Opinion
March Term, 1896.
C.E. Souther, for the appellant.
Frank W. Arnold, for the respondent.
The question presented is whether the circumstances attending the agreement in question are such as to impress a trust upon the land which will entitle the plaintiff and the other interested parties to share in the proceeds.
The defendant executrix relies upon the Statute of Frauds, while the plaintiff claims that Mr. Arkenburgh took the property as a trustee for all the tenants; and she invokes the doctrine that the statute may not be used to shield a fraud. It is conceded that the mere breach of a verbal agreement is not ordinarily such a fraud as is contemplated by the doctrine last stated. ( Levy v. Brush, 45 N.Y. 589; Wheeler v. Reynolds, 66 id. 227.) It is not enough that one person has relied upon the promise of another with regard to the purchase of a piece of property. The party seeking relief in such a case must go farther, and show a change of position on his part due to such reliance. He must prove, in fact, the elements of an estoppel in pais. As was held in Wheeler v. Reynolds, "the promisee must have been induced, at the instance of the promisor, to incur some expense or perform some act which he otherwise would not have done." But this rule applies in its full force only where the parties sustain no trust or confidential relations to each other, where they are simply contracting parties in the ordinary sense. It does not apply where there is a trust or confidential relation with regard to the property itself, where there is a community of interest between the owners, and where the promise of one relates to the vested interests of all.
The plaintiff here had a vested interest in the property in question and so had the deceased. So, too, had the other tenants in common. There was a community of interest upon the part of all concerned. It was with reference to this community of interest that the agreement was made. The deceased did not assert his independent right to purchase the property for his own benefit, but avowed his purpose to buy it for the benefit of all parties in interest including himself. That was what he offered, and that was what they accepted. And he coupled this offer with the suggestion that they should not bid against him at the sale. In other words, he avowed a trust relationship with regard to the property, based partly upon community of interest, partly upon ties of blood. It was a plain acknowledgment that there was, as said by MILLER, J., in Rothwell v. Dewees ( 67 U.S. 619): "A community of interest in a common title, which created such a relation of trust and confidence between the parties that it would be inequitable to permit one of them to do anything to the prejudice of the other in reference to the property so situated."
The authorities make this clear distinction between the purchase of property by ordinary contracting parties and the acquisition of joint or common interests, already vested in several persons by one of their number for the benefit of all.
In Van Horne v. Fonda (5 Johns. Ch. 388, 407) Chancellor KENT said: "Community of interest produces a community of duty, and there is no real difference on the ground of policy and justice whether one co-tenant buys up an outstanding incumbrance or an adverse title, to disseise and expel his co-tenant. It cannot be tolerated when applied to a common subject in which the parties had equal concern, and which created a mutual obligation to deal candidly and benevolently with each other and to cause no harm to their joint interest." The learned chancellor admitted that there might be a particular case in which a tenant in common could buy in an outstanding title for his own benefit, but held that this could not be done where two were in possession under an imperfect title derived by devise from a common ancestor.
Mitchell v. Reed ( 61 N.Y. 123) was an action between partners, but the rule there laid down was held to be applicable to tenants in common. Speaking of the rule which declares a partner to be a trustee as to renewals of a lease for a term commencing after the dissolution of the firm, DWIGHT, C., said (pp. 138, 139): "On principle, in many cases it is of but little consequence whether the partnership is dissolved or not before the renewal, since, if the former partners become tenants in common, the result is the same." And in summing up his conclusions he says (pp. 139, 140): "It cannot necessarily be assumed that the renewal can be taken by an individual member of the firm, even after dissolution. The former partners may still be tenants in common, or there may be other reasons of a fiduciary nature why the transaction cannot be entered into."
In Knolls v. Barnhart ( 71 N.Y. 474) Chief Judge CHURCH stated the facts and the principle applicable thereto as follows: "The possession of the widow as dowress and as guardian in socage of the minor children was as tenant in common with all the heirs. * * * She could not buy in the contract or title for her individual benefit. She occupied a fiduciary relation to the heirs, which would prevent her purchasing for her individual benefit. * * * The general rule is, that one tenant in common cannot purchase in an outstanding claim or title to the exclusion of his co-tenant."
In Carpenter v. Carpenter ( 131 N.Y. 101) the defendants, who were tenants in common with the plaintiffs, instigated the foreclosure of mortgages on the common property (although they had in their hands funds sufficient to pay the interest due), and bought in at the sale. It was held that they were trustees for all interested. ANDREWS, J., said (pp. 109, 110): "If the foreclosure of the mortgages was a proceeding hostile to the defendants, and they had not been in default, and their purchase was made of necessity to protect their own rights, with full knowledge of the situation on the part of the plaintiffs, the moral and perhaps the legal aspect of the case would be altered. But to permit the plaintiffs, all but two of whom were infants, to be cut off by a proceeding instigated by the defendants for that very purpose, and in the absence of any effort on their part to avert the danger, and when they were in actual possession of the common property, receiving the rents and profits, is not a mere ethical grievance, but one which the law will recognize and redress."
