121 Minn. 116 | Minn. | 1913
Lead Opinion
Action to declare and enforce a constructive trust and for other relief.
Cassius C. Merritt, one of the discoverers of the Iron Range, and himself familiar with the discoveries of iron and iron properties thereon from actual observations made on the grounds, and an experienced iron man, died testate in April, 1894, leaving a widow, this plaintiff, as his sole devisee and executrix. Several children also survived him. The defendant Hansen E. Smith since 1892 has resided in Duluth, and since 1894 has been familiar in a general way with what was considered iron property. In February, 1894, he became the private secretary of Cassius, and so continued until his death, thus becoming reasonably familiar with the affairs of his employer, and after the latter’s death he continued to look after the business and property of the estate. This plaintiff knew little of the details of her husband’s business affairs, and, as admitted by the defendant Smith, was not a business woman, but was aware of Smith’s familiarity therewith as stated, and for these reasons, and also others, reposing confidence in him, she petitioned for his appointment as administrator. Her petition was granted in June, 1894, she becoming security on his bond, and he continued to act until his discharge on November 10, 1899. The estate proved to be insolvent, the appraised value being $21,000, whereas the claims exceeded $300,000, of which over $10,000 consisted of judgments entered against Cassius and his brother Andrus in 1893 and 1894 prior to the former’s death. Smith had knowledge that Cassius dealt in and purchased iron lands and property, and was familiar in a general way with his opinions of the value thereof. While the deceased and the said Andrus were co-partners, doing business in mining properties in the year 1891,- they acquired the title to an undivided one-half of the southeast \ of the northwest ¿ of section 12, township 58, range 19, St. Louis county, by deed as individual grantees, from one Knudt Olson. This deed was duly recorded on December 23, 1891. Smith’s final account as administrator and the inventories and proceedings in the estate of Cassius C. Merritt contain no account or mention of this land, and Smith, as administrator, never disposed of it or paid the taxes thereon,
In June, 1895, Smith, with two others, organized a corporation named the Northern Security Company; he being the president and treasurer thereof and the owner of the majority of the stock. The corporation engaged, among other things, in the business of buying lands and tax titles. It appears that this corporation, at Smith’s instance, purchased some $1,300 of judgments which were first liens on the property of the deceased; this, according to Smith’s claim, being done for the protection of the estate, in that “the succeeding judgment” creditors would have first to pay such amount before they could levy on and sell any of the property, “and it was a protection in the sense that nobody wanted to do that, and didn’t do it.” Smith gave his note to the company, bearing interest at 10 per cent per annum, for the amount of these judgments. His further explanation of this transaction is as follows:
“Q. What was finally done with those judgments that the Northern Security Company purchased ?
“A. I think the Northern Security Company carried them for some years, while the estate was not in funds. When the estate received the money, the Northern Security Company was repaid; but the claims were still allowed to stand in the same position, and some sort of a contract was drawn up showing that these claims really belonged to the estate. Finally, at the closing up of affairs, the estate got its money back as per his statement here, where they received some 1,300 and some dollars.
“The Court: I don’t understand that exactly. The estate paid these judgments?
“A. The Northern Security Company bought them; they were liens.
“The Court: And the Northern Security Company were the ones that were to receive the money ?
“A. Tes; but later on, after the estate came in funds, the estate paid the money back to the Northern Security Company; but the items were left there, and then finally, when it was closed up, the estate got its money back.”
