Prevost v. Gratz Gratz

APPEAL from the Circuit Court of Pennsylvania. This was a bill in Chancery, filed in the Court below, by the plaintiff George W. Prevost, as administrator de bonis non, with the will annexed, of George Croghan, deceased, against the defendants Simon Gratz, Joseph Gratz, and Jacob Gratz, administrators of the estate of Michael Gratz, deceased, for a discovery and account of all the estate of G. Croghan, which had come to their hands, or possession, either personally or as the representatives of M. Gratz, who was one of the executors of G. Croghan, who died in August, 1782, having appointed M. Gratz, B. Gratz, T. Smallman, J. Tunis, and W. Powell, executors of his last will and testament. All the executors, except W. Powell, died before the commencement of the suit. B. Gratz died in 1800, and M. Gratz in 1811. W. Powell was removed from his office as executor in the manner prescribed by the laws of Pennsylvania, after the death of M. Gratz; and the plaintiff was thereupon appointed administrator de bonis non, with the will annexed. The bill charged M. Gratz and B. Gratz, (the representatives of B. Gratz not being made parties,) with sundry breaches of trust in respect to property conveyed to them in the lifetime of the testator, and with other breaches of trust in relation to the assets of the testator after his decease; and also charged the defendants with neglect of duty in relation to the property and papers of G. Croghan, which had come to their hands since the decease of M. Gratz. The first ground of complaint, on the part of the plaintiff, related to a tract of land lying on Tenederah river, in the State of New-York, which was conveyed by G. Croghan to M. Cratz, as containing 9,050 acres, by deed, dated the 2d of March, 1770, for the consideration expressed in the deed of 1,800. The deed was upon its face absolute, and contained the covenants of general warranty, and for the title of the grantor, which are usual in absolute deeds. At the time of the execution of the deed, G. Croghan was in the State of New-York, and M. Gratz was at Philadelphia. The land, thus conveyed, was, in the year 1795, and after the death of G. Croghan, sold, by M. Gratz, to one Lawrence, in New-York, for a large sum of money. The plaintiff alleged, that this conveyance made by G. Croghan to M. Gratz, though in form absolute, was in reality a conveyance upon a secret trust, to be sold for the benefit of the grantor; and he claimed to be allowed the value of the lands at the time the present suit was brought, upon the ground of a fraudulent or improper breach of trust by the grantee, or at all events to the full amount of the profits made upon the sale in 1795, with interest up to the time of the decree. This trust was denied by the defendants, in their answer, so far as respects their own knowledge and belief; and if it did ever exist, they insisted, that the land was afterwards purchased by M. Gratz, with the consent of G. Croghan, for the sum of 850 15s. 5d. New-York currency. It appeared from the evidence, that G. Croghan, and B. and M. Gratz, were intimately acquainted with each other, and a variety of accounts were settled between them, from the year 1769, to a short period before the death of G. Croghan: that he was involved in pecuniary embarrasments, and extensively engaged in land speculations: and some portions of his property were conveyed to one or both the Messrs. Gratz upon express and open trusts. It also appeared, that in an account which was settled at Pittsburg, in May, 1775, between B. and M. Gratz, and G. Croghan, there was the following item of credit: August, 1774. By cash received of Howard, for 9000 acres of land on Tenederah, sold him for 850l. 15s. New York currency, is here,. £797. 12   6 Interest on 797l. 12s. 6d. from August 1774, to May 1775, is eight months, at 6 per cent.. 31. 18. 1

£829 10  7 Upon the back of another account between B. & M. Gratz and G. Croghan, which was rendered to the latter in December, 1779, there was a memorandum in the hand-writing of G. Croghan, in which he enumerates the debts then due by him to B. & M. Gratz, amounting to  1,220 1s. 2d. and then adds the following words: 'paid of the above 144 York currency, besides the deed for the land on the Tenederah river 9,000 acres patented:' which memorandum appeared to have been made after the conveyance of the land to M. Gratz. It also appeared that the value of the land, as fixed in the account of May, 1775, was its full value; which was proved by public sales of adjoining lands at the same period when Howard was asserted to have purchased the land. A counterpart of the account of 1775 was also in the possession of M. Gratz, in which the word Howard was crossed out with a pen, but so that it was still perfectly legible, and the name of Michael Gratz, in his own hand-writing, written over it. M. Gratz continued in possession of the Tenederah