Connecticut Mutual Life Insurance v. Smith

22 S.W. 623, 117 Mo. 261, 1893 Mo. LEXIS 344

• Court: Supreme Court of Missouri
• Decided: June 27, 1893
• Status: Published

Opinion

Sherwood, J.

— Upon the evidence adduced in support of the issues made by the pleadings, various questions arise requiring consideration.

I. The. settled law of this state as illustrated by frequent instances in this court is that the capacity of a corporation to take a conveyance of land cannot, after the transfer has reached completion, be called in question in a collateral wav. but by the state and not by a privase suitor. This doctrine applies to all classes of actions and in every variety of cases. Chambers v. City, 29 Mo. 573; Land v. Coffman, 50 Mo. 243; Railroad v. City, 66 Mo. 251; Thorton v. Bank, 71 Mo. 221; Shewalter v. Pirner, 55 Mo. 219; Ragan v. McElroy, 98 Mo. 352, and other cases.

The only exception to the rule which prohibits collateral attack by private persons on such conveyances or other unauthorized acts of a corporation, is where such attack is authorized by express legislative permission. Martindale v. Railroad, 60 Mo. 508; Kinealy v. Railroad, 69 Mo. 663; Hovelman v. Railroad, 79 Mo. 633. This is the rule also announced by the supreme court of the United States. Bank v. Matthews, 98 U. S. 621, which overruled on this point, Matthews v. Skinker, 62 Mo. 329.

As shown by the brief of plaintiff’s counsel, this rule still prevails in that court, and in many of the states. This rule, however, is entirely consistent with another rule announced by the Same court in Case v. Kelly, 133 U. S. 28, regarding the refusal of a court to interfere in behalf of a corporation whose rights rest only in executory contract which it seeks outside of the provisions of its charter, to have enforced. This distinction is also taken in Land v. Coffman, supra. But it seems that there was no evidence that the purchase by the plaintiff from Wade (who bought from Fisher, who bought from Mrs. Washington, the original owner) was for an unauthorized purpose. Absent any evidence to the contrary, a proper and legitimate purpose will be presumed. Bank v. Risley, 19 N. Y. 369.

II. Having determined that the capacity of the plaintiff corporation to take whatever title Wade possessed, could not collaterally be attacked, the next point for examination is whether Mrs. Washington’s title to the property in controversy was such an one as possessed the elements and attributes of transferability.

If indeed Mrs. Washington was the possessor of an interest in the land in controversy and she was defrauded out of it, there can be no question under our statutory provisions and frequent rulings on the point, but that she could maintain any suitable action or proceeding to regain whatever rights she had lost by reason of any fraud practised against her; and any such right, whether legal or equitable, whether sounding in contract or sounding in tort, which survived the person, are transferable. 1 Revised Statutes, 1879, secs. 2354, 3462. Thus, in Street v. Goss, 62 Mo. 226, it was ruled that the equitable right of a debtor to have a conveyance obtained by an agent of his principal through fraud, was vendible under execution.

In an early case it was held that under the new code a right of action for the conversion of property was assignable, and that the assignor could sue in his own name. Smith v. Kennett, 18 Mo. 154. See also Melton v. Smith, 65 Mo. 315, and cases cited. In the cases of Snyder v. Railroad, 86 Mo. 613, and Doering v. Kenamore, 86 Mo. 588, it was decided that under the code a right of action arising from a tort to property was assignable. Some observations which fell from Judge Bliss in Smith v. Harris, 43 Mo. 557, were based on the case of McMahon v. Allen, 34 Barb. 56, subsequently overruled on appeal in 35 N. Y. 403, after an elaborate review of the authorities both in England and this country, in which case it was ■ held that a conveyance obtained by fraud and in violation of a. fiduciary relation might be the subject of a grant or assignment which would enable the grantee or assignee to file a bill to set aside the previous conveyance.

On the same footing in equity and governed by the same rules are those cases where a right to establish a trust in lands, either actual or constructive, has been transferred. 2 Story on Equity Jurisprudence [13 Ed.], sec. 1050; Stump v. Gaby, 2 De G., M. & G. 623; Gresley v. Mousley, 4 De G. & J. 78.

III. Having ascertained that the plaintiff corporation had the capacity to take the conveyance upon which this proceeding is grounded, a capacity which cannot at least be questioned collaterally, and that Mrs. Washington, if defrauded, had a tangible interest in the litigated property, capable of recognition in a. court of equity, and capable of being transferred by mesne conveyances from Mrs. Washington to Fisher-, and from the latter to Wade and from him to the plaintiff, it is next in order to determine whether Mrs. Washington was defrauded as charged in the petition. Intimately connected with this question is one respecting notices to the alleged defrauder.

