Ellig v. Naglee & Sharp

| Cal. | Jul 1, 1858

Burnett, J., delivered the opinion of the Court—Field, J., concurring.

The first point made by the plaintiffs’ counsel is that the Chancellor erred in finding that the trustees had fairly discharged the trust.

It appears that Sherman entered under his assignment, on the fourth of April, 1855, and that defendants called upon him for the first time in that month. This delay in calling upon Sher" man was well accounted for, from the fact that the assignment to him was only intended as a mortgage to secure a loan of $5,000, an$ was unknown to the trustees until he entered to receive the rents in April. The rents due on the twelfth of Nov.ember, December, January, February, and March—five months —had not been collected of Brown & Keyser, although they were then solvent. But this delay was justified by the fact that Brown & Keyser were then putting up permanent improvements upon the property, at a cost of some $35,000. These improvements were completed in April, 1855. This indulgence was no doubt given to the lessees to enable them to finish their improvements, and was a prudent and justifiable act on the part of the trustees. From April to October 1, 1855, there were some six months wasted in fruitless attempts to compromise with Sherman. There was a clause in the lease to the effect that if the rent remained unpaid for thirty days after due, then the rent for the whole unexpired portion of the term should become due and payable at once. It appears from the testimony of General McDougall, that about the first of October, 1855, the law firm of which he was a member, consulted about the lease, and the trustees were advised to bring a suit against Sherman for the entire rent of the remaining portion of the term, amounting to some $84,000. The complaint was not filed, however, until June 11,1856, and the suit was determined in December, 1856, against the trustees. It is true, that by a stipulation of the attorneys, the complaint was filed nunc pro tunc, as of December, 1855 j but this stipulation did not cure nor excuse the delay.

It is insisted, by the learned counsel of plaintiffs, that the bringing of the suit for $84,000 against Sherman was not a proper exercise of discretion, and that the delay in bringing the suit was unjustifiable, and the trustees should, therefore, be held responsible for all the losses occasioned by this mismanagement.

It is a general principle applicable to trustees, that when they act with good faith, and without any selfish motive, they are entitled to be treated by a Court of Equity with liberality and indulgence; and, especially, when they act under the advice of counsel. Trustees act for the benefit of others, and not for themselves, and the fair exercise of their judgments should be a protection to them. Very supine negligence, or willful default, will render them liable; but to make them liable for mere errors of judgment would tend to discourage good and prudent men from undertaking any trust. (Garrett v. Noble, 6 Simons, 516; Taylor v. Benham, 5 Haw., 285: Thompson v. Brown, 4 John. Ch. R., 629.)

The trustees were not to blame for bringing the suit against Sherman, as they did it with good motives, and under the advice of competent counsel. But the delay in bringing any suit to settle the question, from April, 1855, to June, 1856, certainly did, prima facie, show supine negligence. It is, however, shown that John Ellig, just before his death, in March, 1856, approved of the conduct of the trustees, after being fairly and fully advised of all the circumstances. This acquiescence on the part of the cestui que trusts will excuse the trustees. (Garrett v. Noble— before cited; 2 Story’s E. J., § 1284; Adams’ Eq., 62; Trafford v. Boehm, 3 Atk., 444.) Besides this acquiescence on the part of John Ellig, there were equitable circumstances that went far to excuse this delay. The trustees charged nothing for their services, and their administration of the trust estate, considered as a whole, was beneficial to the property and greatly increased its productive value. Upon the whole, we can see no error in this part of the decree.

The Chancellor decreed that the sum allowed the trustees was a lien upon the trust property, and that, if not discharged by the plaintiffs within thirty days, execution should issue, and the trust estate be sold to satisfy the same.

It is insisted by the counsel of jDlain tiffs that this portion of the decree was erroneous, for the reason that the advances made by Maglee were not expended upon the trust property, or for its benefit, and, therefore, constituted no lien upon the land •, that they were mere personal loans from Maglee, for which no specific lien could be decreed by the Court, but for which Ellig and wife were personally liable in an action to recover the amounts.

We think this portion of the decree too harsh, under the circumstances of the case.. It seems clear that Maglee made the advances, with the understanding that they should be repaid out of the incoming rents. It was only proper to give him a lien upon the net incoming rents, including those involved in the suit of the receiver against Sherman and others. The allowance to Sharp should be a lien only upon the rents, in the same manner as the allowance to Maglee. The net rents should be appropriated to the payment of the amount of the allowances until the same are paid.

The cause will be remanded, with directions to the Court below to modify the decree in accordance with this opinion. The appellants will be entitled to the costs upon appeal.