Brazel v. Fair

| S.C. | Apr 7, 1887

The opinion of the court was delivered by

Mr. Justice McGowan.

The late Dr. Samuel Fair, of the city of Columbia, died largely insolvent in 1870. He left no children, but a widow, Mary D. Fair, who was the sole devisee and executrix of his will. In July, 1871, the said executrix filed her complaint, Mary D. Fair, as executrix, v. Jacob Geiger et al., to sell the land and marshal the assets of her testator. In this proceeding creditors were called in to prove their demands and were enjoined from suing at law. ' Among the claims proved was one of Sarah J. Brazel, a sealed note for $800, bearing date October 29, 1869. The property stated by the executrix to belong to the estate was all fully administered under the orders of the court; but the lot and brick building in which the testator died and his widow continued to live, near the Central Bank, and lying on Plain street, Columbia, was not included as a part of the estate of the testator, but was held and occupied by Mrs. Fair as a part of her trust estate for life, with remainder over to the children of her deceased sister.

In April or May, 1885, more than thirteen years after Mrs. Fair had filed her creditors’ complaint, as stated, the creditor. Sarah J. Brazel, who had, as before stated, established her demand against the estate, filed her complaint, with leave of the court for that purpose first had and obtained, against Mary D. Fair, as executrix, and the children of Elizabeth A. Marshall, deceased, to subject to the debts of the testator, Dr. Fair, the said house and lot in which Mrs.- Fair lived, alleging that the same was, at the time of his death, a part of his individual estate, and subject to the claims of his creditors. The defendants, Mrs. Fair and-her nephews, the children of her deceased sister, Mrs. Marshall, made earnest defence on several grounds, to which more particular reference will be made hereafter. It was referred to the master to take the testimony, and the following is a mere outline of the case made :

In the year 1842 the testator intermarried with Mary D., one of the daughters of Jesse DeBruhl, of the city of Columbia, and soon after Mr. DeBruhl purchased for his said daughter a lot situate in the city of Columbia, on Plain street, and near where the Central National Bank now stands. There was at that time a wooden building on the lot, which was at once occupied by Dr. Fair and his wife. It did not clearly appear, but it is believed the title was made directly to Dr. Fair, and he claimed it as his own.

In January, 1853, Jesse DeBruhl, having two married daughters,' viz., Mrs. Fair and her sister, Elizabeth A., wife of Col. J. Foster Marshall, of Abbeville, executed and delivered to said Dr. Fair and Col. Marshall, the husbands of his daughters, a deed of trust, ivhereby he conveyed to them a valuable plantation of 1,909 acres on the Congaree River, near Columbia, and one hundred negro slaves by name, to be held by them “as joint tenants in common,” in trust for the sole benefit, use, and behoof of the said Mary D. Fair and the children to be born of her body, and of the said Elizabeth A. Marshall and the children born, or to be born, of her body,” &c., the net profits to be equally divided betAAreen said trustees for the use of their respective wives, Avith the power to sell and reinvest,” &c., &c. This deed was duly proved and recorded. In December, 1853, the trustees sold and conveyed the plantation to John Bauskett for §28,010, payable in bonds, of which one-half were not due until after 1856. In January, 1854, the trustees seemed to have had a partition of the trust property, in which Col. Marshall received ninety-four (94) negro slaves at the valuation of $56,200, and Dr. Fair took two of the slaves at $1,400, and the Bauskett bonds, making $29,410, and leaving a difference still due him, as stated, of $12,395 (afterwards enlarged by Chancellor Carroll to $13,395), and Dr. Fair acknowledged the receipt of $29,410 by him as trustee for his wife, Mary D., according to the terms of the above mentioned DeBruhl deed. (See papers in Brief.)

