Christian v. Waialua Agricultural Co.

For earlier history of this case see Christian v. WaialuaAgricultural Co., 31 Haw. 817-912.

Subsequent to the order of this court remanding the case to the circuit judge for further proceedings, application was made by the petitioner before the circuit judge for leave to amend the petition by adding allegations to the effect that at the time when Eliza Christian executed the lease of March 17, 1905, and the instrument of August 31, 1906, she was mentally incompetent to execute those instruments, received no consideration for either of them and was not in any way benefited by their execution; and that both instruments were wholly void and should be set aside. Objections to the allowance of these amendments were presented by the respondent, the Waialua Agricultural Company, Limited, hereinafter referred to as the W.A. Co., and were overruled. The W.A. Co. (it was the only one of the respondents which offered any resistance to the granting of the prayer of the petition) demurred to the petition as amended and subsequently filed an answer in which it claimed in effect that neither on March 17, 1905, nor on August 31, 1906, was Eliza mentally incompetent to execute those instruments, that she received adequate consideration for each of them, that they were beneficial to her and in her interest and that they ought not to be canceled. Subsequently the W.A. Co., offered to produce evidence tending to show that on March 17, 1905, on August 31, 1906, and on May 2, 1910, the latter being the date of the deed which by former order of this court was to be canceled, Eliza was mentally competent to execute each such instrument. In various ways it made this offer and there can be no doubt that it presented to the lower court and preserved for the consideration of this court the question whether it was entitled to produce further evidence on the subject of the mental competency of Eliza to execute each of the three instruments referred to.

In so far as the deed of May 2, 1910, is concerned, it is clear that no error was committed by the trial judge, in these proceedings on remand, in refusing to admit further testimony or other evidence on the subject of Eliza's mental competency on the date of the execution of that deed. At the original trial about 116 witnesses testified, pro and con, on this issue. At that time both parties had their day in court on that subject and made very extensive use of the opportunity thus afforded them for presenting evidence in support of their respective claims. That evidence received very careful consideration at the hands of this court on the first appeal and a finding was then made with reference to the mental condition of Eliza, to-wit, that she was a congenital imbecile. There must be an end to litigation. The respondent, as well as the petitioner, had ample opportunity to procure and present its evidence of mental competency with reference to the execution of the deed of May 2, 1910, and no reason, either of law or of justice, occurs to us why a second opportunity, with reference to that deed, should be given to the respondent. The finding that on May 2, 1910, Eliza was a congenital imbecile and incompetent to execute the deed of that day is reaffirmed.

The question of the admissibility of the testimony of mental competency, when considered with reference to the lease of 1905, and to the instrument of 1906, did not stand upon precisely the same state of facts. If there was error in the exclusion of the offered testimony in so far as it related to Eliza's mental condition on March 17, 1905, and on August 31, 1906, it was not the error of the trial judge. He construed correctly the order of remand made by this court. It was our understanding and intention in making that order that the finding of mental incompetency, of congenital imbecility, was not to be reopened or disturbed by the circuit judge upon the proceedings on remand even when considering whether those two earlier instruments or either of them should be canceled. If there was error, it was the error of this court in thus restricting the issues for the trial on remand. We think that we did err in that respect. As expressly held in the former opinion, neither the lease of 1905 nor the instrument of 1906 was a subject of contention between the parties at the original trial. It is true that there was an allegation in the petition that on March 17, 1905, Eliza was mentally incompetent to execute the lease of that day but that was followed by an express statement that "relief in equity against said lease need not be and cannot be herein prayed for, respondent's sole claim of right to the said lands being now based upon the said deed of May 2, 1910," and in its answer the respondent expressly accepted that statement as correct, that relief in equity against the lease could not be prayed for or had. It cannot correctly be said that the lease of 1905 was in issue at the original trial when both parties expressly represented to the court and to each other in their pleadings that that lease was not in issue. The prayer was for the cancellation of the deed of May 2, 1910. There was no prayer for the cancellation of either the lease or the instrument of 1906. When therefore, under these circumstances, the petitioner was permitted by amendment to put the two earlier instruments in issue, it followed as a correlative and necessary right on the part of the respondent that it should be permitted not only to file an answer with respect to the new allegations but also to defend with evidence against the new prayer for the cancellation of the two instruments and the new charge that Eliza was mentally incompetent at their respective dates to execute them. It is true that a very large number of witnesses, as above stated, had already testified on the subject of Eliza's condition of mind but her condition on March 17, 1905, and on August 31, 1906, not being among the ultimate things involved the respondent might well have been led not to make any search for evidence relating to her condition on those two particular dates. The respondent's offer was not only to introduce evidence of Eliza's mental condition on the two earlier dates but it was also to present the testimony of one or more experts to the effect that the degeneracy in congenital imbecility grows with the lapse of time. In other words, the offer was to prove that Eliza's mental condition in 1905 and 1906 was not as weak or insufficient as it was in 1910, even assuming that she was incompetent in 1910. There may be, on the part of the members of the court who examined the evidence on the original trial, a temptation to believe that in spite of any new evidence to be adduced their conclusion concerning the degree of Eliza's imbecility would not be affected thereby. Nevertheless the court should not venture any such surmise. The evidence was offered and in our opinion the respondent should have been given an opportunity to present it, — with reference only to its effect on the lease of 1905 and the instrument of 1906.

