Babcock v. Hubbard

| Conn. | Jun 26, 1888

Pardee, J.

In February, 1872, Charles E. Babcock and his wife Lydia, plaintiffs, and Eben T. Starr and his wife Almira, whose interest is now in Ewen McIntyre, plaintiff, claiming that one George H. Penfield had procured from them by fraudulent representations a conveyance of their interest in certain valuable real estate in Hartford, which upon the finding constituted their entire property, employed Richard D. Hubbard, of the firm of Waldo, Hubbard & Hyde, as an attorney-at-law to institute and conduct such legal proceedings as should be necessary for the recovery of their estate. In that month he in their behalf brought a bill in equity to set aside the conveyance. Immediately thereafter negotiations for an adjustment of the controversy commenced, and the son of George H. Penfield made proposals for the purchase of the interests of all owners of the land, including the complainants in that bill. Thereupon E. E. Marey and his wife, owners of a part thereof, plaintiffs, retained Mr. Hubbard as an attorney-at-law to protect their interests.

The title of all these persons to the land was by devise from Dolly Babcock. Claims exceeding $20,000 in amount having been presented against her estate, it had been represented insolvent. Of these the devisees disputed many. At their request Mr. Hubbard spent much time and labor in resisting those which they deemed-unjust and in bringing the estate into a condition for division. As the outcome of these labors it was agreed between creditors, heirs and devisees, that the estate should be represented by the sum of $50,000; that the debts should stand at $13.602.41; the balance to be divided among the heirs and devisees according to their respective rights.

These last agreed to sell, and Charles H. Penfield agreed to buy, their interests in the land, and secure payment by a mortgage thereof with other property. Mr. Hubbard advised the grantors to require from the grantee a separate note for, the share of each, all to be secured by one mortgage to a trustee to hold the title for the equal and common benefit of all, that there might be no opportunity for priority as between them. The grantors requested him and he consented to take and hold the title as trustee for such purpose. On or about April 29th, 1873, C. H. Penfield, having received a deed from the heirs and devisees, executed and delivered to him as such trustee the several notes required, and secured the payment thereof by his mortgage deed to him, as trustee, his successors and assigns, of an undivided three fourths interest therein. The terms and conditions of this trust were not expressed in the deed; neither was any written declaration of the trust ever made or asked for. But he held the notes in trust for the persons whose interests in the land they represented. With the exception of E. E. Marcy and wife, the persons for whom Mr. Hubbard was counsel were unable to pay him otherwise than from the proceeds of the notes.' They were anxious to convert their interest in the land into money, and accepted the notes because of their belief that they would readily sell in the market; and it was their understanding that he would be paid from the proceeds of such sale. The- notes were not sold; they matured in April, 1874, but remained unpaid. In May following Mr. Hubbard commenced proceedings for foreclosure . in September following, by consent of his clients, he granted an extension of one year to the mortgagor upon payment of $5,000. This sum he paid to his clients pro rata.

In June, 1875, he renewed proceedings- for foreclosure, and obtained a decree in October following. the time of redemption to expire in February, 1876. The mortgagor not redeeming, the title then became absolute m Mr. Hubbard as such trustee. Thereafter, with the consent of his clients, he agreed to sell the interest thus acquired by him to the mortgagor upon present payment of $2,000, the balance in instalments. Mr. Hubbard paid the $2,000 to E. E. Marcy in reduction of a prior mortgage upon the property in liis favor. Charles B. Penfield made no further payments.

In September, 1876, E. E. Marcy commenced proceedings of foreclosure against C. B. Penfield, and Mr. Hubbard, trustee, as owners of an undivided three fourths thereof, and against W. J. Babcock and Catherine S., his wife, and Alfred E. Ely, a mortgagee, as owners of the remaining fourth. By decree of court the debt was'fixed, at $6,554, and tbe third Monday in May, 1877, was made the limit for redemption. Mr. Hubbard as trustee had no funds for redemption; the Babcocks, plaintiffs, had none; the Starrs, whose interest is now represented by the plaintiff McIntyre, had none. In January, 1877, at the request of Mr. Hubbard, his son, the defendant, bought the Marcy mortgage at a discount of two hundred dollars and took an assignment thereof. Mr. Hubbard at once gave notice of this purchase to C. E. Babcock, and offered the mortgage interest to him. He also asked Mrs. Marcy to repay her proportion of this sum, and made to her a partial statement, omitting interest and other items. Mrs. Marcy asked for a complete statement, promising to pay upon presentation thereof. Mr. Hubbard said he would advise her as soon as he could “get matters into proper shape for contribution.” He did not make the complete statement.

