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Smith v. Connor

Supreme Court of Arizona

December 16, 1959

Emmet SMITH, Appellant and Cross-Appellee,
Virginia Smith CONNOR; Lawrence J. Smith; and John Conley and Julia Conley, his wife, Appellees and Cross-Appellants.

Page 569

Rehearing Denied April 19, 1960.

Page 570

[87 Ariz. 8] Evans, Kitchel & Jenckes, Phoenix, for appellant and cross-appellee.

Moore & Romley, Phoenix, for appellees and cross-appellants.


Appellees Virginia Smith Connor and Lawrence J. Smith (hereinafter called Virginia and Lawrence) brought this action in [87 Ariz. 9] the Superior Court for Maricopa County against their brother, Emmet Smith (hereinafter called Emmet), asking that a constructive trust be imposed upon certain fees and leaseholds held by Emmet. The trial court entered judgment in favor of the apellees, established the trust, and ordered that Virginia and Lawrence each be vested with an undivided one-third interest in the property. The trial court also decreed that Emmet make an accounting for the period of time that he was found to be the trustee.

The principles of law governing this case are substantially conceded by both parties. Although the statute of fraud prohibits the enforcement of an express parol trust in lands, Rogers v. Greer, 70 Ariz. 264, 219 P.2d 760, it has no application to constructive trusts which arise by operation of law and not by agreement. Bremer v. Bremer, 411 Ill. 454, 104 N.E.2d 299; Dietz v. Dietz, 244 Minn. 330, 70 N.W.2d 281; Stark v. Reingold, 18 N.J. 251, 113 A.2d 679; Pattison v. Pattison, 301 N.Y. 65, 92 N.E.2d 890.

The principle of law apparently applied by the lower court is as expressed in Restatement, Trusts, Section 44:

'(1) Where the owner of an interest in land transfers it inter vivos to another in trust for the transferor, but no memorandum properly evidencing the intention to create a trust is signed, and the transferee refused to perform the trust, the transferee holds the interest upon a constructive trust for the transferor, if

'(a) the transfer was procured by fraud, duress, undue influence or mistake, or

'(b) the transferee at the time of the transfer was in a confidential relation to the transferor, * * *.'

The appellant contends that the trust should not have been imposed because the lower court's findings of fact that the land was transferred to him in trust and that a confidential relationship existed among Virginia, Lawrence and Emmet was not proved by the clear and convincing evidence which is required in this jurisdiction. Murillo v. Hernandez, 79 Ariz. 1, 281 P.2d 786; Stewart v. Schnepf, 62 Ariz. 440, 158 P.2d 529; Butler v. Shumaker, 4 Ariz. 16, 32 P. 265.

Unquestionably, a person who wishes to impose a trust on a transaction which on its face appears to be a valid transfer must convince the trier of fact of the trust by clear and convincing proof. But in our review of the evidence which led the trial court to its conclusions, we do not propose to retry the case on the appellate level. Our function is outlined in the Murillo case, supra [79 Ariz. 1, 281 P.2d 791].

[87 Ariz. 10] '* * * Our duty, on appeal, begins and ends with the inquiry whether the trial court had before it evidence upon which an unprejudiced mind might reasonably have reached the same conclusion which was reached.'

In following the holding of the Murillo case, we will examine the positions of the litigants concerning the various transactions and we will compare the testimony of the parties with the other evidence in a light most favorable to sustaining the judgment to see whether, as a matter of law, the trial judge acted reasonably in holding

Page 571

for Virginia and Lawrence. It is to be observed that it is consistent with the appellees' theory and the findings of the trial court that this transaction could have initially been innocently conceived as a plan to develop a family farm and that Emmet, after performing a major part of the work and labor attendant therewith, later decided to claim it entirely as his own.

Most of the issues of fact in this case are subject to dispute by the parties; however, on some matters there is agreement. The land in question, which we will call the Smith farm, is composed of four contiguous parcels of land, totaling some 1,400 acres in Pinal County, Arizona. These parcels, for purpose of clarity, will be referred to as Parcel A, Parcel D, Federal lands, and state lands. Other pieces of land, also situated in Pinal County, are germane to the lawsuit; they will be referred to as Parcel B, Parcel C, and Section 9 land.

The ownership of the land in the spring of 1951, before the many transfers began, was as follows:

Parcel A (320 acres)--Record owners of title Emmet, Lawrence and Virginia, as tenants in common, although at this time for some reason not disclosed, all three of them thought it belonged to Virginia alone.

Parcel B (36 acres)--owned by Virginia

Parcel C (480 acres)--owned by Lawrence

Parcel D (120 acres)--owned by John Conley, cousin of the litigants

Federal land (40 acres)--under lease by Federal government to an undisclosed party--possibly Leo Ellsworth

State land (960 acres)--leased from state by Leo Ellsworth

Section 9 land (320 acres)--owned by Lawrence

The event which precipitated the transactions in this case was the announcement by the Arizona State Land Department that land in the Queen Creek area of Pinal County was in a 'critical area' under the provisions of the Groundwater Code. See Southwest Engineering Co. v. Ernst, 79 Ariz. 403, 291 P.2d 764. By this proclamation, Virginia and Lawrence lost the right [87 Ariz. 11] to drill wells on Parcels B and C. In March of 1951, Emmet obtained information that the Section 9 land and Parcels A and D would be affected in the same manner by forthcoming proclamations. Emmet was advised to obtain noncancellable well-drilling contracts for the land.

Faced with the prospect of losing the right to drill wells on Parcels A and D and the land in Section 9, the members of the Smith family took steps to protect the value of their land. From July of 1951 on, all the land mentioned above changed hands, some of it several times; but by the end of 1951, Emmet either held the fee or Federal and state leases to the land which ultimately became the Smith farm. Parcels B and C and the Section 9 land did not become part of the Smith farm because they had been traded for state-leased lands in a transaction with Leo Ellsworth.

The parties offer diametrically opposed explanations for the events whereby the land became Emmet's property. Lawrence and Virginia state that the land was transferred to Emmet pursuant to an overall scheme to develop a family farm which Emmet would manage. Emmet insists that the land was transferred to him outright for a valuable consideration. He points to deeds from both Virginia and Lawrence which on their face recite such a consideration. In order to demonstrate what might have been the basis for the trial court's acceptance of the appellees' version of the facts, we will scrutinize the key transactions.

Both Lawrence and Virginia testified that early in 1951 they met their brother Emmet at their mother's house in Phoenix and discussed plans to develop a family farm in Pinal County. At that time, Emmet instructed Virginia to write John Conley, a cousin, proposing to trade some of the Section 9 land, then owned by Lawrence, for Parcel D which bordered on Parcel A. Lawrence corroborates Virginia on the fact that Emmet told his sister what the letter

Page 572

should contain, and that Emmet's name should not be mentioned. Emmet denies the entire conversation, but nonetheless a letter was written on April 5, 1951, and sent to Conley in Cleveland, Ohio, by Virginia. In May of 1951, Conley accepted the trade and sent to Virginia, in her name as grantee, the deed for Parcel D; however, no land was ever deeded to him in exchange. This is the way that Virginia describes the transfer of Parcel D from herself to Emmet:

'A. I placed the Conley land [Parcel D] in Emmett's [sic] name.

'Q. Why did you do that? A. The Conley land was contiguous to the east half of 18 [Parcel A], and it made a solid block there, and then that piece would be contiguous to the Federal grazing land, which Emmett wished to [87 Ariz. 12] get, and he couldn't get it unless he had land that was contiguous to it.'

* * *

* * ...

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