No. 6831

In the Superior Court of the County of Los Angeles
State of California

Juan M. Luco, Plaintiff

vs.

R. S. Baker, Defendant
The time of the Court has been so completely devoted to the examination of the questions of fact and law in this case that but very limited space is left for the expression of the reasons of the Court for the conclusions drawn. It is to be regretted that those reasons cannot now be arranged in more systematic order or more concisely stated, and that the legal authorities herein mentioned cannot be more systematically or concisely referred to, in this opinion. If inaccuracy occurs herein as to the statement of facts or reference to authorities, it will be to the hasty mode of its expression. My conclusions have been drawn after an exhaustive examination and thorough deliberation. My reasons will now be hastily, perhaps inaccurately, expressed.

On the 22d day of May, 1865, Jesus Hernandez and Ramon Perea executed to Robert S. Baker, defendant herein, an instrument purporting to convey all right, title and interest of said Hernandez and Perea in and to a certain claim for 160 acres of land or thereabouts, describing the same by metes and bounds, situate on the northern slope of the San Fernando range of mountains in Los Angeles County, this State; which deed was acknowledged on the day of its date and recorded in the Recorder’s office of this county. Subsequently Baker conveyed to Edward F. Beale an undivided half interest in these premises. Upon receiving the aforesaid deed from Hernandez and Perea, Robert S. Baker put Sanford Lyon in possession of the property, and Sanford Lyon remained there for a long time thereafter, viz: until a lease of the property was made to Reuben Denton, on the [blank] day of [blank], 18[blank]. In Sanford’s absence Baker had another man there in his stead up to the date last aforesaid. Sanford was engaged in working in the roads upon the property, and opening and developing the property for the production of oil – in all doing work of great value, estimated by defendant Baker at about $5,000.

On the 8th of August, 1866, notice of mining claim was recorded in the records of the San Fernando Petroleum Mining District with the names of Pio Pico, Robert S. Baker, Edward F. Beale, Sanford Lyon, Juan Forster, and Francisco P. Forster attached thereto.

The work of Lyon upon the premises under the employ of Baker was continued after the notice aforesaid, over the names of Lyon, Baker and others, was posted. The two properties, viz: the property described in the Baker deed and that described in the notice aforesaid, do not appear to have been exactly co-terminus, a large part of each being included in the boundaries of the other, and a small part of each property being excluded from the boundaries of the other. Baker’s name was not attached to the notice by himself. It does not appear that Lyon signed the notice for himself. Cyrus Lyon, a brother of Sanford Lyon, was called as a witness and testified that Sanford Lyon worked for Baker and Beale.

On the 21st day of May, 1877, and while Sanford Lyon was occupying the property in the manner aforesaid, Pio Pico executed, acknowledged and delivered to Robert S. Baker a deed of conveyance of the property described therein, said deed being in the form of a grant, bargain and sale deed of all right, title and interest of Pico in and to that certain oil claim known as the Pico Oil Springs, situate in the San Fernando Mountains, in the County of Los Angeles, California, located in the San Fernando Oil District. In the body of that deed, immediately after the granting clause, the words “party of the second part” were, by mistake, written “party of the first part,” the deed thus being made to read “the party of the first part does grant, bargain, sell and convey unto the said party of the first part,” but in the habendum clause it reads as follows, “to have and to hold all and singular said premises, together with the appurtenances unto the said party of the second party, and to his heirs and assigns forever.”

