2 Whart. 53 | Pa. | 1837
When the trustee himself, becomes the purchaser of the trust estate, the cestui que trust may set aside the purchase. This equitable principle is recognised and enforced by Lord Eldon, in the case, Ex parte Bennet, (10 Ves. jun. 381,) and by Chancellor Kent, in Davoue v. Fanning, (2 John. C. R. 252,) who with his usual ability and legal research, has reviewed all the authorities having any bearing on the question. It has also received the sanction of this Court, in the lessee of Lazarus v. Bryson, (3 Binn. 54,) and the lessee of Moody v. Vandyke, (4 Binn. 43,) and in the case of Black’s Adm’s v. Black, decided at our last term at Sunbury, and not yet reported. The principle extends not only to a trustee, properly so called, but to judicial officers, and all other persons, who in any respect, have a concern in the disposition and sale of the property of others, whether the sale is public or private, judicial or otherwise. It is immaterial whether the sale was public or private, or for a bona fide price, for it is at the option of the cestui que trust, to avoid the sale, whenever the purchase has been made, in opposition to this salutary restriction. In addition to the cases referred to, these principles are supported by an unbroken current of authorities, most of which have been cited at the bar. It is, however, denied that they apply to a judicial sale. It was at one time doubted, whether they were applicable to a sale at auction, but it has been since held, that such sales come within the reason of the rule. 10 Ves. 381; 2 Johns. C. R. 252. The case of Moody v. Vandyke, was the case of an administrator who purchased the property sold by order of the Orphans’ Court, which was public, and partakes of the nature of a judicial sale; and the case of Lazarus v. Bryson, (3 Binn. 39), was a judicial sale. The purchaser at the sheriff’s sale, was the agent of the sheriff himself, and the counsel endeavoured, but without success, to distinguish it from the case of a trustee, who sells lands in pursuance of his trust, and himself becomes the purchaser. It was contended, that because the sheriff derived his authority from the law, the sale was good. But the Court were unable to comprehend the force of the distinction. Black’s Adm’s v. Black, ‘decided at Sunbury, was also a judicial sale. The case was this: Two persons were the joint owners of a judgment; and the lands being sold on the judgment, one of them became the purchaser at the sheriff’s sale, and took a deed to himself for the' property, which he afterwards sold at an advance; and the Court decided, that the creditors of the other, were entitled to the one-half of the price for which the land sold. The principle has been adopted in Chancery, to prevent fraud, to avoid, as far as possible, even the temptation to commit fraud. The ground is, that though in this particular case, there may be the most satisfactory evidence^ that the transaction amounts to no more than what the general interests of justice-require,
It remains now, to inquire whether this case is embraced within the principles stated. The agreement on which this controversy arises, is prolix, of course obscure, almost studiously so, but stript of its verbiage, it is in substance this. The Pennsylvania Company for insurances on lives and granting annuities, loaned to the plaintiffs, eight thousand dollars. To secure the repayment of the money, the plaintiffs, who were mortgagees, assigned the mortgage mentioned in the agreement, to the company. Upon the mortgage, ten thousand dollars remained to be paid in annual instalments, of one thousand dollars each, at an interest of six per cent, upon the whole amount, to be be paid by the mortgagor annually. It may be fairly inferred from the terms of the agreement, that the defendants took the assignment of the mortgage and bonds, as a collateral security, for the repayment of the eight thousand dollars, and the interest, but with the understanding that they were not to resort to the plaintiffs for the. payment, unless they were unable, after due and proper diligence, to recover it from the mortgagor. And this would appear to be the agreement, from 'that part of it which provides—that the said company shall have full power and authority, to extend, change and alter the day and time, upon all and any of the instalments, except only the two last instalments, which neither were, nor were intended to be assigned; and which further pro
It is also apparent that it was not the intention of the parties to pass any interest in the bonds and mortgages, beyond the first eight instalments, amounting .to the sum of.$8000, the sum loaned; nor was it intended to give the company any authority beyond what might be necessary to enforce the payment of such sum, unless they were empowered to receive the amount of the annual interest, as it became payable, or the whole amount of $10,000, which remained unpaid. This, the company were authorised to receive, and apportion between themselves and the plaintiffs, according to their respective interests. And this, from the account exhibited, was done, as long as the morgagor continued to pay the annual interest upon the whole amount due on the bonds.
