In re Trust Known as Great Northern Iron Ore Properties

In 1906 James Hill and Great Northern Railway (Great Northern) established a trust commonly known as the Great Northern Iron Ore Properties. Several thousand acres of ore lands were placed in the trust. The land was mined under long-term royalty leases. The royalties were distributed to the income beneficiaries. The income beneficiaries (plaintiffs) were approximately 10,000 holders of 1.5 million negotiable certificates traded on the New York Stock Exchange. The trust gave the trustees the power to sell the land and invest in other assets. The trust terminated 20 years after the death of the last survivor of the 19 Great Northern shareholders existing in 1906. Upon termination, all trust cash was to be paid to the income beneficiaries, and the remaining land reverted to Great Northern. In 1972, as termination approached, the trustees petitioned the court for instructions. The income beneficiaries argued that because the land had not yet been mined to exhaustion, the trustees must either delay termination until the land was exhaustively mined or sell the land and distribute the cash to the income beneficiaries. The income beneficiaries reasoned that if a trust asset is a wasting asset, the trustee is permitted to exhaust or consume the asset. Finally, the income beneficiaries argued that Minnesota law made it illegal for a railroad to own mineral lands, so the land could not revert to a railroad. Burlington Northern, Inc. (Burlington) (defendant), successor to Great Northern, argued that the trustees had a duty to protect Burlington’s reversionary interest. On remand after an appeal involving the admission of extrinsic evidence, the trial court held the trustees had unlimited authority and a duty to convert the trust assets to cash. Burlington appealed.