Court Opinion

ID: 6311388
Source: CourtListenerOpinion
Date Created: 2022-02-18 20:15:55.477806+00
Date Added: 2024-06-11T08:59:05.206699
License: Public Domain

The opinion of the Court was delivered by
Gibson, C. J.
This case is an additional instance of the futility of private charities. Even when established by law, and provided with the conservative apparatus of visitation, inspection and whatever else ingenuity could contrive, these misdirected efforts of benevolence have conduced but to the emolument of the agents entrusted with their care. So will it ever be where the vision of the visitor is not sharpened by individual interest. But these considerations enter not into the question of responsibility: for the unpromising aspect of the design furnishes no excuse for a neglect of the means. Neither are we to look with the greater indulgence on the embezzlement of those means because we may consider them as no better than thrown away. The trust was one which the founder had an undoubted right to create, and it is our business to do what we can for the execution of it. In every thing but security for the fidelity of the agents, its object was fully provided with the usual means of accom*441plishment. The founder devoted to it a large and productive estate in or adjoining Middletown, consisting of a grist-mill, three farms containing nine hundred acres, mostly prime, four messuages, a number of town lots, and quit rents issuing out of more than a hundred others. He devoted to it, also, the proceeds of a farm of two hundred acres in Middle Creek Valley, ordered to be sold ; his crop growing; and, subject to the maintenance of his widow, his personal estate, amounting by the inventory to about 29,000 dollars. At the most moderate computation this estate appears to have been worth 100,000 dollars; and the object to be accomplished by the produce of it, was the maintenance and education in the German language and Lutheran faith, of a proportionate number of poor orphan children, in a building erected but not finished by the founder. To this end the office of a “principal,” or in other words an executive agent to manage, the estate, was instituted at a salary of 100 pounds,'and ■with a perquisite called á “ free table,” to be furnished from the produce of it; and a tutor was directed to be employed at a salary of 200 dollars, and with the like perquisite. The trustees constituting the admonitory council of the principal, were to receive a dollar respectively for each day’s attendance. These, with the incidental expenses of cultivation and repair, which were, however, to be lightened by the occasional labour of the pupils, were provided for as the main channels of disbursement. Cassel, one of the respondents, went into possession as principal in June 1806, and continued in the office till February 1814, a period of seven years and eight months ; and the auditors have reported a balance in his favour, to speak in round numbers, of 700 dollars. In favour of Spayd, who succeeded him and who had the office fifteen years and eight months when the accounts were taken, they have reported a balance of 9000 dollars. Had the respondents performed their respective duties and accomplished the purpose of the trust, these balances, though sufficiently startling, might have been deemed to have accrued consistently with good management and fair dealing. But when we find that not a single step had been taken for three and twenty years towards a dispensation of the founder’s bounty; that not a single orphan had had the benefit of it; and that the orphan-house built by the founder has been suffered to rot till it is not worth the cost of repairing it; that a considerable part of the estate has been dilapidated, and sold by the sheriff, a part of it to one of the respondents, and other parts of it to some of the trustees; and that the respondents, having taken the profits without having fully accounted for them, yet claim to be let in as creditors on the fund to an amount that would bankrupt it, we are astounded by the magnitude and boldness of the pretension. It has not been suggested that the incumbent meditates, even now, to accomplish the founder’s design; or that any thing is to be hoped from him in time to come, but to let matters go on in the old way till the residue of the estate is sunk or recovered by the heirs of the. founder adversely to the trust. The most-that the respondents pfo*442fess to believe is, that it may support itself with good management, pay the salary of the principal, and supply his table. But if the purpose of the charity were no more than to give the principal a living, it had been better to give him the estate in full property. The respondent, Spayd, adds