Case Name: LA DOW v. NORTH AMERICAN TRUST CO. et al.
Court: United States Circuit Court for the District of Oregon
Jurisdiction: United States
Decision Date: 1901-12-28
Citations: 113 F. 13
Docket Number: 
Parties: LA DOW v. NORTH AMERICAN TRUST CO. et al.
Judges: 
Reporter: Federal Reporter
Volume: 113
Pages: 13–20

Head Matter:
LA DOW v. NORTH AMERICAN TRUST CO. et al.
(Circuit Court, D. Oregon.
December 28, 1901.)
1. Guardian and Ward — Illegal Salk — Notice--Record —Principal and Agent.
While plaintiff was a minor, owning the undivided one-half of certain land, Ills mother, who wa3 Ms guardian, Ms brother (owning the other half), and another, conspired to raise money by mortgaging such land. The guardian petitioned to sell plaintiff’s property, and a few days thereafter she, with the brother and third party, joined in a mortgage of such land. Nearly two months thereafter a pretended guardian’s sale of plaintiff’s interest was made to such third party, subsequently confirmed, and a guardian’s deed to him made. He paid no consideration, and subsequently he, with plaintiff’s mother and brother, without consideration, conveyed to another, who conveyed to defendant’s son, who was her attorney in fact, and assumed a part of the mortgage, and afterwards conveyed to her. The evidence was indefinite as to what, if any, consideration was paid by defendant’s son, and also conflicting as to whether he was fully informed as to the nature of the transactions and of plaintiff’s rights. The mortgage was subsequently adjudged invalid by the supreme court of the state. Helé, that defendant’s son and grantor was charged with notice that the pretended purchaser at the guardian’s sale had joined in the mortgage before the sale, and that there was no necessity for both the mortgage and sale to meet the minor’s requirements, as shown by the petition for the sale, and that by his assumption of the mortgage he became a party to the illegal' transaction.
2. Same — Principal and Agent — Knowledge of Agent.
Defendant, being the grantee of her attorney in fact, is bound with notice of all he knew relating to the fraudulent character of the guardian’s sale, and of plaintiffs right, and hence such sale and subsequent conveyance should be set aside.
On Rehearing.
1. Guardian’s Sale — Mortgage Prior to Purchase — Inference of Fraud —Record—N otice.
Where a pretended purchaser at a guardian’s sale, pursuant to a scheme to raise money on the property, executes a mortgage thereon before the sale, — it being understood that he will reeonvey the property to the ward, but, instead, conveys' to another, — the transaction is so unusual that a subsequent grantee cannot rely on the record as rebutting the inference of fraud arising from the mortgage being so executed.
8. Same — Fraud—Abandonment of Part of Scheme.
Where a pretended purchaser at a guardian’s sale, pursuant to a scheme to raise money on the property, executes a mortgage thereon before the sale, agreeing to reconvey, the fact that, instead of so ree.mveying, he conveys to another person, does not purge the sale of its fraudulent character.
8. Same — Evidence—Notice.
Evidence leaves no room to doubt that a subsequent grantee claiming title through a fraudulent guardian’s sale had full notice of the character of the sale, and of the existing rights of the ward in the property.
John J. Balleray and Carter & Raley, for complainant.
Raleigh Stott, for defendant Letitia Lombard.
Geo. W. Hazen, for defendant North American Trust Co.

Opinion:
BELLINGER, District Judge.
