Lead Opinion
delivered the opinion of the Court.
It appears, by the proceedings in this cause, that the complainants rightfully held the mortgage executed by Wm. Key Howard, on the Lombard street property, for the sum of 08,500 — 04,000 of that amount having been derived from the will of N. P. Tyson, as legacies, in the hands of Rebecca A. Tyson, as their guardian — the remainder, 04,500, being held by her, as the substituted trustee, in pursuance of the provisions of the said will.
Mrs. Tyson, in her capacity as guardian, had no authority, by law, to execute the mortgage to the appellee, upon the property of the complainants, as her wards. The Code, Art. 93, secs. 167, 168, 173, and Biddess vs. Thompson, 2 H. & G., 120, show with what strictness the guardian must act, in the management and disposition of the property of the ward.
Kor is it pretended that the will of N. P. Tyson, under the provision creating the trust, as to the funds belonging to the complainants, confers any authority upon Mrs. Tyson, the substituted trustee, to execute such mortgage.
But the deed from Wm. Key Howard to Mrs. Tyson, is relied upon by the respondent, as clothing her, as trustee, with the power to execute the mortgage in question.
That deed conveys Howard’s equity of redemption in the Lombard street property, to Mrs. Tyson, and declares the purpose of the conveyance to be to vest the property in her in trust, for the benefit of the complainants, in equal portions, until they respectively arrive at the age of twenty-one; and then the share of each to be conveyed in fee.
Under it, Mrs. Tyson held the property as trustee, for the benefit of the complainants, the cesttds que trust, who, in equity, were actually seized of the freehold.
It also conveys to the trustee, the power and authority during the minority of the complainants, to sell the property ; and after discharging the mortgages thereon, to
The terms of the deed in question are plain upon their face, leaving slight margin for discretion in the trustee, or construction on the part of the Court, as to the purpose of the donor, or the extent of power conferred upon the trustee. Decisions of Courts in England or this country, or elementary authorities as to the construction of deeds of doubtful import, afford but little aid in the interpretation of this deed, where the meaning of the donor is so distinctly expressed. It is his intention as indicated by the provisions of the instrument, creating the trust, that must govern; that is the great controlling principle in the construction of powers. 4 Kent, 374. No specific authority was given to mortgage the property ; nor was the exercise of such a power to be reasonably implied- — such implication was not necessary for the full and complete discharge of the trust. On the contrary, it was inconsistent with the declared purposes of the trust. Without a sale was • alone contemplated, there was no grounds for the direction to the trustee,' as to the investment of any residue.
The execution of the poiiver, if exercised by the trustee, necessarily imported the absolute or “out and out” disposition of the property; the discharge of the mortgages resting thereon, from the proceeds, and the investment of the residue. Unless a sale was made, there could be no investment of a residue after the discharge of the mortgages.
This is the natural and reasonable construction to be given to the instrument.
It would not only be a loose but uncalled for construction, to undertake to give it other meaning.
There is no occasion for this, to enable the trustee fully, fairly and efficiently to discharge the trust, for the benefit of the cestuis que trust. A conditional sale, or a mortgage
Such disposition of the property, would accomplish the entire perversion of the intentions of the donor.
It is clearly unwarranted by any of the terms or purposes expressed in the instrument.
It does not appear from the record, that the execution of the mortgage in question by the trustee, and the receipt of the money under it, had the slightest reference to the purposes of the trust; hut that the money was obtained for mere speculative objects ; ostensibly for the improvement of certain other property on Hanover Street, in which the complainants were interested.
The provisions of the deed creating the trust, when brought to the notice of the Courts, cannot bo disregarded.
It is their duty to see that they are fairly pursued by the trustee, especially where the right of infants or other persons under the peculiar guardianship of the Court are concerned.
A Court of Chancery has no authority to engraft upon the instrument, creating the trust, by construction, other conditions than those provided therein.
It can only afford assistance in carrying into effect, the bona fide purposes of the donor. Lowry vs. Tiernan, 2 H. & G., 34.
Whether the mortgagee under the circumstances ought to be held answerable for the application of the funds, as having liad notice of the nature of the trust and the intended misapplication thereof, constituting a breach of the trust on the part of the trustee, it is not material, from the view we have taken of the matter, to inquire.
The receipt of the money was intended for another purpose, than the discharge of the mortgage on the Lombard Street property, to wit: the improvement of the Hanover Street property, by the trustee, Mrs. Tyson.
