Tenney v. Simpson , 37 Kan. 353 ( 1887 )

The opinion of the court was delivered by

Valentine, J.:

In the latter part of the year 1878, Samuel N. Simpson, "William C. Tenney, and M. Shepard Bolles — the latter representing himself and Henry Shepard and Richard F. Bolles — formed a copartnership to purchase and sell on speculation, a certain piece of real estate consisting of 30 and t673q-acres, situated near Wyandotte city, in Wyandotte county, Kansas, and belonging to Matthias Splitlog. Simpson at that time and prior thereto, by a written contract with Splitlog, had the exclusive right to purchase the property, but he did not have the money with which to do so; and for this reason he entered into the copartnership aforesaid. The price to be paid for the land was $200 per acre. Under this partnership arrangement, and in pursuance thereof, M. Shepard Bolles furnished the money with which to pay for the property, and also furnished some other money to pay, incidental expenses, amounting in the aggregate to $6,300. He took a promissory note from Tenney to himself for this amount, and also took two other notes from Tenney to himself for $1,000 each, for guaranteed profits on the property, and also took two other notes from Tenney to M. Bolles & Co. for $500 each, for the services of M. Bolles & Co. in procuring the foregoing money. The entire notes in the aggregate amounted to $9,300. By agreement of the partners the deed for the land was executed by Splitlog to M. Shepard Bolles, for the purpose, first, of transferring the title to the property from Splitlog to one of the partners in interest, to wit, M. Shepard Bolles; and second, to secure the payment of the aforesaid promissory notes. The deed was executed on December 3,1878. The profits of this speculation, or transaction, after paying the purchase-money and all the costs and expenses connected with or concerning the partnership, were to be divided as follows: Four-tenths to Simpson; three-tenths to Tenney; and three-tenths to M. Shepard Bolles, for himself and those whom he represented. All these matters are set forth in much greater detail in the special findings made by the referee and reported to the court below. Bolles, and the parties whom he represented, resided in Boston, Mass., while Tenney and Simpson resided in Kansas.

After the purchase of the foregoing land, a portion of the same was platted into lots, streets, alleys, etc., and a large number of the lots were sold under the special supervision of Simpson; and Bolles then executed quitclaim deeds therefor to Tenney, and Tenney executed warranty deeds to the purchasers. All this was in accordance with their previous partnership agreement. From the proceeds of these sales, all the foregoing notes to M. Shepard Bolles, and all the expenses connected with the partnership business, were paid; and Simpson and Tenney paid the two five-hundred-dollar notes to M. Bolles & Co., each paying one-half thereof. After this, and after June 15,1883, and not before, but before this action was commenced, Tenney, acting for himself and the Boston parties, refused to permit any further sales, or to permit Simpson to have any further connection with the property.

This action was commenced on January 17,1884, by Simpson against the other parties, to wit, William C. Tenney, M. Shepard Bolles, Henry Shepard, and Richard F. Bolles, to have Simpson’s interest in the property declared, and for partition of the property. Upon the findings of the referee, the court below rendered judgment in favor of Simpson, and that the property be partitioned, giving to Simpson four-tenths thereof; and to reverse this judgment the defendants, as plaintiffs in error, bring the case to this court for review. They claim that Simpson has no interest whatever in the property. They claim that by virtue of the deed from Splitlog to M. Shepard Bolles, the entire title to the property was transferred and is vested in M. Shepard Bolles alone; that no legal or valid express trust has ever been created in favor of Simpson, for the reason that no writing creating the same has ever been executed; and that no resulting trust has ever been created in favor of Simpson, for the reason that Simpson did not make any actual payment of the purchase-money for the property ■to Splitlog, nor agree to pay the same, nor incur any absolute obligation therefor, but that the same was wholly and entirely paid by the other parties. And they further claim that no trust of any kind has ever been created or has arisen by operation of law, in favor of Simpson — no constructive trust, no implied trust.

