Lehmann v. Rothbarth

Mr. Justice Mulkey delivered the opinion of the Court: Upon filing the record in this court, appellee entered a motion to dismiss the appeal for an alleged want of jurisdiction, which was reserved for the hearing. The question presented by the motion is, whether, under the pleadings and proofs, a freehold is involved, it being conceded there is no other ground upon which the jurisdiction of this court can rest. This question must be answered in the affirmative. One of the main objects of the bill is to recover an equitable freehold in land, — or, in other words, to establish a resulting trust in a freehold estate, — which necessarily involves a freehold. The only answer made to this position is, that there is no evidence in the record tending to establish it, and that it is not within the power of a party to confer jurisdiction upon this court by a mere allegation in the pleadings. The latter branch of the proposition we concede, but do not concur in the view there is no evidence in the record tending to establish the claim of the bill in this resp>ect. Evidence was offered, and considered by the court, on both sides of this question, and so far as we can see, the claim of appellants is made in good faith, upon evidence tending to establish it, and this was sufficient to confer jurisdiction upon this court. Appellants are met at the threshold of the case with the claim that Bothbarth’s only connection with the estate of which an account is sought, was that of a mere agent of his wife, to whom he has already fully accounted. We fully recognize the general principle here invoked, and the only question is whether it is applicable to a case like the present. The principle in question, like most general rules, has its limitations, which are as well recognized as the rule itself. The general doctrine, with its limitations, is well stated by Perry in his work on Trusts. The author says: “If an agent is employed by a trustee, and thus comes into possession of the property, he will be accountable to his employer, and will not be responsible as a constructive trustee. But if an agent should act fraudulently or eollusively, he might be made a trustee by construction, and as such accountable to the cestui que trust.” (Sec. 246.) “If an agent secures any benefit" from a breach of the trust, he will be responsible for the property to the party entitled to the beneficial interest. ” (Sec. 813.) “If they mix themselves up with a breach of trust, and by an abuse of their powers as simple agents obtain possession of the trust property, the cestui que trust may proceed against them as trustees de son tort, or constructive trustees.” (Sec. 907.) See, also, to the same effect, Lewin on Trusts, (7th Eng. ed.) 175, 436, 550. The rule, with its limitations, as stated by these authors, is fully recognized by this court in Davis v. Darkness, 1 Gilm. 173. The question then recurs, do the proofs bring appellee within any of the exceptions to the general rule that an agent of the trustee can not be required to account to the cestui que trust for his management of the trust estate. After a careful consideration of the record we feel constrained to hold that they do. We can not stop to discuss the evidence bearing upon this or other controverted questions of fact involved in the case, nor can we even advert in a general way to all the material parts of it, without extending the opinion in the case beyond all reasonable limits. We must therefore content ourselves with a statement of the general results reached upon matters of mere evidence, with an occasional reference to such parts of the proofs as we think have special significance. Assuming appellee, under the circumstances shown, may be required to account to the parties in interest for his management of the estate, as we hold he may, it is then claimed the reports and accounts heretofore fil.ed by him in the name of his wife, and approved by the probate court, must be treated as his reports, and that he is entitled to the same protection under them as if they had been made out in his name, and he had been the legally appointed guardian of the children instead of Mrs. Lehmann. In making this statement of appellee’s position, of course we do not pretend to give his or his counsel’s language, but simply the effect of the claim, as we understand it. There are several serious objections to this view. We think the weight of evidence shows that from the date of the first guardian accounts in 1876, and even during the preparation of those accounts, Mrs. Lehmann had but little to do with the control or management of the estate, and that her knowledge of it was much less. It would appear, from some cause or other, — whether from undue influence, compulsion, or otherwise; — she had at that time, in effect, abdicated her office and trust as guardian, in favor of her husband, over whom she does not seem to have had the slightest supervisory control. It is true, there is considerable evidence in the record that negatives this view, some of which is open to apparently just criticism, and that which is not, we think is overborne by the testimony of more reliable witnesses, and facts about which there is no controversy. Mrs. Lehmann says in her testimony: “Mr. Bothbarth kept charge of my property, and the estate, money and mortgages, from 1874 to December Id, 1879. * * * I did not have the money of the minors during that time. I did not have charge of it at all. I did not have charge of it because Mr. Bothbarth took charge and refused to let me have charge of it. I told him to let me have charge of it, and he said he would never let me have it unless I would force him in court to do so, and if I did, he would burn up everything before he would render it to me. We had repeated conversations like this. I asked him repeatedly to let me have the papers, and let me take care of them, but he refused, and in 1877 I asked him again, but he would not do it, and after I returned from Europe I asked him again, and he said he would never do it unless I enforced it. That was always the answer he gave me, — that he would burn up everything before he would do it, and make my children beggars. These conversations were not carried on in a quiet manner, but in a very rude manner. * * * I signed the accounts now shown me, being the guardian’s accounts filed May 6, 1876. Mr. Rothbarth told me to sign them — that they were correct. When I took them in my hands to look them over, he said they were all right, — that they were correct, — and I did not know enough to examine them, to see whether they were correct. He kept the books and kept the accounts, and as he made them I signed them. ” As already appears from the preceding statement, in 1876 Rothbarth took the securities belonging to the estate, out of the box in the vault of the Fidelity bank, in which they had theretofore been, and to which his wife had access, and placed them in another box under his exclusive control, and absolutely refused her all access to them. At the time of his settlement with Ida and Alfred A., the latter testifies: “Mr. Rothbarth took us down to his private room, and said he wished to settle our estate; we were to settle with him, and at that time mother stepped into the room to be present and see ' how things w7ere to be presented. He took her by the arm and led her out of the room, and said, ‘You don’t know anything about this estate. I have been handling it, and I have got the books, and I am going to settle with the children.’ ” This, to us, looks much like an independent assumption of the duties of guardian, and a repudiation of her rights, as well as his agency. That Mrs. Lehmann knew but little, if ■anything, • about the correctness of her guardian accounts, and that they are really the work of Bothbarth himself, and Koch, his confidential friend and partner in business, is also fully borne out by the testimony of Mr. Bosenthal. He says: “When I turned over the securities to Mr. and Mrs. Bothbarth on their return, (from Europe,) I dealt directly with Mr. Bothbarth. * * * I remember the guardian’s account rendered in 1876, — that data and everything were furnished by Mr. Bothbarth, the amount of receipts and expenditures. I do not suppose Mrs. Bothbarth did anything in regard to it. A great deal of the work in preparing the accounts was done by Mr. Koch. ” To this he adds, on cross-examination: “I have no doubt that Mrs. Bothbarth was sometimes at my office. I have no recollection of requiring her presence to do business, except for signatures to the account.” With reference to the items included in the account, he says he put in things that were doubtful and things that were improper because directed to do so, that the court might pass upon them. We do not give his exact words, but this is the substance of his statement. It is clear from all this, the accounts in question were never verified by the oath of any one who understood them, and an analysis of the accounts themselves, in the light of the undisputed facts, shows they are erroneous in many particulars, and to such an extent that it would be difficult, if at all practicable, to separate the proper from the improper items, without a restatement of the whole account. The guardian herself, on subsequent investigation, admits that these accounts are erroneous and unjust as passed- by the probate .court, and desires they shall be set aside and restated; and that they were thus passed and approved by the court mainly through the instrumentality of Bothbarth, is clear b'eyond all question, and it is but charitable to add that in obtaining their approval under such circumstances, was an imposition upon the court. These accounts not having been verified by his oath, (the only person who fully understood their real condition,) we are aware of no principle upon which he can now shield himself behind them, and to permit him to do so, under all the circumstances of this case, would be a travesty-on legal justice. As a single instance, out of many we can not stop to enumerate, of the glaring injustice of these accounts, may be mentioned the fact the children are charged in them with large sums on account of taxes, insurance, and the ordinary repairs of the homestead premises, that brought them no income, and were used and occupied by Mrs. Rothbarth and her husband as a residence. This is particularly true as to Rothbarth, for a large portion of the time Mrs. Rothbarth was in Europe with her children, who were lodged, boarded and educated there at their own expense for most of the time, and even for the small portion of time they lived at the homestead they were charged up in these accounts with their support. In any event, the children should- not be charged with more than an equitable portion of these expenses. The general rule unquestionably is, the tenant for life must defray expenses of this character. Other matters equally unfair and improper might be pointed out, but we can not stop to do so. As the settlement between Rothbarth and Ida and Alfred A., heretofore mentioned, was based chiefly on these erroneous accounts, they should not be concluded by it; and it may he added, the circumstances already stated, under which it was made, afford additional reasons why they