Pennsylvania Life Insurance Co. v. Austin

• Decision Date: 22 March 1862
• Citation: 42 Pa. 257
• Parties: The Pennsylvania Company for Insurances on Lives and Granting Annuities <I>versus</I> Austin.
• Court: Pennsylvania Supreme Court

42 Pa. 257

The Pennsylvania Company for Insurances on Lives and Granting Annuities versus Austin.

Supreme Court of Pennsylvania.

March 22, 1862.

IN the Supreme Court at Nisi Prius. In Equity.

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W. L. Hirst, Garrick Mallery, and W. A. Porter, for appellant.

R. C. McMurtrie, for appellees.

The opinion of the court was delivered, March 22d 1862, by WOODWARD, J.

By a deed of 4th December 1832, William White, Jr., and Sarah F. his wife, conveyed certain ground-rents and lots in the city of Philadelphia, including the lots which are the subject-matter of the present controversy, to George Brinton, in trust for the use, support, and benefit of the said Sarah. It was a strict settlement by a husband upon his wife, retaining only a right of possession and enjoyment to himself in the event of his surviving her. The deed gave power to the trustee to make partition with tenants in common of any part of the estate, to sell and convey titles and to reinvest the proceeds of such sales upon the same trusts as before; to pay taxes, collect rents, make repairs, and generally to exercise all necessary supervision and care of the estate. No authority to make a mortgage is expressly given to the trustee, but as it is well settled that a power to sell includes a power to mortgage, we must infer, from the terms of the deed the trustee's power to raise money by way of a mortgage, for the legitimate purposes of the trust. Neither by mortgage nor absolute deed could he divert the trust from the purposes of its institution; but to effectuate its purposes he was clothed with a large discretion, and might encumber or sell any portion of the premises, without imposing upon the purchaser any responsibility for the application of the purchase-money.

In 1848, Brinton was discharged from the trust, and Thomas H. White, father of the husband grantor, was appointed trustee. In 1849, Thomas H. White, by a formal letter of attorney, constituted and appointed the said William White his attorney in fact, with full power to execute the trust.

In 1853, William White applied to the defendant below, the appellant here, for a loan of $3000, for which he offered a mortgage on the four lots on Catharine street, which are referred to in the bill, and which were part of the settled estate. Austin alleges (and there is evidence to support his allegation) that he peremptorily refused to take a mortgage, but that after great solicitation, he was induced to offer to buy the lots at $3000, and that he insisted on an absolute conveyance. A deed of conveyance, absolute and indefeasible on its face, was made to him on the 4th October 1853, by Thomas H. White, the trustee, in consideration of $3000. At the same time, William White made his note to Austin for $3000, at three months, which note, according to the evidence, Austin endorsed, got his brother to discount it, and paid the proceeds to Mr. Hirst, who was the attorney for Thomas H. White, the trustee.

The transaction of 4th October 1853 was evidently a loan on the credit of the lots in question. The auditor finds that the conveyance of the trustee was made as collateral security for the note, and that the agreement was that William White was to have a conveyance of the lots on payment of his note. White did not pay his note at maturity, and Austin, as endorser, had to take it up. After several renewals and extensions, Austin's patience was so far exhausted, in November 1854, that he advertised the lots for sale at Thomas's auction. This brought a new note from White to Austin for $3261.82, with such satisfactory security as induced the latter to deliver his deed for the lots. Having thus possessed himself of the legal title to the lots, freed of the trusts in the deed of settlement, White hastened to mortgage the lots to new creditors. In due time they came to sheriff's sales, and it cost the trust estate $3600 to reobtain the title. Both Thomas and William White died. The insurance company having been appointed trustee in place of Thomas White, under the deed of settlement of 1832, filed this bill in equity, and recovered a decree against Austin for the above sum of $3600, with interest.

The theory of the plaintiffs' bill is that Austin confederated with the Whites to defraud the trust estate of the lots in question. The consideration of the deeds is charged to have been false and fictitious, and it is alleged that the conveyance to Austin, if it was in fact a mortgage, was a fraud on the trustee and a fraudulent execution of the powers of sale.

The gist of the case is fraud — the fraud of Austin. It is of no consequence for the purposes of this suit, that the Whites dealt recklessly or even dishonestly with the trust, if the confederacy of Austin be not clearly established. Mrs. White should have sought from her delinquent trustee or his estate, the indemnity for his misdeeds, to which she was entitled, and should not have looked to Austin for it, unless she could come with proof in hand to charge him. Yet the plaintiffs bring no proof to fix the defendant with a fraud, except such as is derived from his own answers, and from the evidence submitted on his part.

The first thing to arrest the attention in every investigation of fraud is the motive of the perpetrator. Very few men do mischief for the mere love of it. What good was to be gained? What loss was to be averted by the alleged fraud? Questions like these...