Barnard v. Duncan

38 Mo. 170

• Court: Supreme Court of Missouri
• Decided: March 15, 1866
• Status: Published

Opinion

Holmes, Judge,

delivered the opinion of the court.

This was a suit hy a trustee vendor against his vendee at a sale at public auction of real estate under a deed of trust, made to secure the payment of the debts of numerous creditors, grounded on an alleged breach of contract by the purchaser in refusing to pay the amount of his bid and accept the deed that was tendered to him, conveying all the right, title and interest in the property that was vested in the trustee, but containing no covenants of warranty whatever, and the action sounded in damages. Upon the refusal, there was a re-sale of the property, a few hours afterwards, on the same day, without a re-advertising or any new notice given, resulting in a difference in the price amounting to some $2,225, which the plaintiff seeks to recover by way of damages.

The answer of the defendant denied the material allegations of the petition. The defence rests mainly upon the grounds that the deed tendered to him did not contain a full warranty of the title, and that the property was encumbered to a much larger amount than he was aware of; that misstatements of fact, or erroneous information, was given to him by the auctioneer with regard to the encumbrances just before the sale took place, by which he was led into mistake as to their amount; that the sale was fraudulently made, and that he is not liable for damages.

The conveyance that was made to the trustee was in the form of an ordinary deed of trust in the nature of a mortgage to secure the payment of debts, and was, in this in-, stance, more like ..an assignment for the benefit of creditors than a simple mortgage-for.'the security of a particular demand, the beneficiaries, being numerous; and it contained the usual power to sell and- convey the property, and apply the proceeds of the sales to the satisfaction of the debts named, according to the trusts declared in the instrument. It contained covenants of warranty of title and against encumbrances. The defendant insists here that he was entitled to demand a deed from the trustee, containing the same or similar covenants. Whether he expected the original grantors, or the beneficiaries, to join in the deed*with the trustee, and make those covenants, or that the trustee should make them as his own personal covenants, does not very clearly appear. But in either case there is no warrant in law for such a demand. The sale is not made by the original owners. It was a sale by the trustee in his fiduciary capacity only. The trustee undertakes only for the execution of the power that is given him, and he is only authorized to sell and convey the title which is vested in him by the deed. He was not empowered to make a deed in the name of the grantors to him, nor to execute any covenants in their names. Nor can he be required to enter into any personal covenants for title or against encumbrances in general. The only covenant that can be demanded of a mere naked trustee, who has no interest in the property, beyond the bare legal title, in any case of this kind, is the usual trustee covenant against acts or encumbrances done or suffered by himself — Rawle Cov. 566. This covenant was not demanded. The deed tendered was refused, as it seems, absolutely, for the reason that it did not contain full covenants of general warranty. The written note sent by the purchaser to the trustee demanded a deed that was good. Precisely what this might mean, unexplained, we need not stop to inquire, inasmuch as the defendant rests his case here, upon the broad ground that he had a right to demand a general warranty.

It seems to have been the practice of the courts of chancery in England, in cases of sales by trustees, or under orders of court, to require the cestui que trysts^- who were to receive the proceeds of the sales,-to-join'wítlí<tlió trustees, and enter into covenants of warranty, of the title. ¿But even this doctrine appears to be of questionable authority in these later times, in a case oí this kind ; nor does it appear to have been recognized in this country. Such a principle would have to be extended to all trustees for the payment of debts, assignees of insolvents, executors, administrators, guardians; and the execution of numberless trusts would be thereby rendered impracticable, or wholly impossible—Duchess of Rutland v. Wakemas, 8 Bro. Par. Cas. 159. Lord St. Leonard thought it might still be applied in some cases of two or more cestui que trusts; but admitted that were trustees sell for the payment of debts, the purchaser is not entitled to any covenants for the title, because no line can well be drawn as to the quantum for which the several beneficiaries should be required to covenant. The principle relates to parties who are presumptively interested as beneficiaries. Mr. Rawle concludes that the correct test of the application of such a rule would be the extent of the purchaser’s liability to see to the application of the purchase money — Raw. Cov., 8 ed., 568, n. 2. The matter would seem to depend upon the jurisdiction of a court of equity, in a proper case, as when one of the parties should come into court to enforce a specific performance against the other. And further, inasmuch as the statute expressly exempts the purchasers, in these cases, from any responsibility for the application of the purchase money by the trustees, the rule as limited can have no application here — R. C. 1855, p. 1556, § 9. This is simply an action at law for damages on breach of contract.

