Clinton Mining & Mineral Co. v. Trust Co. of North America

• Decision Date: 06 April 1915
• Docket Number: 3618.
• Citation: 151 N.W. 998,35 S.D. 253
• Parties: CLINTON MINING & MINERAL CO. v. TRUST CO. OF NORTH AMERICA et al.
• Court: South Dakota Supreme Court

151 N.W. 998

35 S.D. 253

CLINTON MINING & MINERAL CO. v. TRUST CO. OF NORTH AMERICA et al.

No. 3618.

Supreme Court of South Dakota

April 6, 1915

Appeal from Circuit Court, Lawrence County; W. G. Rice, Judge.

Action by the Clinton Mining & Mineral Company against the Trust Company of North America and others. From a judgment for defendants, plaintiff appeals. Affirmed.

Eben W Martin and Norman T. Mason, both of Deadwood, for appellant.

Stewart & Hodgson, of Deadwood, for respondents.

SMITH J.

The Clinton Mining & Mineral Company, a corporation, and the Imperial Gold Mining Company, a corporation, owned adjacent mining properties in Lawrence county. On the 14th day of September, 1911, the Clinton Mining & Mineral Company recovered a judgment in the United States Circuit Court against the Imperial Mining & Milling Company for $14,105.20. This judgment was for the value of ores wrongfully mined and extracted by the defendant from the property of plaintiff in that action. On the 26th day of April, 1911, the Imperial Gold Mining & Milling Company executed and delivered to the Trust Company of North America a mortgage covering and embracing:

"All of the real property of the Imperial Gold Mining & Milling Company, situated in Lawrence county [specifically described]; also all lodes, mineral mining property, flumes ditches, water rights, mill sites, and other mining property that may hereafter be acquired by the said Imperial Gold Mining & Milling Company, by location, purchase, or any other manner whatsoever."

The plaintiff, Clinton Mining & Mineral Company, prays that its judgment in the federal court be decreed a lien superior to the mortgage of the Trust Company of North America, and that the property of the Imperial Gold Mining & Milling Company be decreed to be sold to satisfy plaintiff's judgment. Findings, conclusions, and judgment were for the defendants. Plaintiff appeals. The Trust Company of North America alone appears as respondent in this court.

Appellant contends, first, that the ores wrongfully taken from plaintiff's mining property became subject to the mortgage lien of the Trust Company of North America, by virtue of the clause in the mortgage describing the mortgaged property as:

"All lodes, mineral mining property, *** that may hereafter be acquired *** by location, purchase, or in any other manner whatsoever."

The trial court, as a conclusion of law, found that the ores wrongfully mined and extracted by the Imperial Gold Mining & Milling Company, or the proceeds thereof, never became any part of the property or corpus of the property embraced within the terms and provisions of the mortgage. Appellant assigns this conclusion as error. Each of the bonds contained a recital of authority to execute a mortgage "on all its property, both real and personal, and on all property that the said company may hereafter acquire, either by purchase location, or otherwise," and that the bond "is secured by mortgage upon its real estate *** and on all other property now owned or that may hereafter be acquired." Appellant contends that these recitals must be considered in construing the description of the mortgaged property contained in the mortgage. But these same recitals end with the words:

"To which mortgage reference is hereby made for description of said property," etc.

Such recitals, therefore, cannot be resorted to for the purpose of extending the import of the descriptive words in the mortgage beyond their fair and reasonable meaning, and the intent of the parties themselves. Appellant's contention assumes that, if the mortgage lien be held to cover personal as well as real property, it must be held to attach to all personal property which comes into possession of the mortgagor by theft or trespass. It could hardly be contended that the language used in the mortgage discloses an intent on the part of the mortgagor to give, or of the mortgagee to take, a lien on property which might come into the possession of the mortgagor through a wrongful trespass. Certainly the person whose property was wrongfully taken should not be permitted to interpret the contract as manifesting an intent which never existed in the mind of either mortgagor or mortgagee; and if it be conceded, as contended by appellant, that a trespasser can obtain legal title to property wrongfully taken, as against the owner, when the latter elects to hold the wrongdoer as trustee, it does not follow as a matter of law that the lien of a mortgage previously given, covering after-acquired property, attaches to property so held in trust by the wrongdoer. In this case, both mortgagor and mortgagee deny and disaffirm such a lien.

We are of opinion the trial court was right in its conclusion that the mortgage lien never attached to the ore wrongfully taken by the Imperial Gold Mining & Milling Company. Appellant's logic in this connection is somewhat unique. It insists that respondent shall assume a mortgage lien upon the converted property against its will, and shall then become a trustee of such lien for the benefit of the owner of the converted property, and this without any previous knowledge of, consent to, or participation in the wrongful act on the part of the holder of the lien. We have not discovered any principle of equity which would permit the owner of converted property thus to become subrogated to or to appropriate the lien of a mortgagee who had no part in the wrongful conversion. But a different question is presented by appellant's contention that the enhanced value of the mortgagee's security, by commingling therewith the converted ores, makes the mortgagee an involuntary trustee of the converted property or its value, for the use and benefit of the owner of the converted property.

Appellant in his brief concedes that in order to recover in this action it is necessary for plaintiff to trace its ores, or the proceeds thereof, into some part of the property mortgaged to the trust company. But it contends that when the proceeds of its ores were mingled with the proceeds of the ores belonging to the Imperial Mining & Milling Company, and with moneys borrowed by it, and all deposited together in one account, the whole deposit became a trust fund; that the whole of the trust fund was expended, first, in payment of the company's mining and milling operations, second, in the sinking of the Dakota shaft, and, third, in the payment of interest on the mortgage indebtedness. Its first contention is founded upon the proposition that this trust fund was used to extinguish obligations created by the company's mining and milling operations, and in the sinking of the Dakota shaft, and that, because the statute allows a lien for an indebtedness so incurred, which would be given preference over the mortgage, plaintiff's right would be given a preference over the rights of the trust company under its mortgage. A sufficient answer to this proposition is that plaintiff has not shown that the trust funds were used in the payment of actual lienholders, and cannot therefore be subrogated to their rights, nor can it be subrogated to the rights of persons who might have been privileged to file such liens, but have never done so.

The trial court found that the ores were taken and converted by the Imperial Mining & Milling Company during the months of September and October, 1908. It also found that the total receipts of the Imperial Gold Mining & Milling Company, during the year 1908, from ores mined and milled by said company, including the proceeds from ores wrongfully mined from the property of the plaintiff, amounted to the sum of $124,752.89, and that the disbursements of the company during that year, in carrying on its entire mining and milling operations, was the sum of $140,002.26, resulting in a loss of $15,249.37. It is thus conclusively shown that the entire mixed fund, or trust fund, was expended during the year 1908. The rule is well settled that when an entire trust fund has been expended, and no portion of it can be traced, no trust can be declared in any case. Appellant's counsel, therefore, are correct when they say in their brief:

"It is, of course, necessary for plaintiff to trace its ores into some part of the property mortgaged to the trust company, before a lien can be declared against that property, in favor of the plaintiff."

They of course, concede that, if the trust fund is entirely dissipated, no trust can be declared. But they say, where the mixed fund has been expended, partly in general mining and milling expenses, and partly in permanent improvements on property remaining in the hands...