Ryden v. Jones, 8 N.C. 497, 1 Hawks 497 (1821)

Dec. 1821 · Supreme Court of North Carolina

8 N.C. 497, 1 Hawks 497

Ryden v. Jones.

From Craven.

An executor shall not be permitted to become a purchaser at a sale made by him as executor, notwithstanding such sale be public, necessary, fair, for full price, and that those interested were present and assented to the sale.

This was a petition, filed originally in 1816, in the County Court of Craven, by James Ryden, administrator of Elizabeth Ryden, and Mary Savanoe, shewing1 that Michael Hyman the younger, being seised and possessed of a large real and personal property, in 1793 duly made and published his last will, whereby, after some specific legacies, he gave all the residue of his estate to his four sisters, Margaret wife of Peter Vendrick, Syduey wife of Edward Bowen, Mary Savanoe the petitioner, and Elizabeth Ryden the intestate of the petitioner James. Of this will lie appointed James Hyman executor, who qualified and took into possession the personal property of his testator. The petitioners stated, that among other personal property not specifically bequeathed, was a negro slave named Frank, which Hy-man, the executor, pretended to claim as his own property, whereas it belonged to the estate of his testator, and the residuary legatees were entitled to distribution of the said negro, and of the profits of his labour from the time of Michael Hyman’s death: — that James Hyman died without making any settlement of his accounts as executor, but leaving a last will, whereof he appointed Jones, the Defendant, executor, who qualified and took into his possession the assets of Michael Hyman left unadministered by James Hyman, and also the assets of James Hyman : — that Jones also took into his possession, and retained and employed the negro slave Frank, and received large sums as the profits of his labour :— that James Hyman, in his lifetime, and Jones, since his decease, had satisfied the claims of Peter Vendrick and Edward Bowen, but refused to make any satisfaction to the petitioners for their shares. The petition prayed, that Jones might set forth an account of the assets of Michael Hyman, that came to his hands and to the hands of his testator James: that he might answer especially, whether Frank was not part of the estate of Michael Hyman : that Frank might be sold or valued, and the petitioners receive their respective shares of his value; and that a full account of the distribution or application of the estate of Michael Hyman, by James, might be shewn.

The answer of Jones stated, that he had no knowledge which would enable him to say what assets of Michael Hyman came to the hands of James, but referred to the returns of.James Hyman, made to Craven Court: — that he, this Defendant, never had any assets of Michael Hy-man in his hands, to his knowledge or belief: — that his testator, James, had paid and satisfied Lewis Savanoe, husband of the petitioner Mary Savanoe, whatever legacy, right, interest, or demand, she had, and had the release of said Lewis and Mary to produce : — that he was ignorant whether James Hyman -ever settled with Elizabeth Ryden and her husband Benjamin, or either of them, for any claim they might have under the will of Michael Hyman, or not: — that as to the slave Frank, he had understood and believed that he was part of the estate of Michael Hyman, sold by James Hyman as his executor, and purchased fairly, at a public sale of the éffeets of the said Michael, on credit, by Philip Turner, to the use of James Hyman, who had charged himself with the purchase money, and accounted with all the persons named as interested therein, save Elizabeth Ry-den : — that James Hyman, by will, gave Frank to Fanny Hukins; and that Frank came to the hands of the Defendant as James Hyman’s property j and that as executor, he had disposed of him, and was ready to account with any person lawfully entitled to call on him.

On the several issues submitted to the Jury, they found the facts to he as follows, that the negro Frank was sold at public auction by James Hyman, as executor, and purchased by Philip Turner, for said executor, in March 1794; that the sale was fair and necessary, and that the slave brought his full value ; that all the residuary legatees of Michael Hyman were present at the sale, except Savanoe and his wife, and that all the persons entitled to distribution in the negro, assented to the sale. They further found, that Elizabeth Ryden died two or three months after the sale 5 that James Ryden obtained letters of administration on her estate, in September, 18 LS; that she was covert, at the time of the sale, and at her decease 5 that Benjamin Ryden, her husband, died in the year 1797 ; that letters of administration on his estate were granted to James Hyman, in September, 1797 j and that Benjamin and Elizabeth Ryden left three children, James, the petitioner, Gatsey, and Elizabeth Ry-den, the last of whom was at that time eleven years old. That James Hyman made a settlement of his accounts, as executor of Michael Hyman, in March, 1796 5 that on the 6th of January, 1794, he returned an account of sales, which was signed by the then Sheriff of the county.

On this finding, it was considered by Norwood, Judge, who presided below, that the petitioners take nothing by their petition, but that the same be dismissed j whereupon the petitioners appealed.

Hogg and Hawks for the petitioners 5 Gaston for the Defendant.

Hawks.

