Froneberger v. Lewis

• Decision Date: 30 June 1878
• Citation: 79 N.C. 426
• Court: North Carolina Supreme Court
• Parties: JACOB FRONEBERGER, Adm'r, v. JOHN G. LEWIS, Adm'r.

79 N.C. 426

JACOB FRONEBERGER, Adm'r,

v.JOHN G. LEWIS, Adm'r.

Supreme Court of North Carolina.

June Term, 1878.

CIVIL ACTION commenced in Gaston and removed to and heard on exceptions to the report of a referee at Fall Term, 1877, of CATAWBA Superior Court, before Cloud, J.

The plaintiff brought this action upon a note due his intestate from the defendant's intestate, and the case was referred by consent to obtain an account of the estate, and it was found that the defendant filed a petition in the County Court of Gaston in 1866 to sell the lands of his intestate to pay debts, and that the same was sold by J. B. White, commissioner, and the defendant became the purchaser at $705. The value of the land at the time of sale was $2,000. A report of sale was made and confirmed by the Court, and a deed executed to the defendant. Among the exceptions filed was one by the plaintiff,--that the referee did not charge the defendant with the value of the land purchased at his own sale as aforesaid. This exception was sustained at Fall Term, 1873, of Gaston Superior Court, and upon the defendant's appeal, the case was remanded. See same case, 70 N. C. 456. And at Spring Term, 1875, upon the plaintiff's motion, it was removed to Catawba, and His Honor upon defendant's application referred the case to the clerk to ascertain whether said sale was made by White as commissioner appointed by the Court, or as agent of the defendant; and to report the actual value of the land, and whether the defendant in the purchase of the same was guilty of any collusion with White. From this order of re-reference and refusing judgment for the value of the land, the plaintiff appealed, and from the judgment overruling the exceptions of defendant, he appealed.

Messrs. J. F. Hoke and M. L. McCorkle, for plaintiff .

Messrs. G. N. Folk and R. F. Armfield, for defendant .

READE, J.

We are of the same opinion with His Honor in his rulings upon all the exceptions on both sides, except in re-referring the matter of charging the defendant with the difference between what he bid for the land, $705, and its value at the time of sale, $2,000. That matter was res adjudicata, having been passed upon at a former term of the Court below, and affirmed by this Court on appeal. 70 N. C. 456.

That a trustee or other fiduciary can not purchase at his own sale is an iron rule at law: nor indeed can any one else, because in every sale, there must of necessity be two persons,--a vendor and vendee. It is equally true that where there are two persons, a vendor and vendee, as where a second person is substituted to sell or buy, the sale is valid at law, but in equity the substitution of a second person makes no difference; the validity or invalidity of the sale being determined by other considerations.

This is so well established that we could scarcely be excused for encumbering the case with authorities, except to show how general is the rule and how few the exceptions.

The earliest case in our Reports is Ryden v. Jones, 1 Hawks 497, elaborately argued by Hogg, Hawks and Gaston; opinion by TAYLOR, C. J: Executor sold at public auction, sale necessary, fair, full price, all persons interested present and assenting, except a feme covert, purchase by a third person for the executor, twenty years thereafter sale declared void.

The next case is Gordon v. Finley, 3 Hawks 299: The widow and one of the sons were administrators. It was agreed by the son and all the distributees who were of age, that the widow should pay off debts to the value of one of the slaves, and take him as her property, which she did. Many years thereafter her title held to be bad, HENDERSON, C. J., saying: “No act of hers could be valid where her duty and interest were in opposition. In the sale of the negro it was her duty to get the best price, at least his value; it was her interest if she became the purchaser that she should obtain him on the lowest possible terms. Nor is it an answer to show that in this particular case, full value was given. For wise purposes the rule of law is general and makes no exceptions. A trustee can not purchase at his own sale, that is of himself. The rule may at times produce individual hardships and inconveniences, but its general operation is beneficial. Lead us not into temptation came from the lips of Him to whom error cannot be imputed. To implore it would not disgrace the most honest and pious among us. To make exceptions from the rule in particular cases because full value had been paid, would produce litigation. And who is there to show full value * * * I therefore think that the rule should not be departed from. I will not say in any instance, but I must say in any that I can call to mind. * * * I believe all the assertions made in this opinion are to be found in the common place books, and therefore I have not cited authorities.”

