Moore v. Moore — 4 Sarat. Ch. Sent. 37

Majority

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J. L. Moore and others v. M. P. Moore and others.

Headnote

The court of chancery protects an infant against his own immature judgment and improvident conduct, as well as against the acts and designs of others.

Where an infant defendant, was examined as a witness against his own interest, by an adult co-defendant, his brother, under a common order, and against the objection of the guardian ad litem; his deposition was suppressed.

Such an examination should not be had, without the special order of the court, made upon a full understanding of all the circumstances.

An agent entrusted with the collection of a mortgage, caused the premises to be bid off for his own benefit, at the sale on the foreclosure, for less than their value, and for less than a third of the debt; the mortgagor being insolvent. Held, that the purchase must be deemed to have been for the benefit of his principal.

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May 7, 8, 9, 23, 26 ;

August 28, 1846.

Proof that the principal limited him to bid leas than the sum for which he bought the premises, will net support such a purchase ; unless it were shown that all the facts bearing upon expediency of the pripcipal’s buying the property, were communicated to the latter.

The bill was filed January 19, 1844, by John L. Moore and some others of the heirs of Lewis Moore, late of Hackensack in the state of New Jersey, deceased, against Michael Price Moore, Charles Moore, and the residue of those heirs, and against William B. Aitken. The object of the bill was to have the purchase of a house and lot in Eighteenth street, near the Fifth Avenue, made by W. B. Aitken, under the foreclosure of a mortgage held by Lewis Moore, conducted by M. P. Moore as his agent, declared to have been made for the benefit of Lewis Moore; and to have a partition of the same made among his heirs. The lot had been conveyed by Aitken to M. P. Moore. The bill waived an answer on oath from the latter.

Separate answers were put in by the two last named defendants, and testimony was taken to a considerable extent, on both sides. Charles Moore, who was in his nineteenth year, answered by his guardian ad litem. His interests were identical with the complainants, but he was examined as a witness in behalf of the defendants M. P. Moore and Aitken, under a common order. His guardian ad litem objected to his being examined; and the complainants objected also, on the ground that being an infant, he could not be so examined against his interest.

The facts material to the understanding of the points reported, will be found in the opinion of the court.

There were motions on both sides, to suppress testimony ; of which that to suppress the deposition of the infant defendant will alone be noticed.

E. Sandford, for the complainants.

The deposition of C. Moore should be suppressed. It was given against his interest. He was incapable of electing to testify; the court alone could make the proper election, and exercise a discretion for him. The court is bound to see that his

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interests are protected, and to protect him against himself. (Bing, on Inf. 3, 104.) Even, his guardian cannot compromit his rights ; the. guardianes answer cannot be read against him, nor can the infant admit any thing on which the court will act. (2 Vern. 342; 2 P. Will. 387, 401; 2 Atk. 377 ; 5 Paige, 536; 6 ibid. 353 ; 1 Barb. Ch. Pr. 149.)

On the merits, Mr. Sandford argued the following points:

I. The pleadings establish the facts, that at the time of the foreclosure of the mortgage executed byEdmund Wilkes to Lewis Moore, for $4000, Michael Price Moore was the agent of Lewis Moore, and that the collection of that bond and mortgage and securing the debt evidenced thereby, were matters expressly placed in his charge as such agent, and that M. P. Moore conducted all the proceedings in that character. That he was, in fact, the purchaser of the mortgaged premises at the sale. That no consideration or purchase money was ever paid, and M. P. Moore has ever since received the rents of the premises.

II. The purchase so made by M. P. Moore, was clearly a fraud upon his principal, Lewis Moore, and was successfully concealed until after his decease. Lewis Moore entrusted him with the whole management of his property in New York, and reposed in him as his agent, entire, unsuspecting and absolute confidence. It is the cardinal rule of this court, that he who bargains in a matter of advantage to himself, with a person placing confidence in him, takes upon himself the whole proof that the transaction is righteous. (6 Ves. 266, 276 ; 5 Price, 42; 9 ibid. 169; 10 ibid. 62; 1 Cox Ch. C. 112; 2 Sim. & St. 41; 14 Ves. 273, 287, 289, 293, 300; 1 John. Ch. R. 394; 1 Story, Eq. Jur. § 218, 308, 310, 313, 315, 316, 316, a.) Further, as to his purchase, being agent, &c., 10 Ves. 381, 393, 401; 9 ibid. 235, 245 ; 2 John. Ch. R. 252; 5 John. 43 ; 1 Tamlyn, 282; 8 Cowen, 361, which overrules 13 John. 226 ; 5 Bligh, N. S. 165; 8 Lond. Jurist. Rep. 1015.)

