Opinion ID: 2384488
Heading Depth: 1
Heading Rank: 1

Heading: Action To Set Aside Guardian's Sale of Appellants' Interest in Tip Top (246 March Term, 1964)

Text: In this action, the 1946 action, appellants endeavored to set aside the 1940 court-approved guardian's sale of their interest in Tip Top to Mrs. Hawkins personally. The basis of this action was that Mrs. Hawkins, while acting as fiduciary of the Miller Estate, improperly induced the Bank, guardian of appellants' interests, to sell appellants' interest in Tip Top to her for $20,000, an unfair, inadequate and improvident consideration; that, by fraud, misrepresentation and concealment of essential facts, the Bank was induced to request the court to approve the sale; that the court was misled, by misrepresentation, fraud and concealment, to approve the sale; that, by reason thereof, the sale should be set aside and appellants restored to their rights. After decedent's death and until the guardian's sale, Mrs. Hawkins, as executrix, exclusively managed and operated the Tip Top properties and, from such experience, knew not only the then value but the potential value of Tip Top. [4] During such period, Mrs. Hawkins made some disbursements  comparatively small in amount  on appellants' interest to the guardian Bank but she never furnished any statement to the Bank showing receipts and expenditures in reflection of the Tip Top operation until after the guardian's sale. [5] In the meantime, the pattern of things to come was shaping. Shortly after decedent's death, Mrs. Hawkins approached Autumn Miller, appellants' mother, (whom Mrs. Hawkins and her counsel mistakenly believed had a 1/3 of appellants' 15% interest), and, in an effort to purchase her interest, told her that Lillie Oliver  owner under the Miller will of a 15% interest  had agreed to sell her interest for $20,000. It is uncontradicted that Lillie Oliver had never agreed to sell her interest. The same misrepresentation was made by Mrs. Hawkins by letter to the Bank. Sometime thereafter, Mrs. Hawkins' counsel misrepresented by letter to the guardian Bank that Lillie Oliver had given an option for the purchase of her interest. While it is true that Frank Miller  holder of another 15% interest  had sold Mrs. Hawkins his interest for $20,000, the misrepresentations to the guardian Bank and appellants' mother as to Lillie Oliver were untrue and obviously made to induce them to believe in the adequacy of the price of $20,000 and the suitability of a sale. Moreover, as a possible club to induce the sale, Mrs. Hawkins' counsel represented to the guardian that the Miller estate held a $1100 mortgage against its wards' mother's property although Mrs. Hawkins well knew such mortgage, at decedent's suggestion, had been placed on the property simply to enable appellants' mother to secure mother's assistance from the Commonwealth and was not a valid mortgage. While the Bank's vigilance left much to be desired, [6] it is clear beyond question that the sale of appellants' Tip Top interest was initiated through the machinations of Mrs. Hawkins. A more sordid example of a fiduciary's self-dealing with estate assets to deprive minor beneficiaries of the value of their interests can hardly be envisaged! The petition for the sale of appellants' interest in Tip Top,  which should have set forth all the essential facts necessary to a determination of the propriety of the sale , by misrepresentation in some instances and concealment in others, understandingly misled the court into approval of the sale. By way of illustration, the petition: (1) stated Tip Top was appraised for federal and state tax purposes at $17,044 whereas such appraisal was $25,566; (2) failed to inform the court that the 8 acre tract of land, in which the estate had a lease-hold interest, had thereon $89,000 in improvements; (3) failed to inform the court that, from the date of decedent's death until presentation of the sale petition, the net profit from Tip Top attributable to appellants' interest was $38,771.10; [7] (4) failed to inform the court of the presence on Tip Top of 111 oil wells, 48 water wells and several power plants; (5) failed to inform the court that the purchaser-to-be of Tip Top was the executrix of the estate personally; (6) failed to inform the court of the relationship of one of the two appraisers to the proposed purchaser; [8] (7) misrepresented that 70 acres of Tip Top were watered out and unproductive. Even the advertisement of the proposed sale was misleading in that: (1) it failed to state, contrary to the court's preliminary order, that outsiders could bid on the property; (2) it stated that the interests to be sold were in 138.38 acres whereas, as the subsequent deed indicated, the proper acreage was 161.36 acres; (3) it stated 70 acres were unproductive whereas such acres were most productive. Twenty-three years after it had approved the sale, the court said: he was not apprised nor aware of pertinent facts omitted in the petition relating to the true extent and nature of this property, the improvements and appurtenances thereto, the personal property located thereon, [9] and the fact that the buyer [Mrs. Hawkins] had initiated the proceedings. In the