[Ed. Note.-For other cases, see Corporations, Cent. Dig. §§ 1869, 1872–1874.]

2. TRUSTS 179-LIABILITY OF TRUSTEES— ERRORS IN Judgment.

port the correctness of a charge or a credit | tected itself from liability for the representaby satisfactory evidence, the item must be tions of the mortgagor company. disallowed. It is probable that, upon any such settlement of the account, these trustees will be compelled to forego repayment of sums which they have properly and in Ordinarily trustees are bound to a fair exgood faith expended for the trust, and that ercise of their judgment, and to the unselfish exercise of good faith, and, while supine neglithey will be charged as having received mongence or willful default will render them liaey in cases where they have not, in fact, reble, mere errors of judgment will not. ceived it, and could not with reasonable dil[Ed. Note.-For other cases, see Trusts, Cent. igence have received it. But, if this be the Dig. § 233.] result, it will follow from the failure and neglect of the trustees to perform their duty of keeping full and accurate accounts of their transactions. Their good faith cannot save them from the consequences of this neglect. Whatever doubts arise from their failure to keep proper records or their inability to establish the items of their accounts must be resolved against them.

We shall not make any disposition at this time of the questions of compensation of trustees and costs, both of which are discussed in the briefs. These matters can be disposed of by the court below upon the new trial, in view of the facts as then developed, and in accordance with equitable principles.

The judgment and the order denying a new trial are reversed.

We concur: SHAW, J.; LAWLOR, J.

(174 Cal. 504)

AINSA V. MERCANTILE TRUST CO. OF
SAN FRANCISCO. (S. F. 7019.)
(Supreme Court of California. March 7, 1917.
Rehearing Denied April 4, 1917.)

1. CORPORATIONS 479

INDEBTEDNESS

3. TRUSTS 179-POWER AND OBLIGATION OF TRUSTEE-INSTRUMENT CREATING TRUST. A trustee of an express trust derives his power from the instrument creating it, and such instrument furnishes the measure of his obligation.

[Ed. Note.-For other cases, see Trusts, Cent. Dig. § 233.]

4. MORTGAGES 209-TRUST DEED OBLIGATION OF TRUSTEE.

A trustee under deed of trust does not assume the important obligations in some instances cast upon a trustee by operation of law; an ordinary trust deed being little more than a mortgage with power to convey. [Ed. Note.-For other cases, see Mortgages, Cent. Dig. §§ 466–468.]

5. CORPORATIONS

479-TRUST DEED-TRUS

TEE AS COMMON AGENT.

A trustee under an ordinary deed of trust is the common agent of both parties, and required to act impartially.

[Ed. Note.-For other cases, see Corporations, Cent. Dig. 88 1869, 1872-1874.]

6. CORPORATIONS 479-TRUST DEED-DUTY OF TRUSTEE TO PROTECT SECURITY.

A trustee in a corporation's deed of trust to secure bonds owes a duty to the bondholders of preservation and protection of the security, if the means of the defense are known to the trus tee or may with diligence be discovered.

[Ed. Note.-For other cases, see Corporations, Cent. Dig. §§ 1869, 1872-1874.]

7. CORPORATIONS 479 TRUST DEED-CERTIFICATION OF CORPORATE BONDS BY TRUSTEE CERTIFY"-"GENUINE."

ing, and the word "genuine" means "not spurious, counterfeit, or false," and its use did not involve the legal sufficiency of the security; the purpose of the certification not being to insure the sufficiency of the security, but to prevent an overissue.

