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TREASURER OF THE UNITED STATES: REFERENCE IS MADE TO YOUR LETTER OF AUGUST 20. 981 WAS CASHED THROUGH THE INDORSING BANKS ON THE NEGOTIATION OF "LENTZ AND MCELVANY J. 806 WAS CASHED UPON THE INDORSEMENT OF "LENTZ AND MCELVANY J. THE CHECKS WERE ISSUED IN PAYMENT OF MAGNESIUM ORE SOLD TO THE GENERAL SERVICES ADMINISTRATION. L. MCELVANY WAS UNAUTHORIZED TO INDORSE THE CHECKS AND THAT HE MISAPPROPRIATED THE PROCEEDS. MCELVANY WHEN INTERVIEWED BY THE UNITED STATES SECRET SERVICE STATED IT WAS HIS UNDERSTANDING THAT EITHER HE OR LENTZ WAS AUTHORIZED TO INDORSE CHECKS DRAWN TO THEM JOINTLY AND THAT THE PROCEEDS OF THE TWO CHECKS WERE APPLIED TO BILLS AND INDEBTEDNESS OF LENTZ AND MCELVANY IN EXCESS OF THE AMOUNTS INVOLVED.

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B-129118, DEC. 4, 1956

TO THE HONORABLE IVY BAKER PRIEST, TREASURER OF THE UNITED STATES:

REFERENCE IS MADE TO YOUR LETTER OF AUGUST 20, 1956, 424-DS, RELATIVE TO THE CLAIM OF FRED LENTZ FOR THE PROCEEDS OF CHECKS DRAWN TO THE ORDER OF LENTZ AND MCELVANY; AS FOLLOWS:

TABLE

CHECK NO. DATE AMOUNT DISBURSING OFFICER SYMBOL 24,123,981 MAY 3, 1954 $26,097.39 A. H. HOILAND 412 24,272,806 MAY 13, 1954 $20,013.24 A. H. HOILAND 412

CHECK NO. 24,123,981 WAS CASHED THROUGH THE INDORSING BANKS ON THE NEGOTIATION OF "LENTZ AND MCELVANY J. L. MCELVANY.' CHECK NO. 24,272,806 WAS CASHED UPON THE INDORSEMENT OF "LENTZ AND MCELVANY J. L. MCELVANY CO- PARTNER.'

THE CHECKS WERE ISSUED IN PAYMENT OF MAGNESIUM ORE SOLD TO THE GENERAL SERVICES ADMINISTRATION. MR. LENTZ ALLEGES THAT J. L. MCELVANY WAS UNAUTHORIZED TO INDORSE THE CHECKS AND THAT HE MISAPPROPRIATED THE PROCEEDS. MR. MCELVANY WHEN INTERVIEWED BY THE UNITED STATES SECRET SERVICE STATED IT WAS HIS UNDERSTANDING THAT EITHER HE OR LENTZ WAS AUTHORIZED TO INDORSE CHECKS DRAWN TO THEM JOINTLY AND THAT THE PROCEEDS OF THE TWO CHECKS WERE APPLIED TO BILLS AND INDEBTEDNESS OF LENTZ AND MCELVANY IN EXCESS OF THE AMOUNTS INVOLVED. IN LETTER OF SEPTEMBER 16, 1955, FROM OUR CLAIMS DIVISION, IT WAS STATED THAT LENTZ AND MCELVANY CONSTITUTED A PARTNERSHIP AND IT BEING WELL ESTABLISHED THAT ONE PARTNER HAS AUTHORITY TO INDORSE FOR THE PARTNERSHIP, THE UNITED STATES RECEIVED A GOOD ACQUITTANCE BY MCELVANY'S INDORSEMENTS ON THE CHECKS AND ANY GRIEVANCE OF THE COMPLAINING PARTNER IS A MATTER FOR ADJUSTMENT BETWEEN THE PARTNERS. YOUR LETTER OF AUGUST 20, 1956, REQUESTS, IN VIEW OF ADDITIONAL CORRESPONDENCE ON BEHALF OF MR. LENTZ, THAT WE REVIEW THE CLAIMS DIVISION'S ACTION IN THE MATTER.

