Opinion
10-19-1900
KIDDER v. HOUSTON et al.
Otto Crouse, for complainant. Cornelius Doremus and Washington B. Williams, for defendants.
Bill by Charlotte A. Kidder, by next friend, William F. Kidder, against Charlotte A. Houston and others, to quiet title and setaside a mortgage sale of real estate. Decree for complainant.
Otto Crouse, for complainant.
Cornelius Doremus and Washington B. Williams, for defendants.
EMERY, V. C. Complainant, Charlotte A. Kidder, is a feeble-minded person, who came of age in 1890; and the bill is filed by her next friend, William P. Kidder, who is her half-brother. Complainant has been feeble-minded and non compos mentis from her birth. The primary object of the bill is to obtain a decree that the legal title of a tract of land containing about 50 acres, situate in the village of Ridgewood, Bergen county, which was obtained by one Theodore A, Houston, now deceased, by purchase at a foreclosure sale in April, 1881, was held by him in trust for the complainant. The sale was made on the foreclosure of a mortgage of $18,000 held by the defendant Mary A. Kidder as guardian of the complainant, then an infant, and given to the guardian by her brother Frederick Kidder, the father of complainant. The amount due upon the mortgage at the time of the sale was over $23,000, and Theodore A. Houston, whose wife was a niece of the guardian, purchased the property for $5,300, and took title in his own name. The bill claims that the legal title taken by Houston was held in trust for the complainant. Houston, six years after the purchase, and in the year 1887, sold about seven acres of the land for over $3,500, and died in January, 1888, having devised his estate in the lands to the defendants Charlotte A. Houston, his widow, and Frederick A. and Henrietta A. Houston, his children, giving a power of sale to his executrix, Charlotte A. Houston. Since her husband's death, and up to the time of the commencement of this suit, Mrs. Houston, as such executrix, has sold about half the remaining lands for about $21,500, receiving $6,700 of the purchase money in mortgages, which are still held by her; and two lots have been conveyed by her, as executrix, to the defendants her son and daughter, respectively, for a consideration which, as stated in the deeds, is nominal. The bill, besides praying that the lands still unsold be declared to be held in trust for the complainant, prays an accounting for the proceeds of the lands sold, and of the rents and profits, and that the mortgages for unpaid purchase money be also declared to be held in trust, as well as the lands conveyed to the son and daughter of Houston. The substantial charges upon which the claim of trust is based in the bill are that the foreclosure of the mortgage and the purchase at the sale by Houston were the result of an arrangement between the guardian and Houston, whose wife was the guardian's niece, and upon whose advice and counsel the guardian relied; that the guardian took no active part in the foreclosure proceedings or sale, but was represented by Houston, who attended the sale for her, and agreed to buy in the property in the interest of the infant, and to bid it in in her behalf, it is further claimed that by Houston's representations to the complainant's next friend, her half-brother, who attended the sale, and to others, that he (Houston) was attending in the interest of the guardian, others were deterred from bidding, and, Houston alone bidding, the entire property was struck off on his bid, for the nominal consideration of $5,300; the lands being alleged to have then been worth more than the amount of the mortgage. The deed was made to Houston individually, and in payment or discharge of his bid and the purchase money he gave to the guardian a mortgage of $4,000 upon the property, and his note for $700; only the balance ($600) being paid in cash. "The answers of the defendant guardian and of Mrs. Houston, as the devisee and executrix of Theodore Houston, deny that Houston acted for the guardian, or counseled with her in reference to her duties or the investment of the moneys, or that he represented her at the sale, or attended the sale under an agreement to bid it in for her benefit, or that the title was taken by Houston for her benefit, as guardian, or that of her ward, and allege that the purchase was made by Houston for himself, and was a full and fair price for the premises at the time of the sale. These answers further deny any fraud or collusion between Hous ton and the guardian in relation to the sale, and they also set up the open and notorious possession, and the improvement of the premises by building residences and other wise, on the part of Houston and his grantees, and by the defendant executrix and her grantees, all of which is charged to have been known to the complainant, and the delay in commencing the suit is urged at the hearing as laches sufficient to bar complain ant's relief. The complainant came of age in the year 1890, and is admitted by the pleadings to have been feeble-minded from her birth, and to have been since the year 1884 an inmate of an institution for feeble-minded persons, where she still remains. Laches in the assertion of rights cannot, either in equity or at law, be imputed to a person who is not capable of knowing or asserting his rights; and statutes of limitations, upon principles of justice, entirely exclude such persons from their operation so long as the mental disability continues. Those who fraudulently deal with the lands of a lunatic or idiot can derive no advantage from the mere lapse of time during which the fraud is continued, if the disability continues. On the contrary, in such cases the language of Mr. Justice Story in Prevost v. Gratz, 6 Wheat. 481, 5 L. Ed. 311, in reference to frauds generally, is specially applicable. "It would seem," he says (page 498, 6 Wheat, and page 315, 5 L. Ed.), "that the length of time during which the fraud has been successfully concealed and practiced israther an aggravation of the offense, and calls more loudly upon a court of equity to grant ample and decisive relief." The laches in bringing suit charged upon the next friend, who is shown to have threatened suit against the guardian in 1891 or 1893, when, as he says, he first knew that the land was claimed to be Houston's individual estate, cannot be imputed to the complainant; for her disability places her rights under the protection of the court alone, until some one is appointed to represent her, free from any imputation of laches, and her rights cannot be impaired or lessened by any waiver, laches, or conduct of others who without due authority claim or assume to assert her rights. The case, therefore, must, for the proper protection of the complainant's rights, be considered upon its merits against the guardian, against Houston, and against his devisees, so far as they are volunteers, and it is not affected by mere delay. And inasmuch as the previous dealings of the guardian with the infant's interest in these lands, and the circumstances connected with the original taking of the mortgage, have been referred to in the pleadings and proofs, and may serve to throw some light on the nature of the transaction now in question, these facts, as developed in the evidence, will be stated in connection with the other evidence.
