Dove v. White

²³¹ Hammond, J., delivered the opinion of the Court. Mrs. Ara Dove, claiming beneficial ownership of a house in Montgomery County in which she has lived for almost twenty years, although record title has been in another, sought a declaration that she was the owner of the house and conveyance to her of the legal title. The appeal is from the Chancellor’s dismissal of her bill of complaint. In 1936 Mr. Dove deserted his family.

Mrs. Dove wished to acquire the house which is the subject of controversy for herself and her seven children. She asked an old family friend, Rodney White, to look into the matter for her. He did so. It was bought for a $25.00 deposit, with the balance of the purchase price of $2,200.00 paid by two mortgages, one of $2,000.00 to a building association and the other for $200.00 to the owner.

Mr. White was separated from his wife. There arose the question in whose name title to the house should be put. Mrs. Dove felt that it could not be put in her name because, if this were done, her husband would have an interest in the property and would have to join in the mortgages, and Mr. White’s marital status posed the same problem. Testimony produced for Mrs. Dove is to the effect that Mr. White suggested that his unmarried sister, Amy White, might be a good person to hold title for Mrs. Dove, that he approached the sister and that she agreed, provided she would be put to no expense or obligation, and that, thereupon, Mrs. Dove paid the $25.00 deposit and, over the years, the principal and interest of the two mortgages which were put on the house and signed by Amy White.

It was testified that Mrs. Dove paid the taxes and insurance and the cost of repairs and improvements. In 1953 Rodney White died suddenly and the house was immediately claimed on the one hand by his children and, on the other hand, by Mrs. Dove. Amy White has never claimed any beneficial interest in the property and admittedly held it as trustee. After somewhat prolonged and seemingly unhappy indecision, she deeded the property to her brother’s children, and Mrs. Dove filed suit against her and the children, seeking to be declared the beneficial owner of the house and to have it conveyed to her.

She has appealed from the Chancellor’s holding that testimony ²³² produced in her behalf did not meet the burden of proof imposed upon her to show that she was the cestui que trust and his dismissal of her bill of complaint. The appellant says that a constructive trust has been shown. The appellees agree that if any trust exists for the benefit of appellant, it is a constructive trust, not a resulting trust as to which there is lacking an essential element, payment of the purchase price at or before the time of purchase, and not an express trust for there is no writing to gratify the statute of frauds. We agree that there is not a resulting trust for the reason urged.

Dixon v. Dixon, 123 Md. 44 ; Springer v. Springer, 144 Md. 465, 477 ; O’Connor v. Estevez, 182 Md. 541 . We turn then to whether there is either a constructive trust or an express trust. In England it was held that the statute of frauds was enacted to prevent, not to protect, fraud and that consequently a constructive trust would be imposed when it would be a fraud or give rise to unjust enrichment to deny the oral trust and claim the land. Scott, Trusts, Second Ed., Vol. 1, Sec. 44, p. 309.

The rule in the United States has been said to be narrower. Trossbach v. Trossbach, 185 Md. 47, 51 . In this country when land is conveyed upon an oral trust, a constructive trust arises if the conveyance was procured by fraud, or otherwise wrongfully, or the transferee was in a confidential relationship to the transferor, or if the transfer was made as security. In cases of confidential relations the result under the rule in the United States would seem to be as broad as the result under the English rule.

Maryland has seen the true rule to be even broader than the English rule for this Court has held, as the sole basis for decision, that a constructive trust arises under any circumstances which render it inequitable for the holder of the legal title to retain it. O’Connor v. Estevez, 182 Md. 541, 555 , supra. The law is said to be, in Restatement, Trusts, Sec. 44, and Restitution, Sec. 182, that a constructive trust arises if (a) the transfer was procured by fraud or other wrongful act; or (b) if the transferee was in a confidential relation to the transferor; or (c) if the transfer was made as security for an indebtedness of the transferor. The Institute takes no position upon whether the trans ²³³ feree holds upon a constructive trust where he orally agreed to hold in trust for the transferor, except under those circumstances.

