Case ID: app-dc_3/html/0412-01.html
Source: Caselaw Access Project
Author: {"author": "Mr. Chief Justice Alvey", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

KENADAY v. WAGGAMAN.
    Trustees’ Sale, rights of purchaser at.
    Where a sale of real estate hy a court trustee was ratified by the equity court, but on application of the parties interested and proof of fraud it was vacated and the ratification set aside, the purchaser at the sale, who. had paid his money to the trustee, but who received only a portion of it back, after the vacation of the sale, has no claim for the balance due him upon the proceeds of a resale made by a substituted trustee.
    No. 283.
    Submitted March 12, 1894.
    Decided June 4, 1894.
    Hearing on an appeal from a decree of the Supreme Court of the District of Columbia, holding an equity term, dismissing a petition for an allowance of a portion of a fund in the hands of court trustees, being the proceeds of the sale of land.
    
      Affirmed.
    
    The Court in its opinion stated the case as follows:
    The question presented on this appeal would seem to be a very simple one, and such as only to require the statement of what has been decided on this particular record, to make a final determination of it. The case out of which the present application has grown' has been a long time pending, and has been subject to repeated reviews and adjudications, as between the present appellant and the other parties to the proceedings — the last of which was by the Supreme Court of the United States, on the appeal of the present appellant, in the case of Kenaday v. Edwards, reported in 134 U. S., 117, where all the facts are fully set forth. A detailed statement of such facts here is quite unnecessary.
    By a decree of the Supreme Court of this District, a trustee named in the will of Mrs. Macpherson, deceased, was discharged upon his own request, and a party named Green was substituted in his stead, with power and authority to manage and to make sale of the trust property situated in this District, under the supervision and control of the court. The substituted trustee thus appointed proceeded in the management of the trust property, and he made sale of a house and lot in this city to appellant for $11,000. This sale was reported to and the same day ratified at a special term of the Supreme Court. The sale appears to have been made and the ratification thereof procured without the knowledge and against the known will and consent of the beneficiaries of the trust; and immediately upon discovery of what had been done they made application for the vacation of the sale and the discharge of the trustee. This application was denied at the special term, and the petition dismissed. From this order an appeal was at once taken to the Supreme Court in General Term, where, after hearing and rehearing, the order appealed from was reversed, and the sale, and the ratification thereof, were set aside, and declared that they should be held for naught; and the trustee Green was removed from his office of trustee, without the allowance of commission; and it was adjudged that he pay the cost of the appeal. It was further ordered that he pay into the registry of the court in full the sum received by him as the price of the property referred to in his report of March 7, 1888 — the sale of which was thereby vacated, etc.
    It was from this decree of reversal that appeals, by both the present appellant and Green, were taken to the Supreme Court of the United States.
    That court, upon review of the whole proceedings, affirmed the decree appealed from, in all particulars. The court said: “ It results, from what has been said, that the rights acquired by Kenaday, under his purchase from Green, were subject to the power of the court to ratify or disapprove the sale. The order approving the sale was improvidently passed, because made without notice to the beneficial owners of the property, who were entitled to its income, and who were before the court for the protection of their rights. The confirmation was obtained by the trustee with knowledge that the appellees, if notified of the application to the court, would oppose its ratification.” And in conclusion the court said: “ We are of opinion that the court below did not err in setting aside the confirmation of the sale, vacating the sale itself, and removing the trustee without allowing him any commission.”
    Green, under the requirement of the decree of the Supreme Court of the District, brought in, and paid into the registry of the court, all of the $11,000, the purchase money received of the appellant, except the sum of $1,078.08, in respect to which balance the trustee Green is still in default. After the affirmance of the decree by the Supreme Court of the United States, and the appointment of new trustees by the Supreme Court of the District, the trust property was sold by such new trustees, for the sum of $17,460, and which fund is now held by such new trustees under the will of Mrs. Macpherson.
    The money paid into court by Green, the removed trustee, as the proceeds of the sale made by him to the appellant, was refunded and paid back to the appellant upon the final vacation of the sale. But the appellant now comes in by petition, and says, that inasmuch as he has not received back the $1,078.08, the amount of the default of Green, and interest on the $11,000, he asks to be paid out of the fund now in the hands of the trustees arising from the last sale of the property, the sum of about $1,674.40, which he alleges is necessary to fully reimburse him for the loss that he has sustained in the payment of the purchase money to Green. He alleges and asserts that he has a claim in the nature of a lien upon the property, for this balance, and that it should be paid out of money now in the hands of the present trustees. This claim was rejected by the court below, and hence this appeal.
    
