Osgood v. Franklin

2 Johns. Ch. 1 | New York Court of Chancery | 1816

The cause stood over for consideration until this day, when the following opinion was delivered by the Court.

The Chancellor.

The controversy, between the parties

arises in the cause which was commenced in 1809, between Franklin and others against Osgood and others. Two preliminary objections were raised by the counsel for the defendants.

1. That letters testamentary on the will of Thomas Franklin were taken out in Pennsylvania, and are of no force here.

2. That the assignees of Abraham and John Franklin, who are insolvent, ought to have been plaintiffs, instead of being defendants, as their interest, if any, is as plaintiffs; and that they cannot be made defendants, unless they had refused to be complainants, or were in collusion against them.

[ * 19 ]

The production of a probate recently taken out in this state is a sufficient answer to the first objection; for it seems to be pretty well settled, that where no objection is raised by pleading, a probate taken out at any time before the hearing is sufficient, in this Court, to support the plaintiff’s demand. (Humphreys v. Humphreys, 3 P. Wms. 351. Fell v. Lutwidge, 2 Atk. 120. Patten v. Panton, cited in Bacon, tit. Exec. (E.) pl. 14., edit, by Gwillim.) With respect to the second objection, the assignees could not be compelled to be plaintiffs; and it is admitted, that if they had not consented, they must have been made defendants. It is sufficient for the merits of the case that they are before the Court, and the objection goes only to a matter of form. But as the assignees have put in their answer as defendants, and have made no objection to that character, I would even infer their refusal to join as plaintiffs, if it were necessary, *in 0,'der to avoid any embarrassment from such an objection raised at the hearing.

dema»damtlir'S revim? the'msignees’ of a msoh-ent’CCcaiinot be ’ made gainst their consent, and if they Tnay°he defendants. A naked powtoseiiXeTno? at common iaw¡ sumve.

1. The first question arising on the merits is, whether Mary Osgood, as sole surviving executor of Walter Frank-deceased, was authorized to sell the real estate,

The part of the will of Walter Franklin relating to the question is as follows: “ The whole residue of my estate 1 give and bequeath as follows: one eighth to Sarah Corsa, &c.; one eighth to Mary Wistar, &c.; to my wife, one eighth, &c.; to my daughters, Maria and Sarah, each one eighth; to my brothers, John, Thomas, and Samuel, each one eighth, &c. And I order that the money or effects he distributed and divided from time to time, as it can he raised from, my debts and estate by my executors, hereafter named, &c.; and they are to keep a sufficiency undivided, to pay off. all legacies, and to keep the estate as much on interest or rents as they can for the general benefit. And I appoint my wife with my three brothers aforesaid to be executors, but on this condition, that if they owe me any money at my decease, their appointment, or acting as executors, shall not be a release of their debts, but the same shall be paid; and if they do not act on this condition, they are not to be executors. I give to my executors that (they) may act, and to the major part of them, their heirs or executors, full power to sell any or all my real estate not already devised, &c. I give to each of my executors who shall act, 2001: in lieu of all other commissions and rewards, &c.”

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If the case turned upon the dry question, whether by the common law a naked power without interest to executors to sell, would survive, I should deem the authority of Lord Coke decisive. He lays down the rule repeatedly in his Institutes, (Co. Litt. 112. b. 113. a. 181. b.) as one well established, that the power would not survive; and the same law was declared by Dodderidge, J., the contemporary of Coke, and author of the Touchstone. (Shep. Touch, tit. Testament, pi. 9. p. 429.) These writers were, in their time, and have been in every period since, regarded as oracles of the common *law, and they must have been familiar with the old authorities. I do not, therefore, consider the observations of Mr. Hargrave, (Co. Litt. 113. a. note.) even after giving them all the weight justly due to his talents and learning, as being sufficient to overturn a rule so strongly established ; and especially when it has been shown by Mr. Powell, (Treatise on Devises, p. 292—310.) that he is by no means borne out by the cases to which he refers. The statute of 21 Hen. VIII. c. 4. affords no small confirmation of the doctrine in Coke; for the preamble declares the opinion that a sale by executors under a power in a will “ can in no wise be good or effectual in the law, unless the same bargain and sale be made by the whole number of the executors named to and for the same.”

