Torrey v. Bank of Orleans

The Chancellor. The vice chancellor was clearly right in this case in supposing that the Bank of Orleans, as between that institution and the complainant Torrey, or any persons claiming an interest in lot No. 182, under him, was bound to pay off and satisfy the mortgage to the extent of $1747 and interest, and a proportionate amount of the costs. And the Bank of Monroe was in the same manner bound in equity to pay off the other $>1000 and interest and one third of the costs. The deeds themselves which are in evidence show this, independent of any parol testimony, except so far as such testimony might be necessary to — 659 — prove the fact of the actual acceptance of such deeds by the grantees therein respectively. A recital of a fact in a deed is, as against the grantee in such deed and all persons claiming under him through that deed, evidence of the fact recited therein ; so as to save the necessity of further proof thereof by the grantor or those who claim under him. The acceptance of the deed operates as an estoppel upon the grantee and those who claim under him as against the grantor and his assigns or representatives. (Cov. Read. Ed. of Coke, 352, (a). Carver v. Jackson, 4 Peter’s Rep. 83, 88.) The late Chancellor Jones, in delivering the opinion of the court for the correction of errors in the case of Sinclair v. Jackson, in December 1826, recognizes this principle, that a man who admits the existence of a fact, or deed, either by reciting it in an instrument executed by him, or by acting under such instrument, shall not be received to deny its existence. (8 Cow. Rep. 586.) And in a previous case in the same court, it was held that the recital in a will, of a previous conveyance of a part of the testator’s estate, was conclusive evidence of the fact of such conveyance, as against a person claiming under the attainder of one of the devisees of another part of the estate; which devisee was also an heir at law of the testator. (Denn v. Cornell) 3 John. Ca. 174.) In the case under consideration the Bank of Orleans derived its title to lots No. 169 and 170, and to the mortgage of Allen on the homestead lot, through and under the deeds of those lots to Gardiner ; which deeds recited the existence of the mortgage to the Farmers’ Loan and Trust Company and the amounts that by the arrangement of the grantor and grantee were to be considered as liens on those lots ; and which amounts, as the recitals showed, Gardiner the grantee agreed to pay when they should become due, with the interest thereon. No part of the principal or interest of these two thousand dollars of the bond and mortgage, or of the $1000 which was afterwards assumed by the Bank of Monroe, was then due ; as the interest was payable annually and had been paid up to the 1st of November, 1837. — 660 — By the acceptance of those deeds, therefore, the homestead farm and the two other lots were not only ehargeble with their respective portions of the $2000 and interest apportioned thereon, and a proportionate share of the costs which might be made by a foreclosure of the mortgage if the interest should not be paid when it became due, but the grantee himself was by the acceptance of such deeds, both legally and equitably bound to pay those portions of the charge ; so as fully to indemnify Torrey the grantor, and his remaining lots against the consequences of the non-payment, in case the premises conveyed by such deeds should not, upon the foreclosure of the mortgage, bring sufficient to pay that portion of the debt, and the costs. By the subsequent conveyance of lot No. 12 to the Bank of Monroe, by a deed containing a similar recital, that institution assumed a similar responsibility to the grantor in reference to the residue of that mortgage and his remaining lot, No. 182. Had Gardiner therefore remained the owner of the lands granted to him and if, instead of paying off his part of the mortgage as he was both legally and equitably bound to do, under the agreement recited in the deeds for his three lots, he had suffered the mortgage to be foreclosed for the nonpayment of his part of the incumbrance and had bid in lot No. 182 upon the sale under the decree, it would unquestionably have been the duty of this court, under such a reservation óf the equitable rights of the defendants in the foreclosure suit as was contained in that decree of foreclosure, to have compelled Gardiner to relinquish such purchase and to release that lot to Torrey, or those claiming under him. Arid if the lot had been purchased by a stranger, who had no duty to perform as the agent of Gardiner upon the sale and was under no obligation to protect the equitable rights of the owner of that lot, Gardiner would, in equity, have been bound to indemnify Torrey for the loss he had sustained by such sale. Such being