Yeoman v. Townshend — 26 N.Y.S. 606

Majority

p. 606

YEOMAN et al. v. TOWNSHEND et al.

(Supreme Court, General Term, First Department.

December 15, 1893.)

Headnote

Statute of Limitations—Action to Declare Trust.

Where land sold in partition proceedings is purchased by the" attorney for plaintiff therein, an action to declare that the attorney holds the land as trustee for plaintiff is governed by Code Civil Proc. § 388, which provides that an action, the limitation of which is not specially prescribed, must be commenced within 10 years after the cause of action accrues, (the time of the sale;) and' section 410, providing that where a cause of action arises out of the receipt or detention of money or property by a person acting in a fiduciary capacity the cause of action accrues when the party affected has actual knowledge of the facts, does not apply.

Appeal from special term, Hew York county.

Action by Anthony Yeoman and others against John Townshend and others to declare a trust in certain land. The complaint was dismissed, and plaintiffs appeal.

Affirmed.

The opinion of Mr. Justice Patterson at special term is as follows:

p. 607

Concerning the allegations of the complaint charging the defendant John Townshend with actual and intended fraud in instituting, carrying on, and acquiring all the beneficial results of the partition suit mentioned in the pleadings and proofs in this action, it is enough to say that they are not established. The real nature of the dealings between Townshend and his client, Yeoman, can never be fully ascertained. A quarter of a century has elapsed, and all the persons who might have given information on that subject are dead, except the defendant named, and his lips are sealed. The actual fraud alleged is one in which, if it existed at all, the referee and the so-called nominal purchaser must have been implicated. They are both dead, and mere suspicions and surmises should not take the place of that positive proof, either direct or circumstantial, which is required to establish actual fraud.. That Townshend claimed some interest in the immediate result of the partition suit and from a sale of the property as early as 1866 (the year it was instituted) is shown by the testimony of Anthony Yeoman, (the nephew,) who swears that on a day in that year he was sent by his uncle, Townshend’s client, with a message, and that Townshend then told him he was conducting the suit “on shares.” But the fact remains that the defendant John Townshend did purchase or acquire for himself or his wife the whole or some part of the premises embraced in the partition suit. Whether that was with the assent of his client or not, we cannot tell; nor whether any consideration was paid in addition to what Townshend claims to have parted with for the conveyances to his wife. He could not buy in the property for himself, without accountability to his client if called upon, and I shall hold as matter of fact that the transfer or deed from Huntington was made virtually in the action-, Townshend himself testifying that the deed to his wife was delivered by Meade, the referee. I do not think it necessary to refer specifically to the different conveyances, for, in the view I have of this case, and to dispose of what I consider to be the determinate question involved, I will treat-Townshend as if he were the real grantee of the whole premises, although as matter of fact he was not. Standing in the relation of attorney to Anthony. Yeoman, his client, the purchase made by Townshend was one which Yeoman could have insisted upon was for his (Yeoman’s) benefit. The wise and salutary rule is well known that any one acting in a trust or fiduciary capacity for another shall not profit by purchasing the property, rights, or interest of that other for himself, without consent freely and understandingly given. Such purchases, when they become the subject of judicial inquiry, are always prima facie void, and the persons interested are entitled to have a trust declared in and impressed upon the property, or to follow it and compel its restoration or an accounting concerning it, on such conditions as a court of equity may impose, regard being had to the special facts of each case. Such is this suit, both in its structure and the prayer for relief. The plaintiffs, as alleged owners of an equitable title, seek to have a trust declared and enforced, arising out of acts of Townshend, and from his professional connection with the partition suit in 1866, which they claim precluded him from becoming a purchaser, either for his wife or for himself. Such a suit is one cognizable in equity alone, under its exclusive jurisdiction to establish and declare trusts as against apparently valid legal titles, and, where such trusts are established, to act upon the persons of the trustees to compel conveyances and an accounting of profits. Anthony Yeoman (who died in 1871) had in his lifetime the right to maintain an action for the relief now demanded, and the present plaintiffs, or some of them, would have the same right if their cause of action is not barred by limitation. That it is so barred I think is plain. The case does not come within the sections of the Code of Civil Procedure relating., to actions to be brought within six years after the discovery of a fraud, but, as said before, it is one to have a trust declared; a trust arising out of the relations existing between two parties, and not growing out of an expressed covenant or agreement; a trust resulting from the disability of a purchaser in a particular case to buy for himself, or even for a third person, in the absence of proof that what he did was with his client’s knowledge and approbation. Before the Revised Statutes it was held (Hawley v. Cramer, 4 Cow. 719 ) that a purchase made by an attorney

p. 608

under such circumstances would be avoided if the aid of the court of chancery was invoked within a reasonable time; and six years was regarded in that case as such reasonable time, in analogy with the statute of limitations, although it was said there was no fixed rule, and the matter rested largely in the discretion of the court. There was a question, however, in that case, of possible concurrent jurisdiction at law and in equity, and most of the cases arising since then have come upjn the same aspect. But the provisions of the former Code of Procedure ‘and the present Code of Civil Procedure enact that such an action as this, being cognizable only in equity, no other limitation being prescribed, must be brought within ten years. That the present is such a case seems to follow from what was said in construing the provision in the former Code in Hubbell v. Medbury, 53 N. Y. 98 , which was in equity against the trustee of the equity of redemption of mortgaged' premises, who had purchased at a foreclosure sale. The limitation set up-was that section 97 of the old Code (section 388 of the present Code) is substantially a re-enactment of the former statute, as to which it is said in. Butler v. Johnson, 111 N. Y. 217 , 18 N. E. 643 , that it applies to “all cases "over which equity had sole jurisdiction, where no other rule had been specifically provided.’’ Regarding the case at bar as of that character I think there-must be judgment for the defendant, with costs.

