212 P. 526 | Utah | 1922
This is an equitable proceeding in which appellants, plaintiffs below, seek to establish that each respondent except W. A. Hickenlooper holds certain real property in trust. The prayer of the complaint is that the respondents be declared to hold title to the real property vested in each respectively for appellants, and directed to convey the same to appellants free of any claims of respondents or their grantors. Appellants ask that if for any reason the property cannot be restored to them the respondents and each of them who have conveyed or disposed of said property with knowledge shall account for the value of the property so conveyed; that if, for any reason, any of said respondents have acquired any of such property in good faith and for value, and not as trustee for appellants, the said property shall be restored to the appellants upon their paying to the respondents the amounts of money, if any, so invested. Appellants also pray for general relief. In addition, they ask for a money judgment against respondents Hickenlooper and Sheya.
A joint answer was interposed by all of the respondents save Hickenlooper, in which it is alleged that Hickenlooper
The trial court found the issues in favor of respondents. Judgment was rendered, dismissing appellants’ complaint and quieting the title to the premises in the respective respondents. Motion for a new trial was made and denied.
The assignments of error assail the findings of fact as well as the court’s conclusions of law and judgment. This being an equitable proceeding, it is the duty of this court to examine the record and determine the weight of the evidence. There is, however, but little conflict in the evidence. The controversy relates more to the legal rights of the parties than to any dispute of fact.
It appears, as alleged in the complaint, that the appellants owned certain parcels of real estate situate in the town of Price in Carbon county. There were some four or five small residences on this property. These were occupied by tenants. It also appears that the appellant "W. H. Lawley owned one-third of the stock in a corporation known as the Helper Coal Company. This company owned certain coal lands situate at or near the town of Helper in Carbon county. Some development work had been done upon this property prior to 1918. Two-thirds of the stock of the Helper Company .was held by others, referred to in the record as “the interests of certain Greeks.” The respondent Hickenlooper procured an option to purchase this two-thirds
The ground for relief stated in the complaint is that at these several meetings Hickenlooper stated and represented to appellants that he was possessed of or had approximately $10,000, which he would invest in the development of this coal property; that he had interested others who would subscribe for stock or invest in the enterprise various amounts ranging from $1,000 or $2,000 to $5,000, making the total amount of money available for the development of the mine approximately $30,000. It is also claimed, and the testimony tends to prove it, that Hickenlooper represented- and stated that he 'had interested a Mr. Pettit and a Mr. Lloyd, and that they would invest in the enterprise. It seems that the appellants had known Mr. Pettit personally for a number of years, and had implicit confidence in his ability and iñtegrity in the particular line of work in which they were embarking. They also knew Mr. Lloyd by reputation, and knew him to be a business man. of standing in the state. It is alleged in the complaint, and supported by the testimony of appellants and others, that they were induced by these representations to make the conveyance of the real property; that otherwise they would not have so conveyed the property. Carrying out the agreement or understanding verbally entered into between Hickenlooper and appellants, on the 5th day of April, 1918, the appellants executed two warranty deeds, conveying all of their title in and to the property in question to the respondent Hickenlooper. At the same time Hickenlooper conveyed certain property owned by him to the Lawleys. It was understood that the property
Appellants claim that they were induced to convey title to the respondent Hickenlooper by reason of the representations made by him, and that, relying upon these representations, they made the conveyances as alleged in the complaint; that the representations so made were not true. It is the theory of appellants that under this state of facts Hickenlooper held title to the property as trustee for them; that the remaining respondents had notice of appellants’ claim, and therefore took title burdened with a like trust.
