Pitcher v. Carter — 4 Sarat. Ch. Sent. 1

Majority

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Pitcher and others v. Carter and others.

Headnote

Under a conveyance, prior to the revised statutes, in trust to pay the income to the grantors for life, and after their decease, to convey the premises to their heirs; the children of the grantors, while the latter survived, and after the statutes took effect, were held to have an equitable and not a legal interest.

The court of chancery could authorize a trustee to dispose of an infant’s equitable estate, as the court deemed most beneficial for his interest.

A co-ordinate tribunal cannot review the decision of the court made upon an application for the disposal of an infant’s equitable estate.

But where the order of the court in such a case is obtained by misrepresentation as to the situation of the property, and by concealment of facts very material to 'he exercise of the judgment of the court; the order cannot be upheld in favor of parties participating in or chargeable with notice of such misrepresentation and concealment.

Two stores which were vested in a trustee, to pay the income to A. for life for her support and that of her family, and on her death to convey them to her infant heirs, were destroyed by fire. The stores and lots were then rented to responsible tenants, for six years ensuing, at $1500 a year each, who were bound to pay the taxes and assessments. The tenants, though clearly liable, insisted they were not bound to pay rent thereafter. A. and the trustee as such and acting for the infant children of A., petitioned the court of chancery, for authority to mortgage the lots, in order to rebuild. The petition set forth that the lots were entirely unproductive and would yield no revenue as they then were, and were liable and likely to bo charged with taxes and assessments; whereas by rebuilding they could be rented for $4000 to $5000 per year. No mention was made of the outstanding leases in the petition, or to the master to whom it was referred. The court made an order authorizing A. and the trustee to mortgage the lots to raise money to rebuild; under which a mortgage for $14,500 was executed to the two tenants, who had notice of the misrepresentation and concealment of facts in the petition and proceeding before the master. Held, that the order of the court was obtained by a fraud against the infants and was void; and that the mortgage could not be enforced against them.

Held also, that the assignees of the mortgage received it subject to tlie infants equities, and could not recover upon it.

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May 4, 5, 6 ;

Aug. 18, 1846.

An order of the court, authorizing a mortgage of infants lands, to raise money to be laid out in erecting buildings on the premises; does not authorize the trustee to contract for the erection of buildings to be paid for by a mortgage on the premises, executed to the contractor, having several years to run.

In a suit, simply to foreclose such a mortgage, the court, on declaring it invalid, cannot enforce the contractor’s claim to be reimbursed for his services and materials.

Infants, upon whose lands an invalid mortgage, has been placed to erect buildings thereon, do not ratify the mortgage, by taking possession of the lands, on their attaining their full age.

This cause was heard on the pleadings and proofs. The bill was filed to foreclose a mortgage hereinafter described, on two stores, and the lot known as No. 84 Pearl street, in the city of New York. The heirs of T. Carter and wife, defended the suit. The material facts appearing on the pleadings and testimony, were as follows:—Thomas Carter and Cornelia his wife, the latter being seised in fee of the premises known as No. 84 Pearl street and No. 52 Water street, in the city of New York, together with lot 222 Cherry street, and a lot on Water street in its rear, on the 3rd day of November, 1829, conveyed the same in fee to John Sniffen, upon trust, that he should, whenever required, join them in mortgaging the premises for such sum as they might think proper; and upon the further trust, that he would, during their lives, receive the rents and profits, and after paying all expenses of repairs and rebuilding, if the case might require it, or otherwise improving the premises, and all other expenses of the trust, pay over to Thomas Carter during his life, the net proceeds quarter yearly, as the trustee might receive the same ; to be applied by him for the support and maintenance of the family of Carter and wife so long as their joint lives should continue ; and upon the death of either of them, to pay over in like manner, the net proceeds for the same purpose, to the survivor; and upon the decease of both, to convey the premises to the heirs of Carter and wife, to whom the same would, in due course of law, have descended.

On the same third of November, 1829, Sniffen, the trustee, joined Carter and wife, in executing a morfgage to James Roosevelt for $6500, on lot 84 Pearl street, on which there were two

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brick stores ; which mortgage was duly assigned on the 23rd of December, 1842, to John Howland. The latter was a party to this suit, and his lien was admitted.

Thomas Carter died in September, 1832, leaving three infant children, Wellington A., Thomas J., and Cornelia M. In July 1834, his widow, married Antoine Artois, who, before that event, ratified the deed of trust to Sniifen, and agreed that Mrs. Carter should continue to receive the net rents, and dispose of them in the same manner as if she were sole.

On the 12th of January, 1835, on the petition of Artois and wife, Augustus W. Clason, the brother of the latter, was appointed trustee, by an order of this court, in the place of Sniffen, upon his executing a bond under the direction of a master; which bond was executed accordingly, and Sniifen conveyed the premises to Clason, in trust, pursuant to the order.

