#### E. V. BROGDEN v. T. E. GIBSON.

(Filed 18 February, 1914.)

1. Trusts and Trustees — Partnership — Parol Trusts — Purchase of Lands — Consideration—Division of Profits.

A parol trust- is enforcible in this State; and where in pursuance of a verbal agreement A. has secured certain lands for the purpose of a resale by him and a division of the clear profits, and B., who advanced the purchase money and by reason of the agreement has procured the title to be made to himself, and refuses to comply with- the agreement, the services of A. are a ■ sufficient consideration to support the contract, and B. will be ' declared to hold the title as trustee, subject to the uses declared in the agreement.

2. Same — Money Advanced — Equity—Procedure.

Where A. and B. have entered into a parol agreement for the purchase and sale of certain lands for joint profit, A. to transact the business in that behalf and attend to the selling, and B. to furnish the purchase money, and this is accordingly done, but B; has wrongfully taken the title in his own name and refused to sell the lands and divide the clear profits in accordance with his agreement, the statute of frauds has no application, and the courts will decree a sale of the lands, payment of the purchase price into court, and a division of the clear profits after repaying B. the purchase money he has advanced.

*173. Appeal and Error — Prejudicial Error.

■ A judgment of the Superior Court will not he reversed on appeal for error committed .on the trial when it is not prejudicial to the appellant.

Appeal by defendant from Connor, J., at October Term, 1913, of Edgecombe.

This is an action to comgel the execution of a parol- trust. The verdict of the jury shows that the plaintiff and defendant entered into an oral agreement, on joint account, that they should buy and sell for gain certain lots situated in the city of Rocky Mount, the specific stipulation being that plaintiff should purchase and sell the lots, doing all of the active business in that behalf, and the defendant should furnish the money with which to make the purchases; that the] lands should be sold, defendant repaid the amount of his advances in money, and the clear profits should be divided equally between them. That plaintiff was ready, able, and willing to perform his part of the contract, and actually did do all the things required of him, and. defendant refused to comply therewith on his part. By plaintiff’s efforts, actually bestowed by him, they succeeded in purchasing from one J. H. Flood five lots, upon terms satisfactory to all the parties; but instead of having Flood make the title to plaintiff, or to plaintiff and defendant, so that plaintiff might resell them and realize the proceeds of the sale, and that the agreement could be executed to that extent, the defendant secretly and without plaintiff’s knowledge, and with the intent to defeat his rights in the contract, caused J. TL Flood to convey the lots to him individually and thereby got control of the title. Defendant afterwards agreed orally to perform the contract, which he admitted, by a sale of the lots at plaintiff’s request, but, later, refused to do so. Plaintiff had procured bidders at advantageous prices, but defendant still refused to sell to any one of them, and plaintiff, thereupon, offered to pay his fair proportion of the amount advanced by defendant, and take a conveyance for one moiety to the four remaining lots, one of the five lots having theretofore been sold to- O. R. L. Matthews for $175. This proposal was rejected by defendant. That the price *18paid Flood for tbe lots was $625, a large part of wbicb defend-, ant borrowed for tbe purpose, securing tbe repayment of it by a mortgage on said premises. Tbat afterwards plaintiff proposed to pay defendant bis part of tbe purchase price and take a deed for two of tbe lots, but tbis defendant declined to do, stating tbat be intended to bold tbe lots absolutely for bimself and for bis sole'use and benefit, claiming sole and absolute ownership in spite of tbe plain terms of tbe contract, by wbicb be agreed tbat tbe lands should be held in trust for tbe plaintiff and bimself, as aforesaid, and not by him individually in bis own right.

Plaintiff avers tbat defendant is a trustee for tbe benefit of tbe parties to tbe said agreement, bolding tbe legal title to tbe land-for the uses and purposes Oabove set forth. Ue asks for an adjustment of tbe amounts due and to be paid by each of tbe parties-, and upon payment of tbe sum due by him tbat tbe four lots be equally divided between them, and tbat deeds be executed accordingly, and for general relief.

Defendant denied tbe essential facts alleged by plaintiff in regard to tbe purchase of tbe lots for the joint benefit of plaintiff and bimself, and averred tbat be bought tbe property for bimself — by borrowing tbe money, it is true, and mortgaging tbe land to pay tbe purchase price, but tbat be made no agreement tbat plaintiff .should have any share or interest therein, nor did be conceal any part of tbe transaction from tbe plaintiff. After tbe property was bought by him, be agreed to pay plaintiff commissions if be sold tbe same for him, but before there was any sale by plaintiff, be concluded to withdraw tbe land from tbe market and build bouses upon it, and tbis was all of their agreement. Upon an issue submitted, tbe jury found the facts to be as stated by plaintiff in bis complaint, thereby adopting bis version as above set out. Tbe court, upon tbe verdict, declared tbat defendant held tbe land in trust, according to tbe terms of tbe agreement between tbe parties, and adjudged tbat it be sold and tbe cause retained for further orders and directions, defendant to- pay tbe costs of tbe action; whereupon be appealed.

