Reeder v. Meredith

Wood, J. 1. At the time appellant purchased the land from his sisters, he was administrator of his father’s estate, and as such had possession and control of the land for the payment of the debts of the estate for which it appears the lands were needed. Kirby’s Digest, § 79. Appellant, therefore, was trustee for the creditors to see that their claims were paid. He was also trustee for the heirs to see that the lands were properly administered in the payment of the debts, and that the residue of the proceeds of the lands sold for the purpose of paying the debts should be distributed to them according to their respective interests. Appellant was a trustee for all who were interested in the estate which he had in charge to administer. Wright v. Campbell, 27 Ark. 646; 1 Woerner, Administration, § 10; 2 Woerner, Administration, § 489. The general rule, says Mr. Perry, is “that the trustee shall not take beneficially by gift or purchase from the cestui que trust; * * * the question is not whether or not there is fraud in fact, the law stamps the purchase by the trustee as fraudulent per se, to remove all temptation to collusion and prevent the necessity of intricate inquiries, in which evil would often escape detection, and the cost of which would be great. The law looks only to the facts of the relation and the purchase. The trustee must not deal with the property for his own benefit.” “But,” he continues, “there are exceptions to the rule, and a trustee may buy from the cestui que trust, provided there is a distinct and clear contract, ascertained after .a jealous and scrupulous examination of all the circumstances; that the cestui que trust intended the trustee to buy, and there is fair consideration and no fraud, no concealment, no advantage taken by the trustee of information acquired by him in the character of trustee. The trustee must clear the transaction of every shadow of suspicion. * * * Any withholding of information, or ignorance of the facts or of his rights on the part of the cestui que trust, or any inadequacy of price, will make such purchaser a constructive trustee.” Perry on Trusts, § 195. This is the general doctrine announced by our own court and recognized by practically all the authorities. See Thweatt v. Freeman, 73 Ark. 575; Cook v. Martin, 75 Ark. 40; Cornish v. Johns, 74 Ark. 231. As to the purchase of trust property by the trustee, see also Gibson v. Herriott, 55 Ark. 85; Hindman v. O'Connor, 54 Ark. 627; White v. Ward, 26 Ark. 445; Imboden v. Hunter, 23 Ark. 622, where the general rule is declared. See also 28 Am. & Eng. Enc. Law (2 Ed.), pp. 1016, 1020, where the rule and exception thereto are stated, and the numerous authorities, English and American, are cited; 2 Woerner, Administration, § 487 et seq. In Handlin v. Davis, 81 Ky. 34, it is said: “An administrator or executor is not allowed to purchase or speculate upon the estate confided to him for the purposes of administration.” In all cases the burden is on the trustee to establish all the requirements necessary to bring his title within the exception to the rule. 28 Am. & Eng. Enc. Law (2 Ed.), p. 1023. In Coles v. Trecothick, 9 Ves., Jr., 234, Lord Eldon said: “Upon the question as to a purchase by a trustee from the cestui que trust I agree, the cestui que trust may deal with his trustee, so that the trustee may become the purchaser of the estate. But, though permitted, it is a transaction of great delicacy, and which the court will watch with the utmost diligence, so much so that it is very hazardous for a trustee to engage in such a transaction.” And further on in the opinion, after stating the requirements to bring .a case within the exception upholding such transactions, he says: “I admit, it is a difficult case to make out, wherever it 'is contended the exception prevails.” The chancellor found: “That defendant, W. S. Reeder, was the acting administrator of the said estate; that prior to the purchase by him he submitted to the respective plaintiffs an offer, on behalf of his mother, 'for $225 for the undivided one-eighth interest she had in her father’s estate; that at the time of the submission of the said offer defendant stated to plaintiffs that after the debts of the estate had been paid that would be their respective shares, and that his mother requested him to purchase it in order to hold the estate together until her death, when it would go back to all the children; that defendant further represented to plaintiff that that part of the lands allotted as dower and homestead was not to be taken into consideration in arriving at the extent