Cutler v. Babcock

51 N.W. 420, 81 Wis. 195, 1892 Wisc. LEXIS 37

Opinion

PiNNet, J.

The court below decided that the defendant Babcock, by consenting to the foreclosure of the mortgage and to the plaintiff bidding, in the premises on the sale under the foreclosure judgment and the taking of the title to the lots in himself, as set forth in the findings of fact, attempted to create a trust in the two lots in question resting' in parol, which was void under the statute of frauds, and that the plaintiff’s legal title thus acquired must prevail, and therefore allowed him to recover against the defendants the lots in question. Whether this is the correct legal conclusion from the facts found is the only question for decision.

The finding, more briefly stated, is to the effect that, inasmuch as Babcock desired to clear up the title to the premises embraced in the mortgage to the plaintiff, it was agreed between them, at Babcock's request, that the plaintiff should foreclose the mortgage, bid in the property at the sale under the foreclosure judgment, and take a sheriff’s deed thereof, and that he should convey the title to lots 8, 9, 10, and 11, described in the mortgage, upon request, to Cook, and upon like request he should convey to the defendant Babcock lots 17 and 18, upon condition Babcock would pay the costs and expenses oí such proceedings; that the contemplated foreclosure and sale took place, and the premises affected thereby were conveyed to the plaintiff by the sheriff; that, in reliance upon plaintiff’s promise to convey said premises as aforesaid, Babcock permitted the plaintiff to bid in said real estate at said sale and take the title thereto in his own name,— that is to say, he was induced thereby not to take any other measures to secure the title to himself than those contemplated by the agreement. It is stated in the latter portion of the finding that the agreement to convey by plaintiff was “that he would convey said lots to the defendant or such persons as he might designate.”

The plaintiff has performed his part of the agreement so far as lots 8, 9, 10, and 11, which were to be conveyed to Cook, are concerned, the consideration for which lots Bab-cock received Avith plaintiff’s consent, and, indeed, he fully complied with his part of the agreement in all respects ex.cept as to lots 17 and 18, which he refuses to convey to the plaintiff. It is a just inference that Babcock paid the costs and expenses of the proceedings from the fact that the plaintiff made the conveyance to Cook which was to folloAV and not precede such payment, from the long period of time that has elapsed, and the fact that no claim appears to have been made by the plaintiff in the action that Bab-cock had been at any time in default in this or any other respect in performing the agreement on his part. The agreement, therefore, has been fully performed, except as to the conveyance by the plaintiff to the defendant Babcock of the lots in question. The plaintiff insists upon holding and enforcing the legal title so acquired by him, for the reason that, being by parol, it is within sec. 2802, R. S., which is that “ no estate or interest in lands other than leases for a term not exceeding one year, nor any trust or power over or concerning lands, or in any manner relating thereto, shall be created, granted, assigned, surrendered, or declared unless by act or operation of law, or by deed or conveyance in writing, subscribed by the party creating, granting, assigning, surrendering, or declaring the same, or by his lawful agent thereunto authorized in writing; ” and relies upon the case of Rasdall's Adm'rs v. Rasdall, 9 Wis. 379, and other cases of the class to which it belongs. The provisions of this section, however, are subject to those of sec. 2305, R. S., that nothing therein contained “shall be construed to abridge the powers of courts to compel the specific performance of agreements in case of part performance of such agreements.”

The object of the agreement under consideration, and the purchase which the defendant permitted the plaintiff to make, by foregoing, in pursuance thereof, his right to bid in the lots at the sheriff’s sale, and by which alone the plaintiff was allowed and enabled to obtain the legal title, was not the creation of an express trust by parol in the lots in question in contravention of the statute, but, as. found by the trial court, was for the sole purpose of clearing the title of said real estate, and the foreclosure and the purchase at the sheriff’s sale effected by the deed to the plaintiff were successive steps to be performed in the execution of the agreement in question, which was to culminate in the conveyance by the plaintiff to Babcock of the lots when the title should be perfected in the manner contemplated by the parties.

In ascertaining the legal effect of the agreement, it is to be. borne in mind that Babcock, when the agreement was made and the sale took place, was understood to be, and was, the owner of the lots in question, subject to the mortgage to the plaintiff, and was not a mere stra/nger to the title.