On the 18th of February, 1835, on the petition of Artois and wife and A. W. Clason, the latter acting as trustee, and as the next friend of the infant children of Carter, and on the report of a master, the Vice-Chancellor made an order authorizing Clason to take down the old buildings on the lot 52 Water street, and to erect a large and valuable store thereon, and for that purpose to raise $6500 by a mortgage on the lot, in which Artois and wife were to join, and which was to be a lien on all the rights and interests of the infants, as well as of those parties and the trustee. The order also provided that the trustee should apply $1000 of the rents every year to the reduction of the principal and interest of the mortgage debt thereby created. The $6500 was borrowed by Clason from The Firemens Insurance Company, and the mortgage directed by the order, was executed to that Company. The trustee in the summer of 1835, erected a new store on 52 Water street, which cost about $7600. In the Great Fire of December 16 and 17, 1835, the store 52 Water street and the two stores 84 Pearl street, were entirely destroyed. At that time, they were all insured in the Firemens Insurance Company, the Pearl street stores for $7000 and the Water street store for $5000 ; but the Company was rendered bankrupt by the fire, and it was for several months entirely uncertain what part of the loss it would probably be able to pay.

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One of the stores constituting lot 84 Pearl street, was then occupied by Henry I. Seaman, under a lease to him and John Van Wyck, executed January 18, 1832, by Carter and his wife, for a term of ten years from May 1st, 1832, at the annual rent of $1500, after the 1st of January, 1833. The lease contained a covenant on the part of the lessees, to pay all taxes and assessments, and to make all necessary and proper repairs for maintaining and upholding the premises during the term, at their own costs and charges, and to yield up the same at the end of the term, in as good state as reasonable use and wear thereof would permit, damages by the elements excepted. This lease was recorded on the 20th January, 1832.

The other store on lot 84 Pearl street, at the time of the great fire, was occupied by James M. Goold, under a precisely similar lease for ten years from the first day of January, 1832, at the annual rent of $1500 after January 1, 1833, executed by Carter and wife to Goold and Abraham S. Mesier. This lease was acknowledged on the day of its date, but was not recorded.

The rents under these leases, were collected by Clason, as trustee, until the great fire; after which the lessees refused to pay, and denied their liability to pay rent thereafter. The lessees were at that time in good standing and abundantly able to pay the rent reserved.

On the 12th day of January 1836, Clason as trustee, and in behalf of the three infants as their next friend, united with Mrs. Artois in a petition to the Vice-Chancellor, which set forth all the foregoing facts, except those in reference to the leases, and the occupation of the premises and the payment of the rent under the same. No mention of the leases was made, but the petition stated that by the destruction of the buildings by fire, Mrs. Artois was utterly deprived of any revenue from the premises for the support of herself and her family, and that the premises were then utterly unproductive; and unless some disposition were made of them to make them produce an income, they would be liable to be sold for taxes and assessments; and that such disposition of the premises was necessary and proper for the support and maintenance of Mrs. Artois and her infant children and the education of the latter. The petitioners also

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set forth that the interests of all the parties interested in the premises in Pearl and Water streets, would be substantially promoted by raising on mortgage of the same, a sum sufficient to cancel the liens thereon, and to rebuild the same with three stores; which stores they believed would rent for $7000, annually. That $30,000 would be requisite to pay off those liens and erect the stores, and the petition proposed that $1500 per annum should be applied to the .extinguishment of the mortgage to be given, and that the moneys which should be recovered on the insurance of the burnt stores, should be applied in the same manner. The petition thereupon prayed for an order permitting them to mortgage the premises accordingly, and that a guardian should be appointed for the infants, to join in the execution of the mortgage.

On this petition an order was made, referring it to a master, to ascertain the facts and report thereon, with his opinion as to the execution of such mortgage and its proper terms and limitations. The master, on the 23rd of April, 1836, reported upon the petition. He stated that the material allegations contained in it were true, and he founded his opinion upon the assumption that the premises were wholly unproductive, and in their then condition would yield no revenue, and were moreover threatened with assessments, for opening and regulating streets in their vicinity. It does not appear that the master had any information of the existence of the leases held by Seaman and Goold. He set forth a description of the three stores which should be erected on the lots, and estimated the cost of completing the same at $26,000. That there was due to Mr. Roosevelt on his mortgage $6620 25, and on the mortgage to the Insurance Company $6738 37; and the sum which would be recovered from the latter on the policies, was still indefinite. The master, therefore, recommended that $40,500 be raised on mortgage or mortgages of the premises to build the three stores and pay off those liens, and also to pay off $1085 89 due to the trustee for his advances. He reported that the income from the three stores, when finished, would be $7000 a year; and that besides paying the interest, $680 of the net income should be applied yearly to the principal of the mortgages; that being as much as the estate

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could pay, after giving to Mrs. Artois the same income that she received before the great fire. Mrs. Artois and her husband consented before the master to such appropriation ; and he reported to the court, that the interest of the infants would be promoted by the proposed erections and mortgaging the premises.

