Summary
In Adcock et al. v. Merchants Manufacturers Bank of Ellisville, Miss., 42 So.2d 427, 430, we quoted with approval this text from 54 Am. Jur., page 179, Section 234: "Active conduct on the part of the grantee to bring about the conveyance, especially where there is a fiduciary or confidential relationship between him and the grantor, and the grantee's subsequent failure to carry out his agreement or promise to hold in trust for reconveyance, tend to show fraud or bad faith on the part of the grantee, so as to raise a constructive trust."
Summary of this case from Pitchford v. HowardOpinion
No. 37206.
October 24, 1949.
1. Trusts — constructive trust — case in point.
When the proof shows that the title to a tract of land was conveyed by the owner bank to an employee in order to facilitate the work of the employee whose duty it was to look after lands belonging to the bank; that he paid nothing for the conveyance; had never had the deed in his possession, and for several years did not know he had title, during which time he dealt with the property as that of the bank according to his duties as an employee of the bank, the land being assessed to the bank which paid all the taxes on it, the facts so proved are sufficient to establish title in the employee as a constructive trustee for the bank.
2. Trusts — constructive trust — arise when.
A constructive trust arises where a conveyance is induced on the agreement of a fiduciary or confidant to hold in trust for a reconveyance or other purpose, where the fiduciary or confidential relation is one upon which the grantor justifiably can and does rely and where the agreement is breached, and since a breach of the agreement is a breach of confidence it is not necessary to establish such a trust to show fraud or intent to perform the agreement when made.
3. Trusts — constructive trust — active conduct on part of grantee.
Active conduct on the part of grantee to bring about the conveyance, especially where there is a fiduciary or confidential relationship between him and the grantor, and the grantee's subsequent failure to carry out his agreement or promise to hold in trust for reconveyance tend to show fraud or bad faith on the part of the grantee so as to raise a constructive trust.
4. Trusts — constructive trust — what evidence competent — circumstances.
In a suit to establish a constructive trust all the acts and statements of the parties relative to the situation together with all documents and records and the circumstances surrounding the parties are competent, — trusts may be deduced from circumstances. The intention of the parties may be inferred from the facts, the conduct of the parties and the surrounding circumstances.
5. Trusts — constructive trust — no memorandum in writing as to intention — confidential relation.
Where owner of land transfers it inter vivos to another in trust for the transferor, but no memorandum properly evidencing the intention to create a trust is signed, the transferee will be compelled to hold the land upon a constructive trust for the transferor if the transferee at the time of the trust was in a confidential relation to the transferor, even though at the time of the transfer, the transferee intended to perform the oral trust, and was guilty of no undue influence or other abuse of his confidential relation to the transferor in procuring the transfer.
6. Trusts — constructive trust — lack of consideration.
In a suit to establish a constructive trust oral evidence is competent to prove lack of consideration.
7. Trusts — constructive trust — effect of express agreement.
Where on the facts proved a trust would result in the absence of an express agreement the fact that such an agreement was made will not prevent the trust from arising.
8. Trusts — express trusts — statute relating to, application of.
The statute which provides that all trusts in land must be in recorded writing applies only to express trusts, the statute by its own terms excepting from its operation all trusts arising by implication of law.
9. Trusts — constructive trusts — purchaser from constructive trustee with knowledge of the trust.
A purchaser from a constructive trustee, with knowledge of the trusteeship, is not entitled to hold as an innocent purchaser, but takes subject to the trust.
Headnotes as approved by Roberds, J.
APPEAL from the chancery court of Jones County; SAM V. PACK, Special Chancellor.
Melvin Melvin, and Collins Collins, for appellants.
I. Because the warranty deed in question is clear and unambiguous upon its face and vests the complete fee in the grantee, the oral promise of persons holding title to land under a warranty deed, to so re-convey does not create a constructive trust in favor of the grantor of the warranty deed, in view of the statute of frauds. McDowell, et al. v. Minor, 131 So. 278; Smith v. Taylor, 184 So. 423; Carter v. Dobbs, 18 So.2d 747; Lewis, et al. v. Williams, et al., 191 So. 479; Melan v. Paxton, 160 Miss. 562, 134 So. 171; Wax, et al. v. Pope, 168 So. 54; Jackson v. Parker, 15 So.2d 451; Florida Moss Products v. City of Leesburg, 112 So. 572; Horne v. Higgins, 25 So. 489; Metcalf v. Brandon, 58 Miss. 841; Stephens v. Duckworth, 196 So. 219; Campbell v. Bright, et al., 40 So. 3; Miazza v. Yerger et al., 53 Miss. 135; Clearman et al. v. Cotton et al., 6 So. 156; Palmer v. Spencer, 137 So. 491; Mississippi Code 1942; 26 R.C.L. 1244.