We think the plaintiffs in error (defendants below) misconceive the law of this case. It may be true that no valid express trust has ever been created in this case; and it is certainly true that no resulting trust nor any implied trust can be created except upon a sufficient consideration; but the consideration need not in any case pass directly from the eestui qui trust, or beneficiary, to the grantor of the land. (Rose v. Hayden, 35 Kas. 106; Kendall v. Mann, 93 Mass. [11 Allen] 15; Runnels v. Jackson, 2 Miss. [1 How.] 358; Soggins v. Heard, 31 Miss. 426; Honore v. Hutchings, 8 Bush, 687; Page v. Page, 8 N. H. 187; Kelly v. Johnson, 28 Mo. 249; Millard v. Hathaway, 27 Cal. 140, 141; Sandfoss v. Jones, 35 id. 481; Buck v. Pike, 11 Me. 9; Lounsbury v. Purdy, 18 N. Y. 515; and other cases hereafter ci'ted.) Besides, the transaction in the present case was a partnership transaction, and in such cases real property may usually be considered in nearly the same manner as personal property, and the real intention of the parties with reference thereto, their contracts, promises or mutual understandings will govern, without reference to whether they have been reduced to writing, or not. (Marsh v. Davis, 33 Kas. 326; Morrill v. Colehour, 82 Ill. 619; Knott v. Knott, 6 Ore. 142; Collins v. Decker, 70 Me. 23; York v. Clemens, 41 Iowa, 95; Clark’s Appeal, 72 Pa. St. 142.) In such cases the statute of frauds and kindred statutes have no application. In 2 Story Eq. Jur., § 1207, the following language is used:

“In cases, therefore, where real estate is purchased for partnership purposes and on partnership account, it is wholly immaterial, in the view of a court of equity, in whose name or names the purchase is made and the conveyance is taken, whether in the name of one partner or of all the partners, whether in the name of a stranger alone or of a stranger jointly with one partner. In all these cases, let the legal title be vested in whom it may, it is in equity deemed partnership property not subject to survivorship, and the partners are deemed the cestuis que trust thereof.”

In the case of Morrill v. Colehour, 82 Ill. 619, it is held as follows:

“Where land is purchased by several for the purpose of sale and the acquisition of profits only, and not for permanent use, it will be regarded in equity as personal property among the partners in the speculation; and one of the parties may release his interest in the same verbally, and the same will not be within the statute of frauds.”

Turning our attention for the present to pure resulting trusts, without reference to partnership transactions, we have the following. Mr. Pomeroy, in his work on Equity Jurisprudence, uses the following language:

“ Kesulting trusts, therefore, are those which arise where the legal estate in property is disposed of, conveyed, or transferred; but the intent appears, or is inferred, from the terms of the disposition, or from the accompanying facts and circumstances, that the beneficial interest is not to go or be enjoyed with the legal title. In such a case a trust is implied or results in favor of the person for whom the equitable interest is assumed to have been intended, and whom equity deems to be the real owner. This person is the one from whom the consideration actually comes, or who represents or is identified in right with the consideration; the resulting trust follows or goes with the real consideration.” (2 Pomeroy’s Eq. Jur., §1031.)

Also, in the following cases it has been held as follows:

“A resulting trust in land in favor of a third person may be established by parol evidence, although the deed recites that the consideration was paid by the grantee, and it was in fact paid by him, provided that it was distinctly agreed before the purchase that the sum paid should be considered as a loan from the grantee to such third person; but the proof upon this point must be full and clear.” (Kendall v. Mann, 93 Mass. 15.)

“G. advanced a sum of money to purchase land for the benefit of J., with an agreement that the titles should be taken in the name of G., and the land conveyed to J. upon the payment of the money within a certain time, which J. failed to perform: Held, The facts constitute a resulting trust in favor of J. Payment of the money and conveyance of the land decreed.” (Runnels v. Jackson, 2 Miss. 358.)

“Where P. bought land and took a deed in the name of L., and L. advanced the purchase-money and took the notes of P. for the same, and agreed to convey the land to P. on being repaid the money advanced, and interest — it was held that the money thus advanced by L. might be considered as a loan to P.,and the land as purchased with the money of P.,so as to raise a resulting trust.” (Page v.Page, 8 N. H. 187.)

