Speed v. Smith , 4 Md. Ch. 299 ( 1851 )

The Chancellor :

This case has been brought before the court, and has been argued by counsel, orally and in writing, upon exceptions to the sale reported by the trustee on the 16th of July last.

It appears by the proceedings, that on the 24th of April, 1848, Thomas Smith and Edward Boyle, the latter being the duly appointed and qualified permanent trustee in insolvency of the former, conveyed to the complainant, Speed, a parcel of leasehold property, in the city of Baltimore, to secure the payment of the sum of one thousand dollars loaned by him to the mortgagors, together with the interest thereon, in one year from the date thereof. The property, as described in the mortgage, is therein stated to be subject to the payment of a ground rent of ten dollars per annum, and the mortgage being executed in pursuance of the provisions of the act of 1833, ch. 181, an application was made to the court, as authorized by said act, on the 5th of May following, for a sale of said property, in case the debt, with the interest thereon, should not be paid according to the stipulations of the mortgage, and a decree for that purpose passed on the same day, authorizing a sale of the mortgaged premises when the time limited for the payment of the money should have elapsed.

The money not being paid, the trustee named in the decree advertised the property for sale, and on the 12th of July last, the same was sold at public auction, to the exceptant, William Wylie, for the sum of $5,800, and the sale reported on the 16th day of the same month.

The proceedings further show that Thomas Smith, one of the mortgagors, had applied for the benefit of the insolvent laws on or about the 7th of December, 1836, and that Boyle, who was appointed his permanent trustee, reported to Baltimore County Court, on the 28th of September, 1849, that for the. purpose of closing his trust, he had sold the surplus property on hand, including the premises in the proceedings in this cause mentioned, to said Smith, which sale was confirmed by said court on the 13th of November following, and the consideration money being paid by 6. Smith, Boyle, on the 26th day of the same month and year, conveyed the property to him, and that on the same day Smith conveyed the same to Speed, the complainant in this cause, and the trustee appointed by the decree of this court, in trust, with power to sell for the purposes in the said deed mentioned.

The complainant thus filling the double capacity of trustee of this court and trustee under the deed to him from Smith, advertised the property in both capacities, and in his capacity of conventional trustee, declared the property would be sold free from all incumbrances, as appears by a copy of the printed advertisement, to be found among the proceedings in this cause.

Prior, however, to the mortgage from Smith and Boyle, to the complainant, that is to say, on the 1st of December, 1841, the former had conveyed the same parcel of property to one John N. Smith, by way of mortgage, to secure the payment of the sum of $1,526, upon which mortgage Bolivar B. Daniels, as administrator of the mortgage, filed a bill on the equity side of Baltimore County Court, against the mortgagor, and Speed, the complainant in this cause, which bill has been answered, and the claims being contested, the cause is still depending in that court.

On the day of the sale, the purchaser, Mr. Wylie, signed a paper, acknowledging himself to be the purchaser for the sum mentioned in the report of the trustee, and promising to comply with the terms of sale, but as appears by a memorandum on the same paper, within a few days thereafter he notified the trustee of his objections to the title.

The objections which are now urged to the ratification of the sale, which relate to the form of the proceedings under which the decree was obtained, are not, in my judgment, tenable.

The act of Assembly under which the mortgage was given and the application made to the court for a decree upon it, contemplates, only an ex parte proceeding, and indeed, if it were otherwise, the omission to make a prior incumbrancer a party, though it might possibly be error, for which the decree would be reversed on appeal, is unquestionably not sufficient ground for treating the proceedings as a nullity and the sale void.

I also regard the objections to the mortgage upon which the decree passed upon the ground of the incapacity of the mortgagors to execute such an instrument as invalid. That mortgage was executed by the insolvent and his permanent trustee nearly twelve years after the former petitioned for the benefit of the insolvent laws, and therefore, in the absence of proof that any of the debts due by the insolvent at the time he petitioned, remain unpaid, it may reasonably be presumed that none such exist. And this presumption, is strongly fortified by the two deeds of the 26th of November, 1849, the one from Boyle, the trustee, to Smith, and the latter from Smith to Speed.

I likewise attach no weight to the objection that the property sold for more than it was worth. In the first place, it appears that the bid of the exceptant only exceeded, by a small ■amount, what was offered by other bidders, and in the next, the property was open to the examination of the purchaser, and it was his own fault if he did not fully acquaint himself with its value. There is no pretence that any misleading representation was made to the trustee in regard to the condition or value of the property.

The objections affecting the title remain to be considered.

