Where a declaration of trust, accompanying a conveyance of real property, provided that parties making advances to the trustee to a specified amount for certain designated purposes, with the consent of persons previously named in the declaration as beneficiaries of the second class, should stand as to the advances so made in the same position and receive payment in the same manner and proportion as such previously named beneficiaries: Meld, that the trust estate was not liable for advances made to the trustee for any other than the purposes designated in the declaration, nor for advances made for those purposes by third persons without the consent of the beneficiaries.
Thus, where the purposes designated in the declaration of trust were to secure advances to pay off a debt to a particular estate—to purchase and locate school warrants on certain lands, and to raise a crop upon the lands for the year 1856; and the trustee in one instance borrowed money to harvest the crops of 1856, and to put in the crops of 1857, and gave his promissory note as trustee for the amount borrowed, including also an amount for storage on grain, and stated in the note that for its payment all the property held by him in trust was pledged; and in another instance borrowed money in 1857 to meet the expenses of future farming operations, and gave his note for the same as trustee, in which he also stated that all the property held by him in trust was pledged for its payment: Held, that the statement of the trustee in the notes did not create any lien upon the trust property; that even if raising a crop for 1856, as mentioned in the declaration, implied also the harvesting of the crops for that year, no allowance could be made on that account, inasmuch as it did not appear from the note or otherwise how much of the amount was borrowed for that purpose; that the other objects for which the money was borrowed, as stated in the notes, were not embraced by any of the purposes designated in the declaration of trust; and for the payment of the money the trustee had no authority to pledge the trust property; and further, that he had no authority to accept the moneys and place the claims thereupon arising in the second class of claims secured, even if the moneys had been advanced for the express purposes of the trust, without the consent of the persons holding the claims of that class.
A trustee, acting under a declaration of trust, expending money not expressly authorized by the declaration, is not entitled to reimbursement out of the trust property, unless the expenditure was necessary for the preservation of the property, or to prevent the failure of the designated trusts; and a third person advancing money to the trustee stands in no better position with reference to the trust, property. If the third person advance the money with the approbation of the grantors in the trust deed, he can only enforce the equitable lien thus obtained against the residuary interest coming to them after all the claims mentioned in the declaration are satisfied.
Field, C. J. delivered the opinion of the Court—Cope, J. concurring. These three cases were argued together, as they all relate to the same estate, and require for their disposition a construction of the declaration of trust, and a determination of the respective rights of the beneficiaries named therein, and of parties who claim to have succeeded to the interests of the beneficiaries, or to have acquired liens upon the 'trust property. It is the desire of all the parties that their respective rights, legal and equitable, shall be determined and finally settled by the decree of this Court, without regard to technical objections to the manner of their presentation, and a stipulation substantially to this purport is embodied in the records.
The purposes for which the property was conveyed to the trustee are set forth in the declaration of trust executed by him simultaneously with the conveyance. These purposes are there stated to be, to pay different parties various sums advanced by them or to be advanced for certain specified objects, and also to pay certain previous debts of Hutchinson and of Hutchinson & Greene, and a reasonable compensation to the trustee for services in connection ■with the estate. The claims thus designated are divided into seven classes, and the declaration of trust provides that they are to be paid in their order of classification—all of one class to be paid before any payment is made upon any claims of a subsequent class, and those of any given class to be paid pro rata when the funds applicable to that class are insufficient to pay them all in full. The only claim belonging to the first class has been paid, and no further reference to it need be made. The claims under the second class [27]consist of sums advanced for three purposes — to pay the estate of Erierson $15,000, to purchase and locate school warrants upon a certain ranch or farm in Yolo county; and to raise a crop upon the farm for the year 1856. These sums, according to the declaration