Pacheco v. Mello

In my opinion the appellants' proof established an express trust, and the motion to dismiss, made at the close of that evidence, should have been denied.

At the trial, after the written instruments referred to in the majority opinion had been admitted in evidence, the trial court permitted oral evidence on behalf of the appellants concerning the understanding between them and Mello at the time the deeds were executed and delivered at Carson City, Nevada. That testimony was given by disinterested persons to the effect that Mrs. Pacheco said Mello was going to the state of Washington to try and sell this property for them and that she wanted him to have the deed to show persons who might want to buy, that the deed was not to be recorded when he went to Washington, because she was not selling the property to him; that he was to sell it for $16,000 and all he got over that sum would belong to him; that no revenue stamps were to be put on the deed, because she was not selling the property to Mello and he was not to record the deed; and that Mello stated that that was right. This specific understanding was had at the time of the making and delivery of each of the deeds. No money passed between the parties. This testimony was received over the objection of the respondent.

The majority opinion says that "soon thereafter Mello brought the deeds to Snohomish county in this state and soon thereafter caused them to be recorded in the office of the auditor of that county. He thereafter dealt with the land as his own, taking physical possession of it, mortgaging it to secure a loan of $1,000 to himself, paying off that mortgage loan and again mortgaging it to secure another $1,000 loan to himself, which incumbrance is still on the land." That statement is correct with the qualification, I think, that his dealing with the land as his own was not in denial of his obligations to the appellants. The view of the majority, as I understand the record, is established only by the letters written by Mello and an option he gave another to purchase a part of the land, and yet, further on in the majority opinion in discussing those same instruments, it is said they possess a "want of identity of the land." That is, they prove he took possession of the land deeded to him and yet they do not identify the land.

The tract of land contained one hundred and sixty acres and the price at which it was to be sold was $16,000 or $100 per acre, for the appellants. In his letter of February 15, 1923, to Mrs. Pacheco, Mello stated that he had tried twice to sell the land "to get some money for you," the last time he tried to sell not all of it, as he intended to keep thirty acres for himself. His purpose to keep thirty acres was not inconsistent with the beneficial ownership of his grantors provided, of course, he paid the agreed price for it. He said, "You do not need to be afraid that I will sell any land without your knowledge as people here require an abstract and I cannot give one." Just another way of admitting that, notwithstanding the deed to him that he had already put of record, he knew the property did not belong to him but to them, without whose knowledge he would make no sale of it. He further said in that letter, "If you and John could come over we could fix up the house a little and you can see the garden I put in." Why should appellants help improve the property, if they had no interest in it, or be interested in a garden on land not belonging to them?

His letter of February 23, 1923, admits receipt of money orders she had forwarded to pay taxes on the land. It is against common experience that one should attempt and intend to pay taxes on another's land. He further said, "I can't see, however, how I would be justified in signing mortgage and note and paying interest as set out in the same." It is perfectly plain that, after appellants learned Mello was unable to sell the place, had recorded the deed contrary to the agreement, was living on the place and "did not want to lose my time and work," they desired and asked that he give them a mortgage in protection of their rights, he already holding the legal title of record. But, as they had the right to seek a change in their contract relations, so he had the right to refuse to do so, as he did, by saying "I do not understand that that was our agreement."

The written option signed and given by Mello to a third party on May 29, 1923, to purchase a specifically described part of the land covered fifty-three acres at the price of $6,300 and provided that $5,300 should be paid into a specified bank for these appellants and the remaining $1,000 to the Citizens State Bank of Arlington in satisfaction of a mortgage given by Mello to that bank on the land in question. Running true to the terms of his agreement with the appellants, he provided in his contract with the third party for the payment to appellants of $100 per acre for the fifty-three acres, the remaining $1,000, his profit, to be applied in the discharge of his personal mortgage obligation.

In his letter of July 31, 1923, he spoke of a new building and crops on the place. He again declined to pay $640 interest, which happens to be the legal rate on $16,000, which they were to have upon his sale of the place for them. He wanted them to come up so they could fix things up the best they could, clearly intending, or informing them, that he meant to claim pay for his improvements, closing his letter with the significant statement, "this ranch will never be sold before you sign your name to it." Again, why should they sign their names to a conveyance upon a sale by him of his own land?

On November 16, 1923, he wrote "The way I feel now, I would like to give you back the whole place with all my work. If you will sign a note for the mortgage and pay my fare to go home to see my father." Another practical admission that the land was not his, but at the same time preferring a charge on account of his work which he was disposed to cancel for a moderate consideration. The mortgage he referred to evidently was his mortgage to the bank. Less than two months after the date of the last letter Mello was adjudged insane, and shortly thereafter this action was commenced.