of plaintiff’s interest, and that he was not purchasing that interest at all; that plaintiffs, relying on these declarations, executed the deeds in controversy; that the value of. the homestead and dower land was $4,500, and that the value of the other lands was $3,500; that the $225 received by plaintiffs for their respective interests was not an adequate price therefor.” It could serve no useful purpose to review at length the testimony upon which the chancellor’s findings were based. It suffices to say that, eliminating all incompetent and irrelevant testimony, we are of the opinion that his conclusions of fact were not clearly against the weight of the evidence. Applying the principles of law announced, supra, to these facts, the conclusion reached by the lower court “that the defendant (appellant here) by reason of his relation of trustee for the creditors, the heirs and next of kin, was incapable of dealing with the trust property to his advantage” was clearly correct. But, aside from any trust relationship, appellant was enjoined to the utmost good faith in dealing with his sisters. The dependence upon and confidence in him to do the right, engendered by the natural love and affection incident to such close blood kin, made uberrimam fidem imperative. Million v. Taylor, 38 Ark. 428. 2. The court did not err in canceling the deed from Annie Meredith to appellant, so far as it related to the S. ½ of the N. E. ¼, the N. E. ¼ of the N. E. ¼ and the E. ½ of the N. W. ¼ of sec. 19, and the N. E. ¼ of the S. W. ¼ of sec. 20, all in Tp. 11 S., R. 27 W. While this land had been assigned to the widow of Sam Reeder and the mother of appellant as homestead and dower, and was therefore not in the possession or under the control of the appellant as the administrator, still it was embraced in the deed which conveyed the interest of appellee in the lands of the estate which were under the control of appellant as administrator, and which deed, as we have seen, was voidable. Now, the deed to all these lands was based upon one and the same consideration, and was an entire and indivisible transaction. The contract of conveyance was entire, and, being voidable in part, was voidable as to all. For there is no apportionment of such a contract. See Phoenix Ins. Co. v. Public Parks Am. Co., 63 Ark. 202; McQueeny v. Phoenix Ins. Co., 52 Ark. 257; State v. Scoggin, 10 Ark. 326; Jackson v. Jones, 22 Ark. 158; Iron Mt. & Helena R. Co. v. Stansel, 43 Ark. 275. And, as to entire contracts, Higgins v. Gager, 65 Ark. 604-609. 3. The court did not err in refusing to allow appellant for alleged improvements. The testimony of appellant tends to show that what improvements he put upon the lands were under contract with his mother, she having possession and control at the time appellant claims the improvements were made, and that she paid appellant for these improvements in allowing him the use of the land for two years. Moreover, if appellant’s purchase was in bad faith, as the court’s findings show and the proof warrants, he would not be entitled to any compensation for improvements. 4. It was not necessary under the facts of this record for appellee to offer to return the $225.00 which appellant paid .her for her interest in the land, before she could maintain her suit for a rescission of the contract. For the proof shows that appellant had realized from appellee’s interest in the estate which he bought, apart from the reversionary interest in the dower and homestead, the sum of $55.25 more than he paid. He is therefore in statu quo, with a clear profit of $55.25. 5. The claim of appellee that appellant should pay her the amount he received from the lands sold in excess of what he paid her for her interest is without equity, since the court annulled the sale of her reversionary interest in the dower and homestead. All the proof shows that she was willing to sell her interest in the estate, and would have sold it for the consideration paid her, had her dower and homestead not been included. There is nothing in the proof to impeach the good faith of the contract between appellant and appellee except the alleged misrepresentation on the part of appellant that the reversionary interest of appellee was not to be included in the deed she should execute for her interest in the lands of the estate. But for this there would have been no cause for setting aside the deed. The small profit realized would not show any inadequacy of consideration. So our conclusion on the cross appeal is that the court dir. not err in refusing appellee’s claim for the $55.25. The decree was right. Affirm'.