Court Opinion

ID: 8042762
Source: CourtListenerOpinion
Date Created: 2022-09-09 03:41:59.902695+00
Date Added: 2024-06-11T16:37:23.030921
License: Public Domain

On Petition for Rehearing
Sardis Summer-field, M. B. Moore, and Hoyt, Nor-cross, Thatcher, Woodburn & Henley, for Appellant:
James T. Boyd, for Respondent:
*49By the Court,
Sanders, J.:
Counsel for appellant ásk for a rehearing upon the following grounds:
“(1) That the evidence is insufficient to support the *50finding of the court that Cheney, Downer, Price & Hawkins, or Robert F. Price, or either of them, were authorized as agent, or otherwise, to enter into the agreement with James T. Boyd on behalf of the respondent, Rick De Bernardi.
“(2) That the evidence is insufficient to justify the decision of the court in that the respondent, Rick De Bernardi, did not establish at the trial any legal title to the premises in controversy.
“(3) That this court erred in finding or assuming that appellant was the purchaser of the land in question with notice of the equity claimed by the respondent.”
A response to the petition will serve the purpose of correcting what seems to be an erroneous impression of the facts and of strengthening the conclusions reached in our former opinion.
The case was tried in the court below, and presented here upon two issues — one, that the property in controversy was impressed with a constructive trust arising from the fraud of the Washoe County Bank; the other, that Kate Moore, the appellant, was not entitled to the protection of a subsequent purchaser without notice.
It is well settled that a constructive trust cannot be established by a mere preponderance of evidence, but must be established by evidence which is clear, definite, unequivocal, and satisfactory. 39 Cyc. 192; 3 Pom. Eq. Jur. (4th ed.) sec. 1058. Any evidence which tends to prove or disprove the fraud, actual or constructive, necessary to constitute a constructive trust, and which is not objectionable' as to the relevancy, competency, and materiality of the evidence, is admissible. Parol evidence is admissible to prove the facts and circumstances constituting fraud from which a constructive trust may arise. 39 Cyc. 192.
The respondent’s case was decided upon the application of these familiar principles. If there be any doubt as to the correctness of the conclusion of law that the breach by the Washoe County Bank of its promise or agreement to acquire the legal title to the property *51and subsequently convey it to the respondent operated as such a fraud as to make the bank a trustee ex maleficio for the benefit of respondent, it arises from the credence and weight attached to the testimony of the witness James T. Boyd to prove the fraud necessary to constitute a constructive trust. We examined and have reexamined the testimony of the witness Boyd with very great care, realizing that the fraud constituting the trust was established only by his testimony, he occupying the dual position of witness and attorney in the cause. It is an unwritten law in the legal profession that an attorney may not be a witness in the cause he is conducting, except when essential to the ends of justice. Canon 19 of Professional Ethics of the American Bar Association.
It is conceded, or must be conceded, that the respondent’s cause of action is grounded and built upon Boyd’s testimony, but for whose evidence the cause of action might not have existed or have been maintained. Boyd became a witness in the case out of extreme necessity. Whether, under the circumstances, he should have withdrawn from the case and not have put forth all his skill as an advocate t'o maintain a cause of action of his own making is a matter which rests with Boyd and not with this court. Conceding the infirmative considerations attaching to his testimony because of his dual position as witness and attorney, the trial judge believed in the truthfulness of his testimony, acted upon it, and drew from it the conclusion of law that the Washoe County Bank’s failure to keep faith with its promise made to Boyd to acquire the legal title to the property through the foreclosure of its mortgage and convey it to his client operated as such a fraud as to make the bank a trustee ex maleficio. The books are full of such cases. It is true the bank denied in its pleading that the agreement was authorized or ratified by it. This denial cast upon De Bernardi the burden of establishing by clear and convincing evidence the fact that the agreement was not only authorized but ratified by the bank. To maintain this issue Boyd testified to a conversation had *52by him with Mr. Taylor, the cashier of the bank, before the agreement in question was consummated between Boyd and the bank’s attorney, R. M. Price. It is not charged that Boyd talked with Mr. Taylor, meaning afterwards to swear to the conversation, and upon that conversation found a right which otherwise his client would not have had, but it is strongly urged by counsel for the petitioner that Boyd’s account of the conversation, standing alone and uncontradicted, does not show that Boyd was authorized on the part of the bank to make or to enter into the agreement he did with the bank’s attorney of record in its then pending action to foreclose its mortgage on the property in question, and to which action Rick De Bernardi was made a party defendant with Constance Parker, the mortgagor.