“Hutchings and Honoré, in 1861, jointly purchased thirty acres of land near Chicago, 111. Hutchings advanced the entire purchase-price, took a conveyance to himself, and executed a writing in which, among other things, ‘it is agreed between said parties, that when said land is sold said Hutchings is to have first his six thousand dollars so advanced, and ten per cent, interest, and the profits over and above said sum are to be equally divided between said parties. . . . This arrangement is to continue eighteen months, when, if the property has not been sold, said Honoré is to pay one-half the sum so advanced, with the accrued interest, or said Hutchings is to be the sole owner of the same.’ The land was not sold within the eighteen months, and Honoré failed to pay any part of the sum so advanced. In 1869 Hutchings sold the land for one hundred thousand dollars, and refused to pay any part thereof to Honoré. Honoré sued Hutchings for one-half of the net profits, after deducting purchase-price, interest, etc. Held, That a trust resulted in favor of Honoré to the extent of one-half of the land jointly purchased. This interest he pledged to Hutchings to secure the repayment to him of one-half the purchase-price advanced, etc.; and Hutchings held the legal title to one-half of the land in trust for Honoré, and the latter is entitled to one-half of the net profits realized upon the resale of the same.” (Honore v. Hutchings, 8 Bush, 687.)

“An oral agreement under which the defendant advanced money for the plaintiff to pay certain installments under a contract for the purchase of land, the defendant being named in the contract as the purchaser, but really acting for the plaintiff in pursuance of the agreement, held, to be valid, and not within the statute of frauds.” (Walton v. Karnes, 67 Cal. 255; same case, 7 Pac. Rep. 676.)

See also the cases of Millard v. Hathaway, 27 Cal. 140, et seq.; Barroilhet v. Anspacher, 68 id. 116; same case, 8 Pac. Rep. 814; Ward v. Matthews, (Cal.) 14 Pac. Rep. 614; Soggins v. Heard, 31 Miss. 426: Boyd v. McLean, 1 Johns. Ch. 590 to 593; Jenkins v. Eldridge, 3 Story, U. S. C. C. 181, 284.

Mr. Pomeroy, in his work on Equity Jurisprudence, also uses the following language:

“Where two or more persons together advance the price, and the title is taken in the name of one of them, a trust will result in favor of the other with respect to an undivided share of the property, proportioned to his share of the price.” (2 Pomeroy’s Eq. Jur., §1038.)

• In this present case, the partnership consisted of Simpson, Tenney, and M. Shepard Bolles; and the property was really purchased by and for the partnership, and for the purpose of surveying and platting it into town lots, and making it an addition to the city of Wyandotte, and selling the lots for profit; and there was no intention or understanding on the part of any one of the partners that the property should be purchased for the permanent use of any one of them, or for permanent use at all. Bolles, it is true, furnished the purchase-money, but he really furnished it to and for the partnership, and as a loan to the partnership, and it was really paid to Splitlog by and for the partnership, and the deed was executed to Bolles because he was one of the partners, and as a security for the repayment of the purchase-money to him. The deed answers as an absolute conveyance for the purpose of transferring the property from Splitlog to the partnership; but so far as it was intended as a security for the money loaned, it was only a mortgage. (McDonald v. Kellogg, 30 Kas. 170, and cases there cited.) At this time Simpson was the only person who had any right to purchase the property, and he did not release this right or consent that the deed should be executed to any other person than himself until all the partnership arrangements were perfected and consummated. And these partnership arrangements and this release were certainly a sufficient consideration on the part of Simpson for all the rights or interests in the property which he has at any time claimed. His right to the exclusion of all others to purchase the property was of itself and alone a thing of value and a sufficient consideration for all that followed. (C. B. Rld. Co. v. Wilcox, 14 Kas. 259, 268.) But that was not the only consideration. There were the partnership agreements on the part of Simpson; the contemplated personal services on his part to be performed in the future; and the further fact that Simpson was to pay one of the five-hundred-dollar notes, which he did in fact pay.

