Negaunee Iron Co. v. Iron Cliffs Co.

134 Mich. 264 | Mich. | 1903

Grant, J.

{after stating the facts). 1. It is urged that this bill cannot be maintained, because its main purpose is to declare a forfeiture of the 99-year lease, and that courts of equity will not enforce a forfeiture. Counsel cite in support of this contention Funk v. Haldeman, 53 Pa. St. 229; 2 Story, Eq. Jur. § 1319; Bisp. Eq. § 181; 1 Pom. Eq. Jur. § 459; Crane v. Dwyer, 9 Mich. 350 (80 Am. Dec. 87); White v. Railway Co., 13 Mich. 356. The general rule is undoubtedly as stated in Funk v. Haldeman. The statement by the court was not necessary to a decision of the case. The court held that there was no violation either of tenure or covenants of the instrument which conveyed to Punk an incorporeal hereditament in fee, namely, the right to enter upon certain lands for the purpose of prospecting, boring, and taking away ore, oil, etc., out of the earth. The claim was that Funk had subdivided that which he could only hold in entirety, and had, therefore, lost all. At the close of the opinion the court said that, if Funk had lost his rights by the subdivision, ‘ ‘ a chancellor would be likely to send the grantors into a court of law to enforce the forfeiture by ejectment; for equity does not, ordinarily, enforce forfeitures. ” The case does not hold that in no case of forfeiture may a court of equity interfere. Pomeroy states that those cases which appear to be exception's to the rule are not so in reality. Bispham says, ‘ ‘ In some cases, however, the enforcement of a forfeiture may be regarded ;n equity with favor.” Crane v. Divyer was an attempt to enforce in equity a forfeiture of a land contract, the vendee being in possession. The forfeiture sought to be enforced in White v. Bailioay Co. was similar. These cases are in accord with the general rule. See, also, Hodges v. Buell, ante, 162 (95 N. W. 1078).

The-supreme court of Pennsylvania, in Brown v. Vandergrift, 80 Pa. St. 142, stated the doctrine to be that equity “abhors a forfeiture when it works a loss, but not when it works equity, and protects the landowner against the indifference and laches of the lessee, and prevents a great mischief.” In that case the lessee agreed to keep-his lease good by a payment of $30 per month until he should commence operations, and, failing to do so, the lease was forfeited. He paid for 4 months; then failed to pay or to commence operations for 11 months. He sought to contiiiue his lease by tendering payment for the 11 months. Equity interfered, and declared the lease forfeited.

In Eberts v. Fisher, 44 Mich. 551 (7 N. W. 211), this, court, speaking through Mr. Justice Campbell, said:- “ There is no rule that equity will not recognize a forfeiture when it is only one of the incidents of a past transaction.” In that case it was held that the lease involved had expired by its own limitation, and, until renewed, had lost any efficacy.

Where a lessee has abandoned the premises, asserted no right under his lease for many years, and the lessor has been in exclusive possession, acting in apparent hostility to the lease, equity will interfere to prevent the lessee from afterwards attempting to take possession under the lease and asserting its existence. See Detlor v. Holland, 57 Ohio St. 492 (49 N. E. 690, 40 L. R. A. 266).

The bill in this case alleges exclusive possession for more than 15 years in the complainants; an abandonment by the Pioneer Iron Company of the lease for nearly 40-years ; that the Pioneer Iron Company was dead by reason of the expiration of its charter; that the right to mine ore-conveyed by the lease to the Pioneer Iron Company was appurtenant to the furnaces which it was then erecting; that said furnaces were dismantled in 1894; that no other furnace has been erected since; and that said right to mine ore, conveyed by said lease, was personal to the Pioneer Iron Company, and incapable of assignment.

We think, however, the main purpose of the bill is, not to declare a forfeiture of the lease, but to determine the rights of the parties, which depend largely upon the construction of the deeds, the leases, and the various acts and conduct of the parties, extending over a period of more than 40 years, and to enjoin a continuing trespass. The case is one peculiarly appropriate to a court of equity.