The 50 acres in question appear to have been originally purchased in 1866 by Frederick Kidder, the father of the complainant, from Samuel Dayton, the grandfather of the lady who was then, or afterwards became, Frederick Kidder's second wife, for a consideration which is named in the deed as $12,000; and (by a search which has been put in evidence for another purpose) a purchase-money mortgage for $11,000 seems to have been originally given. This search shows that this $11,000 mortgage was canceled in October, 1871; and the guardian's account, put in evidence by her, shows that a $12,000 mortgage on the premises, given by Frederick Kidder to Samuel Dayton, was outstanding in May, 1876. The land was located in the village of Ridgewood, on the line of the Erie Railroad, a few miles beyond Paterson, containing a population of 1,000 to 1,200; and the land was directly west of the railroad, the frontage thereon being about 1,800 to 2,000 feet There are and were then on the property near the station four small dwelling houses,—laborers' cottages,—and this portion of the property was separated from the balance of the tract by the old road leading from Ridgewood to Midland Park, which crossed the railroad at the station. A new road from Ridgewood to Wortendyke, north of the old road, and also crossing the railroad near the station, was laid out before the foreclosure sale (probably by Frederick Kidder after his purchase), and ran through the balance of the property near the center of the tract. The portion adjoining the railroad on the west, and for about two to three hundred feet back, was lowland; and the tract then rose to a ridge, and descended again towards the west. The land was not cultivated for farming purposes. More than half of it was woodland, and its value consisted in its convenience to the railroad station, and its prospective use for purposes of residence. At the time of its original purchase by Kidder, and up to the time of the foreclosure sale, the development of the village for residence as well as business had been on the eastern or opposite side of the railroad. Three years after this purchase by her father, complainant was born, and in 1874 the defendant Mary W. Kidder, a sister of Frederick Kidder, a maiden lady, then about 55 years of age, was appointed guardian of the complainant, as an infant under 14 years of age; Frederick Kidder, the father, being the only surety on her bond, which was given for $28,000. In July, 1875, a bond of Frederick Kidder for $12,000, secured by a mortgage on these premises (being a bond and mortgage originally given to Samuel Dayton, as appears by the guardian's account put in evidence), was assigned to the guardian, and in the next year the guardian received for the infant $6,000 from the estate of her grandmother. On May 27, 1876, the $12,000 mortgage, as appears by the account, was paid; and on May 27, 1876, the whole $18,000 (being the infant's entire estate) was loaned to the father upon the security of a mortgage upon these premises. No bond or other written evidence of the loan was taken with this mortgage. In their answer in this suit the guardian and the executrix of Houston say that at the time of this $18,000 loan the guardian was advised by another brother (Edward G. Kidder, now deceased), who owned a large amount of real estate in the immediate vicinity of the mortgaged premises, and by other competent persons, that the premises were worth the amount of the mortgage, and that the guardian herself so believed; but no proof has been given, either by the guardian or others, that such advice was given, or that the guardian then thought the security sufficient. At the time of the mortgage the infant then about 7 years of age, and feeble-minded, was living with the father, and no interest was ever paid by the father to the guardian on the $18,000 mortgage; the arrangement between herself, as guardian, and the father, being, as the guardian says, that the latter should take care of the child, and that the interest should be paid in that way. She says that she never kept any accounts before her brother's death, as she was never told to, and that she expected her brother "would attend to things,—expenses and all." In the foreclosure suit, however, the entire amount of the interest from the date of the mortgage is treated as unpaid, and no credits whatever were given; the effect of this being to increase (or swell, if the credit should have been given) the guardian's claim on the property,—animportant element in its relation to outside bidders on the property, when it came to a sale. After the death of the complainant's father, in 1878, the complainant, whose mother was also dead, went to live with Mrs. Brinsmaid, a sister of Miss Kidder, the guardian; and from the father's death up to the time of the sale in foreclosure, in 1881, the guardian says that she received no interest on the mortgage, nor any of the rents from the cottages on the premises, which were in the neighborhood of $200 a year. What became of these rents for the three years intervening between the death of Kidder and the foreclosure sale does not appear.
