Court Opinion

ID: 8765672
Source: CourtListenerOpinion
Date Created: 2022-11-26 12:24:00.415187+00
Date Added: 2024-06-11T17:01:51.295578
License: Public Domain

SHELBY, Circuit Judge
(dissenting). The view I take of this case requires me to dissent from the opinion and decree of the court.
The suit is brought by Mrs. Annie E. Snow against R. R. Hazlewood, who had been her attorney, and J. S. Hogg, James W. Swayne, R. E. Brooks, R. Oliver, E. J. Marshall, and W. T. Campbell, individually and as members of an alleged copartnership known as the “Hogg-Swayne Syndicate,” and W. F. Casey.
The bill alleges the fraud and bad faith of Hazlewood as the agent and attorney of the complainant, and a conspiracy of the Hogg-Swayne Syndicate with him to obtain at a nominal price certain valuable property of the complainant. It calls for sworn answers. The defendants answer under oath, denying the fraud and the conspiracy. Pursuant to a *906written agreement of the parties, the court appointed a special master in chancery, W. S. Moore, Esq., to hear the testimony, and, after hearing the evidence and argument of counsel, to report his conclusions of fact and of law on all the issues presented. The special master, after hearing the case, made a report showing a careful consideration of the evidence, exonerating Hazlewood from the charge of fraud and bad faith as an attorney, and also clearing him and the members of the Hogg-Swayne Syndicate of the charge of conspiracy to defraud the complainant. The complainant filed exceptions to this report. The learned trial judge, after considering the report and the evidence on which it was based and some evidence which the special master had rejected, confirmed the report in holding Hazlewood guiltless of the grave fraud charged against him, .and holding him and the Hogg-Swayne Syndicate guiltless of the conspiracy charged against them. The case comes to this court on appeal by the complainant, who assigns that the court erred in the decree confirming the report of the special master.
The pleadings present this question: Did Hazlewood, while complainant’s attorney, deceive and mislead his client, thereby inducing her to sell her interest in the Veatch survey to the Hogg-Swayne Syndicate for greatly less than its value, having conspired with the syndicate, or a member thereof, to so induce and deceive her, with agreement between the conspirators that Hazlewood was to have an interest in the purchase by the ■ syndicate ?
If there was no conspiracy between Hazlewood and the other defendants, and if when Hazlewood advised the sale of the Snow interest to the Hogg-Swayne Syndicate he did so in good faith and there was no agreement that he was to take an interest in the purchase, then the bill was properly dismissed. How does the case stand as to these issues? The charge of the fraud and the conspiracy is made in the bill, and swofn answers are called for. The complainant, under the forty-first equity rule, could have waived answers under oath, but she did not pursue that course. On the contrary, Hazlewood and Campbell were required to answer the material averments of the bill under oath, and also to answer two interrogatories relating to the charges of fraud, bad faith, and conspiracy. All the other defendants are also required to answer the material parts of the bill under oath. The sworn answers deny the charges clearly and with emphasis. The rule in such cases is plain. When the bill calls for answers under oath, and it is answered accordingly, the matters inquired about being within the personal knowledge of the respondent, the denials of the answer must be overcome by the evidence of two witnesses, or by one witness corroborated by circumstances which are equivalent in weight to another witness. This rule is as well established as any rule applicable to the trial of cases in equity. Morrison v. Durr, 122 U. S. 518, 7 Sup. Ct. 1215, 30 L. Ed. 1225; Vigel v. Hopp, 104 U. S. 441, 26 L. Ed. 765. In Codden v. Kimmell, 99 U. S. 201, 206, 25 L. Ed. 431, this rule is applied in a case where the bill attacked an assignment for fraud; and in Gilman v. Libbey, 4 Cliff. 