Spencer & Newbold's Appeal

| Pa. | May 8, 1876

Mr. Justice Mercur

delivered the opinion of the court,

In the lifetime of Nathan Smith, he was entitled to an undivided one-twelfth part in certain coal-lands. The legal title to the land was in John L. Newbold and William M. Spencer. The widow of Smith filed this bill, alleging that Newbold, acting for himself and Howard Spencer, fraudulently procured from her, and from the heirs of her late husband, a conveyance of this interest in the lands. The master found the allegations to be true. The court sustained the finding. Thereupon, inter alia, it decreed a transfer to Mrs. Smith of the property in its changed form, on the payment to Howard Spencer of the sum which he and Newbold had paid, with interest. From this decree each party appealed.

The controlling questions for consideration are, whether Newbold held the property in trust at the time of procuring this conveyance, and if so, did he conceal from Mrs. Smith the true condition of the title and property to such an extent as to be guilty of fraud in its procurement ?

In 1836, five tracts of land, situate in Luzerne' county, were conveyed to William M. Spencer and said Newbold, in trust as to certain undivided twelfth parts or shares .thereof, for the use and benefit of themselves and of several other persons therein named, and inter alia two-twelfths thereof for said Nathan Smith. A proviso in the deed authorized said trustees at any time on the request in writing of a majority in number and in trust of the eestuis que trustent, to sell and convey the premises discharged of the trust, and to divide the proceeds among the eestuis que trustent in the proportion in which they held the shares in the land. Thus New-bold assumed all the duties and obligations of a trustee at the inception of the title.

Subsequently these shares or twelfths were the subject of sale and purchase. Nathan Smith bought and sold- several shares. Finally, in 1841, lie appears to have been the owner of one share or twelfth only. He died in 1849.

In 1854, The Black Creek Improvement Company, one of the defendants below, was incorporated by an Act of the Legislature. John L. Newbold was therein named as one of the incorporators. By deed of 22d January 1855, Spencer and Newbold, said trustees, conveyed to said company defendant, three of said tracts of land, being all that remained unsold, having been authorized and required so to do by a majority in number and in trust of the cestuis que trustent in the property. In May of the same year, certificates of shares of full paid stock were directed by the company to be issued to the owners of eleven-twelfths of the property, and 3500 shares of the stock to be delivered to William M. Spencer and John L. Newbold, trustees, for the owner or owners of the remaining one-twelfth. In July 1869 Mrs. Smith notified the company “ not to issue the stock to any but herself and the heirs of Nathan Smith, deceased.” Nevertheless, in February 1870, the company did issue certificates for these 3500 shares of stock to William M. Spencer and John L. Newbold.

The agreement of purchase from Mrs. Smith was made in February 1869, and consummated by deeds made in the same month, and in the month of March following.'

In the yews 1869, 1870, 1871 and 1872 the company declared dividends in the aggregate of 22 per cent., or $2.20 per share.

It is claimed, however, by the defendants in the bill, that New-bold did not hold this share in trust at the time of his purchase from Mrs. Smith. It is alleged that he was then the owner in his own right by virtue of a purchase made by him in 1841, of Nathan Smith. The master thus far sustained this allegation as to find that Newbold did purchase by parol at the time alleged and paid the purchase-money.

Although the fact of purchase is stoutly denied, yet we do' not see sufficient evidence to reverse this finding. We therefore assume it to be correct. But the master further found that Nathan Smith did not execute any deed or instrument of writing conveying the same.

This finding of fact is alleged for error inasmuch as in Newbold's answer he distinctly avers he had received a wi'itten title from Nathan Smith for the share in dispute ; that the answer was distinctly responsive to the bill, and it had not been contradicted by any witness of the plaintiff in the bill.

If the case rested on the bill and on the answer of Newbold alone, or if his subsequent testimony had not contradicted his answer, there would be great force in this defence so far as it applied to himself. The answer, however, would not have availed Spencer, who had no knowledge of the alleged purchase, except what he received from Newbold and answered on information and belief only. Besides, in the deed from Newbold to Spencer of the 1st of February 1869, conveying this one-twelfth share to the latter,- it is distinctly averred, “whereas the said Nathan Smith died without executing to me a deed for the said one-twelfth share or interest.”

It is a significant fact that this deed bears the same date as the contract between Spencer and Mrs. Smith, which by a more general description included the same share. Thus it clearly appears that Spencer accepted a conveyance from Newbold of the land in question under an express declaration, that Nathan Smith had never executed a deed for said premises. As further evidencing the knowledge of the parties to the conveyance, and fully to protect Newbold, he therein declared “nothing herein contained shall be construed so as to render me liable to make good the title to the premises hereby granted, but only to transfer to the said Howard Spencer all my right, title and interest therein.”

