1 Brock. 330 | U.S. Circuit Court for the District of Virginia | 1817
The plaintiffs in this cause, are a wife and -a mother, with her three infant children. They apply to this court for its aid, to restore them to the possession of property conveyed in contemplation of marriage, by a deed of which they are the principal objects. The defendants are the husband, the trustee (and that trustee a brother), and the purchasers of the trust estate. ' The defendant, Hugh Wallace Wormeley, being about to intermarry with the plaintiff, Mary, executed a deed, dated the 5th of August, 1807, the day on which the marriage took effect, by which he eon-veyed, in lieu of dower, his paternal estate, consisting of a small tract of land, in the county of Frederick, and some slaves, to Thomas Strode, the brother of his intended wife, in trust, principally for her and ner children. This property is -gone, the trust is totally defeated, and the first inquiry is. whether this effect has been produced by the regular execution of any power inserted in the deed. The deed contains this uncommon clause: “And it is further covenanted, bargained, and agreed, by and between the said contracting parties, that whenever, in the opinion of the said Thomas Strode, the said landed estate can be sold, and conveyed, and the money arising from the sale thereof, laid out in the purchase of other lands, advantageously, for those concerned, or interested therein; that then, in that case, he, the said Thomas Strode, is hereby authorized, and by these presents, fully empowered to sell, and by proper deeds of writing, convey the' same; and the lands, so by him purchased, shall be, in every respect, subject to all the provisions, uses, trusts, and contingencies, as those were by him sold and conveyed.” I term this, an uncommon clause, because it authorizes the trustee to sell on his own judgment, without consulting those who are to be benefited by the trust. The power thus granted is great, but it is not unlimited. The trustee is not to exercise his will, but his judgment. Whenever, in his opinion, the trust estate can be sold, and the money invested in other land, advantageously for the parties interested; then, and then only, may he sell and make this reinvestment. The standard by which he is to act is invisible. Vet it is an actually existing standard, and one by which the conduct of the trustee must be measured. To determine, whether he has been regulated by it or not, his actions must be examined.
In inquiring, whether a party has acted according to his best judgment or not, allowance must be made for the fallibility of the human mind, and for difference of opinion. But there are strong cases, in which all will unite in saying, that the judgment has not been fairly exercised. If, under such a power, as is in this deed, a tract of land, notoriously worth $10,000, should be sold, and invested in a tract not worth $1,000, it would be in vain for the trustee to say, that in his opinion, the sale and reinvestment was an advantageous operation. He could not have entertained such an opinion. The ease is certainly not less strong, where he makes no reinvestment whatever. He could not be of opinion, that it was advantageous to the parties, to sell the land and get nothing for it. But further. Where there is no reinvestment of the money, the very letter of the power is disregarded. He is to sell only, when the money can be advantageously laid out in the purchase of other lands, “and the lands so purchased, are to be held in trust, for the same objects with those sold.” There
Having premised these general observations, on the nature of the power, under which the trustee acted, the court will proceed to consider more particularly, the facts of the ease, in order to decide, whether the cestuis que trust have still a remedy against the land, or only against the person of the trustee or purchaser. Wormeley, with his wife, resided, for a short time, either on the trust estate, or with his mother. Their situation appears not to have been comfortable; and in little more than a year after the marriage, both the father and brother of Mrs. Wormeley expressed a strong desire to remove her into their neighbour-hood; and an agreement was made between the defendants, Strode and Wormeley, with the approbation, as it appears, of the friends of Wormeley, for the exchange of the trust land, for a tract lying in the county of Fau-quier. To this tract, Wormeley removed; and soon afterwards, Thomas Strode sold the land, in Frederick, to Richard Yeitch, one of the defendants in this cause, and conveyed it to him by deed, dated in September, 11810, to which deed Wormeley was a party. Yeitch was the holder of a mortgage on the estate of Strode, in Culpepper, which had been foreclosed, and on which something more than $3,000 were due. This sum was discounted in part payment of the trust estate. The Fauquier lands were never conveyed to the same uses with the Frederick lands, nor have any others been substituted in their place. In about twelve months, Wormeley became dissatisfied with this estate, and some arrangements were made for furnishing him with lands in Kentucky, which are not further noticed, because they have terminated in nothing, and do not affect this part of the case. Subsequently to these arrangements, Strode sold the land in Fau-quier.
