Norton v. Phelps, 54 Miss. 467

Campbell, J.,

delivered the opinion of the court.

In the case of Clopton v. Gholson, 53 Miss. 466, we announced the principles applicable to this case. These are, that persons dealing with a trustee must look to him for payment of their demands, and that, ordinarily, the creditor has no right to resort to the trust estate to enforce his demand for advances made or services rendered for the benefit of the trust estate. But while this is the rule, there are exceptions to it, and where expenditures have been made for the benefit of the trust estate, and it has not paid for them, directly or indirectly, and the estate is either indebted to the trustee, or would have been if the trustee had paid, or would be if he should pay the demand, and the trustee is insolvent or non-resident, so that the creditor cannot recover his demand from him, or will be compelled to follow him to a foreign jurisdiction, the trust estate may be reached directly by a proceeding in chancery. The principle is, that while persons dealing as creditors with the trustee must look to him personally, and not to the trust estate, yet where the estate has received the benefit of expenditures procured to be made for it by the trustee, and it has not in any way borne the burden of these expenditures properly chargeable to it, and to fasten the charge upon it will do it no wrong, but simply cause it to pay what it is liable for to the trustee, or would be liable for if he had paid it, or should pay it, and because of the insolvency or non-residence of the trustee, our tribunals cannot afford the creditor a remedy for his demand, he may proceed directly against the trust estate, and assert against it the demand the trustee could maintain, if he had paid or should pay the claim, and should himself proceed against the trust estate. Generally the trustee alone must be looked to. He stands between the creditor and the estate. He represents the estate, and deals for it. He is entitled to be reimbursed out of the trust estate for all disbursements rightfully made by him on account of it, and creditors must get payment from him; but when they cannot do that, and it is right for the trust estate to pay the demand, and it owes the trustee, or would owe him if he had paid or should pay the demand, the rule, founded in policy, which denies the creditor access to the trust estate, yields to the higher considerations of justice and equity; and, in order that justice may be done, the creditor may be substituted, as to the trust estate, to the exact position which the trustee would occupy if he had paid or should pay the demand, and seek to obtain reimbursement out of the estate. Applying these principles to the facts of this case, it will be found that they bring it within the exception stated.

Clearly, if Pearce, the trustée, had paid, or should pay, under a recovery against him, the demand sought to be enforced against the trust estate, he would be a creditor of the estate. He is a non-resident of the State of Mississippi, where the trust property is and where the debt was contracted, and the creditor has the same rights, because of this, as to the trust property, as if Pearce was insolvent. The reason why insolvency of the trustee is an element in the combination of circumstances admitting the creditor to proceed against the trust estate is because of the inability of the courts to coerce an-insolvent person to pay his liabilities ; and the same considerations apply, ordinarily, in case of the non-residence of the trustee, without regard . to his pecuniary condition; for a creditor seeking the aid of our courts should not be dismissed because he might pursue a person to a foreign land, and there have a recovery against him. If he cannot obtain justice through our courts except by departing in an exceptional case from a rule of policy, to secure justice the departure should be made. Trustees have an inherent right to be reimbursed all expenses properly incurred in the execution of the trust, and- no express declaration in the trust instrument is requisite to create that right.” Hill on Trustees, 570 et seq.; 2 Perry on Trusts,jj § 910. The trust-deed in this case vests the title of the property. • in Pearce, as trustee, providing that he “ is to permit the' said Henry W. Yick, as agent for said trustee, ... to superintend, possess, manage and control said property,” &c., “ with power to sell and exchange,” &c. This conferred very large powers for incurring expenditures to be borne by the trust estate. Hill on Trustees, 571, 572. Vick was thus constituted the agent of the trustee for the very purpose of possessing, managing and controlling the trust property. Debts properly made by Vick, agent and co-trustee, as he is elsewhere in the deed called, in the management of the trust property, were the debts of Pearce, the trustee, with this qualification; viz., that he is exempted by the deed from responsibility personally for the acts or conduct of Vick.

The debt set forth in the record is not barred by the Statute of Limitations. It is an account stated between the complainants and Pearce, the trustee, and the time required to bar it is six years. McCall v. Nave, &2 Miss. 494. This case presents peculiar equities. It is manifest that the trust property was surrendered by the trustee to Mrs. Phelps, with the understanding, clearly implied by what occurred, if not distinctly agreed on, that the trustee was to relinquish all connection with the trust estate, upon a settlement between him and the beneficiary, and that the liabilities which had been incurred on account of the trust estate should be met by the beneficiary. This reasonable expectation should be realized. The debt sought to be recovered was recognized as just and proper by Pearce, the trustee, and he explained its existence to the beneficiary, who made a settlement with him, upon a distinct recognition of the idea that he was to be freed from all liability and concern for the trust estate, and that the beneficiary received the estate from him charged with all its liabilities in his hands. The equities accruing to Pearce, the trustee, inure to the complainants.

Decree reversed and cause remanded.

Case Details

Case Name: Norton v. Phelps

Court Name: Mississippi Supreme Court

Date Published: Apr 15, 1877

Citation: 54 Miss. 467

Court Abbreviation: Miss.