83 P.2d 899 | Wash. | 1938
Lead Opinion
STEINERT, C.J., dissents. Plaintiff verbally employed J.F. Alberts, one of the copartners operating as real estate brokers under the firm name Alberts-Gingrich, to negotiate, on behalf of plaintiff, the purchase of certain real property in King county. Alberts purchased that property with his own money and subsequently sold same at a profit. This action was instituted to establish a trust for the plaintiff in the proceeds from the sale of the property. The appeal is from the judgment of dismissal rendered upon plaintiff's refusal to plead further, after a demurrer had been sustained to the complaint on the ground that the alleged agreement, not being in writing, is not enforcible because of the statute of frauds.
The material allegations of the complaint, admitted by the demurrer to be true, are, briefly, as follows:
Alberts, on behalf of his copartnership, orally agreed with appellant to act as the agent of the latter in negotiating for appellant the purchase of certain real *577 property in King county owned by one Eugina Angel — with whom none of the respondents was acquainted — for a commission to be paid by the appellant to the respondents in such sum as should be reasonable, which commission appellant agreed to pay upon the conclusion of the purchase. The parties orally agreed that Alberts would approach Angel and endeavor to purchase the property from him for appellant at a price of approximately five thousand dollars, or such lesser sum at which the land might be purchased, or at such sum in excess of five thousand dollars as appellant might authorize if that be the best price at which the land could be purchased. Appellant agreed to supply the money with which to pay the purchase price of the land upon the purchase being effected.
Appellant took Alberts to the property, concerning which none of the respondents possessed any knowledge or knew that the same could be purchased, and the two made an investigation of the condition and situation of the land. Alberts entered into negotiations with Angel, to whom he did not disclose his agency for appellant, for the purchase of the property. Pursuant to an oral agreement with Alberts to accept three thousand dollars for the property and pay to Alberts a commission on such sale when effected, Angel conveyed the land to one Joseph Francis, who was in fact appellant's agent, J.F. Alberts. Thereafter, "as a part and parcel of the same transaction," Alberts under the name of "Joseph Francis" conveyed the property to one Koch for a consideration of seven thousand dollars.
[1] If a real estate broker, orally employed as an agent to negotiate for his principal the purchase of land, violates the principal's confidence and purchases the land with his own money and thereafter sells the land at a profit, may a trust be established for the *578 principal's benefit in the proceeds received by such agent from his sale of the land? That is the only question presented by this appeal.
In Farrell v. Mentzer,
The trust which appellant seeks to establish must be an express trust, a resulting trust, or a constructive trust. An express trust in real estate cannot be established by parol evidence. Zioncheck v. Nadeau, ante p. 33,
The authorities are uniform, however, that it is necessary, in the creation of a resulting trust, that the principal must have paid over his money at or before the execution of the conveyance from the vendor to the agent, or that the principal incur, at that time, an absolute *579
obligation to pay as part of the original consideration of the purchase. The trust can not be created by an advance of the purchase money after the purchase has been made by the other with his own funds or on his own credit. A resulting trust must grow out of the facts existing at the time of the conveyance and can not arise from a mere parol agreement that the purchase should be for the benefit of another. Hunt v. Friedman,
Constructive trusts, which are also known as trusts exmaleficio or ex delicto, are those which arise purely by construction of equity and are entirely independent of any actual or presumed intention of the parties. Resulting and constructive trusts are clearly distinguishable. In the case of the former, there is always the element, although it is an implied one, of an intention to create a trust, by reason of which, although it is by no means an express trust, it approaches more nearly thereto. In the definition of resulting and constructive trusts in 39 Cyc. 26 et seq., is the following language respecting constructive trusts:
"Constructive trusts on the other hand have none of the elements of an express trust, but arise entirely by operation of law without reference to any actual or supposed intention of creating a trust, and often directly contrary to such intention. They are entirely in invitum, and are forced upon the conscience of the trustee for the purpose of working out right and justice or frustrating fraud."
Counsel for appellant contend that a trust ex maleficio arose by reason of the secret purchase and sale of the land by respondents while agents of appellant, as that constituted a violation of the relationship of trust and confidence created by the oral agreement between appellant and respondents. It is argued that respondents were not employed by appellant to purchase *580 the land and give appellant the benefit of the purchase by conveying the land to appellant at the price at which the property was acquired, but that respondents were employed
". . . merely to act as agents for the appellant with Angel, the owner, to the end that appellant should become the purchaser direct from the owner, Angel."