If the cause of action were predicated solely upon the alleged authority conferred on Boyd by the cashier in the conversation as detailed by Boyd, we should be inclined to agree with counsel, but, taking into consideration Boyd’s account of the entire transaction, it appears that R. M. Price did not act upon the alleged authority as given Boyd by the cashier. His testimony tends to show that Price, before entering into the arrangement as proposed by Boyd, visited, as any prudent attorney would before obligating his client to such an agreement, the office of the cashier of the bank, and returned with the assurance that the arrangement as proposed was agreeable and satisfactory to the bank. Boyd’s positive testimony certainly cast upon the bank the burden of answering it.
In our former opinion we endeavored to make it clear that Mr. Taylor’s nonrecollection or failure to remember ever having told Boyd that any arrangement he might make with the bank’s attorneys with reference to its mortgage would be satisfactory to the bank did not raise a conflict of evidence.
“Judges almost invariably hold that, as a matter of course a witness’s positive testimony to an oral declaration, admission, or contract is not overcome by the other party’s testimony only to nonrecollection thereof, *53oi' his denial that, ‘to his recollection,’ it was made, or his positive denial which dwindles down on cross-examination to mere absence of recollection. * * * ” 2 Moore on Facts, sec. 1169, and authorities cited.
In applying this rule of evidence to the dispute or contradictions between the testimony of the witness Boyd and Mr. Taylor, we took into consideration that ordinarily a cashier of a bank, in the nature of things, by reason of his position and his duties, ought to have known whether he authorized or assented to an agreement affecting a bank’s security, such as a mortgage. We have no doubt that Mr. Taylor was sincerely conscientious in impressing upon the trial court that, if he had at any time authorized the agreement, he would have recalled it. Mr. Taylor was fair enough with his adversary to state in the course of his examination that, if Mr. Price would say that he called upon him at the time and in the course of the transaction, as testified by Boyd, and obtained from him authority or his assent to the arrangement as proposed by Boyd, he would believe Mr. Price, as he considered him a truthful man. Mr. Taylor thus appealed to Price to support his position. If Price was available as a witness, the bank, in justice to Mr. Taylor and its defense, should have called him. The record shows that Price was available as a witness, but was not called. The bank’s failure to call a witness who had full knowledge of the facts essential and material to its case creates an inference that the bank refrained from calling Price because his testimony would not aid its contention that the agreement in question was not authorized, ratified, acquiesced in, or confirmed by the bank. 16 Cyc. 1064.
In the present state of the record we cannot say that the agreement, made the basis of the respondent’s cause of action, was not authorized and ratified by the bank. We therefore adhere to our former opinion upon this branch of the case with this observation upon the argument of counsel for petitioner: That the negligence of respondent in failing to obtain a written stipulation or written contract and to record the instrument *54is wholly responsible for the position in which the respondent found himself. Rule 27, District Court Rules. We concede that this rule of practice requiring that stipulations between parties to causes not made in the presence of the court shall be in writing is a wholesome rule. Its policy is obvious. It points to the imminent danger of making the rights of parties in the conducting of a lawsuit depend upon the memory or the truthfulness of attorneys of record in the case. But in this instance the mischief had been done, and it is our duty to meet the case as it is presented by the record. Boyd’s testimony as to the admission of material facts imputed to the bank stands uncontradicted. The testimony of Price, the opposing counsel of record, might have put a different color upon the verity of Boyd’s testimony, but in the present state of the record it is not impeached.
The'second ground urged upon us for a rehearing is not within any of the issues of the case, and we pass, therefore, to the consideration of the third and more serious objection to our former decision, namely, that we failed to protect Kate Moore’s rights as a subsequent bona-fide purchaser against the claim or equity of respondent.
In support of this contention it is pointed out that the respondent did not come into the court of equity with clean hands, but with supplicant hands holding up a clandestine, secret.agreement entered into by his attorney, James T. Boyd, with a mortgagee, for the purpose of securing an advantage over a mortgagor, Constance Parker, with whom the respondent was then in litigation over his claim or equity to the property because of an executory contract of sale, and thus acquire the legal title to circumvent the result of that litigation, should it terminate adversely to him.
The decisions are uniform that the bona-fide purchaser of a legal title is not affected by any latent equity founded either on a trust, incumbrance, or otherwise, of which he has no notice, actual or constructive. Brophy M. Co. v. B. & D. G. & S. M. Co., 15 Nev. 108.
