American Sodium Co. v. Shelley , 51 Nev. 344 ( 1929 )

The permit granted by the secretary of the interior to Warnken was assignable notwithstanding the regulations prescribed by the secretary of the interior that such was not assignable except with the consent of the secretary. Had Congress intended that a prospecting permit authorized under sec. 23 of the act "To promote the mining of coal, * * * and sodium on the public domain," it would have so provided.

It is manifest that the secretary of the interior or any other cabinet officer has no power of legislation. The power to make rules and regulations are at all times restricted to incidental matters within the power granted by the statute. A prospecting permit is a right in real property. Unless there is some statutory limitation it, like all other rights in real property, may be sold or assigned in whole or in part. If there are any limitations upon that right they must be found in the granting power, which, in this case, is the United States, expressing its limitations by statute. The courts have frequently had occasion to pass upon rules and regulations adopted under similar provisions of acts of Congress, and it is universally held that such power to prescribe rules and regulations does not include the power to legislate or assume the prerogative of Congress. Morrill v. Jones, 106 U.S. 466; U.S. v. United Verde Copper Co., 196 U.S. 207; Waite v. Macy, 246 U.S. 606; Hoover v. Selling, 110 Fed. 43; Int. Ry. Co. v. Davidson, 257 U.S. 506; Williamson v. U.S., 207 U.S. 425; Patterson v. U.S., 181 Fed. 970; Bruell v. Wilson, 123 Fed. 957; Balfour v. Sullivan, 19 Fed. 579; Seigfreid v. Phelps, 40 Fed. 660; U.S. v. Goodsell, 84 Fed. 155; U.S. v. Valley Land I. Co., 258 Fed. 102.

Shelley being an owner with Norrid in the permit, he could not obtain a lease thereon and thereby cut out the interests of his associates in the permit. This is a rule that has been repeatedly applied in the mining states. The fact that we are dealing with a lease and not a patent to a mining claim does not affect the legal principle involved. The principle is well stated in the syllabus to the case of Brundy v. Mayfield, 38 P. 1067. To the same effect, see Miller v. Walser, 42 Nev. 497; Butte Co. v. Schwab, 34 P. 24; Yarwood v. Johnson, 70 P. 123; Lindley on Mines (3d ed.), vol. 3, p. 1782; 39 Cyc. 169.

The court erred in sustaining the demurrer to paragraphs VIII and IX of defendant Jennie Baldwin Shelley's second amended cross-complaint. In making its ruling the court evidently overlooked entirely the allegations in the second amended cross-complaint to the effect that the corporation took the assignment and transfer of lease with knowledge of Shelley's rights; also, overlooked the allegations to the effect that the corporation was organized by Warnken and Guild for the very purpose of taking over the lease, and that, as shown by the assignment of the lease to the corporation, that Warnken was president and Guild secretary thereof. It is manifest from the pleadings that Warnken and Guild at the time of the transfer of the lease to the respondent corporation were, in effect, the corporation. While under the authorities hereinbefore cited, a protest upon the part of Shelley may have been unnecessary, and if he had failed so to do his rights would not have been affected, nevertheless he did have a right to protest and did so protest, and according to the allegations of the second amended cross-complaint, such protest was withdrawn by means of duress imposed upon Shelley by the action of the very parties who organized the respondent corporation, and upon its organization became its principal officers and directors. The sustaining of the demurrer to this portion of appellants' pleading denies appellant Mrs. Shelley the substantial right of ever being able to show upon the trial an important element in the case.

While the evidence adduced at the trial may not be considered on an appeal from the judgment based on the judgment roll alone, nevertheless there are certain of the findings which appellants contend are erroneous, based on the status of the pleadings and the facts admitted therein. The rule that presumptions are in favor of the judgment does not extend to findings on issues eliminated by demurrer and upon which appellants would have no reason to expect evidence would be taken. There is no presumption in favor of a judgment contrary to the findings nor of findings without or contrary to the issues made by the pleadings. Further, the statute does not say that the evidence may not be considered on an appeal from the judgment; it simply says that the sufficiency of the evidence will not be reviewed on appeal unless a motion for a new trial is made. In an appeal from the judgment every presumption and intendment is in favor of the judgment. In early and well-considered cases we think this court has defined beyond doubt the scope of inquiry and review by the supreme court when the appeal is from the judgment alone. In Burbank v. Rivers, 20 Nev. 81, 16 P. 430, this court held that the rule that the supreme court would not review the evidence upon an appeal from the judgment alone for the purpose of determining its sufficiency to sustain the findings of the lower court, no motion for a new trial having been made, lies equally to suits in equity as well as all other actions. No consideration of insufficiency of evidence can be given on an appeal where there was no motion for a new trial. "This has been so frequently decided by this court that it is now unnecessary to discuss it." Conley v. Chedic, 7 Nev. 336; James v. Goodenough,7 Nev. 324; Whitman v. Shiverick, 3 Nev. 288; Cooper v. Pacific Mutual Ins. Co., 7 Nev. 116; Sherman v. Shaw, 9 Nev. 148; Stats. 1919, p. 313. So that if the court had jurisdiction of the parties and the subject matter, and the findings are within the issues and support the judgment, neither is open to attack on an appeal from the judgment alone.

