Case ID: ny-super-ct_39/html/0174-01.html
Source: Caselaw Access Project
Author: {"author": "By the Court.—Speir, J. Freedman, J. (concurring).", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

SAMUEL H. RANDALL, Plaintiff and Respondent, v. CHARLES DUSENBURY, Trustee, &c., Defendant and Appellant.
    I. LIEN ON TRUST FUNDS FOR SERVICES RENDERED TO THE TRUSTEE ON HIS EMPLOYMENT.
    1. When trustee mat contract to erra a libn.
    
      a. Where the trustee Tims no funds in his hands and services are necessary to be performed, either for obtaining possession, or for the preservation of the trust property, he may enter into a contract to have the same performed, not on his personal responsibility, but solely on the faith and credit of the trust property so that payment thereto shall be contingent on success and to be made out of the trust property.
    1. Exception. This is an exception to the general rule that a trustee can not make a contract with a third party which shall bind the estate or fund, and is personalty Hablo for his contracts with regard to the estate or fund.
    
      H. ESTOPPEL.
    1. Persons acting under the claim or pretense oe being TRUSTEES.
    
      a. Having in proceedings instituted by them secured the fruits if the services of one employed by them, they are estopped from shielding themselves against liability for payment for such services out of such fruits, on the ground that their acts were unlawful and void.
    
    IH. ASSIGNMENT UNDER ACT OF 1860, § 348.
    1. Validity oe, attacking collaterally. a. It can not be so attacked on the ground that it was not acknowledged before delivery.
    Before Freedman, Curtis and Speir, JJ.
    
      Decided February 1, 1875.
    The action was brought to recover three thousand and fifty dollars from defendant, as trustee of a certain surplus fund under an assignment or deed of trust from one Selah Hiler to one George W. Haight, to which defendant succeeded as trustee on resignation of said Haight.
    The assignment directed the payment of said fund to said Hiler’s creditors “after first paying all legal expenses growing out of said trust.” The claim is for professional services rendered by plaintiff as attorney and counsel to the trustees on the faith and security of the fund, in collecting and securing against adverse claimants the sum of seven thousand one hundred and ninety-two dollars of said fund, and to have said three-thousand and fifty dollars declared a lien thereon, and for payment of the claim and lien from the fund prior to all other payments.
    Certain issues of fact- were directed to be submitted to the jury which were found in plaintiff’s favor, and thereafter the action was again brought on for final hearing under an order of the court at the special equity term, and judgment was entered in favor of plaintiff against defendant for the amount claimed, directing payment from the fund as claimed by the plaintiff.
    The case comes up for review (upon case and exceptions), on appeal by defendant, from the judgment.
    
      L. M. Northrop, attorney, and Ira D. Warren, of counsel, for appellant urged:
    I. Haight was never a trustee under such assignment. He never had, as trustee or otherwise, any title to, or interest in such fund. The pretended assignment was absolutely void on its face, for the reason that it was never acknowledged before delivery, as required by Laws of 1860, ch. 348, § 1. The title of this whole fund is still in Huyler (Hardman v. Bowen, 39 N. Y. 196; Britton v. Lorenz, 45 Id. 55). “A trustee of a void deed can not claim a lien on the fund for his expenses. It was as though no trust deed had ever been made” (Smith v. Dresser, L. R. 1 Eq. 251).
    II. If Haight ever was a trustee under this instrument, Dusenbury was not. A trustee can not himself appoint a new trustee, though the new trustee consent (Webb v. Shaftsbury, 7 Bing. 480; Hubbard v. Ray, 7 Hare, 106; Kennedy v. Tumly, 6 Ired. Eq. 399; 1 Edm. Stat. (2 ed.) 682, § 71). If it be answered that Dusenbury acted as a trustee, and is, therefore, estopped from denying it, we reply that these papers were all known to the plaintiff, and all Dusenbury and Haight’s rights under them. A portion of them he drew. He knew all the facts, and the maxim ignorantia juris non excusat is not a harsh rule to apply to a lawyer in his own case. There is, therefore, no question of estoppel which will aid the plaintiff.
    III. The defendant, as trustee, could not bind the trust estate, nor by any act of his create a lien on it in favor of a third party. This question has been so often passed upon that it may be considered settled (Austin v. Monroe, 47 N. Y. 367; Ferrin v. Myrick, 41 Id. 325; Worrall v. Harford, 8 Ves. 4; Perry on Trusts, § 907; Hill on Trustees, 4 Am. Ed. 879; Hall v. Laver, 1 Hare, 571; Lightfoot v. Kean, 1 Mees. & W. 745; Lewin on Trusts, 561, and cases cited). The case of Noyes v. Blakeman (6 N. Y. 567), does not militate against this docrine. In that ease the attorney was employed by the cestui que trust and trustee, the trustee expressly stipulating against any personal liability, and both agreeing that it should be paid out of the future income of the estate, which, in fact belonged to the cestui que trust. . The judgment as it was, was affirmed by a divided court and by only one majority.
    IY. The instrument of itself does not create a lien. The language is “to pay all legal and proper disbursements and expenses growing out of said trust.” This, the court holds, created a first lien on the trust fund. The case of Worrall Harford, before cited (8 Ves. 4), contained exactly such a provision, but the court held that the attorney had no lien on the fund, and could look to the trustee alone for his fees.
    