447, Fed. Cas. No. 5,445, Mr. Justice Clifford applied the rule in a case in which the complain*907ant, who had been the client of the defendant, an attorney at law, brought suit against him alleging fraudulent conduct on his part as her attorney. It was a suit to recover property that it was alleged he had obtained partly by his fraudulent conduct as attorney. The court held that, in such case, “where the answer is responsive to the bill of complaint, and positively denies the matter charged, and the denial was in respect to a transaction within the knowledge of the respondent, the answer is evidence in his favor, and, unless it is overcome by the satisfactory testimony of two opposing witnesses, or of one witness, corroborated by other facts and circumstances, which give to it greater weight than the answer of the respondent, it is conclusive, so that the court will neither make a decree nor send the case to trial, but will simply dismiss the bill of complaint.” But, as the majority “eliminates” Hazlewood’s evidence, it may be that the answers of Hazlewood and Campbell are also ignored. But this is not permitted. In Brown v. Bulkley, 14 N. J. Eq. 294, the complainant sought to avoid the rule in question by impeaching the defendants, who had answered denying the allegations of the bill. The court held:
“The rule has been perfectly established for two centuries that the direct and positive answer of the defendant, responsive to the charges of the bill, must prevail unless overcome by two witnesses, or by one witness supported by circumstances, or by equivalent evidence. The admission of extrinsic evidence to discredit the answer by impeaching the credibility of the defendant is a subversion of the principle of the rule.”
The record does not disclose two witnesses, nor one witness testifying to the truth of the allegations of the bill on the crucial points — - the averment of the conspiracy, and the averment of Hazlewood’s fraudulent betrayal of his client. On the contrary, the two witnesses-who must know the real facts, Hazlewood and Campbell, testify in accordance with the denials of their answers, and they are sustained by Marshall, Brooks, and others as to collateral circumstances bearing on the main issues. The opinion of the court sustains the avermentsof the bill, contrary to the established rule above quoted, by collating circumstances of suspicion found in the record. These circumstances seem to me satisfactorily explained by the defendants, but, if they are not explained, they are not sufficient to authorize the granting of relief to the complainant. In Morrison v. Durr, supra, the court applied this rule, although it was said the record was “full of circumstances calculated to excite suspicion.” In Bowden v. Johnson, 107 U. S. 251, 262, 2 Sup. Ct. 246, 27 L. Ed. 386, cited in the opinion of the majority, the sworn answer was overcome by the evidence of one witness, Mrs. Valentine, who was corroborated by circumstances. In Clark’s Executors v. Van Riemsdyk, 9 Cranch, 153, 3 L. Ed. 688, where it was held that the answer may be outweighed by circumstances, the answer related to a fact “which in the nature of things cannot be within the personal knowledge of the defendant.” The circumstances which militate against the answers of the defendants in this case are collected in the opinion. They are not sufficient, in my judgment, even if unexplained, to bring the case within any exception to the rule. 1 Ency. Pldg. & Prac. 932, § 6, notes 1, 3.
There is another well-settled rule that would lead to the affirmance *908of the decree. The case was referred by the court to the special master to report,- not only the evidence, but the facts of the case and his conclusions thereon. The master’s finding is attended by a presumption of correctness, not absolutely conclusive; “but, so far as it depends upon conflicting testimony, or upon the credibility of witnesses, or so far as there is any testimony consistent with the finding, it must be treated as unassailable.” Davis v. Schwartz, 155 U. S. 631, 636, 15 Sup. Ct. 237, 39 L. Ed. 289. The case for the appellees is, I think, stronger than the rule requires, for the master’s finding is sustained by the weight of the evidence. On the turning point in the case it can only be successfully attacked by deciding against the credibility of witnesses who were evidently believed to be speaking the truth by the special master and the learned judge of the trial court.
There is another feature in the case that gives greater weight to the master’s report. The order of reference was made by written agreement of the parties. It was held in Kimberly v. Arms, 129 U. S. 512, 524, 9 Sup. Ct. 355, 32 L. Ed. 764, that a reference by consent of parties of an entire cause for the determination of all the issues, though not strictly a submission of the controversy to arbitration, is a submission of the controversy. to a tribunal of the parties’ own selection, and the' findings should not be disturbed unless clearly in conflict with the weight of the evidence on which they were made.