We have never been able to understand that the declaration of trust was sufficiently definite in the description of its terms or subject matter as to create any legal status between the alleged signatory parties. We cannot find that there was any meeting of minds upon any lawful or existing property condition or relation between the parties.

It may be conceded that a governmental department cannot legislate under the guise of a regulation, but where by a law the department is vested with a discretion and the regulation is not obnoxious to the law under which it is promulgated, the courts have no right to interfere. Numerous instances of departmental regulation are offered by the regulations relating to the issuance of patents for mining claims, homestead entries, desert land entries, rights of way over public domain, and many other such regulations essential to the enforcement and administration of various laws. These, as will be conceded, have uniformly been sustained by the courts. The courts have taken judicial notice of them and they have in fact become a part of the laws of the land, having the force of legislative enactments. Lindley on Mines, sec. 662, pp. 1231, 1234. The federal land leasing act of February 25, 1920, vests much discretion in the secretary of interior, and there is nothing in the act itself inconsistent with or repugnant to the provisions inserted in sodium prospecting permits making such permits nonassignable.

To hold that the permit is assignable while a lease upon the land is not assignable, and that an assignment of the permit gives to the assignee an interest in the lease would defeat the purposes of the act and create an irreconcilable conflict by construction. As was said of a homestead entry in Adams v. Church, 193 U.S. 510, 48 L. Ed. 769: "The whole policy of the government in this respect would be thwarted if the homesteader were permitted to alienate prior to expiration of five years." And the cases in respect to the prohibition against alienation before patent of homestead entries are more analogous to the case at bar than those cited by appellants, which may be ever so sound to the conditions under which they were applied. See, also, Anderson v. Carking, 135 U.S. 483, 37 L. Ed. 272; Douglas v. Sanders, 228 U.S. 609, 59 L. Ed. 985; U.S. v. Jones, 242 Fed. 609; Miller v. Thompson, 40 Nev. 35, 160 P. 775.

The prospecting permit could not exceed the term of two years (sec. 23, act of Feb. 25, 1920), and the permit issued in this case had expired before the demurrers were ruled on and were as dead as Lazarus so far as any rights under it were concerned.

"A statute prohibiting the making of contract, except in a certain manner, ipso facto makes them void if made in any other way." 13 C.J. p. 420, sec. 351, "Contracts." The so-called trust agreement if considered as an effective contract is also void because it is contrary to public policy. It is a contract having for its direct object and result the violation of the regulations of one of the departments of the United States Government respecting the public lands. It also has for its purpose and result the breach of a contract with the government of the United States made through its duly authorized agent, the department of the interior. 12 C.J. p. 427, bottom of column 2.

OPINION After the commencement of this suit and during its trial the name of plaintiff, Nevada Sodium Company, was changed to that of American Sodium Company, and, upon court order, the case proceeded to judgment in the name of American Sodium Company, a corporation, as plaintiff, against W.F.J. Shelley and Jennie Baldwin Shelley, husband and wife, et al., defendants. Their codefendants, Arthur Warnken and W.H. Yarco, are not parties on appeal from the judgment upon the judgment roll alone. For convenience we shall designate the parties as plaintiff and defendants.

1. Counsel for defendants insist that, a motion for new trial having been made and the action being one in equity, we should consider the transcript of the evidence on appeal from the order denying the defendants' motion for new trial and determine whether the evidence supports the findings and the findings the judgment. It is now settled that error cannot be predicated upon the insufficiency of evidence unless the evidence is brought into the record by a bill of exceptions in conformity to the provisions contained in the act regulating proceedings on motions for new trials and on appeal in civil cases. Stats. 1923, p. 163, c. 97. The evidence not having been brought into the record in this case in conformity to the statute, it cannot be considered. Markwell v. Gray, 50 Nev. 427, 265 P. 705.

