Majewsky v. Empire Constr. Co., Ltd.

467 P.2d 547, 2 Cal. 3d 478, 85 Cal. Rptr. 819, 1970 Cal. LEXIS 284

• Court: California Supreme Court
• Decided: April 20, 1970
• Docket: S.F. 22671
• Status: Published

Opinions

Opinion

SULLIVAN, J.

In this action to quiet title, plaintiffs Adolfo and Consuaelo Majewsky appeal from a judgment which although declaring them to be the owners of certain real property, decreed that their interest therein was subject to judgment liens in favor of defendants.¹ (Code Civ. Proc., § 674.)²

The evidence which is uncontradicted discloses the following facts. On January 11, 1965, one Allen Waugh entered into an agreement in writing³ with Irving and Beatrice Cuslidge to purchase from the latter a parcel of real property in San Francisco for $11,000. Waugh then endeavored to find a buyer who would pay $12,500 for the property. He approached Fuentes, a real estate broker, who was not interested but who referred him to Gummufsen, another broker.

Mr. Gummufsen contacted plaintiff Adolfo Majewsky, also a real estate broker, who indicated an interest in the property. He provided the latter with a preliminary title report showing that on January 11th the property was vested in Mr. and Mrs. Cuslidge and that it was not subject to any liens or encumbrances. Mr. Majewsky inspected the property, talked to the tenant and eventually informed Gummufsen that he would make an offer on the property. On January 23, 1965, Mr. and Mrs. Majewsky entered into an agreement in writing to purchase the property and improvements for $12,500. The agreement⁴ was signed by Gummufsen “as agent for sellers.”

An escrow was opened at First American Title Company which had issued the preliminary title report mentioned above. The title company’s file for this particular escrow was received in evidence below and has been transmitted to this court. The file contains among other documents, copies of both the agreement of sale dated January 11th and the agreement dated January 23d, as well as instructions by all of the parties. Mr. and Mrs. Cuslidge deposited in the escrow their deed to Allen and Dorothy Waugh with a demand for $11,000; Mr. and Mrs. Waugh deposited their deed to Mr. and Mrs. Majewsky with a demand for $12,500 and instructions to pay $11,000 on delivery of the Cuslidge deed, broker’s commission and other charges and to remit the balance to them. Mr. and Mrs. Majewsky deposited the sum of $11,655.28 representing the balance⁵ due on the purchase price and closing costs with instructions providing for the disbursement of all funds upon delivery of a deed and issuance of a standard form title insurance policy in the amount of $12,500 insuring title to be vested of record in their names subject only to taxes and assessments not delinquent.

Upon the closing of the escrow $11,014.18 was paid to the Cuslidges, $1,109.25 to the Waughs, $375 as commission to the broker and $156.85 to the title company. The deed from the Cuslidges to the Waughs was recorded immediately before the deed from the Waughs to the Majewskys.

Mr. Majewsky repaired and improved the property. When he decided to sell it in September 1965, he ordered a preliminary title report and learned for the first time that the property had been conveyed to him by the Waughs and that his title was subject to judgment liens against the Waughs amounting to approximately $50,000. The Majewskys had never heard of the Waughs before. Shortly thereafter they commenced the instant action.* **⁶

The trial court found and concluded that the subject property was purchased by the Waughs from the Cuslidges for a valuable consideration; that it was then sold by the Waughs to the Majewskys for a valuable consideration; that the only cash deposited in the escrow was that of Majewskys’; that neither Allen nor Doris Waugh acted as trustee for the Majewskys in the purchase and sale transactions; that the judgment liens attached during the period of ownership of the property by the Waughs; and that although plaintiffs Majewsky were the owners, their interest in the property was subject to the liens and plaintiffs were not entitled to a decree quieting title as against such liens. Judgment was entered accordingly.

