Opinion
08-22-1854
ROSSETT v. FISHER & al.
Price, for the appellant, and Patton, for the appellees, submitted the case.
1. Real estate is conveyed in trust to secure debts. The grantor in the deed has at the time but an equitable title, but is entitled to have the legal title. It is an abuse of his power by the trustee to sell the property before getting the legal title.
2. The trustee having sold the property for one-fourth of its value, without getting the legal title, and the principal creditor secured by the deed having become the purchaser: And the grantor being absent at the time, and the money to pay the debts having been forwarded to his agent at the place of sale, and being at the time in the post-office at the place and not delivered to the agent, though in the expectation of receiving it he had several times applied at the office for the letter, a court of equity will set aside the sale.
Rossett, by deed of trust dated the 12th of April 1844, conveyed certain real estate, consisting of a lot of ground with a brick house thereon, in the town of Ripley in the county of Jackson, to Joseph Smith, in trust to secure the payment of two single bills, one to Andrew Wilson & Co. for forty-three dollars and seventy cents, dated the same day with the deed, and payable one year thereafter, with interest from the date, and the other to Henry J. Fisher, for one hundred and fifty-two dollars, dated the 2d of January 1844, and to indemnify Fisher as security for costs in the case of Hassler's lessee, & c. v. King. The deed provided that in case of default in the payment of the said debts and exoneration of said security in one year from the date of the deed, the trustee should sell the property for ready money, at public auction, before the front door of the court-house of Jackson county, and apply the proceeds to the satisfaction of the purposes of the trust. Rossett having made default, the trustee, at the request of Fisher, after giving thirty days' notice of the time, place and terms of sale, by causing an advertisement thereof to be posted at the door of the said court-house, did, on the 23d of June 1845, (that being the first day of a quarterly term of said county,) at the door of the said court-house, expose the said property to public sale for ready money, when the said Fisher, being the highest bidder, became the purchaser, at the price of two hundred dollars. And the property was accordingly conveyed to him by the trustee, who received the purchase money, and applied it to the purposes of the trust, and made a report of the sale according to law.
In July 1847 Rossett filed his bill in the Circuit court of said county, for the purpose of setting aside the said sale; stating in the said bill that for a short time previous to the expiration of the trust he had been in Pennsylvania for the purpose of raising money to discharge the debts secured by the deed, having left D. G. Morrill of Ripley as agent to attend to his business; that shortly before the expiration of the trust he forwarded, or caused to be forwarded, to his said agent, through the medium of the mail, a draft from the treasury department at Washington, on the Commercial Bank of New York, for the sum of two hundred and twenty dollars, with directions to be applied towards the liquidation of the said debts; that the draft arrived at the post-office in Ripley two days before the day advertised for the sale of the property; but from some cause, either accidental or designed, the post-master neglected to hand the letter containing the draft to the said agent, although repeated applications were made therefor, until two days after the sale, when the agent received the draft and tendered it to Fisher, who refused to receive it. That when the property was exposed to sale Fisher bid two hundred dollars for it, and directed the sale to be suspended for the time then present; that late in the afternoon, near sundown, of the same day, when there were no bidders present, as complainant was advised, but the said Fisher, the sale was resumed, and no further bid being made, the property was cried out to Fisher at his said bid of two hundred dollars; the complainant's said agent being present and forbidding the sale. That the sum of two hundred dollars was a greatly inadequate price for the property, which was worth one thousand two hundred dollars; and complainant believed would have sold for the same, if it had not been represented to some who were anxious to purchase, that the sale would be postponed; and that Fisher had frequently, after the execution of the deed of trust and before the sale, made different offers for the property, greatly exceeding the price at which he purchased it, but complainant rejected them as inadequate. Other statements are contained in the bill, but it is unnecessary to notice them. Fisher, Smith the trustee, and Wilson & Co. were made defendants.
