Case Name: Emily C. Smith, as Executrix, etc., of Emily C. Smith, Deceased, Suing on her own Behalf and on Behalf of all other Creditors of George R. Smith, who were such on December 9, 1884, and George R. Smith, Appellants, v. William Hamilton, Respondent
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1899
Citations: 43 A.D. 17
Docket Number: 
Parties: Emily C. Smith, as Executrix, etc., of Emily C. Smith, Deceased, Suing on her own Behalf and on Behalf of all other Creditors of George R. Smith, who were such on December 9, 1884, and George R. Smith, Appellants, v. William Hamilton, Respondent.
Judges: 
Reporter: Appellate Division Reports
Volume: 43
Pages: 17–22

Head Matter:
Emily C. Smith, as Executrix, etc., of Emily C. Smith, Deceased, Suing on her own Behalf and on Behalf of all other Creditors of George R. Smith, who were such on December 9, 1884, and George R. Smith, Appellants, v. William Hamilton, Respondent.
Assignee for creditors — a purchase by him of assigned property on a moiigage foreclosure is voidable only — Statute of Limitations — acquiescence in the sale.
Where an assignee for creditors purchases, in his individual capacity, a part of the assigned estate on the foreclosure of a mortgage thereon, the sale to him, even if in hostility to his duties as assignee, is voidable only, not void. Fraud need not be shown, however, in order to impeach it.
The ten years’ Statute of Limitations is applicable to an action by a creditor of the assignor to set such sale aside, and where no actual fraud is shown, it begins to run from the day of the sale.
Effect of acquiescence in the sale until large sums of money have been expended in the improvement of the property, and it has, through unforeseen events, acquired an unexpected value, considered.
Appeal by the plaintiffs, Emily C. Smith, as executrix, etc., of Emily C. Smith, deceased, and another, from an interlocutory judgment of the Supreme Court in favor of the defendant, entered in the office of the clerk of the county of Monroe on the 24th day of February, 1898, upon the report of a referee.
The defendant was appointed the assignee of the plaintiff George B. Smith, in trust for the benefit of his creditors, December 9, 1884, and at once entered upon the performance of the trust. Included in the property committed to him as assignee was a flouring mill at Honeoye Falls, in Monroe county, which he carried on by order of the court in the prosecution of the assignment. There was a mortgage of $15,000, which was a subsisting lien on said property at the time of said assignment, and which also was an incumbrance upon. other property situate in the town of Wheatland, in said county, owned by the defendant, Emily C. Smith and her mother, of the same name, of whose will the daughter is sole executrix. In 1886, an action to foreclose this mortgage was commenced, was prosecuted to judgment, and. a sale of both parcels of land was had on the 24th day of May, 1887. One Holden at this sale purchased the property in the town of Wheatland, evidently for the plaintiffs Smith, and on the same day the defendant purchased the flouring mill property for $8,000. On the day of sale he paid on the purchase price, $800, and on the twenty-sixth day of the month paid the balance thereof and received the deed of the premises. On the twenty-fifth he entered into possession of the purchased premises and immediately began extensive improvements thereon, and since that time has been in the undisturbed possession thereof, assuming to own the same, and has expended in improvements thereon over $28,000. Pie bid off and paid for these premises out of his own money and intended to make the purchase for himself individually. The entire assigned estate then in his custody was only $545.06. This action was brought to require the assignee to account for the assigned property, including that claimed to be purchased by him. The defense of the ten years’ Statute of Limitations was interposed, but only as to the mill property. By stipulation of the parties, the accounting has been deferred to await the determination of the question whether the mill property is still a part of the assigned estate.
William De Graff, for the appellants.
George F. Yeoman, for the respondent.

Opinion:
Spring, J.:
It may be assumed that Hamilton, in purchasing this property, was acting in antagonism to his trusteeship. This did not render the sale void. The title was vested in him absolutely, subject to repudiation by the parties interested in the estate intrusted to him. They alone could assail it. (Read v. Knell, 143 N. Y. 484.)
It was not incumbent upon them to show actual fraud to impeach the validity of the deed to the defendant. Their cause of action is based upon the act of defendant in making the purchase in contravention of his fiduciary relation. (Yeoman v. Townshend, 74 Hun, 625.)
The Code does not in specific terms provide how long these parties may have in which to avail themselves of their right to impugn the sale. The ten years' limitation, therefore, applies. (Code Civ. Proc. § 388; Matter of Rogers, 153 N. Y. 316; Gilmore v. Ham, 142 id. 1.) That section provides that an action within its purview " must be commenced within ten years after the cause of action accrues." The turning point in this case is, to determine when the cause of action .was first available to the plaintiffs. Did it accrue when the defendant made his bid and paid the $800, or at the date of the delivery of the deed, or even subsequent to that event? If the ten years commenced to run on the day of the sale, then this action, which was commenced May 25, 1897, was one day too late. There is no pretense that the defendant intended to perpetrate a fraud upon the plaintiffs ; he was by far the heaviest preferred creditor of his assignor. Nine-tenths or more of the estate upon distribution will pass to him. He bid to protect himself, believing he was' acquiring an indefeasible title. He paid $8,000 in cash of his own money, which was applied in reduction of the foreclosure judgment. The fairness of the sale itself is uirimpeached. He was the highest bidder at a sale evidently advertised and conducted in the usual public way. The plaintiffs within a month after the sale acquired by purchase the residue of the"property sold by virtue of the same foreclosure judgment. So they are not gainsaying the regularity and openness of the sale itself. In the action he was a defendant as assignee and individully. The judgment was in the usual form, " barring and foreclosing all right, title and interest and equity of redemption " in the mortgaged premises and permitting any party to bid. The title vested in the purchaser was that of the mortgagor and mortgagee combined and wiped out that of the assignee. (Packer v. The Rochester & Syracuse R. R. Co., 17 N. Y. 283; Thomas Mort. § 1013; Rector, etc., v. Mack, 93 N. Y. 488.) That ended his relationship with that property as trustee of an express trust. His title was subject to attack by the cestuis que trust; if they did not interfere his owner ship was unassailable. At best he was only a trustee ex maleficio. Constructive fraud alone was imputable to him. His sinning is due to'his position. Where a trust arises by implication, or where the fraud charged is hot active but constructive merely, the statute is operative from the time the wrong was committed.. (Lamer v. Stoddard, 103 N. Y. 672; Yeoman v. Townshend, supra; Price v. Mulford, 107 N. Y. 303.)
