Cline v. Cline

255 S.E.2d 399 (1979)

297 N.C. 336

Laura Y. CLINE v. Calvin C. CLINE.

No. 74.

Supreme Court of North Carolina.

June 12, 1979.

*403 Finger, Park & Parker by Raymond A. Parker, II and M. Neil Finger, Elkin, for plaintiff.

Franklin Smith, Elkin, and Henry B. Shore, Yadkinville, for defendant.

SHARP, Chief Justice.

We consider first defendant-appellee's contention, brought to this Court in his brief under App.R. 16(a), that plaintiff's evidence was insufficient to establish either a resulting or a constructive trust, and that the trial court erred therefore in denying his motion for a directed verdict at the close of all the evidence. See Investment Properties v. Allen, 281 N.C. 174, 188 S.E.2d 441 (1972).

The evidence in this case would permit the jury to find the following facts:

(1) After the death of defendant's father, defendant's mother was unable to farm their land and to make the annual payments on the mortgage. She told defendant, whose family consisted of his wife, the plaintiff, and their three young sons, that if he would move on the land with her and make the mortgage payments she would convey the property to him, subject to her life estate.

*404 (2) Defendant discussed the situation with his wife and told her that if they would move on his mother's place with her, farm the land, and pay the mortgage, the property would then be theirs. He asked her to move "up there" with him. She agreed to the proposition defendant had stated to her, and the move was made.

(3) In less than 15 days after the move was accomplished and before the first payment was made on the mortgage, defendant caused his mother to convey the land, subject to her life estate, to him alone. The consideration for this conveyance was defendant's promise to move on the land and to pay the mortgage which encumbered it. Plaintiff had no knowledge of this conveyance at the time it was made and first learned of it in the latter part of July 1975.

(4) In performance of the agreement plaintiff made with defendant preceding their move to his mother's farm, and in reliance upon defendant's representations to her that when they had satisfied the mortgage on the land it would belong to them jointly, plaintiff by her labor assisted defendant in caring for his mother and in cultivating and harvesting tobacco, their annual cash crop. By her labor on the farm and her contributions in money, which she earned in "public work" off the farm, plaintiff paid one-half of the original mortgage indebtedness on the farm and also of subsequent encumbrances securing loans for the purchase of farm machinery and making improvements on the land. In addition, from her wages plaintiff made cash contributions to the support of the family.

Once proven, the foregoing facts are sufficient to establish either a constructive or a resulting trust in plaintiff's favor in the land described in the complaint. See Bowen v. Darden, 241 N.C. 11, 84 S.E.2d 289 (1954); Davis v. Davis, 228 N.C. 48, 44 S.E.2d 478 (1947).

Whenever one obtains legal title to property in violation of a duty he owes to another who is equitably entitled to the land or an interest in it, a constructive trust immediately comes into being. Such a trust ordinarily arises from actual or presumptive fraud and usually involves an abuse of a confidential relationship. Courts of equity will impose a constructive trust to prevent the unjust enrichment of the holder of the legal title to property acquired through a breach of duty, fraud, or other circumstances which make it inequitable for him to retain it against the claim of the beneficiary of the constructive trust. See Fulp v. Fulp, 264 N.C. 20, 140 S.E.2d 708 (1965); Davis v. Davis, supra; 13 Strong's North Carolina Index 3d Trusts § 14 (1978); V Scott, Law of Trusts § 461-462.4 (3d Ed. 1967).

The parties to this action are husband and wife. The law recognizes that "[t]he relationship between husband and wife is the most confidential of all relationships, and transactions between them to be valid, must be fair and reasonable." Eubanks v. Eubanks, 273 N.C. 189, 195-96, 159 S.E.2d 562, 567 (1968); Fulp v. Fulp, supra. Taking plaintiff's evidence as trueas we must when considering a motion for a directed verdict, Rappaport v. Days Inn, 296 N.C. 382, 250 S.E.2d 245 (1979)defendant clearly breached this confidential relationship when he took title to the farm in his name alone after representing to his wife that the land would be theirs jointly after the mortgage was paid. A constructive trust arose, therefore, in her favor at the time defendant wrongfully took title solely in his name. Thereafter, in accordance with plaintiff's understanding with defendant that they were both obligated to pay off the mortgage which encumbered the property at the time defendant agreed to move on his mother's farm, plaintiff's contributions in labor and money paid at least one-half of the mortgage. Thus the equities remained with her and she is entitled to enforce the constructive trust which arose in her favor. Otherwise, defendant would be unjustly enriched at her expense.

