54 S.E.2d 385 | Ga. | 1949
Lead Opinion
1. The allegations of the petition were sufficient to set forth a cause of action on the theory of an implied trust; and the trial judge did not err in overruling the general demurrer.
2. Error was committed in overruling the demurrer attacking that portion of the petition seeking to establish a constructive trust as to a 100-acre tract of land; and all further proceedings in the trial court were nugatory.
On August 17, 1937, pursuant to the arrangement, the principal defendant conveyed the 181 acres to the Federal Land Bank to secure a loan of $2000, and by a second deed conveyed the same property to the Land Bank Commissioner to secure an additional loan of $1000. The principal defendant received the $3000 and retired the existing encumbrances in an amount unknown to the petitioner but insufficient to consume the entire proceeds of the loans. While the loans were closed in August, 1937, the principal defendant repeatedly stated to his father that the loans had not been closed, and for nearly two years the father was kept in ignorance thereof. When the father learned that the loans had been closed he immediately requested his son to reconvey the property, but the son continued to delay the reconveyance upon one pretext or another, contending among other things that he could not legally reconvey the property because of the outstanding loans, that the creditors would not be satisfied with such arrangement, and that he himself was entitled to have the loans paid off before he reconveyed the property to his father. While thus delaying the fulfillment of his obligation as a trustee, the principal defendant, having previously voluntarily conveyed other real estate, which is not here involved, to his wife (the other defendant), did on April 12, *686 1940, voluntarily convey the 181 acres to his wife, subject to the outstanding security deeds. Shortly thereafter the father discovered that the loans had been closed, protested the conveyance to the defendant wife, and insisted that the principal defendant carry out his agreement by effecting a reconveyance to him, but this the principal defendant refused to do. A few months later the father died. The failure of the principal defendant to reconvey the land to his father, and, on the contrary, conveying the land to his wife, was a fraud against his father; and the defendant wife, having taken the deed from her husband with knowledge of the equities of the father, took said deed subject to the equities of his estate.
While no deed was made to the principal defendant to the remaining 100 acres, since it was not contemplated that it would be necessary to include it in the security for the loan, nevertheless, as before stated, the entire home place was turned over to the principal defendant to be operated for his father. On March 31, 1936, the father conveyed the 100 acres to J. P. Lawson to secure $311.81, but in fact the debt created was for the purpose of obtaining funds with which to pay off personal indebtednesses owing by the principal defendant. Subsequently Lawson transferred the note and security deed to Leo T. Barber. On October 2, 1936, the father executed a second security deed to the petitioner embracing the 100 acres. On November 3, 1938, the petitioner transferred his note and security deed to Barber for a consideration of $400. On November 4, 1941, Barber under the power of sale contained in the petitioner's security deed subjected the property to sale, and the same was bought in by L. W. Green for a purported consideration of $1300, when as a matter of fact the indebtedness due Barber was $1215 including the cost of sale. The principal defendant induced Barber to foreclose the deed with the prearrangement and understanding with Green that he purchase the property and convey the same to the wife of the principal defendant. In pursuance thereof Green did convey the property bought in by him to the defendant wife on November 7, 1941, for a purported consideration of $1450. The principal defendant in procuring the sale and the execution of the deeds pursuant thereto violated his duty as a continuing agent and trustee and did so for the purpose of defrauding the estate of his father. *687
The several conveyances place the record title to all of the property formerly owned by the intestate in the wife of the principal defendant, and she took all the deeds and now holds the property with full knowledge of the facts before set forth. In the circumstances, the defendant wife holds all of the property, constituting the entire property of the intestate, impressed with a trust in favor of said estate and the petitioner as administrator thereof.
During each of the years that the principal defendant operated his father's farms, both prior and subsequently to the death of his father, he sold all of the farm produce and made disposition of the funds derived therefrom. In addition thereto he sold all of the livestock and farm equipment together with all the timber suitable for cross-ties and wood purposes. He has never accounted for the balance of the proceeds of the loan from the Federal Land Bank, or for the proceeds from the sale of crops, livestock, farm equipment and timber, and he should be required so to do. Each of the defendants is insolvent.