The case presents two questions : 1st. Can an executor acquire title to a slave, of the assets of his testator, by a purchase at his own sale ? To this we answer, he cannot, notwithstanding the Jury found, on the issues submitted to them, that the sale was at public auction, necessary, fair, anil for a full price, that most of the residuary legatees were present at the sale, and among others the petitioner’s intestate and her husband Benjamin Ryden, and that they assented to the sale. It is the settled rule of Equity, that a trustee cannot purchase of his cestui que trust, and if he does, the sale will, as of course, be set aside. , This rule is founded in public policy, and is intended to deliver trustees from the temptation of .interest. It matters not, therefore, what degree of fairness or publicity may attend the sale in any particular instance. It is the intent of the law, that the trustee shall exert himself to ,ake the best sale, and to that end, the shall disclose the full value of the property. If he be permitted to become the purchaser, it is impossible to suppose that he will be very anxious that competitors shall know all the advantages of the property, or that the terms of the sale should tend to enhance the price. The rule is preventive of frauds ; it ensures the good faith of the trustee, by divesting him of the character of a purchaser, and by allowing the cestui que trust an option in every case to have the sale declared void or not. The doctrine contended for is illustrated by very many adjudications, and has been applied to every species of trust. ' ,

A sale by a trustee at auction will not be supported— ('Campbell v. Walker, 13 Ves. 602 — Sugden 427".)

The necessity for a sale will not affect the general rule — (Owen v. Foukes, 6 Ves. 630, in notis.')

A fair price will "not protect the trustee in his purchase — (Randall v. Errington, 10 Ves. 428.)

The rule is not affected, either, by the assent of a ma~ jority of those interested." Lord Ilqrdwicke, indeed, intimated that it would, in Whelpdale v. Caokson, (1 Ves. 9,) saying, that if a majority of the creditors agreed to allow the sale, he “ should not he afraid of making the precedent.” This was held by Lord Eldon to be erroneous, in Ex parte Lacey, (6 Ves. 625-8) — Ex parte James, (8 Fes.ssr.)

The assent of Benjamin Ryden even does not take the case out of the rule — (10 Ves. 427-9 — 13 Ves. 602-3.) It is observable, that in this latter case the purchase was made, as in the case before the Court, by an agent. In many of the cases referred to, the purchases were made, by trustees from the cestui que trust — the cestui que trust must of course have assented, and yet the purchase has been set aside.

The rule has been adopted in New-York in all its rigour, and the whole of the cases are examined by Kent, Chancellor, in JJavoust v. Fanning, (2 Johns. Ch. Ca. 252,) and it has received the sanction of the Courts of our own State — Mealor v. Kimble, (1 Law Repos. 255)— White v. Brown, (2 Law Repos. 447.)

The second question is, whether the lapse of time from 1794 to 1818, is sufficient in Equity to bar the Plaintiff's relief? It appears from the case, that Elizabeth Ryden was a feme covert until her death in 1794 ; her husband, who survived her, became entitled to her equitable dio-ses in action ; he died in 1797, and the executor, who was bound to account with his representative, became himself administrator, so that the same person was bound to receive and to pay, and there could be no ladies. But the answer obviates all difficulty as to lapse of time ; it does not set up either payment or length of time as a defence, but admits the petitioner’s right to recover, and avers a readiness to settle, but insists that Defendant should account only for the price of the slave. This «S a waiver of laches, and an admission of. an open trust, and the validity of the sale is the only point made by the pleadings in the case.

Gaston, contra.

The rule contended for never had application to the case of a controversy between executor and residuary legatees. An executor is not a mere trustee to sell, and pay the proceeds to his cestui que trust, but is qualified owner of the goods of his testator— (Toller 101-2-3.) He may give, assign, release, sell, if there be no fraud in the transaction. If a trustee alien without consideration, or with notice, the purchaser becomes trustee. It is not so with the alienation of an executor ,• if he use the goods of his testator as his own, they may be taken in execution for his debts—Whale v. Booth, (4 Term Rep. 623)—Quick v. Staines, (1 Bos. & Pul. 293.)

He is only liable for the value of what he received, and makes the chattels of the testator his own, by paying the value—(Toller 108, 185—Plow. 185-6.) An executor is never liable when fairly intending to do his duty—(2 Madd. 114.) And to residuary legatees he is liable for value—(Ibid. 127-8.) Residuary legatees have no right to question the disposition of assets—(1 Madd. 230.) It is only when he violates a trust, that he is answerable for more than the value, and then is simply not permitted to make gain—(4 Ves. 622.)

As to the cases relied on, they are all cases of real estate, and no instance can be shewn of the application of the rule to executors, as such: against such an application are, 2 Hen. & Mum. 261, 265 — 4 Ibid. 430 — 1 Hessaussure’s Rep. 567.

The only doubt in our country has been, whether an executor is liable for the full value, if purchased for less, in the manner pointed out by law7 — (See act of 1723— Tomlinson v. Belastalius, 2 Hay. 284.)