That this was the agreement, appears from this consideration. Nothing is transferred to the company except what is expressly given to them for their own exclusive use and benefit. The words of the instrument are, “ to have, hold, levy, take and receive, all and singular the sum and sums of money, hereditaments and premises, hereby granted and assigned, with the incidents and appurtenances thereunto belonging, or in any wise appertaining to the Pennsyl vania Company for insurances on lives and granting annuities, aforesaid, their successors and assigns, forever.” And it further appears, from the part of the agreement which declares, that “ whenever the said company shall have received the full amount of the said sum of $8000, and the interest thereof, then and in such case, all the estate and'interest, power and authority hereby given and granted, shall cease and determine.” And also, from the clause in the agreement before referred to, which gives the company full power and authority to change all the times fixed for the payments at their pleasures, except the two last instalments, of $1000, with which they are not permitted to interfere.
If this be the fair import of the agreement, .it is difficult to perceive any design to create a trust for the benefit of the plaintiffs. If we infer such an intention, it would be in contradiction to the terms
To permit the plaintiffs to recover would be contrary to the spirit, as well as the letter of the agreement. For with the exception of the excess of interest beyond the $8000, payable annually upon the whole amount, they were not bound to pay over on account to ihe plaintiffs, for any sum received by them, until they had actually received or recovered from the obligor, the full amount of $8000, with the interest. If they had received incidentally more, they were to pay the surplus to the plaintiffs. The words of the agreement are, “ that whenever the company shall have received the full amount of $8000, and the interest, that then and in such case, all the estate and interest, power and authority, given and granted, shall cease and determine; and if there shall then he in their possession any balance or surplus, that the company will, upon demand, pay over, or otherwise appropriate the same, as before mentioned.” And then follows an engagement upon the part of the obligees and mortgagees, to give a preference to the defendants, in purchasing the last instalments. And it is agreed, that if the company do not purchase, they will not, in any way interfere with, or impede the recovery thereof, but will, upon demand, assign and reconvey same to the said plaintiffs, according to their respective interests. The company are not accountable for any money which they shall receive on account of the bond and mortgage, unless for a surplus, recovered from the obligor, beyond the $8000, and interest. But it is not pretended that they have received any surplus, nor even the amount of the $8000, with the interest. But this part of the agreement also shows, that the company were not entrusted with the collection of the last instalment. Instead of being so entrusted, they are expressly prohibited by the agreement, if they did not purchase, in any way to interfere with, or impede the recovery; but upon receiving or recovering from the obligor or the mortgagor the $8000 and interest, they are required to assign and reconvey, upon demand, the bonds and mortgage to the plaintiffs, and according to the respective interests. The plaintiffs, therefore, not having parted with the right to the $2000, mentioned in the agreement, nor authorised the company to collect it, must have intended to reserve that_right to themselves; and hence the insertion of the provision to prevent the company interfering or impeding them in the recovery of the amount due them on the mortgage.
If this he the fair construction of the agreement, there is no pretence to say, that there was any special trust and confidence reposed by the plaintiffs in the company, so far as respected the $10,000, the two last instalments of which belonged to the plaintiffs. The company were only bound to take care of their own interest, leaving to the plaintiffs the protection of their own; for there can be no-doubt, that a judgment or mortgage creditor may purchase in the
The transaction which gave rise to the controversy here, when stripped of all unnecessary verbiage introduced into the agreement between the parties, was simply a loan of eight thousand dollars by the defendants to the plaintiffs, to secure the repayment of which the latter assigned.vthe mortgage and bonds, mentioned in the agreement, upon which ten thousand dollars remained- to be paid thereafter by annual instalments, with an interest of six per cent, upon the whole amount thereof, to be paid by the mortgagor or obligor annually. From the terms of the agreement, it is fairly to be inferred, that the defendants took the assignment of the mortgage and bonds merely as a collateral security for the repayment of the eight thousand dollars with interest thereon; but not to resort to the plaintiffs for the payment thereof, unless so far as they should be unable to recover the same or any part thereof upon the mortgage and bonds, after using reasonable diligence for that purpose. That such was the understanding and intention of the parties, is perfectly manifest from that part of the agreement, which provides “that the said company, (the defendants,) shall have full power and authority to extend, change, and alter the day and time upon all or any of the said instalments, (meaning the instalments mentioned in the mortgage,) excepting, only the said last instalments, (meaning the two instalments which became last payable by the terms of the bonds and mortgage, and were not intended to be assigned by the plaintiffs to the defendants,) are by the conditions of the said obligations, respectively made payable, but that then, and in every such case, the amount thereof shall be deemed, considered and accounted for by the said company, (defendants,) as if the same had been actually paid off and discharged at the day and time fixed and appointed therefor; and that thenceforth the said parties of the first part, (meaning the plaintiffs,) or any of them, shall not in any way be liable for, or charged with any default or loss of the sam.e or any part thereof, or the interest thereon afterwards accruingthus implying most clearly, that if the defendants gave no indulgence upon the bonds and mortgage, for the eight thousand dollars coming to them, and used due diligence by means thereof, to collect the same with interest, but failed therein, from the inability of the obligor to pay, and the insufficiency of the mortgaged premises to produce the amount upon a judicial sale thereof to be made, then the plaintiffs should make good the loss or deficiency. If this were not the true meaning and agreement of the parties, the clause recited ought not to have been'intro duced, but rather one of a directly opposite tendency.