THE RECORD NOW BEFORE US--- INCLUDING INFORMATION RECENTLY RECEIVED FROM THE GENERAL SERVICES ADMINISTRATION WHICH AUTHORIZED THE ISSUANCE OF THE CHECKS--- INDICATES THAT LENTZ WAS IN CONTROL OF CERTAIN MINING CLAIMS UNDER A LEASE FROM ONE CHISHOLM AND THAT LENTZ AND MCELVANY ON JUNE 11, 1953, EXECUTED A "JOINT VENTURE AGREEMENT" WHEREBY MCELVANY AND LENTZ WERE TO GO UPON THE MINING PROPERTY WITH A VIEW TO MINING, MILLING, AND SELLING ORE THEREFROM. EACH WAS TO CONTRIBUTE $1,000 TO BE DEPOSITED IN A BANK IN PARKER, ARIZONA, IN THE NAME OF LENTZ AND MCELVANY TO BE USED TO CARRY OUT THE MINING OPERATION AND SALE OF THE ORE AND ALL PROCEEDS WERE TO BE DEPOSITED IN THAT ACCOUNT. MCELVANY WAS TO FURNISH CERTAIN MINING EQUIPMENT FOR USE IN THE MINING OPERATIONS BUT SUCH EQUIPMENT WAS TO REMAIN HIS PROPERTY. LENTZ WAS TO DEVOTE HIS FULL TIME TO OPERATION OF THE MINE. THE AGREEMENT PROVIDED:

"IT IS SPECIFICALLY UNDERSTOOD AND AGREED THAT THE PARTIES HERETO SHALL NOT BE CONSIDERED AS PARTNERS AND THAT THEIR ADVANCES AND CONTRIBUTIONS FOR THE PURPOSE OF CARRYING OUT SAID LEASE OR SAID LEASE AND OPTION SHALL NOT BE EQUALIZED BY ULTIMATE ACCOUNTING OR DISTRIBUTION OF LOSSES BY THE PARTIES HERETO OR IN ANY WISE REQUIRE EITHER OF THE PARTIES HERETO TO ADVANCE ANY FURTHER SUMS THAN THEIR VOLUNTARY CONTRIBUTIONS TO SAID CAUSE.'

ALSO, THE JOINT VENTURE AGREEMENT PROVIDES:

"IT IS UNDERSTOOD AND AGREED THAT NEITHER OF SAID JOINT ADVENTURERS SHALL HAVE ANY RIGHT, POWER, OR AUTHORITY TO INCUR ANY OBLIGATION OF ANY NATURE OF WHATSOEVER KIND OR CHARACTER NOT DIRECTLY CONNECTED WITH THIS JOINT ADVENTURE IN CARRYING OUT THE TERMS OF SAID LEASE OR LEASE AND OPTION, NOR SHALL EITHER ONE OF SAID PARTIES HAVE POWER OR AUTHORITY TO BORROW ANY MONEY IN THE NAME OR IN BEHALF OF THIS JOINT ADVENTURE WITHOUT THE WRITTEN APPROVAL OF BOTH SAID JOINT ADVENTURERS.' THE JOINT ADVENTURE AGREEMENT WAS SUPPLEMENTED ON OCTOBER 22, 1953, SO AS TO PROVIDE FOR PAYMENT OF BARE RENTAL TO MCELVANY FOR THE MINING EQUIPMENT USED AFTER JULY 11, 1953, ON THE PROPERTY.

IT APPEARS FROM SUCH AGREEMENTS THAT LENTZ AND MCELVANY ARE JOINT MINING ADVENTURERS AND THAT THEIR RIGHTS AND LIABILITIES ARE GOVERNED BY THE LAWS APPLICABLE TO MINING PARTNERSHIPS. 58 J.S., MINES AND MINERALS 251C. MINING PARTNERSHIPS AS DISTINCT ASSOCIATIONS, WITH DIFFERENT RIGHTS AND LIABILITIES ATTACHING TO THEIR MEMBERS FROM THOSE ATTACHING TO MEMBERS OF ORDINARY TRADING PARTNERSHIPS, EXIST IN ALL MINING COMMUNITIES. WHILE THE MINING PARTNERSHIP IS GOVERNED BY MANY OF THE RULES APPLICABLE TO ORDINARY PARTNERSHIPS, IT HAS SOME RULES PECULIAR TO ITSELF STEMMING FROM THE FACT THAT ONE MINING PARTNER MAY CONVEY HIS INTEREST IN THE MINE AND BUSINESS WITHOUT DISSOLVING THE PARTNERSHIP. KAHN V. SMELTING CO. 102 U.S. 641, 645. IT IS NOT A TRUE PARTNERSHIP, BUT RATHER A CROSS BETWEEN A TENANCY IN COMMON AND A PARTNERSHIP PROPER, PARTAKING IN PART OF THE NATURE OF EACH. IN SUCH A PARTNERSHIP, THERE IS LIMITED AUTHORITY IN THE INDIVIDUAL MEMBER'S POWER TO BIND EACH OTHER. THIS RULE IS SET FORTH IN 36 AM. JUR., MINES AND MINERALS, SECTION 164, P. 395, IN THE FOLLOWING LANGUAGE:

"THE POWER AND AUTHORITY OF A MEMBER OF A MINING PARTNERSHIP BEING LIMITED, HE MAY NOT, UNLESS EXPRESSLY AUTHORIZED, BORROW MONEY FOR THE FIRM, ISSUE OR NEGOTIATE COMMERCIAL PAPER, OR DRAW OR ACCEPT BILLS OF EXCHANGE ON THE CREDIT OF THE FIRM.' ALSO SEE, WILKINSON V. BELL, 168 P.2D 601, 603; JUDGE V. BRASWELL, 26 AM. DEC. 185; SKILLMAN V. LACKMAN, 83 AM. DEC. 96. LENTZ AND MCELVANY ON THE RECORD AVAILABLE HERE DO NOT APPEAR TO BE PARTNERS IN A USUAL COMMERCIAL TRADING PARTNERSHIP, NOR DOES MCELVANY APPEAR TO HAVE HAD EXPRESS AUTHORITY TO NEGOTIATE CHECKS DRAWN TO THE ORDER OF THE JOINT MINING VENTURE.

SECTION 41, UNIFORM NEGOTIABLE INSTRUMENTS ACT PROVIDES:

"WHERE AN INSTRUMENT IS PAYABLE TO THE ORDER OF TWO OR MORE PAYEES OR INDORSEES WHO ARE NOT PARTNERS, ALL MUST INDORSE, UNLESS THE ONE INDORSING HAS AUTHORITY TO INDORSE FOR THE OTHERS.'

THE PAYEES DO NOT APPEAR TO BE PARTNERS IN THE USUAL COMMERCIAL PARTNERSHIP AND THE INDORSEMENT OF ONE OF THE JOINT PAYEES DOES NOT APPEAR SUFFICIENT TO PASS TITLE TO THE INSTRUMENT. THE CHECKS BEAR THE INDORSEMENT OF ONE OF THE JOINT PAYEES ONLY. THUS, THE ENDORSING BANKS APPEAR LIABLE FOR THE AMOUNTS OF THE CHECKS PAID OUT UNDER THEIR GUARANTEE OF PRIOR INDORSEMENTS UNLESS, OF COURSE, THEY CAN ESTABLISH MCELVANY'S SPECIFIC AUTHORITY TO ENDORSE FOR THE JOINT VENTURE. ACCORDINGLY, YOU ARE HEREBY AUTHORIZED TO RECLAIM THE AMOUNTS OF THE CHECKS FROM THE INDORSING BANKS AND TO ASCERTAIN WHO SUSTAINED THE LOSS AS A RESULT THEREOF.

WHILE MR. LENTZ CLAIMS THE FULL AMOUNT OF THE CHECKS, HE DOES NOT, ANY MORE THAN MR. MCELVANY, APPEAR TO BE ENTITLED TO THE AMOUNT DUE JOINT VENTURE SUMS IN EXCESS OF THE AMOUNTS OF THE INVOLVED CHECKS, AND HAS SUBMITTED CANCELLED CHECKS AS EVIDENCE THEREOF, IT IS NOTED THAT MOST OF THE CANCELLED CHECKS WERE ISSUED PRIOR TO THE DATE OF THE GOVERNMENT CHECKS INVOLVED. ALSO, THE GOVERNMENT, IS NOT IN A POSITION TO ASCERTAIN WHETHER THE EXPENDITURES CLAIMED TO HAVE BEEN MADE WERE EXPENDITURES PROPERLY CHARGEABLE TO THE JOINT ENTERPRISE, NOR TO ACT AS AN ARBITER OF THE DISPUTES BETWEEN THE JOINT VENTURERS.

ACCORDINGLY, THE AMOUNT RECLAIMED, SHOULD BE PAID OUT ONLY UPON RECEIPT OF AN AGREEMENT ESTABLISHING THAT MCELVANY, LENTZ, AND THE PERSON WHO SUSTAINED THE LOSS IN RECLAMATION ARE AGREEABLE TO SUCH DISPOSITION OR UPON THE DECISION OF A COURT OF COMPETENT JURISDICTION AS TO THE SHARE TO WHICH EACH IS ENTITLED.

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