186 Mich. 151 | Mich. | 1915
Complainant filed this bill in the circuit court for the county of Wayne, in chancery, praying for an accounting by defendant as a trustee ex maleficio; the primary purpose of said bill being to impress a trust in behalf of complainant upon the sum of $9,000 claimed to be in possession of defendant as the proceeds of a sale of certain land, title to which is charged to have been obtained from complainant without compensation, through fraud, misrepresentation, and betrayal of trust. Avoiding mat
Before and at the time of the transactions in question defendant was a resident of the village of L’Anse, in Baraga county, and complainant resided in the city of Detroit. Complainant held in his name, both in individual capacity and as trustee for others, title to various parcels of land in and around L’Anse, the management of which was intrusted to one William L. Mason, an attorney residing and practicing in said village. Complainant had held the lands for many years, and, prior to its care being intrusted to William L. Mason, the latter’s father had acted in the same capacity for complainant in affairs connected with his land holdings in that part of the country.
Amongst other activities, defendant had interested himself in timber lands in the vicinity of L’Anse, and during the winter of 1910-11 held under option several thousand • acres with a view to purchasing and lumbering them. In connection with others he proposed and planned to organize a company to take over these lands and erect a mill in the village of L’Anse to manufacture into lumber the logs cut therefrom. To that end he and his associates organized, on March' 16, 1911, the L’Anse Bay Lumber Company. Preliminary to and in connection with the project, public interest was aroused, and meetings of citizens were held in the town hall of L’Anse looking to public support and co-operation in promoting and financing the same, at which the advantages to that locality from the erection and operation of a mill were presented and urged; the matter
Upon February 6, 1911, while this matter was rife, and at a time when Mason was confined to his home by illness, defendant, accompanied by two gentlemen who expected with others to be subscribers for stock in the proposed company, and by their attorney, called upon Mr. Mason and discussed the project, at which conference he clearly stated to them that the Smith interests, so called, were ready to and would, through him, donate a site proposed for the mill located on the bay shore, known as lot 3, section 5, town 50 N., range 33 W. Whatever uncertainties had previously existed as to his overtures, he there distinctly told these parties that in his proposal to furnish a mill site for the company, which they intended to form, he represented and was acting for complainant. Defendant and his associates (including Mason himself) thereafter proceeded with their promotion, assuming that Mason had authority to make and carry this offer into execution. Mason, however, never paid his stock subscription and after-wards dropped out of the company.
It is the contention of complainant that in making such representations and proposals Mason acted absolutely without authority. At the time of these transactions he was prominent in local matters, in good standing, and had the confidence of both complainant and the community in which he resided, and was at first active in promoting the L’Anse Bay Lumber Company, although, before trial of this suit, fol
Some time in the summer of 1911 a tentative agreement was entered into between complainant and Mason, who had proposed to himself purchase on contract numerous descriptions of complainant’s property in that locality, including lot 3, for $60,000, of which $10,000 was to be paid down and time given for the balance — lot 3 to be released from the contract and' conveyed as soon as the first payment of $10,000 was made. This lot was claimed to be the most desirable and suitable site for the proposed industry near the village, though defendant and his associates contended that independent of the interests of the village others equally good were available. A form of land contract embodying the terms of their agreement, prepared in duplicate and executed by complainant, was sent from Detroit to the .National Bank of L’Anse by complainant’s Detroit attorney, accompanied by a letter of instruction to the bank, dated September 6, 1911, directing that, when Mason signed the same and paid $10,000 thereon, one copy should be delivered to him and the other returned to Smith with the payment. Mason failed to perform on his part, and the papers remained in possession of the bank until the spring of 1913. Defendant was president of said bank.
While this matter was still under negotiation, Mason went to Detroit, near the 1st of September, 1911, and had a conference with complainant and his
Having thus obtained a deed of the property to himself, Mason, in direct violation of his trust and of the written conditions under which he held the deed, proceeded forthwith to carry out the assurances which he had made to the promoters of the L’Anse Bay Lumber Company, and on September 30, 1911, deeded to defendant Maxey said lot 3, for the stated consideration of $1, no actual consideration then passing; complainant’s deed to Mason and Mason’s deed to defendant being recorded, on October 21, 1911, in the office of the register of deeds of Baraga county.