It is suggested in Restatement, Trusts, Sec. 44, Comment c, in discussing confidential relations, that they exist where “* * * the transferor is in fact accustomed to be guided by the judgment of the transferee or is justified in placing confidence in the belief that the transferee will act in the interest of the transferor * * The comment adds that “It might seem, indeed, that wherever the transferee orally agrees to hold the property transferred to him in trust for the transferor there is a sufficient relation of confidence thereby created to justify imposing a constructive trust upon him if he breaks his promise * * *.” Scott, Trusts, Second Ed., Vol. 1, Sec. 44, p. 314, takes the same view, saying: “It would seem, therefore, that where land is transferred upon an oral trust for the transferor, the policy of the statute should not forbid evidence of the oral trust for the purpose, not of enforcing the trust, but of preventing unjust enrichment by restoring the status quo. * * * The letter and the spirit of the Statute of Frauds are sufficiently adhered to by refusing to enforce the oral trust or contract as such, and neither the letter nor the spirit of the statute should prevent oral evidence for the purpose of placing the parties in statu quo.” In O’Connor v. Estevez, 182 Md. 541, 555 , supra, the Court found no fraud or constructive fraud and made no finding, or indeed mention, of confidential relations, but held that a constructive trust arose because the facts and circumstances showed a situation such as to “* * * render it inequitable for the party holding the title to retain it.” The Court relied on Springer v. Springer, 144 Md. 465 , where there was no finding — although perhaps an assumption — that confidential relations existed and where the rule was stated to be as broad as that relied on in O’Connor v. Estevez. In Trossbach v. Trossbach, 185 Md. 47 , supra, Judge Markell, for the Court, set forth the English rule and the rule in this country, as we have discussed them, and found it unnecessary to decide the correctness of the suggestion of the Restatement, Trusts, and of Scott on Trusts that every conveyance on an oral trust ²³⁴ shows a confidential relation. In Fasman v. Pottashnick, 188 Md. 105 , the Court found no facts sufficient to establish a constructive trust but gave this negative statement of the law: “We find in this case no actual fraud, or any circumstance amounting to constructive fraud, or any facts and circumstances that produce a situation where it would be inequitable to allow Rosen’s heirs or devisees to retain title to the properties in question.” The opinions in Carter v. Abramo, 201 Md. 339, 343 , and Nowell v. Larrimore, 205 Md. 613, 621 , although they do not flatly so hold, suggest that the rule in this State may be as broad as O’Connor v. Estevez and Springer v. Springer stated it to be. The evidencé" before us would seem, to support a finding that Mrs. Dove was accustomed to be guided by Rodney White’s judgment and had the fullest confidence that he would act in her interest only.

Such a finding would gratify the suggested definition of a confidential relationship set out in Restatement, Trusts, Sec. 44, Comment c, as well as that set out in Grimes v. Grimes, 184 Md. 59, 63 , and Carter v. Abramo, 201 Md. 339, 343 , supra, that a confidential relation exists in every case where “* * * confidence is reposed by one person and accepted by the other.” If the confidential relation does exist, and it would be inequitable for the holder of the title to retain it, the right to reconveyance is not affected by the fact that the trustee may have intended at the time of the original conveyance to keep the agreement and was not guilty of any abuse of confidential relations in procuring the conveyance. Grimes v. Grimes, and Carter v. Abramo, cited just above, so hold. As we read the record, there is posed directly a basis for decision, to be discussed later, which makes it unnecessary to determine whether or not there was a confidential relationship or whether, absent such a relationship, the rule of O’Connor v. Estevez that the facts make it inequitable to deprive Mrs. Dove of the property, is applicable and controlling. The same reason makes it unnecessary also to pass on appellees’ contention in this Court that even if the parol evidence showed an express trust, the statute of frauds would prevent the trust from being operative.

If this point had to be decided, it might well be doubtful whether the appellees could raise that ²³⁵ defense for the first time in this Court, having conceded below that Amy White was a trustee for someone and, having failed to either plead the statute of frauds or to object to parol evidence as to the trust, on the basis that it offended the statute. The statute of frauds does not make an oral trust as to land unlawful or void; it requires that it be proved by a writing and this requirement of proof may be waived and the defense put upon the merits of the case. Lingan v. Henderson, 1 Bland 236 , 248; Miller, Equity Procedure, Sec. 253, p. 316. An early rule of chancery pleading in Maryland was that if the respondent admitted the oral contract or agreement relied on by the complainant, but also set up the statute as a defense, there was no waiver.

