Durfee v. Pavitt , 14 Minn. 424 ( 1869 )

By the Court.

McMillan, J.

The principal points of inquiry in this case are :

1. Whether the deed from Atwater to Pavitt was presumptively fraudulent, and whether for want of evidence on the part of Pavitt disproving a fraudulent intent, a trust resulted to the creditor of Hill, under our statute.

2. Whether the deed was fraudulent and void as against the plaintiff, as creditor of Hill, for actual fraud in the conveyance. Some other incidental questions will be considered as we proceed in the case.

It is a well settled doctrine under the statute of frauds, that where one man buys land and pays for it with his own money, and takes a conveyance in the name of another, a trust results by operation of law in favor of the person so paying the purchase money. Sugden on Vendors, 255.

It is also determined by the weight of authority that the trust in such case need not appear- on the face of the deed, but that such trust can be established or rebutted by parol evidence, in that case however the evidence must be clear and satisfactory. Boyd vs. McLean, 1 Johns. Ch. 582; Page vs. Page, 8 N. H. 195 ; 3 Sug. on Vend., 256 and 7, and authorities cited in n. 1. "We are clearly of opinion also that “ It is essential from the very words of the statute, to a resulting trust, that it should arise from some conveyance or deed. ” Stat 29, Car. 2, Ch. 3, Secs. 7-8 ; Brown on Frauds, 512 (app.); Jackson vs. Seelye, 16 Johns. 197; Page vs. Page, 8 N. H. 195. In our State the rule as to resulting trusts under the English statute has been greatly modified. It is enacted by our statute that “When a grant for a valuable consideration is made to one .person, and the consideration therefor is paid by another, no use or trust shall result in favor of the person by whom such payment is made ; but the title shall vest in the person named as the alienee in such conveyance, subject onlyto the provision of the next section, ” which is in the following language: “Every such conveyance shall be presumed fraudulent as against the creditors, at that time, of the person paying the consideration; and when a fraudulent intent is not disproved, a trust shall result in favor of such creditors, to the extent that may be necessary to satisfy their just demands. ” Gen. Stat., Ch. 43 Secs. 7-8. There are also further limitations of section 7 which are-not necessary to be considered in this case. It will be perceived that while the trust in favor of the person paying the consideration money is abolished, and a trust in favor of the existing creditors of such person is expressly preserved, and the conveyance as to such creditors declared to be presumptively fraudulent, by our statute, the statute only embraces trusts resulting upon a conveyance. It is therefore essential to the existence of a resulting trust, in favor of the existing creditors of the person pajino- the consideration, under our statute, ■ that it arise from some conveyance or deed. No such trust therefore could have arisen in favor of Hill’s creditors in this instance until the conveyance from Atwater to Pavitt.

To bring this case within the statute therefore, the consideration of the conveyance to Pavitt'must have been paid by Hill.

