Raynes v. Raynes

| N.H. | Jun 15, 1874

^* Per curiam.

"We need not consider whether, under the terms of the will, the beneficiaries would necessarily have each been entitled to an equal share of the income if part had been rich and part poor. For, in view of the facts which appear as to their past, present, and probable future condition, the conclusion must be, that each, in the absence of misappropriation or mismanagement, has been, is now, and probably always will be, in need of an equal share of the income for his or her support. The case may, therefore, be practically dealt with as though the trustees had been directed to expend an equal share of the income for the support of each beneficiary.

The direction in the will as to the management of the ship-yard after the death of the wife cannot be construed as directing the manner it should be used before her death. In Bacon v. Pomeroy, 104 Mass. 585, it was held, Gray, J., that “ a testator may doubtless subject his estate to liability contracted after his death by a partnership of which he has been a member.- But such liability can be created only by clear provisions of the will, or unambiguous acts of the executors or trustees under an authority thereby conferred upon them.”

In Wightman v. Townroe, 1 M. & S. 412, the executors of a deceased partner continued his share of the partnership property in trade for the benefit of his infant daughter. Held, that they were liable upon a bill drawn for the accommodation of the partnership and paid in discharge of a partnership debt, although their names were not added to the firm, but the trade was carried on by the other partners under the same firm as before, and the executors, when they divided the profits and loss of the trade, carried the same to the account of the infant, and took no part of the profits themselves. Lord Ellenborough, G. J., said “ the fund subsisting at the death of the testator, under a due administration of the will, should have been disposed of by the executors, and converted into money, and distributed as assets. Instead of that it is embarked de novo in the trade in the purchase of other barley and a variety of other contracts, to which the infant is not privy, nor bound by them, but may renounce when she comes of age, as damnosa haereditas. If, then, the infant has such an opportunity, who but the executors can be liable ? ” And judgment was rendered for the plaintiff.

Evidence of a parol request or direction of the testator to George Baynes to carry on the business for the benefit of the family, was incompetent. It did not control, abridge, or vary the powers and duties of the trustees, who could not look beyond the will for instructions, and who, even if bound by a contract on the testator’s part for the future management of the business (as to which we give no opinion), certainly were not bound by anything short of a contract. The court found no “ contract,” only “ a request and direction ” to finish the ship then on the stocks, but no such request or direction to build other ships.

The direction in the will to sell and invest was explicit. The court found the trustees negligent in not doing so, and found no contract of the testator overriding the will. The trustees are therefore chargeable for their failure to sell and invest. See Perry on Trusts, secs. 440,441, 460, 462.

As to Nathaniel K. Baynes having and using part of the property in trade, it seems that he received property on credit from his father, and that the trustees allowed him to keep it without giving security. If he had become insolvent before his father’s death, so that nothing could then have been collected'of him, it might deserve further consideration whether such indebtedness should be deducted from his share of the income of the trust-fund. But we do not understand the findings of thfe court to be such as to raise this question. As we interpret the findings, the trustees could, by using ordinary-care, have collected part, if not all, of the debt. If they could have done so, they are chargeable with a breach of trust to an extent equal to the amount,which might have been, but was not, collected. If it be conceded that this was not giving “a credit” to Nathaniel K. within the meaning of the will, was none the less a breach of trust, for, irrespective of the “ credit” clause, it was the duty of the trustees to collect the indebtedness and invest it safely. In a word, if the trustees allowed him to keep it as “ a credit ” given him under the will, they are chargeable for not insisting upon having the “ ample security ” required by the will; if, on the other hand, they did not allow him to keep it.as “ a credit,” they are chargeable for not collecting and investing it.

N. K. Raynes, a trustee, and himself one of the oestuis que trust, has concurred in several breaches of trust, and has reaped the benefit of these breaches. George Raynes, One of the oestuis que trust (and since made a trustee), has concurred in one of these breaches, and made use of the funds thus misapplied. The court ruled that the innocent oestuis que trust (the plaintiffs) were entitled to have Nathaniel and George’s shares of the income sequestered pro tempore, and the entire income paid to the plaintiffs until the plaintiffs’ income is made up to what it would have been had none of the estate been lost by the mismanagement of the trustees.

Waiving for the present all matters of detail, we proceed to consider the broad question whether the court can thus sequester the income of one who, either as trustee or cestui que trust, has concurred in a breach of trust.

It is objected that the testator gave a share of the income for the support of these two oestuis que trust, Nathaniel K. and George, and that this income cannot be appropriated to pay their debts.

That their shares of the income could not be taken to pay their general debts may not be quite so clear upon the authorities as the defendants may have supposed. 4 Kent’s Com., 12th ed., 131, note 1; ib. 311, b.; 2 Story’s Eq. Jur. 974, a; Perry on Trusts, sec. 555; addenda cix, cxi; Upham v. Varney, 15 N. H. 462. But it is unnecessary to enter fipon this inquiry. It is not now proposed to apply their shares of the fund to pay their debts to other parties, but to pay their debts to the fund itself. Here has been a wasting of much the larger part of the trust-fund. The'question is, On whom shall the consequent loss of income fall ? Shall it fall on all the oestuis que trust, innocent as well as guilty, pro rata ? or on those only whose misconduct has been the direct occasion of the deficiency ? The defendants cannot complain if they are made to bear the consequences of their own unjustifiable acts. They diminished the fund, and they must bear the loss thereby occasioned, rather than compel the innocent plaintiffs to share it equally with them.