I have thus discussed the written evidence with reference to the two aspects of the case, first as to whether that evidence is sufficient to obviate the statute of frauds, and second, if so, whether it is sufficient, together with the oral evidence, to make out a case for the appellants.

It is easy and very common, in view of the statute of frauds, for courts and other writers to say that an express trust in real property cannot rest in parol, but must be evidenced in writing. In the most of the cases so holding the facts were in parol. Such was the situation in each of the four cases decided by this court that are cited in the majority opinion. The rule stated in 1 Perry on Trusts and Trustees (5th ed.), § 83, quoted in the majority opinion speaks of the general rule, while 26 R.C.L., p. 1183, referred to in that opinion, also speaks generally of the "essential elements" of an express trust.

It is not necessary that the word "trust" or "trustee" be used. Perry on Trusts and Trustees (5th ed.), vol. 1, § 82. Nor will it do to accept without qualification the general statement, so often found, that the writings must speak with certainty of the nature of the trust. In Railroad v. Durant, 95 U.S. 576, it was said:

"All the deeds but one designate the appellee [grantee] as `trustee,' without setting forth for whom or for what purpose. Parol evidence was admissible to show these things."

Browne on the Statute of Frauds (5th ed.), in discussing the subject of express trusts, at § 111, says:

"Where there is any written evidence showing that the person apparently entitled is not really so, parol evidence may be admitted to show the trust under which he actually holds the estate. In the case of Cripps v. Jee, an estate being subject to certain encumbrances, the grantor mortgaged the equity of redemption, by deeds of lease and release, to two persons of the name of Rogers, as purchasers for a consideration stated in the deed, the real intention of the parties being that the Rogerses should be mere trustees for the grantor, and should proceed to sell the estate, and after paying the encumbrances should pay the surplus money to the grantor. In the books of account of one of the Rogerses, there appeared an entry in his handwriting of a year's interest paid to an encumbrancer on the estate, on account of the grantor, and other entries of the repayment of that interest to Rogers by the grantor, and there was also evidence of a note and bond given by the Rogerses to a creditor of the grantor, in which they stated themselves to be trustees of the estate of the grantor. Lord Kenyon held that this written evidence being inconsistent with the fact that the Rogerses were the actual purchasers of the equity of redemption, farther evidence by parol was admissible to prove the truth of the transaction. Parol evidence has also been admitted by Chancellor Kent to repel the inference of a trust from certain letters and accounts, in a case where the writings were of a loose and ambiguous character, the principle being however carefully reserved, that if the written proof had been clear and positive, it could not have been rebutted by parol."

Perry on Trusts and Trustees (5th ed.), vol. 1, § 82, speaking of express trusts in connection with the statute of frauds, says:

"The statute of frauds will be satisfied if the trust can be manifested or proved by any subsequent acknowledgment by the trustee, as by an express declaration, or any memorandum to that effect, or by a letter under his hand, or by his answer in chancery, or by his affidavit, or by a recital in a bond or deed, or by a pamphlet written by the trustees, or by an entry in a bank-deposit book; in short, by any writing in which the fiduciary relation between the parties and its terms can be clearly read. And if there is any competent written evidence that the person holding the legal title is only a trustee, that will open the door for the admission of parol evidence to explain the position of the parties, as where there are entries in the books of the grantee of payments made by him to or on account of the grantor, which payments were consistent only with the fact that the grantee took in trust, he was decreed to be a trustee."

Further in the same section, it is said:

"The trust thus proved, however late the proof, will relate back to its creation."

26 R.C.L., p. 1202, § 41, speaking of express trusts, under the subdivision "Evidence to Establish Trusts" says:

"Where there is some written evidence showing the existence of a trust the door is thereby opened to the admission of parol evidence to show the truth of the transaction."

