Adams v. Henderson/Opinion of the Court

By a final decree of the district court of the Fourth judicial district of the territory of Utah, a contract for the sale of certain land, made March 27, 1890, between L. B. Adams and W. N. Shilling, on one side, and Edward A. Reed and H. H. Henderson, on the other side, and three promissory notes given by the purchasers, together with a mortgage executed by them to secure the payment of such notes, were adjudged to be null and void.

It was also adjudged that Henderson and Burgitt (the latter having become guardian of the person and estate of Reed, who was incapable of conducting his own affairs) recover of Adams and Shilling the amount paid by Henderson and Reed on the agreed price of the land purchased by them from Adams and Shilling.

The decree was affirmed by the supreme court of the territory (40 Pac. 720), and the case is here for review upon the appeal of Adams and Shilling.

The material facts out of which the case arises, and which are embodied in a report of a special master in chancery, are as follows:

In March, 1890, Shilling and Adams, in response to an inquiry made by Reed and Henderson, stated that they owned and had a good, indefeasible title in fee simple to 440 acres of land lying a few miles west of Ogden City, Weber county, Utah territory.

The lands referred to-as as understood by all parties at the time-were the E. 1/2 of section 9, township 5 N., of range 2 W. of the Salt Lake meridian, the S. 1/2 of the S. W. 1/4 of said section, and the N. E. 1/4 of the S. W. 1/4 of that section.

Reed and Henderson had not at that time seen the land, and had no knowledge as to the title. But Shilling and Adams promised that they would furnish an abstract of title. Reed and Henderson, relying and acting upon the representation of Adams and Shilling that they had a good and indefeasible estate in fee simple to the lands inquired about, without investigation the title, purchased an undivided two-thirds interest in the 440 acres for the sum of $7,333.32, of which one-third was to be paid, and was paid, in cash, and time was given for the payment of the balance, with interest. They would not have made the purchase if they had not believed the above representation as to title to be true.

On the 27th of March, 1890, Reed and Henderson received from Adams and Shilling a deed of general warranty for the following land: An undivided two-thirds of the E. 1/2 of section 9, township 6 N., of range 2 W. of the Salt Lake meridian, of the S. 1/2 of the S. W. 1/4 of that section, and of the N. E. 1/4 of the S. W. 1/4 of the same section, in Weber county, Utah.

The land contracted for, it will be observed, was in township 5, while the land actually conveyed was in township 6. But the grantors intended by the above deed to convey an undivided two-thirds of the land in township 5, and the grantees supposed that the estate embraced by the conveyance was that which they intended to purchase. But, by mistake of the scrivener, the premises conveyed were described as lying in township 6.

At the time the above deed was received, the grantees, in addition to the cash payment of one-third of the purchase price, executed two promissory notes, payable to the grantors, for the sum of $2,444.45, each bearing 8 per cent. interest, payable one year and six months from March 26, 1890, and secured by a mortgage on the premises. But in that mortgage, by the mistake of the scrivener who prepared it, the land was described as lying in township 6. The mortgage was duly signed, witnessed, and acknowledged; Reed and Henderson, at the time, fully believing and acting upon the representation of the grantors as to title, and paying to the grantors the interest on said notes down to and including September 26, 1890, which amounted to $180. They also signed a promissory note of June 26, 1891, payable to the Utah National Bank of Ogden, Utah, for the sum of $391.10, as the interest on the above notes, which were held by the bank. The note last named was brought into court, and, when the final decree was rendered, it was still in court for the defendants.

The plaintiffs, Shilling and Adams, failed to furnish an abstract of title; and Reed and Henderson, having an opportunity to sell the land in township 5, and assuming that that was the land conveyed to and mortgaged back by themselves, procured an abstract on the 3d day of September, 1891.

The above lands in township 5 are within 10 miles of the line of the Union Pacific Railroad, and within the limits of the lands granted to that company by the act of congress of July 1, 1862 (12 Stat. 489). They lie in a valley at the base of the Wasatch Mountains, and had theretofore been used and cultivated as agricultural lands. But no exploration or examination has ever been made on them for coal or minerals of any kind or description.

As bearing on the condition of the title to the land in township 5, it may be stated that the Union Pacific Railroad Company twice mortgaged all the lands granted to it by the act of congress of July 1, 1862, and the act amendatory thereof approved July 2, 1864 (12 Stat. 489, c. 120; 13 Stat. 356, c. 216),-one of the mortgages being dated April 16, 1867, and the other, December 18, 1873.

Adams and Shilling acquired, by proper conveyance made in 1889, all the interest of the Union Pacific Railroad Co pany in the lands in township 5 sold by them to Reed and Henderson, and freed from the liens created by the above mortgages, except that the deed received by them from that company contained a clause reserving 'to the said Union Pacific Railroad Company the exclusive right to prospect for coal and other minerals within and underlying said lands, and to mine for and remove the same if found, and for this purpose it shall have the right of way over and across said lands, a space necessary for the conduct of said business thereon, without charge or liability for damage therefor.'

No patent has ever issued from the government for the land in township 5.

