MOORE v. DE BERNARDI
Moore v. De Bernardi
Ducker, C. J.: I concur in the order.
MOORE v. DE BERNARDI
No. 2556
MOORE v. DE BERNARDI
April 7, 1923.
213 Pac. 1041.
1. Appeal and Error — Finding of Trial Court Conclusive on Appellate Court when Evidence Is Conflicting.
Whore there is a substantial conflict in the evidence, the finding of the trial court is conclusive upon the appellate court in the absence of a showing that a wrong conclusion was readied.
2. Appeal and Error — Where Finding Assailed as Being Contrary to Evidence, Court Deemed to Have Found as Truk Evidence Favorable to Prevailing Party.
The rule which governs the appellate court in reversing a verdict alleged to he contrary to the evidence, that the jury must he deemed to have found to be true the evidence that is most favorable to the prevailing party, applies to findings by court.
3. Attorney and Client — Attorney's Authority to Bind Client Extends to Acts Necessary' for Prosecution of Business for which Employed.
An attorney’s authority to hind his client extends only to such acts and agreements as are necessary for the due prosecution of the business in connection with which he has been employed, and lie has no implied poiver to bind his client by an agreement collateral to and independent of the subject-matter of his employment.
4. Attorney and Client — Client Not Bound by Unauthorized Agreement of Attorney to Convey Land.
A client is not hound by au unauthorized agreement of his attorney to convey land.
5. Trusts — Evidence Held to Establish Agreement whereby Bank Agreed to Foreclose Property' for Benefit of Occupant.
Evidence held to show that defendant bank, through its cashier, made a parol agreement with defendant occupant of land whereby hank agreed to proceed -with foreclosure of property for occupant’s use and benefit, and convey the legal title to him for a consideration upon acquiring the legal title after period of redemption expired.
(i. Frauds. Statute of — Refusal to Perform a Void Parol Agreement In Not a Fraud in Daw oh in Equity.
The mere refusal to perform a parol agreement, void under the statute, may he a moral wrong, hut it is not a fraud in law or in equity.
7. Frauds, Statute ok — Refusal to Perform Parol Agreement to Convey Land Not, of Itself. Sufficient to Take Agreement Out of Statute.
A refusal of a bank to carry out its parol agreement (o convey land to defendant for a consideration after the bank obtained sheriff’s deed held not, of itself, a breach tainted with fraud to take the agreement out of the statute of frauds.
8. Trusts — Trusts lex Maleficio Excepted from Operation of Statute of Fra tins.
Trusts ox maleficio are excepted from tlie operation of the statute of frauds.
!). Trusts — Violation of Parol Agreement to Foreclose Property for Benefit of Occupant Holding Interest in Land Held to Create Trust ex Maleficio.
Where defendant occupant of land had an existing interest therein with the mortgagor, but, in reliance upon a parol agreement with the mortgagee bank that the latter would foreclose for defendant’s use and benefit, and convey land to him upon acquiring title,- if he would not become a bidder to protect his interest in the property, defendant refrained from protecting his interest so that he could acquire title to the land in its perfected state through the foreclosure proceeding. held, that the refusal of the bank to convey was such a fraud as operated to convert tlie bank into a trustee ex maleficio.
10. Trusts — Purchaser at Foreclosure Sale Taking Title for Another, hut Violating Ills Trust, Becomes Trustee ex Maleficio.
Where one having an interest in land is induced to confide in the verbal promise of another that he will purchase for the benefit of the former at a sheriff’s sale, and in pursuance of such promise allows him to become the holder of the legal title, a subsequent denial by the purchaser of the confidence is such a fraud as will convert the purchaser into a trustee ex maleficio.
11. Trusts — Conventional Uelation of Trustee and Cestui Que Trust Need Not Exist to Create Constructive Trust.
T<> create a constructive trust it is not necessary that a conventional relation of trustee and cestui que trust, or that any express fiduciary relation should exist between original wrongdoer and the beneficial owner of land, since such relations arise in invitum for tlie purpose of working out justice in tlie most efficient manner.
12. Trusts — Trust Agreement May Not Be Avoided Because Promising Party Was .Moved by Benevolent Considerations Only'.
A trust may not be avoided on the ground that the party promising was moved merely by benevolent considerations, since such considerations constitute the foundation of almost every trust, and a trustee should be held to account in the same spirit in which he originally contracted.
