Teachey v. . Gurley , 214 N.C. 288 ( 1938 )

This is a civil action instituted by plaintiffs, heirs at law of W. M. Gurley, against the mortgagees of W. M. Gurley and certain other of his heirs at law, in which the plaintiffs seek to vacate and annul a foreclosure sale under a mortgage on the lands of the deceased and to enforce a contract alleged to have been entered into by the mortgagee to purchase the land at the sale and reconvey.

W. M. Gurley died testate, having devised all of his land to his widow, Mary Gurley, for life, with remainder, subject to the life estate, to his children and certain grandchildren. All of said children and grandchildren are parties plaintiff except W. G. Gurley, Annie Gurley, John Henry Gurley, David Gurley, and Joseph Isaac Gurley, who are parties defendant.

At the time of his death W. M. Gurley was seized and possessed of more than 400 acres of land, consisting of a number of tracts. At that time he was indebted to the defendants B. G. Thompson and Sons in an amount in excess of $24,000. There was an outstanding mortgage to B. G. Thompson Sons securing $24,000, and an outstanding trust deed to John W. Thompson, trustee, securing $7,000. Part of the land was unencumbered. The widow, Mary Gurley, was surety upon some of the outstanding notes.

The mortgage and the trust deed were foreclosed and Wm. B. Thompson became the purchaser. There was a proceeding to sell the unencumbered land to make assets, under which a commissioner was appointed to make sale, and this land was likewise purchased by Wm. B. Thompson. Shortly thereafter Wm. B. Thompson, at the direction of B. G. Thompson, conveyed all of said land by warranty deed to the defendants Gurley. The grantees in said deed in turn conveyed said property to secure the amount due the defendants B. G. Thompson and Sons, it having been agreed that the land was to be conveyed to said grantees in consideration of their assumption and agreement to pay the amount due B. G. Thompson Sons by the estate of W. M. Gurley. In purchasing said land at said sales Wm. B. Thompson acted as the agent of B. G. Thompson. All of these conveyances were made in the spring of 1931, the last one to the defendants Gurley being dated 29 April, 1931. Mary Gurley died in 1937, having left a will, in which she devised her property to her living children and to the children of such of her children as predeceased her, per stirpes.

At the conclusion of all the evidence, on motion of defendants, the action was dismissed as of involuntary nonsuit. The plaintiffs, other than the husbands of the feme plaintiffs, who had theretofore taken a voluntary nonsuit, excepted and appealed. The only exceptive assignment of error which requires consideration on this appeal is the one which challenges the correctness of the judgment of nonsuit entered on motion of the defendants at the conclusion of all the evidence.

Plaintiffs offered a number of witnesses who testified as to the alleged contract made by B. G. Thompson. Each in almost identical language testified that "he was going to sell the land as he promised he would do; he was going to bid it in at the lowest figure, and was going to deed it back to her (Mary Gurley) as he told her he would do, and let her divide it among each and all of the children." No witness for the plaintiff testified that the defendant B. G. Thompson agreed to convey the property to any person other than Mary Gurley. All testified that this was to be done so that she could divide it among each and all of her children. In that connection it is also alleged in the complaint that the property was to be bid in by B. G. Thompson and he was to hold the title to the same in trust for Mary Gurley and that Mary Gurley was thereupon to execute a mortgage or deed of trust to secure the amount due B. G. Thompson by the estate of W. M. Gurley, which deed of trust was to embrace all the lands sold by B. G. Thompson and J. B. Thompson, mortgage, by John W. Thompson, trustee, and by Mary Gurley under the order of court.

It is unnecessary to decide whether this evidence tends to establish an express trust by contract in favor of Mary Gurley or merely amounts to a contract to purchase and reconvey. We may assume for the purposes of this decision that considered in the light most favorable to the plaintiffs it tends to show an express trust.

Shortly after the sales were had the defendant B. G. Thompson told Mrs. Gurley in the presence of the witness Parks that he was not going to let her have the land back as he had promised her to do. Likewise, within a few days after the sales, on 29 April, 1931, Thompson actually conveyed the property to the defendants Gurley in direct violation of the alleged agreement.

It appears, therefore, from plaintiffs' evidence that the agreement to reconvey, which was in effect an agreement by Thompson to purchase as trustee for Mary Gurley, was breached in April, 1931, to the knowledge of the cestui que trust. Mary Gurley died in February, 1937. She lived almost six years after the known breach of the contract creating the trust relationship without taking any action. Is plaintiffs' cause of action barred by the statute of limitations — that is, does the three-year statute or the ten-year statute apply? Counsel seem to agree that this is the determinative question on this appeal.

