This action involves the ownership of residence property located at 701 Cherry Street in Anaconda. Plaintiff and defendant, Catherine Boggs, are sisters, and William H. Boggs is the husband of Catherine.
The property was first transferred by Charles Dalberg and wife to this plaintiff by deed which was recorded July 19, 1921.
On November 18, 1924, plaintiff deeded the property to her mother, Lenora Leahy, which deed was recorded on November 19, 1924. The complaint alleges that this deed was without consideration, and it was agreed that the conveyance was merely *Page 133 intended to make Lenora Leahy a trustee to hold the legal title for the use and benefit of plaintiff and that defendants had knowledge that Lenora Leahy held the legal title only as trustee for plaintiff.
The complaint sets forth that on February 22, 1928, Lenora Leahy conveyed the property to the defendant Catherine Boggs (then Catherine Moore) without consideration, both parties having full knowledge of the actual ownership by plaintiff, and that it was agreed that Catherine held the property as trustee for plaintiff and that she promised and agreed to hold the title as trustee for plaintiff who was the actual owner of the property.
On December 3, 1942, a deed from Catherine to William H. Boggs was placed on record and it is alleged that since the time of the recording of that deed defendants wrongfully and unlawfully repudiated and denied plaintiff's ownership and asserted ownership in William H. Boggs.
The complaint alleges that the deed from Catherine to William H. Boggs was without consideration and intended to defraud plaintiff out of her ownership of the property; that both defendants knew that the property belonged to plaintiff and that Catherine held the legal title only as trustee for plaintiff. The complaint seeks to have that deed cancelled and annulled and that plaintiff be adjudged the owner of the property; that defendants be required to release and quitclaim to plaintiff all claim by them to the property.
The answer admits that plaintiff obtained a deed from Dalberg and wife in July 1921; it alleges that Eugene Miller paid the consideration for the deed and that plaintiff held the property as trustee for Eugene Miller and that the property was "designated" for the use and benefit of Lenora Leahy and Catherine Boggs as their home and that plaintiff never was the actual owner of the property. It admits that on November 18, 1924, plaintiff deeded the property to Lenora Leahy and alleges that she did so at the request and order of Eugene Miller who was then the actual and beneficial owner of the property. The answer admits the making of the deed by Lenora Leahy to defendant *Page 134 Catherine Boggs on February 23, 1928, and alleges that it was made for a valuable consideration.
The answer admits the making of the deed by Catherine to her husband William H. Boggs and denies the other allegations of the complaint. It asserts by way of affirmative defense that the cause of action is barred by limitations and one affirmative defense raises the question of estoppel.
The reply put in issue the affirmative allegations of the answer. The court found that Dalberg and wife conveyed the property in question to plaintiff on July 21, 1921, and that Eugene Miller paid the consideration for the property; that plaintiff conveyed the land to her mother on November 18, 1924, as a gift, but not in trust; that plaintiff thereafter made no demand from her mother to reconvey the property back to her; that on February 23, 1928, Lenora Leahy conveyed the property to Catherine Moore, now Catherine Boggs, the deed containing no trust provisions; that plaintiff acquired actual knowledge of the conveyance from her mother to Catherine in November 1931; that Catherine paid all the taxes from November 1925 to the time of her marriage in July 1937, and that defendant William Boggs has paid them since that time, including special improvement taxes; that defendants made improvements and repairs on the property without any protest by plaintiff; that on August 21, 1942, Catherine conveyed the property to William H. Boggs, her husband; that plaintiff made no demand for delivery of the property nor claim to the property until August 21, 1942; that plaintiff had actual knowledge of the conveyance from Catherine to husband on December 5, 1942; that after he acquired the deed. William H. Boggs expended money for repairs and performed labor in improving the property; that plaintiff has at no time been in the possession of the property nor exercised any dominion or control over it and has paid no taxes thereon, nor collected any rent from the occupants; that she, herself, paid rental for the use of a garage thereon, of $3 per month for one year in 1936 or 1937; that the property has been insured since 1928 in the name of and for the benefit of *Page 135 Catherine and Catherine has paid the insurance premiums; that plaintiff has failed to prove the existence of any trust for her benefit in or to the property and has failed to prove the material allegations of her complaint.
As conclusions of law the court found that defendant William Boggs is the legal owner of the property; that plaintiff's cause of action is barred by subdivision 4 of section 9033, Revised Codes of Montana 1935, and by sections 9015, 9016 and 9024, Revised Codes, and barred by laches. Judgment was entered accordingly, from which plaintiff appeals after her motion for new trial was denied.
