American Inv. Co. v. Brewer

Opinion by STEWART, C. David II. Spain is a minor Indian owning certain lands situated in Stephens county: Thomas H. Spain being his guardian. On application for order of the county court the guardian sold the land of the minor to B. L. Brewer, $2,000 being the consideration, $1,100 of which was to be cash, the remainder to be secured by mortgagei against the land. The guardian made his report to the court, and the sale was approved, and guardian’s deed executed. The evidence shows that B. L. Brewer was without funds, and that, by arrangement with the guardian before he paid the cash consideration, the guardian’s deed was executed and the land was mortgaged by Brewer to the American Investment Company to secure a loan of $1,100, and what is known as a commission mortgage was executed as a part of the same transaction to C. E. Caret to secure two notes of $165 each, said commission mortgage being second to the mortgage made to the American Investment Company; that afterwards O. E. Cartt transferred the commission mortgage' to> the American Investment Company. The $1,100 was paid to the guardian, and a third mortgage given to secure the minor for the remainder of- the purchase price. It does not appear that the court made investigation of the facts at the time of approving the sale and transfer, but granted relief upon the representations of the guardian in the return of the sale which showed the payment of the cash consideration and proper security for the unpaid part. On failure to pay the notes secured by the commission mortgage when due, the American Investment Company brought foreclosure action on the commission mortgage, alleging in the petition that . the first mortgage for $1,100 had been trans- , ferred by the company and was not at the time owned by the plaintiff; a foreclosure of the commission mortgage only being asked. T« B. Reeder was appointed guardian ad litem for the minor, and appeared and filed answer and cross-petition setting up necessary facts showing collusion and fraud between the guardian of the minor, the American Investment Company and B. L. Brewer, .•the purchaser, of .the land, and asking that :.$11 mortgages against the land be canceled and all cloud be removed from the minor’s title to the same, also praying in the alternative that the mortgage made for the purpose of securing the unpaid purchase price coming to the minor be declared superior to all mortgages and liens against the land, and that the same be foreclosed. Upon a trial being had, the court ordered that the. title and possession of the premises be settled and quieted in the minor as against any and all claims or demands of the plaintiff and other defendants who had been made parties and those claiming under them; that the guardian’s deed, the commission mortgage, and all other deeds or- documents be canceled and removed as clouds upon the title of the minor; that the American Investment Company and those claiming by, through, or under it and the defendants and each of them, and those claiming through, by or under them, or either of them, be perpetually enjoined from claiming any right, title, interest, or estate in and to the land adverse to the minor, from which judgment the plaintiff duly appeals to this court, and as grounds for reversal urges the following propositions: “First. The judgment is void for the reason that said court had no jurisdiction of the particular matter which the judgment professed to decide. “Second. The fact that the prayer to the answer of said defendant prayed that plaintiff’s mortgages and certain deeds through which it claims be canceled as clouds upon his rifle did not warrant the court in canceling the same. “Third. The validity o'f the guardianship sale cannot be attacked in this proceeding.” Under the first proposition the plaintiff in error urges that the court had no jurisdiction to render the particular judgment for ihe reason that the same was entirely outside the issues in the case; in other words, that the pleadings were not sufficient to authorize the court to render the particular judgment. Our attention is called to Standard Savings & Loan, Association v. Anthony Wholesale Grocery Company, 62 Okla. 242, 162 Pac. 451, L. R. A. 1917D, 1020; Jefferson v. Gallagher, 56 Okla. 405, 150 Pac. 1071; Sharp v. Sharp, 65 Okla. 76, 166 Pac. 175, L. R. A. 1917F, 562; Rogers, Treasurer, et al. v. Duncan, 57 Okla. 20, 156 Pac. 678; Rogers v. Bass & Harbour Furniture Co., 47 Okla. 786, 150 Pac. 706; Anglea v. McMaster et al., 17 Okla. 501, 87 Pac. 660, Choi v. Turk et al., 55 Okla. 499, 154 Pac. 1000; 23 Cyc. 683. ... The second proposition is necessarily embraced in ithe first, being argumentative and merely meant to suggest that, as the issues *273 joined did not authorize the particular judgment, the prayer could not cure the failure to make necessary allegations. There is no doubt about the soundness of the authorities presented nor of the abstract proposition of law urged by plaintiff in error, but, on an examination of the pleadings in the ease, we find that the facts showing the fraud have been sufficiently pleaded, and that the allegations have been sustained by the proof. The relief sought being equitable, it was therefore the duty of the court, under the pleadings and the proof, to render such judgment as would adequately protect the injured minor,, at the same time doing equity between the parties. As to the third proposition, that the validity of the guardianship sale cannot be attacked in this proceeding, we desire to say that the rule of law which-the plaintiff in error seeks to invoke does not apply' to a proceeding to set aside a sale or cancel instruments affecting the title of land on the ground of fraud, and that upon a proper showing such relief may "be--ha'd whether the fraud is in connection with a guardian's sale approved ’ by the court or otherwise. The, thing necessary to be determined is whether or'not there was fraud in the sale, and. if fraxid was. perpetrate#, the fact that it has the ‘appearance of judicial sanction does not affect the right of the defrauded person to equitable relief. The American Investment Company and all other persons' dealing with the land in question were charged with notice of the probate proceedings which showed that the rninor’s land w.as sold partly for cash ánd partly on 'time and a.re also presumed., ito kno-w and, are charged. with notice of tíáe law as to guardianship sales. The statute which applies - is section 6567, Rev. Laws 1910,-which .reads “All sales of real estate of wards must'be for cash, or. for part