13 N.W.2d 341 | Iowa | 1944
This is another of several suits to come before us involving the Henry W. Lunt trust. See In re Trust of Lunt,
[1] I. Count I is based on payment by plaintiffs of a deficiency judgment against the trust in favor of the Aetna Life Insurance Company. The facts are these: In March 1925, Willie C. Lunt owned a one-fifth beneficial interest in the trust. (In 1937 Gordon acquired that interest.) Willie became financially involved and in 1923 had assigned or mortgaged his interest in the trust real estate to secure his debt of $7,500 to a bank. On March 11, 1925, the trustees and the four children of Henry W. Lunt who were then living (owners of four fifths of the beneficial interest) made a note for $7,500 to the Aetna Life Insurance Company, secured by a mortgage on a farm of 126 acres known as the Gable farm, owned by the trust and occupied by Willie. Application for the loan, signed by the trustees and Willie, was made to raise funds to pay off Willie's debt to the bank. Proceeds of the loan were immediately used for that purpose. The trustees endorsed the draft from the Aetna over to the bank.
The Aetna mortgage was foreclosed. Decree of foreclosure was entered on June 21, 1937. At the execution sale on this foreclosure, the mortgagee bid in the Gable farm at $7,600 and acquired sheriff's deed thereto. A deficiency judgment was left of $2,107. The Aetna caused general execution to be issued and levied on 515 acres of trust real estate to satisfy this deficiency. The trustees had no funds with which to pay it. Cole R. Van Gorden, then one of the trustees and husband of one of the plaintiffs, asked plaintiffs to pay off the deficiency, which they did in May 1939.
On Count I, plaintiffs' prayer is that their claim for $2,389 (the $2,107, with interest and costs) be established against the trust, the trustees pay the same, plaintiffs be subrogated to the lien of the Aetna upon the lands of the trust, and the lien be established. No other relief is asked. Gordon R. Lunt contends plaintiffs are not entitled to recover because the Aetna loan was made without his knowledge or consent, the transaction was of no benefit to the trust but was for the accommodation of Willie, for whose benefit the proceeds of the loan were used. Plaintiffs rely strongly upon the adjudication in the mortgage foreclosure *835 as establishing the liability of the trust on the Aetna note and contend they were required to prove only that the Aetna judgment was a debt of the trust which they paid at the request of a trustee because he could not pay. The lower court granted the relief asked on Count I.
The only defendant to the mortgage foreclosure who filed answer in that suit is Gordon R. Lunt. His principal contention in that suit was that the Aetna note and mortgage were not valid obligations of the trust because not signed by him nor made with his consent. The court held, however, in the foreclosure, that under the trust agreement it was necessary that only the trustees and the living children of Henry W. sign the note and mortgage. Gordon is not a son of Henry W. but of Johnson R. Lunt, who, in turn, was a son of Henry W. In 1922 Johnson died and Gordon later acquired his interest in the trust.
Unquestionably, it was adjudicated in the foreclosure, asbetween the Aetna on the one hand and the trustees andbeneficiaries on the other, that the trust was liable to the Aetna on the note and mortgage. All that was determined in the foreclosure was the liability of the mortgagors to the mortgagee. The rights of the defendants as between themselves were in no way involved or adjudicated. No issue was raised as between them. The trustees and the beneficiaries were coparties, not adverse parties, in that suit. Generally, a former judgment held to be res adjudicata in a subsequent suit is rendered in an action in which the parties to the subsequent suit were adverse parties and not merely coparties. While a judgment is res adjudicata as to issues between the judgment creditor and judgment debtors, it is not so as to issues which were not litigated or determined between the debtors themselves. 13 Am. Jur. 55, 56, section 60; 30 Am. Jur. 966, 967, section 233; 34 C.J. 1040, 1041, section 1478; Kemerer v. State Farm Mut. Auto. Ins. Assn.,
While perhaps this is not strictly a suit for contribution, it is of that nature. A judgment against a number of defendants *836
does not prevent a defendant from showing, in a subsequent action between them, that as between themselves he was not liable and therefore not bound to make contribution. 13 Am. Jur. 55, 56, section 60; annotation 101 A.L.R. 104, 120; Kennedy v. Independent Sch. Dist.,
It is our conclusion that the foreclosure decree in favor of the Aetna did not adjudicate the liability which plaintiffs now seek to enforce against the trust. If such liability does not exist independent of the foreclosure decree, it does not exist at all.