Parties applied to Reed and Henderson for the purchase of that land, but they declined and refused to buy, and a sale by them was defeated.

Within two days of the 3d of September, 1891, and before the bringing of this action, Reed and Henderson ascertained that the plaintiffs were not the owners of, and had no title to, the land which the deed from Adams and Shilling purported to convey to them; that is, to the land in township 6.

On or about the 4th day of September, 1891, Reed and Henderson notified Adams and Shilling that they rescined the contract of sale, and demanded, not only the return to them of the moneys paid on account of their purchase, with interest, but the surrender of the two notes of $2,444.45 each, bearing date March 27, 1890, and the note for $391.10, dated June 26, 1891. All of those notes had been returned by the bank to Adams and Shilling.

After Reed and Henderson notified Adams and Shilling of the rescission of the contract of sale, and before the bringing of this suit, Adams and Shilling tendered another deed,-a special warranty deed, containing a proper description of the land intended to be sold by them to Reed and Henderson. The latter refused to accept that deed, saying that they rescinded the contract of sale; that Adams and Shilling did not have a good title to the land described therein; and urging the objection, also, that the deed was not one of general warranty. The deed so tendered was dated September 29, 1891.

At the time Adams and Shilling tendered the deed of special warranty, the title to the land therein described was incumbered by the above reservation, in the deed of 1889, made by the Union Pacific Railroad Company to Adams and Shilling, of an exclusive right in the Union Pacific Railroad Company to mine, under said land, for coal and other minerals, and to remove the same.

Subsequently, the Union Pacific Railroad Company executed and delivered to Reed and Henderson a quitclaim deed dated November 2, 1891, and which was acknowledged November 17, 1891, and duly recorded on the 8th of January, 1892. This deed released the land in township 5 from the claim of that company under the coal reservation contained in the deed of 1889; but it did not release the right of that company to prosepct for and mine 'other minerals' under that land.

On the 28th of March, 1890, Reed and Henderson let, leased, and demised unto Adams and Shilling, who were occupying the land, for the term of six months from that date, the land in township 5. But neither Henderson nor Reed ever actually occupied any part of it.

Neither of the notes described in the mortgage of March 27, 1890, made by Reed and Henderson, has been paid. Adams and Shilling are still the owners and holders of them, as well as of the mortgage. The amount unpaid on those notes is the principal of each one, with interest from September 26, 1890, at the rate of 8 per cent. per annum.

The relief sought by the suit was a decree reforming the mortgage given by Reed and Henderson so as to correctly describe the land in township 5, and then a sale thereof in satisfaction of the costs of the action, and the balance of the purchase money, with a personal decree for any deficiency in purchase price that may be found to exist.

The defendants controverted the right of the plaintiffs to any decree, and, b cross complaint, asked the cancellation of the above mortgage and notes, and a judgment for the amount they had paid to the plaintiffs, with interest.

The decree rendered was in accordance with the prayer of the cross complaint. In legal effect, it was a decree rescinding the contract between the parties, because of the inability of the plaintiffs to make a sufficient title to the lands sold by them.

Under the facts stated, the case is within a very narrow compass. It is found, and the plaintiffs and defendants agree, that the former intended to sell, and the latter intended to buy, the land in township 5. By mistake, the vendors conveyed land in another township, which they did not intend to sell, to which they had no title, and which the defendants had no thought of buying; and by mistake the grantees, in order to secure the purchase price for the land they in fact purchased, mortgaged back to the plaintiffs the land in township 6 which the latter had assumed to convey to them. That a court of equity has power to correct this mutual mistake, make the instruments given in execution of the contract conform to the real intention of the parties as established by clear and convincing proof, and hold the parties to their actual agreement, cannot be doubted. Snell v. Insurance Co., 98 U.S. 85, 88, 89; Simpson v. Vaughn, 2 Atk. 33; Henkel v. Royal Exchange, 1 Ves. Sr. 318; Gillespie v. Moon, 2 Johns. Ch. 585; Keisselback v. Livingston, 4 Johns. Ch. 144, 148; Inskoe v. Proctor, 6 T. B. Mon. 311, 316; Hendrickson v. Ivins, 1 N. J. Eq. 562, 568; Wesley v. Thomas, 6 Har. & J. 24, 26; Newson v. Buffertoor, 1 Dev. Eq. 383, 384; State v. George, 4 Ired. Eq. 430, 432; Barley v. Barley, 8 Humph, 223; Cloption v. Martin, 11 Ala. 187. But before the mortgage executed by the defendants can be reformed so as to properly describe the land which the plaintiffs intended to sell, and which the defendants intended to buy and mortgage back, it must appear that the plaintiffs have such title as they represented themselves to have when selling the land. A good and indefeasible title in fee imports such ownership of the lands as enables the owner to exercise absolute and exclusive control of it as against all others.

