54 Ala. 532 | Ala. | 1875
The bill was filed by the appellees, against the appellant, who was a trustee for the appellee, Laura E., under the will of her father, for an account and settlement of the trust. The defense made by the appellant is, that in 1866, soon after the cestui que trust became of full age, which was the period appointed for the termination of the trust, there was an adjustment and settlement of his accounts, and a release executed by her and her husband, acknowledging full satisfaction, and. discharging him from all further liability. The release is impeached by the appellees, as having been obtained by fraud and undue influence, and the appellant affirms not only its fairness and validity, but its subsequent confirmation by the appellees, their acquiescence in it, and relies upon the lapse of time, and the statute of limitations, as constituting a bar to the relief sought. Near eight years elapsed after the settlement was made, and the release executed, before the bill was filed, or any complaint made of the settlement, which was communicated to the appellant. The money the appellant agreed to pay on the settlement, and in consideration of the release, was payable chiefly in two annual installments, and for these appellant made his promissory notes, with surety, which were payable to the appellee, William H., as trustee for his wife, and were paid to him as they became due.
Any contract or agreement into which a party is lured by fraud, or into which he is drawn by surprise or mistake, superinduced by the party with whom he contracts, or which is extorted by the undue influence of the party claiming the benefit of it, is vicious and will be annulled. When no fiduciary relation exists between the parties, and they are of legal capacity, however improvident or disadvantageous the contract may appear, though marked by folly or indiscretion, it must stand until the party seeking to escape its obligation clearly proves that it was the result of fraud, mistake or surprise, or undue influence practiced upon him. — Judge v. Wilkins, 19 Ala. 765. If, however, either of the known legal relations, of guardian and ward, trustee and cestui que trust, attorney and client, or any other relation, in which confidence is reposed and accepted, or influence acquired, exists between the parties, on him to whom the confidence is extended
The facts of this case do not permit us to doubt that the settlement and release on which the appellant relies as a bar to the relief sought, must be supported. We do not concur
The interview was had, each party confiding and trusting in the other. The bill abounds with allegations in reference to it, in some respects directly contradicted, and in others unsupported by the evidence. The serious ill health of the cestui quc trust, her prostrate or nervous condition, vehemence in the conversation with her, or with her mother in the conversation had with her, or the mother’s earnest solicitations or active interference at that time in producing assent to the terms of adjustment proposed by appellant, are not shown, but rather negatived by the evidence. The relation in which the parties stood demanded from the appellant the utmost good faith, and the utmost truthfulness of statement. We cannot say that he was wanting in these, or, rather, we can affirm from the evidence that they characterized the interview, and his conduct immediately preceding and subsequent to it. He did plead and insist on the poverty to Avliich the war had reduced him — his inability to meet so large a demand as accounting for the entire trust fund and the interest, and on his fidelity in the administration of the trust. He did insist on the legal validity of the investment in Oon
Nor can it be said that the cestui que trust had not full
It must not, in this connection, be overlooked, that the transaction was not the mere independent act of the cestui que trust. There was the intervention of counsel of her own selection, who was active and diligent in his inquiries as to her rights, and watchful of her interests. She had, also, the advice of her husband, her step-father and her mother. The mother and step-father had personal knowledge of many of the facts in reference to the trust estate, its amount and when ieceived, and full opportunity of ascertaining every fact in reference to its administration, if they were not known to them. It is manifest, if the husband did not know the facts, it was the result of his indifference. In determining the validity of transactions between persons standing in confidential relations, it is always a material fact that the cestui
It can not be doubted the settlement was induced, and the release procured, by the representations of the trustee as to his pecuniary condition. The evidence proves the truth of these representations and the causes producing his impoverished condition. There is but little if - any conflict, in the evidence on this point. A witness for the appellees does testify that the partnership of which the trustee was a member, were doing a good business during 1866-7, were of good credit, and that he never heard of their compromising any of their debts. This may all be true of the partnership, and
Much stress has been laid on the vague and indefinite promise by the trustee, that he would, if able in the future, pay the cestui que trust more. This promise is too uncertain for us to suppose that it could have had any material influence in inducing the settlement. It is impossible to say the contingency has arisen for its performance, if it was of legal value. How much more was he to pay ? One dollar, or one thousand, or ten thousand, would be a literal compliance. Who was to determine the sum which could satisfy it, the trustee, or the cestui que trust? No court can determine it, for the promise furnishes no basis on which a judgment could be founded. It can not be supposed the trustee was expected to pay the whole amount claimed, without regard to the investment in Confederate bonds. That would be to suppose he was seeking, and the cestui que trust was according only temporary ease, and the debt was in effect acknowledged, remaining suspended over him, to fall and crush him, if by his energy, industry and economy, aided by the confidence of his friends, he should improve his pecuniary condition. As a legal promise, because of its indefiniteness, it is without validity. — Erwin v. Erwin, 25 Ala. 236; Hatton v. Landman, 28 Ala. 138. We have previously said, we regard it-as intended and accepted as an expression only of the trustee’s inclination to deal not only justly, but if he had ability, generously with the cestui que trust. If it was ever esteemed as a promise, compliance with it was had, doubtless, in. the con
The testator, at his death, was a partner in the mercantile firm of Leavens & Malone. Immediately on his death the trustee succeeded to his place in the partnership, and the business was conducted without any interruption of its usual course. The estate of the testator consisted mainly of his interest in the partnership. As this interest was reduced to money, that part of it to which the trustee was entitled was passed to his credit on the books of the new firm and was continued in the firm business. The business was profitable, and though several changes in its membership occurred, the business was continued and was prosperous until the commencement of the late war, which operated a suspension of all regular business in this State. If the business could then have been closed, the investment of the trust funds in it would have proved safe, yielding larger profits than interest. The assets of the partnership consist entirely of debts due to it, which were almost entirely lost by the insolvency of the debtors, resulting from the war. It does not appear that the cestui que trust was, prior to the settlement, informed the trust funds had been used in the partnership business, nor was any statement furnished by the trustee showing the profits which had accrued from the us'e of the funds. The trustee seeks to excuse this use of the funds, by evidence that it was in accordance with-verbal instructions and authority given by the testator; and that he accepted the trust on the expectation that he would be entitled to all profit above interest, which should be realized from this use. This may relieve the trustee from the imputation of wilfully imperiling the trust funds in trade instead of investing' them permanently on safer security. It can not, however, legalize the act, or entitle him to the profits resulting from it. The will creates the trust — the law operating on it, defines the rights of the cestui que trust, and the duties and responsibilities of the trustee. It would be most dangerous to permit these varied by evidence not in writing, resting merely in parol, and known to the trustee only.
