The defendants appeal from an order denying their motion for a new trial. The defendants interested are Wm. C. Hoffmann and Louise Wright. It is claimed that the court below erred in excluding important and material evidence for the defendants and for the cross-complainant, Hoffmann.
The complaint stated a cause of action against the defendants to quiet title to a tract of land. The defendants jointly answered, alleging that Hoffmann was the owner of an undivided one half of the land, that the defendant Louise Wright held under him as lessee thereof, and that the deceased, Handley B. Doane, and plaintiff, as his administratrix, held the title to said one-half interest in trust for said defendants. Hoffmann filed a cross-complaint setting forth the facts upon which the alleged trust arose and existed and asking that the trust be declared and enforced. The facts alleged in the cross-complaint are as follows: —
The plaintiff and Hoffmann claim under a common source of title, one Alfred H. Fitch, who was the owner in fee of the land on August 23, 1886. On that day he executed to Felipe Tarpio, whose true name is Tapia, but who is also known as Tarpio, a deed purporting to convey said land to Tarpio. The consideration for this deed consisted of six hundred dollars in money paid to Fitch by Tapia, a deed by Tapia to Fitch conveying to Fitch three lots in Santa Cruz, and a deed executed by one Carlotta Amaya, afterwards and now the wife of Tapia, conveying to Fitch a certain parcel of land near Santa Cruz, of the value of twelve hundred dollars, and equal in value to the lots conveyed and the money paid to Fitch by Tapia. It was, at the time, agreed between Tapia and Carlotta Amaya that they were each to own an undivided one half of the land conveyed by Fitch to Tapia, and that Tapia should hold title to the one half thereof in trust for Amaya. On September 7, 1887, Handley B. Doane loaned to Tapia one thousand dollars, taking as security a mortgage on the land from Tapia alone. Tapia, at the time, informed Doane that he owned but an undivided one half thereof, that Carlotta Amaya, who was then his wife, owned the other undivided one half and that he held title to her half in trust for her. Afterwards said mortgage was foreclosed by plaintiff as administratrix of Doane's estate and a deed was executed to *Page 523 plaintiff, as such administratrix, in pursuance of the sale upon said foreclosure decree. Prior to the foreclosure, Tapia and his said wife, Carlotta, mortgaged the land to Christian Hoffmann, who assigned the mortgage to the appellant and cross-complainant, William C. Hoffmann. On May 25, 1897, while said foreclosure suit was pending, Tapia and his said wife conveyed the land to appellant Hoffmann, in satisfaction of the Hoffmann mortgage. Hoffmann, as successor of Carlotta, claims an equitable title to an undivided one half thereof and that his said title is superior and paramount to the Doane mortgage and to the plaintiff's title thereunder.
The claim of Hoffmann depends upon the existence of the alleged trust in favor of Carlotta Amaya, and upon the knowledge of said trust by Doane at the time Tapia executed to him the mortgage under which plaintiff claims. The payment by Carlotta Amaya of one half of the price of the land conveyed by Fitch to Tapia, at once created a resulting trust in favor of Carlotta in an undivided one half of the land and the title thereto was thereafter held by Tapia, the grantee, in trust for her. (Civ. Code, sec. 853; Thomas v. Jameson, 77 Cal. 93, [19 P. 177];Hidden v. Jordan, 21 Cal. 99; Case v. Codding, 38 Cal. 193;Somers v. Overhulser, 67 Cal. 237, [7 P. 645]; Fulton v.Jansen, 99 Cal. 591, [34 P. 331]; Murphy v. Clayton, 113 Cal. 157, [45 P. 267]; Polk v. Boggs, 122 Cal. 114, [54 P. 536];Faylor v. Faylor, 136 Cal. 92, [68 P. 482].) And if Doane took his mortgage from Tapia with knowledge of the trust, his mortgage lien was subject thereto, and any title to such one-half interest that might be obtained by him, or by his estate, or by his administratrix in her representative capacity, under a foreclosure of such mortgage, would be held as successor of Tapia in trust for Carlotta Tapia or Hoffmann, her grantee, free from the mortgage lien. (Prince v. Reeves, 38 Cal. 457; Riley v.Martinelli, 97 Cal. 580, [33 Am. St. Rep. 209, 32 P. 579];Murphy v. Clayton, 113 Cal. 157, [45 P. 267].) If Doane had no notice when he took the mortgage, nor prior to his death, and the administratrix bought for the benefit of the estate, without notice, she would hold as an innocent purchaser free from the trust. (Riley v. Martinelli, 97 Cal. 580, [33 Am. St. Rep. 209, 32 P. 579]; De Lany v. Knapp, 111 Cal. 169, [52 Am. St. Rep. 160, 43 P. 598].) But if Doane had notice, the mere purchase for the estate by *Page 524 the administratrix at the foreclosure sale, without knowledge on her part, would not make her an innocent purchaser, nor discharge the land of the trust.
