Reynolds v. Hennessey

• Decision Date: 28 January 1886
• Citation: Reynolds v. Hennessey, 15 R. I. 215, 2 A. 701 (R.I. 1886)
• Parties: REYNOLDS v. HENNESSEY and another.
• Court: Rhode Island Supreme Court

2 A. 701

15 R.I. 215

REYNOLDS

v. HENNESSEY and another.

SUPREME COURT OF RHODE ISLAND.

Filed January 28, 1886.

Bill in equity for an account. On plea of the statute of limitations.

Charles Bradley and Geo. B. Barrows, for complainant.

William H. Greene and P. J. McCarthy, for respondents.

DURFEE, C. J. The case stated in the bill is this: The complainant formerly had a son, Bartley or Bartholomew by name, who died February 4, 1872. Some time before his death, he was the owner of certain real estate, situate in the city of Providence, subject to a mortgage for $1,600, with interest, in favor of the defendant Hennessey, bearing date of February 17, 1870. During the illness which preceded said Bartley's death, the defendant Patrick Reynolds procured from him, by fraud, a conveyance of said estate, and entered into possession thereof. Immediately after the death of Bartley the complainant, who was his sole heir at law, instituted a suit in equity against Patrick Reynolds for the annulment of said conveyance, and in February, 1879, obtained a decree annulling it. While this suit was pending, to-wit, May 7, 1872, said Hennessey, by virtue of a power of sale in his mortgage deed, sold the estate at auction, and conveyed it to said Patrick Reynolds, who bid therefor the sum of $4,950, being much more than the amount needed to pay the mortgage debt, with interest and the expenses of sale. The bill charges that Hennessey has refused to account to the complainant for the surplus, and prays that he may be decreed to account, and to pay over what may be found due. The bill was filed in November, 1881. Hennessey has answered, setting up in his answer a plea of the statute of limitations. The case has been heard chiefly on the sufficiency of that plea.

The complainant contends that the plea is bad, because Hennessey, by selling the estate by virtue of the power, submitted himself to the obligations of the power, which amount to an express or technical trust in favor of the complainant, and against such a trust the statute does not run. The power is in the usual form. It appoints Hennessey, "his executors, administrators, and assigns," the mortgagor's "attorney, irrevocable, with full power of substitution and revocation," and empowers them to sell and convey the estate in case of default, after giving the notice prescribed; to receive the purchase money, and out of it to pay the expenses of sale and the mortgage debt, accounting to the mortgagor, his heirs and assigns, for the surplus. It is these express directions in regard to the execution of the power which the complainant argues make the power an express trust. It will be observed, however, that the power is expressed, not in terms of trust, but in terms of agency or attorneyship. The word "trust" or "trustee" nowhere occurs in it. It is doubtless true that a trust may exist without the use of the word, courts looking through words to things; but, nevertheless, the absence of the word is significant where the claim is that the language creates an express trust. The complainant cites text-books and cases in which a mortgagee exercising the power is called a trustee, and treated as such. He does not cite any case which holds that the trust is express or technical. Chancery, when it asserts its jurisdiction over persons having charge of property for the benefit of others, generally speaks of and treats them as trustees, taking advantage of an analogy to subject them to the rules which apply to trusts. It proceeds thus in regard to executors, administrators, agents, or partners. Such persons are in chancery quasi or constructive trustees. In the case at bar the power of sale does not convey an estate, which is the usual mode of creating a technical trust. It delegates an authority. It appoints the mortgagee an attorney, and empowers him to sell, receive the proceeds of sale, pay the mortgage debt and expenses out of the proceeds, accounting for the surplus, if any there be, to the mortgagor. The mortgagee may exercise the power or not as he chooses; but, if he chooses to exercise it, he virtually promises to fulfill the conditions under which the power is granted. Such a promise may be implied at law as well as in equity, and we cannot see why an action at law will not lie for a breach of it. Indeed, the mortgagee, by the terms of the power, receives the purchase money for himself only to the extent of the debt and his expenses, being accountable for the rest of it to the mortgagor, his heirs and assigns. The surplus is in fact the equity of redemption converted into money. Why, then, cannot the mortgagor recover it in an action for money had and received?

The case closely resembles the case of a factor who receives goods for sale on which he made advances. He thereby acquires a lien, which he is entitled to satisfy out of the sales. But the consignor can recover his balance, after the lien is satisfied, at law as well as in equity, notwithstanding that in equity the factor may be treated as if he were a trustee. Scott v. Surnam, Willes, 400-405; Story, Eq. Jur. §§ 463, 464.

The complainant contends that the trust is express and technical, because the mortgagee has the legal title. He has the legal title, not as donee of the power, but as mortgagee. His title as mortgagee is peculiar; the mortgagor in possession being regarded as owner, subject to the mortgage as well at law as in equity. The...