Court Opinion

ID: 3821779
Source: CourtListenerOpinion
Date Created: 2016-07-06 07:56:23.591792+00
Date Added: 2024-06-11T13:50:54.714312
License: Public Domain

I think the sale made by the guardian void, because in contravention of section 6567, Rev. Laws 1910, requiring that:
"All sales of real estate of wards must be for cash, or for part cash and part deferred payments, not to exceed three years, bearing date from date of sale, as, in the discretion of the county judge is most beneficial to the ward."
That the lands were in fact exchanged and not sold is not seriously questioned. Counsel for defendants in error in their original brief concede as much when they say:
"We deny that technically the drug store was exchanged for the lands, but contend that the record shows that the lands were. sold for $10,000 and the proceeds were invested in the drug store and fixtures, and that the record cannot be collaterally attacked, and that these matters are not open to proof."
The defendant in error Rea, while on the witness stand as a witness for the plaintiff in error, concerning the transaction involving his disposition of the drug store, testified:
"Q. Now, at the time you sold this stock of drugs who invoiced it  — what was the trade between you and Bridges on that piece of land? A. Well, I bought it with this understanding: that if it went through the court properly I was to give him $10,000. Q. In what? A. Virtually it was a trade. Q. What were you to pay the $10,000? A. In cash value of the drug store. Q. That was the trade? A. Yes, sir. Q. Did you ever give him a check at any time? A. No, sir. Q. Did you have him indorse a check? A. No, sir. Q. Did you give him any money? A. No, sir. Q. Now this stock invoiced a little better than $11,000? A. I think so. Q. And you allowed him $10,000 for the farm and what went with the other $1,000? A. I retained a lien on the fixtures."
J.E. Bridges testified in respect to the trade as follows:
"Q. I will ask you to state if before the appointment as guardian of Ida L. Bridges if you had a conversation with the defendant W.C. Rea. A. Yes, Sir. Q. Tell to the court that conversation. A. Well, I had several conversations with him, but the first one I had was in the drug store. Q. At what place? A. At Roff, in Rea's drug store, and he asked me if I would like to trade the land for the drug store. Q. What land? A. Her land. * * * Q. What was stated in *Page 121 
the second conversation, if you remember? A. In the second conversation he asked me it I had made up my mind to make this deal, and I told him that I could not make this deal; that I had no authority, and he said, well, I could be appointed guardian and get the deal through that way. Q. Do you remember anything else in the conversation? A. I told him that I was a stranger there. and did not know many people and there would have to be a bond made, and I did not know whether I could make one, and he said he would make one. Q. He did  — who did make the bond? A. He did; W.C. Rea. Q. Who is on it? A. His father and brother. Q. When you agreed with Will Rea to take the farm for the drug store do you remember when that was? A. No, sir; I don't remember exactly when it was  — it was about the 1st of October, maybe before that. Q. What was he to give you for the farm? A. Well, he was to trade me the drug store for the farm. Q. What did you and he agree that you would show in the court papers that he paid you? A. Ten thousand dollars. Q. After the sale was complete did he pay you any money? A. No, sir. Q. Explain to the court what action, if any, he went through with. A. As well as I remember he had a check run out for $10,000. Q. Did you see it? A. I saw it with the other side up  — if it was a check at the time the deed was signed that was the time  — when they signed the deed he said, 'Sign that too.' Q. The check was blank side up? A. Yes, sir. Q. What did Rea say it was? A. He never said what it was. Q. What did you understand it was? A. He said, 'Indorse this.' Q. What did you understand it was? A. I understood it was a check. Q. From whom? A. It was from him. Q. For what? A. For $10,000. Q. And to pay for what? A. Well, it wasn't to pay for anything, it  — Q. What was it supposed to pay for? A. Why, we were playing like it paid for — Mr, Rea said the law was that the deal was to be a cash consideration, but as this was a trade, we would have to use this check to make the trade stand up. Q. What went with that check? A. I don't know; I never saw it any more. Q. Do you know who got it? A. No, sir. Q. What, if anything, in the way of money did you receive? A. Nothing at all. Q. Was an invoice taken of this drug store when you took possession? A. I taken possession on the 1st of January, and we commenced taking inventory on the 1st of January."