the legal and equitable liabilities of Gardiner at the time he conveyed the two lots to the Bank of Orleans, he took the precaution to insert, in his deed to that — 661 — institution, a corresponding recital, which is conclusive evidence against the grantees therein who accepted that deed, of the agreement that such grantee was to pay off and discharge the amount charged upon those two lots; so as to relieve Gardiner from the responsibility which he had assumed by the agreement recited in the deed from Torrey. Whether Torrey could have sued the Bank of Orleans in an action at law, founded upon its agreement to pay as recited in the deed from Gardiner, according to the principle of the cases referred to by Chancellor Kent in Cumberland v. Codrington, (3 John. Ch. Rep. 254,) is perhaps doubtful. For it is evident that Gardiner himself had an interest in that agreement, as well as Torrey, to indemnify him against the responsibility he had assumed by the recital in the previous deed to himself. There is no doubt, horvever, that a court of equity, to prevent circuity of action as well as to protect the rights of Torrey, for which purpose that agreement was more especially intended, is bound to givev him the benefit thereof in the same manner as if it had been recited in a conveyance directly from him to the bank for these two lots. And if the bank itself had become the purchaser of lot No. 182 at the master’s sale, I think there could not have been any reason to doubt that in equity that institution could not hold the lot as against these complainants. The provision in the decree of foreclosure that any of the parties to the suit might become purchasers at the master’s sale was not intended to permit one defendant to bid in a portion of the premises belonging to another, and to hold the same as against the latter contrary to equity ; but it was inserted merely to avoid the effect of a supposed technical rule that a party to the suit cannot be a purchaser under the decree therein, without special permission. The question therefore arises whether the defendant Clark is to be considered as a mere stranger to the other parties, so as to entlitle him to hold this lot No. 182 which he bid off at the master’s sale, in his own name. Previous to considering that question, however, it may be proper — 662 — to inquire what were the equitable rights of the Bank of Orleans and the complainants as between themselves, at the time of the sale under the decree, in reference to the part of the mortgage money and interest and costs chargeable upon the homestead lot, by the deed to Gardiner and by the subsequent conveyance of that lot to Allen. As to that lot it will be recollected that upon the conveyance to Allen, he gave back a bond and mortgage to Gardiner for $1800, to secure that portion of the purchase money; which bond and mortgage were assigned by Gardiner to the Bank of Orleans at the same time that he conveyed the other two lots to that institution. It does not appear that any recital was contained in that assignment, of an agreement on the part of the bank to pay off and satisfy the $253 and interest charged upon that part of the premises which was embraced in the mortgage to the Farmers’ Loan and Trust Company. Neither is there, any parol evidence of such an agreement at the time of the assignment; though it was well understood that the bank was to take the mortgage of Allen upon the homestead farm, subject to the amount of the original mortgage, which, as betwmen Torrey and Gardiner and Allen, was equitably chargeable thereon. Had the bank, therefore, paid up the amount of the debt and interest and costs which was properly chargeable upon lots No. 169 and 170, or if Clark had bid up those lots to that amount, and the homestead lot had been sold separately and had produced less than the amount charged thereon, I am not prepared to say the complainants w'ould have had any equitable claim against either of these defendants for the deficiency w'hich in that case would have been chargeable upon lot No. 182. It appears, however, that the agent of the bank suffered all three of the lots in which that institution had an interest to be put up together, and bid in the whole in one parcel for an amount far less than the sum the bank was equitably bound to pay under the agreement contained in the recital of the deed from Gardiner for the other two lots. The homestead lot, as appears by the mortgage thereof, wras — 663 — sold to Allen for $1800 in addition to the amount of the original mortgage charged thereon, and there is no room to doubt that the actual value of that lot was much more than the $253 and interest, and a rateable proportion of the costs of foreclosure. The fact that the Bank of Orleans was not liable to pay that amount if the homestead lot had been sold separately and