Case Name: NEVADA MINING AND EXPLORATION COMPANY v. RAE
Court: Supreme Court of Nevada
Jurisdiction: Nevada
Decision Date: 1923-09-05
Citations: 47 Nev. 173
Docket Number: No. 2568
Parties: NEVADA MINING AND EXPLORATION COMPANY v. RAE
Judges: 
Reporter: Nevada Reports
Volume: 47
Pages: 173–197

Head Matter:
No. 2568
NEVADA MINING AND EXPLORATION COMPANY v. RAE
September 5, 1923.
218 Pac. 89.
1. Trusts — Allegations Held to Have No Place in Complaint.
In a suit by corporations to have defendants declared trustees of certain mining claims for benefit of plaintiffs by reason of defendant's failure to carry out their contract to sell plaintiffs’ property conveyed to defendants for that purpose, a paragraph in the complaint alleging that C., to facilitate the sale, advanced sums of money to plaintiffs, held to have no place in complaint, since, if C. had any grounds for relief, it was against plaintiffs.
2. Pleading — Code of Civil Procedure, though Liberal, Does Not Justify Amendment after Verdict to Enable Party to Plead Cause of Action Opposed to Theory of Original Complaint.
Code of civil procedure, though liberal, does not justify an amendment after verdict so as to plead a cause of action diametrically opposed to the theory of the original complaint and that upon which plaintiff proceeds until after the verdict is rendered.
3.- Pleading — Amendments to Original Complaint Held to Present Two Inconsistent Theories. •
Where the original complaint in a suit to have defendants declared trustees of certain property for benefit of plaintiffs was based upon the terms of an alleged contract with defendants under which the latter agreed to sell plaintiffs’ property and account to plaintiffs for proceeds, it was error to allow plaintiffs to file an .amended complaint to conform to the proof charging that defendants procured the contract by fraud without its having been read by plaintiffs, as the amendment entirely changed the theory of plaintiffs’ case as presented in the original complaint, or at least incorporated two inconsistent theories into the complaint.
4. Fraud — Fraud Must Be Clearly Proved.
Fraud is never presumed, but must be clearly and satisfactorily established.
5. Contracts — Fraud Not Shown by Mere Failure oe One Party to Read Contract.
That one party to a contract signs it without reading it does not establish fraud where he does not testify that its terms were not explained to him, or that he was misled, and especially where he does testify that some time after signing it he read it and was satisfied with its terms, and remained so satisfied for about six years.
Appeal from Eighth Judicial District Court, Lyon County; T. C. Hart, Judge. '
Suit by the Nevada Mining and Exploration Company and another against J. H. Rae and others. From judgment for plaintiffs and from an order denying motion for new trial, defendants appeal.
Judgment and order reversed, with direction to enter judgment for defendants. Rehearing denied.
Leonard B. Fowler, Robert Richards, Mack & Green, and Clark J. Guild, for Appellants:
Amendment may be allowed after verdict, presenting issue upon which both sides have introduced evidence; but amendment after verdict, changing issues so as to require new trial, should be refused. 31 Cyc. 404; Huron Dock Co. v. Swart, 24 Ohio C. C. 504.
Where person signs document, he is not permitted to show he did not know its terms, and in absence of fraud is bound thereby. It is immaterial that he did not read and does not know contents. 13 C. J. 277; Gage v. Phillips, 21 Nev. 150.
One seeking equitable relief where subject-matter involves highly speculative enterprise must act with diligence. Kinne v. Webb, 49 Fed. 515, affirmed 54 Fed. 34; Gamble v. Silver Peak M. Co., 34 Nev. 432.
Proof of fraud must be clear and convincing, especially in cases where one seeks, cancelation of his own written instrument. 9 C. J. 1254. Facts constituting fraud must be specifically alleged. Gruber v. Baker, 20 Nev. 476.
Platt & Sanford and Edward F. Treadioell, for Respondents:
Where one holding fiduciary relation to another wrongfully mixes his property with property of such other, he must bear full loss occasioned by impossibility of identifying property. Lightner M. Co. v. Lane, 161 Cal. 689.
The case is strictly in equity' and verdict of j ury is only advisory; therefqre error in instructions is not ground for reversal. Johnson v. Rosaschi, 44 Nev. 394. Same rule applies to amendments to pleadings. The changes made removed only immaterial variances. Rev. Laws, 5080; Miller v. Thompson, 40 Nev. 39.