of trust, were not to exceed in the aggregate $30,000, and were to draw interest at the rate of two per cent, a month from the time of their respective advances. The declaration designates as having been already advanced at its date, $2,400 by Mills; $2,000 by Morrill and Anthony; $2,500 by Haworth; $2,500 by Watson, and $5,000 by Clark and Gass; and to secure them payment, and also the payment of $5,000 to Winans, $2,000 to Grissim & Co., $2,000 to Davis, and $5,000 to Cadwalader, or so much of these sums as might be advanced, as claims of the second class, the conveyance to the trustee was executed. And the declaration of trust in the article relating to this second class of claims also states that it is understood and agreed that “ should the parties, or either of them, or any other with their consent, advance any other or further sums, to an amount not exceeding in the aggregate with the sums already advanced the sum of $30,000, for the purposes aforesaid, then the person or persons making such other and further advances shall, as to the advances so made, stand in the same position, and receive payment in the same manner and in the same proportion, in the event there should not be funds sufficient to pay the whole, as parties whose names are above mentioned in this second article.” The first inquiry presented is as to the amount of “ other or further sums ” advanced in addition to those already advanced ” when the declaration was executed, which are to be placed under the clause cited in the second class of claims. We say the inquiry is as to the amount of such other or further sums, for the fact that further advances were made is not disputed. Winans advanced $650; Grissim & Co. advanced in cash, and what was taken as its equivalent, $2,000; Davis advanced in like manner $2,137.88; and Cadwalader advanced $1,500 ; all of which sums form claims of the second class. The sums advanced, upon which there was much discussion at the hearing, are those for which the notes of the trustee to HaE and to Raun were executed. We do not, however,
If in an instrument conferring a power there be an inconsistency between the recital stating the consideration moving the donor to the execution and the subsequent terms defining the power, the recital will not operate as a limitation upon the power.
Equity will not aid the nonexecution of a power; but when a party undertakes to execute a power, and by mistake does it imperfectly, equity will, in favor of creditors and others peculiarly within its protective favor, aid the defective execution.
Thus, where there is a defect in the execution of a power to make a mortgage, the condition of the mortgage not following the terms of the power, and the design to execute a mortgage in pursuance of the power is apparent, and the object sought by its execution is substantially accomplished, equity will afford relief and enforce the mortgage. This it will do either by directing a correction in the condition of the mortgage, and then enforcing the mortgage in its corrected form, or by construing the defectively executed instrument in connection with the power to which it refers, thus qualifying and restricting the condition, and giving effect to the mortgage conformably to the intention of the donors of the power, and of the mortgagor.
Property is conveyed in trust to pay classes of debts in a certain order. H and others are creditors and beneficiaries under the trust of the second class; M. & Co. are creditors of the trustee claiming a lien upon the trust property, but subordinate to the claims of H. and others; M. & Co. threaten to bring suit and subject to sale the trust property, in order to reach the residuary interest of the grantors in the trust deed after satisfaction of the preferred claimants under the trust; to prevent this, and in consideration of an agreement by M. & Co. not to sue, H. and others execute a power authorizing the trustee to mortgage the real property held by him in trust to M. & Co., as security for the payment of their claims; the mortgage was executed accordingly, but by mistake the condition of the mortgage did not follow the terms defining the power; the delay stipulated for by H. & Co., and recited in the power as its consideration, was obtained in full: IMd, that equity will afford relief and enforce the mortgage.
Held, further, that under a stipulation for an equitable settlement of the rights of the parties upon the facts presented, it is immaterial which course of the two above mentioned for the correction of the defect is pursued; that the result of either is to give M. & Co., the mortgagees, priority in the security which H. and others, donors of the power, possessed by the trust fund to the extent of the latter’s respective claims, and to place these claims in the position which the claims of M. & Co. would have occupied but for the execution of the power and mortgage, H. and others preserving relatively to each other, in their postponed claims upon the trust fund, the order of their original classification.
