MR. JUSTICE LAMAR delivered the opinion of the court.
This is a bill in equity to rescind a contract of purchase of a silver mine on the ground of fraudulent representations and to recover the consideration paid.
The suit was commenced originally in the Superior Court of Inyo County, California, on the 8th of May, 1884, but on account of the diverse citizenship of the parties, the plaintiff being a corporation organized under the laws of Nevada, and the defendant a citizen of California, it was removed into the United States Circuit Court. Demurrers to the original bill and to an amended bill having been sustained, the present "second amended" bill of complaint was filed. Answer was filed by defendant, replication by complainant, and issue was joined. Testimony was taken, and the case was heard, resulting in a decree dismissing the bill on the 14th of March, 1887.
It appears from the record that on the 15th of March, 1884, the appellant (who was the complainant below) purchased from
On the 8th of May, 1884, the original bill of complaint was filed, charging in substance that complainant was induced to purchase said mine and mining property solely upon the representations made by Silva as to its condition, extent, and value; that such representations were made to H.M. Yerington, the president of said complainant company, and to one Forman, a mining expert in his employ, in January, 1884. when an examination of said mine was made by them; that said representations were false and fraudulent, and were well known to the defendant at the time to be such; and that said representations were, in substance and in a somewhat different order, as follows:
(1) That there were 2000 tons of ore in the mine;
(2) That the bottom of what is called the "ore chamber" was solid ore, as good as the ore exposed on the sides of the chamber;
(3) That there were not less than 500 tons of ore in and about the said "ore chamber";
(4) That the mine was worth fifteen thousand dollars; and,
(5) That, after going through the mine, the defendant represented to said Yerington and Forman, that he had shown them all the work which had been done in or about the mine that would throw any light upon the quantity of ore therein.
The answer of the defendant is direct, positive, and unequivocal in its denials of the allegations of the bill, and, as an answer on oath is not waived, unless these denials are disproved by evidence of greater weight than the testimony of one witness, or by that of one witness with corroborating circumstances, the complainant will not be entitled to a decree; and this effect of the defendant's answer is not weakened by the fact that the equity of the complainant's bill is the allegation of fraud. Vigel v. Hopp, 104 U.S. 441; Story Eq. Jur. § 1528; Daniell Ch. Pr. 844.
The burden of proof is on the complainant; and unless he
First. That the defendant has made a representation in regard to a material fact;
Secondly. That such representation is false;
Thirdly. That such representation was not actually believed by the defendant, on reasonable grounds, to be true;
Fourthly. That it was made with intent that it should be acted on;
Fifthly. That it was acted on by complainant to his damage; and,
Sixthly. That in so acting on it the complainant was ignorant of its falsity, and reasonably believed it to be true.
The first of the foregoing requisites excludes such statements as consist merely in an expression of opinion or judgment, honestly entertained; and, again (excepting in peculiar cases,) it excludes statements by the owner and vendor of property in respect to its value.
