Adams v. Reed

11 Utah 480 | Utah | 1895

King, J.:

The plaintiffs allege in their complaint that in March, 1890, they were the owners and entitled to the possession of certain land in Weber county; that on the 27th of said month they sold said estate to defendants, and executed a warranty deed, but by mistake said property was-described as being in township 6, instead of 5; that on the 29th- of September, 1891, as soon as said mistake was-discovered, they made a quitclaim deed to defendants,, correctly describing the land intended to be conveyed, which they tendered to defendants, and now brmg 'into-court; that, in part payment for said land, defendants-executed two promissory notes, which were secured by a-mortgage on the land, but which mortgage contained the-same error in description as said deed. Plaintiffs pray for the reformation of the mortgage and for its foreclosure. Defendants answered and filed a cross complaint, in which they averred that relying upon the representations of plaintiffs that they owned, and had a good title in fee-simple to, 440 acres of land lying near Ogden city, and without investigating the title or seeing the land, they purchased an undivided two-thirds interest, and executed the mortgage described in plaintiffs' complaint in part payment of the purchase price; that subsequently they ascertained that plaintiffs were not the owners of, and did not have an indefeasible and fee-simple title to, said land,, or any title to the land conveyed; that thereupon they demanded back the amount paid to plaintiffs, and the surrender and cancellation of the notes given in part payment; that said representations as to title were false and fraudulent, which plaintiffs then and there knew, and were made-to deceive defendants. There are further allegations in the cross complaint with respect to the character of' plaintiffs’ title and the fraudulent representations. Defendants pray that the mortgage and notes be cancelled and delivered up.

The principal questions presented for our determination ■are: (1) Did the Union Pacific Railway Company have a. fee-simple title to the land claimed in township 5, which plaintiffs attempted to convey to defendants? (2) If so,, was this title conveyed to defendants? (3) If the above-questions are determined negatively, then was there such fraud upon the part of plaintiffs as to be the foundation, for the rescission of the contract between plaintiffs and defendants? (4) Do the facts of the case show a rescission?

1. By the act of Congress passed July 1, 1862, certain lands were granted to the Union Pacific Railroad Company for the purpose of aiding in the construction of a transcontinental railroad. The language of the grant is: “There be and is hereby granted to the said company * * * every alternate section of public land designated by odd numbers to the amount of five alternate sections per mile on each side of the railroad on' the line thereof, and within the limits of ten miles on each side of' said road, not sold, reserved, or otherwise disposed of by the United States, and to which pre-emption or homestead claim would have attached at the time the line of said' road is definitely fixed: provided that all mineral lands-shall be excepted from the operations of this act.” It is admitted that the land in controversy in this suit is within this grant, and that no patent has ever been issued therefor. The court below, adopting the findings of the referee, found that the land has been and still is used for agricultural purposes; also that no exploration or examination has been made for coal or minerals of any kind. Appellants’ contention is that the act of Congress aboye referred to was a grant in prmsenti, and passed the present legal title — at least as soon as the road was constructed, and the identification of the sections became possible — to all of the lands embraced within it, except those to which a preemption or homestead claim had attached, and which were not known to contain mineral. Respondents’ claim is that no exploration or examination having been *made by the government to ascertain whether the lands were mineral or nonmineral, and no patent having been issued, an imperfect and defeasible title passed by the grant to the railroad company.

