Title: Baker v. Leigh
Citation: 385 S.W.2d 790
Docket Number: 5-3385
State: Arkansas
Issuer: Arkansas Supreme Court
Date: January 18, 1965

385 S.W.2d 790 (1965) Ralph H. BAKER, Jr., Admr., et al., Appellants, v. William W. LEIGH, Appellee. No. 5-3385. Supreme Court of Arkansas. January 18, 1965. *791 Gentry &amp; Gentry, Little Rock, for appellants. H. B. Stubblefield, Little Rock, for appellee. McFADDIN, Justice. This case involves a trusteeship. Mr. Ralph H. Baker, Sr., departed this life in March 1963, and the appellant, Ralph H. Baker, Jr., is the administrator of said estate with will annexed. The present litigation grows out of a real estate transaction wherein Mr. Baker, Sr. acted as trustee for himself and the appellee, Mr. W. W. Leigh; and Mr. Baker, Sr. died without having settled his trusteeship. Mr. Leigh brought this suit, and his difficulty in making proof was because the administrator pleaded the dead man statute,[1] as he had a perfect right to do. Mr. Leigh was thus unable to testify as to any of his transactions with Mr. Baker; and the evidence in Mr. Leigh's behalf as to such transactions had to be established by written instruments, cancelled checks, bank statements, and the testimony of third persons. On December 16, 1958, Mr. Baker, as Trustee, paid Messrs. Ellis $4250.00 for a 6-months option to purchase a tract of 40 acres at a total consideration of $40,000.00. In exercising the option, a fee of $2000.00 was paid an attorney. The option was exercised, and on June 19, 1959, a deed was executed by Messrs. Ellis to "Ralph H. Baker, Trustee", reciting the total consideration to be $40,000.00, paid and payable as follows: *792 On June 22, 1959, Ralph H. Baker, Sr. signed and delivered to W. W. Leigh an instrument reading as follows: "DECLARATION OF TRUST In September 1963 Mr. Leigh filed the present suit.[2] He alleged the trusteeship of Mr. Baker Sr., as shown by the above instrument, and claimed that he (Leigh) had paid a total of $48,775.22 on the trust property and that Mr. Baker Sr. had paid only $520.18. On the basis of these figures Mr. Leigh prayed that he have judgment against the estate of Mr. Baker and a lien on the one-half interest of Mr. Baker Sr. in the land for $24,127.52, being the amount Mr. Leigh had paid for the protection of the interest of Mr. Baker Sr. The answer was a general denial and plea of limitations. Trial in the Chancery Court resulted in a decree for Mr. Leigh for all the prayed relief; and this appeal resulted, in which appellants[2] urge two points: I. Amount Of The Judgment. This is appellant's first point. In the trial *793 there were introduced Mr. Leigh's cancelled checks, identified by witnesses, as to the amounts[3] paid by him in connection with this land transaction, as follows: In their first point the appellants claim that Mr. Leigh should have an unsecured judgment for only $15,259.43 instead of the amount rendered by the Court. The appellants reach this figure of $15,259.43 by deducting from the total amount paid by Mr. Leigh the items "A," "B," and "C," and Item "K," as identified and shown in the tabulation of Mr. Leigh's checks above. Appellants claim that the items "A," "B," and "C," should be stricken because it was not until the Declaration of Trust was signed that Mr. Baker became bound to Mr. Leigh to pay half of the cost; and appellants claim that Item "K" should be stricken because it was a surveying item and not within the purview of the Declaration of Trust. We cannot agree with appellants as to Items "A," "B," and "C." There was introduced into evidence another instrument, shown to have been signed by Mr. Baker Sr. and delivered to Mr. Leigh, which recited: "P.S. You actually advanced $12,133.34 on 6/19/59 broken down as follows: There was also introduced the closing figures when Mr. Baker Sr., Trustee, closed the transaction with Messrs. Ellis at the Beach Abstract Company. From these, and from other proof in the case, it is thus clear that Mr. Leigh has paid far more than the amount which he was to pay; that is, his half of the purchase price and interest. Because of failure to introduce some checks, we find that the proof on this point justifies a judgment for Mr. Leigh for only $24,028.94, as previously explained; so we affirm the judgment in favor of Mr. Leigh for $24,028.94. II. The Lien On Baker's Interest In The Land. This point consumes the larger portion of appellants' brief. They insist that Mr. Leigh cannot acquire a lien on Mr. Baker's interest merely by showing that Mr. Leigh has paid money that Mr. Baker should have paid, and they undertake to show that Mr. Leigh cannot obtain a lien by subrogation, equitable lien, or resulting trust. We agree with appellants that the mere payment by Mr. Leigh of more than his half of the cost did not, standing alone and in the absence of other factors, give Mr. Leigh a lien on Mr. Baker's half interest in the land. The case of Dowdy v. Blake, 50 Ark. 205, 6 S.W. 897, is on this point. But there are many other factors in this case and after considering all of these we hold that Mr. Leigh is entitled to a lien on Mr. Baker's interest in the land because of the application of the equitable doctrine of subrogation. In Southern Cotton Oil Co. v. Napoleon Hill Cotton Co., 108 Ark. 555, 158 S.W. 1082, this Court discussed at some