Opinion
09-24-1807
Lee v. Randolph and Others
OPINION
Robert Randolph and others, who were appointed by the last will and testament of Charles Carter, of Shirley, trustees for the benefit of his daughter, Anne Hill Lee, wife of Henry Lee, having declined acting, a bill was filed, on her behalf, by John Minor, as her next friend, against the trustees and her husband, for the purpose of obtaining from this Court the appointment of a new trustee; which was accordingly done, and a like bond, with the one directed in the case last reported, was ordered to be taken in this case.
TRUSTS AND TRUSTEES.
I. Definitions.
II. Relation of Trustee and Cestui Que Trust.
III. Who May Be a Trustee.
IV. What Property May Be the Subject of a Trust.
V. Creation of Trusts.
A. Trustee De Son Tort.
B. Beneficiary Must Be Certain.
C. Trusts for Maintenance and Support.
1. Spendthrift Trusts.
2. Encroachment upon Corpus of Estate.
D. Precatory Trusts.
E. Consideration.
F. Statute of Frauds.
VI. Acceptance.
VII. Appointment and Removal of Trustees.
A. Receivers.
B. Duty of Former Trustee.
C. Jurisdiction.
D. Proceedings for Removal of Trustees.
VIII. Statute of Limitations.
IX. Powers, Duties and Liabilities of the Trustee.
A. In General.
B. Right of Trustee to Set-Off.
C. Discretionary Powers.
D. Delegation of Duties.
E. Duty of Diligence.
1. In General.
2. Depreciated Currency.
3. Depositing Trust Fund.
4. Failure to Collect Debts.
5. Payment of Taxes.
F. Right to Apply for Instructions.
G. Investments.
H. Settlement of Accounts.
I. Expenses of the Trust.
1. Attorney's Fees.
2. Clerk's Hire.
3. Office Rent.
4. Reimbursement for Improvements.
J. Compensation of the Trustee.
K. Trustee Using the Trust for Personal Gain.
1. Making Profit.
2. Trustee Paying His Own Debts with Trust Funds.
3. Trustee Setting up Adverse Claim.
4. Effect on Cestui Que Trust of Declarations of Trustee.
L. Trustee Buying at His Own Sale.
M. Dealings between Trustee and Cestui Que Trust.
N. Joint Trustees.
1. Liability for Acts of Co-Trustee.
2. Death of One Joint Trustee.
3. Liability of Participators in Breach of Trust.
4. When Trustees Jointly Liable.
O. Notice.
P. Sales by the Trustee.
1. Advertisement of Sale.
2. Duty of Trustee in Regard to Sale.
a. In General.
b. Consent of Cestui Que Trust to Sale.
c. Trustee Must Be Present at Sale.
d. Place of Sale.
e. Amount to Be Sold.
f. Sale of Parcels.
g. Right to Mortgage.
h. Sale on Credit.
i. Warranty.
j. Injunction to Sale.
k. Setting the Sale Aside.
l. Rights of Cestui Que Trust in Case of Wrongful Sale.
m. Rights and Liabilities of the Purchaser.
(1) Purchaser Seeing to Application of Purchase Money.
(2) Following Trust Property.
n. Exterritorial Power of Trustee.
X. Rights and Remedies of Cestui Que Trust.
A. When Beneficiaries Take Vested Interests.
B. Cestui Que Trust May Compel an Accounting.
C. Rights of Beneficiaries When Trustee Delays Executing Trust.
D. Bill to Compel Sale or Mortgage of Trust Property.
E. Liability of Trust Estate for Debts of Cestui Que Trust.
F. Acquiescence of Cestui Que Trust in Breach of Trust.
XI. Termination of the Trust.
XII. Pleading and Practice.
A. Jurisdiction.
B. Bringing Trust Fund into Court.
C. Parties.
1. Who May Sue.
2. Who Are Necessary Parties.
D. Costs.
XIII. Implied Trusts.
A. Definition.
B. Resulting Trusts.
1. Purchase Money Paid by One, Conveyance to Another.
a. In General.
b. Effect of Death of Nominal Purchaser.
c. Character of Consideration.
d. Presumption Rebuttable.
e. Where Trust Is Express Implications Are Excluded.
2. Purchase by Agent with Funds of Principal.
3. Time of Payment.
4. Purchase Money Paid by Third Persons.
5. Money Advanced as a Loan.
6. Part Payment of Purchase Money.
a. Rule as to Aliquot Part.
7. Advancements.
a. In General.
b. Payment by Husband, Conveyance to Wife.
c. Payment by Wife, Conveyance to Husband.
d. Payment by Parent, Conveyance to Child.
e. Purchase by One in Loco Parentis.
8. Admissibility of Parol Evidence.
9. Declarations and Admissions.
10. Purchase by Fiduciary with Trust Funds.
11. Resulting Trust in Favor of an Alien.
12. Resulting Trust in Favor of a Charity.
C. Constructive Trusts.
1. Purchase at Judicial Sale.
D. Statute of Limitations and Laches.
Cross References to Monographic Notes.
Assignments for the Benefit of Creditors, appended to French v. Townes, 10 Gratt. 513.
Charities, appended to Kelly v. Love, 20 Gratt. 124.
Deeds of Trust, appended to Cadwallader v. Mason, Wythe 188.
Fraudulent and Voluntary Conveyances, appended to Cochran v. Paris, 11 Gratt. 348.
Interest, appended to Fred v. Dixon, 27 Gratt. 541.
Jurisdiction, appended to Phippen v. Durham, 8 Gratt. 457.
I. DEFINITIONS.
A trust, in its most enlarged sense, may be defined to be an equitable right, title, or interest in property, real or personal, distinct from the legal ownership thereof. Nease v. Capehart, 8 W.Va. 95.
Express and Implied Trusts.--Trusts should be divided into two classes, namely, direct or express trusts, that is trusts springing from the agreement of the parties, and the other constructive or implied trusts, that is a trust created by equity law. An express trust means a trust created by words, either expressly or impliedly evincing an intention to create a trust; and a constructive trust means a trust not created by any words either expressly or impliedly evincing a direct intention to create a trust but by the construction of equity in order to satisfy the demands of justice. Currence v. Ward, 43 W.Va. 367, 27 S.E. 329.
Active and Passive Trusts.--An active trust is one in which the trustee is not a mere depositary of the property, but has special active duties to perform, pointed out by him who created the trust by the terms of its creation. But a simple or passive trust is one in which the trustee is a mere passive depositary of the property, with no active duties to perform. Thompson v. Whitaker Iron Co., 41 W.Va. 574, 23 S.E. 795; Carney v. Kain, 40 W.Va. 758, 23 S.E. 650.
II. RELATION OF TRUSTEE AND CESTUI QUE TRUST.
It is a well established rule, that when the relation of trustee and cestui que trust is once established, no subsequent dealing with the trust property by the trustee can alter the relation between the parties or relieve the property of the trust as between the trustee and the cestui que trust. Murry v. Sell, 23 W.Va. 475; Heiskell v. Powell, 23 W.Va. 717; Cox v. Cox, 95 Va. 173, 27 S.E. 834; Currence v. Ward, 43 W.Va. 367, 27 S.E. 329.
III. WHO MAY BE A TRUSTEE.
Corporations. --Corporations of every description may take and hold estates, as trustees, for purposes not foreign to the objects of their creation and existence; and they may be compelled by courts of equity to carry the trusts into execution. Therefore, a devise or bequest to a corporation in trust, if otherwise valid, is not for that reason void. Protestant Episcopal E. Soc. v. Churchman's Reps., 80 Va. 718.
Lunatics. --But if a trustee be insane, he cannot do any valid act either alone or in conjunction with the cestui que trust. Bailey v. Hill, 77 Va. 492.
Counsel. --Where the parties agree that their respective counsel may act as trustees, it may be done. But where there is but one trustee, he ought not to be counsel of one of the parties, especially, where he may have to decide questions which may be of vital interest to the adverse party. Terry v. Fitzgerald, 32 Gratt. 843.
IV. WHAT PROPERTY MAY BE THE SUBJECT OF A TRUST.
A trust may exist in any property, real or personal, which is, in the eye of a court of equity, property of value. Currence v. Ward, 43 W.Va. 367, 27 S.E. 329.
V. CREATION OF TRUSTS.
A trust need not be expressly declared in terms, but it may arise from operation of law. Protestant Episcopal E. Soc. v. Churchman's Reps., 80 Va. 718; Currence v. Ward, 43 W.Va. 367, 27 S.E. 329; See infra, this note, " Implied Trusts."
Where a grantee of land, who had paid a valuable consideration therefor, wrote letters to different persons stating that he held the land " for A." that he had " bought it for A.," that he was " going to turn it over to A." and that he bought it " for the purpose of securing half the property for A." it was held to be a sufficient declaration of trust. McCandless v. Warner, 26 W.Va. 754.
Likewise, where a wife joined with her husband in the conveyance of her land on condition that the proceeds be applied to the payment of a debt binding her children's land, a trust is thereby created, which a court of equity will enforce against the husband, though the bonds for the proceeds are made payable to him. Barnes v. Trafton, 80 Va. 524.
So also, when a debtor has conveyed land to a trustee to secure a debt, and afterwards another person and the debtor agree that the former shall purchase the land and hold it as security for the purchase money he pays, and, accordingly, the debtor acquiesces and the other purchases the land, the transaction constitutes a trust which a court of equity will enforce. Nease v. Capehart, 8 W.Va. 95.
A. TRUSTEE DE SON TORT.
A trustee de son tort is he, who of his own authority enters into the possession, or assumes the management, of property which belongs beneficially to another; and he is subject to the same rules and remedies as other constructive trustees. Morris v. Joseph, 1 W.Va. 256, 91 Am. Dec. 386; Brown v. Lambert, 33 Gratt. 256; Pannill v. Calloway, 78 Va. 387.
Within the meaning of the Va. Code 1887, ch. 119, § 2660, the term " trustee" must be understood in the restricted sense of an express trustee, as distinguished from trustee in a general sense, by construction or implication of law. But a trustee de facto, although acting without authority at the time, is within the purview of the statute, if afterwards he receives authority. Brown v. Lambert, 33 Gratt. 256.
And persons acquiring title by fraud are trustees for the injured persons, although they do not intend to acquire the property in that character. Coleman v. Cocke, 6 618, 18 Am. Dec. 757. See Jones v. Thorn, 45 W.Va. 186, 32 S.E. 173.
B. BENEFICIARY MUST BE CERTAIN.
It should be carefully observed, however, that in the creation of trusts by deed or will the beneficiary must be a definite, certain, ascertainable person, natural or corporate, for if the trust is so vague, indefinite and uncertain, that it cannot be ascertained who the cestui que trust is, it is inoperative and void. Gallego v. Attorney General, 3 Leigh 450, 24 Am. Dec. 650; Stonestreet v. Doyle, 75 Va. 356, 40 Am. Rep. 731; Knox v. Knox, 9 W.Va. 124; Carskadon v. Torreyson, 17 W.Va. 43; Brown v. Caldwell, 23 W.Va. 187. Compare Morris v. Morris,Morris v. Morris, 48 W.Va. 430, 37 S.E. 570.
For example, a devise of land to certain persons as trustees, to build a school house for the purpose of a free school, and further extend the education of poor children, is null and void at law, because of the uncertainty of the beneficiaries intended. Stonestreet v. Doyle, 75 Va. 356, 40 Am. Rep. 731.
But where property was devised in trust for the maintenance and support of a man and his family, it was held that the devise was not void for uncertainty in the beneficiaries. Whelan v. Reilly, 3 W.Va. 597.
Nor is a trust to support a man and his wife void for uncertainty, as by the support of a man and wife is meant such support as is proper and suitable to them in their station of life, and the amount required to furnish such support can be ascertained with reasonable certainty. Johnson v. Billups, 23 W.Va. 685.
C. TRUSTS FOR MAINTENANCE AND SUPPORT.
Where property is conveyed to a trustee for the maintenance and support of the grantor and his family, debts contracted by the grantor, even for the support of the family, cannot be charged by a court of equity on the prospective profits of the trust estate beyond the annual income, so as to deprive the beneficiaries of their support and maintenance; to hold otherwise, would be to defeat the very purpose for which the trust was created, namely, to shield it from the improvidence and waste of the cestuis que trust and to make that which, under their management, would have been dissipated in a short time, a permanent fund, which should, from its profits, furnish some support to the beneficiaries as long as they live. Markham v. Guerrant, 4 Leigh 279; Doswell v. Anderson, 1 Patton & H. 185; Nickell v. Handly, 10 Gratt. 336; Johnston v. Zane, 11 Gratt. 552; Armstrong v. Pitts, 13 Gratt. 235. See Galt v. Carter, 6 Munf. 245; Rankin v. Bradford, 1 Leigh 163; Lindsey v. Eckels, 99 Va. 668, 40 S.E. 23.
For example, where a parent conveys property in trust for the support, maintenance and education of her children, the trust property is not liable for the debts thereafter contracted by the parent beyond the profits of the trust estate, although some of the debts were contracted for necessaries furnished for the support and maintenance of the cestuis que trust. Doswell v. Anderson, 1 Patton & H. 185.
In another case, a testator devised a farm to a trustee for the benefit of his daughter and her family. The trustee was directed so to use and conduct the farm as to be most advantageous to the interest and support of the cestui que trust and her family during her lifetime. Upon a bill being filed by the creditors of the daughter to subject her interest in the property to their debts, it was held that the creditors would only be entitled to the daughter's ratable portion of any surplus of the annual products of the trust subject, after providing for the support of herself and family; and if no such surplus is alleged or shown to exist, the bill must be dismissed. Nickell v. Handly, 10 Gratt. 336.
So, also, where land was settled on a wife for life, to use for the support of herself and children, remainder to her children surviving her, but to her husband, should he survive both her and them, with power to her to sell the trust corpus, and reinvest the proceeds, subject to the same trust and limitations, it was held that creditors, by her general engagements, are entitled only to her ratable portion of the remnant of those rents and profits after deducting the support of herself and children. French v. Waterman, 79 Va. 617.
A devise to a father for the support and maintenance of his wife and children creates an express trust for the latter, and the income derived from the trust subject must be so applied irrespective of the father's ability to support and maintain them. National Bank v. Hancock, 100 Va. 101.
But, it was held in Rhett v. Mason, 18 Gratt. 541, that a devise to a wife during her life and widowhood, " for her maintenance and support, and for the maintenance and support of our children," does not create a trust for the maintenance and support of the children, and that the reference to the subject of the maintenance and support was merely an expression of the motive of the gift.
In Ward v. Funsten, 86 Va. 359, 10 S.E. 415, the donors requested that the fund be invested and applied " in such a way as will best promote the interest of the family," and by order of court the money was invested for the use and benefit of the widow and the children during her life, and until the youngest child should reach the age of twenty-one, and all the female children should marry and be provided with a home. The widow died, and all the children reached the age of twenty-one, and but one daughter was unmarried, she having a home with her aunt. It was held that the trust was absolute without regard to the pecuniary circumstances of the cestui que trust, and the unmarried daughter was entitled to the whole income.
Where a father who is trustee for his wife and children, and as such invested with a discretion to spend the income of the trust subject for their maintenance and support, collects the income, and mingles it with his own, and makes extensive improvements on the trust subject, but settles no account of his transactions, he will not be permitted, to the prejudice of his creditors, to assert that he has supported his wife and children from his private means, so as thereby to enhance the value of the trust subject. He will be held to have supported them out of the trust funds, and his creditors will be permitted to follow his estate into the trust subject. National Bank v. Hancock, 100 Va. 101.
Trust for Husband and Wife. --On the other hand, where property is conveyed in trust, to permit a husband and wife, during their joint lives, to enjoy the profits of the estate, the property may be taken in execution to satisfy a debt incurred after marriage, for the proper support of the husband and wife; for the purpose here is simply to intercept the marital rights, and shield the property from the husband's creditors. Scott v. Loraine, 6 Munf. 117.
1. Spendthrift Trusts.
A valid trust may be created for the support of another, although it is stipulated that neither the trust property nor the profits therefrom shall be bound for the past or future debts or liabilities of the cestui que trust, except for supplies furnished for his support. Garland v. Garland, 87 Va. 758, 13 S.E. 478, 24 Am. St. Rep. 682; Camp v. Cleary, 76 Va. 140. Compare Hutchinson v. Maxwell, 100 Va. 169, 40 S.E. 655.
2. Encroachment upon Corpus of Estate.
Courts look with disfavor upon the assumption by trustees of authority to encroach upon the capital of the trust estate. And the burden is on the trustee, or those claiming the benefit of his action, to show the necessity for such encroachment, and that it was impossible to apply to the courts for directions. Green v. Wooldridge, 89 Va. 632, 16 S.E. 875; Sedgwick v. Taylor, 84 Va. 820, 6 S.E. 226.
And although the court may authorize an expenditure of the corpus of the trust fund for the maintenance and support of the infant beneficiaries, if it appears proper and judicious to do so, yet where there is a limitation over to a stranger, neither the trustee nor the court can expend any part of the capital. Sedgwick v. Taylor, 84 Va. 820, 6 S.E. 226.
But under the terms of a trust deed, providing that the trustees are to provide and supply all necessary provisions or supplies of all kinds necessary for the comfort of the grantor and his minor children, for which the trustees are to be allowed to charge cost prices against the grantor, which shall be a charge upon his estate, it was held that the trustee had the right to charge the corpus of the trust subject with the necessary support of the grantor and his minor children. Hughes v. Williams, 99 Va. 312, 38 S.E. 138.
Rights of Cestui Que Trust.--It must be carefully observed, however, that where, by the terms of the trust instrument, the cestui que trust is only entitled to the income of the trust estate, but the trustee, in violation of his duty, turns over the corpus to her, and she is sui juris, she cannot maintain an action against the trustee for support after the estate has been expended. Sedgwick v. Taylor, 84 Va. 820, 6 S.E. 226.
Rights of Remainderman.--But where the cestui que trust, to whom the corpus of the estate is wrongfully turned over, had only a life estate therein, with remainder over, the remainderman may maintain a suit, while the life tenant is still living, to have his interest protected. Sedgwick v. Taylor, 84 Va. 820, 6 S.E. 226. See Brown v. Lambert, 33 Gratt. 256.
D. PRECATORY TRUSTS.
Words of request, recommendation, or hope, are treated as imperative and are sufficient to create a trust, when the objects of the precatory language are certain, and the subjects contemplated are also certain; unless a clear discretion to act or not to act be given, or the prior dispositions of the property import absolute or uncontrolable beneficial ownership. Harrisons v. HarrisonGratt. 1, 44 Am. Dec. 365.
For example, where a testator in his will said: " I wish you to take my negroes to Pennsylvania where they will be free," it was held that this created a trust in favor of the negroes. 4 Va. L. Reg. 545; Reid v. Blackstone, 14 Gratt. 363.
E. CONSIDERATION.
An express trust requires no consideration to support it. Titchenell v. Jackson, 26 W.Va. 460; McCandless v. Warner, 26 W.Va. 754.
Thus, if a conveyance be made by A. to B., and at the same time and as a part of the transaction B. executes a writing wherein he declares that he purchased the land in trust for C., this constitutes an executed and express trust and is valid, though C. gave no consideration whatever for being thus made cestui que trust. Titchenell v. Jackson, 26 W.Va. 460.
Where a trust is actually created, and the relation of trustee and cestui que trust established, a court of equity will in favor of a volunteer, enforce the execution of the trust against the persons creating it and all subsequent volunteers; although it will not create a trust or establish the relationship of trustee and cestui que trust by giving effect to an imperfect conveyance in favor of a volunteer. Jones v. Obenchain, 10 Gratt. 259; Reed v. VannorsdaleLeigh 569.
F. STATUTE OF FRAUDS.
The seventh section of the English statute of frauds, requiring all declarations or creations of trust to be manifested and proved by writing, though re-enacted in many of the American states, is not in force in Virginia (Walraven v. LockPatton & H. 547; Borst v. Nalle, 28 Gratt. 423; Bank of U.S. v. Carrington, 7 Leigh 566), nor West Virginia (Currence v. Ward, 43 W.Va. 367, 27 S.E. 329), and, therefore, in these states, trusts may be proven by parol evidence.
