Summary
In Newberry v. Walker, 162 S.C. 478, 161 S.E., 100, this Court held that a proceeding to sell does not divest the interests of unborn remaindermen unless such proceeding complies with the rules announced in Bofil v. Fisher; Gainesv. Sullivan, and Des Champs v. Mims, supra. That is to say, the sale must be made to preserve the trust and not to destroy it.
Summary of this case from Bettis v. Harrison et alOpinion
13265
November 3, 1931.
Before MANN, J., Dorchester. July, 1931 Reversed and remanded.
Controversy between John S. Newberry and Lawrence A. Walker, submitted without action on an agreed statement of facts. Judgment for plaintiff and defendant appeals.
The exceptions directed to be reported were as follows:
EXCEPTION IIn that his honor erred in holding and decreeing "that the title tendered by the plaintiff, John S. Newberry, to the defendant, Lawrence A. Walker, is a good and marketable title in fee-simple," and in ordering the said defendant to accept the title so tendered to him; the error being:
(a) That the said title is defective to the extent of an undivided one-half interest in the lot in question, whereof Alice White Smith died seized and possessed, as a tenant in common with Frederick P. Smith, which said one-half interest passed under her last will and testament, and to which said one-half interest the plaintiff has no title.
(b) That the said title is defective to the extent of the interest of any child or children (now unborn, but who may hereafter be born) of the said Annabell Huey Smith, in the said lot.
(c) That the proceedings in the case of Frederick P. Smith v. Maurice Kimpe, as Administrator with the Will Annexed of Alice White Smith, et al., did not bind any child or children (now unborn, but who may hereafter be born) of said Annabell Huey Smith, and any such child or children might hereafter assert title to, or claim their interest in, an undivided one-half interest in the said lot.
EXCEPTION IIIn that his Honor erred in holding as follows, to wit:
"However that may be, I prefer to rest my decision on other grounds rather than to distinguish Des Champs v. Mims, 148 S.C. 52, 145 S.E., 623, on legal grounds, or attempt to limit its full scope"; and again, "If what we have above said is correct, the rule in Des Champs v. Mims, would not apply to the facts in this case," thereby in effect holding that the case said of Des Champs v. Mims was not applicable to the case at bar; the error being that the case at bar is ruled by the said case of Des Champs v. Mims, and under the authority thereof the said case of Frederick P. Smith v. Maurice Kimpe, as Administrator, etc., et al., did not bind any child or children (now unborn, but who may hereafter be born) of the said Annabell Huey Smith, and any such child or children might hereafter assert title to, or claim their interest in, an undivided one-half interest in the said lot.
EXCEPTION IIIIn that his Honor erred in holding (with respect to the said case of Frederick P. Smith v. Maurice Kimpe, as Administrator, etc., et al.) that "the class to which the children not in esse belonged were before the Court and that they were sufficiently represented by the others in that same class to be bound by the decree"; the error being:
(a) That there was no person before the Court, in the said case, representing the class to which any child or children (then unborn, but who might be hereafter born) of Annabell Huey Smith belonged.
(b) That, in the said case of Des Champs v. Mims, it was held that the decree in a prior case, to which all possible persons in esse, in interest, were parties, but to which, of necessity, a then unborn person, in interest, was not a party, did not bind the said unborn person, in interest.
EXCEPTION IVIn that his Honor erred in holding that the facts in the said case of Frederick P. Smith v. Maurice Kimpe, etc., et al., established a "mistake of law," which warranted a reformation of the deeds, so as to give to the plaintiff in that case a full title, in fee simple, to all of the properties covered thereby; the error being:
(a) That the said facts showed "ignorance of the law," and presented no ground for the reformation of the said deeds.
(b) That the said facts showed such carelessness and negligence on the part of the said Frederick P. Smith in posting himself with respect to the legal effect of such deeds, when taking the same, as to preclude him from securing a reformation thereof for "mistake of law."
EXCEPTION VIn that his Honor erred in holding, in effect, that the legal title to the one-half interest in the properties, passing under the will of Alice White Smith, being in the said Frederick P. Smith, as trustee, inter alios, of the child or children (then unborn, but who might thereafter be born) of the said Annabell Huey Smith, which trustee was a party to the said case of Frederick P. Smith v. Maurice Kimpe, etc., et al., and there having been no appeal by him, as such trustee, in that case, from the decree rendered therein — under the principle of "res adjudicata," the trustee was bound thereby, and through him, the unborn child or children of the said Annabell Huey Smith; the error being:
(a) That the rights of such child or children were not bound in the said proceedings by the decree against the said trustee.