The bill sets forth three notices in the name of the Pioneer Iron Company that it had entered upon the disputed lands for the purpose of mining iron ore. It is, therefore, apparent that numerous acts of trespass and the removal of valuable ore were threatened. The defendants are not in possession. The Pioneer Iron Company, through Mr. Duncan, its alleged agent, who is also agent and manager of the defendant companies, gave notice to the complainants that they had entered upon certain of these lands for the purpose of exploring for iron ore to be used in the furnaces, according to the grant made in the 99-year lease. Under this notice and all the others there was no claim of occupancy by the defendants or the Pioneer Iron Company by adverse possession. Whether or not, under these circumstances, ejectment would lie, we need not determine. Complainants being in possession of the property, if their title is valid, irreparable injury was threatened by the defendants. Such trespasses a court of equity will enjoin. 3 Pom. Eq. Jur. § 1357; Stone v. Lumber Co., 59 Mich. 31 (26 N. W. 216); Hall v. Nester, 122 Mich. 141 (80 N. W. 982); Halpin & Co. v. McCune, 107 Iowa, 494 (78 N. W. 210); Campbell v. Kent Circuit Judge, 111 Mich. 575 (70 N. W. 141); F. H. Wolf Brick Co. v. Lonyo, 132 Mich. 162 (93 N. W. 251); West Point Iron Co. v. Reymert, 45 N. Y. 703; Oolagah Coal Co. v. McCaleb, 68 Fed. 86, 15 C. C. A. 270.

2. It is also urged as a fatal objection to the maintenance of the bill that the Pioneer Iron Company is not made a party. Under the allegations of the bill, and as well under the proofs, the Pioneer Iron Company is used as a “dummy ” for the benefit of the defendant companies. The defendants own, and have owned for many years, all its capital stock, its furnaces and property, both real and personal. They have managed all its affairs, and for their own benefit. All its accounts, if any have been kept in the name of the Pioneer Iron Company, have been kept upon the books.of the defendants. The defendants refused upon the trial to produce the books of the Pioneer Iron Company, or their own books showing the accounts. Some of its officers having charge of the books were produced as witnesses, and testified to the above facts. Under these circumstances, these defendants cannot escape-the consequence of their acts done in the name of the-Pioneer Iron Company for their own benefit. Admitting that the Pioneer Iron Company is not a dead corporation, yet all its property, franchise, and rights are owned by the defendant companies, so far as the rights under the 99-year lease are concerned, and are fully represented by those now before the court.

The theory of the complainants, as stated in their bill,, is that the Pioneer Iron Company is a dead corporation;, that its charter expired by limitation April 2, 1887; and that no steps were taken for some time thereafter to reorganize the corporation under the amendment to the Constitution and the law; and that that action was wholly invalid. The Pioneer Iron Company, therefore, was not a necessary party. 15 Enc. Pl. & Pr. p. 627; Hale v. Hale, 146 Ill. 227 (33 N. E. 858, 20 L. R. A. 247). Complainants could not well have made the Pioneer Iron Company a party defendant without recognizing it as an existing corporation. Its existence was in issue, and, having expired by limitation of its charter, the burden of proof was upon the defendants to show a valid reorganization, so as to make it the successor of the company, within the terms of the 99-year lease. Equity will enjoin the threatened acts of those assuming to act within the name of a dead corporation. Attorney General v. Railroad Co., 112 Ill. 520; Brooklyn Steam Transit Co. v. City of Brooklyn, 78 N. Y. 524.

3. The further answer to those objections to the jurisdiction of the court is that they should have been raised by demurrer. The facts upon which they are based are apparent upon the face of the bill. The defendants, having answered, put the case at issue upon the merits, and taken proofs upon that issue, cannot now raise the question of jurisdiction. F. H. Wolf Brick Co. v. Lonyo, supra; Le Roy v. Platt, 4 Paige, Ch. 81; Livingston v. Livingston, 4 Johns. Ch. 290 (8 Am. Dec. 562); Waterloo Mining Co. v. Doe, 82 Fed. 45, 27 C. C. A. 50.

4. Construction of Deed from Beynolds to Harvey. Whatever interests in the lands Reynolds reserved in himself, which were assignable by him or descendible to his heirs, the complainants own by appropriate deeds. Whatever interests are not now vested in the Pioneer Iron Company by the 99-year lease are also owned by complainants by appropriate conveyances from Harvey. The first important question, therefore, is, What interest did Reynolds convey to Harvey, and what did he retain in himself ?

