Evans v. Folsom

By the Court. Elahdrau, J. This case presents a most ' extraordinary state of facts, and perhaps the most expeditious mode of giving our views upon them, and at the same time making them appear in a connected and intelligible form, will be to take the land from the time the title was in the United States, and follow it through all its transfers, — 427 — showing the state of the title, and the equities of the parties as they appear from the whole pleadings, at each successive step, with such comment as may be appropriate, during the progress of the examination. Askin pre-empted the land November 11, 1855. He preempted in Violation of the law of Congress in several respects, but perhaps the only one material to notice, is the agreement that existed between himself and the Plaintiff, by which the latter was to become a pai’t owner of it with him. What the terms of this agreement were as to the particular interest the Plaintiff was to have in the land, does not appear until after Askin had conveyed it to Case, which took place on the 3d day of January, 1856, Case purchasing the land “ with the intent of carrying out, fulfilling and completing the intent, purposes and agreements of said Askin with the Plaintiff.” It then transpires that the 'agreement was, that Case and the Plaintiff were to found a town on the land, and build certain mills and machinery, &c., and that the Plaintiff was to have three-fifths of the land and four-fifths of the mill and machinery, and Case was to have the balance, which interests they were to hold in common, and they were to be also the proprietors of the town. It is hardly necessary to say, that such an agreement made with a pre-emptor, concerning land that he was about to preempt under the act of Congress of September 4th, 1841, would be utterly void, and so tainted with immorality as to render it incapable of becoming the foundation for any rights, let alone equities. It involves a perjury under the act, and nothing more nor less. It is quite clear under the allegations in the pleadings, that Case took the land subject to this agreement, and not that a new one was entered into between Case and the Plaintiff. He purchased “ with the intent of carrying out the agreement of Askin with the Plaintiff.” Fol. 11, Complaint^ and after-wards “ The said Anthony Case had an understanding and agreement by which the Plaintiff and the said Anthony Case were to carry out the said agreements and understandings of said Askin with the Plaintiff,” &c. Fol. 12, Oorrvpla/int. This agreement resting in parol, and it not expressly appear — 428 — ing tbat Case bad knowledge of its having been made with A skin, prior to bis pre-empting tbe lands, we will examine its effects under tbe pleadings, as a new agreement with Case, unaffected by tbe fraud upon tbe act of Congress. At tbe time Case took tbe land from Askin, January 3, 1856, nothing bad been done upon it in tbe way of carrying out tbe agreement. Tbe first act that was performed in pursuance of it, was tbe survey of tbe town of “Fremont,” on the 15th of June, 1856, by tbe Plaintiff. Tbe contract, therefore, even when relieved of its fraudulent features, was within tbe Statute of Frauds, and could not be enforced at law, and only in equity upon tbe idea tbat tbe Plaintiff, relying upon it, bad performed, or partly performed it, and it would be a fraud upon him to allow tbe Defendant to take advantage of tbe Statute of Fraud to appropriate the expenditures of tbe Plaintiff, while at tbe same time violating bis own promise. 2 Story’s Equity, seos. 759, 760. It must be remembered also tbat when a Court of Equity is called upon to aid a party against tbe operation of tbe Statute, and tbe acts of one who would take an unjust advantage of it, it scrutinizes tbe conduct and acts of tbe party invoking its aid, and demands of him tbe utmost good faith and fair dealing. Tbe Plaintiff’s equities, under this agreement with Case, depend upon tbe expenditures made by him in carrying out tbe same, and be alleges tbat be made very large outlays under tbe contract. On tbe 3d day of August, 1856, tbe Plaintiff was insolvent, and applied to be discharged from bis debts by proceedings in insolvency, in tbe State of Massachusetts. On tbe 29th of August, 1856, all tbe property of tbe Plaintiff was assigned, by act of tbe Court, to trustees for tbe benefit of bis creditors, and on tbe same day was sold by tbe trustees to John Farnsworth, for the sum of $15,000, who took tbe same upon a secret trust with tbe Plaintiff, tbat it should be for bis benefit ; and tbat tbe Plaintiff, on paying Farnsworth bis outlay, and two thousand dollars per annum for bis services about the estate, should have it all back again. Under these circumstances tbe Plaintiff commenced building tbe dam