KROLL v. COACH
Supreme Court of Oregon
October 31, 1904
Rehearing denied May 15, 1905
45 Or. 459 | 78 Pac. 397 | 80 Pac. 900
JAMES W. HAMILTON, Judge
From Douglas County. Argued 12 October, decided 31 October, 1904.
Argued 12 October, decided 31 October, 1904; rehearing denied 15 May, 1905.
KROLL v. COACH.
[78 Pac. 397, 80 Pac. 900]
EFFECT OF EVIDENCE OF JOINT PURCHASE.
1. Evidence in a suit to have defendant declared a trustee for plaintiffs to the extent of a certain interest in land held sufficient to sustain a finding that plaintiffs were joint purchasers with defendant, under an option obtained by him, of said land, and not purchasers directly from him of an interest therein.
EFFECT OF FRAUD BY A JOINT PURCHASER ON THE OTHERS.
2. A person having exclusive information relative to a proposed purchase, offering others an opportunity to take an interest and share the anticipated advantages on equal terms with him, is bound to act with entire truthfulness and good faith toward them in the matter, and if he derives a personal gain by deceiving them he is accountable as a trustee ex maleficio.
EQUITY JURISDICTION - PROCEEDS OF TRUST FUNDS.
3. Where the holder of an оption of purchase induces others to join with him on a representation that for specified proportions of the price they shall have corresponding interests in the property, but fraudulently misstates the price so that the other purchasers are deceived and do not really get the proportions that they paid for, the difference going to the optioner, such purchasers may either sue for damages at law or have an equitable decree for the conveyance of the interest that they really bought.
TRUST EX MALEFICIO - STATUTE OF FRAUDS.
4. The enforcement of a trust arising ex maleficio is not dependent upon a memorandum, nor is it at all affected by the statute of frauds.
WRITINGS NOT CONCLUSIVE BETWEEN PARTIES IN CASES OF FRAUD.
5. In a suit to compel restitution of property fraudulently withheld by an agent or trustee, a deed between the parties is not conclusive, it being part of the scheme by which the principal was deceived.
Suit by William Kroll and another against William Coach in which there was a decree for plaintiffs. Defendant appeals. AFFIRMED.
For appellant there was an oral argument by Mr. Edward B. Watson and Mr. Andrew M. Crawford, with a brief over the name of Watson, Beekman & Watson, to this effect.
I. Courts of equity in this country have no concurrent jurisdiction in cases of fraud where the remedy at law is adequate and complete: Story, Eq. Jur. §§ 49, 61, 62; 2 Pomeroy, Jur. §§ 912-914; Dows v. Chicago, 78 U.S. (11 Wall.) 108-110; Grand Chute v. Winegor, 82 U.S. (15 Wall.) 373-377; Teft v. Stewart, 31 Mich. 367-378.
And such is the rule in this State both under the statute and decisions of the supreme court:
II. A parol agreement between parties that one shall act as the agent of the other, or of both jointly, in the purchase of lands is within the statute of frauds:
III. All previous and contemporaneous negotiations and agreements merge in the deed of conveyance made in consummation thereof, and which thereby becomes the executed contract of sale and purchase, and conclusive evidence that the transaction was a sale and purchase,
IV. There is no resulting or constructive trust in any case, unless the amount pаid is intended to be the purchase part of the whole, or of an aliquot part of the property: 1 Perry, Trusts (3 ed.), § 132; McGowan v. McGowan, 14 Gray, 119-122 (74 Am. Dec. 668); White v. Carpenter, 2 Paige Ch. 217, 240; Skehill v. Abbott, 184 Mass. 145 (68 N. E. 37); Kaphan v. Toney, 58 S. W. 909, 913.
V. False representations as to the price paid for property, inducing the purchase thereof by another, afford ground for rescission only, and no other relief: Cook, Stockholders, § 145; Valton v. National Fund Life Assur. Co. 20 N. Y. 32, 37; Coles v. Kennedy, 81 Iowa, 360 (46 N. W. 1088, 25 Am. St. Rep. 503); McLaren v. Cochran, 44 Minn. 225 (46 N. W. 408, 20 Am. St. Rep. 566, 9 L. R. A. 263).
