Morris v. Covey

• Decision Date: 20 May 1912
• Citation: 148 S.W. 257,104 Ark. 226
• Parties: MORRIS v. COVEY
• Court: Arkansas Supreme Court

148 S.W. 257

104 Ark. 226

MORRIS v. COVEY

Supreme Court of Arkansas

May 20, 1912

Appeal from Benton Chancery Court; T. Haden Humphreys, Chancellor affirmed.

Decree affirmed.

R. F Forrest, for appellant.

1. The evidence clearly shows that appellee's attorney occupied toward appellants a relationship of confidence and trust, and his controlling influence is admitted. The burden was on appellee to show the validity of the transaction and that it was not the result of undue influence. 9 Cyc. 410, and cases cited; 9 Cyc. 456, and cases cited; Id. 470; 34 Cyc 1068, and note; 11 Wis. 303; 92 Mo. 250; 46 Mo. 147.

2. Where wrongful advantage is taken of one who is in great mental distress, grief and despair such as to impair his judgment and freedom of action, and thereby the execution of a contract is procured, equity will intervene and cancel the contract. 123 Mo. 1; 1 Story's Eq. Jur. (13 ed.) §§ 139, 251; 8 L. R. A. 261, and cases cited; 6 Cyc. 353; 85 Ark. 370; 38 Ark. 428; 2 Pomeroy, Eq. Jur., (3 ed.) § 951.

3. Undue influence may be shown by facts and circumstances from which it may be inferred as well as by direct proof. 197 Mo 68.

4. Pressure, whether acting on the fears or hopes, if so exerted as to overpower the volition without convincing the judgment, is a species of restraint under which no valid will or deed can be made. A grantor's contract or conveyance must be the offspring of his own volition. 92 Mo. 250; 13 Cyc. 587; Schouler on Wills (2 ed.), § 242.

5. The courts will closely scrutinize all transactions between an attorney and client, because of the confidential and fiduciary relations between them and the influence the attorney has over the client. 4 Cyc. 960. On account of this relationship, which had existed for twenty-five years between appellant and appellees' attorney until the filing of this suit, and his knowledge that appellant was relying on him for advice at the time he called on appellant on August 10, 1910, it was his duty to exercise toward appellant the utmost good faith and to disclose to him all information in his possession as to the material facts about which appellant was consulting and upon which he was about to act. 78 Ark. 87; Enc. of Evidence 345-358, and cases cited; 73 Ark. 580; 38 Ark. 438; 54 Ark. 627; 23 Ark. 622; 33 Ark. 575; 49 Ark. 242.

6. The acknowledgment of the mortgage is not in accordance with the statute, the proof showing that the signatures of the husband and wife were procured, not separately and apart, as required by statute, and only after long persuasion, the wife at the time protesting and objecting. This case differs from Bell v. Castleberry, 96 Ark. 566, in that the regularity of the certificate in this case is overcome by the testimony of the notary himself. 38 Ark. 377; 41 Ark. 421; 45 Ark. 117; 149 N.Y. 71.

7. No grounds for reformation are shown. The rule that a contract prepared by a party to it and for his exclusive benefit will be construed as unfavorably against him as its terms will permit applies here. 90 Ark. 92; 73 Ark. 339.

To justify reformation on the ground of mistake, the proof must be clear, unequivocal and convincing, not only that there was a mistake, but also that it was mutual, and that the deed as executed did not express the contract as understood by either. Parol evidence alone is not sufficient, and the witnesses must be disinterested. 71 Ark. 615; 46 Ark. 107; 50 Ark. 179; Bishop on Contracts, § 708; 2 Pomeroy, Eq. Jur., § 857.

The powers of married women were not enlarged by the statute. Kirby's Dig., § 5209; 66 Ark. 437.

8. Appellees' cause of action should have been dismissed as res judicata, the State laws having been superseded by the bankruptcy act of Congress. 92 F. 135; 45 L. R. A. 186-7; 5 Cyc. 240, 241, and cases cited; 97 Ark. 513; 145 F. 466; 115 F. 906; 116 F. 530; 108 F. 591.

9. Appellant's demurrer to the interplea should have been sustained. Remington on Bankruptcy, §§ 2469, 2670; 102 F. 731; 128 F. 971; 96 F. 594; Sec. 17, Bankrupt Act; Collier on Bankruptcy, (8 ed.) 308, 331; 88 Ark. 519; 5 Cyc. 240-41; 97 Ark. 513; 116 F. 530; 115 F. 906.

Rice & Dickson and McGill & Lindsey, for appellees.

1. The acknowledgment certificate of the notary being regular on its face, the recitals therein will be taken as conclusive, in the absence of fraud or duress. The burden was on Mrs. Morris to prove fraud or duress, and to establish either the evidence must be clear, cogent and convincing. 38 Ark. 377; 41 Ark. 421; 45 Ark. 117; 96 Ark. 565; 89 Ky. 508; 12 S.W. 947. It was not necessary that she should be in a different room from her husband when her acknowledgment was taken. 41 Ark. 421.

