Pritchard v. Smith

WaleeR, J., after stating the case: The plaintiffs have elected, in this case, to sue for the value of the land or their equity of redemption therein-, instead of canceling the entire transactions which culminated in the fraudulent acquisition of the title to the several tracts of land belonging to the 'ancestor, Benjamin Pritchard; but the settlement between the parties has been conducted, under the perfectly fair and benign charge of the learned judge, upon principles obtaining in chancery, where the jurisdiction exercised is more flexible and tolerant than it would be strictly at law. Clements v. Nicholson, 73 U. S., 299. Plaintiffs have acquiesced in this adjustment, and defendant certainly has no right of objection to it. It has the clear merit of being favorable and just to him and an exemplification of the advantage in the new procedure, under which the legal and equitable rights of litigants are more carefully guarded and enforced than under the former system. A close examination of the testimony in the case satisfies us that Benjamin Pritchard, at the time the deeds were executed, was enfeebled by old age and physical infirmities to such an extent that his.mental faculties were greatly impaired, and he was not able to take care of his interests in any dealing with the defendant, and that the latter took advantage of his weakness and imbecility to effect an advantageous bargain for himself. He was evidently the master of the situation, and held the will of his victim in complete subjection to his own. It further appears that the consideration for the deeds was not fair or adequate, the real value of the land far exceeding the — 84 — outlay by Smith. It must be noted also that be held a mortgage with power of sale, executed by Pritchard to him, and stood, therefore, in a confidential relation toward Pritchard. By their verdict the jury have found these facts, and others disclosed by the evidence, which show weakness and dependence on the one side and shrewdness and unfettered domination on the other.. ' “It is an established doctrine, founded on a great principle of public policy, that a conveyance obtained by one whose position gave him power and influence over the grantor, without proof of actual fraud, shall not stand at all, if without consideration, and that where there has been a partial or inadequate consideration, it shall stand only as a security for the sum paid or advanced.” Bellamy v. Andrews, 151 N. C., 256, citing the following cases: Huguenin v. Basely, 14 Vesey, Jr., 273; Harvey v. Mount, 8 Beavan, 437; Dent v. Burnett, 4 Myl. and Cr., 269; Buffalow v. Buffalow, 22 N. C., 241; Mullins v. McCandless, 57 N. C., 425; Futrill v. Futrill, 58 N. C., 64, and s. c., 59 N. C., 337; Franklin v. Ridenhour, 58 N. C., 421. It has been said that a deed will be set aside on the ground of undue influence, which is a species of legal and moral fraud, only where the influence is such that the grantor has no free will, but stands in vmculis (Conley v. Nailor, 118 U. S., 127), and this rule, if applied to the facts of the case, would equally condemn the transactions assailed by the plaintiffs. But the defendant was mortgagee, with a power óf sale, which added much to the power he held over his weak adversary. Approving what is stated in Bigelow on Fraud, p. 160, the Court (by Justice Ruffin) said, in McLeod v. Bullard, 84 N. C., 516, that there are certain relations, termed relations of confidence, from the existence of which the law raises a presumption of fraud in any dealings that may take place between the parties, because of the undue advantage which the situation itself gives to one over the other. Of these “relations of confidence” he enumerates eight in number and in the following order: Attorney and client; principal and agent; partners; trustees and ces-tuis que trustent; guardian and ward; executors and administrators mortgagor' and mortgagee; parent and child. Thus he — 85 — places tbe relation of mortgagor and mortgagee witb tbe other well-defined and universally acknowledged fiduciary relations. Upon principle tbis should be so. It is due to good faith and common honesty that such a presumption should arise in every case where confidence is reposed and the property and interests of one person are committed to another. To every such person his trust should be a sacred charge, not to be regarded with a covetous eye. The Court, in that case, adopted as a correct statement of the law the following language of Chief Justice Pearson in Whitehead v. Hellen, 76 N. C., 99: “Courts of equity look with jealousy upon all dealings between trustees and cestuis que trustent; and if the mortgagor had by deed released his equity of redemption to his mortgage, we should have required the purchaser to take the burden of proof and satisfy us that the man whom he had in his power, manacled and fettered, had without undue influence and for a fair consideration released his right to redeem.” The same principle was announced in Lee v. Pearce, 68 N. C., 76. The cases, therefore, have established this rule as to the fiduciary relation: “Where a mortgage buys the equity of redemption of his mortgagor, the law presumes fraud, and the burden of proof is upon the mortgagee to show the bona fides of the transaction.” Jones v. Pullen, 115 N. C., 465. It follows that when the defendant took a deed absolute for the property, on which, at the same time, he held a mortgage, there arose a presumption of fraud against him, which was evidence for the jury to consider in connection with the other circumstances, and the jury have found that the presumption has not been met by the