Summary
In Boyd v. Hawkins, 17 N.C. 329, which is relied on by the defendant Leach, it appeared that the relation of trustee and cestui que trust already existed under former conveyances, when the agreement for compensation to the trustee was inserted in a subsequent deed of trust, and the decision rests upon the ground that the trustor was in the power of the trustee.
Summary of this case from Banking Co. v. LeachOpinion
(December Term, 1833.)
1. Agreement between trustees and cestui que trusts are not void, but voidable, and prima facie require evidence of collateral facts to support them; and where a trustee had taken an assignment of a judgment which was a lien upon the trust estate, and be and the cestui que trust believing it could be used for his pecuniary advantage, agreed that it should be held for the benefit of the latter, and in consideration thereof, and as a compensation for his trouble, the former was allowed one-fourth of the trust estate; it was held that the agreement being entered into by the cestui que trust under a mistake of his rights, was void.
2. The case of Boyd v. Hawkins, ante, p. 195, upon a rehearing confirmed in part, and in part disapproved, and the interlocutory order made therein altered.
3. Bargains between trustee and cestui que trust must be such as a prudent man would make, and which the former might conscientiously advise the latter to accept from a stranger.
4. In England it is clear that the trustees who are quasi officers of the law as executors, etc., having no right to compensation, and by analogy the rule is extended to trustees by compact.
5. But here, by the act of 1799 (Rev., ch 536), a different rule has been introduced as to executors, etc.
6. And as equity follows the law, the rule as to trustees by compact is also altered.
7. A court of equity will not enjoin a suit at law in the court of another state; neither will it direct a particular order to be made in a chancery suit thus pending, unless it be by putting a party to his election.
AFTER the decree pronounced in this case at last December term ( ante, 195), the defendant filed a petition for a rehearing. The matters complained of, and which were sought to be corrected, were:
Badger for petitioner.
Devereux for plaintiff.
1. That by the former decree the agreement of 13 September, 1824, was declared to be wholly void as a measure of compensation to the defendant Hawkins for services rendered the plaintiff. The defendant averred that the agreement was fair, the result of deliberation on the part of the plaintiff, and, further, that the property to which it applied was situated in Virginia, where the services for which it provided a compensation were to be rendered, and that by the law and usages of that state the agreement was valid, and constituted a proper measure of compensation.
2. That so much of the decree whereby it was declared to be contrary to the rule of a court of equity to allow compensation to a trustee by way of commission proceeded upon a mistake of the laws and usages of this State.
3. That the allowance of the gross sum of $1,500 as a compensation to the petitioner was inadequate, made without proper information, and should have been the subject-matter of a reference to the clerk, before whom additional testimony might have been offered.
4. The petitioner set forth several instances in which it was averred that there were mistakes and omissions in making up the balance due by him, which it is not necessary to state. (330)
5. That no provision was made to protect the petitioner from a number of suits principally pending in this State, in which his agency for the plaintiff had involved him.
6. That the decree was erroneous in directing what proceedings should be had in the court of Chancery in Virginia, and in prescribing to the petitioner the course which he should take in defending his rights there.
The rehearing having been granted, the several points above set forth were, during this term, extensively discussed.
The importance of this suit to the parties, and the nature of some of the questions discussed in it, which were novel among us, make it gratifying to the Court that they have been brought up for a reconsideration by a petition to rehear the decree. It is especially so, as upon further reflection it is found that some general propositions were stated in the opinion given that are not entirely correct, and that on other points further information than was then laid before the Court was necessary to doing exact justice between the parties.
Upon the principal question before discussed and adjudged, the Court sees no reason to alter the decree. That was upon the validity of the deed of 13 September, 1824, as an agreement of purchase, or as an agreement for measuring the compensation of J. D. Hawkins as a trustee. No doubt, the trust was troublesome and responsible, and required Mr. Hawkins' personal attention. It is clear, too, as stated in the decree, that the defendant had with both diligence and skill discharged the trust. It is equally true that it was understood by the parties, as admitted in the bill and collected from some of the deeds of trust, that Mr. Hawkins should receive compensation; and that his care, personal labor, time, and loss of attention to his own affairs, and the advantage derived by Mr. Boyd from his services, altogether may and do constitute a (331) meritorious consideration for a proper agreement for remuneration, and for the ultimate allowance of a liberal remuneration. But upon the principle of equity which has long formed the law of this Court for the regulation of dealings between parties standing in the relations these did at the time of entering into the articles of September, such an agreement cannot be sustained, though not obtained by actual imposition.
