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.
Held:
(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
Page 142 U. S. 327
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
Page 142 U. S. 328
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. "
Page 142 U. S. 329
"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. "
Page 142 U. S. 330
"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.
Page 142 U. S. 331
MR. JUSTICE BREWER, after stating the facts of the case in the
foregoing language, delivered the opinion of the Court.
There are three principal questions in this case: First. Was the
mine chargeable with the payment of the consideration money?
Second. Was it also chargeable with the payment of the moneys
expended in the fruitless search for the lost vein? And third, is
the cause of action barred under the statute of limitations?
With respect to the first, the contention of appellant is that
Stephens, as trustee, was a purchaser of the undivided two-thirds
acquired by Gisborn by his deed of 24th February, 1874, that, as
such purchaser he took all the chances of the mine's
productiveness, and that now, on its failure, he must
Page 142 U. S. 332
pocket the loss; and, secondly, that the trust was only in
reference to the rents, issues, and profits; that Stephens, having
taken title for the purpose of executing such trust, has failed,
and relinquished all attempts at so doing, and therefore that the
title to the one-third of the mine, of which Gisborn was all the
while the owner in equity, has now reverted, and a decree should
have been entered directing a conveyance thereof by Stephens to
him.
These matters must be settled not by parol testimony as to the
prior conversations and negotiations between the parties, but by
the terms of the written instruments, which express the result of
all such negotiations, and constitute the contract between the
parties. If the meaning of these instruments be in any respect
doubtful, reference may be had to the surrounding circumstances for
the purpose of interpretation, but, when interpreted, the writings
which constitute the contract determine the relative rights.
Fortunately the language is not obscure, and the real transaction
is fully disclosed. There was no purchase by Stephens or the firm
for which he was trustee. On that side of the transaction there was
only a loan of money. By the deed of February 24, 1874, from his co
owners, Gisborn became the owner of the entire mine. True, the
delivery at first may have been conditional, and to be completed
only on the payment of the consideration; but when that was paid,
as it was, then the delivery was complete, and Gisborn became the
absolute and full owner. Gisborn, as owner, by two deeds conveyed
the entire mine to Stephens as trustee, and not individually. The
terms of that trust were disclosed by the declaration of May 30th,
which, as stated in it, was "a part of the same transaction." The
two deeds and the declaration may therefore be considered as one
instrument, making a conveyance of lands upon certain specified
trusts and conditions. They are that the grantee shall take the
title and possession, out of the rents, issues, and profits pay
certain moneys, and then reconvey the entire property to the
grantor. If the firm had been a purchaser, then, on performance of
the trust, the trustee should have conveyed to it the portion of
which it was a purchaser. As was well said
Page 142 U. S. 333
by the supreme court of the territory: "The idea of a sale and
that the purchaser was not to get the title are not
consistent."
Nor is this conclusion affected by the surrounding
circumstances, or the subsequent conveyances disclosed by the
testimony. It appears that Warren Hussey, who had no interest in
the property, was helping Gisborn to negotiate the loan on a
promise of receiving, if successful, an interest in the mine. In
order to induce Allen Stephens & Co. to make the loan, he
promised to share with them his compensation, and on April 13th,
and prior to any advances, this agreement was executed:
"New York, April 13, 1874"
"It is understood that Warren Hussey gets four-eighteenths of
all the 'Mono' mine in his own right. With us he agrees to make the
matter satisfactory to us from the said four-eighteenths, even if
he gives us all of it."
"ALLEN, STEPHENS & Co."
"WARREN HUSSEY"
After the declaration of trust, but on the same day, Gisborn
gave to Hussey a contract, which recited that
"for and in consideration of certain moneys advanced and
services rendered to me in effecting the purchase of two-thirds of
the 'Mono' mining claim and lode from my late cotenants, . . . as
soon as the uses and purposes of said trust shall be fulfilled and
accomplished according to the terms of said declaration of trust
(reference thereto here made for particulars) I shall and will
convey to the said Warren Hussey, his heirs and assigns, by good
and sufficient deed, the following described part, portion, and
interest in said mining claim, lode, and premises,
viz.,
the one-half, undivided, of all that portion of said 'Mono' mining
claim, lode, and premises,"
etc. And on August 10, 1874, Hussey executed to William A.
Stephens a bond to convey to him all the interest acquired under
such contract from Gisborn.
But the transaction evidenced by these instruments was
independent of the loan. It was an arrangement of the agent
Page 142 U. S. 334
with respect to his compensation for services, and does not
change the contract made by the two deeds and the declaration.
