Opinion
No. 4395.
February 8, 1934. Rehearing Denied March 1, 1934.
Appeal from District Court, Rusk County; R. T. Brown, Judge.
Petition by Mrs. Tommie Swanzy, as guardian of the person and estate of William S. Holt, a person non compos mentis, against W. F. Neal and others. Plaintiff's petition was denied by the probate court. From a judgment of the district court for plaintiff, defendants appeal.
Affirmed.
Mrs. Tommie Swanzy, as guardian of the person and estate of Win. S. Holt, a person non compos mentis, filed a petition in the probate court of Rusk county on June 15, 1931, to set aside certain probate orders or decrees ordering and confirming a sale to W. F. Neal of certain real property owned by the lunatic, claiming that the orders or decrees were void for the reasons fully stated, in effect, as without authority of law; failure of compliance with statutory requirements; failure to pay the purchase price of the sale; and for fraud and undue influence. The prayer reads: "That upon a hearing judgment be entered setting aside the order of sale and confirmation of sale, and each of them, as theretofore entered and heretofore herein referred to, together with the guardian's deed executed in pursuance thereto, and that said instruments and each of them be in all things held for naught, set aside, cancelled and vacated," etc.
The attack upon and the vacation of the guardian's deed itself was expressly withdrawn from the controversy by a trial amendment of the plaintiff's petition.
The purchaser of the land at the probate sale and the Shell Petroleum Corporation, the lessee of an oil and gas lease executed by the purchaser of the land, were named as defendants. Upon a hearing the probate court denied the plaintiff's petition, and the guardian appealed to the district court, where, upon trial on the merits, a judgment was rendered vacating and canceling the probate orders of sale and of confirmation of the sale of the land.
It appears from the evidence that prior to 1910 Wm. S. Holt, an adult above the age of twenty-one years, inherited a one-third interest in a 30-acre tract and a one-sixth interest in a 79 1/2-acre tract of land. Wm. S. Holt in 1910 in regular lunacy proceedings was adjudged to be a person of unsound mind, and was committed to the state insane asylum at Terrell, where he has since remained. He was still the owner of the land at the time he was adjudged insane. In January, 1912, C. M. Holt, a brother of Wm. S. Holt, purchased from his mother and all of his brothers and sisters all their entire undivided interest in the 30-acre tract and the 79 1/2-acre tract of land, and warranty deeds were executed and duly acknowledged. The consideration, deemed at the time by the parties to be just, was certain vendor's lien notes, payable to each heir in amounts equal to their several interests in the land. It was determined that the consideration to Wm. S. Holt was a vendor's lien note for $400, payable five years from date, bearing 10 per cent. interest. C. M. Holt then procured a warranty deed from Wm. S. Holt, who at the time was an inmate of the insane asylum at Terrell. The deed conveyed all the undivided interest of Wm. S. Holt in the land, and bears the date of "26 day of January A.D. 1912," and was signed "(X) W. S. Holt." The acknowledgment was taken before "a notary public in and for Kaufman County, Texas," in which county the state insane asylum is located. This deed was registered "September 17, 1918." C. M. Holt went into immediate possession of the land and erected a house thereon, and he and his wife and family occupied and used the land. The guardian of the person and estate of William S. Holt, insane person, was appointed at the June term, 1912, probate court. Thereafter, on December 15, 1917, C. M. Holt, joined by his wife, executed a warranty deed to W. F. Neal in consideration of $2,000, conveying 79 1/2 acres of land. The deed was registered December 17, 1917. And later, on October S, 1918, C. M. Holt, joined by his wife, executed a warranty deed to W. F. Neal in consideration of five notes for $500 each, conveying the 30-acre tract in suit and other land. This deed was registered July 28, 1930. It appears that W. F. Neal at the time he acquired the land paid over to the guardian of Wm. S. Holt the $400 in payment of the outstanding vendor's lien note, mentioned above. W. F. Neal knew at the time of the deed of the insanity of Wm. S. Holt. He was also a surety on the guardian's bond. In this connection, though, the evidence goes to show that Wm. S. Holt at some time between 1912 and 1917, the time not fixed by proof, was on a furlough from the insane asylum, and he came to Overton and engaged in truck farming for nearly two years before returning to the asylum.