The settlement of the estate of Frederick Kidder, the father of the complainant, was involved in difficulties which were settled by a suit in chancery, which was brought by a daughter of Frederick Kidder's first wife to establish a trust in all the real estate of which Frederick Kidder died seised, comprising twenty tracts of land in Ridgewood, one of which was the mortgaged property in question. In this suit the trust was established, and the entire 20 tracts, including the mortgaged premises, were directed to be sold by a master in chancery (Isaac Wortendyke, Esq.); the sale to be made subject to incumbrances. The sale under this decree was advertised originally for December 29, 1880, but adjourned from time to time to April 20, 1881. Pending this suit the guardian foreclosed her mortgage, and the holders of the mortgages on other tracts which were incumbered also foreclosed; and the sales under the foreclosures, which were made by the sheriff, and the sale under decree, by the master, all occurred at the same time. The sales under foreclosure took place first, as appears by the master's report, and also by the evidence of the witnesses in this suit, and upon the guardian's mortgage the amount due at the time of the sale was $24,472.34. For the purposes of the foreclosure sale, the land, all of which adjoined the railroad, was directed by the decree to be sold in three parcels, which were indicated by the two roads above mentioned, which ran through the property toward the west The first tract was a triangular plot fronting about 525 feet on the railroad, and lies on the south of the old road, and on this tract the buildings were located. It contained about two acres, and the buildings were worth, according to the evidence submitted by the defendants in this suit, about $800 to $1,000. The second tract comprised the land between the old and new roads, while the third embraced the remaining portion lying north of the new road. The relative dimensions of the second and third tracts do not appear exactly, but, from the map and references in the evidence, they seem to have been nearly equal, and together contained about 47 acres.
The decree in the chancery suit above referred to established a three-eighths interest in the lands and proceeds of sale in Mrs. Havemeyer, the complainant, a three-eighths interest in William F. Kidder, a son of Frederick Kidder by his first wife, and a one-fourth Interest in William F. Kidder and complainant, as the heirs at law of Frederick Kidder, subject to the right of his administrator, Isaac Wortendyke, to receive this share for the payment of debts; he having previously obtained from the orphans' court an order for sale of the entire lands of Kidder for that purpose. The decree specially allowed Mrs. Havemeyer and William F. Kidder to bid at the sale. As appears by the report of statement of sale put in evidence, Mrs. Havemeyer attended or was represented at the sale, and purchased 5 of 27 tracts sold. William F. Kidder also attended the sale, with his counsel, for the purpose of bidding. The guardian did not attend the sale, nor does it appear clearly whether either of her solicitors, Ackerson & Van Valen, attended. Mr. Ackerson is now deceased, and Mr. Van Valen has not been called as a witness. William F. Kidder says that he does not remember whether Mr. Ackerson was present or not, and that, as he recalls, he first saw Mr. Van Valen not earlier than 1897. Theodore Houston was present at the sale, and William F. Kidder swears that before the sale he saw Houston, and asked him if he was there to represent his aunt Mary (the guardian), to which Houston replied that he was, and would bid the mortgaged property in for her. William F. Kidder thereupon, as he says, instructed Mr. Thain, a member of the New York bar, who attended to bid for him, not to bid upon this property. Thain did bid upon, and purchase for William F. Kidder, eight other properties of Frederick Kidder, which were sold that day by the master, but did not bid upon the property in question,—in consequence, Kidder says, of instructions not to do so, received from him. Mr. Thain's account is that before the sale he saw William Kidder speak to a gentleman who after a few minutes was introduced to him as Mr. Houston, Mr. Kidder stating that this gentleman was there to represent his aunt Mary; that he (Thain) understood that Mr. Houston represented the guardian, and that Mr. Kidder instructed him not to bid upon the mortgaged property. But whether this instruction was given in Houston's presence he is not prepared to say, nor does he recall what Mr. Houston said at the time he was introduced in this way. The foreclosure sale took place before the master's sale, and was conducted by the sheriff in the usual way. A number of people were in attendance, but whether any bids other than Houston's were received upon the property in question does not appear. The first tract, upon which the houses were located, was struck off to Houston at $2,400, the second tract at $1,000, and the third tract at $1,900,—a total of $5,300; the second and third tracts thus averaging alittle less than $60 an acre. After the sheriff's sale upon this and the other foreclosure sales, the master proceeded to sell the other tracts directed to be sold, but, as appears by his report, did not sell these tracts sold