*55For the purposes of rehearing it is conceded that Kate Moore had actual notice of the respondent’s latent equity founded upon his agreement with the Washoe County Bank. This being true, she is in no position to question the motive of her adversary, but she insists that, conceding that she was a purchaser with notice, the proof shows that, before receiving notice, she had become a complete purchaser by having paid to her grantor the full purchase price, or what was tantamount in law thereto, and she was not, therefore, precluded from completing the transaction by obtaining a conveyance of the legal title, and thus secure the. precedence due to a bona-fide purchaser for value and without notice. 2 Pom. Eq. Jur. (4th ed.) sec. 691.
The argument and the very authorities cited in the petition concede that there must be actual payment before any notice, or what in law is tantamount to actual payment, to entitle Kate Moore to protection. That a promise, contract, bond, and mortgage, or other non-negotiable security for the purchase price, will not render the party a bona-fide purchaser, nor entitle him to protection; for upon failure of the consideration he can be relieved from such obligations in equity, even if not at law. 2 Pom. Eq. Jur., sec. 751. Notice after the agreement for the purchase is made, but before any payment, will destroy the character of bona-fide purchaser. 2 Pom. Eq.. Jur., sec. 750; 27 R. C. L., sec. 468, p. 703; 39 Cyc. 1763.
To entitle a party to the character of a bona-fide purchaser, without notice, he must have acquired the legal title, and have actually paid the purchase money before receiving notice of the equity of another party. Moresi v. Swift, 15 Nev. 215.
Was the purchase money paid before notice? The evidence, in our opinion, shows that it was not.
Kate Moore, as a witness in her own behalf, testified that she deposited.with the Washoe County Bank, on or about June 3, 1920, $3,217 for one-half of the purchase price of the property in question. She admitted that her husband, M. B. Moore, acted as her agent in all *56her transactions and negotiations for the purchase of the property. When we look to the testimony of her agent and husband, M. B. Moore, we find it was upon the 10th day of July, 1920, that it was finally agreed that Mrs. Moore would become the sole purchaser of the property, according to the terms and conditions then and there agreed upon. The deed which conveys the property to Kate Moore bears the date of the 22d day of July, 1920. This being the date of the conveyance pursuant to the agreement made on the 10th day of July, 1920, when, then, was the actual payment for the property made? In the course of his cross-examination, after having testified that the agreement to purchase was made on the 10th day of July, 1920, Mr. Moore was asked this question:
“Q. And if I understand you, then, on the 21st or 22d day of July is when the final agreement was finally entered into and consummated, is that correct? A. When the payment was made.
“Q. Well, that is when you finally determined on it, too, wasn’t it? A. No; I think that the final arrangements were made some days preceding that.”
The witness, in the course of his examination, stated that the payment under those terms, as he recollected it, was in the neighborhood of the 22d day of July, 1920.
M. B. Moore, as agent, as shown by the former opinion, received actual notice of the claim or equity of Rick De Bernardi, founded upon the agreement so much discussed, on the 19th day of July, 1920, three days before actual payment was made. Under these circumstances it cannot be claimed that the purchase money was paid before notice. Regardless, then, of the contract to purchase having been made before notice, both on principle and on a just consideration of the authorities, Kate Moore was not a complete purchaser before notice, and therefore not entitled to protection.
The petitioner further contends that she was entitled to protection as a bona-fide purchaser under the registry or recording statute (Rev. Laws, 1038). It is only subsequent purchasers in good faith against *57whom unrecorded conveyances are void; and a purchaser with actual notice is not a purchaser in good faith of the estate previously conveyed. Gilson v. Boston, 11 Nev. 413.
We are urged to grant a rehearing for the further reason that in the present state of the record it affirmatively appears that the equities of the parties are shown to be equal, and that Kate Moore, having subsequently acquired the legal title to the property, thereby secured an advantage which entitled her to priority over the latent equity of Rick De Bernardi. This contention is set at rest by the application of the doctrine that, between an earlier equity and a subsequent legal estate, even when purchased for a valuable consideration, the one who acquires the subsequent estate with notice of the earlier equity in favor of another person will hold his acquisition subject and subordinate to such outstanding interest or right. This subordinating effect is produced from information given to an agent. 2 Pom. Eq. Jur., sec. 730.
No principle is better settled than that if A contract to sell land to B, but before consummating the sale conveys the same land to C, who has a knowledge of the preexisting contract, C is .in equity bound to fulfil that contract. Stonecifer v. Yellow Jacket S. M. Co., 3 Nev. 38.
Rehearing denied.
Ducker, C. J.: I concur in the order.