Cooper v. Thomason

45 P. 295, 30 Or. 161, 1896 Ore. LEXIS 113

• Court: Oregon Supreme Court
• Decided: June 15, 1896
• Status: Published

Opinion

Mr. Justice Moore,

after stating the facts in the foregoing language, delivered the opinion of the court:

1. It is contended by counsel for the appellants that this is a suit to enforce a parol trust in lands, that the deed from Christian and wife to Cooper, “as trustee,” failed to declare an express trust, and that parol evidence was inadmissible to explain the nature and purposes of the instrument; while counsel for the respondents maintain that the trust has been executed by the trustee with the consent of the beneficiaries, and, this being so, the bar of the statute of frauds is removed, and the door is opened for the admission of parol evidence to establish the material terms of the trust. The parol evidence admitted at the trial, of which the defendants complain, clearly shows that Christian, being indebted to the First National Bank of Independence on his own account, and as a member of the firm of Klemsen & Christian, entered into a contract with Cooper, who was the president of said bank, by the terms of which he agreed to convey said premises to Cooper, who was to sell the same, and out of the proceeds arising therefrom discharge the obligations of Christian and the firm of which he was a member, including any advances that might be made, and pay the remainder, if any, to Christian; that, in pursuance of this agreement, Christian and wife executed to Cooper, “as trustee,” the said deed, without specifying therein the nature of the trust; that Cooper, with the consent of Christian, entered into a verbal contract with Thomason for the sale of said land; that, in accordance therewith, he, as trustee, made to him a deed thereof, which was deposited with Hawley, and accounted with Christian for the payment made by Thomason; and that the bank, on the faith of the conveyance to Cooper, and the sale by him to Thomason, advanced money to Christian and the firm of Klemsen & Christian. The principal question for consideration is whether this evidence was admissible. If it be conceded that this is a suit to establish a parol trust in lands, it must be admitted that its introduction was in contravention of the statute of frauds, which provides that no trust or power concerning real property can be created, transferred, or declared otherwise than by operation of law, or by a conveyance or other instrument in writing, subscribed- by the party creating, transferring, or declaring the same, or by his lawful agent, under written authority, and executed with such formalities as are required by law: Section 781, Hill’s Code.

The rule is universal that a parol declaration of a trust will not affect the land, and for this reason parol evidence is inadmissible to establish such a trust. In Fairchild v. Rasdall, 9 Wis. 379, the court, speaking of the universality of this rule, say: “We do not feel called upon to cite authorities to show that, in the absence of fraud, accident, or mistake, parol evidence cannot be received to prove that a deed, absolute on its face, was given in trust for the benefit of the grantor.” But if it be agreed that the land shall be sold and converted into money, and in pursuance thereof a sale is made, the subsequent declaration of the trust by the trustee will bind the proceeds or the money: x Perry on Trusts and Trustees, § 86. The reason assigned for the existence of this rule is that a trust in personal property may be declared by parol, and a sale of the land by the trustee of a parol trust under an agreement to convert it into money changes the land into personal property, and the subsequent declaration of the trust by the trustee, being supported by the prior agreement to hold the premises in trust, furnishes a sufficient consideration for the enforcement of the declaration: Hon v Hon, 70 Ind. 135; Mohn v. Mohn, 112 Ind. 285 (13 N. E. 859); Maffitt’s Admr. v. Rynd, 69 Pa. St. 380; Wiseman v. Baylor, 69 Tex. 63 (6 S. W. 743). In Karr v. Washburn, 56 Wis. 303 (14 N. W. 189), it is held that a parol trust in land is not absolutely void, but void only at the election of the, trustee. The court, speaking of the power and duty of the trustee under a parol trust in lands, say: “He may execute it or not, as he chooses, and the courts will not interfere to compel him to execute it, or to restrain him from doing so. If he refuses to execute it, from thenceforth the trust, which rests only upon a moral obligation, is a nullity.” Tested by this rule, it appears that the land in question was converted into personal property by Cooper under a parol agreement to apply the proceeds to the satisfaction of Christian’s debts, and that, having executed the trust, he subsequently declared his liability to Christian, and accounted with him for the money received from Thomason. Such a declaration of the trust in personal property rendered Cooper liable to Christian for any balance that might be left after the satisfaction of his debts, and an action could be maintained for its recovery.