Without going through the case again, it will be sufficient to state that although all bargains between trustee and cestui que trust are not absolutely void, yet they are not favored, but are the objects of distrust. Generally, they have been regarded as mere securities, if in the event they turned out to be very gainful to the trustee and prejudicial to the other party, and unless the whole subject was clearly understood by the cestui que trust in its circumstances and their legal consequences. Even then, the contract has not been permitted to stand when it was not freely entered into by the party under protection, without any undue influence on the part of the trustee or any pecuniary necessity, or mental embarrassment on the other side. To gain the countenance of the Court, therefore, such agreements must, as it has been said, prove to be fair and reasonable — such as the cestui que trust, as a prudent man, might or would again enter into, and the trustee might, consistently with his duty, advise him to make with another person. It is impossible to define the sources of secret influence which one person may, in their relative situation, have over another, imperceptibly to the world, and almost to themselves, and when it is not sought or even desired — an influence which may not only control actions, but color the opinions and determine the judgment of the dependent party. It is wrong to engage him reluctantly in a contract known to be to his prejudice, and it is hardly less so to insist upon a contract with him, thought equal at the time, and to which he made no objection, but which in fact was to his prejudice, and which, on that ground, and (332) upon his discovery of it, he is resultant to proceed in. One reason why the Court leans this way is that, regarding such dealings as definitive contracts, they would conclusively bind the cestui que trust at all events, and might do great injustice. But taking them to be voidable and prima facie to be supported by the aid of collateral proofs, the Court always has the power of disposing of them in a way that will secure all parties and do complete justice.
In the case before us it cannot be doubted that, certainly in Mr. Boyd's and probably in Mr. Hawkins' opinion, the latter was the owner of Brown's judgment, and could, without violating either a rule of law or morality, use it for his own benefit, by selling under it and buying in the trust property. Unquestionably that supposition entered materially and mistakenly into the agreement of September. It is recited in it and is fairly stated in the answer to have been one of the main motives. Here, then, is at once a clear mistake in the essence of the contract. If the truth had been known, Mr. Hawkins would never have advised the other party to come, nor would he have consented that he should have come, to such an agreement with anybody else. Again, Mr. Boyd only did not know the true state and value of the property of which he was disposing, but seems to have had a different opinion upon that subject every succeeding day, and it is extremely probable that it was so uncertain that Mrs. Hawkins' own opinion frequently fluctuated; at all events, Boyd's spirits seem alternatively to have been greatly elated and depressed; so that there is no likelihood that in any treaty then carried on he either reflected coolly or stipulated upon any confidence in himself. Now, although Mr. Hawkins may not have intended any advantage, and may not then have believed he was gaining any undue advantage, yet it is certain that Boyd was not in a condition to protect himself, that he did not stand on his rights, that he would have yielded more if more had been asked; and that Mr. Hawkins absolutely refused to accept all that was offered. The case really, then, is that of a bargain made all on one side; and, therefore, as a contract, it cannot be enforced, because it turns (333) out to be too much to the advantage of the one and to the prejudice of the other. It is for these reasons that contracts between trustee and cestui que trust can hardly be said to be binding until the relation is dissolved and a confirmation is given, as in the case of a conveyance from a ward to one who has been his guardian. But, independent of the relation of trustee and cestui que trust, merely as such, that which actually existed between these parties was peculiar — the trust being of the whole estate of Boyd, for sale, to pay very large debts, which gave the trustee a control over his will that could hardly be resisted. It is by no means declared that it was sought from sinister motives, or that it was exercised with any intent to oppress. But we cannot but see that it might be so exercised, and that in fact an agreement was obtained that may have been the result of it. It is the danger of such consequences that has given rise to the rule of equity, as one of legal policy in prevention of fraud, on which the Court is bound to relieve, although there be no actual fraud, but only a loss upon an improvident bargain. Such a bargain ought not to be gained nor insisted on. The Court doth, therefore, affirm so much of the decree complained of as declared that deed void for any of the purposes for which it was set up in the answer, and as sustained the first exception taken by the plaintiff to the report.
In the decree the defendant was allowed the sum of $1,500 as a compensation under all the deeds. It is now right to correct the decree in that respect; first, because the allowance was upon a wrong principle, being in a round sum as for an agency, and not as a commission, which the Court declared was against the rule of equity; and, secondly, that it was not adequate, if the principle was right.
It is not seen how the error in the mere matter of law could prejudice the defendant, since the Court made him an allowance, as being agreed for in the deeds, and submitted to in the bill, except so far as its being a proper subject of compact might tend to sustain the deed of (334) September. For the reasons already given, it could not have that effect, because, as a compensation it is not, in the event, fair and reasonable.
