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Confidential Relations and Unenforcible Express Trusts

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Confidential Relations and Unenforcible Express Trusts University of Chicago Law School Chicago Unbound Journal Articles Faculty Scholarship 1928 Confidential Relations and Unenforcible Express Trusts George Gleason Bogert Follow this and additional works at: https://chicagounbound.uchicago.edu/journal_articles Part of the Law Commons Recommended Citation George Gleason Bogert, "Confidential Relations and Unenforcible Express Trusts," 13 Cornell Law Quarterly 237 (1928). This Article is brought to you for free and open access by the Faculty Scholarship at Chicago Unbound. It has been accepted for inclusion in Journal Articles by an authorized administrator of Chicago Unbound. For more information, please contact [email protected]. CONFIDENTIAL RELATIONS AND UNEN- FORCIBLE EXPRESS TRUSTS GEORGE GLEASON BOGERT* It is a commonplace that courts of equity frequently base relief solely on the violation of a confidential relation. One of numerous examples of this action is to be found in the constructive trusts which are often created where a grantee has broken an oral, unenforcible promise to hold in trust for the grantor, and the grantee stood in a confidential relation to the grantor at the time of the making of the promise. The following is a typical case: A has conveyed land to B on B's oral agreement to hold it in trust for A and reconvey at A's command. A and B were in confidential relations before the deed was made. The Statute of Frauds prevents the enforcement of B's express promises. The retention of the land after setting up the Statute is not generally regarded as such inequitable conduct as to justify a decree that the holder is a constructive trustee. But the breach of the "confidential relation" existing between A and B is made the sole basis of a constructive trust in favor of A. The scope and rationale of this doctrine seem unsatisfactorily explained. Doubtless there is some truth in the remark of Professor Pomeroy that chancery declines to define the term "confidential relation" in order to preserve for itself complete liberty of action. It would seem, however, that sufficient freedom could be retained without shrouding the subject in the vague, conflicting generalities which now obtain. An effort will here be made to examine some of the judicial and editorial expressions on the subject and to offer a scheme of analysis which may clarify thought. Discussion is confined to the typical case outlined above. Similar will cases are excluded. Numerous other non-trust cases where confidential relationship is an important factor are not considered. To avoid the use of the cumbersome phrases, "the one trusting," "the one expressing confidence," "the confider," and the like, the word "grantor" will be used to refer to the person who has occupied the trusting or confiding end of the confidential relationship. And with like purpose the awkward phrases, "the one trusted," "the party relied upon," "the confidante," and similar words, will be *Professor of Law, University of Chicago Law School. 12 POMERoY, EQUITY JURISPRUDENCE (4th ed. 1918) § 956. HeinOnline -- 13 Cornell L. Q. 237 1927-1928 CORNELL LAW QUARTERLY replaced by the word "grantee" when it is desired to indicate the individual who has been the recipient of trust and confidence. In the law of trusts no extensive effort seems to have been made to keep the terms "confidential relation" and "fiduciary relation" distinct. They are generally used interchangeably.2 The quotations hereinafter given sometimes use "confidential," sometimes "fidu- "ciary." They are in fact referring to the same type of relation. Reference to a few of many judicial and editorial discussions of the meaning and theory of operation of the confidential relation doctrine will, it is believed, illustrate the prevalent confusion. Many definitions of "confidential relation" seem question-begging or so vague as to be valueless. In this class might be placed the following: "Stripped of all embellishing verbiage, it may be confidently asserted that every instance in which a confidential or fiduciary relation in fact is shown to exist will be interpreted as such... If a relation of trust and confidence exists between the parties (that is to say, where confidence is reposed by one party and a trust accepted by the other, or where confidence has been ac- quired and abused), that is sufficient as a predicate for relief."' "A person is said to stand in a fiduciary relation to another when ,he has rights and duties which he4 is bound to exercise for the benefit of that other person." A confidential relationship is one "in which, if a wrong arise, the same remedy exists on behalf of the injured party as would exist against a trustee on behalf of a cestui que trust."5 An important question upon which one might well expect to find light in the decisions, is whether "confidential relation" means a pre-existing state of trust and confidence or whether it may be a status arising at the time of the conveyance in question and the expression of which is consummated in the conveyance. Some judicial definitions seem broad enough to cover cases where the sole proof of the confidential relationship is the deed given on the faith of the oral promise. Thus the Supreme Court of Illinois has used these words:6 "A fiduciary relation exists in all cases in which influence has been acquired and abused. The origin of the confidence 2 Kochorimbus v. Maggos, 323 Iil. 510, 154 N. B.235(I926); Newell v. Halloran, 250 Pac. 986 (Utah, 1926); 20 R. C. L. §§ 93, 96; 39 Cyc. 182; 2 POMEROY, op. cit. supra note I, § 955. ZQuinn v. Phipps, 113 So. 49, 421 (Fla. 1927). 