Court Opinion

ID: 7976569
Source: CourtListenerOpinion
Date Created: 2022-09-09 01:00:29.21509+00
Date Added: 2024-06-11T16:34:55.409147
License: Public Domain

Holt, J.
(dissenting).
Regretting that my conclusions in this case have cast the burden upon my Associate to prepare the opinion of the court, I wish to state briefly why, in my judgment, there should have been a reversal, instead of an affirmance.
It is to be noted that the complaint charges active fraud against defendant, in that, from the time of his appointment as administrator until the Torrens judgment, every move of his was to deprive the plaintiff of her property. The burden was upon plaintiff to prove these allegations, or at least the fraud upon which recovery could be predicated. Plaintiff cannot prevail on proof of constructive fraud, for whatever of plaintiff’s rights, if any at all, Smith obtained under that doctrine were restored to her by the transfer to the state of the tax certificate upon which the Northern Security Company judgment to determine adverse claims was based. Therefore active fraud must be proven.
That Smith had formed no intention up to December, 1898, to deprive either plaintiff, the estate of Cassius C. Merritt, or any judgment lienholder of this property is perfectly clear to me. Within three months after Smith entered the employ of Cassius C. Merritt, the latter died, leaving an estate hopelessly insolvent. On account of a $50,000 insurance policy on the life of the deceased having been assigned by him to plaintiff some time prior to his death, it *138was thought best not to have her act as executrix, although she was so named in the will, and upon the advice of her attorney and the brothers of deceased, Smith was appointed administrator with the will annexed. It appears that in the settlement of the estate several years were consumed in litigation, but with profit both to Smith and the creditors, for the former was allowed some $10,000 for his services by the probate court, and the estate, which was inventoried and appraised at hut $27,000, realized about $100,000.
It is quite clear, also, that through no design or scheme of Smith was the land in dispute not inventoried or sold to pay debts in the due course of administration of the estate, as was all the other real estate of which Cassius C. Merritt died seised. Undoubtedly this land was omitted through ignorance that the Merritts had any interest therein. Cassius C. and Andrus E. Merritt had been partners for some years previous to the former’s death, buying and speculating in lands, especially such as might contain iron prospects. The deed from Knudt Olson ran to Cassius O. Merritt and Andrus E. Merritt to an undivided one-half of the 10. Smith testified that he did not know that the estate had any interest in this land, for it was not entered on the books of Cassius, but was entered as the Knudt Olson lands, though upon a wrong description, on the partnership hooks in the handwriting of Cassius, and from those books it appeared, also, that prior to January, 1893, it had been transferred to the Great Western Company for its stock.
No sinister motive should he imputed to Smith in the purchase ■ of the forfeited tax certificate by an employee sent by Smith to attend and bid at the sale, and who bid in more than 30 scattered tracts in the vicinity of the supposed mineral area. The purchase at the void tax sale was no douht done without any knowledge that the Merritts ever owned any interest in this land, for when, after Smith’s discharge as administrator, an abstract procured showed that the government title to an undivided half stopped in Cassius C. and Andrus K. Merritt, Smith at once wrote to Alfred Merritt, informing him of the situation. He later wrote Andrus in regard to the matter. Smith was justified in assuming at that time that Alfred Merritt,, who had taken assignments of nearly all. of the $70,000 judg*139ments docketed against his brothers Cassius and Andrus, was the only one interested in the 40. With these judgments constituting valid liens upon the real estate of Cassius and Andrus, it could not be anticipated that there was any interest of value to the devisee of Cassius, this plaintiff. At the administrator’s sale other tracts of valuable mineral lands went for a few dollars. Alfred Merritt was not only the one most interested in the •estate because of the judgments he held, but was the one of the brothers who advised and assisted plaintiff. He was also the one who, .at the administrator’s sale, secured nearly all, if not all, of the tracts of land having any mineral prospects. So that there is no reason for claiming that the evidence shows any intention to defraud up to the time the Northern Security Company instituted the suit to quiet title.
I quite agree with my Brethern that, since Smith had not been discharged as administrator when the forfeited tax certificate was purchased by a corporation under his management and control, the purchase was a breach of trust, and the cestui que trust could pursue and claim whatever title was procured thereby, and this, even though the purchase was made in good faith and without knowledge that Cassius C. Merritt had any interest in the land. And it is also good law to hold that the Northern Security Company, being Smith’s ■creature, could not, by an action to quiet title begun after Smith’s discharge as administrator, obtain a title divested of the trust. Correct is also the conclusion that when, after obtaining that judgment, the Northern Security Company transferred the tax certificate on which it was based to the state, the judgment and all interest of the Northern Security Company, as well as of Smith, in the land, was completely wiped out. From that time on Smith stood in no fiduciary relation to plaintiff or the estate, and if thereafter he committed any wrong to plaintiff’s damage, he must be proven guilty like any other wrongdoer before he can be held liable. It was for the plaintiff to plead and prove, and the court to find, that plaintiff was deprived of her property, or that defendant has obtained her property, by an actionable wrong or fraud, because that which he did when he stood in a fiduciary relation to plaintiff, namely, the purchase of *140the tax certificate and the suit based thereon, became a nullity by the subsequent transfer to the state of the certificate.
