J.S.W. having advanced to his brother R.W.W. moneys to aid him
in developing mines the title to which was in dispute, and being
about to
Page 144 U. S. 395
advance further sums for the same purpose, the latter executed
and delivered to him an agreement as follows:
"San Bernardino, Cal., May 14th, 1881. -- For and in
consideration of one dollar to me in hand paid, the receipt whereof
is hereby acknowledged, I hereby agree that at any time within
twelve months from this date, upon demand of J. S. Waterman or his
heirs, administrators or assigns, I will execute to him a good and
sufficient deed of conveyance to an undivided twenty-four
one-hundredths (24/100) of the following mines, known as the Alpha,
Omega, Silver Glance and Front, each being 600 feet wide by 1500
ft. long, and the same interest in all lands that may be located or
has been located for the development of the above mines, with such
machinery and improvements as is to be placed upon same, all
subject to the same proportion of expenses, which is to be paid out
of the development of the above property, all situated near the
Grape Vine, in the County of San Bernardino, California."
Held:
(1) That, taken in connection with the evidence, this conveyed
to J.S.W. no present interest in the property, but only the right
to acquire such an interest within a period of "twelve months from
this date."
(2) That time was of the essence in such a contract for
acquisition.
The principle that time may become of the essence of a contract
for the sale of property from the very nature of the property
itself is peculiarly applicable to mineral properties, which
undergo sudden, frequent, and great fluctuations in value and
require the parties interested in them to be vigilant and active in
asserting their rights.
The Court stated the case as follows:
This appeal brings up for review a decree requiring R. W.
Waterman, the original defendant, to convey, free from encumbrance,
to Abbie L. Waterman, the original plaintiff, and the widow and
assignee of J. S. Waterman, an undivided twenty-four one-hundredths
of certain mining property in San Bernardino County, California,
and also to pay to her the sum of $42,987.22, which was adjudged to
be the amount of profits derived from that property, with the
interest that accrued thereon prior to January 10, 1888. 27 F.
827.
J. S. Waterman and R. W. Waterman were brothers, the former of
large wealth and a citizen of Illinois, and the latter of limited
means and a citizen of California, engaged with one Porter in
"prospecting" and developing mining property. R. W. Waterman and
Porter having acquired certain mining claims or interests in San
Bernardino County, California, the
Page 144 U. S. 396
former wrote a letter to his brother under date of April 5,
1881, which seems to be the beginning of the transactions out of
which the present litigation arose. The writer said:
"Porter finished assay yesterday, and will start in tomorrow.
The mine improves all the time. It goes beyond our most sanguine
expectations. The chimney will extend somewhere about 800 or 1,000
feet, and is worth, itself, millions. The assay for the dump, after
picking out the best ore and assay -- the average of the poorest --
is over $50.00, and, so far as we can see, the entire mass is vary
rich. . . . Now we can fight all of them, pay all expenses, and
make a million a year, but I don't anticipate much, if any,
trouble. . . . You let Mr. Porter have some money to pay his
expenses, without his asking for it. He is one of the most modest
men I ever saw. I want you to have a talk with Jane about your
joining me, and having an interest in the mine. It will include the
four claims, the Alpha, Omega, Front, and Silver Glance. They are
-- what there is of it, and either one is enough to form a company.
I propose to let you have 24-100 of my interest of 75-100 -- you
give up my indebtedness, and give me to pay off any debts that I
have incurred in mining, say $2,000. That 24/100 is worth $250,000,
and may be 1/2 a million to sell outside of this. All the money you
get to buy machinery or advance in any way shall be paid from the
first earnings of the mill. You might be at the head of the affair
financially, and otherwise; each one of us to have his part, but
you be at the head. . . . You speak to Porter about our
partnership. I know he is all O.K., and will not pretend to own but
1/4; yet try him. I presume he would give you a share of his if you
raise the money for us."
It does not appear that any formal reply was made to this
letter, but it does appear that J. S. Waterman was in California
the succeeding month, and took from his brother an obligation, of
which the following is a copy:
"San Bernardino, Cal.,
May 14, 1881"
"For and in consideration of one dollar to me in hand paid, the
receipt whereof is hereby acknowledged, I hereby agree that at any
time within twelve months from this date, upon demand
Page 144 U. S. 397
of J. S. Waterman, or his heirs, administrators, or assigns, I
will execute to him a good and sufficient deed of conveyance to an
undivided twenty-four one-hundredths (24-100) of the following
mines, known as the Alpha, Omega, Silver Glance, and Front, each
being 600 feet wide by 1,500 ft. long, and the same interest in all
lands that may be located or has been located for the development
of the above mines, with such machinery and improvements as is to
be placed upon same, all subject to the same proportion of
expenses, which is to be paid out of the development of the above
property, all situated near the Grape Vine, in the County of San
Bernardino, State of California."