land, paid great attention to it, and incurred great expenses in making improvements on it, after the year 1786. The mother of the plaintiff was the heir of G. Croghan, and it was proved that his father had unreserved and frequent access to the papers of G. Croghan, and resided several years in Philadelphia, with the view of investigating the situation of the estate, and finally abandoned all hopes of deriving any benefit from it. The account of May, 1775, from which the alleged trust was sought to be proved, was delivered over to him by the representatives of M. Gratz, among the other papers of G. Croghan. The second principal ground of the plaintiff's complaint respected a judgment obtained by the representatives of one W. M'Ilvaine, against G. Croghan, which was purchased by B. Gratz, during the life-time of G. Croghan, and was by him assigned to S. Gratz, one of the defendants, who, under one or more executions issued on that judgment, became the purchaser of certain lands belonging to G. Croghan. It appeared, that on the 30th of March, 1769, G. Croghan gave his bond to W. M'Ilvaine, for the sum of 400, which debt by the will of M'Ilvaine, became on his death vested in his widow, who afterwards intermarried with J. Clark. A judgment was obtained upon the bond against G. Croghan, in the name of W. Humphreys, executor of M'ilvaine, in the Court of Common Pleas in Westmoreland County, Pennsylvania, at the October term, 1774, upon which a ''fi. fa.'' issued, returnable to the April term of the same Court, in 1775. On the 8th of March preceding the return day of the ''fi. fa.'' Bernard Gratz purchased this judgment from Clark, and received an assignment of it, for which he gave his own bond for 300, and interest. About this time G. Croghan was considerably embarrassed, and several suits were depending against him. Bernard Gratz, having failed to pay his bond, was sued by Clark, and in 1794 a judgment was recovered against him for 89 6s. 10d. the balance then due upon the bond, which sum was afterwards paid by M. Gratz. The judgment of Humphreys against G. Croghan was kept alive from time to time, until 1786, and in that year, on the death of Humphreys, J. Bloomfield was appointed administrator de bonis non with the will annexed of Humphreys, and revived the judgment, and it was kept in full force until it was finally levied on certain lands of G. Croghan. In the year 1800, B. Gratz assigned this judgment to his nephew, S. Gratz, one of the defendants, partly in consideration of natural affection, and partly in consideration of the above sum of 89 6s. 10d. paid towards the discharge of the bond of B. Gratz, by his (Simon's) father, M. Gratz. S. Gratz, having thus become the beneficial owner of the judgment, proceeded to issue execution thereon, at different times, between September, 1801, and November, 1804, caused the same to be levied on sundry tracts of land of G. Croghan, in Westmoreland and Huntington counties, of five of which he, being the highest bidder at the sale, became the purchaser. The tracts thus sold, contained upwards of 2,000 acres, and were sold for little more than 1,000 dollars. The title to some part of this land is still in controversy. Shortly after the assignment of the judgment to B. Gratz, on the 16th of May, 1775, G. Croghan, by two deeds of that date, conveyed to B. Gratz, for a valuable consideration therein expressed, about 45,000 acres of land. A declaration of trust was executed by B. Gratz on the 2d of June, 1775, by which he acknowledged that these conveyances were in trust to enable him to sell the same, and with the proceeds to discharge certain enumerated debts of G. Croghan, and among them the debt due on the M'Ilvaine bond, and to account for the residue to G. Croghan. The bill charged, that the assignment of this judgment was procured by B. and M. Gratz, or both of them, after the death of G. Croghan, and that nothing was due upon the judgment; or if any thing was due, it was paid upon the assignment out of moneys belonging to the estate of G. Croghan. But the evidence disproved these charges, and showed, that the assignment was made to B. Gratz in the lifetime of G. Croghan, and that the judgment never was paid or satisfied by G. Croghan, or out of his estate. The defendants, in their answer, denied, to their best knowledge and belief, all the material charges of the bill; and upon replication, the cause was heard in the Court below upon the bill, answer, evidence, and exhibits; and a decree was pronounced dismissing the bill as to all the charges, except that respecting the lands lying on Tenederah river; and as to this, a decree was pronounced in favour of the plaintiff for all the profits made upon a sale of those lands by M. Gratz. From this decree, both parties appealed to this Court. February 28th. Mr. Webster and Mr. D. B. Ogden, for the plaintiff, argued, (1.) That not only ought M. Gratz to be considered