The bank held a mortgage upon the parcel of real estate designated in the case as No. 1. When that parcel was exposed for sale under a prior mortgage held by another person, it was the official duty of the defendant, as the financial agent and manager of the institution, to see, so far as he was able, that the land should sell for enough to satisfy both the liens. Beyond this, the bank had no interest in the premises or in the sale. The situation of the defendant, therefore, was not such as to disqualify him absolutely from purchasing at that sale for his own benefit. His duty and his interest might be in conflict until a sum was bid large enough to cover the demand which he represented as trustee or agent; but he had the same right which any other person had to buy at that price or at any greater price. It was his duty to collect the debt due to the bank; but when that object was attained, he was under no further duty to speculate in its behalf. The same observation, in substance, may be made in reference to the parcels Nos. 2 and 3. In respect to No. 2, the bank appears to have had a mortgage upon some equitable interest of its debtors, the legal title being in a third person. The defendant, by arrangement with all the parties, acquired the title, in consideration of which he surrendered the whole claim of the bank. As to No. 3, the debt due to the bank existed in a decree of foreclosure and sale against its debtor. At the sale under that decree the defendant bid the sum of $5,000; but whether this was less than the sum due on the decree is not stated in the case. The relations of the defendant, and the duty flowing therefrom, were the same in respect to all the three parcels. Having a controlling management of the bank, he was bound to take care that its liens should be made available so as to protect it from loss; and until that duty was discharged, he had no right to consult his own interest as a purchaser on his own account. But he could purchase at prices which would satisfy the liens, provided he paid to the bank the amount thereof, or he could purchase at any price, if, by paying the bank debts, he perfectly protected the interests entrusted to him in his representative character. There is neither principle nor authority for *Page 531 the doctrine that the financial officer of a moneyed corporation cannot, in any circumstances, acquire an estate on which it has a lien for the security of a debt. He must take the most scrupulous and exact care that the lien is made productive to its utmost value, and, therefore, he cannot buy for himself while anything remains due to his principal. But he can, like other men, act for his own interest, by avoiding all conflict with the duty which his situation imposes.
The plaintiff in this case, representing, as receiver, no greater rights than the bank would have if it were a party to this controversy, demands from the defendant a conveyance of the titles acquired in the manner stated, and, in support of that demand, he invokes the doctrine that an agent or trustee cannot purchase, for his own benefit, an estate to which the agency or trust relates. The general doctrine is extremely familiar. A person, who is the trustee of property, or has an agency in respect to it, is not allowed to take a situation producing a conflict of interests. It is not this precise principle, but an analogous one, which would apply to this case, if the defendant had purchased for his own benefit. The principle would be analogous only, and not identical, because the defendant had no trust or agency in respect to the lands in question. He was the trustee, or agent, of those who owned the capital of the bank, and his duty was to collect the debts which constituted a portion of that capital. It is, therefore, only one of the analogies of the doctrine involved which would apply, if the defendant had bought the lands on his own account, and the application would be made with the qualification which I have mentioned, that he might thus buy under the condition of satisfying the debts which were a lien on those lands.
But when we come to take a more exact view of the actual circumstances of the case, I see no room for the application of the rule invoked, or any of its analogies. The defendant did not purchase for his own benefit, within the sense of that rule. Nor did he pay the prices with his own funds. He used the funds of the bank, consisting either of money or of the very debts which were secured upon the lands which he bought. *Page 532 Applying those debts and appropriating other means which belonged to the bank, he acquired the titles, and he did not even profess to make himself a debtor to the institution for the amount of its funds which he thus used, although he took the titles in his own name and with no attending declaration of trust in favor of his principal with whose funds he was thus dealing. If it were assumed that he designed to hold the lands thus acquired for his own benefit, the rights of the plaintiff would depend, not on the principle referred to, but on another, having a more simple and direct application to the facts. On that assumption, the defendant would stand in the situation of using the corporate funds without even the formality of borrowing those funds, and, therefore, without any pretence of authority, and investing them in a private speculation in lands. Upon such facts, the conduct of the defendant would be grossly fraudulent. The bank, in its election, could charge him as a defaulter, in respect to the assets thus used, or it could follow them into the lands acquired, and claim unconditionally a conveyance. As the defendant was a trustee in respect to the funds appropriated without authority, equity, if the bank so insisted, would impress the same trust upon the land, and a conveyance of the legal title could be rightfully demanded.
