Wright v. Chilcott

Mr. Justice McBride delivered the opinion of the court. The evidence tends to show that at the time the agreement above recited was entered into plaintiff had a valid — 567 — option or contract of purchase for one tract of the land in question, which for convenience we will call the Stutsman tract, and that he had paid upon the purchase price the sum of $1,000, leaving $6,000 to be paid before he would be entitled to a conveyance, and that ■ he had a verbal option for the purchase of another tract called the Braithwaite tract for the sum of $6,200, upon which nothing had been paid, and which depended for execution solely upon the good faith of the vendor. 1. He had an equitable interest or estate in the first tract which he could convert into a legal title by paying the remainder of the purchase price but which was liable to be defeated in case of failure on his part to pay the, purchase money, That these rights and the services he had rendered in securing them were of some value and so considered by Chilcott is shown by the fact that he entered into the written agreement, and the value of these is impliedly fixed at one-half the net profits of the venture after deducting the amounts advanced by the parties. 2. The agreement itself is a peculiar document, evidently drawn without the aid of counsel, and contains an amount of unnecessary verbiage; but divested of its superfluities it amounts to this: (1) That Chilcott was to take over the options, rights, and opportunities of Wright, and to complete Wright’s contracts by advancing the purchase money, and to take conveyances to himself of the tracts of land, and also to make such further advances as might from time to time be necessary to effectuate the purpose of the contract, which was to dispose of it to the best advantage. (2) That out of the sale of the land he was to be reimbursed for such outlays. (3) That, when this was accomplished, the profits of the adventure were to be shared equally. (4) That the contract contemplated the formation of a holding corporation which should take over the property at an agreed price and the division of stock — 568 — to be issued by such corporation in proportion to the interest of the parties and such other parties as might be induced to buy into the venture. To complete the purchases initiated by Wright required $12,200 in addition to the $1,000 already paid by Wright, and this sum was to be advanced by Chilcott. To secure him in these advances, he was authorized to take the conveyance of the property and hold it until it should be so disposed of as to repay his advances, and what remained after this was done was to be divided between the persons concerned. To secure this result, a method of disposing of the property to a holding corporation and a division of stock was tentatively agreed upon. It is true that a division of profits by this method could not be enforced in equity and rested solely in the good faith and honesty of the persons and it was not impossible of performance and was entirely practicable. In our opinion the contract created a resulting trust in favor of Wright to the extent of his interest in the contract, and, as that interest was to come out of the land, it was a trust in the land. The fact that the deed was taken in the name of another person designated by Chilcott instead of being taken directly to him did not destroy the trust relation. The “dummy” grantee took the title subject to the same burdens as though Chilcott himself had taken it. It is immaterial whether the trust was a trust in the lands or in the profits to be derived from their sale, as in either case the lands should, in equity, be charged with the obligation, although the authorities, which hold that contracts of this character create an interest in the land itself, appeal to us as sound and consonant with equity. Shaeffer v. Blair, 149 U. S. 248 (13 Sup. Ct. 856: 37 L. Ed. 721) ; Seymour v. Freer, 8 Wall. 202 (19 L. Ed. 306). 3. The contention that the method or disposal of the property set forth in the contract contemplated a violation — 569 — of the law, and is therefore illegal, cannot be sustained. It is true that the contract contemplated' the incorporation of a company with a capital stock of $250,000 to take over and dispose of the property, and that the property at that time was not of that value nor approaching thereto. There is nothing in the agreement to indicate an intention to sell the property to the corporation for $250,000 or for any particular sum. In one paragraph of the contract it is said: “The land is to be disposed of to a corporation formed for the purpose of disposing of the same at an agreed price,” etc. And again: “In selling these lands to the company, the sale will be made for a stipulated amount of preferred stock and the whole issue of the common stock.” It is evident that extensive improvements and the probable expenditure of large sums of money in addition to the purchase price were within the contemplation of the parties when the agreement was signed as shown by the following paragraphs: “Inasmuch as large amounts of money will be required to cultivate, stock, and otherwise operate these farms, which the said Chilcott agrees to provide, the amount of money so furnished is to