The next case is Hunt v. Bass, 2 Dev. Eq. 292: Edwin Bass was trustee and sold property at auction. His two brothers bought for themselves and him. RUFFIN, C. J. said: “A sale thus conducted can not be supported in this Court. * * * Such conduct amounts to a flagrant breach of trust, and subjects the trustee to the payment of the full value of the property sold, and in that way Edwin would be charged here if necessary, and Gideon also who participated with him in conducting the sale and gaining an interest under it. But as the slaves have got back into the hands of those who did the wrong, the plaintiff has the right to them specifically. * * * The plaintiff is therefore entitled to an account * * * for the full value of the property sold, other than the slaves, and to a reconveyance.”

Observe that here the trustee was held liable, not for what the property was bid off at, nor for what he subsequently sold it at, if he had sold it, but for its full value. And so he was liable for the full value of the slaves, but as the slaves had got back into his possession and the cestuis qui trust preferring it, he was compelled to surrender them specifically.

So in Boyd v. Hawkins, 2 Dev. Eq. 105, RUFFIN, C. J. says: “The well established principle of equity in this State is that a trustee cannot purchase the trust property, directly or indirectly, at a sale made by himself, either privately or at auction. It is founded on the notion that it exposes him to temptation, and the cestui qui trust to imposition. Although no actual fraud be proved, the contract is invalid by reason of the danger of fraud.”

So in West v. Sloan, 3 Jones Eq. 102: The executor sold slaves at auction and a third person bid them off for him. Twenty years thereafter he was compelled to surrender such as were on hand and to account for their hire, and note, to pay full value for those that he had sold, not what he gave for them at public sale, nor yet what he sold them for, but for their full value,-- opinion by NASH, C. J.

So in Patton v. Thompson, 2 Jones Eq. 285: The guardian of a lunatic filed a petition in the Court of Equity for the sale of his ward's land. The Court appointed the clerk and master to make the sale, the guardian procured another to buy the land, the sale was reported fair and full, and was confirmed and title made, and then the guardian took a deed from the purchaser. The only thing he had to do with the sale was to act as crier and clerk. PEARSON, J. “It is an inflexible rule that where a trustee buys at his own sale even though he gives a fair price, the cestui qui trust has his election to treat the sale as a nullity, not because there is, but because there may be fraud. * * * The allegations tending to show actual fraud, as that the sale was not duly advertised, competition was suppressed, &c., are not sustained by the proof and must be put out of the case. * * * The position taken for the defendant, that this being a sale by order of a Court of Equity, and the sale being confirmed by the Court, makes an exception to the general rule above mentioned, and is to be considered res adjudicata, does not apply to this case, for here, the Court had no notice that the guardian was in fact the purchaser. We are not at liberty therefore to express an opinion whether such an exception can be allowed, but we will say this--if it is allowed at all it should be with extreme caution and only under very peculiar circumstances. Who but the guardian can be relied on to show the property to persons wishing to buy, and to take the necessary steps to make it bring a fair price? Who but the guardian can the Court look to for information as to whether the matters have been conducted in such way as to bring the property to sale under the most advantageous terms, and that in fact it did sell for a fair price? It must be declared that the guardian holds the property in trust and there must be an account for rents, &c.”

Observe that here is a strong intimation, supported by cogent reasons that although the sale was necessary, fair and full, and made by order of a Court of Equity, by its own officer, and confirmed with full knowledge that the guardian had bought, yet except under very peculiar circumstances he ought not to be permitted to hold against the will of the cestui que trust.

So in Brothers v. Brothers, 7 Ire. Eq. 150: The trustee sold land and slaves at auction and a third person bid them off, and he made title and took a reconveyance, and subsequently sold the land for the same it was bid off at. PEARSON, J.--“It is an inflexible rule that where a trustee buys at his own sale, even if he gives a fair price, the cestui que trust has his election to treat the sale as a nullity. * * * It must be declared to be the opinion of the Court that the plaintiff is entitled to have the personal property resold, and to have the land resold...