Upon the coming in of this report, the Vice-Chancellor, on the 23rd of May, 1836, made an order that the petitioner Clason, and the infants, should have leave to raise money upon the premises, 52 Water street and 84 Pearl street, by mortgage or mortgages, as might he deemed most beneficial for the estate, not exceeding in the whole $40,500 ; and that the trustee should pay the principal of the same, out of the rents, $680 yearly, or should each year place that amount in the New York Life Insurance and Trust Company to accumulate for that purpose. The order directed the mortgage or mortgages to be executed by Artois and wife, by Clason as trustee, and also by Clason on behalf of the infants, and that the same should bind and be an incumbrance upon the several estates which those parties had in and to the premises; that the sum of money so to be raised should be received by Clason, on his giving a bond for the faithful performance of his trust in respect of the same, to be settled and approved by a master; that the money so to be raised should be expended by Clason in the erection of the proposed buildings and for the expenses attending such erection, and to the cancelling of the existing claims against the premises ; and that the surplus, if any, should be paid on the mortgage or mortgages so to be given. The order further directed the mortgage or mortgages to be executed under the direction of a master, and subject to his approval.

On the 26th day of January, 1837, an agreement was executed between Clason, describing himself as trustee, &c., of Mrs. Artois of the first part, James M. Goold of the second part, and Henry I. Seaman of the third part. It recited Carter and wife’s lease to Seaman & Van Wyck, and their lease to Goold and Mesier; the destruction of the premises 84 Pearl street, by fire during the continuance of those leases; that the title to the premises was vested in Clason as the trustee of Mrs. Artois, the interest in the first lease was vested in Seaman, and that in the

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second lease in Goold; and that the parties had come to the conclusion of rebuilding the premises to the end, that the several lessees might occupy the same advantageously, to the close of their respective terms. The agreement then provided, that Seaman and Goold should rebuild the premises in the style and manner therein expressed, for $14,500, and would furnish all needful funds for that purpose:—That Clason should immediately after the execution of the agreement, execute and deliver to Seaman and Goold a mortgage on the building and premises, pursuant to the terms of the Vice-Chancellor’s order, for $14,500, payable May 1, 1842, with interest semi-annually; the mortgage to remain in escrow, till Seaman and Goold should have expended the amount in rebuilding. That the leases should stand ratified and confirmed between the parties to the agreement, and in addition to the rent therein reserved, Seaman and Goold were each quarter to pay the interest on the mortgage of $14,500 during the unexpired terms ; such rent and addition to commence May 1,1837 ; and Seaman and Goold were respectively to pay their arrearages of rent up to November 1, 1836 ; but they were not to pay any rent between those dates, except the interest of the mortgage. And Seaman and Goold covenanted with Clason, to indemnify him against Mrs. Artois in respect of the rent so remitted. And that Clason as trustee should keep the building to be erected, fully insured; and in case of its being injured by fire, the insurance money should be applied to repairing or rebuilding the same for the use of Seaman and Goold.

A mortgage was executed pursuant to this agreement, dated January 14, and acknowledged January 27, 1837, but not recorded till January 16, 1838, by which Artois and wife, Clason as trustee of Mrs. Artois, and Clason as the next friend of the infants, conveyed the premises 84 Pearl street, to Seaman and Goold, to secure the re-payment of the $14,500 with interest semi-annually. The order of May 23, 1836, was set out at large in the mortgage, and the latter recited that Seaman and Goold had loaned and advanced to the parties of the first part, pursuant to the order, the sum of $14,500 for the rebuilding of

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the store on the premises mortgaged. The master, under date of July 20, 1837, indorsed, his approval on the mortgage.

After the execution of the mortgage, Seaman and Goold, who had previously negotiated'terms with the builders, entered into a contract with Otis Pollard for the carpenter work and materials of the store, and with the complainant, Stacey Pitcher for the mason work and materials. They were to pay Pollard $6000 and Pitcher $6200, one third to each in cash, and the balance by assigning to each an interest in the mortgage, equal to the respective amounts. Seaman and Goold also paid $1000 for finishing off the lofts of the store into lodging apartments, to connect with the Pearl Street House; and somewhat less than that amount for fitting up the stores for use.

The stores were built and completed during the year 1837, and were occupied under the old leases, from thence to the expiration of the terms therein limited. It appeared that there was some difficulty in finding builders who would receive such a mortgage in payment, and estimates on the basis of a cash payment were made at a little lower price than those of Pitcher and Pollard.

Mr. Clason, with Pitcher and Pollard, and one other person, as his sureties, executed a bond to the three infants, in the penalty of $29,000, conditioned that he would faithfully pay over and account for the $14,500 raised by him on mortgage, pursuant to the order of May 23, 1846, and would expend the money in the erection of buildings on lot 84 Pearl-street, and would apply any overplus in discharge of the mortgage. This bond was dated July 1, 1837, and was approved July 19,1837, by the same master who approved the mortgage.

On the 28th of May, 1838, Seaman and Goold executed an instrument to Pitcher, stating that $4,133 34, of the mortgage of $14,500, was loaned by him, and that they held it as security for that amount, for his benefit, and also stating that interest on that amount was paid to Pitcher, to May 1, 1838.