On October 22, 1930, W. F. Neal and wife executed a lease of the land to the Shell Petroleum Corporation for the exploration and production of oil, and placed the lease in escrow. By the terms of the escrow agreement, in substance, W. F. Neal was to furnish an abstract showing a title satisfactory to the lessee. Upon the examination of the abstract, certain objections to the title were pointed out by the attorneys, and, while working out the matters of curing the objections, the land man for the Shell Petroleum Corporation found out that Wm. S. Holt had been judicially adjudged insane in 1910, and that a guardian of his person and estate had been appointed in 1912. He then procured a supplemental abstract showing these lunacy and guardianship proceedings, and forwarded it to the attorneys for the lessee. The attorneys for the lessee in an opinion, which was shown to W. F. Neal, in effect called attention to the fact that the purported deeds from Wm. S. Holt to C. M. Holt had been executed about two years after Wm. S. Holt had been adjudged insane in 1910, and observed that the title in W. F. Neal of the interest of the lunatic should emanate from the probate court in guardianship proceedings, and upon a bona fide consideration. W. F. Neal then undertook to procure the necessary probate orders for the sale of the land by the guardian. The application that was made by the guardian sets up that Mrs. Tommie Swanzy was the duly qualified guardian of the person and estate of Wm. S. Holt, a lunatic, and that the ward, Wm. S. Holt, had attempted to convey his undivided interest in the land to C. M. Holt, and at the time was not legally capacitated to do so, and that C. M. Holt had subsequent thereto conveyed the premises to W. F. Neal; that such conveyances of the ward, Wm. S. Holt, were void, but that W. F. Neal had actually paid C. M. Holt for the land; and further recites that: "And whereas it now appears that the conveyances as to the interests of said ward, Wm. S. Holt, in the two tracts of land herein described are void and of no effect; and whereas your petitioner, Guardian of the Estate of Wm. S. Holt, is of the opinion that said interests of her ward, Wm. S. Holt, should be legally conveyed to said W. F. Neal who is rightfully and legally entitled to ownership and possession of said interests, having fully discharged his obligation by payment of all indebtedness against him, the said W. F. Neal, for said interest." The prayer reads:
"Now therefore, your petitioner, Mrs. Tommie Swanzy, Guardian of the Estate of Wm. S. Holt, Ward, prays for an order authorizing and empowering her, as guardian of the estate of said ward to convey the interest of said ward in and to the two tracts herein referred to, and that due notice be given of this application as required by law; and that upon granting of such order by the Court said guardian shall proceed to sell for cash undivided interests in the two tracts in the manner and upon the terms as the Court may direct belonging to said Ward, Wm. S. Holt."
The above application was dated and signed on "December 22, 1930," and was filed with the clerk of the probate court on "December 23, 1930." The trial court finds that this application was "not accompanied by any exhibit under oath, or otherwise, of the estate, showing the condition of the estate of Wm. S. Holt, as required by the statutes." The probate court granted the above application on "this, the 30th day of December, 1930," by an order of record stating that the sale of the land was "advisable and necessary, and that the application should be granted, and that it was more advantageous to said estate to sell the land," and directing the guardian to sell the ward's interest in the land "for cash at private sale." On January 17, 1931, the guardian filed with the probate clerk a report of the sale stating that on January 16, 1931, she sold the interest of the ward at private sale to W. F. Neal for $260 cash. On January 17, 1931, by order of record, the probate court approved and confirmed the sale, and directed the guardian to make a deed to W. F. Neal upon his compliance with the terms of the sale. The sales bond of the guardian was signed by W. F. Neal as one of the sureties. The guardian's deed was made on January 17, 1931. An abstract showing all of these recent probate proceedings was obtained by Mr. Sharp, the land man for the Shell Petroleum Corporation, and was forwarded to their offices at Dallas, Tex. The Shell Petroleum Corporation thereupon paid W. F. Neal the sum of $2,500 on January 28, 1931, and the oil and gas lease dated October 22, 1930, was released from escrow and placed of record in Rusk county, Tex. The Shell Petroleum Corporation, however, noticed that the order confirming the sale was made and entered before five days after the report of sale had been filed, and required W. F. Neal to have the guardian enter into a new sales bond for $520, and to have a new order entered confirming said sale. This additional or second order confirming this sale was made and entered on February 23, 1931, and on same date the other sales bond in the principal sum of $520 signed by Mrs. Tommie Swanzy, guardian, as principal, and by W. F. Neal and others as sureties, was filed and approved. Another guardian's deed, which on its face complied with said second order confirming the sale, was executed immediately after this second order of confirmation was made. No new report of sale was filed, but the second order of confirmation was entered upon the original application and report of sale, which had been previously filed. This second order of confirmation stated that:
"On this the 23rd day of February, 1931, came on to be heard in the guardianship of Wm. S. Holt, Ward, the report of Mrs. Tommie Swanzy, Guardian of said Ward, of the sale of the tracts of land hereinafter described, made in obedience to an order of the Court entered on December 30, 1930; and it appearing to the Court that the said report of the sale has been filed and docketed in the manner and for the time required by law; and it further appearing upon examination and the evidence herein that the sale was fairly made, and in conformity with law, and that the Guardian, Mrs. Tommie Swanzy, has filed her bond herein as required by law, which has been duly approved by the Court, and that said land brought a fair price; and it further appearing that W. F. Neal became the purchaser of the land at private sale for $260.00 payable in cash; that said ought to be confirmed."