The provisions of the seventh and eighth sections of the English statute of frauds never were enacted in Virginia; and the law here, in relation to declarations of trust, is, and always has been, the same that it was in England before the statute, consequently verbal declarations of trusts may be set up by parol proof in Virginia. Hancock v. Talley, 1 Va. Dec. 433.
But in an early West Virginia case, it was said that even if it does exist in that state a trust of lands need not be created in writing to take it out of the statute, but it is sufficient if it is manifested and proved in writing by the party enabled by law to declare the trust; such writing, however, must show both the existence of the trust and the terms thereof. McCandless v. Warner, 26 W.Va. 754.
But if a party obtains a deed without any consideration, upon a parol agreement that he will hold the land in trust for the grantor, such trust will not be enforced, as it would violate the statute of frauds to permit parol evidence to establish such trust; but if such agreement is reduced to writing and signed by the grantee at the time the deed is executed or afterwards, a court of equity will enforce such trust, unless the deed was made to hinder, delay or defraud creditors of the grantor or for any vicious purpose in violation of public policy. Cain v. Cox, 23 W.Va. 594.
Letters Sufficient Declaration. --Letters written to any one after the creation of the trust, in which the trust and the terms thereof are admitted and declared, are a sufficient declaration of the trust within the seventh section of the statute of frauds; and it is not necessary that the trust and the terms thereof shall all appear in the letter or other writing, but if they can be ascertained with reasonable certainty from a number of letters, or from one or more letters and other writings, it is sufficiently proved. McCandless v. Warner, 26 W.Va. 754.
Parol Declarations of Trust.
Land. --If a trust can be created in land by a parol declaration, the declaration should be unequivocal and explicit, and established by clear and convincing testimony. Jesser v. Armentrout, 100 Va. 666, 42 S.E. 681; Harris v. Barnett, 3 Gratt. 339. See Handlan v. Handlan, 42 W.Va. 309, 26 S.E. 179; Bailey v. Calfee, 49 W.Va. 630, 39 S.E. 642.
Personal Property. --A valid trust can be created by parol in personalty or the proceeds of realty, and when once effectually created, it cannot be subsequently revoked or altered by the party creating it, for it is governed by the same rules that govern trusts by writing. Riggan v. Riggan, 93 Va. 78, 24 S.E. 920.
In London v. Turner, 11 Leigh 403, it was said that although, where personal property is given to one upon a trust by parol for another, the declaration of trust by parol may be valid as between the donee and the cestui que trust, yet as between the cestui que trust and the creditors of the donee the case is essentially different.
VI. ACCEPTANCE.
It has been held that the appointment by power of attorney of an agent to execute the trust, and the institution of a suit to recover the trust subject are unequivocal acts of acceptance of the trust by the trustee. Christian v. YanceyPatton & H. 240.
And where a judgment is assigned to a party for the benefit of an infant child, and the same judgment is assigned to another party for the benefit of the same child, and in a suit in chancery both of the assignees file petitions respectively claiming to be entitled to the control of the judgment, it was held that the successful party in the contest must be regarded as having accepted the judgment and subsequently as holding the judgment as trustee for the infant child. Feamster v. Feamster, 35 W.Va. 1, 13 S.E. 53.
Acceptance Relates to Date of Instrument. --An acceptance of a trust by a trustee relates back to the date of the deed, and the title of a trustee, who accepted after a sale of the trust subject under an execution against the grantor in the deed of trust, made after the record of the deed of trust and before the acceptance by the trustee, is good against a purchaser at such sale. Christian v. YanceyPatton & H. 240.
Effect of Delay. --A delay of ten months by a trustee in a deed of trust to accept the deed, and expressions of doubt and hesitation about accepting the trust, made to a creditor of the grantor claiming against the deed, by the trustee, without having seen the deed or knowing its precise terms, creates no bar to the subsequent acceptance of the trust by the trustee. Christian v. YanceyPatton & H. 240.
Estoppel. --Acceptance of a trust estops the trustee from denying the title of the person for whom he holds. Morris v. Morris,Morris v. Morris, 48 W.Va. 430, 37 S.E. 570.
Assent of Cestui Que Trust. --The assent of the cestui que trust to a trust created in his favor will be presumed, and therefore the estate vested in his trustee is not overreached by the lien of a judgment obtained against the grantor, intermediate the creation of the trust estate, and the acts of the beneficiary indicating his assent to the trust. Skipwith v. Cunningham, 8 Leigh 271, 31 Am. Dec. 642.
VII. APPOINTMENT AND REMOVAL OF TRUSTEES.
Appointment of Trustees.
In General. --Equity will not allow a trust to fail for want of a trustee, therefore, if the trustee appointed dies, refuses to accept the trust, is removed, or is incapable of performing it, a court of equity will appoint a new trustee. Dunscomb v. DunscombHen. & M. 11; Lee v. RandolphHen. & M. 12; Reynolds v. Bank of Virginia, 6 Gratt. 174; Atwood v. Shen. Val. R. R. Co., 85 Va. 966, 9 S.E. 748; Whelan v. Reilly, 3 W.Va. 597; Shelton v. Jones, 26 Gratt. 891; Hunter v. Vaughan, 24 Gratt. 400.
Personal Representative of Sole Trustee. --And although the statute provides that the personal representative of a sole or surviving trustee shall execute the trust, still in a suit to set aside a deed of settlement executed by a debtor to a trustee for his wife and children, it is the duty of the court, upon the trustee's death, to appoint a substitute. Strayer v. Long, 83 Va. 715, 3 S.E. 372.
Who May Maintain Proceedings. --All persons interested in the trust may institute proceedings in their own names for the appointment or removal of trustees, but notice should be given to all other parties in interest. Machir v. Sehon, 14 W.Va. 777.
Appellate Court. --Moreover, if the party interested desires the appointment of another trustee, and the lower court thinks it necessary to the proper management of the trust fund, an appellate court will not interfere, although it might think such an order unnecessary. Crickard v. Crickard, 25 Gratt. 410.
Necessary Parties. --As a general rule, in suits for the appointment of new trustees, all persons beneficially interested in the object of the suit must be made parties, and should be given notice. But a person whose interest is future, uncertain, and contingent is not a necessary party. Fitzgibbon v. Barry, 78 Va. 755; Machir v. Sehon, 14 W.Va. 777.
It is provided by statute in Virginia, that in any suit in equity in which it appears that a trustee has died, although the heirs of such trustee are not parties to the suit, yet if his personal representatives and others interested be parties, the court may appoint another trustee in the place of him who died. " This appears to mean that the court wherein the suit is pending may appoint a trustee in the place of one who, if a party to the suit, has died pending the suit." Fisher v. Dickenson, 84 Va. 318, 4 S.E. 737.
Notice. --If the trust instrument provides that notice shall be given to certain persons before another trustee is appointed, the appointment will be irregular unless such notice is given, even though the person to be notified is not within the jurisdiction of the court, for notice can be given him by order of publication. Washington, etc., R. R. Co. v. Alexandria, etc., R. R. Co., 19 Gratt. 592, 100 Am. Dec. 710. See Galt v. Carter, 6 Munf. 245.
Notice to Subsequent Purchaser from Grantor. --But where the grantor and one of the trustees in a deed of trust are dead, and the other trustee has removed out of the state, it is sufficient, on the motion of the creditors secured by the deed, for the appointment of a trustee to execute the trust, to give notice to the personal representatives of the grantor and of the deceased trustee, and to the surviving trustee; and it is not necessary to give notice to the subsequent purchaser from the grantor or his personal representative, if he is dead. Hunter v. Vaughan, 24 Gratt. 400.
Form of Proceedings. --The form of proceedings for the appointment or removal of trustees is by bill or petition. The proceeding by petition, however, is more used with us, although the uniform course in England is to proceed by bill. Machir v. Sehon, 14 W.Va. 777; Shelton v. Jones, 26 Gratt. 891.
But a bill for the appointment of a new trustee, and also for an injunction against a threatened injury to the trust property, is not demurrable. Forsyth v. City of Wheeling, 19 W.Va. 318.
Mere Written Request. --In Shelton v. Jones, 26 Gratt. 891, an order by a county court made on the written request of the life tenant and with the consent of the trustee for her and her children, removing the trustee and appointing another, was held valid, though made without either bill or petition.
Motion in Pending Proceedings.--Proceedings are generally commenced directly for the removal or appointment of trustees, but where a bill or petition is already pending for the administration of the trust, the trustee may be appointed or removed upon motion in the cause. Machir v. Sehon, 14 W.Va. 777.
Death of Trustee Pendente Lite. --Where a trustee dies pending a bill for an injunction against him, the court may supply the place of the trustee upon motion, and without putting the parties, who are all before the court, to new pleadings. Pate v. M'Clure, 4 164. In this case the court said: " If the trustee had continued in life, and there had been no objection to him on the score of interest, misconduct, or any other sufficient ground, I would by no means be understood to say, that the chancellor could, of his own mere motion, set him aside, and put the execution of the trust into the hands of the marshal."
Power of Trustees to Appoint Their Successors. --It is well settled that trustees may be clothed by the testator with power to appoint their successors, but the power must be exercised by the number of trustees, and in the manner indicated in the will. All new trustees, when so appointed, will have the same power as those appointed by the testator. Whelan v. Reilly, 3 W.Va. 597.
Prayer for Relief. --Under the prayer for general relief in a bill, it is proper for the court to grant the appointment of a new trustee to aid in the execution of the trust, where the original trustee has gone beyond the jurisdiction of the court, and also to compel the administrator to settle his accounts, and to adjust and protect the rights of the complainant and all other creditors. Woods v. Fisher, 3 W.Va. 536.
The appointment of commissioners to sell and administer the trust under the supervision and control of the court is authorized under the prayer for the appointment of trustees, or under the prayer for general relief. Reynolds v. Bank, 6 Gratt. 174.
Appointment of Insolvent Trustee. --The appointment of an insolvent or untrustworthy trustee will not, of itself, render the trust deed void. In such case, a court of equity may, upon the proper showing, take charge of the trust property, put it in the hands of a receiver, who thus administers the trust according to the provisions of the deed. Cohn v. Ward, 32 W.Va. 34, 9 S.E. 41, citing Harden v. Wagner, 22 W.Va. 356.
Removal and Substitution of Trustees.
Grounds for Removal.
In General. --In removing and substituting trustees, the court does not act arbitrarily, but upon certain general principles, and after a full consideration of the case, therefore, courts will not substitute trustees upon the mere caprice of the cestui que trust, and without reasonable cause; and although the instrument of trust or a statute gives the cestui que trust full power to remove and appoint other trustees, yet good cause must be shown or the court cannot be put in motion. Machir v. Sehon, 14 W.Va. 777.
Insolvency of Trustee. --The better view is that bankruptcy or insolvency of a trustee does not disqualify him to act. 1 Perry on Trusts (2d Ed.) 353, § 279; Terry v. Fitzgerald, 32 Gratt. 843. Contra, Hill on Trustees.
In M'Cullough v. Sommerville, 8 Leigh 415, however, both the trustees were wholly irresponsible individuals, owning no property of any description, and it was held that the trustee should be relieved from the execution of the trust.
But where money of the trust fund is to pass through the hands of an insolvent trustee, upon the application of one who is interested in the right disbursement of the money, and who is apprehensive that it may be misapplied or misused, a court of chancery ought to require of the trustee security before he is allowed to proceed with the execution of the trust. Terry v. Fitzgerald, 32 Gratt. 843.
Solvency of Trustee's Sureties. --Although a trustee is insolvent, yet if his sureties are solvent, and the beneficiary in the trust is only entitled to the interest on the fund during her life, which fund is well invested, the court will refuse to remove the trustee. Moorman v. Crockett, 90 Va. 185, 17 S.E. 875.
Mere Disagreement between Trustee and Cestui Que Trust.--Mere disagreements between a trustee and the cestui que trust will not justify a removal; nor is it ground for removal that the trustee fails in the discharge of his duties from an honest mistake, or mere misunderstanding of them, or from misjudgment. Machir v. Sehon, 14 W.Va. 777.
Refusal to Exercise Discretionary Power. --Likewise, the refusal of a trustee to exercise a purely discretionary power is not a breach of trust for which he can be removed from office, although the trustee assigns no conclusive reason for the refusal, and although the proposed act is apparently beneficial to the trust estate. Cochran v. Paris, 11 Gratt. 348.
Refusal to Act. --But one of the causes for which a trustee may be removed by a court of equity and a new trustee appointed, is where the trustee refuses to act after having once accepted. But it has been held, that within the meaning of the statute, a trustee shall not be removed as having " refused to act" if it appears from the whole evidence that it was inequitable for him to do the particular act demanded of him, the failure to do which is made the ground for the motion for his removal. Machir v. Sehon, 14 W.Va. 777.
Unfaithfulness. --So, also, an unfaithful trustee of a married woman and infant children, though appointed by the testator, may be removed from his trust, and another trustee appointed in his place. Walters v. Hill, 27 Gratt. 388. See Crickard v. Crickard, 25 Gratt. 410.
Intemperance of Trustee. --And where the trustee, by reason of his intemperate habits, becomes incompetent to execute the trust, the court, upon application by the cestui que trust, may execute it through its commissioner. Payne v. Morriss, 1 Va. Dec. 665. See Barger v. Buckland, 28 Gratt. 850.
A. RECEIVERS.
Where a court has removed trustees, appointed by will to manage an estate, for mismanagement, and pending the appointment of their successors, placed the property in the hands of a receiver, it may remove such receiver in its discretion, and appoint proper persons to take charge of and manage the property as trustees under the terms and conditions of the will. Bayly v. Gaines, 1 Va. Dec. 618.
After a party has denied an express trust, in a suit to have the trust declared, and after the trust and the terms thereof are in writing proved to the satisfaction of the court, it is proper to put the trust property into the hands of a receiver. McCandless v. Warner, 26 W.Va. 754.
B. DUTY OF FORMER TRUSTEE.
When a trustee is removed and a new trustee appointed in his place, it is the duty of the former to account with and make payment to his successor of the trust money in his hands. Rowe v. Bentley, 29 Gratt. 756.
C. JURISDICTION.
In General. --Independently of the statutes, a court of equity, by virtue of its general jurisdiction over the administration of trusts, has power to remove trustees for cause, and to substitute others in their stead. Rankin v. Bradford, 1 Leigh 163; Lewis v. Glenn, 84 Va. 947, 6 S.E. 866; Machir v. Sehon, 14 W.Va. 777; Shelton v. Jones, 26 Gratt. 891.
Though a testator appoints his executor a trustee for the legatees, a court of equity may, for good cause, appoint another trustee for the management of the trust fund. Crickard v. Crickard, 25 Gratt. 410.
What Courts Have Jurisdiction. --In Virginia trustee is removed by the county court, or the judge thereof in vacation, upon motion after five days' notice; in West Virginia a trustee is removed by notice to the circuit court of the proper county. Lackland v. Davenport, 84 Va. 638, 5 S.E. 540; Machir v. Sehon, 14 W.Va. 777.
By statute in Virginia, a court of equity in the county in which the deed of trust is, or might have been, recorded, has jurisdiction to remove trustees and appoint others in their place. Lewis v. Glenn, 84 Va. 947, 6 S.E. 866.
D. PROCEEDINGS FOR REMOVAL OF TRUSTEES.
Motion. --The proceeding prescribed by statute for the removal of trustees is notice and motion. Machir v. Sehon, 14 W.Va. 777; Lackland v. Davenport, 84 Va. 638, 5 S.E. 540.
Under the Virginia statute authorizing the appointment of a trustee to execute a deed of trust, in place of one deceased, upon the motion of any person interested, and after notice to certain named parties, it was held that an order substituting another trustee, but not showing upon whose motion it was made, nor that the proper parties had notice or were before the court, is invalid, and a sale made by such trustee is void. Pitzer v. Logan, 85 Va. 374, 7 S.E. 385.
Merits of Cause. --But a proceeding by motion under the statute to substitute a new trustee in a deed of trust to secure a debt, in the place of a trustee who has resigned, determines nothing as to the rights of the parties under the deed, nor as to the character of the deed itself. Pettus v. Atlantic Savings & Loan Assn., 94 Va. 477, 26 S.E. 834.
Who May Maintain Proceedings. --See ante, " Appointment of Trustee."
VIII. STATUTE OF LIMITATIONS.
As between Trustee and Cestui Que Trust. --The statute of limitations does not run as between a trustee and cestui que trust in case of express continuing trusts not cognizable at law and falling exclusively within the jurisdiction of equity, until the trust is disarmed or the trustee, by word or act, denies the trust and the cestui que trust has notice of the denial. But this rule applies only in cases of direct or express trusts, and, as we shall see, does not embrace those trusts which are matters of implication or construction. Redwood v. Riddick, 4 Munf. 222; Sheppards v. Turpin, 3 Gratt. 373; Rowe v. Bentley, 29 Gratt. 756; Saum v. Coffelt, 79 Va. 510; Redford v. Clarke, 100 Va. 115, 40 S.E. 630; Nease v. Capehart, 8 W.Va. 95; Gapen v. Gapen, 41 W.Va. 422, 23 S.E. 579; Woods v. Stevenson, 43 W.Va. 149, 27 S.E. 309; Rowan v. Chenoweth, 49 W.Va. 287, 38 S.E. 544, 87 Am. St. Rep. 796; Etting v. Marx (Va.), 4 F. 673; Crumrine v. Crumrine, 50 W.Va. 226, 40 S.E. 341.
The statute of limitations does not run in favor of trustees, as between trustee and cestui que trust, mortgagor and mortgagee, so long as the confidence may fairly be presumed to continue. Harrison v. Harrison, 1 Call 419.
But when the circumstances require it, equity will enforce against the cestui que trust, especially where the rights of third persons are concerned, its own peculiar maxim, vigilantibus et non dormientibus jura subserviunt. Etting v. Marx (Va.), 4 F. 673.
Sheriff and Deputy. --It has been held that such a trust is not created between a sheriff and his deputies with respect to money received by the latter for the former, as is not subject to the statute, for the relation of deputy and sheriff is that of principal and agent, and an action of assumpsit lies for money had and received between principal and agent. Rowan v. Chenoweth, 49 W.Va. 287, 38 S.E. 544, 87 Am. St. Rep. 796.
Attorney in Fact and Principal. --So also, no trust relation exists between an attorney in fact and his principal, and therefore the latter's cause of action against his attorney for a failure to pay over money collected arises at the date of the collection; nor does the mere fact that the agent collects a part of the share some time after he collects the main portion make it a continuing trust. Hasher v. Hasher, 96 Va. 584, 32 S.E. 41.
Repudiation of Trust by Trustee. --But though the rule is well settled that in cases of direct or express trust, as between the trustee and cestui que trust, the statute of limitations has no application during the continuance and recognition of the trust, yet if the trustee repudiates the trust by clear and unequivocalacts or words and claims thenceforth to hold and control the estate as his own, not subject to any trust, the statute of limitations will commence to run from the time such repudiation, claim or denial of the trust by trustee is brought home to the notice or knowledge of the cestui que trust in such a manner that he is called upon to assert his equitable rights. Rowe v. Bentley, 29 Gratt. 756; Jones v. Lemon, 26 W.Va. 629; Key v. Hughes, 32 W.Va. 184, 9 S.E. 77.
For example, it has been held that when the subject is land, of which the trustee has the legal title, and the cestui que trust is a member of his family living upon the land, if the trustee, asserting title in himself conveys a part of the land, by deed in his own name, to a third person, whom he places in possession of the part so sold and takes the purchase money to himself, and the deed is put upon record and there is no evidence that the trustee thereafter recognized the trust, but on the contrary claimed the residue as his own; these acts and declarations will be regarded as a repudiation of the trust, and the statute of limitations will begin to run against the cestui que trust from that time. Jones v. Lemon, 26 W.Va. 629.
As between Cestui Que Trust and Stranger--If the statute of limitations will bar the action of the trustee against third persons for the recovery of the trust property, it will equally bar the action of the cestui que trust for the same subject-matter. Sheppards v. Turpin, 3 Gratt. 373.
