#### H. L. GODWIN v. T. A. PARKER, Guardian.

(Filed 27 May, 1910.)

1. Deeds and Conveyances — Insane Persons — Knowledge — Valid Contracts — Loss.

A contract made with an insane person by one with knowledge of the fact of insanity, is void, and the one so contracting must bear the loss attendant upon the void transaction: Hence, when the one thus dealing has erected a building on the land contracted for, he is not entitled to betterments.

2. Same — Judgments—Equity.

In this case the plaintiff sued for the specific performance of a contract made with an insane person, and the verdict of the jury established the fact of insanity and plaintiff’s knowledge thereof at the time. It likewise appeared that plaintiff had erected a building on the land at a cost, by his own evidence, of $475, found by the verdict to be now worth $1,000, but had been in possession for eight years, collecting an annual rent of $100: Held, a judgment should be entered decreeing that defendant recover possession; that the alleged contract be canceled of record ; that defendant be not charged with taxes paid by plaintiff on the property, and that the latter be not required to account for the rents and profits by him received.

Appeal from W. B. Allen, J., at November Term, 1909, of IÍARNETT.

Tbe plaintiff brought this action to compel specific performance of the following contract:

North Carolina. — Harnett County.

I, Bud Tart, of said county and State, have this day given to H. L. Godwin the privilege of erecting a store building on my lot in Dunn, N. C., the same being lot No. 11 in the. subdivision of the original lot No. 3 in block R in the blue-print, plan of town of Dunn, N. C. The said H. L. Godwin has the privilege of remaining in possession of said lot for three years from the date of this contract, and he is required tó keep the taxes paid on said lot. And it is agreed and understood, and I do hereby bind myself, my heirs, executors and administrators to make a good and lawful deed to H. L. Godwin, his heirs or assigns, upon the receipt of the sum of $360, which must be paid indefinitely (immediately) upon the expiration of this, contract, or at any time before it expires.

Bud X Tart. (seal.)

H. L. GODWIN. (seal.)

*673His Honor submitted tbe following issues to tbe jury, wbicb were responded to as set out:

1. Did tbe plaintiff and tbe defendant Bud Tart execute tbe contract set out in tbe complaint? Answer: Tes.

2. Did Bud Tart, at tbe time of executing tbe said contract, have sufficient mental capacity to make same? Answer: No.

3. If not, 'did tbe plaintiff bave notice of said mental incapacity? Answer: Yes.

4. Wbat was tbe value of said lot on 17 June, 1902? 'Answer: $360.

5. Wbat was tbe value of tbe improvements put on said land by H. L. Godwin? Answer: $1,000.

6. Wbat was tbe annual rental value of tbe lands before tbe improvements were put upon it by tbe plaintiff? Answer: Nothing.

7. Wbat was tbe annual rental value after tbe improvements were put upon it by tbe plaintiff ? Answer: $100.

Upon tbe verdict, bis Honor rendered tbe following judgment:

“Tbis cause came on for trial at tbe November Term, 1909, of tbe Superior Court of Harnett County, before W. B. Allen, Judge, and a jury, and tbe jury having returned their verdict, as appears in the record, it is, upon said verdict and tbe admissions in tbe pleadings, considered and adjudged that tbe defendant Bud Tart is tbe owner in fee of tbe lot described in tbe complaint, and that be is entitled to recover poss’ession thereof of tbe plaintiff, H. L. Godwin, upon tbe payment to him-of tbe sum of $1,000, tbe value of the improvements placed on said land by tbe plaintiff.

“And it further appearing to tbe court that tbe defendants still refuse to perform tbe contract referred to in tbe issue, and that they demand possession of said lot, it is further considered and adjudged that said sum of $1,000 is due to tbe plaintiff, H. L. Godwin, and tbe same is a lien on said lot, and, upon failure to pay the same within ninety days it is ordered that tbe said lot be sold for tbe satisfaction thereof by N. A. Townsend and E. E. Young, now appointed commissioners for that purpose, who shall report their proceedings to tbis court.

“It is further ordered that each party pay bis costs. Let tbe pleadings be amended, if’so advised.”