Any seeming conflict or confusion in our decisions in applying the statute of limitations to trusts (commented on by counsel) arises only when the decisions are considered without reference to the several types of existing trusts, of which there are three: First, express trusts, which are created by contract, express or implied; second, resulting trusts, which arise when a person becomes invested with the title to real property under circumstances which in equity obligate him to hold the title and to exercise his ownership for the benefit of another. Under such circumstances equity creates a trust in favor of such other person commensurate with his interest in the subject matter. A trust of this sort does not arise from or depend on any agreement between the parties. It results from the fact that one man's money has been invested in land and the conveyance taken in the name of another. It is a mere creature of equity. And third, constructive trusts, which are such as are raised by equity in respect to property which has been acquired by fraud, or where though acquired originally without fraud, it is against equity that it should be retained by him who holds it. This type of trust likewise arises purely by construction of equity independently of any contract or of any actual or presumed intention of the parties to create a trust and is generally thrust on the trustee for the purpose of working out the remedy. The relief in such cases is predicated on fraud and not on trust. Equity declares the trust in order that it may lay its hands on the thing and wrest it from the possession of the wrongdoer.

Strictly speaking, resulting trusts and constructive trusts are not trusts, but equity imposes a trust relation because morality, justice, conscience and fair dealing demand that the relation be established. In neither does the relation of trustee and cestui que trust actually exist for the element of trust and confidence is absent. The holder of the legal title is declared to be a trustee on equitable principles by reason of some tortious or wrongful act of his.

1. Where there is an express trust based on contract, express or implied, the statute of limitations has no application and no length of time is a bar unless and until there has been (1) a repudiation or disavowal of the trust, or (2) a demand and refusal, or (3) the trust has been terminated by death, or (4) has been closed. 17 R. C. L., 708, and numerous authorities cited in notes. The reason for the rule is that the possession of the trustee is presumed to be the possession of the cestuique trust. As long as the relation of trustee and cestui que trust is admitted to exist, and there is no assertion of adverse claim or ownership by the trustee, no refusal on demand to comply with the terms of the trust, and no repudiation or disavowal of the trust, no cause of action rests in the cestui que trust. The cause of action arises when and only when there has been some assertion of adverse claim or ownership, or a refusal to comply upon demand, or a disavowal or repudiation of the trust. Perry on Trusts and Trustees, 7th Ed., Vol. 2, page 1468, etc. Bogert on Trusts and Trustees, Vol. 4, page 2758, etc. Hinton v. Gilbert, 70 A.L.R., 1192;Cavanaugh Bros. Horse Co. v. Gaston, 47 A.L.R., 1; 17 R. C. L., 708;Edwards v. University, 21 N.C. 325; Bradsher v. Hightower, 118 N.C. 399,24 S.E. 120; Lowder v. Hathcock, 150 N.C. 438, 64 S.E. 194;Hospital v. Nicholson, 190 N.C. 119, 129 S.E. 149; Efird v. Sikes,206 N.C. 560, 174 S.E. 513; Bacon v. Reeves, 160 U.S. 107; Coxe v.Carson, 169 N.C. 132, 85 S.E. 224, in which it is said that the statute begins to run when the trust is closed or when the trustee disavows the trust with the knowledge of the cestui que trust, or holds adversely to the claim of those he represents. If a trustee repudiates a trust by clear or unequivocal acts or words and claims thenceforth to hold the estate as his own, not subject to any trust, and such repudiation and claim are brought to the notice or knowledge of the cestui que trust in such manner that he is called upon to assert his rights the statute will begin to run from the time that such knowledge is brought home to the cestui que trust and he will be completely barred at the end of the statutory period.

In such instances the breach of the trust is in effect and, usually, in fact a breach of contract, express or implied. Actions thereon are necessarily based on the contract and the breach thereof. This being true, C. S., 441, applies and the right of action is barred at the expiration of three years after such breach, repudiation or disavowal. Robertson v. Dunn,87 N.C. 191; Edwards v. University, 21 N.C. 325; Dunn v. Dunn, 137 N.C. 533,50 S.E. 212; County Board v. State Board, 107 N.C. 367,12 S.E. 452; House v. Arnold, 122 N.C. 220, 29 S.E. 334; Davis v. Doggett,212 N.C. 589.

