On the facts in this case, the court finds that the deed in
controversy was not a mere gratuity and left in escrow, but that it
was delivered, and imposed upon the appellant a trust in favor of
the grantor of the appellee to which the appellee has
succeeded.
When a trustee denies the trust and refuses to perform, it a
court of equity will appoint a new trustee in his place, and the
old trustee will not be entitled to retain the property under cover
of having an account as trustee, before paying over the net
proceeds.
The bill of complaint in this case was filed by Dunham, the
appellee, against Irvine, the appellant. It averred that on March
28, 1874, Irvine and one Richard H. Sinton were the joint and equal
owners of one undivided half of the Morgan mine, in Calaveras
County in the State of California; that the legal title to such
undivided half was vested in Irvine, but was held by him in trust
for himself and Sinton equally, share and share alike; that the
undivided half of the mine has been acquired
Page 111 U. S. 328
by Irvine and Sinton by their common efforts and their common
expense, and pursuant to an agreement between them to acquire the
title thereto, and sell and otherwise dispose of the same, and
share equally the profits and losses. The other undivided half of
the mine was, so the bill alleged, held by Irvine in trust for
certain other persons.
The bill further alleged that on the said March 28, 1874, Irvine
executed to Sinton an instrument and declaration of trust in
writing, of that date, of which the following is a copy:
"This is to declare that I, William Irvine, of San Francisco,
California, am the owner of one undivided half of that certain
gold-bearing quartz lode or mine situated on Carson Hill Calaveras
County, California, and known familiarly as the 'Morgan mine,' and
that I hold said half interest equally for myself and R. H. Sinton,
also of San Francisco, share and share alike, and I hereby promise
and bind myself, my heirs, and assigns, whenever said mine shall be
sold or otherwise disposed of, to account fully and truly to said
Sinton, his heirs, or assigns, for the one-half of all net proceeds
of such sale or other disposition of said half interest."
"All necessary expenses, including counsel fees heretofore
incurred, or that may hereafter be incurred, in and about the
property, up to the time of such sale or other disposition thereof,
to be first paid before division of such proceeds."
"Witness my hand and seal this 28th day of March, A.D.
1874."
"WILLIAM IRVINE [Seal]"
"Witnesses:"
"T. K. WILSON"
"H. J. TILDEN"
The bill also averred that on September 8, 1874, Sinton assigned
and conveyed to one George P. Ihrie all his right and title in the
mine and declaration of trust, and everything coming, or that might
come, to him by virtue thereof; that on March 17, 1875, Irvine and
the owners of the other undivided half of the mine, organized,
under the laws of California, a corporate body called the Morgan
Mining Company, and that on April 9 following, Irvine and the other
persons having an interest in the mine, except Ihrie, sold and
conveyed
Page 111 U. S. 329
the same to the corporation, and received in consideration
thereof shares of stock in the company, in proportion to their
interest in the property conveyed, Irvine receiving 10,000 shares
for the undivided half held by him for himself, in trust and for
Ihrie, as the grantee of Sinton, and that Ihrie then and there
became entitled to the one-half of the 10,000 shares.
It was further alleged that on June 29, 1875, Ihrie conveyed all
his title and interest in the mine and in the 5,000 shares of the
stock of the Morgan Mining Company, to Dunham, the complainant, for
whose use and benefit Irvine held the shares subject to the payment
of the expenses, etc., mentioned in the declaration of trust.
The bill further alleged that after the conveyance by Ihrie of
his interest in stock of the Morgan Mining Company to the
complainant, the latter applied to Irvine for an account of the
necessary expenses and fees incurred by him in and about the mine
up to the conveyance thereof to the company, and offered to pay him
one-half thereof, and demanded a transfer to himself of the shares
of stock in the company held in trust for him by Irvine, but Irvine
refused to render any account, denied the complainant's right to
the stock, or any part of it, denied that he held any stock in
trust for complainant, and claimed all of the 10,000 shares as his
own, and denied that he was ever trustee in the premises for
Sinton, or Ihrie, or the complainant.
The bill further averred that the complainant was ready, and
that he then offered, to pay into court the one-half of all the
expenses and fees paid by Irvine, on account of the mine, up to the
conveyance thereof to the Morgan Mining Company, and such further
sums as the court might deem equitable and just; that Irvine had it
in his power to transfer the stock held in trust by him for the
complainant to a
bona fide purchaser for value without
notice, and that he would do so unless restrained by
injunction.
The prayer of the bill was that Irvine be decreed to hold in
trust for the complainant said 5,000 shares of the capital stock;
that the court would declare what sum was
Page 111 U. S. 330
justly due to Irvine from the complainant, on account of the
necessary expenses, etc., incurred by him in and about the mine,
and that upon the payment of the same by complainant to Irvine, the
latter might be decreed to assign and transfer said five thousand
shares to him.
