Case ID: va-patt-heath_1/html/0528-01.html
Source: Caselaw Access Project
Author: {"author": "THOMPSON, J.,", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

*Lesslie’s Ex’or v. Brown’s Ex’ors.
    January Term, 1855,
    Richmond.
    Trusts and Trustees — Arbitration—Statute of Limitations. — Property embraced in a deed of trust to secure creditors is sold by the trustees. After paying- those creditors, there is a surplus, which is claimed by the trustees in a second deed, for the benefit of th e cestuis que trust in this last deed, and is also claimed by a judgment creditor of the grantor. This conflict of claim is submitted to arbitrators, by the trustees in the last deed and the judgment oreditor, and the arbitrators award in favor of the latter. Seven years afterwards, a bill is filed to recover back this money, on the ground, among others, that the trustees had no right to submit to arbitration, and that the award was wrong in point of law. The judgment creditor, in his answer, relies on the statute of limitations and other defences. Held:
    That whether the award was right or wrong, or whether the trustees had the right to make the submission to award or not, the fund is not such a trust fund as equity will pursue, without regard to the statute of limitations, and the judgment creditor is completely protected by that statute.
    * Note sx the Reporters. — It did not appear distinctly from tlie record, wliy Scott did not claim for Ais judgment priority over .the deed of July, 1824, as well as that of October, 1824. It seems, however, to have been because a part of tbe debt due from Brown to tbe bank, and secured by the former deed, was for money advanced to him by tbe bank, to lift an incumbrance on tbe property, by deed existing anterior to tbe judgment of 1823, to tbe lien of which, therefore, tbe bank was entitled by substitution: and nearly all, if not tbe whole of the remainder, was secured also on another piece of property, on which Scott likewise bad a lien, by deed for another debt, subsequent to- that of the bank, and which property (not being sufficient to pay both debts) be was anxions to relieve to this extent from tbe bank debt.
    In 1819, James Brown, a Richmond merchant, found himself largely indebted to various persons, but chiefly to one John Ivesslie, to whom, in settlement, he executed five bonds; and to secure the payment of the same, made a deed of trust on a large amount of property, which after-wards proved insufficient to pay them off. On two of these bonds thus unpaid, James Scott, executor of John Uesslie, who had since died, afterwards obtained judgment as follows: on the 10th of April, 1823, a judgment for $8000, with interest from the 31st of January, 1818, till paid; and on the 6th of November, 1824, one for $10,000, with interest as in the former judgment. On the 20th of July, 1824, Brown made a further deed, conveying to Richard Anderson and Robert Stanard a lot in the city of Richmond, numbered 466 in the plan of said city, called the Basin Warehouse lot, in trust, to secure a *debt due to the Bank of the United States, and on the 28th of October, 1824, he made still another deed, conveying to Charles Copland, Charles J. Macmurdo, Sr., and Robert Burton, nearly all his property, both real and personal, inclusive of lot Ño. 466, to secure against loss, the legatees and dev-isees of Robert Burton, Sr., (whose executor he was,) as well as his securities in his official bond, as such executor, he never having rendered an account of his transactions as such.
    In February, 1836, the lot No. 466 was sold by Richard Anderson and Robert Stan-ard, trustee in the deed' of J'uly 20th, 1824, for the sum of $21,500, and after the payment out of this sum of the debt due the bank, there remained in the hands of the said trustees, the sum of $6,519.81. This balance was claimed by Scott, executor of Uesslie, to belong to him under the lien of his judgment of April, 1823, and it was Like'wise claimed by the trustees in the deed of October, 1824, to be subject to their lien under that deed. It is not necessary to state here the particular circumstances upon which their respective claims rested.
