Mays v. Perry

A complainant who seeks relief based on the doctrine of trusts ex maleficio must allege more than the breach of a verbal promise. There must be an unequivocal allegation of positive fraud accompanying the promise, by means of which the acquisition of the legal title was consummated. General allegations as to an entire course of fraudulent conduct are not sufficient, in the absence of a specific averment that the promise was made to be broken. Applying these principles, the petition failed to set forth a cause of action, and the general demurrer was properly sustained.

No. 14599. OCTOBER 7, 1943. REHEARING DENIED NOVEMBER 12, 1943. Edward O. Mays brought suit against George D. Perry and alleged: The plaintiff at the time of filing his petition, and at all times therein mentioned, was the owner of 407 acres of valuable timbered land in Burke County, fully described. On March 7, 1923, he borrowed $2,187 from the Peoples Bank of Sardis, Georgia, and to secure payment of the loan he executed to the bank a security deed conveying the land. Thereafter he made payments on said debt, and on March 31, 1928, there was a balance due of $500. On that date he executed to the bank a renewal note for $523.43, which included interest to accrue up to October 1, 1928. At the time of the execution and delivery of the renewal note the bank was insolvent, and all its assets were taken in charge by the State Banking Department and liquidated in April, 1929. The defendant at the times mentioned, and for several years previously, was a director of said bank, and as director had and exercised the active control of the business policies of the bank. Due to the depression which set in during the year 1929, the plaintiff, in common with all farmers, became financially embarrassed and was unable to meet his obligations as they matured. After the bank had closed, the defendant approached the plaintiff and stated that before the closing of the bank he, the defendant, had purchased said renewal note and caused the bank to transfer to him the security deed executed by plaintiff; that he did this as a friendly favor to plaintiff and in order to prevent the Banking Department from foreclosing and sacrificing plaintiff's property at a forced sale for the small balance due by him, and that defendant would hold the deed and take over control and charge of the land, and the rents accruing and to accrue, for the benefit of plaintiff and plaintiff's creditors, until such time as plaintiff's financial condition improved, and in order that plaintiff, without sacrificing said property, might pay off his obligations to his creditors. The plaintiff had been a customer of said bank for many years, during which time a cordial and friendly relationship existed between the plaintiff, the defendant, and the bank, and by reason of said cordial and friendly business dealings the plaintiff had confidence in the defendant and trusted him, and, believing in good faith that the defendant was endeavoring to befriend and assist plaintiff in his financial difficulties, did then and there enter an agreement with the defendant to take over the control and management of said property for the benefit of plaintiff and his creditors, and until such time as plaintiff and defendant could work out plaintiff's financial difficulties.

Thereafter, on August 19, 1931, the defendant approached the plaintiff again, and did then and there state to plaintiff that he had a prospective purchaser for said land, who was willing to pay therefor the fair market price or value, and that in order to effect a sale of the land the defendant, would have to put the full and complete title in himself, and did then and there suggest that he sell the land under the power contained in said security deed and bid in the land at the sale thus made, in order that he might make the said advantageous sale for the benefit of plaintiff, his creditors, and the defendant, who then claimed to be a creditor also to the extent of the balance due on said note and security deed, under his alleged transfer made on November 20, 1928. The plaintiff, having implicit confidence in the defendant and believing that he was acting in good faith with plaintiff, did enter into an agreement with the defendant to sell the land and bid it in for some nominal amount, in order that he might effect the said private sale for the purposes aforesaid. For the consideration and for the purposes aforesaid the defendant did have the plaintiff to then and there agree that plaintiff would not attend the sale or bid against the defendant at the sale, or have any one else to do so. Pursuant to said agreement and understanding the defendant advertised the land for sale under the power contained in the security deed and did bid in the same at said sale on the first Tuesday in October, 1931, and caused a deed to be made to himself.

Attached to the petition are copies of the security deed and of the deed executed by the defendant to himself under the power, reciting a consideration of $675. Each deed contains a full description of the land.

The plaintiff further alleged: Before the trust agreement made with the defendant respecting the sale of said land, the plaintiff made definite arrangements with one Alwood to pay off in full the balance due on said note and security deed, and informed the defendant of such arrangement and of his purpose to pay off the debt. The defendant would not give his consent to such arrangement, and stated that the plaintiff could not make a private sale without the defendant's consent, and then and there persuaded the plaintiff to enter into the trust agreement with the defendant whereby he would make a more advantageous sale of the property for the benefit of the plaintiff, after first getting title in himself in the manner and for the purposes aforesaid. The plaintiff, still trusting and believing in the defendant and his good intentions, continued to wait patiently for several years for the defendant to comply with his agreement. The plaintiff at the time was an aged and infirm man and unable to keep after the defendant and press him as diligently as the delay and his indifference appeared to require. Time went on, and finally the plaintiff received information that the defendant had executed and delivered to D. O. Smith a conveyance and sale of all the timber on said land, which had been recorded in the office of the clerk of the superior court in said county, and which recited as a consideration for the sale of said timber the sum of ten dollars and other valuable consideration. That plaintiff did not receive said notice or information of the sale of his timber by the defendant until October 15, 1941. Upon due inquiry plaintiff was informed, and alleges that the consideration named in said timber lease was inserted therein for the purpose and with the intent to mislead and deceive plaintiff, and that the true consideration paid for said timber and received by the defendant was $5000.

