Christy v. Sill , 95 Pa. 380 ( 1880 )

Mr. Justice Paxson

delivered the opinion of the Court,

It was not denied that the facts found by the jury in their special verdict constitute-a clear case of fraud; that by reason of said fraud Jake Hill acquired no title that he can set up as against the heirs of William Sill, and that those claiming under Hill not being bona fide purchasers without notice, stand in no better position. The defendants, however, set up the Act of 22d of April 1856, as a bar to the plaintiff’s recovery. The sixth section of said act provides that “ no right of entry shall accrue or action be maintained for a specific performance of any contract for the sale of any real estate, or for any damages for non-compliance with any such contract, or to enforce any equity of redemption after re-entry made for any condition broken, or to enforce any implied or resulting trust as to realty, but within five years after such contract was made, or such equity or trust accrued. * * * Provided, that as to any one affected with a trust, by reason of his fraud, the said limitation shall begin to run only from the discovery thereof; or when by reasonable diligence the party defrauded might have discovered the same.” The learned judge of the court below held that the case did not come within the letter of the Act of 1856, although he considered it to be within its spirit, and entered judgment for the plaintiffs below upon the verdict. This ruling was assigned for error here.

The sixth section of the Act of 1856 is not, strictly speaking, an Act of Limitation, but rather of repose. So much was said by the present chief justice in Douglass v. Lucas, 13 P. E. Smith, at page 12. It is “ an act for the greater certainty of title and more secure enjoyment of real estate,” the preamble of which declares its object to be that “the people should acquire, hold and improve their homesteads and estates in the confidence that they will not be lost by secret and unknown claims, or by fraud and perjury.” The court below was clearly right in saying that the case comes within its spirit. It is also within the mischief intended to be remedied. We have here an ejectment brought in 3875 for a valuable property and a recovery upon the ground of a fraud committed in 1863 by the purchaser at a sheriff’s sale. Said fraud consisted chiefly in obtaining the property at less than its value by falsely pretending that he was bidding it in for the family of the defendant in the execution, and by this and other devices deterring other persons from bidding. There must be some point of time when a purchaser of real estate at a judicial sale shall not have his title cut up by the roots by mere parol evidence of what took place at such sale.; or by a secret trust, disentombed after the lapse of years and set up by the uncertain recollection of witnesses as to remote transactions. The Act of 1856 was evidently intended to' to prevent titles being disturbed in this manner. It is a highly beneficial statute and ought to be liberally construed. It remains to consider whether this case comes within its protection.

That the act was intended to apply to cases of fraud appears both from the preamble and the body of the act. “Fraud” and “perjury” are mentioned in the preamble as among the causes that endanger titles, while the exception in the proviso as to per-song affected with a trust by reason of their fraud is conclusive that trusts of this character are within the act. We have then in the sixth section the case of implied and resulting trusts; the former, implied trusts, including cases of trusts arising from fraud, which are generally known as trusts ex maleficio.

It was not denied that if Jake Hill was a trustee ex maleficio, the case comes within the act. The contention was that such trusts are confined to cases where there has been a confidential relation between the parties; or that they had a mutual interest in the subject of controversy and one of the parties by a fraud obtained an advantage over the other; that there was no confidential relation between Hill and Sill; that Hill owed no duty to Sill, but that his act was a bare, bald fraud committed upon Sill; that as a result, the title which Hill acquired by the sheriff’s sale was absolutely void under the Statute of 13th Elizabeth, and that Hill took no title and was clothed with no trust for Sill by reason of his fraud.

If there was a trust, it is clear it was what is known as a constructive trust, implied by the law from Hill’s fraud, and Hill was a trustee ex maleficio.

Much stress was given to the fact that Hill’s title was absolutely void under the Statute of 13th Elizabeth; that he stood as regards Sill as if no such conveyance had been made; that there was no title in him, and therefore no trust.

It is true, the Statute of 13th Elizabeth does say that as against the party intended to be defrauded, the title shall be “ utterly void, frustrate and of none effect.” Some little confusion. has arisen out of the use of the word “void” in this and other statutes by giving it too broad a meaning. If such title is absolutely void, nothing passes to the fraudulent grantee. Yet he takes sufficient title to pass a good title to an innocent purchaser, and this is so by the terms of the act. And I apprehend the party defrauded could ratify and confirm a conveyance void under the Statute of Elizabeth, which he could not do if it were void in the broad sense of the term. This subject is very fully discussed by Chief Justice Lowrie in Pearsoll v. Chapin, 8 Wright 9, and the authorities are there collected. In a later case (Seylar v. Carson, 19 P. F. Smith 81), the late Justice Williams, after citing Pearsoll v. Chapin with approval, proceeds to point out with great clearness the distinction between contracts which are void and those which are merely voidable. He says at page 87: “ The principle on which the distinction rests seems to be this: that is absolutely void which the law or the nature of things forbids to be enforced at all; as contracts to do an illegal act or omit a legal public duty; contracts in a form forbidden by law or made by persons having no legal power or capacity to contract; as bonds of married women. That is relatively void or voidable which the law condemns as a wrong to individuals and refuses to enforce against them; as contracts tainted with fraud or any other wrong against persons. A contract that is absolutely void cannot be ratified or confirmed, for that would be giving sanction and validity to an agreement which the law declares to be illegal and refuses to enforce. But a contract relatively void, though it cannot be enforced against the defrauded party, is not so void as to vitiate a title under it as against a bona fide purchaser for value and without noticeor to prevent the party intended to be injured by it from renouncing the privilege which the law allows him of rejecting it altogether, or from ratifying it and thus making it his own.”

