Case ID: ad_121/html/0538-01.html
Source: Caselaw Access Project
Author: {"author": "\n      Jenks, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Andrew L. Bush, as Sole Surviving Executor and Trustee under the Last Will and Testament of Newberry D. Halsted, Deceased, Respondent, v. Augustus M. Halsted and Others, Respondents, Impleaded with Forrest H. Parker, Appellant.
    Second Department,
    October 4, 1907.
    Sale — agreement .of selling', agent to share profits with purchaser — assignment, for creditors — when title to remainder reverts limitation of action by remainderman—order confirming void sale by assignee not binding on owner — constructive notice.
    When on a judicial sale by an assignee for the benefit of creditors, the purchaser without the knowledge.of the trustee or assignor entered into an agreement with the assignee’s attorney, who procured the order and conducted the sale as auctioneer, to share with'him the profits realized,, the safe is null and void and the owner may assert title as against the purchaser.
    ' Although the property so sold was a .remainder limited on a life, estate not then expired, which remainder passed under an assignment for the benefit of creditors of a partnership, of which the remainderman was a member, he may assert Jiis title against the purchaser, when the assignment entitled him to' any surplus after the firm debts were paid, for under chapter 545 of the Laws of 1875, there was a reverter to him:
    The Statute of Limitations does not begin to run against such remainderman until the death of the life tenant. • . ■
    The order confirming the report of a referee on an accounting by the assignee for the benefit of creditors after the sale is not binding upon the insolvent seeking to avoid' the illegal sale, for it was not.necessary that he should attack the sale ■ in that proceeding or institute action to avoid the final order.
    Such insolvent is not charged with constructive notice of the agreement of the purchaser to share the profits with the auctioneer by reason of a record thereof made after, the sale and delivery of the deed.
    Appeal by the defendant, Forrést H. Parker, Horn portions of a judgment of the Supreme Court in favor of the plaintiff and certain of tíie defendants, entered in the office of the clerk of the county of Westchester on the 24tli day of January, 1906, upon the decision of the court rendered after a trial at the Westchester Special Term. ■
    
      Matthew O. Fleming, for the -appellant.
    
      William, C. Beecher, for the respondent Augustus M. Halsted.
   Jenks, J.:

This action is by the surviving trustee under the ‘will. of Hew- • berry Halste.d, deceased, to pass his accounts and incidentally to determine the ownership of certain lands involved. The accounts were passed without objection, and the sole question litigated and brought up to us relates to the said lands as to which two of the defendants present conflicting claims.

The will of the testator, who died in 1862, gave the remainder of his estate, real and personal, to his executors in trust for the benefit of his widow during her life, and upon her death directed the trustees to' convey a part of the realty to Halsted. In 1867 Halsted’s firm of Putnam & Halsted made an assignment for the benefit of its creditors to Smith, who was subsequently removed and gave way to Stevens. Stevens died in 1888 and the State Trust Company, became the trustee in his place. In 1891 the said company sold the estate of Halsted under 'the said will of Newberry Halsted to Parker. The widow of Newberry Halsted was then in enjoyment of her life estate. She lived until 1904. The plaintiff complained that as to such share devised to Halsted, demands had been made' by Halsted and by Parker that any action on the part of the plaintiff as trustee necessary to be taken to place either in possession should be taken, thus endeavoring to put this plaintiff * * * in a position where he shall determine to which of the two parties so demanding the same now rightfully belongs,” and that by reason of their adverse claims and the question whether any conveyance should.be made by plaintiff the plaintiff could not settle his accounts, it further appearing that he had in his hands $2,753.60 in the nature of the real estate.'. The plaintiff prayed for an adjudication as to these questions. Halsted answering asserted that he was entitled to the said fund, alleged that the sale of his estate by the State Trust Company was illegal, fraudulent and collusive, that any interest which passed under the said assignment by his firm had reverted to him and demanded judgment accordingly. Parker answering asserted . that he was entitled to the fund by virtue of his title to the realty, which lie had acquired from the State Trust Company at public sale, and demanded that he be decreed the owner of the fund and of the realty. Thus the contest was between these two defendants of whom each had thus affirmatively submitted his claim and his rights to the court in this action. .The Special Term decided that the sale to Parker was illegal, inequitable and for a very inadequate price, and that the Cowdreys, of whom I shall speak hereafter, were likewise purchasers at the same sale, although the title was taken in the pame of Parker. It thereupon adjudged that the sale was null and void, that the deed to Parker must be canceled and that a conveyance thereof must be "made by the plaintiff as executor and trustee to Halsted.. It adjudged on consent of Halsted-that" the-purchase price, with interest, should be repaid to Parker and that he. should have a lien on the lands- therefor. Parker appeals from the parts of the judgment adverse to him. - '