In August 1847 Fisher filed his answer, denying many, if not most, of the material allegations of the bill. He denies that the property, (the imperfect and dilapidated condition of which he minutely describes,) could under any circumstances have been sold for as much as one thousand two hundred dollars; and attributes the sacrifice, if any, at which it was sold, to the fact that the sale was forbid by Rossett's agent, and also to the condition of the title at the time of the sale. In regard to the latter, he states, that Rossett had no deed for the property, and only incumbered his equitable right thereto, the legal title being in A. N. Kinnaird of Wood county, whose wife had and still has a claim of dower therein; " that it was very uncertain whether Kinnaird would make the deed or not; for if there is not now, there formerly was, a suit depending on the equity side of Jackson county Superior court, brought by respondent for Rossett against Kinnaird, to compel him to make this very deed; which suit or another similar one had to be brought at the sale under the trust; all of which was well known to respondent, and it is believed also to most, if not all of the capitalists present at the sale; and it is believed most of the capitalists of Jackson county were present." He further states that after getting the trustee's deed, he turned his attention to getting in the legal title outstanding in Kinnaird; and on the 1st day of August 1845 drew a deed which was by him executed and acknowledged on the 4th day of September 1845, and came to respondent's hands some months thereafter, when it was placed on record. A copy of this deed is filed with the answer.
In October and November 1847 Wilson & Co. and the trustee Smith filed their respective answers. That of the former it is unnecessary to notice. The latter states in his answer that there was a large crowd at the sale; that at its commencement between 10 and 11 o'clock, D. G. Morrill, representing himself to be Rossett's agent, forbade the sale, which was disregarded, and the sale went on; that after getting two or three, or perhaps more bids, respondent suspended the sale until after dinner, when he recommenced it, and there being no other bid, was about to close the sale, when Morrill requested him to leave it open as long as he could; representing that a few, perhaps two or three days before, Rossett had gone to Point Pleasant, and would very likely be back before sundown, and perhaps be able to effect an arrangement and obviate the sale; that with Fisher's consent the sale was suspended until near sun-down; that shortly before the sale was closed respondent went to several who had during the day bid, or talked of bidding, and let them know that the sale would shortly be closed at the court-house door, and at more than one place gave public notice that the property would there be cried for the last time; and after crying it thirty or forty minutes at the court-house door, without receiving another bid, he cried it out to Fisher, who requested respondent not to make a deed for the property until he should see respondent again. That in fact the deed was not made until the date of the acknowledgment, (which is the 30th of July 1845,) though it bears date on the day of sale. That it was not true that any person was prevented from bidding at the sale in consequence of the time it was closed. That he knows of no representation having been made to any person anxious to purchase, that the sale would be postponed; and if he had known of any such representation, he would at once have undeceived the person to whom it was made; and that he would not, acting as trustee, (and knowing his duty to be to act as the agent of both parties,) have sold property under such circumstances as are alleged in the bill.
Sundry depositions were taken in the case; and among them the depositions of Smith the trustee, Morrill the agent of Rossett, Wetzel the deputy postmaster at Ripley, and Hassler. Smith proved substantially the same facts stated in his answer. Morrill proved that he was Rossett's agent in Jackson, at and before the time of the sale, informed Rossett, who was absent, that the property would probably be sold under the deed of trust, and furnished him with a statement of the probable amount necessary to discharge the deed. Rossett replied that he would make arrangement with Hassler to have the requisite amount forwarded for that purpose. Previous to the sale deponent had frequently called at the post-office at Ripley and enquired for a letter in which he expected a draft to discharge the deed of trust, and was as often informed by the post-master that there was no such letter. When the trustee was about to proceed to make the sale, deponent, as the agent of Rossett, forbade it, stating that he had received the most positive assurance that an arrangement would be made to pay the money, and that he expected Rossett (who had been a few days before in Ripley, and had gone to Point Pleasant to see if the draft had