at “ Fremont,” on tbe 15th day of September, — 429 — 1856, about two weeks after Ms having been declared insolvent in Massachusetts, and went on making large outlays, as he alleges, in constructing the hotel, mills, machinery, &c.,in the town. There can be no doubt that the agreement between the Plaintiff and Farnsworth, creating a secret trust in favor of the former for the estate that had been on the same day assigned for the benefit of his creditors, was void. Such a transaction could not stand for a moment before any court; and the Plaintiff would not, nor would his trustees, be allowed to show that the sale to Farnsworth was an advantageous one for the creditors. Such speculating by insolvents with their assigned estates cannot be tolerated under any circumstances. Now, if matters stood thus, no Court of Equity could resist the conclusion that the improvements put on the town site by the Plaintiff, were from the avails of the insolvent estate. Nor in putting this view, do we go to the extent claimed by the Defendant’s counsel, that a man once shown to be insolvent is to be presumed so until he makes the contrary appear. The rule that the status of a party as to a disability or otherwise, being once fixed, remains, obtains in many cases ; but we do not think it applicable to insolvency. Yet where insolvency is alleged, and is accompanied by such an unauthorized attempt to regain the estate, as appears in this case, and the insolvent is seeking the aid of a court to uphold equities founded upon expenditures of money made immediately after insolvency, he must clear the matter up much more explicitly than by alleging simply that the expenditures were of “ after acquired property.” Where such a presumption is raised against him, he should overcome it by the clearest allegations, or the Court will be bound to take his evasive denials as confirmation of the charge. No equities can arise in favor of the Plaintiff upon facts such as have accompanied the acquisition of his interest, from its inception with Askin, to the point at which we have now carried the examination. -Should we stop here the Court would be obliged to leave him where he had placed himself, in the hands of Case, dependent upon his fulfilling the confidence reposed in him. The Plaintiff has defeated his own equities, — 430 — by showing that they are founded upon acts in frtmdem, legis. The case presents many other features, taken in connection with those we have considered, that would awaken hesitancy in a Coúít of Equity to interfere in behalf of the Plaintiff. In the spring of 1857, the Plaintiff took from Case and wife a power of attorney to act in their behalf concerning the land, which power authorized him to convey any portion of the land in such pieces, and to such persons as he should deem for the best interests of the town, &c. Case, under the Plaintiff’s own showing, was entitled by his purchase from Askin to two-fifths of the town property, and one-fifth of the contemplated improvements, &c., for which he had paid the sum of $800 to Askin, the proportion he was to bear in the expenditures not appearing. Case, on the 13th day of October, 1857, gave Evans a bond for a deed of three-fifths of the town site, and a piece of land on the south side of the river near the mill dam, for a brick yard, &c. Of the execution of this bond to Evans the Plaintiff was informed, and consented thereto upon the understanding that Evans was to hold the land for him, the Plaintiff. It is true that the Plaintiff alleges, that Evans had represented to Case that the Plaintiff desired the bond so made, and that such statements were false and fraudulent, but it af-terwards coming to the Plaintiff’s knowledge that the bond had been so made out, and Evans renewing his statement, that he held it for the Plaintiff, the latter rested upon the verbal trust so created, and went on making investments. Two months after this, and on the 14th day of December, 1857, the Plaintiff, as attorney for Case, conveyed the remaining two-fifths of the town site to David K. Shaw, without any consideration, and with the verbal understanding that Shaw should re-convey it to Case, or as the Plaintiff should direct. Now let us see how the property stood at this time, upon the theory of the Plaintiff. The bond to Evans made by Case was one of the three-fifths of the land that belonged to the Plaintiff, because the verbal condition of the bond was, that it was for the use of the Plaintiff. Evans was merely — 431 — tbe trustee of tbe interest of tbe Plaintiff, wbicb bad formerly-been in Case, under a similar verbal trust. Therefore, tbe remaining two-fifths of tbe land was tbe property of Case. Now tbe Plaintiff bad tbe disposal of tbis two-fiftbs under bis power of attorney, and be was bound to do so in good