Court Opinion

ID: 3603154
Source: CourtListenerOpinion
Date Created: 2016-07-05 23:49:13.416422+00
Date Added: 2024-06-11T14:07:26.912016
License: Public Domain

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Doubtless, the general rule in equity would require a trustee to account to his cestui que trust in a proper case, and would require of him, when laying down his trust, *Page 600 
upon a proper demand, to render an account of his management of the estate confided to him. The application of the rule, however, is complicated with such extraordinary facts, in the present case, as to make its enforcement questionable. The proceeding is in a court of equity and whether it will exercise its equitable jurisdiction, and grant the relief prayed for, will depend upon the facts, as well as upon the application of legal principles. The above facts, as they are established for us by the unanimous affirmance of the judgment of the Appellate Division, exhibit the parties to this action in a situation which is creditable to neither. As to the defendant, he is shown to have been unmindful of the trust and personal confidence reposed in him by his testator and to have neglected the duties devolved upon him by the will; the performance of which he assumed by qualifying as executor. Instead of preserving and managing the trust properties, as directed, he permitted the same to pass into the possession of, and to be used by, the plaintiff and her husband. This, necessarily, subverted the testator's testamentary scheme; for his intention, in appointing the defendant as his executor and the trustee of his residuary estate, was to prevent the trust estate from being controlled by his daughter, and, necessarily, of course, by her husband. It was to be cared for by the defendant during the plaintiff's life and the income, to a certain amount, only, was to be applied for her benefit. Upon her death, it was to go to her children, or descendants; or, failing such, to the testator's next of kin and heirs at law. The defendant, though chargeable with no actually dishonest dealings with the trust property, was, nevertheless, unfaithful to his testator's instructions and, therefore, in the eye of the law, delinquent to his trust. Although he may have been released from accountability by his cestui que trust and by her children, the remaindermen, he finds himself in a situation, where he will be incapable of responding to possible demands of contingent remaindermen for the trust estate, in the event of the failure of plaintiff's children to survive her.
As to the plaintiff, there are several considerations, which render her situation, as a complainant in the action, one which neither appeals to the conscience of a court of equity, nor *Page 601 
inclines it to strain any rule of law in her favor. As thecestui que trust, it was, manifestly, improper and incompatible with her relation to the estate, that she should be appointed the trustee. (115 N.Y. 346-357; 147 ib. 560-568.) Having secured from the defendant the possession and the control of the trust properties, soon after her father's death, and having, thereafter, managed them, personally, or through her husband as her appointed agent, she wasted the estate in illegal investments, or in a mode of living beyond that which her rightful income warranted. When, after the lapse of some twenty-seven years of this course of conduct and when, after having released the defendant, some ten years before the action, as far as she and her children could do so, she demands that he now account for the trust estate and that he pay it over to her, in her new capacity, her demand comes with an ill grace. When she sought, and obtained, his resignation as trustee and her own appointment as trustee, in his place, no accounting was required, or ordered, on his part. When instituting this action, she does not make herself a party individually, as cestui que trust. (See Perry on Trusts, secs. 875, 876; Sherman v. Parish,53 N.Y. 483, 490; Vetterlein v. Barnes, 124 U.S. 169.) Furthermore, such time has elapsed as to make it difficult for the defendant to render any account, under the circumstances.
These are considerations, which must militate against the plaintiff's right to maintain her action. It is no absolute right. It is one which should be accorded upon principles of equity, alone. It may be lost by operation of an estoppel through acquiescence, as it may by release; or the circumstances may be such as, either to make an accounting unnecessary, or one improper to be decreed. (See Perry on Trusts, sec. 849; Sherman
v. Parish, 53 N.Y. 483-492; Butterfield v. Cowing, 112 ib. 486-492; Matter of Niles, 113 ib. 547-559; Brice v. Stokes,
11 Vesey, 319; Walker v. Symonds, 3 Swanst. 1-64; Nail v.Punter, 5 Sim. 555; Chillingworth v. Chambers, L.R. [1 Ch. 1896] 685, 699, 707.) If it is just and equitable that the defendant should be required to account to the plaintiff, he will be so directed; but not otherwise. The matter is exclusively one coming within the domain of equity. *Page 602 
It is true that the plaintiff is suing in her capacity as trustee, alone; but the court will look through the form of the proceeding, at the substance of the matter. It will consider whether the facts disclosed are such as to justify her, in any aspect, in appealing to the exercise of its equitable powers. Representing herself as the cestui que trust, she is without right to hold the defendant to account; for she not only has authorized, and acquiesced in, the breach of his trust, in complaisantly surrendering the control and management of the trust properties to her or to her husband, as her agent, but she is found to have what trust properties there are. She has, individually, released the defendant from all liability by reason of his executorship and trusteeship and she is, herself, liable to the trust for the trust properties which she has received and used. (Perry on Trusts, sec. 669; Chillingworth v. Chambers,supra.) Of course, it follows that she has no possible claim for any accrued income of the trust. It is not a question of any alienation by the beneficiary of her interest. It is whether she can make the defendant account for the income of the trust, when she has received, and is liable for, the trust fund. Directly, or indirectly, she received the whole of it, as it is found, and the defendant has accounted as well as the nature of the case permitted.
She cannot demand an accounting in the right of her children, in whom, by the terms of the will, the residuary estate has vested as the remaindermen; because, when of full age, they joined with her in releasing the defendant and the instrument of release is found to to have been voluntarily executed by them, as by her, without any fraud, or misrepresentation, and with full knowledge of all the facts.
What right has she to call him to account? By an impersonal right? But that means that, notwithstanding her complicity in the course which has led to this result, if disastrous to the trust, she may be recognized in her assumed office of trustee and may be accorded a right, which, personally, she has forfeited, morally, as well as legally. That cannot be. However separate the office and the individual, a court of equity cannot, and should not, grant to the former what the incumbent is unfit to be trusted with. Herein is the flaw, *Page 603 
which deprives the plaintiff's assertion of an equitable right of any force.
Is she in any position to maintain the action in the right of the infant descendant, as a contingent remainderman; which is the only possible theory, under the circumstances? That the court might, in a proper case, require the defendant to account for, and to make good, the wasted trust estate, in order that it may be preserved for the contingent remainderman, may be true; but this is not a case where it is necessary to decide that question. The plaintiff may represent the trust estate; but she does not represent the remaindermen. She is not their trustee and they are not represented in court. She is the cestui que trust and, as such, she has had the whole trust estate, directly, or indirectly, and is liable for it. The court might well deny the prayer of plaintiff's bill of complaint, by reason of the impropriety of her acting in the double capacity of cestui quetrust and of trustee; as by reason of her being equally liable with the defendant upon the demand of a contingent remainderman to account for the estate, in the event of the failure of her children to survive her. If she cannot maintain it for herself, or for the present remaindermen, by reason of their acts, I perceive no equitable principle, upon which she might maintain it upon the fiction that she is proceeding in behalf of contingent remaindermen.
However inexcusable the defendant's acts as trustee may be, he should not be held to account to one, who has induced the commission of his illegal acts; who has acquiesced in his violation of the trust; who, individually, is answerable for the wasted estate and who, having acquiesced in the discharge of the defendant without a direction to account, after the lapse of years brings such an action. The plaintiff's demand is repugnant to equity.
The conclusion I reach is that the judgment should be affirmed, with costs, and that our order shall state that the determination in this action shall be no bar to, nor authority against, the maintenance of any action, or proceeding, by or in behalf of, the contingent remaindermen, as may be advised, to secure their rights, or interests, in the corpus of the trust fund. *Page 604