For present purposes the pleadings consist of the complaint, the separate answers of defendants, and the second amended cross-complaint of the defendant Jennie Baldwin Shelley, and the replies. The answers contain practically the same allegations, with this difference — the answer of the defendant husband shows that he assigned whatever interest he has or had in the subject of the controversy to his wife as her separate property, and he defends solely in his capacity as husband. The wife defends in her capacity as assignee and in her own right. The plaintiff interposed a demurrer to the cross-complaint, which was sustained. The case was tried upon issues joined upon the complaint, answers, and replies which resulted in a judgment in favor of the plaintiff and against the defendants in accordance with the trial court's findings of fact and conclusions of law after a full hearing upon the pleadings and evidence.

The facts leading up to this suit as disclosed by the pleadings, stated in our way, are substantially as follows: Under and by virtue of an act of Congress, approved February 25, 1920, entitled "An Act to promote the mining of coal, phosphate, oil, oil shale, gas, and sodium on the public domain" (41 Stat. at L. 437; U.S.C. title 30, sec. 181 and following [30 U.S.C.A., sec. 181 et seq.]), the secretary of the interior granted to each, W.F.J. Shelley and Arthur Warnken, a sodium prospecting permit to prospect the land described therein for sodium. The permits are not before us, but it is inferable from the pleadings that each permit was in the form of permits adopted by the secretary of the interior under rules and regulations of the department of the interior as authorized by said act of Congress (Cir. 699; 47 Land Dec. 531).

On January 15, 1924, Arthur Warnken and W.F.J. Shelley each assigned and transferred his permit to Arthur Warnken, W.F.J. Shelley, and one W.H. Yarco as trustees named in an instrument in writing, called a declaration of trust, to be carried out in accordance with the articles of trust made a part of the agreement under the name and style of Wabuska Development Prospecting Association. The assignment and transfer of said permits were made without the consent in writing, or at all, of the secretary of the interior.

Said declaration of trust was caused to be recorded by W.F.J. Shelley in the records of the county of Lyon, where the land described in said permits is situate.

The complaint filed herein, on March 1, 1926, proceeds upon the theory that the recordation of said declaration of trust, with said assignments, created a cloud upon the land described in an indenture of lease entered into, by and between the government of the United States, as lessor, and said Arthur Warnken and one Clark J. Guild, as lessees, bearing date on June 29, 1925, whereby the government granted and leased to said lessees the exclusive right and privilege to mine, remove, and dispose of all the sodium and other minerals in, upon, or under the tract of land described therein, containing 1,440 acres, situate in Lyon County, Nevada. On August 4, 1925, said lease was assigned and transferred to the Nevada Sodium Company, a corporation, organized under the local law, with Arthur Warnken, as president, and Clark J. Guild, as secretary. The assignment of the lease was approved by the secretary of the interior in writing on September 12, 1925. It is conceded that the lease was granted under and by virtue of the leasing act of Congress, approved February 25, 1920, supra. The corporation entered into possession of the leased premises and expended large sums of money in excess of $18,000 in mining, removing, and disposal of sodium in the forms named in said act, and continued and now continue to mine, remove, and dispose of sodium in accordance with the terms, conditions, and covenants of said lease.

The separate answers of the defendants admit the execution, delivery, and assignment of the lease, and in this connection assert that the lease passed to the lessees their respective interest therein, subject to the equitable rights of the defendants. This allegation is predicated upon other allegations of the complaint and answers which show that the lease covered a portion of the lands described in the sodium permit granted Arthur Warnken hereinabove referred to. The answers further admit that the Warnken permit was assigned as a trust estate to the trustees named in said declaration of trust in violation of the condition expressed in the permit, namely, "not to assign or transfer the permit granted hereby without the express consent in writing of the secretary of the interior." In this connection each of the defendants aver and assert that the secretary of the interior possessed and possesses no power or authority to require such a condition to be included in the form of sodium permit, and in doing so the secretary of the interior exceeded his authority. This allegation is made the ground for demurrer to the cross-complaint of the defendant Jennie Baldwin Shelley. We may as well dispose at this point of the alleged error in sustaining the demurrer to the cross-complaint.

