Rogers v. Rogers

1 Hopk. Ch. 515 | New York Court of Chancery | 1825

The Chancellor.

On the sixteenth day of April 1803, Thomas Rogers made his will; by which he appointed Alpheus Doty, Thomas Littlefield and Halsey Rogers executors. In the year 1813, the executors of James Rogers recovered a judgment in the supreme court, against Thomas Rogers : and on the seventeenth day of November 1813, this judgment was assigned to Halsey Rogers; who thus became a creditor of Thomas Rogers, the testator. On the twentieth day of September 1816, Thomas Rogers died; being indebted to several persons, leaving some personal estate and a considerable estate in lands, and leaving his will in force. It appears, that the personal estate of the testator, was not sufficient to pay his debts. Doty and Littlefield have never acted as executors. Halsey Rogers holding the judgment which had been assigned to him, took upon himself the execution of the will; as executor, he took into his possession the personal estate of the testator; and he alone, has acted as executor. In 1820, Halsey Rogers caused an execution to be issued on the judgment held by him, against the v lands of Thomas Rogers; and on the twenty fifth day of March in that year, the sheriff of Saratoga acting under the execution, sold three tracts of land belonging to the estate of Thomas Rogers; and Halsey Rogers became the purchaser. The price bidden and given by Halsey Rogers at the sheriff’s sale, was two thousand two hundred and seventy dollars. The true value of these lands at that time, is stated variously, by different witnesses; but according to most of them, the value was not less than nine or ten thousand dollars ; and according to all, it greatly exceeded the price for which the lands were purchased by Halsey Rogers from the sheriff. The complainants contend, that the sale and purchase should be vacated, for their benefit ; and Halsey Rogers insists, that he acquired a perfect title to these lands, by his purchase from the sheriff.

When Halsey Rogers assumed the office of executor, he took upon himself all the duties of that trust; and he voluntarily, became a trustee for all persons interested in the estate of Thomas Rogers, He became accountable for all the duties of an executor, not only to the creditors of the testator, but also to the legatees and devisees, who are entitled to the estate of Thomas Rogers, after payment of debts.

In this situation, Halsey Rogers was both debtor and creditor. He was debtor as executor, to all the creditors of Thomas Rogers; he was himself a creditor by the judgment; and he was thus, in respect to his own demand upon the judgment, debtor as executor, and creditor in his own right.

If the personal estate of Thomas Rogers had been sufficient to pay his debts, it would have been the duty of Halsey Rogers as executor, to pay the debt to himself from the personal fund. He could not have been allowed in the exercise of his right as creditor by judgment, t® levy the debt to himself from the lands of the testator, while it was his duty as executor, to discharge that debt from the personal estate. Such an exercise of his right as a creditor, would have been subversive of his duty as executor : and it is' clear, that in such a case, his right as a creditor must have yieldéd to the duties of the trust which he assumed.

But the personal estate was inadequate to the payment of the debts of the testator. Halsey Rogers being both executor and creditor, might have retained from the personal estate, in discharge of the debt to himself, against any creditor of equal degree. He had also a remedy by action at law, against the heirs and devisees of Thomas Rogers, his debtor. He might also have instituted a suit in equity, to obtain satisfaction and just contribution from all who were interested in the personal and real estate of Thomas Rogers. These measures were in his option, as a creditor; but there was another, which while it would have produced satisfaction to him as a creditor, was his special duty, as executor. It was to apply to the surrogate, for an order to sell so much of the real estate, as would be sufficient to discharge the debts which could not be satisfied from the personal fund. He resorted to none of these remedies; but while be was charged with the duty of pursuing proper measures for the payment of all the debts of the testator, he as creditor by judgment, issued an execution, upon which a large part of the real estate of Thomas Rogers . was sold, and he himself became the purchaser, for a price far less than the true value of the lands purchased. If this transaction is supported, he gains and the other parties interested in the estate of Thomas Rogers, lose about three fourths of the true value of these lands.