"R. W. WATERMAN"
This was the obligation, the specific performance of which was
required by the decree below.
An obligation of like character as to date and terms was taken
by J. S. Waterman from Porter with respect to an undivided three
one-hundredths of the same property.
Prior to but perhaps in expectation of the execution of these
writings, J. S. Waterman advanced to his brother and Porter the sum
of $1,817, and subsequently other sums, the aggregate amount of
advancements, on the 22d day of November, 1881, being $26,317,
exclusive of interest. For each sum so advanced, J. S. Waterman
took the notes of R. W. Waterman and Porter. It also appeared that
when the writings of May 14, 1881, were given, R. W. Waterman was
indebted to J. S. Waterman in the sum of $11,750.53 for moneys
loaned; but R. W. Waterman contended that, if all matters of
business between them had been settled, he would not have been then
indebted to his brother in any sum whatever.
J. S. Waterman died July 19, 1883, having made a will, which was
dated November 28, 1870. That will provided, among other things,
that any and all notices, bills, accounts, agreements, or other
evidence of indebtedness against any of his brothers, held by the
testator at his decease, be cancelled by his executors, and
delivered up to the maker or makers without payment of the same, or
any part thereof, except two
Page 144 U. S. 398
notes against John C. Waterman, secured by a deed of trust on
lands, which were to be collected and equally divided between his
brothers and sisters, and the children of such as had died. By a
codicil to the will, of date December 7, 1872, his brother R. W.
Waterman was substituted as executor, in place of George S.
Robinson.
Upon the paper of May 14, 1881, given by R. W. Waterman, appears
the following endorsement: "I hereby assign the within to Mrs.
Abbie L. Waterman. J. S. WATERMAN. M'ch, 1883. I hereby agree to
execute the within agreement on demand." In March, 1883, the paper
with this endorsement upon it was presented to R. W. Waterman, and
he refused to sign it. At that time, there was a balance of about
$11,000 due J. S. Waterman on the notes given by R. W. Waterman and
Porter. Porter signed a similar endorsement on the writing of May
14, 1881, executed by him, but the evidence satisfactorily shows
that he did this only to indicate his willingness that that paper
should stand as security simply for the moneys advanced by J. S.
Waterman.
All the moneys advanced to R. W. Waterman and Porter were repaid
out of the proceeds of the mining property before the institution
of this suit, the principal part before and the balance after the
death of J. S. Waterman.
No demand was made upon R. W. Waterman or Porter at any time
within twelve months after May 14, 1881, for a conveyance, nor
until after the death of J. S. Waterman. This suit and the decree
below proceeded upon the general ground that the writing of May 14,
1881, was intended to pass, and was accepted as passing, a present
interest of 24/100 in the property covered by its provisions, and
required R. W. Waterman to convey such interest at any time before
or after the expiration of twelve months from that date, on the
demand by J. S. Waterman, his heirs, administrators, or assigns, of
a conveyance. The defendant disputed this interpretation of that
instrument, and insisted that it was given and accepted only as
security for such moneys as J. S. Waterman might advance for the
development or management of this property.
Page 144 U. S. 399
MR. JUSTICE HARLAN delivered the opinion of the Court.