The evidence in the case shows that in the development of this mine a tunnel, called the "Sterling Tunnel" had first been dug. At a distance of about 140 feet along the line of this tunnel, from its mouth, there are branches running easterly and westerly. About 60 feet from the main tunnel, in the eastern branch, winze No. 1 starts down. About 38 feet below the level of the tunnel, a level known as the "38-feet level" starts off from this winze, and at the bottom of the winze, a distance of about 82 feet vertical below the main tunnel, there is another level known as "82-feet level." In the easterly branch of the tunnel, about 30 feet from winze No. 1, there is another winze starting downward, inclining to the southeast as it goes down. This winze is numbered 2, and is connected with the 38-feet and the 82-feet levels. Intermediate between these levels is another level, known as the "55-feet level," which opens out to the eastward of winze No. 2, into a chamber about 15 feet long and about 8 feet wide. In the southeast corner of this
As to the first alleged representation, as classified above — viz., that there were 2000 tons of ore in sight in the mine, and that Yerington relied upon such statement when he made the purchase — the proof utterly fails to establish either that Silva made the statement, as a statement of fact, or that Yerington relied upon such statement even had it been made. Silva, both in his answer and in his testimony, denies ever having made the statement, and the testimony of Yerington himself is to the effect that Silva's statement was qualified by the phrase "in his judgment." This then is shown to have been nothing more than an expression of opinion on the part of Silva as to the quantity of ore in sight in the mine. But even if Silva had made the statement imputed to him in the bill, there is abundant evidence to show that Yerington did not rely upon it in the purchase of the mine. Yerington's own evidence, on this point, is against him. He testifies that he did not believe that there were more than 1000 tons of ore in the mine, and that Forman agreed with him on that point. And he further testifies that, valuing this ore at 32 ounces of ore and 45 per cent of lead per ton, (which it appears was its approximate value as determined by several assays,) and calculating that there would be 1000 tons of ore there, the mine would be worth
In the case of Tuck v. Downing, 76 Illinois, 71, 94, the court say: "No man, however scientific he may be, could certainly state how a mine, with the most flattering outcrop or blow-out, will finally turn out. It is to be fully tested and worked by men of skill and judgment. Mines are not purchased and sold on a warranty, but on the prospect. `The sight' determines the purchase. If very flattering, a party is willing to pay largely for the chance. There is no other sensible or known mode of selling this kind of property. It is, in the nature of the thing, utterly speculative, and every one knows the business is of the most fluctuating and hazardous character. How many mines have not sustained the hopes created by their outcrop!"
We approve the position of the court below, that "Yerington and his expert, Forman, were as competent to judge how much ore there was `in sight' as Silva was. They were no novices in matters of that kind. This misrepresentation, if such it be, does not contain either the 1st, 4th, or 5th element stated by Pomeroy as essential elements in a fraudulent misrepresentation."
As stated above, the substance of the allegation of the bill is, that Silva represented that the bottom of this ore chamber which was covered with loose ore slacked down from the pyramid, was composed of ore as good as that exposed on the sides of the chamber. Silva in his answer expressly denies ever having made such statement. Forman testifies that with a little prospecting pick he had with him, he raked through the dirt and loose ore that had slacked down, to see if it
On this point, then, the testimony of Silva is directly to the contrary of that of Yerington and Forman. Certain other material facts in the case seem to indicate that there is just as strong probability that Silva's statements in this matter are true, as that those of Yerington and Forman are true. In the bill Yerington alleged, under oath, that Silva had discovered the fact that the bottom of the ore chamber was not composed of ore, and had afterwards covered that bottom with ore, veinrock, and matter — in other words, had "salted" the mine. There is no evidence in the record to prove this, or tending to prove it. On the contrary, the evidence of Yerington himself, and of the other witnesses who were examined on that point, is all to the effect that the ore covering the floor of the chamber had slacked down from natural causes in fine particles like wheat. Nor is there such evidence to show that Silva knew
Furthermore, the testimony of Yerington and Forman, as regards the little hole or shaft in the southeast corner of the chamber, is directly opposed by the testimony of Silva and Eddy. Both Yerington and Forman testify that this little shaft was completely filled up with dirt and loose ore; while Silva and Eddy both testify that it was not so filled up, but that both Yerington and Forman stood in that shaft and took samples of ore from it.
It is thus seen that the evidence on this material point does not clearly establish the fraudulent representations of Silva as claimed by the complainant; but that, on the contrary, the
As to the third alleged representation — to wit, that there were not less than 500 tons of ore in and about that ore chamber — Silva, both in his answer and in his testimony, denies that he ever told Yerington and Forman, or anybody else, that there were 500 tons of ore there, or that there was any amount fixed or agreed upon by them as to the quantity of ore there; while the testimony of both Yerington and Forman is to the effect that Silva said in his opinion, or in his judgment, there were 500 tons of ore in the chamber. So that taking the strongest testimony produced on the part of complainant upon this point, it simply amounts to an expression of opinion on the part of Silva as to the amount of the ore in the chamber, and not a statement of fact. It therefore does not constitute fraud.