Hamilton v. Jones, 3 Gill & J. 127, 132, 133. It was also an early principle of Maryland chancery pleading that if the respondent completely denied the parol agreement or contract but did not plead or rely on the statute, the general denial was enough to compel the complainant to meet the requirements of the statute. Billingslea v. Ward, 33 Md. 48, 51 ; Semmes v. Worthington, 38 Md. 298, 317 . The rule elsewhere is not so restricted.

Scott, Trusts, Second Ed., Vol. 1, Sec. 44, p. 315, says that the better holdings are that failure to plead the statute of frauds waives the defense. See, in confirmation of Scott’s views, 2 Corbin on Contracts, Secs. 317, and 320. Abalan v. Abalan (Mass.), 107 N. E. 2d 302 , is an example of the cases applying the better rule mentioned by Scott. There the Court said: “The defendant does not set up the statute of frauds * * * and therefore cannot rely upon it. * * * If by any form of trust or contract she was obligated to reconvey the property, she cannot complain of the decree.

The only question is whether there was such an obligation.” Some courts hold that despite failure to plead the statute a defendant nevertheless can take advantage of it by objecting to any testimony, the purpose of which is to prove orally what the statute says must be proved by a writing. 2 Corbin on Contracts, Sec. 319, and cases cited. Professor Corbin says in the same section that the Court will not raise the question of its own motion and that “It is universally held that the question cannot be raised for the first time on appeal.” This ²³⁶ Court has shown a trend towards the views of Scott and Corbin. In Trossbach v. Trossbach, 185 Md. 47 , it was held that it was not necessary to determine whether a constructive trust arose since the alleged trustee in his testimony had admitted the general tenor of the agreement relied on by the complainant, although claiming certain variations. The Court decided that the statute of frauds required no more and refused to follow the earlier decisions that an admission in the answer was not enough if the statute was pleaded and relied on, as it was in the Trossbach case.

Judge Marked, for the Court, noted that the statute of frauds does not provide that a trust as to land must be constituted by a writing but merely that it must be proven by some writing, and that this requirement may be waived. In J. A. Laporte Corp. v. Pennsylvania Dixie Cement Corp., 164 Md. 642 , it was held that an objection that the contract in suit was unenforceable under the statute of frauds made for the first time on appeal could not then be relied on because the statute had not been pleaded below, nor had objection been made to the proof of the contract on the ground of the statute, although the defendant had pleaded the general issue and had asked for a directed verdict for lack of legally sufficient evidence as to the contract. On a motion for re-argument, it was noted that there had come to the attention of the Court the case of Hamilton v. Thirston, 93 Md. 213, 220 , a suit at law on an alleged oral agreement by an uncle to devise a portion of his estate, consisting of real and personal property, to a nephew in consideration of certain services to be rendered. The Court, in denying the nephew’s claim, said: “The Statute of Frauds was not set up by plea in this case but the making of the alleged contract was categorically denied by the first plea and that was sufficient either at law or in equity to entitle the defendant to rely upon it as a defense.

Billingslea v. Ward, 33 Md. 48 ; Semmes v. Worthington, 38 Md. 317 ; * * *."The cases cited are the equity cases to which we referred earlier, holding that the statute could be relied upon, although not pleaded. The Court in the Laporte case denied the motion for reargument, refusing to follow Hamilton v. Thirston. It said that without reference to that case: “* * * we should have regarded the objection to enforcement ²³⁷ of a contract for want of writing as an objection to form which would be raised too late on the appeal after a full trial on the merits. That is the view taken in the great majority of other jurisdictions; the contracts referred to in the statute are not void, but only voidable at the option of the party sought to be charged, and the option is viewed as exercised by acceptance of the oral contract if the trial is gone through with and verdict taken on the assumption that the oral contract is sufficient.” The Court held finally: “* * * we have concluded that the decision previously rendered here should not now be recalled, and that the objection should remain classed as one of those which cannot be raised for the first time on appeal.” The case before us was tried below with each side claiming that it was the beneficiary of an oral trust.

It was conceded by the appellees that Amy White had never had, and did not now have, any claim of beneficial interest in the property. She so testified. It seems plain that Amy White did not know who really was the beneficial owner of the house. Acceding to the importunities of her nephews and nieces, she finally signed a deed conveying the house to them and sent it to their lawyer.

