Opinion
March 4, 1959 —
April 7, 1959.
APPEAL from a judgment of the municipal court of Kenosha county: URBAN J. ZIEVERS, Judge. Reversed.
For the appellants there was a brief by Cavanagh, Mittelstaed Sheldon, Heide Hartley of Kenosha, and oral argument by William A. Sheldon.
For the respondent there was a brief by Vaudreuil Vaudreuil of Kenosha, and oral argument by Leo E. Vaudreuil.
On August 18, 1955, Lydia Nehls commenced an action of ejectment against her brother, Elroy Meyer, and Elroy's present wife. The property involved had been the home of their parents, owned in joint tenancy. The father died in 1938. In 1939 the mother gave Elroy a warranty deed to the property including a parcel later sold to a Mr. and Mrs. Voight and not involved in this action. The deed recited consideration of $1 and bore a 50-cent revenue stamp.
In 1941 Elroy and his then wife, from whom he was later divorced, executed a warranty deed of the entire property to Lydia. The deed recited consideration of $1 and other valuable consideration, but does not appear to have borne revenue stamps. Mortgages of record were excepted from the warranty. The 1939 and 1941 deeds were prepared in the office of the same attorney.
It is undisputed that Elroy lived on the property at all times since 1920 and that at least since 1939 he paid the taxes and the current monthly instalments on the mortgage. The mother lived in the home until about 1952. She died in 1955. Lydia lived elsewhere.
Lydia's complaint alleged the delivery to her of the 1941 deed and that she owned the property. Defendants alleged that when the mother delivered the 1939 deed to Elroy, he agreed to hold title in trust for his mother; that when Elroy was married and contemplated going into the armed services, the mother directed that he convey title to Lydia upon the same terms; that Elroy did so and Lydia agreed to hold title in trust for the mother; that Elroy paid no consideration for the deed from the mother and Lydia paid no consideration for the deed from Elroy; that her refusal to perform the agreement is an abuse of a confidential relationship existing between Lydia and her mother and brother.
Elroy was made a party in his capacity as special administrator of the mother's estate. Counterclaims were filed alleging the same facts as the answer and demanding that Lydia be adjudged constructive trustee for the estate of the mother. In her reply Lydia denied the alleged agreement to hold the property for the benefit of the mother.
The trial court found that Elroy did convey the property to Lydia for valuable consideration; that the conveyance was unconditional; that she is not a constructive trustee for the mother's estate; that she did not secure title by fraud, duress, or undue influence, and was not in a confidential relationship to Elroy. On May 23, 1958, judgment was entered confirming Lydia's title and requiring defendants to remove from the premises. Defendants appealed.
With reference to the 1939 conveyance Elroy testified that he paid no money to his mother for the deed; that Lydia had said at that time in the presence of the mother that the mother should turn the property over to Elroy and that Elroy would hold it in trust. Elroy testified that it was agreed that he was to pay the taxes, insurance, and upkeep. Lydia did not testify as to the conversation just referred to.
With reference to the 1941 conveyance Elroy testified that Lydia paid him no money, but he delivered the deed at the direction of the mother; that in the presence of the mother, Lydia said that Elroy should turn it over to Lydia and that in case Elroy would not have to go into the army or came back, Lydia would turn it over to Elroy. It was not clear just when Elroy registered for the draft or just when the deed was delivered to Lydia. He was never called into the army. Lydia did not remember any talk with Elroy about the 1941 deed and did not testify as to any payment of money or other consideration for the deed. She testified that Elroy gave her the deed at some time before it was recorded in 1943.
Mr. and Mrs. Voight purchased a portion of the property in 1946 for $5,250. The deed to them was signed by Lydia, Elroy, the mother, and other members of the family. Voight testified that he had his discussions about the purchase with Elroy and Elroy's mother; that after Voight had made a $50 down payment to Elroy, Elroy said they would have to get the papers from Lydia. Besides the $50, which Elroy; testified he paid over to his mother, $899.88 out of the proceeds of sale was used to pay the balance on the mortgage; $2,082 to pay claims for old-age pensions received by the elder Meyers; $73.97 for 1946 taxes; $132.30 for miscellaneous expenses of sale; $1,677 was paid to Lydia; and the record does not show who received the $334.85 which was the balance of the proceeds remaining after the other payments.
Several times before the mother died Elroy asked Lydia to reconvey the property to him. He testified that she replied that she would do so after the mother died. After the mother's death, however, Lydia told Elroy he would have to buy the property from Lydia or move out.
The crucial findings made by the trial court were that there was valuable consideration for the 1941 deed to Lydia; that Lydia was not in a confidential relationship to Elroy; and that she is not a constructive trustee for the estate of Emma Meyer, their mother. These findings could perhaps be interpreted as findings that the conversations related by Elroy did not take place and since Elroy had the burden of proof, Elroy might be unsuccessful in attacking such findings upon appeal.