as a trustee of the Tenederah lands, but a decree ought to have been given for the value of the lands at the date of the decree, instead of the amount for which the lands were sold by him. They insisted, that the original existence of the trust was fully proved by the evidence, and being thus clearly established, the burthen of proof was on the defendants to show how, and by what means, it had been discharged. M. Gratz being a trustee to sell, he could not buy. 10 Ves. 423; 1 Ves. sen. 9; 2 Bro. C. C. 400; 2 Johns. Ch. 252; 5 Ves. 794; 4 Ibid. 497; 6 Ibid. 631. This is the universal, inflexible rule of a Court of equity: and even if the trust is to pay a debt due to the trustee himself, still he is a trustee for the surplus, subject to the same prohibition: and in this case never having sold the land in execution of the trust, he must now be regarded as still holding it, and ought to be accountable for its value at the present time, and not at the time of the pretended sale. If he now held the land, the Court would compel him to account for its present value, or to reconvey it; but he does hold it in equity, and no act of his ought to prejudice the cestui que trust. The lapse of time is nothing, unless it appear that he knew the purchase by the trustee, and must, therefore, be presumed to have acquiesced. 12 Ves. But here no such knowledge is proved, and, therefore, no such acquiescence can be presumed. (2.) They insisted, that S. Gratz had no right to purchase the lands sold at the sheriff's sale under the M'Ilvaine judgment; but under the circumstances of the case ought to be considered as holding them in trust for the plaintiff. This being a proceeding without any notice to the party interested, cannot be sustained. The notice given by the scire facias was only to B. Gratz, the executor of G. Croghan: that is, the owner of the judgment revived it by notice to himself. It is a settled principle, that an executor cannot purchase the property of his testator (2 Johns. Ch. 252), and the purchaser of an equity takes it subject to all claims. Besides, this is a judgment which the law would presume to be satisfied from length of time; which is attempted to be executed by the judgment creditor who has in his own hands the funds with which it was to be satisfied, and thus attempts to convert a legal right into an instrument of injustice, which forms a strong ground for equitable relief. 3 Ves. 170. Mr. Pinkney and Mr. Sergeant, contra, contended, (1.) That the present plaintiff had no right, alone, to call the defendants to account for the alleged trust as to the Tenederah lands, nor jointly with other parties as the administrator de bonis non, with the will annexed, of G. Croghan. Equitable estates descend as well as legal estates. Mrs. Prevost, the heir of Croghan, died, while the supposed trust existed, leaving several children, besides the plaintiff, who ought also to have been made parties, if he is to be considered as suing as a parcener. The sale of the trust estate indeed extinguishes the right of the heirs to the land, but it entitles them to the money for which it was sold, which now represents and stands in the place of the land. Nor has Croghan's will any effect upon the matter. The will empowers a majority of his executors, (of whom B. Gratz during his life was always to be one,) to sell such of his lands as they should think fit, for the payment of his debts. It does not devise to the executors to be sold, but gives them a naked authority to sell and convey. Even admitting that the Tenederah lands fell within the authority, the executors could only have sold the equitable estate of Croghan, which on his death descended to his heir. But this supposes that very equitable estate, for the existence of which we contend. But the executors did not sell that equitable estate. M. Gratz, though one of those executors, did not sell under the will. He sold, not the equitable interest merely, but the whole estate, and threw the equitable claimants under Croghan, upon the surplus of the proceeds which he could not appropriate. To sell under the will, he must have had the sanction of the other executors, which he had not; and the plaintiff, as administrator de bonis non, could not have authorized it, because he did not become administrator until M. Gratz had rendered a sale by his orders or consent impossible. The will, therefore, did not reach the case, and cannot now, in any degree, control it. Nor does the interest which creditors may have in the proceeds, make it personal estate in Croghan, or subject it to the control of his administrator de bonis non. (2.) The counsel argued that there was no sufficient proof of the existence of any such trust, as that alleged respecting the Tenederah lands, but that M. Gratz became the absolute owner of the lands, with the knowledge and consent of Croghan. Fraud is never to be presumed, especially after such a