Court Opinion

ID: 6672759
Source: CourtListenerOpinion
Date Created: 2022-07-20 21:13:42.16424+00
Date Added: 2024-06-11T16:00:36.012759
License: Public Domain

The opinion of the Court was delivered by
Willard, A. J.
The appellant was appointed by the Court of Equity trustee of an estate, assigned for the benefit of creditors, *114upon the death of the assignee. Respondent makes a demand against the assigned estate, on the ground, that under a sale, made by the assignee, of real estate, part of such assigned estate, respondent became a purchaser; that the assignee gave a deed, with a covenant of warranty, and that respondent has sustained damages through a breach of such covenant.
The case, as presented by respondent’s argument, involved two questions: first, had the assignee power to bind the assigned estate by a covenant of warranty? second, is a covenant of warranty to be implied from the fact of a sale and consideration paid ?
It does not appear that the assignment, in express terms, conferred upon the assignee power to bind the estate by a covenant of warranty. If, then, he had such power, it must be made out by implication, based either upon the general terms and expressions of the assignment, or upon the nature of the power of an assignee for the benefit of creditors.
It has been urged that the terms of the assignment embrace such authority. The assignment authorizes the assignee to sell, “in such manner, and upon such terms, as he may deem expedient and prudent.” The effect of these expressions is to give to the assignee an unrestricted power of sale. It is contended that a collateral warranty is fairly within the sense of the expression “ terms of sale.” Taken in an enlarged sense, this’ might be correct, but the nature and object of the instrument operates to limit the expression to a strict sense, which is satisfied by allowing to the assignee control over the consideration and conditions'on which the sale is made. Respondent contends that such authority is necessarily involved in the unrestricted power of sale conferred on the assignee. It is said that a power without restriction to sell and convey real estate, gives authority to an agent to execute deeds, with general warranty binding the principal. This proposition is derived from the relation of principal and agent, where that relation exists in its simplest character, namely, where the title, the beneficial interest, and the power of ratification and revocation unite in the principal, and the agent acts solely as the hand of the principal. Such a relation does not exist in the present case. The assignment vested the title in the assignee, and the beneficial interest in the creditors, leaving in the assignor nothing but a resulting trust, should assets remain after the trusts are satisfied. If, then, the proposition advanced is applicable to the ease in hand, it must rest on some other ground than that of a similarity between the relations involved in the two cases.
*115No such implication arises from the nature of the power of sale, for it is capable of being fully executed without the aid of a covenant of warranty. The covenant of warranty may, by possibility, make the sale more productive, but adds nothing to its completeness.
Neither does the object of the power of sale, in the case of an assignment for the benefit of creditors, furnish any ground for such an implication. The object of the assignment is to satisfy the demands of the creditors, by a voluntary surrender of that which, it must be assumed, might by process of law be subjected to such demands. For this purpose power is lodged in the hands of the assignee to convert the assigned assets into a form suitable for distribution, and to make distribution among the benfieiaries. It is obvious that no authority should be implied tending to defeat or embarrass the accomplishment of this object, and it is equally clear that such authority as the respondent contends for, would have that effect. It would, perhaps, enable the assignor to realize a larger sum from the sale of the assigned estate applicable to the discharge of his debts, but at the expense of his creditors, who might thereby be subjected to unreasonable delay, and exposed to litigation and expense. It is said that it would enure to the benefit of creditors, by increasing the distributable fund ; but the same end may be obtained under orders in equity, (Rogers vs. Hunt, 6 Rich. Eq., 361,) without resort to an implication that would place in the hands of the assignee authority limited only by his discretion and prudence.
The state of relations, as created by the assignment, between the assignor, the assignee, and the creditors, precludes the application to the case of the principle contended for. In the case of principal and agent, the effect of its application is that a covenant is created in the name of, and for the benefit of, the principal, but no lien or charge arises affecting the proceeds of sale in the hands of the agent in order specifically to subject them to any claim for damages for a breach of the warranty. Yet this is the effect claimed as the result of applying that principle to the case in hand. It is not enough for the respondent to show that the assignee had power to bind the assignor by a covenant of warranty, for such an obligation could not be satisfied out of the assets. It is not disputed that the assignee may bind himself personally, but that gives no claim upon the assets. It will not be contended that the assignee had any authority to bind the beneficiaries under the assignment by a personal covenant.
*116It follows that, to reach the present case, it must appear that the assignee had authority to create either a legal or equitable lien or charge on the assets. In no way of viewing the proposition, as to the powers of an agent to bind his principal, can such operation be ascribed to it as that claimed in the present case.
An argument has been pressed, based upon the general powers of fiduciary agents. It is contended that the estate is chargeable for the act or contract of the' trustee, where it has received benefit through such act or contract. It is claimed that the covenant of warranty enhanced the product of the sale of the land, and thus conferred a benefit on the estate, which is ground in equity for holding the estate liable to answer for the performance of the trustees’ contract. It will be found that the rule on this subject, as practically applied by the Courts, is restricted within limits that would exclude the respondent’s demand. It will be also found that the act or contract of the trustee, in order to bind the estate through the benefit derived, must be within his proper powers, as trustee, and that the benefit must be substantial and actual, and not merely speculative.