The proper application of these familiar rules in my opinion would require an affirmance of the decree of the Circuit Court.
But, if the foregoing rules are disregarded, I reach the same conclusion from an examination of the record.
It is true, of course, that Hazlewood could not, while acting as Mrs. Snow’s attorney to sell the property, become interested in its purchase. If he bought under such circumstances, he would hold the property in trust for her, and the purchase, so far as he was concerned, would not be valid unless she ratified it. But, after she had sold her interest and executed a transfer and he had ceased to be her agent as to the property sold, there is no good reason why he could not buy an interest in it from her vendees. After she had sold her interest, his right to buy is well settled. Robertson v. Chapman, 152 U. S. 673, 682, 14 Sup. Ct. 741, 38 L. Ed. 592; Walker v. Carrington, 74 Ill. 446; McGar v. Adams, 65 Ala. 106.
The case turns on the question whether or not, before or at the time of Mrs. Snow’s sale, it was agreed between Hazlewood and Campbell, the latter acting for the Hogg-Swayne Syndicate, that Hazlewood was to have an interest in the property transferred by Mrs. Snow. The weight of the evidence, in my opinion, sustains the defendants’ sworn answers that there was no such agreement. Both Hazlewood and Campbell so testify. Brooks, whose relations to the syndicate were such that an agreement of this kind would probably not have been made without his knowledge, testifies that he had no knowledge of such an agreement. Moreover, it is shown that no member of the syndicate knew of it. There is nothing to indicate that Campbell would have felt authorized to make agreements with Hazlewood as to the sale of property without the knowledge of Brooks or of other members ■of the syndicate. ■ On the contrary, when it came to closing the pur*909chase of the Snow interest, including also the half interest of Hazlewood, Gordon, and Beaty, Judge Brooks declined to take the attorneys’ half. He was evidently in control at that point. Are we to believe that Campbell would have ventured to make an agreement to let Hazlewood have one-half interest in the purchase from Mrs. Snow without consulting Brooks, Hogg, Swayne, or any other member of the syndicate? It seems to me clear that, if the conspiracy existed, it was not confined to Hazlewood and Campbell. The complainant, however, tries to avoid the burden of fastening the grave charges on Hogg, Brooks, and others. Campbell is selected, being less conspicuous, as the vicarious victim. It is not reasonable, however, that Campbell would have acted without informing others of the syndicate, and the fact that the others deny all knowledge of the alleged fraud is a strong circumstance in favor of the truth of the answers of Hazlewood and Campbell.
The evidence convinces me that, under all the circumstances that surrounded the litigation in which Mrs. Snow was engaged, the sale of her interest for $10,000 was not unwise, and that the price at that time was fair. The charge in the bill that Hazlewood fraudulently induced her to malee a sale for an inadequate price is not sustained by the evidence. The fact that Beaty, Gordon, and Hazlewood offered to sell on exactly the same terms on which the latter advised Mrs. Snow to sell is a circumstance, almost, if not entirely, conclusive, to show that, as things then appeared, $10,000 was a fair price for her interest. The attorneys would have sold at the same price if Judge Brooks had not declined to have the syndicate buy their interests. They all three offered to do what Hazlewood advised her to do. The weight of the evidence of other witnesses, moreover, is to the effect that the price was, under the circumstances, fair and adequate. If the bubble of speculation and inflated prices Had burst a little sooner than it did, she would have plumed herself on her wisdom in selling, and the attorneys would have regretted their failure to sell on the same terms. Events occurred that increased the value of the property she had sold, and great stress is laid on the increased value to show that she was induced to sell at an unfair price. That is a circumstance that appears in every case where a rescission and cancellation of deeds is sought and a tender of purchase money is made, because if the property, at the time of the suit, was not worth more than the amount paid for it, there would be no reason for suing. That Hazlewood advised her in good faith is shown by the further fact that Beaty, a lawyer well informed as to the facts and who had a one-sixth interest in complainant’s claim, frequently offered to,sell his interest on the same terms that Mrs. Snow sold hers. Hazlewood could have bought Beaty’s interest at the time he advised the sale of Mrs. Snow’s, or at the time he purchased an interest from the syndicate. I cannot believe that he would have conspired with Campbell to cheat his client and obtain an interest in the property when he could have obtained nearly the same result by a purchase of Beaty’s share.
