« AnteriorContinuar »
faith or adequacy of price, and whether the trustee bas or bas not a personal interest in the same property. Nor is it sufficient to enable a trustee to make such a purchase that the formal leave to buy, which is usually granted to the parties in a foreclosure or partition sale, have been inserted in the judgment. Such a provision is inserted merely to obviate the technical rule that parties to the action cannot buy, and is not intended to determine equities between the parties to the action, or between such parties and others. Fulton v. Whitrey, 66 N. Y. 518; Torrey v. Band of New Orleans, 9 Paige, 649; Conger v. Ring, 11 Barb. 356. But where the the trustee has an interest to protect by bidding at a sale of the trust property, and he makes special application to the court for permission to bid, which upon the hearing of all the parties interested is granted by the court, then he can make a purchase which is valid and binding upon all the parties interested, and under which he can obtain a perfect title. See DeCaters v. DeChaumont, 3 Paige, 178; Gallatian v. Cunningbam, 8 Cowen, 361; Davone v. Fanning, 2 Johns. Ch. 252; Bergen v. Bennett, 1 Cai. Cas. 20; Chapin v. Weed, 1 Clark Ch. 469; Colgate, ex'r. v. Colgate, 23 N.J. Eq.372; Froneberger v. Lewis, 79 N. C. 426; Faucett v. Faucett, 1 Bush, šll; Michoud v. Girod, 4 How. (U. S.) 503; Campbell v. Walker, 5 Vesey, Jr. 678; Farmer v. Dean, 32 Beav. 327; Potter's Willard's Eq. Jur. 607; Lewin Trusts, 7th ed., 413; Godefroy Trusts, 184. Here, upon notice to all the beneficiaries, an order was made allowing these appellants to bid. After they had made their bids and signed the terms of sale, a further hearing was had upon notice to all the parties as to the fairness of the sales and the adequacy of the prices, and the sales were approved and confirmed by the court. Under such circumstances there can be no doubt that those appellants would get a good and perfect title to the lands purchased by them. And their title would be good, not only as against all the living parties to the suit, but as against unborn grandchildren, if any such should hereafter come into being. Code of Civ. Pro., $$ 1557-1577.
The order appealed from should, therefore, be affirmed, with costs. All concur, except Miller J., absent. Order affirmed.
into dealings between the trustee and cestui qui trust.3 The trustee's duties are, to carry out the trust, to use care and diligence, to act with good faith. Hence, the trustee can acquire in and for his own benefit the trust property, only as he can do so consistently with the sweeping and overlapping requirements. The restrictions grow out of the relationship, and the relationship constitutes the protection to the cestui qui trust, not the good faith or want thereof of the trustee,6 for it is for the former to abide or not by the transaction, and his action is controlling. The general rule follows that a trustee may not so manage the trust as to gain personal advantage other than that contemplated by the inception of the trust, e. g., his regular compensation, and if he does, the gain or ad. vantage may be claimed by the cestui qui trust.8
He can not be allowed by his acts or declarations to work a disadvantage to a sale of the trust property.9 The cestui quitrust may claim the trust property in whatsoever hands he may find it, or through whatever hands it may have passed, except where the rights of bona fide purchasers for value without notice intervene.10 But not to commit a breach of peace.11 It is not necessary to trace the trust fund into some specific property in order to enforce the trust. If it can be traced into the estate of the defaulting agent or trnstee, this is sufficient.12 If property is bought with trust funds by a trustee, it will be impressed with the original trust.13 If the trustee speculates with trnst funds, the advantage may be claimed by the cest ui.14 The latter may take the profits, or the principal with compound iuterest; 15 or he may proceed against the trustee personally or follow up the property which was the object of the trust.16 But he cannot proceed
31 Story Eq. Jur. § 321; Willard's Ey. 187; Puzey v. Se. nler, 9 Wis. 370; Stewart v. Kissam, 2 Barb. Sup. Ct. 194; Davone v. Fanning, 2 J. C. R. 252; Gibson v, Jeyes, 6 Ves. Jr., 266.
4 2 Pomeroy's Eq. par. 1061; See Graham v. King, 50 Mo. 622; Howard v. Thornton, id. 291.
5 Davone v. Fanning, supra; Farnum v. Brooks, 9 Pick., 212.
6 Davone v. Fanning, supra.
7 Campbell v. Walker, 5 Ves. 678, 680; Olliver v. Piatt, 3 How. 333; Pooley v. Quilter, 2 DeG. & J., 327, Harrison v. Monk, 10 Ala. 185; Crane v. Mitchell, Sandf. Ch. 251; Green v. Winter, 1 Johns. Ch. 27; Harvey v. Mancius, 7 Johns. Ch. 174.