But the respondent alleges and insists, that as the money derived from his mortgage was applied, or was so intended, to make improvements upon the property of the complainants, on Hanover Street; that ought by a Court of Equity, to be considered, a fair execution of the power of the trustees ; at all events, sufficient, to bind the complainants, and estop them from setting up any equitable claim against his mortgage.
No such authority to improve property of the complainants was given by the terms of the deed nor can it be fairly implied.
A clear power to sell, generally for certain purposes, to wit: for the purpose of raising money, may carry the authority to mortgage, or to sell on condition; if it is apparent the purposes of the deed may be accomplished, in that mode; but it can never be inferred, in opposition to the terms of the deed, and where the nature of the trust requires a sale of the property out and out; and its absolute conversion can alone afford the means of effecting all the objects contemplated by the instrument.
Under such circumstances it is obvious the mortgage of the* property is a nugatory act, beyond the scope of the authority of the trustee, and a manifest breach of the trust.
As a general rule, a power to sell and convey does not confer a power to mortgage.
Questions of this sort must depend on the peculiar circumstances of the trust, and tire intention of the parties as shown by the instrument.
A trust with a power of sale “out and out,” will not authorize a mortgage ; and a trust for sale with nothing to negative the settlor’s intention to convert the estate, absolutely, will not authorize the trustee to execute a mortgage. Lowry vs. Tiernan, 2 H. & G., 34; Dolan & Foy, vs. Mayor, &c., of Balt., 4 Gill, 394; Huntt vs. Townshend, 31 Md., 338; A Kent’s Com., 378; Albany Fire Ins. Co. vs. Bay, 4 Comstock, 9; Haldenby vs. Spofforth, 1 Beavan, 390; Stroughill vs. Anstey, 1 DeG. McN. & G., 645;
Every deed of trust must receive a construction to effect the purposes contemplated according to its terms and provisions. The directions of the deed in question, would not be gratified in any particular, if the trustee were permitted to add another mortgage to those already resting upon the property of the complainants, and which it was the evident design of' the deed, the trustee should discharge.
This was the sum and substance of the deed, and its natural and necessary import — and it would be foreign to its purpose to engraft upon it a power ad libitum, in the trustee, to mortgage the property therein embraced. The complainants having the equitable estate and being the sole beneficiaries, cannot be prejudiced by the unauthorized acts of their trustee; and the execution of the mortgage, between the trustee and Mr. Latrobe, was clearly extra vires, and a breach of the trust. The cases of Price and Nisbet vs. Bigham’s Ex’rs, 7 H. & J., 296; Tiernan vs. Poor, 1 G. & J., 216; Brundige vs. Poor, 2 G. & J., 1, referred to by respondent’s counsel, relate to the jus disponendi of the wife, over her separate property, and do not illustrate the power of Mrs. Tyson as a mere trustee, in this case.
The Circuit Court ought to have declared the mortgage inoperative and void as against these complainants, and restrained the respondent from the execution of the decree of the 22nd February, 1861; a decree will therefore be passed reversing the decree of the Circuit Court, and vacating the said mortgage, so far as it might affect the Lombard Street property, belonging to the complainants ; and perpetually enjoining the respondent from the execution of the said decree.
The bill' does not charge, nor is there any proof, that there was want of good faith in the execution of the mort
If the trustee and mortgagee acted under a mistake, as to the extent of the power of Mrs. Tyson to impose a lien, as trustee, on the property of these complainants, for the money advanced by respondent; and if, as alleged by the respondent, the money was applied to the improvement of the Hanover Street property, in which the complainants were and are interested; the ends of substantial justice would seem to require that the complainants should not be discharged, under the circumstances, from all equitable obligation arising therefrom.
We think the respondent ought to be permitted, without prejudice by the decree in this case, to assert an equitable claim, if he so desire, by original bill, against these complainants, for any application of the said money by the trustee, to the improvement of the Hanover Street property, in which the complainants are interested, so far as they may have been benefited thereby, in the rendering the said property more valuable or productive to them, by its permanent improvement or addition to its vendible value.
Decree reversed„
Dissenting Opinion
filed the following dissenting opinion :
The question presented by this appeal is the validity of the mortgage dated February 14th, 1857, of certain property on Lombard Street, in the City of Baltimore, held by the appellee, J. H. B. Latrobe, Esq., as trustee. The mortgage was executed by Mrs. Rebecca A. Tyson, the mother of complainants, as trustee under a deed from W. K. Howard to her, dated July 30th, 1853. This last mentioned deed of trust is referred to in the mortgage, as containing a power to Mrs. Tyson of disposing of the property, and it is stated in the mortgage that the same is made in the execution of the power.
