Arnold v. Smith
| Decision Date | 20 March 1913 |
| Docket Number | 17,878 -- (201) |
| Parties | ELIZA M. ARNOLD v. HANSEN E. SMITH and Others |
| Court | Minnesota Supreme Court |
Action by Eliza M. Arnold, the widow of Cassius C. Merritt deceased, in the district court for St. Louis county against Hansen E. Smith, The Northern Security Company, H. E. Smith & Company, corporations, H. H. Phelps, as trustee of the creditors of Hansen Smith, and another, copartners as the Merchants Bank, L. A. Barnes, trustee in bankruptcy of Hansen Smith individually and Hansen Smith and another, copartners as the Merchants Bank of Duluth, and others, to obtain a decree that defendants and each of them held any part of the southeast quarter of the northwest quarter of section 12 township 58 north, range 19 west, then or thereafter acquired, in trust for plaintiff; to enjoin each of them from conveying or mortgaging any part of the same; for an accounting between plaintiff and defendant Smith; and for $ 50,000 damages. The facts are stated in the first opinion.
The separate answer of H. H. Phelps alleged that his appointment as trustee of the estate of Hansen Smith and another copartners as The Merchants Bank, was by private agreement and upon the appointment of a trustee in bankruptcy of that copartnership he ceased to be such private trustee, and disclaimed any interest in the property.
The answer of defendant Barnes, as trustee in bankruptcy, claimed an interest in the land but denied that such interest was subservient to any title of plaintiff or of the estate of C. C. Merritt, deceased.
The answer of defendant Smith and others denied that his interest in the land was held in trust for the estate of Cassius C. Merritt or for plaintiff, denied that plaintiff had any interest in the land, and alleged that the action was brought in collusion with Thomas A. Merritt and David L. Fairchild for the sole purpose of assisting the latter to defeat defendant's petition to the United States District Court, District of Minnesota, to set aside a pretended sale of the land to Merritt and Fairchild.
The case was tried before Ensign, J., who made findings of fact, as mentioned on page 126, infra, and as conclusions of law ordered judgment that defendant H. E. Smith & Company held in trust the undivided 2/32 of the premises described in trust for plaintiff, that defendant by its proper officers deed the premises to plaintiff and deliver to her the certificates of title for such undivided interest; that defendant Smith pay the sum of $ 4,000, with interest from September 27, 1905, $ 6,000, with interest from September 19, 1906, and $ 2,000, with interest from July 8, 1907; that all right, title, interest, estate or lien in, to, upon or against said undivided 2/32, held and owned by any of the defendants, be transferred and vested in plaintiff; that plaintiff was the owner in fee simple, and all the defendants and persons claiming under them be forever barred from asserting any interest in the premises. The defendants, excepting H. H. Phelps as trustee and E. H. Jennings, appealed from an order denying their motion for amended findings of fact and conclusions of law and from an order denying their motion for a new trial. Affirmed.
Personal interest of administrator in estate -- constructive trust.
1. One who holds the position of an administrator is incapable of acquiring for his own use an interest in the estate, and if he attempts so to do equity impresses a constructive trust upon the title so acquired, regardless of whether such acquisition was accomplished innocently, or even without knowledge of the fact that the property belonged to the estate, or was tainted with actual fraud.
Refund of forfeited tax certificate -- judgment inoperative.
2. Where the purchaser at a forfeited tax sale assigned to the state the certificate of purchase issued thereon, and received a refundment of all the money paid for such certificate, a judgment theretofore entered, quieting such purchaser's title under the certificate, was thereby rendered inoperative as between the owner of the land and the purchaser; the latter being thereafter estopped to assert any rights thereunder.
Trust -- finding sustained by evidence.
3. Findings of the trial court, in an action by a devisee to impress a trust upon the subject of the devise in the hands of the defendant, who had acquired the same subsequently to his discharge as administrator of the estate, that the defendant acted throughout the transactions leading up to his acquisition of title with knowledge that the land belonged to the estate, that he participated therein, and that his acts were done with a view of acquiring the plaintiff's interest in the land, held sustained by the evidence.