[2] It is unlawful for any person to engage in the business or act in the capacity of a real estate broker within this state without first obtaining a license therefor. Rem. Rev. Stat., § 8340-5 [P.C. § 5724-5].
The statute (Laws of 1925, Ex. Ses., chapter 129, p. 219, § 4, Rem. Rev. Stat., § 8340-4 [P.C. § 5724-4]) defines a real estate broker as follows:
"Within the meaning of this act, a real estate broker is a person, who, for a compensation or promise thereof, performs one or more acts of selling or offering for sale, buying or offering to buy, negotiating or offering to negotiate, either directly or indirectly, whether as an employee of another or otherwise, the purchase, sale, exchange, lease or rental of real estate or interest therein for another person. The word `person' as used in this act, shall be construed to mean and include a corporation, copartnership or unincorporated association. The provisions of this act shall not apply to any person who purchases property for his own use or account, nor to any person who, being the owner of property, sells, exchanges, leases, rents or otherwise disposes of the same for his own account, nor to any person holding a duly executed power of attorney from the owner granting power to consummate the sale, exchange, or leasing of real estate, nor to the services rendered by an attorney at law in the performance of his duties as such attorney at law, nor to any receiver, trustee in bankruptcy, executor, administrator or guardian, nor to any person acting under the order of any court, nor any person selling under a deed of trust."
That is, excluding persons performing a specified *581
type of service, a person who, for a compensation or promise of compensation, performs one or more acts of buying or offering to buy, negotiating or offering to negotiate, as anemployee of another or otherwise, the purchase of real estate is a real estate broker. The restrictions and limitations upon the powers of the respondents — merely to act as agents for appellant in negotiating the purchase — do not, in view of the statute quoted, change the role or status of respondents as real estate brokers. We held in Grammer v. Skagit Valley Lumber Co.,
[3] Is appellant's oral agreement employing respondents as agents or brokers to negotiate on appellant's behalf the purchase or real estate under the ban of that portion of the statute of frauds reading as follows?
"In the following cases specified in this section, anyagreement, contract and promise shall be void, unless such agreement, contract or promise, or some note or memorandum thereof, be in writing, and signed by the party to be charged therewith, or by some person thereunto by him lawfully authorized, that is to say: ________________ an agreement authorizing or employing an agent or broker to sell orpurchase real estate for compensation or a commission." Rem. Rev. Stat., § 5825 [P.C. § 7745]. (Italics ours.)
Appellant and respondents direct our attention to the annotation, commencing at page 10, in Vol. 42, A.L.R., in which the editor has collated the decisions *582 arising out of the situation which exists where one who has orally promised to buy property for another buys it and keeps it for himself.
It is stated at page 28 of that annotation that there is a conflict of opinion as to whether an agent verbally employed to buy land for another, but who purchases it for himself with his own funds, may be compelled to convey it to his principal. The editor observes that some courts seem to have felt that to admit oral proof that the purchase was to have been made for another is virtually to abrogate the statute of frauds, while others regard the agreement as creating a relationship of trust and confidence, a violation of which will give rise to a constructive trust, to which the statute of frauds does not apply. The argument contained in the authorities cited by the editor against the existence of a constructive trust is that there is nothing more than a breach of contract, which is not such fraud as will give rise to a constructive trust. The counter argument is that the breach of the agreement discloses that the agreement was made by the agent with actual fraudulent intent to obtain the property for himself.
Matney v. Yates,
The complainants, under numerous mesne conveyances, acquired title to the Matney tract of 241 acres. Because complainants' (heirs of Walter Matney) evidence of title had been destroyed by fire, they entered into a contract with Richard Yates, Jr., who agreed to obtain releases for the complainants from all the heirs of Richard Yates, Sr. Yates, Jr., proceeded to procure releases in his own name, thereafter violated his contract and committed a breach of trust by continuing to hold the title in his own name, refusing to make any conveyance to the complainants. Complainants prayed that a commissioner be appointed to make deeds to the present owners in lieu of the deeds that had been destroyed, and that Yates, Jr., be required to execute to the present owners of the tract of 241 acres a release deed for all the interest acquired by him from the heirs of Yates, Sr. Demurrer to the complaint was sustained.