Excluding from our view the rights of the purchaser, and considering the case as between the plaintiffs and the trustee, can it be doubted whether this transaction would, in any manner, affect the Frederick lands? We will not inquire into the relative value of the two tracts: we will not inquire whether the approbation, given by the friends of Wormeley to this exchange, arose from a knowledge of this relative value, or from the hope that he would derive other advantages from living in the neighbourhood of his wife’s father, which would more than compensate for any small loss in the exchange; we will not inquire, whether, at the time, Strode intended to execute the contract; we will suppose this transaction to have originated in the causes which have been assigned for it; still the policy, and the wise policy,, of courts of equity, forbids trustees to bargain with themselves. In the execution of trusts, especially such as this, no unworthy ingredient, respecting self, ought to be intermingled. It is wisely held to vitiate the whole transaction. A trustee, conscious of the utmost purity and fairness of intention, who makes a contract with himself, for the trust property, performs a most perilous act. He exposes himself to every hazard which can befal the estate. It does not, in point of law, alter the ease, that Wormeley assented to this exchange. He had no power to assent. The deed was executed to secure the land against him and his indiscretions. If, then, the Fauquier lands had been actually settled in trust, the title of Strode, to the Frederick land, could not be secure. But the Fauquier land has not been, nor can it be, settled on the Wormeley family. That part of the power, which respects the reinvestment of the money in other lands, remains totally unexecuted. Can it, then, be doubted, that Strode, if he now held the Frederick lands, if he had conveyed them, and taken back a re-conveyance to himself, would hold them under the trusts created by the deed of 1807?
Believing this point to be perfectly clear, the court will proceed to inquire, secondly, whether the land, in the hands of purchasers, remains liable to the same trusts? It is believed to be unquestionable, that, by conveying the land in Frederick, to his own purposes, without selling other land to the same trusts, the trustee committed a breach of trust. It is equally clear, that a purchaser of the trust property, with notice of the trust, and its violation, is himself a trustee-Tliis principle is too familiar with the profession to require that cases should be cited in its support. Had the purchasers, in this ease, notice? And, first, had Veiteh notice? I do not mean to inquire, merely, whether he had notice of the trust, because, claiming title under the trust deed, he is, of course,' acquainted with its contents; but, also, whether he had also notice of the breach of trust? Strode violated his duty as a trustee, probably, in bargaining with himself, or with Wormeley, whom he knew to be incapable of making a contract respecting this property: and in selling the Frederick land for his own purposes: certainly, in not immediately executing a proper deed for the Fauquier lands. He ought not to have permitted this duty to remain a day unperformed. He ought not to have exposed the Fauquier lands to the
Were these facts known to Veiteh? With the application of the purchase-money in discharge of his own decree, he was of course acquainted. That Wormeley relied on receiving the Fauquier land instead of the Frederick land, was, probably, equally well known to him. The character of the title, and the situation of the parties, Wormeley, no longer residing on the Frederick land, and having removed to Fauquier, would lead to inquiries which must explain the transaction. Wormeley’s certificate, too, given a few days before the deed to Veiteh was executed, shows that some specific land was substituted for that in Frederick; and shows further, that .the tract so substituted was acquired by an exchange of property with the trustee. Veiteh then knew from this certificate. that the land was not to be sold to him by Strode in execution of his power, but that Strode had already appropriated the trust estate to his own use, and was selling for himself. Whether he knew that the tract in Fauquier was the land alluded to or not,' he knew the character of the transaction, and took upon himself the .risk of its validity. But it is not to be believed, that he did not know eveiy thing which it was material to know. The certificate itself points to the tract, for it is dated at Roseville, in Fauquier. He must, also, be considered, in this court, as having notice, that a deed was not executed, declaring the trusts on which the newly acquired land was held. He had a right to see this deed, and was bound to see it. Its non-production was proof of its non-existence. But this is not all. If he knew that the Fauquier land was substituted for the Frederick land, as we think he did, then the deed he received of those lands, as collateral security, proves his knowledge, in fact, that no conveyance of them in trust had been made. He probably relied on the certificate of Wormeley as his security, and, certainly, that certificate would go far in protecting him from any claim made by Wormeley. But he ought to have been advised, that Mrs. "Wormeley and her children could not be affected by it.
