Smith v. Pullum

de GRAFFENRIED, J.

— -This litigation grew out of the purchase by G. W. Smith of certain telephone property at Slocomb, Ala. The bill of complaint, which was filed by W. E. Pullum against G. W. Smith, alleges that Bigbie and Winslett owned a telephone line which they were willing to sell for $4,500; that G. W. Smith desired to become interested in this property; that Wm. Pullum, who was insolvent, desired, also, to become interested in it, and to assume its management; and that it was finally agreed that G. W. Smith should buy the property for the $4,500, with the understanding that W. E. Pullum, a brother of said Wm. Pullum, was to furnish $1,650 of the purchase money. The bill further alleges that it was agreed between the three parties, viz., G. W. Smith, William Pullum, and W. E. Pullum, that upon the purchase of the property for the above sum a corporation was to be formed, with a paid in capital of $4,500; that $1,650 of the said capital stock was to- be the property of W. E. Pullum, $600 of said capital stock was to be the property of said Wm. Pullum, and $2,250 of said capital stock was to be the property of said G. W. Smith. The bill further alleges that it was understood that G., W. Smith, who appears to be a man of means, was to loan said Wm. Pullum the said $600. The hill further alleges that it was understood that, when the property was bought, the deed should be taken in the names of the said G. W. Smith and W. K. Pullum, and should show their respective interests, but that the name of said ¥m. Pullum should not then appear as a purchaser because of pending proceedings in bankruptcy against him. The bill further alleges, however, that it was understood and agreed that, when the proceedings in bankruptcy were terminated, then ¥m. Pullum was to own $600 of said capital stock, as above indicated, and that the corporation was then to be formed.

In order that the meaning of this court may be made plainly to appear, we copy the following from the bill as amended: ‘The complainant would further show that the said G. W. Smith was conducting said purchase, and was looking after said matters for him, and that complainant turned over to the said G. W. Smith through his brother, William Pullum, a check for $1,-650, with which to pay, and with which he did pay, his interest in said purchase; that said G. W. Smith did use said $1,650 in paying the purchase price of the said telephone exchange and outfit; but complainant avers that said G. W. Smith caused and procured a deed to the said property to be taken in the name of the said G. W. Smith, and for some reason failed to have the deed taken to the parties named, and failed to have the interest of the complainant in said property conveyed to him as was agreed upon. And complainant avers that he later spoke to the said Smith about the condition of the said conveyance, and the said Smith assured him that the same would be all right, and that he (complainant) would hold his interest in said property as though the deed had been made to him as his interest is, and that the reason the deed was taken in the name of the respondent was that William Pullum was involved in some way in bankruptcy matters, and, to avoid any entanglement on that score, that respondent made the deed straight to himself. He further assured the complainant that he would have the matter straightened out, and see that he was protected. '* * * And complainant would further show that at the time of the said agreement, and prior thereto, William Pullum was indebted to the respondent, in a large sum, to wit, $1,800; that the said respondent had no security for ■ the same, and that there was no prospect in sight of collecting the same; that said respondent was paid the said $1,650 placed or put in said business by complainant; that said respondent then and there conceived the idea of collecting the debt due him by William Pullum, and to that end applied said $1,650 thus paid by complainant as his part of the purchase money to the said debt due respondent by William Pullum, such application being made in the absence of, and without the knowledge of, the complainant; that respondent, in furtherance of such purpose and design, and in furtherance of the purpose and design to exclude complainant, had deed to the telephone property executed to himself; that immediately thereafter the said respondent executed to William Pullum a deed for an undivided one-half interest in said telephone property; that said deed was executed on the 31st day of January, 1910, and two days after the execution of the deed by Bigbie and Winslett to respondent; that said deed was filed for record in the office of the judge of probaté February 24, 1910; that on February 22, 1910, the said respondent caused the said William Pullum to execute to him a mortgage in the sum of $2,250, and to convey in said mortgage his purported undivided one-half interest in said telephone property; and that said mortgage was also filed for record on February 24, 1910. And complainant would further show that, in furtherance of said purpose and design on the part of respondent to use the money of complainant in the payment of the debt of William Pullum, and to exclude complainant from any interest therein, the said respondent, on January 14, 1911, procured from William Pullum an agreement reciting that the said William Pullum was indebted to respondent for an undivided one-half interest in said telephone property, and also a dissolution of the said telephone business between the said William Pullum and G. W. Smith, and on the same d’ay, as a part of the same transaction, procured from the said William Pullum a deed conveying to G. W. Smith the purported one-half interest of the said William Pullum in said telephone property. And the complainant further avers that the respondent Avell knew that the complainant, in good faith, paid said $1,650 for an interest in the said telephone property, and that the respondent immediately undertook to so manage and operate the said transaction as to collect the debt due him by William Pullum, and to conceal the interest of the complainant in and to said property.”