In November, 1903, the Merchants Bank, a partnership composed of Hansen E. Smith and James P. Smith, assigned its effects to H. H. Phelps, as trustee for creditors. Phelps, as trustee, obtained a judgment against the Northern Security Company on an indebtedness due the bank. In November, 1904, Smith individually and the Merchants Bank were adjudged bankrupts, and L. A. Barnes was appointed trustee. Barnes thereafter, as such trustee, caused an execution to be issued upon the judgment last mentioned, and a sale thereunder to be made in March, 1905, of all the right, title and interest of the Northern Security Company in the 40 acres mentioned; the purchaser being L. A. Barnes, trustee, and a certificate of sale being issued accordingly. Thereafter the trustee, on September 23, 1905, conveyed to Thomas A. Merritt and David L. Fair-child, the alleged undivided one-fourth interest called the Crosley interest, and also on September 20, 1905, assigned to them the certificate mentioned, which included the interest involved in this action. In May, 1906, Thomas A. Merritt and David L. Fairchild brought an action to quiet title to an undivided three-fourths interest in the land, naming as defendants the Northern Security Company, Hansen E. Smith, the assignee of Andrus P. Merritt, Crosley, and those claiming under him, the plaintiff in this action, and also all other persons unknown claiming any estate, right, or interest in and to the land, and judgment was duly rendered August 17, 1906, in favor of plaintiffs therein, that they were the owners of the interest claimed, and that none of the defendants had any claim, right, title, or interest therein. On September 19, 1906, Thomas A. Merritt and David L. Fairchild conveyed to Smith, for the stated consideration of one dollar, an undivided one-eighth of all right, title, and interest in the 40 in question under the assignment of the certificate of sale mentioned; the deed being as follows:
“This indenture, made this 19th day of September, A. D. 1906,*123 by and between Thomas A. Merritt and Jennie S. Merritt, his wife, and David L. Fairchild, single, all of Duluth, St. Louis county, Minnesota, parties of the first part, and Hansen E. Smith, of the same place, party of the second part,
“Witnesseth: That whereas, heretofore and on the 20th day of September, 1905, the parties of the first part herein purchased from L. A. Barnes, as trustee in bankruptcy of Hansen Smith and James P. Smith, copartners as the Merchants Bank, a certain portion of a sheriff’s certificate on execution sale covering an undivided one-half of [the 40 in question is here described], which assignment of said sheriff’s certificate is recorded in the office of the register of deeds of St. Louis county, Minnesota, in Book 222 of Deeds, on page 213; and
“Whereas, on the 23d day of September, 1905, said parties of the first part herein acquired from said L. A. Barnes, as trustee in bankruptcy of Hansen Smith, by deed dated on that day, an undivided one-fourth of the land above described, which said deed from the said trustee in bankruptcy to the parties of the first part herein is recorded in the office of the register of deeds of said St. Louis county, Minnesota, in Book 222 of Deeds, on page 211; and
“Whereas, the said parties of the first part have contracted, bargained, and agreed with the party of the second part herein to deed and transfer to him an undivided one-eighth of all the interest in said land which they, the parties of the first part, acquired by virtue of each of said transfers to them by the said trustee in bankruptcy:
“Now, therefore, the said parties of the first part, pursuant to the agreement to convey aforesaid, and in consideration of one dollar to them in hand paid by the said party of the second part, the receipt whereof is hereby acknowledged, do hereby grant, bargain, quitclaim, and convey unto the said party of the second part, his executors, administrators, and assigns, forever, an undivided one-eighth of all the right, title, and interest which the said parties of the first part acquired in and to [the 40 is here described] by virtue of the assignment [described as above] ; it being intended to quitclaim and convey to the party of the second part herein an undivided three thirty-seconds of the land above described, provided .said parties of*124 the first part acquired by the said assignment and the said deed from» the said trustee in bankruptcy three-fourths of said land, hut in any event the transfer by virtue hereof to be limited to an undivided one-eighth of whatever interest in said land was acquired by the parties-of the first party by virtue of said assignment from said trustee in-bankruptcy, and an undivided one-eighth of whatever interest was-acquired in said land by virtue of the deed aforesaid from said trustee in bankruptcy. To have and to hold,” etc.
Smith, when interrogated on the trial, in response to the question, asked by his counsel, “What was the consideration for that deed ?” replied, “The amount to be transferred to me was one-fourth-of what they received, and the consideration was one-fourth of the-consideration paid by them.” The interrogation and answers of the-witness then proceeded as follows:
“Q. Subsequently did you dispose of a part of your fourth before they made the conveyance to you?
“A. Yes, sir; for sufficient to pay for the whole. I parted with-half of it, or rather they made the deal. The result was that the-returns from the half that was sold was sufficient to pay for the-whole interest that I received, or nearly so.”