There being no redemption of the Marcy mortgage the title vested in W. D. Hubbard, subject to a prior mortgage to the State of Connecticut, which he subsequently paid from his own funds.

On or about the 17th "of September, 1878, Catherine S. Babcock, as the owner in fee of one fourth interest in the real estate, and Wells J. Babcock as tenant therein by the ■ curtesy, and Alfred E. Ely as a mortgagee thereof, brought their petition to the Superior Court in Hartford County, showing that they had never been served with notice of the foreclosure proceedings instituted by E. E. Marcy, and asking for ieave to redeem. During the pendency of this petition, on May 17lh, 1879, W. D. Hubbard conveyed to R. D. Hubbard the premises included in the Marcy mortgage, and on the same day R. D. Hubbard gave him a memorandum check for $10,163.13, on which check he paid on August 25th, 1879, $7,000, and the balance on September 22d, 1879, with interest at the rate of five per cent, from the date of the check.

R. D. Hubbard thereupon intervened in the suit commenced by Catherine S. Babcock and others, before mentioned, and filed a cross-bill therein, and such proceedings were subsequently had that the court passed a decree allowing the petitioners to redeem the mortgage originally held by Marcy, but also decreed that if they did not pay to R. D. Hubbard the sum of $3,706.14, with interest from the 29th day of May, 1879, on or before the 27th day of July, 1879, they and each of them should be barred of all interest in the premises.

Neither Catherine S. Babcock, Wells J. Babcock, nor Alfred E. Ely, have ever paid that sum, and they have become barred of all rights' in the premises, and the legal title thereto became vested in R. D. Hubbard individually.

It is found that it was the understanding between the plaintiffs and Mr. Hubbard that the latter should be paid for services and disbursements from the proceeds of the property. No one offered to pay him or asked for a statement of his account before Charles E. Babcock’s request for it in September, 1880. His letter contained these paragraphs : “I merely want the amount due against the estate, including your bill. It will be necessary for me to have the items. I feel confident of making arrangements that will he satisfactory to all.” Mr. Hubbard gave it with this explanation: “The interest items in the account are left blank, also the items for my personal services in raising money for redemption of the Marcy mortgage, payment of the state mortgage, taxes, etc., and for managing the property. These can be adjusted hereafter upon settlement of the account.” C. E. Babcock made no objection to the charges. He did not pay them.

In 1875 Mr. Hubbard instituted proceedings for foreclosure in order to obtain possession of the whole premises; also an action of ejectment against C. H. Penfield in the name of E. E. Marcy, upon his mortgage; and had judgment upon the latter at the expiration of the time limited for the redemption of the former.

At a time prior to October, 1881, the plaintiffs, with Mr. Hubbard’s consent, placed the property in the hands of a real estate agent for sale. They received and rejected an offer of @20,000. In that month McIntyre offered to pay Mr. Hubbard $15,000 in full for his fees and disbursements, and demanded a warrantee deed. Mr. Hubbard refused to execute such a deed for the reason that there was or might be some outstanding interest in Starr, or in his grandchild, but offered to execute a quitclaim deed. This McIntyre refused to accept, and offered payment and security against any possible claim upon the part of Starr or of his grandchild. Mr. Hubbard then declined to make conveyance, claiming that there was some uncertainty or embarrassment arising from the interest of some other party. McIntyre abandoned all further efforts to accomplish a settlement. In 1881, 2 and 3, C. E. Babcock irrged Mr. Hubbard to sell and close the trust. In 1882 Starr refused to give consent to a sale, giving as his reason that he had no interest. Babcock urged Mr. Hubbard to sell and hold the Starr portion of the proceeds, or apply to the court and obtain authority to sell. At this time Mr. Hubbard refused to sell although all others than Starr had consented. He declined to sell in the absence of consent from all; but repeatedly offered to release the property to any one of them upon consent of the others, and allow them to sell subject to his claim. He refused to sell and convey without such assent, because he could not obtain consent either from Starr or his grandchild.

