Mason v. Martin

Tuck, J., delivered the opinion of this court. On the 8th of Decnmber 1845, the complainant executed a deed of trust to Martin and Kemp, two of the defendants, to indemnify them against loss on account of certain acceptances for the accommodation of Abram Barnes. The deed contained a power of sale, by the trustees, for the payment of any ¹³⁴ balance that might be due, u upon oath made before any justice of the peace of the State of Maryland, by said David G. Martin and Lewis G. Kemp, or in case of the decease of either, by the survivor, or in case of the decease of both, by the executor or administrator, as the case may be, of such survivor.” Afterwards there being a large balance claimed by Martin and Kemp, one of them made the required affidavit, and the property was advertised and bought by McAttee, for the trustees, as their agent, to be resold on their account. At the resale it was purchased by the defendant Nesbitt.

The bill is filed to vacate these sales. The case having been submitted on bill and answers, without replication, we are to consider the allegations contained in the answers as true. Story's Eq. Pl., sec. 887. 12 Gill and Johns., 271.

It is well settled that a trustee cannot purchase for himself, at his own sale, directly or indirectly. The policy of the law forbids it. And if he does the sale will be set1 aside on the proper and reasonable application of the parties interested. This is established on the soundest principles of equity, to remove all temptation from the trustee to promote his own interest by violating the trust. 3 Gill and Johns., 184. 4 G. & J., 379 .

But while this principle is conceded, on the part of the appellee it is insisted that the present appellant has no real interest in having the property again put in the market, because it will not sell for enough to pay the claim of Martin and Kemp; and under such circumstances, it is said, that the trustees had a right to purchase the property in order to save themselves from loss, giving the appellant the benefit of the resale. It does not appear that the sale to McAttee was made on account of Martin and Kemp, as trustees, in order that a resale, on more reasonable terms, might be made for the benefit of the cestui que trust. On the contrary, he was authorised to buy the property, as the agent of Martin and Kemp, and to resell it on their account. It. is true, they say in their answers that they intended to give Barnes the benefit of any profits on the resale, but this does not affect the complainant’s right to question the validity of the original sale.

This subject was very fully discussed by Chancellor Kent, in the case of Davoue ¹³⁵ vs. Fanning, 2 Johns. Ch. Rep., 252. Similar arguments were there urged in support of the sale — that it was made at public auction, bona fide, and for a fair price, — but the court said the case came clearly within the spirit of the principle, that if a trustee, acting for others (and there he was acting for his wife as one of the cestui que trusts, as Martin and Kemp were interested here) sells an estate and becomes himself interested in the purchase, the cestui que trust is entitled to come in, as of course, and set aside that purchase, and have the property re-exposed to sale, without showing actual injury, if he chooses to say, in any reasonable time, that he is not satisfied with the first sale.

It is no hardship on the tiustee to hold that he alone shall not buy. It is part of his contract that in accepting the trust for the benefit of others he will not act for his own advantage — and, besides, if he has an interest in becoming the purchaser he may do so by fairly dissolving his relation with those interested in the property. Bui, as strictly as courts of equity have enforced this principle for the protection of cestui que trusts, the security of the trustee making the purchase has not been overlooked, The property in some cases will be put up at the original price in addition to expenditures for improvements, and if it will not bring more on the resale, the purchase will stand — the trustee in the event of a resale being allowed for the improvements. The quesiion in all its bearings, and the cases are so fully examined in the case to which we have referred, that it is unnecessary here to cite other authorities.

But it is insisted that this sale should not be disturbed because the agent and attorney of the appellant was present at the sale, and that her acquiescence may be inferred. It is true that the rule that a trustee cannot buy at his own sale is to be taken with some exceptions, “ as if the cestui que trust be of full age at the time of the sale, and under no disability, and, with a full knowledge of the transaction lies by for an unreaable time, or, being under age, or other disability, does not in a reasonable time after corning of age or the disability is removed, seek to set aside the sale, or treat the trustee as a purchaser for his benefit, it will be considered as an acquiescence in the sale, and the trustee will not be disturbed in his purchase.” 4 G. ¹³⁶ & J., 379 . We are then to inquire whether there was'any acquiescence or unreasonable delay on the part of the complainant in filing her bill ? The sale to McAttee, as agent of the trustees, was made in March