Upon the same day that the deed was executed, Robert S. Baker executed, acknowledged and delivered to Pio Pico an instrument in writing referring to the deed aforesaid, covenanting that in consideration of the premises the said Baker agrees with the said Pico that out of the net proceeds of said Oil Springs (should there by any) the said Pico will be entitled to his proportionate share of the same as the same may be realized by the said Baker. Said Baker will bestow the same care and attention to the interest of Pico as he will to his own interest, but in no event nor in anywise shall the said Baker be liable or responsible, but shall be saved harmless by said Pico, his assigns and successor. That instrument was acknowledged by Baker before a notary public on the day of its date. Thereafter, on the 14th day of June, 1877, Pico executed, acknowledged and delivered to Robert S. Baker another deed of conveyance in the ordinary form of a grant, bargain and sale of deed of all the interest of the grantor and describing the property in the same words as the aforesaid deed of May 21st described the same, and being identical in form with the deed of May 21st, except that the words “party of the first part,” after the granting clause in the first deed, were written “party of the second part” in the second deed, and except that a clause at the close of the description in the first deed, to-wit, “meaning to convey to said party of the second part all the interest, rights and privileges of the said party of the first part, of whatsoever nature they are or may be, in the said oil claim and land, and to which he is entitled under the laws of the State of California,” was omitted from the second deed. Each deed recited a money consideration of twenty dollars, but no actual consideration money passed between the parties at the time of the execution of either of the deeds. Baker at that time was claiming an interest adverse to Pico, and had shortly theretofore discovered the fact that the notice hereinbefore mentioned with the names of himself, Pico and others attached, had been recorded, and that Pico was claiming an interest thereunder. Pico had a brother named Andreas Pico, who had died about a year and a half previous to that time, with whom Baker paid out certain moneys, to or on account of said Andreas and on account of property in which Andreas and his brother, Pio, each claimed some character of interest. There was an outstanding account in favor of Baker against one or both of the Picos, but an account, nevertheless, indefinite in its amount, so far as shown by the evidence herein, and an account which Baker, doubtless, did not intend to attempt to collect by any legal proceedings, or perhaps at all.

On the 28th of June, 1879, Beale & Baker, as parties of first part, and one F. B. Taylor, the California Star Oil Works Company, and one A. E. Davis, as parties of the second part, entered into an agreement reciting that theretofore there had been various controversies and disputes between the parties to that instrument, some of which controversies respected the lands, premises and claim known as the Pico Oil Springs Claim, and transactions therewith, and reciting further that the parties thereto desired to settle all the controversies and conflicting claims and that therefore it is agreed: first, that the parties of the second part will transfer or cause to be transferred 4286 shares of the capital stock of said California Star Oil Works Company to said Beale and Baker, and will also pay to said parties of the first part $2,500 United States Gold Coin; second, the said Beale, Baker, Taylor and Davis will unite in a conveyance purporting to convey to said California Star Oil Works Company all of the said Pico Oil Springs Claim, including the machinery and appurtenances thereon, said premises being situated in Los Angeles County, California, and being the same premises for which application for a United States Patent has been heretofore made by said Baker, containing 160 acres; third, that said Beale and Baker will release all claims and demands against the California Star Oil Works Company and said Davis to said Taylor, and will also release all claims and demands which they have against any person growing out of the lease made by them, Lyon and Leaming to Reuben Denton of said premises; fourth, that the suits and controversies between the parties hereto, or any of them, respecting any transactions, growing out of or connected with said oil claim or lease, shall be dismissed; and containing other provisions.

The said California Star Oil Works Company, a corporation, entered into possession of a portion of the premises aforesaid, some time in the spring of 1876, and between that date and the 28th of June, 1879, placed valuable improvements thereon. Subsequently said Baker and said Beale procured to be issued to them a United States Patent for 160 acres of land including a large part of the lands included in the notice first herein mentioned, the notice to which the names of Pico, Baker and others are attached.

On the 15th day of August, 1882, Baker and Beale executed and delivered to the California Star Oil Works Company a deed of grant purporting to grant to said corporation the premises described in said patent, which deed was recorded on the 23d of March, 1883. That deed was executed in pursuance of the compromise agreement hereinbefore mentioned, and the consideration therefor is mentioned in said agreement, to-wit, stock of the said corporation to be issued to said Baker and Beale, etc.