That Hickenlooper made the representations claimed by appellants, in our judgment, is abundantly supported by the record. That the appellants relied upon such representations and were thereby induced to make the conveyance is likewise supported. The appellant W. H. Lawley and his
“Q. You laid plans for the development of the mine? A. Yes, sir. Q. How were you going to develop it? A. Well, I was subscribing for $8,000 worth of stock myself. Q. You told Mr. Lawley that? A. Yes; that I would dispose of certain property that I had, and I thought I would be able to put that in. Q. Put in $8',000 yourself ? A. Yes, sir. Then he put in the houses, the Price property here, and that helped that much. I also put in the Weber Hotel at Coalville, which we were to dispose of and use the proceeds for development of the property. Then it was determined that we would undertake to raise certain other funds, whatever might be necessary, from the sale of small blocks of stock, $100 here and $100 there, which X was opposed to, but in a way taking part in it if you might call it that. Q. Did you say anything to him about people subscribing for blocks of $1,000 or more? A. Yes, sir. Q. What did you tell him about that? A. I told him that I thought that Mr. Pettit might put in $1,000, which Mr. Pettit had told me he thought he might do, though he had not promised, and X did not promise Lawley that he would. Q. Did you mention to Lawley about Pettit thinking of pitting in $1,000? A. Yes, sir. Q. What else did you tell him about that? A. I told him that I had a friend that might put in $5,000. He had talked about it, but he didn’t know for sure. Q. What friend was this? A. E. C. Olson, of Ogden. I didn’t mention the name, but that is the name. Q. Didn’t you tell him that one of them had enough money to see the thing through, and you thought that you could get him interested in this? A. I did not. Q. In this agreement with Lawley you were to finance the corporation, wasn’t you? A. Not wholly. I was to do the larger part of that. Q. You had also made arrangements to open the mine, the coal mine? A. I anticipated doing that. Q. Did you say anything about Mr. Pettit being superintendent of the coal company? A. Yes, sir. Q. What did you tell him? A. I said that I had asked Pettit if he would come in and be general superintendent and take charge in particular of the Coalville property if we obtained enough funds to develop the Coalville prop*305 erty. Q. What else did you tell him? A. About Mr.. Pettit? Q. Yes. A. Nothing. Q. Did you tell him what Pettit said in reply? A. I told him that Mr. Pettit appeared to he favorably inclined. Q. Did you tell him whether Mr. Pettit said anything? A. I told him that I had talked with Mr. Pettit about it. Q. What did you tell Mr. Lawley that Mr. Pettit had said about it? A., No; I told him that no definite arrangements had been made; that it was simply in contemplation. Q. What did you tell Mr. Lawley that Mr. Pettit said? A. I think I told Mr. Lawley that Mr. Pettit said he might he interested in doing that.”
Mr. Pettit’s testimony is tbat be at no time agreed or promised to invest any money in tbe enterprise.
It is contended tbat Mr. Hickenlooper, as shown by tbe testimony, actually expended of bis own means approximately tbe amount of money that be bad agreed to contribute personally to tbe development of this coal property. Tbe testimony offered in support of tbat claim is not entitled to much weight. No part of tbe money ever found its way into tbe treasury of tbe fuel company. No record is produced showing tbe expenditure of any such amount. No check or bank account seems to have been kept of tbe distribution of such fund. No satisfactory or probable explanation is in tbe record as to just bow or for what purpose such amount was expended.
Tbe court found, at least inferentially, tbat representations were made to appellants by Hickenlooper as claimed. In its twelfth finding tbe court found tbat neither Lloyd nor Pettit bad tbe sum of $2,000 to invest in tbe capital stock of tbe fuel company, but also found tbat tbe statements or representations of Hickenlooper were not tbe inducing cause which led appellants to make tbe conveyance to Hiek-enlooper. We are unable to agree with tbe conclusion in tbat finding tbat those representations were not tbe inducing cause. Such seems to be contrary to tbe evidence. This court is of tbe opinion tbat tbe great weight of tbe evidence — in fact, almost tbe undisputed testimony — supports tbe allegations of tbe complaint tbat those representations were tbe real moving cause tbat induced tbe appellants to make tbe conveyance to Hickenlooper, and tbat such representations were not supported by tbe facts. It now re
It is appellants’ contention that it created a relationship of trust so long as Hickenlooper held the title in his name, and that that relationship followed the property into the hands of any one charged with notice either actual or constructive, of appellants’ rights in the property.