*19 F. B. ■Grantham for plaintiff.

Bunn & Spruill and G. M. T. Fountain & Son for defendant.

Walker, J.,

after stating tbe case: Tbe main contention of tbe defendant is tbat tbe agreement between tbe parties, alleged by tbe plaintiff and found by tbe jury to be tbe true one, is witbin tbe terms of tbe statute of frauds, and not baring been reduced to writing, is roidable by bim. But tbe fallacy of tbe position is apparent when we consider tbat tbis is an action to enforce a trust, wbicb is not witbin tbe statute, and not one for specific performance of a contract relating to land. Tbe English statute includes parol trusts witbin its prohibition, but ours does not, and they remain here as -at common law.

Tbe transaction between these parties falls clearly witbin tbe definition of á parol trust, as settled by several decisions of tbis Court. If tbe land bad been sold by tbe defendant, and tbat part of tbe Contract performed,, tbe plaintiff would be entitled to recover bis share of the proceeds of tbe sale, in assumpsit, upon tbe theory of money received to bis use, from wbicb tbe law implies a promise by defendant to pay it over to him, and tbis without regard to tbe statute of frauds, as the case would not be covered by its provisions, wbicb refer to a sale or conveyance of land and not to a division of money merely or tbe proceeds of tbe sale. Massey v. Holland, 25 N. C., 197; Michael v. Fort, 100 N. C., 178; Sprague v. Bond, 108 N. C., 382; Bourne v. Sherrill, 143 N. C., 381.

Tbe Court held in Hess v. Fox, 10 Wendell (N. Y.), 436, tbat tbe statute did not apply to such an agreement, because, “No question can arise on tbe validity of tbe agreement to sell. Tbat was performed, and'tbe remaining part was to pay over money,, supported by tbe consideration of land conveyed to tbe prom-isor.” Tbis ease is cited with approval in Bourne v. Sherrill, supra, and it may now be taken as settled law in tbis State, if not in all jurisdictions.

While defendant has not sold tbe land, so- as to bring tbis case witbin tbe operation of tbe principle just stated, be has, by bis agreement, charged it with a trust wbicb equity will enforce, *20and the statute, fortunately for fair and'honest dealing, is no protection to him. That he is-morally bound to its performance will not be questioned, and he is also legally required to fulfill' his promise. The law, upon this phase of the matter, is equally well established. We cannot doubt for a moment that the agreement was that the title to the land should be taken in the name of the plaintiff, or,' at least, in the joint names of the parties, as the plaintiff was authorized to sell as well as to buy the lots, and everything, necessary to carry out this purpose is implied: It surely was not intended that defendant should be able to block the execution of the agreement by taking the title to himself and refusing to- convey. But even if it was the purpose that he should have it, the agreement was that he should hold it for the joint benefit of himself and the plaintiff, and upon the faith of this promise he acquired the title, and will not be permitted to hold it discharged of this obligation, but only in trust for the uses declared in the agreement. The further consideration for the promise was that the plaintiff should contribute his skill and labor in securing the property for the purposes of the joint enterprise. This he has done fully and faithfully, and equity will not disappoint his reasonable expectation that defendant would not take the benefit of this skill and labor and refuse to execute the trust and confidence reposed in him. •

Plaintiff's equity is clear. The case is fully covered by Avery v. Stewart, 136 N. C., 426. Without quoting literally, the Court then held: A breach of a mere moral obligation is hot, by itself, sufficient ground for the interference of the court. The evidence, if taken as true, shows that there was more than that in this instance, and that the defendant has acquired property .which he could not have obtained but for the plaintiff’s request that he furnish the money and take the title, and his promise to do so. The plaintiff’s equity seems to- uh to- be plain.

