McRae v. McRae

27 A. 1038, 78 Md. 270, 1893 Md. LEXIS 88

• Court: Court of Appeals of Maryland
• Decided: November 23, 1893
• Status: Published

Opinion

Robinson, C. J.,

delivered the opinion of the Court.

The property out of which this controversy has arisen, being a storehouse and dwelling, was sold at public auction on the 13th March, 1888, by John M. Littig and Jane McRae, trustees, under a decree of the Circuit Court of Baltimore City, and George P. McRae was returned as purchaser, and on the 18th April following the sale was finally ratified. On the 20th April, two days after the ratification of the sale, the purchaser leased the property to his brother, Charles McRae, for a term of five years at a yearly rent of $960, payable in monthly instalments, the .lessor agreeing to pay all taxes, including water rent and expenses of repair; and upon default in the payment of the rent, the lessor was to re-enter, and the lease thereby to be null and void. The lessor further agreed to sell and convey the property to Charles, the lessee, in fee, upon the payment by him, his heirs or personal representatives, of the sum of ten thousand dollars and all arrearages of rent at any time during the continuance of the lease. Under this Charles entered into possession of the premises, and remained in possession until his death in January, 1892. After his death, and within the time designated in the lease, his widow, the complainant, as executrix and devisee under his will, through Mr. Lanahan, her attorney, tendered to George P. McRae, the lessor, ten thousand dollars and all arrearages of rent, and also a deed conveying the property in fee to the complainant. This tender George the vendor refused to accept, and refused also to execute the deed. Thereupon a bill was filed by the complainant, executrix and devisee, against the vendor to enforce the specific performance of the contract of sale. In his answer, George, the vendor, says his wife not being a party to the contract of sale, refuses to join in a deed conveying the property in fee to the complainant, and that all the complainant has a right to demand of him under the contract of sale is a conveyance of the property by him upon the payment of the sum of ten thousand dollars and all arrears of rent subject to the dower therein of his wife. Subsequently an amended bill was filed by the complainant against George P. McRae, and Margaret his wife, alleging that since the filing of the original bill she had discovered that George was not in fact the owner of the property, but that it was purchased by Charles, her husband, at the trustees’ sale, and was paid for by him with the money loaned to him by his brother George, and that the title was conveyed by the trustees merely as a security for the payment of the loan. Now, if these averments be true, if the property was purchased by Charles, and George loaned to him the ten tho usand d ollars to enable him to pay the purchase money, and took the legal title on himself as a security for the payment of the loan, then upon such a state of facts a trust would arise by operation of law in favor of Charles, and the case would fall directly within the decision of Dryden vs. Hanivay, 31 Md., 254. In other words, George would hold the property in trust for Charles, and the deed conveying the legal title to George would be treated in equity merely as a security for the payment of the loan. The burden, however, is upon the complainant to establish the facts upon which the trust rests by clear and satisfactory proof. Now, what is the proof ? In the first place, it is said that the property was struck off to George at the trustees’ sale. And so the auctioneer testifies, but at the same time he says that $6,500 was the highest bona fidt bid made upon the property, and that he himself, by the direction of Mr. Merryman and of George and Charles McRae, both of whom were directly interested in the sale, the property being part of their father’s estate, bid the property up to $10,000, and then struck it off to Charles. Mr. Merryman, who was counsel for all the parties in interest, testifies that the property was struck off to Charles, and that George was substituted as purchaser, because of Charles’ unwillingness or inability to take the purchase money out of his business, and in pursuance of a verbal agreement between George and Charles that the latter should have-the property whenever he paid to George the ten thousand dollars, the same being the purchase money, and that this verbal agreement was embodied in the lease-which was drawn by the witness. And being pressed by the question, he says the lease was understood to be-merely as a security for the payment of $10,000. Now whatever may be the recollection of the witness testifying as to matters which occurred five years ago, one thing is certain, that from the beginning to the end of this lease there is not a line or word from which it can be inferred that it was executed as a security for the-payment of $10,000 loaned by George to Charles, nor as security for the payment of any sum whatever. On the contrary, it is a carefully prepared instrument, by which George, as purchaser and owner, leases the property to Charles for a term of years upon the payment of a stipulated rent. And besides the covenants ordinarily contained in leases, there is an agreement on the part of George' to sell and convey the property in fee to Charles upon the payment of a designated sum, within a designated time.

