#### Ada H. Newis *et*al., Appellants, v. Christian Topfer *et*al., Appellees.

Trusts: when may be shown by PARot. Where one, with full 1 knowledge of the transaction, places the title to real property in another, and fails to reserve, by a contemporaneous writing, a beneficial interest therein, he cannot afterward show by parol that a trust was in fact intended; but where fraud or *434deception enters into the transaction; a constructive trust arises, and equity will enforce a parol agreement for the protection of the innocent party. The facts in this case are *held*to create a trust.

Trusts: fraud: confidential relation. Where a grantor, in a 2 helpless condition both mentally and physicially, and confiding in the grantee and others, conveys her property by an absolute deed to her stepfather, expecting to secure a maintence for her children after her death, a constructive trust is created through the confidential relation existing, though no fraud was intended in procuring the conveyance.

Trusts: limitation of action to enforce. Where property is con-3 veyed impressed with a trust, the position of the parties is the same as though the trust were expressed in the deed and the statute of limitations will not commence to run against an action to establish the trust on the ground of fraud, until the trustee disclaims the relation.

Trust Property: lien of beneficiary. Where it appears that 4 specific property has been purchased by a trustee with trust funds, the beneficiary may have a lien established thereon, in a suit to enforce the trust.

*Appeal from Pollt District Court.*— Hon. *G. P.*Holmes, Judge.

Tuesday, October, 20, 1903.

This is an action in equity to have a deed of conveyance absolute in form declared to be a deed of trust, and for general relief. The defendants answered, denying the trust alleged, pleading the statute of limitations, and presenting a counterclaim upon which judgment is demanded in the event the trust relation alleged shall be found to exist and it is further found that the plaintiff’s action is not barred by the statute. The facts, as far as necessary to be considered, will be found stated in the opinion. There was a trial, to the court, resulting in a decree iu favor of the defendants dismissing the petition, and rendering judgment against plaintiffs for costs. The plaintiffs appeal.

*—.Reversed.*

*435
      *J. 0. Hume*for appellants.

*E. T Morris*for appellees.

Bishop, O. J.

It appears that on October 11, 1887, Wilhelmina Heine, a widow, was the owner in fee of a house and lot in the city of Des Moines, which is described in the petition, and the same then was, and for several years had been, occupied by herself and family as a home. On the date mentioned she signed a deed of conveyance of the same to the defendant Ohristain Topfer, who was her stepfather. The instrument signed purported to be an absolute conveyance and deed of general warranty. The consideration named therein is love and affection and the sum of $1 in hand paid. Mrs. Heine continued to occupy the property with her family until her death, which occurred October 18, 1887. She left surviving her four children, all minors, viz., Lena, born February, 1870;'Ada, now Ada H. Newis, born October, 1872; Marie, born August, 1877; and William, born October, 1879. Lena, the eldest, died in September, 1888, unmarried. Mrs. Heine was the daughter by a former marriage, and only child of the defendant Gotlebe Topfer, now and at the time in question the wife of defendant Christian Topfer. After the death of their mother, the plaintiffs and their sister Lena were taken to the home of defendants, where they remained for the time being. In May, 1888, the defendants sold and conveyed the Heine property to one Harris, receiving therefor the sum of $750, which sum it appears was the reasonable value of the property at the time of such sale. Without entering upon a discussion of any of the controverted points of evidence, we find the facts bearing upon the execution of the deed in question to be, in substance, these: The' illness which terminated in the death of Mrs. Heine had continued over a period of several years. She had gradually declined, until but a *436shadow of her former self remained, and "for several months before her death had been bedfast. It appears that the Reverend Kleinlein, minister in charge of the church to which she. belonged, was a frequent visitor at her house, and towards the last the defendants, one or both^were there most of the time. Some three or four weeks before the death of Mrs. Heine, it then having become apparent that the end was not far off, Kleinlein brought up the subject-matter of the disposition of the children and of the property. As far as shown by the record, he is the only person who talked directly with Mrs. Heine relative to the matter, although the defendants were present during some of the conversations, Mrs. Heine had grown to be very deaf, and either unable or disinclined to talk, so that she responded to what was said to her only by shaking or nodding her head. It appears without dispute that Kleinlein, in presenting the matter to her, said, in substance, that she ought to execute’ a will, and thus put her property in such shape that the children might have the benefit thereof. To this she responded simply by a nod. The record is barren of any evidence tending to prove that the subject of making a deed of the property, absolute in terms, to the defendants, was ever suggested to the dying woman, although the propriety of defendants taking and caring for the children was discussed in her presence. From our reading, the conclusion seems to be irresistible that Kleinlein under took to settle all matters involving the children and the property according to his own notions. . He demanded of the defendants that they take the children, to which they demurred at first, but finally consented when assured by Kleinlein that the property would be placed in their hands. About a week before the death of Mrs. Heine, Kleinlein and Christian Topfer visited a lawyer, and the subject of the disposition of the property' was talked over. The lawyer advised the execution of a will, but this was objected *437to because thereunder the property could not be made available, and a similar objection was made to a trust deed. It was finally decided that an unconditional conveyance should be made to Topfer, in consideration of which he should take the children and care for and educate them. Accordingly, a simple deed was prepared, 'and the parties then repaired to the residence of Mrs. Heine. The condition of the latter at this time is described by her attending physician. He says that she was hopelessly ill, and only partially in possession of her physical senses; that when he saw her last, which was within a day or two, she had passed into a semi-comatose condition, and did no.t seem to recognize and comprehend her own condition or the surroundings. He also says that she was neither physically nor mentally able to attend to any business affair, nor to understand the nature and effect of any contract she might make. Other witnesses also testify to her helpless and hopeless condition, and this does not seem to be the subject of any serious question, although some of the witnesses say that she would occasionally rally and appear to be conscious of what was going on about her. Upon arriving at the house, Klginlein, without making any explanations, and without reading the document to her, as far as appears, told Mrs. Heine that he wanted her to sign the instrument they had brought, and that it was all right. She was raised up, and he put a pen in her hand, and then with his own hand guided hers, whereby her name, was traced upon the face of the deed. Thereafter the deed was delivered to Christian Topfer. Now, in his testimony, Topfer does not claim that he ever conversed with Mrs. Heine upon the subject of a conveyance of the property to him. By way of a conclusion he says that Mrs. Heine and the minister promised him the property if he would care for the children. When such conversation occurred, what was said and who said it does not appear. ’ Taken , in connection with the rest of his testimony, we think it *438more than probable that the statement came from Klein-lein alone. Kleinlein was not a witness upon the trial, and all the other witnesses who overheard his conversations with Mrs. Heine agree that there was mentioned only the execution of a will for the benefit of the children.