Since the controlling facts of the controversy are clear and undisputed, and susceptible of but one rational inference, the crucial issue confronting us is one of law. (See Baugh v. Rogers (1944) 24 Cal.2d 200, 206 .[148 P.2d 633, 152 A.L.R. 1043]; cf. Mah See v. North American Acc. Ins. Co. (1923) 190 Cal. 421, 426 [213 P. 42, 26 A.L.R. 123].) We must determine whether the liens of the judgments against the Waughs attached to the property during the brief, indeed minute, period of time in which Mr. and Mrs. Waugh held title. Contending that no liens attached, plaintiffs argue that the Waughs were trustees or mere conduits;⁷ that having no money of their own invested in the property but rather “using” that of plaintiffs, the Waughs “had no right to control the title” but could only “pass it on to plaintiffs”; and that since they had only “naked title” no liens attached. We find no basis in law or in the record for such a claim and have concluded that the decision of the trial court should be upheld. We affirm the judgment.

We think that the uncontradicted evidence establishes, as indeed the trial court determined, that there were here two separate and independent sales of the property, based upon two separate agreements of sale, supported by separate considerations and effectuated by separate conveyances. Apart from the Majewsky agreement of January 23 d and regardless of its continued vitality, eventual performance or sudden demise, the agreement of purchase and sale entered into between the Cuslidges and the Waughs had its own exclusive and individual existence. It made no reference to the later agreement; nor was it conditioned in any way upon the existence or performance of the latter. By the terms of the January 11th agreement, Waugh was bound to purchase the property for the stipulated consideration. There was nothing to prevent his deposit of his own funds in order to carry out the agreement; he could have discharged his obligations as buyer under this agreement leaving a longer interval of time to discharge his obligation as seller under the later agreement. Indeed, if for some reason the later agreement could not be performed, Waugh would nevertheless remain bound to the Cuslidges and required to perform his agreement with them according to its terms, and at the time of performance to pay them the stipulated $11,000 for their deed.

The clear facts of this case show that Waugh contracted to buy from the Cuslidges and then contracted to sell to the Majewskys so that he could make a profit. These were two separate sales in which he participated first as buyer and then as seller; he dealt with each of his opposite contracting parties at arm’s length. He was in no way different from countless others who acquire property in the hope of reselling it at a profit. There is simply nothing in the record before us which makes these two transactions one or which transmogrifies Waugh, the entrepreneur, acting for his own gain, into Waugh,, the trustee, acting in the interest of another.

Nor did these two separate transactions whose individual entities had been already established, become coalesced by being processed in a single escrow or with a simultaneous closing.

The facts of the instant case exemplify what has been called a “middleman” escrow. “A, as seller, and B, as purchaser, give separate instructions to X, escrow holder, for the sale and purchase of Blackacre for $10,000. B, as seller, and C, as purchaser, give separate instructions to X, escrow holder, for the sale of Blackacre for $15,000. B, of course, is acquiring the land from A and reselling it to C at a $5,000 profit. There are technically two escrows; but the escrow holder is the same, the two escrows are to be closed together, and the instructions are often kept in the same portfolio.” (Ogden’s California Real Property Law (1956), § 21.4(4)(c), p. 904, italics added.)⁸

In sum, Mr. and Mrs. Waugh, pursuant to the agreement dated January 11, 1965 with Mr. and Mrs. Cuslidge, acquired the subject property as their own, albeit with the objective in view of reselling it at a profit. At the time of such acquisition there were, and prior thereto had been, judgments outstanding against the Waughs of which abstracts had been properly recorded in San Francisco. Upon recordation of such abstracts with the county recorder each “judgment or decree becomes a lien upon all the real property of the judgment debtor, not exempt from execution, in such county, owned by him at the time, or which he may afterward and before the lien expires, acquire. . . .” (Code Civ. Proc., § 674, italics added.) It is manifest that when the Cuslidges delivered their deed to the Waughs, the latter acquired the subject property as the actual owners on their own behalf,⁹ and not in trust or as agents on behalf of any other person or persons. At the instant of such acquisition, the existing liens attached. To ignore their operative effect because the Waughs immediately conveyed to plaintiffs, would be to frustrate the purpose of the statute and emasculate its provisions by conditioning their efficacy upon the length of time the judgment debtor owned the property. The above statute took effect the instant the judgment debtor acquired the property irrespective of how long he might decide to hold it.