On the 9th day of March, 1886, Pio Pico executed an instrument in writing purporting to assign and transfer all his right, title and interest of, in, to or arising from or by virtue of said declaration of trust or said instrument in writing, executed by Baker to Pico on the 21st day of May, 1877, as also of, in or to the said Pico Oil Springs Mine and the proceeds thereof, to Juan M. Luco, plaintiff herein.

This action is brought by Luco, who claims among other things that the second deed executed by Pio Pico to Robert S. Baker was executed for the sole and only purpose of correcting the clerical error of the first deed. He claims that the property was still to be held in trust by Baker under the instrument executed by Baker at the time that Pico made the first deed. Baker claims that soon after the execution of the first deed he was advised by his attorneys that to allow the instrument which he had executed to Pico at the time of the execution of the first deed, to remain in force, might complicate his rights to the property which he claimed adverse to Pico; that he offered thereupon to reconvey to Pico for the reasons last mentioned; that Pico did not accept the reconveyance, but made the second deed to Baker for the purpose of conveying to Baker absolutely the property described therein and all interest that Pico may have had under the declaration of trust, and to free the property from that trust.

There are other questions involved in the case, but from the view this Court has taken of the law and evidence, the determination of the question as to the effect of that second deed is conclusive of the entire case, and by reason of the late day in the term at which the case was tried, and the still later day at which the final arguments were submitted, the attention of the Court will now be confined chiefly to the reasons for its decision of that question, vis., as to the effect of that deed.

It is conceded by both parties herein, that the clerical error in the first deed was an immaterial one, that the deed was as effective in spite of that error as it could have been without the error; therefore, if the second deed was made for the sole purpose of correcting that error, it was an idle thing to execute that deed. It was inoperative for any necessary purpose.

But before more fully considering the transaction as to the second deed, a brief glance may be taken as to the early history of the property, so far as shown by the evidence herein.

The Perea and Hernandez deed to Baker was dated and recorded May 22, 1865. At a miner’s meeting, June 24, 1865, San Fernando Petroleum Mining District was organized, and its laws were recorded in June, 1865. The notice of Pico, Baker et al, under which plaintiff claims, is dated August 8th, 1865, and recites that the claim was taken up and recorded March 22, 1865, in Los Angeles Asphaltum and Petroleum Mining Office, and recites that parties making the location failed to comply with the mining laws of either district, and that the undersigned re-locate the claim, with additional claim of right of discovery of said spring. Recorder certifies, that, finding same not private property, but subject to location, he did, Aug. 8, 1865, place parties in peaceable possession. The witness, Cyrus Lyon, testified that his brother, Sanford Lyon, in 1865, was at Pico Springs, engaged in working for Beale and Baker, and that he continued there until 1871 or 1872, working sometimes on the road and sometimes at the Oil Springs; that he was engaged by Beale and Baker.

Defendant Baker testified that at the time he received the Hernandez and Perea deed he immediately put Sanford Lyon in possession, and kept him there until he, Baker, leased the property to Denton, which was in 1876. That he always employed Sanford Lyon. That if he went away temporarily, Baker had another man in his place. That he never lost possession one day, to his knowledge. That during that time that he was working the road and developing the property. That he shipped oil to San Francisco. That he did a good many thousand dollars’ worth of work.

Plaintiff has made no attempt to show what persons it was whom the Pico notice admits to have “Taken up the property on March 22, 1865,” just two months before the date of Baker’s deed from Hernandez and Perea. It is fair to assume, from the other evidence, that the reference in the Pico notice was probably to the Hernandez and Perea claimants, and that the recital in the Recorder’s certificate, to the effect that he found the same not private property, but put the parties to the Pico notice in peaceable possession, was false, and that the acts of the Recorder, and such others as assisted him, could have been more accurately designated in miner’s phraseology, an attempt to “jump” the Hernandez and Perea property, than by use of the term “re-located,” used in the Pico notice.

