Hughes v. Fargo Loan Agency

• Decision Date: 10 September 1920
• Citation: 46 N.D. 26,178 N.W. 993
• Parties: HUGHES v. FARGO LOAN AGENCY et al.
• Court: North Dakota Supreme Court

46 N.D. 26

178 N.W. 993

HUGHES

v.FARGO LOAN AGENCY et al.

Supreme Court of North Dakota.

July 3, 1920.

Concurring Opinion July 7, 1920.

Rehearing Denied Sept. 10, 1920.

Syllabus by the Court.

In an action to declare a conveyance a trust deed and for an accounting, where the defendants were not residents of the state, and where an affidavit for publication of the summons was filed, which may be construed to state that defendants were nonresidents, “as affiant is informed and believes,” and which states the “present post office address” of the defendants, “as affiant is informed and believes,” and where the summons and complaint were personally served upon such defendants in the state of Washington, and thereafter judgment upon default was rendered, it is held that such affidavit was fatally defective, and the judgment rendered a nullity.

In such action, the jurisdiction of the court extends only to an equitable proceeding in rem concerning the title of the land involved.

In a subsequent action to determine adverse claims to the real estate involved in the alleged trust deed, where the defendants and intervener through such void judgment, and the plaintiff as the grantee of the vendee in such trust deed, claim title or liens upon the land, it is held that all parties are affected with notice of the void judgment and of the unsettled and undetermined nature and administration of the alleged trusteeship, upon which the equities of the parties, or their successors in interest, and the questions of laches and of estoppel, must depend.

Additional Syllabus by Editorial Staff.

Under Comp. Laws 1913, § 5364, a conveyance by father to his son on a parol understanding that the father during his lifetime should receive the net proceeds of the land, and thereafter that the grantee should divide the land equally between the three children, did not create an express trust.

A deed from a father to his son, on the parol understanding that the father during his lifetime should receive the net proceeds of the land, and that the grantee should thereafter divide such land equally between his three children, by reason of the confidential relations imposed a constructive trust, enforceable in equity, whereby, on the death of the father, the children each received a beneficial interest in the land, the legal title to which the grantee was holding as trustee.

Appeal from District Court, Ransom County; Cole, Judge.

Action by T. B. Hughes against the Fargo Loan Agency, the Citizens' Bank of Lisbon, and the First National Bank of Fargo, with J. C. Vincent as interpleaded defendant. From a judgment quieting title in the intervener, subject to the liens of defendants' mortgages, plaintiff appeals, and demands a trial de novo. Reversed, and cause remanded for a new trial.

This is an action to determine adverse claims to a quarter section of land in Ransom county. The trial court rendered judgment quieting title in the intervener, subject to the liens of defendants' mortgages. The plaintiff has appealed, and has demanded a trial de novo in this court.

For the consideration of the questions involved it is necessary to set forth somewhat in detail the facts appearing in the record. All parties claim title from Gottlieb Grounitz. In 1891 the land was deeded to him for a stated consideration of $1,520. In 1899 he deeded this land to his daughter, Clara. This deed was not recorded. Later, in 1900 this deed was surrendered and canceled. On July 31, 1902, he gave a warranty deed, conveying in fee this land, and also a house and lot in Lisbon, N. D., owned by him, to his son Elmer. The father then had three living children, Elmer, Emil, and Clara, and a granddaughter, the child of a deceased son.

In accordance with the testimony of Emil, who contested this deed to Elmer, his father, shortly after the deed to the daughter, Clara, was surrendered and canceled, told him that he would leave this land in the hands of either Elmer or himself, to be divided between the three children. Concerning the Lisbon property, he testified that his father was then living there with his sister, and he supposed that he intended that for her. He does not know what agreement the father had with Elmer, nor what the father had in his mind when he deeded the land to Elmer. Another witness, one Summerfield, testified that he was a next-door neighbor of the Grounitz family when they lived in Lisbon; that on one occasion the father told him that Clara wanted to get possession of all the property, but he did not think it was right; that the two boys had in a lot of money and hard work, and they ought to have their share. (This apparently was during the time of the deed to the daughter.) He testified that later the father told him that he was going to give to Clara the house and lot, and to deed the farm to one of the boys, and “then they can settle it up between them.” In another action between the children concerning the nature of this deed to Elmer (to be considered hereafter), the district court found that this land and the property in Lisbon were deeded to Elmer upon the agreement that Elmer would pay the net proceeds thereof to the father during his lifetime for his maintenance and support, and that upon his death the property was to be equally divided among the three children.

