Case Name: Patrick Ragan vs. Peter Campbell
Court: Supreme Court of the District of Columbia
Jurisdiction: District of Columbia
Decision Date: 1882-10-23
Citations: 2 Mackey 28
Docket Number: Equity. No. 5407
Parties: Patrick Ragan vs. Peter Campbell.
Judges: ¿ The Chief Justice and Justices Cox and James sitting.
Reporter: Reports of cases argued and determined in the Supreme Court of the District of Columbia (District of Columbia - reported by Mackey)
Volume: 13
Pages: 28–35

Head Matter:
Patrick Ragan vs. Peter Campbell.
Equity. No. 5407.
J Decided October 23, 1882.
¿ The Chief Justice and Justices Cox and James sitting.
1. A parol agreement by A with B to purchase and hold real property for the benefit of B is, it seems, within the statute of frauds, and if, after the purchase, A refuses to comply with his antecedent agreement, equity will not enforce it.
2. But when such a transaction does not turn upon the mere agreement, but upon conduct which deceives the other party, which misleads him and which it would be fraudulent to deny, the statute of frauds does not apply to such a case, and the question is one of fact. Thus where C agrees verbally with R, whose property is about being foreclosed for default.in the payment of a debt secured upon it by deed of trust, that he will attend the sale and purchase the property, and will after-wards convey to R, on being reimbursed, the purchase price, and accordingly attends the sale and announces to the bystanders that he is purchasing the property for R, and thus discourages the bidding, equity will regard such conduct as operating to charge him as a trustee for R, especially wtien he purchases the property far below its value. And in such case proof of the antecedent agreement will be admissible as going to show one of the elements of the fraudulent device of the defendant in announcing himself at the sale as a purchaser for the benefit of the debtor.
3. A ease resting upon such facts stated wherein the court decrees the purchase a resulting trust and directs an account of the rents and profits.
STATEMENT 0E THE CASE.
The bill in this case sets out, that October 15,1874, plaintiff' borrowed of Millard Metzger about $1,000, for which he gave his note secured by deed of trust upon parts of sub-lots 37, 38, 48 and 49, square 209, in the city of Washington, improved by seven frame tenements. Under this deed of trust O. O. Duncanson, surviving trustee, November 7, 1876, advertised the property for sale. That said property was worth $4,000, and. was under a rental of $75 per month. That the day before the sale plaintiff went to the defendant, who had been his intimate personal friend for many years, and proposed to him to attend the sale and bid a sufficient sum for the property to pay Metzger’s debt and hold the property until plaintiff could pay him. Defendant agreed to attend the sale and buy the property in for the plaintiff, and to allow him as long a time as he pleased to pay him; and that upon the plaintiff reimbursing defendant the amount of money he should pay for said property, and all expenses attending the sale, to convey the title of said prop erty to the plaintiff'. On the 7th day of November, defendant attended said sale with the plaintiff'and purchased five of the lots for $1,175, their real market value being about $4,000. Defendant said on the day of sale, in the presence of the trustee and others, that he was buying said property for the plaintiff, and that he was to have two months, or longer, in which to pay him the money lie (the defendant) had paid for the property. That the trustee had executed a deed to defendant for said property. That about ten days after the date of the trustee’s deed, plaintiff went to defendant and asked him if he would be satisfied if he would pay him the interest on said purchase regularly, and defendant said he would not; that he liked the property and thought he had sufficient grounds to back out of said agreement. Plaintiff reminded defendant of their agreement, and defendant admitted there was such an agreement, but the plaintiff became uneasy at his conversation, and in a few days thereafter borrowed the money, and, in the presence of a witness, offered defendant the full amount he paid for said property, together with interest, costs and expenses, which defendant refused. Plaintiff' has repeatedly since that time offered to pay defendant said money, which defendant has refused to accept, and the plaintiff now brings said money into court, and prays—
1. That an account be taken of the amount due defendant by plaintiff'.
2. That plaintiff may be allowed to pay what shall be thus found due.
3. That upon such payment defendant be required to convey said property to the plaintiff'.
4. That the necessary accounts be taken.
5. General relief.
The defendant filed a demurrer to the relief prayed, on the ground that plaintiff’s bill stated a case barred by the statute of frauds. No action was taken on this demurrer. Defendant afterwards filed an answer in -which he denied that the plaintiff’s property was worth $4,000, and claimed that it was not worth more than $1,175, the price he paid for it. He denied the agreement alleged by the plaintiff* in reference to the sale of the property, and asserted that he attended the sale as any other bidder and purchased the property with no understanding or agreement with the plaintiff that he would, on being reimbursed his purchase money, &c., convey it to him. He denied having stated in the presence of the trustee, or any other person, that he was buying the property in for the plaintiff, or that the plaintiff should have two months from the day of sale in which to redeem it. He denied the conversation stated in the bill to have been had by plaintiff with defendant about ten days after the sale; and admits, that Duncanson, trustee, executed and delivered to him a deed for the property.
