95 P. 527 | Utah | 1908
Lead Opinion
This is an action in equity in which the plaintiff seeks a decree adjudging that the defendants hold certain real estate in trust for her use and benefit. The substance of the allegations of the complaint is that the plaintiff, the owner of the real estate, mortgaged it to the wife of the defendant, Am-
At the trial the plaintiff gave evidence tending to show that on September 24, 1900, she was both the legal and equitable owner of the real estate in question. On that day she gave a mortgage on the real estate to Eliza Arnold, wife of defendant Arnold, to secure the payment of a promissory note in the sum of $4,200, with interest at 8 per cent, per annum. Arnold and his wife did not live together harmoniously, and, for three or foxxr years prior to July, 1904, the defendant Arnold lived at plaintiffs place, as she said “throughout the day, and ate his meals there most of the time.” They were then very friendly, and had more or less business ti’ansactions together. After the mortgage became due, Arnold told plaintiff that he thought he could make a deal with his wife to buy the mortgage by trading his farm where his wife lived for the mortgage and some cattle owned
The testimony of the defendant Arnold in some respects differs from that of plaintiff, but from his own testimony it is quite clear that there was some sort of agreement between himself and the plaintiff concerning the acquiring of the title and reconveying it to- the plaintiff. In this regard he testified: “Q. Now, then, Mr. Arnold, did you ever, at any time, have any conversation with Mrs. Chadwick in regard to selling or reconveying the place to her ? And, if so, what was that conversation? A. She asked me if I would take $2,500, and I said ‘yes.’ ... It was some’ time in January- — -the last days in January or the first days in February after the sale of the property, I think, or after the sheriff’s sale. I think a few days after that, the same month. . . . She asked me if I would take $2,500 down and let them keep the place; if they would pay me $2,500' down and let them keep it. . . . She says, ‘I can pay you $2,500 down.’ She says, ‘Will you take it if I’ll pay you $2,500 down; and we can pay you the rest out of this wood contract ?’ I says, ‘yes.’ ” The material difference between their testimony is that plaintiff claimed Arnold agreed before the mortgage was foreclosed to bid it in and reconvey it after he got the sheriff’s deed for the sum of $2,500, while he claimed the agreement was made about the time or shortly after the foreclosure sale, but within the statutory period of redemp
Though from all tbe evidence in tbe case it clearly appeared tbat some kind of an agreement was entered into between plaintiff and Arnold with respect to Arnold’s acquiring tbe title and reconveying it to plaintiff, nevertheless tbe court wholly failed to find what tbe terms of the agreement were, or any of tbe facts or circumstances surrounding tbe making of it. Instead of making such findings, tbe court found as follows: “Tbe evidence is insufficient'to warrant any finding tbat tbe defendant J. II. Arnold and plaintiff ever entered into any agreement respecting tbe said land, or whereby tbe said Arnold ever obligated himself to convey or restore said premises or-property to plaintiff for any sum or amount whatever, or’that there was any contract at all entered- into such as could be enforced. Tbe court further finds that tbe contract, such -as tbe plaintiff claims exists, would, if existing, come within the inhibition of tbe statute of frauds, and no part performance is either pleaded or proven.” It is, of course, apparent tbat such a finding is not a finding of facts, but- a statement of mere conclusions. If the court was of tbe opinion tbat tbe evidence was insufficient to establish tbe facts and transactions alleged in tbe complaint, tbe court ought to have found them against
This brings us to the real question in the case: Whether
“A second well-settled and even common form of trusts ex maleficio occurs whenever a person acquires the legal title to land or other property by means of an intentionally false and fraudulent verbal promise to hold the same for a certain specified purpose — as, for example, a promise to convey the land to a designated individual, or to reeonvey it to the grantor, and the like — and having thus fraudulently obtained the title, he retains, uses, and claims the property as absolutely his own, so that the whole transaction by means of which the ownership is obtained is in fact a scheme of actual deceit. Equity regards such a person as holding the property charged with a constructive trust, and will compel ñim to fulfill the trust by conveying according to his engagement.”
