Denvir v. Park

NORTONI, J. This is a suit in equity. It involves a charge against a trust estate. The finding and judgment were for plaintiff and defendant prosecutes the appeal. ■< Plaintiff is administrator of the estate of William, F. Crow, who was former trustee under the will of the estate now represented by defendant Park as his successor in trust. After the death of Crow, trustee under the will, defendant Park was appointed by the circuit court as his successor in trust. The original trustee, William F. Crow, after serving under the will for almost two years, departed this life without having made a settlement and before any compensation was allowed to him in that behalf. The present suit by the administrator of Crow, the prior trustee, against the trust estate is for an allowance in compensation for Crow’s services as trustee and for an expenditure by him for the services of an attorney rendered in the interests of the trust estate. Camilla S. McManus, under whose will the trust was created, departed this life on November 16, 1905, at the city of St. Louis. By her last will, duly probated, she appointed plaintiff’s intestate, William F. Crow, trustee to manage and care for one-third part of her estate, with directions to pay the net income thereof as collected to the granddaughter of the testator, Camilla S. Walcott, during her life. The cestui que trust, Camilla S. Walcott, intermarried and her — 344 — name is now Camilla S. Burrows. By this will Camilla S. McManus devised one-half of her estate to her son, Thomas Ward McManus, and one-sixth portion thereof to her granddaughter, Camilla S. Walcott, now Burrows, absolutely and the remaining one-third part of the estate to Crow in trust for her granddaughter, Camilla S. Walcott, now Burrows, during her life, with cross-remainders over in favor of Thomas Ward McManus and Camilla S. Walcott, now Burrows, in event either should die prior to the other. Crow, the trustee, qualified immediately and took charge of the trust estate. ' It appears the entire estate of Mrs. McManus consisted of real estate valued at $837,000, besides something over $15,000 in personalty. This real estate consisted of about twenty separate pieces of property located at different places in the city of St. Louis, some of which were vacant, and many other pieces were occupied by tenants. While Crow, the trustee, .collected the rents through real estate agents, he devoted much time to looking after and caring for the estate. Among other pieces of property owned by the estate is the parcel of vacant ground between Pine and Laclede avenues and Vandeventer avenue and Sarah street in St. Louis. During the time of Crow’s incumbancy, condemnation proceedings were pending against the north front of this property and these largely engaged the attention of the trustee. A few months after he took charge of the estate, Thomas Ward McManus instituted a suit against Camilla S. Burrows and Crow, the trustee, with respect to a partition of all of the realty. Crow employed counsel to look after these matters .and to advise him with respect to the affairs of the trust estate. From a reading of the record, it is clear that, besides devoting a large portion of his own time to the trust estate, the trustee occupied much of the time of his counsel with respect .to those matters. It is obvious that the best — 345 — interests of the estate required the services of the counsel employed by the trustee; that the employment was in good faith and the services well rendered. . The trustee served in that capacity nearly two years and died without having made a settlement or received any remuneration whatever for the services of himself or the counsel employed by him. After the death of the trustee and the appointment of plaintiff Denvir as administrator of his estate, James P. Maginn, who had represented the trustee as attorney, filed a claim in the probate court for attorney’s fees amounting to $5,333.33, accrued through the services rendered by Maginn to the trustee in respect of the matters pertaining to the management of the trust estate. This claim was allowed and classified by the court against the estate of Crow, the deceased trustee, in the hands of his administrator, Denvir. Thereafter, plaintiff, administrator of Crow,, instituted this suit against Park, trustee, Crow’s successor, and Camilla S. Burrows, the cestui que trust, and Thomas Ward McManus, remainderman, seeking to recover compensation for the services of Crow, trustee, and for the amount he had expended for the services of his attorney, Maginn, rendered to the trust estate. Upo'n hearing the evidence, the court found the issue and gave judgment for plaintiff for $1600 as compensation for the services of Crow, the trustee, and $5000 in' compensation for the employment of counsel. By their answer, defendants Park, trustee, and Thomas Ward McManus, remainderman, denied the right of plaintiff to any compensation whatever, on the theory that Crow had mismanaged the estate, in that he h,ad omitted to pay the current taxes on the realty in the fall of 1906 and permitted penalties, amounting to $702.04, to accrue thereon, which penalties were paid off and discharged by defendant trustee upon his succession. Furthermore, this answer — 346 — contains a counterclaim asking judgment against the estate of Crow, deceased, for the amount of such penalties — that is, $702.04. There is no suggestion whatever in the record that Crow mismanaged the estate, except that he omitted to pay these taxes and permitted the penalties to accrue. The court found this