The fact that, pursuant to the agreement, Babcock was induced to forego his right to bid in the property, so that the title thereto might be perfected, and the plaintiff was thus enabled to obtain title solely upon the faith of his agreement to convey it to Babcock or to such persons as he might designate, together with the continued possession by the latter for such a long period of years without his right being questioned so far as appears, taken in connection with the conveyance by the plaintiff of the four lots to Cook, in part execution of the agreement, must, we think, be regarded as such acts of part performance as to take the case out of the statute of frauds, and justify the court in decreeing a conveyance of the premises to the defendant Babcock. Part performance of a parol contract is allowed to take it out of the statute and justify a decree for its specific performance upon the ground that it would be inequitable and a fraud upon the part of the one insisting upon the statute if, having by his acts induced his adversary to do acts on his part in part performance of the contract and upon the faith of its further performance by both parties, and for which he cannot well be compensated except by a specific performance of the agreement, he shall be allowed to • repudiate and refuse to perform it on his part. The act or acts of part performance, to have this effect, must be referable to the parol agreement, be in part execution of it, and not be referable to another title, and be an act prejudicial to the party claiming specific performance, and for which he can have no adequate compensation in damages if the agreement be not enforced. Possession, more frequently relied on than any other, is an act of part performance as to both parties to the agreement, in that the owner has allowed the other party to do an act on the faith of the contract, namely, to take and hold possession of the land, which would otherwise be wrongful and would render him a trespasser, and he, on his part, has withdrawn from the land and acquiesced in the possession of the other party as rightful. They are therefore both bound. Pry, Spec. Perf. §§ 575-579; Wat. Spec. Perf. §§ 260-263. Tbe possession, in some oases, may be of an equivocal character, as where a tenant under a lease is already in possession, but holds over and enters into a parol agreement to purchase, in which case, it is said, his existing- and continued possession will be referable to the lease and not to the parol agreement. But in other cases it has been held that the possession of the tenant after the expiration of the lease, where there has been a parol agreement for a renewal, is referable only to the contract for renewal, and is part performance' of such contract. Fry, Spec. Ferf. §§ 575-579, and cases there cited. And the general rule is that the possession, to be available as an act of part performance, must not be merely the continuance of a previous possession, but one given and taken under and in consequence of the parol contract. But this rule is subject to exceptions. A wrongful possession will not be sufficient, but where possession has been taken without consent, or an existing possession has been retained, if the owner has afterwards allowed the party to remain in possession, this, it seems, will amount to an act of part performance of a parol agreement to convey.

In Fisher v. Moolick, 13 Wis. 322, where one who was already in possession under a pre-emption claim entered into a parol agreement with another to enter the land for him which he was so occupying, and to convey it to him on the payment of a certain price, the continued possession of such party, with the knowledge and consent of the person with whom he contracted, was held an act of part performance sufficient to take the case out of the statute of frauds. And in Lincoln v. Wright, 4 De Gex & J. 16-20, a case where a mortgagee with a power of sale sold the mortgaged premises, then in the possession of the mortgagor, and it was verbally agreed, in substance, that another should buy it on behalf of the mortgagor for a certain sum, and that the mortgagor should pay interest and continue to occupy the premises, it was b.elá that bis continued occupation, after the conveyance which extinguished his title, was referable only to the verbal agreement, and amounted to part performance of that agreement, and excluded the operation of the statute.

The continued possession of the premises in question, under a claim of title thereto, by Babcock, for a period of seventeen years between the mortgage sale and the bringing of this action, presumptively with the knowledge and acquiescence of the plaintiff, must, we think, be regarded as referable only to the parol agreement. The foreclosure proceedings had extinguished the title and vested it in the plaintiff, and Babcock's possession during all this long period of time can, we think, be referable only to the parol agreement in question, and must be held sufficient to take it out of the operation of the statute. An agreement by one person to purchase land for another, and the purchase of the same accordingly, under circumstances which would amount to a fraud upon the latter if the former tvere allowed to repudiate his promise, is not within the statute. The purchaser cannot, in such case, be allowed to adopt and use the agreement by which he obtained title, and repudiate its conditions, by which he was to convey it, in execution of the contract, to the other party. In this case the agreement between the plaintiff and defendant Babcock that the plaintiff should purchase the lots at the sheriff’s sale tinder the foreclosure judgment, and acquire a sheriff’s deed thereto, was equivalent to a stipulation on the part of Babcock that he would do nothing to prevent the plaintiff from performing his part of the agreement and obtaining title by means of the foreclosure and sale, as a means of accomplishing the purpose in view, namely, perfecting the title to the lots, and was a renunciation on the part of Babcock of his right, by litigation in the foreclosure suit or by bidding at the sale, to protect his rights and interests by any other means than those provided for by the agreement. Having thus enabled the plaintiff to acquire title to the property under the agreement in question, it would be a fraud on the defendant BabeoeJc if the plaintiff were now permitted to repudiate his promise and obligation to convey according to its terms.

