Cline v. Cline

• Decision Date: 12 June 1979
• Docket Number: No. 74,74
• Court: North Carolina Supreme Court
• Parties: Laura Y. CLINE v. Calvin C. CLINE.

Page 399

255 S.E.2d 399

297 N.C. 336

Laura Y. CLINE v. Calvin C. CLINE.

No. 74.

Supreme Court of North Carolina.

June 12, 1979.

Finger, Park & Parker by Raymond A. Parker, II and M. Neil Finger, Elkin, for plaintiff.

Franklin Smith, Elkin, and Henry B. Shore, Yadkinville, for defendant.

SHARP, Chief Justice.

We consider first defendant-appellee's contention, brought to this Court in his brief under App.R. 16(a), that plaintiff's evidence was insufficient to establish either a resulting or a constructive trust, and that the trial court erred therefore in denying his motion for a directed verdict at the close of all the evidence. See Investment Properties v. Allen, 281 N.C. 174, 188 S.E.2d 441 (1972).

The evidence in this case would permit the jury to find the following facts:

(1) After the death of defendant's father, defendant's mother was unable to farm their land and to make the annual payments on the mortgage. She told defendant, whose family consisted of his wife, the plaintiff, and their three young sons, that if he would move on the land with her and make the mortgage payments she would convey the property to him, subject to her life estate.

(2) Defendant discussed the situation with his wife and told her that if they would move on his mother's place with her, farm the land, and pay the mortgage, the property would then be theirs. He asked her to move "up there" with him. She agreed to the proposition defendant had stated to her, and the move was made.

(3) In less than 15 days after the move was accomplished and before the first payment was made on the mortgage, defendant caused his mother to convey the land, subject to her life estate, to him alone. The consideration for this conveyance was defendant's promise to move on the land and to pay the mortgage which encumbered it. Plaintiff had no knowledge of this conveyance at the time it was made and first learned of it in the latter part of July 1975.

(4) In performance of the agreement plaintiff made with defendant preceding their move to his mother's farm, and in reliance upon defendant's representations to her that when they had satisfied the mortgage on the land it would belong to them jointly, plaintiff by her labor assisted defendant in caring for his mother and in cultivating and harvesting tobacco, their annual cash crop. By her labor on the farm and her contributions in money, which she earned in "public work" off the farm, plaintiff paid one-half of the original mortgage indebtedness on the farm and also of subsequent encumbrances securing loans for the purchase of farm machinery and making improvements on the land. In addition, from her wages plaintiff made cash contributions to the support of the family.

Once proven, the foregoing facts are sufficient to establish either a constructive or a resulting trust in plaintiff's favor in the land described in the complaint. See Bowen v. Darden, 241 N.C. 11, 84 S.E.2d 289 (1954); Davis v. Davis, 228 N.C. 48, 44 S.E.2d 478 (1947).

Whenever one obtains legal title to property in violation of a duty he owes to another who is equitably entitled to the land or an interest in it, a constructive trust immediately comes into being. Such a trust ordinarily arises from actual or presumptive fraud and usually involves an abuse of a confidential relationship. Courts of equity will impose a constructive trust to prevent the unjust enrichment of the holder of the legal title to property acquired through a breach of duty, fraud, or other circumstances which make it inequitable for him to retain it against the claim of the beneficiary of the constructive trust. See Fulp v. Fulp, 264 N.C. 20, 140 S.E.2d 708 (1965); Davis v. Davis, supra; 13 Strong's North Carolina Index 3d Trusts § 14 (1978); V Scott, Law of Trusts § 461-462.4 (3d Ed. 1967).

The parties to this action are husband and wife. The law recognizes that "(t)he relationship between husband and wife is the most confidential of all relationships, and transactions between them to be valid, must be fair and reasonable." Eubanks v. Eubanks, 273 N.C. 189, 195-96, 159 S.E.2d 562, 567 (1968); Fulp v. Fulp, supra. Taking plaintiff's evidence as true as we must when considering a motion for a directed verdict, Rappaport v. Days Inn, 296 N.C. 382, 250 S.E.2d 245 (1979) defendant clearly breached this confidential relationship when he took title to the farm in his name alone after representing to his wife that the land would be theirs jointly after the mortgage was paid. A constructive trust arose, therefore, in her favor at the time defendant wrongfully took title solely in his name. Thereafter, in accordance with plaintiff's understanding with defendant that they were both obligated to pay off the mortgage which encumbered the property at the time defendant agreed to move on his mother's farm, plaintiff's contributions in labor and money paid at least one-half of the mortgage. Thus the equities remained with her and she is entitled to enforce the constructive trust which arose in her favor. Otherwise, defendant would be unjustly enriched at her expense.

The classic example of a resulting trust is the purchase-money resulting trust. In such a situation, when one person furnishes the consideration to pay for land, title to which is taken in the name of another a resulting trust commensurate with his interest arises in favor of the one furnishing the consideration. The general rule is that the trust is created, if at all, in the same transaction in which the legal title passes, and by virtue of the consideration advanced before or at the time the legal title passes. See Fulp v. Fulp, 264 N.C. 20, 140 S.E.2d 708 (1965); Rhodes v. Baxter, 242 N.C. 206, 87 S.E.2d 265 (1955); Deans v. Deans, 241 N.C. 1, 84 S.E.2d 321 (1954); V Scott, Law of Trusts §§ 440-440.1 (3d Ed. 1967); Bogert, Trusts and Trustees § 455 (2d Ed. 1977) (hereinafter cited as Bogert). See generally 13 Strong N.C. Index 3d Trusts §§ 13-13.5 (1978).

If A and C pay for a parcel of land, but only C takes title, the theory of the law is that at the time title passed A and C intended that both would have an interest in the land. "A resulting trust is a creature of equity, and arises by implication or operation of law to carry out the presumed intention of the parties, that he, who furnishes the consideration for the purchase of land, intends the purchase for his own benefit." Waddell v. Carson, 245 N.C. 669, 674, 97 S.E.2d 222, 226 (1957). This rule does not apply where A and C agree to buy a tract of land but A Pays the purchase price and takes title in his name. In this situation, while it is possible depending upon the circumstances that he may have other remedies, no resulting trust arises in C's favor when consideration passes from him to A thereafter. Bryant v. Kelly, 279 N.C. 123, 181 S.E.2d 438 (1971); Rhodes v. Baxter, 242 N.C. 206, 87 S.E.2d 265 (1955).

However, as Bogert points out, § 456 at 669-673, in a large number of cases the person claiming a resulting trust proves a payment on the purchase price made to the grantee or grantor after the delivery of the deed but pursuant to a Promise made to the grantee before the deed was delivered. Although it seems that this Court has not considered the application of the resulting trust doctrine to this specific situation other jurisdictions have. See Bogert, § 456, n. 25, where the authorities are collected. In discussing the "large group of cases (in which) the person claiming a resulting trust proves payment after the delivery of the deed, pursuant to a promise made To the grantee . . . before delivery of the deed," Bogert offered the following example and comments:

"A is bargaining for land to be bought from B, and A seeks the aid of C in financing the sale. It is agreed between A and C that A shall pay part of the price at the time of the delivery of the deed from B to A, and that A shall give a note and mortgage to B for the remainder of the purchase price; and C agrees with A that C will make payments to A in the future which A agrees to use to help him in meeting his obligations to B. Here C, the third party, does not promise the grantor, B, anything. The consideration received by the grantor for his deed consists of cash paid...