Appeal from Second Judicial District Court, Washoe County; Edward F. Lunsford, Judge.
Action by Kate Moore against Rick De Bernardi, in which the Washoe County Bank was made a defendant. Decree for defendant De Bernardi, and plaintiff appeals.
Affirmed. On rehearing, this opinion affirmed.
Sardis Summerfield, for Appellant:
Specific performance to convey land made by attorneys of parties to action in which land is in dispute, will not be decreed in absence of specific authority in such attorneys to make contract. Hagerman v. Bates, 38 Pac. 1100. No such agreement is valid unless affirmed and ratified by the principals. Bank v. McEwen, 76 N. E. 222.
Ordinarily there is no implied power vested in attorney at law to bind his client by contract. Haselton v. Florentine Co., 94 Fed. 701; Haynes v. Tacoma Co., 34 Pac. 922.
A general retainer does not authorize attorney to enter into agreements regarding his client’s property. Hagerman v. Bates, supra; Scully v. Book, 28 Pac.'556; 4 Cyc. 945-6; Weeks on Attorneys at Law, sec. 219.
Constructive trusts do not arise by agreement or from intention, but from operation of law. 39 Cyc. 169; Bowler v. Curler, 21 Nev. 161; 28 R. C. L. 1232.
Though some decisions apparently hold to the contrary, it is the generally accepted rule that mere verbal agreement, by which one of the parties thereto promises to buy in at judicial sale, lands in which the other has interest and to hold same for latter’s benefit,does not, in absence of other circumstances, create trust enforceable in equity, even though the agreement is carried out to extent that promisor acquires property at such sale. The agreement is within the statute of frauds. 26 R. C. L. 1244; Strasner v. Carroll, 187 S. W. 1057; Minot v. Mitchell, 95 Am. Dec. 685, and note.
Specific performance of contracts to sell land will not be enforced when defendant had no title to lands of which conveyance is sought to be compelled. Kennedy v. Hazelton, 32 L. Ed. 576; Adair v. Adair (Or.), 29 Pac. 193.
Specific performance will never be decreed where the party can otherwise be fully compensated. Memphis v. Brown (U. S:), 22 L. Ed. 264; Texas Co. v. Central Co., 194 Fed. 1.
A constructive trust always arises ex maleficio; it is constructed by law, and not by parties. If parties have attempted to construct it, the law will not construct one. Through failure to comply with the statute it becomes an invalid express trust. Spaulding v. Collins (Wash.), 99 Pac. 306.
Continued possession by grantor after full conveyance by him while in possession of property conveyed is not constructive notice. Brophy M. Co. v. B. & D. M. Co., 15 Nev. T13, which refused to follow Pell v. McElroy, 36 Cal. 268, but which was cited with approval in McDonald v. Fox, 20 Nev. 368; Gruber v. Baker, 20 Nev. 462.
Boycl & Curler, for Respondent:
The whole case involves itself around the separate defense and counterclaim of defendant, and the principles of equity upon which he believes he is entitled to judgment in his favor. The evidence clearly establishes a constructive trust in favor of respondent, by virtue of his agreement with the bank. It is evident from all the facts in this case that the fraud complained of — that is, the neglect and refusal of the bank to notify respondent of amount due and to give him the deed— immediately impressed the property with a constructive trust, and this trust followed property to vendee of bank, unless such vendee could show that she was a bona-fide purchaser without notice. Such property is taken completely out of statute of frauds.
Courts of equity have exercised their powers to enforce contracts which in good faith ought to be complied with and will do this by impressing property with a trust for use and benefit of one who would be defrauded unless court of equity gave its aid in enforcing agreement. Pomeroy (2d ed.),sec. 1044.
Where a person acquired legal title to land by an intentionally false verbal promise and seeks to retain property as his own equity will not regard such person as holding property charged with a constructive trust, and will compel him to fulfil trust by conveying according to his agreement. Isenberg v. Goldsmith, 113 Pac. 1127; Pomeroy (2d ed.),1005, and footnote; Brown’s Estate v. Stair, 136 Pac. 1003.