Our attention is invited to numerous oases decided by the supreme court of the United States, and other courts, wherein this and similar grants to railroad companies are construed. The language of these decisions seems, to the writer of this opinion, clear and unambiguous. By many it is declared that by their terms these grants import a grant in prmsenti, carrying at once the interest of the grantor in the lands described, and, while the grant is in the nature of a “float,” when the route of the road is definitely fixed the lands granted become susceptible of identification, and the title attaches as of the date of the grant, and has the same effect upon the selected parcels as if they had been specifically described in the acts of Congress. To me it seems there is much force in this-contention of appellants. The Union Pacific Railroad has been completed for more than a quarter of ■ a century. The government has not explored the lands to ascertain whether they contain minerals. There is nothing to evidence a purpose upon its part to make such exploration. The railroad was entitled to a patent as soon as the commissioners, appointed by the president of the United States, reported the completion and equipment of the road. The supreme court of the United States has declared, in effect, that patents are unnecessary to divest the United States of its title, and invest the grantee therewith. Patents Ci* * * identify the lands as coterminous with the completed section, but they would be evidence that, as to that portion of the road, the conditions of the grant had been complied with. * * * As deeds of further assurance, they would thus be of great value, in giving quiet- and peace to the grantee’s possession.” St. Paul & P. R. Co. v. Northern Pac. R. Co., 139 U. S. 1, 11 Sup. Ct. 889. The decisions cited by appellants seem to have regarded the mineral reservations in these grants as reaching only such lands as were known to contain minerals at the time of the grant. But it would be profitless' to enter into a discussion of this phase of the subject, and analyze the authorities collated, for the reason that they are ably considered and exhaustively treated by Mr. Justice Brewer in his dissenting opinion in the case of Barden v. Railway Co., 154 U. S. 332, 14 Sup. Ct. 1030. The writer of this opinion acknowledges the almost unanswerable arguments adduced by the learned justice, but recognizes that this court is bound by the majority opinion in that case. But it must be confessed that this opinion cannot easily be reconciled with very many utterances of that high tribunal.

Appellants’ counsel insist that the case last cited is not decisive of the point now under consideration. Counsel for respondents contends, with equal vehemence, that under this decision, until patent issues, no indefeasible title to the lands within the grant passes to the grantee. An examination of the grant to the Northern Pacific Railroad Company shows that the words there employed are almost identical with those found in the grant to the Union Pacific. The words in the former are, “to every'alternate ■section of public land not mineral;” and the following proviso is attached to the granting section of the act: “ Provided, that all mineral lands be-and the same are hereby excluded from the operations of this act,” etc. Applying the doctrine •enunciated in the Barden case, it would seem that, at any time before exploration for minerals and the issuance of patents, the government can, upon the discovery of minerals within the land granted, not only refuse patent for .such lands as contain mineral, but dispose of them to ■others than the grantee or its vendees, and that such .grantee or vendees would not possess an indefeasible title to all the lands embraced within the grant. In the Barden case, just cited, the court held that the words •quoted were an exclusive reservation' of all minerals to the United States, and that it was immaterial whether there was knowledge of the existence of mineral deposits; if discovered at any time before patent, no title passed from the government. Some of the cases upon which appellants rely .are considered and explained. Speaking of St. Paul & P. R. Co. v. Northern Pacific R. Co., 139 U. S. 1, 11 Sup. Ct. 389; and Salt Co. v. Tarpey, 143 U. S. 241, 13 Supt. Ct. 158, the court say:

“ In both of these cases the writer of this opinion had the •honor to write the opinions of this court, and it was never asserted or pretended that they decided anything respecting the minerals, but only that the title to the lands granted took effect, within certain designated exceptions, as the date of the grant. They never decided anything else; and what was that title? It was of the lands which at the time of the location had not been sold, .reserved, or to which a pre-emption or homestead right had not attached. * * * It seems to us as plain as .language can make it that the intention of Congress ■was to exclude from the grant actual mineral lands, whether known or unknown, and not merely such as were •at the time known to be mineral. * * * Mineral lands were not conveyed, but by the grant of Congress itself, ■and the subsequent resolution of Congress cited they were specially reserved to the United States, and excepted from the operations of the grant. Therefore they were not to be located at all, and, if in fact located, they ■could not pass under the grant. * * * When the act was passed it would have been impossible to state with -any accuracy what parts of the tract contained minerals, and what did not. That fact could only be ascertained •after extensive and careful explorations. * * * The ■determination of the character of the land granted by ■■Congress in any case, whether agricultural or mineral, is ■placed in the hands of the officers of the land department, whose action is subject to the revision of the commission-ers of the general land office, and an appeal lies from them to the secretary of the interior. Under their direction and supervision the actual character of the land may be determined and fully established." The court then •quotes from the opinion of Mr. Noble, late secretary of •the interior, in the -case of Railroad Co. v. Valentine, 11 Land Dec. Dep. Int. 238. The language is as follows: ■“Moreover, I am informed by the officers in charge of the mineral division of the land department that ever ■ since the year 1867 * * * it has been the uniform practice to allow and maintain mineral locations within the geographical limits of railroad grants, based upon ■discoveries made at any time before patent, or certification, where patent is not required."