Plaintiff has made numerous assignments of error but has seen fit to discuss them collectively. The first assignment of error questions the propriety of the court's finding that the deed from plaintiff to her mother made on November 18, 1924, was a gift "and contained no provisions nor covenants concerning nor creating a trust or condition of any kind or character." Both plaintiff and her mother testified that the deed from plaintiff to her mother was not intended as a gift. They both testified that the reason for making the deed was that Mr. Miller, who paid the purchase price to Dalberg, might have relatives who might claim the property upon his death. It was understood between plaintiff and her mother that the property was being held as a home for plaintiff. Plaintiff's mother on that point testified as follows:
"Q. `What was the talk between you when Agnes made the deed to you?' A. We thought, if Mr. Miller had relatives, they would come in and take everything from her; that was it.
"Q. Yes. What did you decide about that? A. Well, I thought when she made it over to me I would keep it until she got it back.
"Q. Did you say anything along that line to Agnes? A. Well, no, but I knew it was right, that it was hers; I knew it wasn't mine.
"Q. Do you remember whether you and Agnes talked about *Page 136 the possibility that Mr. Miller might have relatives? A. Yes, we did."
There was no evidence refuting the testimony of plaintiff and[1] her mother on this point. The effect of defendants' evidence was that Agnes deeded the property to her mother upon the request and at the direction of Mr. Miller. But the court impliedly found against defendant on that issue and impliedly found that Miller had given the property to plaintiff because if plaintiff did not own the property she could not make a gift of it to her mother. The court evidently took the view that an absolute deed without consideration and with no covenants creating a trust must, as a matter of law, be considered a gift. This result would perhaps follow if all trusts in relation to real property must be in writing. But it is not necessary that all trusts in relation to real property be in writing. Section 6784, Revised Codes 1935, which is the same as section 852 of the California Civil Code, reads: "No trust in relation to real property is valid unless created or declared: 1. By a written instrument, subscribed by the trustee, or by his agent thereto authorized by writing; 2. By the instrument under which the trustee claims the estate affected; or, 3. By operation of law."
Section 7887, Revised Codes 1935, corresponding to section 2224 of the California Code, reads: "One who gains a thing by fraud, accident, mistake, undue influence, the violation of a trust, or other wrongful act, is, unless he has some other or better right thereto, an involuntary trustee of the thing gained, for the benefit of the person who would otherwise have had it."
The California courts have repeatedly upheld trusts concerning real property resting in parol under facts very similar to those here involved so far as the transaction between plaintiff and her mother is concerned and particularly where, as here, a relationship of trust and confidence existed between the parties. (Bradley Co. v. Bradley, 37 Cal. App. 263, 173 P. 1011; Lauricella v. Lauricella, 161 Cal. 61, 118 P. 430, and cases therein cited; Robertson v. Summeril, 39 Cal. App. 2d 62,102 P.2d 347; Huber v. Huber, 27 Cal. 2d 784, *Page 137 167 P.2d 708, 712. In the latter case it is said: "In this state it is settled that because of the confidential relationship between husband and wife, an oral agreement between the spouses in connection with a conveyance of real property between them or by a third person to one of them can be enforced by making the grantee a constructive trustee for the other spouse if the grantee violates such an oral agreement." (Citing numerous authorities.)
In Scott on Trusts, Vol. I, section 44.2, the rule is stated[2] as follows: "There are numerous cases to the effect that where at the time of the transfer the transferee was in a confidential relation to the transferor, and the transferor relied upon his oral promise to reconvey the land, he is chargeable as constructive trustee of the land for the transferor. In these cases it is held that the constructive trust will be imposed even though at the time when he acquired the property the transferee intended to perform his promise and was not therefore guilty of fraud in acquiring it; and even though the transferee did not take improper advantage of the confidential relation in procuring the transfer and was not therefore guilty of using undue influence. The abuse of the confidential relation in these cases consists merely in his failure to perform his promise." The court erred in holding that the deed from plaintiff to her mother was a gift.
Under all the evidence a constructive trust resulted when the[3] deed passed from plaintiff to her mother. For the same reason the court erred also in making that part of finding No. XI reading: "That the plaintiff has failed to establish or prove the existence of any trust for her benefit in or to said property and that no trust exists in her favor therein." Plaintiff proved a constructive trust between herself and her mother and she has the right to enforce that trust unless prevented from so doing by subsequent events.
