Opinion
(June Term, 1841.)
Where a guardian purchases land of his ward, soon after he becomes of age, at a grossly inadequate price, the guardian having sought the purchase and taking advantage of the imprudence and thoughtlessness of the young man, the contract will be rescinded in a court of equity upon a bill filed for that purpose against the guardian.
Between persons standing in that relation to each other, only fair and equal bargains ought to be supported.
Unequal contracts between a guardian and his late ward, just come of age, are set aside upon a ground of public utility and to prevent fraud, not merely to redress it.
THIS was a case transmitted from JOHNSTON Court of Equity. The facts are stated in the opinion in this Court.
W. H. Haywood, Jr., for the plaintiff.
J. H. Bryan for the defendant.
John Williams died intestate in 1824, seized and possessed of a large real and personal estate in Johnston County, and leaving seven infant children, of whom the (461) plaintiff was one. Of all of them the defendant Powell was appointed the guardian in 1826, and as such took into possession the land descended to them from their father, lying on both sides of Neuse River. One Isaac Williams administered on the personal estate of John Williams and, alleging that he had exhausted the personal estate in paying the debts of the intestate and that there remained a balance of $981.83 due to him, the administrator, on his administration account, the said Isaac, in March, 1831, filed his bill in the court of equity against the present plaintiff and his brothers and sisters as the heirs of their father, praying satisfaction of his said demand out of the real estate descended. The suit was defended by Powell, as the guardian of the children of John Williams, upon the ground that the land was not legally chargeable to the administrator and that the sum demanded was not due, or but a small part of it. On 20 May, 1831, the plaintiff came of full age, and having in the meantime contracted for the sale thereof to the defendant Powell he, by deed bearing date 5 September, 1831, in consideration of the sum of $600, conveyed to the defendant all the share of the plaintiff of and in the lands descended from his father, with general warranty. When the plaintiff came of age he instituted suit by petition against the infant wards of Powell for partition of the lands and the allotment of the plaintiff's share to him. The sale to the defendant was made pending that petition, which was afterwards proceeded in, so that in May, 1833, 479 acres on the north side of the river and 216 1-2 acres on the south side of the river were allotted in severalty as the share of the plaintiff, and the defendant took possession thereof, claiming the same under his said purchase. In March, 1837, the suit of Isaac Williams against the plaintiff and the other heirs of his father was compromised and a decree entered therein by consent for the sum of $500, of which one-seventh part was by the decree to be paid by Powell, as representing or standing in the place of the plaintiff. The present bill was filed on 30 August, 1838, and the object of it is to have the contract rescinded and a reconveyance of the land to the plaintiff upon the payment of the sums advanced by the defendant after deducting the profits made by him. The (462) bill states that besides being the guardian of the plaintiff and his brethren the defendant had married their mother, and thus had, as a father, the immediate personal care and control of the children, and commanded the confidence of the plaintiff and entire respect for his opinions. It charges that the defendant was particularly desirous of owning the plaintiff's land and knew its value, and had formed designs before the plaintiff came of age of purchasing it from him at an under value as soon as he should attain twenty-one; that to enable him the better to succeed in those views the defendant represented to the plaintiff and in the family at large the claim of Isaac Williams, the administrator of the plaintiff's father, to be ruinous to the heirs although, as the plaintiff has since discovered, the defendant knew the small amount of that demand in comparison with the amount of the estate, and was well advised by able counsel that probably even that could not be recovered.
The bill further charges that before the plaintiff came of age and afterwards, until the sale, the defendant advised him to remove out of the State to the West, well knowing that the plaintiff could not do so without making sale of his land to get the means for removing, as that was his only property. And that ultimately the plaintiff, being influenced by the advice of the defendant, which he then thought disinterested, and much alarmed also by the representations made by the defendant of the encumbrances aforesaid, which the defendant artfully magnified, agreed to make the sale and conveyance to the defendant at the price of $600, which the defendant paid, and upon the receipt of which the plaintiff left the State and has since resided abroad until shortly before the compromise made in March, 1837, whereby the plaintiff's proportion of the encumbrance, including interest up to that time, was ascertained to be but little over $70. The bill further charges that the price given by the defendant for plaintiff's interest in his father's lands was grossly inadequate; that it was worth more than double the sum, even if the encumbrance had been such as the defendant represented it; but that the plaintiff, from his want (463) of knowledge of the lands and of experience upon such subjects, and from his confidence in the fairness and friendship of his stepfather and late guardian, was induced, without further inquiry into those points, to sell at the inadequate price mentioned. The answer denies that the plaintiff was under the influence of the defendant or had any particular respect for his opinions, and states that the plaintiff was notoriously insubordinate and beyond the defendant's control. It further states that the plaintiff determined to remove to the West and without any advice from the defendant; and that he was anxious to sell his land that he might raise money for his outfit, and offered it to several persons before he came to the defendant; that not being able to sell to any one else the plaintiff then offered his portion to the defendant, and that the defendant; advised him not to sell but to go to work on the land and wait until the decision of the suit against the heirs, when the title would be clear and he could sell to greater advantage, but that the plaintiff declared that he was then determined to sell at some price or other; and the defendant, having no doubt that the plaintiff would so sell, was induced to make the purchase himself. The answer states that besides the consideration of $600 expressed in the deed the defendant was also to pay such sum as might be decreed in the suit against the heirs against the plaintiff on his share. The answer further states that the defendant feared that Isaac Williams would recover his claim, and that he occasionally spoke of it in the family, but in so doing he only expressed the apprehension really felt by him, and not for the unworthy purpose of alarming or deceiving the plaintiff; so far from it the defendant avers that he repeatedly advised him not to sell. The answer further states that after he had taken the deed the defendant was informed by counsel for the first time that a dealing with his late ward so soon after he came of age might perhaps be impeached, and thereupon he sent a message by a mutual friend to the plaintiff proposing to rescind the contract, which the plaintiff refused to do. The answer then insists upon the lapse of time, and relies on the statute of limitations.