In response to the following questions asked by the plaintiff’s-counsel, Smith answered as follows:
“Q. There was no advance consideration over the price that was-paid to L. A. Barnes that was paid by you, was there ?
“A. Well, I was to pay one-fourth of what they had paid for one-fourth of what they had received.
“Q. From L. A. Barnes ?
“A. Yes; part of it from the bank estate, and part from my ■estate. I owned personally a quarter interest in this land, and half' interest of the bank matter.
“Mr. Arnold: I move to strike that out, as not responsive to the-question, or all of it, excepting the word ‘Yes.’
“The Court: It may be stricken out.
“Witness: That answer is not correct as it stands now.
- “The Court: Bead the testimony.” The question and answer were read by the reporter.
*125 “Mr. Arnold: Now I move to strike out all except the word ‘Yes.’
“The Court: The motion is denied.
“Q. One-fourth of what amount do you refer to?
“A. One-fourth of three-fourths.
“Q. Three-quarters of what ?
“A. Of the Southeast \ of the Northwest ¿ of 12 — 58—19.
“Q. That is one-fourth of three-quarters of the amount that was paid to L. A. Barnes, wasn’t it?
“A. Was what I was to pay; yes, sir. I presume that is true. I took their statement for it.
“Q. Well, you know as a matter of fact that you checked it up and found it was the identical amount that was paid ?
“A. I don’t know as a matter of fact. I think I paid more, because there was some expenses in connection with it, and I was -to pay one-fourth of what it stood them, including interest.”
Likewise in relation to this transaction the following is an excerpt from Smith’s answer to the plaintiff’s complaint:
“Further answering, these defendants admit that the trustee in bankruptcy of the estate of the Merchants Bank sold an undivided one-half interest in said lands under a judgment against Northern Security Company, and that the said trustee became purchaser thereat, and that thereafter the defendant Hansen E. Smith bargained for and caused to be conveyed to him an undivided 3/32 of said 40-acre tract from Thomas A. Merritt and David L. Fairchild, who, as these answering defendants verily believe, had fraudulently attempted to deprive the bankrupt’s estate thereof, and that because thereof the defendant Hansen E. Smith had doubts when he took such conveyance, and now had doubts, whether he acquired any title by such conveyance from said Thomas A. Merritt and David L. Fairchild.”
On September 19, 1906, said Merritt and Fairchild executed to Walter A. Barrows, at Smith’s request, a deed in substantially the same form as the one set out above and covering interests to the same amounts, which conveyance was the one referred to by Smith in his testimony set out above as netting him enough to pay for the entire interest conveyed to him by the same grantors.
In 1897, or thereabout, the plaintiff resided in California, where she has since resided, and some 12 years ago she married a Mr. Arnold. Smith never called her attention to the fact that her former husband had any interest in the 40, and sho was unaware that he had until about two years before the trial in the registration proceedings.
The facts above recited are practically undisputed and cover substantially all the matters of importance which developed on the trial.
The court’s findings covered all of them, and in some respects go-beyond what has been stated, especially concerning the so-called Crosley interest, and were to the following effect: That Hansen E.. Smith procured the forfeited tax title for the Northern Security Company, knowing that it embraced the Merritt interests; that he-knew of the purchase of the land by the Merritts for mining purposes; that the Northern Security Company was a mere creation of Hansen E. Smith, and through it, for his own benefit, and to acquire-this one-fourth interest of the plaintiff, the action to determine adverse claims was instituted and carried into judgment on December 3, 1900, as above stated; that Smith participated in the steps which resulted in the divesting of the plaintiff’s title, having such end in view; that‘the judgment in the action brought by Merritt and Fair-
The defendants moved for amended findings, and also for a new trial. This is an appeal by several of the defendants, including Smith, from the order of the court denying such motions.
The main assignment of error is that the decision of the trial court is not sustained by the evidence and is contrary to law, and while there are further claims of error concerning matters of evidence, or the refusal of the court to strike out or amend findings, we do not deem it necessary to discuss them.
