Rensselaer & Saratoga Rail Road v. Miller & Knapp

| Vt. | Oct 15, 1874

The opinion of the court was delivered by

Barrett, J.

It is apparent in the cause that the trustees, Miller & Knapp, held a position such as to entitle them to charge upon the subject-matter of the trust such compensation and reimbursement as they ought to have by reason of what they did and incurred in the administration of the trust. See Perry on Trusts, §§760, 907, 909, 910. They were holding their position for the behoof of all the parties interested in the subject of the trust; and, in the first instance, for the parties beneficially interested in the first mortgage, viz: the Rutland & Washington R. R. Go. mortgagor, and the holders of the bonds secured by said mortgage. The primary object of having said trustees was, to enable the security to be created and rendered effectual for the bondholders. The expenses of a trustee in the execution of the trust, are a lien upon the estate ; and he will not be compelled to part with the property, until his disbursements are paid. Perry § 907. If the trust fund is insufficient for such reimbursement, he may call on the cestui que trust, in whose behalf and at whose request he acted, and recover of him personally reasonable compensation for the time and trouble and money expended. Perry § 909 ; Hill 578. Trustees have an inherent equitable right to be reimbursed all expenses which they reasonably iucur in the execution of the trust, and it is immaterial that there are no provisions for such expenses in the instrument of trust. If a person undertakes an office for another in relation to property, he has a natural right to be reimbursed all the money necessarily expended in the performance of the duty. Perry § 910. ' The costs of winding up a trust and distributing the money, and all expenses for documents, deeds, and other papers, must be paid from the trust fund. Ib. § 983. The trustee’s lien cannot be allowed to control the estate in such manner as to destroy the trust: but no conveyance will be ordered or allowed until he is repaid. Ib. § 907. The concurrence of a co-trustee is not necessary for the incurring of expenses, if the expenses are proper in themselves. Ib. 912.

We have not deemed it important to make a wider or more detailed citation of authorities, for the reason that those citations, and the cases therein referred to, answer all the exigencies of the case and the occasion.

The foregoing citations, with the cases referred to, state, and give practical illustration of, the established doctrines of the law applicable and controlling in the present case.

The property and rights conveyed to the trustees by the mortgage, constituted the value of, and ultimately became, under the foreclosure, the substitute for, the bonds. That property, in its connection with the franchise, became charged with the lien of the trustees ; and it remains so charged, unless the trustees have done something that has operated a discharge of it. What has been done by the cestuis que trust since the foreclosure, in the matter of transferring the bonds and the rights appertaining thereto, — what has been done in the matter of organizing a new corporation by the bondholders in virtue of said foreclosure, and taking possession of the property, and transferring the possession and right of possession to Rensselaer & Saratoga R. R. Co,. — cannot, of itself, relieve the trust property of the trustees’ lien. All this has been done by, and in the right of, the bondholders under said first mortgage. The fact that subsequent mortgagees, by reason of their right in equity to redeem the first mortgage, and in order to derive benefit to themselves as subsequent mortgagees, have seen fit to buy up the interest of the first mortagagees, and thus combine in themselves the rights of both mortgagor and mortgagee under the first mortgage, and that they have done this instead of redeeming the first mortgage by paying the amount fixed by said decree of foreclosure, — does not touch the right of the trustees to hold all the lien originally existing in them for their service and expenses of administering the trust. Nor is that lien affected by the fact that the trustees might have a personal claim therefor against the bondholders. In reference to that lien as giving them "an interest in the property, or its representative equivalent — the redemption money — it was their province to have had that money paid to them. If it had been so done, then it is agreed they could have retained of it enough to satisfy their reasonable charges for service and disbursements. But the bondholders — the cestuis que trust — saw fit to arrange the matter with their adversaries in interest, so as to let the decree have full effect on the title as between mortgagor and mortgagee, without the payment of the redemption money to the trustees. The legal title by the foreclosure unredeemed by payment of the money to the trustees, who had an interest in it by way of said lien, is still in the trustees; and if parties would get rid of them by a resort to a court of equity, as in the present case, it must be by doing towards the tru tees, what the trustees would have done for themselves in case the money had been paid to them in redemption of the foreclosure.

The cases and doctrine produced and urged against the trustees in the argument, are right and conclusive as between mortgagor and mortgagee, as to the effect of a decree of foreclosure and redemption under it, or buying in the mortgagee’s interest in lieu of strict redemption. Those cases do not involve the interest and right of a party, like the trustees in this case, who have a lien as against both mortgagor and mortgagee, upon the trust property and its avails.

All the parties in this cause claiming against the trustees, are chargeable with knowledge of the relations of said trustees, and of their rights arising from said relations. Such parties are standing in this litigation upon rights derived from the immediate parties to the creation of said trust, and are claiming to have and enjoy the fruits of the administration of said trust, resulting in said foreclosure of the first mortgage. It is not shown that said trustees have released or lost their lien and rights by anything they have done or omitted in reference to transfers and transactions between the parties interested in, and affected by, said first mortgage and its foreclosure.

Under the cross bill, the claim on the score of advances by Mr. Cobb and Mr. Wilson, is proper tor consideration and adjudication. If those advances were a gratuity to the common interest involved in the foreclosure suit, that would end the claim. If, on the other hand, they were designed and understood as supplying a temporary and then present need of funds in the course of the administration of the trust, then the trustees should be held accountable to them for those advances, and the property be chargeable for the same.

The claim of compensation for .services by the trustees, is also proper for adjudication under the cross bill; and any allowance therefor will be chargeable on said property.

The matter of fees, claimed to be due from the trustees to the estate of Mr Stoughton, stands on the same ground. Whatever services wore procured by the trustees to be rendered by Mr. Stoughton in the. relations they sustained as trustees, and were reasonable and proper, are to be compensated for by the trustees, and charged upon the trust property.

We are unable to find that either the trustees, personally, or Mr. Stoughton as their attorney and counsel, were so connected with, or participating in, the negotiátions and transactions that have resulted in the title and rights now existing in the Rensselaer & Saratoga R. R. Co., as to disentitle a proper allowance for services of Mr. Stoughton, rendered for the trustees in the discharge of their duties and assertion of their rights as such trustees.

These several subjects of claim will be referred to a master, to ascertain and report to the court of chancery whatever may legitimately appertain thereto, to the end that they may be duly considered and adjudicated by that court.

The decree is reversed and cause remanded, with a mandate as above indicated.