Court Opinion

ID: 6312898
Source: CourtListenerOpinion
Date Created: 2022-02-18 20:17:57.12731+00
Date Added: 2024-06-11T08:59:08.467736
License: Public Domain

Rogers, J.,
dissentiente.— It is not my intention to analyze the testimony, although, in my apprehension, there would be no difficulty in proving that the facts in evidence disclose a case of combination between Woolley, the insolvent debtor, and Fisk, the assignee, to become the purchaser of the real property of the insolvent estate at a price which subsequent events have shown, was greatly below its real value, of which they, from their superior means of information, were well aware before and at the time of the sale. It could, also, I think, be further made apparent that the judicial sale, though nominally under the superintendence of the bank, was really under the control of Fisk, in consequence of a private and secret contract between them, and that in truth the sale was, in forra, a means of conveyance adopted by the parties to cover the real transaction, and having the title passed to them under the sanction of a court of justice. If such was the state of facts, it is admitted it would bring the case within the principles assumed by a majority of this court. But I do not rest my objection to the judgment on that ground, but I take leave to protest against the broad principle for the first time held by this court, that at a judicial sale a trustee has the same right as any other individual to purchase the trust estate, with the single exception of an execution issued by himself or where in some manner the sale is subject to his government and control. In other words, according to the principles now asserted, the trustee must be both buyer and seller to invalidate the sale; that it cannot be impeached except by proof of actual fraud.
This, it is believed, is a fair statement of the principle ruled by the court, and it amounts to this: that the assignee of a bankrupt or insolvent estate, an assignee under a voluntary assignment, a trustee under an express or implied trust; an executor, a guardian, an attorney in fact or at law, in short, all and every person acting in a fiduciary character, has the same authority, and with the like consequences only, to purchase the trust property, as any other person, however disconnected with it, at a judicial sale, with this reservation only that he is prohibited from becoming the owner when he has the control of the sale, or, in other words, stands in the category of both buyer and seller; that the well established and wise rule, which prohibits the trustee from purchasing the trust estate during the subsistence of the trust, does not apply to such a case, but only exists where he has placed himself in the predicament of vendor and vendee. This is a limitation, with all due respect, of modern growth. It certainly never entered into the heads of the sages of the law, who have taken so much pains to explain and vindicate the reason and policy of the rule. If such an exception is admitted, it would readily occur to them that in a most numerous class of cases, which enter into the common transactions of life, cestui que trusts are entirely at the mercy of fraudulent trustees, who can plunder them without stint or limit, without *31any effectual restraint or redress whatever. If the rule is so necessary and salutary, as it is uniformly declared to be by every jurist who has touched the question, is it not passing strange it should be restricted in its operation in a class of cases much the most numerous, and requiring at least as much protection from the effects of artifice and fraud ? I will readily admit that in many, perhaps most of the cases, it has happened that the trustee was both seller and buyer; but, with deference, I submit, that the rule does not depend on that circumstance, but has its foundation in reasons much more extensive and comprehensive. And this, in my opinion, is most apparent from the rule itself, which covers more ground, and from the reasons given by the Judges in vindication of the rule, which they take unusual pains to enforce.
The principle uniformly held is this. A trustee cannot act for his own benefit on a subject connected with the trust, during the subsistence of the trust. No party can be permitted to purchase an interest in property, and.hold it for his own benefit, when he has a duty in relation to such property which is inconsistent with the character of a purchaser on his own account, and for his individual use. That during the time the relation subsists, the trustee cannot, without the assent of the cestui que trust, put himself in a hostile attitude to the cestui que trust. Van Epps v. Van Epps, (9 Paige 241). “It is not sufficient,” says Sergeant, Justice, (M’Ginn v. Shaeffer, 7 Watts 415), “for a party, who has been clothed with a fiduciary character, to intrench himself in forms of law. Equity follows his character throughout, and clothes him with it, notwithstanding his endeavours to shake it off, in order that he may enjoy advantages derived from that character to the injury of others for whom he has acted. There is but one recognised path for a trustee to walk in, and that is, that all his views and conduct be directed to a faithful discharge of his duty as such; and where his acts may admit of two constructions, one rightful, the other tortious, in respect to his cestui que trust, equity will choose the former and reject the latter.” The case of Keech v. Sandford, (Select Cases 61), is a strong case in illustration of the rule. There Chancellor King held, that where there was lease of a market devised to a trustee for the benefit' of an infant; lessor before expiration of the lease refuses to renew to the infant; trustee takes it himself; he shall be obliged to convey to the infant and account for the profits.
