Sime v. Howard

By the Court, Whitman, J. This action was brought by John Sime k 'Co., a banking firm, in the District Court of the First Judicial District, to foreclose a mortgage given by H. C. Howard — W. R. Armstrong being made codefendant, by’ reason of some supposed interest in the mortgaged property. He and Howard unite in an answer, averring among other defenses that Howard held one-half of the premises in trust for Armstrong. The proof was, that on the 27th of April, 1868, Armstrong and wife conveyed the premises to Howard, under a verbal contract that on demand Howard should reconvey one-half thereof. The title stood in Howard at the date of the execution of the mortgage in suit. Upon the trial the following written instrument -was offered in evidence: “ To all to whom these presents shall come, H. C. Howard, of the City and County of San Francisco, State of California, sends greeting. “ Whereas William Riley Armstrong, and his wife Levantia, as of the County of Lyon, and Territory of Nevada, as parties of the first part, on the twenty-seventh day of April, a.d. one thousand eight hundred and sixty-three, by their deed of that date conveyed to me, H. C. Howard, all the undivided equal one-half (i) of a certain hotel, bar-room, furniture, and fixtures belonging thereto, with a spring of water thereto attached, situated at or near a place in said County of Lyon called the Devil’s Gate ; also a like undivided one-half (-£) interest in and to a certain toll-road, or turnpike, known as the Devil’s Gate Toll-road, lying near or west of a place in said county called ‘ Chalk Hills,’ running between Carson and Silver Cities, and extending to Gold Hill in Storey County; also an undivided one-half of the Johnstown Branch of said road, leading down Gold Hill Canon to Johnstown; also an undivided one-half of all franchises belonging thereto; also an undivided one-half of all rights thereunto granted to Wm. Sweryhut, and D. II. Haskell, by the County Court of Carson County, Utah Territory, by a charter for a wagon road from Dutch Nick’s to — 480 — Virginia City, with a branch from Silver City through Johnstown to Chinatown; also an undivided one-half of all franchises heretofore granted to Armstrong and Roberts, or their predecessors in interest, by any Act or Acts of the Legislature of the State of Nevada, relating to said road, or of any of its branches; also a like interest in all the improvements, rights, franchises, and privileges in any wise to said toll-road and hotel property belonging or in any respect appertaining, together with all and singular the tenements, hereditaments, and appurtenances thereunto belonging, or in any wise appertaining, and the reversion and reversions, remainder and remainders, rents, issues, and profits thereof, and all the estate right, title, interest, easements, franchises, privileges, property, possession, claim, and demand,'whatsoever, as well in law as in equity of the said parties of the first part of, in, or to the above described premises, and every part thereof, with appurtenances. “ Now know ye that I, the said H. C. Howard, do hereby acknowledge and declare that the said deed and conveyance were and are made to me as to one moiety of the estate therein and thereby conveyed, that is to say, as to the undivided one-fourth of all the property, premises, rights, franchises, and things therein mentioned, only in trust and confidence, and to the intent that I, the said H. 0. Howard, should, upon the request of the said W. R. Armstrong, his executors, administrators, or assigns, assign and convey the said moiety or undivided quarter to him, the said W. R. Armstrong, his heirs, executors, administrators, or assigns, and that I do not and never did claim to have any right or interest in the said moiety or quarter, or any part thereof, by the said conveyance so made to me, or otherwise, to my own use or benefit, but only to and for the sole use and benefit of the said W. R. Armstrong, his heirs, executors, administrators, or assigns. In witness whereof, I, the said H. C. Howard, have hereunto set my hand and seal, this 14th day of May, a.d. 1868. • “ H. C. Howard.” [seal.] The reception of this paper in evidence was objected to on the ground: First — “That the same was not stamped'with United States or State stamps, for denoting the duty thereon, as required — 481 — by law.” Second — “ That it was executed subsequent to the commencement of this suit, and was therefore irrelevant and incompetent.” These objections were overruled, the evidence admitted, exception taken; subsequently decree was rendered for the foreclosure of the mortgage upon one-half only of the property. From this decree