(b) That in the said case of Des Champs v. Mims the court held that the persons then holding the legal title, in fee, were parties to the case therein attacked, but the said proceedings were not binding on a then unborn person in interest.
EXCEPTION VIIn that his Honor erred in not holding that any child or children who might be born to Annabell Huey Smith would be entitled to their day in Court, in order to litigate their rights, on the facts and law then applicable thereto, unbound not only by the proceedings in the said case of Frederick P. Smith v. Maurice Kimpe, as Administrator, etc., et al., but by the evidence adduced in that case.
EXCEPTION VIIIn that his Honor erred in holding, in effect, that the right of the plaintiff in the said case of Frederick P. Smith v. Maurice Kimpe, as Administrator, etc., et al., to a reformation of the said deeds, for "mistake of law," was paramount to the right of the child or children (then unborn, but who might thereafter be born) of the said Annabell Huey Smith, to take under the said will, or that the right of the said child or children to take under the said will was subservient to the right of the said plaintiff to a reformation of the said deeds, and that for this reason such child or children were not necessary parties to the said case, and were bound by the decree therein; the error being that the said child or children would be entitled to their day in Court, in order to litigate their rights, on the facts and law then applicable thereto, unbound not only by the proceedings in the said case of Frederick P. Smith v. Maurice Kimpe, as Administrator, etc., et al., but by the evidence adduced in that case.
EXCEPTION VIIIIn that his Honor erred in holding that the testimony of Paul B. Moody, in the said case of Frederick P. Smith v. Maurice Kimpe, as Administrator, etc., et al., was competent; the error being that, by such testimony, the intention of the testatrix Alice White Smith, was established, whereas her testamentary intention could be determined only by the construction of her will.
EXCEPTION IXIn that his Honor erred in holding, in effect, that there was nothing in the record of the said case of Frederick P. Smith v. Maurice Kimpe, etc., et al., showing any unfairness or intention to take any advantage of the interest of the child or children (then unborn, but who might thereafter be born) of Annabell Huey Smith; the error being that the following facts are sufficient to cast discredit upon the said proceedings, or at least put it in the class of a friendly, or not seriously contested, suit, especially with respect to the duty of a Court of Equity to protect the interest in the property of persons then unborn.
(a) The suit was by Frederick P. Smith, individually, against inter alios himself as trustee, inter alios, of the said child or children (then unborn, but who might thereafter be born) of his infant daughter, Annabell Huey Smith, who was then about 9 years of age.
(b) Incompetent testimony of the plaintiff himself, not objected to.
(c) Incompetent testimony (or at least testimony of doubtful competency), of Paul B. Moody, not objected to.
(d) No testimony offered on behalf of any of the defendants.
(e) No attempted differentiation between the principles of "mistake of law," and `ignorance of law," or attempt to show such carelessness, or negligence, on the part of the plaintiff therein, in failing to post himself in regard to the legal effect of such deeds, as would prevent a recovery by him for "mistake of law,"
(f) No cross-examination of any of the witnesses, on behalf of any of the defendants.
(g) Though the interest of the said unborn children, in the properties involved, was of great value, no appeal was taken to the Supreme Court.
(h) Final result that a half interest in the said valuable properties was acquired by the plaintiff individually.
ADDITIONAL GROUNDSNotice was duly served by respondent upon appellant's attorney of intention to urge upon the Supreme Court to sustain the decree appealed from upon the following additional grounds, to wit:
Notwithstanding the will of Alice White Smith expressly declared "I do not anticipate that my estate will include any "real estate," the said will provided that "should there be any real estate, I direct that the same be sold and converted into personal property, and I give my executor and trustee full power to sell, mortgage and lease any part of my estate, real or personal, without obtaining the order of any Court"; thereby effecting an equitable conversion under the will, so that if Alice White Smith had any interest in the lands involved in this action, the interest of the devisees under her will in the same was converted into personal property and consequently there was no title in remainder or otherwise vested in the possible unborn children of Annabel Huey Smith; but their only interest under the will is to hold the executor and trustee, to wit, Frederick P. Smith, who under the will was required to give no bond, accountable for personal property, or its proceeds, which right they would continue to have in any event, without necessitating the divesting of the title of an innocent purchaser of the title to the real estate bought by the plaintiff, John S. Newberry.