On appeal, the judgment was reversed, the supreme court holding that the defense that the complainants are undertaking to enforce an oral contract made between them and Yates, which is not in writing and therefore invalid, is not good; that the allegations that the complainants are claiming the ownership of the 241-acre tract, and that, as successors in title of the original owners, they have succeeded in possession of the land which has continued ever since the oral partition in 1879, shows a very substantial and an entirely sufficient interest in the land in controversy and easily *584 brings the case within the principle of constructive trust.
The action was nothing more and nothing less than a bill in equity to set up a lost deed. That case involved something more than the mere breach of an oral agreement to purchase lands for another. In the course of the opinion, the court said that the confusion and conflict, among the cases upon the question whether an agent verbally employed to buy land for another and who purchases in his own name and with his own funds, and then repudiates the agency, may be compelled to convey to the principal, arise:
". . . from a failure to apply to every case the test of the very simple question, was the contract in its essence and effect one of agency, or was it one for the purchase of real estate? If it was the former, it creates a trust relation, is not within the statute of frauds, and can be established by parol; if the latter, the parties are to that extent dealing with each other as principals and the contract is within the statute and can only be established by such writing as will meet the requirements thereof." Matney v. Yates,
In discussing the question whether an oral contract, like the one in the case at bar, in its essence and effect is one of agency, hence not within the statute of frauds, or the contract is one for the purchase of real estate and within the statute of frauds, the editor of the Annotation in 42 A.L.R., pp. 10 to 126, inclusive, cites the following cases as holding that one who has orally agreed to purchase lands for another, and who has instead purchased them for himself, cannot be compelled to convey them to his principal:
Garrow v. Davis, 15 How. (U.S.) 272,
The following cases are cited by the annotator in support of the proposition that the statute of frauds does not preclude the establishment by oral evidence of an agency to purchase land; and that a purchase in violation of the duty thus assumed gives rise to a constructive trust, or, as it is sometimes termed, a trustex maleficio:
Hellenthal v. Sloane,
[4] The weight of authority is to the effect that an agent verbally employed to buy land, or to negotiate the purchase of same, for another, but who purchases it for himself with his own funds, cannot be compelled to convey that land to his principal.
"By the weight of American authority, a mere parol *588 agreement to purchase land for another does not create such a fiduciary relation that the promisor will be declared a constructive trustee if he purchases for himself with his own money . . . The mere parol agreement to buy for another does not create such a relation of trust and confidence that equity should interfere to do justice in case of a breach of the agreement." 1 Perry on Trusts (7th ed.), 361, § 206.
"In order that the doctrine of trusts ex maleficio with respect to land may be enforced under any circumstances, there must be something more than a mere verbal promise, however unequivocal, otherwise the statute of frauds would be virtually abrogated; there must be an element of positive fraud accompanying the promise, and by means of which the acquisition of the legal title is wrongfully consummated. Equity does not pretend to enforce verbal promises in the face of the statute." 3 Pomeroy's Eq. Jur. (4th ed.), 2412, § 1056.
The mere promise by one, without more, to purchase land for another, is not a contract out of which a court of equity will raise a trust when the agent buys the land and pays for it with his own money and takes the deed to himself, was the holding inMitchell v. Wright,
In Oden v. Lockwood,
In Worthen Co. v. Vogler,
"A trust ex maleficio can not be established merely upon a broken promise to purchase lands for another, there being no positive fraud perpetrated other than the breach of the promise."
In Bauman v. Wuest,
"An agency attempted to be created by parol, in violation of the provisions of the statute of frauds, is not sufficient to impose a trust in a case where the principal who seeks its enforcement has parted with no consideration." [Syllabus.]
Hellenthal v. Sloane,
To the same effect are Church v. Sterling,
See Grantham v. Conner,
"A parol agreement between one who has obtained an option to purchase a tract of land and another, that the latter would buy the land, pay the full purchase price of it and also the amount paid by the first party to obtain the option, taking the title in his own name, and that he would, when the land was sold, pay the first party one-half of any increase that might be paid for the land, did not create a valid express trust in favor of the first party; and since no part of the purchase price was paid by him, a trust did not arise in his favor by implication of law under section 8 of the act relating to trusts and powers (Gen. Stat. 1909, § 9701)." [Syllabus.]