A definition of a constructive trust and a statement of the facts out of which such a trust is created are found clearly stated in 1 Perry on Trusts and Trustees (6th Ed.) § 166, as follows:
“Thus, if one party procures the legal title to property from another by fraud or misrepresentation or concealment, or if a party makes use of such influential or confidential relation which he holds towards the owner of the legal title, to obtain such legal title from him upon more advantageous terms than he could otherwise have obtained it, equity will convert such party thus obtaining property into a trustee. If a person obtains the legal title to property by such arts or ácts or circumstances of circumvention, imposition, or' fraud, or if he obtains it by virtue of a confidential relation and influence under such circumstances that he ought not, according to the rules of equity and good conscience as administered in chancery, to hold and enjoy the beneficial interest of the property, courts of equity, in order to administer complete justice between the parties, will raise a trust by construction out of such circumstances or relations; and this trust they will fasten upon the conscience of the offending party, and will convert him into a trustee of the legal title, and order him to hold it or to execute the trust in such manner as to protect the rights of the defrauded party and promote the safety and interests of society. Such trusts are called constructive trusts.”
Tbe same principle is enunciated in almost tbe same language in 3 Pomeroy Eq. Jur. (4tb Ed.) § 1044.
Tbe second beadnote to Henderson v. Murray, 108 Minn. 76, 121 N. W. 214, 133 Am. St. Rep. 412, announces tbe same general principle as follows:
“Where, however, a party obtains the legal title to land from another by fraud, or by taking advantage of confidential or fiduciary relations, or in any other unconscientious manner, so that he cannot justly retain the property, equity will impress a constructive trust upon it in favor of the party who is equitably entitled to it.”
Applying, this general principle to the facts in the instant case, we see no escape from the conclusion that the respondent Hickenlooper held title to these premises in trust for appellants, and that any one receiving title from him charged with either actual or constructive notice would bear the same relation to appellants as did the respondent Hickenlooper.
It is, however, argued by counsel for respondents that the property was conveyed to Hickenlooper in trust to be conveyed to a corporation to be thereafter organized; that the trust w&s substantially complied with by using the proceeds received from the mortgage, and sale in paying the obligations of the fuel company, and that appellants for such reason have no just ground of complaint. If it be admitted that the testimony establishes (which we do not think it does) that the proceeds were paid to the fuel company, that does not answer the claim of appellants that they were induced to and did convey this property upon the representations that Hickenlooper had ready to and would invest $10,-000 of his own funds, and that others would invest as much as was necessary to develop the coal property. The moving purpose of appellants was to contribute to the success of opening up the coal mine. It is a matter of common knowledge that it is expensive, and frequently costs many thousand dollars to develop coal property in that vicinity. The representations relied on by appellants were that sufficient money had been acquired, or could be acquired to accomplish that purpose, and when it was ascertained that these representations were not founded in fact, then the consideration and the moving cause had failed, and the appellants were entitled to have their property restored to them. It was not contemplated by any of the parties that the amount of money that could be received for the
It remains to be determined whether the respondent Sheya and the other respondents are bona fide purchasers for value without notice of the appellants’ rights. There are certain general rules respecting notice recognized by all the cases and text-writers that it may be well to state at this point.
In 39 Cyc. 1703, it is said:
“The fact that one pays a valuable consideration for property does not make him an innocent purchaser if he had knowledge of outstanding equities of third persons.
“Notice to affect purchasers for value with charges on property purchased may he actual or constructive. There is conflict in the cases and among writers as to what is actual notice, but as actual and constructive notice are the same in effect, it is immaterial.what kind of notice is received by the purchaser.”
On page 708 of the same volume it is further said:
“Notice which will charge a purchaser of land with notice of fraud is the knowledge of any facts that would inform him of the fraudulent intent, or that would put a person of ordinary prudence on inquiry as to such fraudulent intent, where it appears with reasonable certainty that such inquiry would result in a discovery of the intended fraud.”