About the time of this division of the trust estate Dr. Fair placed on the lot whereon he lived, as before stated, valuable permanent improvements in the form of eight tenement buildings, afterwards known as “Fair’s Row,” and, as alleged, in doing so he expended about $24,000 of the trust money realized from the Bauskett bonds. In 1863 he applied to his legal adviser, Joseph Daniel Pope, Esq., for instruction as to. how he could make safe this investment of the trust funds, and upon the advice thus obtained he executed what in the “Case” is called the “declaration of trust,” which recites the DeBruhl deed, the sale thereunder, and the subsequent partition and agreement. It further recites his ownership of the valuable property known as “Fair’s Row,” and the advisability of substituting said property for the said trust fund of $42,800, and thereby discharging in his hands the said funds of the trusts and limitations of said deed. It then declares that, in consideration of the premises, and by virtue of the power vested in him by the said DeBruhl deed, the said lot of land, with the buildings thereon, “is held by me in trust under the provisions of the said deed of trust, for the use and benefit of the said Mary D. Fair, subject to the same conditions, limitations, and powers as expressed in the said deed in reference to the other property therein conveyed,” with covenant of general warranty, &c. This deed was not recorded until 1885. See copy printed in the Brief.

This was during the war, and soon after the “declaration of trust” was executed, all the buildings on the lot were consumed by the fire in which Columbia was burned, and when the war ended there was nothing on the. lot where “Fair’s Row” had stood, but a mass of ruins. The slaves which, in the division, had fallen to Col. Marshall, as trustee, for his wife, were emancipated; and Col. Marshall himself had fallen at the battle of Second Manassas, leaving a will, of which Elizabeth A. Marshall, his widow, was executrix, and his brother, J. W. W. Marshall, executor.

• In 1866 Fair and wife filed their bill in the then Court of Equity against E. A. Marshall, executrix, and J. W. W. Marshall, executor, making parties defendant also the children of Mrs. Marshall (then all infants, except William J., who was barely of age). This bill recited all the proceedings hereinbefore stated, pointed out the mistake of $1,000 in equalizing the shares, and the $12,395 still due by the estate of Col. Marshall, and prayed “that the mistake may be corrected, and that he be paid $13,395 and interest by the executors of Col. Marshall, and that the declaration of trust may be decreed to be a valid execution of the power conferred in discharge of the trustee from all liability for the said sum of $42,805.” Merely a formal answer was put in for the minors, but Mrs. Marshall, as executrix, vigorously resisted the claim that the estate of her testator should be made to pay the $13,895 difference in the partition, and declining to assent to the proposition that the ruins of “Fair’s Row” should be taken in full satisfaction of the trust fund of $28,010 still left, as she alleged, in the shape of the Bauskett bonds, and praying that Dr. Fair, the trustee, who received those bonds, should be required to give security for the forthcoming of the said funds.

The decree of Chancellor Carroll corrected the error of $1,000, but refused to give judgment against the estate of J. Foster Marshall for the $13,395, and also declined to require Dr. Fair to give security for the amount of the Bauskett bonds, and held that Dr. Fair, trustee, had no right, as a general proposition, or under the DeBruhl deed, to use the trust money in purchasing from himself, and therefore that “the investment in the lot and ■buildings referred to could not be sustained. It is voidable at the option of the cestuis que trust. Mrs. Fair, by reason of her coverture, is incapable of consenting to it, and her sister, the other beneficiary, strongly objects,” &c.

Mrs. Marshall died in 1868, leaving several children surviving, remaindermen under the DeBruhl trust and defendants here. The decree of Chancellor Carroll was never appealed to the Supreme Court. Dr. Fair sold much of the old brick and other material on the place, and Avith the proceeds, the debris, and the old brick retained, he commenced the erection of the building that now stands upon the lot. Being unable to go on, he completed the building with money borrowed from Mr. J. J. McCarter, the mortgage of McCarter on the premises being paid by a sale of part of the lot as trust property, ordered by the court to be sold, upon petition of the cestui» que trust. In 1870 Dr. Fair died, and bis childless widow, Mary D. Fair, has been continuously living on the same ever since, electing always to take it, and noAv claiming it, as the very small remnant of her once large trust estate, and her only home.

The cause Avas heard on the pleadings and evidence taken by the master, and the Circuit Judge held, substantially, that although the trustee, Fair, may have expended a large amount of the trust fund in making the permanent improvements of Fair’s Roav, yet he placed them on lands of Avhieh the title was in himself, and thereby so mingled the fund with his oato property as to preclude the cestuis que trust from folloAving it into the lot, and that their only redress was a money accounting against his estate as an ordinary creditor. He also held that the decree of Chancellor Carroll in the case of Fair and Wife v. The executors of J. Foster Marshall et al., decided against the validity of the investment in Fair’s Row, and in doing so, as he construed its effect, all the questions which the cestuis que trust could have made, including that of their election to take under the “declaration of trust,” Avere res adjudicata, and they could never aftenvards make an election to that effect; that “the court had the right and exercised it of objecting on the part of Mrs. Fair, then a married woman, and on the part of the minors, all of whom were properly before the court;” and holding that the house and lot in question was the individual property of Dr. Fair at his death, ordered it sold for the payment of his debts generally.