and the further order of the District Court denying motion for new trial, an appeal is taken. There was much other matter presented to the District Court, some of which it is unnecessary to notice, and other becomes material only after decision upon the ruling set forth. The paper writing was offered in proof of compliance with the provisions of the fifty-fifth section of the statute of the State of Nevada adopted from the Territory entitled “An Act concerning Conveyances,” approved November 5th, 1861, as follows : “ 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 a 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.” Under the section quoted, a declaration of a trust must be by “ deed or conveyance in writing subscribed by the party declaring the same, or by his lawful agent thereunto authorized by writing.” To meet such requirement, the paper offered must come within the definition of a deed, or a conveyance. It is not a conveyance, because it conveys nothing, nor does it meet the statutory definition of a writing “ by which any estate or interest in lands is created, aliened, assigned or surrendered;” but it is a deed in the enlarged sense of that word, being “ a writing sealed and delivered by the parties,” (2 Bl. Com. 295) and does not come within the designation of instruments requiring a stamp duty; as they are only any “ conveyance, deed, instrument or writing, whereby lands, tenements or other realty sold, shall be conveyed, the actual consideration of which does not exceed,” etc.; * * “ trust deed made to secure a debt;” “ trust deed conveying an estate to uses,” (Statutes Nev., 1864-5, pp. 821-2) or “ conveyance deed, instrument or writing, whereby any lands, tenements — 482 — or other' realty sold, shall be granted, assigned or vested in the purchaser or purchasers, or any other person or persons, by his, her or their direction, where the consideration or value does not exceed,” etc. * * (Laws U. S. 1867.) The object of the instrument in question is not to accomplish any of the purposes defined in the foregoing citations, but to declare under the solemnity of a seal a pre-existing state of facts which could not without the assistance of such formal declaration be orally proved. The first objection then is not well taken. The second objection requires a somewhat extended and careful examination of the fifty-fifth section of the “Act concerning Conveyances,” before referred to. This and similar statutory provisions of many of these United States, seem to have been founded upon and intended as a substitute for the seventh, eighth and ninth sections of 29 Car. II, Ch. 3, as follows: Section 7. “All declarations or creations of trusts, or confidences of any lands, tenements or hereditaments, shall be manifested and proved by some writing signed by the party who is by law enabled to declare such trust, or by his last will in writing, or else they shall be utterly void and of none effect.” Section 8. “ Provided, always, that where any conveyance shall be made of any lands or tenements, by which a trust or confidence shall or may arise or result by the implication or construction of law, or be transferred or extinguished by an act or operation of law, then, and in every such case, such trust or confidence shall be of the like force and effect as the same would have been if this statute had not been made ; anything hereinbefore contained to the contrary notwithstanding.” Section 9. “All grants or assignments of any trust or confidence shall likewise be in writing, signed by the party granting or assigning the same, or by such last will or devise, or else shall likewise be utterly void and of none effect.” Whether these State statutes are substantially the same with that of Charles Second, will be hereafter considered; but to a proper consideration a previous understanding of the judicial exposition of the English statute is necessary. Says Lewin, in his treatise on the Law of Trusts and Trustees, 30, Ch. 4, Sec 2 : “ The principal point to be noticed is, that trusts are not necessarily — 483 — to be declared in writing, but only to be manifested and proved by writing ; for, if there be written evidence of the existence of such a trust, the danger of 'parol declaration against which the statute was directed, is effectually removed. It may be questioned whether the Act did not intend that the declaration itself should be in writing, for the ninth section enacts that ‘ all grants and assignments of any trusts or confidence shall likewise be in writing signed by the party granting or assigning the same, or by such last will and devise,’ (he might have added and also provides “ or else shall likewise be utterly