Speight v. Branch Banking & Trust Co.

183 S.E. 734, 209 N.C. 563, 1936 N.C. LEXIS 292

• Court: Supreme Court of North Carolina
• Decided: February 26, 1936
• Status: Published

Opinion

Devin, J.

Eeduced to its last analysis, the question here presented is this: When the wife is surety on the note of her husband and executes a mortgage on ber land as security for bis debt, and tbe husband subsequently buys tbe land at a sale under tbe mortgage, pays off tbe debt with bis own money, and takes title to tbe land to himself, will a court of equity impress on tbe legal title thus acquired a trust in favor of tbe wife?

We think tbis question must be answered in tbe affirmative.

It is admitted tbat tbe plaintiff signed tbe note as surety for ber bus-band, James E. Speigbt, and tbat she executed tbe mortgage on ber individual land as security for bis debt. Thereupon, in consequence of tbe relationship of principal and surety thus brought about, James E. Speigbt owed a duty to bis surety with reference to ber property put up as security for bis debt, and be could not, in good conscience, take advantage of tbe lien imposed on tbe land solely for bis benefit, and of tbe position so created, to acquire title to tbe land and bold same in hostility to tbe right of tbe surety, to whom was due complete indemnification. Equity, which acts in personam, would regard him as bolding tbe legal title to tbe property as trustee for tbe benefit of tbe surety. Thus, a trust would be created by tbe operation of law, and it would fall into tbe category denominated in equity jurisprudence as a constructive trust.

“Constructive trusts arise by pure implication of equity without regard to tbe intention of tbe parties, or, necessarily, tbe frustration of fraud.” Bispham’s Eq., sec. 91.

One of tbe most ordinary trusts of tbis kind is tbat which grows out of tbe rule of law forbidding one occupying a fiduciary or qwosi-fiduciary position from gaining any personal advantage touching tbe property as to which tbe fiduciary position exists. Bispbam’s Eq., sec. 92; Avery v. Stewart, 136 N. C., 426.

We quote from Pomeroy on Equity Jurisprudence, sec. 1044, as follows : “Constructive trusts include all those instances in which a trust is raised by tbe doctrines of equity for tbe purpose of working out justice in tbe most efficient manner, where there is no intention of tbe parties to create such a relation, and in most cases contrary to tbe intention of tbe one bolding tbe legal title, and where there is no express or implied, written or verbal, declaration of tbe trust. They arise when the legal title to property is obtained by a person in violation, express or implied, of some duty owed to the one who is equitably entitled, and when the property thus obtained is held in hostility to his beneficial rights of ownership.”

A constructive trust has been concisely defined as “one not created by any words, either expressly or impliedly evincing a direct intention to create a trust, but only by the construction and operation of equity in order to satisfy the demands of justice.” 65 C. J., 223, 224.

It seems to be a well settled rule that if one person obtain legal title to property by the violation of a fiduciary relationship, or in any other unconscientious manner, equity will impress a constructive trust upon the property in favor of one who is in good conscience entitled to it. And this applies where such person owes some duty or obligation with respect to the property. 26 R. C. L., 1236, 1237.

Equity applies the principles of constructive trusts wherever it is necessary for the obtaining of complete justice, although the law may also give the remedy of damages against the wrongdoer. Pomeroy Eq. Jur., sec. 1053; Edwards v. Culberson, 111 N. C., 342.

The principle is stated in Pomeroy’s Equity Jurisprudence that while ordinarily constructive trusts, properly so called, may be referred to what equity denominates fraud, actual or constructive, many instances spring from the violation of some fiduciary obligation, and in them “there is, latent perhaps, but none the less real, the necessary element of that unconscientious conduct which equity calls constructive fraud.” Pom. Eq. Jur., sec. 1044.

The equitable doctrine of constructive trusts is fully discussed in two well considered opinions from this Court, one by Walker, J., in Lefkowitz v. Silver, 182 N. C., 348, and the other by Adams, J., in Bryant v. Bryant, 193 N. C., 372.

It was held in Jordan v. Simmons, 169 N. C., 140, that a husband, who had the management and control of his wife’s property, should not be allowed to buy her property at a tax sale without her knowledge or consent, and hold same adversely to her. Ruark v. Harper, 178 N. C., 249.

It is apparent that the equitable principles herein stated apply to the facts in the case before us.

There is no question here of laches, or of affirmance by acquiescence on the part of the plaintiff. These could only arise after knowledge, and here it is expressly agreed that the plaintiff had no knowledge or information that the deed to her land had been made to James E. Speight until shortly before this suit.

The judgment of the court below that the plaintiff is the equitable owner of the described land is

Affirmed.