And in section 1056:
“The foregoing eases 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 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; it endeavors to prevent and punish fraud by taking from the wrongdoer the fruits of his deceit, and it accomplishes this object-by its beneficial and far-reaching doctrine of constructive trusts.”
“The doctrine is often used with great efficacy to prevent the triumph of fraud, and to protect persons under necessities, in cases where, at execution sale, or mortgage foreclosure, or other compulsory public sale, a party buys in the land under a prior fraudulent promise made to the owner that the purchaser will take the title, hold the property for the benefit of such owner, and will reconvey to him on being repaid the amount advanced for the purchase price; and having thus by fraudulent contrivance cut off competition, and prevented the owner from making other arrangements to protect his property, and having obtained the property perhaps for much less than its real value, he refuses to abide by his verbal promise, and retains the land or other' property as absolutely his own. Equity will relieve the defrauded owner by impressing on the property a trust ex maleficio, and by treating, the purchaser as a trustee in invitum.”
Air. Waterman, in bis work on Specific Performance of Contracts, at section 252, says:
“A verbal agreement enteren into by A. and B. with an execution debtor whose land is about to be sold by the sheriff to purchase it with their own funds and hold it for his benefit is equivalent to a loan of money and a taking of the title as security for its repayment, or an agreement by one person to purchase land for the benefit of another, under circumstances which would amount to a fraud upon the latter, if the former were allowed to repudiate his promise, and therefore is not within the statute of frauds.”
And in section 253:
“Where it is verbally agreed between the vendor of land at a judicial sale and the purchaser that the purchaser’s rights shall be only those of a mortgagee, and he fraudulently violates the contract by obtaining an absolute deed to himself and selling the land to a third person who has notice of the agreement, the purchaser and his vendee hold the title in trust for the original owner.”
• With respect to the question when a constructive trust will be created by a court of equity, at section 171, vol. 1, Perry on Trusts (4th Ed.), it is said:
“Thus, where one buys land at an execution sale, or sale under a trust deed, under an agreement with the debtor that the latter may redeem, the purchaser holds in trust; it would be a fraud to allow him .to repudiate the contract.”
“Where one having any interest is induced to confide in the verbal promise of another that he ■will purchase for the benefit of the former at a sheriffs sale, and in pursuance of this allows him to become the holder of the legal title, a subsequent denial by the latter of the confidence is such a fraud as will convert the purchaser into a trustee ex maleficio.”
In support of these texts are the following cases: Sandfoss v. Jones, 35 Cal. 481; Wolford v. Herrington, 74 Pa. 311, 15 Am. Rep. 548; Mulholland v. York, 82 N. C. 510; Tankard v. Tankard, 84 N. C. 286; Avery v. Stewart, 136 N. C. 437, 48 S. E. 775, 68 L. R. A. 776; Rose v. Bates, 12 Mo. 30; Soggins v. Heard, 31 Miss. 426; Dodd v. Wakeman, 26 N. J. Eq. 484; Cutler v. Babcock, 81 Wis. 195, 51 N. W. 420, 29 Am. St. Rep. 882; Larmon v. Knight, 140 Ill. 232, 29 N. E. 1116, 33 Am. St. Rep. 229; Ryan v. Dox, 34 N. Y. 307, 9 Am. Dec. 696; Laing v. McKee, 13 Mich. 124, 87 Am. Dec. 738.