That case was approved in Russell v. Wade, 146 N. C., 116, and the two cases distinguished in their facts by the following-reasoning, though it was held there was> no material difference, but both were governed by, the same general and equitable rule: “The difference in the tw,o cases consists in the fact that, in one. *21the defendant agreed to take the-title to himself for the benefit of plaintiff, whereas in the other he was to take the option in the name and for the benefit of both, and in violation of his promise and his duty, he took it to.himself. In one the wrong was in refusing to execute an express promise, upon the faith of which defendant got the property, whereas in the other defendant took title in violation of his agreement. In the first ease the court enforces the execution of an express parol trust. In this ease the court declares defendant a trustee to prevent fraud ex male-ficio." It had before been said in Avery v. Stewart, supra: “Trusts of the second class exist purely by construction of law, without reference to any actual or supposed intention to create a trust, for the purpose of asserting rights of parties or of frustrating'fraud, and are therefore termed constructive trusts. The party guilty of the fraud is said in such cases to be a trustee ex maleficio and will be decreed to hold the legal title for the use and benefit of the injured party and to convey the same when necessary for his protection, as when one has acquired the legal title to property by unfair means. The jurisdiction is exercised distinctly upon the ground of the fraud practiced by the party against whom relief, is prayed,” citing Bispham on Equity (6 Ed.), sec. 79 and pp. 125, 216, 143; Wood v. Cherry, 73 N. C., 116; Gorrell v. Alspaugh, 120 N. C., 362.

In Glass v. Hulbert, 102 Mass., 39 (2 Am. Rep., 418), the Court so states the principle as to make its application to our facts very transparent: “Where a party acquires property by conveyance or devise secured to himself under assurances that he will transfer the property to, or hold and appropriate it for, the use and benefit of another, a trust for the benefit of such other person is charged upon the property, not by reason merely of the oral promise, but because of the fact that by. means of said promise he had induced the transfer of the, property to himself.” . . "

When one has, by his promise to buy, hold, or dispose of real property for the benefit of another, induced action or forbearance of another relying upon said promise, it would consummate a fraud if the promise, so solemnly but deceptively made, should *22not be enforced'. If tbe plaintiff bad suspected that tbe defendant intended to betray him by a false promise, and tbus to mis^ lead bim into tbe adoption of a course of action wbieb otherwise be would not bave taken, or to cease efforts in tbe same direction and witb tbe same end in view, wbieb otherwise be would bave continued, be would bave withdrawn bis misplaced confidence in defendant and bave arranged witb some other and more reliable person, equally able to assist bim, in. order to secure tbe same kind of benefit. Vestal v. Sloan, 76 N. C., 127; Johnson v. Hauser, 88 N. C., 388; Shields v. Whitaker, 82 N. C., 516; Thompson v. Newlin, 38 N. C., 338.

If we should permit defendant to profit by any suob betrayal of tbe trust so implicitly and innocently reposed in bim, it would be not only inequitable, but a reproach to tbe administration of justice. This view is further sustained by tbe language of Chief Justice Smith in Cheek v. Watson, 85 N. C., at p. 198; “Our conclusion upon tbe-whole testimony is that tbe defendant has deceived an embarrassed man into assent to tbe sale of bis land to tbe defendant, through the trastee, by taking advantage of bis distress and exciting false hopes, that tbe sale should not be pleaded as absolute, but that tbe land might be redeemed within a reasonable time. Tbe trust would equally arise where tbe party relying upon tbe assurance is prevented from making arrangements witb others by which he could bave secured the same benefits promised by tbe purchaser.” It will not do- to say that tbe defendant was moved merely by friendly or benevolent considerations, and bis promise was, therefore, voluntary, and, therefore, be may, at his option, refuse a compliance witb it. Equitable considerations, we bave described,, constitute tbe foundation of almost every trust, and tbe fiduciary should be held to account as nearly as possible in tbe same spirit in which be originally contracted and to tbe same extent. Sandfoss v. Jones, 35 Cal., 481; Owens v. Williams, 130 N. C., at p. 168; Soggins v. Heard, 31 Miss., 428.

In Cousins w. Wall, 56 N. C., 43, Judge Battle states ,our ease substantially, and says: “By paying his money and taking tbe legal title to himself, the defendant held the legal estate in trust *23to secure tbe repayment of tbe purchase money, and tben in trust for tbe plaintiff. Tbe defendant never contracted to sell or convey tbe «land or any interest therein to tbe plaintiff, for at the time of tbe agreement be bad no title or interest in tbe land, and it was only by force of tbe agreement that be was permitted to take tbe legal title, and by tbe same act be took it in trust for tbe plaintiff. It is manifest that tbe statute of frauds does not apply.”