faith towards bis principal; but instead of doing so be conveyed it, without consideration, to Shaw, upon tbe verbal understanding that Shaw would convey it to Case, or to whomsoever tbe Plaintiff should request. Now, unless Case consented to such a disposition of bis interest, which does not yet appear to have been tbe case, and Shaw proved false* to bis trust, it would hardly be fair to set aside tbe conveyance that Case bad made to Evans, thus restoring tbe three-fifths to Case, and then compel Case to convey them to tbe Plaintiff, under tbe settlement of tbe 14th of January, 1858, or under the original arrangement of their interests ; because, in such event, Case would be stripped of all ownership in tbe lands, having irretrievably lost the other two-fiftbs by tbe deed of bis attorney to Shaw. I say irretrievably lost, with reference to vacating tbe deed on tbe application of tbe Plaintiff, as I can see no grounds upon which, in such case, it can be done. Case, tbe principal, might, perhaps, set it aside, it having been made on tbe terms it was ; but certainly tbe attorney could not question it. He having voluntarily relied upon tbe word of Shaw to re-convey, and that promise being within tbe Statute of Frauds, it cannot be enforced. No court would decree a conveyance by Case to the Plaintiff of bis interest under such circumstances. But oven if tbe bond and consequent deed to Evans should be set aside, and Case be restored as trustee of tbe Plaintiff’s interest, be would be allowed to retain at least two-fiftbs of it as bis own, as against bis unfaithful attorney, and especially in tbis case, where tbe interests are all undivided, and no particular share could have been conveyed by either of tbe deeds. After tbe deed to Shaw of tbe two-fiftbs of the whole property, Shaw conveyed two-fiftbs of the mill property to Evans on tbe 29th day of December, 1857, tbe Plaintiff alleging that be did it upon the representations of Evans, that be was receiving it for tbe Plaintiff. This is tbe first conveyance by wbicb Evans acquired the legal title to any of the property. — 432 — After all this, and on tbe 14th clay of January, 1858, Case and the Plaintiff met and had a settlement, Evans being present. The Plaintiff and Case agreed that the property should be divided as follows : The Plaintiff to have the whole of the mills and machinery, with the block they occupied, and the undivided three-fifths of the town property, with certain exceptions unnecessary to mention. And Case was to have two undivided fifths of the town, with some immaterial exceptions and reservations. The Plaintiff, for this distribution, was to pay Case “ a certain amount of money.” The parties, at this time, wex-e all fully aware of the condition of the title. They knew that two-fifths of the town property was in Shaw, by the deed from Plaintiff, as Case’s attorney; also, that Shaw had, in violation of his secret trust with the Plaintiff, conveyed two-fifths of the mill property to Evans, and that Evans had the bond from Case for three-fifths of the town property. With this understanding, the Plaintiff consented that the deed should bo made by Case of all the' property that was coining to him under the settlement to Evans, upon Evans promising him that on the next day he would convey it over to him. Now, no matter how fraudulent the previous conveyances to Evans-might have been, they were adopted by the Plaintiff as the very reason why the last one should be xnade. The Plaintiff alleges that Evans, on the occasion of the settlement, l’epresented to him and to Case that the fact of his having these conveyances was a reason why the last one should be also made to him, and promised that he would, on the next day, convey it all to the Plaintiff, and the Plaintiff, “ fully relying upon such promises and rep resentations,” allowed the deed to bo made. This certainly presents a most unusual and incomprehensible state of things, involving an amount of ci’edulity on one side, and assurance on the other, seldom met with in the affairs of men. Yet, as the Plaintiff avers it, we must take it to be true. The deed was accordingly executed to Evans, and he declined to make good his promise by conveying it to the Plaintiff. Does the transaction constitute a fraud such as a Court of Equity will relieve against % or do the facts simply constitute a pai’ol promise to convey land ? The real nature of the transaction — 433 — must be determined upon the facts, and not upon tbe terms by which, the Plaintiff designates it. He characterises it as as a fraud and a swindle ; but if every false promise to convey land is to taint the proceeding with fraud, then the ends of the Statute of Frauds are at once defeated, and every such promise may be relieved against in equity. Such is not the