If that record be admissible to prove the facts recited therein, as claimed by counsel for plaintiff herein, it proves that the claim was in fact “taken up” by some persons prior to the organization of the San Fernando Petroleum Mining District, and the other facts point rather strongly to the Hernandez and Perea claimants as being the persons by whom it was so taken up, while the evidence of Baker and Cyrus Lyon proved, to the satisfaction of this Court, that, from the date of the Hernandez deed, sufficient work was done, and that the Pico party was not put in quiet possession August 8th, 1865, at date of their notice, and that the predecessors of Baker had discovered the property prior to that date, and that Baker was, in fact, in possession, holding by Sanford Lyon, at the very time that plaintiff’s predecessors claimed to have discovered and located the property.

And again, there is absolutely no proof that the Pico party did the work required by the mining laws of the district, except on the theory that Sanford Lyon was doing work for that party. But the evidence of Baker and Cyrus Lyon disproves that claim, and establishes the fact that Sanford was working for Baker and Beale.

The witness Clarke, called for plaintiff, was not asked any direct question as to his knowledge in regard to whether Lyon was working for himself or for others, and, as it is clear that Baker claimed an interest in the property when he put Lyon there to work for him, it will certainly not be assumed without evidence, except the naked facts as to the record of notice, that throughout all the time that Baker was paying Lyon for his services, Lyon was secretly attempting to procure a title for himself against the claim of his employer, Baker.

Again, it is a proper subject for consideration as to whether or not Pico and his co-claimants, under the lease, were not in possession of sufficient facts to put them upon their inquiry, at least as to whether Sanford Lyon was not exclusively in the employ of Baker, doing work upon a claim other than that set forth in the Pico notice. Baker’s deed from Hernandez and Perea was of record in the office of the County Recorder. The notice of Pico and others recited that the claim had been formerly taken up, but that the provisions of law had not been complied with by the former claimants. Sanford was doing all the work that was done, and, so far as the evidence herein shows, without receiving compensation from Pico or any other of the parties whose names were attached to the Pico notice, except Baker; and, so far as the evidence herein shows, without any claim ever having been made by Sanford Lyon upon any of the others for compensation. And there are other circumstances connected with the case which had some tendency to put Pico and the others upon their inquiry as to the circumstances under which Sanford was doing his work.

Counsel for defendant argued that Pico had no interest of any value whatever to convey, and, while counsel for plaintiff claimed that he was owner of a on-seventh interest in the property which thereafter turned out to be vary valuable, the question of the actual value of Pico’s claim at the date of the deed, surrounded, or at least threatened, with litigation as it was, has received little if any attention from counsel. If it be assumed that Pico was then the actual owner of an interest in the property, it must be conceded that that interest could not be maintained without bitter and probably continued litigation; that the situation was such as to materially decrease, in Pico’s hands, any actual intrinsic value the property may have had; and the situation of the parties at the date of Pico’s deeds was such that, even though the conveyance were intended merely as a gift from Pico to Baker, who had befriended him, such gift (although between beneficiary and trustee), being without coercion, fraud or undue influence of any kind, and being between persons who dealt upon equal terms, and being followed by larger expenditures upon the property by Baker and by long acquiescence, or at least non-interference, by Pico, after knowledge, both actual and by being put on inquiry, should not now be disturbed.

What we regard as the most important phase of the entire case, the transactions between Pio Pico and Robert S. Baker on June 24, 1877, will now be considered.

In determining the question, we shall consider first, the prima facie effect of the deed itself not supported by evidence as to its purposes or consideration. Second, what should be the finding of fact as to the effect of the deed in the light of the form of the deed itself, considered in conjunction with the evidence as to the circumstances under which it was executed and the purposes for which it was executed.

