Patterson v. Booth

• Citation: 15 S.W. 543,103 Mo. 402
• Parties: PATTERSON v. BOOTH et al.
• Decision Date: 23 February 1891
• Court: Missouri Supreme Court

15 S.W. 543

103 Mo. 402

PATTERSON v. BOOTH et al.

Supreme Court of Missouri, Division No. 1.

February 23, 1891.

GUARDIAN AND WARD — PURCHASE WITH WARD'S MONEY — TRUSTS — ACCOUNTING — ASSIGNMENT OF MORTGAGE NOTE.

1. Defendants' intestate H., who, as curator of plaintiff, an infant, held notes secured by deeds of trust on land, procured an order of the probate court authorizing him to purchase the land for his ward. Deeds of the land were made by the trustee to H., reciting the order of the probate court, that it was made at the instance of H., and that H. held the notes as such curator. Afterwards H. gave a deed of trust on the land to secure an individual debt, and subsequently he conveyed the land to plaintiff. After this he made a settlement in the probate court as curator, stating that he had bought the land for and conveyed it to plaintiff. After the death of H. a memorandum was found among his papers, stating that the debt to secure which he had given a trust-deed was to be paid by himself. Held, that H. purchased the land with plaintiff's money, and that he took title thereto impressed with a trust in favor of plaintiff.

2. The recitals in the deeds to H. were notice that H. was dealing with his ward's property.

3. Since plaintiff was not a party to the note or mortgage executed by H., and H. was not a party thereto in his capacity as curator, and since plaintiff's title was prior to the mortgage, the rule that the assignee, without notice of a negotiable note secured by deed of trust, takes the benefit of the mortgage free from equities between the original parties, does not apply in favor of an assignee of the mortgage note given by H.

4. The note given by H., being his individual contract, and not either an asset or a debt of the estate, was properly omitted by H. from his final settlement as curator, and the judgment of the probate court on such settlement is not a bar to an action to set aside the deed of trust given to secure the note.

Appeal from St. Louis circuit court; JAMES A. SEDDEN, Judge.

Hitchcock, Madill & Finkelinburg, for appellants. Alex. Martin and J. P. Ellis, for respondent.

BLACK, J.