So much for the rule; and now for the reason of it. The principle has been adopted in chancery to prevent fraud, and moreover, to avoid as far as possible the temptation even to commit fraud. There may be, as is said in all the cases, the most satisfactory evidence that the transaction amounts to no more than what the general interest of justice requires, yet the trustee shall not be permitted to purchase for himself or another; because the powers of the court would not be equal to protect against decep*32tion in many cases, from the impossibility of ascertaining the truth in all cases. Moreover, to permit a trustee to bid, -would be applying the information acquired by the trust to his own benefit. It is not necessary to show that the trustee has made any advantage by the purchase, for in Ex parte Bennett, (10 Vez. 385), it is said, if a trustee may buy in an honest case, he may buy in a case having that appearance, but which, from the infirmity of human nature, may be grossly otherwise; and yet the power of the court would not be equal to detect the deception. Human infirmity will rarely permit a man to exert against himself that providence which a vendor ought to exert, in order to sell the estate most advantageously for the cestui que trust, and which a purchaser is at liberty to exert for himself, in order to purchase at a lower price. It is further said that these principles should be enforced, to protect the rights of persons so circumstanced; for otherwise the temptation to fraud would be irresistible ; and it is well known that no court is equal to the examination and ascertainment of the truth in much the greater number of cases. 10 Vez. Jun. 381; Davoue v. Fanning, (2 Johns. Ch. R. 252); Hawley v. Cramer, (4 Cow. 717); Greenlaw v. King, (5 Lond. Jur. 18).
The existence, therefore, of actual fraud is not required, for however fair and unexceptionable the conduct of the trustee may be, however adequate the price, yet the cestui que trust may, although the contract is not void, still consider the trustee clothed with his fiduciary character. The rule is intended to prevent fraud, and also to lessen the temptation to fraud, by affording no inducement to the trustee to act other than for the benefit of the beneficiary, inasmuch as he may lose by his purchase, but cannot gain by it. And also from the impossibility, in numberless cases, to unravel actual fraud, although it may exist in its rankest and most offensive form. The principle applies, however innocent the purchaser may be; for it is, as Chancellor King says, poisonous in its consequences. The cestui que trust is not bound to prove, nor is the court bound to decide, that the trustee has made a bargain advantageous to himself. The fact may be, and yet the party may not be able to show it. It is to guard against the uncertainty and hazard of abuse, and to remove the trustee from temptation, that the rule permits the cestui que trust to come in at his own option, and without showing essential injury, to insist upon having the experiment of another sale, or that the purchaser may be decreed a trustee and made to account for the profits. The prohibitions, the wisdom of which has been repeatedly shown, arise from the subsisting relation of trusteeship, nor can they be dispensed with until the relationship is completely dissolved, unless by clear, unequivocal assent of the beneficiary. It will not be denied that this observation applies not only to trustees, strictly so called, but to all persons standing in like situation, such as assignees, and solicitors of a bankrupt or insolvent estate, who are *33never permitted to become purchasers at the sale of the bankrupt or insolvent estate.