Did defendant have notice? This question will be considered and answered from various points of view. Notice in this connection does not mean positive information brought directly home to the party .sought to be charged. Anything which will put a prudent man upon inquiry is notice. And gross negligence in' failing to make inquiry when the surrounding facts suggest the existence of others, and that inquiry to be made is tantamount in courts of equity to notice. Major v. Bukley, 51 Mo. 227; Leavitt v. LaForce, 71 Mo. 353; Roan v. Winn, 93 Mo. 503. This is the universally prevalent doctrine of courts of equity in all jurisdictions. 2 Pomeroy on Equity Jurisprudence [2 Ed.] secs. 596, 597, 598, 599, 600, et seq.' And actual notice may be inferred from circumstances and by reasonable deductions therefrom. Ibid; Brown v. Volkening, 64 N. Y. 76. Courts of equity, since their earliest foundation, have always recognized that the still, small voice of suggestion, emanating as it will frorg contiguous facts and surrounding circumstances, pregnant with inference and provocative of inquiry, is as potent to impart notice as a presidential proclamation or an army with banners.

In this case, however, there is no occasion to invoke inferences from surrounding circumstances or draw deductions from conceded facts, because here the testimony is uncontradicted that: First. Mrs. "Washington told defendant in 1874, at the time he opened negotiations with her respecting the land, of Darby’s contract, its non-performance and its rescission. And in his testimony taken in another cause defendant admitted the same thing. Defendant was also notified by seeing and taking from Darby in October, 1880, an assignment of the very contract itself, whereby Darby had undertaken to recover. Mrs. Washington’s interest for her; a contract then over seven years old and wholly unperformed. ■ Not content with that, defendant even took an assignment of the deed to Darby, and of Darby’s interest therein, paying him therefor $100, a beggarly pittance for property then worth some' $15,000. Second. The purchase from Darby, by defendant, of such valuable property at such a paltry figure is evidence of notice in and of itself and shows, when coupled with the other pregnant circumstances mentioned, that the transaction was merely colorable and not a bona fide purchase. Eck v. Hatcher, 58 Mo. 235; Lionberger v. Baker, 88 Mo. 454; Hoppin v. Doty, 25 Wis. 573; 2 Pomeroy on Equity Jurisprudence [2 Ed.], section 600. Third. Butin this case defendant pleaded as an affirmative defense that he “acquired the title of Darby for full value and without notice of the supposed fraud and breach of trust of Darby.” This plea, it will be observed, lacks the averment that the purchase was made in good faith. ■ This is a serious defect. 2 Pomeroy on Equity Jurisprudence [2 Ed.], section 762. But, waiving such defect, treating the plea as sufficient in fullness and specific averments, still the onus of proving himself a bona fide purchaser rested on defendant. Jewett v. Palmer, 7 John Ch. 65. Fourth. That the burden rests on ‘the shoulders of him who pleads it, is especially true where the vendor of the title in question was guilty of a fraud, in which ease the same rule applies to the purchaser under such fraudulent grantor as applies to the purchaser of negotiable paper which had its origin in fraud. Sillyman v. King, 36 Iowa 208, and cases cited. That Darby was guilty of fraud in the transaction is too plain for argument; and that defendant was equally culpable does not admit of question. Fifth. Moreover, charged as was defendant with fraud, his failure to appear and testify in denial of the charge of something peculiarly within his own knowledge, carries with it the usual unfavorable and damaging presumptions. Henderson v. Henderson, 55 Mo. 534; Cass Co. v. Green, 66 Mo. 498; Goldsby v. Johnson, 82 Mo. 602; Leeper v. Bates, 85 Mo. 224. On this branch of the case then we hold that defendant had ample and actual notice and with such notice he deliberately, so far as in him lay, defraudedNIrs. Washington.

IV. Not only was defendant blameworthy in the-manner already noted, but he was also in other particulars. That he occupied toward Mrs. Washington and her interests a fiduciary relation cannot, considering the evidence, admit of doubt. That this was true upon the making of the first contract which he made with her in February, 1874, -is quite apparent. The contract subsequently made by Mrs. Washington with Morrison was but substitutionary of the first one made by her with defendant. • This is obvious for many reasons. His interest in the litigated land still continued to be bound by a lien in Mrs. Washington’s favor,in addition to the part, reserved to her, which was one-fifteenth, the other two-fifteenth having been conveyed to Morrison on the “joint account” of defendant and himself. After this, defendant took depositions; attended trials; prepared bills of exceptions; effected compromises; drew deeds therefor, in which Mrs. Washington was awarded one-fifteenth, and he received from her deed of compromise in return, and recorded the same; and he drew petitions, carried on correspondence with Mrs. Washington, informing her from time to time of what was being done; receiving letters from her showing the reliance she placed in him. In short, defendant, in all except the bare name, was the attorney of Mrs. Washington, and certainly was her trusted agent. Whether he did so gratuitously or not, does not alter his position towards her or affect its fiduciary character. . And the status of defendant towards Mrs. Washington is not changed because she wrote similar letters to Morrison.

