Plant v. Schrock

• Decision Date: 18 March 1924
• Docket Number: Case Number: 12112
• Citation: 227 P. 439,1924 OK 339,102 Okla. 97
• Parties: PLANT et al. v. SCHROCK.
• Court: Oklahoma Supreme Court

1924 OK 339

227 P. 439

102 Okla. 97

PLANT et al. v. SCHROCK.

Case Number: 12112

Supreme Court of Oklahoma

Decided: March 18, 1924

Syllabus

¶0 1. Guardian and Ward--Fraudulent Sale of Real Estate by Guardian--Setting Aside.

A sale by a guardian of real estate belonging to his ward to his sister-in-law through the interposition of a third person, with the secret understanding that the purchaser not pay for the same and for the purpose of procuring a loan thereon, constitutes a fraud on the estate of the minor and may be set aside against the parties to the fraud and any person not a bona fide purchaser for value, but such sale is not void.

2. Same--Bona Fide Purchasers--Record--Duty of Inquiry.

A purchaser of property sold under circumstances stated above is charged with constructive notice of all facts disclosed by the record and with implied notice of such facts as would have been revealed by such inquiry as a reasonably prudent man would have made after such actual notice as would put a prudent person on inquiry or after being charged with such actual notice by the record, but otherwise no duty to make inquiry existed.

3. Same.

The law does not put a party upon inquiry, except where the facts are such as would naturally put a prudent person upon inquiry and would, if prosecuted with the diligence of an ordinarily prudent man, lead to a discovery of the fraud.

4. Same--Fraudulent Sale--Innocent Purchasers of Mortgage.

The property in the instant case was purchased by Tom Campbell and thereafter conveyed to Sallie Williams. a sister-in-law of the guardian and a member of his family. The sale was made as a result of a secret conspiracy on the part of the guardian, Tom Campbell, and Sallie Williams, without the purchase price being paid and for the purpose of placing the legal title in Sallie Williams, so that a loan might be procured thereon. The order confirming the sale was made February 28, 1914; guardian's deed was executed to Tom A. Campbell on March 31, 1914, and recorded April 7, 1914; Tom A. Campbell executed a warranty deed to Sallie Williams on April 1, 1914. On March 21, 1914, Sallie Williams executed a mortgage on the land to Holmes Sons and procured a loan of $ 2,400 thereon, which mortgage and the notes secured thereby were purchased before maturity by defendants, who paid value therefor and had no knowledge of the fraudulent sale of the property. Held, that the knowledge of the defendants of the above facts, with which they were charged, was not such as to place a reasonably prudent person on inquiry, which if pursued with reasonable diligence would have led to actual knowledge of the fraud, and the sale cannot be avoided as to such defendants.

5. Mortgages--Validity -- Mortgagee's Duty of Inquiry as to Adverse Possession.

Knowledge by a mortgagee that the grantor under whom the mortgagor claims is in possession thereof, is not such knowledge as to put the mortgagee upon inquiry that the possession was hostile or adverse.

Error from District Court, Grady County; Will Linn, Judge.

Action by Lannis William Schrock against L. E. Plant and another. Judgment for plaintiff, and defendants bring error. Reversed and remanded, with directions.

I. R. McQueen and Stephen C. Treadwell, for plaintiffs in error.

Bailey & Hammerly, for defendant in error.

COCHRAN, J.

¶1 In 1914, L. L. Schrock, the regularly appointed guardian of Lannis William Schrock, a minor, sold a portion of the lands belonging to said minor through the county court of Grady county. A guardian's deed was executed to Tom Campbell, who thereafter conveyed the land by warranty deed to Sallie Williams, and Sallie Williams thereafter executed a mortgage on said lands to Holmes Sons, which mortgage was assigned by Holmes Sons to L. E. Plant and William L. Gilbert Home, a corporation. This mortgage was foreclosed in 1917, and the property sold at sheriff's sale and L. E. Plant and William L. Gilbert Home, a corporation, purchased the property at said sale.

¶2 This suit was instituted by the guardian of Lannis William Schrock to recover said lands on the ground that the guardian's sale of said land was fraudulently made and that the sale was made in pursuance of a conspiracy by Tom Campbell, Sallie Williams, and L. L. Schrock, the guardian of the minor, to place the title to said land in Sallie Williams, for the purpose of mortgaging the same, and that the sale was made without consideration.