It does not seem to me that plaintiff maintained this burden of' proof. Fraud and wrong conduct is never presumed; and we expect the one who makes such accusation to produce all the available evidence.
The only evidence which may give any semblance of wrong conduct on the part of Smith is, first, the recording of the judgment quieting title in the Northern Security Company, after the transfer-had been made to the state. This may show a wrongful intent, bub that is all; for the recording of the judgment, then virtually satisfied, by the transfer to the state, gave no life or validity to the same, and can constitute no step in depriving plaintiff of her property. And if my Brethren be right in holding that the registration of title under the Torrens act did not deprive plaintiff of her interest because she was made defendant under her former name, then it follows that the-suit of the Northern Security Company to quiet title did not affect her interest at all, for she was not made a defendant under the name-of Arnold, her true name then, but Merritt. Could it for a moment be claimed that an action for conversion or for defrauding plaintiff of her property could have been maintained against Smith at anytime prior to the time Merritt and Fairchild obtained judgment in: their suit to quiet title ? Certainly not.
Secondly, it is contended that, because Smith bargained for a-quarter interest of the title obtained by Merritt and Fairchild in their action to determine adverse claims, it proves that Smith instigated their acts in procuring their judgment determining plaintiff’s adverse claims. This conclusion seems far-fetched. There is no-moral or legal wrong in a bankrupt attempting to buy property from, the trustee in bankruptcy, if he can obtain the means so to do. Friends may come to the aid of a bankrupt, or he may be able to-make a deal with others whereby he may procure part of his former-estate. Nor should it be forgotten that Smith, after the Northern Security Company judgment had been recorded, acquired an undivided one-fourth interest in the 40 by an execution sale under a judgment obtained by Jane E. and Edgar B. Northrup against one *141Orosley, 'to whom Knudt Olson conveyed an undivided one-fourth at the same time he gave the deed to Cassius C. and Andrus E. Merritt for the undivided one-half. There can be no question on this record that Smith thereby became the owner of an undivided fourth in the land by a perfectly legitimate transaction, not to be questioned in any way by plaintiff. This one-fourth interest passed to Eis trustee in bankruptcy, and was conveyed to Merritt and Fairchild by the trustee for $250, one-fourth of this one-fourth Merritt and Fairchild agreed to convey to Smith, and Smith procured one Barrows to buy one-half of Smith’s part; Barrows paying enough for ■such part to pay the whole amount Smith had agreed to pay Merritt .and Fairchild. It would seem that the interest which Smith thus procured from Merritt and Fairchild in the land formerly owned by Eim should be immune from any claim by plaintiff, and the holding "to the contrary by the court below was error.
Moreover, there is no testimony that Smith counseled the assignee of the Merchants Bank, a partnership composed of Smith and his brother, to sue the Northern Security Company and obtain a judgment against it, nor that Smith instigated the trustee in bankruptcy to proceed to sell and bid in the interest of the Northern Security •Company in this land to satisfy that judgment, nor that he procured Merritt and Fairchild to buy the sheriff’s certificate from the trustee, nor that he induced Merritt and Fairchild to bring the action to determine adverse claims. Phelps, the assignee, Barnes, the trustee in bankruptcy, Merritt, and Fairchild all appear to have been residents of Duluth. Merritt is a nephew of Cassius, and it ■•soems through him, or his father, plaintiff was informed of the alleged cause of action she now asserts. With the burden of proof on plaintiff, there is no excuse for not calling these persons just menfioned to the witness stand. There can be no inference that an assignee in insolvency or a trustee in bankruptcy is in any manner under the control of the insolvent or bankrupt, or does his bidding. On the contrary, the presumption should be that such an official •■acts properly and in the interest solely of the creditors. Smith could not be expected to call either Merritt or Fairchild, because it appears that an action is now pending in the Federal courts wherein *142Smith attempts to set aside this very sale of the sheriff’s certificate transferred by the trustee in bankruptcy to Merritt and Fairchild.
Furthermore, the seventeenth finding of the court, which is the one upon which fraud on the part of Smith on the controlling or pivotal issue in the case is predicated, is so evidently based on a misconception of the evidence that a new trial should be had. It. will not do to say that the evidence would support a finding, had it. been made, that the fraud mentioned in this finding related to the Merritt interest, instead of to the Crosley, which in all fairness it refers to. Fraud was charged in the complaint and denied in the answer, and hence, without a finding on this issue, judgment cannot be rendered in favor of plaintiff, no matter how conclusive-the evidence is considered to be. . The finding mentioned can relate-to none other than the Crosley interest, for that is the only interest Smith ever personally claimed in the 40 prior to his purchase from Merritt and Fairchild. He scheduled it as his in the bankruptcy proceeding. If any assertion was ever made to the Cassius or Andrus Merritt interest, it was that it was owned by the Northern Security Company.
