Campbell v. Johnston

1 Sand. Ch. 148, 1843 N.Y. LEXIS 479, 1843 N.Y. Misc. LEXIS 50

• Court: New York Court of Chancery
• Decided: October 9, 1843
• Status: Published

Opinion

The Assistant Vice-Chancellor.

The defendants, under the will of Thomas Campbell, had merely a power in trust. No estate vested in them, and the land descended to the heirs. (1 R. S. 729, § 56.) Their possession of the premises, taken under the erroneous impression that they were entitled to it as executors, must be accounted for to the heirs.

The next question arises upon the attempts made by the defendants to sell the property under the will. No satisfactory or even plausible reason is shown, in either case, why the respective purchasers did not complete their purchases.

Assuming the mortgage to the defendant Johnston, to have been wholly unpaid, the amount of the incumbrances on the premises was considerably less than the smallest sum at which they were struck off at those sales. But it is said that those purchasers claim that the ten per cent, which they paid upon the sales ought to be refunded to them ;• and they are gravely sworn as witnesses to prove that they make such a claim.

The defendant Johnson,- in his answer states that he believes this claim is made legally or on good ground.

Now the first sale was made by the executors in the fall of 1838, and the ten per cent, paid at the time. Four years had elapsed when the purchaser made his claim by testimony ; and he had never instituted any proceedings for its recovery. In the other instance, more than three years had intervened with the like omission.- In the mean time the premises had been foreclosed and sold,- so that neither purchaser could expect to complete his purchase.- Indeed,-both concede that they declined to complete,- and the answer admits that they refused.

Under such circumstances, the reason set up by the defendant Johnston for not accounting for this money cannot be allowed. If those purchasers were responsible men, he may consider himself fortunate that he is not required' to account for his omission to compel them to complete their contracts.

The mortgages to the New-York Contributionship were foreclosed, the premises sold, and the defendant Johnston became' the purchaser' at the sale. The complainant claims that he stood in the situation of a trustee, so that he could not purchase the property for his own benefit. I do not perceive any evidence of the value of the premises at the time of the master’s sale. In 1838 they were sold by the executors at auction for $3900 ; and in 1839 for $3000. The defendant bid them off for $2425. It is quite probable that if he had not become the purchaser they would have sold for even less than that sum, but that is not material. (Ex-parte Bennett, 10 Ves. 385, per Lord Eldon.)

In this case the defendants were clothed with a power in trust for the sale of the premises and the distribution of the proceeds to the children of the testator. They were also the testamentary guardians of the infant children. In both capacities, as trustees of the power, and as guardians of the beneficiaries, they had a duty to perform in regard to this property, which, it appears to me, rendered it inequitable for them to become the purchasers.

Their first duty was to preserve the property for the children until a sale could be effected. The interest on the mortgages to the New-York Contributionship was only $84 per year, and the premises were rented by them at one time for $850 per year.

It does not satisfactorily appear why the defendants suffered those mortgages to be foreelosed. Johnston states in his answer, that the mortgagees rigorously insisted upon the payment of the principal. This is not proved, and situated as he was in reference to this transaction, he ought to have proved it. As the case stands, I infer that the defendants were guilty of a neglect of duty in allowing the foreclosure to proceed. The mortgages had been permitted to remain for a great many years, on the payment of the interest; and no circumstance appears indicating a change of policy on the part of the company. This statement exhibits the conflict between interest and duty, which so often occurs in the instance of persons holding fiduciary relations to property, and of itself, vindicates the inflexible rule which equity has steadfastly maintained on this subject. (See the principles and authorities in Lewin on Trusts and Trustees, 376, &c. Greenlaw v. King, 5 Lond. Jurist. Rep. 18, per Lord Cottenham.)

(a) It also establishes a breach of trust in the defendants, of which neither can be permitted to avail themselves. On both grounds, I am satisfied that the defendant Johnston' ought not to be permitted to retain the property as against his beneficiaries or his wards. The case of Van Epps v. Van Epps, (9 Paige, 237,) is decisive of the point.

As to the terms upon which such a sale will be set aside, the cestui que trust may have a re-conveyance, or the estate may be re-sold, (Lewin on Trusts, 382, 385.)

In this case it may be but a barren victory, and as the prayer of the bill is alternative, I will give to those interested, an opportunity to elect whether the sale shall stand, or whether they will have a decree for a re-sale, or a re-conveyance.

In either event, it becomes necessary to dispose of the question arising upon the bond and mortgage brought forward by Johnston against the testator, and on which he obtained the surplus money upon the sale under the foreclosure. (Upon examining the testimony on this point, the court decided that the bond and mortgage were not justly due to the defendant.)

If the parties in interest shall elect to have the sale stand, the defendant Johnston must account for the surplus which he received after paying off the Contributionship debt and costs.

The personal property appears to have been small, but as there has been no settlement by the executors, it must be made a part of their accounting.

An objection of form remains to be considered, which the defendant presents for the first time at the hearing. It is said that thé suit is defective, because the two infant children of the testator are not parties. If the suit were one for an account and settlement against executors merely, the case of Hallett v. Hallett, (2 Paige, 15,) would be an authority for sustaining the bill, in its present shape. But it is made to affect the defendant Johnston as trustee, and to call for a re-sale or a re-conveyance of the estate in which the infants are interested. In the view which I have adopted, an election of remedies becomes necessary ; and upon this all the parties in interest should be heard.

The case will have to. stand over to bring the infants before .the court. They may be made defendants by a supplemental bill, or otherwise, as the complainant may be advised.(a)

And see Burton v. Wookey, (6 Madd. 367;) Hamilton v, Wright, (9 Clark & Fin. 111,) and the Scotch cases there cited; Dickinson v. Codwise, postea.

In Fisk v. Sarber, (6 Watts & Sarg. 18, Sept. 1843,) it was decided by the Supreme Court of Pennsylvania, that the assignee of an insolvent debtor, is not incapable by reason of his fiduciary character, of becoming the purchaser of the debtor’s real estate, when sold by the sheriff upon a mortgage which incumbered it before the time of the assignment. Mr. Justice Rogers dissented, in a very able opinion. See also, Prevost v. Gratz, (Peters’ C. C. R. 378,) and the numerous Pennsylvania decisions cited in Fisk v. Sarber.

The infants were made parties, and a decree subsequently made accordingly.