The prayers of the petition, besides for process and a rule nisi, were: (1) that a receiver be appointed; (2) that the defendants be required to account for the moneys and properties coming into their hands belonging to the estate; (3) that it be decreed that the defendant wife holds the property which was turned over by the father to the son, as trustee for and impressed with a trust in behalf of the estate of the father and the petitioner as administrator thereof, and that title thereto be decreed to be vested in the petitioner as administrator of the estate, subject to such valid encumbrances as may be outstanding against the same and subject to administration by the court; (4) that the petitioner have such further relief as to the court may seem meet and proper.
Demurrers were interposed to the original petition and renewed to the petition as amended. The demurrers were overruled, and the defendants filed exceptions pendente lite.
When the case came on for trial four questions were submitted to the jury. The questions, with the findings of fact, were to the following effect: 1. Was the deed from the father to the son, conveying the 181-acre tract embraced in the deed to the Federal Land Bank, executed and delivered with the understanding *688 and agreement between the father and son that the grantee son was to obtain a loan and reconvey the property back to his father? Answer: Yes. 2. Was the sale of the 100-acre tract under the security deed executed by the father to the petitioner, dated October 2, 1936, a fair or fraudulent exercise of the power of sale contained therein? Answer: Fraudulent. 3. If you answer question number one "yes," then you determine under the evidence, if any, the fair or reasonable value of the property the defendant should account to the petitioner for? Answer: $2000. 4. If your answer to question number two is "fraudulent;" then you determine under the evidence, if any, the fair and reasonable value of the property the defendant should account to the petitioner for? Answer: $500. A decree was entered in accordance with the special verdict.
The defendants filed a motion for new trial, which was amended by the addition of special grounds complaining of stated excerpts from the charge and because the court refused to have the jury answer fourteen questions submitted by the defendants. The court overruled the motion for new trial as amended, and the case comes to this court for review upon the defendants' exceptions to that judgment. In the bill of exceptions they also assign error on the exceptions pendente lite.
1. The allegations of the petition as amended, to the effect that the principal defendant, being fully advised in the premises, offered to assist his father in procuring a loan by taking title to the 181-acre tract of land, making application for the loan, and, when accomplished, to reconvey the property to his father, which agreement was in parol, that the son failed to reconvey the land to his father, and on the contrary conveyed it to his wife, and the acts and conduct of the son were a fraud upon his father, were sufficient to allege a cause of action based on an implied trust. Day v. Parham,
The cited cases deal thoroughly with the principles of law giving rise to implied trusts under circumstances similar to those *689 allegedly existing in the present case; and with a citation of these authorities we might with propriety rest our decision upon this phase of the case. However, in view of the forceful argument advanced by counsel for the plaintiff in error, some further discussion of the law of trusts appears to be in order.
It is urged by the plaintiff in error: (1) that the petition attempts to assert an express trust by parol and engraft it on a deed; (2) that no constructive trust is established by the pleadings, in that the allegations of the petition are insufficient to show inceptive fraud in the transaction, that is, that the grantor was induced to execute the deed by false or fraudulent promises, intentionally made; and (3) that the petition attempts to vary the consideration set forth in the deed by substituting an entirely different consideration by parol.