III. The purchase was not merely constructively fraudulent from the relation of the parties, but it was fraudulently devised and concerted with the defendant William B. Aitken, to conceal it from the knowledge of Lewis Moore. Aitken took the title in

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trust for M. P. Moore, and conveyed it to him on the 20th June, 3 843, shortly after the death of Lewis, in execution of the trust. He paid no consideration, and had made no payments whatever on account of the property, until after the filing of the bill in this cause. The title still appears from the records, to be in Aitken, and as the apparent holder of the legal title, as well as from having been a party to the fraud, he is properly made a defendant in this suit.

IV. The heirs at law and devisees of Lewis Moore, are entitled to a decree declaring that M. P. Moore holds the legal title to the premisesin question, in trust for them ; and directing him to convey to them their respective portions thereof, free from all charges or incumbrances imposed, suffered or permitted hy him ; or directing a sale of the premises, and a similar conveyance to be made thereupon by M. P. Moore to the purchaser, and a distribution of the proceeds of the sale among the parties according to their several interests.

V. The defendants M. P. Moore and W. B. Aitken should be decreed to pay the costs of this suit.

A. G. Rogers, for the defendant, M. P. Moore, insisted that C. Moore’s deposition was competent and properly taken.

It is no objection that he was testifying against his own interest. ( 1 John. 162 .) He was, therefore, a most disinterested Avitness. (1 Hoff. Ch. Pr. 485, as to the practice.) The counsel also cited, 10 Mod. 20, Mosely 312 ; 2 Dick. 781; Prec. in Ch. 411; 1 Aitk. 451; 3 P. Will. 287; 1 Bibb, 154 ; 1 Gallison, 630; 2 Cowen, 139. It was necessary to make C. Moore a party, and his interest is in the question, rather than in the event of the suit. An infant cannot make admissions; but that is no reason Avhy he may not prove a fact, though it be against his interest. There Avas no judgment or discretion to be exercised here. The rights of third persons were concerned. Suppose he were the subscribing witness to a deed. His infancy is a personal privilege; these complainants cannot take advantage of it.

On the merits, Mr. Rogers made the following points:

First. The bill in this cause being filed by some of the heirs

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of Lewis Moore deceased, for a re-conveyance by the defendant Michael P. Moore, of the premises mentioned in the bill, solely on the ground that M. P. Moore was the agent of Lewis Moore, deceased ; that he purchased the premises at the master’s sale, under a foreclosure of a mortgage to Lewis Moore, for his own benefit, and that he kept his father in ignorance of the intended sale and of the proceedings to foreclose the mortgage; it is clear that unless these facts be proved, there is no foundation for the suit.

Second. The allegation of the purchase by M. P. Moore, is not only positively denied by the answers of the defendants, M. P. Moore and William B. Aitken, but there is not a single witness produced to prove the allegations or disprove the answers; but on the contrary, the complainants themselves disprove this allegation by their own testimony, nor is there the slightest testimony on the part of the complainants, to prove any of the material allegations in the bill; but on the contrary, all those other allegations are entirely disproved.

Third. If it be said, that though there is no positive proof of the purchase by Michael P .Moore, on his own account, there are facts and circumstances in the case to raise the inference of such purchase—the reply is, that those facts, even if unexplained, and if there were no rebutting facts and circumstances, would not be sufficient against the positive denial of the answers ; more especially as the complainants have no personal knowledge on the subject.

Fourth. The facts and circumstances relied on by the complainants to raise the inference that M. P. Moore purchased the premises on his own account; slight as they are, are all explained and accounted for, and are also met by opposing facts and circumstances.