On the same day they executed a similar instrument to Pollard, declaring that he had advanced $4,000 of the mortgage, on which interest had been paid to May 1, 1838.

Pollard, on the 6th of June, 1838, assigned his interest in the

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mortgage to William Scott. Seaman assigned his interest in the mortgage, to L. D. Coman, on the 24th of March, 1840 ; and the latter, on the 1st of April, 1840, assigned the same to N. G. Kortright, administrator of Robert Seaman. On the 13th of December, 1839, Goold assigned his interest in the mortgage to John Wilson, in trust for his creditors.

Mrs. Artois died before August, 1840, leaving the before-named children of Thomas Carter, her only heirs. Of those children, Wellington became of full age, in December, 1838—Tho-mas, in April, 1841, and Cornelia, in March, 1844.

On the 31st of August, 1840, Clason, the trustee, conveyed the premises in fee to the three children of Thomas Carter.

Cornelia married Jose C. C. Lomelino, in 1842, and Lomelino and wife soon after conveyed their interest in the premises to Wellington A. Carter, in trust, for the separate use of the wife and her children.

The mortgage to Roosevelt was not paid off under the order of May 23, 1836. The transactions relating to 52 Water-street, after that date, were not involved in this suit.

The bill was filed on the 2d of November, 1843, by Pitcher, Scott, Kortright and Wilson, against the three children of T. Carter, and Lomelino, and against J. Howland, setting forth the execution of the trust deed by Carter and wife—the order for the mortgage and its execution under the same, and the several transfers of the same, vesting it in the respective complainants. The bill claimed that there was due on the mortgage, $11,316 67, with interest from May 1st, 1842.

The two Carter’s, and Lomelino and wife, put in an answer, alleging that the order of May 23, 1836, was void, because of misrepresentation ; and the suppression and concealment of material facts, in obtaining it. That there was no loan, or advance made on the mortgage, or money raised upon it, but it was made on an agreement that it should be taken in payment for rebuilding the stores, and it was made for the benefit of Seaman and Goold, and was void as to the infants. That the Court had no authority to grant an order for mortgaging their estate, under the circumstances. And they alleged that the premises would be

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valueless, if the mortgage, held by the complainants were adjudged to be valid.

H. Nicoll and J. Anthon, for the complainants, made the following points:—

I. The trusts created in the conveyance, made by Thomas Carter and wife, to John Sniffen, were valid, active trusts ; and by such conveyance, the whole legal estate to the premises in question was vested in Sniffen, and in his successor, Augustus W. Clason, and such legal estate was in no respect changed by any provision of the revised statutes. (1 R. S. 722, 2d ed., § 47, § 48 ; Cushing v. Henry, 4 Paige, 352; Matter of De Kay, 4 Paige, 403.)

II. The mortgage in question having been made by order of this court, and having been executed by Clason ; and the defendants, who were infants at the time, not being “ seized” of the real estate in question, the validity of the mortgage is not to be determined with reference to the statute regulating the sale of infants estates. (2 R. S. 120, 2d ed.; 2 Hoff. Ch. Prac. 210.)

HI. The Court of Chancery has the clear and well established' jurisdiction, as the general guardian and protector of the rights of infants, to authorize such disposition of their equitable estate, as maybe deemed most beneficial to them. (Cochran v. Van Surlay, 20 Wend. 375 ; Inwood v. Twyne, 1 Ambl. 416 ; Ex parte Phillips, 19 Vesey, 122, 123 ; 2 Story’s Eq. 581, 585 ; Mills v. Dennis, 3 John. Ch. R, 368 ; Wood v. Wood, 5 Paige, 596, 600 ; M'Pherson on Infants, 255, et seq.)

IY. The provision of the revised statutes, (1 R. S. 724, 2d ed.,) declaring the acts of a trustee, when done in contravention of the trust, to be void; are inapplicable to the case under consideration :

, Because, 1st. That provision, by its terms, plainly relates only to such trusts as were to be created after the 1st January, 1830. (See Reviser’s notes, 3 R. S. 586, 2d. ed.; and 5 Paige, 596, above cited.)

2d. Statutes are not to be construed so as to act upon existing rights and liabilities, unless the intention so to act, is expressly declared. (Sayre v. Wisner, 8 Wend., 661 ; Butler v.

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Palmer, 1 Hill, 324 ; Johnson v. Burrell, 2 Hill, 239 ; 1 R. S. 741, 2d ed., § 11.)

3d. The provision is not to be construed as a limitation upon the acknowledged power of this court to deal with an infant’s equitable estate.

V. By the terms of the trusts, the trustee is required to rebuild the premises out of the rents and profits, and to pay over the net proceeds for the support and maintenance of the family of Carter. The mortgage in question was, therefore, not in contravention of the trust:

Because, 1st. The premises having been destroyed by fire were rendered unproductive and useless, unless the same could be rebuilt; the whole object of the settler would have failed, and his general intent, the providing a support for his family, have been defeated.

