Shannonhouse v. . Wolfe

Brogden, J. The determinative question is this: Did the trustees named in the deed have the power to execute a mortgage or deed of trust upon the property, and, by sale thereunder, convey a fee-simple title? The deed does not create an estate on condition subsequent, for the reason that there is no clause of forfeiture, reverter or reentry and other controlling indicia of such an estate. Hall v. Quinn, 190 N. C., 326. However, the deed does create a trust in favor of the designated beneficiaries because the essential elements of a valid trust concur, to wit: (a) Sufficient words to create it; (b) a definite subject-matter; (c) an ascertained object; (d) designated beneficiaries. Witherington v. Herring, 140 N. C., 497; Thomas v. Clay, 187 N. C., 778. An examination of the deed discloses two dominant purposes, to wit: (1) That said land should be used for the purpose of establishing, maintaining and carrying on as a community building, buildings and grounds for the benefit of white persons in the area designated. (2) That if it were impracticable or impossible to carry on the community building idea, the land should be used “for public playgrounds or recreation grounds” for the beneficiaries designated in the deed. In order to execute these purposes it therefore becomes necessary to ascertain the extent of the power delegated by the deed to the trustees. This power is contained in the following words: (a) Hold, use, occupy and receive the same for the purpose of establishing, maintaining and carrying on as a community building, buildings and grounds, etc.; (b) “shall have entire control of said property and premises for the purposes hereinbefore stated”; and (c) “they shall also have entire control, disposal and management of any and all, property whether real or personal, which shall at any time be given or conveyed to the said parties of the second part *773 for tbe said community bouse or of tbe income or profits or furtherance of any of the activities of said community house.” Tbe vital point raised by tbis language is whether or not tbe words used are sufficient to authorize tbe execution of a mortgage upon tbe property for tbe purpose of building a bouse thereon. It must be conceded that tbe only language importing tbe power to mortgage would be tbe words “entire control, disposal and management” ; and it must also be conceded that of these words “disposal” is tbe broadest and most comprehensive. Tbe various definitions and shades of tbe meaning of tbe word “disposal” or its equivalent “disposed of” is set out in Page v. Covington, 187 N. C., 621. In that case it was held that tbe words “disposed of,” construed in tbe setting in which they occurred, indicated sufficient intention on tbe part of tbe donor that a portion of tbe property should be sold and tbe proceeds derived therefrom used in preserving tbe trust; and it will be further noted that tbe power of sale was restricted to a portion of tbe trust property, and that, in addition, tbe beneficiaries of tbe trust authorized tbe sale. Sales of property impressed with a trust for charitable uses have been a fruitful source of litigation. Tbe following principles relating to charitable trusts are deducible from tbe authorities. Sales may be made: (1) 'When tbe instrument creating tbe trust delegates tbe express power of sale; (2) if no power of sale is given in tbe trust instrument, but a sale of a portion of tbe property is necessary to preserve tbe trust. College v. Riddle, 165 N. C., 211; Page v. Covington, 187 N. C., 621. (3) If no power of sale is given, tbe trustees and beneficiaries, if capable of doing so, may dispose of tbe property and bold and use tbe proceeds for carrying out tbe dominant purposes of tbe trust according to its terms. Hall v. Quinn, 190 N. C., 326; Page v. Covington, 187 N. C., 621. (4) If tbe power of sale is prohibited in tbe trust instrument, but, if at tbe same time a sale of tbe trust property is indispensable to tbe preservation .of tbe interests of tbe parties in tbe subject-matter of tbe trust. “We think it is well settled that a court of equity, if it has jurisdiction in a given cause, cannot be deemed lacking in power to order tbe sale of real estate which is tbe subject of a trust, on tbe ground, alone, that tbe limitations of tbe instrument creating tbe trust expressly deny tbe power of alienation. It is true, tbe exercise of that power can only be justified by some