Stewart v. Santa Rosa Mining Co.

BARNARD, P. J. This is an action on a note for $5,000 given to the plaintiff by the Santa Rosa Mining Company, which will be referred to as the mining company.

In 1933, the plaintiff and one Duncan located four mining claims in Inyo County, known as the Empress Nos. 1 to 4. On June 23, 1938, the plaintiff and Duncan sold these claims to the mining company, of which J. R. LeCyr was president and manager, and the mining company as part of the consideration gave to the plaintiff two notes for $2,500 each, secured by a mortgage on the Empress claims. The mining company did not pay these notes and did not perform the annual assessment work on these claims for the year ending June 30, 1939.

On September 1, 1939, one Howell, who had been prospecting with the plaintiff, attempted to locate the same claims calling them the “Wide West Nos. 1 to 4,” his notice of location stating that they were a relocation of the Empress claims. Later that same day J. R. LeCyr went to the property and found the Howell location notices, on each of which he wrote “This location is void and fraudulent.” He then attempted to locate a claim called the “Ethel,” which covered a portion of the other claims. Having learned of LeCyr’s action, Stewart and Howell went to Los Angeles and contacted LeCyr on September 3, 1939. A heated argument ensued with mutual accusations of “claim jumping.” LeCyr told the others that in locating the “Ethel” he was trying to protect the mining company as well as them. The parties then talked over an agreement with the idea of settling the dispute and avoiding litigation. Two days later a written agreement which had been prepared by LeCyr for this purpose, was executed.

This agreement, dated September 5, 1939, recited that it was between the mining company on the one hand and Stewart, Duncan and Howell on the other hand. It provided that the mining company was to purchase and the others to sell for the sum of $15,000 the Ethel claim located by LeCyr and the Wide West claims Nos. 1 to 4 located by Howell, that the company was to pay for said claims by executing and delivering a $5,000 note to Stewart, another $5,000 note to Howell, a $2,500 note to Duncan, a $2,500 note to Duncan’s wife, and a mortgage on the property securing these notes. The agreement then provided that Harold J. Goldman should act as escrow holder; that the mining company should pro[203]cure and deposit in this escrow a quitclaim deed from J. R. LeCyr conveying to it the Ethel claim; that Howell should deposit in the escrow a deed conveying to the mining company the Wide West claims; that Stewart and Duncan would deposit in the escrow promissory notes which had been given them by the mining company in connection with the purchase of the Empress claims in 1938, together with a satisfaction of the mortgage which had then been given to secure said notes; that all of these documents should be deposited in escrow in twenty days; that if this was not done any party thereto might cancel the agreement and receive back the documents which he had deposited in escrow; and that when all these documents were deposited in escrow the escrow holder should deliver the deeds to the mining company and the notes to the respective sellers with the mortgage given to secure the new notes. The agreement further provided that the mining company should have the option to apply 25 per cent of the net smelter returns from ore produced or 20 per cent of money received from the sale of securities to the payment of the notes, provided that it should keep at least one hundred 8-hour shifts per month working upon the property throughout the life of the mortgage. The agreement was signed by the mining company and by Howell.