The opinion filed by the court, however, indicates that in making the findings the court considered that Elroy's testimony constituted parol evidence tending to establish an express trust and therefore disregarded the testimony, most of which had been taken subject to Lydia's objection.
The court relied upon Illinois Steel Co. v. Konkel (1911), 146 Wis. 556, 131 N.W. 842, and Felz v. Estate of Felz (1920), 170 Wis. 550, 174 N.W. 908. Those decisions stated the general rule that only clear and convincing evidence in writing can engraft a trust upon a deed which is absolute upon its face.
The gist of Elroy's case, however, is not an attempt to obtain enforcement of an express trust. He relies principally upon Masino v. Sechrest (1954), 268 Wis. 101, 66 N.W.2d 740. That decision points out that a constructive trust is a device of a court of equity to prevent unjust enrichment which arises from fraud or the abuse of a confidential relationship. The statute of frauds will prevent enforcement of an oral express trust, but in a proper case a constructive trust will be employed to accomplish justice. It was said at page 110, "Since a constructive trust, which is based on unjust enrichment, is construed from the circumstances surrounding the transaction, independent of the intention of the parties, parol evidence of the agreement is admissible, not to enforce the agreement, but to prove that the grantee has been unjustly enriched by his repudiation of the agreement. The proving of the contract is incidental. The purpose of the parol evidence is to prove unjust enrichment, and in the instant case, the unjust enrichment is alleged to have arisen from a breach of an agreement arising out of a confidential relationship."
The Masino decision, particularly at page 111, indicates that where a deed was given by a mother to a daughter and it is found that the purpose was to effect a family settlement, the close relationship, the giving of the deed, and the purpose are sufficient to support a finding that a confidential relationship existed.
Elroy's testimony, if believed, shows that Lydia had knowledge at the time of the 1939 conveyance of the fact that Elroy held title solely for the benefit of the mother. His testimony also shows that when the 1941 deed was delivered Lydia promised to hold title upon the same terms, and in fact to reconvey to Elroy after the reasons which made it more convenient for her to hold the title had ceased to exist.
Lydia's counsel argues that a constructive trust could not be imposed in these circumstances without proof that at the time of the delivery of the 1941 deed the arrangement for Lydia's holding mere nominal title was made between the mother and Lydia. Obviously each party is prevented from testifying in his own behalf as to transactions with the mother. We think it is unnecessary, however, for Elroy to prove that his mother was a party to the arrangement whereby Lydia obtained title if he is able to prove that Lydia knew that his own title was nominal rather than beneficial. Several cases from other states tend to support this proposition.
In Austin v. Austin (1937), 135 Me. 155, 191 A. 276, upon an oral agreement brothers Frank and Herbert had conveyed their interests in property to their sister Alida upon an agreement that Alida would return it to Frank and Herbert in equal shares. Alida later conveyed all of the property to Herbert and his wife. The wife, as well as Herbert, knew of Alida's agreement. A constructive trust in favor of Frank was impressed upon the property to the extent of his original interest. The court held that the constructive trust follows the real estate into the hands of any subsequent holder who is not a bona fide purchaser thereof without notice.
In Metzger v. Metzger (1940), 338 Pa. 564, 571, 14 A.2d 285, a son conveyed property to his mother upon an oral agreement to reconvey when his marital troubles cleared up. Thereafter the mother conveyed the property to her daughter who had knowledge of the arrangements between the mother and the son. It was held that a confidential relationship existed between the son and the mother and that ". . . since the daughter knew of the mother's agreement with the son respecting the property in dispute, the subsequent conveyance to her in no way adversely affects the son's rights, for, even a purchaser from a trustee is chargeable with the same trusts as the trustee from whom he purchases with notice of the trust."
In O'Shea v. O'Shea (1943), 143 Neb. 843, 11 N.W.2d 540, John O'Shea conveyed property to his sister Ella with the oral understanding that Ella was to will the land to John if Ella predeceased him. The court found that there was a confidential relationship between John and Ella and that a brother, Edward, was fully aware of the relationship and of the conditions under which Ella held title. Before Ella's death she conveyed the property to Edward. The court decided that Edward held title under a constructive trust for John.
It is plain from these decisions that the party seeking to establish the constructive trust has the burden of proving the oral arrangements by clear and convincing evidence.
We conclude that the judgment appealed from cannot be supported upon the theory that Elroy's testimony as to the conversations with his sister was inadmissible. Upon remand, whether the trial court reconsiders the matter upon the record already made or reopens the record for additional testimony is a matter which should be left to the sound discretion of the court.
By the Court. — Judgment reversed, and cause remanded for further proceedings consistent with the opinion filed herein.