8 See note to 2 Story Eq., par. 1075, 1076.
9 Goodwin v. Mix, 38 III. 115; Goode v. Comfort, 39 Mo. 313; Thomas v. James, 32 Ala. 733.
10 See 2 Pom. Eq. par. 1018, 1058; Olliver v. Piatt, supra: Cook v. Tullis, 18 Wall. 332; U. S. v. State Bank, 93 U. S., 30; Nat. Bank v. Ins. Co., 104 U, S. 54; Waife v. Bate, 9 B. Mon. (Ky.), 208; Shannon's App. 27 Pa. St. 64; Her's Est. 1 Grant (Pa.) Cas. 272 ; Rosenbergers App. 26 Pa. St. 67; Treadwell v. Mckean, 7 Bax. (Tenn.), 201; Miller v. Bird. song, id. 531.
11 Brush v. Blanchard, 91 III. 31.
12 Frith v. Cartland, 2 Hern. & M.417: Pennell v. Deffel 4 DeG. M. & G. 372; Knotchbull v. Hallett, 13 Ch. Div., 696; Nat. Bank v. Ins. Co., supra; Van Alen v. Amer. Nat, Bank, 52 N. Y. 1; People v. City Bank of Rochester, 96 N. Y. 32; Farmers' & M. Nat. Bank v. King, 57 Pa. St. 202 ; Peak v. Ellicott, 30 Kan. 156; S. C., 1 Pac. Rep. 499; Mc. Leod v. Evans, N. W. Rep. Vol. 28, No. 3, p. 173 (Wis).
13 Breit v. Yeaton, 10 III. 242.
14 Schneffelin v. Stewart, 1 John. Ch. 620; Ringgold v. Swain, 1 Herr. & Gill, 11-80; Harland's Acc., Rawle, 323.
15 2 Kent Com. 230 (8 ed.); Gully v. Dunlap, 24 Miss. 410; Crowder v. Shackelford, 35 Miss. 360.
16 Flagg v. Mann, 3 Grimm. 475, 486; Calhoun v. Burn. ett, 40 Miss. 599; Roberts v. Mansfield, 38 Ga. 452; Free. man v. Cook, 6 Ired. (N. C.) Eq. 379; Hawkins v. Haw. kins, 1 Dru. & Sm. 75; Norman v. Cunningham, 5 Gratt. (Va.) 72; Lathrop v. Bampton, 31 Cal. 17.
The control of trusts and trustees belongs to equity, for trusts were not strictly cognizable at common law, but solely in equity;' fo: the most part, at least, there being few cases, except bailments and rights founded in contracts, and remediable by assumpsit, as for instance, in actions for money had and received, in which courts of law can give a remedy. Courts of equity exercise a jealous and scrupulous examination
1 Wadkins v. Holman, 16 Pet. 25. 2 Story's Eq. Jur. Vol. 2, p. 164, par. 961, 962; Milf. Eq. Pl. by Jur., 4; id. 133, 134; Cooper on Eq. Pl. Int. p. 27; ? Bl. Com. 432; Foubl. Eq. B. 2 Ch. 1; 2 Pom. Eq., par. 79.
against both, nor can he claim profit17 of the investment together with the original fund and interest.18 So long as the property can be identified,19 it may be followed, whether the title was taken in the trustee or a third person with notice.20 As to a purchaser with notice.21 But a purchaser without notice for a valuable consideration is fully protected.22 But the purchaser must clearly show that he is an innocent purchaser for value.23 If he is a mere volunteer, the cestui qui trust may follow the property into his hands, whether he had notice or not.24 But third parties cannot require the cestui qui trust to follow the trust property into the hands of purchasers for their protection.25 And he cannot follow his property into the hands of a receiver, unless it can be identified.26
If a trustee change the investment of trust property without an order of court, he acts at his peril.27 And where a trust instrument provides for a certain investment for certain persons, consent of the cestui qui trust will not validate a change 28 Nor if the change be contrary to the provisions of the trust instrument.29 And where the trust property is inalienable by statute, the consent to a change by the cestui will not validate it.30 If a sale of the trust property by the trus
tee appears to be disproportionate and moved by the trustee's private interests, it will not be allowed to stand.31 So a sale to pay debts, but disadvantageous to the trust property or interests.32 But mere inadequacy of price will not invalidate a sale. If, on a sale by the trustee the property cannot be identified, the trustee is personally liable.34 But not if he has acted with good faith, or with the consent of the cestui in a proper case.35 As to money.36 But a court may direct a change to protect the trustee.37 But the trus. tee cannot set up his office to avoid the sale for his own benefit.38 He cannot dispute the trust, nor set up adverse title.39 He cannot make admissions against trust fund or the cestui 40 A husband who is trustee for his wife cannot, against her will, grant a license to cut timber off from trust property, nor submit the ques. tion of the right to do so to arbitration.41 A trustee cannot settle a debt due him as trustee by cancelling one due from him individually to the trust debtor.“ Nor can a trustee deed trust property to his wife-she then has only an equity subservient to that of the cestui.43 He will not be allowed to derive a profit from the trust property.44 And the great general rule is that he cannot purchase the trust property himself.s Notwithstanding the cestui consents that trust funds remain in the trustee's hands, it is still a debt due by