length the equitable doctrine of subrogation, saying: Quoting from an earlier case, Chaffe v. Oliver, 39 Ark. 531, 546, this Court also said as regards subrogation: Subsequent cases have applied this doctrine of subrogation in a variety of circumstances. In Cowling v. Britt, 114 Ark. 175, 169 S.W. 783, Justice Hart said: "Subrogation is a doctrine of purely equitable origin, and in its operation is always controlled by equitable principles." In Federal Land Bank of St. Louis v. Richland, 180 Ark. 442, 21 S.W.2d 954, Justice Butler said: In Commonwealth Building &amp; Loan Ass'n v. Martin, 185 Ark. 858, 49 S.W.2d 1046, Justice Butler said: Text writers and cases from other jurisdictions also show the force of this equitable doctrine of subrogation. In 50 Am.Jur. p. 692 et seq., "Subrogation" § 14 et seq., the following appears: As to some of the persons entitled to subrogation the same volume of Am.Jur. states on pages 695 and 696: And on page 739 of the same volume of Am.Jur. there is this statement: In 83 C.J.S. Subrogation § 9, p. 604, the text reads: And on page 630 of the same volume of C.J.S. the text reads: As to the right of a cestui to be subrogated to the interest of the trustee, the American Law Institute's Restatement of the Law of Trusts, Second Edition, p. 448, § 202, says: With the equitable doctrine of subrogation thus understood, we revert to the tabulation of Items "A" to "M", inclusive, as found in Topic I of this Opinion. It was shown that all of the items in the tabulation except Items "A," "B," "C," and "K," were amounts advanced by Mr. Leigh to pay the principal and interest of the *797 vendor's lien notes to Messrs. Ellis ($12,400.00) and the Hoffman lien notes ($16,000.00). As to payment by Mr. Leigh of these items (totalling $28,400.00, plus interest) there can be no doubt of Mr. Leigh's right of subrogation and a lien against Mr. Baker's interest in the land for the amount that Mr. Leigh paid to protect Mr. Baker's interest. "Where one having an interest in property pays off an encumbrance on the property in order to protect his interest, he is ordinarily entitled to be subrogated to the rights and remedies of the person paid." (See C.J.S. above cited.) Items "A," "B," and "C," of the said tabulation (in Point I of this Opinion) relate to the amount paid by Mr. Leigh shortly after the exercise of the option by Mr. Baker. These items total $17,311.18 paid to Mr. Baker as the down payment to Ellis and the expenses incident to the sale. Appellants claim that Mr. Leigh is only an unsecured creditor against Mr. Baker's estate for Mr. Baker's half interest of this $17,311.18. We disagree with appellants in this contention. The declaration of trust was dated June 22, 1959; and the undated memorandum (written sometime after August 1, 1959) signed by Mr. Baker[4] says: "You actually advanced $12,133.34 on June 19, 1959." Thus, Mr. Baker admitted that the advance was used to pay for the trust property. Mr. Leigh thus made the advance to Mr. Baker, as Trustee, in order to protect Mr. Leigh's own rights; and there is ample authority that one who pays money to protect his own rights is not a volunteer, and is entitled to subrogation in a case like this. As to Item "K" (a payment to Ken Schuck of $425.00 on April 11, 1961), the proof is rather inconclusive, and we prefer to omit this item from the rule of subrogation. Reverting again to the tabulation of Items "A" to "M" inclusive, as found in Topic I, when we exclude Item "K" ($425.00), there is left a total of $48,153.06 definitely established to have been paid by Mr. Leigh on the trust property. Mr. Baker paid $520.18, making a total of $48,773.23 paid by both. One half of said total would be $24,386.62 which Mr. Baker should have paid. Since he only paid $520.18, it follows that Mr. Leigh is entitled to a lien against Mr. Baker's interest in the property for $23,866.44, being the amount of Mr. Leigh's overpayment. The decree of the Chancery Court is affirmed as to Leigh being entitled to a judgment and a lien on Baker's interest in the property; but the decree is modified as to the amounts; the amount of Leigh's judgment being $24,028.94 and the amount of Leigh's lien on Baker's interest in the land being $23,866.44; both amounts to bear interest from the date as stated in the Chancery decree. As so modified, the cause is remanded for further proceedings not inconsistent with this Opinion. All costs of all courts are to be paid by appellants. [1] The "dead man statute" is found in § 2 of the Schedule of the Arkansas Constitution, and reads: "Provided, that in actions by or against executors, administrators, or guardians in which judgment may be rendered for or against them, neither party shall be allowed to testisfy against the other as to any transactions with or statements of the testator, intestate or ward, unless called to testify thereto by the opposite party. * * *" [2] The defendants below and appellants here are Ralph H. Baker, Jr., as administrator with will annexed of the estate of Ralph H. Baker, Sr., Deceased, and also Mrs. Ruth Baker, being the widow of Ralph H. Baker, Sr., Deceased. [3] The complaint alleged payment of two other checks totalling $197.16, but these checks were not introduced, so we disregard them. [4] This is previously copied in Topic I of this Opinion.