Van Orman v. Nelson

• Decision Date: 10 April 1967
• Docket Number: No. 8023,8023
• Citation: 78 N.M. 11,427 P.2d 896,1967 NMSC 69
• Parties: C. F. VAN ORMAN and C. W. Van Orman, Plaintiffs-Appellees, v. Jess R. NELSON and Noemie J. Nelson, his wife, Defendants-Appellants.
• Court: New Mexico Supreme Court

Page 896

427 P.2d 896

78 N.M. 11

C. F. VAN ORMAN and C. W. Van Orman, Plaintiffs-Appellees, v. Jess R. NELSON and Noemie J. Nelson, his wife Defendants-Appellants.

No. 8023.

Supreme Court of New Mexico.

April 10, 1967.

Rehearing Denied June 1, 1967.

Jess R. Nelson, pro se, LaFel E. Oman, Santa Fe, John P. Eastham, Willard F. Kitts, Albuquerque, for appellants

Stephenson & Olmsted, Santa Fe, for appellees.

OPINION

PER CURIAM.

This action was brought by C. L. Van Orman, Trustee for Rosie Messinger, against Jess R. Nelson and Noemie J. Nelson, his wife, to rescind certain conveyances made by Messinger to the Nelsons and to require an accounting by Jess R. Nelson. After the trial but before judgment had been entered Messinger died and C. L. Van Orman, together with C. W. Van Orman, individually, were substituted as parties plaintiff.

The judgment being adverse to Nelsons they have appealed. The following is a summary of the transactions and related matters between Nelson and Messinger based upon undisputed facts and those found by the court upon evidence which we consider substantial except as to certain of the facts which we will later discuss.

Jess R. Nelson was at all material times an attorney at law licensed to practice in New Mexico. From the year 1954 until January, 1963, he acted as attorney and business adviser for Messinger in connection with all of her legal and business affairs. This representation included the ancillary probate in Sierra County, New Mexico, of the estate of C. S. Messinger, deceased husband of Messinger, and representation of Messinger in association with Texas counsel in the administration of the C. S. Messinger estate in Texas and similar representation relating to certain mineral rights and interests of Messinger in the state of Texas.

When administration upon the estate of C. S. Messinger in the states of New Mexico and Texas had been concluded Messinger was the owner of the following real property located in Sierra County, New Mexico, and in state of Texas:

(a) Lots 36 and 37, Hollywood Homesites addition to Hot Springs (now Truth or Consequences) and improvements hereinafter referred to as the 'Arrowhead Street House.'

(b) Lots 8, 9, 10, 11, 15 and 18 through 30, inclusive, Hollywood Homesites addition to Hot Springs (now Truth or Consequences) hereinafter referred to as the 'unimproved lots'.

(c) Tract B, Hollywood Homesites addition to Hot Springs (now Truth or Consequences) except certain portions thereof conveyed to others hereinafter designated as 'Tract B'.

(d) Lots 17 and 18, Block 8, McElroy No. 1 addition to Hot Springs (now Truth or Consequences) hereinafter referred to as the 'Copper Street House'.

(e) Messinger's residence in Truth or Consequences.

(f) Certain mineral interests in the state of Texas hereinafter referred to as the 'mineral interests'.

Messinger was inexperienced and uninformed in legal and business affairs. During the period she was represented and advised by Nelson he had her confidence and trust. She was eighty years of age at the time of her death and during a substantial period between 1954 and the date of her death she was in a state of progressively failing health and deteriorating mental condition. After the relationship of attorney and client had been established between Nelson and Messinger a number of contracts were entered into from time to time between them relating to and providing for compensation to be paid to Nelson for legal services rendered and to be rendered by him for Messinger and likewise involving loans of money made and to be made by Nelson and Messinger to each other. In accordance with the terms of the contracts Messinger conveyed to Nelson all of the real estate mentioned above except her residence. The contracts reserved in Messinger a life estate or similar interest in the property conveyed or its income, or obligated Nelson to pay Messinger a fixed sum per month during her lifetime. Each of the contracts, conveyances and the facts relating to their execution will be separately stated.