But these principles, which are so firmly established by a long train of decisions, and which have been so anxiously preserved, are now, in my judgment, of but little practical worth, because under the decision just made, they can, and inevitably will be secretly evaded, and almost without the possibility of detection. All that will be necessary, for example, for an assignee of an insolvent debtor or an assignee under a voluntary assignment to do, when he desires to possess himself of the insolvent estate, will be to permit or procure a judicial sale; and this, it is obvious, he may readily do with but little chance of detection. He may then, almost beyond the possibility of prevention, do by indirection, by neglect of duty, by fraudulent procurement, that which, it is confessed, he cannot do directly. When this doctrine is announced and generally understood, we shall hear no more of sales by trustees, assignees, or guardians, when the estate is, as here, known to the initiated to áfíbrd a chance for speculation. It would be a waste of time to run the argument out on this view of it. Its alarming and pernicious consequences must at a glance strike the mind of every man acquainted with the operations of the human heart, and the facility with which fraud, in such cases, may be committed without the possibility of discovery. It is only necessary to suggest it to feel its force. You will find all such sales conducted with the most scrupulous regard to unessential forms, where the sale is conducted nominally by the sheriff and creditor, really by the trustee; or when really by. the creditor, but little attention will be paid to the manner of sale. Having determined to purchase for his own benefit, why should he care to what extent the estate has been depreciated in price by artful misrepresentations, by irregularity in conducting it, and fraudulent practices either by himself or others ? We cannot expect him to complain of the cause which has operated so much to his own advantage. What court is competent to ascertain whether the catastrophe has been caused by his own breach of faith ? It is to prevent this the rule is so strenuously insisted on. It is founded in a jealousy of the trustee, and upon the possibility, at least, that he may be guilty of a fraud which it is difficult for a court to detect. Can it admit of doubt, that if we relax the rule to the extent claimed, the interest of creditors and of debtors must inevitably fall a sacrifice to the cupidity of fraudulent assignees ? In my judgment, this is not the time to increase the temptation to commit fraud. It is the duty of the assignee, when he has funds in hand, or can procure them by reasonable diligence, to pay a debt pressing on the estate, and relieve it from a forced sale; and when he purchases and is chargeable with any neglect of the nature stated, it will hardly be denied, equity will declare him accountable for the profits. But what a temptation does this present to falsify his accounts, and by *34such means conceal a fraud which would inevitably strip him of his ill-gotten gains. In whatever aspect the proposed relaxation of the rule is viewed, it is pregnant with consequences most alarming and disastrous to the best interests of society.
But, it is said, that upon proof of actual fraud, the creditors may be relieved. But may not the fact be so and yet the party not able to show it ? And is it not to guard against this uncertainty and hazard of abuse, and to remove the trustee from temptation, that the rule permits the cestui que trust to consider the trust as still subsisting? That the duties of the trustee continue during the existence of the trust, is supported by all the authorities; and if this be undeniable, which I maintain it to be, the advocates of the adverse doctrine are reduced to this position. They must maintain, that where the property is in gremio legis, in the custody of the sheriff, so far as that property is concerned, the relation of trustee and cestui que trust is ipso facto defunct; that the trustee may abandon all care of the estate and hand it over to the tender mercies of the sheriff or creditor, under whose execution it is sold; that it is no longer the duty of the trustee to see that the best price is gotten for the land. With all due respect, in my judgment, this is a most alarming proposition, neither supported by reason, principle or authority. Is it not the duty of the assignee to see that the sale is properly conducted, according to all the forms of law, to guard, as far as human prudence can, against fraud, trick, artifice, chicanery, and gross sacrifice of the property? Would it not be his duty, in case the property was sold .for a trifle, in comparison with its value, and particularly if there was reason to believe it had been procured by management, to ask for a re-sale ? What would be thought of an assignee who would fold his arms and pay no further attention to an estate, on the flimsy and dishonourable pretext that the estate was in the hands of the sheriff, and he was not bound on principles of law, honour and honesty, to take further care about the property? Nay more, under such circumstances, to have the assurance himself to become the purchaser for his own benefit ? Would not every honest and honourable mind abhor such conduct ? Take the case of guardian and ward, for the principle now assumed, monstrous as it is, must be held to extend to it. Let us suppose a man dies leaving a large real estate encumbered with debts, a minor child and a faithless guardian, who, in consequence of his knowledge of the intrinsic value of the estate, a knowledge derived, it may be, from his parental relation, desires to become the owner. He procures or permits a suit to be brought by one of the creditors, and this, it must be allowed, can be readily done, judgment is obtained by his permission or connivance, an execution is issued and the property is seized, condemned, and in the hands of the sheriff; is it the law, I ask in the name of all that is just and sacred among men, that the fiduciary character of guardian is *35ipso facto gone, that he is at liberty to become the purchaser of the estate and hold it discharged of the trust ? If this be so, it is very obvious that minors have but little protection from the acts and frauds of corrupt guardians. Who, I ask, is left to protect the interests of the minor, if his guardian can withdraw himself from the duty which the law has imposed upon him, and which he has voluntarily assumed, and put himself in a hostile attitude to his ward ? If in the case supposed there has been any irregularity or fraud in the manner of the sale, and the property in consequence thereof has been sold for less than its intrinsic value, who is to ask the interposition of the court to protect the interest of the helpless ward, when the very person who stands in loco parentis, has put himself in an adverse position to him; in a position in which he has interests of his own, inconsistent with his fiduciary character? But what is the apology for this novel doctrine, by w'hich one of the most salutary and wisest rules will be effectually overturned? It is founded on the notion that where the land is in gremio legis, the relation of trustee and cestui que trust ceases; but this, I think, I have shown already, is a most fallacious idea. The trustee, it is true, is not bound to advance his own money and purchase the land, but still he has a duty to perform in relation to the property and to the interest of the cestui que trust. The relationship still continues. He is bound upon principles of common honesty to use every reasonable exertion to obtain the best price for the property, and to do all other things which may promote his interest.