Then we have the testimony of Mr. Littig, one of the-trustees, and what does he prove? Quoting his exact language, he says: “There was a conversation between George and Charles McRae and the attorney Mr. Merry-man and myself, and there was a verbal understanding; Mr. George McRae had money as I understood out at a low rate of interest, and he was to be substituted for Mr. Charles McRae, with a verbal understanding that Mr. Charles McRae could buy the property back; it was a loan, as I understood it. I understood a lease and agreement was made afterwards covering that verbal understanding. ”

This is substantially the proof relied on to show that Charles was the purchaser, and that the purchase money was loaned to him by George, and that the legal title was conveyed to the latter to secure the payment of the loan. And although these witnesses speak of “understandings,” and how they understood the verbal agreement between George and Charles, yet they all agree that this verbal understanding was reduced to writing, and embodied in the lease prepared by Merryman, one of the witnesses, himself. Row, if the case rested here, it could hardly be said, in the face of the clear and explicit terms of the lease, containing, as all the witnesses say, the agreement between George and Charles, and in the face of the trustees’ deed conveying the legal title to George, that the complainant has offered such proof as the law requires to establish a resulting trust. But the case does not rest here. We have the repeated and unqualified declarations and admissions by Charles himself, made directly after the sale, to a number of persons, among whom were some of his intimate friends, that the property was bought by George, assigning at the same time the reasons why he did not himself buy it. Directly after the sale the witness Black went with George and Charles to the house of the latter, and as soon as they entered the dining-room, Mrs. Charles McRae said, “Charlie, who bought the store?” and he replied, “my brother George,” and then addressing George in an excited manner, she said, “What made you buy the store over Charley’s head?”

Then we have the testimony of Mr. Oapron, who called at the store to inquire about the sale of the property, and he says that Charles told him that George had bought it, and assigned as a reason for not buying it himself, that he could do better with the money in his business. The same thing he said to Mr. Banks, and three days before the sale he told Mr. Schruber, his bookkeeper, that George was to buy the property at $10,000, and that he, Charles, could do better with the money in his business.