Defendants invoke the rule that deeds must be construed most strongly against the grantor. This rule cannot be invoked to defeat the intent of the grantor fairly gathered from the four corners of the instrument. Resort to this rule will only be had when other rules of construction fail. Swan v. Morehouse, 6 D. C. 228. Deeds are contracts, and, when courts can ascertain from the deed itself the intent of the grantor, the deed will be construed so as to give that intent effect, and that intent will be carried out “as the mass of mankind would view it,” and not in accord with the technical definition of the words. A dispute raised between parties as to the meaning of the language of an instrument does not of itself create a doubt so as to admit the application of the rule defendants invoke. Therefore the definition agreement, dated February 1, 1871, between Reynolds and Harvey, specifically stating what interest Reynolds conveyed and what he retained (which agreement is referred to hereafter), does not of itself show a doubt as to the meaning of the deed which the court will recognize as a reason for applying the rule. If there is a doubt as to the meaning, courts will consider the situation of the parties, the subject-matter of the transaction, the acts, conduct, and‘dealings of the parties, in determining the meaning of any particular clause. These rules of construction have been recognized and applied, by this court in many cases. Paddack v. Pardee, 1 Mich. 421; Norris v. Showerman, 2 Doug, 16; Bronson v. Green, Walk. Ch. 56; Vary v. Shea, 36 Mich. 397.

It has often been held that to “reserve ” means an exception, and to “except” means a reservation. These words are not controlling, but will be construed in the light of the entire language of the deed. If the grantor, no matter what the words may be, retains in himself title to a part of the land described in the deed, it is an exception. In such case words of inheritance are not necessary to retain in him the title for himself and his heirs. This is reasonable, because the deed did not purport to convey the title to the part excepted, nor to devest him of it. Whatever is excluded from the grant by exception remains in the grantor as of his former title or right.” Stockbridge Iron Co. v. Hudson Iron Co., 107 Mass. 321. Where, however, the language constitutes a reservation,'— i. e., “ when the thing which is to be the grantor’s comes back to him from the grantee in the nature of a grant,” such as rent, or other strictly incorporeal hereditament,— words of inheritance are essential to constitute a title to the thing reserved beyond the life of the grantor. 3 Washb. Real Prop. (5th Ed.) 465; Lathrop v. Elsner, 93 Mich. 599 (53 N. W. 791), and authorities cited; Marvin v. Mining Co., 55 N. Y. 538 (14 Am. Rep. 322); Sloan v. Furnace Co., 29 Ohio St. 568; Whitaker v. Brown, 46 Pa. St. 197; Foster v. Runk, 109 Pa. St. 291 (58 Am. Rep. 720).

The contract referred to in the deed is as much a part of the deed as if its provisions were incorporated in the deed, and the two will be construed as one instrument. Reynolds did not convey the entire fee to Harvey, and then repurchase by the contract a certain interest in the lands.

Applying the above rules, we find no difficulty in construing the deed. It is entirely clear that Reynolds intended to convey a certain interest in the land to Harvey, and to retain the residue in himself. He carved the estate into two parts, conveyed one, and retained the other. One of the express considerations is “ reserving to himself an undivided half interest in and to all the minerals which have been or may be discovered on the premises referred to as conveyed.” Again, in the proviso, where Harvey is required to account for ore mined and sold not for his own use or for manufacturing purposes, Reynolds’ interest is described as “his joint half interest therein.” This language is susceptible of but one construction. It clearly shows that Reynolds conveyed to Harvey the title to one-half of the minerals, and retained the title to the other half in himself. The deed and contract were executed simultaneously. Harvey had nothing to grant till the delivery of his deed. When the deed was delivered, his contract was made a part of it, and he took only what the deed and contract, construed as one instrument, gave him. Reynolds burdened his half interest by conveying to Harvey the right to take without compensation any ore he might find and mine upon the premises for his own use, or for manufacturing purposes within the limits of Marquette county.

Some question subsequently arose between Reynolds and Harvey as to the true construction and effect of the deed, and therefore, on February 1, 1871, they executed an agreement known as the “ Definition Agreement,” in which, among other things, it was “ declared and agreed that by said deed James L. Reynolds conveyed to Charles T. Harvey, his heirs and assigns, the entire surface of the lands described, and an undivided one-half of the minerals therein; reserving and excepting to the said Reynolds, his heirs and assigns, the other undivided one-half of said minerals, together with certain rights and easements in the surface as appurtenant to said mineral right.” This agreement was duly recorded March 7, 1871. It is not, of course, binding upon the defendants. It is, however, valuable as showing the understanding of Mr. Harvey, the witness upon whom the defendants largely rely to maintain their case, outside of their claimed construction of the instruments involved, without considering any extrinsic evidence.