TRUST DEED-LIABILITY OF TRUSTEE. In a deed whereby a corporation accepted a trust on behalf of the holders of bonds of another corporation it was provided that the A corporation trustee's certificate to the trustee corporation should not be liable or ac- bonds of another corporation which merely cercountable for the acts, defaults, or neglect of tified that each bond to which it was attached any agent to be appointed in good faith for any was one of a series of 1,900 bonds, and that the of the purposes expressed in the mortgage, and coupons were "genuine," merely guaranteed the the instrument, referring to the trustee, also pro- bonds and coupons as the issue of the corpovided that no liability or responsibility should ration purporting to execute them, since "cerattach to the corporation other than for the tify" means to testify in writing, to give a cerexercise of reasonable diligence in the perform-tificate, or to make a declaration about a writance of the trust, when action on its part should become necessary, and that it should not be required to take any affirmative action on behalf of the holders of bonds unless indemnified, nor be compelled to pay any taxes assessed or imposed on any of the property unless the moneys necessary should be furnished by the company issuing the bonds or their holders, and that no liability or accountability should attach to the corporation trustee if it should fail to proceed to foreclose the mortgage, but that a new trustee should be appointed in such case. Held, that by becoming trustee under such deed, and by issuing its certificate of genuineness to the bonds, the corporation trustee did not assume any obligation to pay the losses of bondholders arising from abandonment of work on its property by Action by James Ainsa, in his own right the corporation issuing bonds, did not become and as trustee, against the Mercantile Trust liable for representations made by the mortgagor Company of San Francisco. From a judgcompany, and did not become liable to bondholders for defects in the mortgagor's title aft- ment for defendant, plaintiff appeals. Afer issuance of the bonds, having expressly pro- firmed.

[Ed. Note. For other cases, see Corporations, Cent. Dig. §§ 1869, 1872-1874.

For other definitions, see Words and Phrases, First and Second Series, Certify; Genuine.]

Department 2. Appeal from Superior Court, City and County of San Francisco; F. J. Murasky, Judge.

James Ainsa, J. Č. B. Hebbard, Marcel E. | trust hereinafter mentioned until long after the Cerf, and C. H. Sooy, all of San Francisco execution of said contract." (Monte A. Dernham, of San Francisco, of counsel), for appellant. Morrison, Dunne & Brobeck, of San Francisco (R. L. McWilliams, of Burlingame, of counsel), for respondent.

MELVIN, J.

The finding contains a quotation of the contractual portion of this agreement for the purchase of the said coal lands. In substance it provided for the payment by Gen. Eagan of $25,000 American gold; that the Mexican Company, for which it was specified Plaintiff appeals from the he was making the purchase, should pay

judgment on the judgment roll alone.

$700,000 in bonds on January 1, 1902; that James Ainsa sued in his own right and as the bonds should be guaranteed by a first trustee for other persons owning bonds is- mortgage on the real and personal property sued by the Mexican Anthracite Coal Mining of Gen. Eagan and the Mexican Company; Company. The basis of plaintiff's claim is an that the bonds should be issued "with all the alleged breach of trust on the part of the requirements and formalities required for defendant, a trustee under a deed of trust their validity by the laws of the state of executed by the Mexican Anthracite Coal Sonora and the federal government of the Mining Company in support of its bonds. United States of Mexico"; that the Mexican The face value of the bonds held by appel- Company, or on its default Gen. Eagan himlant according to the allegations in the com- self, would perform all the obligations conplaint was $700,000, and judgment for thattained in the concession to the Sonora Coramount, with interest compounded yearly at poration; and that upon default of any of the rate of 7 per cent. per annum from the the stipulated payments Eagan or the Mexi1st day of January, 1901, was demanded. It can Company would forfeit all sums previwas the theory of the plaintiff that the con- ously paid. On its part the Sonora Corporaduct of the defendant as trustee and as a tion guaranteed the validity of its contract corporation which had placed its certificate with the government of Sonora. on the bonds of the said mining company had made the Mercantile Trust Company of San Francisco responsible for and liable for the payment of the losses of the bondholders due to the causes which will be more fully discussed in this opinion.