It may be said, as a general proposition, that whenever a person has obtained the property of another by fraud, he is a trustee ex maleficio for the person so defrauded. The reason of it is this: having perpetrated a fraud and by means thereof obtained the property of another, equity will not permit him to enjoy the fruits of his fraud, but will hold him to be but a trustee for the rightful owner. He is not trustee for- the title, for that he never acquired, but of the thing which he has in manual possession. These and similar cases are not technical' trusts, but constructive trusts, or trusts ex maleficio. If, as was contended by the defendants in error, the effect of Hill’s fraud was to render his title void under the Statute of Elizabeth and as though no conveyance had been made, then Hill was in possession of Sill’s property. For whom did Hill hold it ? Not for himself, for he had no title. Being in possession of the property of another by an admitted fraud, can it be doubted .that it would have been within the recognised powers of a court of equity to have declared him a trustee by his own wrong of the property ? The very ground of relief in such cases is fraud, not trust. Equity declares the trust in order that it may lay its hand upon the thing and wrest it from the possession of the wrongdoer. This principle is distinctly recognised by our leading text writers. It is said by Mr. Bispham in his excellent treatise on the Principles of Equity at section 92 : “ Equity, as we shall see, makes use of the machinery of a trust for the purpose of affording redress in cases of fraud ; as when a party has acquired the legal title to property by unfair means, he will be deemed to hold it in trust for the injured party who may call for a conveyance thereof. The party guilty of the fraud is said in such cases to be a trustee ex maleficio. But in such cases the interference of courts of equity is called into play by fraud as a distinct head of equitable jurisdiction ; and the complainant’s right to relief is based upon that ground, the defendant being treated as a trustee merely for the purpose of working out the equity of the complainant.” Jn Perry on Trusts the same doctrine is laid down. I quote from section 106: “ If a person obtains the legal title to property by such ftrts or acts or circumstances of circumvention, imposition or fraud, or if he obtains it by virtue of a confidential relation and influence jjtpder such circumstances that he ought not, according to the pities of polity and good conscience, as administered in chaneery, to nold and enjoy the beneficial interest of the property; courts of equity, in order to administer complete justice between the parties, will raise a trust by construction out of such circumstances or relations. When it is said that the person who fraudulently receives or possesses himself of trust property, or who has defrauded another of his estate by misrepresentation, concealment or other fraudulent practices, is converted by the court into a trustee and ordered to account for or reconvey the property, the expression is used for the purpose of describing the nature and extent of the remedy against him, and it denotes that the parties defrauded or beneficially entitled, have the same rights and remedies against him as they would be entitled to against an express trustee who had fraudulently committed a breach of trust.” We might multiply citations from the text-books were it necessary.

A confidential relation is not necessary, to establish a constructive trust. Such trusts frequently grow out of confidential relations, as our books abundantly show, but that they are essential to a trust ex maleficio, I apprehend cannot be shown. I know of no Pennsylvania case which so holds, nor has any such case been called to our attention.

Our own decisions show that trusts arising from actual fraud are within the act: Maul v. Rider, 1 P. F. Smith 377, and 9 Id. 167; Rider v. Maul, 20 Id. 15. And while the point is not expressly ruled, it has been laid down as a general proposition in several cases that there is a constructive or implied trust in all cases of fraud, and where transactions have been carried on mala fide. Thus it was said by Justice Duncan in Peebles v. Reading, 8 S. & R. at page 492 : “If, by the artifice of the purchaser declaring that he was to buy for the owner, others were prevented from bidding, and the land was sold at a great under value, this would make him a trustee.” Thedearned judge meant, of course, a trustee ex maleficio. And again, in Haines v. O’Connor, 10 Watts 313, it was said by Justice Posers that “ a purchaser at a sheriff’s sale, who has paid the money, can only be held a trustee ex maleficio on the ground of fraud; and where he is guilty of fraud, he is a trustee for the creditors and for the debtor also, unless the debtor be particeps criminis.” Of course, there must be something more than the violation of a parol agreement in relation to land in order to raise a trust ex maleficio. The violation of such an agreement is no more than the violation of any other contract, and the party must be left to his legal remedy. Besides, such agreements are in contravention of the Statute of Frauds and Perjuries.

It is a mistake to suppose that because Hill was a trustee ex maleficio for Sill, that he was a trustee with a good title; in other words, that he was such a trustee as would entitle him to a tender of what he had paid before there could be a recovery against him. Hill had no title at all under the cases of Gilbert v. Hoffman, 2 Watts 66; McKenna v. Pry, 6 Id. 137; Walter v. Gernant, 1 Harris 515; Abbey v. Dewey, 1 Casey 413, and Sharp v. Long, 4 Id. 433. But as before’said, he was in possession of the property of another man, which property he had obtained by fraud, and it is not straining the law to say that his fraud made him a trustee for the rightful owner.

Even if we had some doubt as to the correctness of our conclusions, which we have not, the case comes so plainly within the spirit of the Act of 1856 and within the mischief sought to be remedied, we would be justified in holding it to be within the act under the authority of Versailles v. Mifflin, 10 Watts 360, and Overseers of Sugarloaf v. Directors of Schuylkill County, 8 Wright 481, where cases not strictly within the letter of the Act of Assembly in regard to the removal of paupers were held to be within its spirit.

We are of opinion that the defendants are protected by the Act of 1856.

The judgment is reversed and judgment is now entered for the defendant below non obstante veredicto.