The unbending rule is, that a trustee’s relation is one of duty and confidence, and not of profit to himself. From the use of the trust funds, if he makes profit, he must account for it to the ceslui que trust, - If in violation of his duty, he employs the trust funds in his own trade or that of another; the profits enure to the cestui que trust, and if the funds are lost the trustee is absolutely liable for them. — Perry on Trusts, § 429, TkP cestui qu$ trust has an election jn such
If the facts presented a case for an election by the cestui que trust, either to take the investment made by the trustee or to charge him with the principal of the trust funds and interest, the settlement and release could not operate to bar this election. They could not so operate, because the trustee has not shown affirmatively that he furnished the cestui que trust the information on which she could have fairly and intelligently exercised her right of election. He did not furnish her any statement or account of the profits resulting from the use of the trust funds; though there had been a statement of facts from which she, or her counsel or her other advisers, could have ascertained that she had the right of election. Indeed, the bill disclosed the cestui que trust, her husband and her counsel, before the settlement and release, were fully informed of the manner in which the funds had been employed. But the facts do n'ot disclose a' case for an election. When that right exists, the cestui que trust -must take either the profits or the interest, for the whole period of the investment or use of the trust funds. He can not, without special circumstances, have interest for one part of the time and profits for another.- — Hill on Trustees, 572, (top p.); Perry on Trusts, § 473. The rule is thus stated, on the authority of Heathcote v. Hulme, 1 Jac. & Wal. 122, a case bearing, in its facts, a resemblance to this case. The intestate died having large capital employed in a cotton manufactory, in which there were several partners. His administratrix continued the business, and married. After her marriage her husband conducted the business for a time, when there was a dissolution of the partnership, some of the partners retiring and others introduced. Eor a part of the time the business was profitable, for a part the profits diminished. The question in the case was, whether the next of kin could elect to take profits up to the time the investment was certainly profitable, and interest subsequently, or whether they must elect to take the one or the other for the whole period? The Master of the Rolls said: “ On general principles it is clear, that .when an executor or administrator has embarked the property of the deceased in trade, whether in his own or in any other, he can not himself be permitted to derive any benefit from it. An option miist be given to the cestui que trust either to take the profit he has made, or, on the other hand, to-insist on their capital itself, and interest released from the loss or from the profits. This is established; but on the part of the plaintiffs no authority has been cited; and
“First, supposing that no such' notice of dissolution, as in this case, had been given, and that nothing had happened to make any break in the period during which the application of the capital to trade continued, could this demand have been'made? I am of opinion it could not, and that the plaintiffs must make their election utrum horum, which rule of account, they will adopt, but that they can not proceed by both. After'tlie whole period is over, they have a right to judge which mode of accounting will be most advantageous to them, and to that they must adhere.
“The reason why I think so is this: if the parties were at liberty to take interest for one part of the period and profits for another, this would not have been the first time that it would have been tried. ■ The novelty of the demand alone is against it. But, besides this, it would be contrary to justice; for what is the principle of the option that is given? It is, that the party elects whether he will ratify the employment of his capital; whether he will say that it was properly applied to trade; if so, he may take the profit, but he must also be subject to the loss. If he has .affirmed the act of the administratrix, and has assented to it, it follows of course that this must continue until something happens to put an end to that implied consent, which is supposed to have been given from the first.”
This is but an application of the general principle on which courts of equity proceed, in decreeing an election between inconsistent or conflicting rights. If the right arises out pi a devise or bequest, or from any instrument, the party must elect to take either under the instrument or against it — he can not accept it in part, and reject it in part. — 1 Lead.. Cases in Eq. 303. The investment in trade of the trust funds, made by the trustee in this case, was continuous and unbroken from the day they were passed to his credit on the books of the firm of Leavens & Malone until their withdrawal and investment in Confederate bonds in 1863 and 1864 There was no change in the character of the business. There were changes in the membership of the firm, but there was no settlement of accounts, and ascertainment of profits and losses. — a partner retired, or a dissolution resulted by operation of law, and another partner was introduced, the business continued substantially as if no change of membership had occurred. The right of the cestui que trust to take the profits from the use of the trust funds, was a right to take for the whole period of investment, not
We must be ready to declare that trustee and cestui que trust, may not by a compromise of disputed questions, adjust and settle the liabilities of the trustee, and that he can not be discharged Rom liability by a release voluntarily and intelligently executed, or we must hold the settlement and release in this case valid, barring the cestui que trust from a right to further accounting.
A consideration of the other questions argued by counsel is unnecessary. Regarding the release as valid, and a bar to the suit, it follows, the decree of the chancellor is erroneous, and must be reversed, and a decree here rendered, dismissing the bills, original and amended, and the appellees must pay the costs of this court, and of the court of chancery.