Court Opinion

ID: 8257191
Source: CourtListenerOpinion
Date Created: 2022-10-16 15:32:57.878611+00
Date Added: 2024-06-11T16:43:02.225975
License: Public Domain

Handy, J.,
delivered the opinion of the court.
This was a bill in chancery, filed by the appellants, for the purpose of setting aside an agreement, made between the appellant’s wife and the defendant Smith, under which the defendants claim title to certain personal and real estate.
The allegations of the bill are in substance, that the appellant’s wife had been the wife of one S. W. Lewelling, who died in Memphis, Tennessee, in February, 1851, leaving a will, by which he gave all his property to his wife after the payment of his debts, and appointed the defendant Cheairs his executor; which will was probated in Tennessee, and Cheairs became administrator there of the estate, jointly with one Craddock. That the appellants were married in November, 1853. That Lewelling was much embarrassed, and in June, 1850, executed a deed of trust to secure certain debts, amounting to the sum of $23,489, and consisting of promissory notes, payable in one, two, three, and four years, and, to indemnify the sureties on those notes, conveying a tract of land and about forty slaves in this State, to the defendant Smith, as trustee, with power of sale upon default in the payment of any one of the notes, either for the amount of the note then due and unpaid, or for the full amount of the indebtedness, at the option of a majority of the creditors; and if all the notes should be paid without sale, that the property should revert to Lewelling and his wife; that the debts secured were partnership debts of the firm of Woods & Lewelling, and that the property conveyed was worth at the time $33,000, and is now worth $38,000 or $40,000; and that the value of the crops raised on the plantation from 1850 to 1854, inclusive, has been about $4000 per annum. That assets belonging to Woods & *261Lewelling, amounting to about $80,000, had come to the hands of the defendants, Smith and Cheairs, who had used them in paying the debts of the firm of Woods & Lewelling, which amounted to but little besides the debts secured in the trust deed.
That after the dissolution of that firm, Lewelling continued to do business in Memphis, and after his death, that assets, amounting to several thousand dollars, came to the hands of Cheairs, but none into the hands of Craddock, his co-administrator ; that soon after Lewelling’s death, his widow took up her residence at Cheairs’s house, on his invitation, and she afterwards proposed to go to the plantation of -her deceased husband, and stay with the family of the overseer, but that Cheairs would not consent to it; that during the time she resided at his house, he gave her no information as to the condition of the estate, and made a secret arrangement without her knowledge, with Smith, to purchase the entire interest which she had in her husband’s estate, for a mere pittance; that she was approached by persons under the influence of Smith and Cheairs, who persuaded her to sell her interest to them, upon false representations, to which she finally yielded, being destitute and without counsel, and under these circumstances, that she signed a conveyance of her interest, for the joint benefit of Smith and Cheairs, who have since divided the property amongst them, and are now in possession of all the property belonging to the estate of Lewelling; that before his death, Lewelling had purchased a lot in Memphis, on which was due a balance of $2000, and that Smith and Cheairs, or Smith alone, agreed to pay that balance, and have the lot conveyed to her, which was accordingly done ; that the section of.land conveyed by the trust deed was worth $6400, and that she was entitled to dower therein, never having relinquished it, and that her dower was worth more than what she received for her interest in the whole estate; that her interest in the estate was worth $20,000 or $30,000, of which she has been defrauded by the defendants ; that Smith had advertised the tract of land and some of the slaves for sale, under the trust deed, but that there was no necessity for such sale, as the debts secured by the deed had all been paid from other sources ; and prays that the sale be enjoined.
The bill charges, that the consideration paid for the widow’s interest in her husband’s estate, was grossly inadequate; that she *262was contracting with those who held the property in a fiduciary capacity for her benefit, and the contract was a fraud, both in law and in fact, Smith and Cheairs being fully conversant with the value of the property, and she being ignorant of its value; that the defendants have refused a bonus at one time of $5000, and at another of $6000, upon their purchase. The bill offers to pay any debts due the defendants, or the creditors of the estate, and take the property and effects, prays an account, and that the conveyance to the defendants be set aside.