produced less, cannot therefore alter the equities between these parties under the circumstances of this case as they now exist. It is a settled principle of equity that no person who is placed in a situation of a trust or confidence in reference to the subject of the sale can be a purchaser of the property on his own account. And in the recent case of Green-law v. King, decided in the court of chancery, in England, in January, 1841, (5 Land. Jur. 18,) Lord Cottenham held that the principle was not confined to a particular class of persons, such a sguardians, trustees, or solicitors; but -was a rule of universal application to all persons coming within its principle, which is that no party can be permitted to purchase an interest where he has a duty to perform that is inconsistent with the character of purchaser. (See Hawley v. Cramer, 4 Cowen’s Rep. 736, and the cases there referred to.) What was the duty then of the defendant ■Clark in reference to this sale, standing as he did in the situation of cashier and agent of the Bank of Orleans and bound to protect its rights on the sale by the master 1 That bank, by the agreement recited in the deed from Gardiner, was bound to pay off and discharge so much of the $1747, with interest and costs chargeable on the two lots conveyed to it as should not be raised by the sale of those lots by the master, and to indemnify not only Gardiner but Torrey and those claiming under him, from the consequences of a neglect to do so. Bidding in these two lots and the homestead farm for the bank, and purchasing lot No. 182 in his own name for the deficiency which the bank was bound to pay, would thereforé leave the bank equitably liable to the complainants for the value of the last mentioned lot j which amount would be lost by — 664 — the neglect of the cashier to perform the engagement of that institution. Whether lot No. 182 was or was not worth more than than the amount of the agent’s bid is a matter of fact which is never inquired into in such cases ; the general interests of justice requiring that purchases made by persons holding a fiduciary situation in relation to the sale, should be set aside in all cases, if an application is made within a reasonable time. For as Lord Eldon very correctly observed in the case of James, (8 Ves. 345,) no court is equal to the ascertainment of the truth in much the greater number of cases. Clark cannot then be permitted to hold this lot as against the complainants and thus leave the bank to make good the loss to them. He must, therefore, relinquish it to the complainants, and look to the bank for payment of the amount of his bid if he did not in fact purchase it for the bank itself. The decree of the vice chancellor must be reversed with costs to be paid by the defendants to the complainants.. And a decree must be entered, declaring that the Bank of Orleans was in equity bound to bid the two lots conveyed to them by Gardiner up to the amount of the $1745 and interest, mentioned in the recital of the deed from Gardinerto the bank, and a proportionate share of the costs, or to pay off and discharge that amount for the benefit of Torrey and his mortgagee ; and that the purchase of lot No. 182 by Clark, whether on his own account or for the benefit of the bank, was inequitable as against the complainants, and-that the same be set aside. And he and the bank must release and quit-claim to Torrey that lot, subject to the lien of Gilbert thereon by virtue of his mortgage, with covenants against any acts of theirs or either of them, whereby the legal title to the same, acquired under the master’s deed, has been in any way impaired or incumbered ; and if they, or either of them, are in possession of that lot or of any part thereof, the same must be delivered up to the complainants. And the defendants must also pay to the complainants their costs of this suit to be taxed. If the defendants, or either of them, have taken possession — 665 — of the premises or any part thereof, under the master’s deed, the complainants are to be at liberty to apply to the chancellor, upon the foot of this decree, for a reference to compute and ascertain the value of the rents and profits of the premises ; and for the payment of the same by the party who is justly chargeable therewith, upon the coming in and confirmation of the report. The defendant Clark is also to be at liberty to apply for a further decree as against his co-defendant the Bank of Orleans, for the payment to him of the amount of his bid upon this lot at the master’s sale, with the interest thereon, if it has not already been paid to him out of the funds of the bank. And the question as to the costs of the reference, and all questions of costs as between the defendants themselves, and all further questions and directions are in the mean time to he reserved.