      Samuel H. Randall, attorney and of counsel for respondent, urged:
    I. Defendant is estopped from attacking the validity of bis trust, or denying he is trustee, or denying his liability to discharge the duties of his trust, the first of which is “ to pay all legal expenses growing out of said trust ” (People v. Norton, 9 N. Y. 176; Hill on Trustees 3 Am. Ed. § 219; Cruger v. Halliday, 11 Paige, 319; Sprigg v. Bank of Mt. Pleasant, 10 Pet. 257; Welland Canal Co. v. Hathaway, 8 Wend. 480; Dezell v. Odell, 3 Hill, 215).
    II. The clause in the trust deed providing for an accounting between Hiler and his creditors named therein, before payment of their claims by trustees, did not require any attorney who should be employed by the trustee to secure or protect said fund to first account with Hiler, and get his consent to the payment of claim by trustee.
    III. The plaintiff held an attorney’s lien on said fund for his services in collecting same, which no change of title of trustee of said fund could affect or destroy ; nor did plaintiff ever abandon or give up his lien on said fund for payment of his services (Bowling Green Savings Bank v. Todd, 52 N. Y. 489; Fox v. Fox, 24 How. Pr. 418).
    IV. While a trustee may not ordinarily make a contract with a third party which shall bind the estate or fund, and is personally liable for his contract with regard to the estate or fund, yet an exception to the rule exists when the estate or fund is in peril, where no funds exist for payment of services to secure or protect it, and where the trustee makes the contract in his representative capacity, and stipulates not to be personally liable in the premises (Noyes v. Blakeman, 6 N. Y. 567; Choteau v. Suydam, 21 Id. 180; Ferrin v. Myrick, 41 Id. 322; Opinion of Freedman, J., Randall v. Dusenbury, action No. 2, special term, November, 1874).
   By the Court.—Speir, J.

On December 7, 1872, Selah Hiler executed and delivered to George W. Haight, an assignment to pay certain specified creditors of Hiler’s named, in order “first to pay all legal and proper disbursements and expenses growing out of said trust,” and then provides for payments of specific amounts to various persons, naming each in the order of payments. Those several payments were to be made after an accounting shall have been had by the. said respective parties, and the amount due and owing to said parties by Hiler agreed upon, and the balance to be held for Hiler.

It clearly appears that the plaintiff’s employment was made wholly on the faith and credit of the fund, with no compensation for services unless in the event of success ; no money being in the hands of the trustees to pay for services, and the defendant stipulating in no event to be personally liable for plaintiff’s services. This arrangement was entered into with the plaintiff by the trustee Haight, his successor the defendant, and Hiler acting as their agent.

The plaintiff under, and by virtue of such employment,rendered services for the benefit of the trust, in securing the fund to the trustee ; the defendant as trastee accepted the benefit of the plaintiff’s services and received from the plaintiff the sum of seven thousand one hundred and ninety-two dollars and seventy-five cents of the surplus fund, by a check of the city chamberlain, payable to the order of defendant upon a promise to pay to the plaintiff the amount of his lien upon the fund.

The learned judge has found that the plaintiff under the first provision of the deed of trust has a lien upon the fund, and is entitled to be paid therefrom for his services, as a part “of the legal and proper disbursements and expenses growing out of the said trust,” and prior to any payments to be made under the remaining provisions of the deed.

The appellant’s counsel asks a reversal of the judgment upon three grounds :■

First. That the assignment was void on its face, for the reason that it was never acknowledged before delivery, as required by the statute of 1860, and that the title to the whole fund is still in Hiler.
Second. Admitting that Haight was a trustee, he could not himself appoint a new trustee even if the latter consent.
Third. That the defendant as trustee could not bind the trust estate, nor by any act of his create a lien on it in favor of a third party.