light of the trial court's findings of fact, fully supported by the evidence, and its conclusion that the sale to the executrix eventuated to the disadvantage of the minors, it is difficult, if not impossible, to reconcile the court's conclusion that the evidence did not clearly show fraudulent intent on Mrs. Hawkins part. With that conclusion we must disagree. Our examination of this record clearly reveals that the guardian's sale was initiated [10] by the executrix in disregard of her fiduciary obligation and in her own self-interest; that the guardian was duped into making the sale and the court purposely misled; that the entire proceedings were tainted with fraud; that Mrs. Hawkins was guilty of self-dealing of the rankest sort and, by employment of her fiduciary-acquired knowledge, she obtained for herself for a comparative pittance appellants' interest in Tip Top to the great detriment of her deceased husband's minor nephews and niece. This sale, vitiated by fraud, must be set aside unless the reason assigned by the court below, i.e., laches on appellants' part, for dismissal of the action is sound. In determining the propriety of the application to this action of laches, we bear in mind that the passage of time per se does not impute laches but that prejudice to the defendant must be shown as a prerequisite to the application of the laches doctrine: Brodt v. Brown, 404 Pa. 391, 172 A. 2d 152; Crunk v. Mid-State Theatres, Inc., 404 Pa. 22, 170 A. 2d 858; Greenan v. Ernst, 393 Pa. 321, 143 A. 2d 32. The court below (President Judge HUBBARD), in dismissing the action, said: Twenty years elapsed between January 20, 1940, the date of the order of the court, and the date this case was put down for hearing We do not wish to imply that all the delays should be attributed to plaintiffs, but we do feel that they are very largely to be attributed to them. (Emphasis is that of the court below). In considering whether the court below erred in its application of laches, we must preliminarily note that, after the rendition of the decree nisi and after appellants were declared guilty of laches, appellants offered as part of the record certain written correspondence beginning in 1948 and ending March 15, 1960, which clearly shows efforts on the part of appellants' counsel to have this matter disposed of expeditiously. President Judge MENCER refused to permit such correspondence to become part of the record. While the matter was within the discretion of the court below, in our opinion this correspondence, so clearly relevant, should have been admitted, particularly in a matter where fraud and misrepresentation is so evident. The court below abused its discretion in ruling against the admission of such correspondence. In determining whether laches is applicable in the case at bar certain facts must be noted: (a) when the sale took place all the appellants were under the legal disability of minority; (b) all the male appellants served in the armed services, one 1942-1952, another 1945-1946 and another 1942-1945; (c) after institution of suit, Mrs. Hawkins and the Bank filed preliminary objections which were not disposed of until two years later by the court; (d) between 1949 and 1954 appellants were required to obtain new counsel; (e) efforts to obtain answers to interrogatories were thwarted by appellees' counsel; (f) the correspondence indicates repeated efforts to have a date set for trial over a period of several years, such efforts being in vain because of the court's illnesses, previous engagement of appellees' counsel, etc.; (g) even though hearings were completed in July 1960, no adjudication was made by the court until 1963  almost two and one-half years after the hearings. Under these circumstances blame for delay cannot be placed entirely or even very largely on appellants; our review of the record indicates responsibility for such delay must be shared by all the parties and the court alike. Prejudice is claimed by appellees due to the deaths of the Bank's trust officer, the Bank's counsel, counsel for both the Miller Estate and Mrs. Hawkins, the secretary for such counsel and the appraisers as well as Mrs. Hawkins' illness at the time of trial. However, only two of such witnesses died after institution of the suit [11]  the Bank's trust officer and the Bank's counsel. However, the assistant trust officer was called and testified, and we cannot assume that the testimony of the Bank's counsel would be antagonistic to the former Bank's wards. We are satisfied that appellees were not prejudiced by the lapse of time and certainly not to the extent to justify a dismissal of this action. The sole reason assigned for dismissal of this action, i.e., laches, is not supported by the record. Our study of this record convinces us that the sale of appellants' interest in Tip Top was engineered by Mrs. Hawkins, that such sale constituted a fraud on the court as well as appellants and that the sale must be set aside and the parties restored so far as possible to the status in existence at the time of the sale. Decree reversed and the matter remanded to the court below for action consonant with the views expressed in this opinion. Costs on Mrs. Hawkins' Estate.