Court Opinion

ID: 8185408
Source: CourtListenerOpinion
Date Created: 2022-09-09 23:07:50.045237+00
Date Added: 2024-06-11T16:40:23.858171
License: Public Domain

The following opinion was filed Hovember 24, 1896:
MaRshall, J.
The first question in order in the discussion of this case is, "Was the contract between Jacob Raff, deceased, and Henry Paulus so far executed as to render it enforceable in equity ?
It does not appear that there is any controversy respecting what the contract was in fact. The only objection raised to its enforcement appears to be that it was indefinite in respect to the time of payment for the land. The price per acre was agreed upon. The vendee was put in possession of the premises, and he continued in such possession from the making of the contract, in 1884 or 1885, down to the 6om-mencement of this action. In the meantime he made improvements and paid half the purchase money.
Ho time being specified for payment of the purchase money, it was payable on demand. Therefore there was no element of uncertainty in that. The rule is that part payment of the purchase money, and delivery of possession of one of the parcels of land included in the parol contract, are sufficient to enable the purchaser to enforce specific performance as to all the parcels. Jones v. Pease, 21 Wis. 645; Dist. No. 3 v. Macloon, 4 Wis. 79; Brandeis v. Neustadtl, 13 Wis. 142; Doctor v. Hellberg, 65 Wis. 415. It follows that the conclusion of the trial court on this branch of the case cannot be disturbed.
Paulus being the equitable owner of the land, the judg*100ment against him attached as a lien on such interest, good as against all persons except purchasers in good faith without notice, as soon as the same was docketed in Marathon county.
The trial court found that Lemke purchased and paid for the forty acres without notice that Paulus had any interest therein, and in good faith believing that the land belonged to Paff; therefore, that he took title thereto under the Paff deed, discharged from the lien of the judgment. The findings of fact, in that regard, appear to be sustained by the evidence. Therefore the conclusion of law based thereon followed as a matter of course.
The important question to be determined is whether Paff is responsible or not for the purchase money paid to him by Lemke and turned over to Paulus. So far, at least, as the purchase money had been paid to Paff on his contract with Paulus, he held the title to the land as trustee for those beneficially interested, first as trustee for Meier, who was entitled to first lien thereon under his judgment, then for Paulus, the equitable owner, subject to such judgment. Winslow v. Growell, 32 Mis. 639; Church v. Smith, 39 Mis. 492. If actual notice of the existence of the judgment had been brought home to Paff prior to the conveyance to Lemke, the relation between him and the judgment creditor would have been precisely the same as in Church v. Smith, though created in a somewhat different manner. There this court held that the cestui que trust had such an interest in the land that he was entitled to come into a court of equity and enforce the execution of the trust.
Such is really the nature of this action as between plaintiff and Paff. It was to enforce a trust, or, if the trust could not be enforced, by reason of a violation of duty on the part of the trustee, then for damages for such violation, and it was and is governed by the law respecting that subject. The damages, if any, for which Paff was liable to plaintiff, *101representing the judgement creditor, grew out of some violation of duty on the part of the former which he owed to the latter. The transfer of the forty acres to Lemke, a bona fide purchaser for value without notice, and the payment of the consideration to Paff, were effectual to remove the lien of the judgment from that part of the land. The same act that removed the lien from the land transferred such lien to the fund in the hands of the trustee, under the general rule that no change in form of the trust property effected by the trustee will impede the rights of the beneficial owner to reach it and to compel its transfer, provided it can be identified as a distinct fund.
If the proceedings had been instituted against Paff to charge him as trustee, while he retained the fund in his hands, obviously he would have been liable to account for it; and if it were found that, with notice of the existence of the judgment, he parted with the fund, he would have been liable to respond in damages as for a breach of trust. 2 Pom-eroy, Eq. Jur. § 1058; Lathrop v. Bampton, 31 Cal. 17; 2 Story, Eq. Jur. § 1232.
The difficulty in this case grows out of the fact that Paff did not know of the judgment lien when the transaction with Lemplce took place. The judgment had been docketed, but that fact was not known to Paff, and the court expressly acquits him of participation in any fraudulent scheme to defeat the collection of the judgment; hence, there is no principle of law upon which he can be held liable in damages for a breach of trust, unless the law is that one so circumstanced is required, before paying the money received from the vendee to the equitable owner, to examine the records and to investigate respecting whether there is any lien upon the land or not.
No duty can exist without knowledge of the facts, or knowledge sufficient, at least, to put one on inquiry which will lead to a discovery of the facts, upon which such duty rests. The rule respecting the subject is laid down with clear*102ness in Freeman, Judgments, § 349, as follows: “ If the trustee sells and conveys the land clear of the lien, the proceeds of the sale, while in his hands, are subject to the lien; but he is not bound to search the records, and therefore is relieved from all liability if, without knowledge of the existence of any judgment on the property, he pays over the money without regard to such lien.” This seems to accord with reason and common sense, when applied to the practical affairs of life. If such be not the law, then, as before stated in effect, no trustee of the title to land is safe in executing his trust by selling the interest of the cestui que 1/rust by authority of the latter and parting with the proceeds for his benefit, without searching the records for information respecting any judgment lien that may rest on the equitable interest of the beneficial owner; and if he sells such interest, with or without notice of such judgment lien if one exists, he is liable to account to the judgment creditor, or to respond to him in damages, as for an abuse of trust.
We may safely venture the assertion that no authority can be found anywhere to charge a person as trustee of a fund after he has parted with it, or to hold him personally liable in damages for a breach of trust, without bringing home to him knowledge of the existence of the trust relation to which he is a party, before the alleged breach.
The question under consideration was expressly decided in Cook v. Dillon, 9 Iowa, 401, 14 Am. Dec. 354, in the following language, in substance: Money that comes into the hands of a trustee under such circumstances is subject to the lien of the judgment, and such lien is enforceable in equity; but, if the money is paid over without knowledge of the lien, the trustee will not have to account for it again, or to be under any liability therefor. It is not his duty to search- and make inquiry respecting the existence of such lien, but it devolves upon the person holding the lien to give notice of and enforce it.
Applying the foregoing to this case, the judgment against *103Paff for $500, received from Lgmke and paid over to Paulus in ignorance of the. lien of the judgment, is inequitable, and opposed to well-established principles of law. The learned circuit judge fell into the error of holding that Paff committed a breach of duty which he owed to the judgment creditor, by assuming that the mere docketing of the judgment charged the former with notice of it. The docketing ■of a judgment is not notice, at common law, to anybody dealing with the judgment debtor (Kerr, Fraud & M. 267), and certainly it is not by any statute of this state. "With that element out of the case, Paff stands entirely inn'ocent of any wrong to the judgment creditor, Meier. The learned circuit judge so found, in the following words, which we quote from his opinion: “ I acquit Mr. Paff of any fraudulent motive or intent, or of any design to assist Paulus in defrauding his creditors.”
As it appears from the record that Paff made no defense in the court below to the enforcement of the contract between him and Paulus, so as to render the judgment an effectual lien upon the remaining land, the judgment against him for costs, as well as for the damages, must be reversed, and judgment be entered in the court below in his favor for costs.
By the Court.— On the appeal of William A. Paff.\ as executor, etc., the judgment of the court below, for $500 and costs, is reversed; and on the appeal of G. D. Bartz, receiver, the judgment of the court below in favor of Hermmi Lemke is affirmed. The cause is remanded, with directions to render judgment in accordance with this opinion, in favor ■of William A. Paff.\ as executor, against G. I). Bartz, receiver, for costs to be taxed according to law. Costs are awarded against the receiver, in this court, on both appeals.