Tyson v. Latrobe

Stewart, J., delivered the opinion of the Court. It appears, by the proceedings in this cause, that the complainants rightfully held the mortgage executed by Wm. Key Howard, on the Lombard street property, for the sum of 08,500 — 04,000 of that amount having been derived from the will of N. P. Tyson, as legacies, in the hands of Rebecca A. Tyson, as their guardian — the remainder, 04,500, being held by her, as the substituted trustee, in pursuance of the provisions of the said will. Mrs. Tyson, in her capacity as guardian, had no authority, by law, to execute the mortgage to the appellee, upon the property of the complainants, as her wards. The Code, Art. 93, secs. 167, 168, 173, and Biddess vs. Thompson, 2 H. & G., 120, show with what strictness the guardian must act, in the management and disposition of the property of the ward. Kor is it pretended that the will of N. P. Tyson, under the provision creating the trust, as to the funds belonging to the complainants, confers any authority upon Mrs. Tyson, the substituted trustee, to execute such mortgage. But the deed from Wm. Key Howard to Mrs. Tyson, is relied upon by the respondent, as clothing her, as trustee, with the power to execute the mortgage in question. That deed conveys Howard’s equity of redemption in the Lombard street property, to Mrs. Tyson, and declares the purpose of the conveyance to be to vest the property in her in trust, for the benefit of the complainants, in equal portions, until they respectively arrive at the age of twenty-one; and then the share of each to be conveyed in fee. Under it, Mrs. Tyson held the property as trustee, for the benefit of the complainants, the cesttds que trust, who, in equity, were actually seized of the freehold. It also conveys to the trustee, the power and authority during the minority of the complainants, to sell the property ; and after discharging the mortgages thereon, to — 334 — apply any residue of the purchase money by re-investment in other property, for the uses and purposes of the trust. The terms of the deed in question are plain upon their face, leaving slight margin for discretion in the trustee, or construction on the part of the Court, as to the purpose of the donor, or the extent of power conferred upon the trustee. Decisions of Courts in England or this country, or elementary authorities as to the construction of deeds of doubtful import, afford but little aid in the interpretation of this deed, where the meaning of the donor is so distinctly expressed. It is his intention as indicated by the provisions of the instrument, creating the trust, that must govern; that is the great controlling principle in the construction of powers. 4 Kent, 374. No specific authority was given to mortgage the property ; nor was the exercise of such a power to be reasonably implied- — such implication was not necessary for the full and complete discharge of the trust. On the contrary, it was inconsistent with the declared purposes of the trust. Without a sale was • alone contemplated, there was no grounds for the direction to the trustee,' as to the investment of any residue. The execution of the poiiver, if exercised by the trustee, necessarily imported the absolute or “out and out” disposition of the property; the discharge of the mortgages resting thereon, from the proceeds, and the investment of the residue. Unless a sale was made, there could be no investment of a residue after the discharge of the mortgages. This is the natural and reasonable construction to be given to the instrument. It would not only be a loose but uncalled for construction, to undertake to give it other meaning. There is no occasion for this, to enable the trustee fully, fairly and efficiently to discharge the trust, for the benefit of the cestuis que trust. A conditional sale, or a mortgage — 335 — of the property, would practically perpetuate the trust and contravene its object, and tend to defeat the power confided to the trustee. Such disposition of the property, would accomplish the entire perversion of the intentions of the donor. It is clearly unwarranted by any of the terms or purposes expressed in the instrument. It does not appear from the record, that the execution of the mortgage in question by the trustee, and the receipt of the money under it, had the slightest reference to the purposes of the trust; hut that the money was obtained for mere speculative objects ; ostensibly for the improvement of certain other property on Hanover Street, in which the complainants were interested. The provisions of the deed creating the trust, when brought to the notice of the Courts, cannot bo disregarded. It is their duty to see that they are fairly pursued by the trustee, especially where the right of infants or other persons under the peculiar guardianship of the Court are concerned. A Court of Chancery has no authority to engraft upon the instrument, creating the trust, by construction, other conditions than those provided therein. It can only afford assistance in carrying into effect, the bona fide purposes of the donor. Lowry vs. Tiernan, 2 H. & G., 34. Whether the mortgagee under the circumstances ought to be held answerable for the application of the funds, as having liad notice of the nature of the trust and the intended misapplication thereof, constituting a breach of the trust on the part of the trustee, it is not material, from the view we have taken of the matter, to inquire. The receipt of the money was intended for another purpose, than the discharge of the mortgage on the Lombard Street property, to wit: the improvement of the Hanover Street property, by the trustee, Mrs. Tyson. — 336 — The transaction seemed to have been founded upon the theory, thatthechange of Judge Dobbin’s lien on the Lombard Street property, and its imposition upon the Hanover Street property, gratified the provisions of the deed of trust, in two particulars — the discharge of a lien on the Lombard Street, and an investment in the Hanover Street property. But independent of their having been no sale of the property, required by the deed, before such results could be accomplished; the scheme totally failed to effect any of the purposes of the deed. Judge Dobbin’s mortgage on the Lombard Street property was not really discharged, but only shifted to or substituted by