2d. The general intent, is always to be regarded and observed, even at the expense of defeating a particular intent. (Doe v. Applin, 4 T. R. 82; Jackson v. Veeder, 11 John. 170 ; Schermerhorn v. Schermerhorn, 6 John. Ch. R. 70 ; Wilson v. Troup, 7 ibid, 25 ; S. C. 2 Cow. 195 , and cases cited; Wilson v. Halliday, 1 Russ, and Myl. 590; Kingsland v. Betts, 1 Edw. 596 ; Long v. Long, 5 Vesey, 445; Kenworthy v. Bate, 6 ibid. 793 ; 1 Sugden on Powers, 547.)

. 3d. The general intent of the testator, requiring a rebuilding of the premises to make them productive, and such rebuilding being directed to be made out of the rents and profits, and it being impossible that the same should be done out of their annual perception ; this court had jurisdiction to raise the necessary sum by a mortgage upon the premises. (Allan v. Backhouse, 2 Ves. & Beames, 66, and cases cited ; Baines v. Dixon, 1 Ves. Sen. 42; 1 R. & M. 590; 6 John. Ch. R. 70; 1 Edw. 596 .)

YI. The mortgage in question, having been executed in conformity with, and by virtue of an order of this court, the defendants cannot in this suit, impeach the order as being fraudulently and improvidently obtained. (Bennett v. Hamill, 2 Sch. &

Lef. 566, 577; Grignon’s Lessees v. Astor, 2 Howard U. S. 319 ; Cochran v. Van Surlay, 15 Wend., 447 ; Story’s Eq. Pl. 340; Elliott v. Pell, 1 Paige, 263.)

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VII. No facts having been misrepresented in the petition for leave to mortgage, or in the report of the master made thereupon, and it appearing that it would be for the benefit of the infants that the mortgage should be made; the order authorizing such mortgage, cannot be impeached on the ground either of fraud or improvidence.

1st. The leases of the premises, made after the execution of the trust deed, and not by the trustee, but by two of the cestui que trust, gave no title whatever to the lessees, and were ineffectual and void. (Blake v. Foster, 8 T. R. 487; Webb v. Russel, 3 T. R. 392; Platt on Cov. 462; Russell v. Cook, 3 Hill, 504 .)

2d. Even if the leases were valid in their inception, it is evident from their contents, that they carried no interest in the land, but simply an interest in the building ; and the building having been totally destroyed by fire, the leases by such fire were wholly put an end to. (Kerr v. Merchant's Exchange Co. 3 Edw. 315 , and cases cited ; Winton v. Cornish, 5 Ohio R. 303.)

VIII. The mode in which the mortgage moneys were advanced, to wit, by rebuilding the stores upon the mortgaged premises, and paying therefor by interests in the mortgage itself; was not a substantial, or other violation of the order of this court, directing the execution of the mortgage; because it sufficiently appears in proof, that the builders, in taking such interests as their pay, demanded and received no more than they would have done, had the payments been made in cash.

IX. The complainants are entitled to a decree of foreclosure and sale of the mortgaged premises ; or if the mortgage be not valid, to a lien for the money, labor and materials expended for the defendant’s benefit. (2 Eq. Cas. Abr. 488 ; Hillyer v. Bennett, 3 Edw. Ch, R. 222.)

E. Sandford and C. O'Conor, for the defendants, argued the following points:

I. The Court of Chancery had no jurisdiction, independently of the statute, to order a sale of, or to sell the real estate of infants, on the ground that such sale would be beneficial to their interests. (Calvert v. Godfrey, 6 Beavan, 97; Peto v. Gardner,

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7 Lond. Jur. Rep. 969; 2 Younge & Coll. Ch. C. 312; Garmstone v. Gaunt, 9 Lond. Jur. R. 78 ; Day v. Day, ibid. 785.)

II. The petition to the Court of Chancery for leave to mortgage the premises in question, and the order of reference thereupon and the report of Master De Peyster, and. the order of the court dated May 23, 1836, confirming the report of the master and authorizing the execution of mortgages on behalf of the infants, and the mortgage executed in pursuance thereof, were all grounded upon the provisions of the statute authorizing the Court of Chancery to direct a sale or disposition of real estate belonging to infants. No case existed under that statute at the time of such application and proceedings, authorizing this court to make any disposition of the interest of the present defendants in the property in question. The court acquired no jurisdiction by those proceedings, and the mortgage in question is void. (2 R. S. 121, 2d ed. §§ 176, 181; and see Sharp v. Spear, 4 Hill, 76 ; Mason v. Waite, 4 Scammon, 127.)

III. The case made by the petition not having given the court jurisdiction in the matter; the mortgage in question cannot be supported, by showing that the court upon a proper application founded upon its inherent powers, might have directed a similar act to have been done, which would have been binding upon the infants. This would permit a party to enforce a void judgment upon proof that he had a good demand, which if he had properly presented it might have Been the foundation of a good judgment.

