BAYER v. PHILLIPS

BAYER v. PHILLIPS. N. Y. Supreme Court, First Department; General Term, May, 1886. Foreclosure and buying in.—Guardian and Ward ; which to sue.—Parties ; guardian as trustee of express trust.—Infant; sale of property without leave of court.—Code Civ. Pro. §§ 449, 468, 1688. The general guardian of an infant, to whom, as such, a mortgage has been assigned, may sue to foreclose the same without joining the infant, notwithstanding Code Civ. Pro. § 1686, which provides that “ any action specified in this title (actions relating to real property), may be maintained by or against an infant in his own name,” and section 468, providing that “ where an infant lias a right of action, he is entitled to maintain an action thereon.” A guardian in such case is within the statute allowing a trustee of an express trust to sue without joining with him the person for whose benefit the action is prosecuted. A guardian who has properly foreclosed a mortgage held by him as such, and bought in the property at the foreclosure sale, taking a conveyance as general guardian, can sell without leave of court such as is required for selling an infant’s real property. Submission of controversy upon agreed statement made between Minnie Bayer, as general guardian of Edwin M. Bayer and Stephen A. Bayer, infants, with James L. Phillips. The plaintiff was a judicially appointed guardian of the persons and estates of these infants, and to her, as such, a bond and mortgage forming part of the personal estate of the infants had been assigned. On default in payment, she sued as general guardian and sole plaintiff, to foreclose the mortgage; and, having obtained judgment directing a sale, purchased the property as such general guardian at the sale, and a deed was executed to her in her name as general guardian, etc. Subsequently she contracted to sell the premises thus purchased, to Mr. Phillips ; who now objected to the title, claiming that the foreclosure should have been in the name of the infants with a guardian ad litem,, and that plaintiff could not sell without leave of court. The provisions of the New York statutes affecting these questions are as follows: “Every action must be prosecuted in the name of the real party in interest, except that an executor or administrator, a trustee of an express trust, or a person expressly authorized by statute, may sue, without joining with him the person for whose benefit the action is prosecuted. A person, with whom or in whose name, a contract is made for the benefit of another, is a trustee of an express trust, within the meaning of this section” (Code Civ. Pro. § 449). “ Where an infant has a right of action, he is entitled to maintain an action thereon ; and the same shall not be deferred or delayed, on account of his infancy ” (Code Civ. Pro. § 468). “Any action specified in this title may be maintained by or against an infant in his own name ; and article fourth of title second, of chapter fifth of this act, applies to such an action, except as otherwise prescribed in sections 1535 and 1536 of this act” (Code Civ. Pro. § 1686). “ In either of the following cases, real property, or a term, estate or other interest in real property, belonging to an infant, or to a person incompetent to manage his affairs, by reason of lunacy, idiocy, or habitual drunkenness, may be sold, conveyed, mortgaged, or leased, as prescribed in the following sections of this title” (Code Civ. Pro. § 2348). Here follow the grounds of insufficiency of income or dilapidation or unproductiveness, &c., which will support such an application. Koones & Goldman, for plaintiff. —I. The action of foreclosure was properly brought by the plaintiff in her own name, as general guardian. It was not necessary to bring the action in the name of the infants, and the infants not being parties, no guardian ad litem wa?s required (Thomas v. Bennett, 56 Barb. 197; White v. Parker, 8 Id. 48, 52; Pardee v. Van Anken, 3 Id. 534; Hauenstein v. Kull, 59 How. Pr. 24, 25; Person v. Warren, 14 Barb. 489; Davis v. Carpenter, 12 How. Pr. 287; Segelken v. Meyer, 14 Hun, 593; Torry y. Black, 58 N. Y. 185; Field v. Schieffelin, 7 Johns. Ch. 150; Pond v. Curtiss, 7 Id. 45; Coakley v. Mahar, 36 Hun, 157; Cagger v. Lansing, 64 N. Y. 417; Holmes v. Seeley, 17 Wend. 75; Seaton v. Davis, 1 Supm. Ct. [T. & C.] 91). Section 1686 of Code of Civil Procedure is permissive only. It contains no negative words, and therefore leaves the common law rule