Carter v. Keesling

Sims, J., after making the foregoing statement, delivered the following opinion of the court: We will first dispose of the questions presented in argument which arise upon the assignments of error before us to the action of the court below in sustaining the demurrer to the original bill by the decree entered October 26, 1920. [1] There is no controversy over the conclusion that the estate vested in James B. Keesling by the clause of the will in question is a defeasible fee in the real estate and a defeasible absolute estate in the personal property, devised and bequeathed thereby, subject to be defeated by the happening of the event of the death of the survivor of the said James — 673 — B. Keesling and his daughter, Edith Keesling Cole, without leaving any descendant of the said James B. Keesling living at the death of such survivor; and that upon the happening of that event the estate, real and personal, devised and bequeathed by such clause of the will, shall pass to the children of the testator other than James B. Keesling or to their descendants. And we hold that such is the proper construction of such clause of such will. The controverted questions before us which arise upon the assignments of error to the action of the court below in sustaining the demurrer to the original bill are only two. They will be disposed of in their order as stated below. [2] 1. Was and is the power to sell and convey given by said clause of the will a power which cannot be completely executed during the life time of James B. Keesling? This question must be answered in the negative. It is contended on behalf of the appellant that the language of the will on the subject under consideration at least leaves this question in doubt, the language being “the said James B. Keesling and his said daughter, if she shall survive her father and become twenty-one years of age and become the heir or devisee of her father, shall have the full power and authority to sell and convey * * * and to invest the proceeds of such sale in other property, to be held and owned in the same way, subject to the like provisions that if they should both die without issue living at the time of their death * * *,” etc. (Italics supplied.) The use of the particle “and” where it first occurs in the quotation is, however, plainly with the meaning of “and also,”' when construed with reference to the exercise of the power, as it is manifest from a reading of the whole sentence that the power is conferred, indeed, upon the father and daughter, but that it may be exercised by the father in his lifetime, and also by the daughter, “if she shall survive her — 674 — father and become twenty-one years of age and become the heir or devisee of her father.” 2. Upon the case made by the original bill, was there any obligation on the appellant as purchaser to look to the application of the purchase money? [3] This question must be answered in the negative. It was a purchase of property which in equity will be regarded as held in trust by James B. Keesling during his life time, but with general power of sale and conveyance given him, with discretion as to time and terms of sale, with express provision that the property in absolute right should pass to the purchaser; and also, along with the duty to reinvest the proceeds of sale in other property to be held upon the same trust, the trustee is given unlimited discretion as to the kind of property and as to the time in which reinvestment shall be made. And, according to the original bill, the appellant was a bona fide purchaser for full value of such property from such a trustee, without actual or constructive notice of any breach of trust committed or intended to be committed by the trustee. It is well settled that in such case there was no obligation on the purchaser to look to the application of the purchase money. Redford v. Clarke, 100 Va. 115, 40 S. E. 630; Hughes v. Tabb, 78 Va. 313; Claiborne v. Holland, 88 Va. 1046, 14 S. E. 915; Potter v. Gardner, 12 Wheat. (U. S.) 498, 6 L. Ed. 706; Elliott v. Merryman, 1 Lead. Cas. in Eq. Pt. 1, 109, 119, and notes. As said in Claiborne v. Holland, supra, 88 Va. 1046, p. 1049, 14 S. E. 915-916: “* * * it is well settled in Virginia, and the prevailing doctrine in this country is, that where a sale is made by a trustee under a power to sell and reinvest upon the same trusts, a bona fide purchaser who pays the trustee will be protected.” (Citing Hughes v. Tabb and Elliott v. Merryman, and notes to latter case, supra.) — 675 — As said in Hughes v. Tabb, supra, (78 Va. 313, p. 325): “The rule is that wherever the trust is of a defined and limited nature, the purchaser must himself see that the purchase money is applied to the proper discharge of the trust; but wherever the trust is general, and of an unlimited nature, he need not see to it. 2 Story Eq. Jur., sec. 1131; 1 Lom. Dig. 302-4; Potter v. Gardner, 12 Wheat. 498. “There is much reason in the doctrine that where the trust is defined in its object, and the purchase money is to be reinvested upon trusts which require time and discretion, or acts of sale and reinvestment are manifestly contemplated to be at a distance from each other, the purchaser shall not be bound to look, to the 'application of the purchase money, for the trustee ■is'- clothed; with a discretion in the management of the trust fund, and if any persons are tc suffer by his misconduct, it should rather' be those who reposed confidence than those who 'háye Bought under an apparent authorized act. Opinion' bf'JpSfice Story in Wormley v. Wormley, 8 Wheat. 