void and of none effect”); but, whatever may have been the actual intention of the legislature, the construction put upon the clause in practice is now firmly established.” “ The statute will be satisfied if the trust can be manifested by any subsequent acknowledgment of the trustee, as by an express declaration by him, or any memorandum to that effect, or by a letter under his hand, by his answer in chancery, or by a recital in a bond, or deed, etc.; and the trust, however late the proof, takes effect from the creation of the trust.” (See also Cruise Dig. Vol. 1, p. 421; Sanders’ Uses and Trusts, Vol. 1, p. 343 ; Hill on Trustees, p. 87; Adams’ Eq., side page 28.) To the support of this text many cases are cited. American text writers adopt the same interpretation. (Kent’s Com. Vol. 4, p. 343, 10th Ed.; Story’s Eq. Jurisp. Vol. 2, Sec. 972; Willard’s Eq. p. 413 ; Bouvier’s Inst. Am. Law, Vol. 2, Sec. 1902 ; Washburn on Real Property, Vol. 2, p. 191.) The American decisions follow in the same course. (Barrell v. Joy, 16 Mass. 221; Steere v. Steere, 5 Johns. Ch. 1; Reed v. Reed, 12 Rich. Eq. R. S. C. 213 ; Raybold v. Raybold, 20 Penn. St. 308 ;) so that no doubt remains as to the received construction of the statute of Charles Second, either in England or America. It will be seen that the Courts held not only that the creation or declaration, etc., of a trust need not be in writing, but went very far in admitting informal writings in manifestation or proof, hence the modifications of the English statute by State legislation, the object of which probably was to provide that the powers or duties mentioned in the seventh and ninth sections of 29 Car. II, Ch. 3, should not only be exercised by instrument in writing, but that such writing should be of an explicit and solemn — 484 — character, referring directly to the special matter in hand; but still the statute as modified remained as before a statute of proof. So far as decisions have been made upon this subject, they sustain this view as will presently be shown. Such seems to be the natural conclusion. It can hardly be said that any of the modified ■statutes are more mandatory to the point, that the instrument touching the trust should itself be in writing, than the seventh and ninth sections 29 Car. II, Ch. 3, read and construed together, as they were evidently intended to be; yet under these sections Courts had held for so long a period that the instrument itself need not be in writing, so that it was thus manifested, or proved, that legislation was the only means of escape from such rule of decision, which also allowed the admission of loose proofs, apparently not contemplated by the statute. This danger is obviated by the modified statutes; but it will be observed that all such statutes make specification of different exercises of power or duty touching trusts; that of the State of Nevada speaks of creation, grant, assignment, surrender, and declaration. These words are not synonymous terms; hence it follows that the1 object of the statute is accomplished if either be in writing by deed or conveyance, and duly signed, according to the particular purpose to be attained by the individual instrument. To create a trust, for instance, is to do one act, and for one purpose. To declare a trust, to do another, and for another purpose. To create is to call into existence. To declare is to make clear a pre-existence. A declaration of trust, says Bouvier, is “ the act by which an individual acknowledges that a property, the title of which he holds, does in fact belong to another, for whose use he holds the same. The instrument in which the acknowledgment is made is also called a declaration of trust.” This view is sustained by the authorities, both text writers, with the exception of Judge Willard, and by the Courts without exception as appears so far as in the consideration of this case access could be had to the reports. (Bouvier on Stat. Frauds, Sec. 144; Story Eq. Jurisp. Sec. 972; Wash. Real Prop. p. 191; Hill on Trustees, Am. notes, p. 86, note 2; Bouv. Inst. Vol. 2, Sec. 1902.) In Jenkins v. Eldridge, (3 Story, C. C. R. 181) Judge Story uses this language: “ My opinion has proceeded upon the ground — 485 — that there is no substantial difference between the Statute of Frauds of Massachusetts, either under the Act of 1783, Ch. 37, Sec. 3, or the Revised Statutes of 1835, Ch. 59, Sec. 31, and the Statute of 29 Car. II, Ch. 3, on the subject of trusts; and such is the conclusion to which I have arrived, upon 'the examination of these statutes.” So far as the present question is involved, the language of the Massachusetts statute of 1835 is substantially that of Nevada ; it