unrepealed. II. As the bond and mortgage was assigned to Minnie Bayer, as general guardian, &c., she had the right to maintain the action as a trustee of an express trust (Segelken v. Meyer, 14 Hun, 593; Thomas v. Bennett, 56 Barb. 197, 200; Person v. Warren, 14 Id. 489; Field v. Schieffelin, 7 Johns. Ch. 150). III. The objection was waived by failure to raise-it in the foreclosure by demurrer (Seaton v. Davis, 1 Supm. Ct. [T. & C.] 91). IV. As the mortgage foreclosed was a part of the personal property of the infant, and the land in question was bought in by the guardian to protect the - estate of the infant, it must be considered as personal property (Horton v. McCoy, 47 N. Y. 21; Ware v. Palhill, 11 Vesey, 278; Chapman v. Tibbits, 33 N. Y. 289, 290; Tuttle v. Heavy, 59 Barb. 334 Field v. Schieffelin, 7 Johns. Ch. 150). S. M. Doscher, for defendant. The question might be different if the mortgage or other contract to be enforced by the action was made to or with the infant by name, and had not been judicially or otherwise assigned to the guardian. A somewhat similar distinction is made in the case of executors, administrators, receivers and trustees, as between actions which they must bring in their official or trust capacity, and those which they should or may bring in their individual names, without alleging their qualification. In the former class fall most of the rights which, as such, belong to the estate they represent, and which have devolved upon them merely by operation of law. In the latter class are rights of action which arise in transactions had with them since their qualification; in respect of these, their action does not generally require an allegation of official character or capacity, even under the recent statute (N. Y. Code Civ. Pro. § 1814), declaring that an action or special proceeding, hereafter commenced by an executor or administrator, upon a cause of action belonging to him in his representative capacity, or an action or special proceeding hereafter commenced against him, except where it is brought to charge him personally, must be brought by or against him in his representative capacity.” See the next case. In connection with this, it is worthy of notice that by the Revised Statutes, an express trust of real property, valid in its creation, vests the whole of the estate in the trustee in law and in equity, subject only to the execution of the trust, so that the infant, although beneficially interested, is neither in law nor in equity the owner of the property in the sense required to maintain an action respecting it against a third person, 1 R. S. 729, § 60. For recent applications of the statute, see Crooke v. County of Kings, 97 N. Y. 421; Moore v. Appleby, 36 Hun, 368. The Article IV. above referred to, is that in the chapter on Parties which relates to infants, and contains section 408 above stated. Sections 1535, 1536, relate only to guardians ad litem, in partition. The statute does not forbid the sale of an-infant's property, but is aimed at authorizing a sale as an exception to the common law incapacity of an infant to sell. [MAJORITY — Per Curiam.] Per Curiam. —There are two points at issue in this controversy which has sprung out of the facts agreed upon. As to the first point,—namely, whether the foreclosure action was properly brought in the name of Minnie Bayer, general guardian, as sole plain US’,—we think that there can be no doubt that the action was properly brought in her name, she being a trustee of an express trust within the meaning of the Code. As to the second point, we entertain no doubt that under the facts and circumstances disclosed, the guardian had the right to sell the property without obtaining an order of the court therefor, and for these reasons the plaintiff is entitled to judgment, but without costs, according to the stipulation. Note on Executors, Guardians, &c., Buying in. A guardian or other trustee who purchases in his own individual name—a method which has sometimes been resorted to from the mistaken idea that its legal effect would be to facilitate resale—runs the risk of involving the title in the claims of his creditors in case of insolvency before sale is effected, or in the claims of his heirs in case of death, and does not avoid the possibility of objections to title on the ground of the existence of the trust. Such a purchase is voidable at the election of tlie cestuis que trustent, and relief may be given against one to whom the trustee