Tbe doctrine has been thus most aptly stated: 'Although no one can be compelled to part with bis own title by force of a mere verbal bargain, yet when be procures a title from another which be could not have obtained except by a confidence reposed' in him, tbe case is different. There, if be abuse tbe confidence so reposed, be is converted into a trustee ex maleficio. Tbe statute which was intended to prevent frauds turns against him as tbe perpetrator of tbe fraud. It is not, therefore, tbe fact that tbe bargain by which be was enabled to obtain the title is verbal which governs’ tbe case, but the fact that be procured tbe title to be made to him in confidence, tbe breach of which is fraudulent and in bad faith. Sechrist’s Appeal, 66 Pa. St., 237. Substantially to tbe same effect is tbe following statement of tbe Court in Carr v. Carr, 52 N. Y., at p. 260, after discussing, tbe meaning and application of tbe statute of frauds: “It bars no other equity and precludes no one from asserting title against one who has thus taken a conveyance for a lawful and specific purpose and attempts to retain tbe property in violation of tbe arrangement and agreement under which be has acquired tbe formal title in fraud of tbe real owner and against equity and good conscience. Manifestly such is tbe case now before us for adjudication, upon tbe judgment nonsuiting tbe plaintiff.” Numerous cases in this Court have stated and applied tbe principle in tbe same way. Sykes v. Boone, 182 N. C., 199; Hargrave v. King, 40 N. C., 436; Turner v. King, 37 N. C., 132; Cloninger v. Summit, 55 N. C., 513; Barnard v. Hawks, 111 N. C., 338, and other cases cited in Avery v. Stewart, supra, and Russell v. Wade, supra. “When one by parol agrees to procure a lease for himself and others, and does procure tbe lease *24in Ms own name, be is a trustee for those for whom be agreed to act, and tbe statutes referred to bave no application.” Hargrave v. King, supra.

“Tbe plaintiff’s equity does not rest upon tbe idea of tbe specific performance of a contract. Tbe parties did not occupy tbe relation of vendor and vendee. Tbe defendant did not agree to sell tbe land to tbe plaintiff, for at tbe time of tbis arrangement be did not bave tbe land, or any interest therein, to sell; nor was tbe plaintiff to pay a price for it. But tbe plaintiff’s equity rests upon tbe idea of enforcing the execution of a trust; and tbe facts show that tbe relation of tbe parties was that of trustee and cestui que trust/’

Tbe ease of Falkner v. Hunt, 76 N. C., 202, would appear to be directly and expressly in point, leaving nothing to inference or speculation, as tbe facts of tbe two cases are so closely and intimately analogous. It was held that tbe statute of frauds did not apply, and that plaintiff’s agreeing to charge tbe “mill site” with a trust in bis behalf and for bis benefit, jointly with defendant, was too plain for discussion, and, therefore, tbe C’ourt merely states tbe facts and its conclusion without tbe citation of authority. See, also, Hanff v. Howard, 56 N. C., 440; 20 Cyc., 237 and 232.

Tbe Court, in Neely v. Torian, 21 N. C. (Battle’s Ed.), 410, after finding that defendant acquired title to land by a false promise, which deceived tbe plaintiff into assenting to bis purchase of it, adjudged that be should bold as trustee, first, to reimburse himself tbe amount be bad advanced, and then for tbe benefit of tbe plaintiff, who should pay tbe purchase money and receive the title by conveyance from tbe defendant, tbe Court saying that defendant bad obtained tbe title by exciting false hopes in tbe plaintiff that tbe sale should not be treated as absolute, and taking advantage of him, and that, in conscience, be should not retain tbe unfair gains thus acquired by tbe deception, but could avail Hrnself of tbe legal title only as a security for what be bad advanced on tbe faith of it.

Tbis Court, at tbe last term, decided a case in all essential respects like tbe one at bar. There a salé of the land was *25ordered, with direction to pay the purchase money advanced by defendant, and then to divide the balance of the proceeds between the parties, according to their agreement. This O'ourfc affirmed the judgment (Anderson v. Harrington, 163 N. C., 140), holding that a trust had been created by contract, based upon a valuable consideration, to stand seized to the use of, or in trust for another, as decided in Wood v. Cherry, supra, and that the statute of frauds did not apply, citing Riggs v. Swann, 59 N. C., 118. That is decisive of this case.

The other exceptions become immaterial, in view of what we have said. Even if there was any error in the rulings upon testimony, which we do not admit, it was so very slight as not to have affected the result. A reversal'will not be granted unless the error is prejudicial. S. v. Smith, 164 N. C., 475; McKeel v. Holleman, 163 N. C., 132; Steeley v. Lumber Co., post, 27.

When the fund is paid into the court after the sale has been made, it will be distributed according to the agreement, the purchase money of the land paid to defendant, and then the balance divided equally between the parties.

No error.