## Facts

- Mary Louise Steinberger deeded encumbered San Francisco real property to William Steinberger, Earle C. Steinberger, and Earle’s brother, each receiving an undivided one-third interest.
- On September 12, 1930, Earle executed a grant bargain and sale deed conveying his one-third interest to his uncle, William.
- The deed was executed at William’s request, without consideration, and on William’s oral promise to manage the property for both of them and to reconvey Earle’s one-third interest upon Earle’s request.
- A confidential relationship existed between Earle and William; Earle relied on William’s promise and executed the deed because he trusted William and was leaving San Francisco for an indefinite period.
- William repeatedly acknowledged during his lifetime that he held Earle’s one-third interest in trust and never repudiated the trust.
- William died intestate on February 8, 1940, without any prior request by Earle for reconveyance.
- After William’s death, the estate administrator refused to recognize Earle’s claimed interest, and Earle sued to establish a trust in the one-third interest.
- The trial court entered judgment for Earle, and the administrator appealed.

## Issues

1. Whether parol evidence of an oral promise to reconvey and trust arrangement is admissible to show that a deed absolute in form was given subject to a trust.
2. Whether the statute of frauds bars enforcement or recognition of an oral trust or promise to reconvey an interest in real property where the conveyance was without consideration and induced by a confidential relationship.

## Decision

- The Court of Appeal affirmed the judgment for Earle.
- The court held that evidence of the oral promise, the confidential relationship, the lack of consideration, and subsequent acknowledgments was properly considered to establish a trust despite the absolute form of the deed.
- The court rejected using the statute of frauds to defeat the trust where enforcement was necessary to prevent fraud or unjust enrichment.
- The administrator was required to recognize Earle’s beneficial one-third interest in the property.

## Legal Principles

- Parol evidence may be admitted to prove that a deed absolute on its face was delivered pursuant to a trust or confidential arrangement, particularly where the conveyance was without consideration.
- Equity will enforce or impose a trust in real property to prevent a transferee (or the transferee’s estate) from retaining property obtained on an oral promise to hold or reconvey within a confidential relationship.
- The statute of frauds cannot be invoked to perpetrate fraud; it does not preclude equitable relief where the transferor relied on a promise and the transferee acquired title under circumstances making retention inequitable.
- Repeated acknowledgments by the transferee that the property was held for the transferor support the existence and nonrepudiation of the trust.

## Conclusion

The court upheld a judgment establishing that Earle’s deed to his uncle transferred only legal title, with the one-third interest held in trust, because the conveyance was made without consideration in reliance on an oral promise to reconvey within a confidential relationship, and equity would not permit the statute of frauds or the deed’s form to defeat that trust.


Steinberger v. Steinberger, 140 P.2d 31 (Cal. Ct. App. 1943)