not been sent to that place) to arrive every hour. Deponent's statement of what followed the sale substantially agrees, as far as it goes, with that of the trustee. On the 27th of June, four days after the sale, deponent received the draft which he had no doubt was in the office at the time of the sale. He afterwards called on Fisher and asked him if he would receive the draft in discharge of the deed, which he refused to do. Deponent's impression was that in the letter conveying the draft, Hassler required that Fisher, on receiving the draft, should have the trust deed assigned to him. Wetzel's deposition confirms that of Morrill in regard to his repeated enquiries for letters, and his belief that the letter enclosing the draft was in the post-office at the time of the sale and when the enquiries were made; but it was overlooked, being, as deponent thought, in a wrong box. Hassler proved that early in the spring of 1845 Rossett applied to him for two hundred and twenty dollars to pay to Fisher for the redemption of his property in Ripley. Deponent would have advanced the money immediately to Rossett, but he preferred a check for the amount to be forwarded to Morrill; and deponent accordingly enclosed a government check on the Commercial Bank of New York for the amount, and mailed the letter on the 12th of June 1845. Such checks he was in the habit of disposing of for a premium in gold. A letter from Rossett to Fisher, dated the 9th of June 1845, and directed to Point Pleasant, stating the arrangement made with Hassler, was received by Fisher on the 18th of June 1845, and was filed as an exhibit by him. From that letter it appears that Rossett expected the check to be sent to Fisher at Point Pleasant, the place of his residence, about thirty miles distant from Ripley: But it was sent to Morrill at Ripley.
The evidence of the value of the property at the time of the sale is somewhat complicated and conflicting. A great deal of evidence was taken by Fisher to show the bad construction and dilapidated condition of the building; but none of it I believe fixes the value in numero at that time. A letter from Fisher to Rossett, dated May 29th, 1844, between one and two months after the date of the deed of trust, is exhibited with the bill. In that letter the writer manifested a strong desire to purchase the property, and complained that Rossett had asked him one thousand dollars for it, while, as the writer had been informed, Rossett had offered to sell it for six hundred dollars. The fair inference to be drawn from this letter is, that when it was written Fisher would have given at least six hundred dollars for the property. But I think the best evidence of the value of the property at the time of the sale is to be found in the deposition of William Shepard, high sheriff of Jackson, who proved that in his opinion the property was then worth at least eight hundred and fifty or nine hundred dollars.
On the 19th of September 1848, the cause came on for final hearing, and the bill was dismissed. From that decree Rossett has appealed.
Price, for the appellant, and Patton, for the appellees, submitted the case.
MONCURE, J. after stating the case, proceeded:
A trustee in a deed of trust is the agent of both parties, and bound to act impartially between them; nor ought he to permit the urgency of the creditors to force the sale under circumstances injurious to the debtor at an inadequate price. 1 Lom. Dig. 323; Quarles v. Lacy, 4 Munf. 251. He is " bound to bring the estate to the hammer," as has been said by Lord Eldon, " under every possible advantage to his cestui que trusts; " and he should use all reasonable diligence to obtain the best price. Hill on Trustees 479, marg. and the cases cited. He may and ought, of his own motion, to apply to a court of equity to remove impediments to a fair execution of his trust; to remove any cloud hanging over the title; and to adjust accounts if necessary, in order to ascertain the actual debt which ought to be raised by the sale, or the amount of prior incumbrances. And he will be justified in delaying for these preliminary purposes, the sale of the property, until such resort may be had to a court of equity. If he should fail, however, to do this, the party injured by his default has an unquestionable right to do it; whether such party be the creditor secured by the deed, or a subsequent incumbrancer, or the debtor himself or his assigns. And this may be done notwithstanding the impediments in the way of a fair sale, may have been known to the debtor at the time of the execution of the deed, and the removal of them before the time prescribed in the deed for the sale was impracticable, and could not therefore have been contemplated by him.
For these principles I refer to 1 Lom. Dig. 322-326; 1 Tuck. Com. book 2, p. 101-106; Quarles v. Lacy, 4 Munf. 251; Gay v. Hancock, 1 Rand. 72; Chowning v. Cox, Id. 306; Gibson's heirs v. Jones, 5 Leigh 370; Miller v. Argyle's ex'or, Id. 460; Wilkins v. Gordon, 11 Leigh 547.
