Lagger v. Mutual Union Loan & Building Ass'n, 146 Ill. 283

Mr. Justice Magbudeb

delivered the opinion of the Court s

The first question is as to the character of the title acquired by Augusta M. Spies through her sale as administratrix of the estate of her first husband, Joseph E. Lagger, deceased. Having married John Spies while she was administratrix of said estate, she applied to the Probate Court and obtained an order to sell the premises to pay debts. The only unpaid debt against the estate was her widow’s award, appraised at $1959.00, upon which, after applying all the personal property, there was due a deficiency of $1840.10. The object of petitioning for a sale of the real estate was to raise money to pay herself this deficiency. At the sale made by her as administratrix she struck off and sold the premises in question to her pwn husband, John Spies, .for an alleged consideration of $1650.00. Although she reported the sale to the Probate Court as a sale for cash, yet, as matter of fact, her husband paid nothing. She merely credited the amount of his bid upon the amount due her upon her widow’s award in her accounting as administratrix with the Probate Court. She executed a deed as administratrix to her husband on August 29, 1888, which was recorded on August 30, 1888. On September 5, 1888, she and her husband executed a deed of the property for a recited consideration of $1650.00 to Cora B. Hirtzel, which deed was recorded on September 11, 1888. Miss Hirtzel paid nothing for the property. She was a stenographer in the office of the attorney, who acted for Mrs. Spies in the Probate Court in filing the petition, and conducting the other proceedings. Under the direction of said attorney, Cora B. Hirtzel at once on the same day executed a deed of the property, conveying it back to Mrs. Spies, which latter deed was recorded on September 12, 1888. The latter deed, like the two others, was without consideration.

The evidence shows beyond question that John Spies acted for his wife in bidding for the property; that she was the purchaser of the premises at her own sale; that the petition for a sale, and the sale by her as administratrix, and the transfer of the title to a third person, and its reconveyance to her, were steps taken in pursuance of a previous arrangement between Mrs. Spies and her husband and her attorney, by which the title was to be vested in her, so that she could raise money to build upon and improve the property.

Trustees, and others occupying fiduciary relations, cannot purchase on their own account the property entrusted to their management. Administrators act in a fiduciary character in the sale of property and settlement of estates. The law forbids an administrator to purchase at his own sale, whether the purchase is in his own name, or in the name of another for his use. Even though, in such case, the intentions of the trustee are honest and there is no fraud in fact, the sale will be set aside, if the parties in interest object to it within a reasonable time. The purchase, however, is held to be voidable only, and not absolutely void. In a number of cases this Court has sustained the right of the heir to file a bill in equity to set aside a sale of land by the administrator where the latter has made the purchase for himself. (Thorp v. McCullum, 1 Gilm. 614; Miles v. Wheeler, 43 Ill. 123; Kruse v. Steffens, 47 id. 112; Ebelmesser v. Ebelmesser, 99 id. 541). It is manifest, therefore, that the present appellants, who are the children of Joseph E. Lagger, deceased, are entitled to have said sale by their mother, and the deeds executed subsequently thereto vesting the apparent title in her, set aside as between themselves and the said Augusta M. Spies, or Augusta M. Lagger.

The next question is whethfer or not the appellee, as the holder of the trust deed executed by Augusta M. Spies and her husband on October 15, 1888, can be regarded as a bona fide purchaser without notice, so as to be entitled to enforce said trust deed against the property in question.