¶3 The trial court found, in substance, that L. L. Schrock was the duly appointed guardian of Lannis William Schrock, and on December 20, 1913, filed a petition to sell the land in controversy, and that an order of sale was entered on January 24, 1914, directing the guardian to sell the land for cash in hand to the highest bidder. That thereafter the guardian filed his return reporting that he had sold said land to Tom A. Campbell for the sum of $ 3,200. On February 28, 1914, this sale was confirmed, and the order of confirmation was filed of record in the office of the county clerk on March 31, 1914. The court found that Tom A. Campbell did not pay the purchase price for said land and that the said Campbell was acting as a pretended purchaser for the guardian of L. L. Schrock; that Campbell was never at any time in possession of the land and did not exercise any act of ownership over said lands; that the guardian's deed was dated and delivered to Thomas A. Campbell March 31, 1914. That Thomas A. Campbell executed a deed to said lands to Sallie Williams on April 1, 1914. That Sallie Williams was a sister-in-law of the guardian, L. L. Schrock, and a member of his family, and had been for 19 years. Sallie Williams never paid the purchase price nor any part thereof for said lands and took the legal title thereto at the request of the guardian, and that Sallie Williams was never at any time in possession of said lands. That Sallie Williams executed a mortgage on said land to R. E. Holmes Sons on March 21, 1914, for the purpose of securing a loan of $ 2,400. That before the maturity of said indebtedness, L. E. Plant and William L. Gilbert Home, a corporation purchased the notes secured by such mortgage and obtained an assignment of the mortgage. That L. E. Plant and William L. Gilbert Home sued to foreclose said mortgage, but that the plaintiff was not a party to the foreclosure suit and that the judgment rendered therein was not binding on the plaintiff. That Lannis W. Schrock has at all times mentioned been in the open, notorious, and adverse possession of said lands, claiming and asserting title to the same, and that his legal guardian has at all times collected the rents therefrom. Having made such findings of fact, the trial court concluded that the guardian's sale was the result of the conspiracy between the guardian and Sallie Williams and was fraudulent and voidable and that the burden of proof was on the defendants to show themselves to be innocent purchasers for value and without notice, and that they had failed to overcome the burden of proof, and that the defendants had notice of such facts that would put an ordinarily prudent person upon inquiry, and that if such inquiry had been pursued it would have led to knowledge of the fraud, and that said purchasers are not innocent purchasers without notice. Judgment was thereupon entered canceling the various conveyances under which the defendants claimed title and quieting the title in the plaintiff. From this judgment so rendered, the defendants have appealed.

¶4 There is no doubt about the correctness of the finding of the trial court, that the guardian's sale was the result of a secret conspiracy on the part of the guardian and Tom Campbell and Sallie Williams, and that the sale was made without considerations, and for the purpose of placing the legal title in Sallie Williams, so that a loan might be procured thereon. The sale, therefore, was voidable and could be set aside against the parties to the conspiracy and any other person or persons who were not bona fide purchasers for value. Langley v. Ford, 68 Okla. 83, 171 P. 471; Brooks v. Tucker, 82 Okla. 255, 200 P. 168: Berry v. Tolleson, 68 Okla. 158, 172 P. 630; Allison v. Crummey, 64 Okla. 20, 166 P. 691; Winsted v. Shaw, 68 Okla. 269, 173 P. 1041; Collins Inv. Co. v. Waide, 70 Okla. 191, 173 P. 835.

¶5 The defendants in this case purchased the notes and mortgages in good faith and paid full value therefor, and they had no actual notice of the fraud which had been perpetrated on the minor. There are only two questions to be determined in order to ascertain whether the findings and judgment of the trial court are sustained by sufficient evidence. It is first contended that the burden of proof was upon the defendants to establish the defense of bona fide purchaser, and that in order to establish this defense it was necessary to prove that the purchase was made for a valuable consideration and without notice of the fraud. In the cross-examination, the defendants stated that no investigation was made by them as to the title to the mortgaged premises, and that they relied upon the investigation which had been made by Holmes Sons. It is contended by the plaintiff that, although the defendants testified that they had no notice of the fraud or of any defect in the title, such testimony was not sufficient to overcome the burden of establishing the defense of bona fide purchaser, as no testimony was introduced to show that Holmes Sons had no actual knowledge of the defects in the title or of the fraud which was perpetrated. It is contended that Holmes Sons...