    In order to settle this conflict of claim, it was agreed to submit the whole matter to the arbitration of Chapman Johnson, Samuel Taylor and Robert Stanard, Esqrs., and, accordingly, articles of submission, for this purpose, were drawn up and signed by James Scott, executor of John Lesslie, James Brown, Richard Anderson *and Robert Stanard, trustees in the deed of July 20th, 1824, and Charles J. Macmurdo and Robert Burton, surviving trustees (Charles Copland being dead) in the deed of October 28th, 1824 — the said Robert Burton signing as such trustee and in his own right as one of the legatees of his father, Robert Burton, the elder. On the 2d of May, 1836, the arbitrators made their award, declaring that James Scott, executor of John Uesslie, was entitled to the money in the hands of the trustees; and it having been previously deposited in bank to the credit of the arbitrators, it was, on the 22d day of June, 1836, paid by them to James Scott, executor as aforesaid.
    
      *Note by Rupobtjsrs. — Though this question, like the others, had no influence on the opinion of the court, yet it has been thought proper to report the argument upon it, to some extent, because as it is believed this is the first case in which the direct question, has ever arisen, either in Virginia or in England. It is to be regretted that the case was of such a character as to make it unnecessary, in the opinion of the court, to consider and decide this question. The Code of 1849 leaves no room for doubt upon the subject, in any case arising since its passage. Vide Code, p. 611, ch. 153, § 5.
    In Eebruary, 1843, Alexander Spiers Brown and Patrick W. Brown, executors of James Brown, filed their bill in the Superior Court of Chancery for the Richmond circuit, alleging' that their father and testator had died in 1841, leaving a will creating the most complicated trusts, and presenting, to a faithful execution of it, almost insuperable difficulties, arising not only out of his own affairs, but out of their complication with those of their father’s testator, Robert Burton, the elder. They, therefore, submitted all their difficulties to the court; and, among other things, claimed to set aside the payment, under the award, to Scott, of the $6,519 81, and to require Scott to refund to them that amount, with interest from the date of its receipt by him, to be appropriated by them in part satisfaction of the debt due from their testator as executor of Robert Burton, the elder, to the devisees and legatees of said Robert Burton. The bill further showed, that these legatees and devisees were Eliza and Sally Burton, two natural children of said Robert Burton, resident in Bondon; Anna P. Burton, his wife, (afterwards Anna P. Brown, wife of said James Brown,) and his two children by her, viz: John Burton, of Scotland, and Robert Burton, the younger, already mentioned.
    To this bill Scott, as executor of Eesslie, replied, insisting on the validity of the .award, and pleading the statute of limitations.
    *Oxi the hearing of the case, the court declared the award null and void, and, over-ruling the plea of the statute, decreed that Scott should pay into bank, to the credit of the cause, and subject to the order of the court, the said sum of money, with interest from the date of its receipt by him.
    From this decree Scott appealed to this court; and here many questions, arising upon the pleadings and the merits, were argued by the counsel in the case.
    On the part of the appellants it was argued : 1. That the bill was multifarious. 2. That the executors of Brown had no right to sue for this fund as such, he having been a party to the award, and in no event having an interest in the subject. 3. That it was not necessary for Burton’s legatees to be parties to the submission to award, but that, even if it were, the decree was erroneous in directing the whole subject to be refunded — Rob’t Burton, the younger, one of those legatees, having been a party to the submission in his own right as well as in the capacity of trustee. 4. That the lien of the execution of 1823 prevailed over that of the deed of October, 1824, and that so the award was in point of fact correct. 5. That the award, even though bad, could not be set aside, except for gross errors apparent on its face, of which there were none, or for misconduct in the arbitrators, which was not pretended, and so must stand. 6. That Scott had received the money from a stake-holder, claiming it by title paramount to all others, and so could not be required to refund.
    On the part of the appellees, these propositions were generally combatted, and it was insisted, that there was no lien under the judgment of 1823 on lot Ho. 466; that the arbitrators so decided, and that this question being the only one submitted to them, they should have made their award in favor of the trustees under the deed of October, 1824; that Burton’s legatees should have been parties to the submission, in order for the award to bind them ; and that the award should be set aside for errors of law, and mistake of facts, apparent on its face.