II. A parol contract to reconvey lands or to sell or buy land is not prohibited by law but no performance can be compelled by either party to the parol contract under statute of frauds, Section 264, Mississippi Code 1942. Waul v. Kirkman, 27 Miss. 823; Kervin v. Bigelow, 110 So. 232; Hairston v. Jaudon, 42 Miss. 380; McGuire v. Stevens, 42 Miss. 724.
III. Equity will not relieve a person who has voluntarily placed his title in a third person where a fourth person must suffer loss by reason of his act. Biles v. Walker, 83 So. 411; Parker v. Fay and Florer, 43 Miss. 260; Kelso et al. v. Robinson, 161 So. 135; John Nixon's Heirs v. John B. Caro's Heirs, 28 Miss. 414; Dixon v. Green, 24 Miss. 618; Peler et al. v. Hutton, 32 So.2d 785; Bigelow on Estoppel (6th Ed.); 10 R.C.L. Sec. 97, p. 782; 11 Cyc. of Law (2nd Ed.) p. 431; Pomerory's Equity Jurisprudence, 5th Ed. 1941, Vol. 3, p. 190, Sec. 805.
Deavours Hilbun, and W.U. Corley, for appellee.
There are only two issues before the court in this case. One is whether a constructive trust was created by the conveyance of the land by appellee bank to Adcock and the other, whether the appellants, Rutland and Hill, were innocent purchasers for value.
The findings of the chancellor in holding that a constructive trust arose in favor of appellee bank are supported by the rule of law found in American Law Institute, Restatement of the Law of Trusts, Section 44, (1) (b), page 137, and see paragraph 2, comment b.
The appellee submits that the appellant Adcock was proved to be the agent of the appellee for the sale of the land here in controversy. A cardinal requirement of the relationship of principal and agent is that the agent shall be at all times loyal and faithful to the interests of the principal and he can acquire no private interest of his own in opposition to that of his principal. McDowell et al. v. Minor, 158 Miss. 788, 131 So. 278 (1930).
The next question for decision is whether the appellants Rutland and Hill were bona fide purchasers for value without notice.
Appellant Rutland employed competent counsel to examine the records before he purchased the land. See Biles v. Walker, 121 Miss. 98, 83 So. 411 (1920).
At the time this controversy arose and when the examination of the records was made by the examining attorney, certain instruments pertinent to this case were on record in the First Judicial District of Jones County, Mississippi, and in addition to the instruments of record the appellant Adcock testified that he guessed he told the appellant Rutland about the Bradley deed of trust.
The witness Ellsworth testified for appellee that he advised the appellant Rutland that appellant Adcock had no title to the land in controversy before Rutland bought the land. In view of these facts and the further fact that appellant Rutland was the son-in-law of the appellant Adcock and knew of his connection with the bank, we believe that the trial court was entirely justified in finding that the defendant Rutland had actual notice of the claims of appellee bank.
Appellants argue under point number one of their brief that the appellee cannot successfully maintain its suit because of Section 269 of the Code of 1942 Annotated. Appellants evidently overlook the last part of said section which reads as follows: "But where any trust shall arise or result, by implication of law, out of a conveyance of land, such trust or confidence shall be of the like force and effect the same as it would have been if this statute had not been passed." Jackson v. Jefferson, 171 Miss. 774, 158 So. 486 (1935); Cameron v. Lewis, 56 Miss. 76 (1878).
We are to determine on this appeal (1) whether appellant, Adcock, holds title as trustee for appellee Bank, or is himself the owner, of the eighty acres of land here involved, and (2) whether the proof is of such nature and weight as to justify the finding on that question by the Chancellor, and (3) whether appellant, Rutland, is an innocent purchaser of the land.
The conveyances attacked by the bill of the Bank in this cause, in the order of execution, are as follows:
November 19, 1932, a deed from the Bank to Adcock;
February 28, 1941, a deed from Adcock to Rutland;
March 1, 1941, an oil, gas and mineral lease from Rutland to Hill.
March 27, 1941, a timber deed from Rutland to Lowery.
The Bank's bill seeks to set aside these conveyances, as a cloud upon its title, to said eighty acres of land, or to compel a reconveyance thereof by Adcock to the Bank, free of the claims of the other parties, and for a personal decree against Lowery for the value of timber he had cut and removed from said land. The theory of the bill is that Adcock held title as trustee for the Bank and that the other subsequent purchasers had notice, actual or constructive, of the trust relationship, and purchased subject thereto.
The Chancellor sustained the bill except as to Lowery. He found that Lowery was an innocent purchaser of the timber and dismissed the bill as to him. Hill did not appeal and the Bank took no cross appeal from the decree against it in favor of Lowery. Only Adcock and Rutland appeal. Therefore, we decide only the rights of the Bank as against Adcock and Rutland.