The defendant claims that he is entitled to the benefit of the covenants contained in the conveyance to the trustee. He can derive no advantage from these otherwise than as assignee of the trustee. If he had accepted the deed of the trustee, he would have become the owner of the estate for the time being, and as such would have had all the protection' which those covenants could have afforded him, without any covenant of warranty from the trustee. Even a sheriff’s deed has been held to be effectual for this purpose— Dickson v. Desire, 23 Mo. 151; Raw. Cov. 352, 360.

The case belongs to the class of fiduciary vendors, as executors, administrators, guardians, mortgagees, assignees for tlie benefit of creditors, and other like trustees, who have no other interest in the property than a legal title with power to sell and convey, and who are not bound to give any other covenant than the ordinary trustee covenant against their own acts — Raw. Cov. 566, 3 ed. They cannot be compelled to enter into any other covenant. They are mere agents to sell and convey, and trustees to execute the trusts declared. They have power to sell and convey such title as is vested in them, and to make such deed as will be effectual to convey that title, and no more, unless expressly empowered and authorized by the conveyance made to them to enter into other covenants in the names of their grantors. Such agents have no authority to bind their principals or grantors by covenants in their names. Their conveyances are good and effectual without either warranty or personal covenants, and an authority to convey merely, gives no implied power to make covenants—Nixon v. Hyserott, 5 J. R. 57 ; Van Epps v. City of Schenectady, 12 J. R. 435. The exemption of this class of vendors from personal responsibility, except where fraud exists, or they voluntarily enter into personal covenants of warranty, would seem to be indispensable ; for otherwise no one would be found willing to accept such offices and trusts—Worthy v. Johnson, 8 Geo. 241; Avon v. Beckom, 11 Geo. 1. Such trustees sell only by virtue of the powers given them. They do not undertake to convey anything more than the right, title and estate that is vested in them. All purchasers are bound to know that there can be no warranty of the title oh such sales, and, it is presumed, it is always so understood. The title is on record; the records are open to all, and the purchasers can examine the title for themselves. There being no warranty, the rule of caveat emptor must necessarily be applied in reference to the conveyance, except as to the ordinary trustee covenant which the vender may require. We see no good reason why this covenant should not be required of this trustee. He could not well object to covenanting against acts or encumbrances done or suffered by himself. And if the purchaser had objected to the deed on this ground, there would have been no cause of action against him here. He absolutely refused to complete his purchase unless a deed with full general warranty of title were tendered. We think this amounted to a waiver of any demand for a covenant against the trustee’s own acts merely, and of all objection to the deed that was tendered on that ground alone.

It appears that the records do not furnish any true criterion of the exact amount of the encumbrances which still remained unpaid on this property. This information could scarcely be obtained otherwise than from the trustee himself. No application' was made to him for information on this head. He made no statements or representations on the subject. But the defendant, just before the sale, inquired of the auctioneer about the amount of the encumbrances. He answered that he did not know, but had heard that they amounted to a given sum named. Such statements could furnish no ground on which any man of prudence and judgment would venture to rely. They do not appear to have been such as could have materially influenced his judgment. We do not think they were such misstatements or misrepresentations as could be considered to have been fraudulently made, even if the information given had turned out not to be entirely true and correct. Statements which are mere matter of opinion, on hearsay information, cannot be supposed to influence the judgment of the purchaser — 1 Sto. Eq., § 197. But the other evidence, so far from showing the information given to have been inaccurate or false, tended rather to establish its entire correctness. There was nothing in this circumstance, taken by itself alone, on which to ground a charge of fraud.