It is also alleged that it is an advantage to the beneficiary to permit the trustee to purchase, as it adds one more bidder to the list. But the law has wisely said that this leads to fraud, and it is far better for the interests of the beneficiary that the trustee should not be put in the way of temptation; that so far from being a benefit, in numberless cases, it will prove a serious detriment to the cestui que trust. And what says Chancellor King, in Keech v. Sandford, (Select Cases 61), before cited ? That, it will be remembered, was a lease of a market devised to a trustee for the benefit of an infant. The lessor, before the expiration of the lease, refused to renew to the infant; and the trustee took it to himself. The chancellor says; “I must consider this as a trust for the infant; for I very well see, if a trustee on the refusal to renew might have a lease to himself, few trust-estates would be renewed to cestuis que use. Though I do not say there is fraud in this case, yet he should rather have let it run out than to have had the lease to himself. This may seem hard, that the trustee is the only person of all mankind who might not have the lease; but it is very proper that rule should be strictly pursued, and not in the least relaxed; for it is very obvious what would be the consequence of letting trustees have the lease, on refusal to renew' to cestui que use.” So here, others may purchase, but an inflexible rule of policy forbids *36the trustee to become the purchaser. Besides, if this argument proves anything, it proves too much, as it is obvious that the same reason, if worth anything, holds good even where the trustee is buyer and seller, or where he orders and conducts the sale. It strikes at the very foundation of the rule itself, which it acknowledges is founded in wisdom, and established by an overwhelming current of decisions.
Another argument has been used, equally unsound. A creditor, it is said, may purchase at a judicial sale; and this is true, although he may have issued the execution, and have the control of the sale; so that this class of cases, in my judgment, proves nothing to the purpose; and if they do, they overturn the rule itself. But this admits of another answer, equally satisfactory; the reasons of the prohibition do not extend to creditors. 1. Because of the want of any fiduciary relationship between debtor and creditor; and next, because where he is guilty of any irregularity or fraud in the sale, or where the property has been sold at a sacrifice, a re-sale may be ordered by the court, on the application of the debtor or the other creditors. But this cannot be done by a minor; and it is unreasonable to expect it to be done by other creditors, or by the debtor, when the care of their interest is committed to a legal assignee or trustee, who, they have a right to expect, will diligently attend to the sales, and who they cannot suppose will voluntarily place himself in a situation inconsistent with his confidential character. By the acceptance of the trust, he pledges his honest endeavoux-s to pi'omote the interest of the cestui que trust by disposing of the property. The creditors may, therefore, very well suppose that, as an honest and conscientious man, he will not create in himself an interest inconsistent with this pledge, or put himself in an attitude which may seduce him fx’om an upright fulfilment of his duty.