But if execup°0”’er the real estate, any ínfcraf7'egal or equitable, ^o'ivL^mvivlí So if the execuj°[,!]1aroach)j|®;d relative to the pe^dm/on the power to sell, vives.°wer sur"

[ * 21 ]

But while I thus acknowledge the rule of the common law, I am equally satisfied that this cause is not governed by it. In the first place, this case comes within the exception stated by Lord "Coke; for here was an interest sufficient to feed the power, and keep it alive in the hands of the surviving executors. The executors were vested by the will with an absolute interest in an undivided moiety of the whole residuary estate, on which the power was to operate, and they were also directed to keep the whole of this residuary estate as much as possible on interest, or rents, for the general benefit. This authority to lease, and this interest in the subject itself, must be sufficient to exempt the power from the character of a mere naked authority to a stranger. It is not necessary that the interest coupled with the power should be a legal interest. An equitable estate is sufficient, and is regarded in this Court as the real interest. So it was held by Lord Hardwicke, in Hearle v. Greenbank; (3 Atk. 714.) nor does the character of the power depend upon the quantity of interest. A trustee invested only with the use and profits of the land for the benefit of another, has an interest connected with his power. This was so understood in Bergen v. Bennett, (1 Caines’s *Cases in Error, 16.) and in Eyre v. Countess of Shaftsbury, (2 P. Wms. 102.) a testamentary guardian, with authority to lease, was held to possess a power coupled with an interest, and capable of survivorship.

[ * 22]

In the next place, here was a trust charged on the executors, in the direction given to them to distribute the proceeds of the residuary estate; and according to the settled doctrine of the Court, the trust does not become extinct by the death of one of the trustees. It will be continued in the survivor, and cannot be permitted, in any event, to fail of execution for want of a trustee. In this case, one of the trusts under the will depended upon a sale. In Garfoot v. Garfoot, (M. 15 Car. II. 1. Ch. Cas. 35.) lands were devised to the wife for life, and then to be sold by the executors, for younger children’s portions, and the wife and executors died, and the younger children exhibited their bill to compel the heir to sell; and on demurrer by the heir, on the ground that the executor had but an authority which died with him, the demurrer was overruled. So, also, in Barnes's case, (Sir Wm. Jones, 352. Cro. Car. 382. S. C.) lands were devised to the wife for life, and then to be sold by the executors for payment of debts and legacies, or as one of the reports of the case says, to be divided among the nephews. One of the executors died, and it was held, on a case sent from chancery for the opinion of the judges at law, that the survivor could sell, though the executors had an authority, and no interest. Whatever, therefore, might have been the character of the power in this case, the strict rule of the. common law could never be permitted, in this Court, to defeat the trust connected with the execution of the power. Whether the residuary legatees might not have come in and taken the land itself, instead of the proceeds which the executors, as trustees, were to distribute) and thereby have arrested the execution of the power to sell, is a point not now before me. No such application was ever made; the power to sell was left by the legatees to its full operation; *and they come too late, after the sale, to make their election, or to raise such a question.

If residuary legatees might come in and take the land itself, instead of the proceeds, it is too late, after a sale by the make their elcc- In the construction of powers of sale, the intention of the testator is much regarded.

Either of these grounds appears to me to be sufficient to support the sale by Mrs. Osgood, as the sole surviving executor. There are other considerations, also, which add great weight to this conclusion.

The intention of the testator is much regarded in the construction of these powers, and they are construed with greater or less latitude in reference to that intent. It was evidently the testator’s intention here, that the power should not fail as long as there was an executor to execute it, for the power is given even to the major part of the acting executors, and it was to descend to the legal representatives, both real and personal, of the executors. In other words, it was made transmissible by descent and by will; and though it is left doubtful as to the portion of the executors from whom that transmission was to proceed, I should take the better opinion to be, that it was to proceed, as in the case of other joint interests or trusts, from the last survivor, and that the testator could not have intended such incongruity and confusion as the union of the heirs and executors of a deceased executor with the surviving executors. The testator had also in contemplation the possible case of his wife acting alone; for he imposes a condition upon the other executors, without complying with which they were not to be considered as appointed.