I am of the opinion that neither the' trustee nor his assignor can be allowed to raise the objection on either the first or second grounds. There were no funds in the hands of the defendant to pay for services, no property had passed to him under the deed, and he stipulated that in no event would he become personally liable. The trustee got possession of the trust estate solely through the services of the plaintiff, upon a special agreement that the fund should be charged with the disbursements and expenses growing out of the trust, and upon an employment already recognized by both Haight and Hiler. The omission to have the assignment acknowledged before delivery may be irregular or erroneous and upon a direct proceeding by proper parties may be set aside or reversed, but its validity can not be questioned in a collateral action. These parties can not be allowed upon any principle of law or justice (after having secured the fruits of plaintiff’s services through proceedings instituted by them) to shield themselves upon the ground that their acts were unlawful and wholly void. The defendant, after having obtained the property under the pretense of being the trustee can not be permitted to deny his liability to account as such. This is an exception to the general rule which undoubtedly is, that a trustee can not ordinarily make a contract with a third party which shall bind the estate or fund, and is personally liable for his contracts with regard to the estate or fund (People v. Norton, 9 N. Y. 176; Noyes v. Blakeman, 6 Id. 567). The principle is a familiar one that no acts of the assignor, after the assignment has been executed and delivered and possession of the property taken by the assignees, or any omission on his part can invalidate the assignment. This rule applies with equal force to the assignees (Hardman v. Bowen, 39 N. Y, 196, and cases cited).

The last objection is also untenable.

It is clearly settled that it is the duty of the trustee to use reasonable diligence to protect the trust estate, and that under certain circumstances he will have a lien upon it for the expense of such protection, although not expressly provided for in the instrument creating the trust. In the case at bar, the provision is explicit, “to pay all legal and proper disbursements and expenses growing out of said trust.”

It has been repeatedly adjudged in this court, in the late court of chancery, and in the court of appeals, that a debtor may provide in his assignment for present and prospective costs of suits going on, and that may be brought, relating to some of the assigned property, without its invalidating such assignment, by a provision authorizing the assignee to prosecute or defend all suits which he may deem necessary to the execution of the trust.

These decisions are put upon the ground that although they give to the trustee large and extensive powers, which may be liable to abuse; yet it can not be said that they grant any other or further power or authority than the law would imply as necessary to carry the trust into execution (Lentilhon v. Moffat, 1 Edw. Ch. 451; Van Best v. Yoe, 1 Sand. Ch. 4; Jacobs v. Remson, 36 N. Y. 668; Townsend v. Stearns, 32 Id. 209).

The judgment must be affirmed, with costs.

Curtis, J., concurred.

Freedman, J. (concurring).

At the trial the learned judge seems to have had before him, among other things, not only the findings of the jury upon the questions submitted to them, but also the testimony upon which such findings were based; and his decision recites that such findings were approved and adopted by him. From such testimony it appeared that the arrangement made with the plaintiff as to the rendition of services, was assented to by Haight, Hiler, and the defendant; that plaintiff’s employment was made wholly on the faith and credit of the expected fund ; that his compensation depended upon his success ; that at the time of the making of the arrangement there was no money, or fund, or property, in the hands of, or under the control of, the trustee with which to pay the plaintiff; that the defendant had stipulated against a personal liability ; and that the defendant, as trustee, received from the plaintiff the amount of the surplus fund in the shape of a check of the city chamberlain,upon his promise to pay the plaintiff the amount of the lien which plaintiff claimed to have.

The judge, therefore, might, and if he had been requested, undoubtedly would have found these additional facts, especially as, with the single exception of defendant’s promise, as to which there was a conflict of evidence, the existence of these facts was not questioned, but tacitly conceded by all parties ; and these facts, if found, would have brought the case directly within the decision of the court of appeals in Noyes v. Blakeman, 6 N. Y. 567.

That these facts were not found, constitutes no sufficient reason for a reversal. Every reasonable intendment on questions of fact as well as of law, is to be made in support of the judgment, and the appellant was bound to show error. This he has not done.

It has even been held that where a judgment, after a trial by the court, comes up for review without any findings of fact, nothing will be presumed against the correctness of the decision, but the presumption will always be in the favor of the decision rendered (Viele, et al. v. Troy & Boston R. R. Co., 20 N. Y. 184; McKeon v. See, 4 Rob. 449, affirmed, 51 N. Y. 300).

I therefore concur, that, for the reasons stated by my brother Speir, the judgment should be affirmed.