Until decision, amendment is proper to conform to proof. McCausland v. Ralston, 12 Nev. 195. So long as it is not entirely foreign and arises from same general state of facts, amendment is proper. Cox v. McLaughlin, 76 Cal. 60.
Entering into contract without any intention of performing it, especially where confidential relation exists, constitutes fraud. 13 C. J. 386; 13 Cyc. 487; Old Colony Trust Co. v. Dubuque & Co., 89 Fed. 794.
Where fraud is charged, a person may prove that he did or did not read instrument. 13 C. J. 387; Lamb v. Lamb, 30 N. E. 36.
Considerable indulgence should be shown for lack of diligence where confidential relation exists. 16 Cyc. 176; Wilson v. Wilson, 23 Nev. 267.

Opinion:
By the Court,
Coleman, J.:
This is an appeal from an order denying a motion for a new trial, and from the judgment rendered in favor of the' plaintiffs in a suit instituted for the purpose of having the defendants declared trustees of certain mining claims for the use and benefit of the plaintiffs. A demurrer to the original complaint urging numerous grounds therefor, and a motion to strike certain portions thereof, were filed, which being overruled, the defendants filed their answer. A reply having been filed, the case came on for trial béfore a jury as advisory to the court upon questions of fact. After the jury had brought in a general verdict in favor of the plaintiffs, an application was made to the court for leave to file an amended complaint to conform to the evidence, which was granted over the strenuous objections of the defendants. An answer to the amended complaint was filed, after which there was a reply denying the affirmative matter alleged in the answer. Subsequently the court rendered a judgment and decree in favor of the plaintiffs as prayed.
It is alleged in the original complaint, inter alia, that at a given time M. Cohn and J. H. Rae were each the' owners of an undivided one-half interest in the mining ground in question; that for some years they were engaged as copartners in holding, developing, and perfecting the title to said property; that on April 1, 1902, for the purpose of more conveniently handling and operating said property, said Cohn and Rae caused to be organized the Nevada Mining and Exploration Corporation, one of the plaintiff corporations, and caused to be conveyed thereto the mining claims referred to, and that thereafter, and on or about March 16, 1906, said Cohn and Rae caused to be incorporated the Virginia and Tonopah Gold Dredging Company, and caused to be conveyed thereto a portion of the property in question, and that said Cohn and Rae were at all times the owners of all of the stock in said corporations; that thereafter the plaintiff corporations performed assessment work upon and developed said mining claims, and that said Cohn expended and advanced to said plaintiffs large sums of money for the purpose mentioned. It is further alleged that on or about January 29, 1913, the defendant Rae represented to said plaintiffs that there was an opportunity to make an advantageous sale of said property, and that he desired to have a deed of the property made to him by the plaintiffs in order that he might consummate such sale, and that it was agreed between plaintiffs and said Rae that he might sell said property for $40,000, whereupon a deed was made and executed by plaintiffs conveying said property to defendant Rae, to be delivered upon payment of said sum. It is further alleged that said sale was not consummated, and that, on or about November 11, 1914, another agreement was entered into. We quote from the complaint as follows:
" An agreement was entered into between the said plaintiffs and said defendant J. H. Rae to the effect that said deed should be delivered to the said J. H. Rae, and that the said J. H. Rae should form a corporation for the purpose of taking over, operating, and developing said property, the stock in which should be issued to the said J. H. Rae, and that either the said property or the stock in the corporation so to be formed should-be sold, and that, upon the consummation of said sale, the said sum of $40,000 should be paid to the plaintiffs. It was further provided by said agreement that, if the sale was consummated by the sale of the stock in the corporation so to be formed, the said $40,000 should be paid from the proceeds of sale thereof, and, if consummated by the sale of property, the same should be distributed in the form of dividends to said J. H. Rae, and by him paid to said corporations plaintiff; that the agreement to transfer the said property to said J. H. Rae and to the corporation so to be formed was solely for the purpose of conveniently handling and disposing of said property and without any intention of changing the beneficial interests of the said plaintiffs in said property."