31 Wormley v. Wormley, 8 Wheat. 421; Cadwell v. Brown, 36 III. 103.
17 Barker v. Barker, 14 Wis. 131; See Bounce v. Holland, 68 Ga. 718.
18 Baker v. Dishrow, 25 Hun. 29; Gaines v. Ligardi, 1 Woods, 56.
19 Ferris v. Van Vechten, 73 N. Y. 113,
20 Ex parte Montefiore, 9 Bank Reg. 171; Georges v. Pye 7 Brr. C. C. 221; S. P. Pierce v. NcKeeham, 3 Watts & S. (Pa.) 280; Bush v. Bush, 1 Stroble, (S. C.) Eq. 377; Bon. sall's App. 1 Rawle, (Pa.) 274; Pailey v. Inglee, 2 Paige, 278; Kaufman v. Crawford, 9 Watts & S. (Pa.) 234; Hetts v. Richmond, R. R. Co., 4 Gratt. (Va) 482; Barksdale v. Finney, id. 338; Turner v. Pettigrew, 9 Humph. (Tenn.) 438; Blaisdell v. Stevens, 16 Vt. 179; Moffat v. McDonald, 11 Humph. (Tenn.) 457 ; Bonner v. Mullins. 4 Rice, (S. C.) Eq. 30; Sollee v. Croft, 7 id. 81; Martin v. Greer, 1 Ga. Dec. 109; Cheshies v. Cheshies, 3 Ired. (N. C.) Eq. 569; See Parker v. Jones, 67 Ala. 234; Allen v. Russell, 78 Ky., 105; Lathrop v. Bampton, supra.
21 McLeod v. First Nat. Bank, 42 Miss. 99; Jones v. Haddock, 41 Ala. 262; Joor v. Williams, 38 Miss. 546; Lathrop v. Bampton, 31 Cal.17; Aynesworth v. Halderman, 2 Dana (Kv.) 655 ; Ryan v. Doyle, 31 Ia., 53; Smith v. Walter, 49 Mo. 250; Joiner v. Cowing, 17 Hun. 256; Lig. gett v. Wall, 2 G. K. Morse, 149; Denn v. Mcknight, 6 Halst. (N. J.) 385 ; Hood v. Falmstock, 1 Pa. St. 470; Wright v. Dame, 22 Pick. 55; Wigg v. Wigg, 1 Atk. 382.
22 Gerrard v. Saunders, 2 Ves. 457; Fagg's Case, 1 Vern. 52 ; 1 Ch. Cas. 68; Willoughby v. Willoughby, 1 T. R. 763; Boone v. Chiler, 10 Pet. 177; Varick v. Briggs, 6 Paige, 325; High v. Batte, 10 Yerg. (Tenn.) 335; Halstead v. Bk, 4 J. J. Marsh, (Ky., 554; Dixon v. Caldwell, 15 Ohio St. 412; Dillaye v. Com. Bank, 51 N. Y. 345; Colesbury v. Dart, 58 Alu. 573; Hamilton v. Mound City Mut. S. lns. Oo. 3 Tenn. Ch. 124 ; Heilner v. lmbrie, 6 Serg. & R. (Pa.) 401; Tomkins v. Powell, 6 Leigh (Va.), 576.
23 Marshall v. Frank, 8 Pr. Ch. 480; Dobson v. Lead. beater, 13 Ves. 230; Hardingham v. Nichols, 3 Atk. 301; Kelsal v. Bennett, 1 id. 522; Hughes v. Garner, 2 Younge & C. Exch. 328; Hughes v. Garth, Amb.421.
24 Mansell v. Mansell, 2 P. Wms. 679; Saunders v. De. hen, 2 Vern. 27; Pye v. George, 2 Yaek. 680; Boursett v. Savage, L. R. 2 Eq. 134; Syford v. Thurston, 16 N. H. 399.
