Loring v. Palmer

May 10, 1886

183

Versions:

Mr. Chief Justice Waite

after stating the case as above reported, delivered the opinion of the court.

The question which meets us at the outset is whether the trust in favor of Palmer, on which the case depends, has been sufficiently established. A statute of Michigan provides that “ express trusts may be created'for any or either of the following purposes:

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“ 5. For the beneficial interest of any person or persons, when such trust is fully expressed and clearly defined upon the face of the instrument creating it,'subject to the limitations as to time prescribed in this title.” 2 Howell’s Ann. Stat. § 5573, p. 1448.. . \

The trust relied on is an express trust, and it relates to lands in Michigan. Consequently it must be established according to this statute, which it is contended requires proof of the creation of the trust by a written instrument that shall clearly express and fully define on its face the rights of the respective parties thereto. It is not enough, as is claimed, to show the existence of the trust by writing. The proof must be that it was originally created by a written instrument sufficient in form. In the view we take of the case it is unnecessary to inquire whether this is the true rule or not, for, in our opinion, the evidence is sufficient to meet all these requirements.

' We do not understand it to be denied that the letters of Palmer to Loring under date of June 18 and June 19; the memorandum of the agreement made in Michigan at the time of the negotiations by Palmer and Frue with Mason for the purchase, and which was sent by Palmer to Loring in the letter of June 19 ; the telegram and letter from Loring to Palmer before the contract between Mason and Loring, trustee, was executed; the letter from Loring to Smith, under date of June 25; the letter from Mason to Perkins under date of June 26 ; and the contract between Mason and Loring, may all be read together as one instrument for the purpose of establishing the trust. If, upon the face of these writings thus read and construed together in the light of the circumstances which surrounded the parties at the time, a trust is fully expressed and clearly defined for the beneficial interest of Palmer, then his case has been made out so far as the creation of' the trust is concerned.

We begin, then, with the fact that Loring, Palmer, and Prue had been operating together for some years in buying mining lands, forming mining corporations, and selling mining stocks. Yery generally the titles, both of lands and stocks, had been, during all the time, taken and held in the name of Loring, as trustee for all concerned. Each party paid for his own share of the purchases, but Loring was the principal capitalist, and both Palmer and Prue relied on him to raise money for them to meet their obligations when necessary. This particular purchase was set on foot by Palmer and Prue, and it was a kind of property in which the parties had been in the habit of dealing. It adjoined or was near to other property in which they were all largely interested at the time, and which they were jointly engaged in advancing in -value. The writings are to be read and construed in the light of these facts.

The contract of purchase, as reduced to writing and finally executed, is in the name of Loring, trustee. This on its face implies that it was made by him for the beneficial interest of others besides himself, in whole or in part. Standing alone, it does not “ clearly define ” the trust which it apparently created but, taken in connection with the correspondence which preceded it, and out of which it confessedly arose, no room is left for doubt that it was made for the benefit of the three persons who had been so long operating together in that kind of property. Palmer, in his letters acquainting Loring with what he and Prue had done in Michigan towards the purchase, says, “ it is a fortune to us if well handled; ” “ when I present the whole matter you will see how important it is to us. We can take from Hecla from 1550 to 2305 fept in length, and still give them out of this purchase double the amount of mining value that we get from them. The fact is, this ground bought is worth more to them than thie ground next to Ossipee. It is for this reason that I do not want anything said till we have fully considered this matter together, and see how we shall open it to Shaw. . . . Hecla would befree then to give us 100 acres, 50 of which would carry the vein, and we should give them 100, all of which would cany the vein. You will see the importance of this matter, and that we should not say anything until we consult. The Hecla is rich, and we can make the Ossipee as rich.” And again, “we shall get out,of Hecla alii have indicated. The land we would exchange is more convenient on surface and underground for them than what they would give us. It will be under their machinery and improvements. This is a great thing for Ossipee.”

It is said, however, that Frue does not appear to have been included as one of the beneficiaries. He was one of those who had been operating together, and Palmer, in his letter, speaks of him as having been present when the negotiations were had with Mason in Michigan. The language on this subject, in the letter of June 19, is: “ Mason talked this matter over with Frue and myself, and says we shall have this land as agreed, and that his word is as good as his deed; ” and, besides, in the memorandum of the agreement, made at the time of the negotiation, either Palmer and Frue were named as vendees, or Charles H. Palmer and his associates, which, under the circumstances, would imply the same thing.

