed made by Patterson to his wife on November 27, 1911, carried with it an asignment or conveyance of the sublease made by Patterson to Hamilton on the same day, under which sublease Patterson retained 5 per cent, of the gross output of the whole claim. We think the question for decision is not thus limited, and that it involves a broader view of the equitable rights of Mrs. Patterson as the owner of a one-fourth interest in the mining claim.

The proof on the second trial clearly established that the money furnished by Mrs. Patterson, whereby the one-fourth interest was so acquired, was her individual and separate property. The situation should be viewed as it would be if the marriage relation did not exist. It may be expressed in this manner: A. holds the legal title to a one-fourth interest in a mining claim, in trust for B., who is the equitable owner thereof. The owner of the three-fourths interest enters into an agreement of lease with A., whereby the latter is to operate the whole claim, and pay the former 25 per cent, of the total output.

A month later, and before the mining operations begin, A. deeds the one-fourth interest to B., and at the same time he sublets to C. under an agreement whereby C. is to pay him 5 per cent, of the gross output, in addition to the 25 per cent, agreed upon to be paid to the owner of the three-fourths interest. Whose is the 5 per cent, which was realized under the sublease ? Does it belong to A., or does it belong to B.P It seems to us that in equity it clearly belongs to B.

When Patterson- entered into an agreement of lease, by which the interest of his wife was bound for a four-year term, it is not to be assumed that she was to get nothing out of it. In case he realized profits from- the lease, he was accountable to her for her share of those profits. If she had been paid for her interest at the same rate that Wickersham was paid, she would have received considerably more than 5 per cent, of the gross output. When Patterson sublet the property in such a way as to secure to himself the payment of 5 per cent, of the gross output, we think that Mrs.

Patterson could have required him to turn over to her that 5 per cent. At the first clean-up she claimed it, and, but for an injunction, it would have been paid to her. She testified that Patterson, when he told her of the sublease, told her that he had reserved 5 per cent, for the one-fourth interest, and that she assented to it. Patterson testified to the same effect.

It is contended that the decision of this court on the first appeal finally determined that Patterson’s deed to his wife did not convey to her the 5 per cent, reserved to him in the assignment of the lease, and thereby settled the law of the case upon the present appeal. The decision of the court below on the first trial of the case was based wholly upon the effect of the deed from Patterson to his wife.

On the appeal from that decision we held that the court below erred in holding that the deed conveyed to her the interest in the royalty which Patterson had reserved, our opinion saying: “That deed did not purport to convey to the defendant Mariam A.

Patterson any part of her husband’s interest in the amount then due or to become due to him from Hamilton under the lease by which the latter worked the ground, and certainly did not convey to her any part of the five per cent, of the gross mineral output which was derived from the undivided three-fourths of the claim owned by Wickersham.” We also held that the evidence in the case indicated that the conveyance by Patterson to his wife was for the purpose of defrauding his creditors, and that error was committed on the first trial in dismissing the complainant’s bill at the conclusion of the complainant’s testimony.

We said “the burden was cast upon the defendants to show the good faith and honesty of the conveyance in question,” and we remanded the cause for a new trial. Now, upon the second trial, the defendants have shown the good faith and honesty of the conveyance, and have shown that Mrs. Patterson is in equity entitled to the 5 per cent, which represented, as both she and her husband testified, her interest in the leased property. On the second trial the court below found against Mrs.

Patterson, not on the ground that the question of her right to the 5 per cent, had been adjudicated by our decision, but on the ground that Patterson had not at any time assigned or transferred that 5 per cent, to his wife. We hold that no such transfer or assignment was necessary, that Mrs. Patterson’s interest was not created by the deed which her husband made to her, that in equity she is entitled to all that her husband got out of the lease of her property, that she is the equitable owner of the 5 per cent, reserved, and could have compelled him to pay it.

Our former decision is therefore not an adjudication of the merits of the controversy as they are now established by the evidence adduced on the second trial. The decree, so far as it awards the appellee the proceeds of the gold dust in question, is reversed, and the cause is remanded, with instructions to enter a decree awarding the same to Mrs. Patterson. other cases see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes-