Carpenter v. . Taylor

On the 30th day of April, 1894, the defendant executed and delivered to the plaintiff a general assignment of all his property in trust for the benefit of creditors. The instrument contains the usual directions for the conversion of the property into money, and the distribution of the same among the creditors in the order therein designated. The last clause of the instrument is in these words: "The said party of the second part doth hereby accept the trust created and imposed on him by this instrument, and covenants and agrees with the said party of the first part that he will faithfully and without delay execute the created trust according to the best of his skill, knowledge and ability." The plaintiff took possession of the assigned property under this instrument and was proceeding to convert the same into money. It appears that the defendant was a harness maker and dealer in goods of that character, and for that purpose kept a store in which the business was conducted and where the property was at the time of the assignment. The plaintiff and defendant, while engaged in taking an inventory of the property, evidently supposed that there might be a surplus after paying all the debts, if the trust was judiciously administered, and to that circumstance we may attribute the present controversy. On the 24th of May, 1894, about a month after the trust property was vested in the plaintiff and he had entered upon the execution of the trust, he procured the defendant to execute and deliver to him another written instrument which recited the fact that the general assignment had been made and that the understanding between the parties was to the effect that since the legal compensation to the plaintiff as assignee was small and insufficient for the best administration of the property, and that with proper management and diligent attention there probably would be a considerable surplus *Page 175 after settlement and payment of all just claims of creditors, and that in case there should be such surplus the plaintiff should have and receive, in addition to his legal fees and commissions, the sum of fifteen per cent, estimated at inventory, on all sums so remaining up to $5,000, and ten per cent on anything remaining as surplus in excess of that sum. It appears that after payment of the debts there remained a surplus in uncollected accounts and goods which, estimated at the inventory value, amounted to $7,292.90. After the trust had been executed and the plaintiff discharged, and the property remaining turned over to the defendant, the plaintiff demanded payment of the amount claimed to be due to him under the special agreement, but the defendant declined to pay the same, and thereupon the plaintiff brought this action to recover the percentages upon the surplus secured to him by the terms of the agreement. The defense was that the agreement was without consideration and was void upon principles of public policy. The learned trial judge submitted the case to the jury with instructions that if they found that nothing was intended by the agreement except to add to the plaintiff's legal compensation as assignee, then he could not recover, but in case it was found that the agreement provided for the performance of services by the plaintiff in the execution of the trust beyond that imposed upon him by law, under the assignment, then he could recover. The defendant's counsel excepted to the ruling of the court as expressed in the charge in which the intention of the parties in this respect was submitted to the jury. During the course of the trial the defendant's counsel, by exceptions to the denial of a motion to dismiss the complaint on the ground that the agreement was void, as without consideration and against public policy, and to proof of the reasonable value of the extra services claimed to have been performed by the plaintiff, and to oral proof of what the parties intended by the paper, and in various other ways challenged the validity of the instrument, upon the ground that it was void for want of any consideration to support it, *Page 176 and as against public policy. The defendant's counsel requested the court to charge the jury that, as there was no mention of such a thing as the extra compensation between the parties prior to the execution of the assignment, if the plaintiff then understood that he was to do what he did in the execution of the trust he could not recover. The court declined to so charge, and the defendant's counsel duly excepted. In the further discussion of the case, it may be assumed that the exceptions taken by the defendant's counsel during the trial and to the charge are sufficient to raise the question as to the validity of this agreement, whether resting upon the writing itself or supplemented by parol proof to show what the parties intended. There is nothing ambiguous in the language of the instrument upon which the action was based. The intention of the parties is perfectly plain, and the legal meaning and construction of the paper was for the court and not the jury. The writing states in the plainest terms that inasmuch as the legal compensation of the assignee was small and insufficient for the best administration of the property, and with such administration there would probably be a surplus, the parties proceeded to agree upon additional compensation and the principles upon which it was to be computed. Parol proof tending to show that the extra compensation stipulated for in the writing was reasonable, or proper, was wholly inadmissible. If the writing was otherwise valid it was enough that the parties had agreed upon the amount. If it was not valid in its general scope and purpose it could not be aided by the opinions of witnesses tending to show that under all the circumstances the arrangement was reasonable and proper. The moment the paper was made and delivered the law impressed upon it a legal character which followed it for all time, without regard to the opinion which the plaintiff or his witnesses had with respect to its operation, whether fair and reasonable or otherwise. But, doubtless, the most important question in the case is with respect to the validity of the written instrument. If that *Page 177 was void for want of consideration, or upon principles of public policy, the plaintiff was not entitled to recover. The defendant's