There is a circumstance growing out of the deed from Strode to Veiteh, not entirely unworthy of notice. That deed is apparently drawn by counsel-before whom the papers were laid. We should expect it to state the transaction truly, was there nothing in the transaction which there was a wish to eon-.ceal. We should expect it to refer to the exchange between Wormeley and Strode, if that exchange was believed to be a fair execution of the trust. Such a reference would have secured the land from many casualties. But the deed declares, that Strode sold the trust land to Veiteh, “with an intention of investing the proceeds of such sale in other lands of equal or greater value.” This untruth, which was known to Veiteh, betrays a consciousness that the transaction required some other shape than its own. But could Veiteh even have supposed, that the money was to be invested in other lands to be purchased in future; he knew that a large portion of it was directed to his own debt, and he must have known, that a trustee, whose embarrassments could induce him to seize a trust fund in order to relieve his own estate from being sold under a mortgage that was foreclosed, could not come into market without money, to purchase other lands, under very advantageous circumstances. Add to this consideration, that the power given by the deed of trust to Strode, was not to sell with the intention of investing the money in other lands at some future time, but to sell and invest when, in his opinion, it could be done to advantage. Veiteh, then, had notice of all the material facts which constituted the breach of trust committed by Strode, and is, consequently, to be considered, in this court, as holding the land subject to the trusts created by the deed of August, 1807.
Are Oastleman and McCormick in a different situation? The answer to this question depends on their having notice of the transactions which constitute the breach of trust. Purchasing a title depending on the deed of August, 1807, they would of course inspect that deed, and would perceive that Strode’s power to sell was coupled with the duty of investing the money in other lands. They would perceive that this was not a ease where a sale is the object of the trust; where it is the duty of the trustee to sell in any event, and afterwards dispose of the trust money; but a case in which the great object of the trust was the security of the estate; and the power to sell was limited to the ease where, “in the opinion of Strode, the land can be sold and the money laid out in the purchase, of other lands, advantageously for those interested, and that in such case, the lands so purchased were to be held for the same trusts, &e.” The very deed' under which they claim, then, informed them that their title originated in a trust, and that it behoved them to inquire how that trust had been executed. The parties were all within the reach of inquiry, and the difficulty of making it was inconsiderable. The deed to Veiteh was dated the 16th of September, 1810, and the deed to Oastleman and McCormick was certified for the purpose of being recorded on 25th of June, 1811. They say in their answer that they purchased in 1S10. Previous to this time, Wormeley had become dissatisfied with the Fauquier land
If the case rested on these facts, the court would feel much difficulty in allowing to these defendants the protection they claim as purchasers without notice. But the case does not rest on these facts. In their answer these defendants say, that they cannot doubt the fairness of the transaction, “because they are well satisfied that Strode never received more from Veitch, than he has given the cestui que trust credit for.” Is it a fair execution of this trust and power, to sell the trust estate, and give the cestui que trust credit for the amount of sales? The defendants proceed to deny all fraud in themselves and all knowledge of fraud in Strode or Veitch. This is not sufficient. Fraud is an inference of law from facts, and this answer denies no fact alleged in the bill, nor does it deny a knowledge of those facts, with which knowledge they are charged, but states their opinion that no fact which has come to their knowledge,' is fraudulent. The answer then, though it does not confess, does not controvert notice of the facts which prove a breach of trust. Is that notice otherwise proved?