issue against defendants, as well as the matter set forth in their counterclaim. It is urged, first, that the court erred in overruling defendant’s objection to the reception of any evidence under the petition because it was insufficient. It is obvious that the petition states a cause of action, when all intendments are allowed in its favor, as is the rule after verdict, and the argument now directed against it must fail. By pleading over as they did, defendants waived the objection now insisted upon. [Spurlock v. Mo. Pac. R. Co., 93 Mo. 530, 537, 6 S. W. 349.] It is urged the court should have sustained defendant’s'objection to the introduction of evidence for the reason there is a misjoinder of parties in the petition, in making Thomas Ward McManus, the remainderman, a defendant to the suit. If the matter presents a case of misjoinder of parties, it was obvious on the face of the petition and was available to defendant by demurrer on that ground. [See sections 1800, 1801, 1802, R. S. 1909.] By answering the petition, defendants waived the point and it is not now open for consideration. [See Sec. 1804, R. S. 1909. See Crook v. Tull, 111 Mo. 283, 289, 20 S. W. 8.] At the trial, the court permitted James P. Maginn, the attorney who had represented the trustee, to testify that Crow, trustee, had sought his advice and employed him pertaining to the litigation and other business of the trust estate. Maginn testified fully with great detail as to all of the services he rendered to the trustee, and it appears that all of the services were beneficial to the trust estate, and of no benefit whatever to the trustee, except as such. The testimony of this — 347 — witness was objected to on the 'ground, that Crow, plaintiff’s decedent, who was the other party to the contract of employment, was dead; bnt the court- overruled this objection. It is argued here that error inheres in this ruling, for it is said that the statute (section 6354, R. S. 1909) inhibits the testimony of Maginn touching his contract of employment by Crow, in view of the fact that Crow is since deceased. This is not a suit against the estate of Crow, nor is a recovery on the contract between Crow and Maginn being sought against Crow’s estate. It is true, as before stated, that Maginn filed a claim in the probate court against the estate of Crow on this contract of employment and that court allowed it to the extent of $5333.33. Had the objection made here been made against the testimony of Maginn in asserting his contract against the estate of Crow, it would obviously have fallen within the very terms of the statute. (See Sec. 6354, R. S. 1909). But that question is not before ns. Here, the suit is by Crow’s administrator against the estate of which Crow was formerly trustee, seeking the recovery of a reasonable amount to compensate him for expenditures in employing an attorney for the benefit of the trust estate. Obviously the “contract or cause of action” between Maginn and Crow is not in issue and on trial here in the sense of the statute (Sec. 6354, R. S. 1909), but, rather, the question is, Did Crow engage counsel in proper circumstances and did counsel render services beneficial to the estate so as to entitle Crow to recover reasonable compensation for the amount expended by him in that behalf? Neither is plaintiff here as administrator of Crow’s estate claiming under Maginn in the sense of the statute, for he is claiming only reasonable compensation, which our jurisprudence awards to a trustee for expenditures made by him in employing counsel to protect the interests of the estate in his charge. Instead of claiming .under the contract with Maginn, plaintiff is merely — 348 — pursuing a primary principle of equity jurisprudence, which, in accordance with the precepts of natural justice, awards to a trustee compensation in a reasonable amount (not the contract amount) for expenditures made by him in protecting the interests of the trust estate. Over the objection and exception of defendants, plaintiff introduced the records of the probate court showing that the claim of Maginn for attorney’s fees had been established against the estate of the former trustee, Grow, for the amount of $5333.33. It is urged that the court erred in permitting this judgment to be introduced in evidence in this cause, for it is said none of the defendants here were parties to thát proceeding. It is true that neither the trustee nor other defendants here were parties to that record, and it is true, too, that the judgment of the probate court establishing the claim of Maginn against the estate of Crow was without probative force in this case. However, the probate record was not admitted for the purpose of establishing the claim for attorney’s fees against the trust estate but merely as a circumstance or a link in the chain of evidence tending to show that the claim for attorney’s fees had been enforced against the estate of the prior trustee. It would have been proper for the .court to have excluded this record, as defendants were in no wise in privity with the judgment which it evinced against the estate of Crow, but, be this as it may, the. ruling complained of affords no ground for a reversal here, when it appears that the plaintiff’s right of recovery touching the expenditure for áttorney’s fees is abundantly established by other competent evidence in the record. The record is replete with evidence tending to show that Maginn counseled and advised the trustee about the matters pertaining to the trust for the whole period of his trusteeship, during which time he looked