Lewis v. Welch
| Decision Date | 21 April 1891 |
| Parties | VILLA J. LEWIS and others <I>vs.</I> THOMAS WELCH. |
| Court | Minnesota Supreme Court |
Warner, Richardson & Lawrence, for appellant.
Francis G. Burke, for respondents.
This is an appeal by the defendant from a judgment. The plaintiffs are the heirs-at-law of one Bond. The defendant, as administrator of his estate, foreclosed a mortgage, and through that foreclosure, he being the real purchaser at the foreclosure sale, acquired the title to the mortgaged property. By the judgment in this action, from which the defendant has appealed, it was declared that the defendant held the title thus acquired in trust for the benefit of the plaintiffs. The facts, as established by the findings of the court, must be somewhat more fully stated. Bond during his lifetime became indebted to the defendant to the amount of $2,000; and in the spring of 1864, as security for such indebtedness, he delivered to the defendant, without making any formal written assignment, the promissory note of one Brown, made in favor of Bond in January, 1859, for the sum of $1,000, payable one year after date, and a mortgage upon the land in controversy, executed by Brown to Bond, to secure the payment of the note. Bond died intestate in the state of Ohio in 1866. In February, 1872, the defendant was appointed administrator of the estate by the probate court of Ramsey county, on petition therefor representing that the defendant was a creditor of the estate. As such administrator he proceeded to foreclose the mortgage by advertisement under a power of sale contained in the mortgage, thus treating it as belonging to the estate, and thereby waiving his equitable claim upon the note and mortgage. The foreclosure sale was made in May, 1872, the defendant purchasing the property, and taking the sheriff's certificate of sale, describing the purchaser as "Thos. Welch, administrator of estate of A. F. Bond, deceased." He paid no money for such sale, but assumed in this manner to satisfy the debt to himself. Except as to one of the several lots in controversy, this foreclosure was defective in that the land was erroneously described in the published notice and in the sheriff's certificate. In view of the subsequent proceedings this first foreclosure is not of very great importance. In December, 1872, at the time fixed by the probate court for receiving proofs of the claims of creditors against the estate, the defendant made proof of the before-mentioned indebtedness of $2,000, and the same was allowed by the court as a valid claim of the defendant against the estate. No other debt against the estate was proved. In August, 1873, the defendant discovered the defect in the foreclosure, and he then proceeded again, as administrator, to reforeclose the mortgage by advertisement, the sale being made in September, 1873. The defendant bid in the property for the aggregate sum of $2,634 in the name of one Kelly as purchaser, but intending the purchase to be for his own personal benefit, Kelly's name being used with a view of carrying such intention into effect. The sheriff's certificate of sale ran to Kelly. No money was paid on such sale, but the defendant charged himself, in his final account as administrator, with the amount for which the property was bid off, $2,634, as so much money received by him on the sale, and credited himself with the expenses of the foreclosure and of administration, $233.78. No redemption was ever made. The premises were then of the value of $4,000. The amount so bid was in excess of the amount really due on the mortgage, but did not exceed the amount claimed to be due. In December, 1873, the defendant, as administrator, filed in the probate court an inventory of the property of the estate, made by him under date of August, 1872. This inventory of property consisted only of the note and mortgage before referred to, which was there set down as belonging to the estate, without reference to any adverse claim of the defendant thereto. On the same day he filed his final account as administrator, in which he charged himself, as before stated, with the sum of $2,634, as received from Kelly on the foreclosure, and credited himself with $233.78 as expenses. Thereupon, and at the time fixed for the examination and allowance of the administrator's account, the court made and entered its order or judgment, reciting the receipt by the administrator of the sum of $2,634 on account of the estate, and that he had paid out $283.78, leaving a balance in his hands of $2,350.22, and that the claim of the defendant, amounting to $3,900, was the only claim allowed against the estate. It was then ordered that the final account be allowed, that the sum remaining in the hands of the administrator — $2,350.22 — be applied in part-payment of the claim of the defendant, and that the administrator be discharged from his trust. Two days thereafter, at the request of the defendant, Kelly assigned to him the sheriff's certificate of foreclosure sale, and afterwards made a formal deed of conveyance to him of his interest in the premises. The assignment and conveyance were made without consideration, and in furtherance of the intention entertained by the defendant at the time of the foreclosure sale. The plaintiffs have not resided in this state since 1865, and they had no actual notice or knowledge of any of the above-stated proceedings for administration or for the foreclosure, nor of any of the defendant's acts, until within six months prior to the commencement of this action.