The trial court made findings, viz.:
"In the report of sale, order of confirmation and deed, and each of them, it was recited that the sale had been made to W. F. Neal at private sale for cash consideration of $260.00. As a matter of fact no part of this consideration was paid. W. F. Neal testified that he made Mrs. Swanzy a present of $110.00 but that he did not intend any part thereof as any consideration for his obtaining the deeds from her as guardian. He admitted that he did not in fact pay any consideration for either of the deeds executed by Mrs. Swanzy as guardian, but claimed that this whole proceeding was merely in ratification and/or confirmation of the transactions he had about 1917 and 1918, when he claims to have purchased this property from C. M. Holt.
"The attorneys for the Shell Petroleum Corporation, prior to the time it paid W. F. Neal $2,500.00 for an oil and gas lease on this property, actually examined and read the abstracts of title to the real estate involved herein, and which contained the lunacy proceedings and the application, order of sale, report of sale, and order confirming said sale, which was entered on January 17, 1931.
"Shell Petroleum Corporation knew that W. F. Neal was a surety on each of the three bonds executed by Mrs. Tommie Swanzy as Guardian, and that he was endeavoring, through these probate proceedings to ratify and confirm deeds secured by him in 1917 and 1918, respectively, and admittedly void."
The court concluded:
"The application for sale above mentioned does not state any statutory grounds therefor, but, on the contrary, shows that the sale was being proposed for reasons wholly unauthorized by statute and was not accompanied by any exhibit under oath showing the condition of the estate of Will S. Holt as is required by statute.
"Neither of the two orders authorizing the sale, as above mentioned, shows any statutory grounds therefor, and the consideration of $260.00 recited in the report of sale, orders confirming sale and guardian's deeds was not actually paid, and there was and is in fact no consideration for said guardian's deeds.
"Under the facts above found, and the other facts appearing in the record herein, the above mentioned application for sale, order authorizing such sale and each of the two orders confirming same, are void, or voidable, and did not authorize any sale by the Guardian, Mrs. Tommie Swanzy, of any interest Will S. Holt, the non compos mentis, had in the properties described in those instruments, and all of said orders should be annulled, set aside and held for naught. This proceeding being in the nature of a direct attack, it becomes immaterial as to whether said proceedings were void or simply voidable.
"Shell Petroleum Corporation is not in a position to claim as an innocent purchaser herein, because:
"(a) It had both actual and constructive notice of the contents of the application for sale and the various orders based thereon, each of which appear in its chain of title, and each of which are fatally defective for each and all of the reasons above shown.
"(b) The $2,500.00 which was paid by Shell Petroleum Corporation for an oil and gas lease covering these properties was actually paid prior to the time any proper orders of confirmation was entered, said sum having been paid while the records showed that the purported order of confirmation was entered on the same day the report of sale was filed and without allowing the statutory five-day period to elapse between the date of such filing and the date of the order.
"(c) It actually knew and is charged with notice of the fact that there was not attached to the application filed by the Guardian herein for a sale of this property any written report under oath showing the condition of the estate of the Ward, Will S. Holt."