It seems very clear from these decisions that while the ' grant to the Union Pacific Company was one in preesenti, .and, as to the lands embraced within its limits which ■were not within the exceptions or reservations, the title took effect, upon identification, as of the date of the grant, hut as to lands containing minerals, whether known or unknown, no title passed, and the failure of the government-to explore, or issue patents, and the great lapse of time, have not ripened a defective title into an indefeasible one. This being true, until patent issues there would be' uncertainty as to the character of one's title. The land might be used exclusively for agricultural purposes; the-grantee and its vendees might regard it as utterly devoid of mineral, men of science might unanimously agree that-it was barren of mineral wealth; still, it is possible mysterious nature may have .impregnated the soil with its-richest wealth. While the patent does not change the character of the land, it is more than an assurance of title. It is conclusive evidence, where no fraud exists, that the government regards the land as freed from the reservation, and it is a remission of any claim the government may possess by reason of mineral deposits upon the land. There can be no doubt but that this view attaches am element of uncertainty to the land granted, as well as the holdings carved out of it. Mr. Justice Brewer, in his dissenting opinion, says: “Take any particular mile of the-road, on either side of the line, as located, there are twenty-alternate sections within the place limits. By the rule now laid down [speaking of the majority opinion of the court] the title to no one of these twenty sections passes to the-company, because it is not known absolutely which are-mineral lands. So far as known, none may be mineral, and yet, as in this case before us, six years after that line of definite location and exploration develops the fact of minerals, and then it is declared that the title did not pass. When you simply say, as the court does in this opinion, that out of those twenty sections there shall pass the-title to such lands as shall thereafter be found or be determined by the secretary of the interior to be nonmineral lands, you say, in effect, that there is no identification of a single tract.”

It is claimed by counsel for appellants that the supreme court of the territory, in the case of Tarpey v. Salt Co., 5 Utah, 494, 17 Pac. 631, decided that all lands, whether surveyed and selected, or not, within the grant limits, passed to the grantee, and clothed it with a perfect legal title. An examination of that case does not fully sustain counsel's statement. The court regarded the grant as conferring a perfect legal title in prmsenii, as distinguished from an equitable or inchoate interest arising upon a contract or promise of the government. But this declaration is somewhat modified by the expression which is the important announcement in the opinion. It is this: “Ve think it is now beyond controversy that, where the question is presented as it is here, — where no right of the government, reserved in the act making the grant, is involved, — it grants the legal title in prcesenti to all the lands included in the grant, whether surveyed or selected or not.” A right of the government is involved in the reservation found in the act of July 1, 1862. The minerals were reserved to the sovereign. We agree with this view, that, aside from the reservations in the grant, a legal title passed to the grantee for all the lands covered by the grant. If the Union Pacific obtained a title less than fee simple by this grant, — and we think it did, — the exact character of it is not now in question. We will observe, however, that under the authority of Tarpey v. Salt Co., supra, the delay in issuing the patent, .or omission of the government to explore and decide as to the mineral character of lands, would not prevent the grantee-from occupying and holding the lands, and maintaining possessory actions against trespassers. A fee-simple estate is the largest in land known to the law. It is an absolute estate in perpetuity, and excludes any qualification, restriction, or limitation. From the foregoing it is apparent that, if the lands in controversy in this case are devoid of minerals, then the grantee possesses a perfect legal title. If they contain minerals, aside from coal and iron, the railroad company has no title whatever. Yet, as •stated above, the Barden case leads to the position that, if there be undiscovered mineral when patent issues, the presumption becomes conclusive that it is barren of mineral wealth. The failure to discover minerals, and the •conclusiveness of this presumption, confer an indefeasible title, though in fact deposits of mineral wealth may abound in greater quantities than in the famous El Dorado. The railroad's title, then, to this land, is subject to be defeated. At most, its title is a base or determinable fee. It may continue forever, or it may be determined at any moment, prior to the issuance of patent, upon the discovery of mineral. And the case of Ankeny v. Clark, 148 U. S. 345, 13 Sup. Ct. 617, supports the view announced in the Barden case, viz., that until patent issues the title is imperfect in.the grantee.

