Court Opinion

ID: 8257591
Source: CourtListenerOpinion
Date Created: 2022-10-16 15:33:27.066225+00
Date Added: 2024-06-11T16:43:03.266283
License: Public Domain

HARRIS, J.,
delivered the opinion of the court.
The plaintiffs in error filed their bill in the Chancery Court of Warren county to set aside a decree rendered against them while infants, at the suit of the said Daniel 0. Williams against them and their father George Joor, setting aside a conveyance made to defendant Rushing by said Joor, in trust for his said infant children. The said Rushing, trustee, was not made a party to said proceeding, nor was any decree rendered against him as trustee.
The facts, as they appear by the present bill and exhibits thereto, are as follows: On the 24th day of November, 1841, the New Orleans Canal and Ranking Company recovered judgment in the United States Circuit Court at Jackson, Mississippi, against George Joor for $8717.
On this judgment, fi. fa. issued, and was levied on personal property, and forthcoming bond given and forfeited, with said Mordecai Powell & William Rushing as his sureties; which bond was forfeited on the 28th day of March, 1842.
The record of this judgment, and the proceedings thereon, although referred to as Exhibit A. in Williams’s original bill, it is alleged, are not of file in said case, and nowhere appear in this record. It is stated,'however, in Williams’s original bill, that execution issued on this forthcoming bond, and was levied on the lands in controversy or part thereof, which were sold by Anderson Miller, marshal of the United States, under a pluries venditioni exponas, on the 4th March, 1844, to said Powell & Rushing (the securities on said forthcoming bond) as trustees for the said bank (plaintiff) (561t^ acres), for $2818 89.
On the 23d day of November, 1842, Lambeth & Thompson, in the same court, recovered a judgment against said George Joor for $1825 17 on a note dated 1st March, 1841, and due 12th September, 1841. Pi. fa. issued on this judgment on 26th December, 1842, Avhich was levied on five negroes as the property of said 'George Joor, and forthcoming bond executed with Mordecai Powell *565as his security. And this bond was forfeited 1st May, 1843. On the 8'th June, 1843, execution issued on the forthcoming bond against said Joor, which was levied by the United States marshal on other lands not embraced in the levy and sale under the New Orleans Canal and Banking Company execution, but also a part of tbe lands now in dispute. This levy was made on the 26th September, 1843, on 312-^ acres, and advertised for sale on the 1st Monday in November, 1843, and returned not sold for want of bidders. On the 5th December, 1843, a venditioni exponas issued, under which the marshal sold said land on the 4th March, 1844, to the said Powell & Bushing, as trustees for plaintiffs’ assignees, for the sum of $100.
This judgment of Lambeth & Thompson was assigned to Payne & Harrison on the 16th February, 1844; and on the same day Payne & Harrison, in writing, authorized the said Powell & Rushing to act as their agents in settling and conducting the execution against Joor and Powell, with directions to sell the property and to buy the same in for Payne & Harrison, and to hold it as trustees for them. On the 3d June, 1844, an alias fi. fa. was issued on this judgment, and was levied by the marshal on six slaves as the property of said Joor, and returned, “ Stayed, by order of plaintiffs, November áth, 1844, and negroes delivered to defendant.” With this further indorsement thereon: “ The marshal is hereby directed to return this execution not acted on, and the cleric is directed not to issue the execution until further orders. (Signed by)Mordecai Poiuell, one of plaintiff s’ trustees in this case.”
It further appears by the statements of said Williams’s original bill, that the said Powell & Bushing made the purchase of the lands in dispute at marshal’s sale, under a previous understanding with the owners of said judgment, that they were to make said purchase in their own names as trustees for the owners of said judgments, and upon the payment to said owners of the whole amount of these judgments, the said Powell & Rushing should become the absolute owners of the land. It is further alleged and shown that no deed was executed for a long time after the sale by the said marshal to said Powell & Rushing for .said land. But, on the 16th day of November, 1846, five days before the conveyance by said Powell & Rushing (as Williams alleges in his said bill), upon *566satisfactory proof that said Powell Pushing had fully paid off plaintiffs’ judgments, the said Circuit Court of the United States ordered the marshal to make them deeds for said land, and refers to Exhibits A. and B. for said deeds. The said bill further alleges as a fact, that Powell $ Rushing had fully paid said judgments to said owners, and refers to their receipts, as Exhibits C. and E., to his bill; and that the said George Joor had “no other property subject to execution besides said land, and the negro named in said deed.” Afterwards, on the 11th day of March, 1848, the said Williams filed an amended bill, in which ho says, that instead of saying as he did in his original bill, “ that Powell Rushing have fully paid and satisfied both said executions,” he “should have stated that he, Williams, for said Powell ¿Rushing, has satisfied and paid both said executions.” Also, that instead of saying “that there was no other property subject to said executions, besides said land and a negro man named in said deed,” he should have added, “ to the best of his hnowledge and belief”
It further appears by said record before us, that on the 30th day of March, 1842, just two days after the forfeiture of the forthcoming bond, executed by the said George Joor to the said Powell & Rushing, as his securities, in the case of the New Orleans Canal and Banking Company, the said George Joor executed to the said William Rushing, as trustee for their benefit, a deed of conveyance of the lands in dispute; and that the said William Rushing, as a trustee for complainants, accepted said trust, with a full knowledge of the existence of said debt, and his own and the said Powell’s liability, ás securities therefor; which deed of trust was duly recorded on the same day, according to law. If the said deed was fraudulent, therefore, he was a party to it.