25 Barr v. Qubbage, 62 Mo. 404; Smith v. Bowen, 35 N. Y. 83.
26 Illinois Trust & Sav. Bank v. Buffalo Bank, 15 Fed. Rep. 858.
27 Carniverse v. Bourguin, 2 Ga. 15; See Quick v. Fish. er, 9 N. J. Eq. 802; Washington v. Emery, 4 Johns. Eq. 32.
28 Wood v. Wood,5 Paige, 596; Ex parte Calmes, 1 Hill, (S, C.) Ch. 112; See Worrell's App. 23 Pa. St. 44,
29 Mundy v. Nawter, 3 Gratt. (Va.) 618.
80 Matter of Turner, 10 Barb. 552; Troy v. Troy, 1 Bush. IN. C.) Eq. 85.
32 Hunt v. Bass, 2 Dev. (N. C.) Eq. 292.
33 Singleton v. Scott, 11 Ia. 589; Franklin v. Osgood, 14 Johns. 527; Hintz v. Stingel, 1 Md. Ch. 283; Johnson v. Dorsey, 7 Gill (Md.) 269; Gibbs v. Cunningham, 1 Md. CA. 44.
34 Lathrop v. Bampton, supra: See Huniv. Bass, 2 Dev. (N. C.) Eq. 292.
85 Campbell v. Miller, 38 Ga. 304; But see Plympton v. Plympton, 6 Allen, 178, as to scope of consent.
36 School Trustees v. Kerwin, 25 111. 73.
37 Wood v. Wood, supra; Burrill v. Shiel, 2 Barb. 457; N. A. Coal Co. v. Dyett, 7 Paige.
38 McClure v. Miller, 1 Bailey (S. C.) Ch. 107.
39 Benjamin v. Gill, 45 Ga. 110; See Lockhart v. Cam. field, 48 Miss. 470.
40 Thomas v. Bowman, 29 III. 426; Same, 30 MI. 84; May. raut v. Gingward, 3 Strob. (S. C.) Eq. 112; McKissick v. Piclke, 16 Pa. St. 140; Nordauns v. McLeran, 4 Melvin, 3 Johns. Eq. (N. C.) 195.
41 Thomas v. James, 32 Ala. 723.
44 Coltrane v. Worrell, 30 Gratt. 434; Loring v. Salisbury, 125 Mass. 138.
45 Sallee v. Chandler, 26 Mo. 124; Jamison v. Glascock, 29 Mo. 191; Flagg v. Ely, 1 Edm. dee Cas. (N. Y.) 206; Davis v. Wright, 2 Hill (S. C.), 560; Freeman v. Harwood, 49 Me. 195; Puzey v. Senier, 9 Wis. 370; Cook v. Berlin Mill, 43 Wis. 433; In re, Taylor Orphan Ass. 36 Wis. 534; Carson v. Marshall, 37 N. J. Eq. 213; Dodge v. Stevens, 94 N. Y. 209; Cavagnaro v. Don, 63 Cal. 227; Toole v. Mc. Keernan, 48 N. Y. Sup. C. 163; Hollman's Estate, 13 Phila. 562; McAlcer's App. 99 Pa. St. 138; Munn v. Berger, 70 m. 604; Brush v. Sherman, 80 id. 160; Star Fire Ins. Co. v. Palmer, 41 N. Y. Sup. Ct. 267; Spencer's App. 80 Pa. St. 317; Un. Slate Co. v. Tilton, 69 Me. 244; James v. James, 55 Ala. 525; Higgins v. Curtis, 82 III. 28; Ferguson v. Lowry, 54 Ala. 510; Michoud v. Girod, 4 How. 503; Childs V. Brace, 4 Paige, 309; DeCaters v. LeRoy de Chaumont, 3 id. 78; Boyd v. Hawkins, 2 Ired. (N. C.) Eq. 304; Camp: bell v. Johnson, 1 Sandf. Ch. 148; Thorp v. McCullum, 6 M. 614; Cram v. Mitchell, 1 Sandf. Ch. 251; Lenox v. Notribe, Hempst. 251; Renew v. Butler, 30 Ga. 954; Remick v. Butterfield, 31 N. H. 70; Den v. Wright, id. 175; Sheldon v. Sheldon, 13 Johns. 220; Abert v. Hammel, 18 N. J. L. 73; Bank of Orlean's v. Torry, 7 Hill, 260; Freeman V. Harwood, 49 Me. 195; Boynton v. Braslow, 63 Me. 362; Deaton v. Cobb, 1 Dev. (N. C.) Eq. 439; sloo v. Law, 3 Blatch. 459; Page v. Naglee, 6 Cal. 241; Buell v. Bucking: ham, 16 1a, 284 ; Pugh v. Bell, 1 J. J. Marsh (Ky.), 399;
the latter in his fiduciary capacity.46 A sale by a trustee to himself is voidable.47 And a breach of trust may be formally released by the cestui.48 After the lapse of time, the cestui will be presumed in a proper case to have consented to or acquiesced in the disposition of the trust property.49 The trustee may purchase from third parties to whom he has sold,50 if the sale was in good faith,51 but he must, at least, prove full price.52 A purchase from a cestui qui trust by a trustee will only he sustained when it is bond fide, understood and agreed that the trust relation is dissolved, and no objection cognizable in equity arises.53 The rule is stated to require on the part of the trustee, no fraud, no concealment, and no advantage of information.54 But it was held that an administrator, who was interested in the estate, and the sale was fairly conducted, tbat he might purchase himself.55
While the cestui may consent to such a sale or ratify it, the mere receipt and acceptance by the beneficiary is not such a ratitication as will prevent him from avoiding the sale.56