The superior court found that the Mexican Anthracite Coal Mining Company (which we shall call the "Mexican Company") was at all times after July 25, 1901, a corporation organized under the laws of Arizona and doing business in the state of Sonora, Mexico; that the defendant was at all times mentioned in the complaint a Californian corporation doing business in San Francisco; that the "Compania Explotadora de Carboniferos en Sonora" (which we shall for brevity term the "Sonora Corporation") was at all times indicated in the amended complaint a corporation organized and existing under and by virtue of the laws of the state of Sonora, republic of Mexico; that Ainsa and his associates were the owners and holders of $603,200 of the bonds of the Mexican Company; that on July 2, 1901, the Sonora Corporation owned and possessed certain coal mains, mines, or zones named in the amended complaint; that said title depended upon and was held by virtue of a concession and contract with the state of Sonora (which agree ment is set out in the findings); and that on or about July 2, 1901, Gen. C. P. Eagan, with the consent of the state of Sonora, entered into a contract for the purchase of the said coal lands from the Sonora Corporation. With reference to the last-mentioned transaction the court found:

"That neither the contents of said contract and deed nor the facts set forth therein were known to the defendant except in so far as its terms and conditions were set forth in the deed of

There were also findings that under the laws of Sonora the contract between Gen. C. P. Eagan and the Sonora Corporation was a good, valid, and absolute conveyance of that corporation's right, title, and interest in and to the coal lands; that the $700,000 of the bonds to be paid and delivered by Gen. Eagan to the Sonora Corporation in consideration for said conveyance was the amount agreed upon by the parties to the contract as being equivalent to the indebtedness of the Sonora Corporation to its creditors and those having claims upon the said coal lands, including plaintiff, James Ainsa, and those represented by him; that on September 13, 1901, Gen. Eagan deeded said coal lands to the Mexican Company, but that his wife did not join in the conveyance; that the deed was not stamped nor recorded as required by Mexican law; but that these defects in the execution and authentication of the deed were not known to defendant when a certain deed of trust was executed and a certificate was attached by defendant to the bonds issued by the Mexican Company. Then follow findings regarding the making, execution and delivery to the defendant by the Mexican Company on November 12, 1901, of a trust deed in and to the coal lands described in the conveyance by the Sonora Corporation to General Eagan and in the deed by him to the Mexican Company; and it is specifically found that the only representations ever made by the defendant with reference to said

coal lands were contained in this trust deed, in the bonds issued by the Mexican Company and secured by said trust deed, and in the coupons attached to said bonds. The deed of trust is set out at length in the findings, as are a copy of one of the bonds and a copy

of the trustee's certificate. This certificate | the lands were mortgaged to respondent as is in the following words and figures:

"This is to certify that the within bond is one of a series of nineteen hundred (1,900) bonds issued by the Mexican Anthracite Coal Mining Company, and described in the mortgage therein the Mexican Company, and not by the rereferred to, and that said bond and the coupons spondent. The trustee's certificate heretofore attached thereto are genuine. Mercantile Trust quoted, merely guaranteed that the attachCompany of San Francisco, Trustee, by Fred'ked bond was one of a series of 1,900 "describW. Zeile, President."

Cal. App. 131-135, 87 Pac. 243; Hollywood | pressly protected itself from liability for Lumber Co. v. Love, 155 Cal. 270-273, 100 the representations of the mortgagor.

case is in harmony with the other authori-, lieved from liability for such inheritance ties cited above because in the opinion the tax the sum of $5,000, as a homestead expurpose of a certificate on a bond is declared emption. The question here presented is to be "to guarantee, not the value or suffi- whether or not under the law an inheritance ciency of the property behind the bond, but tax is imposed upon the value of property, the validity of the bond itself as a legal title to which is thus vested by virtue of instrument and the fact that it is secured by the homestead laws. The inheritance tax act a trust mortgage." of 1913, in section 2, declares that:

No other alleged errors merit analysis. It follows from the foregoing discussion that no material error was committed by the superior court.

The judgment is affirmed.

We concur: HENSHAW, J.; LORIGAN, J.

(174 Cal. 547)

"A tax shall be and is hereby imposed upon the transfer of any property in the following cases: 1. When the transfer is by will or by the intestate or homestead laws of this state, from any person dying seised or possessed of the property while a resident of the state or by any probate homestead set apart from said property." Stats. 1913, c. 595.