IX. POWERS, DUTIES AND LIABILITIES OF THE TRUSTEE.
A. INGENERAL.
Generally a trustee's authority over the trust property is defined and limited by the instrument creating the trust; and where such is the case, he can only do with the trust property what the instrument either in express terms or by necessary implication anthorizes him to do. Atkinson v. Beckett, 34 W.Va. 584, 12 S.E. 717; Seborn v. Beckwith, 30 W.Va. 774, 5 S.E. 450; Fidelity Ins., etc., Co. v. Shen. Valley R. R. Co., 32 W.Va. 244, 9 S.E. 180; Diehl v. Cotts, 48 W.Va. 255, 37 S.E. 546; Morris v. Morris,Morris v. Morris, 48 W.Va. 430, 37 S.E. 570; Pracht v. Lange, 81 Va. 711; Mundy v. Vawter, 3 Gratt. 518; Heth v. Railroad Co., 4 Gratt. 482, 50 Am. Dec. 88.
The estate taken by a testamentary trustee is commensurate with the powers conferred and duties imposed for the purposes intended to be accomplished. Carney v. Kain, 40 W.Va. 758, 23 S.E. 650.
Where the trust instrument authorizes an exchange of the trust property with the written consent of the cestui que trust, it is a breach of trust on the part of the trustee to sell without such consent, given at the time of, or previous to, the exchange. And even then the exchange can only be made when, in the judgment of the trustees, it would be beneficial to the parties interested in the trust. Patteson v. Horsley, 29 Gratt. 263.
It has been held that a trustee, merely holding the legal title to property for the sole and separate use of a married woman, cannot, without authority, sell or incumber it. Seborn v. Beckwith, 30 W.Va. 774, 5 S.E. 450.
And where land was conveyed in trust to pay the debts of the grantor out of the rents and profits, and then for the support of the grantor, his wife and children, and at his death to be divided among his children, it was held that the trustees had no authority to sell the land conveyed for the payment of the grantor's debts, or for any other purpose, however urgent the necessity. Mundy v. Vawter, 3 Gratt. 518.
In Atkinson v. Beckett, 34 W.Va. 584, 12 S.E. 717, a debtor assigned his stock of goods and merchandise to a trustee to secure certain debts, and by the deed of assignment the trustee is directed to sell the stock for cash, and apply the proceeds to the discharge of the debts secured. With the consent of the creditors secured, he makes a sale in bulk on credit, taking the notes of the purchaser, and a deed of trust on the purchaser's farm to secure the notes. Subsequently the purchaser sells a large amount of the goods to the original trustee, who enters into a written agreement that he will donate the proceeds of the sale primarily to taking up the purchaser's notes. It was held that no such agreement between the purchaser and trustee could relieve the former's farm from the lien securing the purchase notes, except as to such creditors as may have actually participated in or expressly assented to such arrangement.
B. RIGHT OF TRUSTEE TO SET-OFF.
Where rents of the trust subject were decreed to be paid directly by a special receiver to the cestui que trust, it was held that the trustee had no power to collect or use the rent, and that drafts drawn by him in his own name or as trustee, and paid by the lessee, could not be set off against the rent due. Witt v. Warwick, 83 Va. 699, 3 S.E. 352.
In Witt v. Warwick, 83 Va. 699, 3 S.E. 352, the costs, recovered in a proceeding whereby real estate was subjected to the lien of a trust, and the rents thereof decreed to be paid by a special receiver directly to the cestui que trust, were assigned by the trustee to the lessee, to reimburse the lessee for money advanced to prosecute the suit. It was held that, even though the trustee had the power to make the assignment, in the absence of proof that the trust estate was benefited by the advancements, the same could not be set off against a claim for rent due.
C. DISCRETIONARY POWERS.
It is well settled that a discretionary power may be conferred on trustees either by the express terms of the trust or by implication from the nature of the duty imposed on them, whenever the object of the trust is certain. Whelan v. Reilly, 3 W.Va. 597; Cowles v. Brown, 4 Call 477.
And a court of equity will not control trustees in the exercise of a discretionary power reposed in them, nor interfere to compel trustees to exercise their discretion, except where such discretion is exercised from fraudulent or improper motives, in which case a court of equity may interfere, if it is alleged in the bill and sustained by the proofs. Cochran v. Paris, 11 Gratt. 348; Dillard v. DillardVa. Dec. 28; Dillard v. Dillard, 97 Va. 434, 34 S.E. 60. See Lee v. Law, 1 Va. Dec. 808.
But a trust cannot be said to be discretionary which requires the trustees to provide and supply all necessary provisions and supplies for the grantor and his minor children. The power conferred is imperative, and, upon the death of one of the trustees, the power survives to the survivor, and if not exercised by him, a court of equity has jurisdiction to carry it into execution. Hughes v. Williams, 99 Va. 312, 38 S.E. 138.
Appointment of Trust Fund among Beneficiaries. --It has been held that the unlimited and uncontroled discretion conferred by a will upon trustees, with reference to the appointment of the trust fund to and among certain specified beneficiaries, will not be interfered with in the absence of bad faith. Carney v. Kain, 40 W.Va. 758, 23 S.E. 650, citing Whelan v. Reilly, 5 W.Va. 356.
Death of Trustee. --Where a trust instrument confers a discretionary power on one of the beneficiaries to sell the trust property for his own benefit and the benefit of all others interested in the trust, but he dies before making the sale, a court of chancery, in the exercise of its general jurisdiction over trust estates, may decree a sale, if the interest of the surviving beneficiaries will be promoted thereby. Faulkner v. Davis, 18 Gratt. 651.
But where a discretionary power is conferred on two or more trustees jointly, though coupled with an interest, it cannot, after the death of one of the trustees, be executed by the survivor or survivors. Dillard v. Dillard, 97 Va. 434, 34 S.E. 60, distinguishing Sulphur Mines Co. v. Thompson, 93 Va. 293, 25 S.E. 232.
D. DELEGATION OF DUTIES.
Trustees in deeds of trust are charged with a personal confidence, and, therefore, they must act in person and not by agent. Morriss v. Virginia State Ins. Co., 90 Va. 370, 18 S.E. 843.
E. DUTY OF DILIGENCE.
1. In General.
Pre-eminent knowledge and uncommon foresight are not required of a trustee. But all that is required is that he should act in good faith, strictly within the line of his duty, and with the same care and diligence that a prudent man is accustomed to exercise in the management of his own affairs. If he so conducts himself he will not be responsible for any loss or depreciation of the trust fund, or the insolvency or misconduct of any person who may have possessed it. To require more than this of a trustee would be to deter men of integrity from taking upon themselves an office so necessary in the concerns of life, from fear of the anxiety, trouble and risk involved. Elliott v. Carter, 9 Gratt. 541; Davis v. Harman, 21 Gratt. 194; Myers v. Zetelle, 21 Gratt. 733; Brown v. Lambert, 33 Gratt. 256; Cogbill v. Boyd, 77 Va. 450; Reynolds v. Pettyjohn, 79 Va. 327; Key v. Hughes, 32 W.Va. 184, 9 S.E. 77.
It would be unreasonable to judge of the conduct of a trustee from subsequent events. His conduct ought not to be condemned if it flowed from an honest though misinformed judgment. Myers v. Zetelle, 21 Gratt. 733.
A trustee in a deed of trust, which requires the trustee to provide and supply all necessary provisions and supplies for the grantor and his minor children, is to be held to the same degree of prudence and care that a reasonably prudent, careful man, in the conduct of his own affairs, would exercise under the same circumstances. Hughes v. Williams, 99 Va. 312, 38 S.E. 138.
In Rush v. Steele, 93 Va. 526, 25 S.E. 604, a trustee was directed by the court, in a pending suit, to lend the trust fund and take as a security therefor a deed of trust or mortgage on real estate. He loaned the money as directed, but took as security therefor a confession of judgment, upon which execution issued, but, by the direction of the trustee, it was not placed in the hands of the proper officer to be levied, whereby the limitation of the judgment was reduced to ten years. The investment by the trustee was reported to the court and confirmed, and three years after making the investment the trustee was removed, and the general receiver of the court substituted instead. The deed was amply secured, but was lost solely by permitting the judgment to become barred by the statute of limitations, after the substitution of the general receiver. It was held, that the trustee was not liable for the loss, but the general receiver was, because it was the duty of the latter to ascertain when the judgment would become barred and to provide against that contingency.
Where a trustee, acting bona fide and under the belief that certain real estate, to which his wife once had an equitable title, belonged to himself, sells the same to bona fide purchasers without notice of the trust, but afterwards it is ascertained that the estate belonged to the heirs of the wife, subject only to his life estate, it was held by a divided court that the beneficiaries, whose interest took effect at the death of the trustee, were entitled to recover from his estate the value of the land at the time of his death, excluding improvements made since the sale. Norman v. Cunningham, 5 Gratt. 63.
Deviation from Line of Duty--On the other hand, if a trustee does not act strictly within the line of his duty, and any part of the fund be invested upon securities not authorized, or be put within the control of persons who ought not to be intrusted with it, when there is no necessity for so doing, and a loss be thereby eventually sustained, such trustee will be liable to make it good, however unexpected the result, however little likely to arise from the course adopted, and however free such conduct may have been from any improper motive. Key v. Hughes', 32 W.Va. 184, 9 S.E. 77.
For example, if there is a breach of trust but an inevitable calamity destroys the property, the trustee must, nevertheless, account for it. Thus, where a trustee commits a breach of trust by selling the trust property, the cestuis que trust have the right to treat the proceeds of the sale as trust funds, and to hold the trustee or his estate liable therefor, although the original trust property would have inevitably perished if it had not been converted. Brown v. Lambert, 33 Gratt. 256.
2. Depreciated Currency.
Where a trustee in a deed to secure creditors received in June, 1861, in good money, a part of the trust fund applicable to pay a creditor who is ready to receive payment, his investment of the fund in Confederate bonds, under an order of the court made on his motion in a suit which he brought for the administration of the trust, is invalid, and he continues liable for the fund. Kirby v. Goodykoontz, 26 Gratt. 298.
And in Bedinger v. Wharton, 27 Gratt. 857, a sale of the trust property by the trustee for Confederate money in 1864, when that currency was greatly depreciated in value, and daily sinking, was held a breach of trust on the part of the trustee, although a power of sale was vested in the trustee. See Patteson v. Horsley, 29 Gratt. 263; Coltrane v. Worrell, 30 Gratt. 434.
Likewise, where it was the duty of the trustees to invest the funds of the cestui que trust, and it was safely invested and secured on land, and the trustees collected it in largely depreciated Confederate notes and reinvested in Confederate bonds, which became valueless, it was held that the trustees would be responsible to the cestui que trust for the amount of such money so improperly collected and reinvested. Knight v. Watts, 26 W.Va. 175.
3. Depositing Trust Fund.
Depositing in Bank of Known Insolvency. --When the loss of the trust fund results from the gross negligence of the trustee in depositing it in a bank known to be insolvent, and from his disobedience to the order of the court directing how the fund should be invested, he must answer for the loss of the fund by the failure of the bank. Whitehead v. Whitehead, 85 Va. 870, 9 S.E. 10.
4. Failure to Collect Debts.
But before a trustee can be held liable for a failure to collect debts reported by a commissioner as " doubtful," the cestui que trust must show that they might have been collected by due diligence. Wimbish v. Blanks, 76 Va. 365.
Therefore, where there has been no misconduct on the part of the trustee of a married woman, it is error to make a personal decree against him for the debt of his cestui que trust. Woodson v. Perkins, 5 Gratt. 345.
5. Payment of Taxes.
A trustee who acts in relation to his trust with reasonable diligence will not neglect a matter so essential to the interests of his cestui que trust as the preservation of his right to the land by payment of taxes on it. Morris v. Joseph, 1 W.Va. 256, 91 Am. Dec. 386.
F. RIGHT TO APPLY FOR INSTRUCTIONS.
The jurisdiction of a court of chancery may be invoked to instruct the trustee how he shall execute the trust. Christian v. Worsham, 78 Va. 100.
G. INVESTMENTS.
A trustee in investing the trust funds, must conduct himself as a prudent man would in the management of his own affairs. And if the funds are improvidently invested he will be personally liable. Cogbill v. Boyd, 79 Va. 1.
Confederate Securities--But a trustee living in Virginia during the war and acting in good faith, was justified in investing trust funds in Confederate bonds, and his estate cannot be held liable for a loss resulting from such investment. Waller v. Catlett, 83 Va. 200S.E. 280.
Discretionary Power. --Where the testator leaves the mode of investing the fund to the discretion of the trustees, a court of equity should not interfere by directing the manner of investments. Overseers of the Poor v. Tayloe, 1 Gilmer 336.
Directions in Instrument as to Investment. --But where property was conveyed in trust, to be invested in " bank stocks, or freehold lands or lots," it was held that the trustee was not thereby authorized to make the investment in United States six per cent. stocks. Banister v. M'Kenzie, 6 Munf. 447.
Loss Resulting from Disregard of Order of Court. --Where the trust fund is lost because the trustee disregarded and disobeyed the decree of the court directing him how to invest the fund, he is personally responsible therefor. Whitehead v. Whitehead, 85 Va. 870, 9 S.E. 10.
Reinvestment. --Where a deed granting in trust lands and slaves authorizes a sale thereof and a reinvestment of the proceeds " in property of the same kind," it is competent for the trustee to reinvest the money either in land or slaves or both. Claiborne v. Holland, 88 Va. 1046, 14 S.E. 915.
Change of Investment. --But a trustee should not change a permanent for a temporary investment, or a secure, interest bearing investment for one that is insecure and bears no interest. Patteson v. Horsley, 29 Gratt. 263; Coltrane v. Worrell, 30 Gratt. 434.
Must Take Security. --Trustees, investing trust funds, must personally see to it that the security is forthcoming upon parting with the money. Cogbill v. Boyd, 77 Va. 450.
H. SETTLEMENT OF ACCOUNTS.
A trustee must make annual settlements of his accounts, and he should not be allowed to resign until he has settled his accounts for the whole period of his trusteeship. Cogbill v. Boyd, 77 Va. 450; Ward v. Funsten, 86 Va. 359, 10 S.E. 415.
How Stated. --And while the execution of a trust is in progress, the accounts of the trustee should be stated on the principles of executors' accounts. But when it is substantially closed, it should be stated on the principle of debtor and creditor, interest to be charged up on each sum received from the end of six months after its receipt, and disbursements first applied to interest whilst there is any due. Harvey v. Steptoe, 17 Gratt. 289. See Dromgoole v. Smith, 78 Va. 665.
Ex Parte Settlements. --It was held in Diehl v. Cotts, 48 W.Va. 255, 37 S.E. 546, that ch. 87, § 6, W.Va. Code, providing for ex parte settlements of accounts of trustees before a commissioner, does not apply to a trustee appointed by private deed.
Resettlement of Accounts. --Where a bill does not specify errors in the accounts of a trustee regularly settled by the commissioner of the county court and confirmed, but only charges generally that there are errors in them, the court will not direct a resettlement of the accounts. Preston v. Stuart, 29 Gratt. 289.
Laches and Acquiescence.--And a court of equity will refuse to order an accounting by a trustee, if, from the delay which has taken place, it is manifest that no correct account can be rendered, that any conclusion to which the court can arrive must at best be conjectural, and that the original transactions have become so obscured by time, loss of evidence and the death of parties, as to render it difficult to do justice. Harrison v. Gibson, 23 Gratt. 212; Wissler v. Craig, 80 Va. 22.
Moreover, where a cestui que trust, who is sui juris, has a settlement with the trustee, which is acquiesced in for twenty years or more, such settlement will not be disturbed, though some rights of the cestui que trust may have been violated thereby. Farish v. Wayman, 91 Va. 430, 21 S.E. 810.
I. EXPENSES OF THE TRUST.
1. Attorney's Fees. --Trustees, who, in good faith, engage the services of counsel to aid them in the execution of their duties, are entitled to pay them out of the trust fund, or to be reimbursed out of that fund for all the expenses which they have incurred, including reasonable fees to attorneys. Cochran v. Richmond, etc., R. Co., 91 Va. 339, 21 S.E. 664.
But a trustee defendant, resisting the plaintiff's claim, and failing in his defense, will not be permitted to charge against the fund, money expended in attorney's fees, unless it appears that such defense was reasonable and proper. Darby v. Gilligan, 37 W.Va. 59, 16 S.E. 507.
Opening Final Decree to Allow Counsel Fees. --A trustee will not be allowed to open a final decree confirming his accounts so that he may obtain compensation for the cost of employing counsel, where a bill of review to such decree has been dismissed on the trustee's motion. Guggenheimer v. Rogers, 95 Va. 711, 29 S.E. 874.
2. Clerk's Hire. --Where, by the express terms of the trust, authority was given to employ at the expense of the trust, such agents, counsel, attorneys and servants as the trustee shall deem necessary for its proper execution, and it appears that the employment of a clerk was necessary, an allowance may be made to the trustees for such clerk's hire. Southern R. Co. v. Glenn, 98 Va. 309, 36 S.E. 395.
3. Office Rent. --Moreover, a trustee, in administering a trust of great magnitude, cannot be expected to furnish free of cost a place in which to give his attention to the business, where his clerk can work, and where the mass of books and papers belonging to the trust estate can be kept. In such a case, therefore, an allowance may be made to the trustee for office rent. Southern R. Co. v. Glenn, 98 Va. 309, 36 S.E. 395.
4. Reimbursement for Improvements. --Likewise where a trustee, in good faith, expends his own funds in improving the property of the cestui que trust, and the property is enhanced in value by such improvements to the extent of the expense thereof, the trustee is entitled to be reimbursed for such expenses out of the increased rents occasioned by the improvements. Dickel v. Smith, 42 W.Va. 126, 24 S.E. 564. See Baugh v. Walker, 77 Va. 99.
Proof. --A charge by a trustee for articles sold and cash lent before the creation of the trust ought not to be allowed, without proof thereof by disinterested testimony. Beverleys v. Miller, 6 Munf. 99.
J. COMPENSATION OF THE TRUSTEE.
In General. --The harsh and unjust rule in England that a trustee is not to receive any compensation for his own labour and pains has never been adopted in Virginia, but the courts of that state, recognizing the unerring truth that the laborer is worthy of his hire, allow the trustee reasonable compensation for his services in performing the trust. There is no rule of law, however, which prescribes what commissions shall be allowed a trustee, but the allowance or refusal of commissions rests in the sound discretion of the court under all the circumstances of the case. Beverleys v. Miller, 4 Hen. & M. 415; Whitehead v. Whitehead, 85 Va. 870, 9 S.E. 10.
A trust deed by a railroad provided that upon the sale of the trust property by the trustee, they should, after satisfying the costs and expenses of sale and of the trust, pay to the holders of the bonds secured thereby the amount so held by them out of the proceeds of the sale. It was held, that if the trustee has performed services in executing the bonds, etc., for which he is entitled to compensation, he is entitled to be paid for these services in preference to the bondholders secured by the deed. Smith v. Washington City, etc., R. Co., 33 Gratt. 617, 1 Am. & Eng. R. Cas. 493.
Compensation Fixed by Trust Instrument. --The general rule is that where the compensation of a trustee is fixed by the instrument creating the trust, no greater compensation can be allowed him without the consent of the other parties to be affected by the increased allowance. Southern Ry. Co. v. Glenn, 98 Va. 309, 36 S.E. 395.
But where a trustee has been appointed upon a specific compensation, and performs all the services demanded of him until he is discharged without his knowledge, he is entitled to have the compensation agreed upon. Maury v. Chesapeake, etc., R. Co., 27 Gratt. 698.
Compensation of Substituted Trustee. --A substituted trustee whose duties are only such as were imposed upon the original trustee, by the deed creating the trust, is not entitled to any greater compensation for his services than the deed provided for the original trustee. Southern Ry. Co. v. Glenn, 98 Va. 309, 36 S.E. 395.
Disbursements. --Although one trustee is not, in general, liable for the acts of his co-trustee, yet each is liable to account to the cestui que trust for his own acts; and, as between them, those acts are binding. Therefore, a trustee is allowed for disbursements which he made without the consent of his co-trustees while they were alive. Miller v. Beverleys, 4 Hen. & M. 415.