This is a suit brought by Patterson against Booth and Barada, the administrator of Horner, Lancaster, and the State Savings Association to set aside a deed of trust executed by Horner to Lancaster to secure the payment of $2,500, and for other relief. The facts are these: On the 23d December, 1874, William H. Horner was duly appointed curator of the estate of the plaintiff Charles L. Patterson, a minor. Horner, as such curator, received from J. B. Johnson, who was the former guardian of the minor, notes, stock, and cash, amounting to something over $24,000. As part of these assets there were two notes executed by Phoebe Hunt, one dated the 27th January, 1871, for $5,000, and the other, dated 26th October, 1874, for $6,383.34. These two notes were secured by two deeds of trust, the first upon block 10 and the second upon said block 10 and also upon block 9, in the same addition. These notes and the interest notes were all payable "to J. B. Johnson, guardian of Charles L. Patterson, a minor," and were so designated and described in the deeds of trust. On account of the inability or refusal of the trustee in the deed of trust, dated the 27th January, 1871, to act, Horner applied to the circuit court, and procured an order appointing Lancaster trustee therein. This order was made on the 20th May, 1881. On the 17th June, 1881, Horner procured an order of the probate court allowing him to purchase the property described in both deeds of trust for and in behalf of his ward. The property was sold under both deeds of trust on the 20th June, 1881, and Horner became the purchaser for the consideration of $2,500. The deed to Horner, executed by Lancaster, the substituted trustee in the first deed of trust, contains a full copy of the order appointing Lancaster trustee, and shows that the order was made at the instance of Horner as curator of Patterson, and that Horner held the principal and unpaid interest notes as such curator. Lucas was the trustee in the other deed of trust, and the deed made by him to Horner does not on its face show that Horner held the principal and interest notes described in that deed of trust, but it does show that the notes were payable to Johnson, curator of Charles Patterson. The foregoing deeds were all duly recorded, and thereafter, and on the 25th June, 1881, Horner made a deed conveying both blocks to Lancaster, as trustee, to secure a principal note for $2,500, due in one year, and two interest notes, all payable to the State Savings Association, a banking institution. Lancaster and his partner, Tiernan, negotiated this loan for Horner, and in doing this they presented to the bank a certificate from an abstract office in good standing, stating that the fee-simple title to the property was fully vested in Horner, and that the property was unincumbered except taxes for 1881. The bank made the loan relying upon this certificate. The bank assigned the note to the Western Building & Loan Association, and that association assigned it to the defendants, Booth and Barada. These assignees took the note relying upon the abstractor's certificate. Horner paid the interest, and the note was extended from time to time, and on the 25th October, 1885, it was extended by Booth and Barada, at the request of Horner, for a period of three years from that date. It is this deed of trust which the plaintiff seeks to set aside. Horner, as before stated, purchased the property on the 20th June, 1881, and executed the deed of trust to the bank on the 25th of the same month. In June, 1882, he executed and recorded a quitclaim deed, conveying the property to his ward, Charles L. Patterson. Patterson was then a non-resident minor, and had no knowledge of this deed until 1885, when he and Horner had and made a settlement as hereafter stated. In a settlement filed by Horner in the probate court in July, 1882, he made report that he had purchased the property for, and had conveyed it to, his ward. In December, 1885, Patterson, being then of age, had a settlement with Horner, and at that time the latter delivered to Patterson the recorded quitclaim deed, stating to Patterson's attorney that the property was unincumbered. Horner, as curator, filed his final settlement in the probate court in July, 1886, showing a full and complete settlement of the estate; but nothing was done in respect of the settlement until after his death. His administrator, Mr. Tittman, and the attorney of Patterson appeared in the probate court in October of that year, and the settlement was then duly approved by the order and judgment of that court. It appears Patterson, who was still a non-resident, did not know that Horner had incumbered the property with the $2,500 deed of trust until April, 1887, and in the following September he commenced this suit. Mr. Tittman, the administrator of the Horner estate, testified that at the request of Mr. Martin, who represented Patterson, he examined the papers belonging to the estate, and found an envelope indorsed: "Important memo. inside as to Charles L. Patterson and deed of trust, $2,500." Inside the envelope were two papers, with a memorandum on each, written and signed by Horner, and in which he says the note "should be paid by me" and "this note I should pay." In case of death he directs notice be given to Patterson or his attorney, "so that it can be paid off, * * * as I should pay this, and not Charles L. Patterson, formerly my ward, who became of age this year." These memoranda bear date 30th December, 1885, and were found after the institution of this suit. On the foregoing and some other evidence to be hereafter noticed the circuit court set aside the curator's final settlement made by the administrator "so far as the same constitutes in law or equity a bar against or a discharge or release of any right of action in favor of the plaintiff and against defendants on account of the wrongful act of said Horner in executing said deed of trust." By this decree the court also set aside and annulled the deed of trust made by Horner to the defendant bank. The defendants, Booth and Barada, appealed.

1. It is a well-settled principle of law that when a trustee purchases property with trust funds, and takes the title in his own name, a trust results for the benefit of the trust-estate. The funds may be followed into the property in which they have been invested; and the principle applies to cases where a guardian or curator has purchased property with the funds of his ward. Philips v. Overfield, 100 Mo. 466, 13 S. W. Rep. 705; Bisp. Eq. § 86; Harney v. Donohoe, 97 Mo. 141, 10 S. W. Rep. 191; Mabary v. Dollarhide, 98 Mo. 198, 11 S. W. Rep. 611. There is still another principle of law applicable to this case. Guardians and other trustees have no right to deal with the trust property for their own benefit. All such transactions, though not always void, are voidable at the option of the beneficiary. The law forbids a trustee or other person who occupies a fiduciary position from dealing with the trust property for his own gain. He must act for and not antagonistic to the beneficiary. Thornton v. Irwin, 43 Mo. 153; Shaw v. Shaw, 86 Mo. 594; Ward v. Davidson, 89 Mo. 458, 1 S. W. Rep. 846; Bisp. Eq. § 92. That Horner purchased the property at the trustees' sale with the funds of his ward cannot be doubted; for he simply credited the amount bid on the notes held by him as curator. Again, it was in his capacity as curator that he directed the trustees to sell. He could not purchase at those sales for himself or for any person other than his ward. Indeed, he purchased the property for his ward, and not for himself, and this is shown by a series of conclusive circumstances before mentioned. There can be no doubt that the property was clothed with a trust, and in equity belonged to the ward from...