And thus the case stands on principle and on reason; and now let us inquire whether the same positions ai’e not supported by authority. But befoi’e examining the cases more particulaidy applicable on this head, let me remark, that all these cases of a purchase at a sheriff’s sale where the contest is between the purchaser and the debtor or the creditors, are aside of the question. They depend on the mala fides of the purchaser; and as there are no confidential relations between them, there is no rule of policy which forbids the pui’chase. There the ingredient 'to avoid the sale must be the proof of actual fraud. There is nothing from which the law infers legal fraud. The question we are considering is the rule, and the extent of it, which obtains, where a trustee_ or a person standing in a fiduciary character, such as an assignee for the benefit of creditors, or a guardian, &e. undertakes to purchase the estate of his beneficiax-y during the subsistence of his trusteeship, and contrary to, or without the assent of the cestui que trust. In considei'ing this question, it must never be fox’gotten *37that the true rule is, that being a trustee once, he cannot devest himself of that character and become a purchaser for his own benefit, whether the sale be public or private, judicial or otherwise, or whether he be the buyer or seller, or whether any other person conducts the sale. That being a trustee at the time of the purchase, he is held still to remain a trustee to all intents and purposes. And this rule a wise policy requires should be without exception, for otherwise the rule is worthless in a class of cases most numerous and useful, which enter into the business transactions of a commercial community. As has been before observed, I will readily admit that in most of the cases in which these principles have been held, the trustee has been both buyer and seller; yet in none has it been said, or intimated, that on that alone the principle depended.
The reasons adduced in support of the principle have a more extended and general application, and have been applied to the trustee during the subsistence of the trust, who is prohibited from purchasing for himself, without any reference to the accidental circumstance that he was at the same time the seller as well as the buyer. None of the cases, when fairly considered, will bear that construction, and it would be very* unfortunate that they should receive such a narrow and confined interpretation, as the necessary consequence will be so disastrous to a helpless class of the community by evasion, fraud or artifice, without almost the possibility of detection. We all know how difficult it is to unravel the web of fraud, and particularly difficult will it be for creditors, dispersed, as they generally are, who cannot act in concert, and must be, even with all the guards we can put round them, very much at the mercy of an assignee who desires to appropriate the property of the debtor to his own use. How will it be possible for them to guard against a combination such as there is very good reason to believe existed here ? In no possible way can it be done, except by adhering rigidly to the rule that an assignee shall make nothing out of the estate for his own benefit, let the sale be conducted in what manner it may, whether public or private, whether by him or at the instance of another. It is admitted that even if it be a judicial sale, yet if the trustee has the control of the sale, he cannot purchase; so that the principle is made to depend upon the fact that the trustee is buyer and seller; as, for example, where the property is sold on his execution, or where he has in some manner the control of the sale.
If, therefore, I am able to show that he has been held a trustee notwithstanding he was neither buying nor selling, nor had any manner of interest in or control of the sale, it seems to me, that on authority, as well as principle, there is an end to the distinction. I will not say that the doctrine is altogether without authority; for there is one case in which the principle is said not to apply to a judicial sale without any qualification whatever. I refer to the *38decision of Judge Washington, in Prevost v. Gratz, (Peters’s C. C. R. 364). According to that case, it is enough that it is a judicial sale; for where that is the case the trustee is at liberty to purchase and hold the estate discharged of the trust. But in the extent of the exception, it is conceded that the learned Judge is inistaken; for not to insist on the admission here, it is in direct opposition to Riddle v. Murphy, (7 Serg. & Rawle 230); Lazarus v. Bryson, (3 Binn. 59); Moody v. Vandyke, (4 Binn. 31; and Van Epps v. Van Epps, (9 Paige 240); Swayze v. Burke, (12 Peters 24); to which may be added numerous other authorities. The truth is, and I say it with all due respect, that Prevost v. Gratz, as to this point, was a hasty decision. It appeal’s not to have been argued, and not to have been considered, either upon principle or authority, with that care which the very great importance of the principle required. It seems • that the claim was made against Gratz by the complainant’s counsel, but it was ndtseriously pressed. It is, therefore, not wonderful that it was not very seriously considered. The learned Judge dismisses it with the observation, “that he knows of no principle of equity which, will invalidate the title of a trustee to land which the law has taken out of his hands, and which he purchased from one appointed by the same authority to sell it. This is precisely like the case of an executor who purchases at a sheriff’s sale the personal property of his testator, seized and sold under an execution. The reasons which forbid a trustee from purchasing the trust-property, where he himself is the seller, do not apply to such a case.”