In 1879 the Negaunee Iron Company filed a bill in chancery in the circuit court for the county of Marquette against Edward Breitung and others, asserting that “no estate of inheritance or other interest capable of being transmitted by inheritance, devise, or assignment” was reserved by or remained in said James L. Reynolds after the said conveyance to Charles T. Harvey of February 26, 1857, and prayed that the title of the complainant might be quieted as against the claims of Reynolds’ heirs. Answer was duly filed, proofs taken, and the bill dismissed. The decree dismissing the bill was entered November 20, 1880. No opinion was filed, and the decree did not state the reason for dismissing the bill. The sole question, however, involved in the case was the construction to be placed upon that deed. It seems clear that the bill could not have been dismissed without determining this question. No appeal was taken, and the parties to that suit — the complainants here — have evidently acted upon the faith of that decree, and have expended very large sums of money in the purchase of these lands, in exploration, and the erection of mining plants. Complainant Breitung bought certain interests for which he paid $45,000, and his father bought the interest of Reynolds’ heirs for $55,000. Several mining corporations have been organized, and valuable mines opened by them, upon the faith of the.validity of complainants’ title. While that decision may not bind the Pioneer Iron Company and the defendants, yet it is entitled to great weight, as it stood unquestioned for 20 years, and must have been known to the officers of the Pioneer Iron Company and these defendants.

In 1889 the Arctic Iron Company filed a bill in equity against the Pioneer Iron Company, alleging the ownership by them as tenants in common of the minei'als upon certain lands covered by the 99-year lease. The bill alleged that the Arctic Iron Company was the owner of the undivided half of the minerals, but that the title of said company was subject to the right of the Pioneer Iron Company to mine for its own use, or for manufacturing purposes within the county of Marquette. In its answer the Pioneer Iron Company averred that its ownership was subject “ to the right of the said complainant [the Arctic Iron Company] to an undivided half of all the minerals which may have been heretofore discovered thereon or may hereafter be discovered thereon.” This is a direct and solemn recognition in writing that Reynolds retained the title in fee to one-half of the minerals by his deed to Harvey.

Shortly before defendants served their notices in the name of the Pioneer Iron Company of entering upon said lands under the 99-year lease, they applied to complainants for options or leases, being refused which they attempted to enter under the 99-year lease. The conduct, therefore, of these defendants, is consistent only with the theory that they recognized the title to an undivided half of the minerals to be in these complainants.

5. The Construction of the 99-Year Lease. By the deed from Reynolds to Harvey, Harvey acquired the sole right to mine for himself and his assigns, free of cost or compensation, for the purposes specified. The right was an incorporeal and indivisible hereditament in Reynolds’ undivided half interest. It gave Harvey no title to the ore in place. The word “ sole,” in the term “sole right,” is not used in the sense that it excluded Reynolds from the right to mine, for the deed expressly conferred that right upon him. It is descriptive of the right Harvey had in the ore, and excludes any other right thereto in him. The 99-year lease conveyed to the Pioneer Iron Company only an indivisible, incorporeal, and personal right to mine ore, and then only for such as it should actually convert into merchantable iron at its own furnaces or forges. It granted only certain rights and privileges for a specific purpose. It prohibited assignment, and the mining of ore for furnaces not owned by the company. It was not exclusive of the right of Harvey, his heirs and grantees, to mine for ore. Such rights may be assigned or conveyed in entirety, but not in severalty. “They may be appurtenant to another piece of land; as, for example, to a furnace property.” Barr. & Adams, Mines, p. 53; Silsby v. Trotter, 29 N. J. Eq. 228; Gloninger v. Coal Co., 55 Pa. St. 9 (93 Am. Dec. 720); Harlow v. Iron Co., 36 Mich. 105, 131, and authorities cited; Van Rensselaer v. Radcliff, 10 Wend. 639 (35 Am. Dec. 582). Whether the effect of the conveyances made by Harvey to the Pioneer Iron Company and to others effected a division of this incorporeal hereditament, we find it unnecessary to determine, as the case will be disposed of on other grounds.