By the sections of the Civil Code and Code of Civil Procedure above cited title to the property impressed with the homestead vestIn re STEWART'S ESTATE. (S. F. 7739.) ed in the widow upon the death of the hus(Supreme Court of California. March 9, 1917.) band. Hart v. Taber, 161 Cal. 20, 118 Pac. TAXATION 864-INHERITANCE TAX-PROP-252; Humboldt Sav. Bank v. McCleverty, ERTY LIABLE - HOMESTEAD - "TRANSFER OF 161 Cal. 285, 119 Pac. 82; Wall v. Brown, TITLE OR OF INTEREST." 162 Cal. 307, 122 Pac. 478. Subdivision 1 of Civ. Code, 1265, and Code Civ. Proc. 8 section 2 of the Inheritance Tax Act above 1474, provide that where a homestead is declared upon community property, upon the death quoted unmistakably indicates that a transof the husband his title to the land impressed fer of title or of interest, as used in the inwith this homestead vests absolutely in the wid-heritance tax law, means a transfer accomow. Inheritance Tax Act (St. 1913, p. 1067) § 2, imposes an inheritance tax upon the transfer of property by will or by the intestate or homestead laws from any person dying seised or possessed of the property while a resident of the state or by any probate homestead set apart from said property. Held, section 2 indicates that a "transfer of title or of interest," as used in the inheritance tax law, means a transfer accomplished by operation of law as well as by the act of the parties, and that homestead property, title to which was transferred to the widow by and on the death of her husband, was liable to an inheritance tax.

[Ed. Note. For other cases, see Taxation, Cent. Dig. § 1679.

For other definitions, see Words and Phrases, First and Second Series, Transfer.]

Department 2. Appeal from Superior Court, City and County of San Francisco; J. V. Coffey, Judge.

In the matter of the estate of James Stewart, deceased. From a decree of the probate court adjusting the inheritance tax, John S. Chambers, as Controller of the State of California, appeals. Decree reversed in part.

Albert H. Elliott, Asst. Inheritance Tax Atty., of San Francisco (Robert A. Waring, Inheritance Tax Atty., of Sacramento, of counsel), for appellant. James C. Sims, of San Francisco, for respondent.

plished by operation of law as well as by the act of the parties. It appears too plain to permit of discussion that under these circumstances the homestead property, title to which was transferred to the widow by and on the death of her husband, was liable to the inheritance tax under the law that has been quoted. Respondent has filed no brief upon this appeal, and we are without light as to the views she may entertain in support of the court's decree. Wherefore that decree, so far as it exempts from the inheritance tax the homestead property, is reversed. We concur: MELVIN, J.; LORIGAN, J.

(174 Cal. 537) ANDERSON v. MATHEWS, County Clerk. (S. F. 8035.)

(Supreme Court of California. March 8, 1917.) 1. INDIANS 29-ELECTORS CITIZENS.

Const. U. S. Amend. 14 declares that all persons born or naturalized in the United States and subject to the jurisdiction thereof are citizens of the United States, and of the state wherein they reside. Petitioner was a descendant of uncivilized Indians who were living Mexico. The United States at no time entered in California at the time of its cession from into any treaty with the ancestors of petitioner who was born after California was admitted to HENSHAW, J. In 1913 Emma Georgina statehood, and it did not appear that the group Stewart, then wife, now the widow, of James of Indians of which petitioner was a part had any tribal form of government, although they Stewart, deceased, declared a homestead lived together and as a rule associated only upon community property. Upon his death among themselves. Petitioner was married untitle to the land impressed with this home-der the state laws, and was living with his famstead vested absolutely in the widow. Civ. Code, 1265; Code Civ. Proc. § 1474.

In the adjustment of the inheritance tax due to the state from the estate of James Stewart, deceased, the judge in probate re

ily in a house on the land of a farmer for whom he worked, although he had secured an allotment and established a residence on land purchased by the government for the benefit of the Indians of which he was one. Held, that as petitioner and his fellows recognized themselves bound by the state laws and conducted themselves similar