reads thus: Sec. 80. “ No trust concerning lands, excepting such as may arise or result by implication of law, shall be created or declared, unless by instrument in writing, signed by the party creating or declaring the same, or by his attorney.” The statute of Wisconsin is the same as that of Nevada. (R. S. Ch. 106, Sec. 6.) In White, adm'r., etc., v. Fitzgerald, adm'r., etc., et als., it Ayas sought to enforce a trust in favor of John White, (as the suit was originally brought) as against the administrator, and heirs at law, of Garet M. Fitzgerald, and one Mullen, grantor of Fitzgerald, as to property purchased in 1854, for joint account of White & Fitzgerald, the deed of which Ayas taken in the name of Fitzgerald. There was an oral agreement between W. and F. as to the purchase, and it was claimed on behalf of W. that a certain written instrument, executed by F. in 1857, Ayas a declaration of trust. The Circuit Judge found for defendants. On appeal counsel distinctly made the point that the statute of NeAy York, from Ayhich that of Wisconsin Avas taken, aauis intended “ to abridge and simplify the language of 29 Car. II, Ch. 3, and not to abridge the means of declaring or evidencing the creation or existence of a trust.” The Court held that the declaration was good, unless in the time which had elapsed before it was made Fitzgerald had transferred the land to innocent Iona fide purchasers, and the decree of the Circuit Court Avas reversed. (White v. Fitzgerald, 19 Wis. p. 489.) In Maine, Avhere the statute prior to 1841 provided, as to an express trust, that it “ must be created and manifested by some writing, signed by the party creating ■ or declaring it, or by his attorney.” (R. S. Ch. 91, Sec. 81.) It Avas held in Brown v. Lunt, (37 Maine R. p. 423) that under such section “ a parol trust may exist, and may be executed voluntarily.” — 486 — In 1841 the statute was altered to read thus: “ There can be no trust concerning lands, except trusts arising or resulting by implication of law, unless created or declared by some writing, signed by the party, or his attorney.” (R. S. Ch. 91, Sec. 11.) Discussing that section in Bragg v. Paulk, (42 Maine, 502) Appleton, Justice, delivering the opinion of the Court, concurred in by four of the six other Judges, says : “ But it is entirely immaterial whether the trust is evidenced by a writing made before or after the purchase. The written declaration of a trust, parol in its origin, is as valid as if its creation had been by writing.” The statute in New York is verbatim with that of Nevada. In Reid v. Fitch, (33 Barb. 9) it was attempted to enforce a trust against a judgment creditor of the trustee, upon the following state of facts : In 1847 the parents of Mary Siemon furnished money to one Youngs to buy an estate, upon the understanding that he should hold it for the benefit of Mary. Youngs took the deed in his own name. In 1849 judgment was recovered against Youngs. In May, 1863, Youngs conveyed to Mary the land. On the 25th of June, 1853, the property was sold, on execution against Youngs, and Austin became the purchaser. Pronouncing the opinion of the Court, Emott, J., says: “There is no doubt that Youngs was morally bound to surrender and convey these premises to the plaintiff; that she was clearly and exclusively entitled to them; and that neither the original agreement nor its execution, by placing the legal title in her, was a fraud upon any one. If this agreement or trust had been expressed in writing, it would evidently have been valid and effectual, at least to protect the plaintiff from the creditors of Youngs. Now if the Statute of Frauds would have been in the way of the subjection of this property to the trust, if Youngs had never recognized or acted upon it, that was a defect in the evidence of the trust, and not in the nature of the trust itself. The law refuses its aid to enforce agreements creating trusts or charges upon lands, when they rest altogether in parol, not because the trusts are therefore void, but because it will not permit them to be proved by such evidence. When a person who has received the title to lands purchased for the benefit of another, although without having declared the fact in writing, recognizes and fulfills the trust, — 487 — it is not the duty of a Court to deny its existence. The trustee may admit the facts in an action, dispense with proof, and thus authorize the Court to establish and enforce the rights of the cestui que trust. If he does not plead the statute he waives its protection. If he fulfills the trust by conveying the property to the true owner, there is no rule in equity which will impeach the title thus acquired.” Whether