On testifying before the examiner, April 18th 1872, Newbold said, “ I believe he made me a deed for it; I had searched for tha¿t deed for years ; I have never been able to find it.” On a further examination, May 29th 1872, he answered: “ I do not know that I ever had a deed, I am strongly impressed that I had.” Then to the question, “who wrote the deed which you say you are impressed you had for the share in dispute ?” he answered, “I don’t know that any deed was ever written, and of course can’t say who wrote it; I have no recollection on the subject.”

Thus, as a witness, he frittered away on this point all certainty in his answer as a party. If, when subjected to the test of an examination, he could not swear that he ever had a deed; nor that he had ever seen one, nor that one was ever written, and that he had no recollection on the subject of a deed, it is very clear the master was correct in finding the evidence insufficient to prove the execution and delivery of a deed. We- may concede the correctness of the remark made by Chancellor Green in Brown v. Buckley, 1 McCarter (N. J.) 295, as to the general effect of the answer; yet here Newbold, the witness, substantially impeached and overthrew the answer of Newbold the party.

The positive declaration made in his deed, under seal, some two years before his answer, harmonized with his solemn oath, made nearly two years after his answer. When a party is permitted to testify, and does testify in conflict with his answer, it will not do to hold that his testimony shall be disregarded and his answer stand wholly unimpeached. Precisely how far the rule should be modified, now that a party may be a witness in his own behalf, it is not necessary at'present to indicate. We see no reason to dissent from the conclusion of the master, that no deed was ever executed by Nathan Smith for the share in question.

Nor do we discover any error in his conclusion that no such exclusive possession was taken by Newbold in pursuance of the contract as to take the case out of the Statute of Frauds. As trustee before the sale he paid the taxes on the land. They were unseated and no one was in actual possession. He merely continued to pay the taxes as before. No change of possession was taken in consequence of his purchase. Payment of the purchase-money alone is insufficient to take the case out of the statute. At most, however, this was a purchase by one tenant in common of the interest of his co-tenant. There can be no valid parol sale of lands among tenants in common in possession, as there cannot be any such delivery of possession as will take the case out of the statute: Workman v. Guthrie, 5 Casey 495; Chadwick v. Felt, 11 Id. 305; Hill v. Meyers, 7 Wright 170; McCormick’s Appeal, 7 P. F. Smith 54. Nor was there any such actual, hostile, continued and exclusive possession in Newbold, as to give him title under the Statute of Limitations.

It therefore follows that at the time of his purchase from Mrs. Smith he had no right to this share which he could enforce at law or in equity against the heirs of Nathan Smith. 'He held the share as land in trust for them, until the sale to the company. Thenceforth he held the stock and proceeds thereof in like manner. Primá facie the purchase of a trustee from his cestui que trust cannot stand. To sustain it the trustee must have acted in entire good faith. He must show that he made to the cestui que trust the fullest disclosures of all he knew in regard to the subject-matter, and that the’ price he paid was adequate: Coles v. Trecothick, 9 Vesey 234; Randall v. Errington, 10 Id. 423; Greenfield’s Estate, 2 Harris 489; Diller v. Brubaker, 2 P. F. Smith 498; Wistar’s Appeal, 4 Id. 60; Parshall’s Appeal, 15 Id. 224.

A reference to the evidence shows that Newbold did not inform Mrs. Smith that he had ever held this property in trust for her late husband; nor that he had purchased it from Mr. Smith; nor that he and William M. Spencer had conveyed it to the Black Creek Improvement Company, and had received in payment therefor, stock of large value; nor that coal mines were being worked on the land, and that a cash dividend had been declared on the stock. It is true he did say to her that Mr. Spencer had some valuable coal interests in lands which he (Newbold) and Mr. Smith had formerly owned, and he was desirous of removing some doubts about his title; that he wanted to get quit claim deeds from her and from the heirs of her husband, and her release of dower, for which he would pay something.

He then withheld the substantial facts, which would have shown that she and the heirs of her late husband had a clear right to the property and its great value. His whole language was manifestly intended to convey, and did convey to Mrs. Smith, the idea that their interest was small and of uncertain value. At this time she was past eighty-six years of age.' The vigor and strength of her mind were impaired. She possessed limited means; hence the persuasive kindness of Newbold to pay her money so soon, was well calculated to prevent suspicion, and cause her to refrain from making inquiries of others. She was thus induced to procure for Spencer the title of the heirs, and transfer her own and all, for not more than one-seventh of .its value. Spencer knew by the quit-claim deed which he received from Newbold, that Smith had executed no deed for the lands. In making the contract with Mrs. Smith, Newbold acted for both Spencer and himself. Each had full knowledge. Both were interested in the stock issued for this share. Spencer therefore stands on no higher ground than his agent and co-partner. Substantially the same concealments and suggestions procured the deeds from the heirs. Manifestly such a purchase cannot be sustained in equity. It is unnecessary to discuss all the collateral questions in detail. We see no error in the conclusion of the master nor in the decree of the court.

Decree affirmed, and the appeal of each party is dismissed at the cost of the appellant therein.