Plaintiff and her mother testified in substance that when plaintiff's mother Lenora Leahy deeded the property to Catherine Moore (now Catherine Boggs) it was understood that the *Page 138 property would remain that of plaintiff and that Catherine promised to reconvey the property to plaintiff whenever requested to do so. This was flatly denied by defendant, but the court never reached the point where it found it necessary to resolve that conflict. The court simply found that such deed contained no covenant or provision creating a trust. For the reasons above given if plaintiff's version of the facts were correct, absence of a writing would not defeat the trust. Likewise plaintiff testified that when she learned that Catherine had conveyed the property to her husband, the defendant William Boggs, she demanded that the property be reconveyed to her but after some discussion defendant Catherine asked plaintiff to sign a paper transferring the property in question to her if she and her husband would fix up the house in which plaintiff was living. According to plaintiff's evidence this proposal was made by Catherine after she had talked with her husband who was upstairs, she stating to plaintiff that her husband had agreed to do so. This constitutes some evidence that both defendants considered plaintiff the owner of the property after it was deeded to defendant William Boggs by his wife. Defendants denied this evidence by plaintiff but the court did not see fit to resolve that conflict because of the finding that the deed from plaintiff to her mother was a gift and because that deed and the subsequent ones contained no provisions creating a trust.
Having found that plaintiff made a gift of the property to Lenora Leahy in November, 1924, it was unnecessary for the court to go further. If that finding were sustained by the evidence then plaintiff had no further standing in court. She had no cause of action left against which the statute of limitations or any other defense had to be asserted. But the court went further and found that the action was barred by subdivision 4 of section 9033, sections 9015, 9016 and 9024. Revised Codes 1935, and by laches.
In treating of this subject in the briefs, the parties have[4, 5] assumed the existence of a trust and we shall do likewise. As above indicated, if there be a trust it is a constructive trust *Page 139 and not an express one. An express trust conveying real estate must be in writing. Since this one, if there be a trust, is a constructive trust we are urged to apply the statute of limitations as commencing to run as of the date when Mrs. Leahy conveyed the property to defendant Catherine, if not from the date when plaintiff conveyed to her mother. Defendants rely upon the general rule enunciated in Stianson v. Stianson, 40 S.D. 322,167 N.W. 237, 6 A.L.R. 280, and the cases therein cited, to the effect that the statute of limitations starts to run on an express trust only from the time it is repudiated to the knowledge of the beneficiary, but that as to a constructive trust the statute of limitations begins to run at the moment the law creates the trust. This is the general rule but it is based upon the supposition that the constructive trustee is holding the property adversely to the beneficiary. Where as in this case there is a relationship of trust and confidence and there is no holding by the trustee adversely, the statute is not running against the beneficiary until refusal to carry out the trust by reconveyance.
The rule applicable here is stated in Scott on Trusts, Vol.[6] III, section 481.1, page 2356, as follows: "Where, however, the beneficiary of a constructive trust has no reason to believe that the constructive trustee is holding the property adversely, the beneficiary will not be barred by laches even though he knows of the circumstances giving rise to the constructive trust. Thus where A conveys land to B who orally agrees to reconvey it to A, and B is in a confidential relation to A, B holds the property upon a constructive trust for A. In such a case A is not guilty of laches in failing to sue as long as B has not repudiated his promise." When the circumstances show an apparent recognition of the trust the statute does not begin to run until the beneficiary has received notice of the assertion of an adverse interest. "Thus where a mother conveyed real estate to her father upon his oral agreement to hold it in trust for her children and he subsequently refused to be bound by his oral agreement, it was held that the statute of limitations did not begin to run in his favor until the time of *Page 140 his open repudiation of the parol trust." (Perry on Trusts and Trustees, 7th Ed., Vol. II, sec. 865 (a), p. 1479.)
Sections 9015, 9016, Revised Codes, in substance prevent the[7] recovery of real property unless the person seeking recovery or his predecessor in interest was seized or possessed of the land within ten years before the commencement of the action. If the property was held first by Mrs. Leahy and then by defendant Catherine Moore in trust for plaintiff, then their possession was possession of, by and for plaintiff and the action would not be barred because of these sections.
Section 9024 provides: "In no case shall adverse possession be considered established under the provision of any section or sections of this code unless it shall be shown that the land has been occupied and claimed for a period of ten years continuously, and the party or persons, their predecessors and grantors, have, during such period, paid all the taxes, state, county, or municipal, which have been legally levied and assessed upon said land." Plaintiff here is not seeking to establish title by adverse possession and in consequence that section does not apply.