Within a few hours after the sale had taken place, a deed was tendered to the defendant purporting to convey all the title that was vested in the trustee, and which he had power to sell, but containing no covenants of warranty, and payment of the amount of the bid was demanded. Upon the refusal to accept it, the trustee proceeded at once to put up the property for sale again, at the same place, on.the same day, without re-advertising or any new notice, and, few persons being present, the property was re-sold for twenty-five dollars. This proceeding can neither be justified nor sustained. It was, in practical effect, a sale without notice. The sale, as advertised,had taken place several hours before, and all bidders had departed. Though yet within the hours mentioned in the advertisement, it cannot be considered a fair and valid sale pursuant to notice. There should have been a new publication of notice for another day. This was done in the case of Gardner v. Armstrong, 31 Mo. 586. Under these circumstances, the difference of price between the two sales was no proper measure of the damages. In Gardner v. Armstrong, it was held that the difference of price between the two sales, fairly made on due notice, might be taken as a criterion of the damages actually sustained, though not as conclusive. We see no reason for departing from this decision; but it is still to be borne in mind that the common law rule is, to give no more damages than the actual loss sustained. Where the property is shown to be still worth as much as was bid for it, the damages can be little more than nominal — Sedg. Dam. 100-2. For these reasons, we think the first instruction that was given for the defendant was entirely erroneous.

The second instruction given for the defendant might properly have been given, if there had been a sufficient basis for it in the evidence: it refers exclusively to the statement made by the auctioneer in answer to the defendant’s inquiries. As an instruction upon the matter of fraud in making the sale, it placed the subject on too narrow ground. The trustee was himself there present as the person making the sale. It appears that there were other deeds of trust, and other property, real and personal, conveyed by this deed, for the payment of these same debts, and that the amount of the encumbrance actually existing upon the land offered for sale would be greatly affected by the application of the proceeds of other property sold,and by the amount tobe realized from other property not yet sold, in reduction of the encumbrance on this land. This was a matter of fact which for the most part could be known only to the trustee, and of which he alone was in a situation to judge with any certainty. These facts could not be ascertained by any examination of the records of the recorder’s office, and were not equally open to both vendor and vendee. Where the facts, or means of information, concerning the condition and value of the thing sold are equally accessible to both parties, and nothing is said or done which tends to impose on the other, or to mislead him, there is no fraud which the law can notice ; but where material facts are accessible to the vendor only, and he knows them not to be within the reach of the diligent attention, observation and judgment of the other party, he is bound to disclose such facts, and to make them known to the purchaser. It is only where such attention on the part of the vendee might enable him to.ascertain the facts, and protect himself against surprise, mistake, or imposition, that the maxim caveat emptor, in this matter of fraud, ought to be applied to him. The vendor must disclose all material facts of which he knows the vendee to be ignorant. There may be fraud in suppressing and concealing material facts and circumstances, as well as in direct misrepresentation, if the other party is knowingly suffered to deal under a delusion— 2 Kent Com. 482-5. These were proper matters to be submitted to the jury on the question of fraud on the part of the trustee in making the sale ; and evidence tending to show that disclosures of such material circumstances were made by the trustee privately to one bidder, who was thereby deterred from bidding further, and which were not publicly stated to all present,- would certainly be admissible and competent, by way of showing an actual and fraudulent suppression of the truth.

The first instruction refused the plaintiff should have been given. The third, fifth, sixth and seventh might very well have been given also. As to tbe second and fourth, they must be held to have been rightly enough refused, as making an incorrect and improper application of the maxim caveat emptor. In reference to the title, it is more accurately a question of warranty, or no warranty, than of caveat emptor, though if the purchaser buys without warranty he takes the responsibility of the title being good, and so far may be said to buy at his peril.

In reference to examining records it is the same; of course, the party may examine the records or not, at his own peril. But the more special and peculiar application of this maxim belongs to the contract of sale of goods, and the question of fraud or of implied warranty ; but in respect of conveyances of real estate, as laid down by Lord Coke, the common law binds not the vendor, “ unless there be a warranty either in deed or in law, for caveat emptor, qui ignorare non debuit quod jus alienum emit — let the purchaser exercise proper caution, for he ought not to be ignorant of the amount and nature of that person’s interest which he is about to purchase.” —Broome’s Leg. Max. 854. In other words, if the purchaser buys real estate and takes a deed without covenant of warranty, he takes the risk of the title on. himself; he must examine the title for himself, and so far the rule of caveat emptor may be said to apply to him. But misrepresentations or suppression of material facts are matters collateral to the written contract or deed, and may be inquired into on the ground of fraud — Ibid. 361.

We think there should be a new trial, upon instructions better adapted to the nature of the case.

Judgment reversed and the cause remanded.

Judge Wagner concurs; Judge Lovelace absent.