It is further averred that no consideration was paid for said property by Rae; that immediately after the delivery of said deed to Rae, he had the same recorded; that at the time of said transaction plaintiffs had entire and complete confidence in the said Rae and the representations made by him, and believed that the said Rae entered into the same in good faith in order to consummate the contemplated sale, and that plaintiffs at all times believed that Rae had formed a corporation to hold said property in accordance with said agreement, and that such corporation so formed was holding said property until the sale thereof, and that said Rae or said corporation was holding the stock thereof, and was endeavoring to consummate a sale of said property either by the sale of the same or by a sale of the stock in bulk, for the sum of $40,000 net, to the plaintiffs, and that they so continued to believe until the year 1920.
It is further averred that the said Rae did not incorporate nor cause to be incorporated a company for the purpose of taking over, operating and developing the said mining property, but, on the contrary, on or about November 16, 1914, he caused to be incorporated a corporation known as the Rae Consolidated Gold Dredging Company, with which are certain ones going to the refusal of the court to strike certain portions of the complaint.
Paragraph V of the complaint reads:
"Thereafter the said plaintiffs continued to develop said properties and to do the assessment work thereon, and to perfect their title thereto, the said Morris Cohn expending and advancing to said corporations large sums of money for the purpose aforesaid."
It is clear that this paragraph has no place in the complaint. This is a suit by two corporations, and not one in which Morris Cohn is a party plaintiff. Furthermore, it appears that the advances made by Cohn were made to the plaintiffs in the action, and, if he had any ground of relief on account of the advances, it is clearly against the plaintiffs, and not against the defendants, or any of them. However, pursuant to the paragraph mentioned, evidence was introduced showing-large advances by Cohn. Such testimony, under the terms of the paragraph mentioned and the pleadings generally, coulcl have served no other purpose than to confuse the court and jury.
We next come to the contention that the trial court erred in permitting plaintiffs to file an amended complaint. Counsel for respondents contend that the amendments were to conform to the proof. In this we cannot agree. We have quoted from the original complaint the allegations charging the execution of a contract between the plaintiffs and J. H. Rae on November 11, 1914. The plaintiffs, instead of repudiating that contract in the original complaint, sought to establish its terms as the basis of their right of action. The complaint charges that the plaintiffs at all times believed that Rae entered into said contract in good faith in order to consummate the sale of said property. Such were the solemn allegations of the complaint, duly sworn to by M. Cohn after he had had possession of the written contract for over six years. The plaintiffs conducted the trial in accordance with the theory presented in the original complaint. Mr. Cohn did not testify on direct examination, nor did plaintiffs seek to show that he did not read the contract or fully understand its terms. His testimony to the effect that he did not read the contract was given under cross-examination. The entire manner of conducting the case by plaintiffs, until after the verdict of the jury, shows that they were relying upon the theory presented in the original complaint. There is not a word or a line in the complaint indicating that plaintiffs sought to charge fraud, unless it be that Rae entered into the contract without intention to fulfil it, and this allegation, interpreted in the light of plaintiffs' attitude in the case from the beginning to the time leave was sought to file the amended complaint, indicates that the plaintiffs entered into the contract understanding its terms, but that, while Rae understood its terms, he never contemplated abiding by them, and had in fact not carried out the terms of the contract.
The amended complaint charged that Rae falsely and fraudulently, and for the purpose of depriving the plaintiffs of said property and of acquiring the same for his own use, represented to the plaintiffs that he (Rae) intended to make a sale of said properties, and thereby prevailed upon said plaintiffs to deliver the deed to said property to him, and that, pursuant to representations so made by Rae, the contract in question was executed without its having been read, and that it does not in fact embody the real terms agreed upon.
We are of the opinion that the court should not have made an order permitting the filing of the amended complaint. Our code of civil procedure is quite liberal as to amendments, but there is nothing therein which justifies an amendment after verdict so as to plead a cause of action diametrically opposed to the theory of the original complaint and that upon which the plaintiff proceeds until after the verdict of the jury is rendered. This court,. in Marshall v. Golden Fleece M. Co., 16 Nev. 156, 180, in passing upon the refusal of the trial court to permit an amendment changing the theory of a party, said:
"We are unable to say, and so was the court below, that defendants expected, or had reason to think, that the affairs of the company, subsequent to the commencement of the action, would be inquired into with the view of arriving at a judicial settlement of the same, or that the case was, in fact, tried upon that theory. The contrary plainly appears. Such being the case, it would 'have been an unwarrantable exercise of power to have permitted the amendment at the time it was asked."