his mortgage on the Hanover Street property, in which the complainants held the reversionary interest; and in its place, Mr. Latrobe’s mortgage, was a substituted lien on the Lombard Street property. The actual effect of which was to burden the property of the complainants, with two mortgages in place of one, both of which, to all intents and purposes operated, notwithstanding the change of the lien, as encumbrances upon the complainants; and whether it was on one parcel of property or another, could not be considered a gratification of the terms of the deed, by applying the proceeds of a sale or quasi sale of the property. If by such a process the complainants have been relieved from liens on their property, we have not been able to perceive that such has been the result. But the respondent alleges and insists, that as the money derived from his mortgage was applied, or was so intended, to make improvements upon the property of the complainants, on Hanover Street; that ought by a Court of Equity, to be considered, a fair execution of the power of the trustees ; at all events, sufficient, to bind the complainants, and estop them from setting up any equitable claim against his mortgage. No such authority to improve property of the complainants was given by the terms of the deed nor can it be fairly implied. — 337 — In the absence of clear and specific authority from the deed of trust; or without the sanction of a competent Court; that any power was possessed by the trustee, to encumber the property of the complainants, for the purpose of investing the proceeds in uncertain and speculative improvement of their other property, is a proposition resting upon no substantial foundation ; but is at war with all the settled principles governing the fiduciary relations between the trustee and cestui que trust. A clear power to sell, generally for certain purposes, to wit: for the purpose of raising money, may carry the authority to mortgage, or to sell on condition; if it is apparent the purposes of the deed may be accomplished, in that mode; but it can never be inferred, in opposition to the terms of the deed, and where the nature of the trust requires a sale of the property out and out; and its absolute conversion can alone afford the means of effecting all the objects contemplated by the instrument. Under such circumstances it is obvious the mortgage of the* property is a nugatory act, beyond the scope of the authority of the trustee, and a manifest breach of the trust. As a general rule, a power to sell and convey does not confer a power to mortgage. Questions of this sort must depend on the peculiar circumstances of the trust, and tire intention of the parties as shown by the instrument. A trust with a power of sale “out and out,” will not authorize a mortgage ; and a trust for sale with nothing to negative the settlor’s intention to convert the estate, absolutely, will not authorize the trustee to execute a mortgage. Lowry vs. Tiernan, 2 H. & G., 34; Dolan & Foy, vs. Mayor, &c., of Balt., 4 Gill, 394; Huntt vs. Townshend, 31 Md., 338; A Kent’s Com., 378; Albany Fire Ins. Co. vs. Bay, 4 Comstock, 9; Haldenby vs. Spofforth, 1 Beavan, 390; Stroughill vs. Anstey, 1 DeG. McN. & G., 645; — 338 — Coote on Mortgages, 59 L. L., 80; Perry on Trusts, sec. 768; Lewin on Trusts, 315; Hill on Trustees, 714; 1 Sugden on Powers, 538. Every deed of trust must receive a construction to effect the purposes contemplated according to its terms and provisions. The directions of the deed in question, would not be gratified in any particular, if the trustee were permitted to add another mortgage to those already resting upon the property of the complainants, and which it was the evident design of' the deed, the trustee should discharge. This was the sum and substance of the deed, and its natural and necessary import — and it would be foreign to its purpose to engraft upon it a power ad libitum, in the trustee, to mortgage the property therein embraced. The complainants having the equitable estate and being the sole beneficiaries, cannot be prejudiced by the unauthorized acts of their trustee; and the execution of the mortgage, between the trustee and Mr. Latrobe, was clearly extra vires, and a breach of the trust. The cases of Price and Nisbet vs. Bigham’s Ex’rs, 7 H. & J., 296; Tiernan vs. Poor, 1 G. & J., 216; Brundige vs. Poor, 2 G. & J., 1, referred to by respondent’s counsel, relate to the jus disponendi of the wife, over her separate property, and do not illustrate the power of Mrs. Tyson as a mere trustee, in this case. The Circuit Court ought to have declared the mortgage inoperative and void as against these complainants, and restrained the respondent from the execution of the decree of the 22nd February, 1861; a decree will therefore be passed reversing the decree of the Circuit Court, and vacating the said mortgage, so far as it might affect the Lombard Street property, belonging to the complainants ; and perpetually enjoining the respondent from the execution of the said decree. The bill' does not charge, nor is there any proof, that there was want of good faith in the execution of the mort — 339 — gage, or wilful disregard of the interests of the complainants in the premises. (Decided 12th May, 1875.) If the trustee and mortgagee acted under a mistake, as to the extent of the power of Mrs. Tyson to impose a lien, as trustee, on the property of these complainants, for the money advanced by respondent; and if, as alleged by the respondent, the money was applied to the improvement of the Hanover Street property, in which the complainants were and are interested; the ends of substantial justice would seem to require that the complainants should not be discharged, under the circumstances, from all equitable obligation arising therefrom. We think the respondent ought to be permitted, without prejudice by the decree in this case, to assert an equitable claim, if he so desire, by original bill, against these complainants, for any application of the said money by the trustee, to the improvement of the Hanover Street property, in which the complainants are interested, so far as they may have been benefited thereby, in the rendering the said property more valuable or productive to them, by its permanent improvement or addition to its vendible value. Decree reversed„