Haynes v. Montgomery

• Decision Date: 28 November 1910
• Parties: HAYNES v. MONTGOMERY
• Court: Arkansas Supreme Court

132 S.W. 651

96 Ark. 573

HAYNES v. MONTGOMERY

Supreme Court of Arkansas

November 28, 1910

Appeal from Randolph Chancery Court; George T. Humphries Chancellor; reversed.

STATEMENT BY THE COURT.

This suit is by Leota Haynes, formerly Leota Arnold, for 80 acres of land, and for the canceling of certain conveyances of same, and for an accounting of the rents and profits.

Benjamin F. Arnold died in 1895 in Randolph County, leaving him surviving, appellant, his only child and heir, about five years old, who afterward married Haynes. His estate consisted of eight or ten head of cattle, a mule and wagon, some household goods, and the land in controversy, the northeast quarter of the northeast quarter of section 27, township 18 north, range 2 east, a part of which was in cultivation, and upon which a lien existed securing a debt of $ 100. He was taken sick at the house of defendant, Montgomery, and realizing that death was near and desiring to provide for his motherless girl as far as possible, made an agreement with Montgomery to take his cattle and all other personal property and the rent on farm for that year and pay the mortgage off the land, to take care of and raise the child, and to turn the land over to her when she became 18 years of age. "Montgomery said the agreement was that he was to take the child, and personal property and rent for the land that year, was to pay the land out, and save it for the child, and turn it over to her when she was 18 years old. He was also to school the girl all he could," was his statement to the brother of the dead man, and is not denied by him.

Montgomery was duly appointed guardian of plaintiff, and the mortgage was foreclosed after a default decree was rendered against her guardian and herself, without the appointment of a guardian ad litem for her, and said Montgomery, at the sale by commissioner, procured said land to be bought in for him and his benefit by J. H. Imboden. The land only brought $ 170, and the proof shows it to have been of the value of about $ 600. L. A. Imboden, the executor of J. H. Imboden conveyed same to Spinnenwebber, Peters & Hanff to hold for Montgomery, and they conveyed it to him by deed, dated October 3, 1907.

In furtherance of his scheme to procure title to said land in violation of his trust and to defraud the plaintiff of her rights, he procured the removal of disability of minority of plaintiff on September 4, 1907, that she might make a deed to perfect the title, and induced her to convey it to said firm on the advice of his attorney, who procured the order that they might convey it to him; and a quitclaim deed was made on the same day, September 4, 1907. The expressed consideration was one dollar, and nothing whatever was ever paid plaintiff for said land.

This guardian had always, while plaintiff was growing up, spoken of this land as his, and told her she had no real interest in it; that he wanted to sell it and Mont. Armstrong would not buy it until she had the order of court removing her disability of minority and made the deed. The defendant Montgomery, was in possession of the land from the time of Ben Arnold's death until January, 1908, and collected from $ 40 to $ 70 per year rent therefor.

The defendant, M. R. Armstrong, claims to be an innocent purchaser of this land from W. J. Montgomery, guardian of the plaintiff. The proof shows that he purchased it from him knowing that he was her guardian, and that the title to it was held by Spinnenwebber and Peters for him in violation of his trust as such guardian, and, after refusing, as Montgomery states, to buy it until plaintiff's disabilities were removed and a deed made from her, that he asked for the papers and examined the records, as he was interested in them and wanted them included in the abstract. This was all done before he paid the purchase money, or any part of it, on October 3, 1907, and before the deed was executed by said Spinnenwebber and Peters to said Montgomery on that date. He required them to make affidavit before him as county clerk, showing, among other things, that when Imboden conveyed it to them "it was agreed and understood at the time that the said lands were to be the property of W. J. Montgomery." He only paid $ 675 for the lands, and the proof shows the value at $ 20 per acre, or $ 1,600.

M. R. Armstrong conveyed this land to A. J. Witt as trustee to secure the payment of a loan of $ 500 from Sloan, along with other lands, and but $ 250 has been paid on said indebtedness. Sloan, for whose benefit this deed of trust was made, claims to have been without knowledge of any of these matters, and an innocent purchaser or mortgagee. The complaint was dismissed for want of equity, and plaintiff appealed.

Case reversed.