[28]
find any difficulty in determining the position of those sums. A slight consideration of the purposes for which advances were to be made, according to the declaration of trust, and of the power of the trustee, will show that they do not constitute claims which can be embraced within those of the second class. The note to Hall bears date on the first of June, 1857, and states on its face that it was given for money borrowed of him “ to harvest the crop of 1856 and put in the crop of 1857,” and “ for storage on grain,” without showing how much of its amount was for any one of these objects. The trustee was not authorized to borrow money to put in the crop of 1857, nor was security for advances of this character within the contemplation of the parties when the trust was ere-' ated. The purposes declared, so far as the second class of claims is concerned, were to secure advances made in order to pay off the debt to the Erierson estate, to purchase and locate school warrants, and to raise a crop upon the farm for the year 1856. It may be, as contended by counsel, that the phrase used in the declaration “ raising of a crop,” implies the harvesting of the crop, as well as its sowing or planting; but this view does not obviate the objection. The note does not disclose, as we have said, the amount borrowed for harvesting the crop of 1856. Nor does the exhibit of items making up the amount of the note, taken in connection with the evidence in the case. Hall was employed as the factor of the crops. Such is the testimony of the trustee, and the advances by Hall were evidently made upon the crop received on storage and the crop anticipated. The note itself specifies that for its payment the grain then on storage with him, and the proceeds of the crop of 1857, then being harvested, were pledged. And though it also states that all the property held by the trustee in trust was likewise pledged, this statement did not of itself create any hen upon the trust property, much less locate the claim arising upon the note among the claims of the second class secured. The trustee could not in this way pledge the property conveyed to him upon specified trusts, so as to give priority to the claim in question over any previously existing claims. The only effect of the agreement, if made, as it undoubtedly was, with the knowledge and approval of Hutchinson and Greene, was to create an equitable hen
[29]
upon any residuary interest coming to them after all the claims designated in the declaration of trust were satisfied. The trustee had no authority even to accept the money of Hall and place his claim therefor in the second class, even had it been advanced for the express purposes of the trust, without the consent of the parties holding the other claims of that class; and there is no evidence whatever that any such consent was ever given. And that neither Hall nor the trustee ever contemplated that the claim for the money was to be placed upon a footing with claims of the second class, is further evident, from the fact that the note is made payable in sixty days, and draws a different and greater rate of interest.
The note to Raun bears date on the twenty-fifth of June, 1857, and most of the observations made as to the claim upon the Hail note are applicable to the claim asserted upon this note. It shows on its face that it was given for money borrowed “ to carry on the ranch in Yolo ”—that is, to meet the expenses of future farming operations; and it expressly provides for its payment out of the proceeds of the crop raised during the year 1857. For its payment the note also declares, that “ the whole crop and all the property held ” by the trustee are pledged. But that there was no authority in the trustee to execute a hen in this way upon the trust property, much less to place the claim for the money borrowed among the claims of the second class, we have already shown. And as with the Hall note, so with this note, it is evident that neither Raun nor the trustee contemplated that the claim arising upon it should have equality with the claims of the second class, for the note is made payable in four months, and with a different and higher rate of interest.
But it is contended by the learned counsel of Raun that the moneys borrowed by the trustee were necessary for the estate, and must be first paid as a claim created for the protection of the estate, which the trustee would be entitled to have allowed to him upon a settlement. The position of the counsel, as we understand it, is this: that for this money the remedy of Raun was in the first instance upon the trustee personally, who, having paid it, could demand its allowance upon a settlement of his accounts, and its reimbursement out of the proceeds of the estate before distribution [30]to the cestuis que trust; but] that the trustee ]. having become insolvent, the remedy of Raun is upon the trust property, from the proceeds of which he is entitled to a like priority.
The answer to this position is plain and conclusive. The premises upon which it rests do not exist. The money borrowed was not necessary for the protection of the estate, or to accomplish any of the purposes designated in the declaration of trust. “ To carry on the ranch,” which we understand to mean, to carry on farming operations, after 1856, was not a purpose for which the trustee was authorized to borrow or accept any moneys and bind the trust property. The claim thus arising, although it was created with the approbation of Hutchinson and Greene, can only be enforced against the trust property—the proceeds of the crop of the year having failed to pay it—after all the claims mentioned in the declaration are satisfied.