For other reasons, however, which are about to be stated, this error in the exclusion of evidence was not prejudicial to the respondent. It may be assumed for the purpose of this phase of the case that on March 17, 1905, and on August 31, 1906, Eliza was an imbecile and mentally incompetent to execute either of those instruments. In our former opinion it was held, after careful consideration, that the better view of the law is that the deed or contract of a mentally incompetent person, who has not been judicially declared insane and whose incompetency is unknown to the other party to the transaction, is not absolutely void but is voidable only and that "in determining whether it should be canceled the nature of the transaction in all its aspects and the good or bad faith of those dealing with the grantor in respect to such transaction should be carefully considered" (31 Haw. 888). In other words, a deed, lease or other instrument of one mentally incompetent is not to be canceled solely because the person was incompetent but in determining whether it should be canceled all of the equities must be considered, including those in favor of the grantee or lessee as well as those in favor of the grantor or lessor. In the case at bar, as already held, while Eliza was an imbecile and mentally incompetent the W.A. Co. had no knowledge of that incompetency at the time that it dealt with her in 1910. The same must necessarily be true as of 1905 and 1906. Eliza had not been judicially declared incompetent. What are the other surrounding circumstances affecting the lease? Eliza was not the only lessor. Other lessors were Carlos A. Long, as administrator of the estate of R.W. Holt, Robert L. Colburn, George H. Holt, Edward S. Holt, Helen A. Holt, individually and as guardian of her minor children, Elizabeth K. Richardson and the Hawaiian Realty Maturity Company, a corporation, acting by its president and its secretary. Still other parties (of the third part) were John F. Colburn and James Lawrence Holt. All of these other parties to the lease, except the children of Helen Holt, were of age and in every way competent to transact their own business affairs and to enter into this contract. The negotiations for the lease were instituted by John F. Colburn, a business man who had some interest in the matter in the capacity of a trustee, by Carlos A. Long, who was an attorney at law, and by C.W. Ashford, also an attorney, who served for some years as one of the judges of the circuit court of the first circuit. Mr. Ashford acted in the matter as attorney for John F. Colburn and perhaps others of the parties lessor. In the evidence there is to be found no reflection whatever upon the mental capacity, the integrity or the business ability of any of the parties lessor other than Eliza. The assumption must be that they were all competent and faithful as well, at least, as ordinarily keen business men. The lease was for a term of twenty-five years from April 1, 1905, and the total rent was at the rate of $9,000 per annum for all twenty-seven twenty-sevenths undivided interests in the lands that were being demised (the W.A. Co. at that time owned a small undivided interest in the lands). The precise terms which were incorporated in the lease were largely if not wholly of the seeking of those who negotiated on behalf of the lessors. They were satisfactory to every one of the competent lessors. Not a word of evidence has been introduced in this case tending to show that the terms secured by the lessors were not the most favorable that could have been secured in 1905. Apparently the W.A. Co. was the only entity that at that time was in a position to make profitable use of the property. The land at that time was wholly uncultivated and covered with noxious weeds, including such well-known pests as lantana and klu. The taxes at that time were four years in arrears. The Holt estate was not in a position to pay them. The lessee undertook to pay the taxes as well as the remainder of the prescribed rent. The consideration that the W.A. Co. undertook to pay for the use of the lands under the lease was adequate. At the date of the lease Eliza's interest was purely contingent but it was within the possibilities that it would become vested shortly after the execution of the lease and for that reason it was important to the lessee to secure that interest, such as it was, as well as the other more definite vested interests. If her interest had vested soon after the date of the lease, Eliza had no funds with which to pay the accruing taxes. She, as well as other lessors, were in some danger of losing their title and interests through enforcement of the government's claim for taxes, past and future. We think that Eliza's joinder in the lease was wise and beneficial. It enabled her to secure support and maintenance for herself, as will more clearly appear when the instrument of 1906 is under consideration. If, in February or March of 1905, Eliza (by guardian) had by proper petition applied to a court of equity for leave to join in the lease it seems to us that the court of equity so applied to, upon a showing of all of the surrounding circumstances as they existed and as they have been hereinabove recited, would readily have granted the application; and if this is so how can a court now, after the fact, after the lapse of the full period of the lease, after the performance by the lessee of all of the requirements of the lease on its part to be performed, with any propriety cancel the lease? To do so would be to hold in effect that there is no such thing as refusing to cancel an instrument which has been executed by a person mentally incompetent. This lease was for an adequate consideration. All of its terms were fair and reasonable to the lessee and to the lessors. It has been fully performed. It was in the best interests of Eliza and beneficial to her, — fully as beneficial as it could have been if it had been secured and entered into under the careful supervision of a court of equity. There was no fraud, actual or constructive. The imbecility of the lessor did not enter into the transaction. Under these circumstances we can see no equity or justice in canceling the lease.

The only reason which can be suggested as an equity in aid of canceling the lease and the instrument of 1906 is that by doing so Eliza will now be enabled to collect as rents very much larger sums than she was entitled to under the lease. This is not a good reason nor does it constitute an equity, properly so called, in her behalf. At the time of the execution of the lease and even later, at the date of the instrument of August 31, 1906, it was not known to any of the parties or to any one else that pineapples could be successfully or profitably grown on the upper lands of the Holt estate. It was not until about fifteen years later that the W.A. Co. was able to lease the upper lands for pineapple purposes at large rentals. If Eliza had been a perfectly sane lessor and had come forward in 1928, or in 1923, with a request to set aside her lease because the lands thereby demised were of very much greater rental value than that specified in the lease, the courts would have said, in effect, "You must stand by your contract even though it has proven more profitable to the lessee than you and it supposed in 1905." Courts should not now enable her to do that which she could not have done lawfully if she had been sane. It is not an equity in her favor that she leased the land for less than its rental value of fifteen or more years later. She leased it in 1905 for all that it was then worth on the market. It would be inequitable to the lessee to permit a lessor, sane or insane, subsequently to cancel a lease on the ground of greater values subsequently developed, acquired and ascertained.

