Mason v. Martin

4 Md. 124

Opinion

Tuck, J.,

delivered the opinion of this court.

On the 8th of Decnmber 1845, the complainant executed a deed of trust to Martin and Kemp, two of the defendants, to indemnify them against loss on account of certain acceptances for the accommodation of Abram Barnes. The deed contained a power of sale, by the trustees, for the payment of any balance that might be due, u upon oath made before any justice of the peace of the State of Maryland, by said David G. Martin and Lewis G. Kemp, or in case of the decease of either, by the survivor, or in case of the decease of both, by the executor or administrator, as the case may be, of such survivor.” Afterwards there being a large balance claimed by Martin and Kemp, one of them made the required affidavit, and the property was advertised and bought by McAttee, for the trustees, as their agent, to be resold on their account. At the resale it was purchased by the defendant Nesbitt. The bill is filed to vacate these sales. The case having been submitted on bill and answers, without replication, we are to consider the allegations contained in the answers as true. Story's Eq. Pl., sec. 887. 12 Gill and Johns., 271.

It is well settled that a trustee cannot purchase for himself, at his own sale, directly or indirectly. The policy of the law forbids it. And if he does the sale will be set1 aside on the proper and reasonable application of the parties interested. This is established on the soundest principles of equity, to remove all temptation from the trustee to promote his own interest by violating the trust. 3 Gill and Johns., 184. 4 G. & J., 379. But while this principle is conceded, on the part of the appellee it is insisted that the present appellant has no real interest in having the property again put in the market, because it will not sell for enough to pay the claim of Martin and Kemp; and under such circumstances, it is said, that the trustees had a right to purchase the property in order to save themselves from loss, giving the appellant the benefit of the resale.

It does not appear that the sale to McAttee was made on account of Martin and Kemp, as trustees, in order that a resale, on more reasonable terms, might be made for the benefit of the cestui que trust. On the contrary, he was authorised to buy the property, as the agent of Martin and Kemp, and to resell it on their account. It. is true, they say in their answers that they intended to give Barnes the benefit of any profits on the resale, but this does not affect the complainant’s right to question the validity of the original sale. This subject was very fully discussed by Chancellor Kent, in the case of Davoue vs. Fanning, 2 Johns. Ch. Rep., 252. Similar arguments were there urged in support of the sale — that it was made at public auction, bona fide, and for a fair price, — but the court said the case came clearly within the spirit of the principle, that if a trustee, acting for others (and there he was acting for his wife as one of the cestui que trusts, as Martin and Kemp were interested here) sells an estate and becomes himself interested in the purchase, the cestui que trust is entitled to come in, as of course, and set aside that purchase, and have the property re-exposed to sale, without showing actual injury, if he chooses to say, in any reasonable time, that he is not satisfied with the first sale. It is no hardship on the tiustee to hold that he alone shall not buy. It is part of his contract that in accepting the trust for the benefit of others he will not act for his own advantage — and, besides, if he has an interest in becoming the purchaser he may do so by fairly dissolving his relation with those interested in the property. Bui, as strictly as courts of equity have enforced this principle for the protection of cestui que trusts, the security of the trustee making the purchase has not been overlooked, The property in some cases will be put up at the original price in addition to expenditures for improvements, and if it will not bring more on the resale, the purchase will stand — the trustee in the event of a resale being allowed for the improvements. The quesiion in all its bearings, and the cases are so fully examined in the case to which we have referred, that it is unnecessary here to cite other authorities.