Fifth. Even if the subsequent conditional conveyance in the nature of a mortgage by Aitken to M. P. Moore, be not satisfactorily explained as a conditional conveyance or mortgage, or security, by Aitken to Moore to reimburse him the amount advanced, and the same is to be considered as an absolute conveyance, Aitken had a right to sell and M. P. Moore a right to put-

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chase the property; his relation as agent, quoad this transaction, having then entirely ceased.

Sixth. The rule that a trustee cannot purchase, does not apply to this case. The principle applicable to a trustee, being different from that applicable to a mere agent.

Seventh. But this general rule is qualified—not that a trustee cannot purchase, but that he cannot purchase from himself without the consent of his cestui que trust. But a trustee may purchase even from himself, with the consent of his cestui que trust.

Eighth. There is no rule that an agent cannot purchase of his principal even at a private sale ; the only disadvantage accruing to him in such case is, the onus lies on him to show that no advantage has been taken of his principal.

In this case the agent had the consent of his principal to purchase ; all the facts were communicated to him, and the principal was advised to purchase and refused, and the sale was beneficial to, and approved of and ratified by him.

Ninth. But the general rule that a trustee cannot purchase, does not apply to judicial sales, much less to a mere agent to collect, not clothed with the legal title to the property. ( 13 John. 220 ; 1 Peters’ O. C. R. 364; 2 Dow, 299 ; 1 Molloy, 417, 457; 1 Sim. & St. 566; 9 Pick. 212 .)

Tenth. The sale was fair, well attended, and the premises sold for their full value ; but whether sold for full value or not, is immaterial under the frame of this bill, and the circumstances of the case. (2 Cowen, 140, 175, 184.)

W. B. Aitken, in person, argued the following points :

I. The defendant Aitken was a bona fide purchaser of the premises described in the complainant’s bill. The sale to him was valid, and a bar to all claim Lewis Moore had to the premises under his mortgage; and the sale is not to be invalidated by any acts between Michael Price Moore and Aitken subsequent to the sale. (2 R. S. 119.)

There is no proof that the defendant Aitken knew of the relation between Lewis Moore and M. P. Moore, or that he was privy to any fraud. Fraud is denied by his answer, and is not

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proved by the complainant; and the bill should be dismissed as to the defendant Aitken, with costs.

II. To establish fraud or interest, the proof is with the complainants. Honesty is to be presumed, the contrary is to be proved at least by strong circumstances (3 Atk. 536.)

III. Lewis Moore, (the mortgagee,) had sufficient time to object to the sale, but did not object; on the contrary he assented to the sale. A suit should have been commenced without delay. (3 J. C. R. 426.)

IV. The presumption is that the price premises shall bring, on a sale at public auction, under the direction of a master of the court, is the true value of the premises. Inadequacy of price, is not a good ground for setting aside a sale, unless it is so gross as to shock the conscience or to bear undoubted evidence of fraud. ( 11 John. 566 .)

V. From the testimony of Charles Moore, it appears that Michael Price Moore furnished his father, Lewis Moore, with all the knowledge he himself possessed in the matter, and Lewis Moore acquiesced in the sale, and the sale on this testimony should be confirmed.

E. Sandford,

in reply, referred to 1 Sand. Ch. R. 148 ; 14 Ves. 273 ; 6 Watts & Serg. 18 , 40 ; 9 Paige, 237 ; 10 ibid. 352; and Ellis v. Messerve, before the chancellor, not yet reported.

The motion to suppress the deposition of Charles Moore, presents a new question. He was properly included in the suit as a defendant, and in one aspect of the relief sought by the bill, a sale of the lot in question as being the real estate of Lewis Moore at his death, Charles Moore was a necessary party.

He has been examined as a witness in favor of his co-defendants, M. P. Moore and W. B. Aitken, adversely to his own interest in the subject matter of the suit.

There is no doubt that the general rule is as insisted on by the defendant’s counsel, that one defendant may examine as a witness in his own behalf, another defendant who is not interested in the question to which he is called.

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And I think, with his own assent, he may in general, be examined for his co-defendant against his own interest. Where he is interested, and is unwilling to testify, he cannot be improved as a witness in equity, or at law.

Is an infant within the general rule ? An infant’s admissions may be proved against him, but they are to be cautiously weighed with reference to his age and understanding.

