Baker v. Leigh

• Decision Date: 18 January 1965
• Docket Number: No. 5-3385,5-3385
• Citation: 238 Ark. 918,385 S.W.2d 790
• Parties: Ralph H. BAKER, Jr., Admr., et al., Appellants, v. William W. LEIGH, Appellee.
• Court: Arkansas Supreme Court

Page 790

385 S.W.2d 790

238 Ark. 918

Ralph H. BAKER, Jr., Admr., et al., Appellants, v. William W. LEIGH, Appellee.

No. 5-3385.

Supreme Court of Arkansas.

Jan. 18, 1965.

Gentry & Gentry, Little Rock, for appellants.

H. B. Stubblefield, Little Rock, for appellee.

McFADDIN, Justice.

This case involves a trusteeship. Mr. Ralph H. Baker, Sr., departed this life in March 1963, and the appellant, Ralph H. Baker, Jr., is the administrator of said estate with will annexed. The present litigation grows out of a real estate transaction wherein Mr. Baker, Sr. acted as trustee for himself and the appellee, Mr. W. W. Leigh; and Mr. Baker, Sr. died without having settled his trusteeship. Mr. Leigh brought this suit, and his difficulty in making proof was because the administrator pleaded the dead man statute, ¹ as he had a perfect right to do. Mr. Leigh was thus unable to testify as to any of his transactions with Mr. Baker; and the evidence in Mr. Leigh's behalf as to such transactions had to be established by written instruments, cancelled checks, bank statements, and the testimony of third persons.

On December 16, 1958, Mr. Baker, as Trustee, paid Messrs. Ellis $4250.00 for a 6-months option to purchase a tract of 40 acres at a total consideration of $40,000.00. In exercising the option, a fee of $2000.00 was paid an attorney. The option was exercised, and on June 19, 1959, a deed was executed by Messrs. Ellis to 'Ralph H. Baker, Trustee', reciting the total consideration to be $40,000.00, paid and payable as follows:

$11,600.00 in cash;

$12,400.00 vendor's lien notes to Messrs. Ellis;

$16,000.00 Hoffman lien notes assumed by Baker, Trustee.

On June 22, 1959, Ralph H. Baker, Sr. signed and delivered to W. W. Leigh an instrument reading as follows:

'DECLARATION OF TRUST

'STATE OF ARKANSAS

COUNTY OF PULASKI} SS

'Whereas Ralph H. Baker, Trustee, has this the 22 day of June 1959 purchased:

'The Northwest Quarter of the Southeast Quarter (NW 1/4 SE 1/4) Section Three (3), Township One North (Twp. 1 N.), Range Thirteen West (R 13 W), in Pulaski County, Arkansas

for the account of the following persons, and in the proportion set opposite their respective names, to-wit:

'William W. Leigh, Fifty per cent (50%)

'Ralph H. Baker, Fifty per cent (50%)

and upon the following terms of purchase: _____ cash, balance over a period of _____ years, amoritized at _____ and balance bearing interest at _____%.

'Now be it known that Ralph H. Baker, Trustee, acknowledges that he holds the title to said lands for the use and benefit of the persons named, but upon the following terms and conditions, to-wit:

'As this land is purchased on terms, the above parties shall pay their respective portions of the balance due thereon.

'It is specifically understood between all the parties hereto, that all of the interested parties shall promptly pay to the Trustee their proportionate part of all State and County taxes, and any special taxes, levied against said lands.

'Trustee, Ralph H. Baker, covenants to exercise such trust in good faith on his part.

'Witness my hand and seal at Little Rock, County of Pulaski, State of Arkansas this the ___ day of June, 1959.

'/s/ Ralph H. Baker

'Ralph H. Baker, Trustee

'/s/ Ralph H. Baker, Jr, Witness.'

In September 1963 Mr. Leigh filed the present suit. ² He alleged the trusteeship of Mr. Baker Sr., as shown by the above instrument, and claimed that he (Leigh) had paid a total of $48,775.22 on the trust property and that Mr. Baker Sr. had paid only $520.18. On the basis of these figures Mr. Leigh prayed that he have judgment against the estate of Mr. Baker and a lien on the one-half interest of Mr. Baker Sr. in the land for $24,127.52, being the amount Mr. Leigh had paid for the protection of the interest of Mr. Baker Sr. The answer was a general denial and plea of limitations. Trial in the Chancery Court resulted in a decree for Mr. Leigh for all the prayed relief; and this appeal resulted, in which appellants ² urge two points:

'I. The Court erred in awarding judgment against Ralph H. Baker, Jr., Administrator of the Estate of Ralph Baker, Sr., deceased, in the amount of $24,127.52, the amount of such judgment should have been $15,259.43.

'II. The Court erred in declaring the fixing any lien on the undivided interest of the estate of Ralph H. Baker, deceased.'