that it is in better condition in respect to improvements, repairs, produce and debts, than it has been heretofore. As regards the debts, the accuracy of this assertion is best tested by the documents. It appears by Cassel’s petition for an order of sale, countersigned by Spayd and the trustees, that they were reduced to 4000 dollars in 1818; and from the answers to Dr Lochman’s inquiries, it appears they had grown to 6000 dollars' in 1820. They are now said to have mounted up to within a fraction of 10,000 dollars in 1829 when the accounts were taken — a sum nearly sufficient to swallow the residue. With the exception of a few hundred dollars, in outstanding debts, this sum is made up of salaries and maintenance allowed by the auditors as if they had been earned by an execution of the trust, though the actual business of the respondents was little more than to direct the cultivation of the estate and consume the produce of it. The excuse for not having attempted the education and maintenance of orphan children pursuant to the directions of the founder — for the employment of a master to teach an ordinary school is disclaimed as an attempt by the respondents themselves — is that the estate was embarrassed by counsel fees contracted to be paid in the trial of an issue to determine the validity of the will. These amounted to but 4800 dollars ; and it appears by the admission of the respondents that the personal estate was sufficient to pay them. Deducting the enormous allowance of 14,000 dollars for desperate debts, the inventory produced 9000 dollars clear of the charge on it for the support of the widow. The only debt certainly known to have been left by the testator is Oberlander’s judgment, which amounted in 1814 to 4200 dollars, and which, with the counsel. fees, made up a round sum of 9000 dollars. By a proper application of the personal estate, therefore, every thing might have been paid; and it was culpable negligence in the respondents, if such were .the fact, to suffer the executors to misapply or embezzle it. But to aid the personal estate they had the Beaver Dam farm, since sold for 1000 pounds, to which recourse might have been had. Whether the credits allowed in the administration account, settled by Landis in 1816, were for debts contracted by the testator, does not appear; neither does it appear that the matters with which lie charged himself were part of the inventory. The gross irregularity of all judicial proceedings in regard to this estate, and certain references in the charges of Landis in his first account, to certain other accounts “ stated and settled in the court of common pleas, and filed according to the provisions of the will,” make it probable that the debts, without distinction of class, all went into the same account. At this distance of time, nothing like certainty can be obtained in respect to it, as the principal and trustees kept either very *443imperfect accounts, or none at all; by reason of which every intendment of fact is to be made against them, according to the principle of Hart v. Ten Eyck, 2 Johns. Ch. Rep. 81—108. But in no aspect can this be material; for it distinctly appears that but a small part, if any, of the testator’s debts was paid out of the personal estate. In answer to the interrogatories, Cassel admits that two houses and several lots in Middletown were sold for them by the sheriff, beside a house and lot at the Swatara landing; and it also appears that the rents of the mill were hypothecated by anticipation to satisfy the residue of Oberlander’s judgment. It is perfectly reasonable, then, to suppose that the proceeds of the personal estate, and the Beaver Dam farm, were more than sufficient to remove the stumbling block interposed by the counsel fees. But independent of that, how could those fees occasion the difficulties ascribed to them, when the revenues of the estate were not applied to pay them, or to keep clown the interest? Having been suffered to accumulate during the administration of Cassel, they were ultimately paid by repeated sales of portions of the land. Thus we see that the income of a valuable and productive estate, in the hands of the respondents, without an incumbrance to cripple it, has been wasted or embezzled, and the estate itself brought to the brink of ruin without an effort on their part to effect the purpose for which it was confided to them; and on the other hand, that the charges against themselves fall short of the truth, while they take credit, with surprising particularity, for every thing they could claim for a faithful performance of their duty. To confirm an account adjusted on such a basis, would redound to the lasting discredit of our jurisprudence.