Section 863 of the Civil Code and the case of Gallagher vs. Pine, reported at page 100 of the 51st Cal. Reports, are cited by counsel for the plaintiff in support of their theory, that after the execution of the first deed (it being conceded that the clerical error was an immaterial one) no estate remained in Pio Pico upon which the second deed could have any effect, or which could be made to pass by another deed executed after the delivery of the first one. The naked language used by out Supreme Court in the case of Gallagher vs. Pine, as well as the language of Section 863 of the Civil Code (if not considered in the light of the other Code provisions of the Code, or if the language of the Court be considered otherwise than in face of the facts upon which the case of Gallagher vs. Pine was decided), would seem to be very explicit authority of law in favor of the doctrine contended for by counsel for plaintiff. The Code provision referred to reads: “Except as hereinafter otherwise provided, every express trust in real property, valid as such, in its creation, vests the whole estate in the trustees, subject only to the execution of the trust. The beneficiary takes no estate or interest in the property, but may enforce performance of the trust.”

The case of Gallagher vs. Pine was ejectment to recover five acres of land situated in Santa Clara County, this State. In 1849, August 4th, Barselisa Martin and John Martin, her husband, executed a trust deed wherein they granted premises including those in dispute, to J. D. Hoppe and C. D. Marvin. The grantees, Hoppe and Marvin, binding themselves, their heirs, executors, administrators and assigns, to lay out said lands so conveyed into town lots, and to sell them at their own expense and to pay to said John Martin one half the amount for which said lots were sold. Subsequent thereto, in December, 1849, the parties entered into another agreement with Peter H. Burnett, reciting the former agreement, and reciting that Martin, for cause of bad health as well as certain valuable considerations paid through him by Burnett, has agreed by consent of all parties to substitute said Burnett in Martin’s place, and it was agreed that Burnett should be so substituted to do and perform all the stipulations of said former agreement not yet then performed in reference to the lots not yet then sold or deeded. Burnett and Hope surveyed the land into lots, laid out streets, squares, etc., and made maps, and Burnett expended large sums of money in his efforts to have a city built, but these efforts were futile. Hoppe died in 1853 and after Burnett’s substitution he continued to claim land under the agreement, made contracts for the same and paid thereon. Martin died in 1851 and Barselisa, his widow, married Frazer in 1855. In April, 1867, Frazer and his wife, Barselisa, executed a deed of the disputed premises to the defendant, Pine, for the consideration of $25 per acre. Gallagher, the plaintiff, claimed under a conveyance from Burnett made for a valuable consideration. The action was commenced in 1872. After disposing of other questions the Court uses the following language: “The instrument executed on the 1st day of December, 1849, vested in Burnett the title then held by Marvin. The conveyance subsequently made by Barselisa and her then husband, Frazer, to the defendant, of a portion of the lands, did not transfer any title, for after her conveyance to Hoppe and Marvin, no title, either legal or equitable, remained in her. She or her husband was entitled, under the instrument of the 4th of August, 1849, to the one-half of the proceeds of the sale, but her deed to the defendant of a portion of the lands did not vest in the latter any estate in the land either legal or equitable.”

