Boston Safe-Deposit & Trust Co. v. Adrian, Mich., Water-Works

47 F. 8 | U.S. Circuit Court for the District of Eastern Michigan | 1891

Swan, J.,

(after stating the facts as above.) Upon the foregoing facts, while I differ with reluctance from the conclusions reached by the able master whose report is under review, I am constrained to sustain the exception taken to the allowance of further compensation to the trustee and its counsel. The principle on which such allowances are made by courts of equity finds no foundation for its application here. While it is well settled that a trust fund is chargeable with the expenses of its own administration, and that counsel fees may be properly taxed against such a fund, the present is not a case calling for the application of that rule. Such allowances are frequently and properly made in cases where the trust fund has been rescued from waste or destruction arising from the fraud, neglect, or misconduct of trustees, or when the energy and efforts of creditors or others interested have saved the property for those entitled. It is also true that a creditor primarily seeking satisfaction of his own debt, who has realized, by his diligence and at his own expense, a fund available for the benefit of others as well as himself, is entitled to reimbursement of his costs and expenses, either out of the fund or by a proportional contribution from those who accept the benefit of his efforts. The cases of Trustees v. Greenough, 105 U. S. 527; Railroad Co. v. Pettus, 113 U. S. 116, 5 Sup. Ct. Rep. 387; Hobbs v. McLean, 117 U. S. 567, 6 Sup. Ct. Rep. 870, — afford examples of the propriety of these allowances. In those cases costs and expenses were allowed the successful plaintiffs for the recovery or salvage of an imperiled fund, which but for the diligence and activity of the creditor or trustee would have been w'holly lost to the beneficiaries or seriously depleted: They are marked, too, by the fact that success was only attained by long and laborious effort, and at great expense, against fraud, neglect, misconduct, or vigorously contested hostile claims. It is just and equitable that such meritorious service should be adequately compensated by the parties benefited. No such features characterize this case. It is a simple pro confesso mortgage foreclosure. The only inquiries involved in the foreclosure proceedings proper Were the ascertainment of the amount due, the extent of incumbrances, and the apportionment between the parties in interest of the moneys realized by the sale. All beyond this was necessitated by Mr. Venner’s well-intentioned, but unauthorized, interference with and additions to the property. That Mr. Yenner voluntarily, without the co-operation „ of the trustee or the consent of his co-beneficiary, advanced his means for the extension and improvement of the water-works, looking to the proceeds of sale for reimbursement, and though this was done in the expectation of enhancing the selling value of the property, and had the intended effect, gives the trustee no equitable claim for the allowance made. A different question might have arisen if Venner asked compensation for his enterprise, but, even then, it would seem that, as he was a mere volunteer, and ran no risk, the interest allowed him on his investment fully compensates this service. The trustee throughout this suit has, it appears, remained, passive, even inert. Though the interest coupons were made payable at its office, the trustee admits it had no knowledge of the default in the payment until about January 1, 1888, although the interest had been unpaid for several years prior to that date. The bondholders were apparently still more remiss in permitting the interest thus to accumulate until the debt had nearly doubled. The record shows no meritorious service rendered by the trustee which has not been fully remunerated by the $1,000 previously allowed.

Some of the reasons already given against further compensation to the trustee are equally cogent against the claim for further counsel fees. It further appears that the services of counsel for which further remuneration is sought were really rendered in the interest of Mr. Venner alone, and were made necessary by his assumption of the management, operation, and enlargement of the water-works. This being Mr. Verniers individual venture, undertaken and conducted independently of the trustee and of Sheffield, I see no reason why the proceeds of sale should contribute for the expenses it entailed. Mr. Sheffield intervened in the suit, and employed his own counsel, as was his right and duty, being himself a trustee for others. Williams v. Morgan, 111 U. S. 699, 4 Sup. Ct. Rep. 688. This left counsel for the nominal trustee free to act for the interest of Mr. Venner, the only other cestui que trust, (at whose instance he was employed,) and limited his professional responsibility and relation to the protection of that interest, which should bear its own burdens. There are no facts in this case which distinguish it from any other ordinary foreclosure suit, where the bill is taken as confessed, or which commend the allowances prayed to favorable consideration.. It results that the exceptions of Sheffield to the further allowance made to the trustee and for counsel ices should be sustained, and the amount of the rejected allowances, §4,600, should be added to the fund applicable to the payment of the mortgage debt, and apportioned between the bondholders in proportion to their interests. This apportionment will so largely increase the dividends of the bondholders as to enable them to exercise from their own means that liberality towards their respective counsel which they have urged upon the court. The facts as fully repel >the claim of Sheffield for an allowance for counsel fees. The report in all other particulars will be confirmed, and an order will be entered in accordance with this opinion, and directing distribution to be made by the master accordingly.