Let us apply these principles to this case. The property was sold for less than a fourth of its value. The sale was made under circumstances and in a manner well calculated to produce such a result. Even if the title had been unexceptionable, I think the trustee ought to have postponed the sale to another day; which would have subjected the creditors to no other inconvenience than a little delay, while it would have avoided a sacrifice, and might have obviated the necessity of a sale. It may be said that Rossett's agent ought not to have forbid the sale. Whether he ought or not, he did what he thought was his duty, and I do not think that this act of the agent justified the sacrifice of the principal's property. See Ord v. Noel, 6 Madd. R. 126; Wilkins v. Gordon, 11 Leigh 547.
But in my view of this case it is unnecessary to consider whether the sacrifice of the property, and the circumstances under which it was sold, independently of the state of the title, would, severally or together, be sufficient ground for setting aside the sale. I am of opinion that the cloud over the title at the time of the sale is of itself a sufficient ground for that purpose. The deed conveyed, and the trustee sold only the equitable title to the property. The legal title was outstanding in A. N. Kinnaird. It should have been gotten in before the sale; and the trustee would have been justified in delaying the sale, and in bringing a suit, if necessary, for that purpose. No efforts were used to get it in. It probably might have been gotten in without a suit, and merely by calling on Kinnaird and presenting him a deed for execution. The deed of trust recited that Rossett had paid Kinnaird for the property. Fisher obtained a deed from Kinnaird shortly after the sale, and seems to have had no difficulty in obtaining it. That this defect was a cloud over the title, which it was the duty of the trustee to have had removed before the sale, and that on his failing to do so the debtor had a right to have the sale enjoined until the cloud was removed, are propositions which are fully established by the authorities before referred to. The existence of the defect appeared upon the face of the deed of trust, and was well calculated to affect the sale. Indeed, Fisher states in his answer that it was well known to him and most if not all the capitalists present at the sale, that the legal title was in Kinnaird; that it was very uncertain whether he would make a deed for it or not; and that a suit would probably be necessary to compel him to do so: And this is stated in the answer as one of the causes of the sacrifice in the sale of the property. But the trustee having made the sale without having the cloud over the title removed, and the principal creditor secured by the deed having become the purchaser, the question is, whether the debtor is entitled to have the sale set aside? He had provided funds for the payment of the trust debts, and expected in that way to prevent a sale; but was disappointed by an unforeseen and unaccountable accident. But for having made such provision he might have resorted to an injunction. He was not present at the sale, forbade it by his agent, and has never acquiesced in it. The purchaser was the principal creditor, was well acquainted with all the facts which rendered the sale improper, and yet insisted on its being made. A few days after the sale and before a deed was made to him by the trustee, the draft for two hundred and twenty dollars, which exceeded the amount of the trust debts, was offered him by the debtor's agent, but he refused to receive it, or give up the benefit of his purchase, and required the trustee to execute the deed; assigning as a reason therefor that the debtor had used abusive language to him. He says in his answer, that he believes when Rossett's agent first offered him the draft, he required an assignment of the deed of trust; though after the draft was refused on these terms, he perhaps offered it as a payment. All that Hassler could have expected was, to be substituted to the place of the creditors whose claims he was willing to pay; and not that they should incur any personal liability as assignors to him; or that the operation of the deed as an indemnity to Fisher as security for costs in Hassler's lessee, & c. v. King, should be impaired. It is obvious that Fisher did not refuse to give up the benefit of his purchase on account of the terms on which the draft was offered to him; though I do not consider that question material.
Whatever might have been the rights of a bona fide purchaser without notice at such a sale, as to which I express no opinion, I think that the creditor being the purchaser under the circumstances before stated, the debtor has lost none of his rights by the sale, but is entitled to have it set aside and the property resold, if necessary, for the purposes of the trust. See Gibson's heirs v. Jones, 5 Leigh 370; Breckenridge v. Auld, 1 Rob. R. 148; Dabney, & c. v. Green, 4 Hen. & Munf. 101; Lord Cranstown v. Johnston, 3 Ves. jr. R. 170.