t trusts-bíshowíby paro1-Without doubt, if it were to be said that the deed to Christian Topfer was understandingly and voluntarily made, and that the agreement on his part was one simply the children of his stepdaughter and care ^01' and educate them, and upon their majority to deed the property to them, or turn over to them the proceeds thereof, if sold, an express trust would be made out. Counsel for appellees does not dispute this, but it is said that under our statute such express trust could be proven only by some writing wherein the trust was declared. Section 2918 of the Code, providing that “declarations of trust or powers in relation to real estate must be executed in the same manner as deeds of conveyance,” is relied upon to support the contention. That the statute is to be given application to all cases coming within the scope thereof cannot be questioned. But such statute was intended to apply where parties are wholly capable of contracting, and do so contract with full understanding and knowledge, if not at arm’s length’. And the avowed purpose is to prevent frauds. The thought of the statute, expressed in homely language, is that, if one shall choose to place title to.realty in the name of another, and shall not by the same or some contemporaneous instrument in writing reserve to himself or for the benefit of some other person any interest therein, public policy requires that he shall not be heard after-wards to assert that in point of fact the creation of a trust was thereby intended. But for such rule, the security of land titles, a subject of much public as well as private importance, and as well other, interests which the law deems of sufficient importance to safeguard would become *439greatly jeopardized. So it is that the mere breach of an express promise, or a refusal on the part of an alleged trustee to execute the trust reposed in him, however reprehensible his conduct from a moral standpoint may be, will not be sufficient to remove the bar of the statute and allow a trust in realty to be proven by parol. *Burden v.*Sheridan, 36 Iowa, 125; *McClain v. McClain,*57 Iowa, 167; *Acker v.*Priest, 92 Iowa, 610. But, as we have said, the rule was designed to prevent, and not, to furnish a cover for, frauds. In connection with the rule, and, indeed, as a part of it, the same section of the statute declares, “But this provision does not apply to trusts resulting from the operation or construction of law.” When, therefore, it is made to appear that fraud has entered into a transaction or agreement, whereby title to realty is procured to pass out from the owner, the rule has no application. In such a case, it being made to appear that an innocent party has been led by fraudulent practice or deception into parting with the title to his property, a constructive trust arises, and, notwithstanding the general rule, a court of equity will grant relief to the extent of enforcing a parol contract entered into at the time, and may otherwise by its decree protect and enforce the rights of the innocent party.

