Court Opinion

ID: 6505571
Source: CourtListenerOpinion
Date Created: 2022-07-19 18:17:50.74409+00
Date Added: 2024-06-11T15:54:43.526299
License: Public Domain

RlOB, J.
An administrator is bound not to do anything which has a tendency to interfere with his duty in discharging the trust.- His office is not conferred on him for the purpose of enabling him successfully to engage in intrigues for his private benefit. If with the money of the estate, he buys property, and thereby makes a profit, the estate is entitled to it, although the estate could not possibly have been injured by his use of the money. If, with his own money, he buys up the debts of the estate at an under-value, the advantage thus derived does not belong to him, but to the estate, although, before he bought them up, the estate was bound to pay the fuil amount of those debts. The just and settled policy of the law is, to deter him from placing himself in a situation *71which gives him a bias against the discharge; of his duty, and to shield him from temptation, by destroying eyery allurement to faithlessness or fraud. — Montgomery v. Givhan, 24 Ala. R. 568.
The mere fact of his being administrator does not, per se, disable him as an individual from buying, bona fide, with his own money, property to which the estate has no right. But when he agrees with his co-administrator, that they will, at the Government land sales, buy certain lands for the estate ; and in compliance with that agreement, procures him to join in raising the funds for that purpose ; and charges the estate with the expenses of raising the funds ; and prevents his co-administrator, and the only adult son of the decedent, from attending the land sales, by assuring them that he will buy the lands for the estate ; and at the sales prevents other persons from bidding for them, by declaring that- he had come there expressly to buy them for the estate ; and by these means, and with these funds, buys the lands for a sum greatly below what he otherwise would have had to pay for them ; and takes the titles in his own name, and soon afterwards sells them for large profits, — he cannot retain these profits. His doing so, under a claim that they belong to him, is a fraud, against which a court of equity has power to relieve. 1 Story’s Eq. Jur. § 256 ; 2 ib. §§ 781, 1265 ; Story’s Eq. Pl. § 767 ; Gaither v. Gaither, 3 Maryland Ch. Decisions, 158 ; Sweet v. Jacocks, 6 Paige’s Ch. R. 355; Brown v. Lynch, 1 ib. 147; Lillard v. Casey, 2 Bibb’s R. 459 ; McDonald v. May, 1 Rich. Eq. R. 91 : Johnson v. Kay, 8 Humph. R. 142 ; Haywood v. Ensley, ib. 460 ; English v. Tomlinson, ib. 378 ; Montgomery v. Givhan, supra; Story on Agency, § 211; Barkelew v. Taylor, 4 Halsted’s Ch. R. 206 ; Benson v. Heathorn, 1 Y. & Coll. C. C. 326 ; Fawcett v. Whitehouse, 1 Russ. & Mylne, 132, and notes; Lees v. Nuttall, ib. 53, note 1.
We think it is sufficiently proved, that LanO, as. the active administrator, had control of a large amount of property of the estate ;■ that he and his co-administrator, Garth, knowing that the estate in 1831 was free from debt, and that the cotton crop of the estate of that year would be worth more than $2,500, agreed to buy the lands described in the amended *72bill for the estate ; that to make this purchase, they drew the bill of exchange for $2,500; intending at the time that its proceeds should be used, as far as was necessary, in purchasing said lands for the estate, and also intending that said bill of exchange should be paid out of the property, or cotton crop of the estate, over which they had control; that the expense of getting the bill negotiated were charged to the estate by Lane; that the lands were bought by Lane, and paid for out of the proceeds of said bill, according to'their aforesaid agreement and intention ; that Lane did make the purchase of said lands at the Government sales in July, 1831, for the estate; that he, by agreement with Garth, did take the cotton crop of the estate, which was of greater value than said bill, and agreed to pay the bill, and did pay the bill after so taking said cotton crop ; that Lane, by his line of conduct and declarations in relation to said lands, did induce Garth and young William Mosely, and others who had and felt an interest in causing these lands to be bought for the estate, to believe that he (Lane) would attend the land sales and buy them for the estate with the proceeds of said bill; that Lane thus influenced the conduct of Garth and young William Mosely and others, to the prejudice of the residuary legatees ; that Lane, at the land sales, declared he was buying said lands for the estate, and thus prevented competition ; that by Lane's declarations before the sales, that he would go and buy the lands for the estate, Garth and young William Mosely were misled and prevented from taking other measures to have the lands bought for the estate ; that by such means, which more fully appear in the record, Lane at the Goveniment sales became the purchaser of the lands, at a grossly inadequate price, and has so dealt with them since as to make large profits out of them, which he now claims as his own property.