When Mrs. Spies applied to the appellee for the loan secured by the trust deed, she delivered to it for examination an abstract of the title, which sets out all the proceedings in the Probate Court in the matter of the estate of Joseph E. Lagger, deceased, and all the deeds hereinbefore described. ,The petition of the administratrix for the sale of the property, as it appears in the abstract, contains the statement that “petitioner since her appointment as administratrix as aforesaid and on or about April 7, 1888, intermarried with John Spies, with whom she is living as his wife.” A party is bound to take notice of such recitals of fact as appear in the direct line of his title. (Brush v. Ware, 15 Pet. 93; Effinger v. Hall, 81 Va. 94). Here, the appellee was notified by the recorded proceedings in the Probate Court, that the purchaser at the sale was the husband of the administratrix who made the sale. The recital of this relationship in the petition, and the deeds showing the transfer of the title to a third person and its immediate re-conveyance to the administratrix herself, were circumstances sufficient to put appellee upon such inquiry as would have resulted in the discovery of the equities of the appellants. The policy of the law, which prohibits á person occupying a fiduciary relation from purchasing at his or her own sale of the trust property, equally forbids such purchase by the wife or husband of the seller. (Tyler v. Sanborn, 128 Ill. 136). The exclusion of the husband as a purchaser, where the wife sells as a trustee, is not so much for the reason that she may subsequently become entitled to some interest in his lands, as on account of the unity which exists between them in the marriage relation. (Bassett v. Shoemaker, 46 N. J. Eq. Rep. 538). Hence, we think that the appellee must be held to have had constructive notice of the real character of the sale made by the administratrix, and that the trust deed cannot be foreclosed against the interests of the appellants in the property, (2 Woerner’s Am. Law of Administration, sec. 487, p. 1086; Filmore v. Reithman, 6 Col. 120).

Where a sale made by an administrator to himself is set aside upon bill filed by the heirs for that purpose, it has been held in this State that the administrator is a trustee, and as such is entitled to have an account stated, and that, in stating the account, he should be charged with the rents and profits received from the property, and credited with monies paid out on the purchase and applied to the discharge of debts against the estate, and with monies paid out for taxes, necessary repairs and reasonable or “proper, lasting and valuable” improvements. (Thorp v. McCullum, supra; Ebelmesser v. Ebelmesser, supra). Whether or not the purchaser of land, whose purchase is set aside, can receive an allowance for the improvements made by him is a subject much discussed in the books. Ordinarily if a subsequent purchaser makes improvements with knowledge of a former purchase, he will be held to have done so in his own wrong. (Dart v. Hercules, 57 Ill. 446). The general rule is, that an allowance for reasonable improvements, which are of a permanent character and of benefit to the estate, will be made to a purchaser who makes them in good faith and under the belief that he is the true owner. (Cable v. Ellis, 120 Ill. 136). In some cases it has been held that the allowance will be made where the sale is fraudulent in law, but free from the suspicion of intentional fraud. (Filmore v. Reithman, supra). The purchaser will not always, however, be given credit for his improvements because his notice of the prior equities is constructive only, and not actual. (Effinger v. Hall, supra). Whatever may be the reasons for granting or refusing the allowance for reasonable and proper improvements in other cases and under other circumstances, we have held that the allowance will be made to an administrator, under such a state of facts as is disclosed by the present record, where the heirs come into equity to set the sale aside; and the reason is that he who seeks equity must do equity. The rule, that the purchaser of a defective title is not entitled to compensation for improvements, is relaxed in favor of such purchaser when he is brought into a court of equity as a defendant at the suit of the real owner. If the latter seeks the aid of equity to establish his right to the property itself, and it appears that the estate has been substantially benefited by the improvement, it would seem to be just that he should be required to make compensation. (3 Pom. Eq. Jur. sec. 1241 and note; Effinger v. Hall, supra; Ebelmesser v. Ebelmesser, supra; 2 Woerner’s Am. Law of Adm’n, sec. 487, page 1088; 2 Story’s Eq. Jur. secs. 799b, 1237, 1238). We have said, however, that “in no event can allowances for improvements be made beyond the actual increase of the value of the land as ascertained by its sale.” (Ebelmesser v. Ebelmesser, supra).