Here the infant could not be compelled to testify. The officer appointed by the court to watch over his interests in the suit, objected to his being examined. If these defendants had sought to compel him to testify by a cross bill, the court would not have permitted him to answer on oath ; and if he had inadvertently admitted their allegations, they would not be entitled to any relief upon such admission.

The court is bound to see that an infant litigant’s rights and interests are protected. It will not suffer him to make a discovery in the suit, nor to affect his rights by any admission contained in his answer. When there is a discretion to be exercised for him, or affecting his interests, the court appoints a suitable person, or refers it to a master, to execute such discretion. In short, it protects him against his own immature judgment and improvident conduct, as well as against the acts and designs of others.

For these positions, I refer to a few of the numerous authorities, viz. Napier v. Effingham, (2 P. Will. 403;) Wrottesley v. Bendish, (3 ibid. 237 ;) Legand v. Sheffield, (2 Atk. 377;) Bulkley v. Van Wyck, (5 Paige, 536;) Stephenson v. Stephenson, (6 ibid, 353;) Bingham on Infancy, 114 to 121. In Serle v. St. Eloy, (2 P. Will. 386,) the Master of the Rolls refused to act on an admission made against her interest in a bill filed by an infant, and directed the cause to stand over, so that the bill might be amended. And see Lady Effingham v. Napier, (3 Bro. P. C. 301.) Lord T hurlow, it is true, allowed the infant’s guardian ad litem to be examined as a witness ; but the report does not show whether it was in favor of the infant or against him. (Walker v. Thomas, 2 Dick. 781.) In any event, he as guardian merely, had no interest in the event of the suit. The argument is plausible, that an infant ought to be permitted to tell the truth, even when it is against his own interest. And the

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argument would be equally cogent, to allow a complainant to compel an infant who is eighteen or twenty years of age, to answer his bill on oath and be bound by his discovery. But so long as the court undertakes to protect the rights of infants ; shielding them from discovery, exercising all discretion for them, and precluding them from influencing their interests, either by their acts, or their ad missions in pleading; I think it would be subversive of the principles upon which the court thus proceeds, to suffer an adult defendant, by any inducements, whether of persuasion or of threats, to obtain an infant’s consent to appear and testify as a witness against his own interest, in a cause where he is a party.

I do not say that in every such case the adult defendant shall be inflexibly precluded from obtaining testimony from an infant co-defendant; but I am entirely satisfied that it should not be permitted except by the special order of the court, made upon a full understanding of all the circumstances.

The deposition of Charles Moore, must therefore be suppresssed.

The principal questions involved in the cause - are free from difficulty.

Mr. Aitken claims to be a bona fide purchaser of the house and lot, without notice, but his case presents scarcely a single element of such a purchase. One indispensable requisite to establish the character of a purchaser in good faith, is the payment of the purchase money. Now Mr. Aitken, when this bill was filed had not paid a cent of the sum which he had bid upon the sale. The alleged crediting of the amount in the private account of M. P. Moore, when Aitken knew the money did not belong to him, does not deserve notice. In Dr. Moore’s own version of the affair before the surrogate, he says his father directed the. sale to be made for cash ; yet no cash whatever was paid, up to the period of this litigation.

M. P. Moore now appears before the court as the owner of the house and lot in fee, stating, it is true, an undefined and indeterminate arrangement between Aitken and himself as to the future ownership; but Aitken, having no legal title, nor any

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claim as a bona, fine purchaser in equity, may be placed entirely out of view, in disposing of the rights of the parties.

The .case is thus narrowed down to a very simple state of facts; the narration of which will suffice to satisfy any fair mind of what the law should decide; and the rules of law, will be found in this respect, to second the dictates of integrity and good sense.

