Schofield v. Spencer
| Decision Date | 30 October 1926 |
| Parties | N.W. SCHOFIELD, Appellant, v. DANIEL S. SPENCER, Defendant and Respondent; P. L. WILLIAMS and JOSEPH R. SHARP, Executors of the Estate of JOHN SHARP, Sr., Deceased, Intervenors and Respondents |
| Court | Idaho Supreme Court |
VENDOR AND PURCHASER - MARKETABLE TITLE - TRUSTS - PURCHASE WITH KNOWLEDGE OF TRUST RELATION.
1. Purchaser under agreement for purchase of real property is entitled to receive marketable title.
2. Purchaser of real property from one holding it in trust for another with knowledge of trust relation will not be accorded protection of bona fide purchaser, but will be deemed trustee for benefit of cestuis que trust to extent of such equitable interest.
3. Showing that deed from holder of legal title to purchaser was made at request of executors or estate of deceased holder of equitable title was insufficient to pass good title, in absence of proof that executors were cestuis que trust.
4. Where purchaser contracting to buy real property had knowledge that actual ownership of land was in deceased and that another held legal title, trial court's conclusion as matter of law that deed from person holding legal title conveyed good and marketable title to purchaser was erroneous.
APPEAL from the District Court of the Third Judicial District, for Ada County. Hon. Charles F. Reddoch, Judge.
Action to recover money paid on contract for the sale of land. Judgment for defendants and intervenors. Reversed.
Judgment reversed. Costs to appellant.
J. G Watts and Robert W. Beckwith, for Appellant.
A deed from one who holds a legal title in trust for the benefit of an estate does not convey a marketable title where the purchaser knows the equitable title is in the estate, unless the abstract or record shows that the trustee is authorized to make the deed. (Maupin on Marketable Titles, 3d ed., p 771; Williams v. Bricker, 83 Kan. 53, 109 P. 998, 30 L. R. A., N. S., 343; Coonrod v. Studebaker, 53 Wash. 32, 101 P. 489; Snowden v. Derrick, 14 Cal.App. 309, 111 P. 757; Warvelle on Abstracts, 2d ed., 30.)
In the absence of an express provision indicating the character of a title provided for by a contract of sale of real property, the implication is that a good or marketable title in fee simple is intended in all executory contracts. (Brady v. Bank of Commerce, 41 Okla. 473, Ann. Cas. 1915B, 1019, 138 P. 1020; Durham v. Hadley, 47 Kan. 73, 27 P. 105; Bell v. Stadler, 31 Idaho 568, 174 P. 129; Colpe v. Lindblom, 57 Wash. 106, 106 P. 634; Speakman v. Forepaugh, 44 Pa. 363; McNutt v. Nellans, 82 Kan. 424, 108 P. 834; Sugden on Vendors, chap. 10, p. 3.)
P. L. Williams, for Respondents.
A trustee holding the title of property by a conveyance absolute in form and containing no limitations or reservations may, for a valuable consideration, pass a good title to a grantee without the consent of the cestui que trust, where the grantee is ignorant of the trust, and such title may likewise be passed where the grantee has knowledge of the trust, if the consent of the cestui que trust is given, and such consent may be given either orally or in writing. (Washburn on Real Property, secs. 1502, 1503, and cases cited, among them Arrington v. Cherry, 10 Ga. 429.)
With the understanding that certain real property in Owyhee county belonged to the estate of John Sharp, Sr., deceased, appellant Schofield agreed with the executors to pay $ 4,000 therefor. He paid $ 1,000 and signed three promissory notes for the balance, payable to the "executors of the estate of John Sharp, Sr., deceased." The notes, together with a deed and other papers, were put in escrow with instructions to deliver them to Schofield on the final payment of the three notes. The deed was executed by Daniel S. Spencer, in whose name the record title stood. Schofield objected to the deed, and commenced an action for the return of the money paid and the three notes. Spencer appeared and answered, alleging, among other things, that he held the title to the land in trust for the estate of Sharp. The executors intervened and demanded judgment against Schofield on two of the notes. Judgment was obtained by Spencer and the executors, from which this appeal is prosecuted.