On what basis then are they to be charged here 'l That a trustee is answerable for negligence only when it is so gross as to be evidence of wilful misconduct, is not to be disputed. But the reason of the rule shows that it is not for cases in which the trustee is to receive a stipulated compensation. It is said that a trustee, even of a charity, may not be charged for more than he has actually received, except for very supine negligence; and that the gratuitous nature of the service distinguishes him from a bailee for hire. ' 2 Fonb. 178. We apply the same rule to executors and administrators, though they have usually an allowance for their services, but strictly eos gratia, and not of right; but the foundation of it fails entirely when the trust has been accepted on terms of receiving a stipulated reward ; and the respondents are therefore to account as bailees for hire. In the case of Cassel, the auditors have gone beyond the widest range of exemption accorded even to an unrequited trustee; and have omitted to charge him, not merely with what he might have got, but what he actually got. Though convinced, as they say they were, that the sum of his receipts, as charged, “ was palpably below what must have been produced,” they nevertheless unanimously agreed, “ that it would be right and equitable to take *444bis account as a faithful exhibit of that part of the estate which came to his hands; and that he ought not to be liable for any thing more.” This result seems to have been obtained exclusively from his not having increased his estate at a time when almost every one else who had an estate, lost it by an epidemic rage of speculation; from his being a plain, honest, illiterate man, with a mutilated German account book, sworn to be a true history of his receipts and expenditure; aud from the authority of an aphorism that “ we cannot begin to reason till we are furnished, otherwise than by reason, with some truths on which we can found an argument.” But whose business was'it to supply these major and minor propositions? Certainly not that of the relators, who were strangers to the doings of the respondents, and could not be expected to produce proof of every bushel of grain or ton of hay grown on the estate for twenty years. On .the principle of the aphorism, the respondents might have discharged themselves entirely, simply by withholding the evidence of their receipts. A trustee may be irresponsible for ordinary negligence; but lie surely ought not to go clear with the proceeds of .the fund notoriously in his pocket because he is unable or unwilling to specify the amount. Nothing co.uld justify such a consequence but the irremediable want of a rule to charge.him ; and happily such a rule is at hand, with materials for its application, furnished by the auditors themselves. Next to specification and proof of items, the clear yearly income of'the estate, according to an estimate of it, may be assumed as a standard furnishing the nearest approximation to the truth of which the case is susceptible. I am aware that this standard was rejected in an anonymous case, 1 Fern. 45, where it was said that a mortgagee shall.not account according to the value of the land, or be bound by proof that it was worth so much, unless it be shown that he actually made so much of it, or might have done so but for his wilful default; as, for instance, in turning out a sufficient tenant who had it at such a rent, or in rejecting one who would have given so much for it. But that he might have been charged with more than his actual receipts for misconduct, is shown not only by the exception in that case, but by other cases in the same book. In Coppring v. Cooke, 1 Vern. 270, a mortgagee who had prevented subsequent incumbrancers from entering on the mortgaged premises by having entered himself, and yet permitted the mortgagor to take the profits, was charged at the instance of the creditors coming to redeem him, with all he had or might have received since his entry. So in Bucks v. Gayer, 1 Vern. 258, a mortgagee who had recovered judgment in ejectment, but refused to take out execution, iu order to favour the tenant in possession, who was insolvent and paid no rent, was ordered, at the instance of the mortgagor, to take out execution before the end of the term, or stand chargeable with the profits, as in case of wilful default. Is there not evidence of wilful default in the case before us? Setting aside the enormous waste and mismanagement *445discoverable at a glance, the very refusal or inability to furnish a just and full account is sufficient to warrant a charge .beyond what can be shown to have been received. In Myers v. Myers, 2 M'Cord's Ch. Rep. 217, 267, the very point occurred. An executor, trasteé of a large real estate, who had kept no accounts, but had mixed up the profits with his own property, and purchased other estates with the proceeds of the whole, was ordered to account for the rents instead of the profits; and this part of the decree was affirmed by the court of appeals, the judge who delivered its opinion remarking, that the method adopted by the chancellor was the best, and perhaps the only one that could be resorted to with effect. On this principle, too, was determined Schieflin v. Stewart, 1 Johns. Ch. Rep. 60, in which the refusal of an administrator to account for the profits of assets employed for his benefit in trade, subjected him to compound interest as the highest standard to which the chancellor could recur. In . every thing but the measure of interest, is not that essentially our case? On the same principle, too, is Hart v. Ten Eyck, already quoted; a case abounding with apposite and just conclusions in respect, to the liability of trustees who furnish loose or imperfect accounts, and in which the omission of an inventory was deemed a proof of fraud. Of a part of Cassel’s administration, be has given no account whatever; so that to reject his accounts entirely, and charge him by an estimate of the annual value, is a matter not of choice, but of necessity. Consistently with a sense of duty, we could not rest satisfied with either his credits or his charges, and by that means allow for a desertion of the trust, what was promised for a faithful execution of it.
