Court Opinion

ID: 6232604
Source: CourtListenerOpinion
Date Created: 2022-02-17 20:25:21.761477+00
Date Added: 2024-06-11T08:57:55.651645
License: Public Domain

The opinion of the court was delivered, by
Read, J.
A trustee for creditors suing out a mortgage belonging-to the trust, and attending at the sheriff’s sale under the execution issued by him or his order, and purchasing the real estate at such sale in his own name, it is as trustee for the creditors. This is the legal implication arising from the whole transaction. “It is certainly not necessary,” says Justice Black in Sherman’s Appeal, 3 Casey 66, “ to decide now, that an executor who buys at his own sale, or, what is precisely the same thing, gets another to buy for him, holds the lands on the same trusts that it was subject to before the sale.” In that case the executor settled what purported to be a final account, and set it up as a bar to any further claim, but the court unhesitatingly decided that it was no bar; and in Rosenberger’s Appeal, 2 Casey 69, Chief Justice Lewis said: “ The acceptance of part of the proceeds, under the circumstances stated, does not estop the parties entitled from claiming the residue. Such an act might bind them not to disturb the title of a purchaser, but surely the payment of part of what the executor owed is no reason why they should not pay the residue.” “ When,” says Chief Justice Gibson in Chronister v. Bushey, 7 W. & S. 153, “he appears as both seller and buyer, as when the estate has been sold by him and bid in for him at auction, the preventive justice of a chan*203cellor goes further, and forbids .him to acquire an indefeasible title to it against the cestui que trust on any pretence.”
The general principle applicable to and governing all cases like the present, is well stated in the Manual of Equity Jurisprudence, p. 176: “If a trustee or other person standing in a fiduciary relation acquires property, or makes a profit, by means of transactions within the scope of his agency or authority, or if a person employs another’s property in any trade or speculation, there will be a constructive trust as to the property so acquired, or the profits so made, for the benefit of the cestui que trust, principal owner or other person standing in the opposite relation.”
There can therefore be no doubt that in the present case the creditors had a right to consider the trustee as purchasing for them, upon the same trusts on which the mortgage had-been held. In this case the property purchased was sold by the insolvent for $2808, and the balance due on the mortgage at the rendition of the judgment was $2011.09, and this was the residue of the purchase-money unpaid. The price bid was $200, of which the trustee only paid the costs, reducing it to $190.81, for which he simply gave his receipt as trustee, never paying a dollar of it to the sheriff.
If the trustee purchased with an intention to hold it for himself, it was clearly a legal fraud ; and looking at the enormous disparity between the original price and the price bid, being one-fourteenth only of . the amount it was sold for by the insolvent, it forces upon us a moral conviction that it was an actual.fraud upon the creditors.
Any confirmation, therefore, of such a sale by the real seller to himself, must be upon a full knowledge of all the circumstances and a deliberate examination by the parties interested, who are the cestuis que trust, whose interests this trustee was bound by every principle of honesty and good faith to protect and promote. It resembles itself, to “ an election by matter in pais, which can only be determined by plain and unequivocal acts under a full knowledge of all the circumstances and of the party’s rights.”
“ One is not bound to elect until he is fully informed of the relative value of the things he is to choose between; and if he make an election before the circumstances necessary to a judicious and discriminating choice are ascertained, will not be bound:” 12 Casey 496. Such is the manifest tenor of the language of Chief Justices Lewis and Black in the cases above cited.
In this case a partial account was filed by the assignee containing this entry, without a single word of explanation showing the accountant was both seller and buyer:—
“ Proceeds of sale of real estate of F. H. Amend on lev. fa. No. 71 March'Term 1857. $190.84.”
Between this period and the filing of the final account, or *204during its pendency,' the facts of the sale appear to have been known to the creditors. The land remains in the hands of the trustee, and he loses nothing by the decree of the court except his expected profit from an act intended on his part as a positive breach of trust. Such acts of a trustee ought not to be passed over or excused, and no counsel could ever advise an assignee for creditors in like circumstances that he could become a purchaser for himself, and for his own benefit, at his own sale.
Decree affirmed at the costs of the appellant.