On the other hand, Streeter v. Shultz (45 Hun, 406, affirmed without opinion in 127 N.Y. 652) upholds the right of the tenant in common to deal with the property under the special circumstances therein disclosed. There the defendant bought in the property at a foreclosure sale under a mortgage executed by the plaintiff alone prior to the defendant's acquisition of his interest. "There was no arrangement between Shultz and plaintiff that Shultz was to buy for joint benefit." (P. 407.) The sale was open and public, and defendant paid a fair price. There was not a fact or circumstance in the case except the joint relation upon which to found the action. It was held that the relation of tenants in common is not such a strict trust relation as would incapacitate one tenant from purchasing for his individual benefit.
The application of the rule may vary with the variation in the facts, but the general rule may well be stated in the language of Judge STORY in Baker v. Whiting (3 Sumn. 475), that a court of equity would indulge the presumption that a tenant in common acted as a common agent for the common benefit of all the proprietors, since in that way he may promote the true interests of all. "Indeed," as that learned judge further observed, "all acts done by one tenant in common are presumed to be done for the interest of all the tenants, and in conformity to their rights, until an adverse claim is notoriously set up, and established by competent proofs." When, in addition to this presumption, we have the ties of blood, and the distinct promise that the uncle tenant in common would purchase for the benefit of the nephews and nieces tenants in common, and would protect his junior and infant relatives, there can be no doubt of the propriety of applying the trustee rule. It would be grossly unconscionable to permit the trustee tenant in common, under such circumstances, to keep the property, and deprive the cestius que trust tenants in common of all interest therein. It is sufficient to effect the trust purchase that it was not made independently, in the right of the purchaser tenant in common, but was made in the interest and for the benefit of all who were possessed of the community of interest. The community of interest principle is, however, here accentuated by the family relationship. We must not treat the case as though it rested independently upon this blood relationship. It is enough that that relationship colors and gives added force to the other doctrine. When combined, the trust result is conclusively established, and we may apply to the exceptional facts the rule which was laid down in Wood v. Rabe ( 96 N.Y. 414), and followed in Goldsmith v. Goldsmith (145 id. 313), that "Where a person through the influence of a confidential or fiduciary relation acquires title to property, or obtains an advantage which he cannot conscientiously retain, the court, to prevent the abuse of confidence, will grant relief." If Mr. Arkenburgh had asserted his right, and expressed his intention, to purchase upon his own individual account, a different question would be presented. That would have been "candid" but not "benevolent." If he had remained silent and simply purchased for himself, still another question would have been presented. That would neither have been candid nor benevolent. The precise question with which we have to deal is whether he can secure the property for himself to the exclusion of his co-tenants and of his sister's children, by a pretense of both candor and benevolence. There can surely be but one answer to such a question. Equity will not permit it.
There is still another fact which entitles the plaintiff to relief. The trust was executed by Mr. Arkenburgh's representatives. They were fully aware of the agreement, and they distinctly recognized it as binding upon them. They did not sell the property in the right of the heirs, but in the right and interest of the tenants in common. They sought the consent of these tenants in common before they made the sale, and throughout the entire transaction they treated their power as impressed with the trust. Under such circumstances equity will impress a lien upon the proceeds of the sale, which, being personalty, are exempt from the operation of the statute. ( Bork v. Martin, 132 N.Y. 280.) In the case cited the defendant came into the possession of real property upon a parol agreement to hold it subject to plaintiff's direction. He was requested to convey to third parties, and refused unless he should receive the purchase money. Thereupon the plaintiff advanced the amount, paid it to the defendant's wife, and the defendant gave a deed. The plaintiff at once sued for, and recovered, the amount of the payment. LANDON, J., speaking for the court, said: "Assuming that the land was conveyed to the defendant upon an oral trust, invalid under the Statute of Frauds and of Uses and Trusts (2 R.S. 134, § 6; 1 id. 728, § 51), yet it was lawful for him to perform it, and he has performed it so far as it required him to dispose of the land. * * * Equity approves his performance so far as he has performed, and as the statutes referred to no longer apply, there is no law which he can invoke to shield him from all the full performance of his duty." (Pp. 284, 285.) The exigencies of the present case do not require the application of the extreme doctrine enunciated in that case. There, indeed, the court held that the disposition of the property was an execution of the trust even when the alleged trustee ex maleficio insisted that the property was his own, and that the sale was for his own sole use and benefit. Here we have the reverse of this assertion. Here the trustee's legal representatives recognized the trust, and executed it loyally. They had a right to thus recognize it, and they have only done their duty in its execution. The trust, therefore, having been fairly and frankly executed, and the proceeds of its execution being in the hands of the defendants for distribution, such distribution was properly decreed. It follows, upon both grounds, that the judgment should be affirmed, with costs.
VAN BRUNT, P.J., O'BRIEN and INGRAHAN, JJ., concurred; RUMSEY, J., concurred in result.
Judgment affirmed, with costs.