Effect of Failure to Settle Accounts. --But commissions will not be allowed a trustee who has failed to make annual settlements of his accounts, and has not given any statement of his receipts to the cestui que trust, as prescribed by Va. Code 1887, § § 2678, 2679, and whose only excuse is that he did not think it necessary, as he had annually paid the interest; but his right to future commissions will depend on his future conduct. Ward v. Funsten, 86 Va. 359, 10 S.E. 415.
K. TRUSTEE USING THE TRUST FOR PERSONAL GAIN.
1. Making Profit. --A trustee will not be permitted to make profit for himself by any transaction with the trust fund, but whatever benefits or profits are obtained will belong exclusively to the cestui que trust. Therefore, if the trustee purchases claims or encumbrances against the trust estate at a discount, the purchase enures to the benefit of the interest which it is his duty to protect. Baugh v. Walker, 77 Va. 99; Coltrane v. Worrell, 30 Gratt. 434.
Thus, a trustee making a compromise with a third person in relation to the trust subject, though he may purchase the subject for himself, is bound to account as trustee for all the profits made on the transaction. Miller v. Holcombe, 9 Gratt. 665.
And if land, upon which a judgment held in trust for infant children is a lien, is purchased by the trustee at a price which fails to satisfy the judgment of his cestuis que trustent, and is resold by the trustee at a profit, the cestuis que trustent may have the profits applied towards the payment of their judgment. Feamster v. Feamster, 35 W.Va. 1, 13 S.E. 53.
Right to Reimbursement. --But though the profit belongs to the cestui que trust, yet the trustee is entitled to be reimbursed for the amount he has expended, with interest. Baugh v. Walker, 77 Va. 99.
2. Trustee Paying His Own Debts with Trust Fund. --It is a flagrant breach of trust on the part of the trustee to apply the trust funds in payment of his own debts, unless the trust is indebted to him; and a person knowingly receiving trust property in payment of an individual debt of the trustee, is bound to account in equity to the estate, although he paid full value for it. Graff v. Castleman, 5 195, 16 Am. Dec. 741; Jones v. Abraham, 75 Va. 466; Jackson v. Updegraffe, 1 Rob. 107; Edmunds v. Venable, 1 Patton & H. 121.
For example, where land belonging to a wife is conveyed by the husband and wife to a trustee, in trust to sell for the use and benefit of the grantors, but the land is not sold by the trustee, it was held that he is not entitled to hold it against a subsequent bona fide mortgagee without notice, in satisfaction of debts due to him from the husband before the mortgage was executed. McClanachan v. SiterGratt. 280.
So also, property held in trust cannot be subjected to the payment of a judgment against the trustee. Farmers' Bank v. Gould, 48 W.Va. 99, 35 S.E. 878, 86 Am. St. Rep. 24.
A trustee of a certificate for a particular purpose cannot apply it in discharge of other demands due himself. Woodson v. Payne, 1 Call 570.
3. Trustee Setting up Adverse Claim. --Under no circumstances can a trustee set up a claim to the trust property adverse to the cestui que trust. Morris v. Morris,Morris v. Morris, 48 W.Va. 430, 37 S.E. 570.
4. Effect on Cestui Que Trust of Declarations of Trustee. --Nor is the cestui que trust bound by the acts or declarations of the trustee. Therefore, the declarations to a third person, of a trustee in a deed of trust upon land made to secure the payment of money due from the deed of trust debtor to his creditor, that the debt so secured has been paid, cannot be received as evidence against the cestui que trust as tending to prove the payment or nonexistence of the trust debt or for the purpose of estopping the cestui que trust from asserting his debt against the property covered by the deed of trust, where the trustee has not executed the deed of trust by sale thereunder. Calwell v. Prindle, 19 W.Va. 604.
L. TRUSTEE BUYING AT HIS OWN SALE.
A trustee cannot buy at his own sale either for himself or as agent for another; but in such case the sale will be set aside, although fairly made and for an adequate price. Carter v. Harris, 4 199; Harrison v. Manson, 95 Va. 593, 29 S.E. 420; Tennant v. Dunlop, 97 Va. 234, 33 S.E. 620; Smith v. Miller, 98 Va. 535, 37 S.E. 10; Newcomb v. Brooks, 16 W.Va. 32, 62.
See monographic note on " Executors and Administrators" appended to Rosser v. Depriest, 5 Gratt. 6, and monographic note on " Agencies" appended to Silliman v. Fredericksburg, etc., R. R. Co., 27 Gratt. 119.
A trustee in a deed to secure debts, who is the attorney at law and in fact of the creditor, cannot make a valid sale of the property to himself. Washington, etc., R. Co. v. Alexandria, etc., R. R. Co., 19 Gratt. 592, 100 Am. Dec. 710.
Thus where a judgment, held in trust for infant children, is a lien upon the lands of a party, and prior judgment liens exist against the same land, which is the only estate of the judgment debtor, the land must be regarded as the trust subject, and cannot be purchased by the trustee for his individual benefit at a judicial sale. Feamster v. Feamster, 35 W.Va. 1, 13 S.E. 53.
And, if the land is purchased by the trustee at a price which fails to satisfy the judgment of his cestuis que trustent and is resold by the trustee, the cestuis que trustent may have the proceeds applied towards the payment of their judgment so held by the trustee. Feamster v. Feamster, 35 W.Va. 1, 13 S.E. 53.
Right of Trustee. --It must be observed, however, that where a purchase of land by a trustee at his own sale is set aside, and an account of the rents and profits ordered, but no actual fraud is shown, the trustee is entitled to credit for the purchase money, with interest, and the value of permanent improvements made by him. Smith v. Miller, 98 Va. 535, 37 S.E. 10, citing Harrison v. Manson, 95 Va. 593, 29 S.E. 420; Henderson v. Hunton, 26 Gratt. 926.
Cestui Que Trust Must Be Diligent.--But if the cestui que trust desires to set aside the sale, he must institute his suit in equity within a reasonable time, otherwise the sale will not be set aside, even though the property remains in the hands of the trustee who has purchased it. Newcomb v. Brooks, 16 W.Va. 32.
Ratification. --Where a trustee, who has purchased property at his own sale, attempts to sustain such sale by showing the ratification of the beneficiaries, the burden of proving such ratification is on him. Smith v. Miller, 98 Va. 535, 37 S.E. 10.
Who May Avoid Sale. --But where a trustee purchases the trust subject from his cestui que trust, the transaction is voidable only at the election of the cestui que trust, and the privilege does not extend to the latter's creditors. Bresee v. Bradfield, 99 Va. 331, 38 S.E. 196; Hurt v. Jones, 75 Va. 341; Newcomb v. Brooks, 16 W.Va. 32.
Accordingly, where a cestui que trust conveyed her life interest in the trust estate to the trustee in satisfaction of her indebtedness to him, it was held that her creditors could not avoid the conveyance because of the trust relation, the cestui que trust not complaining. Bresee v. Bradfield, 99 Va. 331, 38 S.E. 196.
Rights of Bona Fide Purchaser. --If the trustee purchases from the cestui que trust the trust property, and then resells it to a bona fide purchaser without notice before the cestui que trust applies to the court to set aside the purchase of the trust property, the original sale made to the trustee cannot be set aside; but the only remedy left to the cestui que trust is to demand of the trustee an account of the profit he made by the resale. Newcomb v. Brooks, 16 W.Va. 32.
May Purchase When Trust Ceases. --When a trustee has fully discharged his trust, however, and in good faith has sold the property to a third person having no interest in the same at the time, he may afterwards acquire the title from the purchaser. Board of Trustees v. Blair. 45 W.Va. 812, 32 S.E. 203.
But a trustee cannot acquire title to the trust property at a tax sale for a delinquency which occurred while he had control, although the fiduciary relation may have ceased at the time of the sale. Morris v. Joseph, 1 W.Va. 256, 91 Am. Dec. 386.
M. DEALINGS BETWEEN TRUSTEE AND CESTUI QUE TRUST.
All dealings between trustees and their cestui que trust in relation to the trust subject, made while the relation exists between them, are watched with jealousy by courts of equity, and will not be upheld unless the cestui que trust is made perfectly aware of all the facts by his trustee. But if the trustee clearly proves that he gave the cestui que trust all the information about the property and its value that he possessed, and with the consent of the cestui que trust ceased to be a trustee, and deals directly with the cestui que trust without taking any sort of advantage of him, and gives him an adequate price for the property, such a purchase cannot be set aside by the cestui que trust, provided the transaction is proved to the entire satisfaction of the court to have been of this character after a jealous and scrupulous examination of all the circumstances. Newcomb v. Brooks, 16 W.Va. 32; Knight v. Watts, 26 W.Va. 175.
Release of Trustees from Liability by Cestui Que Trust. --An agreement between trustees and their cestui que trust, made while this relation exists between them, whereby the cestui que trust releases them from responsibility for the loss of the fund by reason of an unauthorized investment, is voidable at the pleasure of the cestui que trust. Knight v. Watts, 26 W.Va. 175, citing Newcomb v. Brooks, 16 W.Va. 32.
But where a beneficiary in dealing with the trustee has sought and obtained independent advice from a person competent to advise as to the particular transaction, this fact will go far to give assurance of its fairness, and to induce a court of equity to uphold it. Tennant v. Dunlop, 97 Va. 234, 33 S.E. 620.
N. JOINT TRUSTEES.
Joint trustees all have an equal power, interest, and authority, and, as it respects the rights of third persons, cannot act separately, as executors may, but must join both in conveyances and receipts; but as respects the rights of trustee and cestui que trust, although one trustee is not in general liable for the acts of another, each is liable to account to the cestui que trust for his own acts, and as between them those acts are binding. Miller v. Beverleys, 4 Hen. & M. 415; Graeme v. Cullen, 23 Gratt. 266.
But while one of two or more joint trustees cannot generally execute the trust severally, it is perfectly competent for the author of the trust to empower the trustees to act severally, as well as jointly; and in that case, the act of one of the trustees, in pursuance of the trust, is just as valid as if he only had been appointed to execute it. Graeme v. Cullen, 23 Gratt. 266.
For example, where a deed of trust to two trustees to secure debts empowered the trustees severally as well as jointly to make the sale on being required to do so by the creditor, it was held that one of the trustees may make the sale alone, if the other refuses to join him in making it. Graeme v. Cullen, 23 Gratt. 266.
1. Liability for Acts of Co-Trustee. --But a trustee is not liable for the acts of his co-trustee, unless he has been guilty of fraud, or of such gross neglect as to amount to fraud; and the proof of such fraud must be distinct and conclusive. Boyd v. Boyd, 3 Gratt. 113.
Thus, a trustee in a deed of trust to secure debts, who receives none of the trust funds, they being received by his co-trustee, and who is guilty of no fraud in relation thereto, is not responsible for the misapplication or waste of the funds by his co-trustee, although he unites in sales made necessary to accomplish the purposes of the trust. Griffin v. Macaulay, 7 Gratt. 476.
But in Graham v. AustinGratt. 273, property was settled to the separate use of a feme covert for life, with remainder over to her children. Before the trustees in the settlement consent to act, it is agreed between them and the feme, that each of the trustees shall take and hold a moiety. In pursuance of this agreement one of the trustees collects the fund, and with the knowledge and approbation of the feme, pays over a moiety thereof to the other trustee, who wastes it and becomes insolvent. It was held that the trustee who collected the fund is liable for the whole thereof; and for the interest on the moiety paid over to his co-trustee.
2. Death of One Joint Trustee. --Where property is conveyed to three trustees jointly, and two of them subsequently die, the legal title to the property survives to the third. Nixon v. Rose, 12 Gratt. 425. See Nichols v. Campbell, 10 Gratt. 560.
3. Liability of Participators in Breach of Trust. --All who participate with a trustee in a misappropriation of the trust fund are jointly and severally liable to account for the fund so misappropriated. Accordingly, it has been held that a purchaser concurring in a fraudulent breach of trust, and actively participating in it and converting all the property to his own use, incurs the like liability with the fraudulent trustee. Pinckard v. Woods, 8 Gratt. 140; Barksdale v. Finney, 14 Gratt. 338; Jones v. Abraham, 75 Va. 466.
Where the president and acting manager of a private corporation is trustee in a deed of marriage settlement, and as trustee he sells the trust property in violation of his duty as trustee, and purchases a part of it for the corporation, it was held that the corporation is a participator in the violation of the trust, and is liable therefor. Barksdale v. Finney, 14 Gratt. 338. See Mundy v. Vawter, 3 Gratt. 518.
Moreover, parties dealing with a trustee, and co-operating with him in a misapplication of trust funds in breach of the trust, cannot use such transactions as a defense against the claims of the cestui que trust. Jackson v. Updegraffe, 1 Rob. 107.
4. When Trustees Jointly Liable.
And where two trustees participate in a breach of trust, they incur a joint and several liability to the cestui que trust. Rowe v. Bentley, 29 Gratt. 756, citing Barksdale v. Finney, 14 Gratt. 338.
Thus, where property was conveyed to two trustees to be sold for the payment of certain creditors of the grantor, and a bill is afterwards filed against them charging them with a breach of the trust, and calling upon them to give an account of their transactions, to which they file a joint answer, in effect admitting their joint liability for all the proceeds of the trust subject, it was held that both were responsible for the proper application of the trust subject. Miller v. Holcombe, 9 Gratt. 665.
O. NOTICE.
It is well settled that notice to a trustee is notice to his cestui que trust. Beverley v. BrookeLeigh 425; French v. Loyal Co., 5 Leigh 627; Calwell v. Prindle, 19 W.Va. 604; Fidelity Ins., etc., Co. v. Shen. Val. R. Co., 32 W.Va. 244, 9 S.E. 180 (in this case the rule was held to apply to trustees under an ordinary mortgage deed of a railroad company to secure the holders of bonds issued under it).
For example, a beneficiary in a deed of trust is affected with notice to the trustee, although the latter did not know of the existence of the deed of trust until it was recorded, and then immediately declined to act as trustee. Merchants Bank v. Ballou, 98 Va. 112, 32 S.E. 481, 81 Am. St. Rep. 715.
Likewise, notice to one of two or more trustees is notice to all. Chapman v. Chapman, 91 Va. 397, 21 S.E. 813.
P. SALES BY THE TRUSTEE.
1. Advertisement of Sale.
A trustee should not proceed to a sale of the trust property until it has been duly advertised according to the requirements of the trust deed, and if he does the sale is irregular and will be set aside at the instance of the grantor or his heirs. Gibson v. Jones, 5 Leigh 370; Norman v. HillPatton & H. 676.
For a full discussion of the subject of sales by a trustee under a deed of trust, see monographic note on " Deeds of Trust" appended to Cadwallader v. Mason, Wythe 188.
But in West Virginia it has been held that after a sale is made by a trustee, who has not only the authority to sell but the legal title also and the trustee has entirely completed his duties by making a deed for the land sold to the purchaser, then, in the absence of all proof to the contrary, it will be presumed that he has done his duty by properly advertising the land before the sale. Burke v. Adair, 23 W.Va. 139; Dryden v. Stephens, 19 W.Va. 1; Fulton v. Johnson, 24 W.Va. 95.
Where neither the deed of trust nor the law requires that the advertisement of the trust sale should state that, " so much of the property should be sold as was necessary to pay the debts secured," it is not necessary that the advertisement should so state, as it might be necessary in the interest of the debtor to sell more property than would be necessary to pay the debts secured. Curry v. Hill, 18 W.Va. 370; Michie v. Jeffries, 21 Gratt. 334, opinion by Moncure, P.
2. Duty of Trustee in Regard to Sale.
a. In General.
A trustee in a deed of trust, being the agent of both parties, is bound to act impartially between them, and must bring the estate to the hammer under every possible advantage to his cestui que trust, using all necessary diligence to obtain the best price for the land. Therefore it is his duty, before selling the trust subject, to apply to a court of equity for its aid whenever it is necessary to remove any impediment in the way of a fair execution of his trust; to remove clouds from the title; to ascertain the exact amount secured, and all prior incumbrances; and to do whatever else may be necessary to effect a sale to the best possible advantage to his cestui que trust. Quarles v. Lacy, 4 Munf. 251; Lane v. Tidball, 1 Gilmer 130; Chowning v. Cox, 1 306; Rossett v. Fisher, 11 Gratt. 492; Cole v. M'Rae, 6 644; Horton v. Bond, 28 Gratt. 815; Hogan v. Duke, 20 Gratt. 244; Muller v. Stone, 84 Va. 834, 6 S.E. 223, 10 Am. St. Rep. 889; Glenn v. Augusta Bldg., etc., Asso., 99 Va. 695, 40 S.E. 25; Curry v. Hill, 18 W.Va. 370; Spencer v. Lee, 19 W.Va. 179; Livey v. Winton, 30 W.Va. 554, 4 S.E. 451; Hartman v. Evans, 38 W.Va. 669, 18 S.E. 810.
A trustee in deed of trust must not sell until the priority of all liens and incumbrances on the property are ascertained. Washington, etc., R. R. Co. v. Alexandria, etc., R. R. Co., 19 Gratt. 592, 100 Am. Dec. 710.
The conversion into money by a trustee of well secured bonds belonging to a trust fund, by a sale thereof at a large sacrifice to a purchaser, with full notice of the trust, constitutes such an improper dealing with, and devastavit of the trust subject as will render both trustee and purchaser prima facie responsible therefor. And the burden is on them to show that the necessities of the trust required the sacrifice. Cocke v. Minor, 25 Gratt. 246.
Trustee May Delay Sale. --And the trustee may delay the sale of the property, until resort may be had to a court of equity for these preliminary purposes. Rossett v. Fisher, 11 Gratt. 492.
Failure of Trustee to Apply to Court. --If the trustee does not apply to a court of equity to remove impediments which exist to a fair execution of the trust the party injured by his default has an unquestionable right to make the application, whether he be a creditor secured by the deed, or his assignee, or the debtor, or other person whose property is conveyed by the deed of trust to secure the payment of the debt. Rossett v. Fisher, 11 Gratt. 492; Machir v. Sehon, 14 W.Va. 777; Hartman v. Evans, 38 W.Va. 669, 18 S.E. 810.
When Application to Court Unnecessary. --But it is not the duty of the trustee in every case to invoke the aid of a court of equity before making a sale of the trust subject where there are liens thereon. Accordingly it has been held, that a sale by a trustee will not be enjoined to take an account of liens on the property, when the exact amount of the debts and their respective priorities are fully known. Muller v. Stone, 84 Va. 834, 6 S.E. 223, 10 Am. St. Rep. 889; Curry v. Hill, 18 W.Va. 370.
b. Consent of Cestui Que Trust to Sale.
If the trust instrument authorizes the trustee to sell with the written consent or request of the cestui que trust, such requirement must be complied with to justify a sale of the property. Patteson v. Horsley, 29 Gratt. 263; Norvell v. Hedrick, 21 W.Va. 523.
But the execution of a deed by a cestui que trust is a substantial compliance with a provision of the trust instrument making a request by the cestui que trust in writing a prerequisite to a sale of the trust property by the trustee. Walke v. Moore, 95 Va. 729, 30 S.E. 374.
Where realty is conveyed in trust for the use of a married woman, and the trustee is empowered to sell the land upon her written request, and at her request he conveys the land in trust to secure her debts, neither she nor her husband are necessary parties to the deed, nor is the husband a necessary party to his wife's written request. Norvell v. Hedrick, 21 W.Va. 523.
c. Trustee Must Be Present at Sale.
Moreover, it is the duty of a trustee to be present at the sale of the trust subject, and to superintend and control it; and if the sale is so conducted as to prevent fair competition, whether cognizant of the circumstances or not, he is bound to make good the loss, and should be charged in the settlement of his accounts with the fair value of the property so sold, and interest upon it just as if the money had been received. Harvey v. Steptoe, 17 Gratt. 289.
d. Place of Sale.
When the deed of trust does not stipulate the place where the sale shall be made, then the matter is left to the discretion of the trustee, and if either party is dissatisfied with his decision, he may apply to a court of equity for instructions before the sale. Morriss v. Virginia State Ins. Co., 90 Va. 370, 18 S.E. 843, citing Shurtz v. Johnson, 28 Gratt. 657; Walker v. Beauchler, 27 Gratt. 511.
But where the wishes of the trustee and of the debtor conflict as to the place of sale, the wishes of the latter should govern. Morriss v. Virginia State Ins. Co., 90 Va. 370, 18 S.E. 843.
