Court Opinion

ID: 5185447
Source: CourtListenerOpinion
Date Created: 2022-01-06 04:47:45.270724+00
Date Added: 2024-06-11T08:26:43.750504
License: Public Domain

Patterson, J.
(dissenting):
I dissent from the views of the majority of the court in this case, and am of the opinion that the judgment should be reversed. The trustee violated his trust, and Elizabeth Cummings, his wife, now holds the legal title to certain premises which were affected by the trust. There is nothing better settled in the law than that one who, with knowledge of the terms of a trust, purchases the trust property or takes an incumbrance thereon, is bound by his knowledge. If he buys the property, it will be subjected in his hands to the same trust, notwithstanding he has paid a valuable consideration. If he takes an incumbrance, if it be valid at all, it will be subordinated to the trust purposes. The following facts appear in this case:
James Riley was the owner of certain real property in the city of New York. He and his wife, the present plaintiff, conveyed that property on the 9th of October, 1891, to the defendant Richard Cummings. On the same day an instrument was given back to the Rileys in which it was declared that, while the deed from them was absolute on its face, it nevertheless was taken in order that Richard Cummings might sell the premises as soon as. possible for the best price and the best terms that could be obtained, and apply the proceeds to the payment of expenses incurred for legal services, or by Richard Cummings in finishing a certain building, and to the satis*516faction of claims Cummings had against James Riley, and for labor or materials “ against the said premises,” and to the satisfaction of an indebtedness of James Riley and Margaret Riley to the extent of $12,000.
The trial court found what the purposes of the trust were, and that Richard Cummings held the property to sell the same, .and to apply the proceeds of sale, among other things, to the satisfaction of the indebtedness of James Riley to Margaret Riley to the extent of $12,000. It affirmatively appears that this trust was never carried out, but was apparently violated by Richard Cummings. He did not sell the land. He and his wife, the defendant Elizabeth Cummings, made a formal conveyance of it to one Lawson, who executed mortgages upon it, one of them being to .the Bradley & Currier Company, and another to S. B. Iturzman, and the day after those mortgages were put upon the property Lawson reconveyed it to Richard Cummings. The transaction seems to speak for itself. Afterwards, the Bradley & Currier mortgage was assigned to the defendant Elizabeth Cummings, the wife of Richard Cummings. She then had a mortgage upon this property which her husband had held as trustee which mortgage he had no authority to make or cause to be made. Subsequently the Ilurzman mortgage was foreclosed and on the sale under the decree Elizabeth Cummings became the purchaser. The court below has found that Richard Cummings must account for his administration of this property. Whatever is found due from him may be charged upon the land.
It, therefore, appears that by means of a conveyance in which Elizabeth Cummings joined, not intended as a sale but merely as a device for creating mortgages, the trustee has caused incumbrances to be put upon the property which he had no right to make or cause to be made, and which any person buying or taking with knowledge of the limitation of power would take at his peril. The trustee must account for the property and what he has done with it, so the court below has held. What is the situation of Elizabeth Cummings with respect to her being a bona fide purchaser of her mortgage or of the land at the foreclosure sale ? Is there anything to show that she had notice or knowledge of prior equities ? The complaint was dismissed as to her because of a supposed failure to prove that she was not a bona fide purchaser or in some way connected with the acts of *517her husband, the trustee. Doubtless the burden of proof was upon the plaintiff to show such a state of facts as would charge Elizabeth Cummings with notice or knowledge of the true relation of her husband. to the property, and his inability to place mortgages upon that property. The specific allegations of actual fraud in fact charged against her were not proven; but as I read the pleadings in this case, it was not necessary for the plaintiff, in order to procure an interlocutory judgment, and for the purpose of holding Elizabeth Cumings in court until the case was ripe for final judgment, to introduce any more proof than was given. We find her a party to the. deed to Lawson. That of itself is not of much importance, but she does not answer separately in the action; she does not set up that she is a ion a fide purchaser either of the mortgage or of the land on the foreclosure sale; she does not claim to have advanced one dollar for the mortgage nor to have paid anything on the purchase. It is not true that the only circumstance connecting her with this property and these transactions is the fact that she is the wife of the trustee. She admits in her answer that her husband took the conveyance from Riley and his wife on the terms recited in the declaration of trust. That instrument is set out in the 3d paragraph of the complaint; she and her husband jointly answer that paragraph, and they admit that the conveyance was made by the Rileys to Richard Cummings under that trust. Richard Cummings knew of the trust and its terms, and in her answer Elizabeth Cummings does not separate her knowledge from her husband’s. The admission is broad enough to cover knowledge of the trust on her part at the time she joined in the deed to Lawson. She has refrained altogether from pleading any rights acquired as a bona fide purchaser or as the assignee of a bona fide mortgagee without notice. All the facts and circumstances connected with her relation to the property must necessarily appear on the accounting directed by the interlocutory judgment, and it may be required that the amount found due from the trustee, if any, should be charged on the land in the hands of Elizabeth Cummings.
In my opinion there was sufficient proof in this case to authorize an interlocutory judgment against both defendants.
Judgment affirmed, with costs.