The seventeenth finding is as follows: “That a petition in bankruptcy was filed in the Hnited States court for the district of Minnesota, Fifth division, wherein Hansen E. Smith and James P. Smith, copartners as the Merchants Bank, and Hansen E. Smith individually, were adjudged bankrupts on the 9th day of November, 1904, and in said proceeding the defendant L. A. Barnes was appointed trustee in bankruptcy of the said defendants. That in said proceedings the defendant Hansen E. Smith claimed the ownership of the undivided one-fourth of the lands and premises hereinbefore mentioned under the judgment set forth in the last paragraph, and by such false claim caused the said interest in said land belonging to the plaintiff to be claimed by the trustee and creditors of his estate in bankruptcy, and that but for the false claim of title under the said judgment recorded as aforesaid no claim of title could or would have been made in said bankruptcy proceeding bid in of the defendants herein. That such proceedings were had and taken in said bankruptcy proceeding that the defendant L. A. Barnes, as trustee for said bankrupt estate, *143sold the interest so claimed as hereinbefore set forth to David L. Eairchild and Thomas A. Merritt. That said sale was procured and caused by the defendant Hansen E. Smith, and that at or about the time of said sale an agreement was made and entered into between the defendant Hansen E. Smith and said Eairchild and Merritt that the undivided three-sixteenths of said lands and premises should be conveyed to him, and that no consideration was paid by the defendant Hansen E. Smith, and the said undivided three-sixteenths was and is out of the undivided one-fourth of the said lands and premises belonging to the estate of said Cassius C. Merritt and the other undivided one-sixteenth was at said time lost to the estate and to plaintiff by and through the act of the defendant Hansen E. Smith, and three thirty-seconds out of the three-sixteenths contracted for was subsequent thereto and at about said time lost to the estate by and through the act of said Hansen E. Smith in selling the same to one Walter A. Barrows, Jr.”
Aside from the fact, above pointed out, that the undivided one-fourth interest in the 40 which Smith personally acquired under the execution sale against Crosley, and which went to his trustee in bankruptcy, is confused with the interest once owned by the Merritts, the finding is wrong as to the fact that no consideration was paid, because the testimony is that Smith procured Barrows to take one-half of the one-fourth that Merritt and Eairchild had agreed to transfer to Smith, and to pay therefor the whole amount that Smith was to pay, and the finding is demonstrably wrong in stating that the undivided three-sixteenths that Merritt and Eairchild had agreed to convey to Smith came from the Cassius C. Merritt interest. Assuming that, under the execution sale against the Northern Security Company, Barnes, the trustee in bankruptcy, acquired anything, it was the alleged interest of Cassius C. and Andrus B. Merritt, to wit, an undivided one-half of the 40; he assigned the sheriff’s certificate to Thomas A. Merritt and David L. Eairchild, the latter specifically conveyed one-sixteenth (or one-eighth of undivided one-half) of this title to Smith and one-sixteenth to Barrows for Smith, the Cassius and Andrus interest being transferred together, it would seem that in the title Smith obtained only one thirty-second thereof came from the Cassius O. Merritt interest.
*144But I am also of the opinion that in no event is plaintiff entitled to any interest in the land. She was deprived of neither money nor land by the recording of the judgment quieting title brought by the Northern Security Company, nor was she deprived of anything by the execution sale made by the trustee in bankruptcy of the interest of the Northern Security Company in this land, or by the sale of the sheriff’s certificate by the trustee to Merritt and Fair-child, for no better or other title was obtained thereby than the one had by the Northern Security Company, and we are all agreed that that was nothing. With nothing to stand on except the undivided one-fourth which was derived through the bankrupt, Smith, from Orosley, Merritt and Fairchild claimed an undivided three-fourths in the land, and brought suit to quiet the title thereto and determine plaintiff’s adverse claim. She was made a defendant under her proper name, the judgment alone is in the record, and there is nothing to indicate that the court did not obtain jurisdiction, nor is there any intimation that the proceedings were not perfectly regular. She was under no disability. It is not claimed that any fraud was practiced on her which prevented her from making a defense. This judgment should forever estop her from claiming the land as against Merritt and Fairchild and those in privity with them. Smith derives his title, as far as the Merritt interest is concerned, solely from Merritt and Fairchild.
I am not against a holding to the effect that, upon proper proof and findings that Smith fraudulently instigated and procured Merritt and Fairchild to institute the suit wherein the judgment by way of estoppel deprived plaintiff of her land, she might successfully maintain an action for damages; for such a cause of action would not necessarily be involved or determined in a suit to quiet title or to determine adverse claims to lands. After the transfer to the state there certainly was nothing of value or merit in the judgment quieting title in the Northern Security Company, if there ever was as to plaintiff; she not being named by her true name as a party defendant. Since that time Smith owed plaintiff no duty and did not stand in any fiduciary relation. Therefore he could buy the title acquired by Merritt and Fairchild free from plaintiff’s claims as well as any one else.