It is our view of the law that a lease made by an incompetent, who has not been judicially declared insane, to a lessee without knowledge of the incompetency, for an adequate rental and upon other terms that are reasonable and fair, which is beneficial to the incompetent and is in effect a provision in favor of the incompetent for necessaries for his sustenance and comfort, — a lease which has been fully performed and is accompanied by no fraud or other circumstances of inequity to the incompetent, — should not be canceled, — even though the lessee can be restored to the status quo ante.

"Where indeed a contract is entered into with good faith and is for the benefit of such persons, such as for necessaries, there courts of equity will uphold it as well as courts of law." 1 Story's Eq. Jur. (14ed.) § 318. This, interalia, was quoted with approval in our former opinion (31 Haw. 885) . We do not understand this statement of Story's to be in any way qualified by the next succeeding sentence: "And so if a purchase is made in good faith without any knowledge of the incapacity, and no advantage has been taken of the party, courts of equity will not interfere to set aside the contract if injustice will thereby be done to the other side, and the parties cannot be placed in statu quo, or in the state in which they were before the purchase." The introductory "and" indicates that the succeeding sentence is not a repetition of what was said in the sentence first here quoted but deals with a somewhat different state of facts. It is to be noted that in the second sentence no reference is made to the element of "benefit" to the incompetent or of the contract being "for necessaries;" and the second sentence adds the element of necessity of restoration to thestatus quo when it does not appear that the contract was for the benefit of the incompetent, as for necessaries.

Judge Story (14 ed., § 317), also quoted in 31 Haw. 885, further says: "The ground upon which courts of equity now interfere to set aside the contracts and other acts, however solemn, of persons who are idiots, lunatics, and otherwise non compotes mentis, is fraud. Such persons being incapable in point of capacity to enter into any valid contract or to do any valid act, every person dealing with them, knowing their incapacity, is deemed to perpetrate a meditated fraud upon them and their rights. And surely if there be a single case in which all the ingredients proper to constitute a genuine fraud are to be found it must be a case where these unfortunate persons are the victims of the cunning, the avarice, and corrupt influence of those who would make inhuman profit from their calamities. Even courts of law now lend an indulgent ear to cases of defence against contracts of this nature, and if the fraud is made out will declare them invalid." It is important to bear in mind that, as thus stated by Judge Story, the ground upon which courts of equity interfere to set aside the contract of an imbecile isfraud. If, therefore, the surrounding circumstances and the evidence show clearly that there was no fraud, actual or constructive, but that on the contrary the contract entered into by the imbecile and by others, all as lessors, is in every way fair, favorable and beneficial to the imbecile and is one which a court of equity, if appealed to in advance of its execution, with knowledge of all the circumstances, would advise and authorize the guardian of the imbecile to execute as being in the best interests of the ward, a cancellation of the contract would not be justified. In such a case the imbecility does not enter into or contribute to the transaction.

"The mere fact that a party to an agreement was a lunatic will not operate as a defense to its enforcement, or as ground for its cancellation. A contract executed or executory made with a lunatic in good faith, without any advantage taken of his position, and for his own benefit," (the italics are the author's) "is valid both in equity and at law. And where a conveyance or contract is made in ignorance of the insanity, with no advantage taken, and with 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 Pomeroy's Eq. Jur. (4 ed.) § 946. This was also quoted with approval in our former opinion (31 Haw. 887). In this instance also the second sentence, similarly introduced by "and," adds a statement of the necessity of restoration to the status quo when the fact that the instrument was for the benefit of the incompetent is not a feature in the case. This view is further strengthened by the fact that the author italicized the words "for his own benefit" in the first sentence. That to his mind was an important element of the circumstances stated by him which would leave the contract "valid both in equity and at law," without consideration of the status quo.

"The tendency of the modern decisions is to broaden out the rule above stated, and to refuse rescission or cancellation of any ordinary contract or conveyance of an insane person, if it is shown to be fair, reasonable, based upon an adequate consideration, and beneficial to the afflicted person, although, of course, inadequacy of consideration or any misrepresentations as to value of the subject-matter will be held fatal to such a contract." 2 Black on Rescission and Cancellation (2 ed.) § 256.

"An exception to the general rule that persons of unsound mind are not bound by their contracts is to be found in contracts for necessaries for the lunatic himself." 16 A. E. Ency. L. 625.

"It has been held in many cases that even where the contracting party was shown to have been suffering from impaired mental faculties, yet if the transaction in question was fair and honest and what the party might reasonably be expected to do under all the circumstances, courts will not set aside such a transaction, for the reason that the mental lack has not entered into the act." Rieckhoff v. Goddee, 215 Ill. App. 141, 144.

"Courts of equity ever watch with a jealous care every contract made with persons non compos mentis, and always interfere to set aside their contracts however solemn, in all cases of fraud, or when the contract or act is not seen to be just in itself, or for the benefit of such persons; but when a purchase is made in good faith, without knowledge of the incapacity, and no advantage is taken, for a full consideration, and that consideration goes manifestly to the benefit of the lunatic, courts of equity will not interfere therewith. 1 Story Eq., §§ 227, 228; 1 Chitty on Contracts, 191;Molton v. Camroux, 2 Exc., 487. If a court of equity in any case sets aside the deed of a non compos, it will ordinarily administer the equity of having him to pay back to the other party the money or other thing received of him. And when it appears that the consideration is full and the lunatic is not able to put the other party in statu quo, or, if the benefit received is actual and of a durable character, in either case, the courts of equity will not be inclined to set aside the conveyance. Carr v. Holliday, 1 Dev. Bat. Eq., 344, and same case, 5 Ired. Eq., 167." Riggan v. Green, 80 N.C. 175, 176, 177 (30 Am. Rep. 77, 79).