Equity will not permit statute of frauds to be used as instrument of fraud. When person, through influence of confidential relation, acquires title to property, or obtains advantage which he cannot conscientiously retain, the court will grant relief. Bowler v. Curler, 21 Nev. 158; Nehls v. Stock Farming Co., 43 Nev. 261.
It is well established that the open, visible, notorious, and exclusive possession of land is either notice itself of rights of party in possession, or is sufficient to put person upon inquiry. Delvin on Deeds, secs. 760, 762, 764, 769.
The simple, independent fact of possession is sufficient. to raise presumption of interest in occupant. He cannot be regarded as purchaser in good faith who negligently and wilfully closes his eyes to pertinent facts indicating adverse possession, when he could, with reasonable diligence, have informed himself of facts. Pell v. McElroy, 36 Cal. 273; 75 Cal. 131; 82 Cal. 117.
It is purchaser’s duty to know who is in possession before making purchase; otherwise he could purposely avoid any inquiry and evade rule and its consequences entirely. Scheerer v. Cuddy, 85 Cal. 273. If he has notice of occupant’s title before payment, he is not bona-fide purchaser. Eversdon v. Mayhew, 65 Cal. 163; and burden is upon such purchaser to show he had no notice. Wilhoit v. Lyons, 98 Cal. 409; Beattie v. Crewdson, 124 Cal. 579.
By the Court,
Sanders, J.:
Kate Moore, a married woman, in her own right as owner, sued Rick De Bernardi to recover possession of a certain parcel of land in Washoe County, situate near the western limits of the city of Reno, which bears the name of "Rick's Resort" or "Roadhouse," and demanded in her complaint judgment for $150 per month as rental from the 22d day of July, 1920, until possession be delivered. The defendant answered, and by way of counterclaim interpleaded the Washoe County Bank as a party defendant, and alleged facts to show that said bank and plaintiff hold the land in trust for his use and benefit.
Upon extended findings of facts following closely the averments of the counterclaim, which are too lengthy to be set out, the trial court concluded as a matter of law that the conveyance of the land by the Washoe County Bank to Kate Moore, on the 22d day of July, 1920, if permitted to stand, would operate as a fraud upon the rights of the defendant; that in virtue of an agreement, set up in the counterclaim, between the bank and the defendant, a constructive trust had arisen in defendant's favor in the land; and that plaintiff, Kate Moore, purchased the property from the bank with full knowledge of said agreement. Thereupon it was adjudged, ordered, and decreed that said parties convey to the defendant the land in controversy, free and clear from all incumbrances, upon condition that the defendant pay to the Washoe County Bank $6,336.09, or deposit that amount of money into court for its use and benefit, and that the bank, on the payment of said sum, cancel of record a certain mortgage given it by Kate Moore and her husband, M. B. Moore, which bears date on the 22d day of July, 1920. The Washoe County Bank has not appealed, but Kate Moore, the plaintiff, appeals from said judgment and decree, and also from, an order denying and overruling her motion for a new trial.
While numerous errors are assigned upon exceptions taken to rulings in the course of the trial with respect to the admission and rejection of evidence, the material assignments of error, reduced to precise terms, are: First, that the agreement set up in the counterclaim and purported to be established by the findings was, in fact, a mere parol agreement entered into by one of the firm of attorneys for the bank, who had charge of the bank's action brought against one Constance Parker and Rick De Bernardi to foreclose a mortgage on the land, which had been given the bank by Constance Parker in her own name, in May, 1914, and that said agreement was made and entered into by said bank's attorney without its authorization and ratification. Second, that, if said agreement was established by sufficient and legal evidence, it not being in writing, it was within the condemnation of the statute of frauds. Third, that the evidence is insufficient to support the finding that Kate Moore purchased the property in dispute with notice of the defendant's claim of right and interest in the property.
If there be merit to the last proposition, it is decisive of the appeal, because, if Kate Moore was a purchaser in good faith and without notice, she acquired by her deed a higher right, and took the property relieved of any trust that may have been created by the alleged agreement between her grantor and the defendant. The finding with respect to actual notice, and averred in the counterclaim, is, in substance, that on the 19th day of July, 1920, the defendant notified Kate Moore, by and through her husband, M. B. Moore, who acted as her agent, that the Washoe County Bank purchased the property for the defendant's use and benefit at a sheriff's sale thereof, and that the defendant would insist upon his rights under his contract, and at the same time informed said agent of the terms and conditions of the agreement existing between the defendant and the bank, and that prior to July 22, 1920, plaintiff was fully aware of the fact that the bank had purchased the property at a sheriff's sale for the use and benefit of the defendant.