Certain property, including that in dispute, belonged to Geo. A. La Dow in his lifetime. La Dow died about May 1, 1873, intestate, leaving a widow and two children, Frank La Dow and the plaintiff, Lewis McArthur La Dow, then about 4 months of age. Thereafter, and on September 12, 1889, the widow, Mattie La Dow, as guardian of Lewis, who was then in his seventeenth )fear, petitioned the county court for an order authorizing the sale of certain property, including that in dispute. The' petition alleged the minority of Lewis, stating his .age to be 14 years or thereabout; and it alleged facts showing the necessity for such s,ale, which was authorized by' the county court. Thereafter, and on November 14, 1889, the property of said minor, consisting of the undivided half of lots 3 to 10, inclusive, in block 8 in the town of Pendleton, was sold to one Charles B. I-saacs for the sum of $15,-000, which sale was afterwards, and on January 8, 1890, confirmed by the county court. On the 11th of the same month the widow, as guardian, executed her deed for the property sold to Isaacs. Prior to this sale, and on September 27, 1889, Mattie A. La Dow (the widow and guardian), Frank La Dow, and Isaacs executed a mortgage to the Conklin Trust Company upon said lots 3 to 10, inclusive, in said block 8, for $17,350. This mortgage was dated September 1, 1889. On March 13, 1894, the same parties (Mattie A. La Dow, Frank Fa Dow, and Isaacs) conveyed the mortgaged property to one James A. Howard for the consideration stated in the deed, oí $40,000. On the 21st oí January, 1(895, Howard and wife conveyed an undivided half interest in lots 5, 6, 7, and 8 in said block 8, including the premises in dispute, to B. M. Lombard, for the expressed consideration of $17,500. This sale was subject to one-half of the Conklin mortgage. Thereafter B. M. Lombard conveyed the interest so acquired to Letitia Lombard, defendant herein. Howard and Letitia Lombard divided the property so held in common; the latter taking the west 27 feet of lots 7 and 8, the premises in dispute, and assuming $1,500 of the Conklin mortgage. It is conceded, or at least not disputed, that the guardian's sale was an expedient to secure a loan upon the property by means of a mortgage executed by the purchaser, who did not pay any consideration for the guardian's deed to him. Neither did Howard pay anything for the property. His interest in what was done grew out of an understanding by which he was to have some interest in the property for services in collecting rents, paying taxes, and interest on the mortgage. Both Isaacs and Howard understood that a mortgage on the property was the thing to be effected by the guardian's sale. The purchaser at the sale was to mortgage the property, and then reconvey to the parties in interest. Instead of doing this, the property was conveyed to Howard to manage; and thereafter a portion of it was conveyed to Lombard, in the expectation that Lewis McArthur La Dow's equity could be satisfied by the transfer to him of certain 'back lots." At least, this is the effect of Howard's testimony. Howard testifies that he thinks he talked to Lombard before the 1 aider's purchase about his understanding that the guardian's sale was a step towards mortgaging the property, and that Lombard said the record of the property was all right. B. M. Lombard denies explicitly any conversation with Howard such as is detailed, and he denies any knowledge of the so-called equities of young fLa Dow, and states that his knowledge of the title was derived from his examination of the record. He knew of the Conklin mortgage, and assumed one-half of it. He is charged, therefore, with notice that Isaacs, through whom he claimed, had joined in the mortgage before he became a purchaser at the guardian's s.ale. It was apparent that there was no necessity for both a mortgage and a sale. The necessity for money to meet the minor's requirements, as shown by the petition upon which the order of sale was made, was met by the loan which the mortgage secured. This fact, and the fact that Isaacs' mortgage anticipated his title, tend to show that the sale was a mere device to effect the mortgage. Lombard assumed ,a part of the mortgage debt. To the extent of the minor's interest, an illegal claim was, in effect, paid by him out of the minor's property. He thus voluntarily became a party to the mortgage transaction, by which a lien forbidden by law was attempted to be fastened on complainant's property. The mortgage has since been adjudged invalid by the supreme court of the state; and the defendant Lombard, in the briefs filed in her behalf, seems to assume that the obligation to pay a part of the mortgage debt, which was a consideration in the purchase relied upon, has been discharged by the adjudication, so that she is, upon the contention made in her behalf, benefited by the illegal mortgage at complainant's expense, since it must be presumed that the consideration in the purchase was diminished by the amount of the illegal lien assumed by the purchaser. The defendant Lombard is the mother of B. M. Lombard, and was represented by the latter as her attorney in fact, and she knew all that her attorney knew. The parties to the transaction in question may have intended nothing wrong, in point of morals. They did, however, attempt a legal wrong, in attempting to accomplish by indirection a thing which the law does not permit. Moreover, what was done does not appear to have been of advantage to the interest affected. Lombard testifies that he paid $1,000 and conveyed some 50 or 60 suburban town lots in consideration of the purchase in question. Howard hesitates to say that anything was paid. To the direct question as to whether Lombard paid any money, Howard says:
"Well, that is a hard question to answer. In one way he did. In another way he did not."
And when requested to explain, he says:
"Well, Judge, I would have to detail a trade here that would take a half a day to explain it. We made so many settlements and trades hack and forth, that it would he hard to say whether he paid anything of value or not, and, if he did, how much."
Howard finally admits, however, that he thinks he got $1,000. He received 50 or 60 suburban lots, which he mortgaged for $500 through Lombard, and whether he gave them all up for the mortgage, or got a small equity out of them, he cannot state. Howard further testifies that there was $660 in the bank in his name, which had been deposited under the contract with the mortgage company; that one-half of this sum was turned over to Lombard to pay interest on the Conklin mortgage and insurance on the La Dow Block.
I am convinced that the interests of the complainant were not advanced, but were prejudiced, by the mortgage-sale transaction, and that there are no equities in favor of Lombard or his grantor in the premises, and it is against equity that Lombard should be permitted to profit at the expense of complainant by reason of the illegal mortgage which the sale was intended to effect.
The complainant is entitled to the relief prayed for, and it is decreed accordingly.