Whether it he the settled law of this court, as was said by the late Chancellor, in the case of Anderson vs. Foulke, 2 H. & G., 358, that “to all judicial sales under its orders or decrees the rule caveat emptor applies,” and that in all such cases the right and title of the parties to the suit, and nothing more, is sold, need not now be investigated, though it may ho remarked that the rule caveat emptor is certainly subject to some modification, as appears by what fell from the Court of Appeals in the case of Glenn vs. Clapp, 11 G. & J., 10. It is not necessary to express any opinion upon the point now, because it is supposed to be very clear that if the trustee makes any promise or representation to the bidders, that the estate shall be, or is, clear of all incumbrances, or that the title is better or different from that which would flow from the proceedings, and the promise or representation cannot be complied with, or turns out to be erroneous, the sale will be sot aside. And the question, therefore, in this case, is, whether the promise or representations alleged to have been made by the trustees under this decree is of such a character as upon the facts and circumstances disclosed by the evidence will vitiate this sale ?

The first objection, founded upon the charge that an erroneous representation was made by the trustee in relation to the incumbrances to which the property is subject, is, that the advertisement stated that the ground rent was only ten dollars. It appears by a copy of the lease filed in the cause, that the property of which the premises in question is a part, was leased by the late John E. Howard to Joseph Osborne on the 19th of March, 1796, for ninety-nine years, renewable forever, at and for Ihe yearly rent of twenty dollars. And that the property mentioned in the proceedings in this cause being a part of the premises contained in the lease from the said Howard to Osborne, was, on the 20th of August, 1830, conveyed by Eosannah Kilbreath, administratrix of Thomas Kilbreath, to Thomas Smith for the sum of $2,155, with like liberty of renewal, subject to a ground rent of ten dollars. It appears by the recitals in this deed, that the sale was made by order of the Orphans Court, and that the property had been conveyed to one Thomas Hicks, and by the latter to Thomas Kilbreath, by whose administratrix it was conveyed to Thomas Smith.

There is nothing to show how the title to the ground rent passed from Howard, the lessor, but a witness by the name of S. Gr. Shipley, was examined, who says he is and has been the owner of the rent for six or seven years, and bills are exhibited made out in his name, with his receipts attached, charging ten dollars a year rent, for the years 1850 and 1851, which the receipts show were paid by the trustee Speed. The evidence of Shipley is excepted to, and it appears to me the best evidence of his being" the owner of the rent, would be the deed under which he claims, and that his parol evidence is, therefore, objectionable, but seeing that the lease from Howard is upwards of fifty-six years old, and that no proof has been produced to .show.that this particular parcel of property is now held liable for the rent of $20 reserved by that lease, I cannot think it would be proper to conclude that it is so liable. The burden of proof is upon the exceptant, and I am by no means prepared to say, he has made his case out simply by the adduction of a lease executed more than half a century ago, without any proof whatr ever that the rent reserved by the lease has been exacted from the owner of this particular parcel. On the contrary, I am of opinion, upon the proof now before me, that there has been an apportionment of the original ground rent between the two lots into which the property embraced in the lease from Mr. Howard has been divided, and that by this apportionment the premises mentioned in the proceedings in this cause have been subjected to the payment of ten dollars only, and that this division of the incumbrance has been acquiesced in by those who claim under the original lessor.

The remaining objection to the title rests upon the mortgage given by Thomas Smith to John N. Smith for $1526, on the 1st of December, 1841. Prior to the execution of this mortgage, that is, in December, 1836, Smith, the mortgagor, had applied for the benefit of the insolvent laws, and Edward Boyle was his permanent trustee, and at the date of tho mortgage, Boyle had not reconveyed the mortgaged premises to Smith. It may be well questioned, therefore, whether Thomas Smith, at the date of his mortgage to John N. Smith, had any title to convey. But a bill upon this mortgage has been filed, and is now depending in Baltimore County Court, and the existence of this suit is urged as constituting a valid objection to the sale.

The trustee, in his advertisement of the property under the authority of the decree of this court, says nothing about the title except that the ground rent is only ten dollars, but in his advertisement under the deed from Smith to him, he says the sale is made “free from all incumbrances,” and it is alleged that the mortgage to John N. Smith, and the suit upon it in Baltimore County Court, constitutes an incumbrance which shows the representation to be inaccurate, and relieves the purchaser from the obligation to complete tho purchase.

Without stopping to inquire how far a sale made by a trustee appointed by a decree of this court, can be affected by representations made by the same person acting in a different capacity, it remains to be seen whether the purchaser was not, or might not, have been informed prior to the sale, of tho existence of claims against, or incumbrances upon this property.

