HIDDEN v. JORDAN, 21 Cal. 92

Cope, J. delivered the opinion of the Court Field, C. J. and Norton, J. concurring. This is an action to compel the defendant to convey to the plaintiff a tract of land in the county of Solano. As we understand the case, the plaintiff employed the defendant to purchase the land for him, advancing a portion of the purchase money, and agreeing with the defendant as to the payment of the balance. The defendant paid upon the purchase, in addition to the amount advanced by the plaintiff, the sum of $4,000, and executed his notes for the further sum of $1,780, taking the deed in his own name.

The pleadings are voluminous and somewhat complicated; but the facts, as alleged and proved, show that the money, paid by the defendant was intended as a loan, and that he took the deed merely as security. His position is analogous to that of a mortgagee with a conveyance absolute on its face, and he has no higher or other rights than those of a creditor having a lien upon the property of his debtor. The evidence establishes conclusively the relation of debtor and creditor between the parties, and this relation created at the inception of the transaction determines its character forever afterwards.

The proof consists entirely of verbal testimony, but the facts are clearly made out, and it would be grossly inequitable to deprive the plaintiff of the fruits of the purchase. The Court below held that he was entitled to an undivided interest in proportion to the amount of money which he had paid, and decreed a resulting trust in his favor to that extent. We think he is entitled to the whole land, and the conclusion arrived at by the learned Judge who decided the case, seems to have been based upon the pleadings, and not upon the merits of the controversy.

The complaint was filed in November, 1858, and the summons issued on the thirteenth of January, 1859, and on the seventeenth of the same month a supplemental complaint was filed setting up certain matters occurring subsequently to the filing of the original. It is alleged in the supplemental complaint that on the third of January, 1859, the plaintiff tendered to the defendant the amount due him for money paid upon the purchase, and that he refused to receive the same, etc.

The defendant answered to both complaints, but the Court, deeming the supplemental complaint to have been improperly filed, refused to consider it, and disregarded the evidence adduced in support of it. The objection was not taken by the defendant, but the case throughout, so far as the parties are concerned, was conducted upon the understanding that the supplemental complaint constituted a part of the. pleadings. Under these circumstances, we think the .Court had no right to reject it, or disregard the evidence, but should have treated it as the parties had treated it, as properly in the case.

As the matters involved in this branch of the controversy were not passed upon, they are not now before us for consideration, and the most that we can say is that they ought not to have been excluded. The counsel for the defendant relies upon the statute of frauds, and contends that in the absence of a written agreement or memorandum, the facts stated are insufficient to charge the defendant as a trustee.

Admitting, however, that there is a resulting trust, as decreed by the Court below, he claims that an agreement resting in parol merely cannot be given in evidence to establish a trust as to the balance of the land.

It is clear that to the extent of the purchase money paid by the plaintiff, the case falls within the doctrine of resulting trusts, and trusts arising by implication. of law are expressly excluded from the operation of the statute. “ Where,” says Story, “ a man buys land in the name of another, and pays the consideration money, the land will generally be held by the grantee in trust for the person who so pays the consideration. This, as an established doctrine, is now not open to controversy.

The clear result of all the cases, without a single exception, is that the trust of the legal estate, whether freehold, copyhold, or leasehold— whether taken in the names of the purchaser and others jointly, or in the name of others, without the purchaser, results to the man who advances the purchase money. This is a general proposition, supported by all the cases, and there is nothing to contradict it.” (2 Story's Eq. sec. 1,201.) It seems formerly to have been doubted whether a resulting trust could be sustained, where only a part of the consideration was paid by the person seeking to enforce the trust.

In Crop v. Norton (9 Mod. 233) Lord Hardwieke held that it could not; but this is the only authority we have been able to find to that effect, and there are several English as well as American cases to the contrary. The English cases are referred to by Mr. Chancellor Kent, in Botsford v. Burr, (2 Johns. Ch. 404) and he comes to the conclusion that payment of part of the consideration carries with it a proportional interest in the land. This we understand now to be the settled rule, and it appears to us to be the logical and necessary result of the principle upon which trusts of this character are maintained.

The second point suggested is one of more difficulty, but we think that as the plaintiff advanced a portion of the purchase money, the whole transaction is open to inquiry. He parted with his money upon the faith of his engagement with the defendant, the latter receiving it, agreeing to act as his agent and purchase the land for him. The statute was intended to prevent frauds, and not to encourage and sustain them, and in matters of trust and confidence, where there has been a violation of good faith, no protection is afforded by it. In Bartlett v.

Pickersgill, (2 Eden, 515) it was held, that a verbal agreement by the defendant to purchase an estate for the plaintiff could not be given in evidence to establish a resulting trust. But Lord Keeper Henley, in the opinion delivered, said: “ If the plaintiff had paid any part of the purchase money, it would have been a reason for me to admit the evidence.” This is precisely the case at bar, and the principle at the bottom is, that the party having paid his money in consideration of the agreement, it would be a fraud in the agent to refuse to carry it out.