In Wood v. Carpenter, 101 U. S. on page 141 (25 L. Ed. 807), Mr. Justice Swayne, writing the opinion of the court, quotes, with approval the following from Kennedy v. Greene, 3 Myl. & K 722:
“Whatever is notice enough to excite attention and put the party on his guard and call for inquiry is notice of everything to which such inquiry might have led. When a person has sufficient information to, lead him to a fact, he shall be deemed conversant of it.”
Also from Angelí on Limitations, § 187, and note, the following :
“The presumption is that, if the party affected by any fraudulent transaction or management might, with ordinary care and atten*309 tion, have seasonably detected it, he seasonably had actual knowledge of it.”
In 39 Cyc. 1718, tbe author says:
“Where the contract under which the purchaser buys is sufficient on its face to put him upon inquiry as to what the consideration was, or where it plainly shows that the consideration has not been paid or performed, he is chargeable with notice thereof. A nominal or grossly inadequate consideration recited in a deed is a sufficient circumstance, for a reasonable time after such deed is made and recorded, to put a purchaser on inquiry; but after it has remained of record for some years unquestioned, a person about to purchase under it has a right to conclude that' there was no vice in the deed, that a sufficient consideration had in fact been paid, or it would have been attacked within a reasonable time; and he is justified in relying upon it.”
See, also, tbe following authorities: Hatfield v. Lotty, 48 Okl. 173, 149 Pac. 1171; Hume v. Franzen, 73 Iowa, 25, 34 N. W. 490; Kinney v. McCall, 57 Wash. 545, 107 Pac. 385; Winsted v. Shank (Old. Sup.) 173 Pac. 1041.
Appellants made tbe conveyance to respondent Hicken-looper on April 5, 1918. Tbe property so conveyed is located in tbe town of Price, Carbon county. Tbe respondent Sbeya resides there. There were located upon tbe property some four or five small residences. These were occupied by tenants. Tbe same tenants occupied tbe property at tbe time of tbe conveyance to Sbeya that occupied it on April 5th. Dr. Fisk, who held tbe mortgage on tbe property, with tbe consent of the appellants, collected tbe rents prior to tbe conveyance to Hickenlooper. He continued to collect tbe rents until tbe conveyance to Sbeya. Tbe testimony is undisputed that tbe value of tbe property at that time was $7,500. The deeds made by tbe appellants to Hickenlooper name the consideration as tbe sum of $10. It is also provided in tbe deeds that tbe conveyance is made subject to tbe unpaid portion of a certain mortgage in favor of F. F. Fisk, and tbe grantee assumed and agreed to pay such mortgage. There is placed upon each of the deeds from tbe appellants a 50-cent revenue stamp. There is no testimony that tbe respondent Sbeya made any inquiry or investigation to ascertain tbe rights of tbe appellants in these premises
Gross inadequacy of price may be sufficient in itself to bring home to the purchaser notice of the infirmities of his grantor’s title. 39 Cyc. 1719.
The fourth headnote to Dunn v. Barnum, 51 Fed. 355, 2 C. C. A. 265, reads:
“One who receives a deed of bargain and sale conveying lands worth $30,000 for a consideration of $100 must he presumed to know of infirmities in his grantor’s title, and cannot claim the protection of the rule in favor of innocent purchasers, as against one holding for value under a prior deed, in the recording of which the land in question was omitted by mistake.”
The Supreme Court of Oklahoma, in Brink v. Canfield, 78 Okla. at page 196, 187 Pac. at page 229, in discussing the duty of the purchaser who relies upon record title, says:
“A purchaser of land, who buys in reliance on the record title, is chargeable with all the notice brought to him by the records; and if the record contains matters that would put a person of ordinary prudence upon inquiry into the nature of the title of the grantor, or of the rights and equities of a former owner, then the law charges such purchaser with all the knowledge an inquiry upon his part, prosecuted with reasonable diligence, would have brought home to him.”
“The essential elements which constitute a ‘bona fide purchase’ are valuable consideration, absence of notice, and the presence of good faith.” Winsted v. Shank, supra.
See, also, Connecticut Life Ins. Co. v. Miller, 117 Mo. 261, 22 S. W. 623; Pollard v. McKenney, 69 Neb. 742, 96 N. W. 679, 101 N. W. 9.
