Gisborn v. Charter Oak Life Ins. Co. - 142 U.S. 326 (1892)
U.S. Supreme Court
Gisborn v. Charter Oak Life Ins. Co., 142 U.S. 326 (1892)
Gisborn v. Charter Oak Life Insurance Company
Submitted December 2, 1891
Decided January 4, 1892
142 U.S. 326
G. conveyed to S. a "mining claim and lode" in Utah, and S. executed a declaration of trust that the conveyance had been made to him "upon trust to receive the issues, rents and profits of the said premises, and to apply the same as received": (1) to the payment of operating expenses; (2) to the repayment to S. of $400,000 advanced by him, as trustee, to G. for the purchase of the interest of his co-tenants; together with (3) other trusts. After taking out about $20,000, the vein was lost, and fruitless attempts were made to recover it, which resulted in an indebtedness of about $52,000. The holder of these claims filed a bill against S., G. and others to charge the mining property itself with their payment and to have it sold to satisfy them, no personal decree being asked against any defendant.
(1) That as a result of these transactions, a debt was created and the mining property itself was pledged for the payment of that debt, and of the reasonable expenses incurred in the operation of the mine, and not simply its rents and profits.
(2) That the instruments did not create a mortgage, but an active and express trust, which was not subject to the rule that when an action on the debt is barred, action on the mortgage given to secure it is also barred.
Where the manifest purpose of a transaction is security for a debt created, and title is conveyed, the mere direction to appropriate the rents and profits to its payment will not relieve the realty from the burden of the lien or limit the latter solely to the rents and profits; the test is the manifest purpose.
In California, from which the Territory of Utah took its statute of limitations, the statute does not begin to run, in the case of an express trust, until the trustee, with the knowledge of the cestui que trust, has disavowed and repudiated the trust.
The Court stated the case as follows:
On and prior to February 24, 1874, Obadiah Embody, Warren D. Heaton, William E. Miller, and Matthew T. Gisborn were the owners of the Mono mine, situated in Ophir Mining District, Tooele County, in Utah Territory, Gisborn owning an undivided one-third and the others the remaining undivided
two-thirds. On that day, Embody, Heaton, and Miller executed a deed of their undivided two-thirds to Gisborn. The consideration named and to be paid was $400,000. With the deed in his possession, he went to the City of New York to raise the money. Negotiations were there had with the firm of Allen Stephens & Co. through William A. Stephens, a partner, and by them, on April 30th, $100,000 was advanced, for which Gisborn and Warren Hussey, who was assisting in the negotiations, executed four notes of $25,000 each to William A. Stephens, trustee, and as security Gisborn made a deed of the undivided ten-eighteenths of the Mono mining property, also, to William A. Stephens, trustee. Subsequently the negotiations were completed, the balance of the money advanced, and on May 6, 1874, Gisborn made a second deed conveying the remaining undivided eight-eighteenths of the property to William A. Stephens, trustee. Each of these was a warranty deed.
On May 30, 1874, Stephens executed the following declaration of trust:
"Know all men by these presents, that whereas Matthew T. Gisborn, of the City of Salt Lake and Territory of Utah, has by two certain deeds of conveyance, bearing date, respectively, April 30th, 1874, and May 6th, 1874, conveyed to me, William A. Stephens, of the City and County of New York, trustee all of the 'Mono' mining claim and lode, with the tenements, hereditaments, and appurtenances thereunto appertaining, situate in Dry Canyon, Ophir Mining District, Tooele County, and territory aforesaid, and more particularly described in the survey and application for a patent therefor, now pending in the United States Land Office,"
"Now, as a part of the same transaction, I, the said William A. Stephens, trustee as aforesaid, do declare that such conveyance was made and received upon the trusts, nevertheless, and to and for the uses, interests, securities, and purposes hereinafter limited, specified, described, and declared, that is to say, upon trust to receive the issues, rents, and profits of the said premises, and to apply the same as received as follows, viz.:"
"First. To the payment of all expenses of operating said
mine, keeping the same, with the appurtenances, in good condition and repair, transportation of ores, etc., from and after the 30th day of April, 1874, including expenses for the hoisting works on said premises, and current public taxes."
"Second. To the payment to me, as trustee, of the sum of four hundred thousand dollars ($400,000) advanced by me, as trustee, to said Gisborn, for the purchase of two-thirds, undivided, of said premises from his late co-tenants, together with interest at the rate of seven (7) percent per annum, as follows: on $100,000 thereof from and after the said 30th day of April, 1874, and on the remaining $300,000 from and after the 30th [6th] day of May, 1874."