In the case at bar, the evidence shows that nearly all the money borrowed by Mrs. Spies from the appellee, and for which the trust deed was given, was used in making improvements upon the lot. The money was paid out by the appellee to those constructing the improvements, as the work progressed. A part of the premises have always been occupied by Mrs. Spies or Mrs. Dagger and her children as a homestead. From the portion not so occupied she received rents to the amount of about $33.00 per month before the improvements were made, and about $45 per month after they were made. She used the rents collected “to keep up the property and support the-children.” In the accounting below the trial Court seems to have regarded the amounts, contributed by her to the support of the children and to taking care of the property, as an offset to the amounts with which she was chargeable for rents collected. The offset thus allowed was proper under the circumstances of this case. The amount of the rents was so small that they furnished but a meagre support. It would be unjust to compel the mother to restore to the appellants the rents which she thus expended in their behalf. The father is bound to support his minor children, if he be of ability, even though they have property of their own; but this obligation, in such a case, does not extend to the mother, and the rule as to -the father has become relaxed. Where the father is without sufficient means to educate and maintain his children suitably to their condition and prospects, equity will make him an allowance out of their estates for that purpose. (Bedford v. Bedford, 136 Ill. 354; 2 Kent’s Com. marg. page 191).

The court may, on setting aside the sale by the administrator, charge the amount found to be due to him upon the property, or order a resale of it in order to realize such amount. (Thorp v. McCullum, supra; Ebelnesser v. Ebelmesser, supra). In the present case, the court below ordered, that $4340.10 should be paid out of the proceeds of sale to the appellee; or in other words, it found that the amount of the equitable interest of Mrs. Lagger in the premises, to which the Association was entitled, was $4340.10. This sum was made up of $1840.10, due to the widow upon her award, and $2500.00, representing the enhanced value of the premises by reason of such improvements.

We think that the sum of $2500.00 was properly fixed upon, under the evidence, as the amount of such increased value. Mrs. Lagger was entitled to a credit for that amount in an accounting between herself and her children under the authorities already referred to.

We cannot see that, in the accounting in the present case, the administratrix is entitled to any credit for paying debts against the estate. Although the land was sold to pay the widow’s award, yet no money was actually paid, with which the widow’s award was discharged. If the sale by the administratrix were allowed to stand, it might be said that the widow received the payment of her award by getting title to the land; but inasmuch as the sale of the land is set aside and the bid of $1650.00 was not paid in money, the widow receives neither land nor money. It follows that, upon the setting aside of the sale by the heirs, the claim of the widow against the estate for her award remains undischarged, and the land may be subjected to its payment. Here, a resale of the land is ordered, not merely to raise the amount of its enhanced value by reason of the improvements, but also to raise the amount due to the widow on her award. In making this resale a court of equity is doing what was originally attempted in the probate court. We, therefore, think that the court below properly fixed upon the full amount of the award, rather than the amount of the bid at the sale by the administratrix, as the amount to be realized upon the re-sale.

While, however, the sum of $4340.10 may be properly allowed as a credit to the mother in the accounting between herself and her children, the question arises whether the decree was correct in directing this amount to be paid to appellee. The mortgage or trust deed executed by Mrs. Spies and her then husband, to the appellee Association, contains the words, “and warrants.” It is in the statutory form, and is equivalent to a mortgage containing all the covenants of title. (1 Starr & Cur. Ann. Stat, page 575, chap. 30, see. 11; Elder v. Derby, 98 Ill. 228). Where such a mortgage is given the title subsequently acquired by the mortgagor enures to the benefit of the mortgagee. (Hitchcock v. Fortier, 65 Ill. 239; Bybee v. Hageman, 66 id. 519; Elder v. Derby, supra; 1 Jones on Mtges. (4 ed.) sec. 68; Todd v. Johnson, 51 Iowa, 192). A mortgagor cannot set up against the mortgagee a prior mortgage executed by him to another as an outstanding title. (Fisher v. Milmine, 94 Ill. 328). An estoppel arises against the mortgagor out of the covenants of title contained in the mortgage, so that he cannot deny his title, or claim adversely to the mortgage. (15 Am. & Eng. Enc. of Law, pages 863, 864, and cases in notes).