The answer of Smith admits his appointment as trustee in the deed, and states that at the time of Lewelling’s death, the debts thereby secured were wholly unpaid. That the contract with the widow was made by him on the 14th June, 1851, and two of the notes secured were to fall due in four days thereafter, and there was no money to meet them except some proceeds of the cotton crop of 1850; and the creditors were pressing. That there was little hope of indulgence, and no hope of meeting the debts, but by a sale of the property. That under these circumstances, a person named Webb, who had been the clerk of Woods & Lewelling, and had been employed by the administrators of Lewelling to make collections, came to respondent’s house, in company with Cheairs, and made the proposition to respondent to purchase; he having been engaged for some months in collecting, and had not collected enough to pay his wages and expenses, which facts he had previously reported to the widow, and had furnished her with a statement of the condition of the estate, and had advised her to sell her interest, all of which was done without the respondent’s knowledge. That respondent replied to Webb, that he would not make the purchase until she had consulted some friend; and upon this being made known to her, she desired him to request a person named French to call and see her, which he did. That he was afterwards informed by French, of her intention to sell, of the amount she required, and of her request that respondent would meet her at a specified place. That the meeting took place, and the contract was made upon the terms proposed by herself, after consulting with her friends, without any persuasion either by French or respondent, the act being entirely voluntary on her part. That the contract was entered into with respondent alone, Cheairs not *263having taken part in it until some clays after its completion. That afterwards, when the agreement was about to be consummated, by conveying the lot to her, he told her that if she was not entirely satisfied, he was willing to let it all drop, and she expressed herself entirely satisfied, and the agreement was then consummated. He insists that the price paid for the property was fully its value, under the circumstances; and that besides the trust debts, he and his co-defendant have paid some seven or eight thousand dollars more than was collected from the assets of the estate, making about $31,430 paid by them for the property. That the settlement of Cheairs with the proper court in Tennessee, of his administration, shows that he is in advance to the estate, $3808; and that in a suit between Cheairs and Woods, the partner of Lewelling, for a settlement of the partnership, it appeared that Cheairs, as administrator of Lewelling, had paid out for debts and expenses, $15,380 more than he had collected of the assets of the firm. He admits the advertisement of the land and some of the slaves, for sale, under the deed of trust, but states that the object of it was merely to pass the title to the property by sale under the trust deed. He admits that the clehts of Lewelling have been paid, or assumed by himself and Cheairs, and that Craddock offered him a premium of $3000 for his interest in the purchase, which he declined. He states that the house and lot, conveyed as the consideration for the purchase of the widow’s interest, was sold by her and her present husband, the appellants, for the sum of $5000, which took place in September, 1854, and relies on the Statute of Limitations as a defence.
The answer of Cheairs is to the same effect as that of Smith.
An amended bill was afterwards filed, attempting to charge the defendants with large assets, besides those embraced in the trust deed, arising from the firms in Memphis, in which Lewelling was a partner, denying that the settlement of Cheairs as administrator in Tennessee, was binding upon the appellants, or that they were affected by the settlement in the chancery suit, not being parties to those proceedings ; alleging that the widow was absent from this State after the contract was made, and ignorant of the fraud practised upon her, and that this suit was commenced as soon as the fraud was discovered, and charging that there was a tract of land in Virginia worth $2000, of which she had no knowledge, and of *264•which the defendants were aware at the time of the sale, and have since received rents.
The answers of the defendants deny the material parts of the amended bill, and as to the land in Virginia, state that they know nothing of it except what was derived from a letter shown to Cheairs by the appellant’s wife, shortly after Lewelling’s death; are ignorant of its value or extent, and have not sold or rented it, nor receive any rent for it.
Upon the final hearing the bill was dismissed; and from that decree the complainants took this appeal.
The first position taken in support of the bill is, that the purchase having been made by the trustee from the cestui que trust, must be set aside, as of course, upon the motion and at the option of the cestui que trust, however fairly it may have been made. '
The'rule that’purchases of the trust property by trustees at their own sales, may be set aside as of course, at the election of the cestui que trust, and a resale ordered, is sanctioned by many authorities. But this right does not exist to the same extent in cases of purchases by the trustee directly from the cestui que trust, or by the consent of the cestui que trust, where the purchase is made by the trustee at his own sale. In such cases the rule is, that the trustee is not under an absolute disability to make the ■ purchase; but that it will be regarded with suspicion, and that it is incumbent on the trustee to show that it was in all respects just and fair, and with the most abundant good faith on his part, and the fullest deliberation upon the part of the cestui que trust, with the aid of all the information possessed by the trustee touching the subject, and which it was his duty to communicate. 1 Lead. Cases in Eq. 125; and the numerous cases in the notes, 150.