under foreclosure, for the reason that they had been already sold by the sheriff. Houston gave to the sheriff his individual check, dated April 20, 1881, for $500. The sale was reported on the following day as having been made to Houston, and an order confirming the sale was made on May 2, 1881. On May 31st Houston gave another check to Ackerson & Van Valen for $800. On June 1st, as appears from the docket entries of Ackerson & Van Valen (the only evidence on the subject), the solicitors of the guardian received this check from Houston, together with his bond and mortgage to M. W. Kidder, guardian, for $4,000, and after giving the sheriff their check for his fees, $91.77, the sheriff "gave us back [as the entry reads] the $500 paid on the day of the sale,"—making $1,300 cash received by the guardian's solicitors from Houston; and after deducting their costs and charges, $367.80 (more than $200 over the taxed costs), the solicitors sent their check for the balance, $932.20, to Miss Kidder on June 16th, and placed the mortgage on record. The disposition of the $932.20 check sent to Miss Kidder can only be inferred from her account under oath as guardian, put in evidence, which states that she expended $232.20 for the payment of bills incurred for the minor during the foreclosure suit, and that for the $700 she received a note of Houston, unsecured. The circumstances attending this sale to Houston, especially when taken in connection with the evidence of William F. Kidder and Mr. Thain, showing that they understood that Houston was acting for the guardian at the sale, clearly imposed upon the guardian the onus of explanation on her part, and the burden of establishing the defense set up in her answer. She has not, however, been called as a witness in this suit; the reason given by her counsel at the hearing being that the condition of her health was such that she could not be examined.
Upon this statement, it was stipulated on the record in this case that the evidence which Miss Kidder had given in June, 1897, before the Bergen orphans' court on exceptions to her guardian's account, in which she claimed allowance for the deficiency at the foreclosure sale, should be taken as evidence given in this suit, so far as material to the present issues. This evidence taken in the orphans' court is very unsatisfactory-Taken in its entirety, it is unreliable, for the reason that it apparently gives two contradictory versions of the relations between herself and Houston in regard to the purchase. On the first day of her examination she said, "Mr. Houston bought it when it was sold, and it was made over to me, to use for Charlotte's benefit;" and again, "He bought that for the benefit of the child;" that Houston was not one of her advisers at that time, but "he merely attended the sale for my sake, so that I could have that property to support the child"; that she was not in Ridgewood at the time of the sale, but saw Houston before the sale, and "made arrangements with him that he should do the best he could for the benefit of the child." Another statement of the utmost importance was also made on this first examination, which, if true, would probably be decisive of this case, as affording written evidence of the alleged trust. She said, "I have the letters of Mr. Houston's, where he said everything that was done would be done to benefit the child;" that she then had the letters from Mr. Houston, and could produce them; that her counsel bad seen them, and they were written before the sale; that these letters were in her possession at home,—several of them; that Houston bought the property, and wrote her about it then; and that she got the last letter from him in regard to the purchase of the property just before he bought it. She promised to produce at the next examination all of Houston's letters. On her further examination, a week later, being asked by her own counsel what she meant by her statement that Houston said everything was to be done for the benefit of the child, she said that "Houston said he would buy that land, if it went at all low, and, whatever it was, he bought it for himself, solely, and not for Charlotte, and would give me the interest on the mortgage"; and, in reply to a leading question, that Houston meant that in that way it would be a benefit to the child. Then being asked to explain what was meant by her previous statement that Houston attended the sale for her sake, so that she could have the property for the child, she said: "I meant I would have the interest on the mortgage to support the child. He bought the land for himself solely, and not for any one else. That was what I should have said." As to her previous answer, that Houston was to do the best he could for her benefit, she explains: "I meant whatever he bought was the best. If it was to buy the land and give me a mortgage, or give her a mortgage and I hold the mortgage; and she has always received the money up to this day." In reference to the letters, her statements on the second day's examination are still more contradictory of her previous testimony. In answer to a question by her counsel as to whether, as a matter of fact, the letters were written before, she said that "they were not written until after the sale," and that she now produces them in court; but on cross-examination, being asked whether she