Mcreinadequaof J„jj?eieast pound for set-‘“g inadequacy be te ofUseif eX deuce of fraud. But inadequacy notPsoeposs!s to^ amount u> aau ’ sufficient ground for re-J-“rs™ga specific performance of aalecon rac 0

I am satisfied, for these reasons, that it would be repugnant to the intention of the will, to the rules of law, and to the principles of this Court, to defeat a power uniting so much trust, confidence, and interest, by applying to it the strict doctrine of the common law, relative to mere naked authorities.

[ * 23 ]

2. The next point made on the part of the legatees is, that the sale was a fraudulent breach of trust, and ought either to be set aside, or, if permitted to stand, that the representatives of Osgood and his wife ought to account *for the. real value of the lands at the time of the sale, instead of the price at' which they were sold.

The ground relied on in support of the charge of fraud, is the inadequacy of the price. I have examined the authorities on this point, and I am satisfied that it is not, of itself, and ought not to be, a justifiable cause of interference, unless the inadequacy be so gross as to be evidence of actual fraud.

I see no just pretext for the charge, that the sale was not made by the executrix and her husband in good faith; nor do I think that, under the circumstances of this case, there was any such inadequacy of price as to give color to the inference of fraud.

[ * 24 ]

There is no case where mere inadequacy of price, independent of other circumstances, has been held sufficient to set aside a sale made between parties standing on equal ground, and dealing with each other without any imposition or oppression. And the inequality amounting to fraud, must be so strong and manifest as to shock the conscience and confound the judgment of any man of common sense. (Sir Th. Clarke, in How v. Weldon, 2 Vesey, 516. Lord Thurlow, in 1 Bro. 9. Lord Ch. B. Eyre, in 2 Bro. 179, note. Lord Eldon, in 9 Vesey, 246. Sir William Grant, in 16 Vesey, 517.) There is a very important distinction, which runs through the cases, between ordering a contract to be rescinded, and decreeing a specific performance. Though inadequacy of price is not a ground for decreeing an agreement to be delivered up, or a sale rescinded, (unless its grossness amount to fraud,) yet it may be sufficient for the Court to refuse to enforce performance. It is not an uncommon case for the Court to refuse to enforce for inadequacy, and at the same time refuse to rescind. The two cases admit of very different views and considerations. This whole subject was very fully discussed in Mortlock v. Buller, (10 Ves. 292.) which was the case of a bill for a specific performance of a contract of sale of land by the *defendant, as agent of trustees. The land was sold in September, foi £26,500, and in December following, the plaintiff had contracted for the resale of a part only for £34,900, and the trustees refused to ratify the sale. There was no imputation of fraud in the transaction. The character of the parties was unimpeached, and though the plaintiff had neglected no previous means of information as to the value of the land, yet the chancellor said he was at full liberty to do so, and might honestly contract with persons at arm’s length, and dealing for themselves. But, he said, there was a want of care and attention on the part of the trustees, in not exerting a wise and full discretion as to a reasonable price, amounting to a breach of trust, and he thought himself not bound to afford relief to a purchaser who had contented himself with a contract, instead of a conveyance, and so dismissed the bill. There can be no doubt, from the language of the Court, that if the conveyance had been executed, it would have stood, notwithstanding the inadequacy. Thus, in Day v. Newman, cited in 10 Vesey, 300, Lord Ahanley refused to enforce a specific performance of an agreement for the sale, for £20,000, of an estate worth only £10,000. There was no actual fraud in the case, but the inadequacy was so great that he would not enforce the contract against the seller, nor, on the other hand, would he sustain a cross bill to rescind it.