The plaintiff has made numerous demands upon the defendant to comply with the terms of his agreement made with plaintiff, but the defendant has failed and refused to do so. Said lands at the times mentioned in the petition had a fair market value in excess of $7000; and the defendant's acts and conduct were a part of a fraudulent scheme and conspiracy on his part, the purpose and object of which was to defraud the plaintiff and plaintiff's creditors and to obtain title to said land by indirection. The defendant had never claimed or asserted any right or title adversely to the right and title of the plaintiff, but he has held and controlled the land and collected the rents under and by virtue of the understanding and agreement aforesaid and for the purposes and objects alleged. The defendant having obtained title to the land for the purpose and in the manner charged, and having received payment of his alleged indebtedness in full, and being now indebted to the plaintiff for the purchase-price of said timber, less his indebtedness, the plaintiff is entitled to a decree canceling and setting aside the deeds as a cloud upon his title. While he admits owing the principal amount of the note for $523.43, besides interest, he does not admit owing the defendant any sum. He alleges upon information, that the defendant procured the transfer of said deed at a time when he knew that the bank was insolvent, that the transfer was made without consideration and for the purpose and with the intent to defraud the plaintiff and the creditors of the bank; that the rents and issues received by the defendant from the land under the trust agreement will more than offset any expenditures made by him for taxes and upkeep during the time the defendant was in charge of the land for the plaintiff. He prayed, that the defendant be required to surrender the said deeds; that by decree they be canceled and set aside as a cloud on the plaintiff's title; that he recover of the defendant $3953.16 as a balance due on the purchase-price of the timber, with interest at seven per cent. from May 8, 1941; that full, complete, and unencumbered title to the land be decreed in the plaintiff; and that he have general relief to which he may be equitably entitled.

The defendant demurred generally and specially, on the grounds, that the petition did not set out a cause of action, and did not allege any matter or thing cognizable in equity; that the alleged agreement was in parol and violative of the statute of frauds; that the plaintiff had been guilty of gross laches, and was not entitled to claim the relief prayed for; that if the plaintiff had any cause of action the same arose more than seven years before filing suit; that the allegations as to the alleged parol agreement were too vague, indefinite, and uncertain to be enforced in a court of equity, so as to engraft an implied trust; that the plaintiff by his petition sought to add to, vary, and contradict by parol the terms of a written power of sale in the security deed; that the agreement between the parties whereby the plaintiff was not to attend the sale of the land was illegal and contrary to public policy, and a fraud on plaintiff's creditors; and that the allegations of fraud charged against the defendant were too vague, indefinite, and uncertain to authorize the intervention of a court of equity. The court sustained all grounds of demurrer, and dismissed the action. The plaintiff excepted. If Mays can prevail at all under the facts alleged in this petition, he must do so upon the theory that Perry by fraud, deceit, and breach of faith obtained title to the land in question, so as to create a constructive trust, sometimes referred to as a trust ex maleficio, in Perry as to the land. Otherwise an attempt is made to fasten upon the property an express trust upon a parol agreement, which is forbidden, as all express trusts must be in writing (Code, § 108-105); else they are not enforceable as such. Bentley v. Young, 147 Ga. 373 (94 S.E. 221); Jones v. Robinson, 172 Ga. 746 (3b) (158 S.E. 752); Shaprio v. Steinberg, 175 Ga. 869 (166 S.E. 767). A trust will be implied, "Where, from fraud, one person obtains title to property which rightfully belongs to another." Code, § 108-106 (2). And "Whenever the circumstances are such that the person taking the legal estate, either from fraud or otherwise, cannot enjoy the beneficial interest without violating some established principle of equity, the court will declare him a trustee for the person technically entitled, if such person shall not have waived his right by subsequent ratification or long acquiescence." § 108-107. The statute of frauds is inoperative as a protection and support of fraud (Cameron v.Ward, 8 Ga. 245, 248), and equity will declare a constructive trust in respect of property acquired by fraudulent oral promises of a vendee, which he intends at the time of making to violate.Brown v. Doane, 86 Ga. 32 (12 S.E. 179, 11 L.R.A. 381);Jenkins v. Lane, 154 Ga. 454 (115 S.E. 126). With the foregoing announced principles in mind, the agreement whereby Perry was to acquire title to the land for a nominal amount, through the exercise of the power of sale in the security deed, will be considered for the purpose of determining the existence of fraud. Under the terms of the agreement Perry was to exercise the power of sale in the security deed and bid in the property for some nominal amount, in order to get full and complete title in himself, so that he could effect a private sale to a prospective purchaser who was willing to pay a fair market price therefor; the sale was to be made for the benefit of Mays, his creditors, and Perry, who was a creditor of Mays to the extent of the balance due on the note and security deed. Mays agreed not to attend the sale, or bid against the defendant at the sale, or have any one else to do so. He entered into the agreement because of his implicit confidence in Perry, and believed that he was acting in good faith. This comprises the entire agreement as to the manner in which the power of sale was to be exercised. It was then alleged that Perry, pursuant to the agreement, advertised the land under the power in the security deed, bid off the same, and caused a deed to be made to himself, which recited a consideration of $675. The defendant failed to make the contemplated sale after acquiring the full and complete title, and the plaintiff now calls on the court to give effect to the oral agreement, although it is not alleged that the plaintiff did not attend the sale, or did not bid against the defendant, or did prevent any one else from so doing. It is not alleged that the plaintiff, although agreeing to the arrangement; acted thereon, or was caused thereby to perform any act, or was prompted to any forbearance or non-action, by which Perry was enabled to be the successful bidder at the sale.