talked with Houston before the sale, she replied, "No; he wrote those letters, and I presume I answered them, but I had very little conversation with him."In reference to the evidence given by her on the first day's examination, as to the character of Houston's purchase, she does not on the second day say that her first evidence was correct, but that it was a mistake that she had read over her first evidence, or had it read over to her by her niece, a sister of the defendant Mrs. Houston, who was living with her, and that a great many mistakes were made; that her niece, who was all the time in Ridgewood, and knew all the facts, told her she made a great many mistakes, which she had corrected. Neither the niece, Miss Brinsmaid, nor the counsel, were examined as to the existence of any other letters than those produced at the second examination. These are four letters, the earliest being dated October 20, 1881, six months after the sale, inclosing a check for $120, six months' interest on the mortgage, and directing that the money received by Miss Kidder from Mr. Robertson, the agent who collected the rent of the houses, be credited on the note. The next, dated June 30, 1883, Incloses a check for $13, to pay interest on bond to May 1, 1883; the third, September 22, 1883, incloses a statement of account, showing the amount of interest due on the mortgage to April 20, and on the note to June 30, 1880. The account inclosed shows that, of the total $504, two years' interest due on the mortgage and note, $410.31, was received by Robertson, the agent, and paid over to Miss Kidder. The next letter, of May 14, 1884, shows that, of $282 (interest for one year, to June 30th, on the note, and April 20th, on the mortgage), $224.50 was received from rents up to January 1, 1884; and a letter of January 19, 1886, shows that, of $463, the whole amount of interest due and accrued up to December 20, 1885, on the mortgage, and to December 30, 1885, on the note, $400 was paid by Crouter, the agent who succeeded Robertson. The last statement, dated October 30, 1886, and bringing the interest account on the mortgage to October 20, and on the note to December 30, 1886, shows that, of $705, the total interest since April 20, 1884, the amount paid by rents was $537.
These letters and accounts, so far as they indicate anything in relation to the character of the purchase, show a purchase of the property by Houston for himself, and an accounting to the guardian as mortgagee only. But they are important in another aspect, as showing the small risk incurred by Houston on the purchase, for the rents of the houses on the small tract appear to have amounted to nearly three-quarters of the interest; and this circumstance must have its weight, in connection with the other evidence, in determining whether the purchase by Houston was under an arrangement between him and the guardian which was in violation of the guardian's duty and in fraud of the infant's rights. Houston unfortunately is not here to speak for himself, and explain the purchase, which, on the face of it, gave him, by the comparatively small annual payment, the benefit of any possible future increase in the value of the property, and deprived the infant of any prospect of thereafter realizing on her large claim any more than the small sum needed for her support. The terms of the purchase, and the settlement of Houston's bid by the giving of a mortgage and note for all of the purchase money except $600, must have been arranged between Houston and the guardian before May 30th, when Houston's bond and mortgage for $4,000 was delivered to her solicitors for record, and their check for $932.20 was sent to the guardian. There is in the case no evidence from which a conclusion can be surely drawn as to whether this arrangement as to the purchase by Houston and the mortgage was made before the sheriff's sale on April 20th, or whether it was made afterwards. The fact that the sale was made and reported at once as made to Houston individually would, to some extent, indicate that it was made before the sale; but, on the other hand, the evidence of William Kidder that Houston told him he was at tending to protect the interest of the guardian would indicate that the arrangement was not made until after the sale, unless it is concluded that this statement was made by Houston for the purpose of preventing any outside bidder, and especially William, a person interested, from interfering with an arrangement already made between himself and the guardian. That an arrangement of some kind was made between Houston and the guardian before the sale, contemplating the purchase by Houston, either for himself or in trust for the guardian or infant, and that in consequence of such arrangement the guardian did not herself attend to protect the infant's interest, but left this to Houston, as arranged for, is a conclusion which could be safely drawn from the admitted facts, irrespective of the evidence of William F. Kidder and Mr. Thain as to Houston's conduct and express declarations at the time of the sale. William Kidder's interest in the suit as a possible heir or next of kin of the complainant is urged as affecting his credibility, but, giving this its due weight, as perhaps requiring corroboration, I think it is corroborated by the admitted facts in relation to the sale.
