Gates v. Cornett
| Decision Date | 28 November 1888 |
| Citation | 72 Mich. 420,40 N.W. 740 |
| Court | Michigan Supreme Court |
| Parties | GATES ET AL. v. CORNETT. |
Appeal from circuit court, Jackson county, in chancery.
Bill by William E. Gates, by James D. Knight, his guardian, against George Cornett, to set aside certain mortgages. Decree was entered below in favor of complainant, and defendant appeals.
The bill in this case was filed to set aside six real-estate mortgages and a chattel mortgage, aggregating $15,839.82. It alleges that Gates has from his birth been a simple and weak-minded person, and since the death of his parents has been of unsound mind, foolish, idiotic, and mentally incompetent, and wholly unfit to have the care, charge, and management of his property, and utterly incapable of understanding the effect of bargains, or the adequacy or reasonableness of the consideration therefor; that he is, and has been during said time, incapable of forming an intelligent judgment of the value of services or property and would pay whatever any person with whom he might chance to deal insisted upon, without the slightest regard to the value of the same, or whether such services or property would be of the slightest value to him, and during all said time has been incapable of doing any kind of business in consequence of such mental deficiency; that the defendant and certain other covetous, dishonest, and evil-disposed persons, well knowing the premises and Gates' mental condition, took advantage of his mental condition and infirmity to cheat and defraud him out of his property and estate; that defendant pretended to be a friend of Gates, and advised him in and about his business, but that such pretenses were deceitful, and were made for the purpose of more readily cheating and defrauding him out of his property by reason of said fraudulent notes, bonds, and mortgages; that said mortgages were obtained without any consideration, or, if there was a consideration, it was of trifling value; that the same were made and executed because defendant required them, and induced Gates to believe that it was right and proper to make them, and that they were not the voluntary act of Gates; that, if any money was paid or loaned to Gates by defendant as part consideration for said mortgages, defendant knew the same would be of no use or value to complainant Gates, and would be obtained by the person defrauding him; that defendant claims that the consideration for such mortgages was largely and almost entirely notes of Gates, purchased by him from various persons; that such notes were fraudulent and void; that defendant did not purchase them in good faith, but knew their fraudulent character, as well as Gates' mental infirmity and incompetency; that such notes were largely if not entirely without consideration; that there was an understanding between Cornett and the various persons who procured the notes that such persons should obtain the same, and that Cornett would pretend to or actually purchase the said notes, with the view of obtaining said mortgages from Gates; that there was an understanding and conspiracy between said defendant and those persons taking said notes from Gates to cheat and defraud said Gates of his entire property and estate; that all the real-estate mortgages contained a clause permitting the mortgagee to declare the principal and interest due upon 30 days' default in payment of interest; that the chattel mortgage was made payable before the interest would become due upon said real-estate mortgages, and included all of complainant's personal property, leaving him without means of paying such interest, with the intent thereby to render the payment of such interest impossible, and enable the defendant to foreclose said real-estate mortgages for the full value thereof; that by such dishonest practices of defendant and others acting in concert with him, Gates' property has become greatly reduced, and, if said pretended mortgages are allowed to stand and be enforced against complainant, he will be deprived of nearly, if not quite, all of his property, and be reduced to absolute poverty; that Gates was the owner, and in possession of the property mortgaged. The relief prayed for is that the mortgages, notes, and bonds thereby secured and other notes, be set aside, and said mortgages discharged of record, and that defendant be enjoined from enforcing them, and for general relief. To this bill the defendant answered, neither admitting nor denying that the complainant was from his birth simple and weak-minded, but he denies that Gates, since the death of his parents, has been of unsound mind, foolish, idiotic, and mentally incompetent, as stated in said bill; avers that he has been, and still is, of sound mind, and competent to transact business, and to have the care and management of his property and estate; that in all his business transactions between him and complainant, Gates showed and exercised ordinary intelligence in the same, and he (Cornett) had no reason to believe, and did not believe, and does not now believe, him to have been or to be incompetent; that he was perfectly capable of comprehending bargains and the reasonableness of considerations, and to transact business properly and successfully. He admits the making and execution of the several mortgages set out in the bill, and says the one dated August 21, 1884, was for $2,000 money loaned at that time by him to Gates; that the consideration for the other mortgages was partly money loaned and partly for notes, which he had purchased, against Gates, at his request, and for his accommodation, and upon the promise that security should be given therefor. Denies having taken any advantage whatever of Gates, and denies all fraud, conspiracy, and evil-doing charged against him in the bill fully and particularly.
A large amount of proof was taken by testimony given in open court and relief was granted to complainant nearly to the extent prayed for in his bill. The court found as a fact, which is stated in the decree, that the complainant received from his parents an estate of upwards of $60,000; that he was then and ever since has continued to be mentally unsound, and incompetent to have the care and management of the same, and was defrauded of a considerable portion thereof by the defendant and certain other persons acting in concert with him; that the defendant, when he obtained the said notes and securities mentioned in the bill of complaint, and in all his dealings in reference thereto, had full knowledge of the incompetency of said complainant, and that he was so being defrauded of his property; that said obligations and securities were obtained by the defendant for the express purpose of defrauding the complainant, and are without consideration, or, if any was paid, it was of inconsiderable or no benefit to Gates, by reason of the fraudulent schemes and conduct to defraud him of his property, to which the defendant was a party, and of which he had full knowledge, except some small sums amounting in the aggregate to the sum of $510; that the securities were fraudulent and void. And it was decreed that each and all the mortgages executed by Gates to Cornett, mentioned in the bill of complaint, including the chattel mortgage of $1,900, be each and all of them set aside and held to be of no force or effect, except the mortgage executed January 5, 1884, for the sum of $1,306.29, which mortgage was held to be a valid and subsisting lien for the sum of $510, with interest thereon from the date of said mortgage, being the sum of $104; making in all $614.
There is much testimony in the record of the opinions of witnesses as to the competency and incompetency of William E. Gates to transact business, but it is the conflict of opinion with opinion. The facts upon which such opinions are based lead us irresistibly to the conclusion that complainant is and has been always mentally incompetent to transact business, in the ordinary sense of that term. His mind is weak, and he lacks in judgment, and is incapable of forming an independent judgment of the value of services rendered by laborers, or of property. He is by no means an idiot. He attended the district school, and obtained a passable knowledge of arithmetic and penmanship. He could compute interest accurately, and, so long as his property remained in bonds and mortgages, he appears to have managed it without loss. During the life-time of his parents they deeded to him 80 acres of land. His father died in 1878, and his mother in 1879. He was the only child and heir, and after his parents' death he had the exclusive care and management of the estate, which descended to him. He was appointed administrator of the estate left by his mother, and gave the proper bond, with two sureties. The inventory of this estate showed property amounting to $41,772.96 consisting of both real and personal estate; but the great bulk of the estate consisted of bonds, notes, and mortgages bearing interest. He had some other property aside from this left to him by his father. The exact amount, I think, does not appear; but after his mother's death he kept his money out at interest at good rates, and generally secured by first mortgages. When payments were paid he made his own computation of interest, and was generally accurate. He assigned and discharged mortgages. The only thing that he could do well was to loan money and reinvest it upon safe security. This kind of business he could do as well as ordinary persons, and showed no want of capacity. He could transact business with honest people without detriment or loss to himself, but easily fell a prey to the vicious and designing. In 1881 he sold a farm for $17,000, taking a $11,000 mortgage to secure a part of the purchase price. No...
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