Griffin v. Blanchar
Before: Baldwin, Cope
Synopsis
The trustee of a naked trust has no power to mortgage the trust estate.
Where the trustee of a naked trust is in actual possession of the trust estate, and conveys it, for a valuable consideration, to a purchaser without notice of the trust, the title of the purchaser will prevail.
Plaintiff conveyed to Mrs. B., with the consent of her husband, a tract of land in trust for certain children of Mrs. B. by a former marriage. The conveyance acknowledged the payment of a consideration of $12,000, but no part of this sum was actually paid. To secure its payment, together with other indebtedness, Mrs. B. and her husband executed their promissory notes, and a mortgage upon other property also held by her in trust for her children. By a subsequent arrangement between the parties, these securities were given up and canceled, and other notes of the same character executed, with a mortgage upon both pieces of property to secure their payment. Plaintiff seeks to enforce a lien against the property for the amount of these notes : Held, that as the plaintiff had actual notice of the trust, no equity was created in his favor by the execution of the mortgage, and that the mortgage as such was void; that his lien as vendor was waived by the acceptance of the personal security of Mrs. B. and her husband, and his only remedy is personal action on the notes.
Any conduct which shows an intention on the part of a vendor of real estate to give up his lien for the purchase money, will be a bar to its assertion, and the acceptance of collateral security raises the presumption of such intention— though this presumption may be rebutted by evidence.
After plaintiff has obtained judgment on the notes in this case, he may subject the property to its payment. A Court of Equity would hold the property as that of Blanchar and wife, responsible for their debts before it goes as a mere donation to the children. Baldwin, J.
Opinion — Cope
Cope, J. delivered the opinion of the Court Field, C. J. concurring.
On the tenth of July, 1853, the plaintiff conveyed to Martha J. Blanchar, with the consent and approbation of I. D. Blanchar, her husband, a tract of land, in trust for certain children of Mrs. Blanchar by a former marriage. The conveyance acknowledged the payment of a consideration of §12,000, but no part of this sum was actually paid. To secure its payment, together with other [74]indebtedness, Mrs. Blanchar and her husband executed their promissory notes, and a mortgage upon other property also held by her in trust for her children. By a subsequent arrangement between the parties, these securities were given up and canceled, and other notes of the same character executed, and a mortgage given upon both pieces of property to secure their payment. Upon these facts the plaintiff seeks to enforce a lien against the property for the amount of these notes.
It is well settled that the trustee of a naked trust has no power to bind the trust estate by a mortgage. His powers over the estate are very limited, and it is a general rule in equity that he can do no act to the prejudice of the cestui que trust. The only exception seems to be, that where the trustee is in actual possession of the estate, and conveys it, for a valuable consideration, to a purchaser who has no notice of the trust, the title of the purchaser will prevail. (Hill on Trustees, 316.) In this case the plaintiff had actual notice, and no equity was created in his favor by the execution of the mortgage. His equitable lien as vendor was waived by the acceptance of the personal. security of the Blanchars for the payment of the debt. Upon this subject see Wilson v. Graham, 5 Munf. 297; Williams v. Roberts, 5 Ohio, 35; Boon v. Murphy, 6 Blackf. 273; Conover v. Warner, 1 Gilm. 498, and Campbell v. Baldwin, 2 Humph. 248. The rule is, that any conduct which shows an intention to give up the lien will be a bar to its assertion, and the acceptance of collateral security is sufficient to raise the presumption of such an intention. This presumption may be rebutted by evidence, but there is nothing in this case to show that an intention existed different from that indicated by the facts stated.
The case may be one of great hardship, but we cannot administer relief on that ground. The plaintiff has no remedy as against the property, and must be remitted to his personal action upon the notes.
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