For respondents there was an oral argument by Mr. Wirt Minor, with a brief over the name of Teal & Minor, to this effect.
1. At the time of the agreement between the parties, the lands had not been purchased by the defendant, and in making the purchase the defendant acted as agent and trustee for the respondents as well as upon his own behalf: Story, Agency, § 3; King v. Wise, 43 Cal. 628;
2. The relаtion of principal and agent is a fiduciary one and the rules of law governing other fiduciary relations govern also the relation of principal and agent: Perry, Trusts, §§ 173, 206; 1 Beach, Trusts, §§ 106, 192, 193; Eldridge v. Jenkins, 1 Story, 181.
3. The defendant acted as the agent of the plaintiffs as well as for himself in consummating the purchase of the lands. He, therefore, could not himself become the seller or make a profit out of his principals, or out of the transaction which he conducted for them even if such profit be collateral: Willink v. Vanderveer, 1 Barb. 599; Davoue v. Fanning, 2 Johns. Ch. 252; Moon v. Moon, 5 N. Y. 262; Gardner v. Ogden, 22 N. Y. 347; Conkey v. Bond, 36 N. Y. 427; Duryea v. Vosburg, 138 N. Y. 621; Flagg v. Mann, 2 Sumner, 521; Michaud v. Girod, 45 U. S. (4 How.) 503; King v. Wise, 43 Cal. 62; Cook v. Woolen Mill Co. 43 Wis. 433; Northern Pac. R. Co. v. Kindred, 14 Fed. 77; 1 Beach, Trusts, §§ 92, 192; Perry, Trusts, § 206; Story, Agency, §§ 210, 211; Kerr, Fraud, 173, 174.
4. In all contracts of an agent with his principal, if the agent has information and does not disclose the same to his principal, this is a fraudulent concealment, and the contrаct may be avoided, or the agent held to be a constructive trustee: Perry, Trusts, §§ 178, 206, 209; Farman v. Brooks, 9 Pick. 212; Hendricks v. Nunn, 46 Tex. 141; King v. Wise, 43 Cal. 628; Newell v. Holbridge, 41 Minn. 378; Willink v. Vanderveer, 1 Barb. 599; Wright v. Smith, 23 N. J. Eq. 106.
MR. JUSTICE WOLVERTON delivered the opinion.
1. This is virtually a suit to have the defendant declared a trustee for plaintiffs to the extent of three sixteenths undivided interest in 9,716.67 acres of timbered land in Coos County, Oregon, to the undivided fourth of which tract defendant holds the legal title. Some time prior to June 17, 1902, the defendant procured an option to purchase thе land from the original owners, who, in pursuance thereof, deposited their deeds of grant to him in escrow with the First National Bank of Portland, Oregon, the same to be delivered to him upon condition of his paying to the bank for the owners the agreed price at which defendant held the option. Being so circumstanced, he represented to plaintiffs - more particularly to Kroll, the principal actor in behalf of plaintiffs-that he had secured an option on about 10,000 acres of land at ten dollars per acre, which was the price he was to pay the owners, and that it could not be purchased for less; that the deal had been held up for several months on account of anothеr option having been secured in the mean time upon a part of the tract; that he had previously interested some people in Houghton, Michigan, in the matter, and that they decided it would be well to have the deeds all made to one party and sent to the Houghton bank for
This exposition of the understanding or agreement is amply supported by the testimony of Kroll, which is substantially corroborated by that of Sparrow, Rice, Messner, and Arthur H., son of William Kroll. Kroll testifies, in substance, that Coach told him he had talked with Sparrow about the land, who said to let witness know about it when he got in shape to purchase, and hence he had wired
The witness continues that, having concluded to go to Oregon, Coach said he would buy a draft for $25,000 to
The defendant strenuously controverts this testimony and the foregoing rendition of the agrеement in all essential particulars, and claims that he sold three fourths interest in this land directly to Kroll and Sparrow at ten dollars per acre, the sale having no reference to the price he was paying the holders. In this view he is corroborated but slightly, no one but himself pretending to testify to the terms of such an arrangement between him and Kroll as finally concluded. He admits, however, that the real price he agreed to pay the original holders for the land was concealed from plaintiffs, nor were they able to ascertain the truth about it until Kroll went in person to some of the vendors, receiving either misleading or evasive answers to all inquiries he made of defendant or those acting for him. Thе deed executed by defendant to plaintiffs was in form a warranty, Kroll refusing a quitclaim; but plaintiffs’ money was used to pay for part of the interest that defendant obtained, he paying the balance. This is as far as it is necessary to take note of the testimony adduced, its trend being fairly indicated by the resume given, and its cumulative effect constrains us to the view that plaintiffs’ evidence is by a strong preponderance entitled to the greater weight. The first and most