      Mr. Frank W. Hackett for the appellant:
    1. The sale was not void, but voidable only. The beneficiaries sought to have the purchase money paid into the registry of the court; and they asked, and were allowed to collect interest on the securities in which part of it was invested. If they had regarded the sale as void, they should have refused to touch the purchase money in any shape.
    2. The purchase money held by Green was received under circumstances that rendered it inequitable for the beneficiaries to repudiate the sale without restoring the money to Kenaday. -
    Green, as solicitor for these beneficiaries, and in their name, filed the bill in Edwards v. Maupin, praying for the appointment of a new trustee.
    The decree vested in Green all the powers under the will of Macpherson, and looked to a sale of this lot; for it provided that Green should file a bond of $8,000, conditioned for the faithful performance of his duty in selling the real estate under the powers contained in the will.
    
    The record showed Green to be a non-resident, and that the beneficiaries were sui juris. There was nothing to indicate that the confidential relation of solicitor did not continue to exist for the purpose of carrying into effect the sale contemplated by the terms of the decree.
    This was not a proceeding adverse to the interests of the life tenants. It was simply a change of investment, submitted in accordance with the terms of the decree appointing their solicitor a trustee. The sole question involved was as to the price to be accepted. On this point the trustee took the discretion of the court in addition to his own.
    It was not needful that assent in writing of the cestuis que irustent, or a formal appearance for them, should appear of record.
    The title searcher was justified in concluding that the order of the court below was based upon evidence satisfactory to the court (whether the verbal assurance, or the sworn oral testimony of the trustee in open court) that parties interested as life tenants were desirous of having the sale ratified.
    The real ground of the application by the beneficiaries to vacate the sale was an apprehension that Green would run away with the purchase money. It appears that they would have been content with $11,000, if only Green were removed from his office and allowed no commissions.
    The beneficiaries were guilty of laches. Their sworn statement is that Green was insolvent, and was guilty of an attempt to sell in secret, etc., all of which they had known for nearly two years.
    Allowing six months to elapse without instituting proceedings to have the trustee removed deprives them of the right to say that the purchaser could not fairly assume that their trustee was acting with their full knowledge and consent, and for their best interests.
    3. Upon the vacating of the sale, a lien on the land enured to Kenaday for so much of the purchase money as was not restored to him.
    The transaction falls within the rule governing the rescinding of a contract between two parties to the sale of land. The usual decree is that the price be repaid, and that a lien on the land be given to secure such full payment. Barbour v. Morris, 6 B. Mon., 120; Jett v. Lock, 5 J. J. Marsh., 591. See 1 Jones on Mortgages, Sections 223, 224.
    The lot has been resold for $17,460 — a handsome advance <on what Mr. Kenaday paid. That Mr. Kenaday’s purchase was at a fair price is proved not only by Judge Cox’s refusal to disturb the confirmation, but also from numerous affidavits, including that of Mr. Waggaman himself, one of the present trustees.
    Guilty of no laches, the only risk that Mr. Kenaday can be said to have assumed was that technically the cestuis que irustent did not appear affirmatively of record to have consented to a change of investment upon these terms.
    Equity will decree that the land be returned to the beneficiary for the purpose of re-sale, but only on condition that the purchase money be re-paid.
    Even in void sales upon execution equity will subrogate a purchaser to the rights of a judgment creditor. Though a doubtful point, the weight of authority is in this direction. Davis v. Gaines, 104 U. S., 405. Mr. Freeman, in his work on “ Void Judicial Sales,” sustains the action of the courts in favor of the purchaser, and says substantially that it is uniformly receiving a wider application. See Hudgin v. Hud-gin, 5 Gratt., 320.
    In an administrator’s sale made not in accordance with statute and therefore void, subrogation is allowed the purchaser who has applied the purchase money to extinguish a mortgage on the land. Valle v. Fleming’s Heirs, 29 Mo., 152, and cases cited, 104 U. S., 404.
    Equity here protects a purchaser, although the effect is to deprive the heirs of money they otherwise would receive. The suits are as to them in invitum.
    