Argued before VAN BRUNT, P. J., and O’BRIEN and PARKER, JJ.

M. T. Rosenberg, (John S. Davenport, of counsel,) for appellants.

John Townshend, for respondents.

The complaint alleges that in 1865, John Townshend, then and still an attorney and counselor at law, approached one Anthony Yeoman, now deceased, and informed him that by reason of his relations to persons who had an interest in four lots of land at Eightieth street and Eleventh avenue he was possessed of certain rights therein, and requested to be intrusted to bring a suit in partition to settle the rights of the different parties, which request was acceded to, and a partition suit subsequently commenced. It is further alleged that upon a sale in such partition suit, although the property was bid off in the name of others, it was in fact purchased by Townshend, who thereafter, by various devices, succeeded in preventing the knowledge of such purchase being brought home to those who, after the death of Anthony Yeoman, in 1871, were interested in the property. Upon such facts amplified, the complaint by way of relief demands that Townshend be adjudged to hold the title to such premises in trust, merely, for the plaintiffs.

The first question presented relates to the form of the action,—as to whether it is one for actual or constructive fraud. If the former, —-and this, as we understand it, is the plaintiffs’ contention,—then, upon the finding made by the learned judge below that no actual fraud was proven,—which finding is justified by the evidence,—the complaint upon this ground was properly dismissed. Where actual fraud is alleged it will not be presumed, but the burden is on the parties alleging it to prove it. Upon the theory of constructive fraud, which presents the other phase by which the rights of the plaintiffs may be determined, we shall take the facts as presented most favorably to the plaintiffs. The charge is that the defendant Townshend, as an attorney, purchased the property put up for sale,.

p. 609

which it is insisted entitled the plaintiffs, as heirs at law of Anthony Yeoman, deceased, and as parties to such partition suit conducted by the attorney, to avoid the sale, and have it adjudged to be made for their benefit.

The defenses interposed were that the attorney did not purchase at the sale, and that, if he did, the plaintiffs have by lapse' of time lost their right to avoid the sale. Notwithstanding the tendency of the evidence, which would seemingly show that the property was originally bought at the sale by one Huntington, who thereafter sold . two of the lots to the wife of the defendant Townshend and two to one Mitchell, who subsequently sold to a Miss Langdon, by whom, in 1887, they were conveyed to Townshend, we shall assume, as did the trial justice, that the attorney, though not in name, was in reality the purchaser at such sale. It may be regarded as settled that, where an attorney who has conduct of a sale becomes a purchaser, his client may avoid the sale, and claim the benefit of the purchase. Fulton v. Whitney, 66 N. Y. 548 . And to entitle the client to such relief he is not required to allege or prove any fraud, because such a purchase is one which equity forbids, and to avoid which all that is necessary to be shown is the relation between the parties and the purchase. This appearing, it is at the option of the principal to repudiate or affirm the contract of sale, irrespective of any proof of actual fraud. Where, therefore, no actual fraud has been proven, and the relief, if granted, is to be upon the theory of constructive fraud, the question is, what lapse of time will bar the action? The sale was in 1867. The plaintiffs’ ancestor did not die until 1871, and from the date of the sale until his death in the latter year he took no action to repudiate the sale. This action was commenced in 1892.

The unauthorized purchase by an attorney of property intrusted to him to sell is sometimes termed a “constructive fraud,” and the attorney is termed a “trustee ex maleficio.” A distinction must be drawn with respect to the statute of limitations between an actual, express, subsisting trust, or a case of actual fraud, and the case of an implied trust, of a trustee ex maleficio, or a constructive fraud. In the two former the statute does not begin to run against the beneficiary or cestui que trust until the trustee has openly, to the knowledge of the beneficiary, renounced, repudiated, or disclaimed the trust; while in the latter cases the statute begins to-run from the time the wrong was committed by one chargeable as trustee by implication. This distinction is recognized by our Code of Civil Procedure. Thus, by section 410, it is provided that where a right grows out of the receipt or detention of money or property by an agent, trustee, attorney, or other person acting in a fiduciary capacity, the time must be computed from the time when the person-having the right to make the demand has actual knowledge of the facts upon which that right depends. The two principal witnesses for plaintiffs, with some reluctance, and some qualifications as to the exact date when the knowledge came home to them, admit that as early as 1871 they heard or were informed in some way of the claim made by the defendant Townshend to the property in question^

p. 610

but refrained from taking any action for more than 20 years thereafter. If, therefore, section 410 were applicable, we do not think the plaintiffs would receive much comfort therefrom, for it thus appears that, as to some of the plaintiffs at least, the right to demand the property was complete from the time that they were apprised of the attitude of the defendant in claiming the property as his own, and from that time undoubtedly the statute would run. We do not think, however, that upon the facts here appearing section 410 is applicable, but agree with the view taken by the learned trial justice, to whose reasoning nothing need be added, that the 10-years statute of limitations, as provided by section 388, applies; and in dismissing the complaint upon the ground that it was barred by lapse of time we think he correctly disposed of the case. The judgment appealed from should therefore be affirmed, with costs. All concur.

Cases cited

Hubbell v. Medbury 53 N. Y. 98 N.Y. 1873-06-03 p. 608
Fulton v. Whitney 66 N. Y. 548 N.Y. 1876-09-19 p. 609