State Bank at Elizabeth v. Marsh

The Chancellor. The first exception is, that the master has designated and allowed as liens on the property at the time of the sale, judgments which were no liens. Four judgments are specified:— 1. The judgment in favour of the Trenton banking company. 2. The judgment in favour of Andrew Bell. 3. Drake’s judgment in a justice’s court; and 4. Birdsall’s judgment, also in same court. First, then, as to the judgment of the Trenton banking company. This was not a lien on the property at the time of the first sale by sheriff Dunn. That sale was on the 18th January, 1819, and the judgment was not rendered until the 23d February, 1819. But it was a lien on that part of the property which was subsequently sold by sheriff Yanarsdalen, in September, 1820. The complainants have charged in their bill, and such appears to be the fact, that the sale by sheriff Yanarsdalen was in virtue of an execution issued on that very judgment. I do not, therefore, see with what propriety it can be contended that it was no lien. It was argued, however, by- one of the counsel for the complainants, that the property sold under that judgment and execution brought only three hundred dollars, and that the execution can receive no more; that for any thing further the Trenton banking company must come in as general creditors. I cannot concur in this opinion. I do not find that the Trenton banking company ever agreed that this property should be sold for a — 293 — nominal consideration, and purchased in by the defendants, for the general benefit of the creditors. The property was sold under their execution, without any such understanding. It turns out afterwards that this court, for good cause shown, is constrained to decree that the purchasers hold the property not absolutely, but as trustees for the benefit of the creditors of Smith. The property is ordered to be sold. It appears evident to me, that creditors having specific liens on the property are to be paid.first, according to their respective priorities. If, then, the proceeds of the sales will reach this judgment in its order, why should not the balance be paid? What has the Trenton banking company done to forfeit its claim 1 Or, if Marsh and Edgar have satisfied this execution, why should they not be reimbursed, if there are sufficient funds 1 It makes no difference that this property is now under the direction of this court as equitable assets ; for even in regard to these, where the law gives a priority, equity will not destroy it: 10 Johns. 522. As to the judgment of Andrew Bell, that appears also to have been a lien on the property prior to the sale by Vanarsdalen; and it is stated in schedule 4, of the master’s report, that there was an execution in the hands of the same sheriff. If so, the same principle will apply to this judgment also; and I am not satisfied that the judgment would not be a lien even without an execution. The executions out of the justices’ courts were also liens on the trust property at the time of the sale, or at least on a part of it, and the master has done right in so reporting them. It is contended, however, that they ought not to be paid out of the trust property, because they were only liens on the personalty, which was exhausted by prior incumbrances. The amount of the personalty is not to be taken from the sale list of the sheriff This property was afterwards disposed of again by Marsh and Edgar, at an advance of nearly one thousand dollars, with which they are rightfully charged by the master. But even with this addition, the personal property would all be exhausted in the payment of prior liens. The executions of the State Bank at Elizabeth and the Newark Banking and Insurance company, were both prior to the executions out of the justices’ courts, and they swallowed up the whole of the personal property. These executions — 294 — can be no lien on that part of the trust fund which is created by the real estate; they never were a lien on the real estate, and must be placed in relation to it on the same footing with other claims. I think the master’s report is right, under the order: he was to state the liens on the property at the time of the sale, in their order of priority, and he has done so; but I do not understand the master to say, that because they were existing liens on the personalty at the time of the sheriff’s sale, therefore they are to be paid at all events. He was not directed to report on that point, 2. The second exception, respecting the Swan mortgage, appeared to have been erroneously taken, and was not insisted on. 3. The third exception relates to the allowance of seven hundred and ninety-six dollar's to the widow of James Smith, for her right of dower in the Point-neck farm. The master was directed to inquire and report whether the widow of James Smith had united in any sales of real estate made by the trustees, and “ what sum is justly due and ought to be allowed for her right thus conveyed.” He reported that the trustees-had sold certain real estate, that .the widow had united in the sale, and that the sum of seven hundred and ninety-six dollars and eighty cents ought to be allowed for her right thus conveyed. I am not dissatisfied with this allowance. It appears reasonable ; and under the direction, I think the master was right in computing the allowance in the manner he did. The principle is a novel one, 1 admit, in our courts of justice; but it is often adopted by executors and administrators in the settlement of estates, with the assent of creditors, and with great benefit to all persons interested ; and I think it would be beneficial to all parties in this case. Without considering this as a precedent for the future guidance of the court, and believing that the master has acted substantially in conformity with his directions, I am inclined to overrule this exception. 