The trial court held that, even if the doctrine of res adjudicata were not available to plaintiffs, the Aetna note and mortgage were "given to secure a loan which was used for trust purposes" and that the trust is liable to plaintiffs upon Count I. We are unable to agree. True, execution of the note and mortgage by the trustees, with the consent of the living children, was authorized by the trust deed. This was determined in the foreclosure. Liability to the Aetna was thereby established. But the trustees had no right under the trust deed, as against a beneficiary who did not consent, to borrow money for the purpose of paying the individual debt of Willie. Trustees can exercise only such powers as are specifically conferred by the terms of the trust or necessary or appropriate to carry out the purposes of the trust and not forbidden by its terms. Restatement of the Law, Trusts, section 186. See, also, sections 254, 255, and comments thereunder, dealing with overpayments and loans by the trustee to one beneficiary. To sanction *837 an overpayment to one beneficiary out of the trust estate would result in unjust enrichment to that beneficiary. 2 Scott on Trusts, 1443, section 254.2.
It appears that at the time the Aetna note was made it was understood between the mortgagors that it was to be Willie's individual debt, because the proceeds were used for his benefit. When plaintiffs paid off the deficiency judgment they paid a debt that, as between the parties to this suit, was Willie's and not the trustees'. Plaintiffs must have had full knowledge of this fact. Plaintiffs, therefore, are not entitled to have their claim under Count I established against the trust. They ask no relief except against the trust. Whether they are entitled to relief against either trustee individually or the beneficiaries of the trust who consented to the Aetna note and mortgage and joined therein or against the interest formerly owned by Willie are questions that are not before us. It appears without dispute, however, the Aetna loan was made without the knowledge or consent of Gordon Lunt or his grantors of the balance of the one-fifth interest originally owned by his father, Johnson R. Lunt.
[2] II. Count II is a claim for attorney's fees and expenses shown to have been incurred in defending against a partition suit in which it was sought to terminate the trust. Plaintiffs in that suit were Gordon, Walter, individually and as trustee, and Willie Lunt. Defendants were Cole R. Van Gorden, the other trustee, and the two plaintiffs in the present suit. These three employed the attorneys who defended the partition suit. That suit came before us on three occasions: Lunt v. Van Gorden,
Without doubt it was the duty of Van Gorden, trustee, to resist the attack made upon the trust in the partition suit. A trustee is under duty to defend the validity and integrity of the *838
trust against the assault of those who seek to break it down, if he reasonably believes the attack is unjustified. 3 Bogert, Trusts and Trustees (1935), 1830, section 581; 2 Scott on Trusts (1939), 940, 941, section 178; Blackhurst v. Johnson, 8 Cir., Mo., 72 F.2d 644, 648. See Restatement of the Law, Trusts, section 178; In re Will of Jewe,
Reasonable expense, including that in the employment of attorneys, in defending the trust against an unjustified attack is properly payable out of the trust property. 3 Bogert, Trusts and Trustees, 1830, 1832, section 581; 2 Scott on Trusts, 1005, 1006, section 188.4; II Perry on Trusts and Trustees, Seventh Ed. (1929), 1535, 1536, 1537, section 910; In re Assignment of Cadwell's Bank,
It is true we have frequently held (prior to the taking effect of the present Rules of Civil Procedure) that attorney's fees are not allowable as costs in partition suits where the question of title is in controversy. Johnston v. Boothe,
Defendants also argue that the trustees were disinterested in the partition suit and had no authority to employ counsel at the expense of the estate to represent the interests of certain beneficiaries in hostility to those of others. The principle relied upon is well settled. Fleming v. Casady,
[3] Defendants contend there can be no recovery under Count II because no court order was procured authorizing Van Gorden, trustee, to defend the partition suit at the expense of the trust. Failure to produce such order is not fatal to plaintiffs' right of recovery. Expenditures of a trustee, which the court would have authorized had application therefor been made, are properly allowable. II Perry on Trusts and Trustees, Seventh Ed., 1541, section 915. This is an application of the rule that a court may approve an act of a fiduciary, if it would have authorized the act had request been made for such authorization. In re Trusteeship of Lawson,