"Trusts are either express or implied. Express trusts are those created and manifested by agreement of the parties. Implied trusts are such as are inferred by law from the nature of the transaction or the conduct of the parties." Code, § 108-104. "While express trusts must be created by writing, and cannot be proved by parol, implied trusts may be established by parol evidence, although the effect of such evidence is to alter or vary a written instrument, and although the defendant sets up and insists upon the statute of frauds." Jenkins v. Lane,
"Trusts are implied: 1. Whenever the legal title is in one person, but the beneficial interest, either from the payment of the purchase money or other circumstances, is either wholly or partially in another. 2. Where, from any fraud, one person obtains the title to property which rightly belongs to another. 3. Where from the nature of the transaction it is manifest that it was the intention of the parties that the person taking the legal title should have no beneficial interest." Code, § 108-106. Thus it will be seen that implied trusts arise under varying circumstances. Such trusts are divided into two categories; resulting trusts and constructive trusts, and sometimes it is exceedingly difficult to differentiate between the two; but ordinarily distinctions are unnecessary since both are implied trusts and are governed by the same rules. Generally trusts arising under the first *690 and third classifications in the cited Code section are resulting trusts, while those arising under the second classification are constructive trusts. Not infrequently in the case of resulting trusts no fraud exists, such trusts resting primarily on an implication of law from the nature of the transaction; but generally, if not necessarily, the element of fraud is present in constructive trusts.
Sometimes a trust partakes of the nature of both a resulting and a constructive trust. For instance (aside from those cases calling for special considerations, as where there arises an inference of a gift), if A purchases land, paying the purchase-price therefor, and for convenience, or by agreement with B, the legal title is placed in B's name, a resulting trust arises in favor of A; and if B, who had every intention of conveying the property to A, should die, his heirs or representative would hold the property impressed with a resulting trust, although no fraud had entered into the transaction. If, under the same circumstances, B took title, having induced the transaction, intending at the time to break the agreement and appropriate the property to his own use, or after acquiring the title formed such an evil and dishonest intention, which was followed by a retention or disposition of the trust res, this would constitute fraud, and he would hold the property or the proceeds as a trustee ex maleficio. Thus, what in the beginning might have been a resulting trust may by subsequent events partake more of the nature of a constructive trust.
Bringing the illustration squarely within the facts of the present case, if A, a father, deed land to B, a son, not upon a good and valuable consideration, though such consideration might be recited in the deed, but for the purpose of the son's obtaining a loan on the land and reconveying to the father, a resulting trust would arise in favor of the father. SimpsonGrocery Co. v. Knight,
Accordingly, it would appear that it makes little difference whether, in a case such as the present one, the implied trust was in the nature of a resulting or a constructive trust. However, the present petition seems to be predicated on the theory of a constructive trust, and we shall so consider the trust sought to be established.
The principles controlling this case have been so well considered and presented in Pittman v. Pittman, supra, which answers the contentions of counsel for the plaintiff in error, that we feel justified in quoting liberally from that opinion: "While fraudulent undertakings or promises, whatever their terms, `do not, unless reduced to writing, raise express trusts,' yet `the law, acting upon them according to their nature, makes them a basis upon which to build up in favor of the defrauded party an implied or constructive trust. . .While an express trust can only be shown by a writing, an implied trust may rest upon an express parol agreement, fraudulently made, by which a person acquires title to property of another; and in such case the express promise may be proved by parol to raise, not an express, but an implied trust.' Likewise, in Guffin v. Kelley,
"In construing the codified rules quoted, defining express and implied trusts, it has been held in general terms that `a parol trust cannot be engrafted on an absolute deed.' Durrett v.McWhortaer,
Still quoting from the Pittman case, but paraphrasing to bring the ruling squarely within the facts of the instant case — in this case, although a valuable consideration is mentioned, it is contended that none exists, unless it be the assumption by the son of his obligation to obtain a loan on the land and reconvey to his father: "In other words, if the [son] did not take the title with this trust or condition, he did not take any title at all; and such being the case, it would be a fraud for him to hold it adversely or to give it to his wife. It follows that since the deed was wholly without any good or valuable consideration, other than the trust assumed, and since the only title at all that [he] could have had was a title in trust [the petitioner's claim] is not an attempt to engraft on an otherwise good and valid deed an extraneous parol trust, but is an effort either to void the deed, or else to sustain it in the only way that it might possibly be given effect, if allowed to have any effect at all.