Sale Out of State. --Where a trustee is invested with power to sell real estate for the payment of debts, and the place of sale is left to his discretion, he has authority to sell the land outside of the state, or at any other place which he, in his discretion, may select, provided he exercises that discretion fairly and prudently. Shurtz v. Johnson, 28 Gratt. 657.
e. Amount to Be Sold.
A trustee should not sell more of the trust property than is necessary for the purposes of the trust, unless the interests of the owners demand it, or they request it; and this is a question which the trustee, in the exercise of his discretion, must determine. Michie v. Jeffries, 21 Gratt. 334; Muller v. Stone, 84 Va. 834, 6 S.E. 223, 10 Am. St. Rep. 889; Curry v. Hill, 18 W.Va. 370.
In an early Virginia case, a sale of land by the trustees under a decree in chancery, was adjudged invalid, on the ground that such sale was not made pursuant to the decree, which directed as much of the land to be sold as would pay the debts (though it excluded the power of selling in small quantities); whereas the trustees sold the same in small quantities at different times (a circumstance which, even in the opinion of the trustees themselves, may have diminished the price obtained therefor); and became themselves the purchasers, at a very inadequate price, the sale having also been made under a general impression, existing in the neighborhood (which, however, the trustees are not proven to have had knowledge), that the land had been already sold by private contract. Quarles v. Lacy, 4 Munf. 251.
May Advertise the Whole. --But though a trustee can ordinarily sell only so much of the trust subject as is necessary to satisfy the purposes of the trust, yet this does not forbid his advertising, in his discretion, the whole; for until the property is actually offered for sale, it cannot always be known with certainty how much it will be necessary for him to sell. Cleaver v. Matthews, 83 Va. 801, 3 S.E. 439. See ante, this note, " Advertisement of Sale."
f. Sale in Parcels.
Moreover, if the trust property will bring a better price by selling it in separate lots, and the owner desires and requests it, but the trustee refuses, the owner may go into equity to control the trustee in the exercise of his discretion. Terry v. Fitzgerald, 32 Gratt. 843; Morriss v. Virginia State Ins. Co., 90 Va. 370, 18 S.E. 843.
g. Right to Mortgage
A power given to trustees to sell the trust property does not confer the power to mortgage. Green v. Claiborne, 83 Va. 386, 5 S.E. 376.
h. Sale on Credit.
Trustees selling the trust subject upon credit, without taking good and sufficient security for the purchase money, is such a breach of duty on the part of the trustees as will make them personally bound for the debt if it be lost. Miller v. Holcombe, 9 Gratt. 665.
i. Warranty.
A sale by a trustee is without warranty, and if he sells only such property and title as is vested in him by the deed, without warranty or fraud, he incurs no responsibility to the purchaser. But the purchaser is entitled to a deed from the trustee with special warranty. Petermans v. Laws, 6 Leigh 523; Sutton v. Sutton, 7 Gratt. 234, 56 Am. Dec. 109; Fleming v. Holt, 12 W.Va. 143.
j. Injunction to Sale.
Sometimes a court of equity will enjoin a sale by trustees, where the title to the property is disputed, and the full value cannot probably be had for it. Lane v. Tidball, 1 Gilmer 130, and note ; Faulkner v. Davis, 18 Gratt. 651, 98 Am. Dec. 698.
Cloud on Title. --Likewise, a sale of land under a deed of trust will be enjoined if there is a cloud hanging over the title, or if the amount to be raised is uncertain. Gay v. Hancock, 1 72; Lane v. Tidball, 1 Gilmer 130; Miller v. Argyle, 5 Leigh 460; Bryan v. Stump, 8 Gratt. 241, 56 Am. Dec. 139; Schultz v. Hansbrough, 33 Gratt. 567.
Financial Depression. --But where a deed of trust authorizes the sale, an injunction will not issue to prevent the sale, on the ground that great financial depression exists, and that, therefore, the property will not bring anything near its true value. Muller v. Stone, 84 Va. 834, 6 S.E. 223, 10 Am. St. Rep. 889.
In Caperton v. Landcraft, 3 W.Va. 540, the court refused to enjoin a trustee from selling land conveyed in trust, on the ground that, it was about to be sold for cash at a time when in consequence of the general prevalent depression and extreme scarcity of money, and the season of the year, and the inclemency of the weather at the time of the proposed sale, such sale must result in great pecuniary loss and sacrifice.
Dissolution of Injunction to Sale. --Where a trustee, enjoined from selling trust property, is afterwards made a party to another chancery suit involving the same property, it was held that, though the court dissolved the injunction restraining the trustee from selling the property, he was still wholly powerless to exercise his functions as trustee without an express order of the court allowing him to proceed. Maddux v. Triplett, 89 Va. 318, 15 S.E. 897.
k. Setting the Sale Aside.
Although a deed from a trustee in a deed of trust conveys an absolute title in a court of common law, whether the conditions of the trust have been complied with or not, yet in a court of equity, a purchaser at a sale under a deed of trust takes upon himself the risk of the regularity and fairness of the sale, and in that forum a sale and conveyance by the trustee will be set aside if the requisitions in the deed of trust have not been complied with. Taylor v. King, 6 Munf. 358, 8 Am. Dec. 746; Harris v. Harris, 6 Munf. 367; Pownal v. Taylor, 10 Leigh 172; Norman v. HillPatton & H. 676.
Thus, where the purchaser of the trust property from a trustee either knows that the latter is committing a breach of trust in selling, or participates with him in such breach, the sale and conveyance may be set aside at the instance of the cestui que trust. Bedinger v. Wharton, 27 Gratt. 857; Patteson v. Horsley, 29 Gratt. 263.
Trustee an Alien. --But a sale and conveyance of land by a trustee cannot be set aside on the ground that he was an alien when the deed was made to him and when he conveyed the land to the purchaser. Ferguson v. Franklins, 6 Munf. 305.
Inadequacy of Price. --Nor, in the absence of fraud, can a sale of land by a trustee in pursuance of the terms of the trust deed, be set aside on the ground of inadequacy of price, especially where the estimate of witnesses as to the value of the property varies. Basnett v. Higgins, 2 W.Va. 485. See Jones v. NealePatton & H. 339.
But a trustee, selling land under a deed of trust, ought not to permit the creditor's agent to force the sale, at an inadequate price, in the absence of other bidders. Quarles v. Lacy, 4 Munf. 251.
In one case it was held to be improper for a trustee to sell under a deed of trust, for a very inadequate price, an undivided interest in real estate on the day after a decree in a suit for partition had been rendered for a sale of the whole subject, by which the grantee's interest would have been precisely ascertained. James v. Gibbs, 1 Patton & H. 277.
Effect of Death of Grantor. --Upon the death of the grantor in a deed of trust conveying land to secure a debt, the trustee must resort to a court of equity before selling the land. Spencer v. Lee, 19 W.Va. 179. Compare Sulphur Mines Co. v. Thompson, 93 Va. 293, 25 S.E. 232.
But a court of equity will in no case set aside a sale made by a trustee, simply because it was made after the death of the grantor. Spencer v. Lee, 19 W.Va. 179; Jones v. Thorn, 45 W.Va. 186, 32 S.E. 173. But see Gibson v. Jones, 5 Leigh 370.
Among the circumstances which should influence the court in deciding an application for an injunction on the ground that the trustee is offering to sell the land after the death of the grantor, are the length of time which has elapsed since the grantor's death, and the amount of the personal estate which came into the hands of his personal representative applicable to the payment of his debts. Spencer v. Lee, 19 W.Va. 179.
l. Rights of Cestui Que Trust in Case of Wrongful Sale.
Where a trustee commits a breach of trust by a sale of the trust subject without authority, the cestui que trust may, at his option, disaffirm the sale and pursue the property in the hands of a volunteer, or a purchaser for value but with notice of the trust; or he may affirm the sale and resort to the proceeds in the hands of the trustee, if they can be identified, or if they have been invested or converted into other property, held by the trustee or a volunteer, or purchaser with notice, and can be distinctly traced, he may, if he elects to do so, take such property in lieu of the proceeds so invested or converted, or if he elects not to do that, he may have his remedy personally against the trustee. Brown v. Lambert, 33 Gratt. 256; Loving v. Ashlin, 76 Va. 907.
Where a trustee, in violation of his duty as trustee, sells the trust property to one who participates in the violation of the trust, a personal decree against the trustee for the amount of the purchase money for which the property sold, does not preclude a resort to the property itself in the hands of the wrongdoer participating in the breach of trust, or in the hands of those who had notice of the fraud. Barksdale v. Finney, 14 Gratt. 338.
m. Rights and Liabilities of the Purchaser.
A purchaser, who has notice of the trust at the time of his purchase, becomes himself a trustee, though he has paid the entire consideration, and he is liable to the cestuis que trust for the fulfillment of the trust. But where the trustee is in possession of the trust property, and conveys it to a purchaser without notice, such conveyance will avail against the cestui que trust even in equity, and his remedy will be against the trustee. It will rarely happen, however, that the purchaser is without notice, since, in tracing the title, he would in almost every conceivable instance be led to a discovery of the trust. Irvine v. Greever, 32 Gratt. 411; Hobson v. Whitlow, 80 Va. 784; Calwell v. Prindle, 19 W.Va. 604.
One buying from the holder of a legal title, with constructive notice of a trust on the land in favor of one who has partly paid the purchase money, must take subject to that trust. Smith v. Profitt, 82 Va. 832, 1 S.E. 67.
Notice of a prior existing trust, received by a subsequent purchaser before the payment of all the purchase money, although it be secured and the conveyance executed, is equivalent to notice before the contract of purchase, in so far as the legal title to the trust subject is concerned. Webb v. Bailey, 41 W.Va. 463, 23 S.E. 644.
Though the deed creating the trust only conveys personal property, yet if this property is converted into land by the trustee, and this land is afterwards sold by the trustee to a bona fide purchaser for value, and the title papers show the fact that the land is the substitute of the trust fund, the purchaser will be held to have constructive notice of the trust. Heth v. Richmond, etc., R. Co., 4 Gratt. 482, 50 Am. Dec. 88.
But where a sale is made by a trustee under a power to sell and reinvest upon the same trust, a bona fide purchaser, paying the purchase money to the trustee, will be protected. Claiborne v. Holland, 88 Va. 1046, 14 S.E. 915.
It was held in Claiborne v. Holland, 88 Va. 1046, 14 S.E. 915, that a purchaser is not bound to examine a deed which is no link in the chain of title to the property he purchases, and although it was duly recorded and indexed, and the trustee was a party thereto, it constituted no notice to him of any breach of trust.
But a purchaser without notice from a purchaser with notice of a trustee's breach of trust in the application of the proceeds of the sale of the trust subject, is not chargeable with the notice of his vendor, if himself innocent of any breach of trust. Claiborne v. Holland, 88 Va. 1046, 14 S.E. 915.
(1) Purchaser Seeing to Application of Purchase Money.
In General. --The general rule is that whenever the trust is of a defined and limited nature, the purchaser must himself see that the purchase money is applied to the proper discharge of the trust; but wherever the trust is general, and of an unlimited nature, he need not see to its application. Hughes v. Tabb, 78 Va. 313; Garnett v. Macon, 6 Call 308.
Infants. --Thus, where a trustee is authorized to sell the trust subject, whenever he thinks proper, and pay over the proceeds to an infant when he attains his majority, the purchaser is not bound to see to the application of the purchase money; and it is immaterial whether the property be sold before or after the cestui que trust comes of age. Woodwine v. Woodrum, 19 W.Va. 67.
When the time has arrived for the sale of real estate, and the persons entitled to the money are infants or unborn, then the purchaser is not bound to see to the application of the purchase money, because he might thus be implicated by a trust of long duration. But if an estate is charged with a sum of money, payable to an infant at his majority, then the purchaser is bound to see the money duly paid, because in that case the person named, is in esse, and the day is fixed and designated, and the trust is defined and limited. Hughes v. Tabb, 78 Va. 313.
It will be readily seen that where a sum of money is to be paid to persons yet unborn, and from year to year, to require the purchaser to see to it, at his personal peril, that the sum of money is paid to the proper person or persons in esse and that may be hereafter born, and be entitled during the lifetime of each and all, until all are dead, would be to defeat the sale from such act altogether, and defeat the purpose of the will. Hughes v. Tabb, 78 Va. 313.
Trust for Payment of Debts. --Where a trust is of an indefinite character, as to pay debts generally, a purchaser is not bound to see to the application of the purchase money; for he cannot be expected to see to the due observance of a trust so unlimited and undefined. Davis v. Christian, 15 Gratt. 11; Woodwine v. Woodrum, 19 W.Va. 67. See Jones v. Clark, 25 Gratt. 642; Brockenbrough v. Turner, 78 Va. 438.
For example, where executors were authorized to sell to pay debts, " if in their opinion it should become necessary," a purchaser, acting in good faith, is not bound to see that there was a necessity, or that the purchase money is properly applied. Davis v. Christian, 15 Gratt. 11.
And where a testator gave an estate to one son, but charged it with the payment of an annuity to another son, authorizing him, " to sell and convey any of my real property which may be to the interest of my estate," it was held that a purchaser of this property was not bound to see that the purchase money was applied to the payment of this annuity. Hughes v. Tabb, 78 Va. 313.
When Interval Elapses between Sale and Application. --Whenever an interval must or may properly elapse between the sale and the application of the purchase money by the trustee, the purchaser is not bound to see to the application of the purchase money, but he will be freed from all liability by a payment to the trustee and will not be responsible for a subsequent misappropriation by him. Woodwine v. Woodrum, 19 W.Va. 67. This case was cited with approval in John v. Barnes, 21 W.Va. 498.
Purchaser Aware of Breach of Trust. --Of course, if the purchaser was aware of a violation of duty by the trustee in making the sale, the purchaser would, by his concurrence in the breach of trust by the trustee, be regarded himself as a trustee, and the property in his hands would be liable to the cestui que trust. But to convict a purchaser of fraudulent participation in a breach of trust, the evidence of notice of the fraudulent intent must be very strong. The purchaser has the right to presume in the absence of direct or plain proof to the contrary, that the trustee is exercising his power fairly and faithfully in conformity to his duty. Redford v. Clarke, 100 Va. 115, 40 S.E. 630; Woodwine v. Woodrum, 19 W.Va. 67; Davis v. Christian, 15 Gratt. 11; Jones v. Clark, 25 Gratt. 642; Brockenbrough v. Turner, 78 Va. 438.
But when a trustee has power to sell with consent of the life tenants, and does so sell, a purchaser without notice, actual or constructive, of the breach of trust, is not bound to see to the application of the purchase money. Claiborne v. Holland, 88 Va. 1046, 14 S.E. 915.
Time When Question Is Determined. --The question whether a purchaser is bound to see to the application of the purchase money, is determined as of the time the trust instrument is made. In other words, if a construction of the instrument at the time it was made would exonerate him from seeing to the application of the purchase money, that duty cannot be created by subsequent events or facts existing when the sale is actually made. Thus, a trust to sell property and pay the purchase money to infants when they attain majority, excuses the purchaser from seeing the purchase money applied, but, in accordance with the rule just stated, the purchaser is not so bound although the sale does not take place until after the infant comes of age. Woodwine v. Woodrum, 19 W.Va. 67.
Discretion in Trustee. --Where the trustee has discretion as to the time and manner of distributing the purchase money, a purchaser is not bound to see to its application. Steele v. Levisay, 11 Gratt. 454.
Thus, where a testator gave his wife a life estate in his real and personal property, and appointed her his executrix " with full power to sell and transfer any of my real estate, that she may deem proper, and to do and perform everything necessary to be done," it was held that as she had a general power to sell and convey any of the real estate, and as the application of the purchase money was not to be made until the widow either married again or died, therefore, the purchasers were not bound to see to the application of the purchase money. John v. Barnes, 21 W.Va. 498.
Sale for Reinvestment. --A purchaser from a trustee, who is invested with an absolute power of sale for the purpose of reinvestment, is not bound to see to the application of the purchase money, where there is a discretion vested in the trustee to determine in what particular property he will reinvest the fund, a discretion over which the purchaser has no control, and for the due exercise of which, if he acted in good faith, he is not responsible. Redford v. Clarke, 100 Va. 115, 40 S.E. 630; Hughes v. Tabb, 78 Va. 313.
Where a private act of the assembly directed the money received by the sale of land to be invested by the trustee in other lands for the benefit of the parties entitled, those designed for the infants to be purchased at the approbation of the parents or guardians, but no such investment of the money was made, it was held that the purchasers from the trustees were not bound to see to the application of the purchase money. Taliaferro v. Minor, 1 Call 524.
(2) Following Trust Property. --Where the trust fund has wrongfully passed beyond the control of the trustee by an unauthorized sale or otherwise, the beneficiaries may follow it, as long as it can be identified, into any land or other form of investment made by the trustee, as the law raises an implied trust as to such property in their behalf. Marshall v. Hall, 42 W.Va. 641, 26 S.E. 300; Marks v. Spencer, 81 Va. 751; State Bank v. Domestic Sewing Machine Co., 99 Va. 411, 39 S.E. 141; Francis v. Cline, 96 Va. 201, 31 S.E. 10. See Crumrine v. Crumrine, 50 W.Va. 226, 40 S.E. 341.
In breaches of trust, a constant effort of courts of equity is to restore the parties injured, as near as may be, to the position they occupied before the breaches were committed. And for this purpose, when the property has been disposed of and is capable of being followed in specie, the court will compel the trustee or parties in possession (if they have taken with notice of the trust), to reconvey the estate to the purposes of the trust. If the property cannot be followed in specie, or if the holder is a bona fide purchaser without notice, and so not liable to the trust, the trustee will be decreed to compensate the cestuis que trust, by the payment of a sum equal to the value of the trust property, or by the purchase of other property of equal value for their benefit. Norman v. Cunningham, 5 Gratt. 63.
n. Exterritorial Power of Trustee. --A trustee appointed or substituted by a court of a state has no power as such to convey land out of that state. Wilson v. Braden, 48 W.Va. 196, 36 S.E. 367.
X. RIGHTS AND REMEDIES OF CESTUI QUE TRUST.
In General. --Courts of equity are always open at the instance of the cestui que trust to compel trustees to perform their duties; and they may interfere by injunction to restrain him from improperly exercising his powers. Hartman v. Evans, 38 W.Va. 669, 18 S.E. 810; Harrison v. Manson, 95 Va. 593, 29 S.E. 420; Atwood v. Shen. Val. R. R. Co., 85 Va. 966, 9 S.E. 748.
For example, where one trustee claims a growing crop of wheat, which in his absence another trustee takes possession of and commences cutting, the cestui que trust may file a bill in equity asking that the second trustee be enjoined from selling the wheat which he has cut, and for other appropriate relief. Kerr v. Hill, 27 W.Va. 576.
And where the trustees in a deed of trust refuse to act, one or more of the creditors secured by the deed may file a bill on behalf of themselves and all other creditors secured by the deed, for the appointment of other trustees and for general relief. Reynolds v. Bank. 6 Gratt. 174.
A. WHEN BENEFICIARIES TAKE VESTED INTERESTS.
A father, on the eve of a second marriage, conveyed real and personal property to a trustee, to hold in trust for the equal benefit of his six children, reserving the right to control the estate, and to order a sale or division of any portion to the children as they came of age, but the fund in no instance to be diverted from the interest of the children. It was held that each of the beneficiaries took vested interests in the property conveyed, and that the reservations mentioned did not in any manner interfere with the trust declared by the deed, but were all consistent with, and in aid and favor of the trusts. Baldwin v. Baldwin, 76 Va. 345.
B. CESTUI QUE TRUST MAY COMPEL AN ACCOUNTING.
Where the trustee misapplies the trust fund by paying it to a person whom he must know is not entitled to receive it, and the person receiving it knows he is not entitled thereto, the cestui que trust may, at his election, bring his suit in equity against both the trustee and the person who has improperly received the fund to compel them to account therefor. But the decree should be first against the person who has improperly received the fund, and, if necessary, another decree may be rendered against the trustee, treated as surety of the one improperly receiving the fund, to make good any deficiency. Vance v. Kirk, 29 W.Va. 344, 1 S.E. 717; Thomas v. Linn, 40 W.Va. 122, 20 S.E. 878.