There can be no doubt, I think, from the proof, that on the day of sale, and before the bidding commenced, Mr. Speed, the trustee, announced publicly, that the taxes and ground rents would be paid to the day of sale, and that there wore claims or a claim against the property, but that a sufficient amount of the purchase money would be retained by the trustee to pay the claims, and that the purchaser would got a good title.

It is true, some of the witnesses say, they did not hear Mr. Speed make this declaration, hut that he did make it, and that publicly, it is impossible to doubt, and there is no reason to doubt that he was heard by the purchaser. The trustee may not, and I presume did not, say any thing about a chancery suit, but it seems to me, when he spoke of claims against the property which he would retain money in his hands to pay, he said enough to put bidders on inquiry, and if they neglected to make the inquiry, they cannot, for that reason, escape the obligation of their contract and avoid the sale.

But as the declaration was made, and the offer to clear up the title is an important stipulation in the contract, this court will see that it is performed, and that there is retained of the proceeds of the sale a sufficient amount for that purpose, and as it is clear that the money arising from the sale made by the trustee is abundantly adequate, to remove the incumbrance, there are no grounds for apprehending that the title of the purchaser may not be perfected.

I do not, therefore, see, in the existence of the mortgage to John N. Smith, and the pendency of the bill upon it in Baltimore County Court, an adequate reason for refusing to ratify the sale reported in this case. There is certainly no sufficient ground for supposing that the agreement of the trustee to remove incumbrances from the property may not be performed, and, if that is done, the purchaser has no cause for complaint.

The exceptions of the purchaser to the ratification of the sale, were filed on the 2d of September last, and by an order passed on the day following, they were to have been heard on the 10th of the then ensuing month of October, upon notice as usual to the trustee, but the parties afterwards, by an agreement filed on the 20th of the same month, postponed the hearing until the 28th, and it was submitted on that day, upon a written argu- • ment on the part of the plaintiff, and an oral one on the part of the purchaser. And on the same day the purchaser interposed an additional exception, upon the ground that the trustee had omitted^ to give bond conditioned for the faithful performance of his trust prior to the sale, or at this period, and that there is no such bond now among the proceedings.

The trustee, in reply to this exception, has filed a petition, verified by his affidavit, in which he says he did give such bond, and supposes it has been lost or mislaid, and proposing now to give a new bond, which shall be received nunc pro tunc.

It is by no means a clear proposition that a sale made by a trustee, acting under the authority of a decree of this court is void because the trustee omitted to give bond prior to the sale, as required by the decree, and it may, perhaps, be well doubted whether the purchaser, who is not bound to see to the application of the purchase money, can urge such omission as a ground of objection to the sale.

It is the established doctrine of the court, that in all sales under its decrees, the court itself is the vendor, acting through the instrumentality of its trustee or agent, for the benefit of the parties concerned. Iglehart vs. Armiger, 1 Bland, 527; Glenn vs. Clapp, 11 G. & J., 8. The trustee reports the offer of the bidder to the. court and its order ratifying the sale, completes the contract. It is believed the case of Winchester, trustee of Williams vs. The Union Bank, 2 G. & J., 73, and the other cases founded upon our insolvent laws, do not apply to the case now under consideration. The doctrine settled by those cases is, that a trustee of an insolvent debtor cannot act in that capacity at all, until he has given bond and security, without which he is not invested with the character and rights of a trustee in any respect or to any extent. But when this court appoints by its decree, its trustee or agent to sell property, and requires him to give bond for the faithful performance of his duty, no reason is apparent why, if it thinks fit, it may not ratify a sale made by such trustee, even though he omits to give bond, the order of ratification being equivalent to a previous delegation of the power to sell. That the trustee may deviate from the terms of sale prescribed by the decree, and that a private sale may be ratified by the court, though the trustee is directed to sell at public sale, if the sale itself is advantageous, is conclusively settled. Glenn vs. Clapp, 11 G. & J., 8. And it would be difficult to assign a reason why the court, the actual vendor, may not confirm a sale though its agent, the trustee, has not obeyed its direction in giving tbe bond required by the decree.

Alexander and Gill, for Exceptants. J. J. Speed, for the other Parties.

But in this case, I shall not pass a final order ratifying the sale, until the trustee shall have given the requisite bond, because I do not now propose to say that the bond may be dispensed with altogether.. All that I now design to decide is, that the sale is not void, because the trustee may have omitted to give bond before it was made, but I will require him to give it before finally ratifying the sale, that the parties entitled to the money may have the security, which the decree intended they should have, for its proper application.

Since the foregoing was written, the trustee has filed a bond, which has been approved, and an order will, therefore, be passed ratifying the sale.