2. Respondents contend that, even if the title of the railroad company were free from imperfections, the various conveyances executed by it and its trustees and grantees did not pass a fee-simple title to plaintiffs. We think the evidence clearly establishes the truth of this contention. It is not necessary to examine all the defects in the chain ■of title between the railroad company and the plaintiffs, but we will content ourselves with a single reference. In the deed from the railroad company to plaintiffs the following reservation appears: “Reserving, however, to the said Union Pacific Railway Company the right to prospect for coal and other minerals within and underlying said lands, and to mine and remove the same, if found; and ior tbis purpose it shall have the right of way over and •across said lands, and space necessary for the conduct of said business thereon, without charge or liability for damage therefor.” This is an incumbrance — an easement— upon the land. The grantee’s title did not protect it from invasions and trespasses as oft-repeated as the grantor desired. While the fee passed to the grantee, assuming that it was held by the grantor, it was a servient estate. The mere statement of the reservation suffices to show the incompleteness of the estate conveyed to plaintiffs. But •counsel insist that the deed executed by the railroad company on the 2d of November, 1891, cured this defect. The findings show that after the defendants had claimed' ■a rescission of the contract, because no fee-simple title passed to them, the railroad company executed a quitclaim •deed to plaintiffs, wherein it released “all right, claim, * * * it may have in or to any coal which may thereafter be found upon or beneath the surface of said land. * * * It being the intention of this deed to .-relinquish any rights which the said Union Pacific Railway •Company may have retained in said land by virtue of the •coal reservation * * * included in said deed of October 18, 1889.” It will be observed that the company not only reserved the right to enter upon the lands and •prospect and mine for coal, but “other minerals within .and underlying said lands.” The quitclaim deed only relinquished the right to prospect and mine for coal. It is •clear that, even if the release had been in time, — that is, prior to defendants’ notice of rescission, — it is insufficient. .It releases less than was reserved.

3. The finding of the referee upon this question was that the plaintiffs informed defendants that they owned, and had a good title in fee simple to, 440 acres of land lying west •of Ogden city, which said land so referred to was the land intended to be conveyed to defendants, and that the defendants had not seen said land, and were not acquainted’ with the title, but that plaintiffs promised that they would' furnish defendants with an abstract of title to said land;, that defendants believed, relied and acted upon, the representations of plaintiffs, and, without investigating the title, purchased an undivided two-thirds interest therein, which purchase defendants would not have made if they had not. believed said representations; that said representations were-untrue. The conclusion of law based upon this finding is-that the representations made to defendants concerning the-title were untrue, and a fraud, in law, upon the defendants. Appellants contend that this finding and conclusion show that there was no “moral'” fraud; that there was simply innocent misrepresentation as to title; and that, where there is a partial failure of title, or a defect therein,, coupled with innocent misrepresentation as to such title, a. court of equity will not rescind, where the contract has been executed. The learned counsel for plaintiffs insist-that the findings and conclusions of law show that the plaintiffs are entirely exonerated from moral turpitude, or anything that indicates mala fieles. It is true, there is no-direct finding of a scienter in the misrepresentations, but it seems equally clear that plaintiffs are not wholly exculpated from wrong in the transaction. Plaintiffs knew that defendants had never seen the land, and that they were unacquainted with the title. They knew that the purchase-was being made entirely upon their representations respecting the title and its in defeasibility. The conclusion of the referee is not equivalent to a declaration that plaintiffs, were innocent in their affirmations of the unimpeachable-character of their title. But, conceding the construction placed upon the findings and conclusion of law above referred to is- the correct one, the question presents itself' whether, under the facts, there is ground for equitable-relief in behalf of defendants. Counsel for appellants. assume that the facts in this case show an executed contract, and learnedly argue that equity will not decree rescission of an executed contract, in the absence of moral fraud, and that where the contract is a warranty deed, and it is executed by the necessary parties, the purchaser has no remedy, either in law or in equity, in respect of defects in the title, or quantity or quality of the estate, which ■are no.t covered by the vendor’s covenants. If the facts ■of this case show an executory contract only, it is not .necessary to the determination of this case that we decide whether there is “legal,” as distinguished from “moral,” ■fraud, or what remedies are afforded the purchaser in executed contracts, where there is fraud or breach of covenants, because it is conceded, when the contract is still ■executory, the power of equity to decree rescission is ample. Is the transaction between the parties to this suit an executed ■or executory contract? “A contract is executory when the thing agreed has not been done. It is executed when the thing has been done. * * * One who has begun to •do what he promised, but has not finished, has executed •his undertaking in part.” Bish. Cont. § 624.