What other reason can be urged for his recording the first judgment in the action to determine adverse claims ? At the time this was done he knew that the whole foundation of that judgment had been destroyed, and that he was clouding the title to the land. Again, why was he keeping apparently alive the judgments against the deceased, which his corporation had purchased, after they had been paid? It is also to be noted that, at the time of the levy by the trustee in bankruptcy upon the alleged interest of the Northern
Before proceeding further, however, it will be well to get clearly in mind the situation with which we are to deal, and which, while set out at length in the statement of facts, may be reduced, for the purpose stated, within narrow limits, as follows: The administrator of an estate fails to inventory a tract of land belonging to the deceased. While administrator he purchases a tax title thereto, which, however, is void by reason of the invalidity of the statute under which the sale is made. He does not dispose of the land as administrator, and some few years after his discharge we find him asserting the record title to an interest therein, without in any way claiming to have derived such title from the deceased, and this, in effect, without any outlay on his part, so far as concerns his acquisition of the interest of the deceased in the land. It cannot, perhaps, safely be asserted that such a claim might not rest upon a sufficient legal foundation; but we think it may be said that such is unlikely, and before it could so be determined the various steps leading to such a result should be scrutinized with care.
The plaintiff having established her husband’s title to the interest in the 40 here involved, his will designating her as sole devisee, the failure of the administrator to inventory or dispose of the property as administrator, the administrator’s discharge, and the consequent closing of the estate, a prima facie case of title in her was made out. Let us, then, examine the defendant Smith’s claims as to the manner in which her title passed to him. These claims rest wholly upon estoppel by judgment, and this is founded upon (1) the judgment to determine adverse claims of date December 3,
So long as Hansen E. Smith held the position of administrator of the estate of Cassius O. Merritt, he could in no way acquire any part of the estate for his own use. It makes no difference in the eye of the law whether the acquisition was by deliberate fraud to deprive the estate of the property, or came about innocently, or even without knowledge that the property belonged to the estate. If the latter be the case, the court will nevertheless regard the transaction as a constructive fraud, and he will be held accountable to the same extent as if he had carried out a planned design to defraud. In either case he will be held to hold as trustee ex maleficio.
In King v. Remington, 36 Minn. 15, 29 N. W. 352, it is stated: “The rule which disables one occupying a confidential or fiduciary relation, in respect to property the subject of a sale, from purchasing for his own benefit, and regarding him as a trustee if he do purchase, is absolute, and looks to no other facts than the relation and the purchaser.” Fraud in fact need not be shown.
The same rule is announced and applied in Gilbert v. Hewetson, 79 Minn. 326, 82 N. W. 655, 79 Am. St. 486, where it is said, with reference to a claim obtained by a trusted clerk of a receiver, that in so doing “he may have proceeded in good faith — may have supposed that the receiver had no title or interest in the * * * claims — but his good faith does not relieve him. It is not necessary to show fraud in such cases. Equity declares all such transactions illegal, and all profits accruing to the trustee to belong to the cestui que trust, without regard to any intentional or other fraud.”
It must be taken that whatever was done through or by the Northern Security Company was the act of its principal stockholder and managing officer, Hansen E. Smith. Hnder the rule above stated it must also be concluded that, Smith having acquired the tax title
The plaintiff’s contention that the action to determine adverse claims based on such title, though begun by the Northern Security Company after Smith was discharged as administrator, and the judgment rendered therein, did not divest the right of this plaintiff, the sole devisee, of the right to impress a trust upon the interests obtained by the Northern Security Company may be well taken (Henderson v. Murray, 108 Minn. 76, 121 N. W. 214, 133 Am. St. 412) ; but we are not required to determine it. The defendant’s contention that the plaintiff is barred from asserting her rights here because of this judgment must be determined against him upon broader grounds and these we will now consider; the question being: What effect did the subsequent conveyance by the Northern Security Company to the state of Minnesota have upon the judgment and the title to the land? The fifteenth finding of the court contains, in substance, the following: On June 19, 1901, tho Northern Security Company “duly conveyed the interest acquired under said forfeited tax sale certificate to the state of Minnesota, * * * and that thereby the taxes became and were the property of the state of Minnesota, and * * * the estate of Cassius C. Merritt then was the owner of the undivided one-fourth” of this 40 “free and clear of all incumbrances.” We agree in the conclusion reached by the trial court.