That it was the intention of the parties that nothing should pass to the defendants beyond the eight thousand dollars, appears by the agreement between them in several parts thereof; first, from the circumstance that nothing is thereby transferred to them, except w'hat is expressly given to them fur their own exclusive use and benefit. The words of the habendum are, “to have, hold, levy, take and' receive all and singular the sum and sums of money, hereditaments and premises hereby granted and assigned, with the incidents and appurtenances thereunto belonging, or in anywise appertaining, to the Pennsylvania Company for insurances on lives and granting annuities aforesaid to the only proper use, benefit, and behoof of the Pennsylvania Company, for insurances on lives and, granting annuities aforesaid, their successors and assigns forever.” And secondly, from that portion of the agreement which declares, “ that whenever the said company, (the defendants,) shall have received the full amount of the said sum of eight thousand dollars, and the interest thereof, that then and in such case all the estate, and interest, power, and authority hereby given and granted, shall cease and determine.” And thirdly, from the clause of the agreement first recited above, giving the defendants full power and authority over all the instalments, to change and alter the times fixed for the payment thereof at pleasure, excepting the two last of one thousand" dollars each, with which they were not to interfere. '
Having thus shown from the agreement itself of the parties, the real character of the transaction between them, can it be pretended that the .object or design thereof was to create a trust for the benefit of the plaintiffs 1 or is it not perfectly manifest that they thereby only intended to show that the plaintiffs were debtors to the defendants in the sum of eight thousand dollars, for that amount of money borrowed of them, and that the plaintiffs had thereby given to. the defendants a security for the repayment of the same with a guaranty of its goodness. 'To raise a trust in favour of the plaintiffs, would be to contradict the express and positive terms of the agreement,
To permit the plaintiffs to recover here, would not only be contrary to the express letter of their agreement, but to the whole tenor, spirit and meaning'of it; for with the exception of the excess of the interest beyond that of the eight thousand dollars, becoming payable annually upon the entire amount of the debt due from Lang■stroth, the obligor, upon his bonds and mortgage, which the defendants were authorised to receive as already mentioned, unless they received it as it became payable from him, they were not bound to pay over or to account to the plaintiffs for a cent received by them, either directly or indirectly, until they had received or recovered first from the obligor upon the bonds or mortgage, the full amount of their eight thousand dollars with the interest thereof; and having received this, if it should be that they had incidently received more from the obligor in any way, then they were to pay the surplus to the plaintiffs.' The words of the agreement in respect to this are, “ that whenever the said company (defendants,) shall have received the full -amount of the said sum of eight thousand dollars and the interest thereof, that then and in such case all the estate and interest, power and authority, hereby given and granted, shall cease and determine; and if there shall then be in their possession any balance and surplus, that they will upon demand pay over or otherwise appropriate the same as is above mentioned,” (meaning as the plaintiffs and Robert Campbell, the obligees and mortgagees named in the bonds and mortgage, should direct,-) and then follows an engagement upon the part of the obligees and mortgagees, to give' a preference to the defendants in purchasing the last instalments mentioned in the bonds, if they .should thereafter wish to do so;' after which it is thus agreed; “ but if they shall not purchase the same, that they will not in any way interfere with or impede the recovery thereof, but will upon demand assign and reconvey the same to the said parties of the first part, according to their respective interests whence it appears most distinctly that the defendants were not to be accountable to the plaintiffs for any moneys which they should receive on account of the bonds and mortgage or by
Besides, it is not claimed, nor indeed could it be, consistently with the agreement, that the plaintiffs have any right to demand a re-assignment of the bonds, as the defendants have not yet recovered from the obligor, the amount of their eight thousand dollars with interest, then how can it be, that the plaintiffs are entitled to recover the last instalments, which are what, is claimed here, from the defendants, without being entitled to the bonds 1 This would be clearly in direct contradiction to the express terms of the agreement; and involve the absurdity of the plaintiffs being entitled to recover these last instalments from the defendants, without their having been paid them, either directly or indirectly, by the obligor ; or even a right on the part of the plaintiffs, to have demanded them of the obligor; for until the obligor shall have paid the eight thousand dollars, and the interest thereof to the defendants, the plaintiffs according to the agreement, can have no right to either the bonds or the mortgage; nor yet to receive any money thereon, from the obligor.