should not be so bound. A settlement pressed upon wards about the time of their becoming of age, by one standing in loco parentis, and claiming to represent their mother and lawful guardian, from which the latter is forcibly excluded, should not be sustained, except in so far as it is just and fair to them. In restating the account, they must, of course, be charged with all payments made to them, including the real estate taken by them in payment of their interests, respectively, with this qualification : that Rothbarth must make compensation for any loss they may have sustained by reason of taking property instead of cash, other than loss arising by subsequent depreciation of the property. If it was put to them at any material advance on its.then cash value in the condition the property then was, he should make compensation, otherwise not. The right to compensation, however, should be made out, if such a claim is interposed, by clear and conclusive testimony, so as to leave no well founded doubt of its justness. The evidence shows, at least the weight of it does, that the individual estate of Mrs. Lehmann and that of her children was treated as a common fund, and that from and after the date of the first guardian’s report, Bothbarth treated it precisely as if it belonged to him, or he alone had control over it, and a large portion of the cash was carried to his own bank account, where it was used as his own private fund. This is abundantly shown by the fact the accounts filed in the probate court show large balances on hand, when by reference to his bank account, the correctness of which he does not question, it is demonstrated he had little or nothing on hand, and that his account immediately before and after these settlements was even overdrawn. Under these circumstances he is clearly liable for interest. (Perry on Trusts, sec. 468.) One in the possession of trust funds can not thus use them, and then relieve himself of responsibility by falsely reporting he has them on hand and is unable to invest them. To the objection the evidence showing the state of Bothbarth’s bank account on particular days was improperly admitted, we think there is no merit in it. When the question how much ready money a party who is shown to keep a bank account has on hand at a particular time, becomes important in a judicial inquiry, the state of his bank account at the time in question is certainly competent evidence upon such an issue; and as to the manner of proving it, we know of no other way more satisfactory than that which was adopted in this case, — fiamely, by introducing the account itself. It is true that in' this particular case an examined copy of the account taken from the hank books was used, but it was stipulated the copy was to be treated and given the same effect as the books themselves. That one’s bank account is competent evidence for the purpose Bothbarth’s was used in this case, is expressly held in Furness v. Cope, 5 Bing. 114. With respect to the real estate in controversy there is little to be said. While we think the circumstances tend strongly to show that the funds of Mrs. Bothbarth or of the children, or of perhaps both, were used in paying for the property, we are nevertheless of opinion the evidence, upon the whole, leaves the matter in too much uncertainty to warrant relief in this mode. By requiring appellee to fully account for the estate of Mrs. Lehmann as well as that of her children, which he must do, the ends of justice will be sufficiently and more certainly subserved than to establish a resulting trust with respect to this property. As just indicated, we think the court erred in denying relief under Mrs. Lehmann’s cross-bill. We dp not think Bothbarth ought to be permitted to shield himself behind the settlement of December, 1879. The circumstances under which it was effected, as well as its subsequent ratification, appeal strongly in her behalf. It is apparent she did not, at the time, understand what her rights were, for, as already shown, she had been practically excluded by him for years from all participation in the management and control of' the estate, including her own as well as that of her children, and hence it was impossible for her to have any reliable information as to the condition of her affairs or her rights in the premises. Moreover, by his harsh and cruel treatment, his imperious bearing and conduct, resulting, as she claims, in serious sickness and despondency, she was evidently, at the time, in no condition to enter into a business engagement of such magnitude. In short, under all the circumstances, we regard the so-called settlement as a fraud upon her rights, and it should not, therefore, be permitted to stand. He has never accounted to her for the moneys she put into his hands, though often urged to do so. This he must do. Honesty and fair dealing require it. If he has kept his accounts, as her trustee, by preserving proper vouchers for all disbursements, and charging himself with all moneys that went into his hands, as the law requires he should have done, it will impose no hardship on him; and if he has failed to do this, it is but right that he should suffer any inconvenience his neglect in this respect brings upon him. The decree of the court below is reversed, and the cause remanded for further proceedings in conformity with the views here expressed. Decree reversed. Mr. Justice Craig, dissenting. Mr. Justice Scott : I am of opinion no freehold is involved in this case, and that the motion to dismiss should be allowed. For that reason I do not now wish to express any opinion as to the merits of the controversy.