Nevertheless plaintiffs contend that all of the foregoing conclusions must yield to trust principles brought into play by the circumstances that the Waughs in acquiring the property “used” the Majewskys’ money without the latter’s knowledge or consent. As we have said, plaintiffs do not advance a precise thesis, being content with the scattershot attack that the “Waughs were express, resulting or constructive trustees, only.” (Italics added.) However, plaintiffs make no argument that there was an express trust in the instant case, as it seems obvious they cannot (see Rest. 2d Trusts, §§ 2, 23), and we need not consider the point.

All that we can glean from plaintiffs’ briefs is the semblance of an argument that the Waughs’ use of the Majewsky money gave rise to a resulting trust. But a resulting trust, like an express trust, is based on the manifestation of intention of the person creating it. (Rest. 2d Trusts, § 1, com. e, p. 5; see also 4 Witkin, Summary of Cal. Law (7th ed. 1960) Trusts, § 80, p. 2964; 5 Scott, Trusts (3d ed. 1967), § 404.2, p. 3215; § 440.1, p. 3315.) Contrary to plaintiffs’ apparent position here, a “resulting trust is not founded on the simple fact that money or property of one has been used by another to purchase property. It is founded on a relationship between the two, on the fact that as between them, consciously and intentionally, one has advanced the consideration wherewith to make a purchase in the name of the other. The trust arises because it is the natural presumption in such a case that it was their intention that the ostensible purchaser should acquire and hold the property for the one with whose means it was acquired.” (Lezinsky v. Mason Malt W. D. Co. (1921) 185 Cal. 240, 251 [198 P. 884], italics added; see also Berniker v. Berniker (1947) 30 Cal.2d 439, 447 [182 P.2d 557]; Seabury v. Costello (1962) 209 Cal.App.2d 640, 645 [26 Cal.Rptr. 248']; Baskett v. Crook (1948) 86 Cal.App.2d 355, 362 [195 P.2d 39]; Treager v. Friedman (1947) 79 Cal.App.2d 151, 167-168 [179 P.2d 387]; Owings v. Laugharn (1942) 53 Cal.App.2d 789, 792 [128 P.2d 114].) Plaintiffs have not directed our attention to any facts in the present record satisfying the requisite fact of intention. McGee v. Allen (1936) 7 Cal.2d 468 [60 P.2d 1026] and Mercantile Collection Bureau v. Roach (1961) 195 Cal.App.2d 355 [15 Cal.Rptr. 710], cited in support of their claim of a resulting trust are distinguishable on their facts, involve transactions manifesting the requisite intention of the parties, and, therefore, require no detailed consideration.

Apart from the bare assertion quoted above, plaintiffs make no argument and furnish no authorities in support of a claim that the Waughs’ use of the money gave rise to a constructive trust. Since plaintiffs do not press the point, we do not feel obliged to treat it in detail.

The general rule (subject to exceptions not here pertinent) is that “Where a transfer of property is made to one person and the purchase price is paid by another, a resulting trust arises in favor of the person by whom the purchase price is paid, . . .” (Rest. 2d Trusts, § 440, p. 393.) This rule “is applicable not only where the purchase price is paid directly to the vendor by a person other than the transferee, but also where the purchase price is paid to the vendor by the transferee with money or other property belonging to another person with the consent of the other person. Thus, when a transfer of property is made to one person and the purchase price thereof is paid by him with money or other property belonging to another person with the consent of the latter, a resulting trust arises in his favor.” (Rest. 2d Trusts, § 440, com. h, p. 395.) Comment h, however, continues: “If the other person did not consent to the use of his money or other property in making the purchase, or did not consent that the property purchased should be transferred to the transferee, a constructive trust and not a resulting trust arises.” (Accord. Fulton v. Jansen (1893) 99 Cal. 587, 590-591 [34 P. 331]; 5 Scott, op. cit. supra, § 404.2; Bogert, Trusts (2d ed. 1964), § 451, at 498-499.)