The classic example of a resulting trust is the purchase-money resulting trust. In such a situation, when one person furnishes the consideration to pay for land, title to which is taken in the name of another, *405 a resulting trust commensurate with his interest arises in favor of the one furnishing the consideration. The general rule is that the trust is created, if at all, in the same transaction in which the legal title passes, and by virtue of the consideration advanced before or at the time the legal title passes. See Fulp v. Fulp, 264 N.C. 20, 140 S.E.2d 708 (1965); Rhodes v. Baxter, 242 N.C. 206, 87 S.E.2d 265 (1955); Deans v. Deans, 241 N.C. 1, 84 S.E.2d 321 (1954); V Scott, Law of Trusts §§ 440-440.1 (3d Ed. 1967); Bogert, Trusts and Trustees § 455 (2d Ed. 1977) (hereinafter cited as Bogert). See generally 13 Strong N.C. Index 3d Trusts §§ 13-13.5 (1978).

If A and C pay for a parcel of land, but only C takes title, the theory of the law is that at the time title passed A and C intended that both would have an interest in the land. "A resulting trust is a creature of equity, and arises by implication or operation of law to carry out the presumed intention of the parties, that he, who furnishes the consideration for the purchase of land, intends the purchase for his own benefit." Waddell v. Carson, 245 N.C. 669, 674, 97 S.E.2d 222, 226 (1957). This rule does not apply where A and C agree to buy a tract of land but A pays the purchase price and takes title in his name. In this situation, while it is possibledepending upon the circumstancesthat he may have other remedies, no resulting trust arises in C's favor when consideration passes from him to A thereafter. Bryant v. Kelly, 279 N.C. 123, 181 S.E.2d 438 (1971); Rhodes v. Baxter, 242 N.C. 206, 87 S.E.2d 265 (1955).

However, as Bogert points out, § 456 at 669-673, in a large number of cases the person claiming a resulting trust proves a payment on the purchase price made to the grantee or grantor after the delivery of the deed but pursuant to a promise made to the grantee before the deed was delivered. Although it seems that this Court has not considered the application of the resulting trust doctrine to this specific situation other jurisdictions have. See Bogert, § 456, n. 25, where the authorities are collected. In discussing the "large group of cases [in which] the person claiming a resulting trust proves payment after the delivery of the deed, pursuant to a promise made to the grantee. . . before delivery of the deed," Bogert offered the following example and comments:

"A is bargaining for land to be bought from B, and A seeks the aid of C in financing the sale. It is agreed between A and C that A shall pay part of the price at the time of the delivery of the deed from B to A, and that A shall give a note and mortgage to B for the remainder of the purchase price; and C agrees with A that C will make payments to A in the future which A agrees to use to help him in meeting his obligations to B. Here C, the third party, does not promise the grantor, B, anything. The consideration received by the grantor for his deed consists of cash paid by the grantee, A, and a note and mortgage executed by the grantee, A, alone. C's promise to the grantee, A, is not to pay the purchase price, because technically one can pay the purchase price only to the seller of the land. C's agreement with A is to make a payment to A which will enable A to pay the purchase price." Bogert § 456 at 673.

"If the promise of C has been performed by the making of the agreed payment to A, the grantee, after delivery of the deed to A, the authorities hold that C obtains a resulting trust arising at the date of C's payment, but relates back in effect to the time of the taking of title by the grantee, A." Bogert justifies this result in either of two ways: "(1) by a finding that C's promise to A and his performance of it are equivalent in practical effect to a payment of part of the price of the land at the time of the delivery of the deed; or (2) by an argument that even if C's conduct is something totally distinct from paying part of the purchase price to the grantor, there is ground for an inference or presumption of an agreement between the prospective grantee and C that C should have an equitable interest in the land corresponding to the amount of his payment to the grantee." Id. at 674. Certainly the logic of such an inference is as cogent in this situation as it is in that of the *406 classic purchase-money resulting trust. There is no difference in principle between paying money toward the purchase price at the time of the delivery of a deed and contracting at that time to pay the same sum later and then paying it as promised. See Id. at 672, 673.