after the partition suit and condemnation proceedings before refer — 349 — red to. Members of tbe bar testified that tbe services rendered by Maginn to the trustee were of tbe reasonable value of $7500. Indeed, there seems to be no serious controversy over tbe fact that Maginn did perform legal services for tbe trustee which were beneficial to tbe estate and that such services were of considerable value. Tbe cestui que trust, Camilla S. Burrows, by her ’answer admits tbe fact to be true and requires proof only concerning tbe value of tbe services rendered. It is obvious that tbe chancellor was not influenced by tbe judgment of tbe probate court establishing Maginn’s claim at $5333.33 against tbe estate of Crow as conclusive on account of such services, for judgment was given here in tbe amount of $5000 only on that score. Tbe suit is in equity and it is proper for .us to exclude tbe evidence objected to as incompetent and treat with tbe case accordingly here; that is, to affirm or reverse tbe judgment as tbe exigencies of tbe occasion seem to require. As tbe fact that* Maginn performed tbe service as attorney for tbe trustee and that such services were of tbe reasonable value of $5000 is abundantly established by tbe proof made, without regard to tbe record of tbe probate court introduced in evidence, we will exclude that record from consideration here and affirm the judgment, unless a reversal should be bad on other grounds. Such is tbe practice in equity causes. [See Crook v. Tull, 111 Mo. 283, 289, 20 S. W. 8.] It is argued that plaintiff is not entitled to recover tbe amount expended by tbe trustee for attorney’s fees except on tbe theory of a subrogation — that is to say, unless it appears plaintiff became subrogated to tbe rights of Maginn through paying Maginn’s claim established against Crow’s estate in tbe probate court. And it is said that the right of subrogation does not obtain. From a consideration of this argument, it is clear that defendant misconceives tbe theory of plaintiff’s case as to tbe item for attorney’s fees. — 350 — Plaintiff does not predicate his right of recovery upon the theory of subrogation but rather as for reasonable expenditures made in protecting the trust estate. No one can doubt that a trustee may reimburse himself for money advanced in good faith for the benefit and protection of the property of the trust estate. [See 2 Perry on Trusts (6 Ed.), secs. 485, 910.] This right of reimbursement is available to the trustee to enforce compensation from the estate for such reasonable expenditures as the trustee has made in the employment of counsel and obtaining advice toward protecting the property in trust, provided always that the trustee acts in good faith in the matter. [See 2 Perry on Trusts (6 Ed.), sec. 910; Coffman v. Gates, 110 Mo. App. 475, 489, 85 S. W. 657.] While this principle vouchsafes remuneration to the trustee, for the reasonable expenditures of the trustee, as above suggested, it affords no right of recovery against the trust estate upon those persons with whom the trustee contracts. As to such parties, the trust estate may not be required to respond directly, in other than exceptional circumstances, but their claim, if any, is to be asserted against the trustee who contracted the debt, and he may be required to respond, unless a special contract to the contrary appears. [See Johnson v. Leman, 7 L. R. A. 656; Koken Iron Works v. Kinealy, 86 Mo. App. 199; see also Hackman v. Maguire, 20 Mo. App. 286.] Plaintiff’s petition recognizes these principles and seeks a recovery from the trust estate as for attorney’s fees, on the theory that the trust estate is liable to reimburse the trustee for reasonable expenditures in its behalf and that the estate of the former trustee, Crow, in the hands of Denvir, administrator, is, and the trust estate now in the hands of Park, trustee, is not, answerable to Maginn -for his reasonable charges in that behalf. The theory was a proper one and well pursued. — 351 — It is insisted that, as the trustee Crow omitted to pay the current taxes on the realty for 1906 and suffered penalties amounting to $702.04 to accrue thereon, the item of $1600 allowed to his estate by the court for his services should be disallowed here. There can be no doubt that the courts frequently refuse all compensation to trustees when a wilful or flagrant breach of trust appears. Such was the case of Newton v. Rebenack, 90 Mo. App. 650. But,, such judgments are penal in character and should go only on facts and circumstances which justly invoke the condemnation of the court and as a measure of punishment. No such facts or circumstances appear here. By the terms of the will, it was the duty of Crow, the trustee, to collect the income from the trust estate and pay the net proceeds thereof over to the cestui que trust, Camilla S. Walcott, now Burrows, semi-annually. It appears that the trustee collected the income and paid all of it over to the cestui que trust without deducting the current taxes therefrom. This matter related to the taxes payable in the fall of 1906, which were theretofore assessed and existed as a lien upon the property at the time of the death of the testatrix, Mrs. Camilla S. Mc-Manus. Because these taxes were a lien upon the estate .at the time of the death of the testator, the trustee insisted they should be paid by Thomas Ward Mc-Manus, the executor of his mother’s will, and not out of the income of the trust estate. While this matter was in controversy between the trustee and the executor, the taxes were permitted to lapse and the