In some cases the rule is stated that the trustee cannot purchase unless he acts with the utmost fairness.57 But the purchase by a trustee cannot be questioned by third parties,58 A trustee for creditors cannot purchase trust property to hold for his own benefit.69
A sale by a trustee to a corporation of which he is owner of a large number of stocks, is invalid.60 But where a trustee's public sale was duly advertised and fairly conducted, the fact that the sale was to a corporation which was the payee of the note secured by the trust deed, and was for a grossly inadequate sum, and that the trustee was the actuary of the corporation, was not gufficient to set aside such sale.61 The fact that a trustee who holds certain mortgage securi
ties, makes a declaration of trust to a bank in which it is stated that he held the mortgage securities to secure the indebtedness of the cestui qui trust to the bank, will not prevent the latter from buying in other claims against the estate.62 A sale by trustees of a corporation who are trustees of another, of the property of the former to the latter, cannot stand.63 Nor may a trustee sell to his co-trustees. 64 But to render such a sale utterly void, it is necessary to connect the purchaser with the acts of the seller.65 Nor can a trustee purchase at a sale under a prior incumbrance to the prejudice of the cestui que trust.66 He cannot defeat the trust by a purchase at a partition sale.67 In such a case, the statute of limitations cannot be set up by him against the cestui que trust.68 The intervention of third parties in an indirect sale by a trustee to himself is regarded with suspicion,69 and will be scrupulously guarded,io as where a trustee caused a sale to his son and afterwards took the property for him.71 An agent cannot sell his principal's property for the purpose of repurchasing it.72 So, if executors appropriate assets to pay personal debts with the knowledge of the creditor, the latter may be required to repay the money to the estate.73 Where a trustee loaned money to his cestui, a profligate, the court refused to authorize him to sell trust property to reimburse himself.74 And if a trustee is incompetent to purchase for himself, he cannot purchase for third parties.75
It is a violation of the trust for several persons holding together a fiduciary relation to others, to contract with one or more of their own number in matters relating to such trust. So a contract between a school board and one of its members for the building of a school house, is voidable in equity by the district, and the fact that a majority of the board may act in letting such contract does not alter the rule, nor the fact that the contractor did not act with the board nor seek to influence its action.76
Equity deals with the directors of a private manufacturing corporation as trustees of the corporation. Where a contract of sale of real property of their cestui que trust to a stranger remains executory, trustees cannot purchase of such stranger. Where the nature of the agency has given the agent control of the principal's property, and peculiar opportunity of knowing its condition and value, a purchase by him will be voidable, unless he show affirmatively fair dealing and that he imparts to his principal his own knowledge.TT
Where a party conveys away lands purchased by him with funds held in trust for another, and which
Richardson v. Spencer, 18 B. Mon. (Ky.) 450; Smith v. Townsend, 27 Md. 368; Emerson v. Atwater, 7 Mich. 12; Jones v. Smith, 33 Miss. 215; Stone v. Wickson, 10 Mo. 75; Newcomb v. Brooks, 16 W. Va. 32. 46 Crisfield v. Steele, 55 MO, 192. I'Un. Slate Co. v. Tilton, 69 Me. 244; See last citations. 48 Cacks v. Barlow, 7 Redf. (N. Y.) 406. 19 Williams v. First Presb. Soc. 1 Oh. St. 478; North Car. R. R. Co. v. Drew, 3 Woods C. Ct. 691; Connolly v. Ham. mond, 51 Tex. 635.