    *It is not deemed necessary to spread out the argument and the authorities on all these points, (nor has a statement been made of the particular circumstances' on which they rested,) because the3' did not influence the opinion of the court, it having been made up on a different question. There were two other questions discussed, however: 1. As to the right of trustees to submit to arbitration ; and 2. As to the effect of the statute of limitations. On these questions, the views presented were as follows:
    Patton, Jr., for appellant:
    If trustees may submit to arbitration, it will not be pretended that the submission in this case was irregular; for if they may submit, then the trustees in the deed of October, 1824, did so on behalf of Burton’s legatees and devisees, and they are bound by the submission.
    The only substantial difference between executors and trustees arises out of the mode of their appointment; the one class act under a deed and the other under a will; but in respect to their powers and duties they are ranked by the authorities in the same class. 1 Maddock’s Chancery, 465-6. If, then, executors have the power to submit, so have trustees. But it is clearly settled that executors have that power. Vide, among other authorities, Pearson et ais. v. Henny’s adm’r, 5 Durnf. & East. 6; Lyle et al. v. Rodgers, 5 Wheat. 394; Banfill, Jr. v. Leigh and Jeffray, 8 Durnf. & East. 571; Worthington et als. v. Barlow’s adm’r, 7 Durnf. & East. *453; Barry v. Rush, 1 Durnf. & East. 691; Bean v. Farmaa et al., 6 Pick. 269; Coffin v. Cottle, 4 Pick. 454; Dickey v. Sleeper, 13 Mass. R. 244; and though, in case they improperly submit, they may be held liable as for a devastavit, yet the award shall stand ; for the right to submit results from the full dominion which the law gives them over the assets. Wheatley v. Martin’s adm’r, 6 Leigh, 62. (Vide opinions of Judges Cabell and Tucker, 71, 73.)
    Again, trustees have a right to sue, and it is laid down as a general rule in Chap-line v. Overseers of the Poor, 7 Leigh, 231, that whoever may sue, may submit to arbitration. But the question seems to be settled by the case of Davies v. Ridge et als., 3 Espinasse, 101. This was an action of assumpsit upon an award for money had and received, against the defendants as trustees of another, and Lord Eldon held that the “plaintiff must show that the defendants had effects of the trust estate; submitting to arbitration did not make them personalty liable;” thus seeming to take it for granted that trustees may submit to arbitration.
    But 2d. This fund was received by Scott in June, 1836, and held by him without complaint or claim from any source, until January, 1843, nearly seven yeárs after-wards, when the bill was filed, and so he is protected by the statute of limitations. There is no possible ground on which this statute can be held not to run, unless it can be maintained that Scott was a trustee as to the fund, which is held, and that as such trustee the statute would not run in his favor. It will not be pretended that he was any thing but a constructive trustee, (if one at all,) and it is submitted that he was not even such a trustee. The only ground on which such trusts are declared by courts of equity, is that parties who obtain money ex asquo et bono belonging to others, ought not to be allowed to hold it, because it is “contrary to conscience” that they should do so — and this is the governing principle in all such cases. 2 Story’s Eq. Jur. ? 12S4-S, 1265; Eonblanque’s Eq., 327, note B.
    *Now Scott could have no difficulty in taking this fund with the least possible scruple of.conscience. He claimed it as that of his testator, by title paramount to all the world; he claimed it adversely to all others; he submitted it to arbitration, and it was awarded to him by “counsel learned in the law.”
    But suppose he was such constructive trustee, still the statute runs in his favor. Eonblanque’s Eq. 246, note † ; Kane v. Bloodgood et als., 7 Johns. Ch. p. 90, and cases there cited, to wit: Lockejr v. Lockey, p. 113; and others at p. 120-5; Sheppards v. Turpin, 3 Grat. p. 373; Judge Daniel’s opinion, p. 392-3, et seq.
    Johnston and Steger for appellees:
    It is submitted that trustees must show either positive authority in the deed to submit, or a power to be derived from the deed by inevitable implication, for they have no powers except those which are ex.pressly delegated, and in the deed under consideration there was no discretionary power. No case has been produced on the other side in which it can be shown that trustees can bind their cestuis que trust by a submission to award, and this silence of the books is pregnant and eloquent against their power to do so. Davis v. Ridge, cited on the other side, is no authority upon the question, as between trustees and cestuis que trust; for in that case the question was between creditors and trustees; and besides it .does not appear in that case what was the character of the- deed — it might have been a deed expressly giving this authority. Three other little cases like this have been found, but in none of them does the character of the deed appear.