The evidence in support of the finding is based solely on the testimony of James T. Boyd, an attorney of record in this case, the substance of which was that M. B. Moore visited his residence for the purpose of ascertaining from him what his client, Rick De Bernardi, intended doing about the property in dispute. The evidence opposed to his testimony in this particular is that of the witness M. B. Moore, who testified, in substance, that no such conversation was ever had at the time and place stated by Boyd, or at all. The testimony of these witnesses in all material respects is not only in sharp, but irreconcilable, conflict on the material fact of notice. Hence, in order for the trial judge to have found that the witness Boyd, on the date mentioned, informed the witness Moore of the existence of the agreement in question, and of its terms and conditions, he must have acted upon the truth of the testimony of Boyd and rejected the testimony of Moore. There being, then, a substantial conflict in the evidence, under the rule, the finding is conclusive upon this court. Dixon v. Miller, 43 Nev. 280, 184 Pac. 926, and cases cited.
It has been repeatedly held that, in cases tried by the court without a jury, the same consideration is given the court's findings as to a verdict, and the same rules apply as to reversing them on appeal, on the ground that they are contrary to the evidence, as apply to a verdict. In such a case the rule is the same as that which governs the court in reviewing a judgment entered upon the verdict of a jury, which is that the jury must be deemed to have found to be true the evidence that is most favorable to the prevailing party. Canda v. Totten, 157 N. Y. 286, 51 N. E. 989. We, therefore, in the absence of anything to show that the court reached a wrong conclusion, decline to disturb the finding that Kate Moore was not a purchaser without notice of the defendant's claim to the property.
In this connection it is proper to state that we ignore the argument that Kate Moore had constructive notice of the defendant's right and claim to the property by reason of his long-continued occupancy and possession thereof, for the reason that it is not within the issue, which was that Kate Moore had actual notice of the agreement existing between the defendant and her grantor when she purchased the property and gave a mortgage back to the bank to secure the balance due on its purchase price. The relief granted defendant was upon the ground that a constructive trust was created by the agreement between the defendant and the bank, which the latter was bound to execute, of which agreement creating the trust Kate Moore had actual notice.
It is next argued on behalf of Kate Moore, as the successor in interest of her grantor, the Washoe County Bank, that the agreement between said bank and the defendant, upon which the relief as prayed in the defendant's counterclaim was granted, is not established by sufficient or legal evidence and, in the next place, if said agreement was so established, it is not in writing, and therefore within the rule of the statute of frauds. We are of opinion that the agreement was established by sufficient and competent evidence, but the question of whether the conclusion of law that a constructive trust had arisen by virtue of the agreement which the Washoe County Bank was bound to execute is worthy of discussion.