50 Mortmalı v. Skinner, 12 N. J. Eq. 358; Jackson v. Brooks, 8 Wend. 426; DeBevoise v. Sanford, 1 Hoffm. 192; Birdwell v. Cain, 1 Coldw. 301. 51 Creveling v. Fritts, 34 N. J. Eq. 134. 52 May v. May, 7 Fla. 207. 53 Becket v. Tyler, 3 MacArthur, 319. 54 1 Storey Eq. Jur. § 321, note 4; See Brannon v. Oliver Stewart, 47; Julian v. Reynolds, 8 Ala 680; Stallings v. Freeman, 2 Hill Ch. 401; Pratt v. Thornton, 2; Me. 335; But see McCartney v. Calhoun, 17 Ala. 301; Marshall v. Stevens, 8 Humph. 159; Beeson v. Beeson, 9 Barr. 279; McKinley v. Irvine, 13 Ala. 681. 5 Frazer's Ex. v. Lee, 42 Ala. 25. 56 Munn v. Berger, supra; Bush v. Sherman, supra: Star Fire Ins. Co. v. Palmer, 41 N. J. Sup. 267; Spencer's App. supra; Tatum v. McLellan, 50 Miss. 1; Un. Slate Co. v. Tilton, supra: James v. James, supra: Higgins v. Curtiss, 82 111. 28; Ferguson v. Lowry, supra. 57 Schwartz v. Wendell, Walk. (Mich.) 267; Kennedy v, Kennedy, 2 Ala. 571; Staats v. Bergen, 17 N. J. Eq. 554; Coffee v. Ruffin, 4 Cold. (Tenn.) 487; Puzey v. Senier, supra.
55 Baldwin v. Allison, 4 Minn. 25; McKinley v. Irvine, 13 Ala. 681; Woelper's App. 2 Pa. St. 71; Pointer v. Hen. derson, 7 Pa. St. 48; McNish v. Pope, 8 Rich. (8. C.) Eq. 112; Kemp v. Chalfant, 7 Minn, 487; See Jackson v. Walsh, 14 Johns. 407. 59 Campbell v. McLain, 51 Pa. St. 200. & Robbins v. Butler, 24 III. 387; See James v. Cowing, 17 Hun. 256.
61 Clark v. Trust Co. 100 U. S. 149.
62 Detroit Savings Bank v. Truesdail, 38 Mich. 430.
66 Slade v. Van Vechten, 11 Paige, 21; Van Epps v. Van Epps, 9 Paige, 237; Jewett v. Miller, 10 N. Y. 402.
67 Williams v. Van Tuye, 2 0. St. 336. 68 Williams v. Van Tuye, supra.
69 Abbott v. Am. etc. Co. 33 Barb.578; Smith v. lsaacs, 12 Mo. 106.
70 Wortman v. Skinner, 12 N. J. Eq. 358. 11 Murray v. Vanderbilt, 39 Barb. 140.
72 MacGregor v. Gardner, 14 la. 326; Morris v. Joseph, 1 W. Va: 256.
73 Anstin v. Willson, 21 Ind. 252.
75 Harnley v. Cramer, 4 Cow. 717; Gould v. Gould, 36 Barb. 270.
76 Pickett v. Sch. D. No. 1, 25 Wis. 551; Cumberland Coal Co. v. Sherman, 30 Barb. 553; Whitecote v. Law. rence, 3 Vesey, 470; Story on Agency, $ 210, et seq: People v. Town Board of Overyssel, 11 Mich. 222.
77 Crook v. Berlin, etc. Co. 43 Wis. 433; Cook v. Sherman, 4 McCrary C. Ct. 20.
BANKING – COMMERCIAL LAW CERTI. FIED CHECK-NEGLIGENCE OF COLLECTING BANK.
DROVERS ETC. BANK V. ANGLO-AMERICAN
Supreme Court of Illinois, May 15, 1886.