Under all the circumstances disclosed in this case, we hold that Lane is estopped, as against the complainants, from saying that the proceeds of said bill of exchange, which he used in purchasing said lands at the Government land sales, in July, 1831, were not then held and used by him as the funds of the estate. In this suit, as against Lane, we must take it as established beyond denial by him, that said purchase of *73said lands was made with funds bold and used by him at that time as the funds of the estate. Any other construction would enable him to consummate a fraud. It is but sheer justice to apply the doctrine of estoppel in this case. — Dezell v. Odell, 8 Hill’s (N. Y.) Rep. 219 ; 1 Greenlf. Ev. §§ 27, 207, 208 ; Barkelew v. Taylor, 4 Halsted’s Ch. R. 206 ; McDonald v. May, 1 Rich. Eq. R. 91 ; Sweet v. Jacocks, 6 Paige’s Ch. R. 355; White & Tudor’s Leading Cases in Equity, vol. 2, part 1, pp. 560-62.
The case, thus viewed, is stripped of its greatest difficulty. “ It is the ordinary case of a trust created by one person for the benefit of another, without his knowledge, and accepted by such other person upon being notified of such trust. Sucli a trust is not prohibited by statute. It belongs to what Chancellor Kent calls ‘ that mysterious class of trusts arising or resulting by implication of law,’ and which the legislature have left1 undefined and untouched.’ Such trusts arise from the obvious intention of the parties, though not expressed in the instrument with which they are connected ; or they are forced upon the conscience by the manifest justice of the case.” “ Such trusts must be recognized and enforced, from the very necessity of the case, in order to prevent the grossest injustice. A party will not be allowed, in a court of equity, to shelter himself from responsibility for a fraud, under cover of a statute to prevent frauds. — Hosford v. Merwin, 5 Barb. Sup. Ct. Rep. 41; Benson v. Heathorn, 1 Y. & Coll. C. C. 326 ; Fawcett v. Whitehouse, 1 Russ. & Mylne, 132 ; Page v. Page, 8 New Hamp. R. 187 ; White & Tudor’s Leading Cases, vol. 2, part 1, pp, 560, 561.
Upon the pleadings and proofs, we think the complainants were clearly entitled to a decree.' — Sweet v. Jacocks, 6 Paige’s Ch. R. 355 ; Tompkies v. Reynolds, 17 Ala. R. 109 ; McDonald v. May, 1 Rich. Eq. R. 91 ; and other cases supra. We will now indicate to what extent relief should be granted.
If, after said purchase at the land sales at Huntsville, Lane settled with the Orphans’ Court for the entire value of the cotton crop of the estate of 1831, and did not in any manner, in his settlement, charge the estate with anything on account of said lands, except the expenses of getting said bill *74of exchange sent to Nashville and negotiated, then, in this case, he ought not to bo charged with the entire prices for which he sold said lands at private sale, and interest thereon, but there should be deducted therefrom the amounts paid by Lane for said lands whilst he was at the land sales at Huntsville, in July, 1831, as those amounts are stated in his answer. In other words, Lane ought to be held liable for the net profits made out of said lands, and interest thereon. In estimating the net profits, Lane must be held chargeable with the prices at which he made the last sales of said lands, whether he has ever received those prices or not, unless he shows that they never could have been collected ; and he must be credited with whatever sum he was compelled to pay to get the title to said lands, unless he has heretofore obtained a credit therefor. Interest must be allowed on the balance against him.
It appears that the administrators spoke of the cotton crop of 1831, as the cotton crop of the estate. It is evident that, under- the will, the estate being wholly free from debt in 1831, that cotton crop really belonged to the residuary legatees, and that the administrators knew this to be so. The expenses of getting the bill of exchange negotiated were charged to the estate. This was equivalent to charging those expenses to the residuary legatees ; for thereby the residuum to which they were entitled was diminished. These circumstances serve to show, that when Lane and Garth agreed to buy the lands for the estate, they meant for the residuary legatees, who under the will were entitled to every portion of the estate not specifically devised or bequeathed. The complainants are two of five surviving residuary legatees ; — the other three, who refused to join in prosecuting the suit, are made defendants. The administrator of the only other residuary legatee mentioned in the will, is made a .party defendant ; — -that other legatee having died intestate, before arriving at lawful age, and without issue, his share under the residuary clause belongs to the five surviving legatees. Upon the case as presented, the complainants are entitled, as against Lane, to have the net profits arising from the lands described in the amended bill, on his re-sale of them, treated as part of the estate of the testator ; and they are therefore entitled to a decree for two-fifths of those profits and interest, — the profits to bo ascertained as hereinabove indicated.