From this decree Mrs. Fair, and the children of her deceased sister, Mrs. Marshall, Avho are the remaindermen under the DeBruhl deed, appeal to this court. The exceptions are numerous and long, and as they are in the Brief, need not be set out here. We think it proper, however, to make the preliminary observation, that this is not an action at law for the recovery in specie of the house and lot. A mere creditor has no legal title to the property of his debtor, whether living or dead. His only right, when the debtor is dead, is to sue his personal representative to judgment, and to go into equity to subject what is ascertained to be his property, to the payment of his debts. We do not see that there wTas any necessity for this separate action, and we will consider the questions made as if they had arisen in the orderly progress of the cause of Mary D. Fair, as executrix, v. Geiger et al., to marshal the assets of the estate of Dr. Fair. Being a case in chancery, this court is required to review the findings of fact as well as the rulings of law in the Circuit Court.

In order to prevent confusion, let us consider how the matter would stand, leaving out, for the moment, the record in the case of Fair and Wife v. The executors of Marshall et al. (1866). One of the exceptions complains that “his honor should have decided (what he left undecided) that the trust funds derived from the trust estate were by the trustee put into the buildings erected on the lot known as'Fair’s Row ; and having so decided, he should have held, as matter of law, that thereafter the buildings became part and parcel of the freehold, not severable therefrom ; and having thus held, he should have further held, as matter of law, that the subsequent destruction of the buildings neither changed the nature of the estate thus created, nor the equities of the cestuie que trust.”

The Circuit Judge did not, in terms, decide, but he seemed rather to accept as a fact, that Dr. Fair used $20,000 or $24,000 of the trust money in building Fair’s Row. We agree with him in that. We have read the testimony carefully. Mrs. Fair so stated most positively, and Dr. Fair so stated in terms to Mr. Pope when he drew the “declaration of trust.” It is true that Mr. Pope was then the legal adviser of Dr. Fair, and certain confidential communications to a lawyer are not to be disclosed. But Mr. Pope, a gentleman of the highest character, was made a witness to the paper, and as such he had the right to speak at least as to its consideration. Moffatt v. Hardin, 22 S. C., 11. But without turning aside now to go into that, we think ample confirmation of the fact is found in the time at which the improvements were made, the want of proof or probability that Dr. Fair had the necessary means from any other source, his habits of living and subsequent conduct, and other circumstances in the case. We are judicially satisfied of the fact.

We also think the evidence shows that the house now on the lot was, for the most part, built out of the ruins of Fair’s Row, and a sale of part of the lot itself ordered by the court as trust property. It was not shown that, immediately after the war, Dr. Fair had the means to build it, and if he did contribute any of his own means, it did not appear, or how much. Wc regard the house now on the lot as a reproduction and remnant of Fair’s Rowr, as if it were one of the original eight tenement buildings of that row', which, in some way, had escaped the destruction which overwhelmed all the others.

In this state of facts what would be the equities of the cestuis que trust ? “When trustees purchase property with trust funds, and take the title thereto in their own names, without any declaration of trust, the trust arises in respect to such property in favor of the cestui que trust, or other beneficiary. Equity regards such a purchase as made in trust for the person beneficially interested.” 3 Pom. Eq. Jur., § 1049. If Dr. Fair had purchased Fair’s Row entirely with trust funds, we suppose there is no doubt the court would declare that a trust had attached to it, and the cestuis que trust would have the option to take it.

But it is said that Dr. Fair owned the lot upon which the improvements were made, and he may have contributed some of his own means in making them, which makes this a case of a trustee mixing trust funds with his own,. and the money in that way having lost its identity could not be followed; and this on the authority of McNeil v. Morrow, Rich. Eq. Cas., 175. We do not think the case cited goes so far. It holds the undoubted doctrine that “so long as property held in trust or a trust fund can be traced and distinguished, it will enure to the benefit of the cestui que trust, and all claims of the creditors of the trustee must be postponed until the trust is discharged.” But that case does not undertake to determine when the trust funds cannot be “traced or distinguished.” The rule contended for would certainly tend to make the way plain and easy for am insolvent trustee to put the trust funds beyond reach, and thus practically escape all responsibility. The trustee violates his duty when he mixes trust funds with his own, and if he does so, “the burden of proof rests upon him of showing most conclusively what portion is his, and whatever of the mixed fund he cannot thus show to be his own, even though it be the whole mass, will be awarded to the beneficiary.” 2 Pom. Pq. Jur., § 1076.'