"When it appears that the consideration is full and the lunatic is not able to put the other party in statu quo, or if the benefit received is actual and of a durable character, in either case, the courts of equity will not be inclined to set aside the conveyance." 18 Ency. Pl. Pr. 767.

"It does not necessarily follow, when there has been an adjudication by the probate court that a person is insane, that the insanity is of that character which disqualifies him from making a valid contract for necessaries." Stannard v. Burns'Admr., 63 Vt. 244, 246.

"The trial court went off entirely on the single question of insanity, and would consider nothing else. It misapprehended the controlling principles of law which should have governed the case. * * * The great weight of authority is, that deeds of persons in fact insane, but not so adjudged, are generally held to be voidable and not absolutely void. * * * If the transaction was fair and reasonable, and based upon a valid consideration, without fraud, and there was no circumvention, overreaching or undue advantage taken of the grantor's mental condition, and the contract was made in good faith and was fair, and was for her benefit and to her best interests, then the court ought to have sustained the deed and held it absolute under the circumstances of the case."Green v. Hulse, 57 Colo. 238, 242, 243.

"The contract of an imbecile has never been held by this court to be absolutely void but only voidable. * * * The committee for an insane person may avoid the contract of his ward if the contract be one to the disadvantage of the ward, but if the contract be one which a court of equity regards as advantageous and of lasting benefit to the ward, no rescission or avoidance of the contract will be decreed if it is otherwise enforcible. * * * This was a most equitable and reasonable contract so far as the Casebiers" (including the incompetent) "were concerned but rather burdensome, as it appears to the court, for appellant Smith" (the grantee) "for the old folks, or one of them, may live several years, in which event his undertaking would not be a profitable one to him in a financial way. * * * The best interest of the old people is the sole consideration — the only thing that concerns this court in this litigation. They are entitled to care and attention to the end of their days, and as Smith undertook to furnish this and to take pay from their estate, thus preventing them becoming a charge upon their family and their community, it was a most advantageous arrangement for them. The committee should have continued it." Casebier v. Casebier, Committee,193 Ky. 490, 493, 494.

"It has been decided in this state and elsewhere, over and over again, that the deed of a person of unsound mind, especially before he has been adjudged a lunatic, is not void but is voidable only. * * * The mere fact of insanity, even when clearly proved is not sufficient ground upon which to authorize a court of equity to set aside a deed; but there must, in addition, exist some other equitable grounds warranting the cancellation. If the price is adequate and the transaction fair, neither the insane grantor nor his committee has an absolute right to have the conveyance canceled and only when there is injustice or inequity will a court of equity be authorized or justified in interposing to annul a transaction and to restore the parties to the statu quo ante. Unless the grantor, by reason of his insanity or imbecility, has been imposed upon and has suffered some injustice, no reason exists for the cancellation of the deed; and without reason therefor the transaction cannot be disturbed. * * * The deed was not necessarily void, only voidable, and unless there was unfairness or injustice, for instance an inadequate consideration, the deed should not be set aside." Clay v. Clay's Committee, 179 Ky. 494, 495, 496 (also referred to with approval in 31 Haw. 886).

Concerning contracts that have been fully performed it is said in 24 A. E. Ency. L. 612, 613: "Where the contract has been fully and voluntarily performed before relief by rescission is sought, it is only where the most forceful reasons exist for granting equitable relief that a court of equity or a court exercising equitable powers will interpose to decree the rescission of the contract; and this is true even though the circumstances of the case are such that were the contract unperformed, the court would not decree the specific performance on behalf of the other party. Indeed, it has been frequently held that nothing short of actual fraud or mistake will justify the court in granting rescission of an executed contract. This rule is especially applicable where intervening rights of innocent third persons would be impaired by granting rescission."

The instrument of 1906 was not signed by Eliza's husband. Under section 2993, R.L. 1925, which was in effect in 1906, "no sale or mortgage of" a wife's "real estate shall be valid without the written consent of her husband." If the instrument of 1906 was a conveyance of any interest of Eliza's in the land, it was invalid for lack of her husband's written consent. If that instrument was susceptible of two constructions, one leading to invalidity and the other to validity, it should be given the construction which leads to validity, — in order thereby to carry out the intention of the parties. The instrument contains no apt words of conveyance of an interest in land. It can only be thought to have that effect because of the rule that "a gift of the income of property is to be construed as a gift of the property itself."In re Makaka, 29 Haw. 815. But this is a general rule. It does not necessarily follow that because there is a gift or transfer of income from lands there is implied or results therefrom by operation of law a gift or transfer of the title to the land. The exception is as well settled as the rule itself, that if in the instrument under consideration it appears that the testator or grantor did not intend a conveyance of the land or of an interest in it there is no such conveyance. In re Makaka, supra, 815, 818, citing earlier Hawaiian cases and other authorities;Rawlins v. Harbottle, 13 Haw. 297, 300, 301. There is no indication in the instrument of 1906 of any desire or intention to convey an interest in the land. The language is clear that what is sold and transferred by Eliza is "all her title and interest in and to any and all rents, issues and profits to which she may hereafter be entitled or which may be due and payable to her by, through or under the lease to the Waialua Agricultural Company, Limited, dated the 17th day of March, 1905. * * * Or by virtue of being the only child of John Dominis Holt, the elder, and devisee under the will of R.W. Holt, deceased, together with all and every her right to demand, receive, collect and receipt for all such rents, issues and profits from whomsoever due during the term of the natural life of her, the said Eliza R.P. Christian." This language is unambiguous. There is no provision made in the instrument for the joinder therein, in any capacity, of Eliza's husband. The exception, therefore, and not the rule, applies in this instance. The assignment and transfer was of the rents only and not of the reversion or of any interest in the land. In so far as appears from the evidence, on August 31, 1906, as well as on March 17, 1905, Eliza had no income or other means of support. Her interest in the land was purely contingent. It might prove to be, upon vesting, a one-third interest, or it might prove to be an interest much smaller than one-third, or it might never vest at all. For two or three years prior to March, 1905, Eliza had lived with and had been supported by Annie Holt Kentwell, who was her cousin. By the express terms of the instrument of 1906 Annie Kentwell undertook to support and maintain Eliza for and during the remainder of her, Eliza's, natural life. In entering into this contract (1906) neither of the parties knew or could know how long a period of time would elapse before Eliza would become entitled to a share of the rents under the lease or how much of the rents Eliza would become entitled to if she ever became entitled to any, or that she would, in fact, ever become entitled to any. Annie took those chances. As events subsequently happened, a period of seventeen years elapsed before Eliza's father died and Eliza became entitled to any of the rents. In other words, for seventeen years Annie performed her obligations under the contract of 1906, supporting and maintaining Eliza, without any compensation and without any certainty as to when her compensation would begin to accrue, if at all. It is true that after the allowance of the amendments to the petition, Annie filed an answer in which she says that she "now claims no rights of any kind by virtue" of the instrument of 1906 and in effect invites a cancellation of that instrument, but neither her answer nor her present attitude can in anywise affect the nature or the status of the instrument of 1906 or the rights of the W.A. Co. thereunder. By the deed of May 2, 1910, Annie Kentwell, a mentally competent person, transferred all of her rights under the instrument of 1906 to the W.A. Co. She cannot now, by her answer in this case, cause any diminution of the rights which she transferred by her deed.