the trustee executes or only admits the trusts, he supplies the defects in the proof of the original equities, and establishes not merely that his title is, but that it always has been, subject to these equities. If the deed from Youngs to the plaintiff cannot be upheld against the antecedent judgment against Youngs, it cannot be upheld against subsequent judgments, at least as to his debts then existing. The only consideration for this deed is the original equity of the plaintiff. But for that it is a voluntary conveyance, a gift from Youngs to plaintiff, and so liable to impeachment by the creditors of the former whenever their judgments are recovered. But if it be sustained by the equity of the plaintiff, that was not created by the deed, nor at the time of the deed; it was simply confessed by the deed as having always existed ; and being established it takes precedence at once of all general legal liens upon the estate of the trustee.” The plaintiff had decree, and upon appeal under the title of Siemon v. Schurck et als. the case will be found in 29 N. Y. 2 Tiffany, 598, where the decree was affirmed, Justice Hoge-boom deciding the case upon other grounds, and Justice Davis approving the opinion of Justice Emott in addition to the reasons of Hogeboom, J., the other Judges concurring without special opinion. In Wright v. Douglass, (7 N. Y., 3 Selden, 564) the question was, whether an attaching creditor against the Towanda Bank should hold as against the grantee of the bank and one who held, or appeared to hold, the title by deed absolute, from other source when the attachment was levied. In a deed made to the defendant by the Towanda Bank, and another executed a month after the attachment, and four years after the apparent investiture of title in the co-grantor with the bank was a recital, claimed by the attaching creditor to be a declaration of trust. Delivering the opinion of the Court, Ruggles, C. J., — 488 — though holding that upon the special finding of the jury the presumption must be that the trust was created or declared by deed ,01’ conveyance as required by the statute, proceeds to further investigation and says: “ But if we are at liberty to look into the other facts found by, the jury for the purpose of ascertaining whether Mr. Dana took the Sheriff’s certificate and the deed from Dennis as. a passive trustee of the Towanda Bank, we find what in my opinion is abundantly sufficient evidence of the fact. I allude to the deed executed by Mr. Dana and the Towanda Bank to the defendant, Douglass. In this deed it is distinctly recited that the premises in question had been conveyed 'to, and the title thereof vested in, Mr. Dana as the trustee and for the use of the Towanda Bank. To my mind this appears to be a clear and valid declaration of trust between the trustee and the beneficiary. Both were parties to the deed. This, according to my understanding of it, was not the creation of a new trust at the date of the last mentioned deed in 1843, but a solemn declaration that the trust had in fact existed from the time the premises were conveyed to Dana. These parties, Dana and the Towanda Bank, are bound by the declaration; and so is Douglass the defendant. They were all parties to the deed containing it. It showed the relation in which in reality Dana and the Towanda Bank' stood to each other from the beginning. It is of no importance that the object of that deed was to convey the title to Douglass. Nor is it of any consequence what effect the declaration had upon the title attempted to be conveyed by that deed. With that deed before their eyes, the jury could have found no other verdict than they did in relation to the trust on which Dana took the Sheriff’s certificate and the deed from Dennis. It was a declaration of trust by a deed in writing, signed by the party declaring the same ; and this is all the statute requires. It is precisely the instrument the statute requires to show that the trustee was not the owner of the land by virtue of conveyances to him absolute on their face ; and this was evidently the reason 'why the Towanda Bank joined in the deed to Douglass. The statute prescribes no particular form by which the trust is to be created or declared. Under our former statute in relation to this subject, it was only necessary that the trust should be manifested in writing — 489 — and therefore letters from the trustee declaring the trust were sufficient. Such is the law of England. (Stat. 29 Car. II, Ch. 3, Sec. 7. Forster v. Hale, 3 Ves. Jun. 696.) “ Our present statute requires that the trust should be created or declared by deed or conveyance in writing, subscribed by the party creating or declaring