It has been held in other States, that, where the mortgagee becomes the purchaser of the entire mortgaged premises at a void foreclosure sale and then sells and attempts to convey such premises, his deed operates as an assignment of the mortgage debt, as well as the mortgage securing the same, to the grantee in the deed. (Jordan v. Sayre, 29 Fla. 100, and cases cited). We are not prepared to apply this doctrine to the present case so far as to hold that—the administratrix having become thq> purchaser at her own sale made for the purpose of paying her widow’s award and having then mortgaged the premises—her mortgage operates as an assignment to the mortgagee of her claim against the estate for her widow’s award. This would be in effect a subrogation of appellee to the claim of the widow against the estate for her award; but we have held that a purchaser of land at a void administrator’s sale is not entitled to be subrogated to the claims of creditors which have been paid by the purchase money. (Bishop v. O’Connor, 69 Ill. 431; Chambers v. Jones, 72 id. 275).

While it is true, however, that the appellee, as mortgagee, cannot be subrogated to the claim, which Mrs. Lagger, the mortgagor, has against the estate for her widow’s award so as to be able itself to enforce that claim, -yet we think that the doctrine of equitable estoppel ought to be applied so as to prevent her from subjecting the premises to sale for the payment of that award to herself as against appellee. (Herman’s Estoppel and Res Adjudicata, vol. 2, secs. 661 and 895). If she should buy in the premises under a decree in her favor for the sum of $4340.10 which includes the amount of her award, the title so acquired by her would enure to the benefit of appellee under the covenants in the mortgage. If a third person should buy the premises for $4340.10 and pay the money into court, should she be allowed to receive the fund? We think not. The fund is realized from the land which she mortgaged, and when paid into court is a substitute for the land. The court has before it all the parties interested, the mortgagor, the mortgagee, the heirs, the administratrix, and the widow as holder of the claim for widow’s award, and it would be inequitable to pay over the fund in its hands—realized from the enforcement against the premises of the claims for widow’s award and for improvements—to the mortgagor rather than to the mortgagee, in view of the covenants in the mortgage. These considerations apply with greater force to that portion of the sum of $4340.10, which represents the enhanced value of the premises created by the improvements, towit: the sum of $2500.00; because the improvements were made with the money of the mortgagee j and the money secured by the mortgage was borrowed for the purpose of making the improvements. In view of this fact, we think that the appellee is entitled to be subrogated to the claim of the widow for improvements. For these reasons we are of the opinion that the decree below was right in directing the $4340.10 to be paid to the appellee.

It is urged by counsel for appellants that the decree is erroneous in ordering the homestead to be sold free of the homestead rights of the widow and children. The decree finds that, at the time of the sale of the premises by the administratrix, they were worth $2840.10, and that at that time Mrs. Spies and her children had an estate of homestead therein of the value of $1000.00. No provision was made in the order of sale by the Probate Court for setting off the homestead, but they were sold subject to the homestead estate. At the time of Joseph E. Lagger’s death his wife and children were occupying said premises as their homestead and have ever since continued to do so, and were so occupying them when the trust deed was executed and when the bill to foreclose the same was filed. The trust deed in the body of it contains a waiver and release of homestead rights, and the certificate of acknowledgment also contains such waiver and release. Have the homestead rights of Mrs. Lagger and of her children, who still occupy the premises with her, been lost as against the appellee by reason of the waiver in the trust deed executed by Mrs. Spies and her husband, John Spies?