Upon the whole evidence now before me, the conclusion I reach is that Houston attended the sale on behalf of the guardian, to prevent any one else getting the benefit of the purchase of the property at a low price, to bid it in for himself if he chose, and get the benefit of the purchase, on the terms that he was to secure to the infant the income necessary for its support; that being, as arranged between them, the moderate amountof about $300. This conclusion is, I think, the most favorable to the defendants that can be drawn upon any view of the evidence; and it is reached without giving any weight to the guardian's evidence that she had the letters of Houston establishing the purchase for the benefit of the infant, or to her failure to account fully or satisfactorily for their nonproduction, as tending to establish such trust. Such effect cannot be given, because this is parol evidence only of a supposed express written declaration of trust; and, the existence and terms of the writing not being clearly proved, this evidence is not sufficient to establish the written trust, as against either Houston or his successors in title. If an arrangement of the character above set out was made between Houston and the guardian, the inevitable result of carrying it out was the same as if the guardian had herself sold the lands to Houston on these terms. As trustee, she had the right and was bound to bid in the property either in her own name, or that of the infant, if necessary, to prevent a sacrifice of the infant's security. 1 Perry, Trusts, par. 458; Banta v. Trustees (Runyon, Ch.; 1884) 39 N. J. Eq. 123, 125. And this duty was specially imposed on the guardian in this case because the loan of $G,000 in addition to the existing $12,000 was made by her upon this property only five years before, and at a time when, according to all the evidence in this case, its value was prospective only. The necessity of a sale of the land, or some portion of it, to produce an income for the infant's support, would not in any case be of itself a sufficient reason for a sheriff's sale of the entire lands, and in this ease would be insufficient for the special reason that the guardian, by her loan of $6,000 (more than the entire sum now realized) upon this property in addition to the $12,000 prior mortgage, and by her failure to collect any interest upon the whole $18,000 from the time of the loan, was herself responsible for the failure to secure an income-producing fund. Nor was the guardian authorized to consider a sale by the sheriff as the proper method for this purpose, as the lands, if bought in by the guardian, could afterwards have been sold, so far as necessary for this purpose, by application to this court, which would, however, order such sale only after full inquiry, and after being satisfied, on all the circumstances of the case, that the infant's interest required a sale, and that the terms offered were satisfactory. The guardian's first duty, as both she and Houston must be taken to have known, was the protection of the infant's interests in the land from sacrifice, and not merely the production of the small income needed for her support And the guardian was entitled to, and required to secure, the direction and protection of the court in the protection of the infant's interest. Houston, by appearing at the sale in consequence of some previous arrangement with the guardian, and bidding for the property in her absence, occupied a position entirely different from a purchaser at an ordinary public sale, in which, upon principles of public policy, bidders are entitled to the benefit of their purchase; and the sale must be considered as the method by which the guardian, who controlled it, and Houston, the intending purchaser, carried out their arrangement for the purchase by Houston at a sum and upon terms sufficient to secure merely the infant's support. As this arrangement sacrificed the entire claim of the infant on the lands, above $5,300, it was prima facie a fraud on the infant, and imposed upon Houston, as well as the guardian, the burden of showing not only that the price paid was the fair market value of the land at the time of the sale, but also that, in the interest of the infant and imbecile, such sacrifice of the infant's claim should have been made by the guardian's sale at that time. And, on the failure of the purchaser or his voluntary grantees to make such proof, the result must be that the purchase must be held to have been a fraud upon the infant, and that the lauds must be declared to be held in trust for her by reason of such fraud.
No rule less strict than that last stated, against the guardians of infants and those who deal with them for the purchase of the infants' lands, or interest therein, can, as it seems to me, be adopted with safety or security in any case, and there are in this case two special circumstances which require this proof. These are, first, that the loan of $18,000 was made by the guardian herself upon this property only five years before, three years after the panic of 1873, and while its effect was still general, and the value of the lands as security for such loan, at the time of the loan, must have been altogether or largely prospective; and, second, that the sale, which deprived the infant of the benefit of any future rise in value, was made to a person connected with the guardian's own family, and, so far as appears, without any communication or consultation with William Kidder, the infant's half-brother, or any other member of the infant's family who would presumably have been interested in retaining the benefit of the purchase for the infant. In MeCully v. Lum, 49 N. J. Eq. 552, 25 Atl. 705, where a nephew of an executor purchased at a sale conducted by or under the control of the executor, for less than the executor's claim, and indicia of a collusive sale existed, held that the executor was required to explain these by the clearest and most satisfactory proof, so that it should plainly appear that the sale was so conducted as to subserve the best interests of the trust and realize the fair value of the incumbered property, and not so as to put the title of the land in his nephew for less than its value.