First, as to Adcock: On November 19, 1932, the Bank executed to him a deed to the land. The Chancellor found that Adcock held the land as trustee for the Bank and not in his own right. That finding rested largely upon oral and circumstantial evidence. This requires that we determine the competency and sufficiency of the evidence to justify that finding. The conveyance to Adcock appears to have been a special warranty deed, without limitation or qualification as to title, reciting a consideration of $400.00, although the record does not contain this deed or any other conveyance which is attacked.
The proof justified the finding of the following facts:
On and before November 19, 1932, the date of the deed from the Bank to Adcock, and for a number of years prior and subsequent thereto, a total of some nine years altogether, Adcock was an employee of the Bank on a monthly salary. The Bank, during that period, acquired in the conduct of its business and owned a number of tracts of land. It was the duty of Adcock, under his employment by the Bank, to manage, control and look after these lands; rent them out, collect and pay to the Bank rents thereon; see to the proper sale of crops; find purchasers for the lands, reporting to and consulting with the Bank, from time to time, about these matters.
In the discharge of these duties it was found convenient and expedient to place in the name of Adcock unrestricted title to some of the lands. It was thought a better price might be had, and, too, under the conditions then existing, the Bank had not been able to sell and dispossess itself of title to some of the lands within the time required by law, apparently this arrangement being known to and not disapproved by the State Banking Department. A number of tracts had been so handled prior to the execution of the deed in question, and, so far as this record shows, Adcock had not made claim to any personal ownership of lands so held by him, or declined to execute proper deeds thereto for the benefit of the Bank, or make proper accounting to the Bank of the proceeds of land sales, although there is evidence that, near the end of his employment, there was dereliction of duty in reporting rent collections. Pursuant to this custom and arrangement the deed in question was executed, nothing being paid therefor by Adcock. It appears this deed was prepared and executed and placed of record by the Bank without the knowledge of Adcock. The Bank retained possession of the deed. It appears Adcock never knew of its existence, or record, until a short time (the exact time not being shown) before the bill herein was filed. He never saw the deed itself until it was produced by the Bank at the trial of this cause.
In 1933 Adcock had some kind of an arrangement with one Murphy either for rental or purchase of the land, the exact nature and terms of which not being shown. In fact, Adcock testified he did not remember whether the agreement was written or oral. Apparently it was oral. In any event, Murphy moved onto the land. The record discloses, we think, that Murphy understood the land belonged to the Bank and that Adcock was acting for the Bank. Murphy, after remaining upon the land a short time, decided he did not care to go through with the arrangement, whatever it was. He told his friend Bradley of that decision. Bradley thought he might wish to buy the land. The two went to Adcock, who gave them to understand the land belonged to the Bank and it would have to execute the deed to Bradley; whereupon Bradley and Murphy discussed with the Bank Bradley's proposed purchase. Price and terms were agreed upon. Bradley understood the Bank would execute the deed and send it to him later by Adcock. He and Mrs. Bradley executed notes payable to the Bank for the purchase price and a trust deed on the land to secure the notes. These were delivered to the Bank. The Bank understood that Adcock would execute the deed to Bradley. In any event, Bradley became dissatisfied with his purchase and moved away from the property after about a year. The Bradley matters took place in 1934. The Bank retained possession of the notes and trust deed but did not foreclose because it learned that Adcock had not executed the deed to Bradley.
It crops out also that some rental, or prospective purchase, arrangement was made with one Jordan. This appears to have been oral, the terms of which are not disclosed.
The record is silent as to further handling of the land until February 12, 1941, on which date the Bank executed to one Dunbar an oil, gas and mineral lease thereon, which was assigned by Dunbar to an oil company, neither of which is a party to this litigation.
In the meantime, between 1934 and 1941, considerable interest in oil possibilities had developed in the neighborhood of this land. Also, as we construe the testimony of Adcock, it was sometime before 1941, after such oil interest development, he learned the deed had been executed to him, and he conceived the idea he was the owner of the property.
On February 28, 1941, Adcock conveyed the land to Rutland, his son-in-law. It might be added that apparently the first information the Bank had that Adcock was claiming to be the owner of the land was shortly before, or about the time of, the purchase by Rutland. Upon learning of these negotiations the Bank, according to the finding of the Chancellor, and the president of the Bank so testified, informed Rutland it owned the land and that Adcock had title as trustee for the Bank, and if he purchased the land he would purchase a lawsuit. Also the Bank wrote Adcock at least three letters requesting that he reconvey the property to the Bank. Adcock did not outright refuse to execute such conveyance; he simply delayed the matter, saying he wanted to wait a short time.
It might be added, on the point under consideration, that during the years 1932 to, and including, 1935, the land was assessed to and the taxes paid thereon by the Bank; for the years 1936 and 1937 it was assessed to Jordan, who failed to pay the taxes, resulting in a sale thereof, and was redeemed by the Bank; for 1938 it was assessed to and paid by the Bank; in 1939 it was assessed to the Bank, sold to W.H. Ellsworth and redeemed by Adcock; in 1941 it was assessed to the Bank and paid by Adcock.
