Smith v. Jackson
1919 U.S. App. LEXIS 2355
D.C. Cir.
1919
Check Treatment
Mr. Justice Robb

delivered the opinion of the Court:

The learned trial justice was of the view that the duty of Ambrose with respect to the property was such “that his conduct was a palpable violation of his duty;” that the purchase and resale was a joint enterprise, conducted with full knowledge of the surrounding circumstances, and hence that the profits realized were impressed with a constructive trust in favor of the present receiver.

In Anderson v. White, 2 App. D. C. 408, and Mutual F. Ins. Co. v. Barker, 17 App. D. C. 205, this court pointed out the difference between the rule applicable to cases of sales by trustees appointed by the court, “such as trusts to sell for partition or distribution and the like,” and “sales made under the ordinary trust to secure loans, and enforceable upon stipulated terms and notices.” In the former, the interests of the beneficiaries are identical, and the trustee is charged with the absolute duty so as to arrange and conduct the sale as to secure the highest possible price for the property; in the latter, it is the duty of the trustee, upon demand of the security holder after default, to conduct the sale “in the manner and upon the notice prescribed in the trust.” The title under these deeds of trust is not in the creditor, but in the trustees, whose duties are set forth in the deed and who really act independently of either party. Chesapeake Beach R. Co. v. Washington, P. & C. R. Co. 23 App. D. C. 587, 599. Their sole duty is to conduct the sale in accordance with their grant of power, extinguish the debt if possible, and hold any balance for the grantor. While, therefore, a mortgagee or a trustee in a mortgage or deed of trust may not become the purchaser at his own sale, unless permitted by the terms of the in*577stnuiient or authorized by statute, a creditor secured by such mortgage or trust may do so. Not holding the legal title, he is not a trustee for the debtor in such sense as to preclude him from buying at the sale. This was expressly ruled in Smith v. Black, 115 U. S. 308, 29 L. ed. 398, 6 Sup. Ct. Rep. 50. That cabe arose in the District of Columbia, and the court said that “the creditor for the satisfaction of whose debt the sale is made' has a right to compete fairly at the sale, and may become the purchaser.” In Twin-Lick Oil Co. v. Marbury, 91 U. S. 587, 590, 23 L. ed. 328, 330, 3 Mor. Min. Rep. 688, the court said: “The defendant was not here both seller and buyer. A trustee was interposed who made the sale, and who had the usual powers necessary to see that the sale was fairly conducted, and who in this respect was the trustee of the corporation [the grantor in the deed of trust], and must be supposed to have been selected by it for the exercise of this power.” See D. C. Code, § 544 [31 Stat. at L. 1214, chap. 854.]

Coming now to the facts of this case, we are unable to agree with the learned trial justice that the real owner of this property was the association, represented by the receiver. The legal title was in the surviving trustee, the equitable title in the debtor. While it was the duty of the receiver to notify the trustee of the debtor’s default and request a sale of the property, his positive duty ended there. Responsibility for the conduct of the sale rested upon the trustee. This must be so, else the creditor secured by the deed of trust, in this instance the Building Association, would not be permitted to bid at the sale, for obviously one may not be both seller and buyer. Although the receiver was chargeable with no further positive duty, nevertheless his acts should receive the close scrutiny of the court. Evidence warranting the inference that the conduct of the receiver, chargeable also to the purchaser, was to the prejudice of the creditor would warrant the setting aside of the sale if the title had not passed to an innocent purchaser. Does the evidence before us warrant such an inference ? That the sale was regularly and fairly conducted is conceded. “No fraud in fact is alleged in the bill or shown in the evidence, no effort to keep *578bidders away from tbe sale, or to have a surreptitious sale, no want of the usual notice of sale.” Smith v. Black, 115 U. S. 308, 315, 29 L. ed. 398, 401, 6 Sup. Ct. Rep. 50. On the contrary, this was a second sale, and it affirmatively appears that there was competitive bidding. There is no evidence challenging the good faith or judgment of the trustee. The special master found that the price for which the property sold was not “necessarily inadequate in a legal sense.” It is conceded that the price obtained at- the resale was a good one. Having in mind conditions that obtained, including the outstanding tax title, we certainly could not find that the price realized at the trustee’s sale was so grossly inadequate as to shock the conscience of the court and furnish a basis for the setting aside of the sale. Indeed, we do not understand counsel for the appellee to contend that there is any basis for the setting aside of this sale; but, whether or not we correctly apprehend counsel’s position, we are convinced that there is no ground for such a contention. In other words, on the admitted facts w.e are satisfied that the sale was regularly and fairly conducted and that the conduct of Ambrose in respect of the bid was in no way prejudicial to the creditor, the Building Association. In the absence of any evidence from which we might find that the interests of the association were prejudiced by the conduct of the receiver and appellants, no theory is apparent upon which a judgment against them could be based.

It follows that the decree must be reversed, with costs, and it is so ordered. Reversed.

A motion for rehearing was denied April 17, 1919.