At the time she executed the trust deed she held the apparent legal title by reason of the sale by the administratrix and the deeds to John Spies and to Hirtzel and to herself. TJhe release of the homestead was incidental to a supposed conveyance of the fee. But in this suit her apparent legal title is set aside by the heirs, and the trust deed which is based upon it ceases to be operative as to them. When the trust deed was made, the homestead had not been set off. Where the homestead has not been set off or assigned, it is not such an interest in land as is alienable separately from the fee. (Best v. Jenks, 123 Ill. 447). It would seem to follow that the estate of homestead could not have passed to the trustee in the trust deed. Where the surviving wife, having the care and control of her children, abandons the homestead and takes her children with her, her abandonment works a loss of the homestead rights to them as well as to herself. (Kingman v. Higgins, 100 Ill. 319). Here, however there has been no abandonment of the homestead by the mother and the minor children, nor any possession given pursuant to the deed, of trust. Where the fee is in the children, the waiver of the unassigned homestead by the surviving husband or wife in favor of a party to whom the fee is not transferred does not operate to estop the children from asserting their homestead rights. Section 2 of the Homestead Exemption Act provides that the “exemption shall continue after the death of such householder for the benefit of the husband or wife surviving so long as he or she continues to occupy such homestead and of the children until the youngest child becomes twenty-one years of age; and in case the husband or wife shall desert his or her family, the exemption shall continue in favor of the one occupying the premises as a resident.” (1 Starr & Cur. Stat. page 1101, chap. 52, sec. 2). Section 3 of the Act provides that “no release, waiver or conveyance of the estate so exempted shall be valid unless the same is in writing, subscribed by said householder -and his or her wife or husband if he or she have one, and acknowledged, etc., or possession is abandoned or given pursuant to the conveyance; or, if the exemption is continued to a child-or children, without the order of the court directing a release thereof.” (Idem, page 1103). In construing these sections we have held that their object is “to-provide a home and shelter for the surviving husband or wife and for the minor children" that “the homestead interest is continued for the joint and several benefit of the survivor and of the children, after the death of the householder in whom the principal estate was vested;” that “the right of homestead * * * is vested by law in the surviving husband or wife and the children alike.” (Capek v. Kropik, 129 Ill. 509). The latter clause of section 3, which" provides that no release of the homestead shall he valid without an order of the court if the exemption is continued to a child or children, does not refer exclusively to a case where such child or children occupy the homestead alone and without the presence of either parent. The exemption is continued to the children, as well when they occupy the homestead jointly with the surviving parent, as when they occupy it alone after the death or desertion of the surviving parent. It follows that there must be an order of court to make the release of the homestead valid as well when the children are occupying it jointly with the surviving parent, as when they are occupying it alone. In the present ease the release was made while the surviving mother and the children were occupying the homestead together, and there was no order of court directing it to be made. We do not therefore regard it as operating as an estoppel against appellants. In Kingman v. Higgins, supra, the father died owning the premises and occupying them as a homestead and leaving children by a former wife, and also leaving a second wife and her infant child. The widow took her own child and went to her father’s house, abandoning the homestead and leaving it in possession of her step children. It was held that she and her child lost the right of homestead, if but that the other children retained it, and that their homestead could not be released without an order of court. But the case is not authority for the position that the release could have been made by the widow without an order of court if she and her child had remained with the other children, she and they jointly occupying the premises as a homestead.

We are therefore of the opinion that the decree in this ease was erroneous in not setting off a homestead to the appellants, or, in case of the sale of the whole lot, in not ordering the payment of the amount of the exemption to the persons entitled thereto, as provided in section 8 of the Homestead Exemption Act. (1 Starr & Cur. Stat. page 1109, chap. 52, sec. 8).

The decree is also erroneous in not giving appellants the option to save the premises from sale by the payment of the $4340.10. They should have been allowed a reasonable time within which to pay the amount, and the sale should have been ordered to take place on their failure thus to pay. (Ebelmesser v. Ebelmesser, supra.)

It is claimed that Mrs. Lagger was ordered to pay more upon the mortgage debt than was actually due, and that the bill to foreclose was filed too soon as to her. These are matters which concern her alone, and they need not be considered as she has not joined in the appeal, nor assigned any errors in this Court. The amount due from the appellants upon the accounting is in no way dependent upon the amount owing by their mother upon the trust deed.

For these reasons the cause is reversed dnd remanded to the Circuit Court with directions to change or modify its decree in the respects herein indicated.

Decree reversed.

Case Details

Case Name: Lagger v. Mutual Union Loan & Building Ass'n

Court Name: Illinois Supreme Court

Date Published: Mar 31, 1893

Citations: 146 Ill. 283; 33 N.E. 946

Court Abbreviation: Ill.