The learned Judge evidently proceeds upon the hypothesis, that when the land passes into the hands of the sheriff, all care on the part of the trustee ceases; that the relation of trustee and cestui que trust is at an end, and that therefore he may create an interest in himself, although inconsistent with his pledge, and although it may seduce him from an upright fulfilment of his duty; that he is no longer bound to use his honest endeavours to promote the interest of the cestui que trust by acquiring for the property the best terms which can be obtained for it. The fallacy of that notion I have endeavoured to show, and its inevitable consequences; that it, in effect, will destroy the rule itself, and leave a large class of persons, and much the most numerous, to the tender mercies of assignees and, others placed in confidential relations to them. I differ totally from him in the assertion that the reasons which forbid a trustee from purchasing the trust-property, where he him-, self is the seller, do not apply to such a case. That is an assertion without an attempt to support it by law, which I cannot comprehend; for, in my judgment, all the reasons, except one, apply as well to a judicial as to any other sale. The rule does not depend on the sale, or by whom it is made, but upon the person who becomes the purchaser. If he be a trustee, the rule is, without exception, that he cannot purchase during the existence of the *39trust, without the express assent of the -cestui que trust. It was formerly doubted whether the doctrine applied to a public sale, as a public auction, for example; but it is now held, that in all cases where a purchase has been made by a trustee on his own account, of the estate of the cestui que trust, although sold at public auction, it is at the option of the cestiú que trust to set aside the sale, whether Iona fide made or not. Campbell v. Walker, (5 Vez. 678, 680; 13 Vez. 601); 6 Vez. 625; Ex parte Bennett, (10 Vez. 381, 385-6); 12 Vez. 335; 5 Madd. R. 91. The authorities which have been already cited, also prove that he has been held to account for the profits, even where the property has been sold at a judicial sale. 2 Whart. 63.
It remains now to inquire, whether it has also been held applicable to a judicial sale even where the purchaser had no control whatever over the sale. That rule arises from the confidential relation between the parties, and not from the bare circumstance that the purchaser is buyer and seller, or that he has power to control the sale. It would s'eSm to me only necessary to look through the cases, to come to the conclusion that the latter is the only rational foundation of the rule, and that it applies to all sales, public or private, judicial or otherwise, whether conducted by the purchaser or under the direction of an officer of the law.
A solicitor of a bankrupt or insolvent estate is not permitted to purchase at the sale of a bankrupt or insolvent estate, and yet he has not, as solicitor, anything to do with conducting or ordering the sale: and this, though not strictly a judicial, is in the nature of a judicial sale. Ex parte Lacey, (6 Vez. 625); Ex parte James, (8 Vez. 337); Davoue v. Fanning, (2 Johns. Ch. R. 252); Ex parte Bennett, (10 Vez. 381). An attorney for a creditor of a junior judgment to one on which process is issued, cannot, in this State, at least, purchase and hold in opposition to his client, provided the sale does not cover his client’s debt. A contrary idea will hardly be advanced. Black’s Administrators v. Black, referred to in Campbell v. The Pennsylvania Life Ins. Co., (2 Whart. 63), I cite these cases as bearing very directly on this point, and showing the rule is founded exclusively on the confidential relations of the parties. But without insisting on these cases, and Riddle v. Murphy, (7 Serg. & Rawle 230); 3 P. W. 251; 12 Pet. 24, I now come to the case of Van Epps v. Van Epps, (9 Paige 241). In that case the estate was sold under a master’s sale, upon a prior mortgage, and the purchaser was a trustee for several subsequent mortgagees. But notwithstanding, the court decided that he was not authorized to purchase the property sold for his own exclusive benefit, to the prejudice of the subsequent mortgage, which he held in trust for others. Here, it must be remarked, it was a judicial and public sale; i.t was sold under a mortgage, over which the trustee and purchaser had no control; for, it will be observed, the first mortgage had been assigned to the New York Life Insurance and Trust Company, *40and, in consequence of the default of the mortgagee, the' mortgage had been foreclosed, and was sold by them for payment of their debt. It is, therefore, a case in point. Now mark the ground upon which the chancellor founded his decree. “ The rule of equity, which prohibits purchases by parties placed in a situation of trust or confidence with reference to the subject of purchase, is not, as the defendant supposes, confined to trustees or others who hold the legal title to the property to be sold; nor is it confined to a particular class of persons, such as guardians, trustees or solicitors. But it is a rule which applies universally to all who come within its principle; which principle is, that no party can be permitted to purchase an interest in property, and hold it for his own benefit, where he has a duty to perform in relation to such property which is inconsistent with the character of a purchaser on his own account and for his individual use.”