The Supreme Court of Arkansas,' in Gaines v. Saunders, 50 Ark. at page 328, 7 S. W. at page 303, in discussing the facts of that case as to'whether inadequacy of consideration was notice sufficient to put the purchaser upon inquiry, says:
*311 “The evidence shows that the lands in controversy cost about f6,000, and that there was loaned on them, as security, $2,220. The deed executed by Whitaker to Mrs. Saunders was a quitclaim deed, and was recorded; and it states that the consideration received for the lands was $5. Was not this fact sufficient to put any prudent man on inquiry? Is it possible that any sane man, having good title to land worth $2,000 or $6,000, would sell it for $5? The question suggests its own answer. * * * It was, at least, sufficient to have put appellants on inquiry, which, if they had prosecuted with ordinary diligence, would doubtless have led to actual notice'of the facts as shown by the evidence in this case. But they prosecuted no inquiry, and it follows that they are not bona fide purchasers without notice.”
Applying the rules of law thus stated to the particular facts shown here, can the respondent Sheya claim to be an innocent purchaser for value without notice? We do not think so. The consideration mentioned in the deeds is $10. The revenue stamps placed upon the deeds indicate that the consideration was not to exceed $500. The land was occupied by tenants who had occupied it while it was owned by appellants. The same agent was collecting the rents. The deed to Hickenlooper bore date two months and five days prior to the date of Sheyh’s purchase. Certainly such facts were sufficient to put any cautious or prudent person upon inquiry. It is not disputed that the appellants were residents of that county at the time of the purchase of this property. Any inquiry whatever from the appellants would have elicited the information that the respondent Hickenlooper had no right to convey the property to this respondent.
We are of the opinion that the respondent Hickenlooper held the property in trust for appellants, and so hold; that the respondent Sheya took such property with constructive notice of such relationship, and must therefore be held to hold it in like relationship to the appellants.
As to the remaining respondents it appears undisputed by appellants own testimony that they knew from and after June 12, or June 13, 1918, that Hickenlooper had conveyed this property to Sheya. Notwithstanding that fact, no action or suit was brought to cancel the conveyance and have
The Supreme Court of Colorado, in Williams v. Woodruff, 35 Colo. 28, 85 Pac. 90, 5 L. R. A. (N. S.) at page 1000 of the last-named report, quotes with approval the language of the Court of Appeals of that state in Du Bois v. Clark, 12 Colo. App. 220, 55 Pac. 750, respecting laches, as follows:
“The question ordinarily is whether, during the period of delay, such changes have taken place in the position of parties, relative to the subject-matter of the litigation, as to render it inequitable to permit the enforcement of the rights, concerning which otherwise there might he no difficulty. If, while the injured party is'unneees-*313 sarily inactive, * * * the other party, on the faith of an apparent situation, the reality of which he had no reason to \ doubt, has so changed his position that, if existing conditions were disturbed, he would suffer injury, the delay is chargeable as laches, and, in equity the consequence of the laches is the loss of the remedy.”
See, also, Jones Min. Co. v. Cardiff M. & M. Co., 56 Utah, 449, 191 Pac. 426; Hammond v. Hopkins, 143 U. S. 273, 12 Sup. Ct. 418, 36 L. Ed. 134; Jenkins’ Assignee v. Pierce, 98 Ill. 653.
It should be stated that the respondent Sheya is charged with notice only by reason of the rules of law applicable under the particular facts in this case.
In adjusting the rights of the parties the district court should credit the respondents with all amounts expended in satisfying the mortgage and other lien against the property at the time of the conveyance by appellants and such amounts necessarily expended in improving and repairing the property upon the premises, in short, to take an accounting and do justice between the parties.
The judgment of the district court dismissing the action against the respondents other than Hickenlooper and Sheya is affirmed. As to those two respondents, the judgment is reversed, and the cause is remanded, with directions to determine the rights of the parties in conformity with the views herein expressed. Costs on appeal are awarded to appellants.