The tax title and the judgment based thereon were thus completely wiped out. The records disclosed that the title stood in Azro Crosley, Leslie A. Belding, Cassius C. Merritt, and Charles S. Christopher, as assignee of Andrus OR. Merritt, each owning an undivided one-fourth, when, in June, 1899, the forfeited tax sale certificate was obtained by the Northern Security Company, and also when it filed lis pendens and began action to quiet title and determine adverse claims in December following. The only record basis for claim of ownership by the Northern Security Company was this certificate, and it is clear from the evidence that none other existed. Aside from any question of trust, the judgment determined
We come, now, to the second judgment involved in the defendant Smith’s claim of estoppel. The sheriff, by his certificate to Barnes, trustee, as purchaser at the sale made under the execution against the Northern Security Company, undertook to convey to him merely and only all of the right, title, and interest, if any, which such company had in the land, and we have held that it had none. Smith’s: claim, however, is not based upon this judgment only, but upon the judgment thereafter rendered in the action to quiet title, wherein Merritt and Fairchild were plaintiffs. More than one reason exists why Smith cannot, through privity with Merritt and Fairchild, avail himself of the latter. To permit him to do so would be to allow him to take advantage of his own wrong; for it was his improper act in leaving the first judgment above mentioned of record after he had surrendered his tax title to the state and received back the amount paid therefor, and by his affirmative act in recording the judgment in the office of the register of deeds, which gave color to the right of the sheriff to levy upon the supposed interest of the Northern Security Company acquired under such judgment. We are not prepared to say that it was his legal duty to proceed affirmatively to remove the cloud upon the plaintiff’s title created by the
But, this aside, Smith was not a bona fide purchaser of the Merritt and Fairchild title, if they obtained such. If he had any rights under the first judgment, he held them, as we have already declared, as trustee for the plaintiff, and when the alleged interest in the Merritt and Fairchild title came to him it merely placed him in the position of one who, after acquiring title impressed with a trust with knowledge of all the facts, and thus becoming a trustee for the true ■owner, conveys it to a bona fide purchaser, and thereafter reacquires it from him. Smith, therefore, held the interest acquired from Merritt and Fairchild in trust, the same as he did upon his first acquisition of the same. Church v. Ruland, 64 Pa. St. 432, 444. Certainly, knowing all the circumstances of this transaction, and him■self having originated the condition which resulted in the attempts to deprive the plaintiff of title, he could not assert the Merritt and Fairchild title as against her.
This brings us to the Torrens title. We have already adverted to the fact that the plaintiff was married to one Arnold in or about 1899, some seven years prior to the petition for the summons in the registration proceedings, and in the judgment last mentioned >(the Merritt and Fairchild judgment which we have also referred •to as the second judgment) she was designated a party defendant under the name of “Eliza M. Arnold (née Merritt)”; whereas, in the summons in the Torrens proceedings she was designated as “Eliza M. Merritt,” and this notwithstanding the fact that the same Merritt who was one of the plaintiffs in the former action verified the petition for the Torrens summons. As we have stated, the plaintiff
Mr. Justice Bunn has recently delivered an opinion upon a kindred question in Riley v. Pearson, 120 Minn. 210, 139 N. W. 361, and the reasoning of that case is applicable here, as is also that of Baart v. Martin, 99 Minn. 197, 108 N. W. 945, 116 Am. St. 394. The essence of these decisions is that failure to name a known* party defendant in published service is a fraud upon the court, which? vitiates the judgment as to such party on collateral attack. This; court adheres to the rule that, in cases where there is no personal: service, care must be taken to name the defendant correctly, andi we have held that the use of a wrong initial will prevent the acquisition of jurisdiction over the real party defendant. D’Autremont v. Anderson Iron Co. 104 Minn. 165, 116 N. W. 357, 17 L.R.A.(N.S.) 236, 124 Am. St. 615, 15 Ann. Cas. 114. See, also, Clary v. O’Shea, 72 Minn. 105, 75 N. W. 115, 71 Am. St. 465; 2 Dunnell, Minn. Dig. § 7832. Marriage confers upon the woman the husband’s surname. 2 Bishop, Marriage, Divorce & Separation, § 1622. There was, therefore, a misnomer of the plaintiff. See Freeman v. Hawkins, 77 Tex. 498, 14 S. W. 364, 19 Am. St. 769. The Torrens system requires strict application of the rule stated, because* of its drastic results and of the limited period within which the proceedings may be reopened. Furthermore, the reasons for the application of the rule apply with peculiar force in the present case, for it must be deemed that the applicant, who verified the petition for summons in the registration proceedings, knew at the time of his; verification that the plaintiff’s name was not Merritt, but Arnold. Moreover, the burden was upon the defendant to establish a valid' title in himself under the registration proceedings. We hold that the defendant H. E. Smith & Co. holds the 2/32 interest in the 40-in trust for the plaintiff.