And laying down this sound principle, the wisdom of which commends itself to every rational mind, the chancellor proceeds to state what is the duty of a trustee. He says; “ here the duty of the trustee, as holder of the junior mortgage, was to make the mortgaged premises, if possible, produce upon the sale sufficient not only.to pay off the prior encumbrance and the costs of foreclosure, but also to satisfy the subsequent encumbrance, which he held in his fiduciary character; and this duty came directly in conflict with his interest as a purchaser for his own benefit, to bid in the property at the lowest sum for which he could obtain it.” The chancellor then states the result of the conflict, which, as might naturally be expected, results in the promotion of the interest of the trustee and the sacrifice of the interest of the cestui que trust. The chancellor further says ; “ In cases of this kind the court does not suffer itself to be drawn aside from the application of the equitable rule, by any attempt to establish the fairness of the purchase. In the language of the learned commentator on American law, the rule is founded on the danger of imposition and the presumption of the existence of fraud which is inaccessible to the eye of the court. The policy of the rule is to shut the door against temptation, which, in cases where the confidential relation exists, is of itself deemed to be sufficient to create the disqualification. 4 Kent’s Com. 438.” If there is any difference between that case and this, I must be struck with judicial blindness, for I am totally unable to see it. Both are judicial sales, and in neither had the trustee a control of the sale, and the results of both were disastrous to the interests of the beneficiary; for in this case, Fisk, the assignee purchases a property for less than $5000, which has been made to yield, in his hands, upwards of $50,000. A more practical commentary on the wisdom of the rule could not be conceived. There is a well-grounded belief that Fisk was guilty of actual fraud; that he in truth was buyer and seller; and yet the fraud is inaccessible to the eye of the court. There is no want of charity in *41supposing that his knowledge of the value of this property was derived from his confidential relations; and yet this, it seems, cannot be established to the satisfaction of the Court. Fraud is not to be presumed. That he has been exposed to the danger of temptation cannot be denied, and that he has not resisted the temptation I most firmly believe. It is, therefore, such a case as falls particularly within the rule, and about which the learned chancellor, who delivered the opinion of the court in Van Epps v. Van Epps, would not have had a particle of doubt, if that case be a faithful exponent of his views.
But the point has not only been ruled in New York, but by this court in Bartholemew v. Leech (7 Watts 472), where it is held, “ that an agent having the charge of unseated lands cannot become a purchaser thereof at a sale for taxes, without a previous explicit renunciation of the trust.” And here let it be remarked, that formerly lands were sold by the sheriff for taxes, but under the existing Acts by the treasurer; it is, therefore, a judicial sale, or in the nature of a judicial sale. And further, it cannot be pretended that the purchaser in Bartholemew v. Leech had any control whatever over the sale; besides, it was shown that the agency had expired before the sale. But what say the court through the Chief Justice: “It is not denied that the defendant’s father had been the plaintiff’s agent and curator of the land. The father himself testified that his agency had expired before the sale; but that is not enough. To capacitate him as a purchaser on his own account, he must have explicitly resigned his trust. The most open, ingenuous and disinterested dealing is required of a confidential agent,while he consents to act as such; and there must be an unambiguous relinquishment of his agency before he can acquire a personal interest in the subject of it. To leave a doubt of his position in this respect, is to turn himself into a trustee. It is unnecessary to recur to authority for a principle so familiar, or so accordant with common honesty. The agent was employed in this instance expressly to preserve the land from being sold; and taking his agency to have been left unclosed by the absence of an explicit renunciation of it, neither Leisenring v. Black (5 Watts 303), nor Riddle v. Murphy (7 Serg. & Rawle 230), presented a stronger case to restrain the agent from purchasing for himself. Within the three preceding years, he had been reimbursed his expenses and paid for his services; but that was not a dissolution of the previous relation.”