But I believe the proposition as a rule of law cannot stand. Nothing can be more certain than the opinion given by the Court was drawn from the purest and most undoubted sources of equity as established in England. There trustees are not paid in any mode. We thought it dangerous to do it, especially by the way of commission here, although it may be admissible as an allowance for time and labor, because it presents temptations, in cases where sales are not the direct and sole objects of the deed, for the trustee to make them unnecessarily, or to hurry them on, to the detriment of the debtor. In England, trustees seldom act personally, or are more than the nominal owners of the legal title. The business of the trust, as are almost all other negotiations, is conducted by solicitors and law agents, by whom the compensation is derived. For this reason probably the trustees which may be denominated public, as having the origin in the law, such as guardians, executors, and committees, are held to be honorary; and, by consequence, those which are constituted by contract are put on the same footing. This is not so much upon the idea that men are not to have reward for their labor as that these persons do not labor, but that those who are put in their place do.
The state of our country and the habits of our people are so different as to have induced the legislatures of nearly all the states, including our own, to introduce provisions by statute for competent remuneration to those to whom the law commits the charge and care of the estates of infants and deceased persons. Individually, I doubt the policy of such regulations, and my doubts are founded on the observation of much practical injustice suffered by the helpless; and I cannot but believe, if ever professional persons should become so numerous as to be readily accessible to all such trustees as convenient agents, whose services can be substituted for their own personal attentions, that those laws will (335) be repealed, because the business can then be better done and the risk of imposition in charges better provided against. But while the present necessity exists, the rule perhaps must be retained as the means of engaging honest and competent men, in moderate circumstances, to undertake such duties.
It is natural that courts of equity, acting upon one of the most ancient and approved of their maxims, should follow the law, and adopt, in the case of conventional trustees, the rule applied by the statutes to public ones. This has been done in almost every state in the Union, we believe; at least as far as we have had an opportunity of examining their adjudications. It is in Massachusetts, 16 Mass. 227; in Pennsylvania and New Jersey, as appears in Manning v. Manning, 1 John, ch. 529; in Maryland, 1 Har. and Gill. 18; in Virginia, 1 Wn. 246. 4 Hen. Mum., 415, and in South Carolina, 4 Dess., 110. In New York, Chancellor Kent expressed himself strongly in favor of the English rule and refused compensation in Green v. Winter, 1 John, ch. 26; but he was compelled to yield, when a subsequent act of the Legislature authorized the courts to make an order in favor of public trustees. And, in answer to an inquiry, that eminent person has done the Court the honor to say, through one of its members, that he understands the old rule, denying compensation to trustees, to be pretty much abolished throughout the country, for that the statutes give it to guardians, executors, and administrators, and the courts make a reasonable allowance to receivers appointed by them, besides reimbursing their expenses, and the equity of the statutes is by construction generally extended to conventional trustees, when the agreement is silent.
To so strong a current of authority this Court does not feel at liberty to oppose the resistance of its judgment singly; but must yield (even were it with hesitation) to the extent of a reasonable allowance. We are informed, too, that it has been usual in some parts of this State for trustees to charge for services, and that the profession have no (336) decided opinion against it. The amount will, of course, be according to the circumstances, and not beyond that which would under the statutes be made to executors; and if fixed by the parties, it will be subject to the revision of the Court and will be reduced to what is fair, or altogether denied if the stipulation for it has been coerced by the creditor as the price of indulgence, or as a cover to illegal interest, or the conduct of the trustee has been mala fide and injurious to the cestui que trust. Whether it shall be given as a commission or not is hardly worth disputing about; that may be a convenient mode of computing in most cases; but the true object is a just allowance for time, labor, services, and expenses, under all the circumstances that may be shown before a master.
In the case before us the Court supposed that the circumstances appeared as fully as they could be at any time shown by the parties, and therefore proceeded to fix, at once, an allowance. Upon reflection, this is deemed to have been premature, as that view of the subject was not in the contemplation of the parties, or of the master, who took the accounts upon the basis that the agreement of September was binding. The decree must, therefore, be corrected in these respects; and it must now be referred to the master to ascertain (without any reference to the agreement of 13 September, 1824 and report what is a just allowance to the defendant as before mentioned, and, taking into account the payments under the decree, if any, state the balance that may be due between the parties. In taking the account, the master will also credit the defendant with the sum of $72, received by the complainant Boyd as the rent of the blacksmith's shop in Boydton, which was overlooked in the computation on which the decree was based.
The decree will also be extended by declaring the title of the defendant to the blacksmith's shop in Boydton, and to the slave Patsy, a good one, and requiring the plaintiff to surrender the possession of, the shop and desist from any actions or suits in this State for or concerning them.