Boswell v. Cunningham,
"It is well to note that in this case the principal had paid a portion of the purchase money, that the agents were regular real estate agents and were employed in the line of their usual business, and presumably for the usual commission or charge made by them. Hence the case could hardly be considered as authority for the proposition that in all cases where one has been engaged by parol to purchase land for another, and instead of so purchasing takes the title in his own name and pays for it with his own money, he should be charged as trustee for the benefit of such other. On the contrary, in a much later case, to-wit: that of Parramore v. Hampton,
Parramore v. Hampton,
Quinn v. Phipps,
In Chastain v. Smith,
In Houston v. Farley, supra, two persons orally agreed that one of them (Farley) should be the purchaser of land at an administrator's sale, and that, when he received the deed, he would, upon payment to him by the other of a certain sum in cash and the delivery of certain notes for stated amounts payable at stated times in the future (the cash payment and principal of the notes aggregating a sum equal to the purchase price of the land), execute a bond conditioned to convey the land to the obligee on payment of the notes. The purchaser (Farley) refused to comply when Houston tendered the cash and notes, whereupon Houston brought a petition for specific performance of the oral agreement. The petition was dismissed on demurrer. The judgment of dismissal was affirmed. On appeal, the supreme court of Georgia held that equity will not decree specific performance of such an agreement, as, being oral, it was within the statute of frauds. The court said:
"A ground of the demurrer raises the point that the oral contract of which specific performance is sought is within the statute of frauds. The plaintiff contends that the statute does not apply to a case as alleged in the petition. He bases such contention on the dictum *594
of the first headnote in the case of Chastain v. Smith,
In Holmes v. Holmes,
Stevenson v. Thompson,
Mitchell v. Colglazier,
". . . . the ordinary case of a wife furnishing the money and paying for property which the husband, without her consent, has taken to himself. In such a case he holds it in trust for his wife, and a court of equity will protect it for her against his creditors."
In Burden v. Sheridan,
In Havner Land Co. v. MacGregor,
Inderlied v. Campbell,
Kennerson v. Nash,
In Raub v. Smith,
Snyder v. Wolford,
In that case, the plaintiff ascertained that a certain piece of land could be purchased at the price of three *598 thousand dollars. He orally agreed with defendant that he would negotiate the purchase of the land at that price for the defendant, the latter to pay the purchase price and take a conveyance of the land, and when the defendant sold the land the profits should be divided equally between the defendant and the plaintiff. The purchase was made, and the land was conveyed to the vendor through the defendant, who, some years later, sold the land at a large profit. Action was taken to recover one-half of the profit. Manifestly, the agreement did not contemplate that the plaintiff, who was the agent who negotiated the purchase, should have any estate or interest in the land or be interested in any way in the transaction unless upon a sale there should be a profit, then only in the profit and to the extent of one-half thereof. If there should be no profit, he would not get anything. If there should be a loss, he would lose only his time and trouble in making the purchase for the defendant. The agreement was one of employment or agency, and not one for an interest in real estate. The court said:
"No trust in respect to the profits existed other than such as arises upon the receipt by one of money which he has agreed to pay on such receipt to another."
