79 N.C. 426 | N.C. | 1878
That a trustee or other fiduciary can not purchase at his own sale is an iron rule at law: nor indeed can any one else, because in every sale there must of necessity be two persons — a vender and vendee. It is equally true that where there are two persons, a vendor and vendee, as where a second person is substituted to sell or buy, the sale is valid at law, butin equity the substitution of a second person makes no difference; the validity or invalidity of the sale being determined by other considerations.
This is so well established that we could scarcely be excused for encumbering the case with authorities, except to show how general is the rule and how few the exceptions.
The earliest case in our Reports is Ryden v. Jones,
The next case is Gordon v. Finley,
The next case is Gordon v. Finley,
Observe that here the trustee was held liable, not for what the property was bid off at, nor for what he subsequently sold it at, if he had sold it, but for its full value. And so he was liable for the full value of the slaves, but as the slaves had got back into his possession and *323 the cestuis que trust preferring it, he was compelled to surrender (430) them specifically.
So in Boyd v. Hawkins,
So in West v. Sloan,
So in Patton v. Thompson,
Observe that here is a strong intimation, supported by cogent reasons that although the sale was necessary, fair and full, and made by order of a Court of Equity, by its own officer, and confirmed with full knowledge that the glardian [guardian] had bought, yet except under very peculiar circumstances he ought not to be permitted to hold against the will of thecestui que trust.
So in Brothers v. Brothers,
Here observe that it mattered not what the trustee gave for the land, nor yet what he sold it for, except that if he had sold it to a bona fide purchaser they would not disturb the purchaser, otherwise they would at the election of the cestui que trust; but the reference was to ascertain the value of the land at the time of the sale so as to charge the trustee with that value, if he had sold the land. And that is precisely what was done in the case before us, so that that case is precisely in point.
In Roberts v. Roberts,
In that case the sale was declared void although made and confirmed by order of Court and title made to a third person. It is however cited *325 mainly to show how easy it is for an administrator to impose upon the Court in getting the order and having it confirmed. And to corroborate what was said by Judge PEARSON, supra, that the Court was obliged in such cases to reply upon the trustee for information.
In
I have not the case before me, but I have read it in connection with this investigation, and I think I state it correctly.
In addition to those cases the common place books, as said by HENDERSON, C. J., teach no other doctrine. Thus it will be seen that we have a train of decisions with opinions by TAYLOR, C. J.; HENDERSON, C. J.; RUFFIN, C. J.; NASH, C. J.; PEARSON, C.J.; all to the same effect, that a trustee can not buy the trust property either directly or indirectly. And if he does so, he may be charged with the full value, or the sale may be declared void at the election of the cestui que trust, and this, without regard to the question of fraud, public policy forbidding it.
In unison with those decisions is our statute that "at any auction sale of real property belonging to the estate, the executor, administrator or collector may bid in the property and take a conveyance to himself as executor, etc., for the benefit of the estate, when in his opinion this is necessary to prevent loss to the estate."
So that when a sale is made whether by himself or by an appointee of the Court or other preson [person], it is his duty to see that the property is not sacrified [sacrificed]. But in opposition to that just and sensible provision, and to the inflexible general principle, it is insisted that if the sale be made by a third person he may buy for himself, notwithstanding the temptation and danger which public policy guards against. Not in one case in a thousand would a trustee who designs an advantage, take it straight by himself. He will contrive a confederate to sell, or a confederate to buy, and all the better if he can get the color of an (434) order of Court. In Stilly v. Rice,
This is cited to show that he may be charged with the value without a resale. It is however insisted by the defendant that Simmons v. Hassell,
It will be seen that that decision does not touch this case. But Judge BOYDEN does go on to say outside of the case, that the husband of (435) the widow and guardian of the children could purchase at the the clerk and master's sale, because his wife had dower which was included in the sale, and he was also guardian of the children, and it was his right and duty to see that the land brought a fair price. And he says further that there is no objection to a guardian's bidding where the sale is made by a commissioner, etc. If he means that no objection can be taken at law, it is just what he had said before, and is true. But if he means that no objection can be taken in equity, it is contrary to what he said before. Although the greater respect is due to any thing that fell from that learned Judge, yet it would be doing him injustice to strain his words farther than the case warranted. The same may be said of Lee v.Howell,
At law a trustee can not buy at his own sale, because to constitute a *327 sale, there must be two persons, a vendor and a vendee. So at law when there are two persons, that is, when a second person is substituted to make the sale or to buy, the legal requirement is supplied and the sale is valid. And therefore it is that a trustee designing a personal advantage substitutes or procures to be substituted such second person, when, like the ostrich, having hid his own head, he thinks he can not be seen. But equity is clear sighted and looks at the substance, and the substitution of the second person makes not the slightest difference, although it does make the sale valid at law.
There are a class of cases which have to be distinguished from the general rule as follows: Whenever the trustee has a personal interest in the trust property, there of course he must have the right to protect it, and if to bid for and buy it be necessary to protect it, he must be allowed to do it for that purpose. The case stated by Judge (436) BOYDEN was an instance of this. There, the trust property, land, belonging not to the wards alone, but to the wife of the guardian, and as Judge BOYDEN says, he had the right to bid to keep the land from being sacrified [sacrificed]. The same is true where a mortgagee sells land to pay his debt, and the property is likely to be insufficient, and he will lose his debt unless he bid for the property. In these cases, and the like, it is usual and perhaps necessary for "the trustee and beneficiary to obtain leave of the Court to bid, or else to have a confirmation with full knowledge of all the facts appearing."
The only other exceptions are where the cestuis que trust consent or ratify with full knowledge of all the facts. In the case before us there is not a single favorable circumstance for the defendant. No necessity is shown for having a third party to make the sale. No reason why the officer of the Court was not appointed. No evidence as to what was reported to the Court, or that it was made known that the administrator had bought. The price was one third of the value. No offer to surrender the land or to account for its value. It is suggested that the defendant ought to be allowed to surrender the land instead of being charged with its value. Doubtless that is usual at the election of the cestuis que trust. But there is nothing to show the condition of the land. It may have been spoiled, or it may have been improved. There can be no injustice to the defendant in making him pay the simple value of the land with interest, especially as he has never offered to surrender. Indeed his motion is to hold the land, not at the value already ascertained, but at a value to be ascertained by a reference.
If a proper foundation had been made for a re-valuation, as that the former valuation by mistake had been made excessive, it may be *328 (437) that this Court where the judgment was affirmed might have afforded relief. But that has not been done. It is evidently the desire and the purpose of the defendant to keep the land. Indeed I think it was stated on the argument that he had his homestead laid off on it. His object seems to be to have it revalued. He also asks a reference to ascertain whether he had collusion with the commissioner who conducted the sale. That inquiry is unnecessary, for concede that there was no actual fraud, yet the grossly inadequate price — one third the value — supplies the place of fraud. It is unjust to hold the land at that price however acquired, without the consent of the beneficiaries. This will be certified.
Reversed.
NOTE. — READE, J. In the appeal of the plaintiff, this being the appeal of the defendant in the same case at this term, the principles governing this case are decided.
Affirmed.
Cited: Stradley v. King,