Farrar v. Farley , 3 S.C. 11 ( 1871 )

The opinion of the Court was delivered by

Moses, C. J.

The earnestness with which the argument was pressed in favor of the appellants, has induced us to bestow much consideration on the. points it presented. We find in them, however, nothing which so affects our minds as to lead to a modification of the decree of the Circuit Chancellor. If we reverse his judgment, and permit Dial, the assignee, to avail himself of the advanced price at which he sold the lands, we would infringe upon a rule fixed and determined, not only by the Courts of Equity in England, .but in this State — a rule most salutary in its influence, and one which, by reason of the prejudicial consequences which its enforcement averts, should be jealously watched and preserved.

Mr. Lewin says : “ It is a general rule established to keep trustees in the line of their duty, that they shall not derive any personal advantage from the administration of the property committed to their charge.”—Lewin on Trusts, 318. Even while it remains in their hands, they are bound so to regard and manage it, that all its profits shall enure to the advantage of those who, by the terms of the instrument establishing the trust, were entitled to its enjoyment. If while the trust exists, he who has the control of it cannot convert its profit to his own use, with how much more reason does the restriction apply, when he attempts to part with the whole fund through a sale for his own benefit. If a deed confers a power to sell, it is to be exercised in favor of those who have an interest under it. Lord Roslyn well said in Whichcote vs. Laurence, 3 Vesey, 750, “he who undertakes to act for another in any matter, cannot in the same matter act for himself.” From the very circumstance of his thus changing the relation which he bore to the subject of the trust, a presumption arises that he was influenced by motives of private gain. “ The principle is that as the trustee is bound by his duty to acquire all the knowledge possible to enable him to sell to the utmost advantage for the cestui que trust, the question, what knowledge he has obtained, and whether he has fairly given the benefit of that knowledge to the cestui que trust, which he always acquires at the expense of the cestui que trust, no court can discuss with competent sufficiency or safety to the parties.”—Lord Eldon in Ex Parte James, 8 Ves., 750.

The question is not to be tested by the fairness of the transaction measured by the adequacy of the price. This consideration does not enter into the doctrine which forbids a trustee for sale himself to become the buyer. The results which would follow the allowance of such purchases are fraught with so much danger, that looking to the relations of the parties, the superior advantages of the trustee, and the temptations by which he may be seduced, no exception is allowed to the general rule by shewing the honesty of the particular transaction, and that the cestui que trust has suffered no prejudice. The characters are too inconsistent to be influenced by the same considerations. “ Emptor emit quam nimino potest, venditor vendit quam máximo potest.”

It would be an unnecessary task to refer to the numerous authorities which sustain the position taken by the decree in regard to the sale of the land. Chancellor Kent, in Davone vs. Fanning, 2 John. C., 252, with his accustomed research and examination, has collected the leading cases which maintain the same doctrine, and with his usual elegance of expression reviewed the reasons on which it proceeds ; and it is only necessary to refer to his lucid opinion, which, in a concise but perspicuous manner, sustains the conclusions which the Courts have reached on this question.

It is said, however, that if these plaintiffs had any right of complaint, they have not exercised it by either holding Dial to his purchase, or electing to have a re-sale. It was competent for the plaintiffs to recognize the re-sale by waiving all claims against the purchaser, Fuller, and to regard the sum which he paid for the property as its true value. If the title had remained in Dial, they could have either held him bound to his bid, or demanded a re-sale.

They may elect to treat the sale to Fuller as the only one made by Dial, and so it must be regarded, if the sale to him was void at the option of the cestui que trust. They were not bound to ask a re-sale. The property had passed into other hands, and if they so prefer, they may claim the purchase money as received by Dial to their own use. The object of a re-sale is only to ascertain if a price can be obtained beyond that which the purchaser gave to the trustee, and if the cestui que trust is willing to accept it as the value, all the objects to be accomplished'by a re-sale are attained. Mr. Sugden says: “ Where a trustee buys the trust estate at a fair price the sale is seldom called in question, unless he afterwards sell it to advantage, and then the cestui que trust is of course only desirous that the money gained by the trustee on the re-sale should be paid to him. Owing to this circumstance, a purchaser of a trust estate from a trustee who had previously sold to himself, is seldom implicated in the suit; but it seems clean- that a person purchasing with notice of the previous transaction would be liable to the same equity as the trustee was subject to.”—3 Sug. on Vend., 243. The eestuis que trust here are willing that the purchaser may retain the lands, while they alone look to Dial for the price he obtained.