In Krzysko v. Gaudynski,
"Whether the defendant can be held as a constructive trustee as an agent depends on whether his contract *599
of agency, not being in writing and not in conformity with sec. 240.10, should be considered as wholly void and imposing no duty whatsoever upon him. Appellants contend it should be so construed. Sec. 240.10, however, does not require that such a construction be placed upon it. Its declaration is not that a contract of agency, but a contract `to pay a commission' is void unless in writing. The purpose of the statute was not to relieve real estate agents from their obligations as agents, but to protect the public against frauds perpetrated by dishonest agents through falsely claiming oral contracts of agency when another agent effected a sale by which the landowner was subjected to claims for commission by two or more agents, and by falsely claiming agency and claiming a commission for procuring a purchaser when no bona fide purchaser was in fact procured. One may become an agent without compensation. Absence of compensation is immaterial. Wright v. Smith,
"A note in 42 A.L.R. 28, under the heading `Agreements to negotiate purchase as agent,' classifies the decisions of the different states upon the question of the obligation of an agent under oral contract who purchases real estate in his own name in violation of his duty. The states are about equally divided, part holding the agent to be a trustee, and part holding him not so bound under the statute of frauds. Wisconsin is placed with those holding the agent as trustee, and the case of Roller v.Spilmore,
In holding that an oral agreement between plaintiff and defendant that the latter purchase for the former the land of a third person and receive for his services *601
a stipulated sum is within the statute of frauds and can not be enforced, the supreme court of Missouri said, in Allen v.Richard,
"I am of the opinion that the contract attempted to be enforced was clearly within the statute of frauds. That statute forbids the bringing of any action `to charge any person . . . upon any contract for the sale of lands, tenements, hereditaments or an interest in or concerning them . . . unless some memorandum or note thereof shall be in writing and signed by the party to be charged therewith or some other person by him thereto lawfully authorized.' Rev. Stat., 1879, sec. 2513. It is argued by plaintiff that this was only a contract of employment relating to real estate and not within the statute of frauds. Although there is an element of agency in the contract, the action itself, is grounded upon the special undertaking of the agent to buy a particular tract of land and have it conveyed to plaintiff at a stipulated price. The plaintiff seeks to charge him for violation of this undertaking and asks damages for breach of it in like manner as if he had undertaken to convey his own land instead of procuring the conveyance of another person's. The relation of employer and employe was incidentally established between the parties, but the action is not for the value of services rendered or return of the price thereof. If the defendant was suing for the value of his services actually rendered in behalf of plaintiff, the fact that the contract under which they were rendered was within the statute of frauds would constitute no defense. He could recover on a quantum meruit. Brown Stat. Frauds (4 Ed.) Sec. 118. In like manner the statute would be no defense if the plaintiff was suing for a return of the $50 or any part thereof, paid for services which were never rendered in compliance with contract. Basford v. Pearson, 9 Allen 387;White v. Wieland,
"I think it will be found pretty generally held by the courts that the undertaking of any one to procure for another one an interest in or conveyance of a third *602
person's lands is within the statute of frauds, unless evidenced by written memorandum. Mather v. Scoles.
"The naked contract itself being within the statute, I fail to find in the evidence any facts or circumstances recognized in equity as sufficient to take it out of the operation thereof, such as full performance by plaintiff, payment for land taken in the name of another, expenditures in improvements thereon, or change in condition in life so as to render it a fraud on the plaintiff to deny him the title or refuse him compensation in damages. Winters v. Cherry,
Harrop v. Cole,
In Johnson v. Hayward,
"The contract of agency upon which the plaintiff relies rests wholly in parol, and no part of the consideration which the agent Hayward paid for the land was advanced by the plaintiff, and the principal contention of the defendants in this case is that it falls within the provisions of section 3 of our statute of frauds (ch. 32, Comp. St.), which is as follows: `No estate or interest in land, other than leases for a term not exceeding one year from the making thereof, nor any trust or power over or concerning lands, or in any manner relating thereto, shall hereafter be created, granted, assigned, surrendered or declared, unless by operation of law, or by a deed or conveyance in writing, subscribed by the party creating, granting, assigning, surrendering, or declaring the same.' Among other authorities supporting this contention are the following: Burden v.Sheridan,
Schmidt v. Beiseker,
Bailey v. Colombe,
The cases sustaining the right of recovery upon an oral promise made between brokers and their agents or employees to divide commissions are neither within the language or spirit of the statute of frauds or the real estate brokers' statute, hence are not applicable to the facts presented by this appeal.
The insuperable obstacle to enforcement of respondents' oral promise to negotiate purchase of land for appellant is the provision of the statute (Rem. Rev. Stat., § 5825) of frauds that an agreement employing an agent or broker to sell orpurchase real estate for compensation shall be void unless such agreement be in writing and signed by the party to be charged herewith. That provision applies to contracts between the owner of the land to be sold and the agent he employs to make ornegotiate the sale, and that provision also applies to a purchaser of land or one desiring to purchase land and the agent he employs to make the purchase or negotiate the purchase for him. The statute declares, without qualification, that an oral agreement employing an agent or broker to sell or purchase real estate for compensation or a commission shall be void. If the legislature intended to limit the statute to contracts between brokers and sellers and intended to exclude contracts between brokers and purchasers, *606 it would have employed language different than that now in the statute.