2. In such an action parol evidence would be admissible to show the parol declarations of a trust in personal property, and such evidence must be admissible, also, in equity to prove a parol declaration of the trust in land, as a consideration for the subsequent declaration. The deed to Cooper having recited a consideration of $7,000, the conveyance of the land was either absolute or in trust, and, if the latter, the trust'has been fully executed, and the subsequent declaration must take the case out of the statute; but, if the deed was absolute, Cooper would be liable to Christian for the balance of the fund, after the satisfaction of the debts agreed to be paid out of it; and in either case the facts, in our judgment, show a sufficient consideration, as between Cooper and Christian, to support the deed.

3. The conveyance to Cooper transferred the legal title, which must prevail unless defeated by the prior record of Hirschberg’s deed. If Hirschberg, for a valuable consideration, acquired his deed without notice or knowledge of the execution of the prior deed, it must be conceded that he has the paramount legal title. His deed recites a consideration of $6,100, but it is difficult to ascertain from the evidence what amount he has actually paid on account of the purchase. He assumed, however, the payment of a portion of Christian’s indebtedness, and agreed to pay him the balance of the ^purchase price, and this would furnish a valuable consideration for the conveyance. Before Hirschberg accepted the deed, he sent Christian to the First National Bank for a statement of its demand against him, and was furnished a written memorandum showing that the amount thereof was $2,482.47. Concerning this transaction, the cashier of the bank testifies that Christian demanded, and he furnished him, a statement of his individual indebtedness, but that no request was made for a statement of the firm or other notes on which Christian was liable. This statement cannot become the foundation of an equitable estoppel against the bank, so as to preclude it from recovering more than the amount stated in the. written memorandum, because it was furnished upon a request for a statement of Christian’s individual indebtedness, and not for a statement of the whole demand against him. Nor is Hirschberg in a position to invoke such an estoppel, for the reason that his agreement with Christian was to pay $6,100 only on account of the purchase of the premises, and hence the amount of Christian’s indebtedness to the bank was immaterial. Hirschberg caused the records of Polk County to be searched, and, finding that they showed the title to the property to be in Christian, he accepted the deed; and this want of notice by the record would give him a perfect title, if it were not for the existence of certain facts of which he had knowledge.

Christian testifies that he told Hirschberg he had given Cooper some writing concerning the property, but he did not know the nature or character of the instrument, and, on cross examination, further testifies that Hirschberg knew he had given Cooper a deed of trust. Klemsen, the partner of Christian, says he heard Christian tell Hirschberg he had given Cooper a deed to the land. It also appears that Hirschberg, at the time he was negotiating for the purchase, knew that Thomason was in possession of the premises, and had a conversation with him about the payment of his note, but made no inquiry of him in relation to his right of possession. Such possession was sufficient to put a person of ordinary prudence upon inquiry concerning Thomason’s right thereto, and was constructive notice of everything to which that inquiry might lead: Shaw v. Spencer, 100 Mass. 382; Bohlman v. Coffin, 4 Or. 313; Petrain v. Kiernan, 23 Or. 455 (32 Pac. 158). “As a general rule,” says Bean, J., in Exon v. Dancke, 24 Or. 110 (32 Pac. 1045), “the authorities declare that open, notorious, and exclusive possession and occupation of real estate by a stranger to the title is sufficient to put a purchaser from a vendor out of possession upon inquiry as to the legal and equitable rights of the party in possession.” In Pell v. McElroy, 36 Cal. 268, the court, discussing this question, says: “He cannot be regarded as a purchaser in good faith who negligently or willfully closes his eyes to visible, pertinent facts, indicating adverse interest or incumbrances upon the estate he seeks to acquire, and indulges in possibilities ór probabilities,, and acts upon doubtful presumptions, when, by the exercise of prudent, reasonable diligence, he could fully inform himself of the real facts of the case.” We must, therefore, conclude that Hirschberg, at the time of his purchase, had constructive notice of the unrecorded deed to Cooper, if not actual knowledge of the fact, and that his title mitst be subordinate to the equities created by the prior deed. We are strengthened in this conclusion by the fact that Hirschberg’s deed recites a consideration equivalent to the amount evidenced by Thomason’s note, and the further fact that Hirschberg, soon after obtaining his deed, served on Thomason a written notice that this note was payable to him at its maturity. These circumstances tend in no' small degree to show that Hirschberg knew of and acquiesced in the sale made by Cooper.