penalties to accrue. Obviously the trustee was seeking to conserve the interests of the trust estate here, for his endeavor was to fix the charge of those taxes upon the personal estate in the hands of the executor and relieve the trust estate of a burden to that extent. Though these facts may reveal an error of judgment on the part of the trustee, it is certain they suggest nothing which should invoke the condemnation of the — 352 — court nor its punishment as through the denial of compensation for his services rendered in good faith. But it is argued, even though all of the compensation of the trustee be not denied, the amount of the penalties which were permitted to accrue through Crow’s omission to pay the taxes should be allowed in favor of defendants, on their counterclaim charged against the prior trustee and deducted from the amount of his compensation for services. There can be no doubt of the general proposition that a loss to the trust estate which occurs solely through the negligence of the trustee should be borne by him. [See 2 Perry on Trusts (6 Ed.), sec. 914.] From this it is urged the loss to the trust estate on account of the accrual of the penalties, amounting to $702.04, should be borne by the trustee, and it is said the point has been directly decided by this court in the case of Hildenbrandt v. Wolff, 79 Mo. App. 333. The case relied upon is not controlling, for the equities involved in that judgment were highly dissimilar. In that case, as in this one, the will creating the trust directed the trustee to collect the rents and pay. the net income over to the cestm que trust. There, the trustee paid the gross income from the rents over to the cestui que trust while in her last sickness and, therefore, he omitted to pay the taxes and permitted penalites to accrue thereon. The cestui que trust died and these penalties thus permitted to accrue became a charge upon the estate of the remainderman, for our revenue statutes declare the taxes and penalties on real estate to be a lien upon the land. Under the will in that case, as in this one, the trust estate, after the death of the cestui que trust, was to vest in another, or remainderman, acquitted of all charges whatever. The cestui que trust having died, the property passed to the remainderman, encumbered by the penalties permitted by the trustee to accrue. Because of this encumbrance thus entailed upon the estate of the remainderman, the court declared the — 353 — breach of trust in allowing penalties to accrue to be such as, in the equities of the situation, required the trustee to bear the burden. It is the generally accepted doctrine adhered to in equity jurisprudence that the trustee may be required to respond for even technical breaches which operate to impair the rights of the remainderman. [See Newton v. Rebenack, 90 Mo. App. 650, 658, 659.] But here the estate of the remainderman is in no wise involved or impaired through the default of the trustee in omitting to pay the taxes for 1906. The cestui que trust is entitled to the net income of the property during her life. She is sui juris and still lives. The money, which should have been employed by the trustee in paying these taxes and thus preventing the accrual of these penalties, whs paid over to the cestui que trust as collected, and she enjoyed it together with the income or increment therefrom. The trustee acted in the utmost good faith in declining to pay the taxes, for he insisted they should be paid by the executor because they were .a lien upon the land at the time of the death of the testator. His purpose was to protect the interests of the cestui que trust, and, in endeavoring to do so, the penalties accrued, while she enjoyed the use of the money with which the taxes should have been paid. 'The cestui que trust is a party defendant and has filed an answer in the case. By her answer she admits the plaintiff is entitled to compensation and only requires proof with respect to the amount. No claim whatever is set forth by her with respect to these penalties. Neither the remainderman, Thomas "Ward McManus, nor the corpus of the trust estate is affected thereby in any wise whatever. The taxes and penalties have since been paid from the income by the defendant, succeeding trustee. It is true the defendant trustee asserts this claim in his cross-bill and he represents .all parties in interest so far as that is concerned. How — 354 — ever this may be, it would seem inequitable and unjust to allow this claim and deduct its amount from the trustee’s compensation when such deduction would inure only to the benefit of the cestui que trust who has during all of the time enjoyed the money and its increment with which these taxes should have been paid. [See Oellien v. Galt, 150 Mo. App. 537, 131 S. W. 158.] If the loss were to fall upon the reminder-man, a different question would be presented but, as it is, the question is, Shall this loss be borne by the trustee who acted throughout in the utmost good faith, or shall it be borne by the cestui que trust in whose interest he was acting and who has enjoyed the increment of the money with which the taxes should have been paid? It would seem that the precepts of natural justice suggest that the amount of these penalties should not be decreed against the prior trustee but rather should be treated as off-set by the increment from the money which was paid over to the cestui que trust and should have been employed in liquidating the taxes. In this view, the judgment should'be affirmed. It is so ordered. Reynolds, P. J., and Caulfield, J., concur.