[ * 25 ]

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I need not multiply cases on this point. The doctrine is settled, that in setting aside contracts, on account of inadequate consideration, the ground is fraud arising from gross inequality. Unless the inadequacy does, of itself, ex evidentia rerum, prove fraud, the rule is, says Ch. B. Macdonald, (1 Wightwick, 109.) that inadequacy, by itself, has not the weight suggested. If, indeed, advantage be taken, on either side, of the ignorance or distress of the other, it affords a new and distinct ground, not applicable to this case, and a very great inadequacy may form a presumption *of oppression. (1 Wightwick’s Rep. 28, 29. 3 Ves. & B. 117.) Dealing with young heirs, and for reversionary interests, is also watched with the utmost jealousy, and constitutes a particular class of cases, forming another exception to the general rule, that for mere inadequacy of price a contract is not to be set aside. (Evans v. Peacock, 16 Vesey, 512. Gowland v. De Faria, 17 Vesey, 20.) So, leases of charity estates will be set aside for an undervalue, if considerable, though there be no imputation of fraud, on grounds peculiar to that trust. (18 Vesey, 315.) But none of those exceptions to the general rule apply to this case. Here is no imputation on the character of the parties, and there is no appearance of undue means or influence, or of the practice of any kind of imposition. The most that can be said is, that the property would have been vastly more productive, if the executor had taken more pains to ascertain the title, and had made the sales in small parcels, and to settlers upon credit, As the property was situated at the time of the sale, I do not believe, from any proof in the case, that the land could have been sold at that time, in one entire parcel, at a better price. The testimony of John Lawrence, and of Samuel Riker, jun., serve to confirm me in this opinion. The land at that time was, in general, heavily encumbered with adverse claims and pretensions. The former acting executors, who were then dead, and whose representatives are among those who are now seeking to impeach the sale, had suffered all this residuary estate to lie unregarded for upwards of twenty years, and adverse possessions were fast closing upon the Franklin title. These possessions (I speak now of the Cherry Valley lands, and which, indeed, are the only lands of much moment in the case) were generally held under a contract made in 1786, by Col. Corsa, as assumed agent of the executors, and whose ^agency and contract the executors, or one of them, had ratified. By this contract, the settlers were to be paid *for their improvements, if they did not purchase. This claim was a great encumbrance on the title. It is well known, that improvements made by settlers are generally valued quite high; and it is in proof in this case, that such claims exceed, in many instances, the value of the land at the time the settlement was made. I do not perceive, from my present view of the claim under Col. Corsa, as shown by proof here, but that it might have been established in equity, if the application had been made in time. There were likewise defects in the chain of title, which had excited a general distrust of its validity; and this title was not made complete until the discovery of the release of the original patentees to Dubois, some time after the sale in question. It was found in the possession of William North; and as the former executors knew nothing of this paper, Mrs. Osgood had good reason to presume that it was irretrievably lost. There is no doubt this estate has suffered greatly by negligence, but it was a negligence of 20 years’ standing, imputable, in a great degree, to the two former executors, who had the sole management of the trust.

These difficulties, in the way of title, have been justly and strongly urged, to show that the price is not to be charged with inadequacy, under all the circumstances of the case.

[ * 27 ]

Lands in such a situation have no determinate value, and they are not to be estimated by the price of improved farms, or lots which have a clear title, and may yield a known and steady rent. Accidental subsequent advantage made of a bargain, is nothing, according to Lord Eldon. (Coles v. Trecothick, 9 Vesey, 246.) If we were to take such a ground, every transaction of this kind would come into a Court of equity- The purchasers in this case immediately bestowed the utmost diligence to assert their title and recover the lands, and by the fortunate discovery of title deeds, and by still more fortunate suits and negotiations, they must have been able to avoid the statute of limitations, and to escape the embarrassment of the claim for improvements, and have *turned their speculation to great advantage. I see nothing unusual in this, nor any thing censurable on the part of the purchasers; and the suit as against them ought to be dismissed, with costs.

A trustee is ■ wuh'imaghary values, or more ceivei'C "unless there is evinegHgencefr°amounting to wiliui default.