A trustee can gain no advantage to himself, to the detriment of those for whom he holds his trust. This rule of equity is applied to the transactions of the trustee, according to their nature and the circumstances of different cases, in such manner as to give efficacy to the principle upon which it is founded. The most frequent application of this doctrine; is to cases, in which the trustee purchases the subject of his trust. In such cases, equity vacates the sale, at the option of those for whom the trust is held, and considers both the purchaser and the subject still charged with the trust. This doctrine is undoubted; and it has often been enforced in this court. It was-fully examined by the late chancellor, in the case of Davoue against Fanning, 2 John. ch. 252. In that case, the late chancellor traced the reasons of this doctrine, and clearly displayed its foundations. He also applied the same principle, in the case of Van Horn against Fonda, 5 John. ch. 388.—2 Fonblanque, b. 2. c. 7.—2 Kames’ Principles of equity, 87.

This rule is founded in the most salutary policy. It justly considers the trustee, as holding an office, not for his own advantage, but for the benefit of the true owners of the subject held in trust. The objects of the rule are, to secure fidelity on the part of the trustee, and to preserve the interests of those whose rights are confided to his care. To effect these, objects, equity does not inquire for fraud, on the part of a trustee, who attempts to purchase the subject of his trust; but it removes temptation, by declaring him incapable of making a purchase, which shall bind those for whom he is entrusted; and it gives to them the option to vacate or affirm the purchase of their trustee. They have no interest to vacate his purchase, where the subject has been sold for its full value ; and where the subject has been purchased by the trustee for less than its value, it would be unjust, that the trustee who is both seller and buyer while he is trustee, should by his own acts, make gain to himself, and cast loss upon those whose interests he is bound to protect. This rule imposes no hardship on the trustee; it prevents collision between his interest and his duty; and it precludes a difficult and uncertain inquiry into his motives. It is necessary for the security of those, whose property is held in trust; and it produces practical and effectual justice.

In this case, it is said, that Halsey Rogers though a trustee of the personal estate of the testator, was not a trustee of the lands. The personal estate being insufficient to pay the debts of the testator, it was necessary, that the lands or some of them, should be sold for the satisfaction of creditors. All persons interested in the lands, were therefore interested that the personal effects should be fully applied to the payment of debts. It was the duty of this executor, to apply the personal estate in payment of debts; and next and equally, it was his duty, to resort to the lands in the manner prescribed by law, to raise a sum sufficient to pay the debts which might remain unpaid from the personal fund. When the personal fund is deficient, and there are lands of the deceased debtor, the executor or administrator is bound to apply to the surrogate for an order to sell the lands. Such an application is by our statute, made the absolute duty of an executor or administrator ; and by this simple and excellent method, all the creditors of a deceased debtor may obtain satisfaction from his real estate, without litigation or any hostile proceeding. The executor or administrator is by our law, made the agent to effect this object. It is his duty to institute this proceeding, and to prosecute it, to effect; and this measure is often, the most important duty of his office. In this case, the personal estate of Thomas Rogers was the primary subject of the trust of this executor; and the land being the secondary fund for the payment of debts, was the secondary subject of his trust. This executor was a trustee for the payment of debts from bpth funds ; and his trust embraced an administration not only of the personal estate, but also of the lands, so far as the lands were necessary for the payment of debts. As executor, he had no legal estate in the lands; but as executor, he had a power over the lands and a duty concerning them, which for every purpose of justice, constituted a trust and him a trustee, of those lands. Being thus in substance, a trustee of the lands, he was bound so to administer and apply them to the payment of debts, that he should not gain and those interested in the lands should not lose by his acts : and as a trustee, he is subject to the principle of equity, which gives to those who are beneficially interested, the option to affirm or reject a purchase made by the trustee.

Still, it is urged, that this was a sale by legal process. “Where a fieri facias comes to the sheriff, to sell or levy a “ debt of the testator’s goods, the executor may buy the “ goods, as well as another.’.’ Year book, 20 H. 7. 5. 1.— 1 Wentworth, 91.—Toller, 186. This law supposes the ordinary case of an adverse execution by a creditor of the testator ; and it can not be applicable to a case where the executor is himself the creditor. It supposes a case free from fraud or abuse of trust; It does not exempt the executor irom any of the duties of his office, or authorise him to purchase in his own right, to the detriment of interests which are confided to him, in his character of executor. When a judgment creditor, being also executor, causes the goods of the testator to be sold by execution, he does an act which may lead to an injurious sacrifice of their value, and is wholly unnecessary. The executor may without any legal proceeding, retain in discharge of the debt to himself; and if it is necessary, for the discharge of the debt, that the goods should be sold, he as executor, may sell. It is his duty to sell, in the most advantageous manner; and whether he purchases from himself, or upon a sale made by the sheriff, at his instance, he is a purchaser while he is a trustee of the subject sold.