Viewing the case from the standpoint of plaintiff’s evidence, it is made to appear that the plaintiff, when the verbal agreement was entered into, was both the legal and equitable owner of the land in controversy, subject only to 'the mortgage held by Arnold’s wife; that Arnold verbally agreed that he would purchase the mortgage, bid in the land on foreclosure sale, obtain a sheriff’s deed therefor, and that he would thereafter convey the title to plaintiff for the sum of $2,500; that she, relying upon his' promise and representations, failed to make an appearance in the foreclosure suit or to redeem the property from foreclosure sale; that the land, worth more than $15,000, was .bid in by Arnold for $5,100, a sum less than the mortgage indebtedness; that before Arnold obtained the sheriff’s deed, and within the period in which the property could have been redeemed, plaintiff paid him something like $685 in cash, which was received by him and applied on the agreement; and that the defendant Arnold, after having acquired the sheriff’s deed, retained the title, claimed that property as his own, 'and refused to convey it to plaintiff.
“If the legal title is obtained by reason of a promise to hold it for another, and the latter, confiding in the purchaser and relying on his promise, is prevented from taking such action in his own behalf as would have secured the benefit of the property to himself, and the promise is made at or before the legal title passes to the nominal purchaser, it would be against equity and good conscience for the latter, under the circumstances to refuse to perform his solemn agreement and to commit so palpable a breach of faith. It would be strange indeed if such conduct is beyond the reach of a court of equity, and if the party who has been grossly deceived and injured by it is without a remedy. The fact that the defendant in this case paid the purchase price out of his own money should not alter the case to the prejudice of his victim.”
And as Emert took tho property with notice, be is in no better position to assert title and ownership of the property than is Arnold. We therefore think that the finding, or conclusion, of the trial court that the agreement as claimed by plaintiff came within the statute of frauds was erroneous. The foregoing authorities clearly * show that the statute of frauds does not apply to such a case.
It is urged, however, that the plaintiff must recover, if at all, the specific performance of the contract as alleged and testified to by her. That is, it is claimed that the defendants must be required to reconvey to her on the payment of the balance of the $2,500, or not at all, and, since the plaintiff did not dispute owing the full amount -of the mortgage indebtedness and had no defense to the foreclosure action, it is said that to compel the defendants to reconvey the property to her for $2,500, when she owed more than twice that amount is inequitable and unjust, and therefore, as the contract which she is seeking to enforce is inequitable, no relief can be granted her. Such a conclusion does not necessarily follow. The relief granted by courts of equity, where a trust ex maleficio is raised, is not founded on the specific performance of the oral contract, but upon the principle that equity turns the fraudulent procurer of a legal title into a trustee to get at
“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 wrongdoer the fruits of his deceit, and it accomplishes this object by its beneficial and far-reaching doctrine of constructive trusts.”
In Bispham’s Principles of Equity (7th Ed.), section 218, in speaking of the enforcement of trusts ex maleficio„the rule is stated that /
“The ground of these decisions is-that the statute of frauds is not to be used as a shield for fraud; and that where a party has, by his promise to buy or hold or dispose of real estate for the benefit of another, induced action or forbearance by reliance upon such promise, it would be a fraud that the promise should not be enforced; and that the method of enforcement will be through the machinery of a trust.”
And in the case of Cutler v. Babcock, supra, the court said:
“Nor is it necessary to rest the right of the defendant Babcock solely on the power of a court of equity to compel the plaintiff to specifically perform his part of the agreement by conveying the lots in question to the defendant. The relief sought may well be rested on the jurisdiction of the court on the ground of fraud by holding the plaintiff liable to convey as a trustee esc male/ieio.”