Dr. Moore from early in 1839 to the death, of his father in June 1843, was the agent of the latter, having the entire charge of his real and personal property in this city. The bond and mortgage of Wilkes came to his hands as such agent; and previous to 1842, he had obtained possession of the mortgaged premises. In 1841, they yielded a rent of $250, a year, out of which were payable the repairs, taxes and insurance. The loan made on this mortgage by Lewis Moore in 1836, was $4000. The mortgagor had become hopelessly insolvent. In the winter of 1841, 1842, when real estate was exceedingly depressed in price; having, as one of the masters of the court stated, no market price; this mortgage was foreclosed by Dr. Moore as his father’s agent. He attended the sale, and suffered Mr. Aitken to become the purchaser for $1660. Mr. Aitken was his legal adviser at the time, and he had suggested to A., that the sale was to take place, and expected to meet him at the sale. The mortgage debt was then about $5000; the property, yielding an income of $250, annually, was estimated by some witnesses as low as $1500, to 1600, for cash, and by others at $2800. It was appraised at $2500, by the assessors in their assessment for the city taxes in 1842. In the fall of 1845, the same witnesses valued it at $2900, and $4000 respectively.

Dr. Moore paid the master’s fees about a year after the sale. Nothing else was ever paid to the master ; but on his executing the deed to Aitken, Dr. Moore gave to the master his receipt for the.net proceeds of the sale, as agent for his father. While these proceedings were going on, the latter, an aged, infirm man, was drawing to the close of his life. He had intrusted every thing to his agent; he had rarely visited New York for several years, and not at all for two years, before his death ; and he died just after the delivery of the master’s deed. A few days after his

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death, Mr, Aitken executed to Dr. Moore, a deed of the house and lot, which was not recorded ; and the latter has received the rents, with the exception of a single quarter, from the time the mortgagor gave up the possession, to the closing of the testimony in the cause.

He states that he credited the purchase money to his father in account, and he produced an account showing it credited under a date six days subsequent to his father’s death. And he now claims that the master’s sale was valid, and that his father had no right or interest in the property; and as a necessary consequence, that it belongs to him.

In other words, the position is, that the general agent of a party, proceeding to collect a mortgage for his constituent, may buy the property at the sale on the mortgage for less than a third of the debt, pay the price by a paper credit to his constituent, and become its absolute owner.

Before giving my view of this monstrous proposition, it is proper to advert to the ground on which the proceeding is justified by the defendants. Dr. Moore insists that his father had an inveterate horror of owning real estate in this city, and instructed him peremptorily, not to bid over $1500 on the sale of the house and lot. The deposition of Charles Moore being out of the case, there is no proof in support of this direction, except that derived from Dr. Moore’s examination before the surrogate, which was introduced as an admission by the complainants. There is no positive allegation in the examinations, that Lewis Moore restricted him to a bid of $1500. In one paragraph, Dr. Moore says that Aitken knew that his father had authorized him to go no higher than $1500 ; and in the only other paragraph concerning it, he says he told the master that he was limited by his father not to bid over $1500. He also states that he paid Whitely $20 for the release of the equity of redemption, with the consent of his father. But this payment was consistent with his father’s sttpposing either that he was the purchaser, or that the property was yet to be sold.

The testimony falls entirely short of establishing that Lewis Moore limited his agent to bid only $1500.

If the testimony of Charles Moore were admitted, it would

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not materially affect the case. In order to support his own purchase of the subject matter of his agency, after proof of actual payment of the price, it would be incumbent on Dr. Moore to prove that his father gave the instruction after he had informed him fully of all the facts, and of his own intention to buy the property at a price beyond the limit designated. It seems that Lewis Moore’s dislike of New York lots, did not prevent him from buying in four other houses and lots on the foreclosure of mortgages, about the period of this sale; hence, that element of the alleged instruction is not sustained. Now, can any one believe, that Lewis Moore, as a man of sense and intelligence, if he had been aware of the state of the market for the sale of lands in New York, that there were none but forced sales made, that this lot was in a rapidly increasing part of the city, was in his own possession irrecoverably, and producing a net income equal to the interest, at six per cent, on at least $3000; that the mortgagor was desperate, and the lot on which he had loaned $4000, was his only resource for payment; would have instructed his agent to let it go for $1500 ? Especially, if his agent had told him that, if he would not bid beyond that, the agent himself would buy it at a greater price, Would not Mr. Moore, under those circumstances, have instructed his agent to bid $4000, rather than $1500 ?

Another ground which was urged at the hearing, was, Lewis Moore’s ratification of what had been done by his agent. This was not set up in the answers ; and, moreover, as it rests upon the testimony of Charles Moore ; I need not comment upon its validity.

