Pickett v. Ferguson

Smith, J. In November, 1877, Ferguson & Hampson, merchants and partners, trading at Memphis, in Tennessee, accepted from Mrs. Pickett and her husband a lease of the plantation, Nodena, lying in Mississippi county, Arkansas, for the term of five years, to begin on the first of January then next ensuing. They stipulated to pay, on the first of -December in each year, a certain rent for each acre of tillable land, the area to be determined by an actual survey, and to repair the fences and buildings. They were to enjoy free of rent any land which they should themselves clear and put into cultivation; but Mrs. Pickett was not to be charged with the value of any improvements. According to the survey, made about the same time, the rents reserved amounted to $3510 per annum. At the time this lease was executed, the plantation was incumbered by a deed of trust, the debts secured thereby aggregating about $2*>,ooo, and a decree of foreclosure had been rendered by the circuit court of t-he proper county; but the cause was pending in this court, on appeal. Soon after-wards a decision was reached, which is reported in 32 Ark., 3‡6, under the style of Pickett v. Merchants National Bank. And pursuant to that decree the clerk and master of this court sold the premises on the 28th of February, 1879, to Louis Hanauer, for the price of $18,001. The sale was approved and a deed executed to the purchaser. Mrs. Pickett was, at the date of the lease and of the sale, the owner of the equity of redemption. Her lessees were not parties to the foreclosure suit, but coming in. pendente lite were •chargeable with constructive notice and had, besides, actual notice of the pendency and status of the litigation. The rent for which they were liable for the year 1878 remained unpaid. And they had also, about the 21st of May, 1878, collected ^536.33 of insurance money belonging to Mrs. Pickett, which they refused to pay over. She accordingly brought her action in the circuit court of Shelby county, Tennessee, against them to recover this rent. and insurance money. The defendants ■claimed, to recoup the damages they had sustained by their eviction under the foreclosure sale. The jury returned a verdict of $3000 for the plaintiff. Mrs. Pickett having moved for ■a new trial, the court declared the verdict to be too small, and gave the defendants their option, either to consent that the amount of recovery be increased to $3850 or to submit to another trial. As they refused to raise the verdict, a new trial was granted. Mrs. Pickett now dismissed her action at law and filed her bill in the chancery court of Shelby county against them and Hanauer. In the trial of the action at law, it had been developed that Hanauer’s purchase was made at the instance and for the benefit of Ferguson & Hampson, and that he had subsequently quit-claimed to them, they remaining all the time in possession. The theory of Mrs. Pickett’s bill is, therefore, that Ferguson & Hampson w<gre the real purchasers, at the foreclosure sale, and that, by reason of the relation they sustained to her, their purchase enured to her benefit. She prays to redeem, upon the terms of refunding the purchase money actually advanced by Hanauer, less the amount due her by Ferguson & Hampson for insurance collected by them and not accounted for, and less, also, the rents of the place that-accrued both prior and subsequent to the sale. 1. Purchase pendente lite. Constructive notice. Process was duly served upon Hanauer and Hampson, but. there was no service upon Ferguson, except constructive service-by publication in a newspaper, nor did he appear to the suit. He had, long before the bill was filed, removed his family from. Memphis and had taken up his permanent residence on the plantation, and had become a citizen of Arkansas. His connection with the firm of Ferguson & Hampson still continued, and down to the time of filing the bill he was in the habit of visiting Memphis frequently, but thereafter he systematically avoided going into Tennessee, for the avowed purpose of preventing the service of process upon him. While the cause was still pending in the chancery court of’ Shelby county, Tennessee, Mrs. Pickett filed a substantial copy of her bill in the circuit court of Mississippi county in this, state. She charges that the original agreement between her and her tenants had been that they should make their rent notes payable to her order, so that she might sell or. hypothecate them in the market, and thus raise funds to pay off the decree against Nodena; but that this stipulation was not inserted in the lease, because the acreage was not then certainly known, and the lessees had afterwards fraudulently refused to give their notes, with a view to cripple her resources and precipitate a sale, to the end that they might themselves become the purchasers. She avers that she also owned a valuable residence property in Memphis, which one of the beneficiaries in the trust deed had offered to take in satisfaction of his claim, amounting to $8508.58; and