Opinion
July Term, 1899.
William De Graff, for the appellants.
George F. Yeoman, for the respondent.
It may be assumed that Hamilton, in purchasing this property, was acting in antagonism to his trusteeship. This did not render the sale void. The title was vested in him absolutely, subject to repudiation by the parties interested in the estate intrusted to him. They alone could assail it. ( Read v. Knell, 143 N.Y. 484. )
It was not incumbent upon them to show actual fraud to impeach the validity of the deed to the defendant. Their cause of action is based upon the act of defendant in making the purchase in contravention of his fiduciary relation. ( Yeoman v. Townshend, 74 Hun, 625.)
The Code does not in specific terms provide how long these parties may have in which to avail themselves of their right to impugn the sale. The ten years' limitation, therefore, applies. (Code Civ. Proc. § 388; Matter of Rogers, 153 N.Y. 316; Gilmore v. Ham, 142 id. 1.) That section provides that an action within its purview "must be commenced within ten years after the cause of action accrues." The turning point in this case is, to determine when the cause of action was first available to the plaintiffs. Did it accrue when the defendant made his bid and paid the $800, or at the date of the delivery of the deed, or even subsequent to that event? If the ten years commenced to run on the day of the sale, then this action, which was commenced May 25, 1897, was one day too late. There is no pretense that the defendant intended to perpetrate a fraud upon the plaintiffs; he was by far the heaviest preferred creditor of his assignor. Nine-tenths or more of the estate upon distribution will pass to him. He bid to protect himself, believing he was acquiring an indefeasible title. He paid $8,000 in cash of his own money, which was applied in reduction of the foreclosure judgment. The fairness of the sale itself is unimpeached. He was the highest bidder at a sale evidently advertised and conducted in the usual public way. The plaintiffs within a month after the sale acquired by purchase the residue of the property sold by virtue of the same foreclosure judgment. So they are not gainsaying the regularity and openness of the sale itself. In the action he was a defendant as assignee and individually. The judgment was in the usual form, "barring and foreclosing all right, title and interest and equity of redemption" in the mortgaged premises and permitting any party to bid. The title vested in the purchaser was that of the mortgagor and mortgagee combined and wiped out that of the assignee. ( Packer v. The Rochester Syracuse R.R. Co., 17 N.Y. 283; Thomas Mort. § 1013; Rector, etc., v. Mack, 93 N.Y. 488.) That ended his relationship with that property as trustee of an express trust. His title was subject to attack by the cestuis que trust; if they did not interfere his ownership was unassailable. At best he was only a trustee ex maleficio. Constructive fraud alone was imputable to him. His sinning is due to his position. Where a trust arises by implication, or where the fraud charged is not active but constructive merely, the statute is operative from the time the wrong was committed. ( Lamer v. Stoddard, 103 N.Y. 672; Yeoman v. Townshend, supra; Price v. Mulford, 107 N.Y. 303.)
When the premises were struck off to him and he paid the $800 provided by the terms of sale, he acquired a right in the property. He could enforce the conveyance, assign his bid, and was burdened with the liability to pay the balance of the purchase price. In case of a failure to complete his purchase, he was liable for the taxes accruing before the resale and for any deficiency that might accrue. ( Ruhl v. Law, 8 Hun, 251; Chase v. Chase, 15 Abb. N.C. 91.)
That act terminated the equity of redemption. The mortgagors could not pay up and take the property. (Thomas Mort. § 1020.) That right is akin to that possessed by these plaintiffs. It is intangible until galvanized into life by those entitled to assert it. The only physical impairment to the title of a purchaser at a foreclosure sale, antecedent to the deed, or the rights which flow from it, is, he cannot oust the mortgagor of possession. The indicia of title are essential to enable him to accomplish that; but, so far as his right to the deed is concerned, it is unqualified, and, when the deed is delivered, it relates back to the date of the bid, and his obligations and benefits are governed primarily by the terms of sale accepted by him on that date. Again, on the day the mill property was struck off to the defendant, the cestuis que trust could have commenced an action to nullify the purchase or to decree that he took the title as trustee, or, by motion, to vacate the sale. This right to intervene arises from the fact he was purchasing in hostility to the trust. He had already perpetrated an act inconsistent with his fiduciary relation by which he had acquired a property right, and the estate had lost one. The fact that the plaintiffs could obtain its abrogation does not impair the force of the proposition, for affirmative action was necessary to insure the devolution of the premises to the defendant as assignee. It accordingly seems clear that the wrong was done on the day of sale, and the plaintiffs' right to attack the purchase had its inception on that date. Hubbell v. Medbury ( 53 N.Y. 98) is not in conflict with this position. The purchaser at that sale immediately took possession of the premises, and the court held the liability accrued as soon as he went into possession, asserting his individual right thereto. The fact of the sale itself was not in question, for more than ten years had elapsed since the purchaser had been notoriously in occupation, claiming title in himself.
In Nutt v. Cuming ( 155 N.Y. 309), cited by appellants' counsel, the defendant held a lien subordinate to that of the mortgage foreclosed. Ten years had not expired since the rendition of his judgment at the date of the entry of the foreclosure judgment. Four years intervened this date and the sale and conveyance, and, in the meantime, the ten years' limitation had run on the judgment of defendant. The court decided there was no lien on the surplus moneys arising from the sale, as only liens existing at the time of the sale attach to the surplus. The right of the purchaser was not involved, and the rule of practice providing that a person with a lien at the time of the sale is entitled to participate in the surplus moneys was quoted to uphold the principle that the judgment of defendant was not a lien.
It is urged that the plaintiffs' cause of action did not become ripe until they had acknowledged that Hamilton was asserting title in himself individually. The presumption is, the knowledge came to them the date the wrong was perpetrated. The burden was upon them to show the fact that they were not apprised of his claim until a later date. ( Mason v. Henry, 152 N.Y. 529, 539; Baldwin v. Martin, 14 Abb. Pr. [N.S.] 9.) But the inception of the cause of action is not dependent upon knowledge in plaintiffs where no actual fraud has been committed. That date is an arbitrary one prescribed by the Code. While the obvious aim of the courts is to bring each right of action within some definite Code limitation, yet it is a drastic constriction of the powers of a court of equity to hold that the plaintiffs could recover in this suit irrespective of the statutory limitation. They were parties defendant in the foreclosure suit; they lived near the mill property, and must have known of the purchase made by the defendant and of the extensive improvements he was making. They knew he was principally interested in the assigned estate; and yet it was not until unexpected value was imparted to the property by the acquisition by the city of Rochester of certain water rights that they made any claim the defendant was holding as assignee. After this long acquiescence, and after this apparent assent to defendant's purchase, and after their failure to interfere until he had expended a large sum in improving the property, and when the wheel of fortune gave this new unforeseen value to it, they might well be said to have allowed their rights to become too dormant to be aroused. The defendant had paid $8,000 to apply in payment of a subsisting lien on the property, and yet these plaintiffs make no offer to reimburse him for that sum, and they knew he must have paid that individually, for they were aware of the small sum he held as assignee. They have received the benefit of the payment of the mortgage debt the same as if it had been paid to them individually. The equities are overwhelmingly with the defendant.
The interlocutory judgment is affirmed, with costs to the respondent.
All concurred.
Interlocutory judgment affirmed, with costs.