The lease of 1905 secured to Eliza a possibility, however uncertain or dim it was, of obtaining from her contingent interest in the land the means of self-support. By the assignment of 1906 she transformed that possibility, uncertain and dim as it was, into a present and real undertaking by Annie Kentwell to provide her for the rest of her days with support and maintenance. The assignment of 1906, including as it did a transfer of rents, if any, which might accrue under the lease of 1905, and transferring also the rents accruing thereafter from whatever source, was beneficial to Eliza. In effect, it was so regarded in our former opinion in this case when the assignment and Annie Kentwell's contract therein to support Eliza were referred to as being of the surrounding circumstances or elements or equities which led us to the conclusion that the deed of 1910 was not beneficial to Eliza and should be canceled. We there said: "That it was not beneficial to Eliza to dispose of her interest at the time the deed was signed is obvious. She was then living with her father and the Kentwells at the home of the latter in Oxford. Her life, because of her imbecile condition, was very restricted and her wants were accordingly simple. There was no necessity for her to have more than enough money to supply them. Annie Kentwell, by the instrument of August 31, 1906, to which we have already referred, had undertaken to support Eliza during her life. She was in no danger, therefore, of becoming a public charge or of not being supplied with the things necessary to her sustenance and comfort. In her circumstances it would clearly be the part of wisdom to hold on to her contingent interest when by doing so she might eventually become the owner of a vested and more valuable interest. It was certainly of no benefit to her to exchange her interest for a sum of money which she did not need and which she herself did not receive" (31 Haw. 896). But if she had not had those assurances of money and support from her lease of 1905 and her assignment of 1906, the effect on the deed of 1910 might conceivably have been different. That cannot be decided now.

For the petitioner it is argued that Eliza did not receive any consideration for the lease of 1905, or for the instrument of 1906. While it is true that the rents under the lease were not paid to her even after the death of her father in 1922, that is because she had assigned them to Annie Kentwell. She was not entitled to any rent under the lease until 1922. She did, however, receive valuable consideration, both for the lease and for the assignment, in the form of support and maintenance from Annie Kentwell and is entitled, under the assignment of 1906, to continue to receive that support and maintenance during the remainder of her life. In addition, the property was preserved from tax liens and sales and was greatly improved.

While it was held in our former opinion that a conveyance by a mentally incompetent person who has not been judicially declared insane and whose incompetency is not known to the person he deals with, is voidable and not void, no consideration was given to the question, which had not then arisen, whether, when an incompetent conveys or assigns to one who has knowledge of the incompetency and then the grantee or assignee conveys or assigns to a third person who has no knowledge of the incompetency of the first grantor or assignor, the conveyance or assignment to the innocent third person is void or is voidable. The authorities on this point are in conflict. We think that the rule better supported by reason is that the property passes to the innocent third person freed from the taint which it received by reason of the guilty knowledge of the first grantee or assignee.

"There are two special rules on the subject which have been settled since an early day; one being a mere application of the general doctrine, and the other a necessary inference from it. The first is, that if a second purchaser, for value and without notice, purchases from a first purchaser, who is charged with notice, he thereby becomes a bona fide purchaser, and is entitled to protection. This statement may be generalized. If the title to land, having been passed through successive grantees, and subject in the hands of each to prior outstanding equities, comes to a purchaser for value and without notice, it is at once freed from these equities; he obtains a valid title, and, with a a single exception, the full power of disposition. This exception is, that such a title cannot be conveyed, free from the prior equities, back to a former owner who was charged with notice." 2 Pomeroy's Eq. Jur. (4 ed.) § 754.

"We have repeatedly held that the deed of a person of unsound mind is not void, but merely voidable, and this being true it will not be set aside as to a bona fide purchaser for value and without notice of the unsoundness of mind of the grantor. This is especially true as to a second purchaser of the land. * * * If a second purchaser for value and without notice purchases from a first purchaser who is charged with notice, he thereby becomes a bona fide purchaser and is entitled to protection." Campbell v. Kerrick, 142 Ky. 279, 280, 281. To the same effect is Bevins v. Lowe, 159 Ky. 439, 443.