that, if her tenants had not thwarted her purposes, she could have satisfied the other creditors and have averted a sale. The prayer was that the bill might be retained until the final determination of the suit in Tennessee, to the end that if the plaintiff should be successful there, she might, by appropriate supplemental pleadings, enforce her equities thus ascertained by a decree here operating directly on the title of the lands, and if she should be defeated there, upon any grounds not concluding the merits, as for example, on account of the absence of Fergusqn, then she might be permitted to prosecute her bill as an independent suit for redemption; and in the event that she failed to establish her right to. redeem, she prayed to recover of Ferguson & Hampson her insurance money and the rents for 1878. To this bill the three defendants filed a joint answer, which was made a cross-bill. They denied that Ferguson & Hampson were' the real purchasers at the foreclosure sale; but admitted that Hanauer had bought at their suggestion, and for their protection against irreparable injury, they having expended several thousand dollars in the year 1878 in repairs, fencing and clearing land, and in preparations for planting during the term of their lease, and being in danger of losing the benefits of these improvements and outlays by the impending sale, which Mrs. Pickett was powerless to prevent, she being, as it was alleged, utterly insolvent. They further admitted that Hanauer, about one year after the sale, had resold and conveyed the plantation to his co-defendants for $22,541, of which sum $9000 were paid in cash, and for the remainder, notes secured by a mortgage on the place were given, which were still unpaid. They denied that Ferguson & Hampson had ever agreed to make their notes for the rent. They admitted the non-payment of the insurance money and rent for 1878, but justified the detention of those sums to reimburse themselves for the loss of their term by the constructive eviction of themselves and determination of the tenancy by the foreclosure sale. They denied Mrs. Pickett’s right to redeem upon any terms, and alleged that since the purchase they had expended $25,000 in improvements, consisting of a- fine steam gin, thoroughly equipped with machinery of the latest pattern, the erection of a barn, two store houses and more than fifty tenant houses, the building, of a levee along the Mississippi river three-quarters of a mile long, the clearing and fencing of seven hundred acres of land, etc. And because the Tennessee court was unable to do complete justice in the premises for the want of jurisdiction over the person of Ferguson, and litigation there was likely to result in casting a cloud upon the title, it was prayed that Mrs. Pickett a.nd her solicitors might be enjoined from prosecuting that suit. A temporary injunction was awarded; but it was disregarded, after knowledge that it had issued, and the cause in Tennessee was pressed to a decree. Mrs. Pickett was accordingly adjudged to be in contempt. She afterwards offered to file a plea to the jurisdiction of the court, alleging her residence in Tennessee and that she had not been served with a subpoena to answer the cross-bill; but the court declined to entertain her plea until she had purged her contempt by procuring the decree in Tennessee to be set aside. She then asked leave, successively, to file a demurrer and answer to the cross-bill, and a motion for a continuance, and finally to dismiss her bill without prejudice. But the court refused to hear her, or to permit her to take any further steps in the cause until she obeyed the injunction. On the final hearing Mrs. Pickett was not permitted to introduce any evidence; but the opposite side read all of the records, papers and depositions, taken in behalf of both parties, that were used on the trial of the case in the chancery court of Shelby county. Mrs. Pickett’s bill was dismissed and upon the cross-bill it was decreed that the order restraining Mrs. Pickett from prosecuting her suit in Tennessee be perpetuated and that the title of Ferguson to the lands in controversy be quieted as against her claims. No decree was made in favor of Hampson or Hanauer on the cross-bill, presumably for the reason that the Tennessee court had retaliated by an order restraining the prosecution of the suit in Arkansas, and they, being subject to that jurisdiction, did not desire to fall under the displeasure of the court. From this decree Mrs. Pickett has appealed. The case involves several questions of practice, which we have found to be more difficult of solution than the merits of the controversy. And first, as to the restraining a party from proceeding in the courts of another state; this is a matter of very great delicacy, almost inevitably leading to distressing conflicts of jurisdiction. For this reason the courts of some states, notably those of New York, have declined to interfere in such cases. But the jurisdiction is established by the clear weight of authority, as well as by the necessity of interposition under special circumstances where the foreign suit appears to be ill calculated to answer the ends of justice. Sto. Eq. Jur., Secs. 899-900; 1 High on Injunction, and cases cited; Bushley v. Munday, 5 Madd. Chy., 184; French v. Hay, 22 Wall, 250; Dehon v. Foster, 4 Allen, 545; Carron Iron Co. v. McLaren, 5 H. L. Cas., 416, 438; 2 Lead. Cas. in Eq., 4 Am. Ed., 1396. 