It requires no argument to convince us that an attorney's authority to bind his client extends only to such acts and agreements as are necessary for the due prosecution of the cause or business in connection with which he has been employed; he has no implied power to bind his client by an agreement collateral to and independent of the subject-matter of his employment. A client is not bound by an unauthorized agreement of his attorney to convey land. Thornton on Attorneys at Law, sec. 202. But we do not understand the case or the finding of the trial judge to be that the agreement in question was not authorized and ratified by the bank, but, on the contrary, that it was so authorized. The finding is based solely upon the testimony of the defendant's attorney, Boyd, who testified, in substance, that, before the agreement was consummated by him with one of the firm of attorneys for the bank, he was first assured by the cashier of the bank, after stating to him his reasons for soliciting the agreement on behalf of his client,'that any agreement entered into by the witness with the bank's attorneys would be entirely agreeable and satisfactory to the bank. It appears that at the time the proposition was made to the bank, which culminated in the agreement, the bank had comfnenced an action (in January, 1918) in the court below to foreclose a mortgage on the land in controversy, which had been given it in 1914 by one Constance Parker to secure the payment of her note to the bank for $3,000, and De Bernardi was made a party defendant to the action. It is conceded, or must be conceded, that De Bernardi had an interest in the property which he had a right to protect and preserve from being completely extinguished by the foreclosure of the bank's mortgage. It appears that he was then in possession of the property, and had been in its continuous occupancy under a claim of right since 1906, and, in order to protect and preserve his interest from entire loss, and to obtain the advantage of having the legal title to the land conveyed to him through the foreclosure proceeding, upon the authority of the cashier of the bank, De Bernardi's attorney entered into an arrangement or agreement with It. M. Price, the attorney who had in charge the foreclosure proceeding, whereby it was agreed that the bank should and would proceed with the foreclosure of its mortgage for the defendant's use and benefit, and, upon acquiring legal title thereto through its foreclosure proceeding, convey the land to De Bernardi, and, in consideration for its promise to convey, De Bernardi agreed not to appear in the action and permit his default to be taken, and not to become a bidder at the sheriff's sale of the property, or take any other step, by action or otherwise, to protect his interest in the property. The foreclosure took place, and upon the expiration of the time for redemption the sheriff of Washoe County delivered to the bank a sheriff's deed to the property. The bank thereafter refused to carry out its promise to convey the property to De Bernardi.
The cashier of the bank, as a witness in the case, testified, in substance, that he had no knowledge or recollection of having ever authorized the agreement, as testified to by the witness Boyd. There is no doubt that the witness may honestly have been of opinion that, if he had authorized the agreement, he would have recalled the fact, and would never have dealt with Kate Moore. But the cashier's nonrecollection, or the bank's repudiation of the agreement by its conveyance of the property to Kate Moore, does not justify the deduction that the agreement was not authorized by the bank's cashier. The cashier's failure to remember or recollect the fact does not amount to a contradiction of the positive testimony of the witness Boyd that the agreement was authorized by the cashier of the bank; neither does the conveyance of the property amount to such a contradiction, because the repudiation of the agreement was but the conclusion of the officers of the bank that no such agreement had been authorized. There being, then, no substantial conflict in the evidence upon which the finding of the court is.based, we decline to disturb the finding.
The agreement having been established, the inquiry arises: Does the agreement and circumstances of the case create a trust which a court of equity can enforce. In support of the affirmative, counsel for De Bernardi rest their case on the principle, which has become almost a maxim in equity, that the statute of frauds, intended as a protection against fraud, shall not, in equity, be perverted to its consummation. We are in accord' with what is said in Moseley v. Moseley, 86 Ala. 292, 5 South. 732, that this principle, which may now be regarded as a maxim,-has been carried in many cases so far beyond the first intention as to amount to annihilation of the statute of frauds. It is certain that the principle has been overworked by the defendant in this case. The mere refusal to perform a parol agreement, void under the statute of frauds, may be a moral wrong, but it is in no sense a fraud in law or in equity. Wheeler v. Reynolds, 66 N. Y. 234.
In the present case no specific averment of fraud is alleged in the pleadings, but the court concludes fraud in law from its findings, manifestly upon the assumption that to permit the parties to hold the land in face of the agreement and the circumstances would be to support a breach of trust, and a fraud in law. If from this it is to be understood, as argued by the defendant, that the refusal of the bank to carry out its agreement constituted such a fraud as calls for the intervention of a court of equity, we should be impelled to. conclude that there is no such element in its breach as to take it without the rule of the statute of frauds. On examination, however, of the material findings, in connection with the evidence in the case, we are satisfied that the court's conclusion of law is warranted, not because the bank refused to carry out its parol agreement, but for the reason that it appears, as above stated, that the defendant had an existing interest in the land, which, in reliance on the promise contained in the agreement, he omitted to protect, and by its terms expressly precluded himself from protecting from entire loss by the foreclosure of the prior mortgage of the bank. In reliance on the agreement, he omitted and refrained from taking any other step to protect his interest, and, furthermore, by the bank's failure to carry out the agreement he lost the advantage of having the legal title transferred to him in its perfected state, which, apparently, was one of his motives in soliciting the agreement. We are of opinion that, the defendant having an interest in the land, the subsequent denial of the confidence reposed was such a surprise and fraud as operates to convert the bank into a trustee ex maleficio, which trusts are excepted from the operation of the statute of frauds. 3 Pomeroy, Eq. Jur (4th ed.), sec. 1055, note 1.