Upon this state of the facts the court considered that the defendant held the legal title in trust for the benefit of the plaintiffs, but subject to the defendant's claim for the amount bid at the foreclosure sale, and reported to the probate court as assets, ($2,634,) with interest since the sale, for the payment of which provision was made in the order and judgment of the court.
In the foregoing statement of the case we have referred to an indebtedness of Bond to the defendant. It is contended by the respondent that there was no legal indebtedness, because, as it is said, the agreement as found by the court was not valid under the statute of frauds. Upon this point we will only say that the debt was allowed by the probate court as a just claim against the estate. That adjudication determined that matter. State v. Probate Court of Ramsey Co., 25 Minn. 22. If in this action proof of fraud could avail to impeach or qualify the effect of that adjudication, it is enough to say that fraud is not found.
The appellant makes the point that before the commencement of probate proceedings the right of those who might represent Bond's estate to redeem the pledged note and mortgage had become barred by delay and by statutory limitation, and the note and mortgage had become, in effect, the absolute property of the defendant. To this it is a sufficient answer that in the probate and foreclosure proceedings the defendant treated the note and mortgage as the property of the estate, and he is estopped from now saying that they belonged to him and not to the estate. He elected, as he might do, to relinquish whatever benefit accrued to him by the pledge of the note and mortgage as collateral security. By that election, and by the proceedings taken in the probate court inconsistent with the assertion of a proprietary claim on the part of the defendant, he is concluded.
The most important question in the case is whether, in view of the fiduciary relation of the defendant, as administrator of the estate, he was disqualified from purchasing at the foreclosure sale in his own behalf, even though he bid and paid the full amount of the mortgage debt due to the estate. Should he be deemed to hold the title so acquired in trust for those towards whom he stood in the relation of a trustee, if they should seasonably elect to treat the purchase as made for their benefit? The plaintiffs seek by this action to have such a trust declared and enforced. We shall treat the case as though the purchase had been made, at the second foreclosure sale, by the defendant in his own name, and for his own benefit. The plaintiffs rightly assert that this was the legal effect of the transaction. The intervention of a third person, Kelly, as the merely apparent purchaser, by the procurement of the defendant and in his personal behalf, did not affect the legal result. It is true that it tends to show a purpose to deceive all who might be interested, to cover up and conceal the fact that the purchase was really in behalf of the defendant. But whatever may have been the reason for this, it does not affect the question now under consideration. The rights asserted by the plaintiffs rest upon the fact that the defendant, while acting as administrator in foreclosing the mortgage for the estate, was the real purchaser at that sale in his own behalf. If he might thus lawfully secure to himself and hold the benefits accruing from the purchase, it does not affect the rights of the parties that he pursued a course calculated to conceal that fact.
We shall hereafter refer to this disguising of the defendant's interest in the purchase in its bearing upon the question of the plaintiffs' laches. For the present we assume that the plaintiffs have seasonably exercised their election to treat the purchase by the administrator as having been made for the benefit of the estate, and that the delay in commencing this action is to be attributed to the improper disguise which the defendant threw over the transaction, rather than to any acquiescence of the plaintiffs in a purchase by the defendant.
There can be no doubt that the defendant, as administrator of the estate, acting as such in foreclosing this mortgage, occupied such a fiduciary relation...
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