Page 144 U. S. 400
We cannot assent to the view taken by the court below. The bill
alleges -- and the evidence fully sustains the allegation -- that
when the writing in question was given, the title to this property
was in dispute, and that its development and improvement involved
the expenditure of large sums, great risk of the total loss of
everything invested in it, and uncertainty of profit. Under these
circumstances, J. S. Waterman, according to the decided
preponderance of the evidence, did not wish to become a part owner
of the property or to incur the responsibility of developing and
managing it in conjunction with his brother and Porter. He was
entirely willing, indeed, anxious, to assist his brother, but was
not willing at the outset to take an interest in the property or to
become connected with them in business. His chief concern then was
to secure the repayment of sums advanced and to be advanced by him
to his brother and Porter for the development of the property,
postponing to a future time the decision of the question as to
whether he would take an interest in the property as suggested in
the letter of April 5, 1881. If it proved to be valuable, he would
incur no responsibility by becoming a part owner and uniting with
his brother and Porter in its development and management. If it
proved to be worthless and if his brother and Porter were unable to
meet their notes, he would only lose, and as he possessed large
wealth, could afford to lose, the sums advanced by him. These were
the objects he had in view when he prepared and obtained from his
brother the writing of May 14, 1881. That writing evidently
contemplated that "out of the development of the above property" --
that is, out of its earnings -- were to be paid
Page 144 U. S. 401
the expenses incurred in providing machinery, in making
improvements, etc. These expenses were to be met in the first
instance by the moneys advanced by J. S. Waterman to his brother
and Porter. They could not have been otherwise paid, for the
resources of R. W. Waterman and Porter were very limited, and the
property had not then been sufficiently developed to become itself
the basis of borrowing large sums from banks or from individual
lenders of money. All this is manifest from the facts in the
case.
But it is clear from the face of the writing, without calling to
our aid the circumstances under which it was executed, that J. S.
Waterman did not stipulate for a present interest in the property.
It was drawn so as not to give him an interest as owner during the
period supposed to be required for its development. While intended
by the parties as security for moneys advanced and to be advanced
by J. S. Waterman, it contains no word or clause indicating a
purpose to create, as of its date, the relation of purchaser and
vendor between him and R. W. Waterman. It gave the former, his
heirs, administrators, and assigns, an option to demand a
conveyance within a prescribed period, thus making time of the
essence of the agreement. If a conveyance was not demanded within
that period, the obligation of R. W. Waterman to make one ceased
altogether. Such was the contract, and the suggestion that the
transposition of the words "at any time" was a mere clerical error,
to be corrected by construction, is simply an appeal to the court
to make for the parties an agreement they did not choose to make
for themselves, and then decree its specific performance. No
principle of equity would support such a decree.
Hepburn v.
Dunlop, 1 Wheat. 179. The demand for a conveyance
within a given time -- looking alone at the writing -- was made by
the parties a condition precedent to the acquisition by J. S.
Waterman of an interest in the property. R. W. Waterman did not
agree to convey, except upon the performance of that condition
precedent. The condition being lawful, it is not competent for the
court to dispense with its performance.
The principles by which a court of equity is governed in cases
of this character are well settled. Mr. Justice Story says
Page 144 U. S. 402
that
"notwithstanding the rule is well established in courts of
equity that time will not be regarded as indispensable in regard to
decreeing specific performance of contracts for the actual sale of
lands on one side and the actual purchase on the other, it is
different where the contract gives a mere election to purchase upon
certain conditions. Accordingly, where, upon a lease, with the
right of purchase within seven years upon giving three months'
notice and paying a fixed sum at the expiration of such notice, and
the lessee gave the requisite notice, but did not pay the money in
time, a bill for specific performance was dismissed. And a similar
decision was made by the Lord Chancellor, where his lordship said:
'The things required must be done in the order of sequence
stipulated. These were notice and the payment of the money, on a
day certain.'"
Story, Eq.Jur. § 777a. In
Potts v. Whitehead, 20
N.J.Eq. (5 C. E. Green) 55, 57, 59, which was a suit for the
specific performance of a contract to convey land, the owner
stipulating, for the consideration of one dollar, that the
complainant should have, for thirty days, the refusal of the lands,
the court said:
"The paper signed by the defendant is not a contract, but on its
face, and by it very terms, only a refusal or offer of the lands to
the complainant at a certain price. This is not disputed by the
counsel of the complainant. This, like all such offers, was not
binding, and could not be converted into a contract unless accepted
within the thirty days. Whether, when such an offer is made for a
mere nominal consideration, the person offering can withdraw it
within the time specified it is not necessary to consider, as it
was not withdrawn, and, like all such offers, it would be binding
it accepted within the time, and before it was withdrawn."
Again:
"There can be no question but that when an offer is made for a
time limited in the offer itself, no acceptance afterwards will
make it binding. Any offer without consideration may be withdrawn
at any time before acceptance, and an offer which, in its terms,
limits the time of acceptance is withdrawn by the expiration of the
time."