The findings and conclusions of the trial court are for the most part included in and set forth in the foregoing statement of the case, and they are here adopted as warranted by the evidence. The terms of the probate orders are above stated, and the orders speak for themselves, and this meets the objections made by appellants as to the conclusions drawn in respect thereto.
J. W. McDavid, of Henderson, R. H. Whilden, of Houston, J. M. Holmes, of St. Louis, Mo., and Thompson, Mitchell, Thompson Young, of St. Louis, Mo., for appellants.
Ed Yarbrough, of Henderson, J. L. Goggans, James F. Gray, and T. Whitt Davidson, all of Dallas, for appellees.
In order to render a sale by a guardian of a ward's real estate effectual to confer a valid right, the probate court must have acquired active jurisdiction by the presentment of a proper application by the guardian of the estate. The same rule applies alike to estates of a minor and estates of persons of unsound mind. The application for sale by the guardian becomes the first step or the commencement of the proceeding for the court to acquire and exercise jurisdiction. What shall be the purposes for which the guardian may make application for order of sale of real estate is prescribed by the statutes. Articles 4195, 4196, R.S. In the instant case the guardian by his application undertakes, first, to disclose to the probate court the following facts: That before the guardianship proceedings had been instituted, and while he was in a state of mind "not legally capacitated" to do so, William S. Holt, the person of unsound mind, for a consideration executed a deed conveying his undivided interest in the land to C. M. Holt, who subsequently deeded it to W. F. Neal, and that W. F. Neal actually paid full consideration to C. M. Holt for it. Next following is stated the purposes of the sale, with recommendation of the guardian in respect thereto, namely: That "it now appears that the conveyance as to the interest of said ward, William S. Holt, in the two tracts of land herein described is void and of no effect," and, for that reason, "your petitioner, Guardian of the Estate of William S. Holt, is of the opinion that the said interest of her ward, William S. Holt, should be legally conveyed to said W. F. Neal, who is rightfully and legally entitled to ownership and possession of said interest, having discharged his obligation by payment of all indebtedness against him, the said W. F. Neal, for said interest." The prayer asked the probate court specially for grant of authority to effectuate the purposes stated, empowering the guardian "to convey the interests of the said ward" in the land and "to sell for cash" by implication to the named subsequent purchaser W. F. Neal. Upon that application the probate court made and entered an order authorizing the guardian to make sale of the ward's interest in the land "at private sale for cash." The order recites the purposes for which the sale was authorized to be:
"It further appearing to the court that the sale of the real estate of said ward is advisable and necessary and that said application should be granted, and that it is more advantageous to said estate to sell the land mentioned in said application."
The order recites no other purposes than above quoted. It is plain from the language of the application of the guardian that the interest in the land of the insane ward was not asked to be sold for one of the purposes mentioned in the statutes, either of support and maintenance, or payment of his debts or liens against the property or taxes, or because the land in which the ward has an undivided interest had better be sold than held undivided. Article 4195, R.S. And it is manifest from the order of the probate court that the probate court never granted to the guardian the power to sell the land for any one of the purposes mentioned therein. The statute does not by its terms confer, besides the purposes specially mentioned, the additional power to make a sale or order a sale of the real estate of an insane person whenever it is made to appear to the court that such sale would be "advisable and necessary" or "advantageous to said estate." It is not a provision of the statute that the guardian may sell, and the probate court may order sale of, the real estate, or any part of it, of the lunatic whenever the interest of the lunatic would be materially or essentially promoted thereby. And, further considering the circumstances affirmatively disclosed in the guardian's application, it may not be held that the particular real estate mentioned was at the time of the application property of the estate which had passed into the possession of the guardian and under the control and supervision of the guardian and the probate court. It was not under the immediate administration of the guardianship. There had been conveyance of the land by the insane person himself previous to the guardianship, and the purchaser under the grantee was holding actual possession thereof. The requisites or essentials of contracts generally apply to contracts of insane persons. The rule is that a contract, and as truly a deed, of an insane person entered into prior to the appointment of a guardian, is not conclusively void. A deed of an insane person so made may only at most be deemed voidable. Williams, Guardian, v. Sapieha, 94 Tex. 430, 61 S.W. 115, and numerous other cases following that case.