[5] That intent is so clearly and unambiguously expressed that there is no room for the office of construction; and no precedent should be held sufficiently strong to lead to a construction of this statute which does not give effect to the plain legislative intent.
"Where the language of a statute is transparent, and its meaning clear, there is no room for the office of construction. There should be no construction where there is nothing to construe." Lewis v. United States,
"And if the words of the statute are in themselves precise and unambiguous no more is necessary than to expound these words in their natural and ordinary sense, the words themselves in such case best declaring the intention of the Legislature." Maxwell,Interpretation of Statutes (6th ed.), 1.
"A cardinal rule of statutory construction, followed by the courts, is that, where a statute is clear upon its face and is fairly susceptible of but one construction, that construction must be given. Burdick v. Kimball,
It is not necessary to resort to the real estate brokers' act (Rem. Rev. Stat., § 8340-4); however, when the statute of frauds is read in the light of that act, the clearly expressed intent of the legislature is emphasized.
Whether the agreement contemplated a conveyance of the land from Angel to the respondents, who in turn would convey the land to their principal (appellant) upon payment of the purchase price, or whether the *607 agreement was for respondents to negotiate with the owner of the land and induce that owner to make the conveyance direct to appellant, is no different, under the statute, in principle, than a contract between an owner of land and an agent he employs to make a sale through the agent or to convey, after negotiations by the agent with the buyer, direct to the buyer.
We held in Richards v. Redelsheimer,
There is, as the editor of A.L.R. observes, a conflict of authority on the question whether, where an agent orally employed to negotiate purchase of land for another but who purchases it for himself and sells the land at a profit, a trust may be established for the principal's benefit in the proceeds received by such agent from his sale of the land.
[6] The authorities uniformly hold that the agent purchasing the land will not be permitted to keep the property he has obtained where circumstances, apart from a mere breach of an oral agreement to convey to another, render it inequitable that he should do so. The same rule, of course, is applicable to the proceeds received by the agent from his sale of the land.
Does the agent's breach — a moral wrong — of his oral promise amount to legal fraud? There is a conflict among the cases upon the question whether the repudiation by the agent of his duty is such a circumstance as renders it inequitable that he retain the land or the proceeds he derives from sale of the land.
The general rule relating to promises and assertions of intention is stated as follows in 12 R.C.L. 254, § 21: *608
"The general rule is that fraud cannot be predicated upon statements promissory in their nature and relating to future actions, nor upon the mere failure to perform a promise, or an agreement to do something at a future time, or to make good subsequent conditions which have been assured. Nor, it is held, is such nonperformance alone even evidence of fraud. Reasons given for this rule are that a mere promise to perform an act in the future is not, in a legal sense, a representation, and a failure to perform it does not change its character. Moreover, a representation that something will be done in the future, or a promise to do it, from its nature cannot be true or false at the time when it is made. The failure to make it good is merely a breach of contract, which must be enforced by an action on the contract, if at all. And as in the case of promises, it is generally held that mere assertions of intentions, or declarations of future purpose, do not amount to fraud."
While the breach of a mere verbal promise to purchase and convey land or negotiate as agent for the purchase of that land for a principal is a moral wrong, such breach is not a legal fraud, and, standing alone, is not a sufficient basis upon which to establish a constructive trust or a trust ex maleficio. We quote as apt, with reference to the conflict among the cases on the question presented, the following language from Farrell v.Mentzer,
"By no honest process of reasoning can the different decisions be harmonized or reconciled, and by no sophisticated reasoning should it be attempted to be done. . . . the statute of frauds is not an equitable doctrine, but is an absolute statute. . . . It may be that a strict application of the statute in some cases will operate to defeat a just claim, but that is not a sufficient reason for attempting to remove those cases from the operation of the statute."