be compensated for with perferred and common stock in the same proportion as the money provided for the purchase of the land.” “It is further provided that inasmuch as moneys will be expended from time to time, to what extent cannot at this time be told, the above apportionment cannot at this time be made until the personal expenditures of the said Chilcott ceases; therefore, to have all the interests properly defined, should there be no valid objection apparent, the agreed proportion may be made of record with the company, or otherwise the terms of this document stand.” — 570 — While this is about as indefinite as a prophecy from the Delphic oracle, it seems to indicate that substantial sums in the way of improvement of the property and its consequent enhancement in value might be expended before its sale or transfer to the proposed corporation, and does not show or indicate any intention to issue or float fraudulently watered stock. The law does not presume that parties intend to contract to do a fraudulent or illegal act when such intent is not made plainly manifest. The case stands thus: Chilcott has received from plaintiff the advantage derived from his contract of sale as to the first tract, together with the $1,000 payment made by him thereon and the advantage of his verbal option as to the second tract, with the promise on his part in return to turn these over to a prospective corporation for the benefit of himself and plaintiff. He now says in effect: “You cannot compel me to participate in the formation of the proposed corporation. Therefore I will retain all these advantages and give you nothing.” This is not equity nor even common honesty, and no court can sanction such conduct. 4. A trust not infrequently results from a grant or contract, the purpose of which turns out to be incapable of performance or of specific enforcement. Perry, Trust (6 ed.) §§ 159, 160. And, where the instrument, will, or conveyance makes provision for indemnity for expenses of the grantee out of the corpus of the property conveyed or devised, a trust will be presumed. Saltmarch v. Barrett, 3 De Gex, F. & J. 279. The trustee having refused to execute the trust and denying its existence, it is the province of a court of equity to see that plaintiff has relief, and the decree of the circuit court is therefore affirmed. Affirmed. — 571 — Decided April 9, 1912. On Petition foe Modification. [122 Pac. 765.] Me. Justice McBride delivered the opinion of the court. A petition has been filed by defendant Chilcott suggesting that our decree herein be modified so as to permit him to have a hearing in the circuit court as to amounts expended by him upon the property up to the date of our decree. 5. It is set up by affidavit that he has expended in fencing, constructing buildings, clearing land, stocking, and cultivating the place, and paying taxes and insurance $31,500, and that his receipts have been $14,000. He therefore seeks reimbursements for his outlay in excess of receipts and for his personal services in superintending the property. No claim for these items was set up in the court below. The defendant simply stood upon the defense that the agreement made with Wright" was void, and that as a consequence defendant was the sole owner of the property. This defense was in our opinion bad in law and unconscionable in morals. The defendant did not occupy the premises for the purpose of carrying out his agreement with Wright, but for his own purposes to the exclusion of Wright. He spent money upon it and cultivated it for his own benefit, and not for the benefit of his co-owner, and appropriated the proceeds to his own use. If, therefore, his venture has not proved financially profitable, he has no right to ask plaintiff to share his losses. Notwithstanding his abuse of his trust, however, if he has made improvements which will add to the permanent value of the land, so that it will bring a greater price at a sale than it would have brought had such improvements not been made, he is entitled to the value of such permanent im — 572 — provements out of the proceeds of the sale, and should also be reimbursed for all taxes paid by himself, unless the receipts from the farm have been sufficient to cover all his expenditures in cultivation and carrying on the place and the value of permanent improvements and taxes paid as well. The cause will therefore be remanded to the circuit court with directions to allow the defendant to file a supplemental answer, showing the value of permanent improvements affixed by him to the land, which will increase its selling price, and also the amount of taxes paid by him, to the end that an issue may be framed and tried as to these matters alone, as indicated in this opinion, and that as to all other, matters the original decree shall stand. 6. As the defendant could have litigated most of these matters in the original case and his neglect to do so will put plaintiff to additional annoyance and expense, this modification will be made upon terms, namely, that defendant on or before the 26th day of April, 1912, pay to the clerk of this court, for the use of plaintiff, the sum of $150. In default of such payment, the original decree of this court will stand. Affirmed : Conditionally Modified : Rehearing Denied.