At the time of the sale of the property the disbursements made by Mr. Hubbard and the charges for his legal services, together with a proper compensation for his services as trustee, amounted, with legal interest, to more than the price received by the defendant for the property.

During the year prior to his death, Mr. Hubbard stated to his son, W. D. Hubbard, on several occasions, that the property was absolutely and unqualifiedly his own and that no one else had any interest in it.

After March, 1888, he had no correspondence with any of , the parties in relation to the property, nor did he see any of them in respect to it.

Prior to 1883 Mr. Hubbard at all times considered that he held the property as trustee, and often só stated in his letters to the plaintiffs or some of them, and he intended to manage the same in good faith and for the best interests of the plaintiffs, and did so manage the same unless the facts hereinbefore stated constitute negligence.

After his death the plaintiffs verbally notified Ms executor that they claimed to have an interest in the property, and that Mr. Hubbard had held it in trust for them. The executor denied that they had any-right or interest in the same, and assured them that no one except the estate of R. D. Hubbard had any right or interest therein.

Afterward, on August 16th and August 22d, 1884, the executor, in an answer to letters received from C. E. Babcock, sent to Mm the following letters:

“ Hartford, Conn., August 16,1884.

“C. E. Babcock, Esq. : Dear Sir,—Your favor of the 14th inst. received and noted. Mr. Gross, who has been looking up the title for me to the property in question, finds, he told me yesterday, that the property is absolutely and unqualifiedly ours, and has so been passed on by the courts. This is as my father told me sometime before his death, but you were so positive it was otherwise that I had Mr. Gross go carefully through the whole matter to verify my remembrance. If you heirs could come up here at once with the cash and pay principal and interest due the estate, .1 am not sure but we should all be glad to deed you' the property. Mr. Gross assures me there is no one who has the slightest legal claim to the property except the estate of E. D. Hubbard. Yours truly, W. D. Hubbard, Executor.

“Hartford, Conn., August 22,1884.

“C.E. Bab cock, Esq.: Dear Sir,—Yours of the 19 th received and noted. I find the property in question stands us in at least $20,000, without adding any extras and figuring only simple interest. I will be pleased to sell it to you, or any one else, for that price; offer good for thirty days from above date. If you wish it, would let one half the purchase money remain on mortgage on the property at six per cent. If you cannot or do not cafre to raise that amount of money, let us drop the subject, for it has taken more of my time looking over the accounts to get exactly how the thing stands than I care to spend again if you do not mean business.

“ May 17, ’79, there was due R. D. H., $10,506.85 ' Interest at 6 per cent, to Nov. 17,

1884—5 years, 6 months, . 3,466.00

Taxes paid since 1879, . . 816.71—$14,789.06

Due Waldo, Hubbard & Hyde, Sept.

1,1880, . .' . . .$2,175.20

Interest at 6 per cent, from Sept. 1,

1880, to Nov. 17, 1884, . . 555.87— $2,781.07

Due R. D. Hubbard for services as trustee since

1873—11 years at $250, .... 2,750.00

$20,270.18

“As I before remarked, I have not put in a good many items, and when I found what I did put in amounted to much more than the property would bring, I did not figure closely at all. Yours truly, W. D. Hubbard, Executor”

The executor upon his father’s death took possession of the land, and thereafter used and occupied it as belonging to him exclusively as executor, always refused to admit that R. D. Hubbard held it in trust at the time of his death, and, without the knowledge of the plaintiffs or of any of them, on the first day of July, 1885, sold a part of it to Trinity College, and received therefor $6,250, and on August 14th, 1885, sold the balance of the land to Trinity College and received therefor the sum of $11,750, which sums were the then value of the land.

Afterwards the executor, in November, 1885, furnished an account to the plaintiffs’ attorneys at their request.

Upon the foregoing facts the plaintiffs claimed—

1. That in this action no part of the bill stated to be due to Waldo, Hubbard & Hyde, amounting to $631.14, could properly be allowed the defendant, and that the same and $470.20 charged as interest should be disallowed.

2. That if said $631.14 were allowed, no interest should be allowed on the same until after October, 1880, when the bill was rendered; and the item $470.20 for such interest should be reduced to that extent.