The plaintiff testified, over tbe objection of tbe defendant, that be bad been in possession of tbe lot since June, 1902; that be knew Bud Tart bad been in tbe asylum; that be returned to tbe asylum at Raleigh; that tbe building put by him on tbe lot cost him $475, not exceeding $500;- that its rental value was *674$100 per year; tbat be bad received tbe rents; tbat be bad tendered tbe amount be was to pay to defendant Parker, as guardian of Bud Tart, and demanded a deed from bim; tbat Parker declined to make tbe deed. Another witness for plaintiff testified tbat Bud Tart, at times, looked dangerous. Tbe summons showed service on Dr. James McKee, superintendent of tbe State’s Hospital at Raleigh, N. C., where Bud Tart was confined; tbe service was made 17 June, 1905. There was evidence tbat tbe unimproved lot was worth, in June, 1902, from $300 to $400, and tbat it bad since then increased in value. Tbe defendant tendered tbe following judgment:

“This cause coming on to be beard, and being beard before bis Honor, W. R. Allen, and a jury, and tbe issues answered as follows (here follows tbe issues as set out above) :

“It is now considered, ordered and adjudged tbat tbe defendants, Bud Tart and bis guardian, T. A. Parker, recover of tbe plaintiff, H. L. Godwin, tbe possession of tbe said land described in the complaint; and it is further ordered and decreed tbat tbe paper-writing or contract referred to and set out in tbe complaint be canceled of record; and it is further adjudged tbat tbe plaintiff pay tbe costs of this action, to be taxed by tbe clerk.”

To tbe judgment of tbe court, defendant excepted and appealed to this Court.

Godwin & Townsend and J. G. Clifford for plaintiff.

E. F. Toung and H. E. Norris for defendant.

Manning, J.

In our opinion, tbe judgment of bis Honor is not supported by tbe adjudications of this Court. Tbe jury found tbat Bud Tart was insane at tbe time be attempted to contract with tbe plaintiff, and bis insanity was known to tbe plaintiff. Upon a verdict establishing the same facts, this Court, in Creekmore v. Baxter, 121 N. C., 31, said: “Tbe first two issues found facts which constitute fraud in law. No other kind of fraud was charged in tbe pleadings; and tbe third issue, referring to actual fraud in fact, is neither necessary nor contradictory. It cannot be doubted tbat any one dealing with an insane person, knowing bis insanity, deals with bim at bis own peril.” “The ground upon which courts of equity interfere to set aside tbe contracts and other acts, however solemn, of persons who are idiots, lunatics or otherwise non compos 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 inca*675pacity, is deemed to perpetrate a meditated fraud upon them and their rights.” Story Eq. Jur., sec. 227; Adams Eq., 183; Odom v. Riddick, 104 N. C., 515. In Sprinkle v. Wellborn, 140 N. C., 163, Mr. Justice Walker, speaking for this Court, said: “If, therefore, one person induces another, who lacks this capacity or this freedom, to enter into an apparent contract, equity will not recognize the transaction, however, as one author says, it inay be fenced by formal observances, but, deeming it fraudulent, will in proper cases afford relief against it at the suit of the party imposed upon. Fetter on Equity, 143. On this ground, the contracts of idiots, lunatics and other persons non compos mentis are generally regarded in a certain sense as invalid. It has been said by many courts that the contracts of a lunatic, made after the fact of insanity has been judicially ascertained, are absolutely void, and that he can have no power to contract at all until there is reversal of the finding and he is permitted to resume control of his property. Fetter Eq., 143; Odom v. Riddick, 104 N. C., 515.” Beeson v. Smith, 149 N. C., 142.

• The plaintiff’s evidence established the fact that 'the insanity of Bud Tart had been judicially ascertained, for it appeared that he had previously been committed to the State’s Hospital for the care of the insane, and the verdict establishes the fact of his insanity at the time of the alleged contract, to the knowledge of the plaintiff. In Creekmore v. Baxter, supra, this Court said: “Courts of equity always protect innocent purchasers as far as possible, and ordinarily place the parties back in statu quo, when it can be done without injury to either; but if any one contracts with a lunatic, knowing his insanity, he must bear alone whatever loss arises from the transaction.”

The evidence of the plaintiff himself shows, however, that a reversal of the judgment can work no loss or inequity to him; he has now had possession of the property for nearly eight years, at a rental1 of $100 per year, and the improvements put by him on the lot cost him, by his own evidence, $475. From this statement it clearly appears that the plaintiff will sustain no loss by the improvements placed by him upon the property. In no event is he entitled to betterments.

It is our opinion that his Honor should have signed the judgment tendered by the defendant, and that he was in error in signing the judgment tendered by plaintiff. "W"e, therefore, reverse the judgment of his. Honor and direct judgment to be entered in accordance with this opinion, without liability to the plaintiff to further account for the rents and profits by him received to 17 June, 1910, and without charge to the defendant *676for tlie taxes which may have been assessed against said property, and which are to be a charge against the plaintiff. The plaintiff will pay the costs of this action.

Reversed.