Was this right to mine ore under this lease appurtenant to the furnace then existing? It is true that the lease itself does not in express terms limit it to the then existing furnace. We must, therefore, look to the situation of the parties, the object in contemplation, and the surrounding circumstances, in determining thq question. The lease speaks in the present tense. The furnace, with its two stacks, was then in existence. If, instead of the lease, Mr. Harvey had made a contract on September 17, 1857, to supply the furnace or furnaces of the Pioneer Iron Company with iron ore sufficient for its use, clearly such contract would be held to mean’the furnace or furnaces as it or they then existed. If A. enter into a contract with B. to supply B.’s flouring mills for a series of years with sufficient wheat to keep them running, and B. have two mills, clearly the contract would mean that A. should supply B. with wheat for the mills then erected, and not for the mills he might thereafter erect. The same rule would hold if B. obtain from A. the right for a series of years to enter upon A.’s land and raise wheat for use in his mills. Harvey and the Pioneer Iron Company were dealing with things as they existed, and not with things that might exist thereafter.

The preliminary agreement executed at the same time of the deed by Harvey to the Pioneer Iron Company limited the right to use the ores mined “to its [the Pioneer Iron Company’s] own establishment.” A furnace may have one stack or more, in which case it is sometimes called furnaces, and sometimes a furnace with stacks of a specified number. The Pioneer Iron Company’s articles of association provide for only one furnace. They state the purpose for which the corporation was organized to be that “ of procuring a suitable location for a manufactory, and lands to furnish coaling facilities therefor, in the Upper Peninsula of the State of Michigan, and working the same .for the production of merchantable iron ” In each of the three written instruments, viz., the preliminary lease, the articles of association, and the 99-year lease, different terms are used interchangeably, meaning the same thing, viz., a furnace for the manufacture of pig iron. The ^circulars sent out by it on the formation of the company refer to but one furnace. If the above facts were insufficient to establish the character of the furnace with reference to which the parties contracted in the lease, its character is conclusively established by the contract made April 25, 1857, by the Pioneer Iron Company with the Jackson Iron Company,-by which the latter agreed to supply the former with ore for the manufacture of pig iron. It was recited therein that the Pioneer Iron Company proposed “to erect and build a blastfurnace establishment of one or two stacks for manufacturing pig iron near the Jackson Iron Mine.”

Is it reasonable to suppose that Harvey intended to confer upon the Pioneer Iron Company the right to erect as many furnaces as it chose, and obtain ore for them all from this land ? If this he the construction of the lease, then Harvey conveyed to the company the right to use all the ore found in his land, provided it could erect enough furnaces to use it. It is unreasonable to hold that such was the intent of the parties. The undoubted consideration for this lease was the exploration and development of iron ore upon the lands by the company, the discovery and development of which would redound to the benefit of the lessor. There must have been some consideration moving from this company to Harvey to induce him to make the lease, other than the nominal consideration expressed in it. The learned counsel for defendants attempt to show that the $25,000 paid for the deed was also the consideration paid for the lease. The record fails to establish any such claim. On the contrary, it conclusively appears that the standing timber upon the lands conveyed by the deed was then worth more than the $25,000, the consideration expressed therein and paid. Furthermore, Harvey, one of the company’s incorporators, its agent and its witness, testified positively that but one furnace was in contemplation when the articles of association and the 99-year lease were executed. We therefore conclude that the Pioneer Iron Company contemplated, provided for, and erected only one furnace, with two stacks; that the parties contracted with reference to that furnace; and that the mining right conveyed was appurtenant to the furnace.

6. By the voluntary act of the defendant companies, who, since 1866, operated it, the furnace was dismantled in 1894, and totally destroyed. It has never been rebuilt, and there evidently was no intention to rebuild it. The abandonment and destruction of the furnace also destroyed the appurtenant right to mine the ore under the lease. Nothing was left for the right to be appurtenant to. When the principal is destroyed, the appurtenant rights go with it; or, as one author puts it, “when the substance disappears, its shadow vanishes.” Day v. Walden, 46 Mich. 575 (10 N. W. 26); Jones v. Van Bochove, 103 Mich. 98 (61 N. W. 342). The doctrine of abandonment is sufficiently discussed in these two cases and the authorities there cited.