Other Courts in declaring the meaning of that language will consider it in the light of the facts before that Court in rendering that decision. If the owner of lands conveyed the same in trust to a trustee, with power to sell absolutely and to pay a portion or all of the proceeds to the trustor, one of the elementary purposes of the conveyance is to invest the trustee with the power to convey the title to purchasers from him. So far as concerns that power, it would be absolutely inconsistent with the purposes for which the trust deed was executed to leave an interest in the trustor sufficient to defeat the title of a purchaser from the trustee to the trust lands. If such were the law or the provisions of the instrument it would remain within power of the trustor at any moment to absolutely defeat the purposes of the first instrument, and to defeat the beneficial interest which the trustee might have in the property (it appears that the grantee in the Gallagher case did have an interest) by making conveyance to a third party at his will at any time after the execution of the trust deed. It is apparent that, consistent with the purposes of the trust, no estate could be allowed to remain in the trustor, either equitable or legal, such as would prevent the entire property from passing to the trustee’ grantee (leaving only in the beneficiary the right to his share of the proceeds after a sale, but not a right in himself or his assigns, after the trustee’s sale, to the property), which the trustee has the full power to part with in order to give the instrument creating the trust the effect intended. In a sense other than that last referred to, that language of the Court cannot, consistently with the elementary principle of trust estates, have been intended to carry with it the full meaning which its words might import, if the deed from Martin and wife to Hoppe and Marvin was considered a trust deed (but if the Court did not deem that a trust deed the case is not an authority herein). It is an elementary doctrine upon the subject of trusts, that, if the owner of property convey the same to a trustee, in trust for the exclusive use and benefit of the trustor, while the legal title undoubtedly passes to the trustee, the trustor is nevertheless passes to the trustee, the trustor is nevertheless still the equitable owner; his property is held by the trustee, its legal title is in the trustee, the trustee has power of disposition, but the trustor is as rich in the real ownership of the property as he was before, stripped only of his power of conveyance, etc., and of the naked legal title. For instance, if a property valued at a million dollars be conveyed by A, its owner, to B, a trustee, B does not become a million dollars richer by the transaction, A does not part with his riches to the extent of a million dollars, he parts only with the legal title and the power of disposition. B, the trustee, receives only the legal title and the power of disposition. A has something which he could convey to a third party, but such conveyance would be subject to the provisions of the trust deed. A is the owner of the land and B is the holder of the legal title until B conveys it, after which A is owner of the price which B holds in trust. He might not be able to recover the property in ejectment, but, until the trustee exercises his powers and makes actual sale, A, the trustor, must still own something, and if the trustor be his own beneficiary, no one but himself can be injured if he elect to convey that something absolutely to B. The trustee could not part with a trust property in contravention of the trust to a person with notice, so as to have any effect as against A, but A, if he elects to do so, may transfer all his rights and ownership to B, whom he has made his trustee, and may merge the estate of the trustor in that of the trustee and make it one estate; but, so long as he does not do so, and so long as trustee and trustor both fail to part with whatever title or interest they have, the trustor remains the owner of an equity at least, in the trust property, an interest which he can convey.

As the language to be used in making such conveyance of the equitable title, or as to the presumption that attach as the effect of a deed (in the form of the second deed made by Pico) upon that beneficial interest, after an exhaustive search by counsel (who, with commendable ability and zeal, have guarded the interest of their client at every point), they are compelled to remark, referring to the Gallagher vs. Pine case, “this is the only case that we have been able to find precisely in point.” It must be conceded that the books do not abound with authorities to the contrary, namely, to support the view that a deed in the ordinary form, without in express terms mentioning the equitable or beneficial interest of the trustor, or cestue qui trust as such, would prima facie be construed to convey that beneficial interest. Lewin on Trusts, at star page 693, Sec. 3, contains the following language: “As to lands, in order to convey an equitable interest, writing is all that is necessary, but it is the practice to employ the same species of instrument and the same form of words in the transfer of equitable as of legal estates.”

Perry on Trusts, at Sec. 386, contains this language: “An equitable interest is necessarily vested in a cestui qui trust; he may dispose of it.”

31 Arkansas, at page 400, in the case of Badgett vs. Kealing, contains this language: “In the contemplation of a Court of Equity the cestui qui trust is deemed absolutely seized of the freehold.”

Cruises’s Digest, Title 12, Chap. 2, Sec. 34, contains the following: “Trust estates are subject to merge in the legal estates where both estates go to the same person, and are coextensive.”

The case of Wade vs. Paget, 1 Bro. C. C., 363, contains the following: “It is universally true that, where legal and equitable estates unite, the equitable must merge in the legal.”

Again, by a general grant of a reversion, rent will pass with it as an incident.
14 Barb., 654.
18 Cow., 206.
21 N.Y., 282.

The Transfer of a thing transfers also all its incidents, unless expressly accepted. Civil Code, Sec. 1084.