IY. The statute has not authorized the court, nor did the court in this case possess any authority, to order the execution of the mortgage in question ; because the disposition of the property thereby made, so far as the interests of the present defendants were concerned, was against the provisions of the conveyance by which such estate was granted to them. It was a direct application to the court to unsettle property which had been already settled, and the legislative authority alone is competent to make such an enactment. (Stone v. Theed, 2 Bro. C. C. 243; Playters v Abbott, 2 M. & K. 97 ; Earl of Shaftesbury v. Duke of Marlborough, 2 id. 111 ; Ivy v. Gilbert, 2 P. Will. 13; Butler v. Duncomb, 1 ib. 448; Evelyn v. Evelyn, 2 ibid. 659; Mills

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v. Banks, 3 ibid. 1; Okeden v. Okeden, 1 Atk. 550 ; Green v. Belcher, 1 ibid. 505 ; 2 Story’s Eq. § 1064, 1064 a.; 20 Wend. 376 .)

V. By the terms of the trust deed executed by Carter and wife to Sniffen, the trust estate was to cease upon the decease of the grantors. Thereupon the estate of the trustee ceased. (1R. S. 724, § 67; Matter of De Kay, 4 Paige, 403.)

VI. The proceedings in' the Court of Chancery, to obtain the order directing the execution of the mortgage in question, were fraudulent as against the present defendants and operated as an imposition upon the court. The order and proceedings of the court, are the only authority given to the guardian to convey the estate of the infants. Proof of the mortgage, as against them, is not made out, without proof of those proceedings ; and those proceedings are, therefore, directly in issue in this suit. Their validity may be as well contested and decided, by way of defence to the instrument founded upon them, as by way of complaint to set that instrument aside. They are in no sense, collaterally in issue. They form the foundation of the case made by the bill, and if those proceedings are successfully impeached, the bill must fail. The complainants were privies to the fraud and imposition practised by the lesses and tenants for life, upon the remaindermen, and had notice of the rights of the defendants. The mortgagees are estopped from denying the validity of the leases. (Galatian v. Cunningham, 8 Cowen, 361, 370, 372; Lawrence v. Taylor, 5 Hill, 107 , 112; Davis v. Shields, 24 Wend. 325 ; 2 R. S. 135, § 7,8.)

VII. Had the whole case been presented to the court, upon the application for leave to mortgage; it is obvious, that the court, if it acted at all for the relief of Mr. and Mrs. Artois, and the lessees, Seaman and Goold, would have directed the expense of rebuilding to be borne by the .parties respectively in proportion to the benefit they would derive from the rebuilding. If the proceedings be not entirely void as against the defendants, by reason of the misrepresentation and concealment practiced upon the court, it is submitted that they do not authorize the court under the mortgage so executed, to charge the estate of these parties, beyond the proportion of the burthen, they would

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in equity have borne, had their rights been brought to the attention of the court. There are no equities in the case greater or prior to those of the defendants, conflicting with this view. The mortgagees are estopped from denying the validity of the leases; and the defendants, as heirs of Thomas Carter, have a right to avail themselves of that estoppel.

VIII. The alleged mortgage was not executed in such a manner as to affect any estate legal or equitable of the infants :—1. An authority should be executed in the name, and profess on its face to be the act and deed, of the principal:—2. A grant of real estate by the act of an agent, not framed and executed in conformity with this principle, is void:—3. The mortgage does not profess to be the act and deed of the infants, or in any way refer to their title in the premises.

Mr. O’Conor,

cited on the liability of the lessees to pay rent after the fire ; Co. Litt. 352 a.; Shep. Touch. 160; Woodfall's Land. and Ten. 311; Platt on Cov. 336; 3 Lev. 146 ; 19 John. 79 ; 24 Wend. 103 ; 4 Barn. & Cr. 261.

The defendants, who are children of Thomas Carter, are seised in fee of the premises in question, by force of his conveyance to Stiffen, in 1829. The complainants, by their bill, set up a lien upon the property, acquired by the mortgage executed by Clason and others, in January, 1837. The defendants did not execute the mortgage, and were, at that time, incapacitated by infancy. The complainants, in order to establish that the mortgage was valid, as to the infants, and created a lien upon their interest in the property ; stated in their bill, the order of the Vice-Chancellor directing its execution.

, This order, therefore, is the basis of the claim made by the bill, and, so far from its being brought into the suit collaterally, its validity forms the principal issue upon which that claim must be substantiated.

The order is vindicated, on the inherent right of the court of chancery, as the general guardian and protector of infants, to

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authorize such disposition of their equitable real estate, as may ■ be deemed most beneficial to the infants.

It is said, on the other hand, that the interest of the infants, when the order was made, if they had any vested interest, was a legal estate, and that the trustee had no estate, except during the life of Mrs. Artois.

I think, however, that the trustee was then vested with the whole legal estate, and that the infants interest, whether vested or contingent, was equitable.

Next, it is objected, that the order of the court was in contravention of the trust, and was, therefore, void, both as beyond the power of the court, and as prohibited by the revised statutes.

The complainants argue, that the statute has no application to trusts which were in existence when it went into operation. That such is the import of its terms, and it should not be construed to act upon existing rights, unless the intention, that it should so act, is expressly declared.

