National Metal Edge Box Co. v. Vanderveer , 85 Vt. 488 ( 1912 )

Rowell, C. J.

This is a petition in chancery to foreclose a mortgage given to the petitioner by the defendant Jean J. Vandeveer and his wife the 15th of January, 1909, at which time he was insane and had been from and including July 16, 1908, and could not understand the nature and quality of his acts so as to comprehend the results that might flow from them. But he had not been adjudged insane, and was not till about a year and a half afterwards, when he was so adjudged and his wife appointed his guardian, and she is defending as such and as a signer of the mortgage, which was given to secure the money the petitioner paid at the special instance and request of Vanderveer to take up a mortgage on the same premises, given by Vanderveer the 16th of July, 1908, to secure a part of the purchase price of the premises, and which he was being pressed to pay.

The petitioner did not know, and the case shows nothing to charge it with knowing, that Vanderveer was insane when he gave it the note and mortgage, but on the contrary it is found by the master that the giving of them to the petitioner was a sane act, and a proper and prudent proceeding to take up the former mortgage, and was such a transaction as any man of sound judgment would be expected to do, and was necessary, to protect his interest in the property.

Such being the case, the decree of foreclosure appealed from is right, for when, as here, no inquisition nor adjudication of lunacy precedes the transaction, courts of equity do not, as a general rule, set aside the contracts of lunatics that have been executed, if made in the ordinary course of business, on sufficient consideration, of which the lunatic had the benefit, and are fair and reasonable in the particular case, and the parties cannot be placed in their former state, — unless the mental condition of the lunatic was known to the other party, or he is chargeable with knowing it. This is undoubtedly the rule in England, and the prevailing rule in this country, we think; and we are committed to it in this State, and have been for more than fifty years, as shown by Lincoln v. Buckmaster, 32 Vt. 652, decided in 1860, in which the rule above stated was discussed,, approved, and acted upon, though the contract was set aside-because of the foolhardiness and folly of the other party in leading the lunatic into such a contract as he did, from which the lunatic derived no benefit.

The Mutual Life Ins. Co. v. Hunt, 79 N. Y. 541, was for the foreclosure of a bond and a mortgage. The case was tried below on the assumption that when the mortgagor executed the papers she was of unsound mind and not capable of executing, them; yet it was there held that as the case presented a contract, executed on a valuable consideration of which the lunatic had the benefit, made by the plaintiff in good faith, without fraud’ or unfairness, without knowledge of the insanity, and without notice or information calling for inquiry, — the plaintiff was entitled to recover. That holding was sustained by the Court of Appeals, both on principle and authority. On principle, because the plaintiff’s money was had by the defendant, appropriated to her use, and thus tended to increase the body of her estate, and though in some cases a man may now, notwithstanding the old common law maxim to the contrary, be admitted to stultify himself, yet he cannot do so to the prejudice of others, for he would thus make his own misfortune an excuse for fraud, against which the doctrine of that maxim stands unaffected. On authority, the court refers to Molton v. Camroux, 2 Exch. 486, affirmed in error, 4 Exch. 17, as very much in point and similar in circumstances. There a lunatic bought annuities for his own life of a society that had no knowledge of his lunacy, the transaction being in the ordinary course of the affairs of human life, and fair and bona fide on the part of the society. Chief Baron Pollock said that while they were not disposed to lay down so general a proposition as that all executed contracts. bona fide entered into must be taken as valid though one of the parties be of unsound mind, yet they thought they might safely conclude that when a person, apparently of sound mind, and not known to be otherwise, enters into a contract for the purchase of property that is fair and bona fide, and which is executed and completed, and the property, the subject-matter of the contract, has been paid for and fully enjoyed, and cannot be restored so as to put the parties in statu quo, the contract cannot. afterwards be set aside by the lunatic nor those who represented him. In Elliot v. Ince, 7 DeG. M. & G. 487, the Lord Chancellor referred to Molton v. Camroux as very sound in principle, namely, that an executed contract, when the parties have been dealing fairly and in ignorance of the lunacy, should not afterwards be set aside; and said that it was a decision of necessity, and that a contrary doctrine would render all ordinary dealings between man and man unsafe; and went on to say that the result of the authorities seemed to be, that dealings of sale and purchase by a person apparently sane, though subsequently found to be insane, will not be set aside against those who have dealt with him on the faith of his being of competent understanding. And the New York Court of Appeals, in the case above referred to, after quoting what the Lord Chancellor said of the soundness of Molton v. Camroux, goes on to say that so it has been held, and like contracts enforced upon the same principle, in repeated instances in that and other states, citing cases from different jurisdictions, and saying that they stand on the maxim that he who seeks equity must do equity, which was applicable to the case then in hand, for the defendant sought to deprive the plaintiff of its remedies to enforce the security while she retained the benefit of the contract, which, it said, was so plainly inequitable and unjust as to render further discussion unnecessary.

Flach v. Gottschalk Co. 88 Md. 368, 71 Am. St. Rep. 418, 41 Atl. 908, 42 L. R. A. 745, is a well considered case on this subject, and says that the principle that holds the lunatic liable in cases of this kind has long been acted upon in equity, and that such contracts are enforced against the lunatic, not so much because they possess the legal essential of consent, as . because by means of an apparent contract he has gained an advantage or a benefit that cannot be restored, and that therefore it would be inequitable to permit him, or those in privity with him, to repudiate it.

But there are cases holding the other way, and among them, and as strong as any, perhaps, is Gibson v. Soper, 6 Gray, 279, 66 Am. Dec. 414, which is much relied upon by the defendants. But we cannot adopt the view taken in those cases, for, as we have said, we are committed to the other view, which we think the more just and equitable view. Moreover, our best text-writers adopt that view. Thus, Judge Story says that fraud is the ground on which courts of equity now set aside the-contracts of lunatics. That those courts deal with the subject on the most enlightened principles, and watch with jealous, care every attempt to bargain with them; and that when, from, the nature of the transaction, there is not evidence of entire-good faith, or the contract is not seen to be just in itself, or not ■ for the benefit of the lunatic, — they will set it aside or make it subservient to his just rights and interests. But that when the contract is made in good faith, without knowledge of the incapacity, with no advantage taken of the lunatic, and is forhis benefit, and the parties cannot be placed in statu quo, — the contract will not be set aside. 1 Story’s Eq., Redf. Ed. §§227,. 228. So Mr. Pomeroy says that when a contract is made in ignorance of the insanity, with no advantage taken, and in perfect good faith, a court of equity will not set it aside if the parties-, cannot be restored to their original position and injustice would be done. 2 Pom. Eq. §946.

It is unnecessary to consider the subject further, and the result we have reached precludes the idea of intervention by the-minor daughter as a creditor.

Decree affirmed and cause remanded. Let a new time offi redemption be fixed.