The form of the deed was not the subject of agreement between the parties other than that it was implied and is not denied that appellant was to receive a full and complete title to the real property, a title in fee simple. The lower court found as a matter of law that the deed tendered conveyed "a good and marketable title." There can be no doubt that appellant was entitled, under the agreement, to receive a marketable title. (Brady v. Bank of Commerce, 41 Okla. 473, Ann. Cas. 1915B, 1019, 138 P. 1020; Speakman v. Forepaugh, 44 Pa. 363; Maupin on Marketable Titles, sec. 283.) The abstract of title furnished appellant shows that Spencer held title under a deed absolute in form and without restrictions or limitations. However, the record is conclusive that appellant had been informed by the executors and knew that Spencer was a mere trustee for the estate of Sharp and had no beneficial interest whatever in the property. The abstract of title neither made reference to the estate of Sharp nor showed any administration of his estate.
The question for determination is whether one who holds title to real property under a deed absolute in form and containing no limitations or reservations, but who in fact is a trustee and holds title in trust for the benefit of the estate of a deceased person, may convey good title, in the absence of a showing of consent to the conveyance on the part of cestui que trust, where the grantee knows of the existence of the trust.
It is well settled that a purchaser of real property from one who holds it in trust for another, with knowledge of the existence of the trust relation, will not be accorded protection as a bona fide purchaser, but will be deemed a trustee for the benefit of the cestui que trust to the extent of such equitable interest.
Conceding, as contended by respondents, that in the case of "simple or dry" trusts, a deed by a trustee, with the consent of the cestui que trust, will pass a good title (2 Washburn on Real Property, 6th ed., secs. 1490, 1502; Arrington v. Cherry, 10 Ga. 429; Parker v. Converse, 71 Mass. 336; 39 Cyc. 355), there was no consent of cestuis que trustent to the execution of this deed. That the deed was made at the request of the executors of Sharp's estate will not aid respondents, for it was not shown that such executors were the cestuis que trustent. One who has contracted to sell and give a good and marketable title to real property, which stands on the public records in the name of another but which is actually held in trust for the benefit of the estate of a deceased person, cannot require the purchaser, who knows of the existence of the trust relation, to accept the deed of the trustee, as a conveyance of a good and marketable title to the property, where the cestuis que trustent do not join in or consent to the conveyance.
The purchaser contracted to buy the real property, and was to receive a good title thereto, both legal and equitable. In view of his knowledge that actual ownership of the land was in cestuis que trustent and that Spencer held the mere legal title, the deed from Spencer could convey nothing more than the legal title. The court erred in concluding as a matter of law that the deed ". . . . conveys a good and marketable title to the plaintiff. . . ." It is unnecessary to determine other questions presented.
Judgment reversed. Costs to appellant.
(March 7, 1927.)
ON PETITION FOR REHEARING.
WM. E. LEE, C. J.--It is insisted that the judgment in favor of Spencer and against Schofield should have been affirmed. A study of this question has convinced us that in this respect counsel for intervenors is correct. The judgment of the trial court, dismissing appellant's action against Spencer, with costs, is affirmed. Otherwise we adhere to the original opinion.
CONCUR BY: BUDGE (In Part)
In what is designated "on petition for rehearing" a majority of the court concludes that the judgment dismissing appellant's action against Spencer should be affirmed. In this I concur. With the remainder of what the court has to say, I dissent. My views are expressed in the dissenting opinion, above, to which I adhere.
In April, 1920, appellant entered into negotiations with respondent Williams, one of the executors of the estate of John Sharp, Sr., deceased, for the purchase of certain land situated in Owyhee county. An oral agreement was reached, under the terms of which appellant was to pay $ 4,000 for the land and water rights, and in June, 1920, appellant paid to Williams $ 1,000 cash on the purchase price and thereafter signed three notes for $ 1,000 each, payable to respondents Williams and Sharp in one, two and three years from date.
The parties later executed an escrow agreement, directed to the Bruneau State Bank of Bruneau, Idaho, as escrow holder, which recited that a deed to the property, executed by Daniel S Spencer in favor of appellant was therewith delivered to it, together with a...
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