C. RIGHTS OF BENEFICIARIES WHEN TRUSTEE DELAYS EXECUTING TRUST.
Where the trust instrument directed the trustee to sell land and to purchase with the proceeds of the sale other lands in the west to be divided among the beneficiaries, but the trustee improperly delayed the execution of the trust until a great change took place in the situation of the western country and in the circumstances of the parties, it was held that the beneficiaries ought not now to be compelled to take lands in the western country, but should be allowed to take their just proportion of the money arising from the sale. Ashby v. Smith, 1 Rob. 55.
D. BILL TO COMPEL SALE OR MORTGAGE OF TRUST PROPERTY.
The cestui que trust may file his bill against the trustee, to have the court sell unimproved property and invest the proceeds in improved property. Payne v. Morriss, 1 Va. Dec. 665.
And the cestui que trust may file a bill for an order directing the trustee to borrow money and mortgage the trust property, in order that the property may be improved and produce an income. Christian v. Worsham, 78 Va. 100.
Joinder. --The fact that infant beneficiaries are joined as plaintiffs in a bill against a trustee for a sale of the trust property is no objection to the proceedings. Quesenberry v. Barbour, 31 Gratt. 491.
Description of Property. --When the bill and proceedings specify the land, a decree for the sale of the land in the bill and proceedings mentioned, or so much as may satisfy the purposes of the decree, is sufficiently certain. Barger v. Buckland, 28 Gratt. 850.
E. LIABILITY OF TRUST ESTATE FOR DEBTS OF CESTUI QUE TRUST.
Trust estates are liable to all debts and charges of the cestui que trust, like legal estates. But they are not always to be subjected by like proceedings. In general, a trust estate may be levied on by execution, and in all cases be subject to the same lien by judgment and execution as a legal estate; but it cannot be levied on if the trust is a subject of indefiniteness, which would probably occasion a sacrifice in a sale under execution. In such case recourse must be had to a court of equity. This is the case with equities of redemption, trusts to sell and pay debts, and a fortiori, with trusts created not for the debtor only, but for him and another entitled paramount to him; in short, with any uncertain equitable interests none of which are capable of being levied on by execution, but must be reached in equity. 2 Min. Inst. (4th Ed.) 227; Claytor v. Anthony, 6 285; Coutts v. Walker, 2 Leigh 268.
In Coutts v. WalkerLeigh 268, real estate was vested in a trustee by deed of marriage settlement, in trust to pay the wife an annuity out of the profits, and, subject to the annuity, in trust for a son of the grantor; while the annuitant was yet living, a creditor of the son recovered a judgment against him, and exhibited his bill in chancery to subject the son's interest in the estate to the debt. The court held that such an equitable interest could not be taken in execution at law but that it was bound by the judgment in equity, as it would have been bound at law if it had been a legal title; and that the judgment creditor had a right to insist upon the execution of the trust for the satisfaction of his judgment.
Trusts for Maintenance and Support. --Where property was conveyed by deed to a trustee for the maintenance and support of the beneficiary, which property is not alienable by the cestui que trust nor liable for his debts, but there is no termination or limitation over of the estate dependent upon attempted alienation or seizure by creditors, such deed is void, and the property may be subjected to the claims of the creditors. Hutchinson v. Maxwell, 100 Va. 169, 40 S.E. 655. See ante, this note, " Trusts for Maintenance and Support," and " Spendthrift Trusts."
And although trustees may be invested with discretion as to what portion of the income from a trust fund shall be applied to the maintenance and support of a debtor, yet if they cannot exclude him altogether, his assignee and creditors may demand from the trustees whatever amount he could have compelled them to have applied for his benefit. Hutchinson v. Maxwell, 100 Va. 169, 40 S.E. 655.
The accumulation of income in the hands of the trustees under a will depositing a fund with them for the benefit of the testator's daughter for life, with direction to pay the income to her " for her support," is subject to the daughter's debts, in the absence of any intention otherwise expressed or implied that the interest in the income shall not be liable for debts. Young v. Easley, 94 Va. 193, 26 S.E. 401.
F. ACQUIESCENCE OF CESTUI QUE TRUST IN BREACH OF TRUST.
In order that a cestui que trust may be bound by his acquiescence in a breach of trust by the trustee, he must have full knowledge of all the facts and circumstances; and the burden is on the trustee who is charged with a breach of trust, and who rests his defence upon the acquiescence of the cestui que trust, to show that the latter had such knowledge. Sedgwick v. Taylor, 84 Va. 820, 6 S.E. 226.
And where the defense of an acquiescence is set up to justify a breach of trust by the trustee, and it is doubtful whether the cestui que trust had such a knowledge of the facts as to make his acquiescence binding, the question will be referred to a commissioner to inquire and report upon the point. But this reference will not be directed where the defense of acquiescence is not raised by the answer, and is not proved by the evidence. Sedgwick v. Taylor, 84 Va. 820, 6 S.E. 226.
Remaindermen. --Some of the cases hold that a remainderman cannot acquiesce in a breach of trust so as to be bound, until his interest falls into possession. But the better rule is that a cestui que trust whose interest is reversionary though not bound to assert his title until he comes into possession, is not less capable of giving his assent to a breach of trust while the interest is in reversion than when it is in possession; and whether he has done so or not depends on the facts of each particular case. Sedgwick v. Taylor, 84 Va. 820, 6 S.E. 226. See Stewart v. Conrad, 100 Va. 128, 40 S.E. 624.
XI. TERMINATION OF THE TRUST.
In General--The court will refuse to close the trust and cause the property to be turned over to the cestuis que trustent, when applied to by them, where the ultimate purposes of the trust have not yet been accomplished, or where it was the intention of the creator of the trust that the control and management of the property should be in the hands of the trustees, and subject to their discretion. Carney v. Kain, 40 W.Va. 758, 23 S.E. 650, citing Bass v. ScottLeigh 356.
For example, where a testator devised and bequeathed real and personal estate to trustees in trust, for the equal use and benefit of his four sisters (naming them), and their heirs forever, to be managed as the trustees should think most conducive to the interests of each of the parties, it was held that each of the sisters took a fee simple as to the real, and the absolute property as to the personal subject, in her share of the trust estate, but that the legal title remained in the trustees, in order that they might manage the part of the subject intended for the use and benefit of each sister, in such manner as the trustees shall think most conducive to the interests of each respectively. Bass v. ScottLeigh 356.
On the other hand it has been held that, although all the objects and purposes of a trust have not been accomplished, yet if all interests under it have vested, and the beneficiaries are sui juris as to the trust property, and desire to have it terminated, a court of equity may decree its termination. Armistead v. Hartt, 97 Va. 316, 33 S.E. 616, distinguishing Bass v. ScottLeigh 356.
Thus, where a testator gave his estate to his executors in trust for the benefit of his dissipated son, with the provision that if they should judge from proper information of the son's habits and steadiness, that it would be prudent to entrust him with the full management of the funds intended for his benefit, they are directed to turn over the whole into his hands, it was held that the executors, having declared in their judgment that the son had reformed and might be intrusted with the control of the funds, equity will compel them to perform the trust by delivering over the fund to the son. And before it is done, the son has such an interest in the estate that it is subject to his debts. Cochran v. Paris, 11 Gratt. 348.
Termination by Agreement. --The trust created under a will which provides that the income of an estate be paid by the executor to certain beneficiaries for life, and which grants the estate, upon the death of the last survivor of them, to one designated in fee simple, may be terminated by a contract between such beneficiaries, whereby the remainderman sells his interest to the life tenant. Thom v. Thom, 95 Va. 413, 28 S.E. 583.
But trusts created upon the vesting of the legal title in the trustee cannot be destroyed otherwise than by the renunciation of the cestui que trust. Skipwith v. Cunningham, 8 Leigh 271, 31 Am. Dec. 642.
Revocation. --A judgment creditor conveyed his judgment in trust for certain purposes, the residue to be held on such trust as the judgment debtor might appoint, and upon the failure of the judgment debtor to make any such appointment, then in trust to pay the income to the judgment debtor free from liens thereon of any present creditor of the judgment debtor. Power to revoke the trust was reserved. Afterwards the judgment creditor assigned the judgment to the judgment debtors. It was held, that this act terminated the trust, and that the judgment vested in the debtor absolutely and could not be interposed as against his creditor, and mortgagees. Carter v. Hough, 86 Va. 668, 10 S.E. 1063.
Objection of Trustee to Termination. --The mere objection of the trustee to the termination of the trust will be unavailing, when it appears that no good purpose will be served or benefit derived for those most interested in the trust estate by a continuance of the trust. Armistead v. Hartt, 97 Va. 316, 33 S.E. 616.
XII. PLEADING AND PRACTICE.
A. JURISDICTION.
Trust estates are peculiarly and exclusively within the cognizance and under the control of courts of equity, and that tribunal has exclusive jurisdiction of suits to set up and enforce trusts. Garnett v. Macon, 6 Call 308; Faulkner v. Davis. 18 Gratt. 651; Christian v. Worsham, 78 Va. 100; Huff v. Thrash, 75 Va. 546; Salamone v. Keiley, 80 Va. 86; Moorman v. Arthur, 90 Va. 455, 18 S.E. 869; Riggan v. Riggan, 93 Va. 78, 24 S.E. 920. See monographic note on " Jurisdiction" appended to Phippen v. Durham, 8 Gratt. 457.
For example, a court of equity will take jurisdiction where a bank has sued its cashier for a misappropriation of money in violation of his duty. The relation of the cestui que trust and trustee existing between them is sufficient to give jurisdiction. Merchants Bank v. Jeffries, 21 W.Va. 504.
So also, where a trustee and his feme covert cestui que trust jointly undertake to improve the lot held by him in trust for her separate use, and in so doing fail to use due care and skill, whereby the owner of the adjacent land is damaged, a court of equity has jurisdiction to ascertain and allow the claims of the injured party for compensation, and to subject the trust property to its satisfaction, either because of the trust, or because of the separate estate involved in the litigation, each being equally a subject of equity jurisdiction. Salamone v. Keiley, 80 Va. 86.
And in accordance with the well-established rule just stated, that it is the peculiar province of courts of equity to enforce trusts, it has been held that a suit may be brought by the cestui que trust against the trustee's estate, to recover money received and held by him for the benefit of his cestui que trust. Riggan v. Riggan, 93 Va. 78, 24 S.E. 920.
But a trustee, to whom a debtor has conveyed all his property to pay all his debts, not specifying them, cannot generally file a bill against a particular judgment-creditor holding a lien on the land when the deed of trust was executed, asking the court to ascertain and decree whether this particular judgment has been paid or not. He might file a creditor's bill to ascertain all the prior judgments unsatisfied and the amounts still due on them, and thus avoid a multiplicity of suits. Ambler v. Leach, 15 W.Va. 677.
A court of chancery, having trust funds under its control, may make such orders as it thinks necessary for its safety and proper administration, and the manner of doing this must be left largely to the discretion of the court having charge of the fund. Crickard v. Crickard, 25 Gratt. 410.
Demand for Work and Labor. --But a court of equity will not, under its general powers to administer trusts, enforce a mere legal demand for work and labor done on property standing in the name of trustees. Clark v. Oliver, 91 Va. 421, 22 S.E. 175.
Bailment. --And a bailment is not such a trust as gives a court of equity jurisdiction. Thompson v. Whitaker Iron Co., 41 W.Va. 574, 23 S.E. 795.
Lands Outside Jurisdiction . --Chancery courts have jurisdiction to administer relief in cases of trusts wherever the person of the defendant can be found, although lands not within the jurisdiction of the court may be affected by the decree. Davis v. Morriss, 76 Va. 21, citing Dickinson v. Hoomes, 8 Gratt. 353; Barger v. Buckland, 28 Gratt. 850.
Adequate Remedy at Law. --But where there is an adequate remedy at law, the trustees or cestuis que trust cannot go into a court of equity for relief. Kuhn v. Mack, 4 W.Va. 186; Sheppards v. Turpin, 3 Gratt. 373; Moore v. Steelman, 80 Va. 331.
Trustee Guilty of No Misconduct. --Besides, equity will not take charge of and administer a trust where the trustee is guilty of no misconduct in the discharge of his duties. Righter v. Riley, 42 W.Va. 633, 26 S.E. 357; Kester v. Alexander, 47 W.Va. 329, 34 S.E. 819.
Concurrent Jurisdiction. --In some cases of trusts law and equity have concurrent jurisdiction. Thus, where A. delivered a claim to B. to be by him collected and paid to C. and B. agreed with C. to collect the claim and pay it to him, but B. refuses, after he has collected the claim, to pay it over, C. may either sue him at law for money had and received to his use, or he may enforce the trust in a court of equity, Miller v. Lake, 24 W.Va. 545.
But when a trustee sells the trust subject, and receives the money for it, though he promises the beneficiary to pay it, a court of equity, nevertheless, retains jurisdiction to enforce the payment. Nease v. Capehart, 8 W.Va. 95.
B. BRINGING TRUST FUND INTO COURT.
Where a trustee filed a bill setting out that he had in his possession a trust fund, and praying that his trust accounts might be settled, and the fund distributed, and the commissioner ascertained the amount of the trust fund in the trustee's hands, and the court, at the instance of the creditors, issued a rule against the trustee to show cause why the fund should not be paid into court, and the trustee in his answer to the rule failed to show cause, it was held that the court properly made an order requiring the trustee to pay into court the amount ascertained to be in his hands, although it did not appear that the trustee had abused his trust, or that the fund was in danger by the insolvency of the trustee. Grinnan v. Long, 22 W.Va. 693.
Summoning Trustee. --But before an order is made requiring money in the hands of a trustee to be paid into court, the trustee should be summoned to appear and show cause why the money should not be paid into court. Grinnan v. Long, 22 W.Va. 693.
Appellate Review. --An order requiring a trustee to pay funds into court is appealable. Grinnan v. Long, 22 W.Va. 693.
C. PARTIES.
1. Who May Sue.
A person who goes into a court of equity to have a trust enforced, or to correct an abuse of the trust fund by the trustees, must have some interest in the trust, as trustee or cestui que trust, otherwise his bill will be dismissed. Clark v. Oliver, 91 Va. 421, 22 S.E. 175; Trustees of Emory, etc., College v. Shoemaker, 92 Va. 320, 23 S.E. 765.
Conversion of Trust Property. --Where the remedy is only at law, as in the case of a conversion of the trust property by a third person, no action can be maintained by the cestui que trust, but the action must be brought by the trustee because he holds the legal title. Poage v. Bell, 8 Leigh 604.
Specific Performance. --The proper mode of instituting a suit in chancery for the specific performance of a contract, made by a third party with the trustee in a deed of trust, for the purchase of a tract of land conveyed by the deed of trust, would be for the trustee and cestui que trust, to unite as plaintiffs, but it has been held that the cestui que trust may bring such suit, and make the trustee and purchaser of the land and the grantor in the deed of trust defendants. Fleming v. Holt, 12 W.Va. 143.
Satisfied or Executed Trust. --After the purposes of the trust are satisfied and executed, the cestui que trust may maintain ejectment, upon a demise in his own name, although the legal estate is still in the trustee. Hopkins v. Ward, 6 Munf. 38.
But this does not deprive the trustee, holding the legal title, from maintaining such action even after the trust is satisfied. Hopkins v. Stephens422.
Parties by Representation. --One or more of the creditors in a deed of trust to secure several classes of creditors, may sue for themselves and all other creditors secured by the deed to have the trust enforced. Reynolds v. Bank of Virginia, 6 Gratt. 174.
Joinder.
Donors and Husband of Cestui Que Trust. --Where money was given to be invested for certain female children till they should marry, it was held that it was not necessary that the husband of the married daughter, or the donors of the fund to whom it would ultimately revert, should join in the petition to the court that the income of the fund should be paid to the only unmarried daughter, as she was the only party in issue. The fact, however, that the married daughters and the donors of the fund did join in the petition, and that the objection to it on that ground was not sustained, is not reversible error, as they asked for no personal relief, but united simply as evidence that they claimed no interest in the trust subject. Ward v. Funsten, 86 Va. 359, 10 S.E. 415.
Survival of Action between Trustees. --Where two trustees brought an action of detinue to recover the trust property, and one of them died pending the action, it was held that the right of action survived to the other, and that he might carry on the suit. Nichols v. Campbell, 10 Gratt. 560, citing Rose v. Burgess, 10 Leigh 186.
Answer. --Where a bill was filed against the trustee and cestui que trust in a deed, it was held that an answer by the trustee, putting the allegations of the bill in issue, protects the cestui que trust, and compels the plaintiff to prove his case as to both, although the bill was taken for confessed as to the cestui que trust. Johnston v. Zane, 11 Gratt. 552.
2. Who Are Necessary Parties.
Cestui Que Trust. --The necessity of all parties in interest being parties to the cause, is peculiarly strong in cases of trust. As a general rule, in all case of suits by or against a trustee, or for the settlement of a trust subject, the cestuis que trust are essential parties. The only known exception is where the parties are so numerous as to render it extremely inconvenient to join them all, and the court has permitted a few to sue on behalf of themselves and others. Opinion of Tucker, P., in Buck v. Pennybacker, 4 Leigh 5; Richardson v. Davis, 21 Gratt. 706.
No decree can be rendered in equity affecting the rights of the cestui que trust unless he is a party, because the trustee is a mere nominal party, and the real beneficial interest is in the cestui que trust. Collins v. Lofftus, 10 Leigh 5, 34 Am. Dec. 719; Simon v. Ellison, 90 Va. 157, 17 S.E. 836.
But in a suit brought by the trustee of a feme covert to assert and defend her rights, in which a full opportunity is afforded the cestui que trust to protect her rights, it is not necessary that she should be made a party. Woodson v. Perkins, 5 Gratt. 345.
Personal Representative of Cestui Que Trust. --Where a trustee sells land under a deed of trust after the death of the grantor without resorting to a court of equity and a suit is brought to set aside the sale, the personal representative and heir at law of the grantor are necessary parties. If the cestui que trust is dead, his personal representative, too, is a necessary party. Spencer v. Lee, 19 W.Va. 179.
Representation of Parties--Where the trustees sufficiently represent the interests of their cestuis que trust, the latter are not necessary parties. Buck v. Pennybacker, 4 Leigh 5.
But in Moorman v. Arthur, 90 Va. 455, 18 S.E. 869, the court said: " I do not understand that the doctrine of representation applies in Virginia between trustee and cestui que trust so as to hold the latter concluded by decrees in cases in which the trustee is a party, but the cestui que trust is not. Sand's Suit in Eq. p. 197; Richardson v. Davis, 21 Gratt. 706."
Trustee. --The trustee, who holds the legal title, is always a necessary party to any suit wherein the trust subject is in litigation, though he has no beneficial interest in the subject of controversy, and it is error to enter a decree disposing of the trust subject where he is not a party. Fisher v. Dickenson, 84 Va. 318, 4 S.E. 737; Tavenner v. Barrett, 21 W.Va. 656.
For example, in a bill to recover trust property sold by him and for an account, he is a necessary party. McDaniel v. Baskervill, 13 Gratt. 228.
And both the trustee and cestui que trust are necessary parties to a bill to set aside a contract made with the trustee, Tavenner v. Barrett, 21 W.Va. 656.
Agent. --But a mere agent, though he transacts the business in his own name, is not ordinarily a necessary or a proper party to a suit in equity brought to specifically enforce the contract, unless his relation to the transaction is such as to make him a trustee. Tavenner v. Barrett, 21 W.Va. 656.
D. COSTS.
Wherever a trustee is free from fault he should not pay costs, but if he appeals from a decree construing the trust, and the decree is affirmed, or if he resists a plaintiff's claim and fails in his defense, in either case he is liable for costs. Sorrel v. Procter, 4 Hen. & M. 431; Brown v. George, 6 Gratt. 424; Beverley v. Brooke, 4 Gratt. 187.
