Case ID: ohio-st_40/html/0400-01.html
Source: Caselaw Access Project
Author: {"author": "Martin, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Withers v. Ewing et al.
    A trustee under a will, wlio was also executor of the same, was empowered to manage and sell trust property, and in the course of the business wrongfully converted trust funds to his own use, and for which he gave his note, secured by a mortgage, to a third party, in trust, for and to the acceptance of his beneficiaries, some of whom are minors , and are benefited thereby.
    His beneficiaries, because of his said default, and for other reasons affecting him personally and rendering him unfit to retain the trust, requested him to resign, which he refused to do. Afterwards he resigned, and was allowed, in settlement of his trust account, all his disbursements, and was, at the request of his beneficiaries, also allowed for his services, a sum in excess of the usual allowance proper for a faithful trustee.
    In an action upon the note and mortgage f Held:
    
    1. The note and mortgage were valid and enured to the benefit of the beneficiaries on delivery.
    2. It was the duty of the trustee to resign when requested. And a promise by the beneficiaries, in consideration that he would resign, to cause the note and mortgage to be cancelled and surrendered, in ■ addition to procuring him said allowance for his services, is void.
    Error to the District Court of tucas County.
    Plaintiff in error was plaintiff below. The original action was upon a promissory note, made by defendant, William A. Ewing, for the sum of $8,588.62, payable to order of plaintiff one year after date, and dated November 1st, 1875, and also upon a mortgage of same date of certain realty, in Toledo, Ohio, executed by the defendant, Alexander H. Ewing, to secure that note.
    Alexander H. Ewing alone answered. He set up three defenses.
    1. A general denial of consideration.
    2. That the note and mortgage were given to the plaintiff under a claim by him that he represented the beneficiaries of a trust estate arising under the will of George W. Ewing, of which the defendant, William A. Ewing, was trustee, and that there was an indebtedness by the trustee on account of the trust in the amount named in the note. It is further alleged that the trustee had managed the trust under the orders of the circuit court of Cook county, Illinois, in a chancery suit then pending in which the beneficiaries were parties ; and denies that plaintiff was authorized to take the note and mortgage, and avers that the same was not authorized by nor reported to said court, and denies that the full amount of the note was due to the estate.
    3. That on the 12th day of June, 1876, the plaintiff, upon a good and sufficient consideration, agreed to fully release and discharge the note and mortgage.
    
      The reply alleges that.the trustee Ewing had appropriated to his own use trust funds which he was unable to pay, and for which, upon an accounting between him and the beneficiaries, he gave the note and mortgage to the plaintiff for the use of the beneficiaries; and that the same was reported to and approved by the court, and the trustee credited therewith in his account. And the statements of the third defense are denied.
    On trial in the common pleas the petition was dismissed. Plaintiff appealed. At March term of the district court, 1879, the cause was referred to a special mastér to take and report the testimony, together with his findings of fact and law.
    The report of the master is substantially as follows:—
    That the beneficiaries of the trust estate at the time the note and mortgage were given were Lavinia Holladay, Minnesota E. Tytus, Charlotte E. Thurston and George W. Ewing, Jr. That Charlotte and George were minors, having guardians at their respective homes in Indiana and Ohio. .That the note and mortgage were given for a deficiency in the accounts of the trustee, and in the amountthereof and in discharge of the same. That the taking of the same was approved by the beneficiaries and’guardians, by authority as to some and ratification by the others. That there was then pending in the circuit court of Cook county, Illinois, a suit in equity brought by Lavinia Holladay, and in which all persons interested were parties, the object of which was to subject the administration of the trust to the control of the court. . And that said settlement of the deficiency was not authorized or approved by the court. And his finding of law is that the note and mortgage are invalid.
    And further findings are: ■ That in June, 1876, in Chicago, the beneficiaries and their representatives, through Byrum D. Miner, their - agent, promised the trustee that, in case he should -resign the executorship and trusteeship the mortgage set out in the petition would be'surrendered-and cancelled. That he thereupon resigned, relying on the promise. That Miner exceeded his authority and was not in fact authorized to make that promise; but it was-made under color of authority. That the emoluments of the trusteeship at the time were of the value of $5,000 per annum. And as conclusion of law, the master finds that the resignation was a sufficient consideration for the promise, and that the action should be dismissed.
    At the March term, 1880, trial was had resulting in judgment for defendants. Motion' for new trial was overruled, and a bill of exceptions embodying all the testimony was allowed. The object of this proceeding is to reverse the judgment of the district court. In addition to the facts stated above, and in the opinion, further statements should be made for a proper ' understanding of the questions involved.
    The testator left three children surviving him, viz., Lavinia Holladay, Charlotte F. Ewing and George W. Ewing, Jr., the latter two of whom died before the transactions in controversy occurred, leaving minor children, who were named in the master’s report. At the time of his death,.the testator was a resident of Fort Wayne, Indiana, where in June, 1866, his will was admitted to probate. The defendant William A. Ewing and Byrum D. Miner were named as executors and qualified as such. His estate was large and consisted of real estate in different states. In the fourth item of the will, the principal part in value of his real estate, including lots in • Chicago,' is specifically set apart in trust, to ■ be built upon, improved and leased as should be deemed advisable by his executors, who are directed to pay over semi-annually the net income to his said three children and the survivors' of them each equally during their natural lives; but if either of the three should die leaving issue, the latter should take the ■ deceased parent’s share. He also directed that the property thus set apart should not be sold or encumbered except by lease, nor be divided during the life of any of his said children, and that in The meantime the same should be under the control of his executors.
    