It was, therefore, absolutely necessary for Hoffmann to prove, not only that Carlotta Amaya paid a part of the price of the land conveyed by Fitch to Tapia in 1886, but also that Doane had knowledge thereof when he took his mortgage in 1887. He introduced in evidence the deed from Fitch to Tapia and the deeds from Tapia to Fitch and from Carlotta Amaya to Fitch, and proved that all of them were recorded on the same day, August 31, 1886. Fitch then testified that these conveyances to him were made in consideration of the land he deeded to Tapia, that the land he got from Carlotta Amaya was then worth twelve hundred dollars, that the land obtained from Tapia was then worth nine hundred dollars and that Tapia paid some money in addition, the amount of which he could not remember. Tapia then testified that he paid Fitch six hundred dollars in money as part of the price of the land and that the lots he deeded to Fitch were then worth six hundred and fifty dollars. He was then asked if, at the time of making the Doane mortgage, he told Doane the facts as to the interest he owned. Objection was made and sustained to the question. Hoffmann thereupon offered to prove by the witness that, at the time witness made that mortgage, he told Doane that Carlotta Amaya had paid one half of the price of the land to Fitch, that she was the real owner of one half of the land and he of the other half, and that he held the title, as to one half, in trust for her, and that Doane said he was satisfied with one half of the land as security for the money loaned. This was objected to on the ground that it was irrelevant, immaterial, and incompetent, that Tapia's mortgage purported to cover the entire estate in the land and that he could not be a competent witness to explain, or vary, the terms of his mortgage. The court sustained the objection and excluded the evidence.
That this was error there can be no doubt. We have already seen that proof that Doane had notice of the trust was material and essential to the case of Hoffmann. Tapia was a competent witness to prove that he informed Doane of the trust, or of the facts upon which the trust arose. If he himself had been claiming one half of the land in question free *Page 525 of the mortgage lien, there would be force in the objection that, in the absence of mistake or fraud, he would be estopped to do so. But the person in whose favor the trust was created was not Tapia, but Carlotta Amaya, and Hoffmann was claiming as her successor and not as the successor of Tapia. Carlotta Amaya was not estopped by Tapia's mortgage, and neither was her successor in interest estopped. Tapia was not a party to this action.
Respondent asserts that the evidence of the trust was not clear or convincing, that the right to enforce the same was lost by laches, that it was a stale claim, and that the creation of such trust was rebutted by the taking of the deed in Tapia's name, and the other circumstances shown, and that it was not proven that a trust in her favor was intended or contemplated, and from these circumstances he argues that the defendants' case was without merit and that the erroneous ruling was not prejudicial.
The payment of a part of the consideration by a third person raises a presumption that a trust in favor of such third person was intended (Civ. Code, sec. 853). Respondent is not in a position to claim that the circumstances rebutted such presumption of intention, for Tapia was asked to testify as to the agreement between himself and Carlotta Amaya that he should hold in trust for her, and upon respondent's objection the evidence was excluded. If any direct proof of intention was required, defendants were entitled to this evidence and its exclusion would be prejudicial error. The insufficiency of the admitted evidence to prove the trust alleged, would be no ground for the exclusion of evidence of notice thereof to a third party dealing with the land. It might support the proposition that the rejection of evidence of notice caused no substantial injury and would not justify a reversal of the judgment. But there is no basis for the claim that the evidence of the trust was not clear or convincing. The evidence as to the exact values of the respective tracts of land conveyed to Fitch was conflicting, and this perhaps made the exact proportion or interest covered by the trust uncertain until the court should weigh the evidence and determine the values, but it was perfectly clear that Carlotta Amaya contributed substantially to the consideration paid and held a beneficial interest in a substantial proportion of the land bought of Fitch. *Page 526 We see nothing in rebuttal of the trust in the circumstance that the deed was made to Tapia. It was this conveyance which made the trust relation necessary. Such conveyance always attends a resulting trust of this character, and parol evidence is admissible to explain the deed to this extent.
The defense of laches was presented by the answer to the cross-complaint. The court made no finding as to laches, but did find that Tapia and Amaya did not agree that Tapia was to hold title to her interest in trust, that there was no trust in fact, that Tapia did not inform Doane of the trust and that Doane never had knowledge thereof. As the court had excluded the evidence to prove the agreement of Tapia and Amaya and Doane's knowledge of the trust, the findings as to these particulars were in accordance with the evidence admitted, but not with that which should have been admitted. The finding that no trust ever existed was contrary to the evidence. The evidence that Carlotta paid part of the price was clear and uncontradicted. Furthermore, the evidence of the agreement of Tapia, that he would hold title to one half the land in trust for Amaya, was important and material on the question of laches. If he took the title in his own name without her knowledge or consent, the law would raise a constructive trust; if by agreement with her, then only a resulting trust would be created. (Fulton v. Jansen, 99 Cal. 591, [34 P. 331].) What might be deemed laches in case of a constructive trust, might be of no significance if it were a resulting trust. Under these circumstances, the exclusion of the evidence to prove the facts alleged and found to be untrue as aforesaid, was plainly prejudicial.
There was evidence that at the time Tapia bought the land it was encumbered by a mortgage to Elmer Dakan for one thousand dollars, that Tapia and Amaya agreed to pay this mortgage, as part of the price of the land, and that the money borrowed on the Doane mortgage was used to pay the prior mortgage to Dakan. The respondent claims that, in equity, this prior mortgage would be kept alive for her benefit, as administratrix, and that the estate of Doane would be subrogated to the rights of Dakan. Whether this is so or not, the claim under the Dakan mortgage would be only a lien until it was foreclosed, and as no claim to such lien was alleged or asserted in the Doane foreclosure suit, as the rights of Hoffmann, *Page 527 in virtue of the trust, were expressly excepted and reserved by the decree in that suit, and as no lien was set up to be foreclosed in this action, it follows that the claim under the Dakan mortgage does not, in its present condition, constitute a bar to a judgment herein, declaring the alleged trust, nor a defense to the cross-complaint under the pleadings as they stand.
The order denying a new trial is reversed and the judgment is vacated.
Sloss, J., and Angellotti, J., concurred.
Hearing in Bank denied.