    The argument from analogy must also fail, as we submit. There is a difference between the powers of an executor and those of a trustee, and in Rob. Pr. vol. 2, p. 23, it is said that the reason of this distinction is, that all who deal with the latter can look at the deed, and see whether they are dealing according to their powers under the deed. Several important powers exercised *by executors, cannot be exercised by trustees; they cannot compromise; they cannot release. Hill on Trustees, p. 344, 503, 520, (marginal.) And yet it is said they may submit to arbitration I that they may do that indirectly, through arbitrators, which they cannot do directly 1 We submit, that in all such cases they should go into equity. Vide Story’s Eq. vol. 2, § 1267. The authority of Wheatley v. Martin cannot aid the argument in favor of the powers of trustees, for in that case it is said, that the right of the executor to submit to arbitration, results from the “full dominion which the law gives him over the assets;” and this dominion a mere trustee has not.
    But 2d. It is said that Scott is not to be held a trustee as to this fund, and that therefore the statute runs in his favor.
    Care is to be taken in considering these cases, to avoid a loose nomenclature in regard to trusts, and also to avoid pushing too far the terms used by judges or authors of elementary books. Definitions of the terms trustees and constructive trustees, are much less reliable than the principles out of which those general classifications have sprung.
    A breach of trust by trustees not only renders them liable to the cestuis que trust, but renders the party knowing of the breach, and participating in it, also liable. And this is true, whether the party deriving the benefit of it is to be considered a direct or constructive trustee. Story’s Equity Jur. § 977, 1265, 1254; Mortlock v. Buller, 10 Ves. Jr. 292-309; Clay v. Williams, 2 Munf. 117-125; Heth et ais. v. Richmond, Eredericksburg & Potomac Railroad Company, 4 Grat. 482. In some cases, the courts have even held parties liable where they might not have had notice of the trust, but' where the court held that they ought to have taken notice. Rankin v. Bradford et als., 1 Leigh, 163, 168. The same principle was maintained in Redwood v. Riddick and wife, 4 Munf. 222-227, and it was also held that the statute did not run.
    *Kane v. Bloodgood, cited on the other side, decides that where there is a concurrent remedy at law and equity, the court of equity, if appealed to, will apply the statute; but it also decides, that where the remedy is only in equity7, the statute will not be applied. Now, in the case at bar, the fund is technically a trust fund, to be administered in chancery, and could only have been reached by suit in equity; the trustees, even, could not have sued at law, as we submit; and so the statute of limitations does not apply to the case.
    Sheppards v. Turpin is founded on Kane v. Bloodgood, and does not sustain the doctrine for which it is cited. In that case, all the cestuis que trust were sui juris, and neither they nor the trustee moved for the recovery of the property for fourteen years. Besides, they had a concurrent remedy at law, of which they failed to avail themselves. In the case at bar, the cestuis que trust had no remedy at law, and they were not all sui juris- -one was a married woman, and three of the others lived beyond seas. We submit, that the fund in this case was a trust fund, which may be pursued by a court of equity within any lapse of time which does not amount to evidence of acquiescence or abandonment; Oliver et als. v. Piatt, 3 Howard, 333; Jackson et als. v. Updegraffe et als., 1 Rob. 120; Risher v. Bassett et als., 9 Reigh, 119-137; and that no such time having elapsed in this case, we shall not be barred of our recovery.