      In other items power is given to the executors to sell his personal estate and his other real estate, situate in several states, for the purpose of carrying out the objects of the will. Various devises are also made. The residue of his estate is given to his said three children, share and share alike, but not to be partitioned or disposed of by them until the executors shall have determined that it is not needed for improving the trust property named in item four.
    The executors acted jointly in the execution-of the trust until in July, 1869, when Miner resigned. And Ewing thereafter acted as sole executor and trustee until June, 1876, when he resigned. The duties devolved on him seem to have been faithfully and acceptably discharged down to 1875. His office was in Chicago, and the beneficiaries resided at distant points in other states. In 1875 they became apprehensive as to the safety of their interests, and distrustful of their trustee, and discovered that he had become inattentive to his duties and lapsed into habits of intoxication which on occasions disqualified him for business. And thereupon various expedients were resorted to, with ..the trustee’s consent, to curtail his power over the property.
    
      Pratt $ Wilson, for plaintiff in error.
    
      O. H. Scribner, for defendant in error.
   Martin, J.

There are two questions here for solution.

1. Are the note and mortgage valid securities?

2. Did the plaintiff promise as alleged to release those securities, and if so, is his promise valid?

The money was due from William A. Ewing. It was a trust fund which he was unable to pay to his beneficiaries, because he had wrongfully appropriated it to his own use. The note was payablé nominally to the plaintiff, but in fact to him in trust for the same beneficiaries. The acceptance of the note and mortgage was an indulgence and special favor to Ewing. The note would not have been accepted without the mortgage. It was accepted with the mortgage by the adult beneficiaries and the guardians of the minors. Alexander H. Ewing (who alone defends) gave the mortgage with full knowledge of all the material facts, and cannot in this action question the validity of either security. Each party did everything' that was agreed to be done and the consideration cannot be disputed.

It is objected that the taking of these securities was not authorized or ratified by the court in Chicago, nor by the several courts that appointed the guardians. The consequence of these omissions, it is claimed, is that the minors may, on attaining majority, repudiate the transaction, and successfully plant a suit on the official bond of the trustee. That is, if the note caiinot be collected and the minors’ share paid their guardians, they have the additional remedy. There is no injustice in this, and we fail to see how it affects the validity of the note. At the utmost the settlement is voidable only at their election. This result is sanctioned by the law solely for their protection. The claim made would distort it to their injury. We are satisfied from the testimony that the taking of these securities was for the benefit of all the. beneficiaries, and that the guardians, in authorizing and ratifying the same, simply did their duty.

2. Was the promise-made out?

The master finds that the promise was made by Miner; and that he was then acting as agent for the plaintiff and some of the beneficiaries; and that he was not authorized to make it, and that the. parties for whom he was acting expressly refused to consent to the release of the securities. He also finds as matter of law that the promise is nevertheless binding on the plaintiff, because it was made under color of authority as agent.

Assuming the facts to be as found by the master, is the promise made out?

