Carpenter v. Carpenter — 42 N.Y. St. Rep. 718

Majority

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Lewis H. Carpenter et al., Resp’ts, v. Coles A. Carpenter et al., Appl’ts.^[1]

(Court of Appeals,

Filed February 9, 1892.)

Headnote

1. Fraud—By persons sustaining trust relations.

The ancestor of the parties hereto died, leaving real estate, which he devised, after a life estate, to them. Some of the farms were mortgaged, and one of the executors, an uncle of plaintiffs, induced the mortgagees to foreclose, and procured the property to be.bid inbyone of the defendants, who then conveyed undivided parts to all the other defendants, thus depriving plaintiffs, the children of two deceased brothers, of their shares in the inheritance. Held, that defendants had violated their duty toward plaintiffs, their co-tenants, as not only could the rents and profits of the realty have been used to pay the interest, but the executors had loaned the tunas of the estate to pay one of the mortgages, and defendants were liable as trustees to pay plaintiffs their share in the property.

3. Same.

A year after the foreclosure, the executors brought a partition of a cer

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tain property belonging to the estate, but as this was regularly prosecuted, all parties in interest being joined and served, no legal duty was violated, by the defendants in instituting the partition, and they could not be-charged as trustees in respect to that property.

Appeal from judgment of the supreme court, general term, second department, affirming judgment of special term in favor of plaintiffs and reversing judgment dismissing their complaint as to the dock property.

Josiah T. Marean, for app’lts; Óscar Frisbie and N. G. Moak, for resp’ts.

James S. Carpenter died April 19, 1880, leaving surviving him a widow and seven children, and also the children of a son, Smith S. Carpenter, who had died before him, all of whom were minors. Jesse L. Carpenter, another son of James S. Carpenter, died a few days after his father, leaving a. widow and six children, two of full age and the others minors. James S. Carpenter left, real estate of the value of $65,000 and Over, and personal property of the value of about $74,000. His-real estate consisted of three parcels, viz: the “ Homestead ” farm, of about forty-one acres, of the value of $25,000, subject to a mortgage long past due, known as the Duryea mortgage, on which was unpaid $4,000, with interest from November 1, 1879; the “ Downing ” farm, of about seventy-nine acres, of the value of $40,000, subject to a mortgage, past due, known as the Downing mortgage, on which was unpaid $5,000, with interest from November 1, 1879, and certain other real estate known as the “ Dock ” property.

He left a will under which his real estate went to his children and their issue, one-eighth to each child and one-eighth to the issue of his deceased child, subject to a provision for the occupation of the house and lot on the “ Homestead ” farm by certain members of his family. The use of his personal property was given to his widow for life, and after her death it was distributable among his children and their issue as in the case of the real estate. He appointed executors, among whom were his sons' Coles A. Carpenter and Charles W. Carpenter, two of the defendants,who alone qualified. The executors managed and controlled the real estate from the time of the testator’s death up to the time-of the foreclosures to be mentioned.

The plaintiffs are the children of the testator’s two sons, Smith. S. Carpenter and Jesse L. Carpenter, and the widow of the latter, and the defendants are the widow and the six children of the testator, who survived him, and are still living. The evidence clearly shows that soon after the death of the testator the defendants entered into a scheme to obtain, through a foreclosure of the “Duryea ” and “Downing” mortgages, title to the property covered thereby for the purpose of cutting off the interest of the children of the deceased brothers therein. To this end, in September, 1880, they procured the holders of the mortgages to commence foreclosures, and under judgments obtained in the, foreclosure actions the property was sold in March and April, 1881, and was bid in by one of the sisters for the amount due on the

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mortgages respectively, and costs, and immediately after the execution of the referee’s deeds the purchaser conveyed to the mother (now deceased) a life estate in the “ Homestead ” farm, and to each of her five brothers and sisters one-fifth part of the “ Homestead ” farm and of the “ Downing ” farm in fee.

Before conveying to her brothers and sisters, Sarah J. Osborn, the purchaser on the foreclosure sales, executed to the holder of the “ Downing ” mortgage a new mortgage on the lands covered by that mortgage in payment of the mortgage foreclosed, and to her brothers, Coles A. Carpenter and Charles W. Carpenter, as executors, a mortgage for $5,000 on the “ Homestead ” farm to secure them for money advanced by them out of the estate of James S. Carpenter to pay the holder of the Duryea mortgage the sum due on that mortgage and the costs. It is unnecessary to state more particularly the facts tending to show that the foreclosure of the two mortgages mentioned was contrived by the defendants for the purpose of accomplishing the scheme for depriving the children of the two deceased brothers of their share in the inheritance.

The holders of the mortgages had made no demand of principal or interest on their securities. They had allowed them to stand for many years after they became due, without seeking to enforce collection. The interest had been paid up to November 1, 1879, and the foreclosures were commenced in September, 1880. The mortgages were amply secured upoii property worth many times their amount, and there is not the slightest reason to suppose that any measures would have been taken at the time by the mortgagees to foreclose the mortgages if they had not been prompted to do so by the defendants. The holder of the Duryea mortgage testified that he was approached by the defendant Coles A. Carpenter, one of the executors, who said " he would like to have me foreclose the mortgage; that it would be a favor to them all, in order to settle up the affairs of the estate.” The proof is less explicit as to how the foreclosure of the Downing mortgage was brought about, but the circumstances surrounding the transaction preclude any doubt that it was by the active intervention of the defendants.