The equitable doctrine applicable to trustees who mix trust' funds with their own, is somewhat refined, but, as we understand it, seems to be well stated by Jessel, M. R., in the case of Knatchbull v. Hallett, 13 Ch. Div., 696, as follows: “The moment you establish the fiduciary relation, the modern rules of equity, as regards following trust money, apply. * * * The doctrines are progressive, refined, and improved, and if wre want to know what the rules of equity are, we must look rather to the more modern than the more ancient cases. * * * The modern doctrine of equity, as regards property disposed of by persons in a fiduciary position, is a very clear and well established doctrine. You can, if the sale was rightful, take the proceeds of sale if you can identify them. If the sale is wrongful, you can still take the proceeds of sale in a sense of adopting the sale for the purpose of taking the proceeds if you can identify them. But it often happens that you cannot identify the proceeds. The proceeds may have been invested together with money belonging to the person in a fiduciary position in a purchase. He may have bought land with it, for instance, or he may have bought chattels with it. Now, what is the position of the beneficial owner? In that case, according to the now well established doctrine of equity, the beneficial owner has the right to elect either to take the property or to hold it as a security for the amount of the trust money laid out in the purchase; or, as we generally express it, he is entitled to his election, either to take the property or to have a charge on the property for the amount of the trust money,” &c.

This view, as it seems to us, is corroborated and fortified by the “declaration of trust” in 1863. We do not see how the doctrine that a trustee cannot purchase from himself can be made to apply to this case, in which the question is, not as to the regularity or legality of the investment, but as to the rights of the beneficiaries to claim under a deed made to secure an investment which was “unauthorized.” “When the trust is not created by the instrument of conveyance, it maj1' be sufficiently declared and evidenced by the trustee to whom the land is conveyed, or who becomes holder of the legal title, and this may be done by a writing executed simultaneously with, or subsequent to, the conveyance, and such writing may be of a most informal nature.” 2 Pom. Eq. Jur., 1007, and notes. Dr. Fair had put $20,000 of trust funds into Fair’s Row, but the title of the lot on which it stood was in himself. Could he not dedicate, substitute that property, lands, and houses, as the trust property of his wife, and especially in view of the fact that he had put her trust funds into it? He certainly owed the money, and it was most natural and creditable, if not his duty, to do so. It was very little more than confessing a judgment to secure it, or giving a purchase money mortgage. It is most true, as Chancellor Carroll held, that the investment was “unauthorized,” and did not bind the cestuis que trust, if they preferred to retain their right to have a money account- against the trustee. But the trustee himself could not disclaim it; and if (the trustee being insolvent and not personally able to pay) the beneficiaries chose to take under it, and in that view adopting the investment, why should they not have the right to do so, and hold it as their trust estate ?

It is, however, earnestly urged in opposition to this view, that in the case of Fair and wife v. Elizabeth A. Marshall and J. W. W. Marshall, as executors of J. F. Marshall, et al., the court refused to confirm the investment, holding that “the investment in the lot and buildings could not be maintained,” and Mrs. Fair and the other defendants, having been before the court in that case, are bound by the judgment, and, as a consequence, the right of election which they had before was adjudged against them, and is irrevocably gone. The judgment in that case certainly determined conclusively everything that was properly in issue before the court and decided 'by it. But the precise points' decided must be determined by the pleadings and scope of the bill and the decree. The bill of Dr. Fair claimed that in the partition of the trust property there was a mistake against him of $1,000, and that there was still due him $12,395, which, by correcting the mistake, was $13,395. To recover this, he instituted the proceeding against the executors of J. F. Marshall, and in order to make that expected recovery his own individual property, he prayed the court to confirm the “declaration of trust,” substituting Fair’s Row in full payment and discharge of the whole trust fund in his hands. No mention whatever was made of the right of option or election, but all the questions were made strictissimi juris. Mrs. Fair was co-plaintiff with her husband, - and the minors made formal answer, submitting their rights. It was not alleged that Dr. Fair w'as insolvent, and no reference was asked for to ascertain the facts. Indeed, it did not appear that Mrs. Marshall even knew that the proceeds of the Bauskett bonds had been expended in the buildings on Fair’s Row, which was then in ruins. The negro slaves, which had been assigned to her husband, were all emancipated, and she very naturally, as his executrix, made vigorous opposition to the recovery claimed against her of $13,395, and all the proceedings on which the claim was founded.