When the premises were struck off to him and he paid the $800 provided by the terms of sale, he acquired a right in. the property. He could enforce the conveyance, assign his bid, and was burdened with the liability to pay the balance of the purchase price. In case of a failure to complete his purchase, he was liable for the taxes accruing before the resale and for any deficiency that might accrue. (Ruhl v. Law, 8 Hun, 251; Chase v. Chase, 15 Abb. N. C. 91.)
That act terminated the equity of redemption. The mortgagors could not pay up and take the property. (Thomas Mort. § 1020.) That right is akin to that possessed by these plaintiffs. It is intangible until galvanized into life by those entitled to assert it. Thé only-physical impairment to the title of a purchaser at a foreclosure sale, antecedent to the deed, or the rights which flow from it, is, he cannot oust the mortgagor of possession. The indicia of title are essential to enable- him to accomplish that; but, so far as his right to the deed is concerned, it is unqualified, and, when the deed is delivered, it relates back to the date of the bid, and his obligations and benefits, are governed primarily by the terms of sale accepted by him. on that date. Again, on the day the mill property was struck off to .the defendant, the cestuis que trust could have commenced an action to nullify the purchase or to decree that he took the title as trustee, or, by motion, to vacate the sale. This right to intervene arises from the fact he was purchasing in hostility to the trust. He had already perpetrated an' act inconsistent with his fiduciary relation by which he had acquired a property right, and the estate had'lost one. The fact that the plaintiffs could obtain its abrogation does not impair the force of the proposition, for affirmative action was necessary to insure the devolution of the premises to- the defendant as assignee. It accordingly seems clear-that the wrong was done on the day of sale, and the plaintiffs' right to attack' .the purchase had its inception on that date. Hubbell v. Medbury (53 N. Y. 98) is not in conflict with this position. The purchaser at that sale immediately took possession of the premises, and the court held the liability accrued as soon as he went into possession, asserting his individual right thereto. The fact of the sale itself was not in question, for more than ten years had elapsed since the purchaser had been notoriously in occupation, claiming title in himself.
In Nutt v. Cuming (155 N. Y. 309), cited by appellants' counsel, the defendant held a lien subordinate to that of the mortgage foreclosed. Ten years had not expired since the rendition of his judgment at the date of the entry of the foreclosure judgment. Four years intervened this date and the sale and conveyance, and, in the meantime, the ten years' limitation had run on the judgment of defendant. The court decided there was no lien on the surplus moneys arising from the sale, as only liens existing at the time of the sale attach to the surplus. The right of the purchaser was not involved, and the rule of practice providing that a person with a lien at the time of the sale is entitled to participate in the surplus moneys was quoted to uphold the principle that the judgment of defendant was not a lien.
It is urged that the plaintiffs' cause of action did not become ripe until they had acknowledged that Hamilton was asserting title in himself individually. The presumption is, the knowledge came to them the date the wrong was perpetrated. The burden was upon them to show the fact that they were not apprised of his claim until a later date. (Mason v. Henry, 152 N. Y. 529, 539; Baldwin v. Martin, 14 Abb. Pr. [N. S.] 9.) But the inception of the cause of action is not dependent upon knowledge in plaintiffs where no actual fraud has been committed. That date is an arbitrary.one prescribed by the Code. While the obvious aim of .the courts is to bring each right of action within some definite Code limitation, yet it is'a drastic constriction of the powers of a court of equity to hold that the plaintiffs could recover in this suit irrespective of the statutory limitation. They were parties defendant in the foreclosure suit; they lived near the mill property, and must have known of the purchase made by the defendant and of the extensive improvements-he was making. They knew he was principally interested in the assigned estate; and yet it was not until unexpected value was imparted to the property by the acquisition by the. city of Rochester of certain water rights that they made any .claim the defendant was holding as assignee. After this long acquiescence, and after this apparent assent to defendant's, purchase, and after their failure to interfere until he had expended a large sum in improving the property, and when the wheel of fortune gave this new unforeseen value to it, they might well be said to have allowed their rights to become too dormant to be aroused." The defendant had paid $8,000 to. apply in payment of a subsisting lien on the property, and yet these plaintiffs make no offer to reimburse him for that sum, and they knew he must have paid that individually, for they were aware of the small sum he held as assignee. They have received the benefit of the payment of the mortgage debt the same as if it had been paid to them individually. The equities are overwhelmingly with the defendant.
. The interlocutory judgment is affirmed, with costs to the respondent.
All concurred.
Interlocutory judgment affirmed, with costs..