Farrell v. Mentzer

• Citation: 174 P. 482,102 Wash. 629
• Decision Date: 20 June 1918
• Docket Number: 14775.
• Court: United States State Supreme Court of Washington
• Parties: FARRELL v. MENTZER et al.

174 P. 482

102 Wash. 629

FARRELL v. MENTZER et al.

No. 14775.

Supreme Court of Washington

June 20, 1918

Department 2.

Appeal from Superior Court, Pierce County; M. L. Clifford, Judge.

Action by J. M. Farrell against C. A. Mentzer and others. Judgment for plaintiff, and defendants appeal. Reversed, and action dismissed.

T. F. Mentzer, of Tenino, and Troy & Sturdevant of Olympia, for appellants.

Fred W Dricken and John L. McGar, both of Seattle, and Hayden Langhorne & Metzger, of Tacoma, for respondent.

MACKINTOSH J.

Without determining that they have been proven by clear, cogent, and convincing proof, we may assume that the facts in this case are as alleged in the respondent's complaint and contended for in his brief. The assets of a lumber company of which the respondent was one of the stockholders, were in the hands of a trustee in bankruptcy, and the respondent, being desirous of purchasing these assets at the trustee's sale, had made a deposit to guarantee his bidding at that sale, and a few days before the sale was to take place interested the appellants, who were the owners of a considerable tract of timber land tributary to the mill which had been previously operated by the bankrupt lumber company. These negotiations with the appellants resulted in an agreement that they would become jointly interested with the respondent in the purchase of the assets of the bankrupt company. All the parties agreed that the purchase was to be made by one Wright, who should bid in the property and take conveyance to himself and then should transfer the property, half to respondent and half to appellants. In pursuance of this agreement Wright bid in the property, and subsequently the trustee in bankruptcy deeded the property direct to the appellants for the purpose of saving the expense of a transfer to Wright and a retransfer from Wright to the appellants. After securing title the appellants refused to transfer a one-half interest to the respondent. The amount which the respondent had deposited to secure a public sale was returned to him. All of these transactions rested upon parol testimony, and it is the contention of the appellants that the trial court was in error in allowing parol testimony to be introduced for the reason that the facts relied upon by the respondent established an express trust, and therefore came within the operation of the statute of frauds. Respondent's position is that these facts do not make a case of express trust, but one of resulting or constructive trust, which may be proved by parol.

There is much foundation for the contention of each of the parties to be found in the decisions of this court. The cases abound in the use of inexact terminology in order to avoid the rigor of the statute of frauds; and to accomplish a deserved result the court has at times attempted to avoid the statute of frauds by holding that the facts of a particular case created some sort of a trust other than an express trust. The statute of frauds was intended to and does in the overwhelming majority of cases prevent fraud, but it is also true that in its operation in some cases it works an apparent injustice. This, however, does not furnish sufficient reason for courts in those few cases to attempt to take the facts out of the statute of frauds by attempting to distinguish them from cases which admittedly fall within the statute, when no such distinction can logically be made. As Judge Chadwick, speaking for the court, said in Forland v. Boyum, 53 Wash. 421, 102 P. 34:

'The contract falls within the statute of frauds. Such contracts are held void by force of the statute, and the rights of the parties can never be determined by resort to equitable principles.'

By no honest process of reasoning can the different decisions be harmonized or reconciled, and by no sophisticated reasoning should it be attempted to be done. We have drifted a considerable distance into the waters of confusion, and it is time to return to the moorings, which are these: That the statute of frauds is not an equitable doctrine, but is an absolute statute, which provides, so far as the question under consideration here is concerned, that parol evidence is inadmissible to establish an express trust in real estate. It may be that a strict application of the statute in some cases will operate to defeat a just claim, but that is not a sufficient reason for attempting to remove those cases from the operation of the statute by misnaming the character of the trust involved.