2, 3. In view of the leasing act of Congress, which admittedly authorizes the secretary of the interior to prescribe all necessary and proper rules and regulations and to do any and all things necessary to carry out and accomplish the purposes of the act (U.S.C. title 30. sec. 189 [30 U.S.C.A., sec. 189]), and particularly, the authority contained in section 261 (U.S.C. title 30 [30 U.S.C.A., sec. 261]), the secretary of the interior, wisely, we think, incorporated in sodium permits the condition above quoted. It is just as essential to the proper carrying out and accomplishment of the purposes of the leasing act of Congress for the secretary of the interior to know the qualifications of the assignee of a permit as it if for him to know the qualifications of the permittee; otherwise, a qualified permittee could with impunity assign or transfer his permit to an unqualified assignee, and thus abrogate the act itself.

We are not in accord with the contention of counsel for the defendants that such regulation and condition is inconsistent with and repugnant to law. Whatever may be the character of the right secured by a sodium permit, it is not an indefeasible right which comes from a grant of title ownership, but depends upon the qualifications of the permittee and at all times upon certain acts to be continuously performed for a period not exceeding two years. Section 261. The condition not to assign or transfer the permit granted Arthur Warnken without the express consent in writing of the secretary of the interior, being in our opinion necessary and proper to carry out and accomplish the purposes of the leasing act of Congress, it is not inconsistent with or repugnant to law. This being true, the regulation should have the force and effect of a statute. Hodgson v. Midwest Oil Co. (D.C.) 297 F. 273. This conclusion, however, is not decisive of all the legal questions involved in the appeal from the judgment.

4-6. The cross-complaint of the defendant Jennie Baldwin Shelley proceeds upon the theory that their codefendant, Arthur Warnken, in violation of his fiduciary duty and with the purpose and intention of excluding his codefendants from the benefits to be derived from his sodium permit so assigned and transferred by him to the trustees named in his declaration of trust, procured a lease from the government to mine, remove, and dispose of all the sodium in, upon, and under a portion of the land covered by the Warnken permit, and that said Warnken and said Guild hold the legal title to the leasehold interest granted subject to and in trust for the defendants as to their undivided one-third interest in said leasehold. The defendant, by her cross-action, seeks, in short, to have a trust impressed upon so much of the leasehold of plaintiff as is covered by the sodium prospecting permit granted Arthur Warnken.

In order to support the view in equity and good conscience that Warnken procured the lease in violation of his fiduciary duty, it would be necessary to allege definite facts (not mere inferences and conclusions) sufficient to show an existing fiduciary relation between the defendants and Arthur Warnken. There is nothing in the cross-complaint to show this unless such relation necessarily arose because of the assignment for a consideration by Warnken of his sodium permit, as a trust estate. We are of opinion that a mere sodium prospecting permit, as authorized by the leasing act of Congress, is a mere privilege, personal in character, and cannot be trusted. A permit is granted only to those who possess the qualifications prescribed by the act, and is, for a period of not exceeding two years, at all times dependent upon the execution of the permit in accordance with its terms. The permit is exclusive, it is true, but in no event can it ripen into title ownership. The most that is granted by the government as a reward for the discovery of commercial sodium in commercial quantities is that the permittee is entitled to a lease of one-half the land embraced in his permit, in compact form. Cir. 699; 47 Land Dec. 529. There is nothing in the cross-complaint to show that sodium was discovered by the permittee or his assignee upon the land embraced in the permit. In this situation we do not perceive upon what principle of law or equity the defendants can have the lease in question impressed with a trust in their favor upon that portion of the land embraced in the Warnken permit.

One cannot impose a trust on a leasehold that neither he nor his grantor at any time were, or now are, entitled to receive, or any part thereof. Hodgson v. Federal Oil Development Co.,274 U.S. 15, 47 S. Ct. 502, 71 L. Ed. 901, 54 A.L.R. 869, affirming (C.C.A.) 5 F.2d 442. Further in this connection we may observe that a court of equity is without jurisdiction to grant relief to one claiming a preference right as against one in possession under a lease from the government, the title still being in the government. Wilson v. Elk Coal Co. (C.C.A.) 7 F.2d 112, and cases cited. In no admissible view of the leasing act of Congress is the cross-complainant shown to be entitled to the lease in controversy or any interests therein. Her cross-action seems to be based entirely upon the pleader's misconception of the applicable law — the leasing act of Congress designed to promote the mining of and the conservation of the valuable deposits on the public domain named in the act, coal, phosphate, oil, oil shale, gas, and sodium. The conservation of these deposits is a matter of grave public moment and concern, and their disposition cannot be too carefully safeguarded for the protection of the government.

Finding no error upon the face of the judgment roll, the judgment is affirmed.