In Farrell v. Mentzer,
"The logical result of such confusion would be to hold that the breach of every express contract would be the establishment of a constructive trust, and thus entirely obliterate express trusts. This point is well covered by Pomeroy as follows:
"`The foregoing cases should be carefully distinguished from those in which there is a mere verbal promise to purchase and convey land. In order that the doctrine of trusts ex maleficio with respect to land may be enforced under any circumstances, there must be something more than a mere verbal promise, however unequivocal, otherwise the statute of frauds would be virtually abrogated; there must be an element of positive fraudaccompanying the promise, and by means of which the acquisition of the legal title is wrongfully consummated. Equity does not pretend to enforce verbal promises in the face of the statute; it endeavors to prevent and punish fraud, by taking from the wrong-doer the fruits of his deceit, and it accomplishes this object by its beneficial and farreaching doctrine of constructive trusts.' 3 Pomeroy, Equity Jurisprudence (3d ed.), § 1056."
In classifying the decisions of this court on the subject of trusts, we said, which language is just as applicable in the case at bar, in Farrell v. Mentzer,
"The decisions of this court fall into these groups: (1) Those cases where intentionally the parties, by express agreement, have created express trusts, which cannot be proved by parol even though the agreements have been breached; (2) those cases where parol evidence is admissible to prove express trusts by reason of such part performance by the cestui que trust as to *610 remove the case from the operation of the statute of frauds; (3) those cases of resulting trust where the purchase price has been paid by one and the title taken by another, or where an actual loan has been made by the trustee who holds the title as security, this trust being treated as a mortgage; (4) those cases of constructive trust which have arisen from fraud inhering in the transaction and arising contrary to the intention of the one holding the legal title; (5) those cases where it has erroneously been held that a constructive trust has arisen by the breach of an express contract, where there was no fraud in the transaction and the only bad faith was in the breach of the contract. Here there was an express agreement to do a certain and definite thing; no fraud existed in the making of the agreement, and the only fraud which is claimed was in the breach. Under the decisions which we have analyzed, this is not sufficient to raise a constructive trust. No payment having been made on the purchase price by the respondent, this case does not fall within the class of cases which this court has held were resulting trusts, for here title has not been taken by one party and payment made by another party, nor was a loan made by the appellants which the respondent was obligated to repay. Nor has there been any part performance by the respondent which would take the case out of the operation of the statute."
In Croup v. DeMoss,
"It is no answer to say that the failure to carry out such an agreement was a fraud opening the whole transaction to parol proof. To so hold would be to abrogate the statute and make every contract rest in parol proof upon a mere allegation of its breach. 1 Perry, Trusts (6th ed.), § 134. It is clear, therefore, that this agreement, assuming that it existed, created no trust in the mining claims, or in the title acquired by DeMoss through the deed from Scales, made in pursuance *611
of the option, unless, from other circumstances, there was a trust arising or resulting by implication of law. If such a trust ever existed, it arose immediately upon the execution of the papers by which the title passed from Scales to DeMoss. It vested the instant the deed was taken, or not at all. It could not result from a prior oral agreement alone, or from subsequent payment or tender of the purchase price by the appellant. 1 Perry, Trusts (6th ed.), § 135; Bowen v. Hughes,
We held in Richards v. Lockhart,
"The question of when a constructive or resulting trust will arise has been frequently before this court, and has been many times fully discussed. We shall not here enter upon a restatement or discussion of the law with reference to such trusts. It will be assumed that, if from the facts alleged or any reasonable inference *612
that might be drawn therefrom, it appears that, at the time Nelson B. Richards made the promises referred to as a property settlement, they were made in bad faith and without any intention of performing the same, a constructive trust would arise. Such trusts usually arise as a result of fraud, either actual or constructive. Where promises are made in a transaction in bad faith and with no intention to perform the same, they may be fraudulent. In order, however, for such promises to furnish the basis for a constructive trust, the fraud which they create must inhere in the original transaction. Rozell v. Vansyckle,
In Brown v. Kausche,
"In the present case . . . no fraud inhered in the original transaction. If the trust sought to be proved by parol in those cases was an express trust, it necessarily follows that, in the case now before us, the trust sought to be established by oral testimony was likewise an express trust. It is true that, in each of those cases, the trust sought to be established was in favor of the grantor, while here it was in favor of third persons — the children of the testator and his wife. But this fact could make no difference in the application of the principle. If, in the cases referred to, the trust arose by act of the parties and not by operation of law, it necessarily follows that, in the present case, the trust arose in the same way, that is, out of *613 the oral arrangements between Mr. and Mrs. Kausche, and was therefore an express trust."