7. Soon after the execution of the 99-year lease, the Pioneer Iron Company made some explorations upon certain portions of the land covered thereby, found ore, but not in paying quantities, abandoned the explorations, and for full 43 years made no other attempt to avail itself of this mining right. In 1866 it conveyed to the Iron Cliffs Company by lease for a period of 10 years “ all its ironworks, buildings, lands, and rights,” etc. (reserving, however, certain rights and privileges not necessary to mention ), and provided by the lease that dividends should be paid directly to its stockholders, rather than into its treasury. The Iron Cliffs Company afterwards became the owner of all its -stock, and thereafter carried on the furnace business. The Pioneer Iron Company never thereafter took any control of its furnace. It was regarded as merged in the Iron Cliffs Company. So notorious was this that, in the year 1877, the commissioner of mineral statistics, in his first annual report, speaking of this company, said: “The Pioneer Iron Company, by whom the furnace was built, became subsequently merged into the Iron Cliffs Company.” In subsequent reports it was referred to as “absorbed by the Iron Cliffs Company.” The officers of the Pioneer Iron Company thereafter neither made nor filed any reports as the law expressly required them to do. Meanwhile, commencing about the year 1870, the grantees of Reynolds and Harvey, through themselves and other parties, spent large sums of money in exploration, and discovered in subsequent years valuable deposits; mining corporations were formed, and leases made to them, and valuable mines developed by them; during all of which time the Pioneer Iron Company stood by in silence, asserting no right under its lease. Whether such nonuser amounted to an absolute abandonment, under the rule in Dayr. Walden, supra, we need not determine. That leases of this character may be abandoned and forfeited by nonuser is established in Porter v. Noyes, 47 Mich. 55 (10 N. W. 77), at least as to those who have purchased or leased from the lessor, entered upon the land, developed mines, and made valuable improvements. There is certainly force in the claim that a personal, unassignable, and incorporeal right to take ore appurtenant to a furnace is abandoned by the failure to exercise that right for 43 years; especially where the right was once exercised and abandoned. Whatever may be the rule as between the lessor and the lessee where neither has taken any steps to exercise the right to mine, as between such lessee and subsequent lessees and grantees of the lessor, who have in good faith expended large sums in developing mines, the lessee is estopped to assert his personal and incorporeal right. In an opinion obtained by the complainants in 1890 from Mr. W. P. Healy, a lawyer, who was once interested in these lands, he said: “I am also clear that the Pioneer Iron Company can never enter' and appropriate the discovery of another. They cannot stand by until others have discovered a valuable deposit of ore, and then commence mining a portion of it, ” — which opinion meets our approval. The case of East Jersey Iron Co. v. Wright, 32 N. J. Eq. 248, is similar in many respects to this case, and the language there used is equally applicable here:

“There are persons who will stand by and see large expenditures incurred in such operations, intending, if the venture turns out successful, to set up a claim, but, if otherwise, to have nothing to do with it. Such persons have no right to the aid of a court of conscience.”

8. The charter of the Pioneer Iron Company expired by limitation April 2, 1887. The Constitution, at the date of its organization and at the expiration of its charter, expressly prohibited the organization of corporations beyond the period of 30 years. No provision then existed, either by the Constitution or by the statute, authorizing a reorganization of corporations which had expired by limitation. A constitutional amendment was adopted in 1889, authorizing the legislature to provide by general laws for one or more extensions of the term of such corporations, and also for the reorganization “for a further period, not exceeding 30 years, of such corporations whose terms have expired by limitation, on the consent of not less than four-fifths of the capital.” Const. Mich. art. 15, § 10. Pursuant to this authority, the legislature, in 1889, passed an act authorizing such reorganization. 2 Comp. Laws, § 703$. Very important questions are raised by counsel as to the effect of this reorganization statute, the validity of the act of reorganization by the Pioneer Iron Company, as to whether the Pioneer Iron Company was in position to avail itself of this statute, and also the effect upon the 99.-year lease should the reorganization be held to be valid. Inasmuch, however, as these questions are not essential to a decision of the case, we refrain from determining them.

Decree affirmed, with costs.

The other Justices concurred.