3. That a trustee cannot charge his trust estate for professional services of himself or of his partners, and that all the charges for legal services in the bill of Waldo, Hubbard & Hyde against R. D. Hubbard trustee, should be disallowed;

4. That for the legal services rendered by Mr. Hubbard and his firm, as claimed by the bill of the firm against him as trustee, only such sum, if any, should be allowed as Mr. Hubbard would have been obliged to pay had he employed, upon as reasonable terms as he could, some competent attorney outside his own firm to perform the professional services necessary in the suit.

5. That as against the Marey and Kilbourn interests, no interest should be allowed on any moneys advanced or paid by Mr. Hubbard, as trustee or otherwise.

6. That no interest should be allowed on any of the bills or charges of Waldo, Hubbard & Hyde for disbursements and professional services until after October, 1880, when the bill for the same was rendered, and that the item $399.15 for such interest should be reduced accordingly.

7. That Mr. Hubbard was guilty of such negligence in the execution of the trust and in neglecting, when requested so to do, to dispose of the property and close the trust, that his estate was liable to account to the plaintiffs for its value, (1st) as of March, 1882, when he neglected to sell, and, (2d) as of some time in 1883, when, as appeared by his statements on several occasions to his son, he had determined to appropriate and had appropriated the trust property to his own use.

8. That the defendant was liable for the value of the property as of August 16th, 1884, when, upon careful examination of the matter and under advice of counsel, he asserted his sole ownership as executor and denied all rights of the plaintiffs.

9. That of the item of $10,611.13 claimed to have been •paid W. D. Hubbard, $200 and interest on the same should be disallowed on account of the discount at which the Marcy mortgage was bought, and that this item should be further reduced so as to make the interest on the various sums therein included at the legal rate instead of at the rate of seven per cent., at which it has been figured.

But the court overruled all of the claims of the plaintiffs and rendered judgment for the defendant.

Upon the foregoing facts the court found and decided that R. D. Hubbard and W. D. Hubbard always held the property in trust, and allowed all the charges in the defendant’s account as stated except the item of $150 for services of the defendant, and also ruled that the defendant should be charged with interest on $6,250, from July 1st, 1885, to August 17th, 1885, and on $11,750 from August 14th, 1885, to August 17th, 1885.

The plaintiffs appealed for the reason, substantially, that the court overruled the foregoing claims.

Upon the facts, from the commencement to the close of the transactions mentioned in the record, the relation of Mr. Hubbard to such of the plaintiffs as were parties to the original suit instituted in 1872, was that of counsel to client in proceedings at law. They believed themselves to have .been deprived of all property belonging to them by the fraudulent act of another, and that the wrong could only be redressed by the judgment of a court. To aid them in obtaining this they retained him as counsel, undoubtedly because of their knowledge of his ability and honesty. They stood in need of, and intended to secure, the services of an advocate to regain in court their lost property; they were not looking for a keeper of it when restored. For upon restoration it was their expectation to convert it forthwith into money, pay their counsel, and possess the balance in their own right.

But they were unexpectedly hindered in their effort to. convert real estate into money, and were forced to accept the notes of the purchaser. There were several of these, each representing the interest of one of many owners; all to be secured by one mortgage. For the purpose of preventing any one of these payees from obtaining or claiming any priority as between themselves, Mr. Hubbard suggested that the mortgage should be made to an indifferent person as trustee for the equal benefit of'all. For this purpose he permitted them to deposit the title in his name, upon a naked trust to maintain equality and convey upon request.