2. Actions to enforce constructive or resulting trusts are based on the original wrongful or tortious act of the person holding title, by reason of which equity impresses a trust upon his title. No contract relation exists. A cause of action arises when the wrong is committed. Therefore, the statute of limitations immediately begins to run and the ten-year statute applies, unless sooner barred under the doctrine of laches. C. S., 445.

None of the decisions cited by the plaintiffs are in conflict with the views herein expressed. In Ritchie v. Fowler, 132 N.C. 788,44 S.E. 616; McAden v. Palmer, 140 N.C. 258, 52 S.E. 1034; and Norcum v.Savage, 140 N.C. 472, 53 S.E. 289, constructive trusts were under consideration. In Gentry v. Gentry, 187 N.C. 29, 121 S.E. 188; Sexton v.Farrington, 185 N.C. 339, 117 S.E. 172; Marshall v. Hammock, 195 N.C. 498,142 S.E. 776; and Miller v. Miller, 200 N.C. 458,157 S.E. 604, resulting trusts are discussed. The decisions in Rousev. Rouse, 176 N.C. 171, 96 S.E. 986, and in Latham v. Latham, 184 N.C. 55,113 S.E. 623, are based on laches. In the latter case, which deals with an active trust which had become passive by the death of the cestui que trust, it is stated that the action would be barred at most within ten years. However, some thirty years had expired since the trust became passive.Spence v. Pottery Co., 185 N.C. 218, 117 S.E. 32, was an action to reform a deed for mistake of the draftsman. In Cunningham v. Long,186 N.C. 526, 120 S.E. 81, the statute of limitations was not pleaded and the court held that there was no evidence of unreasonable delay.

Whether courts of equity apply a limitation upon actions in obedience to the statute or by analogy is of little importance, for courts of equity have their own rule of laches which is much more flexible than the statute of limitations and is usually applied to bar equitable rights and remedies when there has been unreasonable, inexcusable and prejudicial delay, equal to and even less than the statutory period of limitations. Patterson v.Hewitt, 195 U.S. 309; Hammond v. Hopkins, 143 U.S. 224; Sawyer v. Cook,188 Mass. 163, 74 N.E. 356; Perry on Trusts and Trustees, Seventh Ed., Vol. 2, page 1457. In equity, where lapse of time has resulted in some change in the condition of the property or in the relations of the parties which would make it unjust to permit the prosecution of the claim, the doctrine of laches will be applied. Hence, what delay will constitute laches depends upon the facts and circumstances of each case. Whenever the delay is mere neglect to seek a known remedy or to assert a known right, which the defendant has denied, and is without reasonable excuse, the courts are strongly inclined to treat it as fatal to the plaintiff's remedy in equity, even though much less than the statutory period of limitations, if an injury would otherwise be done to the defendant by reason of the plaintiff's delay. Thus, where the property has greatly increased in value, especially if through the efforts of the defendant, unexplained delay of a very short time may be laches. This is likewise true where the defendant's means of proving his side of the case has been materially weakened by the lapse of time, as, for example, by reason of the death of parties, loss of evidence, change of title, intervention of equities, or otherwise. Hammond v. Hopkins, supra; Perry on Trusts and Trustees, supra, page 148, and cases noted.

We are prone to hold, therefore, that irrespective of the statute of limitations the laches of the plaintiffs is such as to bar any recovery in this action. They waited for approximately six years after the trust was disavowed and after the property had been conveyed by the alleged trustee and until after the lips of the primary beneficiary were closed in death. In the meantime, one of the plaintiffs and her husband lived on the property for a period as tenants. During the full time all the plaintiffs were in a a position to know that the defendants Gurley were making improvements upon the property, had conveyed a part of it and were undertaking to pay off the debt originally created by the ancestor of the plaintiffs. And yet, to this day neither the original beneficiary nor the plaintiffs have offered to comply with their part of the contract, but have consistently acquiesced in the ownership of the defendants Gurley. Under such circumstances one whose laches is so pronounced cannot successfully seek relief in a court of equity. Jones v. Stewart, 212 N.C. 228.

Plaintiff's cause of action is barred by the three-year statute of limitations, C. S., 441 (1), and under the doctrine of laches, each of which was duly pleaded in defense.

The judgment below is

Affirmed.