So the Court thought and ruled in 1838, and I am sorry they have seen cause to change their opinion in 1843. It never occurred to any person that its being a judicial sale, conducted by a public officer, and not controlled in any way, could alter the established rule of law. It is put upon the broad principles of common honesty, which forbid a man to purchase, who stands in the confidential relation of trustee, until he has explicitly resigned his trust with *42the knowledge of the cestui que trust. It did not then enter into the mind of any person, that because the sale was a judicial sale, and the treasurer the seller, therefore the relation of trustee and cestui que trust, ipso facto ceased, and that consequently he was at liberty to purchase for himself. This case can only be supported on the broad and sound principle that the trustee cannot purchase for himself, while the confidential relation exists. If the Court was right then, of which I entertain no doubt, they are wrong now. In my judgment, the two cases cannot be reconciled.
But there is still another case, The York Buildings Company v. M’Kenzie, (8 Brown’s P. C.). This case is cited and recognised as an authority in Davoue v. Fanning, (2 John. Ch. R. 269), from which I extract the following statement of the case : “ The appellants were an insolvent company, and their estates were sold by order of the Court of Sessions, at a public judicial sale, to satisfy creditors. The course at such sales is to set up the property at a value fixed upon by the court, which is called the upset price, and which is founded on information procured by the common agent of the court, who has the management of all the out-door business of a cause. The respondent here was the common agent in that case, and he purchased for himself at the upset price, no person appearing to bid more, and the sale was confirmed by the court; and in the course of eleven years’ possession he had expended large sums for buildings and improvements. There was no question as to the fairness and integrity of the purchase. But the object of the appellant was to set aside the sale and have the estates sold anew, on the ground that the respondent being the common agent in court in behalf of all parties to procure information and attend the sale, was in the nature of a trustee, and so disabled to purchase. The appellants contended that the common agent was under a disability to purchase arising from his office; that the rule was founded in reason and nature, and prevailed wherever any well-regulated administration of justice was known; that the disability rested on the principle which dictated that a person cannot be both judge and party, and serve two masters; that he who is intrusted with the interest of others, cannot be allowed to make the business an object to himself, because, from the frailty of human nature, one who nas power will be too readily seized with an inclination to serve his own interest at the expense of those for whom he is intrusted; that the danger of temptation does, out of the mere necessity of the case, work a disqualification — nothing less than incapacity being able to shut the door against temptation, when the danger is imminent and the security against discovery great; that the wise policy of the law had therefore put the sting of disability into the temptation, as a defensive weapon against the strength of the danger which lies in the situation; that the parts which the buyer and seller have to act, stand in direct opposition to each*other in point of interest; and this conflict of *43interest is the rock, for shunning which the disability has obtained its force, by making that person who has the one part intrusted to him, incapable of acting on the other side.”
“ The counsel of the respondent admitted the general principle, and contented themselves with denying its application, holding that the common agent was not to be considered in that case, and in respect to that sale, in the character of either seller or trustee. But the House of Lords thought otherwise, and set aside the sale, ordering the purchaser to account for the rents and occupation in the meantime, with a liberal allowance to him for his permanent improvements.” This was a judicial sale beyond doubt, and the counsel puts the case on two grounds; that the common agent was a buyer and seller, and, secondly, on the more general ground that he stood in the relation of a trustee. It must be remarked that the respondent admits that if he was either, the sale must be set aside. It never occurred to him to urge that as it was a judicial sale, the purchaser, though trustee, unless he was both buyer and seller, had a right to hold the property discharged from the trust. This discovery was reserved for more modern times.
On these grounds, I feel myself with the utmost reluctance compelled to dissent from the judgment of the Court, or rather from the reasons assigned for the judgment. It may, perhaps, not be improper to state, that as there were other reasons for the judgment, I must still with great respect consider this point as an open question.
The correctness of this opinion, it will be observed, depends upon very simple, and, as I believe, well-established principles. First, a trustee is prohibited from purchasing the trust estate during the existence of the trust; and second, that the trusts subsist, at least for certain essential purposes, notwithstanding the property is in the hands of a judicial officer. This it has been my aim to prove on principle and authority; and if ¿hese principles are assumed, it follows as a necessary and inevitable consequence that a trustee, who becomes a purchaser even at a judicial sale, takes the estate clothed with the same trusts as before the sale, and is accountable as such for the profits.
Judgment reversed, and judgment for the defendants.