Sengel v. Patrick

• Decision Date: 29 October 1906
• Citation: Sengel v. Patrick, 97 S.W. 448, 80 Ark. 384 (Ark. 1906)
• Parties: SENGEL v. PATRICK
• Court: Arkansas Supreme Court

97 S.W. 448

80 Ark. 384

SENGEL v. PATRICK

Supreme Court of Arkansas

October 29, 1906

Appeal from Sebastian Circuit Court, Fort Smith Division; J. Virgil Bourland, Chancellor; modified and affirmed.

Decree affirmed.

C. E Warner, for appellant.

1. Appellant was entitled to have appellees charged, in a settlement of the mortgage debt, with the fair value of the mortgaged property. The dealings of trustees with trust property are narowly scrutinized by courts of equity. If impugned, they can not stand unless characterized by the utmost good faith and candor. And the burden is upon the trustee to show their entire fairness. 41 Ark. 269; 1 Story Eq. Jur. § 321. The burden was upon appellees to show fair dealing and a sale for fair value, and this was not done. If a trustee does not keep clear, distinct and accurate accounts, as he is bound to do, all presumptions are against him, and all obscurities and doubts are to be taken adverse to him. 2 Perry on Trusts, § 821; Ib. § 602.

2. The court erred in approving the act of the master in failing to apply the proceeds of sales to the prior incumbrances as of the date at which such sales were made.

3. The court erred in allowing the receivers 10 per cent. of the amount of rents collected by them as commission. Appellees having denied that they were trustees of the property and repudiated the agreement on which appellant relied, can claim nothing for their services. 12 Col. 178; 25 How. 175.

Winchester & Martin, for appellees.

1. The question as to whether or not the property in question sold for its fair market value, was not raised by appellant's answer or cross-complaint. It will not be considered here.

2. The debts were all appellant's, who had by contract fixed the rate of interest each should bear. The law which requires payments to be applied to the more onerous debt can not be invoked here.

OPINION

MCCULLOCH, J.

Appellant, Sengel, borrowed $ 3,500 from Fort Smith Building Association No. 2, Permanent, a building and loan association, on stock in the association held by him, and mortgaged certain real estate in the city of Fort Smith as security for the loan. The association subsequently passed into the hands of receivers, the appellees being appointed by the court as such receivers.

On April 23, 1900, he conveyed the mortgaged real estate to the receivers by deed in absolute form, reciting consideration of $ 1,723.98, and on November 27, 1903, the receivers brought an action at law against him to recover the balance alleged to be unpaid on his obligation to the association.

Appellant answered, his answer being made a cross-complaint, admitting the execution of the obligation for payment of $ 3,500, borrowed money, but alleging that his deed conveying the real estate to the receivers was given on express agreement that the conveyance should be considered a mortgage to secure the said indebtedness, that the receivers agreed to assume payment of certain prior mortgage liens on the property conveyed and account to him for all rentals and proceeds of re-sale of the property, and that the receivers had rented out the property for a time and afterwards sold it to other parties. The prayer of his cross-complaint is that the deed be declared to be a mortgage, and "that plaintiffs be adjudged to make an account of the moneys received by them from the said described properties both as to rentals and proceeds of sales, and that same be applied to payment of the mortgage incumbrances on said property."

Appellees filed an answer to the cross-complaint in which they denied that the deed was intended as a mortgage, but admitted that they had agreed with appellant that he should have a re-conveyance of the property on payment of the debt, and that in case of sale he should have credit on his debt for the amount of proceeds of sale.

The cause was transferred to equity, where it was heard, and a final decree entered in accordance with the prayer of appellant's cross-complaint, declaring the deed to be a mortgage and making a reference to a master to take proof and state an account of appellant's indebtedness, the taxes and expenses paid by the receivers and the amount of rentals and proceeds of sale of the property collected by the receivers.

At the next term of the court the master filed his report, finding a balance against appellant of $ 2,082.99, and asking that an allowance of $ 131.77 be made to the receivers as commission on rents collected.

Appellant filed exceptions to the report,...