Part of what plaintiffs seek to recover on Count II is for services rendered Van Gorden, trustee, and plaintiffs by attorneys Cross Hamill of Newton in having set aside a default decree taken in the partition suit. The district court refused to set aside such decree. Upon appeal to this court, there was a reversal. Lunt v. Van Gorden, supra,
Expenses, including attorney's fees, chargeable to a trust must be reasonable. II Perry on Trusts and Trustees, Seventh Ed., 1535-1537, section 910; 2 Scott on Trusts, 1007, 1008, section 188.6; In re Estate of Manning,
[4] Courts are not absolutely bound by expert evidence on the value of legal services. The court itself is an expert as to what are reasonable attorney's fees. In re Estate of Chismore,
[5] III. In Count III recovery is sought for the expense of Mr. Bannister's services in "sitting in" as an observer at the trial of the Aetna foreclosure, a half day's time spent by him in arranging to have a bid made for the trustees at the execution sale on that foreclosure, his attempt to get Walter Lunt, trustee, to pay the Aetna deficiency judgment, and a half day spent by him in paying off that deficiency. Mr. Bannister testified that his total charge for these four items was $130. The lower court allowed $100, which it found to be reasonable expense in connection with making the bid at the foreclosure sale and attempting to get Walter, trustee, to pay the deficiency judgment. No recovery was allowed for the expense of "sitting in" at the Aetna trial nor for paying off the deficiency judgment. Plaintiffs do *841 not complain of the decision below on Court III but seek only to sustain it.
Van Gorden, trustee, feared the Gable farm would be sold at the foreclosure sale for an inadequate price. Consequently, Van Gorden's son was asked to and did attend the sale and on behalf of the trustees bid $7,500 for the farm. It is claimed this caused the Aetna to bid up to $7,600, $1,100 more than its initial bid, thereby leaving a smaller deficiency, from which the trust was benefited. The son's charge for his services was $10.
If, as we have held in Division I hereof, the amount paid by plaintiffs to satisfy the deficiency judgment is not a proper charge against the trust, the expense in connection with the Aetna foreclosure sale is not properly allowable against the trust. The same principles control both Counts I and III. As between the parties to this suit, the expense incurred for which recovery is sought on Count III and the payment of the deficiency referred to in Count I were for the benefit of Willie and not the trust.
[6] IV. Count IV seeks recovery for attorney's fees in connection with the appointment of a trustee to succeed Van Gorden, who died in September 1940. Plaintiffs brought suit in the district court for the appointment of a successor. Walter and Gordon Lunt resisted the application. After a hearing in which Devitt Eichhorn of Oskaloosa represented the applicants, E.L. Butler was appointed trustee to succeed Van Gorden, deceased, and to act with Walter Lunt. Devitt Eichhorn charged and were paid $100. Walter and Gordon appealed to this court where the appointment of Butler was confirmed. In re Trust of Lunt,
There is little doubt that the expense incurred in securing Butler's appointment was beneficial, if, indeed, it was not necessary, to the welfare of the trust. Jessup v. Smith, supra,
Our conclusion falls within the rule that one jointly interested with others in a common property or fund, who in good faith maintains the necessary litigation to preserve it or secure its proper administration, is entitled to be reimbursed out of the common property or fund for the reasonable cost of the litigation. Wallace v. Fiske, 8 Cir., Mo., 80 F.2d 897, 107 A.L.R. 726, and annotation 749 [certiorari denied
Our conclusion also finds support by analogy in decisions that one who succeeds in the appointment of a guardian is entitled to have his attorney's fees paid out of the ward's estate. In re Guardianship of Deck, supra,
The above rule is applicable even though Walter and Gordon resisted the appointment of a successor trustee. It is the benefit conferred upon the estate that makes such a charge an equitable one, even though the beneficiaries are unable to agree among themselves. Buford v. Tobacco Growers Co-op., 4 Cir., N.C., 42 F.2d 791; Wallace v. Fiske, supra, 8 Cir., Mo., 80 F.2d 897, 107 A.L.R. 726, 743, 744.
Wilson v. Clayburgh,
All contentions made by both sides have been fully considered.
Half of the costs of this appeal are taxed to plaintiffs and half to Gordon and Walter Lunt, individually. This cause is affirmed in part, reversed in part, and remanded for a decree in harmony with this opinion. — Affirmed in part; reversed in part and remanded.
SMITH, C.J., and BLISS, OLIVER, MILLER, WENNERSTRUM, MANTZ, and MULRONEY, JJ., concur.