Moses v. Moses.

• Decision Date: 27 June 1947
• Docket Number: No. 213.,213.
• Citation: 53 A.2d 805
• Parties: MOSES v. MOSES.
• Court: New Jersey Supreme Court

53 A.2d 805

MOSES

v.MOSES.

No. 213.

Court of Errors and Appeals of New Jersey.

June 27, 1947.

Appeal from Court of Chancery.

Suit by Charles S. Moses against Mabel Oliver Moses, his wife, to recover six parcels of land conveyed by complainant to defendant, allegedly in trust, wherein defendant counterclaimed. From decree dismissing the bill of complaint and in favor of defendant on her counterclaim, 138 N.J.Eq. 287, 48 A.2d 397, the complainant appeals.

Decree reversed as to dismissal of bill of complaint and affirmed as to counterclaim and cause remanded.

Bruce A. Wallace, of Camden (Rocco Palese, of Camden, of counsel), for appellant.

Powell & Parker, of Mount Holly (Harold T. Parker, of Mount Holly, of counsel), for respondent.

HEHER, Justice.

The original transaction here falls into the category of an oral express or direct trust. The presumption of a voluntary settlement arising from the appellant husband's conveyance of the six parcels of land to his wife on May 6, 1941, by deed absolute on its face, was overcome by the proofs. It was shown by clear and convincing evidence (the standard of proof in such cases) that the conveyance was made to the use of the husband. Indeed, there is no contention contra; it is conceded that the transfer was not motivated by a donative intent and purpose. The husband was then a general contractor engaged in construction work on a large scale, and in immediate need of working capital; and the evidence demonstrates that the sole design of the conveyance was the enlargement of his bank credit and borrowing capacity through the establishment of a separate credit for his wife. To the same end, there was a contemporaneous transfer of another piece of real estate by his wife to him. Four of the parcels in question were improved, and tenanted; the remaining two were unimproved. The insistence is that on April 16, 1943, when their relations were in crisis after a period of estrangement, there was an effective voluntary parol settlement of the six parcels of land by the husband upon the wife, as the Vice Chancellor found.

Parol trusts in land are valid and enforceable at common law. But the statute of frauds provides otherwise. Section 3 renders utterly void ‘All declarations and creations of trust or confidence’ concerning lands, unless ‘manifested and proved by some writing, signed by the party who is or shall be by law enabled to declare such trust, or by his last will in writing,’ save ‘any conveyance * * *, by which a trust or confidence shall or may arise or result by implication or construction of law, or be transferred or extinguished by act or operation of law.’ R.S. 25:1-3, N.J.S.A. The inquiry, therefore, is whether in the foregoing circumstances a trust, enforceable in equity, arose or resulted by implication or construction of law.

There was not a resulting trust in the true concept of the term. A trust of this class arises where property is transferred under circumstances which give rise to an inference that the person who makes the transfer or causes it to be made does not intend the transferee to take the beneficial interest in the property; and there are properly but three divisions of the class: (1) where an express trust fails in whole or in part; (2) where an express trust in fully performed without exhausting the trust res; and (3) where the purchase price of the property is paid by one person and at his direction the vendor conveys the property to another person. In each of these instances the inference arises from the character of the transaction that it is not intended that the person taking title to the property is to have the beneficial interest. In (1) and (2) an express trust is created, but there is no disposition in terms of the trust res if the trust fails or a surplus remains after performance of the trust; and the inference is, not that the settlor actually intended that the trust res or surplus should be returned to him, for there is no indication that the possibility of failure of the express trust or the existence of a surplus was in contemplation, but that there was no intention in any event that the trustee should have a beneficial interest. In short, in the absence of a disposition of the res in the events indicated, equity compels the return of the property to the settlor. In (3), although it would seem that a purchase of property by one person in the name of another suggests an express trust arising out of the intention of the purchaser, equity has long considered the transaction as giving rise to a resulting trust, wholly apart from the intention, since the character of the transaction raises an inference that the purchaser did not intend that the grantee should have the beneficial interest in the res, and therefore the statute of frauds does not serve to deprive the purchaser of the right to compel the grantee to convey the property to him. The circumstances of the transaction render unnecessary proof of an undertaking by the grantee to hold the property in trust for the purchaser, and so dispense with the requirement of the statute of frauds that there be a written memorandum of the creation of an express trust in land. The principle of resulting trusts has its genesis in the early doctrine of the English Chancery that where the inference was that the transferee of the land was not intended to take the use or beneficial interest, and there was no declaration as to who was to take it, the use sprang back or resulted to the person who made the conveyance or caused it to be made, and so was a resulting use as distinguished from an express use. There is an express trust if an affirmative intention to create it appears; in the case of a resulting trust the circumstances indicate the absence of an intention to vest the beneficial interest in the person to whom the legal title is transferred. Scott on Trusts, secs. 404, 404.1.