[ * 28 ]

I have confined my attention solely to the circumstance of inadequacy of price, because no other was stated or urged by the counsel, and no other has occurred to me, as evidence of fraud. The only question of any serious doubt in the whole case, is, whether there was not a want of attention and vigilance on the part of Mrs. Osgood, amounting to a breach of trust, so as to render her representatives chargeable beyond the moneys actually received. I think, upon the whole, this would be too rigorous a conclusion. A Court of equity, according to the lord keeper, in Palmer v. Jones, (1 Vern. 144.) never charges a trustee with imaginary values, or with move than he has received, unless the proof be very strong of supine negligence. Lord Thurlow said, it must amount to a case of wilful default. (1 Vesey, jun. 193.) Mrs. Osgood had an interest of one eighth in this residuary estate, and though the sale was to her two sons-in-law, yet she had children living by her second husband, Mr. Osgood; an¿ s¡le an¿ ]ier husband never could have made an intentional sacrifice of that estate, because if would have been sacrificing their own interest, and that of their other children. In that sale, then, it may be said, they took the same care of the interest of others as of their own. There were many considerations that might have had a rational and powerful influence on the minds of Mr. and Mrs. Osgood. This estate had been for more than twenty years under the sole care and management of the other executors, who were equally legatees, and who had suffered the estate to fall into ruin. The title was handed over to Mrs. Osgood in an embarrassed and doubtful state, and a very considerable part of the claim under the testator was null and void. This was the case with the Wawayanda claim, and *with the lands in Greene county, and most of the lands in Vermont. The only valuable property was the Cherry Valley lands, and they were covered with adverse possessions, and with settlers, under burdensome claims for improvements. What was the executor to do ? To undertake to recover these lands might lead to great expense, which would eat up the value of the estate. They aver, in their answer, that they deemed it best for the interest of the legatees, to sell, at once, the whole estate for the best price that could be obtained; and there is no reason to doubt the sincerity of this allegation. Whether that was or was not the most advisable course, under the then existing circumstances, was a difficult question, on which intelligent and prudent men might differ. I do not think that I am bound, by any principles in this Court, to deal so hardly with Osgood and his wife, as to make either of them responsible, as trustees, for an error of judgment, and I shall, therefore, not hold them answerable beyond the amount of the sale.

[ * 29 ]

In arriving at this conclusion, I have been much governed by a view of the peculiar situation of the property when the trust was assumed by Mrs. Osgood, and of the desperate condition to which it was reduced by the folly and negligence of the former executors, and the tacit acquiescence of all parties in interest. The case would have been very different' if she had been an acting executrix from the beginning. To exact of her a responsibility for the defaults of others, would be unjust. When she assumed the trust, in 1807, she was under the necessity of commencing, at once, a series of extraordinary efforts, and of expensive litigation, sufficient to strike ordinary minds with dismay, or of closing the concern of the administration of the estate by bringing the whole interest to market. There was no time for delay. One course or the other must have been pursued immediately, or the property abandoned forever. If she did not elect the most judicious course for the interest of the trust, she elected the other, with the best *advice of her husband, and in perfect good faith. Of this there is no doubt. I cannot but think that the charge of an abuse of discretion does not come with great weight or equity from cestui que trusts, who are partly representatives of the former trustees, all of whom have been silent spectators of the manner in which the former trustees had conducted.

I shall, accordingly, decree, that the bill against the purchasers be dismissed with costs, and that the usual reference be made to a master to take and state an account between the representatives of Mr. and Mrs. Osgood, as executrix, on the one part, and the respective claimants of the residuary estate of W. Franklin, deceased, on the other: in taking which account, the estate of Mrs. Osgood is to be charged with the actual amount of sales and other moneys received, and no more, and the executors of John, Thomas, and Samuel Franklin, deceased, to be charged with the debts due from their testators respectively, to the estate of Walter Franklin, deceased; and the question of costs', and all other questions, to be, in the mean time, reserved.

Decree accordingly, ^(a)

(a) This decree was affirmed by the Court of Errors, on appeal, the 8th of April, 1817.

Case Details

Case Name: Osgood v. Franklin

Court Name: New York Court of Chancery

Date Published: Jan 15, 1816

Citation: 2 Johns. Ch. 1