Mr. Legare Walker, for appellant, cites: Disposition of the rights of unborn remaindermen: 148 S.C. 52; 3 Rich. Eq., 1; 149 S.C. 545. Proper parties: 22 S.C. 323; 78 S.C. 334; 40 S.C. 168; 50 S.C. 120; 63 S.C. 154; 78 S.C. 155; 66 S.C. 155; 76 S.C. 156; 79 S.C. 364. Duty of Guardian ad Litem: 159 S.C. 294. If will permitted executor to sell and dispose of proceeds it would be equitable conversion and beneficiaries would not take any interest in real estate: 7 Enc. Law (2nd Ed.), 463; 62 S.C. 482; 90 S.C. 146; 99 S.C. 151; 113 S.C. 227; 147 S.C. 259; 46 S.C. 230; 113 S.C. 227.
Messrs. Mitchell Horlbeck, for respondent, cite: Court can sell property and protect rights of contingent remaindermen: 3 Rich. Eq., 1; 149 S.C. 545; 147 S.E., 648. Proper parties: 53 C.J., 982, 1007, 1003, 1008; 77 S.W. 364; 239 Ill. App. 173; 132 U.S. 662; 22 S.C. 412. Purchaser for value will be protected as against voluntary grantee: 53 C.J., 982; 115 S.C. 67; 104 S.E., 330. Relief may be had for mistake of law: 53 C.J., 934; 20 S.C. 317; 67 S.C. 280; 44 S.C. 22. Mistake of foreign law is mistake of fact: 21 C.J., 95-98; 95 S.C. 479; 79 S.E., 639; 73 A.L.R., 1260; 77 S.C. 193; 130 S.C. 211. Declarations proving mistake admissible: 44 S.C. 22; 46 S.C. 230; 2 Rich. Law, 229; 6 Rich. Law, 1; 49 S.C. 169; 27 S.E., 16; 107 S.C. 57; 91 S.E., 978; 22 C.J., 282-284. When will effects conversion: 46 S.C. 230; 113 S.C. 227.
November 3, 1931. The opinion of the Court was delivered by
This is a "Controversy Submitted Without Action Upon an Agreed Statement of Facts," filed in the Court of Common Pleas for Dorchester County. It was heard by his Honor, Judge M.M. Mann, who passed a decree favorable to the plaintiff and decreed specific performance against the defendant. The defendant now appeals to this Court upon the exceptions set out in the record, which will be reported.
The main question involved is the marketability of the title to the lot which plaintiff agreed to convey by a good and marketable title, in fee-simple, to the defendant. The solution to this question depends upon the further question: Would any child or children (now unborn, but which may hereafter be born) of Annabell Huey Smith be entitled to claim a one-half interest in said lot under the will of Alice White Smith, or would they be precluded from asserting such claim, as being bound by the decree in a certain case instituted in the Court of Common Pleas for Dorchester County in 1927 by Frederick P. Smith against Maurice Kimpe, as administrator with the will annexed of Alice White Smith, deceased, et al., referred to in the decree of Judge Mann in the instant case? The facts necessary for an understanding of the questions presented, briefly stated, are these:
Frederick P. Smith and his wife, Alice White Smith, both of Detroit, in the State of Michigan, from March 26, 1925, to March 10, 1927, by six separate conveyances, acquired ten tracts of land, containing in the aggregate about 980 acres, situate in Dorchester County. All of these deeds were in the usual form of deeds to real estate, in common use in this State. The habendum clause in each deed read as follows: "To have and to hold, all and singular, the said premises before mentioned, unto the said Frederick P. Smith and Alice W. Smith, their heirs and assigns forever." These deeds were duly and legally recorded.
Of these lands, one tract containing 498.30 acres is near Summerville. The lot, the marketability of the title to which is involved in this action, is a part of this tract.
Alice White Smith (designated in said deeds as Alice W. Smith) died on June 29, 1927, leaving of force a will dated February 1, 1927, which was duly admitted to probate in the Probate Court for Oakland County, in the State of Michigan. Frederick P. Smith, who was named in the will as the executor and trustee thereof qualified thereon. Thereafter an exemplified record of the said will and the probate thereof were filed in the Probate Court for Dorchester County, in this State, and duly admitted to probate by that Court on the 10th day of October, 1927, and Maurice Kimpe, a resident of Dorchester County, was duly appointed administrator with the will annexed, and qualified as such.