It is equally true that any statements that may have been made by Silva with reference to the value of the mine, cannot, under the circumstances of this case, be considered an act of fraud on his part sufficient to warrant a court of equity in setting aside the contract herein. Yerington testifies that Silva
This disposes of all the alleged fraudulent representations, as arranged above, except the last, adversely to the complainant, and it is to this one that attention will now be directed. This charge is, substantially, that Silva represented to Yerington and Forman, when they visited the mine in January, 1884, and had gone through it, that he had shown them all the work which had been done in and about the mine that would throw any light on the quantity of ore therein. This representation is alleged to have been false and fraudulent, and well known by Silva to be such, because at a cut a short distance from the mouth of the main tunnel, at a point known as the "point of location," a little hole or shaft had been sunk which had been filled up, and was not observable at the time of the examination of the mine in January, 1884, and also because there had been a number of drill holes made in the sides of the ore chamber, and afterwards filled up before the examination in January, 1884, so that they were not observable at that time, which holes clearly developed the fact that the ore about the chamber was nothing more than a shell instead of a continuous body as it appeared to the observer.
The existence of the plugged-up drill holes in the sides of the ore chamber is the worst feature of the case against Silva. They could not have been made by a former proprietor of the mine, as is slightly claimed in his behalf, for, as has been already shown in this opinion, Silva himself, or at least persons in his employ, had excavated that chamber after he had purchased it from one Edwards in 1876. And certain it is that the drill holes were found plugged up within a short time
The testimony, therefore, and all the other facts and circumstances of record, do not substantiate complainant's theory of the case on this point; in other words, there is not a satisfactory case of fraudulent representations on this point made out — not such a case as would justify the interposition of a court of equity to set aside the contract under consideration on the ground of fraudulent representations.
As regards the little hole or shaft that had been sunk at the "point of location" and afterwards filled up, so that it was not observable at the time of Yerington's visit in January, 1884, there is absolutely no testimony at all to show that Silva knew anything about its existence. He had done no work at that place, or very little at most, and was using the cut there as a sort of kitchen. The sides of the cut indicated that there was a ledge of ore there. It is admitted that Forman asked Silva why he did not "go down" on that ore, and that he replied that he considered the tunnel the best place to mine.
Silva denies, both in his answer and in his testimony, that he ever knew that a shaft had been sunk at the point of location, and no one is found who can testify that he did know
It is essential that the defendant's representations should have been acted on by complainant, to his injury. Where the purchaser undertakes to make investigations of his own, and the vendor does nothing to prevent his investigation from being as full as he chooses to make it, the purchaser cannot afterwards allege that the vendor made misrepresentations. Attwood v. Small, supra; Jennings v. Broughton, 5 De Gex, Macnaghten and Gordon, 126; Tuck v. Downing, supra.
The evidence abundantly shows that Yerington had been willing to give $10,000 for the mine prior to the time he visited it and made his examination in January, 1884. He had made inquiries of various persons for months previous to that visit. Several experts in his employ had visited the mine, had taken samples of ore from it, and it must have been from reports thus received that Yerington had made up his mind as to what the mine was worth. From the letters of an agent (Woods) to Eddy, the testimony of the witness Boland, the testimony of the witness Anthony, Eddy's testimony, and from the testimony of Silva himself, there can be no doubt that Yerington had offered $10,000 for the mine several months before he had ever seen it. Thus showing that his examination of the mine in January, 1884, merely went to corroborate the reports that he had received of it from his experts, Forman, Bliss; and that it was upon such reports, and his own judgment after an examination of the mine, that he made the purchase of it.
From all which it is clear to this court that the complainant has not proven his case, and the decree below is