lapse of time; and even if the trust ever existed, equity will rather presume it to be satisfied, than indulge a presumption of fraud, where the parties are dead, and the evidence respecting the transaction is lost. 12 Ves. 261, 374; 2 Ibid. 581; 3 P. Wms. 266; 2 Atk. 67; 3 Ibid. 105; 3 Bro. C. C. 640; 2 Sch. & Lef. 41, 71. Even if there was here a trust to sell, it was a trust to sell for a fixed price, created by a person of full age, and full knowledge of the circumstances, for the benefit only of the trustee and himself. The reason of the rule, that a trustee cannot purchase, is, that the trustee might be tempted from his duty, and buy at an inadequate price. Where the power is general, or, where other persons are interested in the execution of the trust, it may be conceived to be a salutary rule, though sometimes operating severely. But where the trustee is a creditor, where the price is fixed, and no one else is interested, it would be difficult to assign any good reason why the trustee might not be the purchaser. (3.) As to the M'Ilvaine judgment, they principally relied upon the same grounds which are stated in the opinion of the Court below, quoted infra in a note to the opinion of this Court in the present case. March 13th. Mr. Justice STORY delivered the opinion of the Court, and after stating the proceedings in the Court below, proceeded as follows: The first point upon which the cause was argued, respects the tract of land on the Tenederah River. It appears from the evidence that this tract of land, containing 9,050 acres, was conveyed by Col. Croghan to Michael Gratz, by a deed bearing date on the 2d of March, 1770, for the consideration expressed in the deed of 1,800. The deed is upon its face absolute, and contains the covenants of general warranty, and for the title of the grantor, which are usual in absolute deeds; but are unnecessary in deeds of trust. At the time of the execution of the deed, Col. Croghan was in the State of New-York, and Michael Gratz was at Philadelphia. The lands was, after the death of Col. Croghan, and in the year 1795, sold by Michael Gratz, to a Mr. Lawrence, in New-York, for a large sum of money. The plaintiff contends that this conveyance made by Col. Croghan to Michael Gratz, though in form absolute, was in reality a conveyance upon a secret trust, to be sold for the benefit of the grantor; and in this view of the case, he contends farther, that he is entitled to be allowed the full value of the lands at the time that the present suit was brought, upon the ground of a fraudulent or improper breach of trust by the grantee, or at all events, to the full amount of the profits made upon the sale in 1795, with interest up to the time of the Decree. The attention of the Court will, therefore, be directed, in the first place, to the consideration of the question, whether this was a conveyance in trust, and if so, of what nature that trust was; and, in the next place, whether that trust was ever lawfully discharged or extinguished. If there be still a subsisting trust, there can be no doubt that the plaintiff is entitled to some relief. It appears from the evidence that Col. Croghan, and Bernard and Michael Gratz, were intimately acquainted with each other, and a variety of accounts was settled between them, from the year 1769, to a short period before the death of Col. Croghan. During all this period, Col. Croghan appears to have had the most unbounded confidence in them; and particularly by his will, made in June 1782, a short time before his decease, he named them among his executors, and gave to Michael Gratz, in consideration of services rendered to him, five thousand acres of land, and to his daughter Rachel Gratz, one thousand acres of land on Charter Creek, with an election to take the same number of acres in lieu thereof, in any other lands belonging to the testator. The situation of the parties, therefore, was one in which secret trusts might, probably, exist, from the pecuniary embarrassments in which Col. Croghan appears to have been involved, as well as from his extensive land speculations. And, in point of fact, some portions of his property were conveyed to one or both of the Messrs. Gratz, upon express and open trusts. Still, however, the burthen of proof to establish the trust in controversy, lies on the plaintiff. The circumstances on which he relies are, in our judgment, exceedingly strong in his favour; and sufficient to repel any presumption against the trust drawn from the absolute terms of the deed. In an account which was settled at Pittsburg, in May, 1775, between Bernard and Michael Gratz, and Col. Croghan, is the following item of credit: August, 1774. By cash received of Howard, for 9000 acres of land, at Tenederah, sold him for 850l. 15s. New York currency, is here,.... £797. 12. 6 Interest on 797l. 12s. 6d., from August 1774, to May 1775, is eight months, at 6 per cent...  31. 18   1