purchasing in his own name has conveyed or mortgaged with notice of the facts. Dodge v. Stevens, 94 N. Y. 209. The decision in the text indicates the proper course for a guardian, executor, or other trustee in buying in to take title in his own name, and as guardian if it be desired, to hold the property so that it can be sold without such formalities as may be required if the purchase was in the name of the ward or cestui que trust; but the conveyance better not merely describe the grantee by the addition “ guardian,” but make him a party as guardian. The embarrassment of taking title individually is often enhanced by the difficulty attending the establishment of a trust by oral evidence. For the mode of doing this, see Foote v. Bryant, 47 N. Y. 544; aff’g Foote v. Foote, 58 Barb. 258; and for Note on Actions to Establish Trust, see 13 Abb. N. C. 334. The following recent cases illustrate the effect of buying in. Where an administratrix purchased in her own name property once belonging to her testator, and sold by a receiver of his property for the benefit of his creditors, but the purchase was made under such circumstances that she did not purchase as trustee to protect the property, —Held, that the purchase did not inure for the benefit of creditors, and that the administratrix could not be compelled to account therefor. Peters v. Carr, 2 Dem. 22. Where an executor loans money belonging to the estate, and takes the bond and mortgage in his own name, payable to himself individually, in case of default the cause of action accrues to him individually, and can be enforced by his personal representatives only. [Distinguishing Walton v. Walton, 4 Abb. Ct. App. Dec. 512; Luers y. Brunges, 56 How. Pr. 282; and citing Dale v. Roosevelt, 8 Cow. 333; Patterson v. Patterson, 59 N. Y. 574; Austin v. Munro, 47 N. Y. 360; Ferrin v. Myrick, 41 N. Y. 315.] Caulkins v. Bolton, 98 N. Y. 511. A trustee who holds, as such, the title to lands subject to a mortgage, cannot, upon the mortgage being foreclosed and the property bid in by the mortgagee, take an assignment of the bid and a deed from the referee. A title so acquired is defective in the hands of a purchaser with notice. [Citing Gardner v. Ogden, 22 N. Y. 327; Forbes v. Halsey, 26 Id. 53, 65; Abbott v. American Hard Rubber Co., 33 Barb. 578; Fox v. Mackreth, 1 Lead. Cas. in Eq. (H. & W.) 188, 255; Obert v. Obert, 2 Stock. Ch. 98; aff’d in 1 Beas. 423 ; Rosenberger’s Appeal, 2 Casey, 67; Wortman v. Skinner, 1 Beas. 358. Toole v. McKiernan, 48 Super. Ct. (J. & S.) 163. A deed by an executor and another deed, dated four days later, by his grantee to the executor personally, both recorded on the same day, with an interval of but five minutes between,—Held, presumptively to constitute but a single transaction, in which the executor acted in the double capacity of vendor and purchaser of the trust property, and that the title conveyed was therefore voidable by the beneficiaries under the will. [Citing Davoue v. Fanning, 2 Johns. Ch. 252; Gardner v. Ogden, 22 N. Y. 327; Forbes v. Halsey, 26 Id. 53; Van Epps v. Van Epps, 9 Pai. 237; Duncomb v. N. Y., Housatonic, etc. R. R. Co., 84 N. Y. 199.] People v. Open Board of Stock Brokers’ Bldg. Co., 92 N. Y. 98; rev’g in part 28 Hun, 274, In affirmance of a like principle, it was held, that whoever receives property, knowing that it is the subject of a trust, and has been transferred by the trustee in violation of his duty or power, takes it subject to the right, not only of the cestui que trust, but also of the trustee, to reclaim possession or to recover for its conversion. [Citing Briggs v. Davis, 20 N. Y. 15; Western R. R. Co. v. Nolan, 48 N. Y. 513.] Wetmore v. Porter, 92 N. Y. 76. Upon somewhat the same principle, executors who foreclose and buy in have power to sell the real property thus purchased, although there be no express power contained in the will, so that if the prop- ■ erty had belonged to the testator they could not have sold it. Cook v. Ryan, 29 Hun, 249. The insertion of the words, “guardian or executor,” &c., after name, may operate as notice of the rights of those for whom he is trustee. Fellows v. Longyor, 91 N. Y. 324. On the question of the right, as between life beneficiary and beneficiary in remainder, to a profit made by buying in at the first sale, see Roosevelt v. Roosevelt, 5 Redf. 264, and other authorities collected in Abbott's Ann. Digest 1882-3, 471. Present, Brady, P. J,, Daniels and Macomber, JJ.