There is no reason for withholding the same measure of accountability in Spayd’s case. His accounts purport indeed to cover the whole period of his administration, but there is such convincing proof of his malversation as to make them, resting as they do on his personal credibility, an insecure foundation for a decree. The means by which he procured the office, shows that it was not sought for the good of the trust. His agreement with Cassel to let one of the farms to him at a reduced rent, as the price of his resignation, was, in truth, a purchase of his place with the proceeds of the fund, which entitles his representations to no very extraordinary confidence. But the intrinsic evidence of his accounts entitles them to still less. The sum of 23,000 dollars, credited for house expenses and repairs, balancing, as it nearly does, the consolidated revenues of the estate, is enormous. The item of house expenses alone is more than 11,000 dollars, while the produce of the farms in grain and hay sold, is put but at two.-thirds of the sum. ' But the “free table,” for which the respondent thus takes credit, and to which he would have entitled himself, by a conscientious discharge of his duty, could be no more, by the most liberal construction,' than such a living as a farmer gets from his own land, consisting of house-rent, fuel, grain, hay, vegeta*446bles, fruits, butchers’ meat, poultry, and whatever else may be the immediate produce of the estate, as well as necessary groceries procured elsewhere; but the whole in moderation, as the restricted amount of the salaries indicates that the founder meant not to minister to luxury and extravagance. But as the house expenses were credited, it is not a little strange that the produce out of which they came was not correspondently charged; for it is incredible that all the grain, hay, vegetables, stock, butler, cheese, fruit, cider, poultry, eggs, and other matters produced by the estate, were sold ; or that they netted no more than the sum charged if they were. Neither can it be supposed that the respondent advanced his own money for any thing but groceries. These things ought to have been produced by the estate, and not being fully charged, must have been consumed by the family, who surely could not have required additional articles of consumption, to the annual value of 700 dollars, a sum nearly three times as great as the principal’s salary. And that the 12,000 dollars are not overcharged for repairs, being at the rate of 750 dollars the year, is altogether incredible.
On the principle now to be adopted, these matters sink into the estimate of the clear yearly value, being deducted from the gross produce in order to ascertain the net proceeds ; and they.are, therefore, to be dropped as particular items. As to the salary, unless the respondent is to be paid for mismanaging the estate for his own profit, it ought not to be allowed in either case; and the item of tuition, furnished in violation of the plain directions of the will, stands on no better foundation. In addition to these considerations, the very equivocal position of the respondent (Spayd) in relation to those who are claiming the estate adversely to the trust, evinced by his refusal to answer the interrogatories touching his consanguinity to one who was a claimant, and who died leaving a descendible interest alleged to be vested in the respondent himself; his supineness in respect to the bill, at one time before the legislature, to vest the property in those claimants or their representatives; and especially his refusal to permit the relators to take part by their counsel in defending against the actions of ejectment brought by them, must destroy all confidence of a personal nature in the accuracy, of his accounts.. But the credits taken for debts paid and expenses incurred in building the saw-mill, are to be allowed and deducted from the aggregate of the clear yearly income of the estate, to be ascertained by the standard presently to be named. On the other hand, he is to be charged with the amount of goods taken by Cassel after his resignation, but not with the balance now to be decreed against him, as the respondent has clearly not been guilty of such negligence in respect to it as to make it his proper debt.
It remains but to pronounce upon the sum at which the clear yearly profits of the estate are to be estimated and charged. * On this part of the case we have the judgment of three witnesses, who put *447the pvooeeds of the mil], farms and town lots,'respectively, at 1200, 1250, and 1400 dollars; and we have the answers of the accountants themselves to the inquiries of Doctor Lochman, putting the proceeds of the whole at 1600 dollars, and substantially agreeing with the estimate of the witnesses. But as these estimates are ever inaccurate, and more frequently over than under the truth, we deem it safe to adopt the sum of 1000 dollars as the standard, being about one per cent on the capital; and we direct the prothonotary to restate the accounts on these principles, charging simple interest on the produce of each year, and allowing it on the credits.
Decree accordingly.