The claims upon the notes to Hall and to Raun being excluded from those of the second class, we proceed to state the established claims of that class; those which remain unpaid, and their respective amounts. In this statement we do not adopt, in all respects, the findings of the referee. We differ from them in several particulars. We allow some claims rejected by him, and place credits in some instances against subsequent advances, when they were placed by him against advances made for purposes directly contemplated by the declaration of trust. We can only give the result of our examination of the immense mass of evidence, oral and documentary, embodied in the record. It is impossible within the limits of an opinion to comment upon the testimony which relates to each separate claim. The amounts advanced by Mills and Anthony have been paid. The amount stated in the declaration of trust to have been advanced by Watson, was advanced in the form of two notes, one of which was subsequently returned to him, and the other has never been paid. The amounts advanced by the other parties (with the exception of twenty-one dollars and eleven cents paid on the advance of Gass, and five hundred dollars paid on the advance of Cadwalader, and interest on the entire sum to November 21st, 1856) remain due, with interest thereon at the rate of two per cent, a month from their respective dates. These amounts, deduct[31]ing the payments in the two instances mentioned, are as follows : $1,000 advanced by Morrill; $2,500 by Haworth; $2,500 by Clark; and $2,478.89 by Gass, with interest from January 24th, 1856 ; $2,137.88 advanced by Davis, with interest from April 8th, 1856 ; $2,000 by Gxissim & Co., with interest from May 28th, 1856 ; six hundred and fifty dollar’s by Winans, with interest on five hundred dollars from October 21st, 1856, and on one hundred and fifty dollars from November 12th, 1856; and $1,000 of the advance by Cadwalader, with interest from November 21st, 1856. These different sums, with the stipulated interest thereon from their respective dates, constitute the unpaid claims of the second class under the declaration of trust. A portion of them are now owned by other parties than those named. The entire claim of Cadwalader has been assigned to James and William Bailey; and $1,000 of the claim of Clark has been sold to Winans.
So far as the claims of Haworth, Clark, Gass, Davis and Winans are concerned, D. O. Mills & Co. assert that they have acquired a prior right and hen upon the real property held in trust, entitling them to the payment of their own demands to the extent of the claims. The right thus asserted arises in this way: D. O. Mills & Co. were the owners, by assignment, of the Hah note ; they had also advanced various sums to the trustee and received his notes therefor—one dated November 17th, 1856, for $1,200, bearing interest at the rate of two and a half per cent, a month, and the other dated February 22d, 1858, for $2,668.33, bearing a like monthly interest. These various sums constituted claims against the trust property, though subordinate to the claims designated in the declaration of trust. D. O. Mills & Co. had it in their power to subject the trust property to sale in order to reach any residuary proceeds coming to Hutchinson & Greene after the satisfaction of existing claims. And it would seem that they contemplated legal proceedings to that end. They also at the same time asserted that by the claim which they held by the Hall note, they were entitled to come in, for a portion at least of such note, as creditors of the second class. Such being their position, certain of the beneficiaries under the trust deed to Clark entered into an arrangement with them to the effect that they, D. O. Mills & Co., should postpone [32]the payment of their demands against the trust property for the term of two years and a half from the first day of July, 1858; and that in consideration of such postponement, the beneficiaries referred to should authorize the trustee to execute a mortgage upon all the real property held by him in trust for the security of the demands, payable within that period, with interest thereon at the rate of one and a half per cent, a month. In pursuance of this arrangement, the beneficiaries mentioned executed and delivered to the trustee the following power: “ Know all men by these presents that we, the undersigned, cestuis que trust and beneficiaries in a declaration of trust made by Robert C. Clark, bearing date the twenty-fourth day of January, 1856, and recorded in the Recorder’s office of Yolo county, in consideration that D. 0. Mills & Co. will agree to postpone the payment of their demands against said trust property for the term of two years and a half, upon the same being secured by a mortgage upon the real property embraced in the said deed of trust, do hereby consent and agree that Robert C. Clark, said trustee, may execute and deliver to the said D. 0. Mills & Co. a mortgage upon all the real estate held by him in trust as aforesaid, conditioned to secure to the said' D. 0. Mills & Co. the payment of the debt due them from the said trust estate, within the period of two and one-half years from the first day of July, 1858, and bearing interest at the rate of one and one-half per cent, per month, and payable as provided between the said D. 0. Mills & Co. and said trustee.
“As witness our hands and seals, fourteenth day of October, 1858.
“ James Haworth, [L. S.]
“ W. H. Watson, [L. S.]
“ F. W. Hatch, [L. S.]