exigency which makes tbe action of tbe court, in a sense, indispensable to tbe preservation of tbe interests of tbe parties in tbe subject-matter of tbe trust, or, possibly, in case of some other necessity of tbe most urgent character.” Trust Co. v. Nicholson, 162 N. C., 257; St. James v. Bagley, 138 N. C., 384; Church v. Bragaw, 144 N. C., 126; Church v. Ange, 161 N. C., 314; College v. Riddle, 165 N. C., 211; Middleton v. Rigsbee, 179 N. C., 440. *774 However, the mere naked power of sale implied in the word “disposal,” or, for that matter, language of like import, does not necessarily imply or delegate power to mortgage. “A sale of property presumably brings its full value. A mortgage of property presumably brings but a part of its value, and yet may result, by foreclosure, in the loss of the rest.” O'Brien v. Flint, 74 Conn., 502. A clear expression of the proper construction of power to mortgage occurs in the case of Hamilton v. Hamilton, 149 Iowa, 329, and is as follows : “Question is further raised whether, under the power given in the will, the plaintiff may mortgage the property. That a mere naked power to sell given to an agent or attorney or to the trustee of any ordinary trust does not include the power to mortgage is well settled by the weight of authority. In such case the power is to be strictly construed and will not be extended to cover an act not clearly within the terms of the instrument by which it was created; but a different rule has often been applied where a testamentary power has been given, not for the benefit or profit of the donor, but in the furtherance of some benefit which the donor confers upon the donee. The language creating such a power is to be liberally construed to promote the purpose or intent of its creation, and, if the power to sell is amplified by other words of broader or more general meaning, and the circumstances under which the gift is made he not such as to forbid that construction, the authority to mortgage for the purpose expressed in the writing may be inferred.” In the Hamilton case the language of the will under construction was “full power to sell, transfer and dispose of the same or as much thereof as may from time to time be needed for his support and maintenance during his said lifetime.” It is further pointed out that the real estate devised in the will was encumbered by an outstanding mortgage. Price v. Courtney, 87 Mo., 387; Hoyt v. Jaques, 129 Mass., 286; Parkhurst v. Trumbull, 130 Mich., 408; Bloomer v. Waldron, 3 Hill (N. Y.), 364; (Aaron Burr case); Arlington State Bank v. Paulsen, 57 Neb., 717; Stokes v. Kennedy, 58 Miss., 614; Hicks v. Ward, 107 N. C., 392. If the mortgage in the case now under consideration can be upheld, its validity must rest upon principles announced in Hall v. Quinn, supra. An analysis of the case of Hall v. Quinn will disclose: (1) That the donors of the property procured the incorporation of the donee by the Legislature, and the legislative act, incorporating the donee, conferred and delegated full, ample and comprehensive powers “to use and enjoy, alien, exchange, invest, convert and reinvest all of its property and assets in as full and ample manner as other institutions of,the State similarly chartered.”' Having participated in procuring this charter, the donors, therefore, were estopped, and could not question the exercise *775 of tbe power conferred, and tbe power to mortgage is fully conferred by tbe provisions of tbe charter. (2) Tbe beneficiary in tbe deed of gift duly authorized tbe execution of tbe mortgage. Tbe result was that there was no person who could raise tbe question or challenge tbe validity of tbe mortgage so given. “Tbe parties who can maintain a suit to enforce a trust must be either a cestui que trust or a trustee, or must sue in right of one of these or must have some legal interest'in tbe subject-matter of tbe trust either granted or reserved, or by reverter.” Shields v. Harris, 190 N. C., 520. It is obvious, therefore, that tbe principle announced in Hall v. Quinn is not applicable to tbe facts here. Tbe language of the deed under consideration, tbe weight of authority, and tbe clear logic of tbe principles involved, compel tbe conclusion that tbe mortgage in this particular ease was not properly authorized, and therefore invalid. It necessarily follows that a sale thereunder could not vest an indefeasible title. Tbe judgment must be Affirmed. ClaeKson, J\, did not sit.