cash and part deferred payments, not to exceed three years, bearing date from date of sale, as, in the discretion of-'the county judge, is most beneficial ’to the ward. Guardians making sales must demand and receive from the purchaser-a bond and mortgage on the real estate sold, with such additional security as the, judgej deems necessary and sufficient to secure the faithful payment of ,the deferred payments' and the interest thereon.” ,,,; As -(ye construp su$i statute/it is necessary that a cash, payment’ be' ma.'d.e and 'tliat itlie balanee.be secured by a first mortgage ,on the land with such additional security as ‘the county judge may deem sufficient. While 'the Statute,,dops nothin it^ terms,, r.pqpire a 'first mortgage on the land, it. wouíd'be’un-reasonable to hold that the Legislature 'had any other, intent. , It would also be violative of the. terms of the statute requiring, part cash that the minor should furnish the security out of the identical property sold for thy purpose of procuring the money for the cash payment. This would not be a cash payment, but would amount in effect to permitting the guardian , to make ,a first mortgage on the land and then, sell the equity without any cash payment, 'merely securing the' remaining purchase price by a mortgage aloné npon the equity sold. The courts will not uphold such circumvention in dealing with the property of minors. In addition to being charged with notice of the probate proceedings and of the law, the American Investment -Compáñy had actual knowledge of the arrangements' between Brewer and the guardian, as is shown by .a letter in the record, admitted to, have been written by them sent to their'agents, Womack & Brdwu, at, Duncan, Okla., at the time' of clbSing the loan and prior to the recording of A ¡mortgage given to secure the minor, which letter in part reads: ", . “ “We are paying this loan" out upon the promise of your Mr; Womack that he wall procure an acknowledged statement frpm Thomas H; Spain.-, the guardian, waiving- all ,-rights for the balance of the purchase.nipney in-favor’of this company, and that if Mr. Spain, fakes a mortgage for any part of the .purchase' moneyv.said^mo'trgage will recite that same is infeííiór tt>' $1100.00 mortgage to the American' investment Company' dated 'Marcb 28th 1913, recorded in Book --, page -- — , and to a second mortgage to C. 'ffl. Cartt, for. $330.00;'same date; recorded'in Bo.ok-, page-=. - . “We know that your 'Mr. Womack1 uWier-stands (xafíflyf what' i's-’ñé'cessary Mid ¡We wa-nt; yPu to send-' us an exact, copy of the language thafydirusain, the third mortgage that1 we may place with our files and know ■that we are:protected.and will have the ipat-•ter,always before-us for ■qeaáiy reference” . We are of the opinion that the court was Authorized to grant- the relief which- is provided for in the judgment, and that-, under the state of pleadings and with the part.les at that time before the court; no more ¡adequate relief could have been' afforded. But the record in this case discloses- to us that the minor did not- obtain -aii of’ the -relief to which he was entitled, diie-to: the fact-that the assignee of the first mortgage was not made a paity to the proceeding. Ordinariiv this court would-leb fhe-matter rest where it is, in-view of the fact that the party, interested did not-file.'the,.prpperr pleadings, or take proper steps; to w^r.d making-¡pther p,ar- . tips: but a. different epurse. should be pursued 'where f¿e'’ínterés£s of a minor aré involved. *274 The guardian ad litem is the arm of the court extended to protect the minor, who, because of his minority, is incapacitated to act for himself and is unable to protect his own interests. Minors and incompetent persons are the especial objects of attention of the conits and it is the duty of the court, whenever the necessity appears to advise the guardian ad litem as to what steps to take and what pleadings to file. It is clear that the assignee of the first mortgage should bare been made a party to the proceedings below in order that the minor could have ah the relief to which the facts entitled him. Under the state of the record it is clear that the assignee was charged with notice of the probate proceedings showing the return of the sale and of the law involved, but a judgment could not be rendered affecting his rights without having him before the court as a party. The assignee, under the law, was not an innocent purchaser for value. We think that the facts would warrant the cancellation of the guardian’s deed and also all transfers of the land or incumbrances against the same, since the guardian’s sale, but, ¡under the rule that he who seeks equity must do equity, it would -be the duty of the minor to restore everything of value which he has received before the cancellation of the first mortgage should be awarded. The guardian was paid $1,100 as the proceeds of the loan made by the American Investment Company: the presumption being that the minor received the benefit thereof. There is no evidence before us to show whether or not the guardian had squandered this money. ' We assume that, if such is the case, there is a sufficient bond to protect the minor, and, as it does not appear that the price received for the land was inadequate, we are also- of the opinion that, for the minor’s best interest, the court would be authorized -to- declare the mortgage given to secure the balance of the purchase price of the land superior to all other outstanding liens against the land not existing at the time of the sale, and that such mortgage so declared be a first lien, that the same be foreclosed, and the proceeds first applied to the -payment of such mortgage indebtedness, costs, and taxes. This being an equity case, the court has authority to modify the judgment so as to do justice between the parties or to remand the case to the trial court for such purpose. Not having the assignee before us, we ar.e unable to modify the judgment; therefore we have decided to- remand the case to the trial court for further proceedings, where all necessary parties can be brought before the court. It is ordered that the cause be remanded to the trial court, with directions to- set aside the original judgment and require the guardian ad litem to make the assignee of the indebtedness secured by the first mortgage a party to the proceedings, and that the trial court hear and determine the issues in accordance with the views herein expressed, allowing or ordering such amendments to the pleadings as the court in its discretion may find proper. By the Court: It is so ordered.