Evidence having been taken, the cause came on for hearing in the Special Term, and a decree was entered declaring a resulting trust in the property for the benefit of the plaintiff’, and referred the cause to the auditor with directions to state an account between the parties as to the rents and profits as between mortgagor and mortgagee. From this decree the defendant appealed.
Birney & Birney and R. J. Murray for complainants :
The statute of frauds constitutes no defence in this case, for equity will at all times lend its aid to defeat a fraud, notwithstanding the statute of frauds. Browne on Statute of Frauds, sec. 438.
In Taylor vs. Luther, 2 Sumner, 228, Story, J., said r “ Nothing is better settled than that the true construction of the statute of frauds does not exclude the enforcement of parol agreements respecting the sale of lands in cases of fraud. * * * Parol evidence is admissible to show that an absolute deed was intended, as a mortgage, and that the defeasance had been omitted or destroyed by fraud or mistake. It is the same if it be omitted by design upon mutual confidence between the parties, for the violation of such an agreement would be a fraud of the most flagrant kind, originating in an open breach of trust against conscience and justice.”
The following cases are directly in point with the case at bar, and are sufficient to establish the doctrine that one who at a foreclosure sale undertakes to purchase for the benefit of the mortgagor, and thus acquires the title at a price greatly below its value, will be' deemed the trustee of the party for whom he has undertaken tlm purchase, and will be compelled to convey to him upon tender of the purchase money and interest. Ryan vs. Dox, 34 N. Y., 307; Brown vs. Lynch, 1 Paige, 147; Lincoln vs. Wright, 4 De Gex & Jones, 16; Jenkins vs. Eldridge, 3 Story, 181; Miller vs. Antle, 2 Bush. (Ky.), 407; Trapnall vs. Brown, 19 Ark., 49; Peebles vs. Reading, 8 S. & Rawle, 492; Kendall vs. Mann, 11 Allen, 15; Davis vs. Walsh, 2 Harr. & Johnson, 329; Botsford vs. Burr, 2 Johns. Ch.
In such case the purchaser occupies the shoes of the mortgagee, and will be so considered. Brown vs. Lynch, 1 Paige, 147; Reigard vs. McNeil, 38 Ills., 400; Boyd vs. McLean, 1 Johns. Ch., 582; see also Lingenfelter vs. Ritchie, 58 Pa. St., 485; Seichrist’s Appeal, 66 Id., 237.
In other cases it has been held that, although proof of the parol contract would be insufficient to ground relief upon, yet proof of defendant’s statements at the sale, and inadequacy of price, will warrant a decree. Johnson vs. La Motte, 6 Rich. Eq. (S. C.), 347; Cox vs. Cox, 5 Id., 365.
In Keith vs. Purvis, 4 Dess., 114, the court says: “ Can it be tolerated that a creditor shall, at a sale of his debtor’s property, lull him to sleep and keep off other purchasers by an agreement under which he buys in the land for a small sum, much below the value, and then that he should declare that the agreement was void under the statute of frauds, and that the other party should have no benefit from the agreement whilst he reaped all the fruits ? Surely not. Courts of justice would be blind, indeed, if they could permit such a state of things.”
Hiñe & Thomas for defendant:
The decision of this case in the court below went upon the theory of a resulting trust in favor of cbmplainant.
A verbal agreement that another is interested in the put chase of land, or a verbal declaration that he buys land for another, without that other advances the purchase money, comes directly in the teeth of the statute of frauds, and cannot give rise to a resulting trust.
This is the clear result of the cases, both in this country and in England, without, perhaps, a single exception.
The cases of Irwin vs. Ivers, 7 Ind., 308, Kisler vs. Kisler, 2 Watts, 323, and Dyer vs. Dyer, 2 Cox, 92, are examples of the doctrine invoked here.
Lord Keeper Henry (in Bartlett vs. Pickersgill, 1 Eden, 515), drawing the distinction between the admissiou of evidence to prove the advance of purchase money where the trusts result by operation of law, and are exempted from the statute of frauds, and the admission of parol evidence to prove an agreement, said, that to allow parol evidence in the latter case would be to overturn the statute. “ The statute,” said his lordship, “ says that there shall be no trust of land unless by memorandum in writing, except such trusts as arise by operation of law. Where money is actually paid, there the trust arises from the payment of the money, and not from any agreement of the parties. But this is not like the case of money paid by one man and the conveyance taken in the name of another ; in that case the bill charges that the estate was bought with tlie plaintiff’s money. If the defendant says he borrowed it of the plaintiff, then the proof will be whether the money was lent or not ; but as here the trust depends on the agreement, if I establish the one by parol, I establish the other also. * * * If the plaintiff’ had paid any part of the purchase money, it would have been a reason for me to admit the evidence.”