426 R. C. L. 93. zDick v. Albers, 243 Ill. 231, go N. E. 683 (1909). 8 Seeberger v. Seeberger, 325 Ill. 47, 51, 155 N. E. 763 (1927). HeinOnline -- 13 Cornell L. Q. 238 1927-1928 CONFIDENTIAL RELATIONS is immaterial. It may be moral, social, domestic, or purely personal. If the confidence is in fact reposed by the one party and accepted by the other, the relation is fiduciary, and equity will regard dealings between the parties according to the rules which apply to such relation." Some Illinois decisions appear to support the conclusion that the apparent breadth of the Illinois definition is actual. Thus, in Kocho- rimbus v. Maggos,7 the only evidence of the confidential relation between grantor and grantee was that (i) the parties had known each other for twenty years, (2) their wives were cousins, and (3) the grantor had trusted the grantee in connection with the convey- ance of the particular property in litigation. There was no proof of other business dealings between them in which the grantor had trusted the grantee. Obviously items (i)and (2) do not show a confidential relationship. But the court held that there was such relationship, apparently basing its decision on the single act of trusting out of which the litigation arose. This tendency to define the confidential relation which causes equity to act in these cases as one which existed before the conveyance or arose out of and at the 8 time of the conveyance, is also manifested in numerous other cases. There are, however, many other cases in which the grantor had, by various acts, for a longer or shorter period before the conveyance, placed reliance on the good faith and skill of the grantee, so that it could be said that there was a pre-existing status of trust and con- fidence. 9 Whether or not the existence of this relationship before the grant on an oral promise was necessary to enable equity to create a constructive trust out of the transaction, at least there was such prior intimacy in business affairs. In other decisions dominance or superiority seems to be treated as a sine qua non to the origin of a confidential relationship. It is said that the grantee must be one who overshadows the grantor, by reason of superior physical condition, maturity, experience, 7323 Ill. 510, 154 N. E. 235 (1926). 8Smith v. Sharp, 70 Calif. App. 336, 233 Pac. 374 (1925); Cameron v. Ward, 8 Ga. 245 (185o); Meheula v. Hausten, 29 Haw. 3o4 (1926); Lewis v. Ziegler, 1o5 Mo. 604, 16 S. W. 862 (I89I); Wells v. Cline, 19 Ohio App. 165 (1924); Hatcher v. Hatcher, 264 Pa. 105, 107 At1. 66o (1919). 9See, for example, Dahlgren v. Dahlgren, I Fed. (2d) 755 (C. A. Dist. Col. 1924); Cole v. Manning, 248 Pac. IO65 (Calif. 1926); Wood v. White, 123 Me. 139, 122 Atl. 177 (1923); Goldsmith v. Goldsmith, 145 N. Y. 313, 39 N. E. 1057 (1895); Sinclair v. Purdy, 235 N. Y. 245, 139 N. E. 255 (1923); Broadway Bldg. Co. v. Salafia, 47 R. I. 263, 132 Atl. 527 (1926). HeinOnline -- 13 Cornell L. Q. 239 1927-1928 CORNELL LAW QUARTERLY education or some other qualification. Thus, an Indiana Court has said:10 "There is no invariable rule for determining the existence of a fiduciary relationship, but it would appear from the de- cisions that there must be not only confidence of the one in the other, but there must exist a certain inequality, dependence, weakness of age, of mental strength, business intelligence, knowledge of the facts involved, or other conditions giving to one advantage over the other." And a Utah court has recently made the following statement:" "The doctrine rests upon the principle of inequality between the parties, and implies a position of superiority occupied by one of the parties over the other. Mere confidence in one person by another is not sufficient alone to constitute a fiduciary relationship. The confidence must be reposed by one under such circumstances as to create a corresponding duty, either legal or moral, upon the part of the other to observe the con- fidence, and it must result in a situation where as a matter of fact there is superior influence on one side and dependence on the other."'1 In numerous cases courts have laid emphasis on lack of equality between the parties as proving a confidential relationship,13 and sometimes lack of dominance or overweening influence has been treated as a reason for refusing to find a confidential relation.
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