It may be said that the testator intended tliat liis children should all share equally, and that this result prostrates his intention. Undoubtedly it was the intention of the testator that all should share in the income of the fund, so long as that fund remained undiminished hy the act of any of the beneficiaries; but it must have been equally his intention that no one of the beneficiaries should improperly diminish! the-fund. Barnett v. Sheffield, 1 De Gex, M. & G., 371. He did not intend that Nathaniel K. and George should continue entitled to claim the benefit of his bequest, at the same time that they practically repudiated the obligations thereby imposed on them. Nathaniel K.’s legacy maybe said to have been given “under a condition,raised and implied by law, that he should duly fulfil the duties and obligations imposed on him by the instrument giving it.” See Knight Bruce, vice chancellor, in Morris v. Livie, 1 Y. & Coll. 380, p. 388. So, too, George Raynes, even when (as at first) a beneficiary only, could not, claim liis interest except upon the condition of continuing loyal to the testator’s directions. They stand somewhat in the same relation to the fund, that a party in contempt stands in to the court. The -motions of the latter will not be listened to nor his claims passed upon till he has first purged himself of the contempt. Till then he has no standing in court. So Nathaniel K. and George Raynes cannot claim anything from the fund, till they have made good the deficiency in that fund for which they are responsible. They must first repair the breach of trust. They cannot ask the court to withdraw (at periodic intervals) the substantial means of reparation now under the control of the court, and leave the plaintiffs to seek other remedies which are likely to prove ineffectual. If these views are not correct, it would seem that, if George Raynes had improperly made way with 99-100 of the fund, he could still claim one sixth of the income of the remaining 1-100 — a result which the court would be slow to sanction.

That the shares of Nathaniel K. and George Raynes in the income should be sequestered pro tempore to make good the deficiency they bave improperly occasioned is clear on principle ; and the authorities seem to point strongly in that direction. Belknap v. Belknap, 5 Allen 468, Hoar, J.,is a case directly in point; — so, also, is Morris v. Livie, 1 Y. & Coll. 380; — see, also, Skinner v. Sweet, 2 Madd. 244; Fuller v. Knight, 6 Beav. 205; Booth v. Booth, 1 Beav. 126; — see, also, Christian Stamler’s estate, 1 Tucker’s N. Y. Sur. Rep. 42. That the diminution was not with criminal intent seems to us immaterial. It was none the less a breach of trust implicating all who concurred in it.

Upon the facts as found by the court, there was no acquiescence that would bar the plaintiffs. See Perry on Trusts, sec. 467.

In Belknap v. Belknap, 5 Allen 468, the share of income sequestered was applied to make good the deficiency in the principal of the fund. But in the present case we think it more just to apply it in the first instance to make good the deficiency in the income.

If the deficit in the fund were comparatively trifling in amount, it might be important to consider whether the plaintiffs, by allowing their mother hereafter to receive her share of the income, will or will not thereby waiye pro tanto the right to sequester the shares of Nathaniel K. and George Raynes. The mother was a trustee, and, it would seem, a participant in the breaches for which her two sons, George and Nathaniel K., are liable. If the question were material, our present impression is, that whatever the plaintiffs allow their mother to receive should be considered as so much paid to the plaintiffs themselves to make good the deficit in their income, and should be deducted from the amount which would otherwise have to be realized from Nathaniel K. and George’s shares. For example, — suppose Nathaniel K., and George, and their mother all responsible for a deficit of one thousand dollars, and that the plaintiffs consent that their mother may receive her share of income (say fifty dollars per annum) for two years: the plaintiffs cannot then sequester shares of Nathaniel K. and George till a deficit of one thousand dollars is made up, but only till a deficit of nine hundred dollars is made up. By releasing one hundred dollars of the mother’s income they exonerate Nathaniel K. and George’s shares pro tanto. But we leave this point for future consideration, should it ever prove important.

Upon the facts found by the court, it would seem that Nathanial K. and George are respectively responsible for more loss than their shares of the income will ever make good, even if they are held for only two thirds of the losses for which they are respectively liable.

Walker’s representatives are not necessary parties to this proceeding, unless the plaintiffs insist (as they do not) on further relief than tha t given them under the rulings at the trial. It is important to be observed, that the court are not proposing to make a decree against the general property of any trustee, beneficiary, or third person, but merely to regulate the temporary disposition of the income of the trust-fund. The representatives of a part trustee are not concerned in this matter.

The rulings as to making sales of the real estate were correct.

Taking the facts to be as found by the court, an accounting to ascertain the exact amount of deficit for which each defendant is responsible would be a useless task, the expense of which ought not to be imposed on the fund or on the plaintiffs. If the deficit is.so large “ that the defendants’ shares of the income of what is left are, and in all probability always will be, far too small to make up the shares of the plaintiffs,” what necessity is there of ascertaining the precise amount to a cent ?

The foregoing views are all based on the case as originally drawn by the judge who heard the cause at the trial term. There are motions for amendments, affidavits, documents, suggestions of error, and a motion for a rehearing. We think the motion for a rehearing should be decided by the judge who tided the case. If he decides in favor a rehearing, let it be granted ; if not, let a decree be drawn here, or at the trial term, in substantial conformity to this opinion.

It has not been thought best at this time to discuss the questions of law which may hereafter arise if the defendants should upon a rehearing succeed in establishing some facts which they now claim that they can prove if opportunity is offered.

Note. The judge who tried the cause being of the opinion that there should he a rehearing, the cause was remanded to the trial term for that purpose.