Again, it is said that the individual interests of the respective beneficiaries are not stated, and, therefore, that the trust is not sufficiently defined to meet the requirements of the statute; but the rule in Michigan, as well as in all other States where the principles of the common law prevail, is that where a conveyance of lands is made to two or more persons, and the instrument is silent as to the interest which each is to take, the presumption will be that their interests are equal. Campau v. Campau, 44 Mich. 31, 34; Eberts v. Fisher, 44 Mich. 551, 553, Under this rale the purchase by Loring, as trustee, was for the equal benefit of the three parties in interest, and the trust, therefore, enured in that way. Without doubt it was expected that each of the parties would pay for his own interest, and that as between themselves neither should be bound for the other; but that is a matter the effect of which need not now be considered, as Palmer has paid for his share in full. There is nothing whatever on the face of the papers to indicate that at the time the contract was made and the trust created it was expected that one should have a greater interest in the purchase than another.

Finally, it is claimed the letters show that the purchase was made for the Ossipee Company, and not for Loring, Palmer, and Frue individually. We cannot so read what was written. The Ossipee Company had been promoted by these parties. They had bought the land which was made the basis, in whole or in part, of its organization. They were at the time of the purchase from Mason the three largest stockholders. The Ossipee was a corporation, and it nowhere appears that these parties, or either of them, had ever been authorized to make the purchase on its account. There is no doubt that all the parties expected to handle the property with a view to an • enhancement of the value of .Ossipee stock, but there is nothing whatever to indicate that the corporation was to be in any way directly interested in the purchase. The land might have been, and undoubtedly was, necessary to the complete success of the company, but it was nevertheless when bought the property of the purchasers, who occupied no such trust relations to .the company as to make their purchase enure, directly to its benefit; and, besides, the company is not now seeking to charge them as trustees. Palmer does, indeed, say in his letter to Loring, “ the purchase will add to the Ossipee $5 per share at once in actual value,” and “ we must make a family concern of Ossipee, and I would not sell any stock in it; we can make it put on its own importance; this we will do; I see this matter clearly; ” and “ we shall have- a Hecla of our own; ” but this does not make Ossipee the purchaser, or the direct beneficiary under the trust as thus created and defined. The expectation ol an indirect benefit to their investments in Ossipee was undoubtedly great, but' nothing occurred to bind the company to the purchasers or the purchasers to the company.

We conclude, therefore, that the original trust in favor of Palmer for a one-third interest in the property has been sufficiently established.

It is contended, however, that if the conveyance was made' to Loring as trustee for himself and Palmer and Prue, then, under the statutes of Michigan, the legal title vested at once in the beneficiaries, and the remedy of Palmer is at law, and not in equity, because he holds the legal title to his share and not an equitable title merely. The statute referred to is as follows:

“ § 5567. Sec. 5. Every disposition of lands, whether by deed' or devise, hereafter made, except as otherwise provided in this chapter, shall be directly to the person in whom the right to the possession and the profits shall be intended to be vested, and not to any other, to the use of, or in trust for, such person; and if made to one or more persons, in trust for, or to the use of another, no estate or interest, legal or equitable, shall vest in the trustee.” 2 Howell’s Ann. Stat. 1446.

This, it has been held, abolishes all express passive trusts in Michigan, but allows express active trusts when created in accordance with § 5573, cited above. Burdino v. Amperse, 14 Mich. 91, 96; Ready v. Kearsley, 14 Mich. 215, 227; Steevens v. Earles, 25 Mich. 40, 44; Thompson v. Waters, 25 Mich. 214, 234; Goodrich v. Milwaukee, 24 Wis. 422, 430. But here the conveyance under which Loring took the title that he has since conveyed to Welch did n,ot create the trust in favor of Palmer. That was done by the original contract of purchase from Mason, read in connection with the contemporaneous correspondence between the parties, and the object of this suit is to charge Loring as trustee under that contract, and to compel him and his grantee to perform the trust which was then created. There is nothing on the face of the deed to Loring to show that Palmer is the person for whom Loring took title in trust. The legal title did not, therefore, vest in him by that conveyance. All he has is the equitable title which he acquired under the contract of purchase, and his purpose now is to com pel Loring to convey to Mm the legal title to his share which passed from Mason when the contract was performed and the deed executed to him in accordance with its provisions. This is relief which a Court of Chancery alone can afford. So far as this record shows, Mason knew nothing of the particulars of the arrangement between Loring, Palmer, and Frue as to their respective interests. It is true the contract was made with Loring as trustee, but that is all. The terms of his holding are nowhere explained, and Mason performed his duty towards all who were interested, when he conveyed to Loring in accordance with the terms of the contract. The deed was intended to and did vest in Loring the legal title in trust for whomsoever it might concern. This suit is prosecuted to establish the fact that Palmer was one of the persons concerned and to charge Loring accordingly.