As to this, there is nothing express in the statute, either one way or the other ; and I do not perceive how any existing rights would be infringed, by holding that it restrained the court of chancery from directing an act in contravention of a subsisting trust.

But it is needless to speculate on this proposition, because I do not understand that this court has ever knowingly sanctioned, much less directed, an act by a trustee, in contravention of a trust reposed in him by a deed or conveyance.

This being an equitable estate, to which these infants were presumptively entitled to succeed, on the death of Mrs. Artois, it was within the established jurisdiction of this court to authorize the-trustee to dispose of it, as might by the court be deemed most beneficial for the infants; provided the rights of others should not be injured by such disposal. The Vice-Chancellor thus had jurisdiction of the subject matter, and he exercised the discretion and judgment with which he was clothed. It is not my province to review his decision, either on the facts involved, or the law which was applicable to them. Even if I were satisfied that he erred so far in point of law, as to direct a disposition which contravened the trust itself, I do not think that I could

p. 17

disregard or interfere with his act. How that might he, in a tribunal superior to his, and in a proceeding like this, is foreign to the case.

Conceding that the court had jurisdiction to make the order, and that the judgment of the 'Vice-Chancellor, in exercising it, ought not to be questioned in this suit; the next objection to its validity is, that it was fraudulently obtained, by representing to the court, in the petition, and to the master, on the reference, (upon whose judgment, embodied in his report, the court acted,) that the premises were entirely unproductive, would yield no revenue as they then were, and were liable to be charged with taxes and assessments, when in truth, they were yielding a rent of $3000 a year, secured for six years to come, from responsible tenants, who were bound to pay all the taxes and assessments.

1 consider this an important point, and will examine it in detail.

That such a representation was made to the court, is shown by the production of the petition itself. The master’s report shows that no different statement was brought before him. I cannot presume that a master of such acknowledged intelligence and fidelity, would have made a report, wholly omitting to mention the leases, if their existence had become known to him. Now, was the representation untrue? I entertain no doubt about it. Though the lessors had no legal title, they had the entire equitable right to the income, so long as they lived ; and their act had been so long and so repeatedly sanctioned and affirmed by both trustees, that had Clason attempted to regain the possession by an ejectment, this court would have restrained him, and upheld the leases. And the lessees would not, in an action for the rent, have been permitted to set up title out of the lessors, until they had been dispossessed by such title. The fact that the premises were actually held under those leases, after the stores were rebuilt, and to the end of their terms, speaks volumes in regard to their validity, as well as the opinions in that respect entertained by the various parties then interested in the property. It will not be denied, that on an application to the sound discretion of the court, for permission to mortgage the fee of the land for the erection of stores, the immediate benefit

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of which was to enure mainly to the equitable tenant for life; it was a very material, nay, a vital point, that the court should be correctly informed as to the existing income of the property, and its extent and duration. Nor can it be supposed for a moment, that the court, on learning that responsible tenants were liable for a rent of $3000 a year, and nil taxes and assessments for six years to come, and were entitled to hold the premises at that rent, whether rebuilt or vacant; would make the same order, or any such order, on the subject, that it would make on being informed that the premises were vacant, unproductive, and likely to be heavily assessed, and that, when built upon, they would yield $4000 or $5000 a year.

While, under the circumstances last mentioned, the court might well deem it highly advantageous to the beneficiaries, both present and future, to incur a charge on the property of $14,500, and even $20,000, for buildings; it would probably in the circumstances which actually existed in this case, have left it to the tenants to rebuild, at their own expense ; a course most obviously dictated by their own interest, they being liable for $3000 a year, at all events, and especially if, as the petition and report state, the new erections would yield a much larger rental.

There was not only a misrepresentation to the court in this most essential particular, but the omission to set forth the existence and situation of the demises, must have been intentional, and not the result of accident.

With whatever view or motive, or by whom, the thing was done, these circumstances, in the judgment of law, constituted a fraud against the infants, in obtaining the order to mortgage.

The next inquiry is, were the mortgagees cognizant of the fraud, and, if they were, are the complainants affected by it ? The mortgagees, as lessees in possession, knew all the facts in respect of the demises. They were fully aware that an application for an order to mortgage the lots, for the purpose of rebuilding the stores, was pending before the Vice-Chancellor, and one of them testifies to his impatience at the delay which intervened in perfecting the mortgage. The agreement which they made, to rebuild and receive the mortgage therefor, was one which they were bound to know, was far more for their benefit than

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for that of the owners of the inheritance. But aside from that, the mortgage itself derived its whole vitality from the order of the court, which is set forth in it, verbatim; and in which is recited the master’s report, stating the false ground for his opinion, that the premises were entirely unproductive. The report also stated, that the material facts contained in the petition were true - and as those facts were necessarily the basis of the whole action of the court, I think the parties, relying upon the order to mortgage, must be deemed to have had notice of the statements contained in the petition on which it was founded. Indeed, such parties could not be assured that the court had jurisdiction, without an examination of the petition. Thus, Seaman and Goold either knew, or were chargeable with notice, that in obtaining the order, there had been a fraudulent representation of material facts made to the court. They were bound to take notice of what had been stated and omitted, and they actually knew of the facts omitted, and of the falsity of those which were stated.