It is next insisted that, under the rule thus stated, this sale cannot stand, because the defendants have not only failed to show that fairness and good faith which are required, but the evidence shows a positive advantage taken of the cestui que trust by the trustees in making the purchase. The circumstances relied upon as showing that an undue advantage was taken of the widow in the transaction are, her destitute and distressed condition, her ignorance of the state of her husband’s affairs, complicated as they were, and of the value of his property and means, and even the amount of his pro*265perty; the failure of Smith, who was trustee under the trust deed in which she was interested, and of Cheairs, who was administrator of the estate of which she was residuary legatee, to obtain and impart full and accurate information as to the condition of the estate, if indeed they were not actually apprised that it was of much greater value, than the amount of the debts agreed to be paid by Smith in making the purchase; and lastly, the inadequacy of the consideration paid, to the real value of the interest in the property conveyed.
Upon these points many witnesses were examined, and the testimony is very voluminous. But the particulars principally relied upon as showing that a fraud was practised in procuring the sale are, the circumstances under which the widow of Lewelling was advised to make the sale; the fact that Smith and Cheairs were both interested in the transaction, though conducted in the name of Smith alone, and that they were aware that they were making a speculation at the time.
There appears to be nothing in the evidence, in relation to the means employed to induce Mrs. Lewelling to make the sale, to justify the charge that it was the result of fraudulent representations, or that there was a combination for such a purpose between Smith and Cheairs. It was first proposed to her by Webb, who stood indifferent between the parties, and who was intimately acquainted with the affairs of the estate, having been clerk for Lewelling in his lifetime, and having been engaged for several months before the sale in collecting the debts due to the estate. He had previously furnished her with a statement of the condition of the estate, and now, upon full conference with her, advised her to sell if she could get $5000 for her interest, believing that her interest was not worth more than that sum. She was at first disinclined to sell, but changed her mind upon his representations, and desired him to request French to call and see her. He did so, and she consulted with French as her friend, and he advised her to sell, as Webb had done. Webb first mentioned the subject to Smith of his own accord, who declined making the purchase unless she was advised to sell by some friend, and stated that if it was proposed to him after such consultation, he would consider it. After consultation with French, she authorized him to propose the sale to *266Smith, which he did, and it was accordingly made by him for her. Some time after this, and when the agreement was about to be consummated, Smith stated to her that she might abandon it, unless she was entirely satisfied with it; and desired her to consult her friends upon the subject. She replied that she was entirely satis- • fied, stating that it might be doubtful whether, after the lapse of several years, she would get anything after settling up the liabilities of the estate.
In addition to the probability that but little of the estate would be left after paying the debts, as was the opinion of Webb and French, who were well acquainted with its condition, there was strong reason to believe, that the property would have to be sold under the trust deed for the notes secured thereby, and which were about falling due when the sale was made; and she was anxious that the property, which consisted mostly of family slaves, should not be sold and separated. She therefore preferred that they should be sold together to Smith, and thereby prevented from being “scattered,” by being sold under the trust deed, which appeared to be inevitable, unless the arrangement with Smith had been effected; and this appears to have been a controlling motive with her in disposing of her interest and making the arrangement with Smith.
It is true that the evidence justifies the belief that Smith and Cheairs were both interested in the purchase when it was made, and that for some reason, which does not sufficiently appear, the name of Cheairs did not appear in it. But it does not appear that any influence or undue means was exerted by either of them to induce her to make the arrangement, or that they had a better knowledge of the condition of the estate than Webb, who had been so intimately connected with it, or that they refused to give her such information upon the subject as they possessed.
There is much testimony with respect to the value of the property and assets of the estate, and considerable disagreement between the witnesses for the respective parties as to the value of the slaves in the trust deed and the choses in action of the estate. The estimated value relied upon by each party appears to be sustained by the witnesses examined by them respectively; and under such a state of disagreement of witnesses, we cannot say that the court *267below erred in adopting the valuation proved by the witnesses for the defendants, who are not only unimpeaehed, but are shown to have had opportunities to form reliable opinions upon the subject.
But there is a circumstance shown by the testimony, tending to cast suspicion upon the purchase of the defendants, with reference to the value of the interest of Mrs. Lewelling in the estate. It is proved that shortly after the arrangement was made, Smith stated that he had made a trade with Mrs. Lewelling by which he and Cheairs would clear $10,000. He also declined an offer made him by Craddock, shortly after the trade, of $3000 for a third interest in it. He also refused an offer of $5000 for the bargain, made by another person shortly after the trade.
