Court Opinion

ID: 6546967
Source: CourtListenerOpinion
Date Created: 2022-07-19 22:20:21.752952+00
Date Added: 2024-06-11T15:55:59.650816
License: Public Domain

I-IarT, J., (after stating the facts). The plaintiff and defendants in this case deraign title from a common source. Plaintiff became the purchaser of these lands at' an administrator’s sale made by the administrator of the'estate- of W. H. H. Lovett, deceased. The purchase money was paid, and the sale was duly confirmed by the probate court.. At the time of the sale, the administrator was cashier and a .stockholder in the; plaintiff bank. The plaintiff contends that this did not in any way affect the validity of the sale. We do not think this position can be successfully maintained. The rule is firmly established, both by the text writers and the adjudicated cases, that a purchase by an executor or administrator at his own sale is not void, but is voidable at the electiorTof those who may be interested in the estate. 3 Pomeroy’s Equity Jurisprudence, § 1077, 3d Ed.; 11 Am. & Eng. Enc. of Law, 1148; McGaughey v. Brown, 46 Ark. 25; Gibson v. Herriott, 55 Ark. 85; Montgomery v. Black, 75 Ark. 184. This is true without regard to the motive or intent of the administrator. It is an ancient and well-settled doctrine that his purchase, either directly or indirectly, no matter how honest, whether at private sale or public auction, makes him a trustee for the beneficial owners, and the sale may be avoided by them at their option. The reason for the rule is thus aptly stated by one learned text writer: “However innocent the purchase may be in the given case, it is poisonous in its consequences.” A stockholder, and more especially the cashier, who is largely responsible for its success, is interested in the financial prosperity of a bank. Whether the interest is large or small is of no moment; for what would appeal to the cupidity of one man would be no temptation to another. The rule is that the executor or administrator stands in a fiduciary relation to those interested” in the estate. It is his duty to conduct the sale and to report to the court any fraud or collusion in bidding or any other facts or circumstances that would warrant the court in not confirming the sale. The rule stands “upon one great moral obligation to refrain from placing ourselves in relations which ordinarily excite a conflict between self-interest and integrity.” The sale being merely voidable and not void, the defense could not be interposed in a suit at law; for the avoidance is at the election of the cestui que trust, and upon exercising his election to avoid the sale the purchaser is entitled to be credited with payments for the purchase, if applied in the administration of the estate for taxes, necessary repairs, etc. 2 Woerner, Administration, 1088. Courts of law have no power to set aside a sale because the administrator was interested in the purchase. This is for the reason that the sale is not void, but merely voidable at the election of the beneficial owners of the estate; and if they seek to set it aside, they must observe the maxim of “he who seeks equity must do equity.” The doctrine of granting relief upon terms or conditions imposed is not known at law, but is purely a creature of equity. In the case of Doe v. Harvey, 3 Ind. 104, the court held that a sale of land by an administrator for the payment of debts will not be set aside at law because the administrator himself became the purchaser. In discussing the subject, the court said: “We have found no case where such a purchase has been held void at law, and there,seems to be weighty reasons why it should be set- aside only in equity.” In the case of Jones v. Graham, 36 Ark. 384, the court held that if an administrator purchases land sold at a trust sale for a debt due his intestate, he holds the land as trustee for the benefit of the estate; and the probate court had no power to denude him of the trust. In the case of Horsley v. Hilburn, 44 Ark. 478, the court in effect held that it is imperative upon the circuit -court to transfer a case to t'he equity docket which set up a defense exclusively cognizable in chancery. See, also, Newman v. Mountain Park Land Co., 85 Ark. 208; Rowe v. Allison, post p. 206. The demurrer to the answer should not have been sustained; for the averments of-the answer presented an equitable defense, and, under our statutes, it is the duty of a defendant, when sued at law, to make all the defenses he has, both legal and equitable. Daniel v. Garner, 71 Ark. 484; Kirby’s Digest, § 6098. The court should have treated the plaintiff’s demurrer as a motion to transfer to the chancery court. Therefore the cause is reversed with directions to transfer it to the proper chancery court.