law. In the case of Fisher vs. The New York Common Pleas, 18 Wend., 608, the Plaintiff had leased a house much out of repair, and promised that he would insert a clause to do the repairs. On his producing the draft of the agreement it was objected that the clause for repairs was omitted. The Plaintiff objected to putting it in, saying he would do them, and that Ms word was as good as his bond. The agreement was signed upon these representations, and the promise violated. On suit for the rent, the defence was fraud in obtaining the signature to the instrument. The Court say : “ Fraud cannot be predicated of a promise not performed, for the purpose of avoiding a writfifen instrument, or bargain of any kind. This case is no more, A contrary doctrine would avoid almost every contract for the breach of which a suit is to be brought.” “ It is said, here was an intention not to pei'form, and a drawing in of the party to sign and seal by a delusive promise of performance, with a fraudulent intent to leave the premises out of repair. I have only to say that the tenant, and the Defendant below were content to take the Plaintiff’s word. If that was not legally obligatory, then there has been a mistake of the law ; but the Defendant could not set that up for fraud.” See also The Commonwealth for the use of Brenneman, 1 Rawl., 311. Now what more was the promise of the Defendant, Evans ? He said he would convey, and has not done so. Our Statute upon this subject is as follows: “ No estate or interest in land, 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 — 434 — in wi’iting, subscribed by tbe parties creating, &c.” Comp. Stats:, 497, sea. 6. Also, “ When a grant for a valuable consideration shall be made to one person, and the consideration therefor shall be paid by another, no use or trust shall result in favor of the person by whom such payment shall be made ; but the title shall vest in the person named as the alienee in such conveyance, subject only to the provisions of the next section.” Comp. Stats., p. 382, peas. 7, 8, 9. The succeeding section provides that the creditors of the party paying the consideration may impeach the deed, and that a trust results for their benefit. The next section protects principals against the acts of their agents, and also parties who pay for land, when the conveyance goes to another without their consent. The case of Wentworth vs. Wentworth, 2 Minn. R., 277, decided by this Court, from its peculiarly iniquitous features, presented the question of relieving against such promises, in a light perhaps as strongly demanding intervention as any case ever considered. Yet we could not have done so without overthrowing the Statute of Frauds. There the Plaintiff had settled upon and improved lands to a large amount, and allowed his brother to enter them at the United States Land Office, with all his improvements, upon his promising to re-convey them when the purchase- price should be repaid to him. He violated the faith reposed in him, and although it was a very hard case, we could not decree a specific performance without repealing in effect the Statute of Frauds, and the Plaintiff had to lose his land and improvements. Under the view we have taken of the case down to this point, it will be unnecessary to consider the effect of the ¡purchase by Evans of the assets of Folsom’js estate from Farns-worth, or whether it included the property in question. There is an obvious ..want of equity pervading ike Plaintiff’s case from beginning to end, as well as insuperable legal obstacles to his recovery. It is also unnecessary to notice the deeds by Evans to Lovett and Powers, and the subsequent ones mentioned in the complaint. As all parties, both Plaintiff and Defendants, ask that the deed from Askin to Case be corrected, and made to conform — 435 — to tbe fact, or tbe correction be made in tbe ■ record of sncb deed, if tbe mistake occurred therein, and also that tbe deed from Askin to Simeon P. Eolsom, and tbe deed from Eolsom to Whitney, be set aside, tbe Court will retain tbe case for tbe purpose of granting such relief, but dismiss the complaint for all other purposes. Let an order be entered, that tbe Defendant, Anthony Case, produce in court for inspection, tbe deed from Askin to him, within fifteen days after service of a copy of tbe order upon him, or account satisfactorily for its absence. . If it shall appear on the return of such order, that the error in the description of the land occurred in the deed, or in tbe record of tbe same, let the error be corrected by a proper and sufficient clause in tbe decree. Let the decree also cancel the deed from Askin to Simeon P. Eolsom, and from Simeon P. Folsom to Whitney. The appeal being from an order, the record is in the District Court. Emmett, C. J., dissents.