"The contract of a person of unsound mind, like that of an infant, is not void, but voidable only, if made before inquest. * * * If a second purchaser for value and without notice purchases from a first purchaser who is charged with notice, he thereby becomes a bona fide purchaser and is entitled to protection. * * * Where a deed is not void ab initio, but only voidable, the title passes to the grantee and consequently a sale by him to abona fide purchaser without notice passes the title." Arnett'sCom. v. Owens, 23 Ky. L.R. 1409 (65 S.W. 151, 152).

"Had the defendants purchased directly from Oliver Odom for value, and without notice of his mental incapacity to make a deed, a court of equity would not ordinarily set aside the deed. * * * We do not see that the condition of the defendants is any worse because they bought mediately and not immediately. * * * If the title of an innocent purchaser for value, and without notice, can be upset for the alleged mental incapacity of one grantor, it can be done though the grantor may have been a very remote one."Odom v. Riddick, 7 L.R.A. (N.C., 1890) 118, 119.

In view of the rule which we have already adopted in this case that, when the deed of an incompetent is to a person not having knowledge of the incompetency, the deed is voidable only and not void, consistency requires that an innocent third person in the position above described should not be placed in a worse position than he would have been in if he had been an innocent, direct taker from the hands of the incompetent. When the W.A. Co. received the deed of Annie Kentwell, of May 2, 1910, it did so, as we have already held, without knowledge of the incompetency of Eliza. In our opinion the deed from Annie Kentwell, a competent person, to the W.A. Co., did operate to transfer to the company the right which Annie had secured from Eliza by the assignment of 1906.

No decision of the United States Supreme Court holding to the contrary has been called to our attention. Kendall v. Ewert,259 U.S. 139, is not on the point. In that case the conveyance was by an Indian, who was a common and habitual drunkard, to one Smith and about a year later Smith conveyed to the defendant Ewert. The latter considered himself legally incapable of purchasing direct from the Indian because he (Ewert) was employed at the time by the government in Indian affairs and an existing statute prohibited all persons employed in Indian affairs from having any interest or concern in any trade with the Indians. Ewert, therefore, arranged with Smith that Smith should take the deed from the Indian and then a year later should convey to him, Ewert. This program was carried out. The evidence in the case abundantly showed that at the time of the transaction between the Indian and Smith, Ewert had complete knowledge of the habits of the Indian in the matter of drinking to excess. In other words, Ewert took his deed from Smith and procured the taking of the deed by Smith as his agent, in both instances with entire knowledge of the incompetency of the grantor. There was no occasion for the court to consider, and it did not consider, what the law would be if Ewert had been an innocent subsequent grantee taking from an earlier grantee who had knowledge of the incompetency of the grantor. Dexter v. Hall,82 U.S. 9, has already been considered, at some length, by this court in its former opinion. Hall, the grantor, had been judicially adjudged to be a lunatic and at the time of the execution of the power of attorney was in confinement in a lunatic asylum under judicial commitment. Under this power of attorney the land was conveyed to persons who afterwards conveyed to Dexter, the defendant. Under these circumstances Dexter, the subsequent grantee, as well as the earlier grantee who took direct from Hall through the latter's attorney in fact, was legally chargeable with knowledge of the insanity of Hall. As stated by this court in its former opinion, Hall's confinement under commitment in the lunatic asylum "in itself was sufficient to inform any one coming in contact with him that he was in no condition to transact business and that it would be hazardous to deal with him" (31 Haw. 877). In that case, therefore, the subsequent taker took with guilty knowledge of the grantor's incompetency, as clearly as did the earlier grantees; and there was no occasion to consider, and the court did not consider, what the law would be in a case in which the subsequent grantee took innocently from an earlier grantee who had taken with guilty knowledge. And seeLuhrs v. Hancock, 181 U.S. 567, discussed in our former opinion (31 Haw. 877-879).

Another question remains to be considered, with reference to the deed of 1910. In our former opinion it was held that restoration to the status quo could be accomplished by returning Eliza and the W.A. Co. to the position of tenants in common, which they would have occupied, after 1922, if the deed of 1910 had not been executed by Eliza, on the theory that in a partition suit a court of equity, with its wide range of powers, could secure to the W.A. Co. a continuation of the benefit of the improvements which it had erected in reliance upon the deed from Eliza. At that time no consideration was given by the court, as a careful examination of its opinion will indicate, to the fact that large and costly improvements had been constructed by the W.A. Co., in reliance upon the deed of 1910, on lands other than Holt estate lands. More specifically, no consideration was given to the fact of the reconstruction in 1921 by the W.A. Co. of the Wahiawa dam and the creation thereby of a reservoir extending back into the mountains for a distance of several miles along both the north and the south forks of the Kaukonahua stream and covering about 300 acres, the reconstruction in 1931 costing the company the sum of about $210,000. Nor was any consideration given at that time to the construction of a ditch more than four miles in length to lead the waters from the Wahiawa dam to the cane lands of the W.A. Co., including lands of the Holt estate as well as other lands of the company. Similarly, no consideration was given by the court to the establishment of the Poamoho pump by the W.A. Co. on grant 235 belonging to the Holts but with ditches and pipe lines (on non-Holt lands) through which the water raised by the Poamoho pump was forced and carried to cane fields both on and off the Holt lands. It is true that a very slight reference was made to these improvements (which had been constructed away from the Holt lands) in one of the briefs of the respondent filed on the first appeal but we can find no reference to this subject in the brief of the petitioner filed on the first appeal. In any event, the fact remains that the existence of these costly improvements away from the Holt lands was not considered in the former opinion with reference to its effect on the issue of restoration to the status quo. It should be considered now.