Mrs. Snow’s son, John Allen Veatch, was on the ground and took part in the negotiations leading to the sale of his mother’s interest. He appears to be fully competent to understand the business connected *910with the sale. He was a mining engineer, 34 years of agé, and, according to his own statement, received an annual salary of $20,000. He approved of the sale, and thought the price fair at the time it was made.
The complainant seeks to overcome these convincing circumstances by asserting that Hazlewood deceived not only his client, who was in California, but the lawyers Gordon and Beaty, and the mining engineer, Veatch, who were on the ground and had every opportunity to know the market value of the property. The special master and the Circuit Court ruled correctly, I think, in refusing to indorse such a theory.
1 do not concur in the view that the burden of proof is on the defendants. A conspiracy being charged in the bill and denied in the answers, the burden is on the complainant to prove it. Hazlewood -being charged with betraying and deceiving his client, and having denied it, the- burden is on the complainant to prove the charge. Cochran v. Blout, 161 U. S. 350, 16 Sup. Ct. 454, 40 L. Ed. 729. Moreover, the evidence, where fraud is charged, must be so clear and cogent as to satisfy the triors of the issue of the truth of the allegation. The law is reluctant to impute fraud and unfair dealing on slight and conflicting evidence, and thereby cast an unjust reproach of a grave nature on the character of the defendants. Bump on Fraudulent Conveyances, 562.
I concur in the view that, it appearing that Hazlewood acquired an interest shortly after the termination of his agency, it is incumbent on him to show affirmatively that there was no agreement at the time of the sale by the principal that he was to have an interest in the purchase. He does this in the only way that it could be done, by his own testimony, giving in detail the facts that led to his purchase several weeks after Mrs. Snow’s sale, and by the testimony of Campbell, who acted for the Hogg-Swayne Syndicate in making' the sale to Hazlewood,' and by Marshall, who was present when Hazlewood’s note was given and who made the suggestion as to dating it back to November 8th, so'that it would bear interest from that time; and Marshall’s evidence -also indicates that he was a witness to the transfer made to Hazlewbód, which does not appear in evidence and will be referred to later. r All- three of these witnesses testify to circumstances which enable ¡them to fix the date when Hazlewood acquired the interest, and that 'it was'-about the last of November or the first of December. This evidence, ■ I .think, fully shows that Hazlewood acquired the interest in question after the termination of his agency. The evidence showing that there was no previous agreement that he was to have such an interest has already been mentioned.
Mrs. Snow’s deed conveying hér interest to a trustee for the syndicate is dated November 6, 1901. She alleges in her bill that before or at that time it was understood between Hazlewood and the other defendants that the former wás to have a one-half interest in the purchase from her. Hazlewood claims that he' obtained his interest afterwards, between November 28 and December 4, 1901. Great stress' is laid on the date of a note offered in evidence as tending to sustain the averments of the bill. Here is the photographic copy of the note:

*0

*911On the back of the note is the following indorsement, without date:
“It is hereby agreed that the one-fourth interest in the Snow claim, being one-half of that of Mrs. Annie Snow purchased by W. T. O. and held in the name of W. E\ Casey is security for this obligation.
“R. R. Hazlewood.’’