That the plaintiffs have no such title is too clear to admit of dispute. They hold under the Union Pacific Railroad Company. They accepted a conveyance from that company which expressly reserved, in its favor, and without limit of time, an exclusive right, not only 'to prospect for coal and other minerals' under the land in question, and 'to mine for and remove the same if found,' but 'a right of way over and across said lands, a space necessary for the conduct of said business thereon, without charge or liability for damage therefor.' It does not appear that the railroad company is under any legal obligation to surrender or waive this reservation. The plaintiffs cannot compel it to do so. It is true that the reservation was subsequently released or withdrawn so far as it related to coal, but it is in full force as to other minerals. So that the plaintiffs, in effect, ask that, instead of a good and indefeasible title in fee simple, the defendants shall take and pay for land incumbered with the right of the railroad company, for all time, to pass over and across it for the purpose of prospecting for and mining minerals other than coal. A court of equity could not compel the defendants to take and pay for land thus incumbered without making for the parties a contract which they did not choose to make for themselves. 'Equity,' this court said in Hunt v. Ronsmainer's Adm'r, 8 Wheat. 1, 14, 'may compel parties to perform their agreements, when fairly entered into, according to their terms; but it has no power to make agreements for parties, and then compel them t execute the same. The former is a legitimate branch of its jurisdiction, and in its exercise is highly beneficial to society. The latter is without its authority, and the exercise of it would be not only a usurpation of power, but would be highly mischievous in its consequences.'

Reference was made in argument to the fact that no patent has ever been issued to the railroad company for the land in question, and it has been suggested by the defendants that if it was discovered, before a patent issued, that it was mineral land, the title of the company would fail altogether; for the grant made by congress to the company did not include mineral lands. Barden v. Railroad Co., 154 U.S. 288, 381, 14 Sup. Ct. 1030. We do not think it necessary to consider this aspect of the case, nor to determine whether the plaintiffs would be entitled to the relief asked if the mineral reservation had not been made by the railroad company, and nothing else appeared affecting the title except the fact that no patent had been issued by the United States, together with a possibility that, before the issuing of a patent, the land might be ascertained to be mineral land, which did not pass under the grant by congress. We forbear any expression of opinion upon that point, because, if it be assumed for the purposes of this case that the fact just stated would not stand in the plaintiffs' way, we are of opinion that the mineral reservation made by the railroad company is in itself such an incumbrance as prevents the plaintiffs from making a good and indefeasible title to the land.

It is suggested that the reservation as to 'other minerals' ought not to be deemed an obstacle to the relief asked, because it may never appear that there are any minerals under the land; that it cannot be assumed, in the absence of proof, that the defendants are likely to be disturbed in the full and complete enjoyment of the land for every purpose for which it is adapted. On the other hand, it cannot be affirmed, in view of the discovery of valuable minerals in many parts of the West, that there are no minerals, other than coal, under the land in question. What the defendants are entitled to is a marketable title,-a good and indefeasible title in fee. But that they will not obtain if forced to take the land subject to the railroad company's right of way over it for the purpose of prospecting for and mining minerals, which may be taken off when found. From that burden they cannot be relieved in any way except by the voluntary action of the railroad company.

But it is contended by the plaintiffs that the act of March 3, 1887, entitled 'An act to provide for the adjustment of land grants made by congress in and of the construction of railroads and for the forfeiture of unearned lands, and for other purposes' (24 Stat. 556, c. 376), the act of March 2, 1896 (29 Stat. 42, c. 39), and the concurrent resolution of June 10, 1896 (29 Stat. Append. 14), confirmed as against the United States the right and title of bona fide purchasers of lands contained within the limits of railroad grants; so that, as against such bona fide purchasers, the United States, by the acts cited, expressly disclaims any rights whatever, and confirms absolutely the title of such bona fide purchasers. By this contention is meant that the act of March 3, 1887, as the same has been construed by this court in U.S. v. Winona & St. P. R. Co., 165 U.S. 463, 466-469, 17 Sup. Ct. 368, protects the title of Adams and Shilling as bona fide purchasers even if, before a patent was issued by the United States, the lands in question should prove to be mineral lands.

It is sufficient upon this point to say that, if the legislative enactments referred to have any reference whatever to mineral lands,-if they were held applicable to lands purchased in good faith from the railroad company, and which turned out to be mineral lands that congress never granted,-that would only remove one of the difficulties which, it is insisted, are in the way of plaintiffs; for, if the plaintiffs' title is, under the legislation of 1887 and 1896, good as against the United States, there will still remain the incumbrance upon it arising from the right reserved by the railroad company, for all time,-whether the plaintiffs or their vendees consented or not,-to go upon the lands in question, for the purpose of prospecting and mining for minerals other than coal, and removing any found there. A patent would convey the interest of the United States in the land; but it would not destroy or release the mineral reservation made by the Union Pacific Railroad Company in its deed to Adams and Shilling. Purchasers from Adams and Shilling would be bound by that reservation, even if the United States issued a patent to the railroad company or to its vendees.

The result of these views is that the defendants were not bound to accept the deed tendered by the plaintiffs; and as it appears that the plaintiffs cannot make such a title as they agreed to give, as the cash payment was made upon the basis of a good and indefeasible title in the plaintiffs, the defendants were entitled upon their cross complaint, framed in accordance with the established modes of procedure in the territory, to have a decree which, in effect, rescinds the contract, and gives them back what they paid.

The decree is affirmed.