First Savings Bank & Trust Co. of Albuquerque, N. M. v. Greenleaf

• Decision Date: 03 December 1923
• Docket Number: 6254.
• Citation: 294 F. 467
• Parties: FIRST SAVINGS BANK & TRUST CO. OF ALBUQUERQUE, N.M., v. GREENLEAF.
• Court: U.S. Court of Appeals — Eighth Circuit

294 F. 467

FIRST SAVINGS BANK & TRUST CO. OF ALBUQUERQUE, N.M., v. GREENLEAF.

No. 6254.

United States Court of Appeals, Eighth Circuit.

December 3, 1923

A. B McMillen, of Albuquerque, N.M. (Lawrence F. Lee, of Albuquerque, N.M., on the brief), for appellant.

J. O Seth, of Santa Fe, N.M. (Summers Burkhart, of Albuquerque N.M., on the brief), for appellee.

Before STONE, Circuit Judge, and VAN VALKENBURGH and KENNEDY District judges.

VAN VALKENBURGH, District Judge.

The appellee was on the 3d day of May, 1918, the owner of certain premises described in the complaint, and situated in the city of Albuquerque, N.M. On that date she conveyed the premises to the appellant in trust for the following purposes:

'To manage, control, maintain, improve, repair, care for and lease said property so conveyed, collect and receive the rents and income thereof, and to pay over the net income thereof to or for the benefit of said Olivia G. Greenleaf, subject to any and all agreements and assignments hereafter to be made for the application or distribution of said income. This trust to continue to the death of said Olivia G. Greenleaf. Upon the termination of said trust by the death of Olivia G. Greenleaf all the rights, title and interest hereby conveyed to the said second party in trust shall immediately revert to and vest in the heirs of the said first party, without any further grant or conveyance.'

The appellant accepted said trust, entered into possession of the premises, and continued as such trustee until in the month of October, 1920. The premises so conveyed consisted of lots having a frontage of 50 feet and a depth of 75 feet, upon which stood a three-story brick building. The lower floor of this building was used as a storeroom, and the two upper floors for hotel purposes, with an adjoining hotel. For about three years prior to October 18, 1920, the appellee, a widow 85 years of age, had been living in California, and was personally unfamiliar with the changes that had taken place in real estate values in Albuquerque following the close of the World War. Shortly prior to the latter date the appellant sent its vice president, Charles S. White, to California for the purpose of negotiating a purchase of the premises above described, which appellant desired in part to remodel and occupy for its banking purposes. Appellee alleges that White represented to her that the property was worth not to exceed $42,500, and that she would receive a much larger income by selling the property to the appellant for that price and taking the appellant's note secured by mortgage for the full purchase price at 8 per cent. per annum, than she would receive from the rentals of the property. It is further alleged that appellee had known White from boyhood, and had absolute confidence in his ability and integrity; and, relying on his representations and in ignorance of the true value of the property, alleged to be worth about $65,000 at that time, executed on October 18, 1920, a warranty deed conveying the premises to appellant.

On or about October 13, 1920, the appellant, apparently in view of its proposed dealing with appellee in the purchase of the property which it held in trust, executed an instrument purporting to terminate the trust relation and to reconvey the premises to the appellee. This instrument was not brought to the attention of the appellee, and she had no knowledge of its existence until after the execution and delivery of her deed to appellant. It is conceded that appellee first obtained knowledge of the alleged falsity of the representations made to her as to the value of her property on or about November 15, 1920, and on the following day she executed a power of attorney to her son, an attorney at law, himself a nonresident of New Mexico, authorizing him to protect her rights in the premises and to take such action as might be deemed necessary. Her son, under this authority, employed an attorney in Albuquerque to handle the matter; but, as appears from the record, no steps were taken looking toward a repudiation of the sale until the filing of this suit on the 10th day of December, 1921. Meantime, the appellee continued to keep the note and mortgage given as purchase price, as above stated, and on or about August 25, 1921, hypothecated the same to the First National Bank of San Diego, Cal., to secure a loan of $8,000 and as a basis of credit referred said bank to the officers of appellant for information as to this collateral security, and through her son refused to accept payment thereof when payment before maturity was suggested. Appellee had also accepted and received the interest upon said purchase price note as it accrued.