The rule is well expressed in
Lord Ranelagh v. Melton,
2 Drewry & Smale 278, 281, where it was said:
"No doubt if
Page 144 U. S. 403
an owner of land and an intending purchaser enter into a
contract constituting between them the relation of vendor and
purchaser, and there is a stipulation in the contract that the
purchase money shall be paid and the contract completed on a
certain day, this court, in ordinary cases, has established the
principle that time is not of the essence of the contract, and that
the circumstances of the day fixed for the payment of the money and
the completion of the purchase being past does not entitle either
party to refuse to complete. On the other hand, it is well settled
that when there is a contract between the owner of land and another
person, that if such person shall do a specified act, then he (the
owner) will convey the land to him in fee, the relation of vendor
and purchaser does not exist between the parties unless and until
the act has been done as specified. The court regards is at the
case of a condition in the performance of which the party
performing it is entitled to a certain benefit; but in order to
obtain such benefit, he must perform the condition strictly.
Therefore, if there be a day fixed for its performance, the lapse
of that day without its being performed prevents him from claiming
the benefit."
In
Taylor v.
Longworth, 14 Pet. 172,
39 U. S. 174,
the principle was recognized that time may become of the essence of
a contract for the sale of property, not only by the express
stipulation of the parties, but from the very nature of the
property itself. This principle is peculiarly applicable where the
property is of such character that it will likely undergo sudden,
frequent, or great fluctuations in value. In respect to mineral
property, it has been said that it requires -- and of all
properties, perhaps, the most requires -- the parties interested in
it to be vigilant and active in asserting their rights.
Prendergast v. Liston, 1 Yo. & Coll.Ch. 110;
Doloret v. Rothschild, 1 Sim. & St. 590, 598; Fry on
Specific Performance §§ 714, 715; Pomeroy on Contracts
§§ 384, 385;
Brown v. Covillaud, 6 Cal. 566,
572;
Green v. Covillaud, 10 Cal. 317, 324;
Magoffin v.
Holt, 1 Duvall 95.
That J. S. Waterman did not, in fact accept the writings of May
14, 1881, as passing to him a present interest in the property, but
at the utmost, as security for the moneys
Page 144 U. S. 404
advanced and to be advanced by him, with the right reserved or
the option given to demand a conveyance within a certain time, is
established by many facts and circumstances disclosed by the
evidence. When those writings were given, the title of R. W.
Waterman and Porter to this mining property was disputed by one
Miller. This fact was well known to J. S. Waterman. In a suit
brought by Miller, he was examined as a witness for R. W. Waterman
for the purpose of contradicting the evidence of Miller. His
cross-examination, as taken down at the time by the official
reporter of the court was as follows:
"Q. Have you any pecuniary interest in this litigation?"
"A. No, sir."
"Q. Have you any interest in any of these mines, out there?"
"A. No, sir."
"Q. Or in the mill?"
"A. No, sir."
"Q. Haven't you made advances of money the repayment of which is
dependent principally upon your brother and Porter retaining these
mines and working them?"
"A. Yes, sir. I loaned them money."
"Q. And you understand that their ability to pay depends in a
great measure, if not entirely, upon their retaining these mines
and working them successfully?"
"A. That hasn't been talked over."
"Q. Isn't that your understanding of it?"
"A. That is the understanding; they would have to pay out of the
mines."
"Q. They would have no other mines to pay you from?"
"A. They have other mines."
"Q. Do you think they have other mines that would respond?"
"A. I think Mr. Porter has, or either one of them. I merely have
their promise to pay, no security."
"Q. Haven't you been up the country examining mills and
machinery for their use?"
"A. Yes, sir."
"Q. Haven't you taken an active interest in their mining
operations?"
"A. I purchased the mill. Yes, sir. I became security for
them."
The learned counsel for the plaintiff, referring to this
evidence, observes:
"But it is said that, subsequently to the date of the contracts,
James S. Waterman admitted that he had no interest in the mines,
but it does not appear that he was then the owner of the contracts.
It may be presumed from the evidence that he had previously
assigned them to complainant."
But it does appear conclusively that the above
Page 144 U. S. 405
statement by James S. Waterman under oath that he had no
interest in the mines was made subsequent to the execution of the
writings of May 14, 1881, after he had advanced to R. W. Waterman
and Porter nearly $24,000, but long before the assignment of the
writing of May 14, 1881, to his wife. The assignment to Mrs.
Waterman was in March, 1883, it is so alleged in the bill, while
the cross-examination of J. S. Waterman in Miller's suit took place
in August or September, 1881. This latter fact is proved by several
witnesses, some of whom participated in the trial as attorneys, and
from numerous letters which passed between R. W. Waterman and J. S.
