Court Opinion

ID: 6238826
Source: CourtListenerOpinion
Date Created: 2022-02-17 20:39:14.400089+00
Date Added: 2024-06-11T08:58:08.064602
License: Public Domain

Opinion,
Mk. Justice Paxson.
This case has been so well discussed by the learned judge of the court below that we might well be excused from adding to what he has said. In order that the case may not be misunderstood or misapplied hereafter, we desire to repeat emphatically that we do not propose to interfere with or impair in the least degree the well established rule that a trustee will not be allowed, unless by leave of court first had, to purchase the trust property at his own sale, nor in any manner to make a profit out of the same. This rule is not only established, but it is one of great value, and essential to the proper administration of trust estates. But we are of opinion with the learned judge below that the rule in question does not apply to the facts of this case. As a general rule a trustee who purchases the trust property at his own sale does so in violation of his trust; whereas the appellee in this case, in the application of the stock in question to the payment of the four creditors of the company, including himself, was acting in the direct execution of his trust. He was doing with the stock just what it was given to him for. There is therefore no room for even an allegation of a breach of trust. The only question, therefore, is whether the stock was so applied in good faith, and at a fair price. Upon this point there is no room for a serious dispute.
There were but three creditors to pay besides himself. His own claim exceeded the aggregate of the others as his contribution of stock greatly exceeded theirs.-. 'It is true the stock was not sold at public sale. It was merely transferred in ex-tinguishment of the respective claims. That this mode of its application was the mode, and the only mode ever contemplated by the parties to the trust, is self-evident. The stock had no market value ; it could not have been sold at any time at any price that would have paid'the debts. Had the appellee paid his own claim at the time he paid the others, I presume no dispute about it would ever have arisen. He delayed for some years, and then took it at 142.71 per share. This was greatly above any price that could have been obtained for it at any sale, public or private. After the appellee had taken *588the stock at $42.71 per share, Mr. Patterson, one of the complainants, on November 10, 1879, sold 188 shares at $15.96 per share. On March 24, 1881, he sold 432 shares at $25.00 per share. This was seventeen months after the appellee had taken the stock at $42.71 per share.
Much stress was laid upon the delay of the appellee in appropriating the stock to the payment of his debt. Upon this point the learned judge below found the facts as follows: “ The reason why Mr. Lennig waited so long before paying his own debt with the stock which he held for that purpose, is quite apparent from the evidence. He waited to see if within a reasonable period, by the success of the company the stock might not attain a higher value and become worth more than the amount of his debt, his declared intention being in that event to return any surplus which might remain to the contributors. It was to carry out in good faith this purpose that Mr. Lennig continued to hold the stock as trustee, hoping that the business of the company would so improve as to cause a rise in the stock, which, when he received it, had no marketable value whatever.” This finding of the court is not contradictory of any finding by the master, and, if it were, is based upon sufficient evidence. It leaves nothing whatever to sustain the appellants’ charge of bad faith.
It was also urged that the appellee did not report to the company the transfer of this stock in payment of his own debt. We do not attach much importance to this point. Some of the appellants had knowledge if not notice of the transaction, and as the transfer appeared upon the books of their own company to which they had access, they might have known it, had they cared to inquire. This is a question of good faith, and in such cases knowledge is regarded as equivalent to notice of the highest degree: 2 Leading Cases in Equity, 4th Amer. ed., 148. “ When a party having knowledge of such facts as would lead any honest man using ordinary caution to make further inquiries, does not make, but on the contrary studiously avoids making such inquiries, he must be taken to have notice of those facts, which, if he had used ordinary diligence, he would readily have ascertained:” Wade on Notice, § 11, and cases there cited.
The aquiescence of the appellants for four years is certainly *589against them. They had no right to suppose that Mr. Lennig would settle his own claim in any different manner than he settled with the other creditors, and if they had given him notice of any objection he could have sold the stock under an order of court. It is true it would not have brought half the money at which he took it, but it would have left no room for subsequent complaint.
The complainants are in a court of equity and there is no equity in what they ask. The principle which they invoke was never intended for such a case, and to apply it here would work the very reverse of equity.
The decree is affirmed and the appeal dismissed at the costs of the appellants.