2 Chancery restrain suhs m °ther states‘ The fact that the real estate, which is the subject of controversy, was situate in Arkansas, was not an insuperable obstacle in the way of doing complete justice by the Tennessee court. But as a court of equity in such cases acts in personam, it must have jurisdiction over the parties in order to administer the cause. Ferguson, an indispensable party to the litigation, was absent. Mrs. Pickett .was .thus forced to seek the assistance of the courts of this state. The two suits involve precisely the same questions between the same parties. The defendants to the suit last instituted in effect say: “ The property is here. The matter in controversy depends on the laws of Arkansas. The parties are all now before the court, which is not the cáse in the Tennessee suit. We insist that the whole controversy shall be settled here, and Mrs. Pickett be required to stay proceedings in Tennessee, as a vexatious harassment of us for the same cause of action, when it is evident that the result there will not finally conclude the rights of all the parties.” Acting upon these suggestions, the circuit court construed the filing of the bill to be an election by Mrs. Pickett to transfer the whole litigation to this forum. Such was , not in reality her intention, but only to affect any purchaser of the property with notice by a lis pendens, and possibly to acquire undoubted jurisdiction over Ferguson. She therefore filed what her counsel styles an auxiliary bill, to • hold the property until the determination of the suit in Tennessee, and then to carry the decree into effect if it should be favorable to her. But we are not aware of any precedent for such a bill. Between the courts of the several states there is no connection or dependence so as to render them subservient to each other. It is only such rights as have been ascertained by a concluded litigation that the courts of other states undertake to enforce. The court below properly assumed jurisdiction over the entire controversy. Mrs. Pickett had voluntarily submitted her rights to its determination and had invoked its aid. The very act of filing the bill implied this and could legally mean nothing less. And there was an equity to restrain the prosecution of the suit in Tennessee, since it appeared that the court there had no jurisdiction over the person of Ferguson and could make no decree which would bind him. But it is said that'the punishment visited upon Mrs. Pickett 1 A for her contumacy was excessive, extending to a deprivation of her status in court and of her right to defend against the cross-bill ; and the utmost the court could lawfully do in that behalf was to deny all applications addressed to the favor of the court, and not matters of common right. A court of equity has the power to refuse to hear a party, when he is in contempt for disobeying its order. Walker v. Walker, 82 N. Y, 260, and authorities cited. It is indeed rarely exercised, for it is seldom necessary to go so far. 3.,same: Refusing to hear p^pty in con~ In Casteel v. Casteel, 38 Ark., 477, the plaintiff being in contempt, his bill was dismissed and the cause was heard on the cross-bill alone. But whatever errors the court below may have fallen into in this respect may be corrected here. All of the pleadings, papers and motions which Mrs. Pickett proposed, but was not allowed, to file, have been brought up by bills of exceptions. And although she was refused the privilege of adducing testimony, yet the opposite side read all of the evidence that had been taken in behalf of either party in the Tennessee suit. This evidence was quite voluminous, covering more than one thousand pages. And it was conceded on the oral argument that it embraced all of the evidence materially bearing upon the case that was accessible. The depositions of all the witnesses who were in a situation to know any of the facts likely to affect the decision were taken at great length, and under circumstances most favorable to elicit the whole truth; and some of the more important witnesses were repeatedly examined. So we feel assured that we are as completely in possession of the facts of this case as it is possible to be in any case of like nature where the facts are disputed. And it is our invariable practice not to remand chancery causes for further proceedings and proofs, where we.can plainly see what the rights and equities of the parties are, but to render such decree here as should have been rendered below. 