“ W. T. Grissim, [L. S.]
“ Clark & Gass, [L. S.]
“ J. C. Davis. [L. S.].
Of the grantors of this power, W. T. Grissim was a beneficiary, under the declaration of trust, of the third class, and Hatch was a beneficiary of the fifth class and also of the seventh class. The [33]signature of Clark & Gass was affixed by Clark without the consent of Gass, and therefore binds Clark alone. Gass refused to execute the instrument. It follows that the instrument must be deemed only as authority to the trustee from Haworth, Clark and Davis of the second class of beneficiaries, and of Grissim of the third class, and of Hatch of the fifth and of the seventh class, to execute to D. O. Mills & Co. a mortgage upon the real property held in trust for the security of their demands. Watson, whose signature is also attached to the instrument, cannot be regarded as having had any claim against the estate, as neither of the notes advanced by him were ever paid.
On the first of January following, the trustee executed to D. 0. Mills & Co. a mortgage upon the real properly in question, referring in its recitals for his authority in the premises to the instrument already mentioned. At the time, the demands of D. 0. Mills & Co. amounted to over $26,000. This amount they reduced to $21,800, and took three notes of the trustee for the same, bearing interest at one and a half per cent, q month, and payable one for $6,800 on the first of October, 1859, one for $10,000 on the first of October, 1860, and one for $5,000 on the first of October, 1861. To secure these notes, the mortgage by the trustee was executed. The mortgage, as we have said, refers in its recitals to the power of October 14th, 1858 ; in other respects it is in the usual form, with the usual conditions. The question is as to the efficacy of this mortgage. It is objected on the one side that it does not follow the power, and hence is inoperative and void. On the other side, the objection is met by the fact that the purpose desired of D. O. Mills & Co. by the beneficiaries has been accomplished, on the faith that the mortgage was effective, and by the position that the defect in the form of the mortgage may be corrected, and the instrument enforced after its correction.
The instrument of October 14th, 1858, is very awkwardly drawn, but we do not perceive the inconsistency, to which counsel refer, between the terms of the mortgage, which it authorizes, and the consideration which it recites as moving to the grant of the power; and if such inconsistency did in fact exist, the recital would not operate as a limitation upon the power. The instrument authorizes [34]the execution of a mortgage, not merely to pay the demands within the designated period, but it adds that the demands are to be payable “ as provided between the said D. 0. Mills Qo. and said trustee.” Inasmuch as at the time this power was executed the demands had all been past due for months, and no new agreement as to their payment had been made, the clause in question must be considered as referring to arrangements thereafter to be made, “ as may or shall be provided.” As we read the instrument, it amounts to this; that in consideration of an agreement from D. 0. Mills & Co. to postpone them demands for two years and a half, certain of the beneficiaries named in the declaration of trust authorize the trustee to execute the mortgage conditioned to pay such demands, with interest at one and half per cent, a month, at such times within the two years and a half as may be arranged between him and the creditors in question. On the part of D. 0. Mills & Co., an agreement to postpone payment for two years and a half was desired; on the part of the beneficiaries, the liberty to the trustee to make the payments within the prescribed period as might be most convenient, and be arranged between him and the creditors. Delay for a given period in the enforcement of existing demands was the object sought—not absolutely, but as the trustee, with knowledge of the probable means of meeting the demands, might agree with the creditors. The fact, therefore, that the trustee gave for the amount due D. 0. Mills & Co. three notes, two of which were made payar ble within the prescribed period of two years and a half, and executed the mortgage for them payment, does not constitute any departure from the terms of the power. The departure arises from the fact that the third note is payable beyond the prescribed period, and is covered by the same mortgage. A power to execute a mortgage conditioned to pay certain demands within a designated period, is not followed by the execution of a mortgage to pay one portion of such demands within that period, and another portion within a different and further period. The mortgage, it is true, does not in terms prescribe or appoint a time of payment, but it does so substantially. Its condition is to pay the three notes and interest thereon according to their “ true tenor and effect,” by which we understand, according to the promises which they severally express, including those for payment at their respective maturities.