The case, in principle, is. identical, we think, with those of Paine v. Wilcox, 16 Wis. 202-217; Daniels v. Lewis, 16 Wis. 142; and Horn v. Ludington, 32 Wis. 73, In the former case a somewhat similar arrangement existed, where a party permitted a sheriff’s sale to take place, which he might have prevented by further litigation, upon the faith of an oral agreement that the purchaser should reconvey to him or to his use, upon certain terms, under which the sale was allowed to take place; and it was held that “ whenever a party so circumstanced is also in a condition to prevent a sale by further litigation, and he makes an agreement with the adverse party by which the sale is allowed to take place for the purpose of passing the title to a particular person, who is to hold it as security or reconvey it upon certain terms, that it might operate as the grossest fraud upon him if the one who had thus obtained the title might then repudiate the agreement and assume the character only of a general purchaser at a judicial sale. A judicial sale proceeds altogether in invitum. Each party stands upon his own rights, and neither is thrown off his guard or induced to neglect any steps to protect himself. Rut where such sale is allowed to take place for the purpose of executing an amicable arrangement, the most valuable interests might be sacrificed if the party thus getting the title could ignore the agreement and insist on being regarded only as a hostile purchaser. To get a title by means of such an agreement, used to throw the owner off his guard and induce him to abandon his litigation and deliver himself defenseless in the hands of his enemy, and then claim to bold as though the sale had been entirely adverse without any such agreement, is an obvious fraud.” And this was so held on account of the impossibility of restoring a party, who has so far performed his part of the agreement, to his former position, and that his rights can only be preserved by enforcing the agreement on the faith of which he acted. The plaintiff’s conduct, after having obtained the title in the manner and for the purpose stated, is clearly fraudulent as against the defendant Babcock, an4 entitles him to a decree for a conveyance of the property;

Nor is it necessary to rest the right of the defendant Babcock solely on the power of a court of equity to compel the plaintiff to specifically perform his part of the agreement by conveying the lots in question to the defendant. The relief sought may well be rested on the jurisdiction of the court on the ground of fraud by holding the plaintiff liable to convey as a trustee ex maleficio. The defendant, relying upon the promise of the plaintiff to convey to him and thus protect his interests, was induced to refrain from taking any other steps for that purpose, either by litigation or by bidding at the sale, and from which he was, by the terms and purpose of the agreement, precluded. The plaintiff was thus enabled to take to himself the legal title, in order that it might be perfected and conveyed to the defendant, and it will operate as a surprise and fraud on the defendant if the plaintiff is allowed to repudiate his obligation to convey to the defendant and carry out the agreement. The facts of the case justify the belief that, after having made the agreement, the plaintiff perceived his advantage growing out of the confidence created by it, and did not hesitate to use it in order to accomplish the result before us, namely, the acquisition by those means of the legal title, and the subsequent betrayal of the confidence reposed in him, by insisting on the statute of frauds as a means of holding these two lots without having paid or agreed to pay any consideration whatever for them. As against conduct so grossly fraudulent, the defendant is entitled to relief. In Eldredge v. Jenkins, 3 Story, 290, Judge Story held that “ the rule in equity always has been that the statute is not allowed to operate as a protection for a fraud, or as a means of seducing the unwary into a false confidence, whereby their intentions are thwarted or their interests are betrayed.” And in Lincoln v. Wright, 4 De Gex & J. 22, Turner, L. J., held that the case there before •the court needed not the aid of possession as part performance of the agreement, but that the case -was one not of mere trust, but of equitable fraud; that a party could not be allowed to adopt one part of the transaction and repudiate the other. This view of the case is vigorously maintained by Brook v. Chappell, 34 Wis. 413-418; and by Laing v. McKee, 13 Mich. 124; Beegle v. Wentz, 55 Pa. St. 374; Faust v. Haas, 73 Pa. St. 300, 301; Boynton v. Housler, 73 Pa. St. 453. In Wolford v. Herrington, 74 Pa. St, 311-313, it was held that if one having cm interest in land is induced to confide in the verbal promise of another that he will purchase it at sheriff’s sale for the benefit of the former, and in consequence the other is allowed to obtain the legal title, his denial of the confidence is such a fraud as will make him a trustee ex maleficio. The distinction upon which cases such as this have been made to turn is as between one having an interest in the premises to protect by the parol agreement and a mere stranger to the title and estate seeking to enforce such an agreement. That, under the facts found, the plaintiff ought to be held a trustee ex maleficio for the defendant Babcock, is maintained in Arnold v. Cord, 16 Ind. 177; Teague v. Fowler, 56 Ind. 569; Hunt v. Elliott, 80 Ind. 258; Ryan v. Dox, 34 N. Y. 307; Morey v. Herrick, 18 Pa. St. 128, 129; and Rose v. Bates, 12 Mo. 30-51.

We are of;the opinion that the defendants are entitled to judgment in their favor, and that the defendant Babcock is entitled to the relief prayed in his counterclaim.

By the Court.— The judgment of the superior court of Milwaukee county in favor of the plaintiff is reversed, and the cause is remanded to that court with directions to grant the defendant Babcock the relief prayed for in his counterclaim.