An interpretation which gives effect is preferred to one which makes void. Civil Code, Sec. 3541.

The purchase by the trustee from the cestui qui trust puts an end to the trust.

In the absence of authority either way this Court would unhesitatingly hold, that subject to the limitations hereinafter discussed, as to the confidential relation of trustor and trustee, the prima facie presumption from the execution of that second deed would be that it passed the equitable interest of Pico to Baker, and the weight of authority is believed to support that doctrine, though it must be conceded that the books are meager in adjudication upon that point, and that the citations above referred to are not all directly in point.

With that view and assuming, what is now found to be the fact, by this Court, that the evidence introduced by the defendant is sufficient to rebut the testimony of the plaintiff as to the purposes for which the second deed was executed, and as to its consideration it would follow that independent of affirmative evidence of the defendant himself and his other witnesses as to the purposes for which that deed was executed, the finding of this Court would be that the second deed was executed to extinguish the trust and to merge the estate of Pico in that of Baker for Baker’s own use and benefit. But the plaintiff having introduced affirmative evidence to support the allegations of his pleadings to the effect that the purpose of the execution of the second deed was only to correct the clerical error in the first, and not for the purpose of making any conveyance to Baker, and the plaintiff having claimed that the confidential relation of trustee and beneficiary existed between Pico and Baker at the time of the execution of the second deed, and that the burden of proof rests upon Baker to establish that the execution of the second deed was not intended to feed the trust, the objections of plaintiff to that class of evidence on behalf of the defendant should be, and are, overruled, and the same is admitted in evidence.

The first question that is then met is upon the doctrine which throws suspicion around the dealings of the trustee for his own benefit with the trust property as against the beneficiary, a doctrine which is well established, but no more thoroughly established than is the doctrine “that the purchase by a trustee of his cestui qui trust, sui juris, provided it is a deliberate and agreed or understood between them that the relation shall be considered dissolved, and there is a clear contract ascertained to be such after a jealous and scrupulous examination of all the circumstances and it is clear that the cestui qui trust intended that the trustee should buy, and there is no fraud, no concealment and no advantage taken by the trustee of information acquired by him as a trustee, will be sustained in a court of equity.”
Michoud et al. vs. Girod et al. 4 How., U.S. Sup. Ct., 556.

It is likewise true that the suspicion cast upon a transaction by the fact that it is a dealing between the beneficiary and his trustee, carries most of its force from the idea that the trustee has “superior knowledge of the subject of the contract,” and that the control which the trustee has always been accustomed to exercise over the other party prevents that contention between the parties which is the principal, if not the only security against unfair dealing; that in such cases the parties do not meet on equal terms, and that it is, therefore, almost if not quite a matter of course to open the account or set aside the contract if seasonable applied for.
Johnson vs. Johnson, Ala. Rep., Vol. 5, New Series.

It may be laid down as a certain proposition that trustees – unless they are nominally such to preserve contingent remainders – agents, commissioners, and so forth, who have been consulted as to the mode of sale, or any persons who, by their connection with any other person or by being employed or concerned in his affairs, have acquired a knowledge of his property, are incapable of purchasing such property themselves, except under the restraints which will be shortly mentioned; for, if persons having a confidential character were permitted to avail themselves of any knowledge acquired in that capacity, they might be induced to conceal their information and not to exercise it for the benefit of the persons relying upon their integrity. The characters are inconsistent.
Michoud et al. vs. Girod et al., 4 How., 554.

“The disability to purchase is a consequence of that relation between them, which imposes on the one a duty to protect the interest of the other, from the faithful discharge of which duty his own personal interest may withdraw him. In this conflict of interest the law wisely interposes.”
Id. 554.

The foregoing citations indicate the reasons for the general rule that courts view dealings of the trustee with his beneficiary with suspicion.