4. There is no foundation for the fourth exception. I understand from the master’s report, that the property in which Smith had a life estate, was, together with all the other lands, purchased by Marsh and Edgar, (except the Tharp place,) rented by them to Smith at a certain rent, which is accounted for. — 295 — 5. The fifth exception is, that the master has not charged the defendants with all the rents and profits received from the estate. This exception does not appear to be sustained. The master has taken great pains to attain a just conclusion on this part of the case submitted to him. He ascertained, by the oath of the defendants and the examination of their accounts, which he states to have been accurately kept, that the whole of the nett proceeds of the real estate, from the 1st of April, 1819, to the 1st of April, 1827, (eight years,) was two thousand six hundred and ninety-one dollars and ninety-eight cents, making an average of three hundred and thirty-six dollars and forty-nine cents per annum. On comparing this with the testimony of witnesses who were examined before him on the subject, he came to the conclusion that they should be charged the annual sum of three hundred and fifty dollars, as the fair rent of the premises. I see nothing in the evidence to satisfy me that this is incorrect. And if, as some of the witnesses seem to think, the property might, if rented for a money rent, have produced a larger amount, yet the mode pursued by the trustees was certainly a prudent one, and such as they judged most for the benefit of the property; and they ought not to be charged, unless the deficiency can be considered as growing out of their default or neglect. The property was kept in good repair, and increased in value. 6. The allowance of one third of the nett proceeds of the real estate for the widow’s dower is correct. In making the allowance in that wajr| her share of the land bears its full share of the expenses, which is all the complainants can desire. 7th Exception relates to the commissions allowed by the master. On this subject much has been said about the nature of the trust, and the conduct of the trustees. I do not know that it would be profitable for me to go into a particular investigation of the matter. The property in their hands was declared to be trust property by the court, and to be held in trust for different purposes than those set up by the defendants in their answer.^ The principle is well settled, that trustees are not entitled to compensation for services rendered in the performance of their trust. It is a principle not of modern origin, but has been so long established as to have become an axiom in the law. The cases on — 296 — the subject, from the earliest times to the present, are collected in Manning v. Manning, 1 John. C. R. 527. In that case the trustees set up a claim to a commission of five per cent, for their care and trouble in the management of the estate, and it was expressly disallowed: the court holding that they were entitled only to charges and expenses; or, in the language of the court, “just allowances.” If, therefore, this question rested on general principles, I should have no hesitation in saying that the exception was well taken. But in this case I am to look for the true rule in the decree already made by the court. The master was to be guided by that, and the inquiry is, whether he has pursued his instruction. By the interlocutory decree, which appears to have been settled with great care, the master was directed, in taking the account, to make and allow to Marsh and Edgar “ a just compensation for their trouble, charges and expenses in taking care of the said property, making sales thereof, or otherwise in and about the same.” If I understand the meaning of this direction, it is, that the defendants shall not only be allowed, in taking the account, for their charges and expenses, but also for their trouble and care in executing the trust—not merely in taking care of the property, but in making sale of it, or otherwise in and about the same. Such kind of trouble and care is usually compensated ⅛ the shape of commissions. It is in this way that executors, administrators and guardians are compensated, and it is preferable to the allowance of a gross sum. The master, it seems, has divided this direction. He has allowed the trustees for their trouble, (fee. in taking care of the property, twenty dollars per an-num ; and then for making sale of the real and personal property, and collecting and disbursing the money, he has allowed them a regular commission. I see no particular objection to this mode. The master might have put both together : by separating them he has given his view more clearly, and enabled the court to judge more distinctly of its correctness. To the first item there is no exception, and T do not see how there could be with any reason. Ten dollars a year to each trustee, is a very moderate compensation for the management of the property. The exception to the second item, (the commissions,) so for as regards the right of allowance under the decree, is not well taken: neverthe — 297 — less it does appear to me that the rate of commissions allowed by the master is too high. Six per cent, is a liberal allowance for commissions on the personal estate, but much higher than is usually allowed to executors and administrators on the sale of real estate, especially where the amount is considerable ; and I cannot think that these trustees stand before the court in the situation that executors ordinarily do. Considering that an allowance is made for their trouble in managing the estate, my opinion is that the commission should be reduced from six to four per cent, on the whole sum. 8. The eighth exception, relative to the recognizance to Abigail Blanchard, is not well taken, and must be overruled. 9th Exception is, that the master has made a statement of payments made by defendants, on account of the debts of James Smith, but does not decide and specify which payments are to be allowed. By the decree the master was directed to take “ an account of the payments made by the said Marsh and Edgar for and on account of the said debts due and owing from the said James Smith, and of the dates and amounts of such payments, respectively.” The master has complied with the order, and made a detailed statement; and in this he has done right. But it is necessary that something further should be done before the court can proceed to make a final decree. There should be a statement made of the whole amount of trust monies that have come to their hands, or with which they are to be charged, according to the interlocutory decree and the directions now given ; and of the allowances to be made them for monies retained or paid by them according to the trust. The trust property having been sold since the master’s report, he will now have it in his power to take and state an account which will present the whole matter to the court in one view, and enable it to make a final decree. To (his end, I will refer it back to him to take and state such an account—charging interest on the payments and receipts, respectively, upon the principles adopted in the concluding part of the report. The question of costs is reserved until the coming in of this report.