Chancellor Carroll held that Dr. Fair had no right, as a general proposition or under the DeBruhl deed, to use the trust money in purchasing from himself, and, therefore, that “the investment in the lot and buildings referred to could not bo sustained. It is voidable at the option of the cestuis que trust. Mrs. Fair, by reason of her coverture, is incapable of consenting to it, and her sister, the other beneficiary, strongly objects,” &c. The chancellor ivas right on all the points. After holding that the investment could not be “sustained” as in full discharge of the trustee, he held that it was voidable at the option of the cestuis que trust, and he abstained from confirming it, because Mrs. Fair, by reason of her coverture, was incapable of consenting to it, and her sister, Mrs. Marshall, who was only interested in remainder, obj ectcd.

We are unable to see how this can be construed into an adjudication, deciding and concluding negatively Mrs. Fair’s right of option. It seems to us rather as a refusal to determine the matter of her election on account of her disability, leaving her to make it afterwards, if her disability should be removed. The judgment was, and is, binding on the parties as to the questions of the right of the trustee to make the investment and to recover the $13,395. But we do not consider that the question as to the right of election was before "the court, or was necessarily involved in the issues, or actually adjudged. The decree cannot be construed, against its own terms, to have adjudged adversely Mrs. Fair’s right of option to take what was left of the investment, although it was made without authority. If it had turned out as Dr. Fair insisted, that he had the power to make the investment, there would have been no need of option on the part of the beneficiaries, for Fair’s B.ow would have been the trust estate with or without their consent. The occasion for option never arose until the decision was made that the investment was “unauthorized.”

The familiar doctrine of election is, that “when one is put to his election he is not bound to elect until all the circumstances necessary to enable him to make a deliberate and discriminating choice are ascertained, and it seems if he makes an election without it, he is not bound by it.” Pinckney v. Pinckney, 2 Rich. Eq., 219; 2 Story Eq., §§ 1097, 1098. But even if it should be held that Mrs. Marshall, who was only one of the remainder-men as to this trust of her sister, Mrs. Fair, and is now dead, must be considered to have elected against the investment, we cannot see how in a case like this that should bind all the other parties. See 1 Pom. Pq. Jur., § 516, and notes.

If it was intended to reach beyond the questions made as to the legal right of the trustee to make the investment and to recover the $13,395, w7e think it w7as error to hold that “the court had a right and exercised it, of objecting on the part of Mrs. Fair, then a married woman, and on the part of the minors, all of whom were before the court.” These parties at that time could not, on account of disability, make an election or option for themselves, and, as we have seen, Chancellor Carroll did not make an election for them, but distinctly disclaimed doing so. The election of Mrs. Fair at. that time w7as in no way necessary to the decree rendered by Chancellor Carroll; and we assume that if he had -considered himself as having the right, he could not, without great necessity, have undertaken to make an election for her and her minor nieces and nephews in reference to a matter of vital consequence to them, and as to which he had no information whatever. See 1 Pomeroy, § 509.

It has always been the just boast of equity that it protects those who cannot protect themselves, and that it delights especially in guarding with watchful care the rights of infants and married women. We do not think that Mrs. Fair has ever elected, either in person or through the chancellor, or by the force of the judgment of the court, to repudiate her husband’s declaration of trust; but, on the contrary, has always and under all circumstances, before his death and after, by deed as well as by word, claimed to hold under that deed; and that, having now expressed her option to take the house and lot in which she lives as the small remnant of her once handsome trust estate, she has a right to do so, holding it as trustee for the remainder-men, in accordance with the terms of the DeBruhl deed and the declaration of trust of 1863.

This makes it unnecessary to consider the other defence of laches and the statute of limitations.

The judgment of this court is, that the judgment of the Circuit Court be reversed, and the complaint dismissed.