Conveyances between persons standing in the relation (464) in which these parties did are justly the objects of suspicion in courts of equity. An undue influence, either from a blind confidence on the side of a youth just of age or awe and fear of a former guardian, must often enter into the considerations which lead to such contracts, and in most cases it is almost impossible by evidence to make those considerations, though actually existing in the bosoms of the parties, distinctly appear. But it would be a public mischief to encourage dealings between persons thus situated by allowing the conveyance to stand, unless actual unfairness should in each case be clearly established, as is the rule between persons standing on an equal footing. But contracts with an heir for his expectancy, or with a young remainderman, entitled after the death of his father, for his remainder, or by a guardian with his ward just upon his coming of age, are all put upon the same footing and set aside upon a ground of public utility, and to prevent fraud and not merely to redress it. Twistleton v. Griffith, 1 Pr. Wms., 711; Wiseman v. Beake, 2 Vern., 121; Hylton v. Hylton, 2 Ves. Jr., 547. Undue influence, produced by the attachment of the ward or obtained by flattery of the guardian, is not always necessary to vitiate the transaction. There are many other ways in which a guardian may obtain an unequal bargain — from his particular knowledge of the estate and its encumbrances, of the temper and plans of his ward and of his necessities. Therefore in such cases the guardian must, in support of his purchase, show that the ward acted freely, without any control or influence of either kind, and that the offer came from the ward and without any contrivance of the guardian to draw him into making it, and that the guardian did not even take advantage of an offer imprudently made by the ward, at least without fully communicating all the guardian knew that might enable the other party to judge correctly of his interests. In other words, only a fair and equal bargain between such persons ought to stand. When then the guardian seeks the purchase and obtains it for much less than the true value, the Court cannot hesitate to treat the conveyance merely in the light of a security for the money advanced by the purchaser, as if he were (465) a mortgagee. Any substantial inadequacy of price in such a case amounts to undue advantage. Peacock v. Evans, 16 Ves., 517; Gowland v. DeFaria, 17 Ves., 23; Medlicott v. O'Donnell, 1 Ball and Beat., 165.
In the present case the evidence does not establish any particular control or influence held over the plaintiff by the defendant, at least not through the medium of affection, for they were rather on bad terms than otherwise. But it is clear to the points that the plaintiff was a wild, thoughtless and thriftless youth, and was known and declared so to be by the defendant who, believing that the plaintiff would sell his patrimony at any price he could get in order to get a little ready money, took advantage of the plaintiff's impatience and imprudence and purchased it at a great under value, probably at a fourth or fifth of the actual value. Much of this is indeed to be collected from the answer, in which the defendant endeavors to excuse himself upon the ground that the plaintiff was determined to sell at all events, and that if he did not buy some one else would, and in which the defendant does not express even his own belief that he gave a fair price or anything like it; but upon the depositions the case is put beyond doubt. It is the opinion of three witnesses that the land assigned as the share of the plaintiff (695 1-2 acres) is worth from $4 to $5 per acre, and it is stated that the dower of Mrs. Powell covered about half the land (216 1-2 acres) lying on the south side of the river; and a brother of the plaintiff sold his share after the division for about $3,000. Besides this inadequacy of price, gross as it is, it appears by the testimony of Daniel Boon that he owned land adjoining the plaintiff's tract on the south side of the river and was desirous of buying that part from the plaintiff, and in a conversation with the defendant so informed him; that both the defendant and the witness, from their knowledge of the plaintiff's character, expected he would sell his land, and they agreed with each other that Boon should buy for both and he keep that on the south side and the defendant have that on the north at $800; or if the defendant should make the purchase that Boon should have the part he wished on the same terms. Another (466) witness, William B. Allen, states that he also owned land adjoining the lands of the plaintiff's father on the south of the river and wished to get them, and three or four months before the plaintiff made his deed and immediately after he came of age that the defendant informed the witness the plaintiff intended to sell his share in his father's land and that he wished to buy it, but that the plaintiff would sell to any other person on better terms than to the defendant, and therefore he proposed to the witness to make the purchase on their joint account, so that the witness should take the land that might be allotted on the south of the river and the defendant would take that on the north side and allow the sum of $1,000 for it. These witnesses establish a case of gross inadequacy of price; that instead of advice to the plaintiff not to sell there was an industrious seeking of the bargain by the defendant and a plan to draw the plaintiff into a sale to the defendant without his being aware of it; that there was an unfair contrivance to prevent competition in the purchase by uniting secretly with those who most probably wished to buy upon an agreement to divide; and that finally the defendant got all the land for about two-thirds of the price he had authorized the witness to give for the two-thirds of the land the defendant wanted. When to this are added the circumstances that a part of the plaintiff's land was a reversion after his mother's dower, and that the whole was subject to an encumbrance of which it does not appear the plaintiff knew anything except from the defendant, who admits he spoke of it with apprehension in the family and does not prove that he spoke truly of it as it was; the plaintiff's case is nearly as strong a one for relief as can be imagined. The answer states indeed that the defendant offered to rescind the contract, but that the plaintiff refused. But although the defendant states his proposition to have been made through a mutual friend he has failed to furnish the testimony of that friend or any other person to establish the facts, and therefore they cannot be admitted. The statute of limitations is not a bar, for the bill was filed within seven years from the making of the deed by the plaintiff, and that alone is decisive. There must be a decree for the plaintiff and a reference to take the proper (467) accounts.
Cited: Lee v. Pearce, 68 N.C. 83; Harris v. Carstarphen, 69 N.C. 419.