In Magwood vs. Patterson, (1 Hill Ch., 228,) an attempt was unsuccessfully made to charge an estate, in trust for a wife’s separate use, with advances made for the domestic use of husband and wife. Ch. Harper, whose decree was adopted by the Appellate Court, says : “The equity on which a creditor comes into this Court to render a trust estate liable to the payment of his debt, is this, that he has advanced his money or given credit to effect the objects of the trust, and having accomplished the object of the trust at his own expense, he has a right to be put in the place of the cestui que trust, or to be reimbursed out of the trust funds.” Again he says: “ To expend money for the benefit of the trust estate, would seem to mean either adding value to the estate, or defraying charges to which the trust estate would be liable.”
In Carter vs. Eveleigh, (4 Dess. Eq., 19,) the purchase of a gin, for the use of a trust estate, was sanctioned, it being requisite and proper, in order to render the trust estate, consisting of a plantation, productive.
In Frazer vs. McPherson, (3 Dess. Eq., 393,) slaves were purchased by a trustee, and a mortgage given for the purchase money. While no question was made in that ease, as to the propriety of the investment, still the mortgage was held invalid for want of power in the trustee to create a lien or charge on the trust estate. That *117case went to the length of holding that such lien or charge could not be created, even as to additions to the estate, accruing in the hands of the trustee.
In Montgomery vs. Eveleigh, (1 McC. Ch., 267,) advances made for the maintenance of slaves, part of a trust estate, were held to be chargeable to the estate.
The general rule that persons acting in a fiduciary capacity cannot, by any contract, create a charge upon the trust estate, even in equity, is recognized in O’Neall vs. Abney, (2 Bail., 317,) although exceptions of the class already alluded to are noticed.
We have already seen that, by the terms of the assignment, no power to warrant passed to the assignee, allowing its expressions in the sense demanded by the object of the assignment. Nor can such power be implied from the relative rights and obligations of the several parties affected by the assignment, unless it appears that some duty, incident to the obligation assumed by the assignee in respect to the assigned estate, demands the exercise of such power.
It is not enough that the trustee sees an opportunity of benefitting the trust estate, to warrant an enlargement of his powers, so as to secure such benefit. Such a principle would open to trustees a career of speculation quite inconsistent with the character of trusts. The true rule is that stated by Ch. Harper in Magwood vs. Patterson, which is, in effect, that the act or contract, in order to fall within the proper powers of the trustee, must be in the line of the discharge of his duties under the trust.
In the present case, the benefit claimed to have been realized by the estate is matter of speculative opinion alone. It is not in proof that the land sold for a larger price on account of the covenant of warranty; but we are called on to assume that fact as probable on the ground of argument alone. The respondent’s case cannot, therefore, be brought within the principle of Magwood and Patterson, but, independent of this fact, it was no part of the assignee’s duty, under the assignment, to warrant the title to the land, and no power is to be implied to do that which he was not called upon by his duty to do.
It only remains to consider the proposition advanced by the respondent, that a warranty of title is to be implied from the sale and consideration paid. It is well settled in this State that upon a sale of real estate no warranty is to be implied. In the early cases, where relief was granted to defendants sued at law for the purchase money of land, on the ground of a failure in the quality or quantity *118of the subject of sale, such relief was, iu some instances, said to result from an implied warranty, based upon a full consideration paid, but later cases place the nature of this relief in a true light. In Evans vs. Dendy, 2 Speers, 9, the purchaser of land at an Ordinary’s sale, after payment of the purchase money into the Ordinary’s hand, and while the sum remained undistributed, sought to recover back the amount paid on the ground that the land had been recovered under title paramount. The Court refused to imply a warranty in favor of the purchaser, or to grant him relief. In the opinion of Judge Evans, the relief which had, since Grey vs. Hankinson, 1 Bay, 278, been frequently allowed to purchasers of land upon the authority of that case, was ascribed to the powers of the Courts of law in this State to allow, by way of defense to an action for the purchase money, the equitable defense of failure of consideration by reason of fraud, misrepresentation or mistake affecting the contract.
The authority of Evans vs. Dendy was recognized in Rogers vs. Horn, 6 Rich., 361. It was fully sustained by Prescott vs. Holmes, 7 Rich. Eq., 9, and in Com. vs. Smith, 9 Rich., 575, where, though a different doctrine as to implying warranty was applied to sales of personalty, still it was recognized that no such implication arose in the case of sales of realty.
The petitioner has established no right to be paid out of the assets, and the decree of the Circuit Court must be set aside and the petition dismissed.
Wright, A. J., concurred.
Moses, C. J., absent at the hearing.