4- c Practice £°nd?ng: chan! furtherproof.for 5. Judgments and Decrees : Void as to parties not served. In her answer to the cross-bill, Mrs. Pickett contended and now contends, that, the decree pronounced by the chancery court of Shelby county, Tennessee, after the filing of the cross-bill, was a conclusive adjudication between the parties to this suit, settling their respective rights in the premises, and forever estopping the plaintiffs in the cross-bill to aver or prove anything to the contrary in any other court where the same matters might be brought into question. Laying out of consideration the fact that this decree was entered up on the motion of her solicitor, in violation of the injunction from the Arkansas court, and looking at it as if no such injunction had issued, the conclusiveness of the decree will depend on the jurisdiction of the court which rendered it. It is not our purpose to inquire what effect the failure to get Ferguson before the court had upon its jurisdiction to proceed to a final determination as to the remaining defendants. No affirmative relief was granted in the present suit to Hampson or to Hanauer, and they have not appealed. Now, as Ferguson was neither personally summoned, nor voluntarily appeared in the Tennessee suit, and was not even a citizen of that state, no court sitting there could render any judgment against him which would be recognized elsewhere as of any validity. Such a judgment is treated in other jurisdictions as a mere nullity. Nor does it alter the case that Ferguson was a member of a commercial partnership whose situs was in Tennessee. Iglehart v. Moore, 16 Ark., 46; D'Arcy v. Ketchum, 11 How., 165; Public Works v. Columbia College, 17 Wall., 521; Pennoyer v. Neff, 95 U. S., 714.; St. Clair v. Cox, 106 U. S., 350. 6. Chancery Practice : Dismissal after cross-complaint. The court was right in refusing Mrs. Pickett leave to dismiss her bill without prejudice, after the answer, in the nature ■of a cross-bill, had been filed. Allen, v Allen, 14 Ark., 666. This brings us to the merits. And here it must be conceded, we think, that the purchase of Nodena by Hanauer was, in legal effect, a purchase by Ferguson 8c Hampson. Hanauer, it is true, used, his own money in paying for the place. Indeed, the evidence shows that it was entirely beyond the power of Ferguson & Hampson to- raise so considerable a-sum of money within so short a time. They were a young firm in good credit and excellent commercial standing; byt their capital was extremely limited. And this was ’ probably the chief reason why the purchase was made in the name of another, and not a desire to conceal their interest in it on account of any supposed incapacity on their part to bid owing to their relations with Mrs. Pickett. Hanauer was a wealthy merchant, closely connected with Hampson by family ties, and with the firm by business ties. He was willing to assist these young men out of the predicament in which they had involved themselves by taking a long lease of a mortgaged plantation, that was now advertised for peremptory sale, and to furnish the money to buy it. But he must have security. The plantation itself was a sufficient security, and one which it would not embarrass Ferguson & Hampson to give. , So he takes the legal title in his own name. Perhaps they might never be .in a condition to take, the land off his hands. In that event he would simply have made an investment. Thus, without any very definite understanding as to the terms upon which Ferguson & Hampson were to have the benefit of his purchase, Hanauer bought Nodena. Perhaps no trust arose to them out of this purchase which a court of equity would enforce. Perhaps a refusal by him to convey would have been a mere violation of a parol agreement; Perry on Trusts, Sec. 134.; Williard v. Williard, 56 Pa. St., 119. Still, the fact remains, that he purchased for them and not for himself. He did not expect to hold the land, but to resell to them. And he did afterwards convey to them! True, he charged them an advance of some $4500. But this was only a bonus for the accommodation, or a compensation for his risk and the use of his money. 7. Landlord and Tenant :— Tenant's purchase o f landlord's title. We must then look at the case as if Ferguson & Hampson had been the bidders at the judicial sale. Now it is claimed that they, being tenants to Mrs. Pickett, could not bid, and that if the property was stricken off to them, they would be held in equity as trustees, and could only hold the title as security for the reimbursement of the amount expended. Judge Story, in discussing the subject of constructive frauds practised by persons standing to each other in confidential relations, enumerates “the cases which arise from the relation of landlord and tenant, of partner and partner, of principal and surety, and various others, where mutual agencies, rights and duties are created between the parties by their own voluntary acts, or by operation of law.” Eq. Jur., Sec. 323. And in Perry on Trusts, Sec. 210, it is said: “ The relation of landlord and tenant, partner and partner, principal and surety, and tenants in common, may create such influences of trust and confidence that courts