It is not necessary to notice either all or many of the cases, English and American, relied on by the authors in support of the rule announced. They are referred to in their writings. One case may be noticed, the case of Johnson v. Calnan, 19 Colo. 168,34 P. 905, 41 Am. St. 224. It was a suit against a grantee to obtain a reconveyance of twenty acres of land on the ground of a breach of contract and trust on the part of the grantee to convey certain portions of the land to a railway company. Under date of January 5, 1887, acknowledgment dated January 10, 1887, the owners of a forty acre tract, plaintiffs in the action, gave Johnson, the defendant in the action, a power of attorney to subdivide and sell the property and account to the donors for all moneys received according to the terms of a written agreement between them of that date. The written agreement referred to, between the landowners as parties of the first part and Johnson as party of the second part, provided that the first parties had bargained and sold to Johnson the forty acres in question; it recited that Johnson had agreed to resell the land and apply the proceeds to the use of the first parties until the sum of $6,500 had been paid, balance remaining to belong to Johnson; it fixed the price at which lots should be sold, the proceeds of which should be divided among the parties of the first part until the sum of $6,500 had been paid, and again stated that the balance should belong to Johnson. There were other recitals in the agreement not necessary to be mentioned here. About the same time, on January 6, 1887, the same parties, as owners, executed and delivered to Johnson, trustee, a deed of conveyance of a twenty acre tract, the reconveyance of which was sought by the suit. No reference was made in the deed to any conveyance to be made to the railway company of any part of the land. On the trial of the case the written instruments referred to were put in evidence and oral evidence was allowed to show the conditions of the trust. The defendant admitted he had done nothing toward complying with the conditions of the alleged trust, and contended that the deed to him of the twenty acres conveyed title absolute. The trial court admitted parol evidence and, upon the whole case, decided in favor of the plaintiffs and ordered a reconveyance of the twenty acres. Johnson appealed. In the decision of affirmance it was stated that the two questions in the case were as to the sufficiency of the complaint to warrant a reconveyance, and whether or not the findings and decree were sustained by competent and sufficient evidence. Then after stating that both questions must be answered in the affirmative, unless the statute of frauds and perjuries compelled a different answer, it was said:

"Section 6 of the statute reads as follows:

"`Sec. 6. No estate or interest in lands, other than leases for a term not exceeding one year, nor any trust or power over or concerning lands, or in any manner relating thereto, shall hereafter be created, granted, assigned, surrendered, or declared, unless by act or operation of law, or by deed or conveyance in writing, subscribed by the party creating, granting, assigning, surrendering, or declaring the same, or by his lawful agent, thereunto authorized by writing': Gen. Stat., § 1515; Mills' Ann. Stats., § 2019.

"Under the foregoing statute it has been held that the existence of a direct or express trust in lands cannot be established by parol evidence: Von Trotha v. Bamberger,15 Colo. 1. But where there is some written evidence showing the existence of a trust, the door is thereby opened to the admission of parol evidence to show the truth of the transaction: Hill on Trustees, 61, 62; 2 Sugden on Vendors, 14th ed., 437; Browne on Statute of Frauds, 3d ed., § 111; 1 Perry on Trusts, § 78, etseq.; Bohm v. Bohm, 9 Colo. 106.

"By their special warranty deed of January 6, 1887, plaintiff conveyed the twenty-acre tract of land to defendant naming him `trustee' in the deed. Plaintiffs also produced further written evidence of the trust, as follows:

"`Florence, 3, 23, 1888.

"`Received of Chas. B. Toll, Esq., one thousand dollars, check No. 2489, part payment on block B, Carbondale, Colo.

`Wm. E. Johnson, Trustee.'

"On the offer of this receipt in evidence `it was conceded by defendant that he made a contract to sell a portion of the twenty-acre tract to Mr. Toll, and that said receipt was given on account thereof. It was further admitted that neither Mr. Toll nor the said contract had any connection with the Aspen and Western Railway Company.' It was also `conceded by defendant that nothing has been done toward complying with the conditions of the alleged trust herein set up by the plaintiff.' . . .

"The word `trustee' inserted after the name of the grantee in the deed executed by plaintiffs, and also affixed by defendant to his signature to the receipt, would seem to indicate something more than a mere descriptio personae; as a description of the person, the word thus used is too general to amount to any thing; as a description it does not identify any one. In our opinion, the word `trustee,' under the circumstances, indicates the intention of the parties that the grantee was to take the title, not in his individual capacity, but in trust for another, though the name of his cestui que trust is not disclosed by the deed. In Railroad Co. v. Durant, 95 U.S. 576-579, where a certain person was designated as `trustee' in certain deeds `without setting forth for whom or for what purpose,' it was held that `parol evidence was admissible to show these things.' The authorities upon this point are not altogether clear or uniform; but we are of opinion that the Durant case announces a proper rule for the determination of the present controversy: Shaw v. Spencer, 100 Mass. 393; 97 Am. Dec. 107; 1 Am. Rep. 115; Brown v. Combs, 29 N.J.L., 36;Selden's Appeal, 31 Conn. 548; 2 Pomeroy's Equity Jurisprudence, §§ 1009, 1010."

According to this rule, which rests upon sound reason, the written evidence in this case opened the door to parol evidence, not to contradict the deed, but to bind the grantee to a trust which he undertook in accepting it, upon the supposed incompleteness of the deed. It is in obedience to the rule that good conscience, after technical, though legal, objections have been substantially overcome, shall not be further deterred in the discovery and establishment of the truth of the transaction.

As to the sufficiency of the evidence, there is no occasion, I think, for any further analysis of it. It is clearly sufficient, unrebutted, to warrant the relief demanded by the appellants.

FULLERTON, J., concurs with MITCHELL, J.