In the application of the rule the distinction to be drawn is between those cases where fraud inheres in the ■very contract under and pursuant to which the conveyance in question was made and those cases which involve simply the moral fraud or wrong incident to the repudiation of such portion of a contract theretofore fairly entered into as rested in parol. In the former class of cases the fraud may be proven, and, being established, the constructive trust which arises therefrom may be said to be independent of any express agreement of trust, if such is claimed or appears, although an express agreement, being proven, may be resorted to for the purpose of defining or *440ascertaining the nature and character of the trust. If the law were otherwise, then it would be that its provisions could be made to serve as a shield to prevent the discovery and punishment of a fraud in fact committed. As illustrative of the point, we quote from the opinion in *Burden v. Sheridan, supra:*“So where one agreementin writing is proposed and drawn, and another is fraudulently and secretly brought in and executed in lieu of the former. In this and like cases where there has been some trick or artifice or misrepresentation by which a party has been induced to enter into an agreement or part with some right, and would sustain injury if the other phrty is allowed to repudiate the agreement, courts of equity have granted'relief to the party injured.” The principal involved is not unlike that which obtains in a case where a devisee or legatee has induced a testator to make a devise or bequest to him by verbal promise to hold the property or an interest therein for the benefit of a third person. It is said that the breach of such promise is a fraud such as will operate to convert the devisee into a constructive trustee. 15 Am. & Eng. Ency. of Law (2d Ed.) 1191; *Moran v. Moran,*104 Iowa, 216. In the second class of cases to which we have referred, the parties having understandingly chosen the form in which their contract shall be evidenced, the law, for satisfactory reasons, will not permit them to assert in parol that the conveyance made was in fact subject to a trust imposed, and this notwithstanding it is alleged that bad faith now dominates the conduct of the grantee.

Now, in the case before us it is the contention of appellants — and without difficulty we are able to agree therein — that a fraud was committed upon Mrs. Heine. We need not and we do not go so far as to say that a fraud was actually intended'. On the contrary, we may concede for the purposes of the case that 'the appellant Christian Topfer and the minister, Kleinlein, were actuated by *441worthy motives; nevertheless what was done amounted to a legal fraud, if the instrument executed is to be given full force according to its terms. If it were to be said that in point of fact Mrs. Heine was *non compos*at the time — ■ and- this is contended for by counsel for appellants — then all question as to the character of the holding by Topfer •would instantly disappear as a matter of course. We would then have a case of no deed, and the appropriation of the property by him would give rise at once to a constructive trust. Granting, however, that Mrs. Heine had not as yet parted with all her mental powers, still we are satisfied that she was led to belie.ve that a will only was to be executed by her, and that such would provide for a devise of the property to, or in trust for the benefit of, her children. There is no ground upon which to plant the assertion 'that it was within her understanding and intention that she was entering into a contract for the support and maintenance of her children, and paying therefor in advance by an absolute and unconditional conveyance of all the property she possessed; and that she did not know, as a matter of fact, what was the character of the instrument she signed, we think is clearly established by the evidence. Taking the circumstances of the case to be as we find them, and it follows as a necessary conclusion that Topfer is in no position to claim that the conveyance to him was voluntarily and understandingly made, or that he obtained and took title to the property in good faith. -He became chargeable, therefore, as a trustee for Mrs, Heine, and upon her death as a trustee for her legal heirs.

s. trusts: dewaire-nn' lation. There is another principle of la-w which has application to the facts here presented, as we think, and upon which the conclusion we have reached can be justified. The defendant sustained a relation parental in character toward Mrs. Heine. He accepted the conveyance from her knowing that it was no part of her intention to bestow a gift or *442confer a benefit upon him. 'Within his knowledge it was the extent of her understanding that in some way the property was being made over to or for the sole benefit of her children. In her weak and helpless condition she confided in her minister and her stepfather to so provide that her desire might be fulfilled. Accordingly it is to be said that a confidential relation existed bel ween the parties, and in such a case, even though there be no fraud on the part of a grantee in procuring a conveyance to be made to him, still equity will decree the existence of a constructive trust, and enforce the same according to the understanding of the grantor as far as such can-be ascertained. 'As supporting this principle, see *Davis v. Dunne,*46 Iowa, 684; *Goldsmith v.*Goldsmith, 145 N. Y. 313, (39 N. E. Rep. 1067); *Brison v.*Brison, 75 Cal.*525*(17 Pac. 689, 7 Am. St. Rep. 189); *Broder v. Conklin,*77 Cal. 330 (19 Pac. Rep. 513; *Gruhn v. Richardson,*128 Ill. 178 (21 N. E. Rep. 18).