(Hn 1) It is thus seen that Adcock was an employee of the Bank; that title was vested in him by virtue of this fiduciary relationship; that he paid nothing for it; for a number of years did not know he had title; had never had the deed in his possession; that for several years he dealt with the property as that of the Bank; that he was performing as to the land the duties for which he was employed; that taxes on the land were assessed to and paid by the Bank. That is enough to establish title in Adcock as a constructive trustee for the Bank. (Hn 2) "A constructive trust arises where a conveyance is induced on the agreement of a fiduciary or confidant to hold in trust for a reconveyance or other purpose, where the fiduciary or confidential relation is one upon which the grantor justifiably can and does rely and where the agreement is breached, since a breach of agreement is an abuse of the confidence, and it is not necessary to establish such a trust to show fraud or intent to perform the agreement when it was made. The tendency of the courts is to construe the term `confidence' or `confidential relationship' liberally in favor of the confider and against the confidant, for the purpose of raising a constructive trust on a violation or betrayal thereof." 54 Am. Jur. p. 178, Sec. 233. It is in evidence here that this general arrangement was suggested by Adcock. (Hn 3) "Active conduct on the part of the grantee to bring about the conveyance, especially where there is a fiduciary or confidential relationship between him and the grantor, and the grantee's subsequent failure to carry out his agreement or promise to hold in trust for reconveyance, tend to show fraud or bad faith on the part of the grantee, so as to raise a constructive trust." 54 Am. Jur. p. 179, Sec. 234.
But it is contended by appellants that parol testimony to the effect Adcock agreed to hold the property in trust for the Bank was incompetent, because it contradicted the terms and effect of the special warranty deed to Adcock. Conceding, but not deciding, the point, still (Hn 4) all of the other parol testimony, and all the acts and statements of the parties relative to this situation shown thereby, together with all documents and records, and the circumstances surrounding the parties, were competent, and this was ample to establish a constructive trust, eliminating parol evidence of an express oral agreement to so hold title to the property. Trusts are often deduced from circumstances. Old Ladies' Home Ass'n v. Grubb's Estate, 191 Miss. 250, 199 So. 287, 2 So.2d 593. The intention of the parties may be inferred from the facts, the conduct of the parties and the surrounding circumstances. Sample v. Romine, 193 Miss. 706, 8 So.2d 257, 9 So.2d 643, 10 So.2d 346; Triplett v. Bridgeforth, 205 Miss. 328, 38 So.2d 756. (Hn 5) "Where the owner of land transfers it inter vivos to another in trust for the transferor, but no memorandum properly evidencing the intention to create a trust is signed, the transferee will be compelled to hold the land upon a constructive trust for the transferor, if the transferee at the time of the transfer was in a confidential relation to the transferor. This is true even though at the time of the transfer the transferee intended to perform the oral trust, and even though he was not guilty of undue influence or other abuse of his confidential relation to the transferor in procuring the transfer." A.L.I. Restatement, Trusts, Sec. 4 (1) (b). (Hn 6) Oral evidence was competent to prove lack of consideration. Raleigh State Bank v. Williams, 150 Miss. 766, 117 So. 365. Nor does it follow that because Adcock orally agreed to hold the property in trust, which might contradict the effect of a special warranty deed, the court cannot establish a constructive trust from the other evidence in the case. (Hn 7) "It is well settled by authority that where, on the facts proved, a trust would result in the absence of an express agreement, the fact that such an agreement was made will not prevent the trust from arising." Thomas v. Thomas, 62 Miss. 531; Sample v. Romine, supra.
It is urged by appellants that Section 269, Code 1942, precludes any relief to the Bank herein. (Hn 8) That Section provides that all trusts in land must be in writing and duly recorded, or they are void. That applies, and is confined to, express trusts. The statute expressly states ". . . but where any trust shall arise or result, by implication of law, out of a conveyance of land, such trust or confidence shall be of the like force and effect the same as it would have been if this statute had not been passed." Therefore, since the facts and circumstances here have created a constructive trust in Adcock, the statute has no application to this situation.
As to Rutland: The Chancellor held he was not an innocent purchaser because, first, the records and other facts within the knowledge of Rutland charged him with constructive notice of the trusteeship of Adcock, and because, second, (Hn 9) he had actual knowledge thereof. We do not pass upon the correctness of the first holding for the reason there is ample testimony to support the second.
As stated, Hill did not appeal, but we might say it is undisputed he was a partner with Rutland and chargeable with the knowledge of his partner.
The Chancellor found for Lowery and the Bank does not cross-appeal, therefore, no issue between him and the Bank is before us.
Affirmed.