1. Amount Of The Judgment. This is appellant's first point. In the trial there were introduced Mr. Leigh's cancelled checks, identified by witnesses, as to the amounts ³ paid by him in connection with this land transaction, as follows:

In their first point the appellants claim that Mr. Leigh should have an unsecured judgment for only $15,259.43 instead of the amount rendered by the Court. The appellants reach this figure of $15,259.43 by deducting from the total amount paid by Mr. Leigh the items 'A,' 'B,' and 'C,' and Item 'K,' as identified and shown in the tabulation of Mr. Leigh's checks above. Appellants claim that the items 'A,' 'B,' and 'C,' should be stricken because it was not until the Declaration of Trust was signed that Mr. Baker became bound to Mr. Leigh to pay half of the cost; and appellants claim that Item 'K' should be stricken because it was a surveying item and not within the purview of the Declaration of Trust. We cannot agree with appellants as to Items 'A,' 'B,' and 'C.' There was introduced into evidence another instrument, shown to have been signed by Mr. Baker Sr. and delivered to Mr. Leigh, which recited:

'Dear Bill:

'The attached memorandum will serve as a complete record of this transaction as far as payments are concerned. Of the eight thousand paid down, you put up $6,000.00. As I remember it you gave me a check on L. B. Leigh and Co. for $5,000.00 and another personal check for $1,000.00. I put up the other $2,000.00 completing the down payment. 'You have put up all the rest of the money except I paid the semi-annual interest due on 1st lien 8-1-59 of $262.50. If you will pay the semi-annual interest on this item due 4-1-60 this will even up this item. In addition you paid the accrued interest before that when we closed the deal amounting to $533.34. Don't forget to charge this item in your 1959 INCOME TAX REPORT.

'/s/ Ralph

                'P.S.  You actually advanced $12,133.34 on 6/19/59 broken down as follows
                "Payment   $11,600.00
                 Interest      533.34
                           -----------
                           $12,133.34"
                

There was also introduced the closing figures when Mr. Baker Sr., Trustee, closed the transaction with Messrs. Ellis at the Beach Abstract Company. From these, and from other proof in the case, it is thus clear that Mr. Leigh has paid far more than the amount which he was to pay; that is, his half of the purchase price and interest. Because of failure to introduce some checks, we find that the proof on this point justifies a judgment for Mr. Leigh for only $24,028.94, as previously explained; so we affirm the judgment in favor of Mr. Leigh for $24,028.94.

II. The Lien On Baker's Interest In The Land. This point consumes the larger portion of appellants' brief. They insist that Mr. Leigh cannot acquire a lien on Mr. Baker's interest merely by showing that Mr. Leigh has paid money that Mr. Baker should have paid, and they undertake to show that Mr. Leigh cannot obtain a lien by subrogation, equitable lien, or resulting trust. We agree with appellants that the mere payment by Mr. Leigh of more than his half of the cost did not, standing alone and in the absence of other factors, give Mr. Leigh a lien on Mr. Baker's half interest in the land. The case of Dowdy v. Blake, 50 Ark. 205, 6 S.W. 897, is on this point. But there are many other factors in this case and after considering all of these we hold that Mr. Leigh is entitled to a lien on Mr. Baker's interest in the land because of the application of the equitable doctrine of subrogation. In Southern Cotton Oil Co. v. Napoleon Hill Cotton Co., 108 Ark. 555, 158 S.W. 1082, this Court discussed at some length the equitable doctrine of subrogation, saying:

'The doctrine of subrogation is an equitable one, having for its basis the doing of complete and perfect justice between the parties without regard to form, and its purpose and object is the prevention of injustice. Cyc. also says: 'And generally where it is equitable that a person, not a mere stranger, intermeddler, or volunteer, furnishing money to pay a debt, should be substituted for or in place of the creditor, such person will be so substituted.' 37 Cyc. 371. * * *'

Quoting from an earlier case, Chaffe v. Oliver, 39 Ark. 531, 546, this Court also said as regards subrogation:

"It rests upon the maxim that no one shall be enriched by another's loss, and may be invoked wherever justice and good conscience demand its application, in opposition to the technical rules of law which liberate securities with the extinguishment of the original debt. This equity arises when one not primarily bound to pay a debt, or remove an incumbrance, nevertheless does so; either from his legal obligation, as in case of a surety, or to protect his own secondary right; or upon the request of the original debtor, and upon the faith that, as against the debtor, the person paying will have the same sureties for reimbursement as the creditor had for payment. And this equity need not rest upon any formal contract or written instrument. Like the vendor's lien for purchase money, it is a creation of a court of equity from the circumstances.' The theory of equitable assignment, as laid down by Pomeroy is: 'In general, when any person having a subsequent interest in the premises, and who is therefore entitled to redeem for the purpose of protecting such interest, and who is not the principal debtor, primarily and absolutely liable for the mortgage debt, pays off the mortgage, he thereby becomes an equitable assignee thereof, and may keep alive and enforce the lien so far as may be necessary in equity for his own benefit; he is subrogated to...