Wilson v. McKleroy , 206 Ala. 342 ( 1921 )

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] [EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] This is a suit for $5,600 by W. C. Wilson against Susan N. McKleroy on a contract, or for alleged breach of contract; and also for damages for an alleged fraud practiced by defendant on him.

There were four counts in the complaint. The court sustained demurrers to each. The plaintiff amended counts 1 and 2. Demurrers were sustained to them. Plaintiff took a nonsuit on account of the adverse rulings to him by the court on the pleadings — appeals as the law allows — and these rulings are assigned as error. Section 3017, Code 1907; Berlin Mach. Wks. v. Ewart Co., 184 Ala. 272, 63 So. 567.

Counts 1, 2, and 3 as originally filed and counts 1 and 2 as amended involve a contract — it is in writing and made a part of each. Its validity is assailed by the demurrers. The amount sued for, or damages claimed, grow out of it.

The contract in its body appears to be made by Susan N. McKleroy, individually and as guardian of William H. McKleroy, Jr., with W. C. Wilson, the plaintiff. It is signed by Susan N. McKleroy as guardian of William H. McKleroy, Jr., and W. C. Wilson.

Susan N. McKleroy individually did not sign it. William H. McKleroy, Sr., died leaving a will. He gave and devised to his son, said William H. McKleroy, Jr., his homestead in Anniston, Ala., consisting of ten lots and the residence thereon, and "who I hereby direct to permit his mother to use and occupy said homestead as her residence during her lifetime should she so desire." The mother is the defendant. She is the guardian of the minor. The defendant as guardian of William H. McKleroy, Jr., agreed by the written contract to sell or cause to be sold the homestead to W. C. Wilson, the plaintiff, for the sum of $22,500, and "if at the sale of said property at public outcry there should be a higher bid than $22,500, then she will pay to the plantiff the amount of said bid in excess of said $22,500, before the confirmation of the sale by the court."

The counts aver that said homestead was sold by order of the chancery court at public outcry; that plaintiff bid at the sale $22,500; that there were other bids, and that plaintiff finally purchased it at highest bid, $28,100; the sale to him for said sum was confirmed by the court, and under the contract defendant owes the plaintiff the sum of $5,600, which she refuses to pay. Count 3, after alleging foregoing facts, also avers in substance that the defendant conspired with sundry irresponsible persons without means, who could not have complied with the contract of purchase had they secured said property, to defraud this plaintiff by artificially "puffing" or bidding up the price of said property at said sale, who, in furtherance of such conspiracy, did appear at said sale and bid thereon the sum of $28,000, after plaintiff had bid $22,500 for the property; that "said persons were known to defendant, but unknown to plaintiff, to be irresponsible and unable and had no intention to comply with said bid," and by the "said fraudulent conduct on the part of this defendant, this plaintiff was compelled and did bid in order to obtain said property the sum of $28,100."

The legal title to land of a minor is not in his guardian, but in the ward. It cannot be sold by the guardian except by an order of a court. The court is the vendor. No title passes from the minor until the sale is confirmed by the court. The duty of the court is to secure the best price, full value of the property, for the interested party or parties. Montgomery v. Perryman, 147 Ala. 207, 41 So. 838, 119 Am. St. Rep. 61; Roy v. Roy. 159 Ala. 555, 48 So. 793.

The guardian of a minor has no right to sell privately her ward's real estate. Any contract made by the guardian to sell the ward's estate is illegal; especially so, and against public policy, when she agrees in the contract that the purchaser can have all in excess of a certain amount that it may bring, when sold at public outcry by order of the court.

When a necessity exists to sell the real estate of a ward for maintenance, division, to pay debts or reinvestment, the order may be obtained from a court of competent jurisdiction, there must be a public sale, the sale reported to the court, the report confirmed, the purchase money paid, and deed directed to be made by the court to the purchaser. In this way a valid title to real estate of a ward may pass to the purchaser. Sections 4411, 4409, 4426, Code 1907; Am. Eng. Enc. of Law, vol. 15, p. 57; Le Roy v. Jacobosky, 136 N.C. 443, 48 S.E. 796, 67 L.R.A. 982.