Conceding that plaintiffs had a fee-simple title to the land intended to be conveyed, the deed contained a description of wholly different land. The land which defendants .agreed to purchase was not conveyed. They contracted for ■a’ warranty deed to a certain tract of land. The contract was not fully performed by plaintiffs. It was execu-tory. The writing or deed amounted to only a contract to convey the land which plaintiffs claimed to own, and in equity would be enforceable, and if the evidence was ■sufficient, would warrant a decree of specific performance. It was a contract executory, conveying a chose in action, not a contract executed, conveying a chose in possession. 2 Bl. Comm. p. 443; McDonald v. Hewett; 15 Johns. 349. No right in rem was created. The only rights existing were in personam. If the contract between the parties-, had been executed, they would no longer have been bound by a contractual tie. Rights would have been acquired in property which would have extinguished the contract, but. we find plaintiffs asking for a reformation of the contract showing that it was incomplete. Executory, the rights-were in personam. They were seeking to enforce a chose-in action. “An executory contract is one in which a party binds himself to do, or not to do, a particular thing.'*' Fletcher v. Peck, 6 Cranch, 137. Plaintiff's warranty deed was a contract, in which they bound themselves to convey the land. Defendants agreed to purchase. But parol evidence would be required to establish the correct description. It was a defective deed, containing land which neither of the parties understood was conveyed or agreed to be conveyed. It was therefore only a contract to convey, and. was executory. A defective deed is an executory contract, and “it is. a familiar rule that a defective deed may be-treated in equity as as agreement to convey, and performance enforced; and, where it is, we think * * * that it stands on the same footing as an executory contract to-convey.'' Hanson v. Michelson, 19 Wis. 535; Petesch v. Hamsbach, 48 Wis. 447, 4 N. W. 565; Eaton v. Eaton, 15 Wis. 284; Mastin v. Halley, 61 Mo. 200; Fitch v. Gosser, 54 Mo. 274.

In the case of Hunt v. Rousmanier’s Adm’rs, 1 Pet. 13, the court say: “There are certain principles of equity applicable to this question which, as general principles, we hold to be incontrovertible. The first is that where an instrument is drawn and executed which professes or is intended to carry into execution an agreement, in writing or by parol, previously entered into, but which, by mistake of the draftsman, either as to equity or law, does not fulfill, or violates, the manifest intention of the parties to the agreement, equity will correct the mistake, so as te produce a conformity of the instrument to the agreement,. The reason is obvious. The execution of agreements fairly and legally entered into is one of the peculiar branches of equity jurisprudence; and if the instrument which intended to execute the agreement be, for any cause, insufficient for that purpose, the agreement remains as much unexecuted as if one of the parties had refused altogether to comply with his engagement.” And in the case of Walden v. Skinner, 101 U. S. 585, this language is adopted and the principle reaffirmed. In the case of Conrad v. Schwamb (Wis.), 10 N. W. 396, plaintiffs brought an action to recover a tract of land. A deed had been executed to defendant. The grantors intended to convey certain land in fee, but, by mistake, it was described as being in a different quarter-section. The court say: “The deed, * * * although, it did not convey the land intended, must be treated, in equity, as an executory contract * * * to convey such-land. * * * Hence * *. * Schwamb might have maintained an action against Felton * * * to compel. Felton specifically to perform his executory contract to-convey the land claimed, so far as he could perform it.”' And the quitclaim deed, correctly describing the land, tendered to defendants after the discovery of the mistake-in the first deed, did not answer the contract and fully execute it. Besides, the defendants had, a few days prior thereto, elected to rescind the contract, and had demanded back the amount paid, and the surrender of the notes held, by plaintiffs.