The promotion and financing of the L’Anse Bay
It is not claimed that Maxey was a direct trustee of Smith, or that any primary fiduciary relations existed between them; but it is claimed that by reason of Mason’s agency, or- trusteeship, the transac
“Wherever property, real or personal, which is already impressed with * * * a trust of any kind, express or by operation of law, is conveyed or transferred by the trustee,' not in the course of executing and carrying into effect the terms of express trust, or devolves from a trustee to a third person, who is a mere volunteer, or who is a purchaser with actual or constructive notice of the tfust, then the rule is universal that such heir, devisee, successor, or voluntary transferee, or such purchaser with notice, acquires and holds the property subject to the same trust which before existed, and becomes himself a trustee for the original beneficiary. * * * It is not necessary that such transferee or purchaser should be guilty of positive fraud or actually intend a violation of the trust obligation. It is sufficient that he acquires property upon which a trust is in fact impressed, and that he is not a bona, fide purchaser for a valuable consideration and without notice.”
The concluding qualification in the above statement of the well-settled rule upon which complainant relies is thus more fully elaborated in 39 Cyc. p. 559:
“The right to follow trust property in the hands of a third person, and impress the trust thereon, ceases when the property comes into the hands of one who stands in the position of a bona fide purchaser for value without notice, as where the legal title to the property comes into the hands of one who acquires it for a valuable^ consideration without notice of its trust character, including a purchaser without notice from a purchaser with notice.”
It is undisputed that no confidential relations existed between Maxey and Smith. They lived the length of the State apart and were not in touch with each other. Smith testified he did not know Maxey, and did not believe he ever saw him. The magnitude of Mason’s perfidy and breach of trust with Smith could have no bearing, unless known to Maxey; and, if unknown, Maxey’s questionable conduct in getting from the Butters Company and absorbing this money by a subterfuge, which is urged and emphasized by complainant, and by which the trial court was apparently largely influenced, cannot operate to attach a constructive trust to what he realized from that source. Evidently each of them was -deceived by and acting upon Mason’s misrepresentations to him.
As it ultimately developed, the initial mischief in this case was done by Smith executing and delivering to his agent, Mason, a full-covenant warranty deed of this property, on its face conveying absolute title, thus apparently clothing him with unlimited ownership and control, and the right to dispose of it, at any time to any one for whatever consideration he chose, only limiting his authority by separate, private written instructions, of which there is not a scintilla of evidence that Maxey or any other person in L’Anse had any knowledge whatever. Had Smith sent his deed to the bank, to be delivered to Mason on payment of what he demanded, as he previously did the land contract, it would have been just as available for Mason to show the “mill people” he could deliver a good title when they were ready to perform, if his representations to Smith were true; yet, though he apparently trusted in and believed Mason and sent him the deed direct, taking Mason’s note for the purchase price, with a private promise not to use the deed until the note was paid, he now urges that Maxey should not have believed Mason and was not deceived by him, although fortified by the convincing muniments of title with which he had equipped him. Smith did in law pass a legal title to Mason.
“It is a well-settled rule of law that, if the grantor does not intend that his deed shall take effect until some condition is performed, or the happening of some future event-, he should either keep it himself, or*161 leave it with some other person as an escrow to be delivered at the proper time. That it should operate as an escrow it is necessary that the delivery should be made to a stranger, and not to the party; for if one makes a deed and delivers it to the party, to whom it is made as an escrow, upon certain conditions, in such case, let the form of the words be whatever it may, the delivery is absolute, and the deed shall take effect presently.” Dawson v. Hall, 2 Mich. 390.
Mason and Maxey, though acquainted and fellow townsmen, and both working in common with other citizens of that village to secure the industry, were not intimate, nor scarcely on friendly terms. They were opposed politically and rivals in other ways, were not in each other’s confidence, and Maxey had even expressed some doubts as to the. value of Mason’s assurances that he could get a deed of this lot as he had proposed, though it is the testimony of various witnesses that it was the general talk and common understanding that he would furnish a deed, just as he apparently did. His own law partner, testified in part as follows:
“Q. Did you ever hear Mason say upon what terms this site was to be given?
“A. Yes; the site was to be given for the erection of a sawmill that would employ 30 or 40 men. It was to be given away in consideration of Mr. Maxey bringing a mill into town. Such terms were made by Mr. Mason a great many times. We talked this over ourselves and with others very often from the time that the first letter was written until after the mill was erected.”