Just below this indorsement are several credits, beginning December 4, 1901. This photograph was taken by a photographer in New Orleans, who received the note from E. C. McLean, one of the appellant’s attorneys. The record shows, without substantial conflict, the manner in which the original note was obtained by McLean. While Gordon and Hazlewood were partners in the practice of law at Beaumont, Tex., they bought an iron safe for use in their office. It had an outside door with a combination lock and two inside steel doors that locked with keys. Gordon had the combination to the safe, but each carried a key to the inner doors. Inside were wooden boxes, each having two keys. One of these boxes was used by Gordon and one by Hazlewood for keeping their private papers. Gordon kept both keys to the box in which he kept his private papers, and Hazlewood kept both keys to the box in which he kept his private papers. Hazlewood had in his private box,, among other papers, the paid note which he had made to Campbell when he bought the interest in the Snow claim. He testifies that he also had in the box a written transfer made by Campbell at the same time the note was given, which written transfer bore its true date. When Hazlewood was served with subpoena in this case, he went to the safe to get these papers. The outer door of the safe had been opened in the morning, and, on trying to unlock his private box, he found something wrong with it, but he finally opened it. He saw marks on the edge of the box indicating that it had been forced open with a chisel. He found in the box other papers which he kept there, but the note he made to Campbell and the transfer which Campbell made to him were both gone. He then called witnesses to see the condition of the box. W. D. Gordon, who testifies for the complainant, says, in substance, that he and McLean concluded that Campbell had advanced the money to Hazlewood for a portion of the purchase by the Hogg-Swayne Syndicate from Mrs. Snow, and that evidence to sustain this theory existed in Hazlewood’s box in the safe. By taking out the box immediately above Hazlewood’s box, he (Gordon) and McLean were able to raise the lid over Hazlewood’s box and get access to his papers. In that way they obtained the original, note, and McLean, carried it to New Orleans, where it was photographed. It was then returned to the box.
The note is dated two days after the date of Mrs. Snow’s deed, but it is so near its date as to give some support (if it bears its true date) to the theory that Hazlewood had an interest in the purchase when made. If the transfer had been produced, it would, probably have made it clear when Hazlewood'acquired an interest.Hazlewood says it was in the box with the note. There is conflict between his statement and Gordon’s on this point. Both Hazlewood and Campbell, as has already been said, testify that the former’s purchase of an interest in the Snow claim occurred between November 28 and Decern*912ber 4, 1901 — and they give reasons for so fixing the date — ¿and that the note was dated back to November 8th to make it bear interest from that date. Marshall, a witness with little, if any, interest in the suit, corroborates this statement. The special master evidently believed them; and I see no good reason to doubt the truth of their statements. The transfer, if it could have been produced, would have cleared up the difficulty. Hazlewood, Campbell, and Marshall testify, in effect, that there was such an instrument, and that it bore the true date. Hazlewood says it was in his box. It is altogether probable that he would have kept it in the box with the note. Evidence was offered of declarations by McLean tending to show that he claimed to have in his possession a transfer from Campbell, the existence of which he thought Campbell would deny. The complainant did not examine McLean as a witness. When Hazlewood’s “private 'box was surreptitiously ravished” — to quote the opinion of the majority in this case — in the unlawful hunt for evidence to convict him of fraud, if the transfer with the true date had been found, would it have been photographed also? Would it have been offered in evidence? Would not the motive that made the searchers disregard the sanctity of private papers have been strong enough to make them produce and use only those that .tended to sustain the theory they sought to establish? The motive that caused this invasion of Hazlewood’s private box must have been strong to have made lawyers violate a right instinctively respected by gentlemen and held so sacred in this country that it has been the subject of constitutional protection — the right to hold one’s papers secure against unreasonable and unlawful searches and seizures. When a motive exists that leads to such a method of obtaining evidence, we should scan with suspicious scrutiny all the evidence coming from the same source.
In my opinion, the evidence shows that a transfer was made, bearing date the latter part of November or the 1st of December, 1901, and that the note was dated back to make the interest run from November 8th, as explained by Hazlewood, Campbell, and Marshall.
I think the decree of the Circuit Court confirming the report of the special master should be affirmed.