The general rule is, that as to third persons the principal is liable for the acts of his agent done within the general scope, of his authority, and that such authority may be general, though limited to a particular business. The promise was to Ewing, the trustee. He alone furnished the alleged consideration. And it is only available to Alexander H. Ewing, the mortgagor, on the theory that it was a valid promise. The fund represented in these securities was originally a purely trust fund under the control of the trustee Ewing. It is still a trust fund belonging to- the same beneficiaries, and payable by the same trustee. The plaintiff intervened'as payee and mortgagee, for convenience, in taking the title and protecting the security from waste by the trustee. Besides it was impracticable for the trustee to take the title. , A similar contrivance was resorted to for the collection and disbursement of the. Chicago rents. The immediate control over them was withdrawn from the trustee with his consent and given to others. Nix collected them and Miner deposited them in his own name, and paid them out precisely as the trustee should have done. If the promise had been to pay the moneys of corresponding amount then on deposit in Miner’s name as agent, it would not have concluded the beneficiaries. An appropriation of trust property to his own use by a trustee is never warranted except under circumstances of absolute fairness. The consent of the beneficiaries must be given, with full knowledge of all the material facts affecting the transaction. Here both knowledge and consent are absent. It was the duty of the trustee, in dealing for his own advantage with this property, to see to it that the subject was ■ understood and assented to by the parties in interest. He was not a stranger or third party in the sense of .the rule that imputes to the principal a consent, when it does not in fact exist, to the act of an agent done within his apparent authority. The creation of the securities in question did not extinguish the claim of the minors, for which, in part, they were given. They are collateral and of benefit to the minors. And the trustee, being a party to them, was clearly bound to make them available as far as practicable. In dealing with them, therefore, he virtually dealt with his original liability and was subject to a trustee’s disabilities.

Again, the only consideration attempted to be shown is the resignation of the trustee. He had wrongfully appropriated trust funds and become inattentive to his duties, and acquired personal habits which rendered him wholly unfit to retain the trust. Under these circumstances his beneficiaries requested him to resign.' It was his duty to have complied forthwith. He refused and insisted on' terms at the expense of the trust estate. On a promise, he resigned. The promise was of bounty to tbe extent of §2,500, in addition to a fair allowance for services and full reimbursement of expenses. This bounty was paid him. He claims' the promise was also to release and surrender the note and mortgage. Assuming that such was the promise, wé think the alleged consideration is not valid.

Waiving the question as to whether such bargain of the mere relation of trustee is invalid as against public policy, we are of opinion that the promise, under the circumstances stated, is void — a nudum pactum. His unconditional resignation was an act which he had no right to withhold. It was purely his duty, and therefore cannot serve as a. consideration for the promise. 1

In Parsons v. Thompson, 1 H. Bl., 322, the plaintiff was late master-joiner of a dock-yard. The defendant was his successor in regular order. The promise sued on was, to allow the defendant during life extra pay from the dockyard books in- addition to his superannuation money. . The consideration was the retiring of-the defendant as superannuated. The case involved the validity of the consideration, and it was treated and decided both with referen.ee to the existence of a consideration. for a simple contract and also as to its validity on grounds of public policy.

Lord Loughborough, in delivering the opinión, said: “ What is the consideration stated here ? That the plaintiff represented himself as unfit for future service and entitled to a pension for the past. This he did at-the request of the defendant - and on the promise from him'o-La certain allowance. Now the representation is either true or false. If true, there was no ground for any bargain with the defendant; the plaintiff did nothing for the defendant; all he did was for his own ease and advantage. If false, the public is deceived, the pension misapplied, and the service injured.”

In Eddy v. Capron, 4 R. I., 394, the suit was on an order for money given by the defendant to a physician of a government hospital. The consideration was the resignation of the physician in favor of the defendant. The defendant received the appointment. As in the Parsons case, the decision turned on the consideration both as to its existence for the contract and also as to its lawfulness on grounds of public policy. In the opinion of the court, it is said:

“At the same time he has either resigned because he was obliged to do so to fulfil his design of removing to California — in which case there would be. no consideration for the defendant’s promise — or he has resigned because of it and because of the money offered to him, and so the promise is void, on the ground that the government is deprived of the services of an officer it had appointed, by his being seduced from an office under it by private and unworthy motives.”

It is elementary that the amount of benefit to the promisor or detriment to the promisee essential to a valuable consideration is immaterial. Any of either is enough. There was neither in this resignation, Jt was a restoration of rights and property unjustly withheld. Advantages accompanied it, but the acknowledged right to them previously existed.

A. promise in consideration of the-payment by the promisee of his undisputed and enforceable debt is quite analogous to the promise under consideration. Nor was there any detriment to the trustee. He had no property in the trust relation; and we must assume that on proper application his removal would have been prompt. In every view his resignation was right of itself, and must be held to have been beneficial to all parties, himself included. ■

Judgment reversed.