Benjamin Barnet deposes that they were in treaty with Strode for the land before the sale to Veitch, and were to have paid a part of the purchase-money to Veitch in discharge of a debt due to him from Strode, and that they endeavoured to make an arrangement with Veitch, but failed; when afterwards this land was sold to Veitch, these defendants must have known that it was sold not for the purposes of the trust, but on Strode’s own account. Their answer avers the opinion that such a sale was lawful. George Tacket proves that in May, 1811, prior to the execution of the deed from Veitch, while the Wormeley family were in Frederick on their way to Kentucky, when some doubt was expressed of continuing their journey, the defendant Castleman expressed great uneasiness, lest the journey should not be prosecuted, because he expected they would receive lands in that country, in lieu of the lands he had purchased from Veitch. Still further.* It is well known that to be a purchaser without notice, not only the contract must be made, but the purchase-money paid before notice, and this should be averred in the answer. See Garnett v. Macon [Case No. 5,215]. Now there is no such averment, and the fact is otherwise. It is proved by Mrs. Powell, that upwards of $3,-000, part of the purchase-money was paid in the fall of 1813, and spring of 1811, not only after the full notice, acknowledged in May, 1811, but after the institution of this suit. What material fact, then, was unknown to these defendants? Not one. They were not ignorant of the facts, but of the law arising on those facts. Either there has been no breach of trust, and the original contract is valid, or the defendants are trustees. The court is of opinion that they are trustees. But though trustees, they are not to be considered as mere squatters; the light in which they are viewed by the counsel for the plaintiffs. They believed their title to be good and acted on the conviction that it was so. They trusted to the full power of Strode. They do not appear to have placed Veitch between them and danger, but, probably, could not raise the money. While compelled to do equity, they are entitled to equity. They are entitled to the benefit of the encumbrances from which the land has been relieved, and of the permanent improvements which they have made on it, and to the advances to Wormeley for the support of his family. At the same time they are accountable for the profits. The advances are properly chargeable against the profits, but the encumbrances which have been taken up, and the improvements, if not absorbed by the profits, constitute a charge upon the land.
Decree: This cause came on to be heard on the bill, answers, exhibits, and depositions of witnesses and arguments of counsel, which being fully considered, the court is of opinion, that the exchange of land made between the defendant, Hugh Wallace Wormeley and Thomas Strode, is not valid in equity, and that the defendant, Thomas Strode, has committed a breach of trust, in selling the land conveyed to him by the deed of the 5th of August, 1807, for purposes not warranted by that deed; in misapplying the money produced by the said sale; and in failing to settle other lands to the same trusts as were created by the said deed; and that the defendants, Richard Veitch, David .Castleman, and Charles McCormick, are purchasers, with notice of the facts which constitute the breach of trust committed by the said Thomas Strode, and are, therefore, in equity, considered as trustees; and that the defendants, David Castleman and Charles McCormick, do hold the land conveyed by Hugh Wallace Wormeley to Thomas Strode, by deed, bearing date the 5th day of August, 1807, charged with the trusts in the said deed mentioned, until a court of equity shall decree a conveyance thereof. The court is further of opinion, that the said defendants are severally accountable for the rents and profits arising out of the said trust property while in possession thereof, and that the said defendants, Castleman and McCormick, are entitled to the amount of the encumbrances from which the land has been relieved by any of the defendants, and of the value of the permanent improvements made thereon, and of the advances which have been made to the said Hugh Wallace Wormeley, by any of the defendants, for the support of his family; the said advances to be credited against the rents and profits, and the value of the said permanent improvements, and of the encumbrances which have been discharged, and which may
