Wallace v. Carpenter

Mr. Justice Dickey delivered the opinion of the Court: In the latter part of January, 1868, Wallace, Wm. Carpenter, Augustus A. Carpenter and Hall, finding an 80-acre tract of land lying in or near Chicago, for sale at $90 per acre, agreed with each other to huy the same on speculation—each to pay one-quarter of the expenses of the purchase, and each to have one-quarter of the land, or the proceeds of the sale thereof, and that, for convenience in case of sale, the contract of purchase and deed should be made in the name of Wm. (). Carpenter. The contract of purchase was made in the name of Wm. O. Carpenter. One-third of the price was to be paid and the deed made as soon as the vendor should produce an abstract showing title, and the remaining part of the purchase money was to be paid in two equal annual instalments. It was supposed it would require some three or four weeks to prepare the abstract and title papers, and $250 of the first payment was advanced as earnest money. Wm. 0. Carpenter furnished this earnest money, and advanced it in behalf of himself and the other parties, respectively, interested in the purchase. Wallace lived in Ohio, and went home to provide money for his share of the first payment. There is some dispute as to the time in which he was to furnish this money. Wallace says that Carpenter agreed to advance this money for him, and he was to refund it in two months. Hall’s recollection is, that he was to refund it in three months, and the Carpenters both testify that it was to be forwarded in 18 days; but in the view we take of the case, this is an immaterial question. Assuming the view of the Carpenters to be correct, it, at most, left Wallace under promise to advance one-quarter of the money from time to time necessary to fulfill the contract of purchase. On the 13th of February, 1868, a sale of their interest in this property was effected, at an advance of $4800, to Ford and Heisler, the purchasers to assume and pay all the payments upon the purchase of the parties to this suit, and $1000 of this profit was. paid, as earnest money, into the hands of Wm. O. Carpenter. At this time, the abstract and title papers, in execution of the original purchase, had not been prepared. Soon after this, the abstract was completed, and the land passed from the hands of Wm. O. Carpenter to the second purchasers, at a profit of $4800, the first purchasers being relieved of all their payments and having refunded the $250 of earnest money paid at the beginning of these transactions. After the contract of sale to Ford and Keisler, and the receipt of the $1000 of earnest money on the contract, but before the transfer was entirely completed, Wm. O. Carpenter, with the consent of Augustus, his brother, wrote a letter to Wallace, telling him there was an incurable defect in the title, and that the trade had either fallen through or would fall through, and that he need not send his $600, or that it was well he had not sent it. (There is some dispute about the true version of this letter, but it is wholly immaterial which of the alternatives above was its true tenor.) Wallace was never in default, in any view of the case. He was in no default to the Carpenters in refunding to them money which they expected to advance, for they advanced no money and had no claims upon him giving them a right to demand to have money refunded to them. He was in no default to the original vendor, for all payments to him were promptly met out of the proceeds of the Turner sale, and one-fourth of these proceeds, in equity, belonged to Wallace. He was guilty of no default whatever. Wallace, being thus misled, rested in ignorance of the true state of affairs until in July, 1870, and supposed that the purchase had never been consummated, and this although he visited the Carpenters in April, 1868, and afterwards removed to Chicago, where he saw them frequently and had other business transactions with them. The fruits of this speculation ($4800) was, early in 1868, paid to Win. O. Carpenter, and divided equally between Hall, Wm. Carpenter and Augustus Carpenter, each taking $1600. After the discovery of this fraud, Wallace filed his bill in chancery, claiming relief. The application was resisted below by the Carpenters, upon the ground that the contract between the parties was void under the Statute of Frauds, and the court below so held, and, on the hearing, dismissed the bill, and complainant appeals. In this we think the court erred. The $250 of earnest money was paid, by Wm. 0. Carpenter in behalf of himself and each of the other parties—that is, he advanced for each of them, at his request, $62.50, and for his use; and if it had turned out that the original vendor had no title, and he had failed to refund this earnest money, William could have compelled contribution by each of the others of $62.50, and in a proceeding for that purpose the Statute of Frauds could not have been interposed. In contemplation of law, one-quarter of that earnest money was the money of Wallace, the complainant, for he at once became liable to pay that amount to Wm. 0. Carpenter. A resulting trust in his favor grew, by operation of law, out of the transaction, which entitled him to one-quarter of all the benefits growing out of that payment. The benefits which did grow out of that payment were the profits of $4800. In the arrangement for the last sale, the Carpenters agreed to allow a compensation to Hall for finding the second purchasers. In consideration of his services in that regard, the Carpenters agreed to allow him one-third, instead of one-quarter, of these profits, and promised that they would take care of Wallace. Hall swears that, either then or afterwards, he, at the request of the Carpenters, promised to keep the matter a secret from Wallace. Afterwards, he was advised of the fraudulent letter written to Wallace. If this contract to allow Hall a compensation for finding a purchaser had been made in good faith by Wm. O. Carpenter, Wallace might have been bound by it. The fair inference, from his conduct in allowing the title to be taken in the name of Wm. O. Carpenter, is, that Carpenter was to exercise a discretion as to the sale of the property, and complainant could not claim a part of the proceeds of the sale without ratifying the acts of Wm. O. Carpenter, done in good faith, in accomplishing the result; and this arrangement with Hall, according to Hall’s testimony, was a part of the transaction of the last sale, and, in fact, the foundation of it. Augustus Carpenter swears that the arrangement to give Hall one-third, instead of one-fourth, of the profits, was not made until after the letter was written to Wallace. Wm. O. Carpenter also testifies that the final arrangement to let Hall have one-third, was after the false letter was written to Wallace, and that, at that time, Hall promised secrecy toward Wallace. Under all the circumstances, we think that Hall can not be regarded as free from participation in this fraud. It is a fact that the arrangement to give him one-third of the profits was based, in part, upon his promise to keep secret the fraud being practiced upon Wallace. Hall can claim nothing by such an agreement. Under the circumstances, Wallace is entitled to a decree against all the defendants for one-quarter of the profits made out of the transaction, with interest upon each instalment received by the defendants, from the time received. The decree is reversed, and the suit remanded with direction to enter a decree as here stated, and to state an account so as to ascertain the exact amount due to Wallace upon this rule, and thus grant him relief. Decree reversed. Mr. Justice Scott dissenting.