"This is not a new proposition before this court. Substantially and in legal effect the identical question here involved was decided by a unanimous bench in McKinney v.Burns,
As to the question of the necessity of inceptive fraud, the principles governing constructive trusts should not be confused with *694
such cases as Brinson v. Hester,
The instant case differs from those cases where the parol trust sought to be imposed would have vested duties and obligations separate and distinct from those which would naturally arise from the "nature of the transaction or the conduct of the parties." Such a case is Jones v. Jones,
(a) Where a grantee holds property impressed with a constructive trust in favor of the grantor, and conveys such property to another, who has notice and knowledge of the circumstances creating the constructive trust, the latter takes the property subject to the equities of the original grantor, and is a proper party in a suit seeking to impress the property with a constructive trust.
Applying the foregoing rulings, the petition set forth a cause of action on the theory of an implied trust; and under the well established principle that a petition will not be dismissed on general demurrer if the facts entitle the plaintiff to any of the substantial relief sought, the trial judge did not err in overruling the general demurrers interposed by the two defendants.
2. The allegations of the petition as amended, to the effect that the father constituted the principal defendant as his continuing agent and trustee to operate and manage the father's business affairs for him during his declining years, and that the principal defendant, subsequently to the death of his father, procured a third person to exercise a power of sale as to the 100 acre tract of land, and thereby violated his duty as a continuing *696
agent and trustee, come within the general rule that the relationship of principal and agent is terminated by the death of the principal. Code, § 4-214 (1); Wilkins v. McGehee,
Counsel for the petitioner insist that the agency was coupled with an interest because the principal defendant was an heir at law and entitled to a child's part in his father's estate. There is no merit in this insistence, for the reason that the exception to the general rule exists where the power of the agent is coupled with an interest in the property; and since the son had no interest in the 100-acre tract at the time the alleged contract was entered into, the father could have revoked the contract during his lifetime. After the death of the father terminated the agency, the principal defendant could bid at the foreclosure sale the same as other children. The petition did not allege that the other children did not have notice of the foreclosure sale, and the allegations that the principal defendant procured a third person to exercise a power of sale, and thereby violated his duty as a continuing agent, were subject to demurrer. Accordingly, the trial judge erred in overruling grounds 3 and 4 of the demurrer, attacking paragraphs 22 to 28 inclusive of the petition "upon the ground that the allegations contained in said paragraphs, both separately and collectively, are insufficient in law to create a trust in favor of the plaintiff on the 100-acre tract described in the petition."
(a) Other grounds of demurrer, such as attacks on certain paragraphs for a failure to attach copies of deeds which did not form the basis of the action, and an attack on the petition for a nonjoinder of parties, have been examined and found to be without merit; and no error was committed in overruling these grounds of demurrer.
(b) The questions raised in the motion for a new trial are not dealt with, inasmuch as all the proceedings in the trial court subsequent to the overruling of the defendants' demurrers, as indicated in the second division of this opinion, are to be treated as nugatory. Southern Railway Co. v. Pope,
Judgment affirmed in part and reversed in part. All theJustices concur, except Atkinson, P. J., who dissents. *697
Dissenting Opinion
I dissent from the first headnote and the corresponding division of the opinion, as I do not think that the facts alleged are sufficient to establish an implied trust. Other than the parol agreement there appears no allegation of any fact or circumstance sufficient to be the equivalent of an implied contract which would authorize the establishment of an implied trust. There is no allegation of inceptive fraud, and the allegations show that possession was given to the grantee. The majority opinion cites much law relating generally to implied trusts, but in each case cited there is some fact or circumstance over and beyond the parol agreement which authorizes the creation of an implied trust. In its last analysis the majority opinion is predicated on Pittman v. Pittman,
The facts alleged amount to no more than an attempt to assert an express trust by parol and engraft it on a deed, which cannot be done. See Jones v. Jones,