Fleming v. McCutcheon

• Decision Date: 03 January 1902
• Citation: 88 N.W. 433,85 Minn. 152
• Parties: FLEMING et al. v. McCUTCHEON.
• Court: Minnesota Supreme Court

85 Minn. 152

88 N.W. 433

FLEMING et al.

v.McCUTCHEON.

Supreme Court of Minnesota.

Jan. 3, 1902.

Appeal from district court, Chisago county; F. M. Crosby, Judge.

Action by Rupert G. Fleming and others against E. A. McCutcheon. Judgment ordered for defendant. From an order denying a new trial, plaintiffs appeal. Affirmed.

Brown, J., dissenting.

Syllabus by the Court

The defendant herein was the owner of a real estate mortgage, and upon the death of his mortgagor he was appointed administrator of his estate. He did not take possession of the mortgage premises of which his intestate died seised, nor take any steps to sell them for the payment of the debts allowed against his estate. He foreclosed his mortgage while he was acting as administrator, and at the sale fairly and in good faith purchased the premises for the full amount due on the mortgage, with the costs of foreclosure. Held, in view of the special facts of this case, that he had a legal and equitable right to so foreclose his mortgage and become a purchaser in his own right at the sale. Francis B. Hart, for appellants.

P. H. Stolberg, for respondent.

START, C. J.

This is an equitable action to charge the defendant as trustee for the plaintiffs, for the amount realized by him from the sale of lands of which their intestate died seised in excess of his mortgage thereon. The trial court made its findings of fact, and as a conclusion of law therefrom ordered judgment for the defendant, and the plaintiffs appealed from the order denying their motion for a new trial. The facts of this case, as found by the court, briefly stated, are these: In the year 1882, E. T. Fleming, then a resident of the county of Chisago, this state, died intestate, leaving an estate therein of both real and personal property. In that year the defendant was by the probate court duly appointed administrator of his estate. The defendant duly qualified as such administrator, and proceeded to and did administer such estate. Debts against the estate were filed and allowed in the aggregate sum of $1,147.05, and after paying preferred claims there remained $880.46, which, by order of the probate court, was paid pro rata upon such debts. The land described in the complaint was a part of the estate of the deceased, and was appraised at $1,280, subject to the mortgage hereinafter mentioned. The intestate, on October 16, 1880, borrowed of the defendant the sum of $780, for the payment of which he gave three promissory notes,-one for $180, due in one year, one for $300, due in two years, and one for $300, due in three years thereafter, with interest at 10 per cent. per annum, payable annually,-to secure which he executed a mortgage containing the usual power of sale to the defendant upon such land, which was duly recorded November 1, 1880. The first note was paid at maturity, with the annual interest on the other two. The defendant did not file his claim against the estate for the amount due on his mortgage, but he proceeded to foreclose his mortgage by advertisement, and such proceedings were had that the mortgaged premises were sold to him on such foreclosure March 17, 1883, for the sum of $770, being the amount then due upon the mortgage, with attorney's fees and costs of foreclosure. No redemption was made from the foreclosure sale, and on July 25, 1884, and after the period of redemption had expired, he sold and conveyed the land to Joseph Bolduc for the sum of $1,250. The value of the lands at the time of the foreclosure sale thereof and at the time of the expiration of redemption was $1,000. At the time of the making of the foreclosure sale and the sale to Joseph Bolduc the defendant was the administrator of the estate. The plaintiffs were nonresidents of this state, and are the sole surviving heirs at law of the deceased, but they did not learn of his death until August, 1900, and prior to that date they had no knowledge concerning his estate, or the management thereof by the defendant. The defendant, as administrator of the estate, received rent for the land for the year 1882, and paid taxes thereon for one year, but he did not take any steps to sell the land at administrator's sale.

The plaintiffs assign as error the rulings of the trial court in refusing to find, as requested, that the defendant took possession of the real estate of his intestate, and in refusing to set aside its finding as to the value of the land. The evidence on these points was far from conclusive in plaintiffs' favor, and the rulings were correct. This brings us to the real question in this case: Do the facts, as found by the trial court, sustain its conclusions of law? The plaintiffs claim that the question must be answered in the negative, for the reason that the defendant, as administrator, was trustee of the land, upon which he held a mortgage in his own right, for the plaintiffs, as heirs at law of his intestate, and therefore he could not purchase at his mortgage foreclosure sale, and acquire title to the land in his individual right. In support of this contention they invoke the general rule that one occupying a fiduciary relation in respect to property the subject of a sale is disabled from purchasing it for his own benefit, and, if he attempts so to do, he will be charged as a trustee for the benefit of the cestui que trust, without reference to his good or bad faith in the premises. King v. Remington, 36 Minn. 15, 29 N. W. 352;Donahue v. Quackenbush, 62 Minn. 132, 64 N. W. 141;Gilbert v. Hewetson, 79 Minn. 326, 82 N. W. 655,79 Am. St. Rep. 486. The reason for the rule is to remove all temptation from a trustee to place himself in a position where duty would conflict with self-interest. The question here, however, is whether the special facts of this case bring it within this general rule, for, if they show that the reason upon which the rule rests is wanting, the rule does not apply. Counsel for the plaintiffs, in support of his claim that the defendant was a trustee of the land for them within the meaning of this rule, relies upon the following cases: Lewis v. Welch, 47 Minn. 193, 48 N. W. 608,49 N. W. 665; Marshall v. Carson, 38 N. J. Eq. 250, 48 Am. Rep. 319; Allen v. Gillette, 127 U. S. 595,8 Sup. Ct. 1331, 32 L. Ed. 271. None of them, however, support the claim. In the first one cited the defendant, as administrator, foreclosed a real estate mortgage, which he treated as the property of the estate which he represented, and purchased the land at the sale for his individual benefit. There was no redemption from the sale. It was ruled that he held the title to the land in trust for the heirs of the intestate; that is, in the case cited, the defendant, as administrator, foreclosed a mortgage which belonged to the estate, and was a part of the trust property in his hands. The second case cited was one where the defendants were, as executors, charged by the will of their testator with the duty of selling sufficient of his real estate to pay debts. They failed so to do, but permitted a part of the land to be sold on execution issued upon a judgment against their testator, and at the sale they purchased the land for their own benefit, and they were rightly held chargeable as trustees of the land for the beneficiaries under the will. The last case relied upon was one where the defendant, as executor, was given, by the terms of the will, control of the testator's real estate during the settlement of his estate. The plaintiff, one of the residuary legatees, gave a deed of trust of all of her interest in the real estate to a third party to secure a loan. The executor became a purchaser in his own name of the land at the foreclosure sale. The legatee brought the action to charge the executor as trustee of the land for her benefit, but it was held that he had a right to so purchase and hold the land for his own benefit. The facts in the first two cases cited are so different from the facts in the case at bar that it is manifest, without argument, that they do not support the plaintiffs' claim, while the last case cited is an authority against the claim. It is true that the general rule as to trustees applies to an executor or administrator so far as to disable him from deriving a personal benefit from the manner in which he manages property intrusted to...