Toole v. McKiernan — 48 N.Y. Super. Ct. 163

Majority

p. 163

ANN TOOLE v. JOHN McKIERNAN.

Headnote

Trustee of lands cannot take assignment of lid of purchaser on foreclosure sale.

One who holds, as trustee, the legal title to lands, subject to a mortgage, cannot individually acquire an interest therein by taking an assignment of the bid of the purchaser on foreclosure sale under said mortgage and a deed from the referee. Until the sale to the original purchaser is consummated by payment and delivery of the deed, the disability of the trustee to take title individually is absolute. That the trastee was duly made a party to the foreclosure, together with the cestuis que trusts who were represented by guardian, and that the mortgagee was the purchaser at the sale, does not affect the case.

Before Sedgwick, Ch. J., Freedman and Russell, JJ.

Decided April 3, 1882.

On a case agreed upon between the parties, pursuant to section 1279 of the Code of Civil Procedure.

The husband of the plaintiff died, leaving her, his widow, and four minor children. By his will, he appointed as its executor his friend James Duff, and its executrix, his wife, the plaintiff. The will devised to them, after a specific legacy to his wife, all his estate, real and personal, in trust among other things for the benefit of his children. The plaintiff qualified as executrix. A part of the real estate was subject to a mortgage. After the plaintiff had qualified, and before the trust was performed, this mortgage was foreclosed. The widow as executrix and individually, and the minor

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children were made defendants. Guardian ad litem was duly appointed for the infants. The due proceedings were had, and judgment of foreclosure and sale was entered. In the words of the submission, the premises were sold by the referee, ‘‘ and on such sale were purchased by the plaintiffs in said foreclosure action, who subsequently assigned their bid to the plaintiff in this action, and thereafter the referee in the foreclosure action aforesaid, duly executed, acknowledged and delivered to the plaintiff herein a deed of the premises, &c.

The plaintiff herein entered into a written contract with the defendant herein, for a sale of a part of the premises conveyed by the referee. The defendant declined to take title to the premises from the plaintiff, upon the ground that said plaintiff could not convey a good and perfect title to said premises under the conveyance executed to her by the referee, &c., inasmuch as, at the time of such conveyance to her, she could not purchase or take the title to the property, &c., because she, at the time of the assignment of said bid and the taking of the deed as such assignee, was executrix and trustee under the will of her husband, &c. The question is, should the defendant be adjudged to specifically perform the contract.,

Miller & Kip, attorneys, and Isaac L. Miller, of counsel, for plaintiff.

Townsend & Mahan, for defendant.

The learned counsel have not cited any authority in this State which decides the controversy. The general rule forbiding guardians, trustees, or persons in similar relations to deal for their own benefit with the property in which the eestuis que trust have an interest, is familiar. The trustee is forbidden to buy it (Gardner v. Ogden, 22 N. Y. 327 ; Forbes v. Halsey, 26 Id. 65 ; 33 Barb. 578 ; and many other cases). The present plaintiff, by her

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purchase from the bidder at the foreclosure sale, acquired the interest both of the mortgagor and mortgagee.

It does not, however, seem necessary to search for prcedents in this State. Such safe and sound principles are announced in the note to Fox v. Mackreth and Pitt v. Mackreth (1 Leading Cases in Eq. Hare & Wallace’ s Notes, 4 Am. ed. pt. 1, 255), that it is only necessary to give the words: “ Where the purchaser at such a sale reconveys the property at once or within a brief period to the executor or trustee, the presumption is that he was used as a tool or cover, and the transaction will be set aside as a constructive, if not actual fraud (Obert v. Obert, Stockt. Ch. 98; 1 Beas. 423 ; Rosenberg’s Appeal, 2 Casey, 67). And where the defect is apparent on the face of the record or title papers, a third person buying subsequently will be affected with notice and cannot hold the land (Rosenberg’s Appeal). The presumption may, however, be repelled and does notapply where it is made to appear with sufficient clearness that the purchaser bought for himself, and that there was no concert between him and the trustee (Waterman v. Skinner, 1 Beas. 423). In Waterman v. Skinner the court refused to interfere,-although the executor purchased the premises immediately after the sale from a bidder, who, as it would seem, had not paid. Such a transaction should, nevertheless, be scrutinized with jealous care, and it is very clear that the disability continues until the sale is consummated by payment and the delivery of the deed. Until then, the vendor is acting on behalf of the cestuis gae trust, and cannot acquire an interest in the property confided to his care.

In a foreclosure action, the referee sells for the mortgagor as truly as for the' mortgagee. And when the trustee buys the bid, he becomes owner of the equity of redemption and of the mortgage. The intervention of the mortagee, as the successful bidder, cannot obviate the objection. His re

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lation to the matter is not an absolute security against the manifest dangers there are in allowing combinations that are likely to be made at the expense of the price to be bid for the property.

I am of opinion that the defendant should not be compelled to take title.

There should be judgment for defendant, with costs.

Freedman and Russell, JJ., concurred.

Cases cited

Gardner v. Ogden 22 N. Y. 327 N.Y. p. 164
Abbot v. American Hard Rubber Co. 33 Barb. 578 N.Y. Sup. Ct. 1861-02-04 p. 164