3 Trusts-ofaítíonto • enforce. II. Having reached the conclusion that the acceptance of the deed to the property in question on the part of Christian Topfer had the effect to create a constructive trust, we next proceed to consider whether the right to declare upon and enforce such trust has been lost by reason of the running of the statute of limitation. It is the contention of counsel for appellees that plaintiff’s action, being grounded on fraud, comes within the provisions of subdivision 6 of section 3447 of the Code, which requires all actions brought for relief on the ground of fraud to be commenced within five years. And it is said that the statute commenced to run from the instant the deception complained of was practiced on Mrs. Heine, or, at best, from the time knowledge of such deception was imparted, which was accomplished by the recording of the deed occurring on the day the same was executed. It is also said that the operation of the statute was not suspended by the death of Mrs. *443Heine, but continued to run as against her heirs and representatives. With this conclusion, arrived at by counsel, we cannot agree. The title to the property having been taken by Topfer impressed with a trust, and the terms thereof being ascertained, it follows that from the beginning his relation to the property and to the *cestui que trust*must be regarded precisely as though the terms of the trust had been declared in the deed itself. We think that it fairly appears from the evidence that from the rents of the property, or from the proceeds thereof, if necessary, the defendant was to maintain and educate the children of Mrs. Heine; that, when all the children had arrived at the age of majority, the balance remaining,.if any there were, should then be distributed among them. Nothing was said or done by Christian Topfer indicating an intention to repudiate the trust until shortly before the commencement of this action, and, in any event, five years has not elapsed since said children became of age. It follows that the statute-of limitations has not run, and the plea thereof is without force. As illustrative of the principle involved, see the following cases: *Otto v. Schlapkahl*57 Iowa, 226; *Gebhard*v. *Sattler,*40 Iowa, 152; *Murphy v.*Murphy, 80 Iowa, 740; *Long v. Valleau,*87 Iowa, 675.

III. We now inquire into the merits of the counterclaim pleaded by defendants. There are items amounting to $73.25 paid out in connection witk the property in question, and, without entering upon a discussion of the items, or the evidence relating .thereto, -we think the same should be allowed. So, too, we think an item of $25 for funeral expenses of Lena should be allowed. The remaining items of the claim.are for board, schooling, clothing, etc., of the children, and these should not he allowed. It appears that, when taken to the home of defendants, the children lived in a room by themselves; that they cared for themselves principally, doing their own cooking, washing, etc. The girls soon went out to work, and from their *444earnings they provided food and clothing for themselves and the younger children. True, defendants contributed to’some extent to the support of the younger children, but it seems that as soon as they were old enough they went out to work, and their earnings were appropriated by defendants. On the whole, and after a careful reading of the record, we think that what was received by defendants in the way of service and earnings, together with the use of the money derived from the sale of the property in controversy, was sufficient to fully compensate defendants for all expense incurred by them. Accordingly we find that from the sum of $750 in the hands of defendant Christian Topfer there should be deducted the sum of $98.25, and plaintiffs are entitled to judgment in the sum of $651.75, with interest from the date of the decree to be entered, at the rate of six per cent, per annum. It is made to appear that of the moneys so received by him the said Christian Topfer invested the sum of $800 in lot 14, block 1, In White’s addition to Fort Des Moines, which property said defendant still owns. Plaintiffs having traced so much of the trust fund to said property, the same may be established by the decree to -be a lien thereon, with an order for sale under special execution to satisfy the same. For the remainder of the judgment ordered plaintiffs may,have general execution.

Upon the trial in the court below plaintiffs expressly consented that the decree, if one were ordered in their favor, should provide that the lien upon the property described in the purchase and improvement of which the trust fund was used should be decreed to be subject to the right on the part-of defendants to use and occupy the property during the remainder of their lives. A similar.consent is here expressed. The decree entered will so provide.

The judgment entered by the court below is reversed, and a decree in favor of plaintiffs in harmony with this *445opinion is ordered. The canse will be remanded for that purpose, or plaintiffs may have decree entered in this court, at their election. — ReveRSed.