442; Sugden on Vendor’s Ch. 11, sec. 1. So, when a sale is made by trustees., üpder a power to sell and reinvest upon the same terms, - ,it "has been held in America that the purchaser is not bound to see to the application of the purchase money. 2 Story’s Equity, sec. 1134, and authorities there cited.” In Redford v. Clarke, supra (100 Va. 115 p. 119, 40 S. E. 630, 631), this is said: “In this case there was a discretion vested in the trustee to determine in what particular property he would reinvest the fund, .a. discretion over which the purchaser had no control, and for the due exercise of which, if he acted in good faith, he was not responsible. We come now to the questions which arise upon the assignments of error to the action of the court below in refusing to allow the bill of review to be filed except upon the condition imposed by the decree of November 22, 1920, which is also under review on this appeal; or, what is the same — 676 — thing, the action of the court in imposing the condition aforesaid upon the leave to file such pleading. These questions are also but two in number and they will be disposed of in their order as stated below. [4] 3. Upon the case made by the allegations of the bill of review, what was the situation and duty of the appellant and of the court? According to the case made by the allegations of the bill of review the appellant, at the time of his purchase, was under no obligation to look to the application of the purchase money. But after his purchase and, indeed, after the decree upon the original bill, it is alleged by the new pleading that the appellant discovered, and, in substance, became possessed of actual knowledge that the sale to appellant by the trustee was for the purpose of enabling the trustee to commit a devastavit by the diversion and use by the trustee? of the purchase money to pay his own personal obligations, and that if the purchase money was paid by appellant to the trustee the latter would so use such money and thus be enabled to commit and would commit the devastavit. This plainly presents a situation in which the purchaser occupies the position of a stakeholder with respect to the unpaid purchase money, and, in equity and good conscience, it was his duty, by interpleader, to convene all of the persons in being, who might have an interest in such money, before the court having jurisdiction of the subject matter and pay the money which was due and to become due and payable into the hands of the court, so that it might be reinvested by the trustee under the terms of the trust, subject to the supervision of the court. And this, in substance, was precisely what the appellant conceived to be his duty under the circumstances set forth in his new pleading and was the relief he himself prayed, if not by the specific prayers of his new pleading, certainly by his submitting — 677 — the matter to the jurisdiction of the court and by his prayer for general relief. The situation presented by the new pleading is not one in which, accurately speaking, the purchaser has the right tc look to the application of the purchase money. The discretionary powers vested in the trustee by the terms of the will with respect to the undesignated character of property and unlimited time within which the reinvestment is to be made, prevent this. The purchaser has no right of control of the action of the trustee in these matters. Nor, indeed, would the court. But the court could prevent the devastavit and yet permit the trustee to exercise the discretion vested in him by the will. The sole right which the purchaser has under such circumstances is to take such action as will enable him to avoid becoming liable as particeps criminis with the trustee in the commission of the devastavit aforesaid. [5] As said in the note to Eliott v. Merryman, 1 Lead. Cas. Eq. Pt. 1, p. 119: “* * * the purchaser will unquestionably be liable to the cestui que trust, if he knows that the trustee is acting in violation of his trust, or even that he entertains such a design and sells as a means of accomplishing it”; citing, among other cases, Jackson v. Undegraff, 1 Rob. (40 Va.) 107; Graff v. Castleman, 5 Rand. (26 Va.) 195, 16 Am. Dec. 741; Pinckard v. Woods, 8 Gratt. (49 Va.) 140. As stated in the note to Pinckard v. Woods, 8 Gratt. (49 Va.), in Va. Rep. Ann., at bottom pages 471-2: “It is a well-settled doctrine that all who participate in a breach of trust are jointly and severally liable; thus a party knowingly dealing with the executor in such a way as to enable him to commit a devastasvit will be held liable therefor.” The Virginia cases there cited to sustain this proposition undoubtedly do so. — 678 — It is true, as appears from the above-cited authorities and numerous others on the same subject which might be cited, that when the purchaser of trust property from a fiduciary derives a peculiar personal benefit, such as the payment of an existing personal debt of the fiduciary to him, or the payment of less than full value, or other fruit of the collusion, it is a plain case of liability on the part of the purchaser, upon the principle that he is particeps criminis with the defaulting fiduciary. It is also true, as stated in Graff v. Castleman, supra, 5 Rand. (26 Va.) 195, at page 201 (16 Am. Dec. 741): “In the cases of Nugent v. Giffard, 2 Ves. 