The defendant had not the legal title to the land, or any part of it, before the consideration was paid to the original holders. The deeds running to him were deposited in escrow awaiting the payment of the consideration before their delivery, and it is well understood that such deeds did not become effective to convey the title until the condition upon which they were deposited was fulfilled. Defendant simply had what he aptly characterized as an option to purchase, and, having secured it, he dealt with plaintiffs as though they were purchasing with him under the option, the three to become joint purchasers of the property for the consideration that he representеd he was paying to the holders; in other words, using his expressive language, plaintiffs were to be “let in on the ground floor” - that is, were to come into the purchase upon the same terms and conditions that he had made with the holders - with the further proviso, only, that they were to reimburse him according to their proportion for his expenses incurred in traveling and examining the property and the fee that he agreed to pay to Mr. Crawford for examining the title. It is palpably inconsistent with this understanding that plaintiffs should pay more for the lands than the defendant was to pay the original holders therefor under his option, for, if they did, they would not secure the same advantages to which he was entitled. Their interests, therefore, wоuld cost them more than the defendant‘s interest would cost him. The defendant, without doubt, not only concealed from plaintiffs the real purchase price, but purposely misrepresented to them that he was paying to the holders ten dollars per acre, this
The decree of the trial court directed that plaintiffs pay to defendant $500 to reimburse him for his expenses and the outlay incident to the purchase of the property, and, upon such payment being made, that defendant convey to plaintiff Sparrow one eighth and to Kroll one sixteenth interest in the entire tract; otherwise that the decree stand as and for such conveyance. It will be noted that the amount actually paid as indicated by the testimony does not equal the purchase price of a fifteen-sixteenths interest of the tract at eight dollars per acre, but it was so intеnded, and for all practical purposes it stands in that proportion to the whole; the difference being seven dollars and some odd cents, which must be attributed to an error in calculation. It is to reverse this decree that the appeal is prosecuted.
2. In the legal aspect of the case, the defendant assumed a relation of trust and confidence toward plaintiffs. His position was such that he had exclusive knowledge of subsisting conditions affecting the venture that he proposed, and the plaintiffs were dependent entirely upon his representations, and relied upon them. In effect, he acted as their agent, as well as for himself, in negotiating and consummating the purchase frоm the original holders of the land to which they subsequently acquired the title in their own right. Such a relation enjoined upon the de-
Agency is a fiduciary relation, which is one of trust and confidence, and “the same observations apply,” says Mr. Perry in his work on Trusts (vol. 1, 4 ed., § 206), “as to other relations of trust and confidence.” He further observes: “No person whose duty to another is inconsistent
Nor can he be permitted to enjoy the benefits thus acquired which belong to his principals, and a court of equity will adjust them accordingly. Mr. Pomeroy says: “In general, wherever the legal title to proрerty, real or personal, has been obtained through actual fraud, misrepresentations, concealments, * * or through any other similar means, or under any other similar circumstances which render it unconscientious for the holder of the legal title to retain and enjoy the beneficial interest, equity impresses a constructive trust on the property thus acquired in favor of the one who is truly and equitably entitled to the same, although he may never, perhaps, have had any legal interest therein. * * The forms and varieties of these trusts, which are termed ex maleficio or ex delicto, are practically without limit. The principle is applied wherever it is necessary for the obtaining of completе justice,
3. At the risk of a possible restatement of the case in part, we may say the transaction amounts to this: Upon the defendant‘s representations, plaintiffs purchased, investing in these lands to the extent of a three-fourths interest; but in reality, taking into account the actual value paid for them, they invested to thе extent of a fifteen-sixteenths of the whole. In other words, instead of purchasing with plaintiffs’ money a three-fourths interest, defendant purchased a fifteen-sixteenths interest, and took the title to a three-sixteenths in his own name. Thus the defendant has secured a benefit accruing to himself with the funds of plaintiffs, and being so secured through his own mala fides he ought not to be permitted to retain it. To put the case in a clearer light: Suppose defendant