The rule of damages for tort in this state is that “the perpetrator of a tort is responsible for the direct and immediate consequences •thereof, whether they may be regarded as natural or probable, or whether they might have been contemplated, foreseen, or expected, ■or not. It is not necessary to the liability of a wrongdoer that the result which actually follows should have been anticipated by him. It is the general character of the act, and not the general result that the law primarily regards.” Watson v. Rinderknecht, 82 Minn. 235, 238, 84 N. W. 798, 199.
It cannot be disputed that the plaintiff’s loss traces back to the •first judgment, which must be deemed to have been the cause of •causes. It must be remembered that the defendant Smith at no time
We have adverted to some of the features of the case in relation to the matter under consideration in the first part of this opinion. In addition thereto, we will say that-, while it is not an impossible theory that Smith did not know that the trustee in bankruptcy of his insolvent banking concern was proceeding to impound the apparent interest of the Northern Security Company in the land to pay the ■obligation owing by it to the bank, yet we think it so improbable that the court was justified in rejecting it. It is a significant fact in this connection that, after the judgment in the Merritt and Fair-child action, Smith is found receiving a conveyance from them apparently, and in effect, without consideration from him or profit to them. So, therefore, if participation in the acts of the others involved in the transactions under consideration be considered to be essential to Smith’s liability, we consider that such was established.
But even if there was no collusion between Merritt and Fairchild .and Smith, the latter is in no position to complain that his acts in leaving the first judgment of record and in placing a certified copy thereof on the land record had the effect he evidently intended that they should have, namely, the inducement of others to believe that his Security Company, which was really himself, owned the property, thus misleading others to the plaintiff’s damage, for which he
the next question, then, is whether the court’s award of damages is based upon the correct theory as to amount and time of estimation; the former question being dependent upon the answer to the latter.. Tbis action is not based on the defendant’s neglect of duty, as administrator, in failing to inventory the property and to dispose of it for the benefit of the estate. If it were so grounded, it would necessarily result in the defendant’s favor so far as concerns the damages now being considered; for the estate was insolvent to such an extent that the property would have been insufficient to pay the debts. But as the land was not disposed of it became the property of the plaintiff, and her damages must be assessed as of the time wben her title was divested. Erom what we have said, tbis occurred wben klerritt and Fairchild obtained their judgment — the second judgment — quieting title, wbicb accords witb one of the defendant’s claims. We find no ground for disturbing the court’s determination as to value.
But tbe court erred witb reference to tbe interest to be allowed up
We cannot overturn the court’s conclusion that the plaintiff was not guilty of laches.
The theory of the defendant’s liability which we have adopted is the only one which we have found it necessary to discuss, and upon the whole case, after giving due weight and effect to all errors assigned or committed below, we conclude that the order appealed from should be affirmed, and the case remanded, with direction to modify - the findings of fact and conclusions of law respecting interest in accordance with this opinion.
Dissenting Opinion
(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
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
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
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
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
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,
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.
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.