The title would stand in the grantee until such grantor disagrees to the transaction upon sanity. And, in legal effect, until rescinded by judicial action brought for the purpose, the apparent legal title stood, not in the lunatic ward, but in the grantee of the deed or the purchaser under him. The guardian, under the statutory authority to take possession of all property belonging to the ward, may be deemed to have the incidental power to bring suit to rescind the voidable sale made by his ward. Article 4168 expressly gives the guardian the right to recover possession of all property to which the ward has a "title or claim." But until the necessary steps are taken of rescission by suit and decree the land could not be regarded as within the possession of the guardian and under the immediate control and supervision of the guardian and the probate court. Therefore, in the view of such legal situation of the land and the terms of the guardian's application for sale, it may not be held that the land itself was in the possession and under the authority and jurisdiction of the guardian and the probate court subject to contract or conveyance in respect thereto by the guardian, or a purpose was presented for which a sale is authorized by the statute.
Reasonably construed, the application of the guardian and the order of the probate court thereupon must be considered as in the prime purpose of empowering the guardian to make to the subsequent purchaser, W. F. Neal, a guardian's deed to the same land conveyed by the insane ward previous to the guardianship, but while he was insane. There was to be a new sale upon a new consideration, in confirmation or affirmation of the previous deed by the ward. The rescission or interference with the previous sale by the insane person was in no wise sought. The intention was, as plain as any language could possibly be, of making absolutely effectual through a guardian's deed upon a consideration the previous sale by the insane ward. Such purpose for a sale is not authorized or derived from the statute. And it is believed the authority of the probate court to order a conveyance under guardian's deed of the land to effectuate the purposes stated is not fairly implied. It is not doubted that a voidable deed may be rescinded in a suit brought for the purpose by the grantor himself when restored to reason, or by his guardian or legal representatives. The express authority is conferred upon the guardian to reduce all property of the ward to possession and to take control and supervision thereof. Such proceeding is merely to conserve the estate of the ward, by destroying voidable deeds, and retaining the property. But there is a distinction between a disaffirmance or avoidance of a voidable deed and a ratification or valid affirmation thereof; the effect of ratification or affirmance being to shut off the right to disaffirm, and making the previous conveyance valid and binding. The right of affirmance is a personal right of a minor or an insane person, not exercisable during the existence of his disability, but upon the removal of the disability, of the minor becoming of age and the insane person restored to sanity. The right of election to do so rests solely with such insane person upon removal of the disability. And, in the absence of express statutory provision making it the subject of a probate sale, neither the guardian nor the probate court could sell or dispose of the right, as in its nature of a right in real estate, to disaffirm and recover back the land. And it is concluded that, in the absence of express statutory provision, neither the guardian or the probate court, nor all together, can ratify or confirm a conveyance of land by the ward made previous to the guardianship, but while he was insane. The powers of the probate court, in respect to the estates of minors, and as truly estate of a person of unsound mind, are all conferred by statute. Whatever the statute authorizes the probate court to do, it may rightfully do. And it is as certainly plain that, if the probate court orders a sale of land when the circumstances do not exist, which, under the law authorizes it to do so, it acts, in doing so, without authority. If the order of sale was a nullity, the confirmation of such sale could not legalize it. It was clearly within the power of the probate court, and the district court upon appeal sitting in probate, to set aside and vacate the orders upon the petition of the guardian. Article 4328, R.S. And, in another point of fact, as found by the trial court, as respects the purchaser, there was failure of compliance with the terms of the sale, requiring as to him the setting aside of the order of confirmation of the sale of the ward's land. It is expressly provided by the statute as a prerequisite of conveyance to the purchaser the compliance by the purchaser with the terms of purchase. Article 4220, R.S.