But it is insisted that this sale should not be disturbed because the agent and attorney of the appellant was present at the sale, and that her acquiescence may be inferred. It is true that the rule that a trustee cannot buy at his own sale is to be taken with some exceptions, “ as if the cestui que trust be of full age at the time of the sale, and under no disability, and, with a full knowledge of the transaction lies by for an unreaable time, or, being under age, or other disability, does not in a reasonable time after corning of age or the disability is removed, seek to set aside the sale, or treat the trustee as a purchaser for his benefit, it will be considered as an acquiescence in the sale, and the trustee will not be disturbed in his purchase.” 4 G. . We are then to inquire whether there was'any acquiescence or unreasonable delay on the part of the complainant in filing her bill ? The sale to McAttee, as agent of the trustees, was made in March 1847. It does not appear that the complainant had any notice of that sale, or at what time she discovered that he had bought the land for the trustees. McAttee as agent for Martin and Kemp, sold to Nesbitt in September 1848. The bill was filed in September 1850. If we assume that the complainant, by her agent, was present at the last sale, and made an offer for the land, she would not be bound',- as having thereby acquiesced in the sale to Nesbitt*, unless she was then aware that the trustees had violated their duty in making the first sale, under which the title was to pass. She must have had a full knowledge of the transaction. There are two grounds of objection to this sale — that one only of the creditors made the affidavit of the balance due, and that the trustees bought at their own sale. As to the first objection she was certainly in no default, as far as we can gather from the record. The present is not unlike the case of Webb vs. Mong, 2 Gill, 163, where eighteen years had elapsed from the sale to the filing of the bill. Applying the reasoning of the court in that case to the one before us, it would appear to have been an ordinary sale to McAttee and by him to Nesbitt; and it seems only to have been discovered, from the answers, that the terms of the deed had not been complied with, as to the manner of proving (he claim against Barnes. In that case (he complainant attended the sale and was requested to bid, and declined,- but did not express any dissatisfaction therewith.* It did not appear that he then or at any subsequent time, until the commencement of the suit, had any notice or knowledge that .Boyd was purchasing for the trustees. Supposing the complainant was, by her agent., present at the sale to Nesbitt, and made an offer for the land, it docs not appear that she or her agent had any knowledge that McAttee had purchased for the trustees,-or that there was any defect in the affidavit. Questions of this kind must depend on the particular circumstances of each case. In the absence of further information we cannot say that there was unreasonable delay. The Counsel for the appellees contends that the affidavit of one of the creditors was sufficient. We do not think so. The complainant was about to convey this land as security for,advances to be made for a third person, with whose business she does not, appear to have had any connection or interest. Relying upon Martin, and Kemp and Barnes, the only guarantee she required was the oath of both the creditors that the balance they might thereafter seek to recover against the land, was actually due. The deed appears to have been drawn with reference to this mode of proof, and being a condition precedent, to a sale, we are of opinion that it should have been performed. In the case of Cross vs. Cohen, 3 Gill, 257, it was provided, in a deed of trust, that certain claims should be paid upon the certificate of Warren and Wood, or one of them. The court held this to be a condition precedent to be strictly complied with (269, 272.) We can perceive no difference in principle between the two cases.

An affirmance of the decree is claimed by Nesbitt, as a bona fide purchaser, without notice. The deed of trust being upon record, was notice to him that a sale could not be made without the affidavit of both the creditors ; indeed his answer admits that he bad knowledge of the arrangements between the parties as far as they are set forth in the deed of trust. But he denies any knowledge of the arrangements under which Mc-Attee purchased the land. Under the circumstances of this case we do not. think that he can claim to be in any better position than his vendors, Martin and Kemp. If they derived no title under the first sale they could pass none to Nesbitt, unless by the express or implied assent of the cestui que trust, or conduct amounting t.o acquiescence. It is not. apparent that Nesbitt will likely be injured by a resale. He has paid part of the purchase money, but it is not averred that the property has been enhanced in value by improvements ; yet, if this be so, he should have an opportunity of showing his expenditures. It may be that the proceeding will not result in any advantage to the complainant. If this be so we cannot look to it. Trustees who purchase at their own sales, and those claiming under them, take the property subject to this equity of the cestui que trust — the right of setting the sale aside, at his option, if he has not confirmed the transaction with a knowledge of the facts. Adam's Equity, ch. 5. 68 Law Lib., 168, 169. But she has an interest in the amount of sales, because that is to be the standard of her recovery against Barnes. If the land is sacrificed without the fault of Barnes, and she submits, she cannot claim more against him ; and, so, if it sells for its full value and she recovers that sum against him, she will be fully indemnified for her suretyship. A resale should, be made according to Davoue vs. Fanning, 2 Johns. Ch. Rep., 271, for which purpose, and for taking an account of the expenditures and improvements, if any, the cause will be remanded ; and as this controversy has grown out of the unauthorised acts of Martin and Kemp, the costs will be decreed against them.

Decree reversed with costs, and cause remanded.