It is said, too, by the appellants, that these plaintiffs are not cestuis que trust under the fourth assignment, and are, therefore, not in a condition to complain. The fifth assignment (April 13, 1855,) is to secure Dial and Farley against debts and liabilities incurred for Crews, then to discharge two certain judgments, and lastly, to pay and satisfy, in whole, if the funds are sufficient, such general creditors as may come in, and release the balance of their several demands against the assignor, and if not sufficient, to pay such creditors in rateable proportion. The plaintiffs have complied with the condition, and thus acquired rights and interests under it. The four previous assignments were exclusively for the protection and security of the said Dial and Farley. If these plaintiffs, then, can shew, that the purposes of the said assignments have been fulfilled by the payment of all the liabilities for which they provide, or that they have been so nearly satisfied as to leave but a portion of the choses transferred by the fifth applicable to them, it necessarily follows that they have such a direct interest as entitles them to a full account from the assignees of their administration of the property conveyed to them by the fourth assignment. The principle which prevents a trustee from being himself the seller and the purchaser is not restricted to such as alone act under a technical trust, but includes all who act in a fiduciary capacity. The principles laid down with reference to trustees for sale, are of course applicable to all who, though differing in name, are invested with the like fiduciary character.”—Lewin, p. 205. They were recognized by our Courts in Ex parte Wiggins, Hill Ch., 353, in reference to the assignee, under an assignment for. the benefit of creditors.

They apply, too, with still stronger force, to the debts of Crews bought up by Dial. The assignee does not represent himself alone, but he holds the fund for the benefit of all creditors who have an interest in it. In satisfying any incumbrance, good faith and fair dealing require that he should not credit himself on such account with more than he has paid. The assignment provided that if it should be insufficient to meet all the debts of Crews, the creditors were to be paid in rateable proportion. The amount to be so applied might leave nothing for the creditors unwilling to make any abatement, except that to which they were bound by the terms of the assignment, if the assignor could buy in a portion of the claims at a sacrifice, and in the distribution of the assets demand that he should receive the full amount apparently due upon their face. At the time of the compromise of these claims by Dial, the presumption is irresistible, that he had in his hands, from the assignments, enough to meet the price he paid for their transfer to him, and yet in view of this fact, it is asked that he be allowed to retain the benefit which the creditor must be supposed to have released. The authorities already referred to reject the proposition, and as we have already said, with increased force.

In the examination of the report, we cannot perceive that Dial has been charged with any proceeds received by Farley, his coassignee, which did not actually go into his hands, or those of his agent, Crews. The Commissioner properly discriminated between the amounts directly due by Farley, and that which was due by Dial, made up of money received by himself and his said agent.

The Court was asked by the counsel for the plaintiffs, at the conclusion of his argument, not to send the accounts back to a referee, that they may be made conformable to the directions of the decree, but at once, by its own judgment, to terminate the case. If it were in our power, we would willingly bring the litigation to an end, but a new examination of the accounts is rendered necessary by the decree, and to this requisition, the exceptions of the plaintiffs to the report in part contributed. The Court cannot undertake the duties which properly belong to its examining officers. “ The province of this Court does not extend to a minute examination of long and complicated accounts.”— Wright vs. Wright, 2 McC. Ch., 195. “ The Court of Appeals will not undertake a detailed examination of accounts; these must be settled in the Court below.”—Myers vs. Myers, Bail. Eq., 33.

We concur with the Chancellor in such parts of his decree as have not been here particularly referred to.

The motion is dismissed, and it is ordered and adjudged that the cause be remanded to the Circuit Court for Laurens County, that such orders may be taken as are necessary to carry out the directions of the decree.

Willard, A. J., and Wright, A. J., concurred.