After the payment 11 for Powell Rushing,” of the judgments which they had agreed to pay before their title to the land, under their agreement, "was to become absolute, and after the procuration of the title by order of court, “ upon proofthat said “ Powell $■ Rushing had fully paid off said judgments,” and after the execution of the deed of Poioell Rushing to said Daniel 0. Williams, the said Williams filed the original bill already referred to, setting up this title derived from Powell & Rushing, and his payment ufor them,” and alleging that the deed from George Joor to William *567Rushing, as trustee, for the benefit of those infants, was fraudulent and void, and a cloud upon his title, and praying that it might be set aside and held for nought. Rushing, as already stated, was not made a party, although his title as trustee was to be divested by the proceeding.
• But George Joor, a drunken imbecile, as alleged in this record, and these infants, were, made parties. The said George filed Ms own answer, as the record shows, and substantially admits the allegations of the bill, except that he intended no fraud. He was either so .drunk or so imbecile that he did not remember, that when he signed the deed to his trustee, Rushing, for his children, that he had the six negroes which were subsequently levied on by the plaintiffs on these executions, and released, and returned to Mm by their order; but is made to say positively, that he had no property liable to execution against him, except that embraced in this deed to. Rushing for the benefit of his children, — a fact which Williams at first stated in his bill, but afterwards, by his amended bill, refused to affirm; a fact which Rushing refused to state when on the stand as witness, and a fact wholly omitted to, be proven, on the hearing of his bill, by Williams, although the most important fact in his case to be established.
The record shows that not only does Rushing, the trustee of these children by voluntary acceptance, take no step for their protection, but in violation of his duty he becomes the agent and trustee of the' creditors of George Joor, to have the subject of the trust swept from the beneficiaries, by sale under executions at law, for Ms own benefit.
When it is alleged in these proceedings, and admitted by the demurrer, that there was ample other property, out of which they might and ought to have been satisfied; and further, that after his purchase and sale of the property to Daniel 0. Williams, and after the filing of said Williams’s .bill, to annul the rights of his infant wards in these lands, instead of making defence, he is the willing witness for complainant Williams, without any knowledge of the object of the conveyance, as he states in his deposition, to volunteer his “opinion,” that it was made to evade the payment 5f his creditors, he does not offer to prove (nor is he even asked the question), that there was no other property out of which these judgments *568might have been satisfied. No explanation is made as to how he voluntarily became a party to a fraudulent deed made to defraud himself as security on the forthcoming bond, and to compel him to pay this debt; and there is no other proof of any fraud to sustain said bill.
Upon this state of facts, it is alleged in the present bill, the chancellor rendered a decree in favor of said Williams against the said George Joor and his infant children (these complainants), setting aside the said deed to Rushing for their benefit, and ordering the same to be delivered up to be cancelled as fraudulent and void, saving to the minors six months in which to contest said decree.
This bill is now filed to set aside said decree. The bill, after setting forth the foregoing facts, with full copies of the bill of Williams, and all the exhibits, and proofs, and proceedings therein (except Exhibit A.) and said decree, proceeds to charge that Daniel 0. Williams was a purchaser from the said Rushing, trustee for complainants, with full notice, actual as well as constructive, of said deed of trust.
That said Rushing, being trustee for the benefit of complainants, could make no purchase for himself of said land, and the said Williams, being a purchaser from said trustee with full knowledge of the rights of complainants, could occupy no better position than Rushing.
The bill further alleges that the said lands, at the time of the execution of the deed of trust for their benefit, were worth twenty-five or thirty thousand dollars; that their father was cultivating the same, and was in possession of a large number of slaves and other property, and was considered a man of wealth, and had the said Rushing proved faithful to his trust, the said land would have been secured to them ; that their father was a man of intemperate habits, and incapable of attending to his business for three or four years before his death; that when he conveyed said property, he had ample other property subject to execution ; that the annual value of the said land by way of rent was two thousand dollars at the time of the conveyance to complainant’s trustee; that the sale of said land's, under the circumstances, was a fraud upon the rights of complainants, for -which said sale ought to be set aside.