After giving a legacy of $5,000.00 to one Nancy H. Burrowes, of Barrie, Ontario, the testatrix, Alice White Smith, made the following provisions:
"Third: All the rest, residue and remainder of my property and estate, real and personal of every character whatsoever and wherever situated, I give, devise and bequeath to my trustee hereinafter named, in trust, however for the following uses and purposes:
"(a) Said Trustee is directed to take possession and full control and management of said estate, collect the rents and profits thereof, protect and serve, manage, control, improve, sell, convey, mortgage, pledge, lease, invest and reinvest the same and the proceeds thereof in accordance with the best judgment and discretion of said Trustee as fully as I could do it myself.
"(b) From the net income of said Estate there shall be paid to my sister, Maude H. Farmer, of Birmingham, Michigan, the sum of One Hundred Dollars ($100.00), per month from and after the date of my death, so long as she shall live.
"(c) All the remainder of the net income from my Estate (and after the death of my said sister, the entire net amount) shall be paid to my husband, Frederick P. Smith during his lifetime in convenient installments from time to time.
"(d) After the death of my husband, the net income from my Estate not required to meet the payments to my sister as hereinbefore mentioned, shall be disposed of as directed in this paragraph. Out of such income there shall be paid for the benefit of my daughter, Annabell Huey Smith for her support, maintenance and education, during her minority, such sums, at such times and in such manner as my Trustee may find most judicious. Any part of the income not required for such purposes shall be added to the principal during her minority. After my said daughter, Annabell Huey Smith, shall have reached the age of 21 years, such net income shall be paid to her in monthly or other convenient installments from time to time. If in the judgment of my Trustee it becomes necessary because of illness, misfortune, emergency or other unforeseen circumstances or condition affecting my said daughter, my Trustee is authorized to use such portion of the principal of the trust of her benefit, either during or after her minority as in the discretion of my Trustee appears necessary to meet such condition; any such expenditure from principal to be later replaced out of the income if practicable.
"(e) Should my said daughter, Annabell Huey Smith, not survive my husband, then the trust property remaining in the hands of my Trustee, upon the death of my husband shall be paid and delivered to her lawful issue, if any survive; and if there be no such issue, then the same shall be paid and delivered to the Children's Aid Society, a Michigan corporation, of Detroit, Michigan, provided, however, that sufficient of the trust property shall be retained in the hands of my Trustee to provide for the continuance of payments to my sister, Maude H. Farmer, during her lifetime. Upon the death of my said daughter, Annabell Huey Smith, at any time after the death of my husband, the trust property remaining in the hands of my Trustee shall be disposed of in the same manner as in the case of her death prior to the death of my husband.
"Fourth: I do not anticipate that my estate will include any real estate, but should there be any real estate, I direct that the same be sold and converted into personal property, and I give to my executor and trustee full power to sell, mortgage and lease any part of my Estate, real or personal, without obtaining the order of any Court."
In November, 1927, the said Frederick P. Smith instituted an action in the Court of Common Pleas for Dorchester County, S.C. against Maurice Kimpe, as administrator with the will annexed of Alice White Smith, deceased, Frederick P. Smith, as executor and trustee of the will of Alice White Smith, deceased, Maude H. Farmer, Annabell Huey Smith, and Children's Aid Society. In this action Frederick P. Smith alleged that at various times between March 1, 1925, and February 16, 1927, he had purchased the said ten tracts of land at his own expense and cost, and paid the purchase price thereof from his own individual funds, and spent considerable further of his own funds in improving the site with a clubhouse, golf courses, and other improvements; that in the State of Michigan (the home of himself and his wife, Alice White Smith) the common-law estate by the entirety still existed, and that he and his wife were familiar with said estate; that it was their intention to take title deeds to the South Carolina lands by the entirety, as they did not know that such an estate did not exist in this State; that thus by mutual mistake of law and of fact they had taken the deeds to the lands in South Carolina with the intention and under the belief that they were taking an estate therein by the entirety and not as tenants in common. A reformation of the deeds was prayed for, in order to effectuate the alleged intention of Frederick P. Smith and his wife, so that the full title in fee simple would vest in him.