Though the sale of these lands was public, and Halsey Rogers was the highest bidder, yet it was a sale by his own procurement; and he purchased the lands for about one fourth of their value, while he stood in a relation of trust to all persons interested in the subject, A sale by auction, does not give sanction to a purchase made by a trastee; and a sale by legal process, cari not sanctify the purchase made in this instance. Halsey Rogers was the author of this sale, as well as the purchaser; and the sale and purchase were made, while it was his duty to resort to the lands, in his character of executor. He became a purchaser upon execution, when his duty required, that he should have been a seller, as executor. Though he was a creditor by judgment, he was not at liberty to wield his judgment to the injury of the interests, which he as executor, was bound to protect. Had he resorted to the lands in his character of executor, he might have obtained payment as a creditor; his duty as executor would have been fulfilled; and his rights would have been satisfied, without repugnance to his duties. This sale having been made at his own instance, while he was in effect, a trustee for all persons interested in the lands which he purchased, and while it was his special duty to convert the lands of Thomas Rogers into money, in a different manner, the case is within the principle of equity which forbids a trustee to do any act beneficial to himself and detrimental to those for whom he is trustee; and it can not be exempted from the effect of that principle, by the forms of a sale upon his own execution.

In the case of Davoue against Fanning, the executor was authorized to sell, by the will of the testator; he sold; he purchased for his wife; and the purchase was vacated, for the benefit of the persons interested in the estate. In the case now before the court, the executor was bound by a law of the State, to obtain a power to sell, for the payment of debts; he did not obtain such a power; he caused a sale to be made in another manner; and he became the purchaser. Here, was not only a purchase by the executor, but the sale itself, was a violation of his duty, as executor.

If Halsey Rogers had not accepted the trust of executor, he would have been at full liberty, to pursue all his remedies for satisfaction of the judgment; and if loss to others had followed the exercise of his rights as a creditor, he would not have been responsible. But when he accepted a trust which imposed on him the duty of taking every legal and prudent measure to pay the debts of Thomas Rogers, from the personal and real estate, he was no longer at liberty, to exert his rights as a creditor, in opposition to his duties as executor. He continued a creditor, but he relinquished any right of a creditor, which might interfere with his duty as a trustee. Having accepted the trust, he could not in the character of creditor, do any act which should subvert or impair the interests of those for whom he was trustee. In the ordinary case of a debt from one person to another, each party may guard his own interests; and the debtor may in general, protect himself from loss. Though the creditor may pursue his legal remedies, without regard to any loss which may result to his debtor from adverse proceedings, the debtor may also, exercise his rights and his prudence, to prevent a sacrifice of his property. But here, the two characters of debtor and creditor, were represented in one person; and the due vigilance of adverse parties could not be exerted to guard opposite interests. So far as the rights of Halsey Rogers as a creditor, and his duties as a trustee, were in conflict with each other, his rights were yielded to his duties. It is therefore, in vain, that the rights of Halsey Rogers as a creditor, are advanced, in opposition to his duties, as executor. A sale by execution, produces a sacrifice of value, more frequently, than any other mode of selling; this sale produced such a sacrifice; he became the purchaser; and he can not retain the advantage of this purchase.

This purchase having been made by Halsey Rogers, while he was charged with a trust affecting the lands purchased, it must be vacated at the instance of the persons interested in the trust; the complainants are some of those persons; and they demand, that this purchase shall be rescinded. The effect of this decision will be, to reinstate the parties in their rights; the lands or some of them, will be again sold for the payment of debts; the debt due to Halsey Rogers as a creditor, will be paid; and the parties interested in the lands will lose nothing by these procee dings of the executor. The complainants also claim an account of the entire administration of this executor; their interests in the estate of Thomas Rogers, entitle them to such an account; and it is accordingly directed. Other questions in the cause, will be more properly and fully before the court, when an account shall have been taken; and for that reason, I do not discuss them, at this time.

Decree accordingly.