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Fay v. Burditt.
of proof, but as he chose to aver the facts specially, the question of the legal effect of the facts stated is presented.
Upon these facts, it seems clear, upon authority as well as reason, that the plaintiff was not entitled to recover. It is now the well settled doctrine of this court, that the contracts of the unsound in mind, whose incapacity has not been judicially determined, are not void, but only voidable, and may, upon the removal of the disability, or by the act of a lawfully appointed guardian, be disaffirmed or ratified. Musselman v. Cravens, 47 Ind. 1, and cases cited; Nichol v. Thomas, 53 Ind. 42; Freed v. Brown, 55 Ind. 310; Wray v. Chandler, 64 Ind. 146; Hardenbrook v. Sherwood, 72 Ind. 403; Schuf v. Ransom, 79 Ind. 458.
If the contract in respect to the party of unsound mind is wholly executory, no act of disaffirmance is necessary, and the incapacity may, of course, be pleaded in defence to the action by the other party, or his assignee.
But if the contract has been performed, or if the consideration has been paid, or the possession of property parted with, under the contract, by the party under disability, there must be an act of disaffirmance before the other party can be put in the wrong, and a complete right of action established to recover the consideration so paid, or the possession of property which had been surrendered or taken away under the contract or deed. Cases, supra.
The execution of a chattel mortgage vests the title to the chattel at once in the mortgagee, not absolutely, indeed, but on a condition subsequent; and unless it is otherwise stipulated, the right of possession follows the right of property. If there be such a stipulation, the right of possession follows the right of property upon a breach of the condition. Jones Chattel Mortgages, section 426.
The plaintiff does not allege that he had been adjudged to be non compos. This being so, his mortgage was not void, and, until disaffirmed, it justified the taking and holding of possession of the property by the appellee. It follows that,
Fay r. Burditt.
if otherwise good, the second paragraph of the complaint is bad, because it does not allege a disaffirmance before bringing the action.
But the question arises, and may as well be considered here as upon the instructions, which also present it, whether, upon the facts stated in the answer, the plaintiff, though of unsound mind when he made the note and mortgage, had the unqualified right to disaffirm and set them aside.
Counsel for the appellant insist, that once the insanity of a party to a contract, of whatever character, is conceded, the right to disaffirm is absolute; while counsel for the appellee contend, as the court below instructed, that “The contracts of persons of unsound mind, who are not under guardianship, are, at most, only voidable. Courts will enforce or disregard such contracts, according to the circumstances of the case. If there is nothing in the appearance, conversation or actions of the person of unsound mind, indicating his mental incapacity, and if a person, ignorant of his unsoundness of mind, makes a contract with him, taking no undue advantage, and if such contract becomes so far executed that the parties can not be placed in the same condition respecting the subject-matter of the contract that they were in immediately before the making of such contract, the law permits the contract to stand, and will not disturb it on account of the mental incapacity of one of the parties.”
This is in accord both with authority and with reason and conscience. In Musselman v. Cravens, supra, a passage from Story is quoted with approval, which concludes as follows: “And so, if a purchase is made in good faith, without any knowledge of the incapacity, and no advantage had 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 can not be placed in statu quo, or in the state in which they were before the purchase.” 1 Story Eq. Jur., sections 227, 228.
And so, in 1 Chitty Contracts (11th ed.) 191, it is said:
Fay v. Burditt.
“In like manner, it has been decided, that where a person apparently of sound mind, and not known to be otherwise, enters into a contract for the purchase of property, which is fair and bona fide, and which is executed and completed, and the subject-matter of the contract has been paid forand fully enjoyed, and can not be restored so as to put the parties in statu quo; such contract can not be set aside, either by the alleged lunatic, or by those who represent him. And so, where the plaintiff had entered into a contract for the purchase of land, and had paid a deposit on the purchase-money, pursuant to the conditions of sale; and it appeared that, at the time of the contract, he was a lunatic, and incapable of understanding its meaning; but that the defendant entered into the contract and received the money fairly and in good faith, and without knowledge of the lunacy: it was held, that the plaintiff could not recover back the money."