After the L’Anse Bay Lumber ■ Company was organized, with many small stockholders in the village, the people of Baraga, a neighboring village on L’Anse bay, offered a site as an inducement for the company to locate there, and meetings were held at L’Anse to discuss the subject. Of one of these meetings, at
“The talk was principally about the site, and Mr. Mason again said that a site would be donated, and that he would get busy at once and see that the deed was here in about a week or ten days, if I remember right. Mr. Mason said it would be without any cost to the people or the L’Anse Bay Lumber Company. At that meeting there was general talk about the plant, but the main object was to find out what Mason would do regarding the site. Every business man at L’Anse felt that something had to be done, and done quick.”
It was not long after this that Mason delivered the deeds to Maxey, enjoining him to “go out and make good.” This court has quoted with approval, in Marx v. King, 162 Mich. 258 (127 N. W. 341), the following from 31 Cyc. p. 1331, which appears particularly pertinent' to the facts involved here:
“While as between the principal and the agent the scope of the latter’s authority is that authority which” is actually conferred upon him by his principal, which may be limited by secret instructions and restrictions, such instructions and restrictions do not affect third persons ignorant thereof; and as between the principal and third persons the mutual rights and liabilities are governed by the apparent scope of the agent’s authority, which is that authority which the principal has held the agent out as possessing, or which he has permitted the agent to represent that he possesses, and which the principal is estopped to deny. The apparent authority so far as third persons are concerned is the real authority, and when a third person has ascertained the apparent authority with which the principal has clothed the agent,' he is under no further obligation to inquire into the agent’s actual authority.”
It is contended ih behalf of complainant that the land contract from Smith to'Mason, sent by Smith’s attorney to the Bank of L’Anse, of which Tracy, treasurer of the L’Anse Bay Lumber Company, was
Maxey testified that he never saw or knew of the contract, and there is no direct testimony of any witness to the contrary. What is proposed with that evidence is to build up inference on inference — to infer from the fact that the contract was sent for delivery to the bank of which he was president that he knew of it, and from the inferred fact that he knew of it that he read it, and from the inferred fact he read it that he knew, or ought to have known, that Smith’s full-covenant warranty deed to Mason was not what it purported to be, and the latter was perpetrating a fraud in deeding the lot to him in violation of a secret trust duty he owed to Smith. We are unable to conclude that complainant has shown defendant knew, or ought to have known, that the apparent authority conferred upon Mason by the deed to him was not what it purported to be.
It is; contended that complainant never received a cent for this property' from any one, and therefore Maxey’s deed is void, and no protection to him for want of valuable consideration. There were no dealings, nor contractual relations, between them. Maxey, as a third party, dealt with Mason on the apparent authority with which his principal had clothed him. Mason, as agent for complainant and in charge of his extensive land holdings in that locality, named the consideration and made the offer. He said to Maxey and others that he and those he represented “figured,” if they could secure such an industry at
“If the object of this testimony is simply to prove that the incoming of a substantial mill would benefit Mr. Smith’s holdings, we will concede upon this record that we hoped and expected that it would.”
The evidence that Maxey was the leading spirit and devoted much time and effort to this promotion, finally securing the industry as stipulated by Mason, is not controverted. A witness named Seavoy testified:
“The Marshall Butters Lumber Company this spring (1913) started operating their mill on the lot in controversy; they broke ground for that mill in September, 1912.”
“A Valuable consideration,’ in a legal sense, may consist either in some right, interest, profit, or benefit accruing to one party, or some forbearance, loss, or responsibility given, suffered, or undertaken by the other.” Words and Phrases, vol. 2, p. 1445.
There can be no question of the rule that extraneous and parol evidence is admissible to show the actual consideration for a conveyance of land independent of the amount or thing stated in the deed by which title passes. In Stanley v. Schwalby, 162 U. S. 255, 16 Sup. Ct. 754, a similar question to that raised here was thus settled in an opinion written by Justice Gray:
“A valuable consideration may be other than the actual payment of money, and may consist of acts to be done after the conveyance. Prewitt v. Wilson, 103 U. S. 22; Hintz v. Metropolitan Bank, 111 U. S. 722, 727 [4 Sup. Ct. 613]; 4 Kent Com. 463; Dart, Vend*166 ors (6th Ed.), 1018, 1019. The advantage inuring to the city of San Antonio from the establishment of the military headquarters there was clearly a valuable consideration for the deed of the city to the United States.”
We think it undisputed that by the terms of the agreement between Mason and defendant the conveyance was made for a valuable consideration, and that the stipulated terms were fully observed and performed by the grantee. For the foregoing reasons, we are led to conclude that no constructive trust, as contended for, is shown to have arisen between defendant and complainant.
The decree is therefore reversed, and complainant’s bill dismissed, with costs to defendant.