These counts in the complaint show that the homestead belonged to the ward, with directions to him to permit his mother, the guardian, to use and occupy it as her residence during her life, if she so desired. The counts show that the contract was signed by defendant as guardian and not individually. The counts show that the plaintiff knew there would have to be a sale of the property at public outcry, an order of court for the sale, and a confirmation of the sale by the court. The contract shows these were matters in contemplation of the parties when executed. It refers to sale at public outcry, highest bidder, and confirmation of sale by the court. The plaintiff and defendant knew in law, if not in fact, when the contract was executed, that the homestead could be sold legally only by order of a court of competent jurisdiction, after proper application by proper parties and proof made, at public outcry, and to the highest bidder. This being true, the plaintiff could not successfully maintain suit against the defendant personally on a void and illegal contract, known to him in law to be void and illegal, when executed by him and defendant as guardian and not as an individual; and this is true even though the defendant personally had some right to use the property or had a license in it.

When both parties, acting under a mistake of law, make a contract which the law forbids, then the principals are not liable thereunder, nor personally the guardian of a minor, who as guardian was one of the parties to it. It is a mistake of law, known in law, yet probably unknown in fact, to the parties to the contract at the time of its execution.

Counts 1, 2, and 3, and counts 1 and 2 as amended, set up the contract, make it part of each count, and the agreement in it or its breach is the gravamen of each. Count 3 is different from the others, yet is defective. It relies on the illegal contract and also alleged fraud by artificial bidding caused by defendant. It fails to aver that those bidding forced him to pay or bid more than reasonable market value of the property. The contract referred to and made part of the count, on which he bases his right to recover, has the following clause therein:

"And that if at the sale of said property at public outcry there should be a higher bid than twenty-two thousand five hundred ($22,500.00) dollars, then she will pay to the said party of second part [plaintiff] the amount of said bid in excess of said sum of twenty-two thousand five hundred ($22,500.00), such payment to be made by her on or before the confirmation of the sale."

This count alleges that plaintiff bid $28,100 — forced to do so by artificial bids. If injured and relying on the contract, he had a right to demand the $5,600, the "excess bid" under it, "before confirmation of sale"; and if she did not pay it before the sale was confirmed as agreed, then he could have under the very averments of the count protected himself from the fraud, if any, by refusing to pay the $28,100, or reporting the contract and facts to the court and have the sale set aside.

The demurrers to counts 1, 2, 3, and 1 and 2 as amended were properly sustained. Le Roy v. Jacobosky, 136 N.C. 443,48 S.E. 796, 67 L.R.A. 982; Schloss Kahn v. McIntyre, 147 Ala. 557,41 So. 11.

Count 4 is different from all of the other counts. It does not refer to the contract. It avers that defendant caused certain real estate to be sold at public outcry under a decree of the chancery court of Calhoun county, "that defendant knew plaintiff would bid at said sale the sum of $22,500, and such sum in addition thereto as was necessary to purchase said property," and knowing such facts defendant conspired with sundry irresponsible persons, without means, who could not comply with a contract of purchase, had they secured the property, to defraud this plaintiff by artificial "puffing" or bidding up the price of said property, and in furtherance of said conspiracy did offer and bid at said sale $28,000 after plaintiff had bid $22,500 for the property, all of which facts were known to defendant and unknown to plaintiff, and plaintiff was compelled and did bid in order to obtain said property the sum of $28,100, "whereby defendant was defrauded of the difference between the then reasonable market value of said property, to wit, $22,500, and the amount bid at said sale, to wit, $28,100."

It is a fraud on bona fide bidders at a public sale for a vendor or his agent to employ or have puffers or by-bidders — to artificially inflate the price. The person, principal or agent, vendor or his agent, employing or securing the puffers or by-bidders or sham bidders, is guilty of a fraud, and, if any damage is done thereby, the law gives the party defrauded a right of action. Section 2468, Code 1907; 18 Cyc. 774; 24 Cyc. 28; Wall v. Graham, 192 Ala. 396, 68 So. 298.

The defects in this count (No. 4) are: (1) Failing to aver facts showing a necessity for plaintiff "to bid at said sale $22,500, and such sum in addition thereto as was necessary to purchase said property," and that defendant knew such facts before the sale; and (2) in averring "defendant" instead of "plaintiff" was defrauded of the difference between the then reasonable market value of said property, to wit, $22,500, and the amount bid at said sale, to wit, $28,100. This last error is unintentional, no doubt, yet it avers "defendant was defrauded," and not plaintiff. It must aver plaintiff was injured by the fraud of the defendant. These questions were raised by demurrers and there was no error in sustaining them. Wall v. Graham, 192 Ala. 396, 68 So. 298; section 2468, Code 1907.

Affirmed.

ANDERSON, C. J., and SAYRE and GARDNER, JJ., concur.

On Rehearing.