The thought which the above-quoted excerpt from the bill of complaint conveys to the candid mind is that, under the agreement to which we have above referred, $1,650 of the complainant’s money went, to the knowledge of the respondent, into the hands of the respondent, that it went into the hands of respondent as complainant’s agreed contribution to the purchase money of the telephone line, and that it, in fact, was used by the respondent in paying for the telephone line, but that the respondent, in violation of the confidence which the complainant had reposed in him, and in violation of the agreement under which the money Avent ifito the hands of the respondent, credited the money on a debt due by William Pullum to respondent, and took the conveyance to the telephone line in his own name.

The quoted paragraph must be given a reasonable construction. Each sentence in it must be read and interpreted in the light of each of its other sentences, and the interpretation which we have above placed upon the paragraph gives to each sentence its full meaning and harmonizes every apparent conflict in the paragraph. In addition to the above, we direct specific attention to the fact that the paragraph directly and unequivocally charges that the respondent, in the purchase of the telephone line, was acting, not for himself alone, but that he was also acting for the complainant. The opening sentence of the quoted paragraph makes this extremely plain. This sentence is as follows: “The complainant Avould further show that the said G. W. Smith was conducting said purchase, and was looking after said matters for him, and that complainant turned over to the said G. W. Smith through his brother, William Pullum, a check for $1,650, Avith which to pay, and with which he did pay, his interest in said purchase.”

We deem it wise to call attention to these matters, for they are not unimportant in their bearings upon the true equities of the parties in this case.

1. In the case of Dean v. Roberts, et al., 182 Ala. 221, 62 South. 44, we quoted with approval, and, in that case, enforced the following rule announced in Kech v. Sandford, 1 Lead. Cas. in Equity, 53, viz.: “Wherever one person is placed in such relation to another, by the act or consent of that other, or the act of a third person or of the law, that he becomes interested for him, or interested with him, in any subject of property or business, he is prohibited from acquiring rights in that subject antagonistic to tbe person with whose interest he has become associated.”

If, therefore, G-. W. Smith bought the telephone property under the circumstances set out in the above-quoted paragraph of the bill of complaint, he is not, under the above rule, in a position to claim that his purchase, •although the deed was taken in his own name, was for his sole benefit, or that the complainant, at his election, has not the right to follow that money into the telephone line, and, through a court of equity, get that money out of the telephone, line.

2. The prayer of the bill of complaint is as follows: “Complainant further prays that, upon the final hearing of this cause, a decree be rendered to the effect that complainant is entitled to an interest in said property commensurate with the money advanced by him, and a resulting trust be established in said property in favor of complainant to the extent of such interest, or that a reference be ordered before the register to ascertain the amount invested by complainant in said purchase, and that it be decreed that complainant has a lien on said property for said purchase price, and the said property be sold for the satisfaction thereof, or that it be decreed that complainant and the said Smith were partners, and that the property is partnership property, and that complainant's interest in said venture be ascertained and declared, and that a decree be rendered ordering a sale of said property for the payment of the amount thus ascertained to be due, and that said partnership be dissolved, or, if complainant has prayed for the wrong relief, then he prays for such other relief, both general and special, as under the facts and law he may be entitled to.”

We find no inconsistencies in any of the alternative reliefs above prayed. There is, in each alternative relief prayed, a recognition of the validity of the conveyance by Bigbie and Winslett to G. W. Smith. The effort of complainant, in the specific alternative reliefs prayed, is to have his interest, in the purchase ascertained, or to get his money — the part of the purchase money furnished by him — out of the property purchased. It cannot be affirmed that in some of the aspects of the bill there is a claim against, and in other aspects of the bill a claim under, the conveyance. Every aspect of the bill recognizes the validity' of the purchase by Smith of the telephone line.