4. The next question for consideration is whether a court of equity can compel Thomason to specifically perform his oral contract of purchase. In discussing this question, it may be well to consider whether Thomason could compel a specific performance of the contract. The deed executed by Cooper, as trustee, to Thomason, and deposited with Hawley, did not contain the terms of the verbal agreement to convey the premises, and in such case it has been held that a deed deposited in escrow, unless it contained a memorandum of the agreement, was inoperative to take the case out of the statute of frauds: Kopp v. Reiter, 146 Ill. 437 (34 N. E. 942). The payment of the purchase price is not such a part performance of an oral contract to convey land as to overcome the plea of the statute, but possession in pursuance of the terms of the contract, and improvements made upon land, are sufficient for that purpose. When possession, in pursuance of the terms of a verbal agreement to convey land, has been taken by the purchaser, he thereby acquires an equitable estate in the premises; and his notorious occupation thereof is such evidence of his equitable title as to overcome the statute, and renders parol proof admissible to establish the terms of the verbal contract upon the faith of which he has acted. Applying this rule to the case at bar, the evidence shows that Thomason, relying upon the validity of the contract made with Cooper, took and retained the possession of the land, and has made valuable improvements thereon. He alleges that he has been damaged in the sum of $1,000, but the evidence fails to show the value of the improvements made by him. It is the universal rule that courts of equity will enforce a parol contract relating to land within the statute of frauds when the refusal to execute it would amount to practicing a fraud: Browne on the Statute of Frauds, § 438. Where one party has done acts in part execution or upon the faith of the contract, with the knowledge and consent of the other, this will take the case out of the statute: Brown v. Lord, 7 Or. 302; Plymale v. Comstock, 9 Or. 321; Wagonblast v. Whitney, 12 Or. 83 (6 Pac. 399); Wallace v. Scoggins, 18 Or. 502 (17 Am. St. Rep. 749, 21 Pac. 558).

5. It is the equitable estoppel created by force of the acts, or silent acquiescence of the party who would plead the statute of frauds, that prevents him from doing so. There is no doubt that Thomason in a court of equity could have compelled the specific performance of the contract, had he instituted a suit for that purpose; and, this being so, can the plaintiffs enforce the contract against him? To entitle a party to invoke the aid of equity for the enforcement of a verbal contract to convey real property the acts relied upon as part performance to take the case out of the statute must have been done by the plaintiff himself: Browne on the Statute of Frauds, § 453. It is the possesion by the purchaser, in pursuance of the terms of the contract, that entitles him to the specific performance, and, upon the theory of the mutuality of the contract, it is held that the owner should have a right to enforce its terms when he has delivered possession: Pugh v. Good, 3 Watts & S. 56; Waterman’s Specific Performance of Contracts, § 15; Browne on the Statute of Frauds, § 471. -The deed to Cooper transferred the legal title which drew after it the possession (Swift v. Mulkey, 14 Or. 64), and this Cooper, with the consent of Christian, delivered to Thomason. The bank also, relying on the faith of the agreement, advanced money to Christian and to the firm of which he was a member, and, while the payment of the money is not such part performance of a verbal contract as to take the case out of the statute, yet, taken in connection with the delivery of the possession by Cooper as agent for the bank, it was in execution and .amounted to a part performance of the terms of the contract on the part of all the parties to and interested in it, and, as Thomason could compel a specific performance of the contract to convey, the plaintiffs for like reasons are ■entitled to a mutuality of remedies, and can invoke and obtain the aid of a court of equity to compel the specific performance of the agreement to purchase.

6. It is contended that the decree is inoperative in that it requires Cooper to cause Hawley, who is not a party to this suit, to deliver the deed deposited with him to Thomason upon the payment of said note, or, upon the failure of Hawley to so deliver it within thirty days, that Cooper execute to Thomason a new deed, or, if Cooper neglect or refuse to do either within thirty days from the default of Hawley, that the decree operate as and for a deed to Thomason. It is alleged in the complaint that Hawley had offered and was ready and willing to deliver the deed to Thomason upon the payment of the note, and this fact is not denied in the answer. The objection to this part of the decree must prove unavailing, for the defendants, knowing that Hawley was not a party, did not demur for defect of parties. This defect was apparent upon the face of the pleading, and the defendants, by failing to demur, have waived their objection to the nonjoinder: Section 71, Hill’s Code.

7. Besides, Thomason is the real party in interest, who is affected by this portion of the decree, and, not having appealed therefrom, it must be presumed he is satisfied therewith. It follows that the decree is correct..

Affirmed,

Mr. Justice Wolverton, having been of counsel in the trial in the court below, took no part in the trial or decision here.