promise to pay the percentages on the surplus was, we think, without consideration, and hence the agreement was a merenudem pactum. The only consideration alleged or claimed was the obligation of the plaintiff to administer the trust to the best of his knowledge, skill and ability. But he was already bound to do that, both by his express covenant and by law. A promise by one party to do that which he is already under a legal obligation to perform is insufficient as a consideration to support a contract. This principle has frequently been applied by this court, and is recognized as elementary in all of the authorities. (Seybolt v. N.Y., L.E. W.R.R. Co., 95 N.Y. 562; Robinson v. Jewett, 116 N.Y. 40; Vanderbilt v. Schreyer, 91 N.Y. 392;Crosby v. Wood, 6 N.Y. 369; Geer v. Archer, 2 Barb. 420; Arend v. Smith, 151 N.Y. 502; Olmstead v. Latimer,158 N.Y. 313; 2 Pars. on Cont. 437; Poll. Prin. Cont. 161, 162.) It is argued by the learned counsel for the plaintiff that since his client managed the trust with such success as to leave a surplus for the assignor the agreement should be sustained. But that is precisely what he agreed to do when he assumed the trust, and what he was bound to do by law. This new promise by the plaintiff to do something which he was already bound to do produced no fresh advantage to the defendant or detriment to the plaintiff. We must assume that the plaintiff performed his duty as trustee with fidelity and skill; but he assumed that obligation when he accepted the trust. It may be admitted that he performed those duties better than they are ordinarily performed by trustees in such cases, but certainly he did not exceed the measure of his obligation to the defendant and his creditors, which was to administer the trust to the best of his knowledge, skill and ability. The fact that trustees in some cases neglect to execute such trusts as well as they might does not furnish any legal ground for one who does his duty to demand extra compensation. The plaintiff's standard of duty was prescribed by law and *Page 178 by the terms of the trust instrument, and is not to be measured by the conduct of other trustees who failed to accomplish such desirable results. We think, also, that the agreement is invalid on the ground of public policy. A trustee who holds the title to property for the benefit of others cannot use his position for his personal advantage. He cannot make profit for himself in the execution of the trust. He cannot ordinarily deal with the beneficiaries or parties interested in the estate so as to acquire the ownership of the trust property. We are now dealing with a case where the extra compensation was not given by will nor by the trust instrument, but by an agreement between the trustee and beneficiary after the former had accepted the trust and become vested with the title to the trust property. The learned counsel for the plaintiff has cited cases which contain dicta that would seem to support his contention, but in no one of them was the precise point involved. In most, if not all of them, the court referred to cases where extra compensation was given by will or by the trust instrument. It is, doubtless, true, as these cases hold, that a person may do what he will with his own. He may dispose of what he owns by gift or any other mode of transfer, if the transaction is free from fraud and can be said to be his voluntary act. The principle applies to parties who deal with each other on terms of equality, or, as it is sometimes expressed, at arm's length. But it has no application to the case of a trustee who bargains with the beneficiary for a greater share or interest in the trust estate than he would be otherwise entitled to. In such cases the trustee occupies the dominant position, and the beneficiary or person interested in the estate is, in some respects, subject to his power and influence. For obvious reasons the disability of the trustee to bargain with the beneficiary for a share or interest in the property, whether in the form of compensation or otherwise, is absolute in order to avoid the possibility of fraud. In such cases the law acts upon the principle that the temptation of self-interest is too powerful and insinuating to be trusted. (Perry on Trusts, §§ 129, 196, 209, 427; *Page 179 Munson v. S., G. C.R.R. Co., 103 N.Y. 58; Sage v.Culver, 147 N.Y. 241; McClure v. Law, 161 N.Y. 78.) The plaintiff held all of the assigned property in trust, first for the benefit of creditors, and the surplus, if any, for the assignor. While occupying this position he bargained with the defendant for a large share of the surplus, if any, without any other consideration than the performance of services which he had already undertaken to perform for the statutory compensation. When the beneficiary is called upon to perform a contract entered into under such circumstances, as the defendant is in this case, he may resist the claim, and the courts cannot sustain such an agreement without encouraging obvious abuses in the administration of trusts. The officer, or other person, to whom a fee or other compensation is allowed by law for any services, is forbidden by statute to charge or receive a greater fee or reward for that service than is so allowed. (Code, § 3280.) It was held that this statute applied to a claim by a court stenographer for extra compensation based upon an agreement, the consideration of which was his undertaking to furnish minutes more expeditiously than otherwise would be required. (McCarthy v. Bonynge, 12 Daly, 336; affirmed, 101 N.Y. 668.) We see no reason why it does not apply with equal force to the agreement in this case. When a statute forbids a person to ask or receive compensation for services in an official or trust capacity, greater than that prescribed by law, an agreement to pay such extra compensation creates no binding obligation. (Hatch v. Mann, 15 Wend. 44;Crofut v. Brandt, 58 N.Y. 106; Moss v. Cohen, 158 N.Y. 240. ) One of the defenses which the defendant interposed to the plaintiff's claim was that the agreement was made under some kind of duress, but this was negatived by the verdict of the jury. We have assumed that it was freely made, but it was, nevertheless, open to the defendant to assail it upon the grounds that have been discussed. The judgment must be reversed and a new trial granted, costs to abide the event. *Page 180