In reference to the fair market value of the property at the time of the sale, the effect of the entire evidence offered in thecause is to leave the question of value very uncertain and largely conjectural. This arises from the fact that, as appears by the evidence of nearly all of the witnesses as to the value, there were few or no sales of property in Ridgewood at or near this time, and no sales at all of property in the neighborhood, or similarly circumstauced, for several years before or after the sale in question. The only actual sales or transactions put in evidence are those relating to the property in question, being the purchase of the property in 1866 by Kidder for $12,000, the mortgage by him to the guardian in 1876 for $18,000, and the sale of 7 acres in 1887 by Houston to White for $3,500. This portion sold to White seems to have been, in 1887, the most desirable portion of the tract for residence purposes; and the witness (Mr. Walton) produced by the defendants, whose evidence seems to be most reliable, now states that this portion was worth $500 an acre in 1887, and was probably worth $250 an acre in 1881, and that an increase in value had taken place between 1881 and 1887. Mr. Walton, whose knowledge of values, as depending on actual sales or transactions, begins after the sale by Houston to White, now estimates the value in 1881 as $6,000 to $6,500, including the houses; basing the valuation on something less than $100 an acre for the entire tract, considered as one tract. The fact that this witness is a nephew by marriage of the defentdant Miss Kidder has some weight in determining the reliance to be given to his estimates of value. The other witnesses called by the defendants as to values are Mr. Isaac Hutton, a resident of Ridgewood since September, 1878, who says that at the time of the sale practically no sales were being made in Ridgewood; that nobody would buy, and nobody was disposed to sell; that in 1881 there seemed to be no value in property; it was not selling, and did not have much of a value; that he might have given $200 for a small portion of this property (that near the railroad), but for other portions he would not give more than $50 an acre, and an average of $90 to $100 for the whole 50 acres ($5,500) would cover its value in 1881; that the houses were cheap,—not worth anything except to remove. This witness paid $4,800 for two acres of property along the railroad, and opposite the property in question, having bought it before 1881 for $300, subject to a mortgage of $4,500; this property, however, being bought for a lumber yard, and having on it a railroad switch,—an advantage which, as this witness says, could not be had for the property opposite. In 1887 or 1888 this witness also made propositions to purchase 10 acres of the property (including the portion afterwards bought by White), and then thought this worth $200 to $250 an acre for the 10 acres. This witness thinks an increase of value had taken place between 1881 and 1887. Cornelius P. Crouter, a real-estate agent who collected the rents of the houses for Houston after the purchase, and who came to Ridgewood shortly before 1881, values the land in 1881 at $100 per acre in bulk, and the buildings at $200 apiece. This value, he says, is fixed as other lands were selling at the time, but no instances of such sales are given. This witness says that four or five years after the sale he, with others, talked of purchasing the property, and Houston offered it to them for $10,000, but, as fifty to seventy-five thousand dollars would be necessary to develop it, the plan fell through. Whether this offer of the property for $10,000 included the whole property does not expressly appear. Mr. Crouse, a grocer of Ridgewood, who has also been in the real-estate business since 1887, says that in 1881 there was no property sold in Ridgewood, and that the value of the property was about $100 an acre; that there was not much improvement between 1881 and 1887; and that he did not know that the property sold to White in 1887 for $500 an acre was worth in 1881 any more than the rest was. He afterwards says there was a rise of 50 per cent. in value between those years. This witness' judgment as to the present value of the remaining property is $500 an acre, which is less than one-third of the present value given by other witnesses, and indicated by the actual sales. John B. Van Dien, a former builder, who owned land in Ridgewood in 1886, says that the 50-acre tract was worth about $125 an acre, including the buildings; that values have increased since 1881, but that in 1887 the value was about the same as in 1881, and remained the same until the time of the improvement, four or five years ago, when there was a big change right away.