The referee finds, among other things, that Atwater verbally agreed with Hill to sell and convey the premises to him, or to such person as he should direct, and that Hill paid him the purchase money, at the time of making the agreement ; that the title to the premises became perfect in At-water on the 18th of August, 1861 ; that afterwards, and during the pendency of the action, commenced on the 12th of IVIay, 1862, in which the judgment in favor of the plaintiff, Durfee, was recovered against Hill — no conveyance having ever been executed by Atwater — “ One Lucius A. Babcock, nephew of said Atwater, applied -to .said 1. P. Hill for authority to sell said lot No. 3, for said I. P. Hill’s benefit, and that said I. P. Hill authorized said Babcock to sell said lot, and gave said Babcock a writing directing the said Lucius Atwater to convey said lot 3, to whomsoever said Babcock should direct. * * * * That said Babcock bargained said lot to the defendant, Samuel N. Pavitt, for §200, andón the 9th of July, 1862, j>rocured a conveyance of said lot, by deed, from said At-water and wife to said Pavitt, by producing said writing from said I. P. Hill; that said Babcock delivered said deed to said Pavitt, and that on such delivery the said Pavitt paid said Babcock $200, the consideration before agreed upon ; that there is no evidence tending to show that at the time of this conveyance said Pavitt knew that said Babcock was acting in behalf of I. P. Hill, or that Hill was in any way connected with the title to said lot. * * * * * * On the other hand, there is no evidence tending to show that said Pavitt was not fully informed of all these matters.” The facts found by the referee show that Babcock was in fact the agent of Hill, and acted as such in the sale to Pa-vitt.' The presumption under such circumstances is that the authority under which Babcock acted was communicated to Pavitt. So far, therefore, as the referee finds that there is no evidence in the case tending to show, that at the time of this conveyance, Pavitt knew that Babcock was acting on behalf of Hill, or that Hill was in any way connected with the title to the lot, the finding is erroneous. But on the contrary, as the case stands, we must presume that Pavitt knew of Babcock’s agency for Hill, and of Hill’s interest under the agreement with Atwater, and that in the transaction Babcock was disposing of Hill’s interest for the benefit of the latter. The facts, then, so far as it is necessary to advert to them in order to ascertain whether the consideration of the deed to Pavitt was paid by Hill, so as to render the conveyance presumptively fraudulent as to Hill’s existing creditors, within the meaning oí our statute of “ Hses and Trusts, ” are these : Atwater made a verbal contract with Hill for the sale of the lot, and agreed to convey the same to him or to such person as he should direct, in consideration of $700 which Hill paid at the time. Subsequently, and before any conveyance by Atwater, Hill, through his agent Babcock, in consideration of $200, paid by Pavitt, transferred to the latter, by a verbal agreement, all Hill’s interest under the agreement with Atwater ; thereupon, on the written order of Hill, Atwater conveyed the lot to Pavitt.

Upon this state of facts, the case, so far as the questions of a resulting trust in favor, of Hill’s creditors, and the presumptively fraudulent character of the deed, are concerned, is not distinguishable in principle from that of Jackson vs. Seeley, 16 Johns., 196. Although Atwater gave the deed on the consideration originally paid by Hill, yet as between Hill and Pavitt, by the agreement between them, through Babcock, Hill’s agent, Hill parted with all his interest in. the payment by him, and all his rights under the contract, and transferred the same to Pavitt in consideration of $200 paid by the latter. Pavitt, therefore, both as to Hill and Atwater, stood in Hill’s place, as an assignee for value of Hill’s interest. This in effect rendered the payment- by Hill to Atwater, a payment by Pavitt to Atwater, and the deed having been made upon this consideration, Pavitt is a purchaser for value. Under this state of facts no trust would have resulted to Hill under the statute of frauds, and under our statute the deed was not presumptively fraudulent ; it was not therefore incumbent on the defendant Pavitt, in the first instance, to disprove a fraudulent intent, in order to prevent a resulting trust in favor of Hill’s existing creditors. '

2. Was the deed to Pavitt void as to the plaintiff, a creditor of Hill, .for actual fraud in the conveyance ? In order successfully to invoke the aid of a court of equity on this ground, to subject the land in the hands of Pavitt, a purchaser for value, to the payment of the plaintiff’s judgment, it is necessary for the plaintiff to establish a fraud on the part of Hill, in which Pavitt participated, or of which he had notice prior to or at the time of the conveyance to him.