It is true that these facts would not of themselves be sufficient generally to set aside a contract on the ground of gross inadequacy of price, nor would they be sufficient to show fraud in procuring the sale. The hazard of taking the property, and, as a consideration, undertaking to pay all the debts of the estate, might be a risk which would justify the purchase of the widow’s interest in the estate, if the relation of trustee and cestui que trust had not existed between them; for there would, in such ease, be no such evidence of fraud, and no such gross inadequacy of consideration as to vitiate and annul the contract. But when the relation of trustee and cestui que trust exists between the parties, it is the duty of the trustee to show, that he gave all the information in his possession to the cestui que trust, and that he took no advantage whatever of his superior knowledge in relation to the value of the estate; and unless all suspicion against the openness and fairness of his conduct be removed, the sale will be vacated at the election of the cestui que trust. Although, in this case, the value of the purchase, as acknowledged by Smith, may have been based upon a calculation of the prospective profits to be derived from the use of his capital and industry to be employed upon the property, yet, under the stringent rule applicable to cases of this nature, his acknowledgments as to the value of the purchase would tend strongly to show that the consideration paid was greatly less than what he believed its value at the time; and we should be inclined to hold that, on this ground, the sale cannot be sustained, if there was nothing else in the case to show, that upon principles of equity it should not be *268set aside. This brings us to consider the only other point which we deem it necessary to notice.
It appears that no step was taken by the appellants to disaffirm the contract until this bill was filed, which was not done until the lapse of three years and about eight months, after the date of the purchase. And in September, 1854, more than three years after the contract was made, the appellants sold the house and lot in Memphis, conveyed by Smith to Mrs. Lewelling, to a third person for the sum of $5000.
■ It has been held by this court, that the cestui que trust, in cases of, this character, may elect to treat the sale as valid, and that such election will be implied from any unreasonable delay in taking steps'to,set it.aside. Scott v. Freeland, 7 S. & M. 419. In that case, the delay of an heir for about one year after his majority, to institute his. suit to set aside a sale, made by the trustee to himself during;the heir’s minority, was held sufficient to prejudice his right, and the ;sale was not set aside upon his application. In this case, the delay, was;much greater. For aught that appears, the facts relie'd'.upon to show that an undue advantage was taken of the widow,'might have'been ascertained at any time after the sale, by proper .investigation'and vigilance. She remained a widow until November, 1853, resting under the advice given by her friends, French and Webb, under which she had acted. If her forlorn condition during that interval, could constitute a sufficient excuse for her. want of diligence, that reason ceased upon her marriage to the appellant, Jones, after which there was no excuse for want of diligence, in inquiring into the transaction and asserting their rights. Yet there was no effort made to investigate the matter until about twelve months after the marriage, and this suit was not brought until the lapse of about fifteen months after that time. During all this time, no act on the part of the defendants is shown calculated to prevent inquiry, or to lull the appellants into security, or to conceal the true nature of the transaction. On the contrary, they appear to have declared openly, their views of the transaction, insomuch that these declarations, which appear to have been fully and frequently made, are the strongest circumstances turned to their prejudice. Under such circumstances, the failure of the appellants to prosecute their rights for so great a length of time, must pre*269elude them from impeaching the sale, and amount in law to a ratification of it. Scott v. Freeland, 7 S. & M. 419; Ayres v. Mitchell, 3 Ib. 683.
There maybe circumstances of gross fraud and imposition, which; would form an exception to this rule, and justify the court in ‘holding that under the peculiar circumstances of fraud and oppression, the guilty party was entitled to no indulgence. But there is no evidence to bring this case within such a rule, no proof of positiye fraud or undue influence, practised by the defendants upon Mrs. Lewelling; the sale appears to have been freely and voluntarily made by her, not through the influence or solicitations of the defendants, but under the advice of her own friends, and upon her own proposition; and entered into by the defendants as a speculation, in which they took the hazard, and from which they' expected by diligence to realize a handsome profit. ’ '
We think, therefore, that the case comes fully within the rule, stated in Johnson v. Jones, 13 S. & M. 583, — that if the party seeking to rescind has been negligent, and there has been a change' of circumstances in any material particulars, a-rescission should not be decreed.
And under this view of the case, the decree is correct, and must be affirmed. - ■