of equity will construe a trust to arise out of their contracts, or will decree such contracts to be set aside.” But none of the cases cited in support of these sections were cases between landlord and tenant. * In Scott v. Levy, 6 Lea., 662, where a sub-lessee purchased the lease-hold estate at an execution sale against his lessor, Mr. Justice Cooper, speaking for the court, says: “Besides, Moses Levy, at the time, by reason of his possession of the lease-hold property under his sub-lease, occupied such a fiduciary relation to his lessors, that he could not acquire a valid title against them by reason of the purchase of the property under an incumbrance. All he could do, would be to hold his lessors liable, under the covenant for quiet enjoyment, or warranty of title, for the amount expended in removing the incumbrance.” But as it had already been decided that there was no judgment in evidence to support the execution, and as, moreover, proof seems to have been offered of a contract between Levy and his lessor, that he should hold his purchase only as security for repayment, we cannot regard this as anything more than the expression of an opinion, by a very great judge in equity, that a ténant cannot buy his landlord’s title unT der execution and hold it for any other purpose except security. There is, however, one case—Lansman v. Dralos, 10 Neb., 172 —which goes to the full length contended for by Mrs. Pickett’s counsel. That case asserts that, if a tenant in possession purchases the leased premises without surrendering his lease, or notifying his landlord, it will be presumed the purchase was made to protect his possession, and the landlord may redeem. These are all the authorities on this point, favorable to Mrs. Pickett, that the industry of her counsel has been able to collect. On the other hand, it is settled law in this state that a tenant, who is under no obligation to pay the taxes, may purchase at tax sale the lands of which he is in possession and may set up such title, and the sale, if otherwise valid, extinguishes the landlord’s title and cuts off the lease. Bettison v Budd, 17 Ark., 546; Ferguson v. Etter, 21 Id., 160. See also Higgins v. Turner, 61 Mo., 249. And in Brittin v. Handy, 20 Ark., 381, it was ruled that unless some fraud can be shown to have been perpetrated, one tenant in common may purchase at forced sale the moiety of his co-tenant, and may retain and assert the title thereby acquired, as fully as if he were a stranger to the defendant in the judgment. The same principle is announced in Freeman on Co-Tenancy and Partition, Sec. 165. So it is laid down in the text-books, and has been frequently decided, that a tenant may purchase the demised premises at an execution or judicial sale against the landlord, and that in any subsequent controversy between the parties relating to the possession, or the payment of rent, it may be shown that the landlord’s title has expired and the estate become vested in the tenant. 1 Wash. Real Estate, 3 ed., 361; Taylor’s Landlord & Tenant, Sec. 705; Wood on Same, Sec. 236; Bigelow on Estoppel, 2 ed., 374; Nellis v. Lathrop, 22 Wend., 121; Hetzie v. Barber, 69 N. Y., 1; Ryder v. Mansell, 66 Me., 167; Elliott v. Smith, 23 Pa. St., 131; Wolf v. Johnson, 30 Miss., 513; Camley v. Stanfield, 10 Texas, 546. And in none of these cases is it intimated that while at law the tenant may purchase, yet in equity he cannot hold against the landlord’s option to redeem. On the contrary, in Casey v. Gregory, 13 B. Mon., 595,—a chancery case—it is said that the landlord has no more right to redeem in such a case than if the purchase had been by a stranger. The obligations of a tenant are to pay his rents and to surrender possession at the expiration of his term. He cannot dispute the title under which he entered. He cannot buy in an outstanding title and set it up against his landlord. He cannot use his possession as a basis to acquire title as an actual settler, and thereupon found a claim hostile to his landlord: And any title which .he obtains in his own name, by means of hís personal residence, he holds for the benefit of his landlord. Waggener v. McLaughlin, 33 Ark., 195; Chavinger v. Reiman, 3 W. & S., 486. The foundation of the rule is an enjoyment by permission. And as the estoppel begins by permissive possession, it continues only so long as possession is retained by permission. If the tenant is evicted, he no longer owes allegiance to one who does not protect him. Consequently, if the landlord, by the determination of his title after demise, loses the power to permit possession, the tenant owes him no duties for the future. Bigelow on Estoppel, 351. Now, the reasons which prevent a tenant from purchasing and asserting an adversary title have no application when it is ,the landlord’s own title that he buys. • In this case he does not deny the landlord’s title, but affirms it. There is no doubt he may buy of the landlord at private sale. What considerations then of law or public policy prevent his bidding when his landlord’s title is