While the facts in that case are very dissimilar from those in the instant one, it-clearly appears from the quotation that the court held that the defendant had no reason to anticipate, from the nature of the pleadings, that the case would be tried upon the theory sought to be presented by the amendment, or that it was so tried, but that it clearly appeared that it was not tried upon that theory, and, such being the case, it would "have been an unwarrantable exercise of power" for the court to have allowed the amendment. While the rule thus adopted by the court is contrary to that prevailing in California (Bradley v. Parker, 34 Pac. 284), it is in accord with the great weight of authority, and what seems to be the safer rule. In Foste v. Standard L. & A. Ins. Co., 26 Or. 449, 38 Pac. 617, it is said:
"Courts should be liberal in allowing amendments, and when the cause of action is improperly set forth in the complaint, or a pleading is defective in any respect, the court may, in its discretion, at any stage of the case before the cause is submitted, authorize such amendments as may be necessary to make the case as intended by the original pleading, but not to insert a new and distinct cause of action or defense. Ford v. Ford, 53 Barb. 525; Davis v. Railroad Co., 110 N. Y. 646; 17 N. E. 733; Baldock v. Atwood, 21 Or. 79, 26 Pac. 1058."
See, also, Barnes v. Quigley, 59 N. Y. 265; Clark v. St. Louis T. R. Co., 127 Mo. 255, 30 S. W. 121; Anderson v. Groesbeck, 26 Colo. 3, 55 Pac. 1086; 1 Stand. Ency. Proc. 919; 1 Ency. Pl. & Pr. 584-586; Grand Cent. M. Co. v. Mammoth M. Co., 29 Utah, 490, 83 Pac. 648, 685.
It is contended that the amendments presented by the amended complaint are only formal, and made to conform to the proof, and that defendants were in no way prejudiced, as they might have presented such further material evidence as may have been available. It is very likely that the trial court' in allowing the amendments accepted this view. We have pointed out that the amendments are not merely formal. They entirely change the theory of the plaintiffs as presented' in the original complaint. At least, if they do not do this, they incorporate into the complaint an entirely different theory, thereby presenting two theories as a basis for recovery, and theories, too, which are inconsistent, both of which cannot be true. Such amendments could but be confusing. Clear-cut, well-defined issues should be presented by the pleadings. They are essential in every system of pleading, and there can be no orderly administration of justice without them, and, if a party can allege one cause of action, and then recover upon another, or if his complaint can be so drawn that it will be difficult to determine which of two apparent theories he proceeds upon, it can serve the purpose only to ensnare and mislead the adversary. Christensen v. Duborg, 38 Nev. 404, 150 Pac. 306.
March 5, 1924.
223 Pac. 825.
1. Cancelation oi'' Instruments — Heal Contract Must Be Pleaded in Action to Rescind Contract.
In an action to rescind a contract, the real contract entered into must be pleaded.
2. Contracts — Oral Negotiations Embodied in Writing..
Generally when parties have committed their agreements to writing all oral negotiations and stipulations are embodied in the writing itself.
3. Mines and Minerals — Evidence Held Not to Prove that Contract Conveying Mining Claims Was Procured by Fraud.
Evidence hold insufficient to prove that contract conveying mining claims, providing for incorporation by grantee of a corporation for the development of the mines, was procured by fraud in that grantee did not intend to comply with its terms at the time it was executed.
On petition for rehearing.
Petition denied.
We think there is another reason why the evidence does not justify the amendment. While Cohn swore he did not read the contract, he did not testify that its terms were- not explained to him, or that he was misled. Besides, he testified that several months after it was signed he read it and was satisfied with its terms, and remained so satisfied for about six years, during which time the defendant company spent many thousands of dollars upon the property. Fraud is never presumed and must be clearly and satisfactorily established. Gruber v. Baker, 20 Nev. 476, 23 Pac. 859, 9 L. R. A. 302. There is no such testimony in this case.
While we have deemed it proper to dispose of the foregoing questions, we are clearly of the opinion that there is no competent and relevant evidence in the record to establish fraud upon either of the theories suggested "by the pleadings.
For the reasons given, the judgment and order are reversed, and the trial court is directed to enter judgment in favor of the defendants.