It is not found as a fact, and there is no presumption of law upon the finding, that the creation of this trusteeship in form was intended by the plaintiffs, or understood by Mr. Hubbard, as an interruption of the relation of counsel and client, if there should be further occasion for professional services for the protection of the property; only an incident to it; a temporary device in aid of it. The plaintiffs were all of legal capacity. The deposit of their title was a voluntary act. The understanding between them and him, as disclosed by the attending acts and facts, as to the character and extent of this trusteeship, is the law of its being. The words “ trust ” and “ trustee ” are not, of legal necessity, of unvarying meaning and measure. The plaintiffs could by agreement, express or implied, put such limitation upon or give such meaning to them as it should please them to do. Doubtless when they deposited the title they hoped that the mortgagor would pay the notes at the end of the year, and that there would be no further need of Mr. Hubbard’s services. But it was not certain that the notes would, be paid; it was certain that there was a mortgage underlying their own, with accumulating interest. They knew that to be possible which came to pass, namely, that some one would be compelled to go into court as counsel to defend the property from the prior mortgage and to enforce their own. With "knowledge and in approving silence they accepted his continued services as counsel in court in saving them from the loss of the property; and this without any attempt to substitute another. And although the legal effect of his permission to make him the grantee as trustee in the deed is that of a written agreement by him to hold the title for the sole benefit of the plaintiffs, yet when the question to be determined is whether he shall be allowed compensation for services as counsel in legal proceedings previously commenced and subsequently continued for the protection of the estate, the understanding between himself and them as to that matter may be proven by parol. The denial of compensation is a rule in equity for the protection of those not in a condition to protect themselves. But inasmuch as these plaintiffs were of legal capacity, and could resume the title at will; as they had knowledge that the fund stood in need of a defender in court; that in the absence of any effort on their part to provide another Mr. Hubbard acted in that capacity without objection from them, there is neither need nor place for the rule. If, being again in possession of their title, they believed themselves able to defend it thereafter without his aid, and if, as they now assert, their property was fourfold the value of his equitable lien thereon, justice to him, and to themselves as well, réquired them to terminate the existing relation of counsel and clients, to decline thereafter to accept his professional services if offered, procure other counsel to protect the property, and use the title as security in the market for money wherewith to discharge their equitable obligations to him. They did neither of these things. They continued to accept service and detain money from him.

We find no occasion for denying, or for considering even, the proposition that a trustee cannot receive payment from the cestui que trust for professional services in defense of the fund. In view of the limitations placed upon this trusteeship by the plaintiffs when created by them, such rule has no application.

And as Mr. Hubbard held the title at their request and for their convenience upon the naked trust to convey at their command, he was under no additional obligation either to find a purchaser at a price satisfactory to them, or to take •the initiative in inducing them to join in permitting him to sell, or to take the responsibility of selling upon the request of a part only, or to assume any risk by warranting the title. No other' obligation was upon him than to release to them the title, having himself placed no cloud upon it. He could perform his duty by conveying upon their request. Inasmuch as they voluntarily deposited the title with him, so from the beginning it remained their right, and within their power, to resume it and dispose of the property at their pleasure. If at any time they had any reason for believing that it could be sold for a price acceptable to themselves, it was within their power, and was their duty, to unite and make the sale and request conveyance by him. It is found that in furtherance- of that right he repeatedly offered to convey to such purchaser as they might find, subject to his equitable lien. But upon the record they .neither found such purchaser nor united in asking a release from him to themselves. If therefore any loss had resulted from an omission to sell, it would have fallen upon those who had power and right to sell, coupled with the obligation to protect their own interests by so doing. They cannot now unite and make his estate responsible for an omission to sell at the times named in the reasons for appeal.

Moreover, on some day prior to October, 1881, the plaintiffs could have sold the property for $20,000. There is no finding that on any previous day they could have obtained more; therefore no loss is proven to have resulted from holding it until that time. There is no finding that on any subsequent day Mr. Hubbard had their consent to sell it for less: no finding that on any subsequent day he could have sold it for a greater sum than was obtained for it by the defendant; no finding that he could have sold it for a sum greater than the amount of his equitable lien. Therefore no loss to the plaintiffs is proven.

Mrs. Marcy had notice that he had been compelled to protect her interest in the estate by the advancement of money. She had a partial statement as to the amount. If she desired to stop the accumulation of interest on that portion of which she had knowledge, the obligation was upon her to repay it. The fact that she would remain indebted for the unknown portion is no legal justification for withholding payment of the known portion.

In December, 1871, C. E. Babcock and wife, and Eben T. Starr and wife, (the interest of the latter being now represented by E. McIntyre), retained Mr. Hubbard, and the firm of which he was a member, to institute the original suit for the recovery of the property. It is found that at some stage of thé proceedings the parties came to ah understanding with him that his fees and disbursements should be paid from the proceeds of the notes when collected. This understanding whenever made covered the entire duration of service. Therefore in addition to such lien as he might have had by law, there was one by agreement which covered his professional charges. The acceptance of the title by him for the purposes specified did not as a matter of legal necessity affect these liens. It did not break the continuity of service or disbursement; did not distinguish those which preceded from those which followed such acceptance. The accounting is to proceed precisely as it would have done if the title had been deposited with some person other than Mr. Hubbard.