The father died about May 1, 1913. From July 31, 1902, to the time of the father's death, Elmer operated or rented this land (as the court found in such action) as the agent of the father. In 1915 an action (mentioned above) was commenced by Emil against his brother, Elmer, and his sister, Clara, in the district court of Ransom county. The complaint is dated April 20, 1915. It alleges, in substance, that the deed from the father to Elmer was a deed in trust, upon the understanding that Elmer would pay to the father the net proceeds thereof for his maintenance and support during his lifetime, and after his death would divide the property equally among his three children; that until the death of the father, on or about May 1, 1913, the father had full control and supervision of the property, and received the rents and profits pursuant to such understanding; that since May 1, 1913, Elmer has been in the possession of such property; that since May 1, 1913, the reasonable value of the use of the land is $400 annually, and of the city property $20 per month; that the plaintiff, Emil, has demanded his undivided one-third interest in the real estate and in the proceeds. The prayer of such complaint is that this deed be declared a trust deed; that an accounting be had, and the amount found to be due be declared in trust, pursuant to the trust arrangement, for division between the parties equally.

On May 25, 1915, a lis pendens was recorded in the office of the register of deeds to the effect that the object of such action was to declare the deed to Elmer a trust deed and for an accounting between the parties. On the same date an affidavit for the publication of the summons was made. It reads as follows:

“State of North Dakota, County of Ransom-ss.:

T. A. Curtis, being first duly sworn, deposes and says: That he is a member of the firm of Curtis & Curtis, the attorneys for the plaintiff in the above-entitled action; that the defendants are nonresidents of the state of North Dakota, and that the present post office address of Elmer Edward Grounitz is Colbert, Washington, and the present post office address of Clara Hall is Spokane, Washington, as affiant is informed and believes.

[Signed] T. A. Curtis.

Subscribed and sworn to before me this 25th day of May, 1915.

Walter G. Curtis, Notary Public.”

On June 1, 1915, the summons and complaint were served upon Elmer and Clara in the county of Spokane, Wash., by a deputy sheriff. On June 14, 1915, Elmer wrote a letter to Emil, stating, in part, to the effect that to his surprise the summons and complaint were served upon him by the sheriff; that the trip of his father to Germany and his last sickness was expensive; that he had advanced other moneys to his father; that he was perfectly willing that Emil should have anything that was coming to him; that he would try and make out an itemized statement of all expense and mail it to him; that he could advertise the land or Emil could look up a cash buyer; that he advised him to cancel the summons. He requested Emil to write him at once. Emil testified that he received this letter. He did not testify that he answered this letter. No other correspondence appears in the record between them. On August 18, 1915, this action, as upon a default of the defendants, Elmer and Clara, was heard by the district court and findings made. In these findings the court determined that the deed to Elmer was a trust deed, made upon the agreement hereinbefore stated; that the father died about May 1, 1913; that from July 31, 1902, to May 1, 1913, Elmer, as agent of the father, operated or rented the land, but did not pay over the net proceeds to the father; that, when the deed was made, the property in Lisbon was worth $1,500; that since July 31, 1902, Elmer sold such city property for $800; that Elmer and Clara were working together, and divided among themselves the proceeds of the sale of the city property and of the farm; that the reasonable value of the use of the land for each year since July 31, 1902, was $400; that the reasonable value of the land was $5,000; that, considering the reasonable value of the land and the city property, plus the interest thereupon, the defendants have received $10,620, or $3,620 more than the reasonable value of the entire property; that the defendants have received more than their undivided two-thirds interest. The court, as conclusions of law, found that the defendants had no interest in the land, that Emil was the owner, and that the defendants should be restrained and enjoined from asserting any interest or lien upon such land. Pursuant to such findings, on August 19, 1915,...