In the case of a certified check, the bank certifying the check is primarily liable for its payment, and it is negligent in a bank or agent for collection of such check to send it to the certifying bank itself for payment.
he has failed to pay, and thus procures the purchase of said land from his grantee by a third party with means of his own, and the conveyance of the same to his wife, the trust springs upon the land.78
An administrator cannot become the purchaser of outstanding securities or claims against the estates, and then enforce them against the estate, but they became extinguished in his lands, and he can only be allowed what he actually paid for them.79
A trustee cannot award his own compensation.80
A wrongful purchase by a trustee of the trust property is not served by intermediate transfers.81
A trustee purchaser must show affirmatively the bona fides of the transactions; all presumptions are against it.82
Where a majority of trustees of a religious society executed a judgment note in the corporate name to persons who had a claim against the society, constituting a lien on the church building, and included in such note the amount of certain claims in favor of such trustees personally against the society, it was held a violation of their duty as trustees,83 A trustee cannot pay his own claim due from the cestui que trust who disputes it, out of trust funds.84 But sales by a trustee td himself may be ordered by a court having competent jurisdiction, protecting the interests of all parties.85 Equity has jurisdiction to decree a sale of trust property from its inherent nature.86 In such a case the trustee will be protected.87 But where an investment was made by a trustee with the approval of the court in a State loan the interest on which was payable in August and February, and the bonds therefor being deposited in a bank, the latter's cashier drew the interest, and the State repaid the loan soon after the investment, of which the trustee had no notice till long after, he was held not liable for the interest which had ceased.88 But the fact that securities taken by a trustee in an investment of the trust money have been set apart for the beneficiary upon a decree of the surrogate, the beneficiary consenting, will not necessarily relieve the trustee of liability for a negligent investment.89
Where, by the terms of a will, an executor also became a trustee or a donee of a trust power, powers being conferred and duties imposed on him, not as incidents of his office as executor, but as belonging to that of trustee, the trust and executorsbip are distinguishable and separate, and a separation commission may be allowed; but such separation may be determined without the aid of a judicial proceeding.90
STATEMENT OF THE CASE.- The Anglo-American etc. Co., placed in the hands of the Drovers' etc. Bank, a check drawn and certified by Rice & Messmore, bankers of Cadillac, Michigan. The Drovers' Bank forwarded the check for collection to Rice & Messmore themselves. The check was not paid, and the Anglo-American Company brought suit for its amount against the Drovers' Bank and recovered judgment. The bank appealed.
Sleepers & Whiton, for appellant; Page & Booth, for appellee.
SCHOFIELD, J., delivered the opinion of the
F. C. HADDOCK, Oshkosh, Wis.
78 Gunn v. Blair, 9 Wis. 352.
79 Gillett v. Gillett, 9 Wis. 193; Everston v. Tappen, 5 John Ch. 497; Stanley v. Mancins, 7 id. 179; Baugh v. Walker, 77 Va. 99.
80 Gasse v. Beall, 3 Wis. 368.
81 Ely v. Wilcox, 26 Wis. 91; O'Dell v. Rogers, 44 Wis. 136.
82 Lathrop v. Pollard, 6 Col. 424. 83 The U. B. Ch. New London v. Vandusen, 37 Wis. 54. 84 Terry v. Bale, 1 Dem. (N. Y.) 452. 85 Ansley v. Pace, 68 Ga. 402. 86 Walker v. Singer, 80 Ky. 620.
87 Faucett v. Faucett, 1 Bush (Ky.) 511; Cumberland, etc. Co. v. Sherman, 20 Md. 117; Ames v. Port Huron, etc. Co. 11 Mich. 139.
88 Witmer's App. 87 Pa. St. 120.
Assuming, first, that appellant is not chargeable with knowledge of the existence of any other bank than that of Wright & Messmore, at Cadillac, Michigan; and second, that all the information it had, or could reasonably obtain at the time in respect to the financial standing of Rice & Messmore, was that they were solvent-were Rice & Messmore suitable agents to whom to transmit the certified check for collection after it was placed by appellee in appellant's possession? We do not think it is of much consequence whether appellant took the check as payment on account, or for the purpose merely of connection; for in either view it is entitled to show that the check, if it has discharged its duty by an effort to collect it, has availed nothing. Nor do we regard the evidence that certain banks in Chicago were in the habit of transmitting checks drawn on other banks, to those banks for collection, as affecting the present question, That evidence hardly comes up to the requirement of this court in regard to proof of a common-law custom, as laid down in Turner v. Dawson, 50 III. 85, and subsequent decisions of like import; but if it did, that custom does not include cases in which certified checks are sent for collection to the banks by wbich they are certified. In the case to wbich the evidence relates there is no primary liability on the part of the bank to which the check is sent; but in the case of a certified check the bank is primarily liable for its payment.
So far as affects the present question, its position is precisely what it is where it makes its promissory note, bond, or other evidence of original indebtedness. Bickford v. First Nat. Bank, 42 Ill. 242, et seq.
