Case Name: Smith v. Detroit & D. Gold Min. Co, et al.
Court: South Dakota Supreme Court
Jurisdiction: South Dakota
Decision Date: 1903-11-11
Citations: 17 S.D. 413
Docket Number: 
Parties: Smith v. Detroit & D. Gold Min. Co, et al.
Judges: 
Reporter: South Dakota Reports
Volume: 17
Pages: 413–423

Head Matter:
Smith v. Detroit & D. Gold Min. Co, et al.
1. An agreement for the purchase of mining clains stipulated, that, if adverse claims were established to any portion of the land embraced in the agreement, the price would be reduced pro rata. The purchaser at the time of securing the option knew, that title to portions of the land was in dispute. The seller claimed to own all the land included in the agreement, but some ground was subsequently adjudged to be the property of another. The agreement also made mistakes in the boundries of certain lodes. ’ Held, that the purchasei was not entitled ■ to rescind the agreement.
2. Under Rev. Civ. Code 1903, § 1285, requiring a party, in order to accomplish a rescisión of a contract, to act promptly on discovering the facts entitling him to rescind, a purchaser under an option agreement, if entitled to rescind because the title to a portion of the land had been adjudged to be in a third person, lost his right to rescind by his failure to oiler to do so for about 15 months after discovering that such portion belonged to the third person.
3. An agreement for the purchase of a mining claim cannot bo rescinded, after the selling price has greatly depreciated, by demonstrating its unproductiveness, as the purchaser cannot then restore to the seller everything of value which he received.
4. The word “improvements,” in an agreement for the sale of mining claims, which stipulated that, if the purchaser failed to perform his agreements, -the improvements should become the property of the seller, as rent for the occupation of the premises by the purchaser, and as damages sustained by reason of a breach of the contract, includes removable betterments placed on the land by the purchaser, and which he might in the absence of an agreement to the contrary, takeaway.
5. Under Rev. Civ. Code 1903, § 1275, providing that parties to h contract may agree on the amount of the damages sustained by a breach thereof, when, from the nature of the case, it would be difficult to fix the actual damage, the parties to an agreement for the purchase of mining claims may agree on the amount of damages that a breach thereof would occasion.
Corson, J., dissenting.
(Opinion filed Nov. 11., 1903.)
Appeal from circuit court, Lawrence county. Hon Joseph B. Moore, Judge.
Action by Patrick H. Smith against the Detroit & Deadwood Gold Mining Company and others. Prom a judgment for plaintiff, defendants appeal.
Affirmed.
Martin & Mason, for appellants. .

Opinion:
Puller, J.
Upon all the testimony offered at the trial of this action to recover the possession of certain articles of mining ma chinery and equipments, with damages for theirwrongful removal and detention, the court determined, as a matter of law, that plaintiff was entitled to recover the property described in his complaint, or its value in case a return could not be had, together with such damages as the jury might find established by a fair preponderance of the evidence. Unless it was error to overrule the defendant's motion for the direction of a verdict, and charge that plaintiff was entitled to the possession of the property at the commencement of the action, the instructions of the court relative to thp question of damages furnish no just ground for complaint.
The determination of this appeal from a judgment in favor of respondent, and an order denying a motion for a new trial, requires the construction of a contract by which appellants were given the option to purchase certain mining interests and claims situated in the Two Bit mining district, of Lawrence county. On the 21st day of February, 1898, when respondent deposited his deed in escrow, and appellants paid $5,000 and went into possession pursuant to the option agreement, considerable excitement prevailed in that district concerning the discovery of gold, and appellants agreed to prosecute the work of sinking a shaft to quartzite with all possible dispatch, and, in case ore was not struck when quartzite was reached, they agreed to run drifts from the bottom of the, shaft in order to obtain ore as soon as possible. On full compliance -with their agreement, and the receipt of $45,000. in^addition to the $5,000 paid respondent for the option, the deed deposited in escrow was to be'delivered to appellants. It was further provided that ' 'in case said parties of the second part shall fail to carry out any of the conditions of this option at the time they become due respectively, then this option shall cease and determine, and the deed so deposited is to be delivered back to said party of the first part. In case said parties of the second part shall fail to carry out the covenants and agreements of this option, and shall have made any payments thereon, said payments and improvements shall become the property of said party of the first part as rent for the occupation of the premises during the time that the party of the second part may be in possession thereof, and as the damages which said party of the first part may sustain by reason of a breach of this contract are difficult of estimation, said sums are agreed upon as damages and as rent for the said premises. " •