These trusts differ from other trusts in that they are not within the intention or contemplation of the parties at the time the contract is made. They are thrust upon a party contrary to his intention and against his consent. Courts of equity, by raising a trust by construction in cases of fraud, can do equal and complete justice between the parties. When the trust is raised, a court of equity can order the trustee to hold the legal title for the original owner upon just and
We are of the opinion, on the whole of the evidence, that the court erred in holding that the statute of frauds applied to the case, and in finding that Emert was an innocent purchaser. The findings and conclusions of the trial court in that respect are set aside, and the court directed to make findings and conclusions to the effect that the defendants hold the title of the premises in trust for the plaintiff. The case is further remanded to the trial court with directions that an accounting be had between plaintiff and respondents, and that the court especially determine the amount of the mortgage indebtedness, including interest and costs, the payments made by plaintiff to Arnold, and the amount of indebtedness, if any, owing by Arnold to her, and which they had agreed should be credited to her account, the value of the rents and profits since plaintiff’s dispossession, and, if necessary, or if either party desires it, to take further evidence on these questions and on the accounting. The court is then directed to deduct from the amount of the mortgage indebtedness, including interest and costs, whatever amount is found to have been paid Arnold by plaintiff, the amount of his indebtedness to
The judgment-of the court below is therefore reversed, and the case remanded. Appellant is given costs of this appeal.
Concurrence Opinion
(concurring.)
While I concur in the law as the same is stated, and the result reached, by my Brethren, I, nevertheless, feel constrained to- add a few words, in view of some of the statements contained in the opinion of Mr. Justice Straup with regard to the testimony in the record. I do this, not because the testimony in the opinion is stated incorrectly, unfairly, or improperly, but because I fear that, in referring to the case hereafter as a precedent, it may be assumed that the conclusions reached iu this case were based on certain elements which, in my judgment, are not in the case.
In summing up plaintiff’s testimony and the reasons why a trust ex maleficio should be declared. Mr. Justice Straup, among other reasons, gives the following: “That the land, worth more than $15,000, was bid in by Arnold for $5,100, a sum less than the mortgage indebtedness.” From this — although, no doubt, not so intended — no other inference could be deduced than the one that Mr. Arnold obtained the title to the land for the purpose of reaping a large profit. It is true that Mrs. Chadwick placed such a value upon the land, but the testimony of a number of qualified and disinterested wit
It appears that the land was placed in the hands of at least one real estate agent -for sale; that he inspected it with a view of setting a price upon it; and that another man, who was a large owner of lands in the vicinity, also inspected it,, and was well qualified to express an^opinion as to its value, testified that the land was worth not to exceed $5,000, and that he would not pay that sum for it, while the real estate agent testified that it was worth about that amount. In view of these facts, which, to my mind, are conclusive with respect to the value, Mr. Arnold cannot be said to have been actuated in what he did by the expectation of reaping a large profit out of the land; and this feature, therefore, in my judgment, ought not be considered as an element in the case. But, even after eliminating this feature — as Mr. Justice Straup well says — there was at least some kind of an agreement between Mrs. Chadwick and Mr. Arnold with respect to his acquiring the title to the land at the foreclosure sale and its disposition thereafter. What this agreement was the parties to it do not agree, and the court has made no findings respecting its terms and conditions. Taking Mrs. Chadwick’s version of it and that of the only other witness who testified in her behalf upon that subject, I was strongly inclined to the view that the agreement amounted to no more than that Mrs. Chadwick should have the right to repurchase the land from Mr. Anrold at the agreed price of $2,500 to be paid for by her with interest from time to time as she was able to do so.
While I have no doubt that Mrs. Chadwick was not misled nor injured by the i foreclosure proceedings, nor by the sale thereunder, I am not SO’ clear that she was not misled with regard to her right to redeem the land from foreclosure sale. The majority of this court are firmly of the opinion that in view of all the facts and circumstances a trust ex maleficio arose by reason of which Mr. Arnold should be adjudged as holding the land in .trust for Mrs. Chadwick. In this regard I feel constrained to yield to their judgment. The judgment of two out of three, where all have equal opportunity to examine and judge of the facts, is, in my judgment, stronger than the judgment of one. Under such circumstances I feel constrained to yield to their judgment. I do so with less hesitancy in this case for the reason that if my judgment, as first conceived, should be wrong, Mrs. Chadwick would be left without redress, while, on the other hand the court may, in its decree, protect the interests of all and do complete justice between them in accordance with the equities in favor of each.