From the foregoing authorities, we are of the opinion, that the facts in this case do not constitute an executed contract. The transaction between the parties, we think, evidences an executory contract, and that equity has power to decree a rescission. We are not determining what mala praxis is sufficient to entitle one to rescind an executed contract; for, as stated, the transaction in this case shows an executory contract, and we believe the rule to be well settled that material representations which are • untrue, though innocently made, or the concealment of material facts by mistake or inadvertence, when relied on and which have become the foundation of the active relations between the parties, operate as a “surprise and imposition/’ and constitute such fraud as will move a court of equity to decree a recission of an executory contract. 1 Story. Eq. § 193; 1 Beach. Eq. Jur. §§ 69, 93; Bish. Con. § 662; Clark, Cont. p. 339; 2 Pom. Eq. Jur. §§ 883, 887, 889; Derry v. Peek, 14 App. Cas. 337; Arkwright v. Newbold, 17 Ch. Div. 320; Traill v. Baring, 4 De Gex, J. & S. 318; Ship v. Crosskill, L. R. 10 Eq. 73; Cooley, Torts (2d ed.) p. 582; Hexten v. Bast, 125 Pa. St. 52, 17 Atl. 252; Furnace Co. v. Moffatt, 147 Mass. 403, 18 N. E. 168; Wells v. McGeoch, 71 Wis. 196, 35 N. W. 769; De Frees v. Carr (Utah), 33 Pac. 217; Cotzhausen v. Simon, 47 Wis. 106, 1 N. W. 473; Grant v. Law, 29 Wis. 99; Knowlton v. Amy, 47 Mich. 204, 10 N. W. 201; Bullitt v. Farrar (Minn.) 6 L. R. A. 149, 43 N. W. 566; Litchfield v. Hutchinson, 117 Mass. 195; Smith v. Richards, 13 Pet. 26; 2 Warv. Vend. § 18. “As a rule, all representations which are untrue, and which materially affect the value of the property which forms the subject of the contract, will furnish grounds for a rescission, even though they may have been made without fraudulent intent.” 2 Warv. Yend. § 18; Allen v. Hart, 72 Ill. 104; Bennett v. Judson, 21 N. Y. 238; Mulvey v. King, 39 Ohio St. 491; Wilcox v. University, 32 Iowa 369; Alvarez v. Brannan, 7 Cal. 503. The facts in this case show that the representations of plaintiffs as to the character of their title to the land were more than mere expressions of opinion. They were affirmations of a material fact, and inducements to the contract. Being untrue and material, they are fraudulent. Cressler v. Rees, 27 Neb. 515, 43 N. W. 363; Conlan v. Roemer 52 N. J. Law, 53, 18 Atl. 858.

4. There is no controversy id regard to the materiality of the representations made respecting the title, nor is it contended that defendants did not act in due season in giving notice of the rescission after the discovery of the defect in the title; but plaintiffs urge that, the defendants not having tendered hack a deed of the property conveyed, there was no' rescission. The rule is, no doubt, that the parties must he placed in statu, quo before a rescission can be effectuated. Having decided that the warranty deed executed by the plaintiffs was merely an executory contract, it follows that defendants had nothing to return to plaintiffs in order to place them in statu quo. The referee found that the land described in the warranty deed was not owned by plaintiffs, and the conveyance executed by them certainly created no cloud upon the owner’s title, if there was an owner. Plaintiffs conveyed nothing to defendants. Their deed was worthless, except that it might be the basis of an action in equity for specific performance, or the foundation of a suit at law, after reformation, for a breach of the vendor’s covenants. Plaintiffs having parted with nothing of value, defendants had nothing to return, and in such case the failure to tender that which was valueless cannot be interposed to prevent a rescission of the contract. Bish. Cont. § 679. The referee finds that the defendants never actually occupied any of the land sought to be conveyed, but that plaintiffs were in possession of the same. We think that the record clearly discloses that the defendants did all that was required by law, upon their part, in order to justify a decree of rescission by the court. We find no error in the record, and therefore affirm the judgment of the lower court, with costs.

Merritt, 0. J., concurs. Bartch, J., concurs in the result.

Case Details

Case Name: Adams v. Reed

Court Name: Utah Supreme Court

Date Published: Jun 3, 1895

Citation: 11 Utah 480

Docket Number: No. 557

Court Abbreviation: Utah