The Lombard Street property, described in the mortgage, was held by Nathan P. Tyson, in fee, and passed under his will, which empowered the executors to sell the estate, real and personal, for the purpose of paying legacies, and making the division therein directed. In the execution of this power, this Lombard Street property was sold by the executors, and conveyed to W. K. Howard, who took the absolute estate in fee ; discharged from the trusts declared in the will, and these are in no manner involved in the present controversy. In the division of N. P. Tyson’s estate, the complainants became entitled as cestuis que trust to $4500, being their share of the proceeds arising from the sale of the real estate, which was in the hands of George Carey, their trustee, under the will; and also to $4000 of the personalty, which was in the hands of their mother, (Mrs. R. A. Tyson,) as their guardian. These sums making $8500, were loaned to W. K. Howard, and secured by a mortgage of the Lombard Street property, executed by him on the 2nd day of October, 1852, in favor of Carey, as trustee, and Mrs. Tyson, as guardian. Afterwards,. Carey resigned the trust, and Mrs.
“In trust and confidence, nevertheless, and to, for and upon the uses, and to the ends, interest and purposes following, that is to say, In trust for the proper use, benefit and behoof of Alexander II. Tyson, Jr., Mon-y Nevin Tyson, Henry Johnson Tyson a.nd Nannie Key Tyson, (the children of R. A. Tyson,) in equal proportions, share and share alike, until the said children shall respectively arrive at the age of twenty-one years, and when and as they respectively arrive at age as aforesaid, then the share or interest of him or her, shall be forthwith conveyed to them in fee: ” and with the further provision also that “in case of the decease of any of the above named children of the said Rebecca A. Tyson, under the age of twenty-one years, and without issue living, the part, share or interest of the one or more so dying, shall pass to and become the estate and property of the survivors or survivor of them, and the issue of any of them, who may have died,” and with the further proviso following, viz :
*342 “ Provided, however, and full power and authority is hereby given, and expressly reserved to the said Rebecca A. Tyson, at any time during the minority of her said children, or with the approbation and consent of those of them who may have arrived at the age as aforesaid, to sell and dispose of the trust property and premises as aforesaid, at and for such price or consideration as to her may seem proper, and upon receipt of the purchase, or consideration money therefor, to execute and deliver in due form of law, one or more good and sufficient deed or deeds of conveyance and assurance to the purchaser or purchasers thereof, and after paying and discharging the mortgage liens on said property, with all interest thereon, shall and will apply the residue of said purchase money if any, by re-investment in such other property as to her may seem best, to the several and same uses, trusts and purposes as are hereinbefore expressed and declared in reference to the property hereby conveyed; the purchaser or purchasers however of the above described property, not to be bound to see, or attend to the application of the proceeds of any such sale, nor shall the hereby conveyed property or premises be in any way answerable for a misapplication of such proceeds of sale.”
Of the children of R. A. Tyson named in the deed two have died intestate and without issue, leaving the complainants as survivors.
After the execution of this last mentioned deed, viz: in January and February, 1855, the property was conveyed in fee to “the Convention of the Protestant Episcopal Church of the Diocese of Maryland,” and immediately leased by the Convention of P. E. C. to R. A. Tyson (as trustee under the deed of W. K. Howard) for 99 years renewable forever, at a rent of $450 per annum.