On December 11,1878, M. Shepard Bolles admittedin a letter to Tenney that he held the property “ as trustee; ” that he held it “ to secure those who have furnished money; ” and that when “the purchase-money and all other liens against the property have been satisfied,” he would then hold it “ for the benefit of all concerned,” and the profits would then go as follows; Seven-tenths to Tenney and his “associate,” meaning Simpson, and the other three-tenths to himself and his Boston associates. Also, the written stipulation furnished by the Boston parties and signed by Tenney on November 23, 1878, before the deed from Splitlog to M. Shepard Bolles was executed, shows that “Mr. S.,” whom the oral evidence shows was Simpson, was to have four-tenths of the profits after paying the aforesaid purchase-money, costs, expenses, etc. And the evidence shows that Simpson was permitted to deal with the property and expend time, labor, and money with reference thereto for nearly five years before his said interest in the property was questioned. Among other things, he was actually permitted to pay $500, one-half of the commission to procure the purchase-money. Therefore did not Simpson have an interest in the purchase-money, and has not an implied trust arisen in his favor? Valid express trusts are such, and such only, as are created by the express terms of a written instrument. Implied trusts are such as arise by implication or operation of law. The interests which have arisen or been created in favor of Simpson .in the present case, come very nearly being a written express trust; but holding that they are not, then they are clearly an implied trust. Implied trusts include a vast number of trusts not included in Mr. Pomeroy’s definition of resulting trusts; for instance, such trusts as Mr. Pomeroy himself designates as constructive trusts. In the present case we think that the trust which has arisen in favor of Simpson is both a resulting trust and a constructive trust. It is true that by § 6 of the act relating to trusts and powers, such trusts as formerly resulted where one person paid the purchase-money and the property was conveyed to another, have been abolished except in certain cases, designated in §§ 7 and 8 of said act, among which are, “where it shall be made to appear that, by agreement, and without any fraudulent intent, the party to whom the conveyance was made, or in whom the title shall vest, was to hold the land, or some interest therein, in trust for the party paying the purchase-money, or some part thereof.” The trust in favor of the partnership and in favor of Simpson may be upheld under this clause just quoted. It is claimed, however, that it was not “made to appear” in the court below that the mode of purchase and conveyance in the present case was “without any fraudulent intent.” We think it was; or at least it was as far as Simpson is concerned. He had no intention of defrauding any person, and certainly not of defrauding the other parties. The evidence shows that the deed was executed to M. Shepard Bolles instead of to all the parties, or to either of the others, for the purpose that it might be a security to Bolles for the money advanced by him, and not with any fraudulent intent.

The plaintiffs in error (defendants below) have urged as a controlling matter the fact that Tenney gave his individual notes for the purchase-money. But when we come to consider the entire facts of the case, this should make no difference. It was not understood that Tenney should pay these notes individually, and he did not do so. On the contrary, it was understood that these notes should be paid out of the proceeds of the partnership property, and they were so paid. As to to the two $500 notes given as a commission to M. Bolles & Co. for procuring the purchase-money, Tenney paid half, and Simpson paid the other half.

Property, held in trust for copartnership and for members thereof.

It is further urged that Simpson was not to have any interest in the land, but only an interest in the proceeds of the sale of lots. This is very technical, but giving it all the force to which it may be entitled, and still it can make no difference under the further facts of the case; for before the commencement of this action, the sale of the lots was discontinued and the partnership dissolved at the instance of the other parties, and the partnership debts paid; and always, upon the dissolution of a partnership and the full payment of the partnership debts, the partners become tenants in common with regard to any and all real estate still belonging to the copartnership. (1 Washburn on Real Property, 423, sub. 4.) Viewing this case in any light we may, it is clear that M. Shepard Bolles holds four-tenths of the property in controversy In trust for Simpson. When the deed was first executed to him he held the property in trust for the partnership, Simpson’s interest therein after paying the debts being four-tenths. "When the partnership was terminated he then held the property in trust for the individual partners in proportion to their respective interests in the partnership. He now holds four-tenths for Simpson.

The judgment of the court below will be affirmed.

All the Justices concurring.