The law is so clearly settled, that a purchase, under the circumstances of this case, cannot be permitted to stand; as to render it superfluous for me to state the authorities in detail. I will refer to Van Epps v. Van Epps, 9 Paige, 237; Torrey v. The Bank of Orleans, 9 ibid. 649, affirmed unanimously, in the Court for the Correction of Errors, December, 1843^[2] ; Cram v. Mitchell, 1 Sandf. Ch. R. 251; and the cases cited

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in those decisions; also, Rothschild v. Bookman, 5 Bligh, N. S. 165, 189; Charter v. Trevelyan, 11 Cl. and Fin. 714, 732. It was insisted, that the rule sustained in these cases, does not apply to a public judicial sale, and the case of Sheldon v. Sheldon, 13 Johns. 220 , was relied upon as establishing the exception. That decision was in a court of law, and what was said upon this point, was merely a dictum of the Chief Justice. Under the issues there, the question could not be presented.

If it were a decision, Galatian v. Cunningham, 8 Cowen, 361, 372, 379, in our court of last resort, overrules Sheldon v. Sheldon. See also the note to 13 Johns. 222 ; and Davoue v. Fanning, 2 J. C. R. 252.

Mr. Aitken’s argument illustrates one of the many obvious reasons, why an agent should not be permitted to purchase at a sale like this, unless with the consent of his principal. He said it was the practice of mortgagees to have third persons appear and bid at their sales, instead of bidding themselves, lest others coming to bid, might suppose that the mortgagee intended to buy in the property, and that their competing with him would be useless. How easy is it, at such a sale, for an agent of the mortgagee, who wishes to buy the property at a low price, to cause the circle of bidders to understand, that the mortgage is more than its value, and that the mortgagee bidding through his friend, will not let it go for much less than the mortgage 7 And how difficult would it be to prove his interference 7

I do not assert that an agent may, in no case, purchase at a sale made in behalf of his principal. The principal may assent before hand, with full knowledge of the facts ; he may acquiesce after the sale, in a purchase made by his agent; or he may, by lapse of time, be debarred from questioning its validity.

But I must say, that in my judgment, the purchase in this case ought not to be permitted to stand as against the heirs of Lewis Moore, in any court of equity.

The purchase must be held to have been made for the benefit of Lewis Moore, and the title to have become vested in M. P. Moore, for the benefit of his heirs at law.

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Dr. Moore must account to the heirs, for the rents which he has received since the death of Lewis Moore, and all just allowances will be made to him for his disbursements for taxes, assessments, insurance and necessary repairs. A similar account must be rendered by Mr. Aitken, of the rents which he collected.

The decree will also direct the premises to be sold by a master, and that both Dr. Moore and Mr, Aitken join in executing a conveyance to the purchaser.

The proceeds of the sale, together with such sums, if any, as may be found due from those defendants in respect of the rents, will be distributed between the widow and heirs of Lewis Moore, in the same manner as if the land were sold under a decree in partition. The master will retain, from Dr. Moore’s share of the proceeds, the sum found due from him, if he has not previously paid it to the master for distribution. The shares of the infants are to be brought into court and invested, as also the third part out of which the widow is to receive the income, unless she accepts the present value of her dower right. The decree must declare the rights of the respective parties in the property.

It may also- provide for Mr. Aitken’s receiving from Dr. Moore, the sum paid by him to the latter, on the 29th of March, 1844.

The complainants are entitled to recover their costs of suit, against those defendants, up to the entry of the decree, together with the costs of the accounting. The costs of the sale, and those of the guardian ad litem, will be paid out of the proceeds of the sale.

Neither partyis to have costs against the other, on the motions to suppress testimony.^[2]

(a) (a) Affirmed by the supreme court in equity, in the first district, March 31, 1849, before Jones, Edmonds, and Hurlbut, Justices.

Footnotes

(a) (a) Reported in 7 Hill, 260 . And see Dobson v. Racey, 3 Sand. Ch. R. 60; Ward v. Smith, ibid. 592.

Cases cited

Sheldon v. Sheldon 13 Johns. 220 N.Y. Sup. Ct. p. 49