defendant and the bona fides of the transaction shown, but that the very truth of the matter is in accordance with the presumption. The purchase by the defendant from the wife of Stewart, who sold under a prior mortgage, does not help his case to the extent, as he contends, of vesting an unimpeachable title in him. It was held in Taylor v. Heggie, 83 N. C., 244, that a second mortgagee has no right to buy the estate of his mortgagor at a sale to satisfy a prior encumbrance, but he has a clear equity to be reimbursed for any expenditure to relieve the estate' of — 86 — any encumbrances, and tbe property in bis bands is charged therewith in preference to tbe trusts expressed in tbe mortgage deed. When defendant bought from the. Stewarts, be only increased tbe indebtedness of Pritchard, tbe mortgagor, to him, by tbe amount of bis payment to them for their interest, and acquired a lien upon tbe land for tbe additional amount so advanced. We find a felicitous statement of this doctrine in Taylor v. Heggie, supra, approving what is said by Judge Gaston in Boyd v. Hawkins, 37 N. C., 304: “ ‘We bold it to be clear,’ said Gaston, J., That tbe defendant cannot take to himself tbe benefit of tbe purchase from Robards. A trustee, without tbe unequivocal assent of tbe cestui que trust, cannot act for bis own benefit in a contract on tbe subject of tbe trust. It is established upon tbe soundest principles that, if be should so contract expressly for himself, be shall not be suffered to turn tbe speculation to bis own advantage.’ While, then, the trustee is disabled from acquiring a paramount title in another to tbe trust estate for bis personal advantage, and in disregard of tbe equitable interests of those represented by him, be has a clear right to reimbursement of tbe moneys expended in making tbe purchase or removing tbe encumbrance; and tbe estate in bis bands is charged therewith in preference to tbe trusts expressed in tbe deed.” These principles fit into this case, when we recall tbe facts. Defendant took a mortgage on tbe land, subject to Stewart’s prior mortgage. Tbe same day be took an absolute deed for tbe property, upon tbe same consideration as expressed in bis mortgage, with knowledge of tbe prior mortgage of Stewart and tbe fact that tbe latter bad advertised tbe land for sale. He afterwards buys from tbe Stewarts and withholds all tbe deeds from registration until some time after Pritchard’s death. He then buys other land from Pritchard and takes deeds therefor, -there being evidence that tbe consideration for tbe several deeds was inadequate and for much less than tbe real value of tbe land. He offered tbe evidence of bis confidential clerk to prove that the deed of 10 April, 1903, to him was given with tbe understanding that be should surrender certain personal — 87 — property belonging to Pritchard, upon which he had a lien, and cancel the mortgage of the same date; and yet, in 1906, he has the mortgage registered and advertises the land for sale under it, and in other ways he indicated by his conduct that he regarded the mortgage as still on foot and the relation of mortgagor and mortgagee as still subsisting. It is impossible to scan the evidence and not conclude from these facts, virtually uneontroverted, either that the defendant had practiced a fraud upon Pritchard by which he procured title to his land or that he must be considered as still a mortgagee by his own words and conduct. Either view leads to substantially the same result and sustains the verdict and judgment as to the cause of action. We have indicated that plaintiff could elect to sue for damages at law, or proceed in equity to have the deed canceled. But it appears that the land had passed to a bona fide purchaser for value and without notice of the fraud, and in such a case it is clear that, as the plaintiff cannot recover the land in specie, he can have a money judgment for the loss caused by the defendant’s fraud. Sprinkle v. Wellborn, 140 N. C., 163. It was there said that “Wellborn, having sold the land to a bona fide purchaser, and thereby deprived his vendor of the land itself, and having received the price, he must, by reason of his fraudulent disposition of property, which he is considered to have held in trust, and of its conversion into money, be held responsible for the amount of the consideration paid to him. The money in his hands stands for the land. Wait Fraud. Oonv. (3 -Ed.), sec. 178; Holland v. Anderson, 38 Mo., 55; Lawrence v. Bank, 35 N. Y., 320; Dilworth v. Carts, 139 Ill., 508; Hazen v. Bank, 70 Vt., 543. But the administration of this relief is eminently proper under the reformed procedure, where the rights of parties are settled and determined in one action, the distinction between actions at law and suits in equity having been abolished. 1 Pom. Eq. Jur./sec. 242.” The actual loss to plaintiff was ascertained upon equitable principles, all pertinent items having been brought into the account, leaving, therefore, no ground for complaint to the defendant. — 88 — The evidence as to the fraudulent character of the deeds, other, than the mortgage, was clearly competent, as they were all but parts of one and the same series of acts to effect a common object. It was proper to consider all of them in order to arrive at the intent of the defendant and to determine the true •nature of the transaction. Gilmer v. Hanks, 84 N. C., 317. The value of the lands was relevant evidence upon the question of fraud. There was no error in refusing the plaintiff’s motion to nonsuit. This is a clear deduction from what we have already said in regard to th’e general question involved in this case. No error.