the trust. But it need not be done in the form of a grant. A declaration of trust is not a grant. It may be contained in the reciting part of a conveyance. Such a recital in an indenture is the solemn declaration of the existence of the facts recited, and if the trustee and the cestui que trust are parties to the conveyance, the trust is as well and effectually declared in that form as any other.” Opposed to these decisions is the dictum of Judge Willard, in his work on Equity Jurisprudence, page 414. He says: “ It was evidently the intention of the Legislature to alter the former law, and to require a writing in order to create, etc., the trust; and, to give more solemnity to the transaction, they required the writing to be subscribed by the party creating, etc., the trust, or by his lawful agent, etc. This is plain from a reference to the notes of the revisers and to the decision of the Court of Errors in 1841 under a corresponding change of phraseology in the second title of the same chapter. The section must then be understood as requiring the declaration creating the trust to be reduced to writing at the time it was made, and to be subscribed by the party who thus, creates it.” As no authorities are cited, save as to the matter of subscription, the deduction bears only the weight of the individual authority of the writer. However great that may be, it cannot counter or overbalance the authorities before quoted. Testing this case by them, it follows that the District Court properly admitted the written instrument of the 14th May; that the second objection thereto was not well taken; that such instrument was a valid declaration of trust, in compliance with the statute, and that a trust exists as so declared, which must take precedence of plaintiffs’ mortgage to the extent of one-half the property described therein, unless they are bona fide purchasers for a valuable consideration without notice. The question of notice does not arise in the view taken by this Court of this case. Are they then bona fide purchasers for a — 490 — valuable consideration ? The District Court finds the following facts, which are pertinent to that inquiry: “ In the month of September, A. D. 1867, the defendant Howard was authorized by said firm, through said B. E. Hastings, to ‘ overdraw’ from the bank a certain amount of money. Howard did so obtain money from the bank, and within a very few days thereafter, to wit, on or about the 17th day of said month of September, 1867, he was found to be indebted to the bank in an amount exceeding $14,000, but less than $15,000 — the precise sum does not appear — upon the last mentioned date or the day following. At all events, upon the 18th day of September, 1867, upon a conference had between the plaintiff John Sime and the defendant Howard, it was agreed between those two parties that there should be placed upon the books of the bank a credit in favor of Howard for a sufficient amount of money to make up with the existing debt of Howard the sum of $15,000, upon Howard giving to Mr. Sime, for the benefit of the firm, a deed of conveyance, absolute in form, (to operate as a mortgage) of the one-half interest of the property described in the complaint, for the securing of the repayment of said money so loaned. The money was so placed to the credit of Howard, and Howard thereupon made and executed, and upon the following day acknowledged the mortgage and delivered the same, as alleged in plaintiffs’ complaint. As neither the District Court nor the plaintiffs have shown any specific sum advanced contemporaneously with the execution of the mortgage, this Court cannot do so, and the whole sum must be regarded as a debt precedent to the mortgage. The rule of equity is, that where there is a purchase of real estate from the legal owner, and no consideration is paid, or the property passes in payment of or as a security for a pre-existing debt, the grantee takes subject to all existent equities against the grantor. (Powell v. Jeffries, 4 Scam. 387; Dickerson v. Tillinghast, 4 Paige, 215; Bragg v. Paulk, 42 Maine, 502; Merritt v. Northern R. R. Co., 12 Barb. 609; Jewett v. Palmer, 7 Johns. Ch. 64; Jackson v. Myers, 11 Wend. 535.) As the declaration is sufficient pnder the statute, and plaintiffs under the rule quoted cannot be considered bona fide purchasers — 491 — for a valuable consideration, it follows that the District Court not only did not err, as objected by plaintiffs in admitting such declaration, but also that its subsequent decree was correct. It is affirmed; modified, however, so as to be for “ gold coin of the United States of America.” Johnson, J., did not participate in the foregoing decision.