The further and final question arises of whether or not the Shell Petroleum Corporation is in the position of a bona fide purchaser, and can set up such defense against the exercise by the probate court of jurisdiction to set aside the probate orders in controversy for legal invalidity. The most general statement of the doctrine of bona fide purchaser describes the purchase as one made in good faith for a valuable consideration and without notice. The purchaser may pay a valuable consideration, act in good faith, and yet he may have notice of matters or circumstances which vitiate the title of the immediate predecessor under whom he claims. It is an elementary doctrine, therefore, that, independently of valuable consideration and of good faith, notice will destroy the character of a bona fide purchaser and defeat the protection otherwise given to it. It specially appears, by affirmative finding of the trial court, that the Shell Petroleum Corporation, through its representatives, "prior to the time it paid W. F. Neal $2,500.00 for an oil and gas lease on this property," had actual notice, through abstracts of title, of the lunacy proceedings, the contents of the guardian's application, and the orders of sale and confirmation. By such circumstances notice would be charged of adjudication of insanity of the ward, an order of sale and sale under it of the ward's land for purposes not authorized by statute, a previous sale of the same land by the ward before guardianship, although while insane. These facts, all apparent upon the probate record, would show and give notice that the probate court was not authorized to act as it did act. It could not be held that a sale in conformity with the order and a formal order of confirmation would pass the title to the purchaser, who was the grantor of the Shell Petroleum Corporation. The jurisdiction of the probate court was never rightfully called into exercise. Can the defense of bona fide purchaser be made available in the probate proceeding as a remedy against the vacation of the invalid probate orders? The doctrine of protection to a bona fide purchaser is not a rule of property, but is merely a rule of inaction. 2 Pomeroy, Eq.Jur. (14 Ed.) § 743. It is only available by way of defense, and enforces no right and does not determine the question of title between the parties. It means that equity will refuse to interfere to aid the plaintiff in his suit, because, under the circumstances of the case, it would be unconscientious for him to have what he is seeking to obtain. Id., § 738. It seems to be the rule that whenever the orders of sale of the probate court are voidable through irregularities, which do not affect the validity or fairness of the sale, the probate court may, upon the plea of innocent purchaser, in its discretion either decline to set aside and vacate the merely voidable order or set it aside upon the condition attached of refund of the purchase money paid for the ward's property. Kendrick v. Wheeler, 85 Tex. 247, 20 S.W. 44. The sale emanating from probate proceedings which are merely voidable, and the estate having passed to a subsequent bona fide holder by an apparently valid title, the principles of equity in clear conscience would sustain the claim of the subsequent bona fide purchaser in not setting aside the order of sale of the ward's property, or in canceling the order of sale, which has the legal force and effect of reclamation of the land from the purchaser, to require refund of the purchase money. Upon such a state of facts the ward cannot, as a matter of clear right, have the sale set aside, although irregularities are shown. There is complete and effectual execution of the powers given to the probate court of administration upon the land. In the present case, though, the probate orders in controversy were not merely voidable, but were void as without the jurisdiction of the probate court to entertain and make. The right to relief, as to this defense, cannot be rested solely on the ground that the subsequent purchaser and his grantor innocently dealt with the property under guardianship administration. If the guardianship orders were void, the subsequent purchaser nor his grantor would not acquire title or equitable right in the land. They would acquire no interest or estate in virtue of guardianship proceedings that in good conscience should prevail against the claim of the ward who is the legal innocent owner. Such persons would not have a legal estate to protect. There is no equity to deny the setting aside of the order of sale and effect the reclamation of the land to the ward. Quoting from 2 Pomeroy, Eq.Jur. § 735: "When the original owner has done or omitted something by which it was made possible that his property should come into the hands of a bona fide holder by an apparently valid title, it may be just to regard him as estopped from asserting his ownership, and thus to protect the subsequent purchaser. But when the prior legal owner is wholly innocent, has done and omitted nothing, it certainly transcends, even if it does not violate, the principles of equity to sustain the claims of a subsequent and even bona fide purchaser."
The case of Halbert v. Heirs of Young (Tex. Sup.) 6 S.W. 747, 748, would seem to indicate the real rule which would entitle the protection of bona fide purchaser to be "that the orders and decrees of the probate court for Dallas county, while voidable, were not void."
It is here noticed, in order to avoid misconception of the extent of the ruling herein, that the claim of W. F. Neal and his lessee, the Shell Petroleum Corporation, under the deed from the insane person made before guardianship proceedings were begun, is not in any wise involved in this controversy or affected in any particular by the ruling herein. Such deed and such title thereunder as the grantees may have acquired does not arise under or out of the guardianship proceedings.
It is believed the trial court has correctly decided the case, and the judgment is accordingly affirmed.