In view of this and other testimony of like character, it would be a travesty upon justice, a reproach upon the law, to treat the transaction as a guardian's sale for cash, or for part cash and part deferred payments. It was neither, but on the other hand, a disingenuous fraud practiced by the parties, whereby an attempt was made to circumvert the statute by making the transaction appear lawful upon its face. Schemes laid by designing persons to acquire by questionable means and in violation of law the birthright of helpless Indian minors are morally repellent, and deserve the sternest rebuke of all good citizens, as well as of those in author ity. So long as the rights of innocent third parties are unaffected, those engaged in such nefarious practices will not be allowed to profit by them. This much may as well be understood by those who indulge in such transactions. Guardians' sales may be made in the manner and for the consideration named in the statute, and not otherwise. When the statute fixed the consideration for which the real estate of minors under guardianship could be made, it provided the exclusive consideration, and the court was without power either to authorize or confirm a sale made upon a different consideration; and that without regard to the recitals appearing of record, respecting the transaction made for the purpose of covering up the true consideration for which the sale was made In Moran v. James, 20 Misc. Rep. 235, 45 N. Y. Supp. 537, the Supreme Court of New York, Special Term, held that section 2348 of the Code of Civil Procedure of that state, authorizing the sale or mortgage of an infant's land, did not authorize an exchange, and that therefore a mortgage on land taken by an infant in exchange, executed as part of the transaction, was invalid. On hearing before the Appellate Division of the court in 21 App. Div. 183, 47 N.Y. Supp. 486, it was again held that the statute did not authorize an exchange of the guardian's real property. That the county court had no power in the matter other than that given by the statute, which provided that the real property, or an estate therein, belonging to an infant, "may be sold, conveyed, mortgaged, released, or leased in the manner prescribed," and that the contemplated execution of such power was that the sale be made for cash or its equivalent, that the proceeds might be invested. In Perin v. Megibben et al., 53 Fed. 86, 3 C. C. A. 443, in an opinion by Taft, Circuit Judge, it was said to be the settled rule in Kentucky that the powers of the equity courts to sell and reinvest an infant's real estate were not inherent, but were merely statutory, and that the statutes must be strictly followed or the proceedings were a nullity. It seems that by section 489 of the Civil Code of Kentucky (Carroll's Code Ky. 1889, p. 235), an infant's real estate could be sold by a court of equity (1) to pay debts of an ancestor; (2) to pay his own debts; (3) in an action by the guardian for the ward's maintenance and education; (5) in an action against the infant by his *Page 122 
guardian for the sale of real estate and investment in other property. By section 19, art. 2, c. 48, of the General Statutes of Kentucky, as amended March, 1884, courts of equity were limited in the investments which they might authorize guardians to make of the money of their wards, to real estate or stocks or interest-bearing bonds of the United States, state of Kentucky, or some county or town of the commonwealth; and it was held that the Harrison chancery court was without power to exchange the beneficial interest of the minor heirs in real estate for shares of stock in a corporation; that the question was not one of irregularity, but as the power given was clear and specific, limitations upon its exercise must be strictly followed or the proceedings were a nullity.
In Walker, Ex'r, v. McLoud, Trustee, 204 U.S. 302, 27 Sup. Ct. 293, 51 L.Ed. 495, the opinion of the Circuit Court of Appeals, involving an analogous question. (138 Fed. 394, 70 C. C. A. 534), was sustained. There the sheriff of Tobucksey county, Choctaw Nation, sold certain property of the Choctaw Coal   Railway Company in the trustee's possession, upon credit, whereas the act of the Choctaw Legislature of October 30, 1888, provided that the sale should be made "to the highest Choctaw citizen bidder for cash." It was held that the sale was a clear violation of the statute under which alone there was authority to sell at all, and was therefore absolutely void. We need cite no more authorities in support of a proposition involving so fundamental a principle. As between the parties and those who acquired interest in the subject of the litigation with notice, as did the Farmers'   Merchants' National Bank, they are bound, in making their defense, by the statute authorizing the sale, and upon which their rights must depend. As this statute was plainly disregarded, and as no effort, in fact, was made to sell the real estate for cash, but instead to exchange it for a drug store and fixtures, neither Rea nor the bank has such standing as will entitle them to relief in a court of justice. While the decree of the trial court was right in canceling the guardian's deed, it was error to require, as a condition thereof, the payment by plaintiff of the amount of the bank's mortgage.
For this reason, aside from any question of actual fraud, the judgment of the trial court must be reversed.