The referee finds that Atwater, so far as he was concerned, acted in entire good faith in the premises, and had no notice of any fraudulent intention on the part of Hill in the transaction, and there is sufficient evidence to. sustain tbis finding. But it was not necessary to the plaintiff’s case to implicate Atwáter in the fraud. If fraud existed on the part of Hill of which Pavitt had notice, that' would be sufficient for the plaintiff. Hill’s fraud was therefore a distinct issue in the case, upon this issue the referee makes no finding, which he should have done. We think the referee erred in sustaining the objection to the question put to the defendant Hill by the plaintiff’s counsel, ■“ Why did you not have the conveyance of the property made to you at the time the bargain was made? ” And in finally rejecting the answer of Hill to the question, which was taken subject to the objection ; ■ for the evidence offered went directly to establish fraud on the part of Hill. But in the view we take of the case, neither the rejection of the testimony offered, nor the omission of the referee to ’ find upon the question of Hill’s fraud, is sufficient to require us to grant a new trial, for, independent of the fact that subsequent testimony in the case shows the fraudulent intent of Hill, and assuming the existence of fraud on the part of Hill, as against the appellant, it could have no material influence on the result, unless Pavitt participated therein, or had notice of it. We do not.think there is any evidence — and the evidence is all before us — tending to prove either of these • facts. The burden of proof under this issue was upon the plaintiff. The agreement between Atwater and Hill being a mere verbal one, and Hill not having made any improvements on the premises, or entered into possession thereof in pursuance of it, would not, while resting in parol, vest in Hill any interest in the premises either in law or equity. The only right Hill would have in such case, would be to the money paid by him to Atwater, and the creditors of Hill, by taking the proper steps in time, could have reached this'interest; but-clearly Hill had no interest either-in the laud or purchase money, upon which the judgment of the plaintiff was a lien. Whatever may have been the effect of the performance of the agreement by Atwater, as between the parties to the agreement, or their privies, Hill having disposed of his interest to Pavitt for a valuable consideration prior to such performance, it did not give to the plaintiff, Hill’s judgment creditor, who was neither a party nor privy to the agreement, any greater right as against Pavitt, than that which accrued to him under the oral agreement.

The plaintiff’s judgment therefore was not constructive notice to Pavitt at or before the time of his purchase.

We discover no evidence tending to show that Pavitt, at or before the conveyance to him, had any notice in fact of . the existence of the plaintiff’s judgment, or ot Hill’s insolvency, or of any indebtedness of Hill to the plaintiff, or any other person ; or that Pavitt was aware of any of the circumstances attending the attempt of the plaintiff to collect his judgment against Hill, or that there was any communication or intimation to Pavitt -of the intention of Hill or Babcock to hinder, delay, or defraud the plaintiff, or any one else, by the conveyance to Pavitt. It is true the presumption from the facts is that Pavitt knew the legal title to the lot was in Atwater, and was aware of Hill’s agreement with Atwater for the purchase of the lot, but circumstances of this character are of frequent occurrence, and there is nothing in them,_£>ór se, which ’indicates fraud, or is at all inconsistent with perfect integrity. The fact that the consideration of Hill’s agreement with Atwater for the lot was $700, and that Pavitt paid Hill but $200, cannot be regarded either as notice to Pavitt of fraud in Hill, or as a badge of fraud in Pavitt, for Pavitt’s agreement was made more than a year after Hill’s contract with Atwater, and no evidence was offered as to the value of the lot at the time of Pavitt’s purchase. The referee finds that $200, the sum paid by Pavitt for the premises, was, at the time he purchased, an adequate consideration. If the plaintiff relied on the inadequacy of the consideration, it was incumbent on him to show the fact, and having offered no evidence upon the point, the finding of the referee is correct. In addition to this,- referring to the pleadings, we find in the complaint of the plaintiff the allegation, “ that said premises, including the house thereon, are not worth more than $800,” and in the answer of the defendant Pavitt, it is averred that the sum of $200, for which he purchased, was, at that time, a full and fair consideration for the premises; that at that time the premises were unoccupied and unimproved; that prior to the commencement of this action he placed improvements thereon, to-wit, a dwelling house, and fenced and inclosed the same, and that the improvements were reasonably worth $550. The plaintiff, in his reply, denies that Pavitt put $500 im-j)rovements on the premises, or any improvents before he had full notice of the plaintiff's claim, but avers that he put all the “ said improvements on the premises, ” with full knowledge of the plaintiff’s claim. This is am admission of the improvements and their value, and an averment that they were put on with notice of the plaintiff’s claim. This is a substantial admission of the adequacy of the price paid by Pavitt at the time he purchased.

There is an entire absence of evidence to establish fraud in Pavitt, or bring to him any notice of fraud in Hill. Pav-itt therefore is a bona fide purchaser for value of the premises, and the plaintiff is not entitled to the relief sought as against him.

The judgment appealed from is affirmed.