"Third. To the payment to said Matthew T. Gisborn of a sum equal to seven percent per annum upon one-third of the net proceeds of said mine, so applied to the payment of said sum of $400,000 and interest, as aforesaid, from and after the same shall be so applied, or a like percentage per annum on such portion of one-third of the net proceeds of said property as said Gisborn shall not have received in the meantime with my consent."
"Fourth. And finally to deliver and pay over to said Gisborn, his heirs or assigns, the sum of two hundred and seventy-five thousand (275,000) dollars, less the amount of net proceeds he may have received as last aforesaid, but exclusive of the interest mentioned last above in subdivision third."
"And 1, the said William A. Stephens, trustee as aforesaid, do covenant and agree to and with the said Matthew T. Gisborn, his heirs and assigns, that I shall and will duly apply all the rents, issues, and profits of said property to the uses aforesaid, in the order aforesaid, and as soon as the same shall be received by me, and further that as soon as said uses shall be fulfilled and discharged, I will cause said conveyance of said premises to me to be cancelled of record by doing such acts and executing such instrument as may be necessary to recover or revert the title of said premises, with the tenements, hereditaments, and appurtenances thereto appertaining, to and in the said Matthew T. Gisborn, his heirs and assigns, to the same extent and estate as now held by me, as aforesaid, as trustee. "
"And it is further declared, as one of the terms of said trust, that during the continuance thereof the said premises and property, and all the operations and business pertaining thereto, shall be placed in the management and control of two persons, one of whom to be selected by the said Matthew T. Gisborn and the other by myself, and in case of any disagreement between them in respect to the operation of said mine, as the management of the business pertaining thereto, the two agents so selected shall each select one person, and the matter of difference shall be submitted for decision to the persons so selected as last aforesaid, and in the event that the two alternates so selected, as last aforesaid, cannot agree upon a decision of the matter so referred to them, they shall select a third party as an umpire, whose decision shall determine the matter in dispute. The compensation of such agents and their respective alternates shall be paid by the party on whose behalf they are selected, respectively, and that of the umpire, if incurred, shall be paid as a current expense of said mine, and it is understood and approved that said Matthew T. Gisborn both select and appoint Alexander W. Adams as such managing agent on his behalf, and that I select and appoint Samuel K. Holman as such managing agent on my behalf, and that any vacancy which may occur in either appointment shall be filled by the same right of selection on either side, but in no case shall any person directly or indirectly or contingently interested in said property be selected for this purpose, but nevertheless it is provided and specified, as a further term of said trust, that in the meantime, on request of said Matthew T. Gisborn, his assigns or legal representatives, I shall and will reconvey to such person or persons as he may designate that portion of said mining claim and premises which is situate east of the center of the ravine crossing said premises, nearest the eastern boundary thereof, which said ravine is further designated and identified as one in which a living spring rises, a short distance above the north boundary of said premises, the more exact metes, bounds, and extent of such portion to be hereafter described by exact measurement, according to said tokens. "
"In testimony whereof I hereunto set my hand and affix my seal this 30th day of May, 1874."
"[Seal] W. A. STEPHENS, Trustee"
"J. B. ROSBOROUGH"
"JOHN T. CAINE"
The two deeds to Stephens were recorded May 12, 1874, and this declaration of trust June 12, 1874.
The trustee entered upon his duties and mined some $20,000, when the vein which had theretofore produced abundantly suddenly ran out. Thereafter, in fruitless endeavors to find the lost vein, about $52,000 of indebtedness was created. By assignment, the present appellee became the owner and holder of the claims for the original advances and the moneys thus fruitlessly expended, and on August 20, 1883, filed its bill in the District Court of the third Judicial District of the Territory of Utah, the object of which was to charge the mining property itself with both these sums and to have it sold to satisfy such liability. No personal judgment was asked against any party. Stephens, the trustee, Gisborn, the firm of Allen Stephens & Co., and Hoyt Sherman, the assignee in bankruptcy of Allen one of the firm, and Warren Hussey were made parties defendant to the bill. On May 20, 1886, a decree was entered in favor of the plaintiff for both sums and directing that the property be sold to satisfy such amount. Gisborn appealed to the supreme court of the territory, which affirmed the decree, and thereafter he appealed to this Court.