Indeed, the recital in the bond from Gisborn is equivalent to an
assertion by him that he, rather than Allen, Stephens & Co.,
was the purchaser of the two-thirds, and is inconsistent with his
present claim in respect thereto. No disposition which Hussey, his
agent, might make of the interest which he proposed to convey to
him for his services in effecting a purchase from the co-tenants
would reach backward and modify the terms of the contract between
him and the lenders to him, or alter their established
relations.
Further, these contracts throw light upon the third and fourth
clauses of the declaration, which otherwise would appear strange
and unnecessary provisions. Were it not for them, it might seem
singular that if the trust was simply to pay the $400,000 borrowed
from Allen Stephens & Co., the reconveyance should not be made
immediately upon such payment, and that the trust should continue
further, and until the payment of $275,000 to Gisborn. They show
that the final arrangement was not that Gisborn should give Hussey
an undivided one-half of the mine after the payment out of the
profits of the money borrowed, but only after the payment of the
loan, and also the receipt by himself of the further sum named. In
other words, the transaction practically amounted to this: the mine
was placed as security to Allen Stephens & Co. for the $400,000
borrowed, then to Gisborn for $275,000, and thereafter Hussey was
to receive one-half for his services. But whatever arrangements may
have been made between Gisborn and Hussey, and whatever disposition
Hussey may have seen fit to make of the remote interest he was to
acquire from Gisborn, the transaction between Gisborn and Allen
Stephens & Co. was fully contained in and determined by the two
deeds and the declaration. That transaction was a loan by Allen
Stephens & Co. of $400,000 on the security of the mine.
Neither is there force in the contention that the mine itself
was not the security, but only the rents, issues, and profits. It
is true that the language of the trust is "to receive the
issues,
Page 142 U. S. 335
rents, and profits of the said premises, and to apply the same
as received as follows." Undoubtedly the thought of the parties was
that the mine would continue so productive that the issues and
profits would pay these amounts, but the mine itself was conveyed,
and the further stipulation was that upon the discharge of this
trust, the mine should be reconveyed. The trust contemplated the
payment of the sums named, and until they were paid, the trust was
not discharged. The language used may not have been the most apt,
but the intent is clear. What was meant is that the mine was not
placed in the hands of the trustee simply for the purposes of sale,
but in order that he might work it and apply the proceeds to the
payment of these sums. There was not a mere conveyance of the title
in the nature of a mortgage to secure the debt, but an express and
active trust.
Undoubtedly the owner or real estate can specifically
appropriate rents and profits to a named purpose, or create a trust
in them separate and apart from the title to the real estate; but
where the manifest object is security, and the title is conveyed,
the mere direction to appropriate the rents and profits to the
payment of the debt 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. Is that merely to dispose of the
rents and profits, or is it to grant security for an indebtedness?
This question is not a new one. It has arisen frequently in the
consideration of powers given by will to dispose of rents and
profits. In the case of
Allan v. Backhouse, 2 Ves. &
Beam. 65, the vice-chancellor held that where the term was created
for the purpose of raising money out of the rents and profits, if
the trust of a will required that a gross sum should be raised, the
expression "rents and profits" would not confine the term to the
mere annual rents, but would authorize the sale or mortgage of the
estate itself. In 2 Story's Equity Jurisprudence (11th ed.) §
1064a, the rule is thus stated.
"When a testator directs a gross sum to be raised out of the
rents and profits of an estate at a fixed time, or for a definite
purpose or object, which must be accomplished within a short period
of time, or
Page 142 U. S. 336
which cannot be delayed beyond a reasonable time, it is but fair
to presume that he intends that the gross sum shall at all events
be raised so that the end may be punctually accomplished, and that
he acts under the impression that it may be so obtained by a due
application of the rents and profits within the intermediate
period. But the rents and profits are but the means, and the
question therefore may properly be put whether the means, if
totally inadequate to accomplish the end, are to control the end or
are to yield to it. Now if the gross sum cannot be raised out of
the rents and profits at all, or not as soon as to meet the
exigency contemplated by the testator, it would seem but a
reasonable interpretation of his intention to presume that he meant
to dispense with the means, and at all events, to require the sum
to be raised."
See also Hawkins on Wills 120; 1 Powell on Mortgages
61. The same ruling has been applied to mortgages. In 3 Pomeroy's
Equity Jurisprudence § 1237, the author says that "an assignment of
the rents and profits of land as security for a debt is another
mode of creating an equitable lien on the land in favor of the
assignee." And in
Ex Parte Willis, 1 Ves.Jr. 162, it is
said of such an assignment that "it is an odd way of conveying; but
it amounts to an equitable lien, and would entitle the assignee to
come into equity and insist upon the mortgage."