Plaintiff not estopped by judgment.
4. The plaintiff was not estopped, as against the defendant, from asserting her title to the land, by a judgment quieting title thereto in third persons, from whom the defendant subsequently acquired the title sought to be impressed with the trust.
Plaintiff not estopped by a Torrens decree.
5. The plaintiff was not estopped to seek the relief prayed by a Torrens decree adjudging title in the defendant; she having been knowingly misnamed in the summons as bearing her former husband's name, and having neither appeared in the proceeding nor been personally served.
Amount of recovery from defendant.
6. The plaintiff was entitled to recover from the defendant the value, not only of a portion of the land impressed with the trust which the defendant had conveyed to another, but also of the remaining interest in the land devised to her, which the defendant never acquired, but which had passed to third persons, and thus been lost to her, through the defendant's wrongful acts.
Assessment of damages.
7. The value of the land which the plaintiff lost by reason of the defendant's wrong was properly determined by the trial court, and the plaintiff's damages were properly assessed, except as to interest.
Laches.
8. The plaintiff held not barred by laches.
John A. Keyes and H. V. Gard, for appellants.
John B. Arnold, for respondent.
Action to declare and enforce a constructive trust and for other relief.
Cassius C. Merritt, one of the discoverers of the Iron Range, and himself familiar with the discoveries of iron and iron properties thereon from actual observations made on the grounds, and an experienced iron man, died testate in April, 1894, leaving a widow, this plaintiff, as his sole devisee and executrix. Several children also survived him. The defendant Hansen E. Smith since 1892 has resided in Duluth, and since 1894 has been familiar in a general way with what was considered iron property. In February, 1894, he became the private secretary of Cassius, and so continued until his death, thus becoming reasonably familiar with the affairs of his employer, and after the latter's death he continued to look after the business and property of the estate. This plaintiff knew little of the details of her husband's business affairs, and, as admitted by the defendant Smith, was not a business woman, but was aware of Smith's familiarity therewith as stated, and for these reasons, and also others, reposing confidence in him, she petitioned for his appointment as administrator. Her petition was granted in June, 1894, she becoming security on his bond, and he continued to act until his discharge on November 10, 1899. The estate proved to be insolvent, the appraised value being $ 27,000, whereas the claims exceeded $ 300,000, of which over $ 70,000 consisted of judgments entered against Cassius and his brother Andrus in 1893 and 1894 prior to the former's death. Smith had knowledge that Cassius dealt in and purchased iron lands and property, and was familiar in a general way with his opinions of the value thereof. While the deceased and the said Andrus were copartners, doing business in mining properties in the year 1891, they acquired the title to an undivided one-half of the southeast 1/4 of the northwest 1/4 of section 12, township 58, range 19, St. Louis county, by deed as individual grantees, from one Knudt Olson. This deed was duly recorded on December 23, 1891. Smith's final account as administrator and the inventories and proceedings in the estate of Cassius C. Merritt contain no account or mention of this land, and Smith, as administrator, never disposed of it or paid the taxes thereon, though he had sufficient money of the estate available to make such payment.
In June, 1895, Smith, with two others, organized a corporation named the Northern Security Company; he being the president and treasurer thereof and the owner of the majority of the stock. The corporation engaged, among other things, in the business of buying lands and tax titles. It appears that this corporation, at Smith's instance, purchased some $ 1,300 of judgments which were first liens on the property of the deceased; this, according to Smith's claim, being done for the protection of the estate, in that "the succeeding judgment" creditors would have first to pay such amount before they could levy on and sell any of the property, "and it was a protection in the sense that nobody wanted to do that, and didn't do it." Smith gave his note to the company, bearing interest at 10 per cent per annum, for the amount of these judgments. His further explanation of this transaction is as follows:
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