This being the case, all the gains of defendant by means of his position, whether through the Darby deed or otherwise, belonged to 'Mrs. Washington, of which gains he could in nowise deprive her. Jamison v. Glascock, 29 Mo. 191; Bent v. Priest, 86 Mo. 475, and cases cited.

The doctrine which dominates a trustee in this regard applies not only to trustees of technical or express trusts, but to all occupying a similar relation, whether cotenants, agent for hire, gratuitous agents, sub-agents, partners and employees of agents, and even to officious intermeddlers in the business of others, or who, by being employed in the affairs of another, have acquired a knowledge of his property. 2 Sugden on Vendors [8 Am. Ed.], pp. 408 et seq. and notes; Baker v. Whiting, 1 Story, 218; Bispham’s Principles of Equity [4 Ed.], section 93; Keech v. Sandford, 1 White & Tudor’s Leading Cases [4 Am. Ed.], 62; Allen v. DeGroodt, 98 Mo. 159.

Because of the foregoing considerations it necessarily results that Mrs. Washington was entitled to her full one-fifteenth in all of- the lands in United States survey 2500, and the like amount of all moneys derived from compromises or exchange and the plaintiff, as the assignee' of her rights,- should have prevailed in securing that quantum of interest. This is true, unless the statute of limitations has created a bar, which point is next for consideration.

V. As to that point, it is sufficient to say that, as this suit concerns real estate, ten years is necessary to constitute a bar; and the same length of time is requisite where it is sought to enforce trusts in real estate. Buren v. Buren, 79 Mo. 538, and cases cited. Now, in this case, from the time of defendant’s dealing with Darby to the time when this proceeding was instituted was only about five and one-third years. Until that occurrence there was no adverse holding or adverse claim on Darby’s part. Besides, as a fraud was practiced when the Darby deed was delivered, ten years would be allowed the injured party from that time in which to discover that fraud and to bring his action. 2 Revised Statutes, 1889, sec, 6775, sub. div. 5. Furthermore, the question of defendant’s right to the land in question was being litigated. Smith v. Washington, 11 Mo. App. 520; s. c., 88 Mo. 476.

YI. In addition to what heretofore has been said respecting the Darby deed and the defendant’s claim thereunder, it may be remarked that, even if defendant had acquired any valid right under that deed, it would have been swept away, as the result of the litigation in case 55597, reported as above; for in that case the right of defendant to claim against'Mrs. Washington the interest derived under the Darby deed was distinctly adjudged against him, judgment going in her favor. This adjudication occurred in 1882, and though made on a demurrer to the petition, yet, as the demurrer went to the merits, the whole matter in controversy became res judicata. Bigelow on Estoppel [5Ed.], 56. And it was as competent to offer the judgment in evidence as it was to plead it, and the effect was the same. Garton v. Botts, 73 Mo. 274, and cases cited.

Defendant’s testimony taken in other causes ■abundantly shows that 'he relied on the Darby deed, but before that conceded that Mrs. Washington was entitled to one-fifteenth, for, amongst other things, he says: “There never was any dispute about Mrs. Washington’s title to one-fifteenth of that land, until I discovered the Darby deed.”

VII. Something has been said about plaintiff’s inability to obtain equitable relief by removing a cloud from its title because defendant Smith was in possession. There would be weight in this suggestion if. plaintiff had the legal title, but as it has not, resort to a court of equity was a necessity, both for that purpose and in order to divest title and declare a trust. Mason v. Black, 87 Mo. 329, and cases cited.

VIII. It was proper for the court to permit plaintiff, before the entry of the final decree, to amend its petition to conform to the facts proven; and there was no error three days after the entry of the final decree to refuse defendant permission to file an amended answer; nor does it appear in what the proposed amendment consisted, whether or not it was material. Howell v. Stewart, 54 Mo. loc. cit. 407, 408.

IX. As. before indicated, the decree entered, while correct so far as it went, did not go far enough, because it did not accord to plaintiff as extensive relief as that to which it was entitled; but the decree went too far when it required plaintiff to repay to defendant the $100, with interest which he had paid Darby. This money having been paid by defendant of his own wrong, and in furtherance of an actual fraud, a court of equity 'will not aid him to recover it, but will leave him where it finds him. Gilbert v. Hoffman, 2 Watts, 66; Jackson v. Summerville, 1 Harris, 359; Sands v. Codwise, 4 Johns. 597; McCaskey v. Graff, 23 Pa. St. 321.

For the foregoing reasons, we reverse the decree and remand the cause with directions that the lower court, in conformity to this opinion, do enter a decree in favor of plaintiff, treating defendant as a trustee in all respects and compelling him to account for all gains made in that capacity to the extent of Mrs. Washington’s equitable interest in the property, whether in land or money.

All concur.