Chamberlain v. Abrams,
In Cushing v. Heuston,
"`Where a man employs another person by parol, as an agent, to buy an estate for him, and the latter buys it accordingly in his own name, and no part of the purchase-money is paid by the principal, then, if the agent denies the trust, and there is no written agreement or document establishing it, he cannot, by a suit in equity, compel the agent to convey the estate to him; for (as has been said) that would be decidedly in the teeth of the statute of frauds.'" *614
In the case cited, the agent was not to receive any compensation, which is the only feature distinguishing it from the case at bar. Under our real estate brokers' act and our statute of frauds, it is not material, we repeat, whether the agreement is to negotiate the purchase and have the land conveyed direct to the purchaser or whether, in the negotiations, the agent is to acquire the title and in turn convey the property to his principal.
Respondents' oral promise, as agents or brokers for promise of compensation, to purchase, or negotiate the purchase of, lands for appellant, imposed no liability upon the appellant, the promisee; nor was it binding upon the respondents, the promisors. Respondents may, in good faith, have asserted their intention to obtain the property for their principal. Their change of mind does not amount to a fraud. While the failure of performance of a promise may be without excuse or justification in morals, yet it is not cognizable as a fraud in law. The promise or statement of intention of the respondents to induce Angel to sell the property to appellant, standing alone, can not be construed as a fraudulent representation. At most, it is only an assertion of a present mental condition.
A constructive trust, or a trust ex maleficio, can not be established merely upon a broken promise to purchase, or to negotiate purchase of, as agent, lands for another, there being no positive fraud perpetrated other than the breach of the promise.
Some courts hold that the sounder view is that facts like those before us present a case for the application of the general principle that an agent must act with entire good faith and loyalty in dealing with the subject-matter of his agency and should be required to turn over the property, or the proceeds derived from its sale, to his principal. The weight of authority, *615 however (to which view we are committed, Farrell v. Mentzer,supra), is to the effect that the repudiation by the agent of his duty as agent, imposed by an oral agreement to purchase, or to negotiate purchase of, real estate for another, is not such a circumstance, nor does it constitute such fraud, as will give rise to a constructive trust or a trust ex maleficio. The failure of respondents to make their oral promise good constituted a breach of the oral agreement which must be enforced by an action on that agreement, if at all; and, as the statute declares such an oral contract to be void, no action may be maintained. Being a void contract, it is a mere nullity and is void as to every one whose rights would be affected by it if valid. 12 Am. Jur. 507, § 10.
Peterson v. Hicks,
In Pierce v. Wheeler,
While there is language in Merriman v. Thompson,
Herkenrath v. Ragley,
McSorley v. Bullock,
Hansen v. Hansen,
Jones v. Kehoe,
Orr v. Perkey Inv. Co.,
The judgment is affirmed.
BEALS, GERAGHTY, and SIMPSON, JJ., concur.
Dissenting Opinion
My consideration of the majority opinion, in its entirety, convinces me that it is wrong. I think that the case falls squarely within the conceded principle expressed by the majority in the following language: *617
"The authorities uniformly hold that the agent purchasing the land will not be permitted to keep the property he has obtained where circumstances, apart from a mere breach of an oral agreement to convey to another, render it inequitable that he should do so. The same rule, of course, is applicable to the proceeds received by the agent from his sale of the land."
This case does not present "a mere breach of an oral agreement to convey to [or purchase for] another." If the allegations of the complaint be true, as the demurrer admits, then, in my opinion, it is a case of arrant fraud, and the "circumstances . .. render it inequitable" that the agent should "be permitted to keep the property" or retain "the proceeds received by the agent from his sale of the land." According to the complaint, respondent Alberts, under agreement to act as broker on commission to be paid by appellant, straightway proceeded to have himself engaged as broker for the owner of the land upon a commission to be paid by him. Then, false to both parties, he bought the property for himself, under an assumed name, at a price of two thousand dollars less than the amount which he was commissioned to pay for it and then sold it for two thousand dollars more than the initial principal's authorized price, thus inflicting a loss of two thousand dollars upon each of his principals and appropriating a neat profit of four thousand dollars plus a commission to himself. If that be not rank fraud, then I am unable to assign a word for it. A host of the authorities cited in the majority opinion sustain my view.
I dissent. *618