The court has found that he, and his executor since his death, received from the property $20,085.77; and expended in services and money thereupon $20,340, in round numbers. An item in this last amount is charged by Mr. Hubbard in the name of his firm, Waldo, Hubbard & Hyde, against the persons for whom he held the property, for services prior to the date of the deed. Under the agreement he, if living, as a member of that firm might have presented that account in its name and for its use, and the allowance thereof upon such presentation would have barred the firm from a second presentation against any individual interested in the property. In this proceeding the plaintiffs áre entitled to nothing from the defendant executor which they could not have demanded and received from the testator upon a similar statement of the account. From the latter they could not have demanded either a reconveyance of the property, or payment for its value, or damages, until payment for the services of the firm through him as well as for the disbursements by him individually.

So far forth as the allowance of interest is concerned, it is found, as has been said, that the plaintiffs, with the exception of E. E. Marcy and wife, were poor and unable to pay Mr. Hubbard for his services and disbursements, and were compelled to ask him to look to the proceeds of the property when recovered and converted into money; that he acceded to this, and that such thereafter was the understanding between them. The institution of a trust of the character of the one before us did not of legal necessity affect that understanding. There is no finding that the parties terminated it; none that the plaintiffs ever offered to pay him. Therefore he was relieved by them from any obligation to demand payment as a prerequisite to interest. The debtor’s request for delay is the legal equivalent of presentment, and interest rightfully accrued while they asked indulgence. Moreover, Mr. Hubbard stated in writing to C. E. Babcock, in October, 1880, that the interest items in an account then stated were left blank for adjustment upon settlement; to which no objection was then made.

On December 23d, 1876, W. D. Hubbard, the defendant, at his father’s request, purchased the Marcy mortgage upon the land in question, paying therefor $6,600.06; in July, 1887, he paid for taxes $1,167.12; on the prior mortgage to the state $822; for advertisements $17.25; and on September 10th, 1884, a tax of $176.80. On May 17th, 1879, R. D. Hubbard repaid him these sums, with interest at the rate of seven per cent., and this payment of interest is made a charge by the defendant in stating the disbursements of E. D. Hubbard for the property. It is objected that this rate of interest is in excess of the legal rate. The statute reducing the rate from seven to six per cent, was approved on March 23d, 1877, and went into effect on the first day of June of that year. It is true, therefore, that during the largest portion of the time the legal rate was six per cent.

But inasmuch as it is the finding of the court in express terms that Mr. Hubbard’s charges against the property with legal interest exceed the receipts therefrom, we must understand that, after reducing the rate from seven to six per cent., there yet remains a balance in his .favor. Therefore the allowance of the excess over six per cent, worked no injury to the plaintiffs.

Inasmuch as the relation of Mr. Hubbard to the plaintiffs was continuously that of counsel to client, in the absence of a limiting agreement they are under obligation to pay such fees for his services as he usually received; such as are commensurate with the legal learning and ability which they knew him to possess, and which upon their request he used for the protection of their rights. The finding is that he was obliged to give a great amount of time to the examination of the claims against the estate of Dolly Babcock, and that there were numerous and lengthy consultations between him and his clients in effecting the negotiations with George H. Penfield. It is also found that “ the various charges for services in these suits are mostly for services rendered by E. D. Hubbard; the accounts charged by him are fair and reasonable, and no larger than he charged and received in other cases, but are larger than necessary services by other competent attorneys would have cost.” This finding must close discussion upon that point.

Assuming the purchase of the Marcy mortgage at a discount of $200 to have been made by Mr. Hubbard himself, the plaintiffs would not now have any cause of complaint if he, living, should retain the amount of the discount. He was under no obligation to protect the property by advancing money for a prior mortgage; he was a stranger to it, and, so far forth, as it was concerned, to them. He met all moral and therefore all legal and professional obligations to them in that matter, when he informed them of what had been done, and that, if they would repay the money advanced, the advantages resulting from the purchase should be to them. During several years they omitted to avail themselves of his offer. It is now too late to enforce it against his executor.

There is no error in the judgment complained of.

In this opinion the other judges concurred.