This is substantially all the evidence offered by the defendants as to the value of the property in 1881, and in opposition to this the complainant, as to the proofs of value, relies mainly on the purchase by Kidder in 1866 for $12,000, the mortgage to the guardian in 1876 for $18,000, the sale by Houston for $500 an acre in 1887, and the subsequent sales up to the time of the action, showing an average value of about $1,000 per acre. The present statement of William P. Kidder, the next friend, that the property was worth $23,000 in 1881, is not, in my judgment, entitled to much weight. But the sales made since White's purchase have been influenced largely, if not altogether, by the development of the property by White and Mrs. Houston, the expenditure by them of large sums of money in improvement of the tract, and in connection with the owners of adjoining properties, which have together made the entire locality very desirable residence property. These subsequent prices and developments, therefore, while they have some bearing on the sale in 1881, as showing the possible prospective value of the property to the complainant, which the guardian and Houstonshould, in the infant's interest, have taken into consideration, are not proper criteria for fixing by approximate figures the market value of the property in 1881. The single fact to which we are confined for the safest deductions as to value in 1881 is the sale to White made by Houston in 1887. This sale may, I think, be taken as a standard of the market value of the portion sold at that time, taking into consideration the prospective value. This sale was, as stated, for $3,500; and it was a small portion (between one-third and one-fourth, as near as I can estimate) of the entire second tract, which was struck off to Houston at the sale for $1,000. After making all proper allowance for the fact that the 7 acres sold to White was the choice portion of the second tract, and also for any probable increase in value between 1881 and 1887, I think it cannot be considered that $1,000 was a fair price to be paid for this tract, or anything like a fair price. A sale for such a sum sacrificed altogether any prospective value for the property as residence property. The first tract, containing about 2 acres, and upon which the houses were located, was sold for $2,400,—a price somewhat approximating that given for the property opposite; and, on the simple question of value, I am not prepared to say that this first tract was sold for a price below its then market value, if a sale of the infant's interest in the tract was then required to be made. But the sales of the two remaining tracts, which were ordered by the court to be sold separately from the first, to Houston,—the one for $1,000, and the other for $1,900,—seem to me to have been purchases far under their value, and to have been a sacrifice of the interest of the infants in these lands, which the guardian and Houston had no right to make or arrange between themselves. Had the guardian herself bought in the lands, as she should have done, to prevent a sacrifice, she would then have been required to make an application to some proper court for the sale of the lands; and it is impossible to conceive that any court, upon the evidence now presented as to the condition of the real-estate market in 1881, would have then directed or confirmed the sale of either of these second or third tracts at the price or upon the terms at which Houston secured them. It is clear from the entire evidence in the case that from the time of Frederick Kidder's original purchase of the property, in 1866, the only considerable value in this portion of the property was its convenience and adaptability for residence purposes, and that this value was largely, if not altogether, prospective. It must have been upon this view of its value that Kidder made the purchase, and the guardian made the loans on the property, and that Houston purchased the property. The effect of his purchase, made for the price and upon the terms agreed on between him and the guardian, at a time of great depression in values, was to sacrifice. on their judgment alone, three-fourths of the infant's investment in the property, to deprive her of any possible future advantage, and to secure this for Houston on terms which imposed on him a comparatively small annual advance over the actual rents of the property. And the fact that the amount realized for the first tract may not have been below the price which could then have been realized at a forced public sale will not avail to sustain the sale, even as to this tract. In the first place, the purchase by Houston of this tract must be considered to have been in execution of the fraudulent arrangement between him and the guardian for the purchase of the entire property at a low figure; and, in the second place, it does not appear that it was for the interest of the infant that the sale of the first tract should have taken place at that time or manner, or for the price it then brought. The present claim that the sale was necessary in order to procure an income for the infant's support is not sufficient to sustain the transaction in question; for, although it is entitled to-weight, to the extent that a sale of some portion of the property might, after investigation, have been directed, no sale such as this, as to any of the tracts, would have been directed or confirmed by the court. The order of confirmation made by the court upon proceedings for sale which were regular on their face, but which did not disclose in any way the arrangement between the guardian and purchaser now indicated, cannot, except as to bona fide purchasers, be taken in any respect as an approval of the sale, which affects the infant on investigation of the sale, on behalf of the infant, upon a charge of fraudulent collusion. When the guardian and Houston by their private agreement undertook to dispose of the infant's interests in the lands in Houston's favor, by the medium of this foreclosure sale under the guardian's mortgage, they took the risk of being obliged afterwards to show, if the transaction was properly called in question by or on behalf of the infant, that the sale was for a fair price, and also that, in the interest of the infant and imbecile, it should then have been made. The defendants have failed to establish either of these facts, and, in my judgment, the sale must be set aside, so far as relates to the lands still held by the devisees of Houston, and these lands decreed to be held in trust for the complainant; and the defendant executrix, etc., of Houston, must account for the proceeds of the land sold. It is not questioned that the sales which have been made either by Houston or his executrix were made to bona fide purchasers, with the exception of the conveyances to the defendants the son and daughter of Mr. and Mrs. Houston. So far as these bona fide purchasers are concerned, they are entitled to rely upon the confirmation of the sale regularly made by the court proceedings, which were regular on their face. This title is notaffected by this decree, but the executrix must account for the purchase money. It was claimed at the hearing that the conveyances by Mrs. Houston to her son and daughter were upon valuable consideration and without notice. The evidence as to the nature of the consideration was, however, too meager to reach a conclusion upon this point, and I will hear an application for further evidence, if desired. I will also, before signing decree, hear counsel as to the extent and nature of the allowances which should be made to the executrix, either as terms of the decree or on the accounting. The case in this respect presents features which are important and somewhat unusual, and as the question was not touched at the argument, which related wholly to the validity of the sale, I desire to hear further argument upon this question.