Dobson v. Racey

3 Sand. Ch. 60, 1845 N.Y. LEXIS 554, 1845 N.Y. Misc. LEXIS 67

• Court: New York Court of Chancery
• Decided: October 3, 1845
• Status: Published

Opinion

The Assistant Vice-Chancellor.

The validity of purchases made by fiduciaries, of the property entrusted to them, has been much considered recently in the courts of equity, both in this state and in England. And it is now a settled rule both there and here, that no party can be permitted to purchase an interest, where he has a duty to perform which is inconsistent with the character of purchaser. (Greenlaw v. King, 5 Lond. Jur. Rep. 18, before Lord Cottenham; De Caters v. Le Ray De Chaumont, 3 Paige, 178; Van Eps v. Van Eps, 9 ibid. 237; Torrey v. Bank of Orleans, 9 ibid. 649; Hawley v. Cramer, 4 Cowen, 717; Rogers v. Rogers, Hopk. R. 515; Hamilton v. Wright, 9 Clark & Fin. 111; Cram v. Mitchell, 3 N. Y. Legal Obs. 163; and Dickinson v. Codwise, Jan. 24, 1844, before the Assistant Vice-Ghancellor.)

(a)

In this instance, whether Charles Racey is to be regarded as a trustee, or as an agent, the rule was applicable to him. His interest as a purchaser was in direct conflict with the interest of Dobson, his constituent or cestui que trust. His purchase caused one of those collisions between interest and duty, which equity has wisely and resolutely prohibited.

It is said that there was no fraud committed or advantage taken by Racey. This makes no difference in the application of the principle. The very position of the agent or trustee, however, gives him an undue advantage as a buyer; and when he avails himself of such an advantage, he is guilty of a constructive fraud.

The transaction in question is certainly not free from suspicion oi wrong. The conveyence to Harrison was executed within six weeks after the power was conferred upon Racey, and after the constituent had left the country. If such a speedy execution of the power had been in contemplation, the parties would naturally have sold the property and completed the sale before Dobson’s departure. But I need not dwell upon this aspect of the case.

Again, it is urged that no injury ensued to Dobson or any one else. This also, if true does not alter the case. The law declares the sale unwarrantable on grounds of public policy, irrespective of any proof of injury or intentional wrong. In Greenlaw v. King, both the Master of the Rolls and the Chancellor fully exonerated the party from every charge of bad faith or wrongful intention; yet they rigidly enforced the principle which I have stated.

Nor is it an admissible ground for making an exception to the rule, that the trustee paid the fair value of the property. If a trustee desire to become the purchaser in good faith, his simple course is to resign his trust, and appear as a bidder or purchaser.

It may be true, as was urged, that a foreclosure of Racey’s mortgage, or a sale to a bona fide purchaser, would have left no surplus for Dobson. Either of those modes was open for Racey to pursue, but he adopted neither ; so that it is useless to speculate on what might have ensued from them.

Another ground of defence is, that Mrs. Dobson joined in the sale, and received §100, from Racey. This sum being paid to her as the consideration, may be regarded as given for her inchoate right of dower. Whether it was paid to her for.that cause, or as a surplus, it cannot confirm a sale which was irregular as against Dobson. She was not clothed with any authority in respect of his estate in the land, and her assent to the conveyance to Harrison is of no avail against Dobson. He conferred on her one-half of the surplus, but she had nothing to do with its creation, under the instrument which he executed to Racey,

The complainant as the heir of Dobson is entitled to redeem

the lands in question. There is however a defect of parties which precludes the entry of a decree to that effect in this stage of the cause. The heirs or devisees of Racey, are necessary parties to the suit, and it must stand over in order that they may be brought before the court. If Mrs. Racey succeeded to all the title of her husband, the bill may be amended. Otherwise there will have to be a supplemental bill.

Decree accordingly.

These cases are reported in 1 Sand. Ch. R. 214, 251. And see Charter v. Trevelyan, (11 Clark & Fin. 714, S. C. 4 Law Journal, N. S. Chancery, 209,) before the Master of the Rolls; where after thirty-seven years, a purchase by an agent of the lands which he was authorized to sell, was set aside as fraudulent; the facts having remained unknown to the principal, an4 the saje having been made at a great nnder-value in price.