The rule is established by a number of authorities that, where one having an interest is induced to confide in the verbal promise of another that he will purchase for the benefit of the former at a sheriff's sale, and in pursuance of this allows him to become the holder of the legal title, a subsequent denial by the latter of the confidence is such a fraud as will convert the purchaser into a trustee ex maleficio. In the case of Chadwick v. Arnold, 34 Utah, 48, 95 Pac. 527, the writer of the opinion industriously collates the numerous authorities in support of this proposition. In addition, we cite the cases supporting the text, 39 Cyc. 180. As remarked in Cutler v. Babcock, 81 Wis. 195, 51 N.W. 420, 29 Am. St. Rep. 882, 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 agreement. We readily concede that, if defendant had no interest in the property in controversy, no constructive trust was created by the agreement, and without that interest the agreement would clearly be within the rule of the statute. The defendant, however, having an interest, and in reliance upon the bank's parol agreement to purchase and convey to him the land on receipt of the legal title, the refusal of the bank to carry out the agreement and the subsequent denial of the confidence reposed in it was such a fraud as to make the bank a trustee for the defendant.
It is manifest that M. B. Moore, as agent for his wife, before he negotiated with the bank for its purchase, had actual notice of the defendant's claim of interest in the property, but obviously -was of the opinion that the defendant's interest had been completely extinguished by the foreclosure of the bank's mortgage and the sheriff's deed, and therefore her deed would operate as her protection from the claim of the defendant. But this position, unfortunately for Mrs. Moore, was overcome by the court's finding that her agent, prior to the date of the deed, had actual notice that her grantor had promised and agreed to convey the legal title to the land to the defendant. She was not, therefore, a purchaser in good faith without notice.
While it is not incumbent upon this court to answer argument, some of the contentions of counsel for Mrs. Moore deserve special mention. It is urged that no confidential relation existed between the bank and the defendant, and in the foreclosure of its mortgage it did nothing more than what it had the right to do; that the bank's promise, at most, was but a gratuitous undertaking, without consideration, unenforceable, and binding on no one; that the inducement for the promise moved from the defendant to the bank, and not from the bank to the defendant, and no fraud or imposition was practiced upon the defendant.
December 1, 1923.
220 Pac. 544.
1. Trusts — Constructive Trust Established Only by Clear and Satisfactory Evidence.
A constructive trust cannot be established by a mere preponderance ol' evidence, but must be established by clear, definite, unequivocal, and satisfactory evidence.
2. Trusts — Any Unobjectionable Evidence Tending to Prove Fraud Admissible to Prove Constructive Trust.
Any evidence which tends to prove or disprove fraud, actual or constructive, necessary to constitute a constructive trust, and which is not objectionable as to the relevancy, competency, and materiality of the evidence, is admissible.
3. Trusts — Parol Evidence Admissible to Prove Constructive Trust.
Parol evidence is admissible to prove facts and circumstances constituting fraud from which a constructive trust arises.
4. Vendor and Purchaser — Purchaser Not Affected by Secret Agreements of which IIe IIad No Notice.
The bona-fide purchaser of a legal title is not affected by any latent equity founded either on a trust, incumbrance, or otherwise, of which he has no notice, actual or constructive.
It is not indispensable that the conventional relation of trustee and cestui que trust, or any express fiduciary relation, should exist between the original wrongdoer and the beneficial owner of the land to create a constructive trust. They arise in invitum for the purpose of working out justice in the most efficient manner. Millard v. Green, 94 Conn. 597, 110 Atl. 177, 9 A. L. R. 1610. It will not do to say, as said in Sandfoss v. Jones, 35 Cal. 487, quoting from Soggins v. Heard, 31 Miss. 428, that the party promising was moved merely by friendly or benevolent considerations, and may therefore, at his option, decline a compliance with his agreement. Such considerations constitute the foundation of almost every trust, and the trustee should be held to account as nearly as possible in the same spirit in which he originally contracted.
For the reasons and upon the authorities hereinabove stated, we are of the opinion that the evidence is sufficient in this case to support the findings, and the court's conclusions of law are warranted thereby.
The decree appealed from is therefore affirmed.