All persons in interest, in esse, were before the Court in the action of Frederick P. Smith v. Maurice Kimpe, as Administrator, with the will annexed of Alice White Smith et al., but of necessity the child or children (the unborn, but who might hereafter be born) of Annabell Huey Smith, a minor, were not parties and not before the Court. That case resulted in a decree of his Honor, Judge Mann, granting the relief prayed for; the deeds were reformed; and full title to the lands was decreed to be vested in fee simple in Frederick P. Smith, and certificates to that effect were indorsed on the records of the deeds. From that decree no appeal was taken.
On May 8, 1931, Frederick P. Smith executed a deed to John S. Newberry, purporting to convey to him, in fee simple, all the South Carolina lands, except a small part not involved in this case.
On May 21, 1931, Newberry, plaintiff-respondent, and Lawrence A. Walker, defendant-appellant, in the case at bar, entered into a contract of purchase and sale, wherein the former agreed to sell and convey to the latter, by good and marketable title, in fee simple, and the latter agreed to purchase, the lot in question, which, as before stated, is a part of the lands covered by one of the deeds to Frederick P. Smith and Alice White Smith.
On June 4, 1931, Newberry tendered to Walker a deed to the lot, regular in form, purporting on its face to convey the same in fee simple, which deed was refused by Walker, on the ground that Frederick P. Smith had only a one-half undivided interest in the lot, and therefore had conveyed only his one-half interest to John S. Newberry, and for that reason the title was not marketable.
Since there was no appeal from the decree of the Circuit Court in the case of Frederick P. Smith v. Maurice Kimpe, as administrator with the will annexed of Alice White Smith, deceased, and others, that decree which adjudicated that the deeds should be reformed so as to vest the fee-simple title to all of the real estate which had been conveyed to Frederick P. Smith and Alice W. Smith, in Frederick P. Smith alone became res adjudicata binding upon all who were parties to that proceeding, regardless of its correctness or incorrectness; but such adjudication distinctly adverse to the interests of the unborn children of Annabell Huey Smith cannot be binding upon them.
It is perfectly clear that at the time of the death of Mrs. Smith she possessed title to an undivided one-half interest in the land, as a tenant in common with her husband; having made no conveyance of that interest in her lifetime, it passed, not to her heirs or devisees, but to the trustee named in her will, to be converted into cash and disposed of as directed in the will.
If the husband had brought action against Mrs. Smith in her lifetime, demanding a reformation of the deed as he did in the Kimpe case, and a decree had been passed as was done in the Kimpe case, there would have been no doubt that Mrs. Smith would have been bound by the decree as res adjudicata.
But he did not bring such action until after the death of Mrs. Smith, and, if the land had been so devised as to give the unborn children of Annabell Huey Smith a contingent remainder, their interests could not have been divested except according to the rule in Bofil v. Fisher, 3 Rich. Eq. (24 S.C. Eq.), 1, 55 Am. Dec., 627. See, also, Gaines v. Sullivan, 117 S.C. 475, 109 S.E., 276; Des Champs v. Mims, 148 S.C. 52, 145 S.E., 623.
But again this contingency did not occur; Mrs. Smith having died owning the half interest undisposed of, it falls under the provisions of clause 4 of the will, which directs its conversion into money, making it a part of her personal property, to be disposed of by the trustee as provided in the first three clauses.
The unborn children of the daughter, therefore, can never be held to have acquired any legal title to the lands; they may upon birth be held to have acquired an equitable interest in the trust estate. This feature distinguishes the present case from the Des Champs case, supra.
We think that, so far as the unborn children are or may be concerned, the Kimpe proceeding is a nullity; and that the title tendered by Newberry to Walker necessarily leaves open the interests of the unborn children of the daughter who may hereafter come in to assert that the half interest of Mrs. Smith, existing at the time of her death, be sold and that the proceeds become a part of the trust estate.
Without doubt, Frederick P. Smith has conveyed his interest in the lands in question to Newberry. He did not convey the trust estate therein to Newberry. As trustee, he yet may convey that interest, for valuable consideration, to Newberry, and thereby cure the defect in the title.
The judgment of this Court is that the judgment of the Circuit Court be reversed, and the cause be remanded to that Court for such other proceedings as the parties may be advised.
MESSRS. JUSTICES COTHRAN, STABLER, CARTER and BONHAM concur.