I think that the judgment should be affirmed. There was evidence on the trial, not contradicted, that the realty was worth about $132,000 in 1891, the'time of the sale, andfrom $175,000 to $200,000' at the present time. The property was sold to Parker for $2,525. 0f course it is to be remembered that the sale was only the remainder interest of Halsted. Parker admits that he then knew the property was “ very valuable.” The sale was attacked by Halsted o.n the theory that it was' the successful consummation of a conspiracy by Parker and the Cowdreys to buy in the property for a song ; that Parker, the' purchaser, was disqualified because lie was a director of the State Trust Company and also the executor of the j3teveils, estate, quite the largest creditor of the'firm of Putnam & Halsted, and that the Cowdreys were the attorneys for "the State Trust Company and one of them was the auctioneer at the sale. I do not propose to discuss either the evidence in detail or the various questions arising thereupon as to the effect of the several fiduciary "relations. For" I think that the affirmance may rest upon the facts that the trust company obtained the order for this sale through the MessrSi Cowdrey as its attorneys; that the auction sale was thereupon conducted by the Cowdreys, of whom one was the actual auctioneer;' that the- estate was thereby sold to Parker ; that prior to the-sale there-was an agreement between Parker and the Cowdreys that if Parker secured the property the" profits of -the transaction would be divided between him and the Cowdreys on a certain basis and that the Cowdreys were in fact the purchasers with Parker, And it nowhere appears that the trust company or Halsted' knew at that time of any such arrangement. It was the duty of the trustee through the sale thus conducted by the Cowdreys, as its attorney and by one of them as auctioneer, to obtain as large a sum as possible, both for the creditors and for Halsted — for as to the latter the assignment provided : “ If any surplus shall remain of the said proceeds after the payment of all the debts due by the said parties of the first part or either of them the said party of the second part shall return the same to the said parties of the first part, their executors, administrators or assigns.” It was the interest' of the Cowdreys under their arrangement to sell the property to Parker for as small a price as possible in order to enhance the profits of their and Parker’s joint scheme. Pomeroy in his Equity Jurisprudence (Vol. 2 [3d ed.], § 960) says: ^ When an attorney has the charge of .or is employed to conduct a judicial sale of property, he cannot become the purchaser without full explanation and information given to his client of his intention.” (See, too [cited in Pomeroy’s note], Matter of Bloye's Trust, 1 Mac. & G. 488; .Oliver v. Court, 8 Price, 127, especially at 160, 161; Pacific Railroad v. Ketchum, 101 U. S. 289, 300, in that there was “ speculation.”) It is quite immaterial that the purchase was made by Parker, so long as the Cowdreys were also purchasers with him. (See Matter of Bloye's Trust, supra; Pom. Eq. Juris., supra, notes 6, 1, and authorities cited.)

Under the assignment, as I have shown, the assignor was entitled to any surplus, and under chapter 545 of the Laws of 1875 there was a reverter to him. I think, therefore, that he was entitled to assert this claim. In Zimmerman v. Kinkle (108 N. Y. at 287) the court-say : The principle which justifies this conclusion was applied in the recent case of Wetmore v. Porter (92 N. Y. 76), where it was held tha^ whoever receives property knowing it to be the subject of a trust and to have been transferred by the trustee in violation of his duty or power, takes it subject to the right, not only of the cestui que trust, but also of the trustee to reclaim" possession or recover for’its conversion.” (See, too, First Nat. Bank v. Nat. Broadway Bank, 156 N. Y. 459, 468; Moss v. Cohen, 158 id. 240, 251.) There is no need to ' consider whether the Statute of Limitations is in the case and was not waived, inasmuch as the cause of action of Halsted, i. e., the right to the remainder under the will, did not accrue until the' death of the life beneficiary in 1904. (Gilbert v. Taylor, 148 N. Y. 298. See, too, Gates v. Andrews, 37 id. 657.) I think that the order confirming .the report of the referee in the accounting proceedings instituted by the State Trust Company after the sale is not conclusive upon Halsted. For it was not necessary that he should attack the sale in that proceeding, or institute an action to avoid the final order (Mandeville v. Reynolds, 68 N. Y. 528; Ward v. Town of Southfield, 102 id. 287, 292; Warren v. Union Ranh of Rochester,. 157 id. 259, 272.) ' The court has found without exception that Halsted knew nothing of the scheme of Parker and the Cowdreys until after the death, of the life .tenant in 1904. There is nothing to support the contention that Halsted is chargeable with -constructive notice. -For aught that appeared, the sale was. at public auction to-Parker. The share of the Cowdreys in the purchase was in -iio -way-revealed,'and there was no circumstance which should have put Halsted upon inquiry. Certainly he cannot he held to such notice perforce of the record of the agreement between Parker and the Cowdreys made after the sale and after the delivery Of the deed to Parker Halsted had no reason to consult the records, and the mere record of tins .agreement was not.-in itself notice -thereof to him.

. The judgment is affirmed,--with costs.

Hírschberg, P, J., Woodward, Hooker and Miller, JJ., concurred. .-

Judgment, in ..so far as appealed from, affirmed, with costs..