W. A. Cunningham and T. W. Campbell, for appellant.

1. The court of equity is a special guardian of the rights of minors, and will set aside judgments and decrees of any of the courts for fraud and where equity demands it. 54 Ark. 539; 50 Ark. 458; 68 Ark. 492; 73 Ark. 440; 73 Ark. 281; 75 Ark. 425. Montgomery occupied a trust position totally inconsistent with the position of purchaser, and would not, as a matter of public policy, be allowed to purchase. 20 Ark. 401; 23 Ark. 626; 26 Ark. 446; 30 Ark. 48; 33 Ark. 587; 42 Ark. 28; 41 Ark. 264. The removal of appellant's disabilities of minority was procured by fraud and by suppression of facts. Montgomery was under the obligation to make the fullest disclosure to the court of all the facts and circumstances connected with the transaction; but whether or not this proceeding stands or falls, the deed from the ward is presumptively fraudulent and void. 9 Am. St. Rep. 593; 117 Am. St. Rep. 250; 89 Id. 302.

2. Armstrong was not an innocent purcahser. One who has notice of facts sufficient to put a prudent man upon inquiry has notice of all he might have learned by such inquiry. 23 Ark. 744; 58 Ark. 453; Id. 91; 14 Ark. 69; 32 Ark. 251; 9 Am. St. Rep. 595. The fact that he paid Montgomery nearly $ 1,000 less than the land was really worth is one of the strongest of the many evidences that he knew of appellant's rights in the land. 58 Mo. 235; 25 Wis. 573; 97 N.C. 367; Eaton on Equity, 131.

McCaleb & Reeder and Witt & Schoonover, for appellees.

1. Both the decree of foreclosure and the decree removing appellant's disabilities of minority are valid as against collateral attack. 72 Ark. 601; Id. 299; Id. 101; 63 Ark. 1; 73 Ark. 27; 75 Ark. 175-80; 76 Ark. 465; 23 Ark. 121; 31 Ark. 74; 24 Ark. 122; 50 Ark. 338; 57 Ark. 49; 28 Ark. 171; 34 Ark. 642. While in a foreclosure proceeding a decree against a minor defendant without a defense by a guardian is voidable on appeal or other direct attack, yet it is not subject to collateral attack. 18 Ark. 53; 25 Ark. 52; 49 Ark. 397; 56 Ark. 137; 50 Ark. 190; 23 Cyc. 1062; Id. 1070; 1 Black on Judgments, § 252; Id. § 246; 92 Ark. 611; 23 Cyc. 1072; 71 Ark. 330; 72 Ark. 299.

2. If this be held to be a direct proceeding, then appellant has joined in her complaint two actions which can not properly be joined in one action, and a failure to sustain either is fatal to her case.

3. In order to set aside a judgment or decree for fraud, the proof of fraud must be satisfactory and convincing. 73 Ark. 286. If the proof had been sufficient to show that fraud had been committed, it is not sufficient to show that Armstrong had any connection with it, and he, being an innocent purchaser, is entitled to be protected as such. The findings of the chancellor are clearly sustained by the preponderance of the testimony, and ought to be sustained by this court. 89 Ark. 132; Id. 309; 90 Ark. 166; 91 Ark. 69; Id. 149; Id. 246; Id. 268; Id. 299.

OPINION

KIRBY, J., (after stating the facts).

Was Montgomery, the guardian, under such disability to purchase these lands as that they will be charged with a trust in his hands and those of his vendee with notice?

In Hindman v. O'Connor, 54 Ark. 627, 16 S.W. 1052, this court said: "As a general rule, a party occupying a relation of trust or confidence to another is in equity bound to abstain from doing everything which can place him in a position inconsistent with the duty or trust such relation imposes on him or which has a tendency to interfere with such duty. Upon this principle no one placed in a situation of trust or confidence in reference to the subject of a sale can be the purchaser, on his own account, of the property sold."

Continuing quoting from Imboden v. Hunter, 23 Ark. 622: "The rule is not confined to persons who are trustees within the more limited and technical signification of the term, or to any particular class of fiduciaries, but applies to all persons in a situation of trust or confidence with reference to the subject of the purchase. It embraces all that come within its principle, permitting no one to purchase property and hold it for his...