Costs in Suits between Trustees and Strangers. --The general rule is that if trustees bring suits against strangers, or strangers bring suits against the trustees, respecting the trust fund, costs will be awarded against the losing party as in other suits. And if trustees are compelled to pay costs, the amount paid, including proper attorneys' fees, will be allowed to them in their accounts, if the litigation was just and proper; but if the litigation was improper and vexatious, courts may refuse to allow such charges. Darby v. Gilligan, 37 W.Va. 59, 16 S.E. 507.
Costs as between Trustee and Cestui Que Trust. --But it is difficult to state, as a general proposition, any rule as to costs in suits between cestuis que trust and trustees in relation to the trust fund. It may be stated generally, however, that the rule which guides, rather than governs, a court of equity, is that trustees shall have their costs either out of the trust fund, or from the cestuis que trust personally, who may be found to be in fault; and this rule applies whether the trustees are plaintiffs or defendants. Darby v. Gilligan, 37 W.Va. 59, 16 S.E. 507.
XIII. IMPLIED TRUSTS.
A. DEFINITION.
An implied trust means a trust not created by any words either expressly or impliedly evincing a direct intention to create a trust, but created by the construction of equity in order to satisfy the demands of justice. It includes all trusts that do not spring from the agreement of the parties. Currence v. Ward, 43 W.Va. 367, 27 S.E. 329.
B. RESULTING TRUSTS.
1. Purchase Money Paid by One, Conveyance to Another.
a. In General.
The rule is well settled, that when upon a purchase of property, the conveyance of the legal title is taken in the name of one person, while the consideration is paid by another, the parties being strangers to each other, a resulting trust immediately arises from the transaction, and the person named as grantee in the conveyance is a trustee for the party from whom the consideration proceeded. Bank of United States v. Carrington, 7 Leigh 566; Sinclair v. Sinclair, 79 Va. 40; Kane v. O'Conners, 78 Va. 76; Parker v. Logan, 82 Va. 376, 4 S.E. 613; Laws v. Law, 76 Va. 527; Borst v. Nalle, 28 Gratt. 423; Donaghe v. Tams, 81 Va. 132; Cox v. Cox, 95 Va. 173, 27 S.E. 834; Gregory v. Peoples, 80 Va. 355; Brown v. Brown, 77 Va. 619; Chancellor v. AshbyPatton & H. 26; Pumphry v. Brown, 5 W.Va. 107; Hamilton v. Steele, 22 W.Va. 348; McGinnis v. Curry, 13 W.Va. 29; Murry v. Sell, 23 W.Va. 475; Shaffer v. Fetty, 30 W.Va. 248, 4 S.E. 278; McClintock v. Loisseau, 31 W.Va. 865, 8 S.E. 612; Bright v. Knight, 35 W.Va. 40, 13 S.E. 63; Deck v. Tabler, 41 W.Va. 332, 23 S.E. 721, 56 Am. St. Rep. 837; Currence v. Ward, 43 W.Va. 367, 27 S.E. 329; Harris v. Elliott, 45 W.Va. 245, 32 S.E. 176; Cleavenger v. Felton, 46 W.Va. 249, 33 S.E. 117; Weinrich v. Wolf, 24 W.Va. 299.
This rule has its foundation in the natural presumption that he who supplies the purchase money for property intends the purchase to be for his own benefit and not for another, and that the conveyance in the name of another is a matter of convenience and arrangement between the parties for collateral purposes. This rule is vindicated by the experience of mankind. Cox v. Cox, 95 Va. 173, 27 S.E. 834; Borst v. Nalle, 28 Gratt. 423; Shaffer v. Fetty, 30 W.Va. 248, 4 S.E. 278; Harris v. Elliott, 45 W.Va. 245, 32 S.E. 176.
Consideration Paid by Two or More Jointly. --And a similar rule prevails in cases where the consideration proceeds from two or more persons jointly, and the conveyance of the legal estate is taken in the name of one of them only; in such case a resulting trust will arise in favor of the party not named in the conveyance, in proportion to the amount of the consideration which they respectively may have contributed. Pumphry v. Brown, 5 W.Va. 107; Smith v. Patton, 12 W.Va. 541.
Partners. --Thus, where two partners agree by parol or otherwise that the profits of the firm shall be invested in real estate for their joint benefit, and one partner receives the profits, invests the same in real estate, and takes the conveyance in his own name alone, a resulting trust arises in favor of the other partner to the extent of his interest in the funds therein invested. McCully v. McCully, 78 Va. 159. See Diggs v. Brown, 78 Va. 292.
Resulting Trust an Estate, Not Merely a Lien--A resulting trust, arising from the payment by a third person, a stranger to the grantee, of a whole or part of the purchase money of land conveyed to another, is a claim to the whole or a definite portion of the land, corresponding to the portion of the purchase money paid by such stranger, and it is not an interest in the proceeds of the land, nor a lien upon it for the money advanced by the stranger for its purchase, nor an equity or right to have the sum of money advanced by the stranger for its purchase raised out of it or upon the security of it. Shaffer v. Fetty, 30 W.Va. 248, 4 S.E. 278.
This case is cited and approved in Harris v. Elliott, 45 W.Va. 245, 32 S.E. 176.
b. Effect of Death of Nominal Purchaser.
And a resulting trust may be asserted even after the death of the nominal purchaser. Bank of United States v. Carrington, 7 Leigh 566.
c. Character of Consideration.
It is not necessary that the stranger should pay the purchase price in money to raise a resulting trust in his favor, but if he pays a definite amount in some other form, as by surrendering to the vendor a debt due from him, or in any other manner, this will be sufficient. Shaffer v. Fetty, 30 W.Va. 248, 4 S.E. 278. See Seiler v. Mohn, 37 W.Va. 507, 16 S.E. 496.
d. Presumption Rebuttable.
But the presumption that he who pays the purchase money for property intended to own it, being a mere matter of equitable presumption, may be rebutted by facts and circumstances which negative the presumption. And whatever facts appear tending to prove that the nominal purchaser was to take the beneficial interest, as well as the legal title, negatives the presumption. Borst v. Nalle, 28 Gratt. 423; Harris v. Elliott, 45 W.Va. 245, 32 S.E. 176.
e. Where Trust Is Express Implications Are Excluded.
It must be carefully observed, however, that a resulting trust cannot arise where there is an express trust declared by the parties, and evidenced by a written declaration of such express trust, in other words, where a trust is express, implications are thereby excluded. Coleman v. Parran, 43 W.Va. 737, 28 S.E. 769.
Therefore, in accordance with the rule that when a trust is express implications are excluded, it has been held that a resulting trust in favor of heirs, by reason of a payment from the separate estate of their mother of the purchase price of property held in the name of their father, cannot arise when they aver that by an instrument in writing an express trust was created in their favor. Coleman v. Parran, 43 W.Va. 737, 28 S.E. 769.
2. Purchase by Agent with Funds of Principal.
Where an agent, acting for his principal, purchases land and takes the conveyance in his own name, but pays the purchase money out of the funds of his principal, a trust results in favor of the latter, which will be enforced in a court of equity. Wellford v. Chancellor, 5 Gratt. 39; Parker v. Logan Bros., 82 Va. 376, 4 S.E. 613; Jackson v. Pleasanton, 95 Va. 654, 29 S.E. 680.
Purchase by Agent with His Own Funds. --But where a man merely employs another person by parol, as an agent, to buy an estate, and such other person buys it for himself, and denies the trust, and no part of the purchase money is paid by the principal, and there is no written agreement, he cannot compel the agent to convey the estate to him, as that would be in violation of the statute of frauds, and of the fundamental principle governing resulting trusts, namely, ownership and payment of the purchase money by one when the title is taken in the name of another. Nash v. Jones, 41 W.Va. 769, 24 S.E. 592.
3. Time of Payment.
In General. --In order to raise a resulting trust from the payment of the purchase money, it is absolutely necessary that the payment or advance be made by the beneficiary, or an absolute obligation be assumed by him as a part of the original transaction, at or before the time of the conveyance, for a subsequent payment will not, by relation, attach a trust to the original purchase. Murry v. Sell, 23 W.Va. 475; Shaffer v. Fetty, 30 W.Va. 248, 4 S.E. 278; Bright v. Knight, 35 W.Va. 40, 13 S.E. 63; Smith v. Turley, 32 W.Va. 14, 9 S.E. 46; Webb v. Bailey, 41 W.Va. 463, 23 S.E. 644; Harris v. Elliott, 45 W.Va. 245, 32 S.E. 176; Currence v. Ward, 43 W.Va. 367, 27 S.E. 329; Moore v. Mustoe, 47 W.Va. 549, 35 S.E. 871, 81 Am. St. Rep. 812; Armstrong v. Bailey, 43 W.Va. 778, 28 S.E. 766, dissenting opinion of Brannon, J.; Miller v. Blose, 30 Gratt. 744; McDevitt v. Frantz, 85 Va. 740, 8 S.E. 642; Beecher v. Wilson, 84 Va. 813, 6 S.E. 209, 10 Am. St. Rep. 883; Steagall v. Steagall, 90 Va. 73, 17 S.E. 756; Moorman v. Arthur, 90 Va. 455, 18 S.E. 869; Jesser v. Armentrout, 100 Va. 666, 42 S.E. 681. See post, this note, " Purchase by Fiduciary with Trust Funds."
Therefore, where a trustee held land under an express trust for a married woman, it was decided that no trust resulted in his favor by his advancing money to her, after the execution of the conveyance, to discharge a vendor's lien upon the land. Norris v. Woods, 89 Va. 873, 17 S.E. 552.
Limitation of Rule. --But it should be carefully observed that by the rule just laid down, namely, that payment of the purchase money must be made at the time of the purchase in order to create a resulting trust, it is only meant that the trust must arise from the original transaction, and at the time it takes place, and at no other time. Miller v. Miller, 99 Va. 125, 37 S.E. 792.
Therefore, it has been held that when trust funds are invested in land by a trustee and the title is taken in his own name, an implied trust will be raised in favor of the cestui que trust, whether such funds were paid before, at the time of, or after the purchase, provided they are paid in pursuance of the contract of purchase. Webb v. Bailey, 41 W.Va. 463, 23 S.E. 644; Marshall v. Hall, 42 W.Va. 641, 26 S.E. 300.
Payment after Contract Made, but before Conveyance. --Some of the cases hold that where one enters into an executory contract for the purchase of land, and afterwards, but before the title is conveyed to him, or any part of the purchase money is paid, he agrees with another, that if he will pay one-half the purchase money, he shall be an equal owner in the land, and the other consents, whereupon the two pay the purchase money, each one-half thereof, and the legal title is conveyed to one of them, such payment by the stranger creates a resulting trust in his favor, and the conveyance of the legal title to the other makes him trustee for one-half of the land. Heiskell v. Powell, 23 W.Va. 717; Murry v. Sell, 23 W.Va. 475; Seiler v. Mohn, 37 W.Va. 507, 16 S.E. 496. See Weinrich v. Wolf, 24 W.Va. 299.
Sufficiency of Payment. --Moreover, there must be an actual payment from a man's own money, or what is equivalent to payment from his own money, to create a resulting trust. Woods v. Ward, 48 W.Va. 652, 37 S.E. 520.
But it is not necessary that the party in whose favor the trust is claimed, should actually count out and pay down the purchase money to the vendor, but it is sufficient if the money or its equivalent is furnished to the party paying the purchase money. Seiler v. Mohn, 37 W.Va. 507, 16 S.E. 496.
4. Purchase Money Paid by Third Persons.
Where real estate, purchased with money contributed by third persons, is by their direction conveyed by the grantor to trustees, to be held on trust, and after the property has been used in accordance with the purposes of the trust for many years the trust is declared void, the property does not revert to the grantor, nor can the grantors hold it for their own personal use and benefit; but the individuals who contributed the purchase money are entitled to the property by way of a resulting trust. Heiskell v. Trout, 31 W.Va. 810, 8 S.E. 557.
Payment of Consideration by Parents for Child. --In Steagall v. Steagall, 90 Va. 73, 17 S.E. 756, a father buys land for his married daughter and pays the purchase money, but her husband, by collusion with the grantor, has the title conveyed to him. It was held that a resulting trust arises in favor of the daughter as against her husband's creditors, and that as her rights were fixed at the time of the execution of the deed they could not be divested by the failure of her father to take positive action afterwards.
5. Money Advanced as a Loan.
But a resulting trust will not arise in favor of one paying for land conveyed to another where the payment is only a loan to that other person. Harris v. Elliott, 45 W.Va. 245, 32 S.E. 176.
For example, a trust will not result to persons whose money has been used in paying off part of the purchase price of property, where such money was merely loaned to the purchaser under a decree of court. McDevitt v. Frantz, 85 Va. 922, 9 S.E. 282.
6. Part Payment of Purchase Money.
In General. --And in order to create a resulting trust it is not necessary that the alleged cestui que trust should furnish the whole of the purchase money; for a trust results in favor of one who pays only a part of the consideration to the extent of his payment. But the amount paid must be certain, for if that is unknown or uncertain no trust will be raised, Kane v. O'Conners, 78 Va. 76; Sinclair v. Sinclair, 79 Va. 40; Smith v. Profitt, 82 Va. 832, 1 S.E. 67; Miller v. Miller, 99 Va. 125, 37 S.E. 792; Seiler v. Mohn, 37 W.Va. 507, 16 S.E. 496; Currence v. Ward, 43 W.Va. 367, 27 S.E. 329; Coleman v. Parran, 43 W.Va. 737, 28 S.E. 769.
In Shaffer v. Fetty, 30 W.Va. 248, 4 S.E. 278, it was said: " Ever since the case of Wray v. SteeleVes. & B. 388, it has been held that, when land has been purchased, and a part of the purchase money was paid by a third person, a stranger to the grantee, there was prima facie a resulting trust to the extent of such advancement in such land to such stranger; and it has never been questioned in this country but that the payment of a part of the purchase money by a stranger to the grantee will create prima facie a resulting trust to the extent of such payment."
Where land is purchased and paid for by two persons, and the conveyance is made to one of them only, the law will raise a resulting trust for the benefit of the other to the extent of his interest. Smith v. Patton, 12 W.Va. 541.
When one party pays all or part of the purchase money for land, and the title is taken in the name of another, a resulting trust arises in favor of the party paying as to the whole land or pro tanto. Cleavenger v. Felton, 46 W.Va. 249, 33 S.E. 117, citing Currence v. Ward, 43 W.Va. 367, 27 S.E. 329.
Bill Demurrable. --And in a suit to establish a resulting trust, the bill may be demurred to, if it fails to state what portion of the entire purchase money of the land was paid by the plaintiff, who is seeking to set up such resulting trust. Shaffer v. Fetty, 30 W.Va. 248, 4 S.E. 278.
a. Rule as to Aliquot Part.
Moreover, the portion paid need not be an aliquot part of the whole purchase money, so it is clearly shown what that part payment was. His interest in the land must be certain. Currence v. Ward, 43 W.Va. 367, 27 S.E. 329; Miller v. Miller, 99 Va. 125, 37 S.E. 792.
In Currence v. Ward, supra, it was said: " Forty-nine is just as well a certain fraction of one hundred as is fifty."
7. Advancements.
a. In General.
Where one person furnishes money with which to purchase property and the conveyance is taken in the name of another, a resulting trust does not arise, if there was a legal or moral obligation on the part of the payer to provide for the grantee, as husband for wife, or parent for child; in such case there arises the contrary presumption of a gift or advancement for the benefit of the grantee. But, as we shall see further on, this presumption is, in every case, rebuttable. Deck v. Tabler, 41 W.Va. 332, 23 S.E. 721, 56 Am. St. Rep. 837; opinion of Green, J., in Shaffer v. Fetty, 30 W.Va. 248, 4 S.E. 278; Harris v. Elliott, 45 W.Va. 245, 32 S.E. 176; Steagall v. Steagall, 90 Va. 73, 17 S.E. 756.
At What Time Intention Determined. --And when it once appears that no resulting trust was intended at the time, but that a benefit for a relative was designed, the party cannot afterwards recant his generosity and plead a trust; for even if the donee were afterwards to admit such trust orally or in writing, the court would not enforce it without fresh consideration of value. Harris v. Elliott, 45 W.Va. 245, 32 S.E. 176.
b. Payment by Husband, Conveyance to Wife.
It has been held repeatedly that where the consideration for land is paid by the husband, and the conveyance is taken in the name of his wife, the presumption is that the purchase was designed as a gift or advancement by him to his wife, and no trust results in favor of the husband. Irvine v. Greever, 32 Gratt. 411; Hamilton v. Steele, 22 W.Va. 348; Lockhard v. Beckley, 10 W.Va. 87; Deck v. Tabler, 41 W.Va. 332, 23 S.E. 721, 56 Am. St. Rep. 837.
Rebutting Presumption. --But this presumption of a gift or advancement in favor of the wife where the consideration for land is paid by the husband and the conveyance is made to the wife, is one of fact, as to intention, and not of law, and hence may be rebutted by competent evidence of any kind, written or verbal, direct or circumstantial, showing that the husband intended the purchase for his own benefit exclusively. Irvine v. Greever, 32 Gratt. 411; McGinnis v. Curry, 13 W.Va. 29; Hamilton v. Steele, 22 W.Va. 348; Deck v. Tabler, 41 W.Va. 332, 23 S.E. 721, 56 Am. St. Rep. 837.
Declarations and Admissions of Husband. --It should be observed, however, that evidence to defeat the presumption of an advancement to the wife and establish a resulting trust in favor of the husband, must consist of matters substantially contemporaneous with the purchase or conveyance, so as to form a part of the same transaction. Accordingly it has been held, that the acts and declarations of the husband which accompany the transaction so as to be a part of the res gestoe, are admissible to show his intention in making the gift or settlement, and to raise a resulting trust in his favor, but his subsequent declarations are inadmissible. Deck v. Tabler, 41 W.Va. 332, 23 S.E. 721, 56 Am. St. Rep. 837.
c. Payment by Wife, Conveyance to Husband.
On the other hand, when a husband purchases property with his wife's money, and takes the deed in his own name, a resulting trust is raised in her favor, unless it is shown that she intended the money as a gift or loan to her husband, the establishment of which fact devolves on the husband or those claiming under him. Berry v. Wiedman, 40 W.Va. 36, 20 S.E. 817, 52 Am. St. Rep. 866; Skaggs v. Mann, 46 W.Va. 209, 33 S.E. 110.
Rebutting Presumption. --But in this, as in every other, instance, the presumption of a resulting trust in favor of the wife where property is purchased with her money and the conveyance taken to her husband, may be rebutted, as by showing that the money with which the property was purchased was a gift from the wife to the husband. McGinnis v. Curry, 13 W.Va. 29.
Declarations of Husband. --It was held in Jesser v. Armentrout, 100 Va. 666, 42 S.E. 681, that declarations by a husband, made long after a purchase of land, that it was the property of his wife, and paid for with her money, and evidence that from the way the husband spoke of it the witness thought the land was the property of the wife, were insufficient to establish a resulting trust by parol in favor of the wife.
Purchase by Husband with Separate Estate of Wife. --Where a husband purchases land with the separate estate of his wife, and without her knowledge or consent takes the title in his own name, a resulting trust arises in favor of the wife, which will be enforced by a court of equity. But the evidence to establish such fact must be clear and explicit, especially where the trust is sought to be enforced against the husband's creditors. Standard Mercantile Co. v. Ellis, 48 W.Va. 309, 37 S.E. 593; Smith v. Turley, 32 W.Va. 14, 9 S.E. 46. Compare Throckmorton v. Throckmorton, 91 Va. 42, 22 S.E. 162.
Estoppel. --But the wife will not be estopped from setting up the trust by permitting the legal title to remain in her husband's name, unless it appears that credit was knowingly extended to the husband upon the faith of his apparent ownership. Standard Mercantile Co. v. Ellis, 48 W.Va. 309, 37 S.E. 593.
Gift of Separate Estate by Wife to Husband. --Of course, no trust results in favor of the wife, even though the land was purchased with her separate estate, if it appears that she gave such estate to her husband, which she has a perfect right to do. But the burden of proof is on the husband to show she intended a gift to him. McGinnis v. Curry, 13 W.Va. 29; Berry v. Wiedman, 40 W.Va. 36, 20 S.E. 817. See Crumrine v. Crumrine, 50 W.Va. 226, 40 S.E. 341.