It may be well to restate the fundamental characteristics of these varieties of trusts: (1) Those trusts which are created by contract of the parties and intentionally. They are express trusts. (2) Those created by operation of law where the acts of the parties have no intentional reference to the existence of any trust. These trusts are (a) implied or resulting; (b) and constructive. Sections 987 and 1030, vol. 3, Pomeroy, Equity Jurisprudence. Resulting trusts are defined by Pomeroy as follows:

'All true resulting trusts may be reduced to two general types: (1) Where there is a gift to A., but the intention appears from the terms of the instrument, that the legal beneficial estates are to be separated, and that he is either to enjoy no beneficial interest or only a part of it. In order that a case of this kind may arise, there must be a true gift so far as the immediate transferee, A., is concerned. The instrument must not even state any consideration, and no valid complete trust must be declared in favor of A. or of any other person. Such trusts, therefore, generally arise from wills, although they may arise from deeds. If the conveyance be by deed, the trust will result to the grantor; if it be by will, the trust will result to the testator's residuary devisees or legatees, or to his heirs or personal representatives, according to the nature of the property and of the dispositions. (2) Where the second type includes the cases where a purchase has been made, and the legal estate is conveyed or transferred to A., but the purchase price is paid by B.' 3 Pomeroy's Equity Jurisprudence, § 1031.

The same author defines constructive trusts as follows:

'Constructive trusts include all those instances in which a trust is raised by the doctrines of equity for the purpose of working out justice in the most efficient manner, where there is no intention of the parties to create such a relation, and in most cases contrary to the intention of the one holding the legal title, and where there is no express or implied, written or verbal, declaration of the trust. * * * The trusts of this class are imposed by equity, contrary to the trustee's intention and will, upon property in his hands.' Vol. 3, § 1044.

Resulting and constructive trusts have been defined and classified in 39 Cyc. p. 26 et seq. in this language:

'Implied trusts * * * are subdivided into the two classes, resulting and constructive. A resulting trust is a trust raised by implication or construction of law, and presumed to exist from the supposed intention of the parties and the nature of the transaction. Such trusts are also called 'presumptive' trusts, and are frequently defined in terms of or in connection with the character of the transaction out of which they most frequently arise, namely, where one person pays the consideration for a purchase and the title is taken in the name of another, although they may result from other kinds of transactions. Constructive trusts are those which arise purely by construction of equity, and are entirely independent of any actual or presumed intention of the parties. They are also known as trusts ex maleficio or ex delicto. Resulting and constructive trusts, while frequently confused, are clearly distinguishable. In the case of a resulting trust there is always the element, although it is an implied one, of an intention to create a trust, by reason of which, although it is by no means an express trust, it approaches more nearly thereto. Constructive trusts, on the other hand, have none of the elements of an express trust, but arise entirely by operation of law without reference to any actual or supposed intention of creating a trust, and often directly contrary to such intention. They are entirely in invitum, and are forced upon the conscience of the trustee for the purpose of working out right and justice or frustrating fraud. Constructive trusts embrace a much larger class of cases than resulting trusts, their forms and varieties being said to be practically without limit.'

A great deal of the confusion in the classification of trusts has arisen from the fact that some of the courts have mistakenly held that the breach of a contract constituted fraud, and have thereby attempted to convert the breach of an express contract, which would have raised an express trust into a constructive trust created by fraud. The logical result of such confusion would be to hold that the breach of every express contract would be the establishment of a constructive trust, and thus entirely obliterate express trusts. This point is well covered by Pomeroy as follows:

'The foregoing cases should be carefully distinguished from those in which there is a mere verbal promise to purchase and convey land. In order that the doctrine of trusts ex maleficio with respect to land may be enforced under any circumstances, there must be something more than a mere verbal promise, however unequivocal; otherwise the statute of frauds would be virtually abrogated; there must be an element of positive fraud accompanying the promise, and by means of which the acquisition of the legal title is wrongfully consummated. Equity does not pretend to enforce verbal promises in face of the statute; it endeavors to prevent and punish fraud,

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