This salutary doctrine has been upheld both in this country and in England, with firm and steady resolution. To depart from it now, as was done by the learned justice who decided this case below, would, it is respectfully advanced, be to repeal the statute of frauds, rather than to give effect to it.
It is quite unnecessary, we think, to cite in detail the authorities upon such familiar learning ; they will be found ■collected in the notes to Dyer vs. Dyer, 2 Cox, supra. 3 Lead. Cas. in Eq., 314.

Opinion:
Mr. Justice James
delivered the opinion of the court.
The evidence in this case shows that Eagan, being the owner of five lots of land in the city of Washington, borrowed about one thousand dollars, and gave as security for the loan a deed of trust to C. C. Duncanson upon the property in question, and when the debt matured Duncanson advertised the property in default of payment. Shortly before the day appointed for the sale the plaintiff applied to Campbell, the defendant, to let him have the money to pay the debt, or to buy the property in for him and allow him to redeem it; that Campbell agreed that he would attend' the sale and purchase the property on behalf of the debtor, Eagan, and allow him to redeem it within a period fixed; that Campbell did attend the sale, and there said, in the presence of the trustee and of other persons, and of one of the witnesses who relates the story, that he was " buying the property in for the old man."
There is some conflict as to the value of the property, but it appears to be quite clear that it must have been worth something over four thousand dollars. Campbell himself .received rents at the rate of ten per cent, on more than five thousand dollars, and received it so soon after the purchase .as to show that it was worth at least four thousand dollars, and probably more, at the time of purchase. This value was not by reason of a sudden move in the market. He purchased the property, however, for $1,175.
Upon this statement of facts, viz., this antecedent parol .agreement and this conduct at the sale, which are charged to have been in fraud of the plaintiff, we are asked to declare this purchase to be a trust.
The first ground taken by plaintiff's counsel is that we ¡should do so in the enforcement of the parol agreement. ¡Cases were cited to us from New York and elsewhere, showing that this has been done in some courts. We have examined those cases. I have read them with care, and the question is one of great conflict. Some of the courts, it is true, and even so eminent a lawyer as Justice Story, have gone so far as to say that where a parol agreement, which would otherwise come within the Statute of Frauds, is made under circumstances which induce the other party to trust to it and act upon it, it becomes a fraud not to execute it; and that the Statute of Frauds was not intended to encourage fraud, but to prevent it, and, therefore, did not apply to such a case.
There are many cases to the contrary, however, and on a very full examination of them with great care, we are satisfied that the better rule is against enforcing a parol agreement which would virtually require us to set aside the Statute of Frauds. So, that if this case rested simply upon this antecedent parol agreement that the defendant, Campbell, would buy this property for the benefit of the plaintiff, we should decline to enforce it. But there is another reason which do,es not come within the principle of the Statute, and which we think applies to this case. When the transaction does not turn upon the mere agreement, but upon conduct which deceives the other party, which misleads him, and which it would be fraudulent to deny, the Statute of Frauds does not apply to that case; that is a question simply of fact. Now it has been held in a number of cases that where a purchaser goes to a sale and announces to the bystanders that he is buying for the benefit of the debtoi', and thus discourages the bidding, as he naturally does, the effect of his conduct should, itself, operate to charge him as a trustee, especially when he purchases the property far below its value. Here he received forty-five dollars a month rent for this property, which would be over ten per cent, on five thousand dollars, and he bought it in for $1,175. It is said there was another bidder there, and Mr. Duncanson, the trustee, himself, said that the property brought a fair price - But his opinion is not to be put against the fact that the property was a good renting property at five thousand dollars.
We are of opinion, therefore, that the purchaser got this property far below its value by reason of holding himself out at the sale as a purchaser for the benefit of the debtor. With this knowledge no other person would compete for the purchase, as he would know that a purchaser for the debtor would be under no obligation to be subject to his bid. He might bid this property off at six thousand dollars, but it would be immaterial to him because he would not have to pay the money out; all that he would have to do would be to pay over the amount of the debt to the trustee who would! have nothing to do with it after he had received the amount, due, and then the property would return to the original debtor and the purchaser. It is for that reason that such an. announcement at a sale discourages bidding, and it would be an inducement for a purchaser to hold himself out as bidding-for the debtor, thus running the property down below its value, and then to disappoint the owner of the equity of redemption. Moreover, it may happen — though there is no proof to that effect in this case — that the owner of the property has ceased from making efforts to save it, if he understands what is being done at the sale, relying upon his agreement with the purchaser.
I have stated that the cases do not seem to establish the doctrine that the antecedent agreement may be enforced, but they do allow this, that proof of the antecedent agreement may be admitted as going to show one of the elements of the fraudulent device of the defendant in announcing himself at the sale as a purchaser for the benefit of the debtor.
With these views, therefore, we affirm the decree below, and send the case back that an account may be taken that shall cover the receipt of rents.