We think that the construction of these improvements, costly though they were, on land other than Holt lands, need not prove to be an impediment to a restoration to the status quo. They and the land on which they are situated are the property solely of the W.A. Co. Eliza has no right, title or interest in them or in the land occupied by them. She has, however, or, after the execution and delivery of the deed from the W.A. Co. to her, will have some interest in the Holt estate land (at its southeasterly corner) on which a comparatively small part of the Wahiawa reservoir is situated and also has, or will have, a similar interest in the lands occupied by other reservoirs, pumps and other improvements erected by the W.A. Co. on the Holt lands. We think that there is much force in the argument presented by the W.A. Co. to the effect that such relief as the W.A. Co. is entitled to at the hands of Eliza should be afforded it in this suit and not left to consideration and treatment in a future partition suit. The provisions set forth in the concluding paragraphs of this opinion are intended to accomplish an equitable restoration to the status quo.

The W.A. Co. suggests as an impediment to the restoration to the status quo that the Wahiawa dam and reservoir and the Poamoho pump were constructed for the purpose of a "unified," larger sugar-cane plantation and that if the deed of May 2, 1910, is canceled and in consequence a part of the Holt estate cane lands is restored to Eliza, the company will lose a part of the use, benefit and efficiency of these costly instrumentalities of irrigation. The circuit judge, by means purely of mathematical calculation, found that the loss to the W.A. Co. of Eliza's share in the cane lands of the Holt estate would still leave the Wahiawa dam and reservoir "90% to 95% effective." The total area of the Holt lands under cultivation in cane by the W.A. Co. is 1622.95 acres. One-third of that area, if set apart for Eliza, would be 540.98 acres. The total net area of the W.A. Co. cane land, including the Holt lands, is 9,904 acres. All of the Holt cane lands, therefore, constitute 15 1/2% of all of the W.A. Co. cane lands and Eliza's one-third of the Holt cane lands would be a little over 5% of the total lands in cane planted by the W.A. Co. Upon partition the W.A. Co. might be deprived of 5% of its present area of cane lands upon which it could no longer use Wahiawa waters. No witness who took the stand at the trial gave any testimony categorically as to whether the efficiency of the Wahiawa dam and reservoir would be diminished in any degree by the deprivation of this 5% of cane lands. It does, however, clearly appear from other testimony, of engineers in the employ of the W.A. Co., that intermittent supplies of water from lands above Helemano (the Holt property) are used as much as possible in order to conserve the Wahiawa supply since the latter is itself somewhat inconstant. There are periods of time, occasionally, when the Wahiawa reservoir is very low, or becomes entirely exhausted and recourse at those times must be had to the Poamoho and other pumps. It is also clear from undisputed testimony that pumped waters are more costly to the W.A. Co. than waters originating in the mountains and flowing on the surface by gravity. Upon this state of the evidence the only finding can be that efficiency of the Wahiawa dam and reservoir will not be appreciably diminished by the loss to Eliza of one-third of the Holt estate cane lands, if such one-third in cane lands shall be awarded to her by the court in a future partition suit. Hence the possibility of the loss of one-third of the Holt cane lands is not an impediment to status quo.

Under the terms of the lease of March, 1905, all improvements made on the lands by the lessee were to revert to the lessor. Since the lease is being sustained, this provision should be complied with. Any improvements made solely in reliance upon the lease should be permitted to revert to the lessor. Ordinarily, improvements made by the W.A. Co. on the leased land prior to May 2, 1910, would be regarded as having been made in reliance upon the lease alone. It may be, however, that some or all of the improvements made prior to May 2, 1910, were substantially renewed or replaced after the delivery of the deed of that date. It may be, also, that some of the improvements, as for example, roads or railroads, built prior to May 2, 1910, were after that date added to in such a way as to make them essential parts of a larger system of improvements of a similar nature. All such renewals, replacements or additions made after the date of the deed cannot be regarded as having been made solely in reliance upon the lease but must be deemed to have been made in reliance upon every right possessed by the W.A. Co., including its supposed title under the deed of May, 1910. Improvements, therefore, even though made prior to May 2, 1910, which have been substantially replaced, renewed or added to after that date, cannot in equity be permitted to revert to the lessor under the terms of the lease but must be treated as though wholly constructed after May 2, 1910.

Edward S. Holt, one of the nine children of Owen J. Holt, is the owner of an undivided one twenty-seventh interest in the Holt lands. The children of Elizabeth Holt Richardson, a daughter of the same Owen J. Holt, are the owners of another undivided one twenty-seventh interest in the Holt lands. It is contended by the W.A. Co. that the existence of these outstanding two twenty-sevenths interests will require in a future partition suit the joinder of their owners as necessary parties and will place in jeopardy the rights of the W.A. Co. to secure a sufficient and just restoration to the status quo. The answer to this contention seems to us to be that the construction of improvements by the W.A. Co., whether on or off the Holt lands, was with full knowledge on its part of the existence of these two outstanding interests and that no act or omission of Eliza's, whether by deed or lease or otherwise, has operated or could operate to affect in any way any of the rights of the owners of these two outstanding interests in a future partition suit. Whatever those rights were on the part of the owners prior to the execution of the deed of May 2, 1910, by Eliza, they have remained the same so far as that particular conveyance was concerned. In other words, in constructing the improvements, the W.A. Co. did not rely and could not have relied upon Eliza's deed of May 2, 1910, for protection against the owners of either or both of the outstanding two twenty-sevenths interests.