The mortgagees being chargeable with notice of the fraud, their assignees are also subjected to its influence. Both Pitcher and Pollard contracted for an interest in the mortgage, as an existing security in the hands of Seaman and Goold ; and on succeeding to the rights of the latter, they received them, subject to all the equities which had attached to those rights in favor of the ostensible mortgagors. The other parties who derived their title from Seaman and Goold respectively, are also affected by the same equities. (Clute v. Robinson, 3 John. 485 ; James v. Morey, 2 Cowen, 247.)

If I am right in my conclusions, the result is, that the order to mortgage was fraudulently obtained, and was void as against the infants ; Seaman and Goold took the mortgage, with notice of the fraud ; it was inoperative in their hands, in respect of the infant’s title ; and their assignees have no better right than they had, to enforce the mortgage against the defendants.

This disposes of the cause, but as I have considered another of the principal points, I may as well briefly state my opinion upon that also, because, if it stood alone, it would bring the suit to the same termination.

The authority conferred upon Mr. Clason was, to raise money

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upon the premises by a mortgage or mortgages. The whole scheme, as presented to, and as sanctioned by the court, was to raise money; to mortgage the lots for money, which money- was to be laid out in erecting buildings, and paying off the prior liens. There was no authority whatever for the guardians to contract for the erection of buildings to be paid for in a mortgage having several years to run. The buildings were to be paid for in cash, and the mortgages were to be given upon borrowing the cash, and for no other purpose. If the trustee found that he could not borrow the money on such a security, he should have desisted, or else have reported the facts to the court. That result furnished no justification or excuse, for executing a mortgage on terms and for objects which the court never authorized. It is no answer to this to say, that he accomplished the object of the court by an indirect mode, which was just as beneficial for the estate. The court will not enter into any speculative inquiry of the kind, and grope about in the mists in which nine or ten years have involved the transaction, in order to see whether the proceeding which it did not authorize, was as advantageous as the one which it sanctioned. The authority granted, was a plain one. It did not allow the giving a mortgage for a building, probably because of the very obvious reason, that a building, to be paid for at a distant day, would cost the infants more than a building to be paid for in cash, as the work progressed,

The trustee under this authority to raise money, executed a mortgage for work, labor and materials. The simple statement of the proposition, suffices to show that the mortgage was not in pursuance of the order ; and it is, therefore, not supported by the order.

The parties apparently understood the necessity of at least an outward compliance with the terms of the order; for the mortgage recites in due form, that Seaman and Goold have loaned and advanced the $14,500 to Clason.

Upon this point, there is no denial that the mortgagees were acquainted with all the facts ; and the holders of the mortgage are affected by those facts, precisely as any assignee is affected

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by proof of the want of consideration in the mortgage which he claims.

It is asked by the complainant’s counsel, are these builders to lose all that they have expended, and the defendants to reap the benefit of the erections without paying anything 1 And the leading counsel insisted that the defence should be rejected, because of the defendant’s acquiescence, and their omission to file a cross bill bringing Glason before the court with these parties, so as to have complete justice done to all.

It is undoubtedly a hard case upon the builders, who so far as I have seen, acted in entire good faith, and honestly performed their contracts. But they were by law chargeable with all the defences existing to this mortgage in favor of the infants ; and they dealt with it at the same peril which every man encounters, who purchases a mortgage or other security not negotiable. Whether they have any remedy, it is not for me to say in this cause. Their bill is filed to foreclose the mortgage. It sets up no other demand against the defendants, and on the mortgage proving invalid, the suit fails. In order to warrant the court in deciding upon their supposed equities, growing out of what has been done in reliance on the mortgage, and its benefits to the defendants ; a case must be brought forward founded upon all the circumstances on which the complainants suppose they are entitled to relief, and the usual opportunity given to the adverse parties to be heard in their defence.

The case of Galatian v. Cunningham,, 8 Cowen, 361, shows that a cross bill would not have been proper here. And as to acquiescence, the defendants on becoming entitled to the possession of the lands and taking such possession, did not thereby in any sense ratify any unauthorized erection which had been made upon the property. A man who takes possession of a house, built without his knowledge on his vacant lot, incurs by the act, no liability to pay for such building.

The bill must be dismissed with costs, but without prejudice to any legal or equitable remedies, other than on the mortgage, which the complainants may have in the premises,^[1]

(a) (a) This decree was reversed by the present supreme court, sitting in equity, bs» *22 fore Hurlbut, McCoun and Edwards, Justices, January 15, 1849. They held, 1st, that there was no fraud shown in obtaining the order to mortgage ; and 2nd, that the authority to execute the mortgage, was properly exercised in giving it to the contractor for the price of the buildings to be erected. The defendants appealed to the Court of Appeals, where the cause is still pending.

Cases cited

Wilson v. Troup 2 Cow. 195 N.Y. p. 11