*75The decree of the chancellor in this case is reversed, and the cause remanded for farther proceedings not inconsistent with this opinion. Lane must pay the costs of this court.
CHILTON, C. J.
It is certainly true that a trustee is not permitted to make gain to himself out of his fiduciary relation, beyond a reasonable compensation for his services ; and while I agree with what my brethren have said upon this subject, I do not think the subject-matter of this suit, as'disclosed by the allegations of the bill, and shown by the proof, brings it within the influence of this principle.
The complainants must not only make a good case by their bill, but they must, at least substantially, prove the case which they do make, if their allegations are denied by the answer. They proceed here upon the idea of resulting trust —that their funds have been used by the executor, Lane, in the purchase of land, which he has sold, and from which he has derived a profit; which profit, they insist, they have a right to pursue and recover. But the proof shows, that the funds which were used in the purchase, were not the funds of the estate. They were borrowed in Nashville, Tennessee, upon the personal responsibility of the executors' — upon a bill, for the payment of which the estate was in no wise bound. ■ It may be that this debt of the executors was paid out of the funds of the cotton crops raised by the estate. This, however, woufd not, in my opinion, change the principle and convert that into a resulting trust which before was no trust. It is sufficient, in the aspect in which the bill presents the complainants’ case, to show that the funds with which the land was purchased did not belong to the estate.
But it is said the complainants should recover upon the •doctrine of estoppel ; that Lane said he would buy the land for the estate, and thus prevented his co-executor and the adult heirs from making the purchase for its benefit. It is, in my conception, a conclusive answer to this view, that neither of these persons had any authority to. invest the funds of the estate in such purchase. If they had done so, it would have amounted to a tortious conversion of them, for which they would have been liable. The will of the testator forbade the use of the funds in this way, and it was the duty of the *76executors faithfully to carry its provisions into effect. So that to hold Lane liable for the proceeds of the land, it must come to this: — If one party threaten to convert funds of an estate, by reason of which another is prevented from doing it, the party who threatened or said he would do so, must be held accountable as though he had done it. Although he has repented and complied with the law, yet, as he said ho would not comply, he must be treated as though he had not, and estopped from showing that he has.
It is not- pretended that Garth or William Mosely would have purchased the land with their private funds for the estate, and have made a donation of it. It must be assumed, then, that they contemplated using the funds of the estate. This they had no right to do, and so they have been prevented from doing nothing which the law allowed them to do, by the declarations of Lane. So far as the record discloses, Lane has accounted for the funds of the estate. The small sum allowed him as expenses for sending to Nashville for funds, a part of which was used in the purchase of the land in dispute, should properly have been divided between himself and the estate, in proportion as the money was shared between them and it; the record showing that a portion of it was used in paying for land required to bo purchased by the will. But this can have no influence upon the case before us, except as tending to show whose funds were used in buying the land mentioned in the bill.
But, finally, there is another substantial reason for refusing this relief, conceding the foregoing views to be untenable. It is this — the promise was “ to purchase for the estate.” The bill is filed by some of the residuary legatees. These profits sought to be recovered, are clearly no part of the estate proper which can pass under the will. They could not have been within the contemplation of the testator. Yet, by the decree of this court, they are made to pass under the will to the residuary legatees.
These are some of the reasons which compel me to dissent frota the opinion of a majority of the court. In legal contemplation, the estate has not been injured by the failure of Lane to convert the funds after he had declared he would do so, and hence no principle of estoppel can be invoked to hold *77him. to his declaration. Neither has he taken anything from the estate to which it was entitled, by making the purchase in his own name, and for his own account. The bill fails to show that he prevented a gift or donation from being made to the estate, but merely that he prevented a speculation with the funds of the estate, which • the law would not allow, and which, in other hands, may have proved disastrous instead of profitable.