On or about September 1, 1921, the appellant commenced the work of remodeling the lower story of said building for its use as a banking room; this work had proceeded to a very substantial extent, and, as found by the trial court, up to November 1, 1921, the appellant had expended in remodeling said building, or had become bound for contracts for expenditures in the remodeling of said building, in excess of the sum of $56,000. The court further found that at that time said building was in such a condition from the work of remodeling that it was unfit for any use of the ground floor or basement; and also that any considerable delay in the work of carrying on the construction would have been attended with great danger and probable destruction of the building.

The appellee by her bill alleged that because of her unfamiliarity with property conditions at the time the sale was made, her advanced age, and her lack of experience in transacting business without the advice and counsel of persons in whom she had confidence, she was induced to rely upon the appellant and its agents, who were her trustees, in the handling of said property, and made such sale in ignorance of the value of the property sold; that that value was fraudulently and falsely represented to her by her said trustee to her pecuniary damage. She prayed that upon final hearing the appellant be declared to be her trustee of the legal title to the property held by it under her deed of October 18, 1920; that appellant be required to surrender said deed for cancellation and to reconvey the property to appellee upon the surrender to it of its note given for the purchase price thereof; or, in the alternative, if this be deemed impossible, that appellant be decreed to pay appellee the amount of the difference between the consideration paid by it for said property, and the actual value of said property on the date of the sale as ascertained by the court, and for such other and further relief as might be deemed just and equitable.

The court found the issues for appellee as to the trust relationship existing and the fraud and misrepresentations practiced and made. It found, however, that because of the ratification of the sale to be deduced from the retention of the note and mortgage and the acceptance of interest accruing after notice of the fraud, and because of the delay, which the court termed 'laches,' in seeking redress until after appellant had expended large sums of money in remodeling the building, and had so altered the condition of that building that the status of the parties antedating the sale could not be restored, the appellee could not be permitted to rescind the contract and recover the property as prayed. Upon the prayer for alternative relief, however, the court found, the trust relation and the fraud being established, that appellee should recover the difference between the actual value of the property and the purchase price on the date of sale; which the court fixed at $10,000, with interest thereon at the rate of 6 per cent. per annum from the 18th of October, 1920.

It is contended by the appellant:

1. That the complaint asks for inconsistent relief; that the prayer to recover damages cannot be joined with the prayer for cancellation and rescission.

2. That having found the appellee guilty of laches there was nothing for the court to do except to dismiss the suit, because laches is a complete defense to a suit in equity.

3. That the claim for difference between purchase price and value could not be an incident to a suit for cancellation and a proper subject for equitable jurisdiction; that upon that issue appellant was entitled to trial by jury.

4. That her ratification was equivalent to making a new contract after she had full knowledge of all the facts. Appellant also contends that the facts in the case show no misconduct upon the part of the appellant or its agents, and did not justify the court in finding that the property was worth $10,000 more than the price paid.

So far as these latter points are concerned, it is sufficient to say that the trust relation existing between the appellant and appellee was established beyond dispute. As to the representations made, or the suppression of important facts concerning the value of the property, the evidence adduced is substantial and amply sufficient to support the finding of the chancellor. The appellee was a woman of very advanced years, residing at a distance from the situs of the property and unacquainted with the changes that had taken place in property values following the close of the war. The court can almost take judicial notice of the fact that property values had greatly advanced all over the country at the time this sale took place. This was not a mere transitory condition. Appellant sent one of its chief officers, a man in whom appellee reposed special confidence, from Albuquerque to California for the purpose of procuring this property. It knew that it occupied a position of trust and confidence, as evidenced by the fact that it deemed it necessary to...