'But those pa'rts of the agreement recited last, show also very clearly, that the defendants were not thereby entrusted with the collection of the last instalments mentioned in the bonds, amounting to two thousand dollars, and which the plaintiffs now attempt to make the defendants accountable for, without their ever having received any part thereof; and even without its being alleged, that they have received the same, or any part thereof, either from the obligor himself, or from any judicial sale made of his property. If the defendants then were not entrusted with the collection of these two thousand dollars, and never have received the' same or any part thereof, either from the obligor or his estate, or from any one paying it for him, and it is not pretended that they have, it is truly difficult to conceive upon what principle of either trust or obligation of any kind, the plaintiffs can claim to recover. The defendants, instead of being entrusted with the collection of the money claimed by the plaintiffs, are expressly required by the terms of the agreement, if they did not purchase the plaintiffs’ right to it, “ not in any way to interfere with, or impede the recovery thereof, but upon receiving or ■ recovering from the obligor or the mortgagor, their eight thousand dollars, and the interest thereof, to assign and reconvey upon demand, the bonds and mortgage to the plaintiffs, and the parties of the first part in the agreement named, according to their respective interests;” so that the plaintiffs not having parted with
From the view here taken of the original transaction between the parties, and the agreement founded thereon, the defendants cannot, I apprehend, be considered with-any propriety, as having acted in the character of trustees, when théy prosecuted the suit upon the mortgage, and after having obtained an award of execution therein, against the mortgaged premises, caused the same to be exposed to sale by the sheriff, whereat they became the purchasers, fof seven thousand dollars, that sum being the highest and best price bidden. In doing all this, they must be regarded as having proceeded merely for the purpose of recovering the eight thousand dollars, which was coming to themselves, for their own exclusive use and benefit. This they certainly had a right to do, as the assignees of the plaintiffs, and had, as we have seen, an express authority irrevocable from them, for that purpose. And in order to effect this object, by suit upon the bonds and the mortgage, or upon either, it is obvious from the terms of the agreement, as well as perfectly manifest, that such was the understanding of the parties, that the defendants should be invested with all the rights and privileges of the plaintiffs. If the plaintiffs then had not assigned and parted with their rights in this respect, but having retained them, had proceeded on the mortgage as the defendants did, it cannot be questioned but they would have had an undoubted right or privilege, to have bought the mortgaged premises at thp sheriff’s sale, for the same price that the defendants did, or for any less sum, provided it were the highest and best price bidden therefor; and to have resold the property immediately afterwards, if they could, for double the amount of the whole mortgage debt remaining unpaid, and to have pocketed the advance, without accounting to the mortgagor, or to any other, for a cent of it. Then why should not the defendants, who by the agreement, stood in the shoes of the plaintiffs, invested with all their rights, and the most unlimited powers that could be given for the purpose of recovering the eight thousand dollars, and the interest thereof, from the obligor, either upon the bonds or mortgage, be entitled to claim the same privilege and right of purchasing at the sheriff’s sale? Certainly, not because it would militate against any thing expressed in the agreement; nor yet, as I can conceive against any thing that can be fairly implied from it. For the assignment is absolute and unqualified, as to the eight thousand dollars; accompanied also by an investiture of powers to collect the same for their own use, that were to be irrevocable, and to be exercised in as full and ample a manner as the plaintiffs themselves could have done, had they not made the assignment, and
And here it must be observed, and borne in mind too. that the plaintiffs as well as the mortgagor stood in the relation of debtors to the defendants, and were bound for the payment of the debt which tho latter were endeavouring to levy from the property of the mortgagor by a judicial proceeding and sale thereof. The plaintiffs, as I have said, were the debtors of the defendants and could not be looked upon as having a joint interest with them in the bonds and mortgage by virtue of the assignment thereof: nor could they be considered as standing in the relation of tenants in common as to the bonds and mortgage, although this has been alleged. For by the import of the agreement they were not entitled to claim any thing upon either the bonds or the mortgage until the defendants obtained therefrom their eight thousand "dollars with the interest due thereon ; and unless the obligor and the mortgage proved sufficient for the payment of this amount, the plaintifis were to have no right whatever to any thing that-might be recovered therefrom : but on the contrary, were to be liable to the defendants for any deficit there might be in recovering from the obligor the amount due to the latter. To hold, therefore, that the defendants purchased the mortgaged property in trust for the plaintiffs, and became liable to them for any surplus made by the resale beyond the amount of their debt and the interest thereof, would, in effect, be deciding that the assignor of a judgment, bond, note or other security for the payment of
It is unnecessary to notice the cases cited and referred to by the counsel in argument on the subject of trusts; and especially those which evidence the scrupulous jealousy with which the law scans and judges of the conduct of trustees; because they are conceived
Judgment for the defendants,