Under the last theory, it is conceivable that, in some instances, a person wrongfully using the money of another to acquire title to property would be under the equitable duty to convey it to the former in order to prevent unjust enrichment. (Rest., Restitution, § 160; see also Bainbridge v. Stoner (1940) 16 Cal.2d 423, 428-429 [106 P.2d 423]; 5 Scott, op. cit. supra, § 404.2.) We do not perceive however and plaintiffs do not establish from the record, that the Waughs wrongfully converted or appropriated the Majewskys’ funds and used them to acquire the property within the principles of constructive trusts. Indeed, we would say that the Waughs did not convert or appropriate the funds at all. It is only when the entire middleman escrow, after being closed, is viewed in retrospect that one may say that in effect the Waughs used the funds. But the establishing of a single escrow was due solely to a decision and practice of the title company, apparently a settled and accepted practice in the title insurance field (see Ogden, op. cit. supra), and not due to any act, much less scheme, of the Waughs. The escrow files show that Mr. and Mrs. Majewsky’s money was paid to the title company. Presumably in this type of escrow where the title company, is called upon to make a simultaneous closing of actually two escrows, the title company in taking seller’s instructions from the Waughs on the same day as it took buyer’s instructions from the Majewskys’ (along with the purchase price) took the “short-cut” of crediting the Waughs with the $12,500 coming from the Majewskys’ and debiting them with the $11,000 due the Cuslidges. We cannot impute fraud or wrongdoing to the Waughs, or conclude that they were unjustly enriched, merely because the title company employed such adjustments without requiring the Waughs to deposit cash of their own for the purchase of the property.

The judgment is affirmed.

McComb, J., Peters, J., and Burke, J., concurred.

1 defendants are: Empire Construction Co., Ltd.; Glens Falls Insurance Company (assignee of Empire); United California Bank; and Anderson & Perkins, Inc.

2 Code of Civil Procedure section 674 provides in pertinent part that an “abstract of the judgment or decree of any court of this State, including a judgment of any court sitting as a small claims court, or any court of record of the United States . . . may be recorded with the recorder of any county and from such recording the judgment or decree becomes a lien upon all the real property of the judgment debtor, not exempt from execution, in such county, . . .”

3 A printed form adopted by the San Francisco Real Estate Board and entitled “Uniform Agreement of Sale and Deposit Receipt.”

4 A printed form of Uniform Agreement of Sale and Deposit Receipt identical with that used in the Waugh-Cuslidge transaction (see fn. 3, ante). The January 23d agreement however nowhere contains the names of either the Cuslidges or Waughs.

5 After receiving credit for their deposit of $1,000 paid on execution of the deposit receipt dated January 23, 1965.

6 Plaintiffs inform us that they have already 'received payment from the title insurance company to the extent of the latter’s liability under the policy of title insurance issued plaintiffs but assert that their actual loss exceeds the proceeds of the policy.

7 Plaintiffs assert “The Waughs were express, resulting or constructive trustees, only; or mere conduits, through which title passed.” However, as we explain infra, plaintiffs confine themselves to the point that the facts give rise to a resulting- trust.

8 The confidential character of the multiple instructions in a “middleman” escrow provides additional proof that it actually consists of two escrows. The above cited authority continues: “The rules applicable to disclosure of escrow instructions in this case are as follows:

“A is entitled to see B’s instructions relative to the purchase from A, but he is not entitled to information as to the instructions between B and C.

“B is entitled to see the instructions of either A or C.

“C is entitled to see only the instructions of B concerning the sale from B to C. (Farmer, Escrows, p. 74.)

“X, the escrow holder, is under no legal duty—in fact, it would be a breach of confidence—to inform A or C as to the terms or existence of the escrow to which either is not a party, assuming that the instructions do not expressly demand such information. (Blackburn v. McCoy, 1 C.A.2d 648; Shiver v. Liberty Building-Loan Assn., 16 Cal.2d 296, remarks of J. Carter at p. 308.)” (Ogden, op. cit. supra.)

9 Since, as we have explained, the Waughs became the actual owners of the property, they did not take mere “naked” title. We therefore find inapplicable plaintiffs’ authorities cited for the propostitions that “the lien of a judgment does not attach to a naked title but only to the judgment debtor’s interest in the real estate; and if he has no interest, though possessing the naked title, then no lien attaches. [Citation.]” (Davis v. Perry (1932) 120 Cal.App. 670, 676 [8 P.d 514]; see also Iknoian v. Winter (1928) 94 Cal.App. 223, 225 [270 P. 999].)