The only other entity mentioned as a necessary party to a future partition suit is the Territory of Hawaii. Just what the interest of the Territory is in the Holt lands does not clearly appear, although there is a suggestion in the appellant's reply brief that it would be a necessary party because of "lands purchased for school purposes." If the Territory purchased one or more lots of land for school purposes from the W.A. Co., out of Holt lands, it is inconceivable that the W.A. Co.'s interest in that regard cannot be easily protected in a future partition suit. If the record now before us shows that such a sale was made by the W.A. Co. to the Territory after May 2, 1910, Eliza can be required by the decree in this suit to convey to the Territory all of her right, title and interest in such school lands.

The Territory of Hawaii, it does appear, is the owner of certain lands eastward and mauka of the Holt lands and adjoining the latter. The mere fact that the Territory is such an adjoining owner does not render it a necessary or proper party in a partition suit.

This subject of restoration to the status quo is here considered purely with reference to its effect upon the cancellation of the deed of May 2, 1910. Irrespective of the subject of status quo the lease of March, 1905, and the instrument of August 31, 1906, should be sustained. If sustained they afford a complete protection to the W.A. Co. against any award of rents or damages.

In our opinion the decree should provide:

I. That the deed of May 2, 1910, be canceled and that the W.A. Co. reconvey to Eliza all of the interest which it has acquired from her under and by virtue of that deed upon her payment to the W.A. Co. of the sum of $30,000, with interest at six per cent per annum from May 2, 1910, to the date of the final decree herein, or upon her assuring to the W.A. Co. the payment of said sum together with interest by a mortgage upon the interest so reconveyed or in any other satisfactory manner; and that the deed of reconveyance so required of the W.A. Co. be upon the condition subsequent that immediately after its execution and delivery Eliza shall execute and deliver to the W.A. Co. the deeds and grants which are in the next paragraph required of her. II. (a) That, immediately after the execution and delivery to Eliza of the W.A. Co.'s deed required by paragraph I hereof, Eliza convey to the W.A. Co. all of her right, title and interest in and to (1) the land at or near the southeastern end of the Holt lands which is occupied by the waters of the Wahiawa reservoir when the waters in that reservoir reach to the top of the spillway of the Wahiawa dam, together with additional land along the northwestern or Holt side of the Wahiawa reservoir when at its extreme height, of a sufficient width to permit of reasonable care, maintenance and use of the reservoir along that side; (2) all of that portion of grant 235 which is occupied by the Poamoho pump and its accessories and as much more as may be reasonably necessary for the convenient and effective care, maintenance and use of that pump and its accessories; (3) each and all of those portions of the Holt lands which are occupied by reservoirs, dams and camps constructed by the W.A. Co. and as much additional land adjoining each of said reservoirs (including dams) and camps on all sides thereof as is reasonably necessary for the convenient and effective care, maintenance and use thereof; and (4) all portions of the Holt lands upon which the W.A. Co. has constructed and maintains pumps and their accessories and as much land wholly around each of said pumps and accessories as is reasonably necessary for the convenient and effective care, maintenance and use of said pumps.

(b) That Eliza grant to the W.A. Co. by a good and sufficient written instrument, permanent rights of way for all ditches, flumes, syphons, pipe lines, railroads, roads, electric power lines, telephone lines and other utilities, if any, which have been constructed and are being maintained by the W.A. Co. on the Holt lands or any part or parts thereof, together, in each of the instances just recited, with additional land on each side of each such ditch, flume, syphon, pipe line, railroad, road, electric power line, telephone line and other utility above referred to, of such width as may be reasonably necessary for the convenient and effective care, maintenance and use of each such utility so referred to.

(c) That the execution and delivery by Eliza to the W.A. Co. of the deeds and grants by this paragraph II required, immediately after the execution and delivery to her by the W.A. Co. of the deed from it by paragraph I hereof required, shall be a compliance with and performance of the condition subsequent named in paragraph I above.

III. That the W.A. Co., by a sufficient written instrument assure to Eliza such rights of way in her behalf as may be reasonably necessary, over, under or across each ditch, flume, syphon, pipe line, railroad, road, electric power line, telephone line and other utility, if any, constructed and maintained by the W.A. Co. on the Holt lands as aforesaid, and rights of way for which are now required from Eliza in favor of the W.A. Co. under paragraph marked II hereof, — meaning hereby to assure to Eliza at the hands of the W.A. Co. such rights of way over, under or across the utilities mentioned above as may be reasonably necessary for access by Eliza and those acting under her, from each part of the common Holt lands which may be awarded to her on partition to each other part of the Holt lands which may be likewise awarded to her on partition, as well as access by her over, under or across each such utility from or to any nearby public highway to or from any part of the lands so awarded to her on partition.

That the instruments mentioned in this paragraph be executed and delivered last but immediately after the delivery of the instruments required by paragraph marked II above.

IV. (a) These provisions in the preceding paragraphs are intended to assure to the W.A. Co. restoration now, in this suit, to it of the improvements which it has constructed and is maintaining on the Holt lands as well as the continued use and benefit of those which it has constructed off of the Holt lands.

(b) If Eliza and the W.A. Co. cannot agree upon (1) a more specific definition or description than is herein contained of the "additional" strips of land provided for in the foregoing paragraphs for the convenient and effective care, maintenance and use of the lands, utilities and ways which are specifically described in the foregoing paragraphs, and (2) an enumeration and a description of the improvements made by the W.A. Co. prior to May 2, 1910, which, under the views in this opinion expressed, should revert to Eliza under the terms of the lease of March 17, 1905, then the case will be remanded to the circuit judge for such further proceedings as may be necessary for the judicial determination of (1) the extent, definition and description of each and all of such "additional" land and (2) an enumeration and a description of the improvements made by the W.A. Co. prior to May 2, 1910, which, under the views in this opinion expressed, should revert to Eliza under the terms of the lease of March 17, 1905.

The decree appealed from is reversed and a decree or a remanding order, as the case may be, will be entered in this court upon presentation.