2. There was no error in reforming the mortgage as against the husband. It should have been reformed as against the wife. It is only when a conveyance is purely voluntary, and founded on no valuable or meritorious consideration, that equity refuses to reform as against the grantors. 86 Ark. 446; 80 Ark. 458; 24 Am. & Eng. Enc. of L. 653, and note 9; 34 Cyc. 929; 6 Pomeroy's Eq. Jur., §§ 679, 681; 61 Ark. 123; 72 Ark. 534; 65 Am. St. Rep. 517, 521; 117 Am. St. Rep. 244, 96 Ark. 564; 123 Ill. 403; 5 Am. St. Rep. 526; 112 Cal. 345, 53 Am. St. Rep. 216; 75 Ala. 394, 51 Am. St. Rep. 454; 6 Idaho 87, 96 Am. St. Rep. 256; 43 Fla. 54, 99 Am. St. Rep. 108; 65 Am. St. Rep. 511-514.

3. The lien of the mortgage is prior to the lien of the attachment and judgment of the intervener, and the court properly so found. 33 Ark. 72; 61 Ark. 123; 6 Pomeroy's Eq. Jur., 681.

4. The adjudication of R. S. Morris as a bankrupt did not affect the lien or enforcement of the mortgage upon the property set apart to him as exempt as a homestead. The bankrupt act does not affect the allowance to bankrupts of the exemptions prescribed by State laws. Bankrupt Act of 1898, § 6; 1 Remington on Bankruptcy, § 1025; 3 Id. § 1292; Id. § 1100; Id. §§ 2668, 2673; 116 Ga. 811.

MCCULLOCH C. J. HART, J., concurring.

OPINION

MCCULLOCH, C. J.

This is an action instituted in the chancery court of Benton County by J. D. Covey, as receiver of the Bank of Siloam, a banking corporation formerly located and doing business at Siloam Springs, Arkansas, against R. S. Morris and his wife, V. L. Morris, to obtain a reformation and foreclosure of a mortgage executed to him by the defendants on August 13, 1910, on certain real estate in the city of Siloam Springs which now constitutes the homestead of R. S. Morris.

T. C. Churchill, as administrator of the estate of Joseph Rutherford, deceased, was permitted to intervene for the purpose of enforcing an attachment lien on the same property.

Defendant, R. S. Morris, was president of the Bank of Siloam, and had active charge and control of its affairs. The bank became grossly insolvent, and on August 7, 1910, was placed in the hands of a receiver by the chancery court of Benton County, plaintiff, J. D. Covey, being appointed as receiver. R. S. Morris was found to be largely indebted to the bank, and on August 13, 1910, he executed to the plaintiff as receiver the mortgage in controversy, which, in addition to other tracts and lots of real estate in Benton County, covered parts of certain lots in the city of Siloam Springs known as the Morris Hotel property, which included the hotel building property and some stores and the bank building. A ten-foot strip off one side of the property was omitted from the mortgage, and this is alleged to have occurred by mistake, and reformation was sought so as to include that strip in the mortgage according to the real intention of the parties. Mrs. Morris joined in the execution of the mortgage, and duly acknowledged the same before a notary public. The amount of the mortgage, with interest up to the date of final decree in this case, was, as found by the chancellor, the sum of $ 83,230.92, and no question is raised here as to the correctness of that finding. Shortly after the execution of the mortgage defendants moved to the hotel and occupied the same as a homestead.

On October 18, 1910, one of the creditors of R. S. Morris filed a petition to adjudge him a bankrupt in the United States District Court for the Western District of Arkansas at Fort Smith, and he was duly adjudged to be a bankrupt. The bankruptcy court, in an appropriate proceeding for that purpose, cancelled the mortgage executed to appellee Covey as an illegal preference, so far as it covered the property of the bankrupt not exempt, and entered a decree to that effect, and relinquished jurisdiction as to the exempt property of the bankrupt, namely, the homestead in the city of Siloam Springs which is now the subject of this controversy. It should be mentioned, though not material, that the complaint in this case was filed on October 25, 1910, which was before the date of the aforementioned decree in the Federal court.

R. S Morris was formerly executor of the will of J. R. Rutherford, deceased, and, after having filed his settlement account showing property in his hands to the amount of $ 4,718.49, an order was made on him to pay it over to his successor, the intervener Churchill, who was appointed administrator in succession with the will annexed; and on March 29, 1911, the intervener commenced an action against R. S. Morris in the circuit court of Benton County to recover said sum of money, and caused an order of general attachment to be issued and levied upon the homestead property of R. S. Morris now in controversy. He bases his claim to subject said property to the payment of his debt on the exception in the Constitutional provision, relating to homesteads, as against executors, administrators, guardians, etc., for moneys collected by them. Constitution of 1874, art. 9, § 3. The intervention in this case is for the...