Appellants knew when they secured the option to purchase this unpatented property that the title to por cions of it was in dispute, and it is clear that respondent claimed to own and included in the agreement some ground that was afterward adjudged to be the property of another. As a means of adjustment, and to save appellants "harmless from all loss and damages arising from any such adverses and controversy, ' ' the following provision was inserted in the contract: "In case adverse claims are successfully established to any portion of the ground above set forth, or in case said party of the first part shall compromise any adverse claim or controversy, said party of the first part covenants and agrees that said balance due of forty-five thousand ($45,000) dollars may be reduced at the rate of four hundred and fifty ($450) dollars per acre for all ground which he may lose by reason of any such adverse litigation or compromise. ' ' When appellants had sunk a shaft to quartzite and drifted therefrom 361 feet east and 374 feet west, without discovering any ore, they attempted to rescind the option agree- ment, after first secretly severing and removing from the premises the machinery and implements employed in the business, and described in the complaint as follows: "Two boilers, $200 each; one hoisting engine, $600; one air compressor, $600; two air drills, $175; piping and fittings for said air drills, $200; one electric light plant, fittings, and machinery, $600; one station pump and fittings, $600; one sinking pump and fittings, $400; one air drum, $75; one hoisting cage, $75; thirteen hundred feet of iron track; $200; miscellaneous lot of drills, tools, and other personal property belonging to the Ground Hog claim, and used at the hoist thereon, $200. ' '
The reasons for rescission stated in the notice, and urged by counsel for appellants, are ' 'mistake and misrepresentations of material facts concerning the said properties, and the extent, situation and boundaries of the same, relying upon which representations the undersigned were induced to enter into the said alleged contract, and to make extensive expenditures in connection therewith, and also by reason of failure of the consideration of the said alleged contract in material respects. ' '
Appellants were not only aware, at the time of making the contract that some controversy had arisen with reference to conflicting claims, but it actually knew for about one year and three months before it offered to rescind that the title to a portion of the property had failed. It would do violence to the terms of this option agreement, were we to assume that facts justifying rescission ever existed; and, if such there were, the right was lost by appellants inexcusable delay. Section 1285, Rev. Civ. Code 1908. Granting that the mistake as to the boundaries of certain lodes was an essential inducement of the option agreement, recission is prevented by the stipulation that $450 per acre be deducted from the balance to be paid, should appellants elect to purchase the property, and the undisputed evidence shows such amount to be more than ample compensation for all ground for which an adverse claim was established. As the value of these mining locations depended upon the contingency of finding gold in paying quantities, the $5,000 was paid for the mere' chance to win large profits, and the option to purchase the property should the venture prove successful.
The contract cannot be rescinded for the further reason that the selling price of the property was greatly depreciated by demoustratiag its unproductiveness, and the abandonment of. undisturbed possession at so late a time cannot restore to respondent everything of value which appellant received.
There is no merit in the contention that the shaft and drifts are the iinprovements which it was stipulated should be retained by respondent as rent for the occupation of the property during the time appellants might continue in possession, and as damages arising from a breach of the contract to purchase. At the termination of appellants' estate by their failure to perform the conditions of the option, such holes in the ground would of necessity revert with the land to respondent, and it was never the intention to regard anything of that character as an improvement. The parties had reference to removable betterments,- which, in the absence of an agreement to the contrary, might be taken away. At page 66 of 16 Am. & Eng. Encyc. of Law, the author appends the following note to his definition of the term "Improvements": "It would be difficult to select a more comprehensive word, and, where the parties say that all improvements which may be placed on the premises shall belong to the lessor, it is difficult to say what, if anything, would be excluded." At the time the option was obtained and appellants went into possession, there was great activity in the Two Bit mining district, and the market for mining ground was good, but since that time development work and sales have ceased. In fact, there was but one shaft in operation when appellants abandoned their undertaking, and surreptitiously removed the property to recover which this action was instituted. Mining propositions being usually more or less hazardous, and the'value of undeveloped lodes speculative. it would be extremely difficult to ascertain the actual detriment caused by a breach of such a contract as this, and for that reason the parties could anticipate and lawfully agree upon the amount of damages that a breach thereof would occasion. Section 1275, Rev. Civ. Code 1903; Barnes v. Clement, 8 S. D. 421, 66 N. W. 810.
Without the aid of a brief on the part of respondent, we have carefully examined every point urged as error, and find nothing for which the case should be reversed. The judgment appealed from is therefore affirmed.