    Patton, Sr., for appellant:
    Whatever disabilities apply to trustees, as set forth in the paragraph read from Hill on Trustees, by the other side, apply with equal force to executors, and in the same book I find that trustees can release, and can compromise. Hill on Trustees, 735, (marginal, 503.) These trustees might have sued; and is it to be pretended, that, while such a suit is pending, they may not submit to arbitration ! The terms of our statute of awards seem to imply, that any party who can maintain *a suit, may submit to arbitration a pending suit, or without actually bringing suit, may agree to a submission, and make the reference a rule of court. This statute is general, applying to trustees who have the right to sue as much as to any other suitors. 1 Rev. Code 1819, p. 454, ch. 114. The awards under such submissions are required to be entered as the judgments of the court; and if trustees may thus bind the rights of the beneficiaries in the trust, there is no sound reason why they may not equally make a submission in pais, without suit or rule of court. In Russell on Arbitrators, Raw Rib. vol. 63, p. 86, § 5, it is taken for granted that trustees may submit; and I submit that they ought to have the power, where they have the right of action, to recover the subject. j 2. The proposition which is maintained on the other side, to wit: that the fund in controversy was a trust fund, was the very question which was submitted to the arbitrators, and they decided it in the negative, by declaring Scott’s right to it to be paramount to that of the trustees. It would be hard to hold Scott to be a trustee, either constructive or actual; for he denied that it was so, and succeeded in maintaining his position, that the fund was not a trust fund. It could not, therefore, have come into his possession as such a fund, to his knowledge. If one holds a fund by the judgment of a tribunal which he supposes to be a good and sufficient one; then, even if it should turn out that the judgment of the tribunal is void, he still is entitled to hold it, not under the void judgment, but under the statute of limitations; and in such a case, he is in no manner a trustee. As between trustee and cestui que trust, the fund, wherever it is, is a trust fund; but so soon as it gets out of the hands of the trustee into those of a bona fide claimant by title paramount, it ceases to be a trust fund as between him and the cestui que trust — so that this fund, as between Scott and Burton’s legatees, never was a trust fund. None of the cases cited on the other side militate against this position, and in all such cases there “Is some fraud, or mala tides, to take them out of the principle.
    All the cases in which funds come to the hands of parties in such manner as to charge them as trustees, are cases of either actual or constructive fraud, and cases in which it would be unconscionable for the parties to hold them; but the case at bar is not such an one. Scott is not, therefore, a trustee, and the statute runs in his favor..
    If a party gets possession of property bona fide from a trustee — it being trust property — and holds it for five years, he is protected by it, even though he conie into possession of it by violence, but under bona fide claim of title. Kitty v. If itzhugh, 4 Rand. 600.
    But in Sheppards v. Turpin, already cited, it has been adjudged by the Court of Appeals that the statute runs in such a case as the one at bar, and why discuss it any further? That was a case in which the party succeeding claimed ' a trust subject, and levied his execution upon it; (a title by execution gives no better right to property than a surrender of it by a trustee having the control of it;) five years elapsed after the levy; trustee and cestui que trust both sued him; and it was held, that the statute was a bar to the suit of either. On this point, the court was unanimous. •
    
      
      See monographic note on "Arbitration and Award” appended to Bassett v. Cunningham, 9 Gratt. 684.
    
   THOMPSON, J.,

delivered the opinion of the court, as follows:

Without passing upon the objection for multifariousness, taken in the answer of the appellant, or upon the character of his claim to the fund in controversy, whether paramount and superior, or inferior, to that of the appellees, or of those in whose behalf.th.ey prefer it; and whether founded upon ,the submission to, and the award of, the arbitrators, or upon its original justice and merits, independent of and without the award; the .court is of opinion, that the de-fence of the statute of limitations, relied on by the answer, is applicable to and conclusive against any recovery or relief on said "claim, no matter how unquestionable its original validity may be conceded to be, and that the said decree is erroneous. Therefore, it is decreed and ordered, that the same be reversed and annulled, and that the appellees do pay unto the appellant his costs by him expended in the prosecution of his appeal aforesaid here. And this court, proceeding to pronounce such decree as the said Superior Court of Chancery should have pronounced in the premises, it is further decreed and ordered, that the bill, so far as it can be regarded as having for its object to impeach the said submission and award, and to have reclamation of the appellant of the surplus of the trust fund arising from the sale of the Basin ^Warehouse lot, paid to him in pursuance of said award, be dismissed, as to the appellant, with costs.

The other judges concurred.