The same person cannot be both debtor and creditor at the same time, and in respect of the same debt. How then can he,who is debtor,be at the same time,and in respect of the same debt,the disinterested agent of the creditor? Can it be said to be reasonable care, in selecting an agent, to select one known to be interested against the principal-to place the principal entirely in the hands of his adversary? The interest of the creditor, when his debtor is failing is that steps be taken promptly, and prosecuted with vigor, to collect his debt. But at such a time the inclination of the creditor quite often, and it may be, sometimes his interest too, is to procrastinate. The debtor may often be interested in bringing about a compromise with his creditors whereby his debts may be discharged for less than their face. But the creditor, whose debt can all be collected by legal proceedings can never be interested in producing that result. Surely it could not be held reasonable care and diligence in an agent holding for collection the promissory note given by one individual to another individual,to send the promissory note to the maker, trusting to him to make paypayment, delay it, or destroy the evidences of indebtedness, and repudiate the transaction, as his conscience might permit. If this would not be held to be reasonable care and diligence, why should the same conduct be held to be reasonable care and diligence when applied to a bank?
It is to be borne in mind appellant was not compelled to accept this check for collection.
It assumed the burden voluntary, and it ought to have known that the certified check was not delivered to it merely to have it exchanged for the draft of Rice & Messmore on some other bank; for if this had been desired, it ought to have known that appellee would have obtained such a draft instead of the certified check. If appellant had no correspondent or agent at Cadillac,through whom to make collection, it should have so informed appellee,and then acted on the directions of appellee. This would have imposed no hardship,and would have protect ed all. It is true that when appellee placed the check in the hands of appellant, it was to be presumed that it was intended that appellant should collect by the ordinary and usual mode of of collecting in such cases; but neither from facts proved, nor as a matter of law, was it to be inferred that the check was to be surrendered to Rice & Messmore to use their pleasure as to the time and manner of payment and the disposition of the check. If appellant was willing to take the step without special stipulations, appellee was authorized to assume therefrom that it was able to collect, and that it had a proper agent through whom to do it promptly.
Indig v. City Band, 80 N. Y. 106, cited by counsel for appellant, is entirely different in its material facts from that in the present case, we conceive. There the bank owed no primary duty to pay. The note was sent to it for collection, not from itself, but from the maker of the
note. Its liability was solely that of an agent for collection.
In the recent case of Merchaut's Nat. Bank v. Goodman, 2 Atl. Rep. 687, the Supreme Court of Pennsylvania however lay down the rule directly the opposite of that laid down by the New York Court of Appeals in Iudig v. City Bank. The suit there involved the question whether the bank on which the check was drawn was a suitable agent to which to transmit the check for collection. And the court held that it was not. The court among other things said: “We think the principle may be stated as a true one, as the plaintiff's counsel have presented it, that no firm, bank, corporation, or individual can be deemed a suitable agent in contemplation of law, to enforce in behalf of another a claim against itself. The only safe rule is to hold that an agent with whom a check or bill is deposited for collection must transmit it to a suitable agent, to demand payment in such manner that no loss can happen to any party; whether he is depositor and indorser, or the indorsee and holder.
Weinterpret the cases to which we have referred as establishing the rule of transmission to a suitable correspondent or agent, to mean that such suitable agent must, from the nature of the case, be some one other than the party who is to make the payment. By no other rule can the rights of indorsers be protected, if it is the interest of the party who is to make payment to hinder, postpone or defeat payment. This imposes no hardship on the institution undertaking to transmit for collection, which can always protect itself by stipulating that special instructions by the depositor shall be given, which will save the collecting bank from all risk or peril.”
It is unnecessary to say that we concur in these views any further than they are applicable to the facts before us.
We find no cause to disturb the judgment below and it is therefore affirmed.
NOTE.-To confide the collection of a money obligation to its payor would seem to be quasi agnum committere lupo, but it seems that an Illinois bank has come to grief by this precise form of misplaced confidence.
A certified check is an accepted bill of exchange, and all the legal attributes of the latter attach equally to the former. The liability of the drawer of the check is precisely that of the drawer of a bill of exchange accruing only upon the protest for non-payment.2 Certifying a check to be "good,” is nothing more nor less than a promise by the bank to pay it when presented. It follows of course that by certify. ing a check, the bank becomes the principal debtor, its obligation to pay being absolute, wbile that of the drawer is subsidiary and contingent.
1 Harker v. Anderson, 21 Wend. 372; Conger v. Armstrong, 3 Johns. Cas, 5.
2 Smith v. Jones, 20 Wend. 192; Merchanis' Bank v. Spicer, 6 Wend. 445; Murray v. Judah, 6 Cow. 484; Con. roy v.
Warren, 3 Johns. Cas. 259; Glenn v. Noble, i Blackf. 104.
3 Beckford y. First, etc. Bank, 42 III. 242.