The fact of the agency is a material circumstance, and in Lees v. Nuttall (1 Russ. & M. 53) that fact alone was regarded as sufficient, no money having been paid, and nothing appearing but the agency and the purchase. This decision goes further than it is necessary to go in the present case—further, perhaps, than the general current of authorities upon the subject—and is not easily reconciled with the decision in Bartlett v. Pickersgill.

It may be said in reference to the decision, however, that the agent had not been employed to obtain a conveyance, but to make a contract for the purchase, the conveyance to be made to the principal. In becoming himself the purchaser, he had violated the confidence reposed in him and committed a fraudulent breach of trust, to the prejudice of his employer, inflicting a wrong which the Court considered itself called upon to redress.

Undoubtedly the ground taken was that of fraud, and in view of the particular circumstances of the case, it would be going a great way to- affirm with certainty that the decision was wrong in principle. The same rule was applied in Taylor v. Salmon, (4 M. & C. 134) where an agent who had been employed to procure a lease of certain mines had taken the lease in his own name.

The Lord Chancellor, in deciding the case, said: “ If Salmon, at the time when he entered into the agreement with Lord Dunnalley, was acting as the agent of the plaintiff, Taylor, in negotiating for the lease, it is not material whether at that moment he intended that the agreement should be for the benefit of the plaintiff, or for his own; because in either case the plaintiff would be entitled, as against him, to the benefit of the contract.” Judge Story, in Jenkins v. Eldridge, (3 Story C.

C. 181) says, that “ the rule in equity always has been, that the statute is not to be allowed as a protection to fraud, or as a means of seducing the unwary into false confidence, whereby their intentions are thwarted, or their interests betrayed.” He cites the case of Montacute v. Maxwell, (1 P.

Will. 618) where it was said that “ in cases of fraud, equity would relieve even against the words of the statute; but where there is no fraud, only relying upon the honor, word, or promise of the defendant, the statute making those promises void, equity will not interfere.” In respect to that case, he says: “ The case itself seems originally to have stood upon a peculiar ground, that marriage is not a part performance to take the case out of the statute, contrary to the common rule in other cases within the statute; and has been so understood by subsequent Judges.

In its general language, the case affirms the doctrine that fraud takes the case out of the statute, even in cases of agreements in consideration of marriage.

The other language, that it is otherwise where there is no fraud, but reliance is placed solely upon the honor, word, or promise of the party, must be limited to cases of marriage, and certainly is inapplicable to cases where there has been a part performance or execution of the agreement on the other side.” This, however, resolves itself into a matter of fraud, for the distinct ground upon which Courts of Equity interfere in cases of part performance is, that without such interference one party would be enabled to practise a fraud upon the other.

The same learned Judge so declares in his work on equity jurisprudence, and adds that “ it could never be the intention of the statute to enable a party to commit such a fraud with impunity.” (2 Story's Eq. sec. 759.) The rule that fraud takes the case out of the statute is too well settled to admit of doubt, and for the purpose of showing that a fraud has been committed, or is being attempted, parol evidence has always been held to be admissible.

The difficulty has been in determining what amounted to fraud in the particular ease, and to this difficulty is referable those conflicts of opinion which seem occasionally to have trenched upon the rule itself. The rule, however, is universally acknowledged, and there is no case in which the conduct of the defendant was held to be fraudulent that he has been allowed to shelter himself behind the statute. The cases themselves are too numerous for us to attempt even a partial examination of them, nor is it necessary for the purposes of this case that we should do so, for the principle is recognized by all.

The defendant is acting in violation of his agreement, and the fact that this agreement related to a matter of trust and confidence, coupled with the fact of the payment of money by the plaintiff, is undoubtedly sufficient to avoid the statute. What the defendant undertook to do was to purchase the land; not a part of it, but the whole; not for himself, but for the plaintiff; and what he is attempting to do is to deprive the plaintiff of the benefit of the purchase. This, according to the decision in Bartlett v.

Pickersgill, he might succeed in doing, if the whole of the purchase money had been paid by himself; but as the plaintiff paid a portion of it, he is entitled to have the agreement enforced. The money was paid with the understanding that he was to have the entire estate, and the defendant agreed that he should have it, and became his agent for the purchase, received the money and bought the land. The plaintiff cannot be required to take less than the whole, for that was his bargain; and to allow the defendant to force him into the position of a joint purchaser, would be to sanction and legalize a fraud.

It is true, the rejection of the agreement would not compel him to take a part of the land, for he could sue and recover the money; but there is nothing in this to reheve the .conduct of the defendant from the imputation of fraud. He received the money in trust, agreeing to invest it for the benefit of the plaintiff, and having made the investment, to refuse for his own advantage to carry out the trust, is a fraud of the grossest character.

We are unable, in any view of the case, to regard the matter otherwise than a fraud; and our conclusion is, that the judgment of the Court below should be reversed, and the cause remanded for a. new trial. Ordered accordingly.