Subsection 4 of section 9033, Revised Codes 1935, provides a two year limitation for "an action for relief on the ground of fraud or mistake, the cause of action in such case not to be deemed to have accrued until the discovery by the aggrieved party of the facts constituting the fraud or mistake."
This section of our statute "applies only to actions for fraud[8] or mistake within the common acceptance of the term." (Bennett v. Meeker. 61 Mont. 307, 202 P. 203, 204, and compare Wagner v. Law, 3 Wash. 500, 28 P. 1109, 29 P. 927, 15 L.R.A. 784, 28 Am. St. Rep. 56; Cornell v. Edsen, 78 Wash. 662,139 P. 602, 51 L.R.A., N.S., 279; Hutchinson Realty Co. v. Hutchinson,136 Wash. 184, 239 P. 388; Bradbury v. Nethercutt, 95 Wash. 670,164 P. 194; Noble v. Martin, 191 Wash. 39,70 P.2d 1064: Henriod v. Henriod, 198 Wash. 519, 89 P.2d 222.) This action is not predicated upon fraud in the common acceptation of that term. It is true that fraud is a ground for a constructive trust, sec. 7887, Rev. Codes, and *Page 141 that violation of trust obligations is a fraud against the beneficiary. Sec. 7894, Rev. Codes. But here fraud is not the basis of the trust claimed but rather failure to comply with the promise to reconvey the property. In consequence if the trust is established, the action is not barred by subdivision 4 of section 9033, Revised Codes 1935.
As above noted, the court did not pass upon conflicting[9] evidence bearing upon the question whether a trust arose, but concluded there was no trust because the several deeds contained no trust provision. It is our conclusion that the cause should be remanded with directions for the court to pass upon the fact situation as to whether a trust arose as contended by plaintiff. If her evidence and that of her mother is believed, then there is sufficient evidence to establish a trust. On the other hand, if defendant Catherine's evidence is believed, then the deed by plaintiff to her mother passed the title because according to her evidence it was given at the direction of Mr. Miller who she claimed was the actual owner.
The deed from Catherine to her husband was made in 1942 and[10] the action was commenced in 1945. The action is governed by the statute relating to the recovery of real estate which in this state is ten years. (Cohn v. Goodday, 191 Cal. 615,217 P. 756; Bradley Bros. v. Bradley, 20 Cal. App. 1, 127 P. 1044.) In Earl v. Lofquist, 135 Cal. App. 373, 27 P.2d 416, 419, it was said: "The first and second so-called causes of action are, however, for the recovery of real property, and subdivision 4 of section 338 of the Code of Civil Procedure does not apply. The rule stated in Murphy v. Crowley, 140 Cal. 141, 73 P. 820, 821, that `although the main ground of the action is fraud or mistake, whereby the defendant has obtained the legal title to the land in controversy, and the chief contention between the parties is with respect to the fraud or mistake alleged, yet, if the plaintiff alleges facts which show, as matter of law, that he is entitled to possession of the property, and a part of the relief asked is that he be let into possession, or that his title to the land be quieted, the action is in reality for the *Page 142 recovery of real property, and is not barred except by the five-years limitation contained in section 318 [Code of Civil Procedure]' has been repeatedly approved and followed in a long line of authorities, an enumeration of which may be found in 16 Cal. Jur. 438, n. 12."
We deem it unnecessary at this time to discuss the legal effect of defendants' evidence tending to show that Catherine Moore bought the property from Mrs. Leahy or the legal effect of the evidence showing improvements made by defendants on the property, nor the effect of defendants paying the taxes and insuring the property throughout the years.
Defendants made several cross-assignments of error but we[11] think only one of them requires consideration. Defendants assign error on the part of the court in denying their motion to require plaintiff to elect as to the kind of trust she is relying upon. It is our view that the court did not err in overruling the motion. Plaintiff need not do more than plead the facts relied upon and then it is incumbent upon the court to apply the law to those facts. Plaintiff is entitled to rely upon whatever trust, if any, the facts will justify.
It is our view that the cause should be remanded with directions to find on the fact issues as presented by the evidence in accordance with the views herein stated and to otherwise proceed as to the court may seem proper.
It is so ordered.
Associate Justices Choate, Gibson, and Metcalf, concur.