While there is great disparity between the alleged value of the land of $7000 at the time of the sale and the amount of $675 at which it was bid off by Perry, there is nothing in the petition showing that the powers contained in the security deed were not fairly exercised. It was not averred that the defendant at the sale discouraged and suppressed the bidding by announcing that he was buying the property in behalf of the plaintiff, as was done in the cases of Collins v. Williamson, 94 Ga. 635 (21 S.E. 140); Carr v. Graham, 128 Ga. 622 (57 S.E. 875); Dowling v. Doyle, 149 Ga. 727 (102 S.E. 27); Broadwell v. Smith,152 Ga. 161 (108 S.E. 609). Nor is it alleged that but for the agreement the property would not have been sold under the power, or that he would have otherwise protected his equity in the land. While it is averred that the defendant's acts and conduct from the beginning, and all of his statements and agreements with the plaintiff, were part of a fraudulent scheme and conspiracy on his part the purpose of which was to defraud the plaintiff and to obtain title to the property, the petition is lacking allegations of specific acts which could be characterized as fraudulent. It is not alleged that any statement made by Perry to Mays as to the existence of any fact was untrue. It is not averred that there was any misrepresentation of any fact. There is no averment that the original promise of Perry was made with the intention of breaking it. Inasmuch as the doctrine of trusts ex maleficio with respect to land can never be applied when there is nothing more than a broken verbal promise (otherwise the statute of frauds would be virtually abrogated), and since in order for such a promise to be the basis of a constructive trust it must have been made with the intention of being broken and for the purpose of thereby obtaining title, a person who seeks relief on account thereof must unequivocally allege the particular facts constituting the fraud relied on to vitiate the transaction.Jones v. Robinson, 172 Ga. 746 (3 c), 759, supra. As heretofore stated, the petition contains only a charge of a broken promise on the part of the defendant, and does not show that the plaintiff was induced to forego the execution by himself of any design entertained by him for the prevention of the sale or a fair exercise of the power of sale. Viewing the petition as a whole, it must be held that in respect to this matter all it presents is a broken promise. There is not enough to justify a court of equity to grant relief. The case is not one that calls for the application of the principles stated in the Code, §§ 108-106 (2), 108-107, since the plaintiff failed by omitting from his petition the necessary elements of fraud to place the remedy without the statute of frauds. It is governed by the proposition that all express trusts shall be created or declared in writing. § 108-105. A provision of the statute of frauds is controlling: "Any contract for the sale of lands or an interest in or concerning them must be in writing." § 20-401 (4). See Jarrett v. Wallace, 98 Ga. 540 (25 S.E. 577); Etheridge v.Woodard, 106 Ga. 251 (32 S.E. 122); Lyons v. Bass,108 Ga. 573 (34 S.E. 721); DeLoach v. Jefferson, 142 Ga. 436 (83 S.E. 122).

Other grounds of demurrer beside the one embracing the subject-matter of this opinion need not be considered, as the petition failed to allege a cause of action based on fraud. The judge properly sustained the demurrer.

Judgment affirmed. All the Justices concur.