Besieged by doubt, she reclaimed the deed and for some months would not allow it to be recorded. Neither by demurrer nor by answer did either Amy White or Rodney White’s children set up the statute of frauds as a defense, nor did they object to testimony on the basis of the statute. It may well be that the holdings in Trossbach v. Trossbach and J. A. Laporte Corp. v. Pennsylvania Dixie Cement Corp. leave the only question now to be decided by this Court to be the sufficiency of the parol evidence produced on Mrs. Dove’s behalf to prove that she was the beneficial owner, since below the appellees admitted a trust and neither pleaded nor otherwise relied on the statute of frauds. We have concluded, however, as we have noted, that this point need not be decided.

The record presents directly, and we think inescapably, whether there was not such performance by Mrs. Dove of her part of the agreement, under which she seeks legal title, as to take the case out of the statute of frauds. Restatement, Trusts, Sec. 50, declares the law to be that: “Al ²³⁸ though a trust of an interest in land is orally declared and no memorandum is signed, the trust is enforceable if, with the consent of the trustee, the beneficiary as such enters into possession of the land or makes valuable improvements thereon or irrevocably changes his position in reliance upon the trust.” There are Maryland cases in accord with the rule stated. See Brooks v. Dent, 1 Md. Ch. 523, 526 ; Whitridge v. Parkhurst, 20 Md. 62, 85 . Comment e of Section 50 says: “The rule stated in this Section is similar to the rule under which oral gifts of land or contracts for the sale of land become enforceable on the ground of ‘part performance.’ ” There are numerous Maryland cases holding that an oral gift of land will be enforceable if there has been part performance.

Hardesty v. Richardson, 44 Md. 617, 624 . There a father had given land to a son and the Court held that while proof must be clear, definite and conclusive as to the fact of the gift, and those acts done on the faith of it which render inequitable any attempt to avoid the gift, clear proof of the taking of possession and the making of improvements on the strength of the gift was sufficient. It was noted that the Court in such cases relies not so much on the contract, which falls within the statute of frauds, as on the acts done under it subsequently, on the faith that the promise will be performed by the other party. There are similar holdings in Haines v. Haines, 6 Md. 435 ; Whitaker v. McDaniel, 113 Md. 388 ; Chamberlain v. Preston, 170 Md. 1 ; Jaworski v. Jaworski, 202 Md. 1 ; and cf. Withers v. Douglas, 206 Md. 141 .

There are many Maryland cases holding that specific performance of an oral contract to sell or lease land will be granted if there has been part performance. In Hall v. Sharp Street Station, 155 Md. 654 , the bill, challenged by demurrer, alleged an oral contract by the respondent to lease a lot of ground for ten years, as well as complainant’s entry thereon with respondent’s consent, and his construction thereon of a building as provided in the contract and his continued occupancy of the premises for six years, with payment of rent. The Court said that these open, definite and manifest acts were done while in possession and solely pursuant to and in the performance of the particular agreement, and that the al ²³⁹ legations of the complainant entitled him to specific performance. In Schluderberg v. Dietz, 156 Md. 547 , an oral agreement to lease was required to be specifically performed by the lessor on the strength of performance by the lessee.

The Court said: “The taking of the possession of the whole property, tender and acceptance of the rent and, with the privity of the owners, the painting and whitewashing of the storeroom, were all acts ‘unequivocally referring to, and resulting from, the agreement.’ * * * The delivery of the possession of the entire property, and the payment of rent therefor, show that some contract had been made between the owners and the party in possession: and these conditions are admissible as acts of part performance taking the case out of the Statute of Frauds.” In Buckner v. Jones, 159 Md. 679 , a contract for the purchase of property was specifically enforced when the evidence showed that the complainants had gone into the property under an oral contract of purchase at a price to be paid in monthly installments and not as lessees paying a monthly rent, and had occupied the property for years and had made the payments, since this was sufficient part performance for a decree, notwithstanding the statute. Serio v. Von Nordeck, 189 Md. 388 , is a late case applying the same rule. There Judge Markell, for the Court, pointed out that payment oí a part, or even the whole, of the purchase money is not an act of part performance which alone will take a parol contract out of the statute of frauds, but went on to note that payment of the purchase money, plus continued possession, may be enough. The Court held that the complainant’s possession and repairs or improvements made at the cost of some $2,000.00 were all acts unequivocally referring to and resulting from an oral agreement for the sale of the property to the complainants and held that the contract could be specifically