On February 9, 1957, Nelson orally represented to Messinger that between 1954 and that date he had performed services for her for which he had not been paid and that such services had a value of $1,000.00; that the Arrowhead Street house had a reasonable value of $6,000.00; that the value of the life estate of a person of her age in this property was $3,000.00 with the remainder interest having a like value; that the value of all the services already performed by him, together with the value of further services relating to pending and contemplated matters in Texas, and services in connection with all of Messinger's future business and legal matters in New Mexico for the rest of her life, including all reasonable costs incident thereto would equal $3,000.00

Nelson represented to Messinger on the same date that he would perform all of such services for a total of $3,000.00, including the $1,000.00 for past services.

Messinger believed and relied upon these representations and thereupon on February 9, 1957, executed an agreement prepared by Nelson and explained to Messinger by him. The agreement provided that Messinger would execute and deliver a warranty deed to Nelson and wife, as joint tenants, conveying to them the Arrowhead Street house, Nelson to be responsible for the expense of conveyance and cost of abstracts of title. By the agreement Nelson assigned all rents and the use of the Arrowhead Street house to Messinger for the duration of her life. Nelson likewise agreed to pay taxes, insurance, maintenance and repairs to the end that Messinger would have the use of and received the rental income of the property during her lifetime free of expense. A provision was made in the contract adjusting the rights of the parties in the event Nelson should pre-decease Messinger. Provision was likewise made to compensate Nelson for past legal services and such services as Messinger might require in the future. The agreement obligated Nelson to pay all expenses and costs in prosecuting or settling and handling business of Messinger both in Texas and New Mexico excepting, however, actual attorney's fees if required to be paid to associate counsel in Texas.

It was further stipulated in the agreement that the actual and present cash value of property received by Nelson in payment of past and future services was the sum of $3,000.00. As of the date of the agreement the Arrowhead Street house had a reasonable market value of $6,000.00 and at the time was rented for $50.00 per month. The value of the life estate of a person of Messinger's age was less than that represented by Nelson with the result that the interest acquired by Nelson in the Arrowhead Street house exceeded $4,500.00. This value is not supported as will be shown. The agreement of February 9th was neither acknowledged nor recorded.

On February 11, 1957, Messinger executed and delivered to Nelson a deed which he had prepared conveying to him and his wife the Arrowhead Street house in joint tenancy. The deed was absolute in form and made no reference to the reserved life interest in Messinger and other matters specified in the agreement of February 9th. The deed was recorded bty Nelson on the date of its delivery. On August 11, 1958, Nelson represented to Messinger that he had performed additional services for her and incurred additional costs of the value of $250.00, which services were not covered by the agreement of February 9, 1957. Messinger believing and relying upon Nelson's representations executed an agreement dated August 11, 1958, which had been prepared by Nelson ahd was explained to Messinger by him. In accordance with the agreement of August 11, 1958, it was agreed that Nelson had performed all services required of him by the agreement of February 9, 1957, and that all expenses incident to such service had been paid by him. It was further agreed that certain other legal services had been performed by him for Messinger; that the sum of $250.00 was the reasonable value thereof including disbursements and expenses. Messinger thereupon paid Nelson the sum of $250.00, which sum was not owing to him in view of the obligation contained in the agreement of February 9, 1957.

Messinger received the monthly rent from the Arrowhead Street house in accordance with the agreement of February 9, 1957, until the house was damaged by fire in September, 1959. The fire damage was covered by insurance and Nelson received $3,141.45 in insurance proceeds for restoration of the house. Messinger likewise received certain funds covering loss of rental through January of 1960. The value of the house was increased by its restoration although Nelson expended only $2,404.02 in the process.

On or about January 19, 1960, Nelson represented to Messinger that the Arrowhead Street house was in the best possible condition to sell and that its reasonable rental value was $50.00 per month; that it would be to her advantage to change her right to received rentals from the house in accordance with the February 9, 1957, agreement and to receive $50.00 per month for the rest of her life directly from Nelson or his wife. Nelson did not tell Messinger that he had already agreed to sell the house under a real estate contract for the sum of $8,000.00 with $500.00 down and payments at $85.00 per month with 8% interest per annum on the unpaid balance.

Messinger being guided by Nelson's advice and having no knowledge of the terms of the contract for the sale of the house executed an agreement, which had been prepared by Nelson and explained to Messinger by him, dated January 19, 1960, under which Nelson was authorized by Messinger to sell the Arrowhead Street house. He was permitted to retain all the proceeds of sale including the down payment. Nelson was obligated by the last mentioned agreement to pay all expenses of sale including furnishing a new water heater. In lieu of the use and rent of the...