The answer of Irvine denied that Sinton was ever the owner of an
undivided fourth of said mine, or of any share or interest therein,
or any part thereof; denied that Irvine ever held the legal title
to the mine, or to any part or share thereof, in trust for himself
and Sinton; denied that the undivided half thereof was acquired by
himself and Sinton by their common efforts, and at their common
expense, for their equal benefit, but averred that he acquired said
undivided half for his own sole and exclusive use and benefit, and
that Sinton contributed neither effort nor expense toward its
acquisition.
The answer further averred that Irvine, on March 28, 1874, being
about to leave California for a trip to the Atlantic states, to be
absent for several months, signed the declaration of trust as a
mere gratuity to Sinton upon the express agreement between him and
Sinton that the same should be left in the custody of T. K. Wilson,
who was Irvine's attorney, and that it was not to take effect
except in case of the death of Irvine upon his proposed journey,
and in case he should return to California that the instrument
should be delivered up to him; that the instrument was never, in
any manner, delivered to Sinton, and that Irvine, after so signing
it, did perform his journey, and returned therefrom to the State of
California in the month of August, 1874. The answer of Irvine was
put at issue by general replication.
Upon final hearing the circuit court decreed that Irvine hold,
as trustee, for the use and benefit of the complainant, the
one-half of 9,997 shares of the capital stock of the Morgan Mining
Company, the shares being the gross proceeds received by Irvine as
the consideration of a conveyance and disposition by him to the
Morgan Mining Company of one-half of the mining property, the half
of the stocks so held by Irvine in trust for the complainant being
subject to a claim of Irvine for one-half of all the necessary
expenses referred to in the declaration
Page 111 U. S. 331
of trust, and of assessments on said stock made by the Morgan
Mining Company and paid by Irvine. And the court confirmed the
report of the master to whom the case had been referred, finding
that the one-half of the expenses and assessments paid by Irvine
was $14,221.76, and decreed that, upon the payment of that sum by
the complainant to Irvine, the latter should assign and transfer to
the complainant 4,998 1/2 shares of the capital stock of the Morgan
Mining Company. From this decree Irvine appealed.
MR. JUSTICE WOODS delivered the opinion of the Court. He stated
the facts in the foregoing language and continued:
It is not disputed that the appellee has succeeded to all the
rights of Sinton and Ihrie, if they had any, set forth in the bill
of complaint. The question of fact at issue between the parties is
whether or not, before the conveyance by the appellant to the
Morgan Mining Company of the Morgan mine, he held the title to an
undivided fourth of the mine in trust for Sinton. The declaration
of trust, signed by Irvine on March 28, 1874, unless impeached, is
evidence which settles this question conclusively in favor of the
appellee. The appellant, however, contends, as appears from his
answer and testimony, that his promise to hold one-fourth of the
mine in trust for the complainant was a mere gratuity; that Sinton
never paid any money or rendered any services in obtaining title to
the mine; that the declaration of trust was never delivered, and
that it was to take effect and bind him only in case he never
returned from his proposed journey. The burden is on the appellant
to make this appear.
It is shown by the record that in December, 1869, or January,
1870, the appellant purchased at a tax sale the title to the Morgan
mine; that he received a deed therefor dated June 29, 1870, from
the sheriff, and was put in possession of the property by a writ of
assistance. Prior to the purchase at the
Page 111 U. S. 332
tax sale, James G. Fair and A. A. Selover had been in possession
of the mine; they claimed that Irvine had purchased the mine at the
tax sale for them. Irvine demanded a large sum for his services,
and after some delay gave them notice that if they did not accede
to his demand he would hold the title for himself. Fair and Selover
never paid the sum demanded by appellant, or any part of it, and
appear to have abandoned all claim to the property. About this
time, Henry D. Bacon and his associates, seven in number, were
claiming title to the mine. On April 14, 1873, they compromised
their controversy with the appellant by an agreement that he should
apply for a patent for the property in his own name, and, having
obtained it, should sell the property and divide its proceeds,
retaining one-half himself and turning over the other half to Bacon
and his associates. The appellant accordingly applied for and
obtained a patent in his own name for the property. When the Morgan
Mining Company was formed, and the mine was conveyed to it, Bacon
and his associates got half the stock in consideration of their
interest in the mine held in trust for them by the appellant, who
received the other half of the stock.
