136 N.J. Eq. 530 | N.J. Ct. of Ch. | 1945
This trust, which was created inter vivos June 23d 1930, has been the subject of prolonged litigation over certain mortgage investments. Rothenberg v. Franklin-Washington Trust Co.,
It may be that there was no direct adjudication that the disbursements of the Trust Company in the litigation should or should not be paid out of the trust fund. But from the *532 opinions rendered in the Court of Errors and Appeals, and from the remittiturs, the sense of that court appears that all expenses of the trustee in the mortgage suit, as well as a large part of the expenses of the other parties, should be borne by the trustee individually. The Trust Company, indeed, acknowledges this, so far as taxable costs and counsel's bill are concerned, and does not pray allowance of these expenses. No reason appears why the items now in question should be handled in a different manner. The exceptions are sustained.
The second account shows among the assets the sum of $1,521, carried in a suspense account pending final decision whether it belongs to the trustee or to the Franklin Mortgage and Title Guaranty Company. The item arises from two mortgages, part of the trust fund. One of the mortgages, covering 5 Woodbine Avenue, Newark, was made by High Towers, Inc., to the mortgage company, to secure $8,000 with interest at 6 per cent. The mortgage company assigned to the trustee a $7,900 interest in the mortgage and retained a subordinate $100 interest itself. At the same time, it guaranteed payment of principal to the extent of $7,900 with interest at 5 1/2 per cent. Thereafter, on July 1st, 1934, the mortgagor and its grantee defaulted in the payment of six months' interest then due. But meanwhile, in March, 1933, the Commissioner of Banking and Insurance, by General Order No. 1, by authority of P.L. 1933 ch. 71, forbade mortgage companies, including the Franklin Mortgage and Title Guaranty Company, to make payments of principal or interest, pursuant to their guarantees. Accordingly, the mortgage company did not pay, and has never paid, to the trustee any of the interest which fell due in 1934, or thereafter, or any of the principal.
In 1935, the trustee foreclosed and bought in the property at the sheriff's sale for $100. On September 24th, 1935, the trustee sold the property to Donald McNaughton and wife for $950 in cash and a purchase-money mortgage of $8,500. The mortgage was paid off in 1938. The mortgage company says that $947 received on the resale was profit and belongs to it.
The foreclosure sale left a deficiency of $8,217 on the bond of High Towers, Inc. The amount due on the bond was *533
definitely fixed by the sale and was not affected by any subsequent resale. Berman v. 145 Belmont Ave.,
To avoid this conclusion, the mortgage company argues that, except for the order of the Commissioner of Banking and Insurance, it would have paid what was due on the guarantee, taken an assignment of the mortgage, foreclosed and bought the property itself, and so made the profit. Perhaps. More likely the mortgage company would have gone into bankruptcy and paid a small dividend to creditors. But we need not speculate on what might have been. The Commissioner's order, assuming its validity, excused the mortgage company from fulfilling its contract, and doubtless for this reason, the trustee did not bring an action against it on the guarantee. Williston on Contracts, § 1938. But on no principle of law or equity, did the order operate to vest in the mortgage company any right or title in the mortgaged premises when bought by the trustee at the foreclosure sale.
The rest of the money in the suspense account arose from the Sherwood Parkway mortgage. The essential facts are the same as those above recited. The money is part of the trust corpus. *534
The Trust Company asks for a small commission on corpus for its services. The beneficiaries object on the ground that the trustee was faithless to its trust. In the mortgage suit, while it was decided that the mortgage investments were illegal, it was also determined that the Trust Company acted with entire good faith, and was entitled to retain commissions *535 on income which it had received. The accusation of bad faith cannot be entertained in opposition to the prayer for corpus commissions.
The Trust Company has been administering the trust estate since 1932 — nearly thirteen years — with most satisfactory results. The corpus has increased several thousand dollars. Ordinarily, the commission asked would be granted, as of course, but there is a circumstance which forbids. When the Trust Company undertook the trust, it agreed with the donor to accept as its compensation 5 per cent. on income during the first 10 years, 3 per cent. on income thereafter, and "one per cent. on the amount of the said trust when it shall be distributed by the trustee under said (trust) agreement." What induced the company to agree to such inadequate pay, I do not know. Perhaps inexperience with the headaches of trusteeship; perhaps a desire to build up its trust business, even at a loss. However, it made the bargain. The rule is well settled that such an agreement is binding upon the parties to it, and the beneficiaries of the trust, and controls the court. Commercial Trust Co. v. Spiegelberg,
Mr. Mindes, counsel for two beneficiaries of the trust, Mrs. Esther Rothenberg and her son Jerome Rothenberg, asks a fee for services rendered them in the mortgage suit. The court in that cause had discretionary authority, both by precedent and statute to allow him taxed costs, including a counsel fee, to be paid either out of the fund, or by some other party to the litigation. The court did allow him costs and a fee of $5,000 and charged the same against the Trust Company. If this sum did not adequately compensate him, his clients are obligated to pay any balance owing him. But in these accounting proceedings, he can be allowed nothing for services in the mortgage suit.
Mr. Mindes relies on Wasmuth-Endicott Co. v. WashingtonTowers,
Mr. Mindes also represents his clients on the accountings and will be allowed in this capacity $750, one-third out of income and two-thirds out of corpus. *537
Mr. Schaffer now asks for compensation and reimbursement of expenses for the period May 14th, 1941, to June 1st, 1942, namely, on the appeal. He has been paid in the mortgage suit $3,469 for services and expenses prior to May 14th, 1941, and a fee of $1,000 for the period subsequent to June 1st, 1942. The infant, Samuel A. Rothenberg, Jr., a soldier, gave his life for his country October 19th, 1944. He had no interest in the trust estate which survived to his personal representative, and his personal representative is not a party to the present proceedings.
Under the established practice of this court, a next friend who prosecutes, or a guardian ad litem who defends on behalf of an infant, is entitled to no compensation for his services unless he is a lawyer and personally conducts the litigation. He has, however, a right to reimbursement for his reasonable expenses; and counsel employed by him has a right to a reasonable fee, assuming that the services of counsel were necessary. If the next friend or guardian acts as counsel himself, as did Mr. Schaffer, he is entitled to the fee. Who is liable for the expenses and counsel fee, and how is the *538
liability to be ascertained and enforced? The estate of an infant who sues by next friend, is liable for the latter's expenses.Voorhees v. Polhemus,
But in all our New Jersey decisions, which have come to my attention, the order for the costs, expenses and counsel fee of the representative of the infant has been made in the cause in which the next friend or the guardian acted for the infant. The guardian is the officer of the court for the particular cause only and should have the amount due him and the source of payment definitely fixed by order made in that cause. I will deny Mr. Schaffer's prayer for compensation for services in the mortgage suit, for the same general reason I denied Mr. Mindes', namely, that in one cause of proceeding, an allowance should not be made to a guardian ad litem appointed in another cause, for his services therein.
Mr. Schaffer was also appointed guardian ad litem in the second accounting which is now before me. He moved unsuccessfully to dismiss the proceeding on the ground of lack of jurisdiction. From the order denying his motion, he appealed. Both the motion and the appeal had a very slight basis and even had the guardian been successful, the infant would not have benefited, so far as I can perceive. Mr. Schaffer will be allowed, out of corpus, a fee of $250 and disbursements of $68.44. *539