Dobbin’s mortgage which was temporarily released for the puipose only of admitting the ground rent to be created, was renewed by the execution of another mort
It seems to me that the argument of the appellants' counsel, that “their property has been by this proceeding subjected to an additional encumbrance,'' is altogether erroneous. The error proceeds from considering the property on Hanover Street, and that on Lombard Street, as if they were held in the same rights; while they were in fact held in different rights, and subject to trusts entirely different; and so far as this case is concerned, thejr are to be treated as altogether distinct from each other, in the same manner as if the Hanover Street property belonged to strangers, and the complainants had no interest therein. 'The investments made in the improvement of the Hanover Street property were made under the authority of the Court of Chancery, having charge of the trusts thereof. It is said that those investments have not proved safe or profitable ; but that cannot affect the rights of the parties in this case, these are the same as if those investments had proved to be judicious or profitable. The fact remains undisputed that, while the money secured by the mortgage held by Dobbin on Lombard Street, was by the authority of the Chancery Court, invested in the improvement of the Hanover Street property, and secured by a mortgage thereon, the money by which it was satisfied, and the consideration for which the Lombard Street property was released from its operation, was borrowed from Mr. Latrobe, upon the security of the mortgage now in question. It seems to me that the equities of the parties are in no respect different from what they would have been, if Mr. Latrobe had taken an assignment of the Dobbin mortgage
If I am right in the view before expressed, that the substantial effect of the arrangement was to satisfy the existing encumbrance, and to substitute in its place another for a less amount, there could certainly be no just or valid ground of objection to the transaction. But apart from this consideration, I am of opinion that the execution of the mortgage in question was within the power given to the trustee by the deed of July 30, 1853. By the terms of that deed, which have been before recited, the trustee was directed to hold the property, subject to the encumbrances, for the use of the parties named, and to convey to them, as they may respectively arrive at the age of twenty-one years, the share to which each may be entitled. From this it appears that it was not the intention of the donor that the estate should be converted into money, nor is there anything to be found in the nature and purposes of the trust to require a sale of the property “ out and out.” The power to sell is conferred on the trustee, in her discretion, who is directed, in case of a sale, to pay off the encumbrances and to re-invest the residue, if any, to the same uses. I cannot perceive any good reason why it was not a valid exercise of this power, for the trustee to execute the mortgage to the appellee, which was a mere substitution of one mortgage for another.
In Haldenby vs. Spofforth, 1 Beavan, 391, the trust was under a will, which directed the trustee to make sale and dispose of all the testator’s real and personal estate, and to apply the moneys to arise and be jtroduced from the sales of his real estate, and from the rents, .issues and profits thereof, in the meantime, and until such sales should be made and perfected, and the money arising from the personal estate, in the first place, to the payment of his debts, next to raise the sum of £3000, the interest whereof was to be paid to his wife for life, and after her death to be applied in the same way as the residue of the proceeds of the sales; and in the next place, to pay to each of testator’s three daughters the sum-of £1200 ; and “ as to all the residue of the moneys to arise, be produced and got in as aforesaid,” to divide the same between his six sons. The devisees in trust executed a mortgage of a part of the lands. The Master of the Rolls (Lord Langdale) decided that the trustees were not authorized to mortgage, there appearing a clear intention on the part of the testator, that his whole estate should be converted.
Where the object is to pay off the encumbrances, it is settled that a power to sell implies a power to mortgage.
In The Earl of Orford vs. the Earl of Albemarle, 26 L. J. Equity, 396, the trustee was empowered to sell, and apply the proceeds in paying off certain encumbrances upon the settled estates, as well as upon other family estates. It was held by Sir L. Shad well, Y. C., that the trustee was authorized to raise the sums required by mortgage of the estates.
In the recent case of Stroughill vs. Anstey, 1 DeG., McN. & G., 635, (decided in 1852,) the Chancellor, Lord St. Leonards, in a very able opinion, reviews the authorities, and while he decides that in the particular case before him the power of the trustees, who were directed to sell, did not authorize them to mortgage the estates; for the reason that the purposes of the trust required that the property should be converted by a “sale out and out.” Yet he expressed his approval of the decision in Ball vs. Harris, and said, “My own opinion is, that generally speaking, a power of sale, a power of sale out and out, for a purpose, or with an object beyond the raising of a particular charge, does not authorize a mortgage; but that where it is for raising a particular charge, and the estate itself is settled or devised subject to that charge, there it may be proper, under the circumstances, to raise the money by mortgage, and the Court will support it as a conditional sale, as something within the power, and as a proper inode of raising the money.”
The rule established by the authorities on this subject is thus succinctly stated in Hill on Trustees, 742, (4th Ed.)
“A power for trustees to sell, will authorize a mortgage by them, which is a conditional sale, wherever the objects of the trust will be answered by a mortgage; as for instance, where the trust is to pay debts, or raise portions. But where the trusts declared of the purchase money, show that
Now, recurring to the terms of Howard's deed, I do not find in its provisions any intention that the property should he converted into money by a sale “ out and out.” Nor is that required in order to accomplish the purposes of the trust. The estate is settled subject to encumbrances. The power to sell is not given for ulterior purposes, requiring an absolute conversion of the property, in order to answer the objects of the trust; and therefore, I am of opinion, the trustee had power to execute the mortgage in question; and that the decree of the Circuit Court ought to he affirmed.