    In our case, the proceedings under which Mr. Kenaday paid his purchase money were not hostile to the beneficiaries. On its face it was a friendly application for a change of investment. The hostile character that it now assumes was imparted to it subsequently to Mr. Kenaday’s paying the money and taking the deed.
    Mr. Kenaday did what any prudent business man would have done. He applied to title searchers, took legal advice, and upon being assured that a decree had been entered confirming the proposed sale, he paid over his money.
    
      He is not to be remitted to a remedy at law against a nonresident insolvent, while a fund is’within reach of the court-abundant enough for a relief which equity has power to grant.
    
      Mr. Irving Williamson and Mr. R. H. Spencer for the appellees.
   Mr. Chief Justice Alvey

delivered the opinion of the Court:

It is difficult to perceive upon what principle of law or equity the contention of the appellant can be sustained. The sale made by Green to the appellant was vacated and set aside, because the proceeding and conduct of Green operated as a fraud upon the cestui que trusts. The sale was set aside for their relief, and the effect of setting the sale aside was that the beneficiaries were not to be in any manner bound or affected by such sale. The cestui que trusts and their rights thence stood as if ‘such sale had never been made. But such would not be the effect of vacating the sale, if the contention of the appellant were to prevail. Suppose Green had failed or refused to bring into court any part of the $n,ooo, could it be successfully contended that the appellant could rightfully claim and receive the whole of that sum out of the proceeds of any subsequent sale of the property, upon the theory that he had acquired a lien upon the property by virtue of the sale to him by the fraudulent trustee, notwithstanding the sale be set aside and declared that it should be without effect to bind the cestui que trusts ? If the claim would not be good for the whole amount, it cannot be good for a part. The purchaser was bound to know the terms of the decree under which he purchased, and he was therefore charged with knowledge that no sale made by the trustee could have validity and binding force until it was duly and finally approved and ratified by the court. The decree of the General Term required the full amount of the . purchase money received by Green to be brought into court by him; and that was for the protection of the parties concerned, and especially of the appellant, in the event that the decree should be affirmed on appeal. And this is the nature and extent of the remedy for the relief of the purchaser in such case, as is clearly indicated by the Supreme Court in its opinion. The court said: “As to Kenaday, the decree denies his right to property of which he claims to be owner, and which is of the value of eleven thousand dollars. He paid that sum for it in cash to Green as trustee. It is true that there are funds in the registry of the court below, which, in the event of the affirmance of the decree, can be paid over to him, and he be'thus far reimbursed for what he paid to Green on the purchase of the property.” 134 U. S., 123.

The decree of the General Term having been affirmed, the appellant did receive the money that was in the registry of the court, and was to that extent reimbursed. And if the balance of the $11,000 could be reached and made subject to the direction of the court, the appellant would be entitled to receive that also. But clearly he has no enforceable claim whatever against the fund realized on the last sale of the property, and now in the hands of the present trustees to serve the purposes of the trust under the will of Mrs. Mac-pherson.

It follows that the order appealed from dismissing the petition of the appellant must be affirmed, with costs to the appellees.

Order affirmed.