Waterman shortly after the writings of May 14, 1881, were executed.
R. W. Waterman wrote to his brother, under date of July 16, 1881:
"I expect you will have to come out next mo. That suit must come
off; I am tired of holding witnesses." Under date of July 22, 1881:
"Things are transpiring which I fear will make us work to beat
Miller. . . . If the suit comes off, you must be here." Under date
of July 30, 1881:
"I shall do all I can to get this trial on right away, and you
must hold yourself in readiness to come out at a moment's warning.
. . . I will telegraph you when wanted."
Under date of August 2, 1881:
"It [the suit] is set for the first Monday in September, and you
must be here. The lawyers say that your evidence is very important,
and your presence will help very much."
Under date of August 3, 1881:
"I wrote you my suit came off in Sept. They changed the time;
'tis the 30th of August, and you must be here. Rowell and Willis
say 'tis very necessary."
Under date of August 10, 1881: "Hope nothing will prevent your
being out at the suit." Under date of August 15, 1891: "I am at
Rowell's office. He says you must be here. My case is set for the
30th of August, and Porter's for September 3d. Don't fail us."
Under date of August 15, 1881: "The suits are set for the 30th of
August and 3d of September. Come the northern route." Under date of
August 20, 1881: "I really hope you will be able to be here at the
suit; 'tis set for Aug. 30, and Porter's for Sept. 3d and can't be
put off." To R. W. Waterman's letter of July 30, 1881, J. S.
Waterman replied: "I shall
Page 144 U. S. 406
hold myself in readiness, but you see Rowell and Willis before
you send," and in a letter of August 8, 1881, he said: "Try and not
send for me till of the last of the month, or 1st of Sept."
It thus appears that J. S. Waterman, in response to these urgent
requests of his brother to attend the trial of the Miller suit,
went to California, and stated, under oath, when the execution and
object of the writings of May 14, 1881, must have been fresh in his
recollection, that he had no interest in the mines in question in
that suit, and which are the identical mines referred to in those
writings. How can the theory of this suit, namely, that J. S.
Waterman acquired a present interest by the writings of May 14,
1881, be sustained consistently with his oath in the Miller suit?
He was, as we infer from the record, a gentleman of intelligence,
and it must be assumed that he knew what he was saying when he
testified in August, 1881, that he had no pecuniary interest in the
litigation between Miller and his brother, involving the title to
this property, and no interest in the mines themselves.
To all this may be added the fact, established by several
witnesses, that J. S. Waterman declared in their presence on
different occasions that he did not have an interest in this
property, and only desired to secure the repayment of such sums as
he advanced to his brother and Porter on account of it.
The only fact that is apparently inconsistent with the view we
have taken of the evidence is the offer made by R. W. Waterman in
his letter of April 5, 1881, that his brother should take an
interest in these mining claims. But it does not appear that this
offer, as made, was accepted. On the contrary, the decided
preponderance of evidence shows that, upon full consideration, he
declined to take a present interest in the property as one of its
owners; that at the outset he only sought to be secured in respect
to the money he might advance to his brother and Porter, and that
the writings of May 14, 1881, were intended by the parties simply
as security for the moneys so advanced, with an option to J. S.
Waterman to demand a conveyance of the respective interests
described, within a time limited.
Page 144 U. S. 407
As the moneys advanced by J. S. Waterman to R. W. Waterman and
Porter were all repaid before the commencement of this suit, and as
no conveyance was demanded from R. W. Waterman within the time
limited by his obligation, the plaintiff was not entitled to the
relief asked.
One other point requires notice at our hands. An interlocutory
decree was rendered declaring the plaintiff to be entitled to the
relief asked, and the cause was referred to the master to state the
accounts between the parties in respect to the use of the property
and the profits derived from it. The master made his report, and
the final decree recites that each party waived the right to except
to it. This waiver is relied upon as showing that the final decree
was by consent, and therefore not to be questioned in this Court.
This contention is overruled. The waiving of exceptions to the
master's report meant nothing more than that the appellant did not
dispute its correctness in respect to the amount of the profits
realized from the property. This waiver had no reference to the
fundamental inquiry as to whether the plaintiff was entitled to a
conveyance. But as, for the reasons stated, R. W. Waterman was not
bound to convey, the time having elapsed in which a conveyance
could be rightfully demanded, the entire decree falls.
The decree is reversed, and the cause remanded, with
directions to dismiss the bill.