Legard v.
Hodges, 1 Ves.Jr. 477;
Smith v. Patton, 12 W.Va.
541.
The evident purpose of these instruments was not the mere
appropriation of the rents and profits; the parties contemplated
security for the debt. The owner conveyed the title to the trustee,
and the provision as to rents and profits, while imposing a primary
duty on the trustee, does not, if the rents and profits fail to
accomplish the object of the conveyance, to-wit, the payment of the
debt, prevent the application of the realty itself thereto.
Passing now to the second question. The trust, as disclosed by
the first clause, contemplated the continued operation of the mine,
keeping it and its appurtenances in good repair, and the payment of
taxes. Whatever expenses were legitimately incurred in the
discharge of this part of the trust were chargeable
Page 142 U. S. 337
upon the property. These were not debts created on the personal
obligation of the trustee and afterwards sought to be thrown upon
the estate, but in an honest and reasonable execution of the trust.
In 2 Pomeroy's Equity Jurisprudence § 1085, it is said that
"the trustee is entitled to be allowed, as against the estate
and the beneficiary, for all his proper expenses out of pocket,
which include all payments expressly authorized by the instrument
of trust, all reasonable expenses in carrying out the directions of
the trust, and, in the absence of any such directions, all expenses
reasonably necessary for the security, protection, and preservation
of the trust property or for the prevention of a failure of the
trust."
Gisborn is certainly not in a position to complain of these
expenditures, for most of them, at least, were incurred while he
was acting as manager for the trustee, and were approved by him in
writing. It will not do to say that it was the duty of the trustee
to stop work the moment the vein was lost. It was a reasonable
exercise of the power vested in him to make some limited
exploration to see if the lost vein could not be recovered. No one
could tell in advance how great had been the displacement; perhaps
a few feet of mining might have brought it to light, and as Gisborn
was consulted on these efforts and approved of them and the
expenditures were largely made under his direction, it must be
adjudged as against him that they were reasonable, and therefore
also chargeable upon the trust estate.
With reference to the last question, the contention of the
appellant is that if the title was conveyed as security, then the
instruments created simply a mortgage, and that the rule in
California, from which state Utah took its statutes, is that when
action on the debt is barred, action on the mortgage given to
secure the debt is also barred.
Lord v. Morris, 18 Cal.
482;
McCalthy v. White, 21 Cal. 495.
The obvious answer is that these instruments did not create a
mortgage, but an active and express trust, and the rule invoked as
to mortgages does not apply, either in California or elsewhere. In
Miles v. Thorne, 38 Cal. 335, it was held that the statute
of limitations does not begin to run in
Page 142 U. S. 338
the case of an express trust until the trustee, with the
knowledge of the
cestui que trust, has disavowed and
repudiated the trust. In
Hearst v. Pujol, 44 Cal. 230, the
proposition is laid down that
"if A. conveys to B. a tract of land, to be by B. afterwards
reconveyed to himself, he thereby creates an express trust, which
B. may accept by accepting the deed,"
and also that
"the statute of limitations does not commence running on A.'s
right to a reconveyance until B. repudiates the trust, and such
repudiation is brought to the knowledge of A."
And
Grant v. Burr, 54 Cal. 298, draws the distinction
between a deed of trust and a mortgage as to the running of the
statute of limitations. In that case, the trustee under a deed of
trust, long after the note secured thereby had become barred by the
statute of limitations, was proceeding to sell the land under the
power conferred. The grantor in the deed sought to enjoin such
sale, but the injunction was denied, and this ruling was affirmed
by the supreme court.
See also Henry v. Mining Company, 1
Nev. 619;
Bacon v. Rives, 106 U. S.
99;
Seymour v.
Freer, 8 Wall. 202, in which the general
proposition is laid down that the statute of limitations has no
application to an express trust where there is no disclaimer. In
the case at bar, there was no disclaimer on the part of the
trustee, no repudiation of the trust. He never asserted title in
himself as against any beneficiary. On the contrary, he continued
to work the mine, and in the active discharge of the trust, so long
as money therefor was available, and then, with the consent and
approval of Gisborn, leased the mining property for two successive
years, and until January, 1880, to parties who stipulated to do
certain work therein. That nothing was done by him after this was
not because of any repudiation of the trust, but simply from a lack
of means. His inaction under the circumstances amounts to nothing
further than this: that the continued failure to realize rents,
issues, and profits justified an appeal to the courts to subject
the realty itself to the satisfaction of the claims.
These are the principal and decisive questions in the case, and
in respect to them or otherwise we see no error in the rulings. The
decree will therefore be
Affirmed.