Upon that part of the decree which directed the suit pending (336) in the court of Chancery in Virginia to be dismissed, there has been some difficulty, and the Court is not unanimous. The cases cited at the bar establish that the chancellor in England does not confine himself to putting the parties to an election, but where they are within his jurisdiction, he restrains them by injunction from carrying on a suit previously commenced in Ireland or Scotland, and proceeds in the while matter himself. This is commonly put upon the ground that the House of Lords is the common superior of all those courts. But that cannot be the true ground; for the like jurisdiction is taken where the first suit is in a foreign country, or in a colony, from which the appeal is to the King in Council. It seems to be assumed that more complete justice can be done in the English chancery. I wish it to be understood that I disavow altogether any such arrogance on the part of the Court in making the decree in this case. It primarily was not thought of, much less acted on. The sole ground with us was that of the election of the parties. It is true that the pendency of a suit in another state is not, as a plea, a bar to one here. Yet I conceive that no court will suffer one of its suitors to vex another with two suits at the same time, for the same thing, be the other pending where it may, and, upon the motion of either, will refuse to proceed in the one before it unless the other be dismissed. These parties all live within this jurisdiction, and each admitting in the pleadings that the suit was pending in Virginia, went fully into the case here, the defendant insisting in his answer on a trial here on the merits. This struck me as an election, and that as it was improper that the other suit should go on with this, or after it was decided, the Court ought, after a decision, to make it compulsory on the parties to dispose of it. This, too, was considered the most respectful course to the courts of Virginia, as it might prevent a conflict of decision, and the consequences of process of contempt to enforce opposite decrees; for it did not appear to us that any decree had been made in Virginia. These reasons still induce me to abide by the former decree.
But my brethren think otherwise, and I cheerfully yield to (337) them, as the reasons of their judgment chiefly refer to the relation which the courts bear to each other as tribunals of sister states, and the comity which, it is supposed, should be displayed by the one towards the other. We have been able to find no precedent for the decree in the decision of any of the states; and although, in general, a court of equity having a party before it may make him do what may seem right, yet they think that he ought not to be enjoined to any act in the court of a sister state, because it must be presumed that court will, in administering its own justice, make him do the same act, and, at all events, the contrary ought not to be anticipated. The courts of the United States, for this reason, refuse to entertain a bill to enjoin a judgment in a court of law of a state. Diggs v. Wolcott, 4 Cranch, 179; McKim v. Voorhies, 7 ib., 278. In Mead v. Merritt, 2 Paige, 403, Chancellor Walworth decided that he would not entertain a suit to enjoin judicial proceedings previously commenced in another state; in which I fully agree with him, upon the presumption that justice will be done there as well as it would be upon the new suit in our own courts. But he remarks further, that although the court has the physical power to act coercively upon the parties within its jurisdiction, yet he was not aware that any court of equity in the Union had deliberately decided to exercise the power by injunction on the parties to dismiss a suit in another state, for it might be related, and between the courts both parties be brought into contempt. My brethren think we ought not to set the precedent, nor expose these parties to the risk of incurring the censure of the court in Virginia; for we cannot know whether that court will allow the suit to be dismissed. If it ought to be, because the matters are decided between the parties in their own state, that court will do it without our order, and of its own mere motion. They think, too, that although this Court might put the parties to an election, yet it was not done, and that the parties did not, of themselves, elect by first trying here. It is (338) possible, also, that other matters may be involved in that suit which might have prevented an order to elect, had a motion been made; for then the party making it must have shown by the proceedings that the subjects were the same. Upon this last point, I took it from the pleadings that the whole matter of that suit formed a part of the one here, and I still suppose so, because the contrary is not stated by the defendant on affidavit, nor suggested in the petition. However, without that, the majority of the Court is of opinion that the decree was erroneous, and that the parties must be left to avail themselves of the decree here as they may be able in Virginia, where it will doubtless receive full faith and credit. That part of the decree is, therefore, reversed and the parties left at liberty to proceed in the suit in Virginia as they may be advised and allowed by the courts in that state.
Costs were given against the defendant, because the principal matter in controversy, which made a suit unavoidable by the complainants, was decided against the defendant. This seems to us still to be proper, although a small cash balance might be found due to the defendant. However, as the case is to go again before the master, that ground for the rehearing will be reserved until the coming in of the report, and a motion for directions on it.
PER CURIAM. Decree corrected accordingly.
Cited: Phelan v. Hutcheson, 62 N.C. 118; Royster v. Johnson, 73 N.C. 475; Cannon v. McCape, 114 N.C. 582; Pass v. Brooks, 118 N.C. 398; Smith v. Frazier, 119 N.C. 159; Fry v. Graham, 122 N.C. 774; Whitaker v. Guano Co., 123 N.C. 369; Banking Co. v. Leach, 169 N.C. 709, 716.