The trust having thus been established and the jurisdiction of a court of equity over the subject-matter of the suit sustained, it remains only to consider whether the trust, which was originally created, has been abrogated by abandonment or laches. The last payment to Mason was made February 18, 1869, and this suit was not brought until December 20, 1815.

This branch of the case is presented to us very differently from what it was to the court below when the interlocutory decree was rendered, and the cause referred to a master to ascertain how much was due from Palmer to Loring upon the purchase money paid to Mason. It was then supposed that Palmer had no money in the hands of Loring which could be used to pay on the land when the deferred instalments fell due. The court then found that no part of the proceeds of the smelting stock or the Hecla stock was applied to such payment, and that all went into Palmer’s general account with his consent. It now appears that when each of the instalments was paid, or very soon thereafter, Palmer had, or ought to have had, a balance to his credit much more than sufficient to meet his share of what was due. The testimony shows very clearly that neither of the parties had a correct understanding of the state of their accounts with each other at the time. Palmer kept no books of his own, and those of Loring were not at all rehable. Coring always claimed that Palmer was largely in his debt, and Palmer does not seem to have had then any means of showing the contrary. Iiis own credit was exhausted, and Coring had possession of all his securities. Consequently, when Coring called on him to pay by the 20th of March, he did not abandon his claim, but he sold his Hecla stock and paid the proceeds to his general credit and waited for time to show whether this was enough to preserve his interest or not. He gave no special direction for its application, but, under the circumstances, the law will apply it to the only debt he then owed to Coring, and that was his share of this purchase money. Coring, by keeping the charge for the purchase money out of his accounts, cannot deprive Palmer of his right to the application of his credits. In a couple of years or so Coring began his suit, and this was kept pending until 1874, when it was discontinued. Coring says, in his answer, this was because he had “ ascertained that Palmer was utterly irresponsible and worthless.” Now it turns out that when the suit was abandoned, he was himself in debt to Palmer, and that all the time he had securities in his hands which were largely in excess of any amount he had paid for Palmer on the land or otherwise. Under these circumstances it is impossible to say that the evidence makes out a case .of actual abandonment, or that Palmer has been guilty of such laches as to bar him of the equities which are now so clearly shown to have existed in his favor all the time. His delay in bringing the suit is to be construed in connection with the uncertainty that existed as to the true situation of'his accounts. Coring must have known that Palmer relied on him to keep the accounts, and having himself been guilty of such glaring errors in his statements and in his claims, Palmer is not to be charged alone with the fault of delay. The same explanation applies to his failure to respond more definitely to the letter of Coring under date of February 22, if there was in fact any such failure. He did, however, by the sale of his Hecla stock, put Coring in funds to an amount ■ sufficient to meet his entire share of the purchase money, and that too on the very day he was required to do so by this letter of' Coring. This renders it unnecessary to consider the conflicting testimony on the subject of the letter. The explanation also applies to the correspondence in reference to the declaration of trust in favor of Frue under date of March 16, 1869. It is clear that, if Palmer had known the actual condition of the accounts at the time, he would promptly have claimed his rights, and that, to say the least, Loring was as much responsible for this uncertainty as Palmer. If the land had not in fact been paid for by Palmer, the delay in bringing the suit, or otherwise asserting the claim with distinctness, would have been looked upon very differently. As it is, it does not' make out a defence by Loring to the enforcement of the trust which has been so clearly established.

The decree of the Circuit Court is

Affirmed.