The judgment in this case adjudges that the title to the “ Homestead ” farm and to the “Downing” farm, acquired by the defendants under the foreclosures and the deeds in severalty subsequently made, is held subject to a trust in favor of the plaintiffs to the extent of a one-fourth interest in the property, and we are asked to reverse the judgment on the ground that the defendants did nothing more than they had a legal right to do, for the purpose of disencumbering their shares of their father’s estate of the mortgages and separating their interests in the property.

It would be a matter to be regretted if we should be compelled by any principle of law to uphold a transaction so repugnant to every sentiment of honor, and which is instinctively condemned in the forum of conscience. We assent to the claim of the learned counsel for the defendants, that before a plaintiff can invoke the action of a court to give him redress of any sort he must show

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that at some point in the history of his grievance a right, not ethical merely, but cognizable in the domain, of law, has been violated, or that some trust duty owed toward him by some one has been actively or passively disregarded. But that a duty •cognizable by the law has been violated in this case by the defendants cannot, we think, admit of doubt. It is probably true that neither the principal nor interest of the mortgages was a charge upon, or payable out of, the personal estate of James S. Carpenter in the hands of his executors, 1 B. S., 749, § 4, and the general direction in the will to his executors, “To pay all just and legal demands against his estate,” is insufficient to charge the personal estate with mortgage debts.

But the executors and the other defendants, together with the children of the two brothers, deceased, were tenants in common of the real estate. The issue of the deceased brothers were also interested in the personal property of the testator, the extent of which interest could not be ascertained until an accounting by the executors. The executors took possession of and controlled the ¡real estate from the death of the testator, and received the rents and profits from that time and held them for the common benefit of all the parties interested. It appears that there were several tenement houses on the “ Homestead ” lot; that the executors continued to work a clay bed on the premises, selling material therefrom. It is claimed by the defendants that no rents or profits had been received up to the foreclosure, out of which the interest on the mortgages could have been paid. The trial judge refused to find this to be true. The executors kept no accounts of the rents and profits. They seem to have been handed over to the mother. In the absence of clear proof on the subject, a court, in view of the circumstances, is justified in assuming that the rents and profits of the realty were available and sufficient to have paid the comparatively small amount due for interest on the mortgages, and this clearly is all that the mortgagees, upon the facts shown, would in any event, have required. The executors not only omitted to use the rents and profits for this purpose, or to pay their own share of the interest, but they also loaned the funds of the estate to pay one of the mortgages, for this was the substance of the arrangement in respect to the Duryea mortgage.

The transaction by which some of the tenants in common ■claim to have acquired the whole estate to the exclusion of their ■co-tenants, cannot be upheld within the principle of many cases. Van Horne v. Fonda, 5 Johns. Ch., 388 ; Knolls v. Barnhart, 71 N. Y., 474 ; Rothwell v. Dewees, 2 Black (U. S.), 613; Dubois v. Campau, 24 Mich., 361 .

The defendants and the plaintiffs had a community of interest in a common title, arising under the devise. The defendants, or some of them, were in the actual possession and control of the common property. They were bound to do nothing with a view to prejudice the interests of the plaintiffs. They could not buy in an outstanding title, to defeat the right of their co-tenants. If the foreclosure of the mortgages was a proceeding hostile to the

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el ef end ants, and they not been in default, and their purchase was-made of necessity to protect their own rights, with full knowledge of the situation on the part of the plaintiffs, the moral and perhaps the legal aspect of the case would be altered. But to-permit the plaintiffs, all but two of whom were infants, to be cut. off by a proceeding instigated by the defendants for that very purpose, and in the absence of any effort on their part to avert the danger, and when they were in actual possession of the common property, receiving the rents and profits, is not a mere ethical grievance, but one which the law will recognize and redress.

We think the judgment below, so far as it respects the “Homestead ” and the “ Downing ” property, stands upon a firm, equitable and legal foundation. The subordinate points as to the principle of the accounting are not, we think, well taken. Nor do we think that the widow of the testator took the “ Homestead under the will, but that that passed with the other “ landed property” to the children and their issue, subject only to the right of occupancy of the house lot under the provision before referred to.

We are of opinion, however, that the general term erred in reversing the judgment of the special term as to the “Dock ” property. The action for the partition of that property was brought a year later than the foreclosures. It was regularly prosecuted, all parties in interest having been joined in the action and servedi with process, and a sale- made under the judgment. We think the evidence does not show that any legal duty was violated by the defendants in instituting the partition, dr that they can be charged as trustees for the plaintiffs in respect of that property-

The result is that the judgment of the general term, so far as it reverses the judgment of the special term, should be reversed, and that the judgment of the special term should in all things be affirmed, without costs, to either party in this court.

All concur.