Case ID: ny-st-rep_9/html/0275-01.html
Source: Caselaw Access Project
Author: {"author": "Brady, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Huldah H. Clapp App’lt, v. Robert C. Clapp, Individually and as Executor, Etc., et al. Resp’ts.
    
      (Supreme Court, General Term, First Department,
    
    
      Filed May 13, 1887.)
    
    1. Executors and administrators—Power to bind estate by executory CONTRACT.
    The general rule is that an executor may disburse and use the funds of the estate for purposes authorized by law, but may not bind the estate by an executory contract and thus incur a liability not founded upon the obligation of the testator.
    2. Same—Exceptions to rule.
    The exceptions to the rule are 1st, that when the trustee is authorized to make expenditures and he has no trust funds, and the expenditure is necessary for the protection, reparation or safety of the trust estate and he is not willing to make himself personally liable, he may by express agreement make the expenditure a charge upon the trust estate, and 2d, in case-of the insolvency of the executor an equitable cause of action will be created against the estate where the services are rendered for its benefit.
    S. When compensation for services, rendered under direction of AN EXECUTOR, CAN BE COLLECTED OUT OF THE ASSETS OF THE ESTATE.
    Where a person owning a hotel and managing the business thereof during his lifetime, leaves a will which directs that after his death it shall be carried on by his son and executors for the benefit of his estate, and such business is so carried on after his decease, and an attorney renders services necessary to enable the son and executor to carry out the intention of the testator, and beneficial to the estate under a special agreement that the same are to he paid for out of the estate, and the executor is insolvent, an action will lie to enforce the payment for such services out of the assets of the estate.
    Appeal from order confirming report of referee as to claim of Leo G-. Dessar.
    
      Charles P. Crosby and Thomas B. Band, forapp’lt; S. G. Adams, for resp’t.
   Brady, J.

Mr. Dessar claiming a lien upon the lease of the Rossmore Hotel, an order of reference was made for the purpose of ascertaining the value of the services rendered by him upon which the claim rested. The services, it was asserted, were rendered for the estate of Hawley D. Clapp, deceased, who was the acting principal in the business which was conducted at the Rossmore Hotel m this city, which he carried on with his son Robert, the defendant, under the name of Hawley D. Clapp & Son.

By his last will and testament he declared that the business mentioned was his chief property, the success of which he was very desirous of securing, entertaining the conviction, he said, that if the business were conducted with system, carefulness and prudence, and with strict and faithful attention, it might and would become a source of large future profit, and reposing great confidence in his son Robert, who was then his co-partner, and whose knowledge and experience in hotel business he thought best qualified him among all his children for the trust, it was his wish that the Rossmore Hotel, upon his decease, should-be conducted by him under the name of Hawley D. Clapp & Son for the benefit of all the family, and that he should have the sole management thereof, without the control of the other members of the family and without interference on their part, other than such friendly advice and counsel as they might from time to time give, and which he charged his son Robert to receive with kindness and respect. He suggested that if any difference of view should unfortunately arise between his son Robert and the other members of his family, his son Mortimer should be regarded as an umpire to adjust and settle such differences, and that his decision and judgment in the matter should be concurred in and adopted by all the parties. He also states that while he gave the sole management of the hotel to his son Robert for the purpose of securing its better success by having one head, until his brothers should be qualified to share it with him, he did not mean that his brothers might not resort to the courts for better protection to their interest, if unfortunately Robert should prove unfaithful to the trust and cofidence thus reposed in him.

A reference to these provisions of the will is deemed necessary in order to sustain the claim made by Mr. Dessar, for the reason that he was employed after the death of the decedent, and his services, unless brought within the exception, would be subject to the rule in the attempt to recover for them, to wit, that contracts of executors, although made in the interest and for the benefit of the estate they represent, if made upon a new and independent consideration as for services rendered moving between the promisee and the executors as promisors, are the personal contracts of the executors, and do not bind the estate, notwithstanding the services rendered are such that the executors should properly have paid for the same from the estate, and be allowed for the expenditures in the settlement of their accounts, the principle being that the executor may disburse and use the funds of the estate for purposes authorized by law, but may not bind the estate by an executory contract, and thus incur a liability not founded upon the obligation of the testator. Ferrin v. Myrick, 41 N. Y., 315; Austin v. Munro, 47 id,, 360; New v. Nicoll, 73 id., 131; Application of Knapp, 38 id., 284.

The exception to the rule is stated in the case of New v. Nicoll (supra). It is that when the trustee-is authorized to make expenditures, and he has no trust funds, and the expenditure is necessary for the protection, reparation or safety of the trust estate, and he is not willing to make himself personally hable, he may by express agreement make the .expenditure a charge upon the trust estate. And a further exception seems to be recognized in the text books, that in case of the insolvency of the executor an equitable cause of action would probably be created against the estate where the services are rendered for its benefit. Redfield on Surrogates (2d ed.), 496.

It will have been observed that the design of the testator was the continuance of the business under the management of his son Robert; and it clearly appears from the testimony in the case, no evidence having been given on the part of the defense, that the services of Mr. Dassar were rendered to the estate, his employment having commenced soon after the testator’s death, and in reference to matters which if not properly cared for by some professional person would have involved the estate in great loss if not in destruction.

It is said, for example, on that subject by Mr. Dessar, that in the suits which were brought against the estate, he must have saved it while acting as attorney, at least $50,000, having given two years of almost uninterrupted devotion to it.

It appears, also, that Robert C. Clapp is insolvent, and that when Mr. Dessar entered upon the discharge of his duties as the attorney for. the estate, Robert C. Clapp explained to him that his affairs were complicated and that he could not be personally liable for the counsel fees in the matter, and that he would have to look entirely to the estate for payment, although he would, from time to time, make such payments as he could.

The record, therefore, presents these features:

First. The continuance of the business by Robert C. Clapp with all the incidents which were connected with that circumstance, involving of course, the right to make such expenditures as were necessary to carry out the object of the testator.

Second. The special agreement that the services should be paid for out of the estate.

Third. The benefit to the estate resulting from the services rendered, and

Fourth. The insolvency of the executor, Robert C. Clapp.

These elements would seem to be all that are requisite to bring the case within the exception stated in New v. Nicoll, and, also, within the principle laid down in Redfield on Surrogates.

It may be added that the referee found that Robert had no trust funds in his hands for the purpose of paying Mr. Dessar’s claim; but the services rendered were necessary for the preservation of the trust estate, and that the contract made with him was acquiesced in and ratified by.the other parties interested in the estate. It is true that as to the acquiescence of the other parties interested in the estate there is some contention. But there seems to be sufficient, perhaps, to justify that finding. At all events there can be no doubt on the evidence that the estate was benefited by the professional exertions of Mr. Dessar and that he should be remunerated by compensation, if it can be secured to him by the application of any legal principle.

It is said, however, that Mr. Dessar having commenced another action in the superior court, could not proceed with this. But the evidence shows that the action in the superior court was substantially abandoned. Mr. Dessar testified that all the arrangements were made for a disconuance of that action although no order to that effect had been entered; and this statement substantially disposed of the action in the superior court without any formal order.

It was virtually a discontinuance. The order appealed from should be affirmed; with ten dollars costs and disbursements.

Daniels, J., concurs.