But no such fraud is imputed to the defendant, and he claims nothing to justify such an interpretation. Having used the assets of the bank, he admits that his purchase was in trust for the bank. The trust is, therefore, to be enforced; and this he does not contest. But what is that trust? A more exact and punctilious mode of dealing would certainly have suggested a contemporaneous declaration in writing, stating the purposes for which he took those titles. But there is no written evidence of this trust, and the plaintiff's remedy is simply and purely to enforce the one which the law implies from the circumstances. But all the circumstances must be considered. It appears that the defendant purchased the lands, using the funds of the bank, and took the title to himself, with the intention of holding it for the indemnity of himself and others who had united with him in becoming security to the State, and to a *Page 533 savings bank in Buffalo, for moneys deposited with the institution. The finding at the trial is, that the defendant took title to the several parcels of land, claiming to hold them for that purpose. The transactions, in their real character, amounted, therefore, to an appropriation by the financial head of the bank of a certain portion of its funds and assets to the purpose of securing himself and his associates for the liabilities they had assumed. If he had a right to take a pledge for that purpose, it can make no difference in what form he kept the value in pledge. He might keep the assets thus appropriated, or he might invest them in land. If the bank might complain of such investment as unauthorized or unwise, and might, on that ground, charge him with a loss, if one should occur, this would furnish no reason for taking the value thus appropriated out of his hands unconditionally, provided he had a right to secure himself and his associates by taking any pledge whatever.
I see no reason for disturbing the arrangements in question, in opposition to the intention by which they were characterized. The plaintiff's claim, when stated according to law and logic, is, that the defendant holds the title to certain lands which he acquired by using the funds of the bank. This being true, the law impresses a trust upon the lands, and requires the defendant to convey them accordingly. But one of the objects embraced in the trust was the security of the defendant and others for certain liabilities. This object cannot be disregarded. The legal title is in the defendant, and the trust is not brought to light at all except through parol facts which the plaintiff must make out by proof or admission. But all the facts must be attended to, because they all tend to qualify and define the trust. The bank had liens upon each of the parcels of land to secure debts due to it. Undoubtedly, it was beneficial and wise to purchase them in order to make the liens available. At all events, the plaintiff suggests nothing to the contrary of this. The complaint is, that he purchased them for himself, contrary to his duty, as the managing officer of the bank. But this is an illogical view of the facts. The defendant purchased for *Page 534 the bank, taking the legal title to himself for a security only, and he paid with the funds of the bank. The only question, then, is, whether he and his associates, in the liability which they had assumed, had a right to be secured by his act in the premises. And I think they had this right. It is in the usual line of business for a bank to take deposits. The State, as we know, requires security to be given, and any other depositor may require it. And if the president or cashier, being the general agent or manager, enters into the required bonds and procures others to unite with him, I see no reason why he may not, in good faith, take a counter security from the institution. He may be the actor in his official capacity, and, with others united in interest, he may also be the recipient in the transaction. What is fairly done for such a purpose should be allowed to stand. The result in this case will violate no rule of law, while equity will be promoted. The plaintiff claims a conveyance of a legal estate to effectuate a trust; but the trust, in its true character, will not be effectuated in the way he proposes.
These views lead to a reversal of the judgment given at the general term, and an affirmance of that of the special term of the Supreme Court.
BACON, J., expressed no opinion; all the other judges concurred — DENIO and DAVIES, Js., protesting, however, against any implication that the financial officer of a moneyed corporation is at liberty to speculate upon real estate bought by him under execution or the foreclosure of a mortgage in its favor.
Judgment reversed, and judgment at special term affirmed. *Page 535