Dorsey v. Stone

Markell, J., delivered the opinion of the Court. This is an appeal from a decree dismissing, on demurrer, on the ground of laches, a bill to establish, as “an implied, constructive trust”, an express oral trust, invalid as such under the Statute of Frauds. The bill alleges that: Plaintiffs’ father, Walter B. Dorsey, purchased, with his own funds and subject to mortgages subsequently paid by him or out of his estate, four farms in St. Mary’s County, which were placed in the name of his brother, Philip H. Dorsey (defendants’ testator), “for the express and sole purpose of creating a trust estate for the benefit of * * * plaintiffs, commencing at * * * Walter’s * * * death, subject to any indebtedness; * * * Walter * * * having the utmost confidence and faith in his brother.” These properties were caused by Walter to be placed in Philip’s name “as security for certain advancements made to * * * Walter.” They were conveyed to Philip in 1916 and 1918, each subject to a purchase money mortgage from Philip to the respective grantor; these mortgages were released in 1925, 1924, 1924 and 1919 respectively. Walter before his death was in ill health; he was indebted to Philip as an accommodation endorser on notes made by Walter; desiring to protect Philip from any loss he might suffer as endorser, Walter permitted the properties to remain in Philip’s name “with the understanding between the ²²² two brothers that any notes * * * Philip * * * might be called upon to pay as * * * endorser should be a charge upon said farms and the balance, if any, should be turned over to * * * plaintiffs.” In order to protect Walter, Philip signed a blank promissory note to Walter with permission to fill in such amount as would be necessary to cover the value of the farms should Philip “fail to carry out or evade the terms of the trust.” Walter died December 11, 1923; Philip and plaintiff Philip, Jr., were his executors.

All of the notes on which Philip was endorser “were paid from the proceeds of” Walter's estate, as shown by the executors’ account, and Philip was held harmless from any loss by reason of his endorsement. At the time of Walter’s death the crops on the farms were marketed and the proceeds, approximately $3,200, “were retained by * * * Philip * * *, as part of said trust.” On November 23, 1925 Philip sold the first of the farms for $6,250; after deducting the mortgage, $1,500, the balance of $4,750 Philip “had full use of since November 23, 1925.” In 1937 Philip sold a second farm for $4,500; the balance of $3,000 (over and above a $1,500 mortgage) Philip “had full use of since April 2, 1937.” Since Walter’s death Philip (and later his executors) “continued to operate” the other two farms and “to retain the proceeds, rents and profits therefrom.” Walter prior to his death had full control of the four farms, exercised all the rights of ownership, collecting ■ all rents and revenues, paying all costs of operation, including interest on the mortgages. Plaintiffs and Philip “understood between them that the four farms were owned by [Walter], subject to indebtedness thereon, * * * plaintiffs having confidence and faith in