But, while an express trust wanting a written manifestation is not enforceable, equity may be certain cases afford relief by the restoration of the status quo ante through the formula of a constructive trust. A resulting use or trust is closely of kin to an express use or trust, but differs radically from a constructive trust. A constructive trust is not grounded in the intention of the parties, inferred or presumed; it is a remedial device of equity-a trust in invitum-to prevent unjust enrichment. In England, where A has by deed absolute on its face made a voluntary conveyance of land to B, upon B's oral undertaking to hold the land to the use of A and to reconvey to him upon demand without consideration, the cestui cannot enforce the trust if B sets up the statute of frauds, but in that event B is under a duty to return the property received on the faith of the oral promise, and equity will compel performance of the duty through the medium of the constructive trust. Taylor v. Taylor, 1 Atk. 447; Booth v. Turle, L.R. 16 Eq. 182; In re Duke of Marlborough, (1894) 2 Ch. 133; Davies v. Otty, 35 Beav. 208; Haigh v. Kaye, L.R. 7 Ch.App. 469. The prevailing view in this country is to the contrary. By the great weight of authority, the transferee of land upon an oral trust is allowed to retain the land, save (a) where the transfer is procured by fraud, duress, undue influence or mistake; (b) where the land is conveyed to a person who is at the time in a confidential relation to the transferor for whom he has orally agreed to hold it; (c) where the transfer is effected by deed absolute in terms, but intended as a mere security; (d) where the transfer was made in contemplation of death; and, perhaps, other cases which need not be mentioned here. The English rule has not been given its full sweep here on the supposed ground that it violates the policy of the statute of frauds, if not the letter, and the ban of the statute extends also to the restoration of the status quo. Scott on Trusts, sections 44, 481.3, 485 et seq.; 3 Bogert on Trusts and Trustees, § 495 et seq.; Restatement of the Law of Trusts, A.L.I. sec. 44. The English Statute of Frauds of 1677 (29 Car. II, c. 3) is the prototype of ours.

We have not overlooked the reasoning of the Chancery case of Lovett v. Taylor, 54 N.J.Eq. 311, 34 A. 896; but we do not entertain the view that the use of the constructive trust to prevent unjust enrichment in the instances mentioned would contravene the policy of the statute of frauds. There is an obvious distinction of substance between the enforcement of an oral trust and the acceptance of proof of an oral trust for the mere restoration of the status quo, and thus to prevent the unjust enrichment of the trustee. It is familiar practice in equity to compel a person unjustly enriched by the acquisition or retention of property to surrender it in specie to the person at whose expense he is so enriched; and so there is a certain analogy between this equitable remedy and an equitable proceeding to enforce an express trust. But the constructive trust is essentially a remedial concept. The two are quite different juridical institutions. While the constructive trust sometimes affords a remedy for the redress of a breach of an express trust, it is available also in varied situations having no relation to express trusts. In general, a constructive trust arises where a person holding title to property is under an equitable duty to convey it to another because he would be unjustly enriched if he were permitted to retain it. There may be a constructive trust where the retention of the property would unjustly enrich the person retaining it, even though its acquisition was not wrongful. The enforcement of such a trust consists merely in the restoration of the status quo. Scott on Trusts, ...