It was the foregoing theory of a resulting trust which the trial judge attempted to explain to the jury in his charge upon the first issue. We agree with the Court of Appeals, which approved the theory, that the charge was an insufficient and somewhat confusing explanation of the applicable law, and that from it the jury might well have concluded plaintiff's right to have a resulting trust established in her favor depended solely on the contributions which she made subsequent to the delivery of the deed to defendant without determining whether a promise was made to defendant before he obtained title. For this reason the jury's answer to the first issue must be vacated. Notwithstanding, we affirm the judgment of the trial court upon the jury's answer to the second issue, which established plaintiff's right "to have a constructive trust imposed upon the land described in the complaint so as to create a joint ownership in said property by the plaintiff and defendant."

Concededly the charge on the second issue is not a model of clarity and organization. However, when it is read as a whole we think the judge made it clear that for plaintiff to prevail on the second issue she must satisfy the jury by clear, strong, and convincing evidence that there was an agreement, either express or implied, between the parties; that the title to the land was to have been placed in their names jointly and that they were to pay off the mortgage jointly; that thereafter defendant breached the confidential or fiduciary relation the law presumes to exist between a husband and wife by having the deed made to himself alone without her knowledge; that, in ignorance of his breach of trust, she contributed at least one-half of the funds used to pay off the mortgage which encumbered the land at the time of the purchase. The judge specifically informed the jury that any funds plaintiff might have invested in improvements on the property did not bear upon the issue of constructive trust, which arose only in connection with the actual purchase of the land itself.

In this Court defendant's contentions with reference to the charge on the second issue are that "the trial judge engaged in the academics of constructive trusts and the contentions of the parties" and that "there is insufficient evidence to support the judge's charge on this issue." He reargues the sufficiency of the evidence to withstand his motion for a directed verdict and questions the credibility and weight of plaintiff's evidence.

In the final analysis, despite the somewhat complicated questions of trust law involved, this case resolved itself into simple issues of fact: (1) Did plaintiff and defendant agree, before they moved to the farm and before he procured title in himself (as plaintiff testified), that they would pay off the mortgage and title would then be taken in their names jointly; or, did defendant tell plaintiff (as he testified) that when his mother died the property would belong to him ? (2) If the agreement was made as plaintiff testified, did shepursuant to their agreement and in ignorance of the fact that he had taken title in himselfcontribute to defendant for the purpose of paying off the mortgage at least half the amount due; or did she "never bring in any money" for that purpose, as defendant testified? The jury, who heard the evidence and observed the demeanor of the witnesses, resolved all issues in favor of plaintiff. On the second issue submitted to the jury we found no prejudicial error in the court's instructions on constructive trusts.

Finally, we find no merit in defendant's contention that plaintiff's action is barred by the statute of limitations. "A resulting or constructive trust, as distinguished from an express trust, is governed by the ten-year statute of limitations. G.S 1-56. . . . Moreover it is established by authoritative decisions of this Court that *407 the statute of limitations does not run against a cestui que trust in possession." Bowen v. Darden, 241 N.C. 11, 17, 84 S.E.2d 289, 294 (1954). So long as an equitable owner retains possession, nothing else appearing, the statute of limitations does not run against him. The statute begins to run only from the time the trustee disavows the trust and knowledge of his disavowal is brought home to the cestui que trust, who will then be barred at the end of the statutory period. Solon Lodge v. Ionic Lodge, 247 N.C. 310, 317-18, 101 S.E.2d 8, 13-14 (1957).

The record discloses that defendant's mother deeded the land in suit to him on 15 January 1951, and that plaintiff has remained in possession continuously. Further, plaintiff testified that she did not learn defendant had taken title in his name alone until the latter part of July 1975 when the parties separated. Defendant, of course, contends that she knew this from the date of the deed. Thus, the issue of the bar of the ten-year statute of limitations was properly submitted to the jury, which answered it in favor of plaintiff.

For the reasons stated, the decision of the Court of Appeals awarding defendant a new trial is reversed. The cause will be returned to that court with instructions that it be remanded to the District Court of Yadkin County with directions that the judgment in this case, filed 23 May 1976, be reinstated.

Reversed.

BRITT and BROCK, JJ., took no part in the consideration or decision of this case.