had represented to plaintiffs that for the sum obtained he could purchase for them a distinct tract of land, say, 750 acres, but that in reality he purchased with the money another tract, consisting of 187 1/2 acres, taking the title to this latter in his own name, would it be contended that defendant could retain the fruits of his own misrepresentation, although plaintiffs had obtained what they were led to believe and actually thought they were getting? That the parties were dealing with undivided and not segregated interests can make no practical difference as to the legal effect of the transaction. In either event defendant has procured something with plaintiff‘s money that he is not entitled to have or retain, and it is distorted logic to say that the plaintiffs are entitled to damages, but not to the land which their money has purchased. If the land were worth much less than the purchase price, defendant might be contending that the land, and not damages, was the only relief to which they were entitled. But, lеgally, they are entitled to either remedy, according to their own choos-
4. Nor can the objection avail the defendant that the amount paid by plaintiffs in its purchasing value is not resolvable into an aliquot part of the tract of land purchased, as, according to the intention of the parties in making the estimate of payments, it is, on the contrary, exactly so resolvable. The simple demonstration is that three fourths of the tract at ten dollars per acre equals fifteen sixteenths of the tract at eight dollars per acre, and this is what the money advanced to defendant paid for. In further support of these principles, see Barger v. Barger, 30 Or. 268 (47 Pac. 702). Furthermore, thе case is not within the statute of frauds, arising, as it does, ex maleficio, requiring some note or memorandum of the transaction to be in writing: Parrish v. Parrish, 33 Or. 486 (54 Pac. 352).
Another question urged is that plaintiffs are estopped to insist upon their equities on the ground that they paid to defendant part of the purchase price after they discovered the fraud. The fact is, as the testimony shows, that plaintiffs paid the whole of the purchase price by checks in the first instance, and by mistake in estimate more
Again, it is insisted that the insistence upon and acceptance of a warranty deed by plaintiffs from defendant concluded the parties as to the respective interests in the land to whiсh they were entitled. It must be understood, however, that this deed was executed and accepted under the shadow of defendant‘s fraudulent representations; hence the form of the conveyance could have no weight in determining the rights of the parties, except that it afforded an incident, possibly, to show that plaintiffs were purchasers direct from defendant. But this, we are satisfied, was not the case. The defendant was to receive warranties from the owners, and, to make the chain of title uniform, plaintiffs required a warranty also. Virtually, this is all there is in the incident, and has no preclusive bearing in the case as to either party.
Having disposed of all the questions presented favorably to the rеspondents, the decree of the court below will be affirmed, and such will be the order of this court. AFFIRMED.
ON MOTION FOR REHEARING.
MR. CHIEF JUSTICE WOLVERTON delivered the opinion.
5. The appellant, by his petition for rehearing, strenuously insists that the entire arrangement or contract subsisting between the parties touching the land, the subject of the purchase, was merged in the warranty deed executed by Coach and delivered to Kroll and Sparrow, and that henceforth the latter were precluded from setting up any other contractual relations than such as the deed witnesses. The rule suggested that all previous and contemporary negotiations and agreements concerning the sale and purchase of land merge in the deed of conveyance, so that it becоmes an express, entire, and final contract between the parties, may be conceded, but it is difficult to understand that it can have the least application to the case at bar. Of course, the fact that the deed was made was pertinent and strong evidence that the parties were dealing concerning the land in proportions as indicated by its terms; but it cannot stand as the final and conclusive contract between them, so as to exclude or preclude any other condition that the law might entail, where the transaction from the beginning is attacked for fraud, and it is made to appear that the grantees were induced to accept the conveyance through the dеceit and fraudulent intrigue of the grantor. Thus, it was the theory of plaintiffs that, while the deed conveyed to them all the land they bargained for, yet it did not convey all that their money paid for, and consequently all that they were entitled to, looking throughout the transaction, and considering the relations the parties sustained to each other, and the method adopted by which the defendant procured the money of plaintiffs with which to complete the purchase.
WOLVERTON
CHIEF JUSTICE