In Wilder v. Weakley's Estate, 34 Ind. 181, it was said: “It has long been established that a lunatic, like an infant, is liable for necessaries suitable to his condition in life. But the more modern authorities go much further.” And, after quoting from Addison Con. (6th ed.) 1033–4, an extract to the same effect as the foregoing, the following is added :
“We think it may be safely stated, both on principle and authority, that where a person apparently of sound mind, and not known to be otherwise, and who has not been found to be otherwise by proper proceedings for that purpose, fairly and bona fide purchases property and receives and uses the same, whereby the contract of purchase becomes so far executed that the parties can not be placed in statu quo, such contract can not afterwards be set aside, or payment for the goods be refused, either by the alleged lunatic or his representatives.” See authorities collected by Rawle in Smith on Con. (5th ed.) 343–4; La Rue v. Gilkyson, 4 Pa. St. 375; Beals v. See, 10 Pa. St. 56; Molton v. Camroux, 2 Exch. 487; S. C., Ewell Lead. Cases, 614; Beavan v. McDonnell, 9 Exch. 309; S. C., 10 Exch. 184; Loomis v. Spencer, 2 Paige, 153; Campbell v.
Fay v. Burditt.
Hooper, 3 Smale & G. 153; Fitzhugh v. Wilcox,12 Barb. 235; Person v. Warren, 14 Barb. 488; Yauger v. Skinner, 14 N. J. Eq. 389; Young v. Stevens, 48 N. H. 133; McCormick v. Littler, 85 Ill. 62; Hassard v. Smith, 60 Ired. Eq. 429; Behrens v. McKenzie, 23 Iowa, 333; Sims v. McLure, 8 Rich. Eq. 286; Matthiessen, etc., Co. v. McMahon, 38 N. J. L. 536; Lincoln v. Buckmaster, 32 Vt. 658; Long v. Long, 9 Md. 348; Lancaster Co. Nat'l Bank v. Moore, 78 Pa. St. 407.
It is manifest that a person of unsound mind, whose incapacity has not been judicially determined, can not, with a due regard for the rights of others, be permitted, like an infant (except as to necessaries) ora married woman, to exercise the privilege of disaffirming his contracts, irrespective of their character and the circumstances under which they were made. Every person may well be on his guard as to whether he is dealing with a married woman, or an infant; but not so as to the insane who afford no outward sign of their incapacity. The presumption of law is, that any person of mature years is of sound mind, and in the absence of something in his appearance or conduct to indicate, or of some other notice of the incapacity, the person who contracts with him fairly must be protected, else there can be no safety in dealing, one man with another. Eberwine v. The State, ex rel. Koster, 79 Ind. 266.
The issue was made in the case before us, and, by the instructions of the court, was fairly submitted to the jury, whether the defendant dealt with the plaintiff in good faith, believing him to be of sound mind; whether the lease and the note and mortgage were fair and just contracts toward the plaintiff; and upon these points the finding of the jury was for the appellee. There was no dispute that the appellant had occupied and had the use of the farm during the term of the lease. He had had, therefore, the full benefit of the contract on his part, a benefit which he could not restore to the appellee, and for which, therefore, in good conscience, and in order to place her in statu quo, he ought to have made, or offered to make, a just compensation. He had in the first instance given
Fay v. Burditt.
a mortgage to secure the discharge of his obligations under the lease, but instead of paying in full the rent in corn or money, as stipulated, he gave a note for the amount unpaid, and a new mortgage, which, therefore, was not merely a security for a pre-existing debt. It was a substitute for the prior security as well, and under it, after default in its condition, the defendant had taken, sold and bid in the mortgaged property. And now, without offering to make payment to the defendant of a just compensation for the use of her farm, the appellant disaffirms the mortgage, and asks the court to aid him in recovering the property. There is neither law nor equity in the proposition.
It would seem, on principle, that if the defendant had dealt with plaintiff, knowing his incapacity, he would have had the unqualified right to disaffirm his note and mortgage, and to reclaim his chattels, leaving her to such remedy, if any, as the law could afford her, to recover compensation for the use of her land. If the lease of the farm was a necessity to the plaintiff, he ought, it would seem, to be liable, in any event, for the fair value, if not for the agreed price. It has been held to be sufficient notice, where the circumstances known in regard to the other's mental condition were such as to convince a reasonable and prudent man of his insanity, or even to put him on inquiry, by which he might, if reasonably prudent, have learned the fact. Lincoln v. Buckmaster, 32 Vt. 658. See note
. Wirebach's Ex'r v. First Nat. Bank, 21 Am. Law Reg. 29.
There is apparent conflict in the cases upon the question whether the insane party to a contract or deed, on restoration to his right mind, or his guardian for him, may recover what he parted with, without restoring what he received in the transaction. See McGuire v. Callahan, 19 Ind. 128; Nichol v. Thomas, supra; Arnold v. Richmond Iron Works, 1 Gray, 434; Gibson v. Soper, 6 Gray, 279; Foss v. Hildreth, 10 Allen, 76; Henry v. Fine, 23 Ark. 417.
If determined upon principle, it would seem that if the other party to the contract entered into it in good faith and with