But if it affirmatively appears, as it does in this case, that the superior knowledge of the subject or contract does not to any considerable extent exist, and that the trustee has no material control over the other party, and that the parties meet upon practically equal terms, the cloud of suspicion is, by those circumstances alone, largely removed.

Pico was not an imbecile, he was not a victim easily to be imposed upon, he was a smart, shrewd man, had held the important official position of Governor of Mexico, his mind was not weakened by age, he did not create the trust in Baker by reason of Baker’s superior skill nor by reason of Baker’s superior knowledge of the subject. In fact, it is not even contended that any imposition or fraud was practiced upon Pico by Baker to secure the execution of the deed. It is not contended that the transaction in its inception was tainted by the slightest shadow of fraud or deception. The fraud is alleged to have had its inception at a subsequent stage of the proceedings, by the assertion of the claim that the deed had a purpose different from that for which it was intended at the time it was executed. Therefore, the reasons for the doctrine that suspicion is cast over transactions of this character, having no application, the doctrine applies, to say the least, with greatly reduced force.

Again, if the claim of plaintiff herein was a recent one, the proofs against it are sufficient; but it should also be met with disfavor by reason of its staleness.

If there be a clear breach of trust by the trustee, yet if the cestui qui trust or beneficiary has, for a long time, acquiesced in the misconduct of the trustee, with full knowledge of it, a court of equity will not relieve him, but leave him to bear the fruits of his own negligence or infirmity of purpose. The rule requiring the party injured to seek redress in reasonable time has so often received the sanction of courts of equity in this country and England, that it is unnecessary to cite authorities to sustain it. Whether the lapse of time is sufficient to bar a recovery must, of necessity, depend upon the particular circumstances of each case.
Hume vs. Beale’s Executrix, 17 Wall., U. S. Sup. Ct., 348.

“Without reference to any statute of limitations the courts have adopted the principle that the delay which will defeat a recovery must depend upon the particular circumstances of each case.”
Harwood vs. R. R. Co., 17 Wall., 81.

“There is a defense peculiar to courts of equity, founded on lapse of time and the staleness of the claim, where not statute of limitations directly governs the case. In such cases courts of equity often act upon their own inherent doctrine of discouraging, for the peace of society, antiquated demands, by refusing to interfere where there has been gross laches in prosecuting rights, or long acquiescence in the assertion of adverse rights.”
Wagner et al. vs. Baird et al., 7 How., U.S., 258.
2 Story Eq., Sec. 1520.

“A court of equity will not give relief against conscience or public convenience where a party has slept upon his rights.”
Id., 258.

“Length of time necessarily obscures all human evidence, and deprives parties of the means of ascertaining the nature of original transactions; it operates by way of presumption in favor of the party in possession. Long acquiescence and laches by parties out of possession are production of much hardship and injustice to others, and cannot be excused but by showing some actual hindrance or impediment caused by the fraud or concealment of the party in possession, which will appeal to the conscience of the chancellor. The party guilty of such laches cannot screen his title from the just imputation of staleness merely by the allegation of an imaginary impediment or technical disability.”
Id., 258.

The conclusion arrived at is that, by the execution of the second deed made by Pio Pico to the defendant Baker, whatever interest Pico had (if he had any), either equitable or otherwise, was merged in the estate that Baker claimed for his own interest, and that Pico thereafter owned no interest whatever in the property. That it is therefore immaterial, so far as the final determination of this case is concerned, what Baker did with the property thereafter, or whether he procured his patent as successor of Pico or upon the rights which Baker claimed to have prior to the execution of the deed to himself from Pico. It is likewise immaterial (if the above conclusion be sustained) whether Pico ever had any interest in the property. Findings of fact, however, should be drawn in accordance with the preponderance of evidence upon all the issues raised by the pleadings, in order that plaintiff may review all questions in the appellate court at the least practicable expense.

Judgment will be entered for defendant for his costs, and defendant’s counsel will submit findings and judgment in accordance herewith, for signature.