269, and 1 Atk. 463; Meade v. Ld. Orrary, 3 Atk. 235; and Tanner v. Ivis, 2 Ves. 466; Lord Hardwicks would not suffer creditors or legatees to follow assets into the hands of a purchaser from the executor or administrator, unless there was evidence of fraud or collusion between them, nor did he consider it evidence of such fraud and collusion that the executor was applying the assets to the payment of his own individual debt, and this with the knowledge of the purchaser.” And as stated in the same opinion in Graff v. Castleman, 5 Rand. (26 Va.), pp. 201-2, 16 Am. Dec. 741: ‘'In Whale v. Booth, cited 4 Term Rep. 625, note, Lord Mansfield went quite as far. He said, * * (however) * * * there is one exception * * * where a contrivance appears between the purchaser and the executor to make a devastavit’.” But, as appears from the opinion in this Virginia case and in others of the Virginia cases on the subject above cited and referred to, it would seem to be now settled that a party knowingly dealing with a trustee or ether fiduciary in such a way as to enable him to commit a devastavit will be held liable therefor, although such party himself may pay present money and full value and derive no peculiar benefit as the fruit of the transaction. And — 679 — this conclusion seems to us to be sound in principle certainly where the party himself, not merely suspects, but affirmatively states that he knows as an actual fact that the trustee will commit the devastavit if he deals with the trustee by paying money belonging to the trust fund into the hands of the trustee. [6] We are, therefore, of opinion that there was no error in the decree of October 26, 1920, in so far as it treated the case presented by the bill of review as one of which it was proper for the court to take jurisdiction. 4. Is the decree of November 22, 1920, erroneous in that in granting leave to file the bill of review it imposed the condition or terms upon the appellant that he should pay into court that portion of the purchase money which was owing by the appellant in accordance with his contract of purchase and past due at the time of the entry of the decree? This question must be answered in the negative. No authority is cited for appellant to sustain the contention that such action was erroneous, nor have we been able to find any. [7] On the contrary, we see that in 16 Cyc. 523-4, cited for appellees, this is said: “It is not necessary to obtain leave of the court to file a bill of review to correct an error of law apparent on the face of the record; but such leave is necessary where the bill is founded on new matter or newly discovered evidence. The granting of such leave is not a matter of right, but rests in the sound discretion of the court, subject to review * * *; and in granting leave terms may be imposed.” The bill of review in the case before us is founded on alleged newly discovered evidence and must rest solely on that ground; because, as we have above held, there was no error — 680 — of law apparent on the face of the record as it stood at the time of the entry of the former decree. [8] Further: It is well settled that a bill of review filed on the ground of newly discovered evidence entitles the complainant to relief only to the extent that the newly discovered evidence, if it had been brought forward in time, should have changed the character of the former decree sought to be reviewed. And it is plain from what we have said above that if the allegations of the bill of review are all taken to be true the only change in the character of the former decree which the appellant would be entitled to ask would be that the decree allow him to pay the purchase money into court instead of to the said trustee. The alleged newly discovered evidence in no way gives the appellant any right to decline payment into court of the part of the purchase money which is past due, nor,- indeed, of the residue as it falls due, under his contract of purchase. Indeed the bill of review itself states that appellant “is willing, ready and anxious to carry out his contract in the bill and proceedings set out. All he asks is that he be given a clear title against the claims of all persons on account of any action of executor of which he has knowledge.” This relief will be undoubtedly afforded to the appellant if he pays the money into court. The condition or terms imposed upon the appellant by the decree under consideration violates no right of the appellant, grants him the full relief to which he was entitled at the time such decree was entered, and was, indeed, in entire accord with his rights as a stakeholder, which was the position he himself took before the court by his bill of review. For the court to allow the appellant to use the action of the court, in allowing the bill of review to be filed, as a ground for withholding' the payment of the purchase money past due and payable, would be to allow the appellant to' impugn his. own good faith in seeking to file the bill of review. — 681 — Without passing upon the sufficiency, of the bill of review with respect to the well understood essential requisites of .such a bill, since no objection as to such particulars is urged before us, and confining our holding to the points aforesaid raised by the assignments of error before us, we .are of opinion that there was no error in the decree of November 22, 1920. As to both decrees under review, therefore, the case will 'be affirmed. Affirmed.