3. The respondent, in his answer, denies all of the material allegations of the bill. He admits the receipts of the $1,650 from William' Pullum, but claims that the receipts of that money had nothing to do with the purchase of the telephone line, that William Pullum owed him more than $1,650, and that this money was paid to. him by William Pullum on his debt. The respondent expressly denies, in his answer, that, he had any negotiations with complainant with reference to the purchase of the telephone line, or that he, in any way, agreed with complainant that he would invest $1,650 of complainant’s money in the purchase of the said line. The answer challenges sharply the truth of the allegations of the bill, and the evidence of the complainant and of the respondent is in sharp conflict.

4. It is claimed by respondent that there is a variance between the allegations of the bill and the proof which was offered by complainant in support of the bill. The proof shows that complainant mailed to his brother, William Pullum, a check for $1,650, that William Pullum indorsed this check, and placed the proceeds to his (William Pullum’s) personal credit in a bank, and that William Pullum gave his personal check to G. W. Smith for said $1,650 on said bank. The money, however, which Gr. W. Smith received in this way teas the $1,650 which W. K. Pullum sent to William Pullum. If that $1,650 was sent by W. K. Pullum to William Pullum, to be handed to Gr. W. Smith as W. K. Pullum’s contribution to the purchase money of the telephone line, then unquestionably G. W. Smith received that money. While G. W. Smith did not receive the check which W. K. Pullum sent to William Pullum, he did receive the money which the check represented. If it be conceded that G. W. Smith Im-eio, when he received the $1,650 from William Pullum, that the money was the $1,650 which W. K. Pullum had sent as his contribution to the purchase of the telephone line, then, when G. W. Smith bought that telephone line, that money, as between G. W. Smith and W. K. Pullum, went, in equity, into the purchase of the telephone line. It is true that G. W. Smith testifies that, when William Pullum paid him the $1,650, he placed it to his general credit in a bank, and that, when he paid for the telephone line, he gave a check on that general account, and that, after this check for the purchase money of the telephone line was paid, there was still left to his credit in said bank several thousand dollars. All this may be true; but this in no way comes to the aid of respondent.

“Although courts of equity have not made general definitions stating what is fraud, and what is not, they have not hesitated to lay down broad and comprehensive principles of remedial justice, and apply these principles in favor of innocent parties suffering from the fraud of others. These principles, though firm and inflexible, are yet so plastic that they can be applied to every case of fraud as it occurs, however new it may be in its circumstances. The leading principle of this remedial justice is by way of equitable construction to convert the fraMdtolent holder of property into a trustee, and to preserve the property itself as a fancl for the purpose of recompense.” —1 Perry on Trusts (4th Ed.) § 170.

Having made an agreement with W. K. Pullum that he would buy the telephone property for $4,500, that W. K. Pullum was to furnish $1,650 of the purchase money, and that W. K. Pullum was to own an undivided interest in the property proportionate to his part of the purchase money, having received from W. K. Pullum $1,650 as his part of the purchase money, and then having bought and taken possession of the telephone property, the said G. W. Smith cannot, in equity, be permitted to defeat W. K. Pullum’s claim upon the property by showing that he, in fact, had not used the $1,650 in the purchase of the property. In equity he is estopped from showing that he had not so used the money.— Dean v. Roberts, supra.

5. The acute question in this case is not one of law, but one of fact. We have carefully examined the evidence which was offered on the part of the complainant and of the respondent. The chancellor came to the conclusion that under the facts the complainant was entitled to a decree ordering the property to be sold for the satisfaction of his claim upon it for the $1,650,. and the interest.

A careful consideration by us of all the evidence convinces us that, in his finding of fact, the chancellor committed no error. This being true, we are of the opinion that the chancellor was correct in his decree, and that the decree of the court below should be affirmed.

We do not discuss the facts, as a discussion of the facts would prove of service to no one.

Affirmed.

Dowdell, C. J., and Anderson and Mayfield, JJ., concur.