The bill prays that Williams, Rushing & Powell may be made *569parties; that the decree in favor of Williams may be set aside; that an account be taken of the amount due on said executions, and of the rents and profits of said lands, &e. &c.; and that, upon a full and fair account, they shall have said lands, or so much thereof, or of their value, as may remain after the payment of said executions, &c., or whatever may be found due them.
To this bill, presenting this state of facts, a demurrer was filed by all the defendants, a general demurrer for Powell & Rushing, and a special demurrer, with answer denying fraud, for Williams; which demurrer was sustained by the court below, and the bill dismissed. And an appeal is now prosecuted here to reverse said decree.
Taking the statements of this bill as true, for the purposes of this demurrer, and it presents a flagrant case of fraud and bad faith on the part of the trustee, Rushing, in the perpetration of which his associates, Powell and Daniel 0. Williams, must be regarded as fully implicated.
The principle is now too well settled to be called in question, that on grounds of public policy, independent of all fraud, “ a trustee is bound not to do anything which can place him in a position inconsistent with the interests of the trust, or which have a tendency to interfere with his duty in discharging it.” 1 Story’s Equity Jurisdiction, § 322, p. 361.
The principle applies, however innocent the purchase may be in a given case. It is poisonous in its consequences. That it is advantageous to the trustee, or fraudulent, or even injurious to the cestui que trust, is not necessary to he shown. 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, at his own option, to set aside the sale. 1 Story’s Eq. Jur. § 322, and cases cited.
The authorities, ancient and modern, are uniform to this point. They are collected and ably reviewed by Chancellor Kent in Davoue v. Fanning et al. 2 John. Ch. R. 252, in which he concludes his opinion with the reasoning employed by counsel for the appellant in the York Buildings Company v. MacKenzie, decided in the English House of Lords in 1795, and reported in 8 Brown’s P. C. by Tomlin, App. p. 63. This reasoning he gives nearly in the *570words of its author, for the reason, it is presumed, that neither in its style or force of argument could it be improved even by his own vigorous pen.
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 ups'et price, and which is founded on information procured by the common agent of the court, who has the management of all the outdoor business of the cause. The respondent was the common agent in that cause, and he purchased for himself at the wpset 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 building 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 reasons of the House of Lords for setting aside the sale are not given ; but we are left to infer them from the argument upon which the appeal was founded.
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 interests of others, cannot be allowed to make the business an object to himself, because, from the frailty of nature, one who has the power will be too readily seized with the 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 *571which 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 interest is the rock for shunning which, the disability has attained its force, by making that person, who has the one part intrusted to him, incapable of acting on the other side.
The House of Lords set aside the sale', ordering the purchaser to account for the rents and occupation in the mean time, with a liberal allowance to him for his permanent improvements. This decision certainly carried the doctrine to its full extent, and it may be considered as a high and authoritative sanction given to the reasoning which accompanied the appeal.
That it was in the power, and was the duty, of this trustee to have interposed and enjoined the sale of this property under these executions, when there was ample other property, as alleged in this bill, out of which they might and ought to have been satisfied, cannot be doubted.
As to his power, the late case of Keaton et al. v. Miller’s Admr. is conclusive.
And, as to his duty, it necessarily resulted from the acceptance of the trust.
He not only did not protect the property thus conveyed to him, in trust for the benefit of these complainants, but he became the agent of the plaintiffs in execution under a contract beneficial to himself, to destroy their right and defeat his own title so held for them.
Williams, with a full knowledge both of his fiduciary character and of this violation of his trust, became a purchaser from him of the trust property, and cannot therefore be permitted to occupy any better position than his vendor as a trustee.
Williams alleges, in his bill, that this deed of trust was fraudulent. He shows that Rushing was a voluntary party to that deed; that he assumed Rushing’s liability, and actually paid for Rushing & Powell, the amount agreed to be paid by them to render their title t.o said land absolute, under the agreement between them and the plaintiffs in execution. The whole record shorre, on this demurrer, that if there was any fraud in that deed, that Rushing was not only an active participant in it, but that he was the only wit-' *572ness to it. If be was a party to such fraud, bow can he or bis vendee, or any one in privity with him, be permitted to come into a court of equity, not only to assert the fraud, but to claim its interposition to sanctify a speculation made by them out of infant children on that very account ?
This point alone would be conclusive of Williams’s claim, and shows that he can no more be heard in a court of equity than-could Rushing himself.
Let the decree below sustaining the demurrer to complainants’ bill, and dismissing the same, be reversed, and cause remanded for further proceedings in accordance with this opinion.
Smith, C. J., concurred.