The rule insisted on .is of modern date in England. The auciont rule was, that a trustee might buy at a public sale, if it were done fairly, and for value, unless a majority of those interested should object — (1 Cruise's Big. 551-2 — Sugden 426-7 — Whelpdale v. Cookson, 1 Ves. 9 — 5 Ves.jr. 682.) And the fact is avowed, that the rule now applied is different from the former rule, and has grown out of considerations of policy applicable to Great-Britain: but at no time, and in no country, would the application of the rule, under the circumstances of this case, be granted,

The petition is brought by the representative of the residuary legatee, who must do justice before he can get it. The transaction sought to be set aside is honest, took place twenty-three years before the petition was filed, was assented to by all interested, and is now to be invalidated because of subsequent contingencies, and to be invalidated to the ruin of an executor who has done his duty. Length of time is an objection •, the sale was made in 1794, the account of sales filed immediately, the estate was settled in 1796, and the balance due Ryden was then ascertained, and in 1797 he died without having administered on his wife’s estate — (5 Ves. 682 — 1 Caine’s Cases in Error 20.) But the transaction cannot be set aside if done by universal consent — (6 Ves. 630— 8 Ibid. 352.)

Hogg, in reply.

The rule, that a trustee cannot purchase, is admitted ; but it is said that it does not apply to executors, and it is insisted that much difference exists between a mere naked trustee and an executor who has an interest, and may acquire property in a personal chattel of the testator, if the executor be a creditor, or if he advance money in the payment of debts. It is not alleged in the answer, nor does it appear in the case, that the executor was a creditor, or that he was in advance. He claims as a purchaser only, the specific difference pointed out, therefore does not exist in this case, and it is not necessary now to decide, whether an executor in this state can become the owner of a chattel which he is by act of Assembly directed to sell on credit. It is an inversion of sound argument to suppose, because the executor has greater power over the property of his cestui que trust, that the law should be less vigilant to prevent its abuse. The confidence between executor and creditor and legatee, is of the most frequent occurrence, affords great temptation to abuse, and admits a strong probability of concealment. It is for the Defendant to shew that a rule to prevent frauds in trustees, has or can |)e dispensed with in the case of executors. The case of White v. Brown, before cited, is the sale of a slave and a purchase by the executor, and is a decision yjjs (3ourf; point. It is said however, the rule is of modern origin and should not obtain in this State, that it has been departed from in Yirginia, and two cases are cited from Hening & Mumford. Most of the cases relied on by the petitioner, though not ali, have been decided since our revolution, but it is no where pretended that the rule laid down in them is an innovation : they are declaratory of what the law has been and is, not of what it shall be. But whatever may be the law in Yir-ginia, decided in indulgence to what has been the practice of that State, it will scarcely afford a safe precedent for this Court in departing from a rule adopted by themselves, founded as it is in the wisest policy, and sanctioned by the decisions of the greatest men that ever presided in Chancery Courts. The assent found by the Jury is much relied on ; a feme covert could not assent, it is a finding against a legal disability ; neither does assent make any difference, for it must always have been given by cestui que trusts sui juris in sales to their trustees, and yet these sales have always been set aside. As to lapse of time it has already been met in the opening argument.

On another day, Hogg read a case from 1 Johns. Ch. Ca. to shew that Kent considered an executor within the rule that disabled a trustee from being a purchaser.

Tavxor, Chief-Justice.

It has now become a settled rule of equity, too firmly established to be shaken, that a trustee shall gain no benefit to himself by any act done by him in his fiduciary character ; but that all his acts shall be for the benefit of the cestui que trust. It is not necessary in the view I take of the case, to enquire whether an executor comes within the rule as established in England, though in the case of Barden v. Barden, 18 Ves. 170, it was decided that an executor cannot purchase his testator’s effects ; because our local laws have materially changed the rights and duties of an executor. The act of 1723, cli. 15, explained and modified by se-yeral subsequent acts, restrains the executors from selling the unperishable estate without an order of Court; and as the law now stands, the County Courts are to judge of the necessity of a sale either to make distribution or to pay debts. It lias not intrusted the executor with the power of selling at his own discretion $ nor is it any justification to him, acting without an order of Court, that the sale was just and necessary. This .however does not change the principle on which the law considers void a purchase made by a trustee, for it would still be so if the sale was authorised by an oi%ir of Court. The general tendency of our acts in this respect is rather to limit than enlarge the powers of an executor, and shews that the doctrine relied on by the petitioners applies a fortiori to them.

The length of time cannot have an effect on the petitioner’s rights under the circumstances of the case. It is an open unexecuted trust, and it is not pretended that the share of the price for which Frank was sold, has ever been paid to Elizabeth Ryden, or her representatives.

Haza, and Hendersow, Judges, concurred.