exposed at an involuntary sale? What duty, inconsistent with his right to purchase, does he owe his landlord ? The bidding is open to all the world and the injury to the landlord is no greater than if any other person had bought; if, indeed, that can be called injury which happens by operation of law, and by the act, consent or neglect of the judgment defendant. But it is claimed that the sale was brought about by the failure and refusal of Ferguson & Hampson to perform .the duties which they owed to Mrs. Pickett—that if they had paid her what was due her by contract and had made their rent notes, she, with the aid of her Memphis property, would have been able to relieve Nodena from the encumbrance. At the date of the foreclosure sale, the mortgage debts amounted to more than $20,000. The Memphis property was totally unavailable for Mrs. Pickett’s purposes. The creditor whom she 8. Evidence— Parol: To enlaige written contract. was trying to induce to take it for his claim, consented to do so ■only» upon the exhibition of a clear title.- Upon investigation it turned out that the legal title was not in Mrs. Pickett, but in a trustee for her and that the trustee was dead. A bill was filed for the appointment of another trustee. But it seems that the original trustee was invested with a large discretion in consenting, or refusing to consent, to any disposition of the corpus of the estate which the beneficiary might propose to make. And the question arose whether the court could clothe the new trustee with the same powers and discretion which the creator of the trust had vested in a trustee of his own selection. This •question, as we understand, the chancery court of Shelby county answered in the negative. And although it is shown that the ■decree was afterwards reversed by the supreme court of Tennessee, yet the reversal came after the master had sold Nodena. Then as to the agreement to give notes, the lease itself, which is the best evidence of the terms of the contract, con-' tains no such stipulation, and this is not a bill for reformation. The suggestion of the reason for its omission, that the acreage was unknown, is not at all satisfactory; because if that were a term of the contract, it might have been expressed in six words, though the number of acres might require to be ascertained by a subsequent survey. The evidence is very conflicting upon the point whether such an agreement was ever in fact made. Certainly it would have been a. very foolish thing to do, knowing, as Ferguson & Hampson did, that Mrs. Pickett was a married woman, whose ability to respond in damages was not great, even if she were liable at all; and that the plantation was under mortgage, to foreclose which, proceedings were then pending. It would have been to put themselves completely in her power and at her mercy. For what security would they have that the money raised upon the notes would be applied to the payment of the mortgage debts ? If made, the notes would belong to Mrs. Pickett; she might negotiate them and apply the proceeds to any purpose she saw fit. Thus the tenancy might be determined by an eviction and yet the tenants remain liable to pay the notes. And Ferguson & Hampson had been advised by counsel not to incur this risk. But whatever the agreement on this point may have been, our opinion is that parol evidence of its terms was inadmissible in this suit. The parties have deliberately reduced their' engagements to writing. There is no averment that owing to fraud, accident or mistake, the writing does not fully express the concurrent intentions of the parties. And “all antecedent propositions, negotiations and parol interlocutions on the same subject are to be deemed merged in” the written contract. ■3 c. 9. Tenant ing damages from ap> p re h e n ded eviction. Ferguson & Hampson had, however, no just cause or legal excuse to withold from Mrs. Pickett her insurance money and the overdue rents. They claimed to do this to cover their damages from an apprehended eviction. There is in the lease _ no express covenant for quiet enjoyment; but doubtless such a covenant is implied in every mutual contract for leasing land. But a tenant cannot set up apprehended difficulties of this character to defeat the payment of his rents. These sums amounted to more than $4000. But there is no reason to suppose that, if they had been paid' promptly into her hands, as they should have been, Mrs. Pickett could have averted the sale of Nodena. Hence that sale can not be said to have been occasioned through the fault of the lessees. And in not providing in its decree for the payment to Mrs. Pickett of these several sums, with interest, the circuit court committed an error to her prejudice. 10 co°venaAnt for quiet enjoyment A personal judgment will be entered here in favor of Mrs. Pickett against Ferguson & Hampson for $536.33, with six per cent interest per annum from May 21, 1878, and for the further sum of $3510.10, with a like rate of interest from December 1, 1878. Mrs. Pickett will recover her costs in this court.