Purchase with Wife's Personalty to Which Husband Is Entitled by Virtue of Marital Rights. --At common law the husband became the absolute owner of all the estate of his wife which he had in his possession by virtue of his marital rights, therefore, where a husband purchased land with his wife's money, prior to the married woman's act, taking the title in his own name, and such money was not her equitable separate estate, this is practically a purchase with his own money, and consequently no trust results in favor of the wife. Hannon v. Hounihan, 85 Va. 429, 12 S.E. 157; Grayson v. George, 85 Va. 908, 9 S.E. 13; Jesser v. Armentrout, 100 Va. 666, 42 S.E. 681.
d. Payment by Parent, Conveyance to Child.
Furthermore it is settled law, that when the consideration for land is paid by a parent and the conveyance is made to the child, the presumption is that the purchase was intended to be a gift or advancement to the child, and no trust results in favor of the parent. Lorentz v. Lorentz, 14 W.Va. 809; McClintock v. Loisseau, 31 W.Va. 865, 8 S.E. 612; Steagall v. Steagall, 90 Va. 73, 17 S.E. 756.
Rebutting Presumption. --But as this rule is based on presumptions of fact, as to intention, and not of law, extrinsic evidence, either written or verbal, is admissible on behalf of the parent paying the consideration, to rebut the presumption of an advancement or gift, provided such evidence consists of matters substantially contemporaneous with the purchase or conveyance, so as to be fairly connected with the transaction. McClintock v. Loisseau, 31 W.Va. 865, 8 S.E. 612.
Where a son holding the legal title to land in trust for his mother exchanges it, with her consent, for other lands and takes the deed in his own name, it was decided that he holds such other lands on an implied trust for the use of his mother. Francis v. Cline, 96 Va. 201, 31 S.E. 10.
For example, in Beverly v. Beverly, 88 Va. 915, 14 S.E. 758, a father, anticipating a sale of his land to satisfy a judgment lien, arranges with his son that he should, as his agent, buy in the land at the sale, and when the purchase money should be all paid, and the lien of the judgment discharged, that the land should belong to all his children, reserving a mill as a support for himself and his wife during their lives. The son purchases the land, and takes the conveyance in his own name, but the father pays the purchase money. It was held that the son holds the legal title as trustee for his father.
Fraudulent Conveyance by Father. --In one case a father purchased real estate and had it conveyed to his son by an absolute deed. In a suit in equity by the heirs, after the father's death, to set up a resulting trust in their favor, it was held that they could not be permitted to show that the conveyance to the son was made for a fraudulent purpose by the father, in order to rebut the presumption that it was an advancement or gift to the son. McClintock v. Loisseau, 31 W.Va. 865, 8 S.E. 612.
e. Purchase by One in Loco Parentis.
In some cases, where the person paying the purchase money stands in loco parentis to the one in whose name the conveyance is made, it has been held that no resulting trust would arise, but that it would be regarded as a gift to the grantee. Miller v. Blose, 30 Gratt. 744; Steagall v. Steagall, 90 W.Va. 75, 17 S.E. 756; Harris v. Elliott, 45 W.Va. 245, 32 S.E. 176.
Uncle and Nephew. --In Harris v. Elliott, 45 W.Va. 245, 32 S.E. 176, the nominal purchaser was only a nephew to the party paying the purchase money, but it was held that, although such relationship alone would not repel a resulting trust in favor of the uncle, as would the relationship of husband and wife, or parent and child, yet, under the circumstances in the particular case, the relationship of uncle and nephew did negative a trust in favor of the uncle.
Father-in-Law and Son-in-Law.--And where a father-in-law paid the purchase money for a tract of land, and the title was taken in name of the son-in-law, it was held that there was no resulting trust in favor of the wife of the son-in-law, so as to defeat the claims of the son-in-law's creditors. Miller v. Blose, 30 Gratt. 744. See Steagall v. Steagall, 90 Va. 73, 17 S.E. 756.
Grandfather and Grandchild.--The presumption that the advancement of the purchase money was intended as a gift, is not confined to the case where the person making the advancement was under legal obligations to support the other party. For example, a grandparent is under no legal obligation to support a grandchild, especially where its father is living, yet the more recent English cases lay it down that if a grandparent advances the purchase money, and the conveyance is taken in the name of the grandchild, the presumption is that it was intended as a gift, and no resulting trust arises in favor of the grandparent, even though the father is living. McGinnis v. Curry, 13 W.Va. 29.
8. Admissibility of Parol Evidence.
It is well settled that parol evidence may be received to establish resulting trusts which arise from an implication of law, where the purchase money is paid by one and the title is taken in another, because trusts of this character are unaffected by the statute of frauds. See foot-note to Bank of United States v. Carrington, 7 Leigh 566; monographic note on " Evidence" appended to Lee v. TapscottWash. (VA) 276; Bright v. Knight, 35 W.Va. 40, 13 S.E. 63; Seiler v. Mohn, 37 W.Va. 507, 16 S.E. 496; Murry v. Sell, 23 W.Va. 475; Borst v. Nalle, 28 Gratt. 423; Miller v. Blose, 30 Gratt. 744; Kane v. O'Conners, 78 Va. 76; Parker v. Logan Bros., 82 Va. 376, 4 S.E. 613; Francis v. Cline, 96 Va. 201, 31 S.E. 10.
And in Virginia it has been decided that parol evidence may likewise be received to establish express trusts; the court being of opinion that the statute of frauds has no application either to express or implied trusts. Walraven v. LockPatton & H. 547; Hubbard v. Goodwin, 3 Leigh 492.
Likewise most of the cases in West Virginia announce the same rule. Currence v. Ward, 43 W.Va. 367, 27 S.E. 329; Potts v. Fitch, 47 W.Va. 63, 34 S.E. 959; Hamilton v. McKinney (W. Va.), 43 S.E. 82. But see Bright v. Knight, 35 W.Va. 40, 13 S.E. 63, in which case it was held that the rule was confined to resulting trusts.
Character of Evidence.--The courts, however, have been very cautious in the reception of mere parol evidence to set up a resulting trust against the letter of a deed, and require that the evidence to establish such a claim should be clear and unquestionable, or such as to leave no doubt as to the character of the transaction, especially after a long lapse of time. Bank of United States v. Carrington, 7 Leigh 566; Phelps v. Seely, 22 Gratt. 573; Miller v. Blose, 30 Gratt. 744; Donaghe v. Tams, 81 Va. 132; Parker v. Logan Bros., 82 Va. 376, 4 S.E. 613; Woodward v. Sibert, 82 Va. 441; Throckmorton v. Throckmorton, 91 Va. 42, 22 S.E. 162; Moorman v. Arthur, 90 Va. 455, 18 S.E. 869; Page v. Lindsay, 86 Va. 169, 9 S.E. 993; Smith v. Patton, 12 W.Va. 541; Troll v. Carter, 15 W.Va. 567 (in this case the court said the evidence must be full, clear, and satisfactory); Smith v. Turley, 32 W.Va. 14, 9 S.E. 46; Bright v. Knight, 35 W.Va. 40, 13 S.E. 63; Armstrong v. Bailey, 43 W.Va. 778, 28 S.E. 766.
The general rule is well settled that to establish a resulting trust by parol testimony, to override a deed absolute on its face, the property must be described with particularity in the pleadings, and the evidence must be clear, full and satisfactory, and must correspond with the allegations. Leath v. Watson, 89 Va. 722, 17 S.E. 4.
In order that a resulting trust may arise in favor of a party claiming to be the cestui que trust, against the grantee in a clear fee-simple deed of conveyance, he must not only state his case in his bill clearly and with particularity as to when, how, and with what he paid the purchase money, but the case stated must be supported by full, clear, and convincing proof. Donaghe v. Tams, 81 Va. 132.
In Jennings v. Shacklett, 30 Gratt. 765, an attempt was made to enforce a resulting trust, resting on parol evidence, thirty-three years after the transaction by which it was alleged to have been raised. The alleged cestui que trust was in possession of the premises to the time of her death, which occurred five years before the commencement of the action. Neither she nor her heirs made any attempt to set up the trust until creditors of the alienee under-took to subject the land to the payment of his debts. It was held, that the delay was not a bar to the setting up of the trust, but that, owing to the great lapse of time, the testimony to establish the trust must be such as to leave no doubt as to the character of the transaction.
In Woods v. Ward, 48 W.Va. 652, 37 S.E. 520, a third party verbally agreed with the defendant, against whom a judgment for the recovery of land had been rendered, that he would pay one-half the costs of the appeal in consideration of receiving one-half of the benefit derived by the defendant therefrom. It was held that such agreement was insufficient to establish a trust in the land in favor of such third party, as it was within the statute of frauds.
9. Declarations and Admissions.
Evidence of the grantee's declarations in favor of a resulting trust, offered when not susceptible of contradiction, must be taken with allowance. Donaghe v. Tams, 81 Va. 132. See also, Phelps v. Seely, 22 Gratt. 573, where it was said that vague and indefinite declarations and admissions, long after the fact, have always been regarded as unsatisfactory and insufficient.
10. Purchase by Fiduciary with Trust Funds.
Where property is purchased by a fiduciary with assets of the trust estate, and the title is taken in his own name, a trust results in favor of the persons entitled to the funds so used. Webb v. Bailey, 41 W.Va. 463, 23 S.E. 644; Warwick v. Warwick, 31 Gratt. 70; Fisher v. Morgan, 82 Va. 417; Moorman v. Arthur, 90 Va. 455, 18 S.E. 869; Marshall v. Hall, 42 W.Va. 641, 26 S.E. 300.
Thus, if a widow executrix purchase slaves for the estate of her husband, by his direction, with money left by him for that purpose, but afterwards holds them as her own, and applies their profits to her own use, she is to be considered a trustee for the benefit of his estate, and responsible in equity to his legatees. So, also, if she marry again, her second husband, holding and using the slaves and their profits, is in like manner responsible. Redwood v. Riddick, 4 Munf. 222.
And when a father receives funds in trust for his children, and invests them in real estate for their benefit, although he takes the title in his own name, he thereby creates an express trust in their behalf, which a court of equity will enforce. Crumrine v. Crumrine, 50 W.Va. 226, 40 S.E. 341.
This doctrine also applies where a person standing in a fiduciary relation makes use of his position to purchase an interest in the trust property with his own funds, as a reversion, a junior or a senior mortgage, or other interest from a third person, or if he purchase other property so immediately connected with the trust estate, and the independent ownership of which would seriously affect the use and value of the trust property, he cannot retain the same for his own benefit, but he must hold it upon a resulting trust for his beneficiary. Morgan v. Fisher, 82 Va. 417.
Where an administrator converted his in testate's personalty into real estate, it was held that a trust resulted therein for the benefit of the widow and children of the decedent, as if there had been no conversion, and did not result for the benefit of the administrator, or the creditors of the estate; but the creditors may, through a court of equity, subject the real estate to the payment of their debts, if the personalty was liable therefor. Moorman v. Arthur, 90 Va. 455, 18 S.E. 869.
But if a guardian purchases a tract of land with her own money and on her own credit, and takes the deed in her own name, the mere fact that she satisfies the unpaid purchase money out of the guardianship funds, which afterwards come into her hands, cannot create a resulting trust in favor of her wards. Myers v. Myers, 47 W.Va. 487, 35 S.E. 868.
Time of Payment.--And to create a resulting trust in favor of a ward in a tract of land purchased by his guardian, the trust funds must either have been paid at the time of, or entered into the consideration of the contract of purchase, though afterwards paid. Myers v. Myers, 47 W.Va. 487, 35 S.E. 868.
But in Webb v. Bailey, 41 W.Va. 463, 23 S.E. 644, it was held that an implied trust will be raised in favor of a cestui que trust when trust funds are invested in land by a trustee and the title is taken in his own name, whether such funds were paid before, at the time of, or after the purchase, if only they were paid in pursuance of the contract of purchase.
Evidence.--In order to raise an implied trust in favor of the cestui que trust where a fiduciary purchases land in his own name with trust funds, the evidence must clearly establish that the purchase was made with trust funds. Webb v. Bailey, 41 W.Va. 463, 23 S.E. 644; Moorman v. Arthur, 90 Va. 455, 18 S.E. 869.
11. Resulting Trust in Favor of an Alien.
Where an alien purchases real estate in the name of a trustee, for the purpose of evading the law which prohibits an alien to hold lands, upon an express and declared or a secret trust, to be permitted to take and receive the rents and profits, this is such a trust as will pass to the state, to be enforced at its instance and in its favor. Hubbard v. Goodwin, 3 Leigh 492.
12. Resulting Trust in Favor of a Charity.
There is no such thing as a resulting trust with respect to a charity. Clark v. Oliver, 91 Va. 421, 22 S.E. 175.
C. CONSTRUCTIVE TRUSTS.
Property obtained by one through the fraudulent practices of a third person will be held by him under a constructive trust for the person defrauded, though the person receiving the benefit is innocent of collusion. Or, in other words, where one party has acquired the legal title to property to which another has a better right, a court of equity will convert him into a trustee for the true owner, and compel him to convey the legal title. Dickel v. Smith, 38 W.Va. 635, 18 S.E. 721; Skaggs v. Mann, 46 W.Va. 209, 33 S.E. 110; Davis v. Settle, 43 W.Va. 17, 26 S.E. 557. See Virginia Coal & Iron Co. v. Kelly, 93 Va. 332, 24 S.E. 1020; Bailey v. Calfee, 49 W.Va. 630, 39 S.E. 642.
For example, where the committee of an insane married woman filed a petition for the purpose of selling her real estate for debts with which it was not chargeable, it was held that a decree ordering a sale is void, and a purchaser of the property under such void decree, who is a party to the petition, will be presumed to have full knowledge of the fraud vitiating his title, and is a trustee of the property for the benefit of the married woman. Dickel v. Smith, 38 W.Va. 635, 18 S.E. 721.
So, also, an assignment by an administrator to his individual creditor of choses in action belonging to the estate of his intestate, in consideration of which the creditor assigned to the sureties of the administrator a bond of the administrator for the same amount, amply secured, is such dealing with the assets of the estate by the creditor of the administrator, there being no actual fraud, as will raise an implied or constructive trust on the part of the creditor. Morris v. DukePatton & H. 462.
In Bennett v. Harper, 36 W.Va. 546, 15 S.E. 143, a testator devised a farm of 600 acres to the complainant, one of his daughters, which farm he had previously given to the husband of another of his daughters by voluntary deed; the husband having, during the life of the testator, been made aware of the contents of his will, and that, in order for it to be effective to bestow any benefit upon the plaintiff, it would be necessary for him to surrender the former voluntary donation, and that the will was made upon that condition. It was held that the husband, having assented to such condition, or having lain by and acquiesced without objection or remonstrance, thereby securing to himself and wife the whole property designed by the testator to be divided between his two daughters, this conduct was such as to render him a trustee for the complainant to the extent of the interest she would have taken under her father's will.
In Potts v. Fitch, 47 W.Va. 63, 34 S.E. 959, the defendant entered into an agreement with several others to secure a certain oil lease, all to share equally in the expenses and profits. The defendant took the lease in his own name, and, before assigning to the others interested their respective shares, learned that a valuable oil well had been drilled near by. He then falsely represented that he had assigned one-half of the lease held to a certain one of the parties, and thereby induced another to receive one-eighth instead of the one-fourth, to which he was entitled. The party received the one-eighth under protest, and paid for it. It was held, that the arrangement created an express trust under which the party aggrieved could recover the additional one-eighth interest from the defendant.
Where a tract of land was owned by husband and wife, the same being part of a larger tract, she owning as her separate estate four-ninths, and he two-ninths, and she joined with him in the execution of a deed of trust on the entire six-ninths to secure the payment of a debt owing by her husband, and dies before the debt falls due, leaving children, and when the trustee proceeds to sell the entire six-ninths conveyed to him, if collusion is shown between him and the husband, and it appears that the sale is made only for the purpose of conferring title on him, equity will consider and treat him as a trustee for the children, who inherited the four-ninths subject to the trust as to that four-ninths. Jones v. Thorn, 45 W.Va. 186, 32 S.E. 173.
Where a rightful trustee turns over to a wrongful trustee the trust funds, and afterwards, in exchange for such funds, conveys to such wrongful trustee, in his own name, a tract of land, such land will be deemed to be held in lieu of the trust fund for the benefit of the cestui que trust. Webb v. Bailey, 41 W.Va. 463, 23 S.E. 644.
But where A. who had neither title to nor possession or control of the property of a debtor, at the request of the debtor, assumed ownership of and conveyed the property to a trustee for the benefit of the wife and children of the debtor, to defeat the judgment creditors of the debtor, it was held that the mere misrepresentation in the deed as to the ownership of the property, does not make A. liable in equity for the value of the property as constructive trustee for the creditors, though he would have been so liable if he had acquired the possession or control of the property. Bolling v. HarrisonPatton & H. 532.
Where a co-tenant permits the common property to be sold for taxes, and directly or indirectly secures the title in his own name, he will be held to be a trustee holding the legal title for their mutual benefit. Parker v. Brast, 45 W.Va. 399, 32 S.E. 269.
1. Purchase at Judicial Sale.
If one purchases a piece of land at a judicial sale and takes the deed in his own name, under a parol agreement with another that it is for his benefit, and that he may within a reasonable time, by paying a certain sum, become entitled to the land, a trust is raised in favor of the latter. Walraven v. LockPatton & H. 547.
A. purchased a tract of land at a judicial sale, ostensibly for himself, but really in behalf of B., who was ultimately to pay the purchase money and then direct a conveyance to himself. A decree had been rendered in another suit against B., as executor for C., and satisfied by D., his surety. Thereupon D. sought to subject the land as B.'s property to the lien of the decree, and the whole tract was ordered to be sold. It was held that A., having been guilty of a fraud, could not claim a resulting trust in the land by way of security for any money paid by him for B. on the pretended and fraudulent purchase. Almond v. Wilson, 75 Va. 613.
But where one before a judicial sale agrees to buy in the land in his name for the benefit of the debtor, the debtor to pay the purchase money, and keep the land, this is an express trust, enforceable in equity, and a second sale under a decree, and a purchase by the same purchaser, will not defeat the trust. Currence v. Ward, 43 W.Va. 367, 27 S.E. 329.
D. STATUTE OF LIMITATIONS AND LACHES.
Implied, resulting, and constructive trusts come under the statute of limitations, and the statute begins to run from the time the wrong was committed by which the person becomes chargeable as trustee by implication. Rankin v. Bradford, 1 Leigh 163; Saum v. Coffelt, 79 Va. 510; Sheppards v. Turpin, 3 Gratt. 373; Gapen v. Gapen, 41 W.Va. 422, 23 S.E. 579; Beecher v. Foster, 51 W.Va. 605, 42 S.E. 647. Compare Webb v. Bailey, 41 W.Va. 463, 23 S.E. 644; Heiskell v. Powell, 23 W.Va. 717.
Laches.--Moreover, courts will not enforce a resulting trust after a great lapse of time, or laches on the part of the supposed cestui que trust, especially when it appears that the supposed nominal purchaser has occupied and enjoyed the estate. Pusey v. Gardner, 21 W.Va. 469; Smith v. Turley, 32 W.Va. 14, 9 S.E. 46; Berry v. Wiedman, 40 W.Va. 36, 20 S.E. 817.
A court of equity will not enforce an implied or constructive trust, after the lapse of twenty years from the time the transaction became known, or might by the exercise of proper diligence, have become known to the cestui que trust. Morris v. DukePatton & H. 462.
It was held in Woods v. Stevenson, 43 W.Va. 149, 27 S.E. 309, that where a period of forty years had been allowed to elapse since an alleged resulting trust was created, and the plaintiffs and those under whom they claim have not had that actual, notorious, and exclusive possession which would entitle them to specific performance, a court of equity will refuse relief as against one who denies such resulting trust, and relies on the bar of laches.
But it was held in Berry v. Wiedman, 40 W.Va. 36, 20 S.E. 817, 52 Am. St. Rep. 866, that a wife is not precluded after the death of her husband, from maintaining a suit to enforce a resulting trust in her favor to lands purchased with her moneys, by the fact that the purchase was made, and the conveyance taken, twenty-five years before his death, if they, during all that time, lived upon the land as their common home, and he also admitted her ownership thereof.