So taking the whole testimony together, instead of proving that the property was bought by Charles, and that the purchase money was loaned to him by George, it shows beyond all question, it seems to us, that George was in fact the purchaser, that he paid the entire purchase money, and that in pursuance of an understanding between them, George leased the property to Charles for a term of years with an option on the part of the latter to buy it at a named price and within a given time. And this being so there is no ground on which a resulting trust can be maintained. We come then to the original bill. And here we find a contract on the part of George to sell and convey the property in fee to Charles, his heirs and personal representatives, upon the payment by him of ten thousand dollars, and all arrears of rent at any time within five years from the date of the contract. The purchase money and arrears of rent have been tendered to George and he refuses to convey the property in fee, because his wife declines to join in the conveyance. His wife was not a party to the contract, and if she has an inchoate right of dower in the property this Court has no power to compel her to unite with her husband in the conveyance. The contention however is, that the husband having but an equitable estate in the property at the time he entered into the contract of sale, the contract itself being founded on a good consideration necessarily defeats the dower right of his wife. It is well settled that the wife is only entitled to dower in the equitable estates of which the husband dies possessed. If lie sells and conveys the equitable estate, the dower right is gone. The question then is, whether a contract on the part of the husband to sell his equitable estate will, in equity, bar the claim of his wife to dower in the equitable estate ? We say in equity, for executory contracts for the sale of land, and the rights of parties thereunder are governed by different principles in equity than in law. Such a contract at law in no manner affects the title to the property, nor does it create any interest in, or lien, or charge upon the land itself. The vendor to all intents remains the owner of the land; he may convey or devise it, and upon his death it descends to his heirs. The vendee acquires no interest or property right whatever in the land; his right is a mere right of action to recover compensation or damages for a breach of the contract by the vendor. But not so in equity. In some respects and for some purposes, the contract is executory in equity as well as at law. But upon the principle that equity regards and treats as done what ought to be done, a contract for the sale of land, so far as the interest or estate in the land of the two parties is concerned, will be regarded in a Court of equity as executed and as operating’ to transfer the estate from the vendor and to vest it in the vendee. By the terms of the contract the land ought to be conveyed to the vendee, and the purchase money ought to be paid to the vendor upon the principle that that shall be considered as done which .the parties have contracted to do. And hence the vendor will be treated as a trustee for the purchaser of the estate sold, and the vendee as a trustee for the vendor of the purchase money to be paid. The vendee is in fact considered as the owner of the land, and although the vendor may still retain the title, he holds' it as a trustee for the vendee, to whom all the beneficial interest has passed, with a lien on the estate as security for any unpaid portion of the purchase money. And as the vendor holds the title in trust for the vendee, the equitable estate of the vendee will be good against the vendor’s heirs and devisees, and '-others claiming under her with notice. And if the vendor dies, and the vendee completes the contract by the payment of the purchase money, the money paid becomes assets in the hands of his executors or administrators, to be by them administered with the rest of his personal estate. Thus, for instance, in Farrar vs. Earl of Winterton, 5 Beav., 1, where the testatrix made a will devising real estate, and after making the will contracted to sell the land, and the contract was not fully carried into effect by the payment of the purchase money and the conveyance of the property, Lord Langdale said: “In equity she had alienated the land, and instead of her beneficial interest in the land, she had acquired a title to the purchase money. What was hers in right and equity was not the land but the money, of which she alone had the right to dispose, and though she had a lien upon the land and might have refused to convey, until the money was paid, yet that lien was a mere security, in and to which she had no right or interest, except for the purpose of enabling her to obtain the payment of the money.

If it he conceded then that a sale and conveyance by G-eorge P. McRae of his equitable estate would have defeated the dower right of his wife, for the reason that he had disposed of such equitable estate, it must necessarily follow, that a contract entered into by him founded on a valuable consideration to sell the same must, upon the well settled principles of equity to which we have referred, have the same effect. It must have the same effect for the reason that, by the contract of sale, his interest in the equitable estate has been transferred to the vendee. In other words, the contract of sale is regarded in equity as executed, and as operating to transfer the estate from the vendor and to vest it in the vendee.

(Decided 23rd November, 1893.)

We have not overlooked the case of Bowie vs. Berry, 3 Md. Ch., 262, and some of the views expressed by the Chancellor may be considered as being in conflict with what we have said. No appeal, however, was taken in that case, and although the decision of that able and learned Chancellor upon any question is entitled to great weight, yet the conclusion reached by him is, it seems to us, in conflict with the well settled rules and principles by which contracts for the sale of land are treated and governed in a Court of equity. It follows from what we have said, that the complainant is entitled to a conveyance in fee for the property which the defendant, George P. McRae, agreed to sell to her husband, Charles McRae, upon the payment by her of the ten thousand dollars purchase monej'', and all arrears of rent if any may be due. And as the legal title was conveyed to him by the trustees after the execution of the contract of sale, he will be considered as holding such title as trustee for the vendee. In other words, having sold his equitable estate, he acquired no beneficial interest by the conveyance to him of the legal title. At the same time holding the dry legal title, it is proper that his wife should join in the conveyance to the complainant, and if they should refuse to execute a deed conveying the property in fee to the complainant, a trustee will be appointed to convey the same. It follows from what we have said that the decree below must be reversed and the cause remanded, in order that a decree may be passed in conformity with the views we have expressed.

Decree reversed, and cause remanded.