Without going into a discussion of the evidence, we state our
opinion to be, after a careful examination of the record, that it
is established by the testimony that Sinton, who was an experienced
dealer in real property, contributed money and aided the appellant
by his advice and cooperation in obtaining the tax title to the
Morgan mine, and afterwards in getting the patent therefor from the
United States, and in compromising the controversy between the
appellant and Bacon and his associates in regard to the ownership
of the mine, and that the money and services were contributed by
Sinton on the agreement and understanding that he and the appellant
were to share equally in the results of the enterprise. The fact
that Sinton furnished the appellant money on account of the mine is
found by the master to whom the case was referred, and no exception
was taken to that part of his report. It is established that the
appellant, after the compromise with Bacon and others, agreed to
hold the title to the undivided half of the mine in trust for
himself and Sinton, share and share alike,
Page 111 U. S. 333
subject to the payment of the proportion of such undivided half
in the costs and expenses incurred in securing title to and
managing the property. The declaration signed by the appellant on
March 28, 1874, was simply an admission in writing by him of the
contract between him and the appellee in relation to their interest
in the Morgan mine.
The contention of the appellant that the declaration of trust
was a mere gratuity is not sustained by the proof. On the contrary,
independently of the declaration, the testimony in the record
establishes the trust and its terms as set up in the bill of
complaint, and shows that the declaration or trust was not
voluntary, but was based on a valuable consideration.
The appellant contends that the declaration of trust was put in
the hands of Wilson as an escrow, to be delivered to Sinton only,
in case the appellant died on his proposed journey, and to be
redelivered to the appellant in case he returned to California, and
that as he did return, the declaration of trust became ineffectual
to bind him. This contention amounts to this: that by accepting the
declaration of trust upon the terms alleged by the appellant,
Sinton agreed that if the appellant returned from his trip to the
eastern states he would give up all claim to his share of the
property. If such had been the agreement of the parties they would
naturally have embodied it in the written instrument. It contains
no such stipulation. It is an unqualified and unconditional
admission by the appellant that he held the property in trust for
Sinton and himself, and that when it was sold or disposed of he
would divide its net proceeds equally between Sinton and himself.
We find no evidence in the record sufficient to sustain the
improbable story that Sinton agreed, in case appellant should
return in safety from his trip to the Atlantic states, that he
would give up his interest in this valuable property, to secure
which he had contributed money and services extending over a period
of several years. In other words, we do not find that the
declaration of trust was subject to any such condition.
The next contention of the appellant is that the decree should
be reversed, because there has been no sale or disposal of his
property, and that by the terms of the trust Sinton
Page 111 U. S. 334
had only a right to the net proceeds after its sale or disposal.
But the record shows that the property had been disposed of by
conveyance to the Morgan Mining Company. The deed of the appellant
to the company effectually divested him of all title to the
property. It became the property of the corporation in which he
retained no interest or estate. MR. JUSTICE BRADLEY, in
Morgan
v. Railroad Company, 1 Woods 15. The conveyance was therefore
a disposal of the property, and whether the consideration was cash
or shares of the capital stock of the company was immaterial. The
appellant having parted with the title to the property, was bound
to account for its proceeds to the beneficiary of the trust
according to the terms of the trust.
The appellant next contends that he is entitled, under the terms
of the trust, to hold on to the stock which he received as a
consideration for the conveyance of the trust property until there
has been an accounting and the expenses and counsel fees have been
paid. But by his answer he denies the trust; he claims to hold the
stock for himself alone; he wants no accounting, and does not offer
to account or to hand over any net proceeds of the property after
an accounting. In other words, he seeks to hold on to the trust
property until it suits him to execute a trust, the existence of
which he denies. Where there is a failure of suitable trustees to
perform a trust, either from accident, or from the refusal of the
old trustees to act, or from their original or supervenient
incapacity to act, or from any other cause, courts of equity will
appoint new trustees.
Ellison v. Ellison, 6 Ves. 663;
Lake v. De Lambert, 4 Ves. 592;
Hibbard v. Lamb,
Ambler 309; 2 Mad.Pr.Ch. 133; Comyn's Dig. "Chancery," 4 W. 7. No
trustee can be more unsuitable than one who not only refuses to
act, but denies the trust. When, therefore, appellant denied that
he held in trust the stock claimed by the appellee, the latter,
having established the trust, was entitled to have, if he demanded
it, a new trustee appointed or, if the appointment of a new trustee
were not necessary for the preservation of his rights, to have an
account taken by the court of the expenses
Page 111 U. S. 335
and assessments with which his share of the trust property was
chargeable, and upon their payment to have a transfer to himself of
his share of the stock. The decree of the circuit court has given
him these rights. There has been an accounting, and the sum with
which the appellee's interest in the stock is chargeable has been
ascertained, and when the sum so found is paid by appellee, and not
till then, the decree of the court requires a transfer to him of
his share of the stock. The decree of the court simply executes and
winds up a trust the existence of which it finds, but which the
trustee denies and refuses to execute. Both parties got their
rights under the decree. It must therefore be
Affirmed.