But it may be said that the cloud over the title is not mentioned in the bill as one of the causes of the sacrifice of the property; and therefore the sale should not be set aside on that ground. It is true that nothing is said about it in the bill; but it is fully stated in the answer, and is thus made a part of the case. A defect in a bill may be cured by a statement in the answer, where such statement, as in this case, is not inconsistent with the case made by the bill. An instance of this kind occurred in Wood v. Dummer, 3 Mason's R. 308. There the bill charged fraud as the ground for relief; whereas trust was the only ground on which it could be given; and to maintain that ground it was necessary to show that a certain corporation was insolvent. That fact was not charged in the bill, but was admitted in the answer; and thereupon relief was given. After the answer was filed in this case the appellant might have amended his bill and stated the fact in regard to the title. He actually did move at the hearing for leave to make such amendment, but it was denied by the court. If an amendment of the bill had been necessary, I think the court ought to have granted the leave, even at the late period at which it was asked. Bellows v. Stone, 14 New Hamp. R. 175. But I do not think it was necessary. It could have answered no good purpose, and would have been attended with expense and delay. There was much less reason for an amendment of the bill in this case than in Shugart's adm'r v. Thompson's adm'r, 10 Leigh 434, which was a suit to set aside a settled account. The answer denied the grounds on which the settlement was impeached in the bill. There was an order of account, and proofs were adduced, which, though they did not sustain the specific objections taken in the bill, yet ascertained that the settlement might be justly surcharged in other respects. It was held, that although according to the strictest and most formal practice, the plaintiff may be required to amend his bill, and urge therein the objections to the settlement shown by the evidence, yet it is competent to the court to dispense with this proceeding and permit the plaintiff to proceed in respect to the objections shown by the evidence, in like manner as if they had been noticed by the bill. Judge Stanard said, " Such a practice seems to me recommended by many considerations. It is more compendious and less expensive, and tends to prevent or shorten those delays in the administration of justice which are grievances admitted by all, and by many urged as a reproach to its ministers."
Upon the whole, I think the decree should be reversed, the sale set aside, the property reconveyed by Fisher, with covenants against his own acts only, to the appellee Smith, on the trusts declared by said deed of trust, and the said Fisher should account for the rents and profits of the property since the sale, after deducting the value of any permanent improvements made thereon by him, and also deducting any reasonable expense he may have incurred in getting in the legal title which was outstanding in Kinnaird at the time of the sale. And the cause should be remanded to the Circuit court for further proceedings to be had therein, as follows, to wit: An account should be taken of the said rents and profits, and of any such improvements and expense, for the purpose of ascertaining the balance due thereon by said Fisher; which balance should be applied to the purposes of said deed of trust, to wit, to the payment of the debts secured thereby, (both of which are now due to said Fisher, he having paid the debt to Wilson & Co. out of the price at which the land was sold to him at the trust sale,) with the interest which may be due thereon, and to the indemnity of the said Fisher as security for costs in the case of Hassler's lessee, & c. v. King. If the said balance should be sufficient to satisfy the said purposes, the surplus, if any, should be paid, and the property released, forthwith to the appellant. If there should be no such balance, or it should be insufficient to satisfy the said purposes; and the appellant, in a reasonable time to be prescribed by the court, should satisfy the same, or so much thereof as might remain unsatisfied by the application of any such balance as aforesaid, then the property should be released to the appellant. But if he should fail to make such satisfaction, then the said property should be sold in the manner and on the terms prescribed by the said deed of trust; and the proceeds applied to the satisfaction of the purposes of the trust, or so much thereof as might remain unsatisfied as aforesaid. The costs of the appellant in the Circuit court should be paid by the appellee Fisher.
The other judges concurred in the opinion of MONCURE, J.
DECREE REVERSED.