[35]There is no doubt that the trustee designed to execute a mortgage in pursuance of the power. The reference to the power in the mortgage as the source of his authority in the premises, and the evidence given by him on the subject, are conclusive upon this point. The variation from its terms was the result of a mistake in the recollection of the trustee, the instrument not being before him at the. time the mortgage was drawn. The delay between its date and the execution of the mortgage is satisfactorily explained, negotiations were pending for the settlement of the claim of Raun. D. 0. Mills & Co. were willing to give up the security to be afforded by the contemplated mortgage to them, in case Raun would come to an arrangement proposed and accept a like security. The arrangement proposed failing, the mortgage was executed. The object sought by its execution, so far as the delay desired in the enforcement of the demands of D. 0. Mills & Co., has been accomplished ; and it would seem that according to plain principles of justice the mortgagees ought not, under these circumstances, to be deprived of the benefits .promised from their action. There would be some defect in the administration of justice if such a result should follow. Happily,’ in the jurisdiction which equity exercises in cases of defective execution of powers, protection is afforded against results of this character. “ If there be a defective execution, or attempt at execution of a mere power,” says Story, “ there equity will interpose and supply the defect; not universally, indeed, but in favor of parties for whom the person intrusted with the execution of the power is under a moral or legal obligation to provide by an execution of the power. Thus, such a defective execution will be aided in favor of persons standing upon a valuable or a meritorious consideration; such as a Iona fide purchaser for a valuable consideration—a creditor, a wife, and a legitimate child—unless, indeed, such aid of the defective execution would, under all the circumstances, be inequitable to other persons, or it is repelled by some counter equity.” (Story’s Eq. Jur. sec. 169.) Equity, says the same author, will not aid the nonexecution of a power, but “ when the party undertakes to execute a power, but by mistake does it imperfectly, equity will interpose to carry his very intention into effect, and that, too, in aid of those who are peculiarly within [36]its protective favor—that is, creditors, purchasers, wives and children.” (Yol. 1, sec. 170.) “ Whenever,” says the Supreme Court of Ohio, “ the intention to execute a power is sufficiently manifest, but the execution is defective or has not been executed according to the terms,, or in the form prescribed, equity will correct the mistake or supply the defect.” (Barr v. Hatch, 3 Ham. 529.)
Upon well settled principles, then, equity will afford relief in the present case. This it will do by directing a correction in the condition of the mortgage, and then enforcing the mortgage in its corrected form; or by construing the defectively executed instrument in connection with the power to which it refers, thus qualifying and restricting the condition, and giving effect to the mortgage conformably to the intention of the donors of the power and of the trustee.
The condition of the mortgage being corrected, or qualified and restricted by reference to the power, (and it matters not which course be pursued under the stipulation of the parties) we proceed to declare the effect of the mortgage thus corrected or thus construed. The beneficiaries, in authorizing the execution of the mortgage, consented to a postponement of their rights of priority in the security furnished by the real property held in trust, and of course in its proceeds upon the settlement of the estate, to the claims of D. 0. Mills & Go.; in other words, they consented that, to the extent of their respective claims, D. 0. Mills & Co. should receive security and payment prior to them. They could not, of course, affect the rights of beneficiaries subordinate to them who were not parties to the power. They could, however, consent to exchange places with D. 0. Mills & Co. in the security and in the payment of their respective demands; and this is the effect of the mortgage which they authorized the trustee to give. In the settlement, therefore, D. 0. Mills & Co. are entitled to receive out of the proceeds of the real property, and to apply on their own demands, what would otherwise be first applicable to the claims of Haworth, Clark and Davis as cestuis que trust of the second class, and to W. T. Grissim as cestui que trust of the third class, and to Hatch as cestui que trust of the fifth and of the seventh class. Winans states in his brief that he [37]desires to be placed in the same position with them; that, in fact, from a verbal promise to that effect, he has bound himself equally as if he had signed the power. These different beneficiaries (including Winans, upon his own admission) must therefore take in the order of their demands the position which, but for the power and mortgage, (and admission of Winans) would fall to D. 0. Mills & Co.
In the fourth article in the declaration of trust, provision is made for “ a suitable and reasonable compensation ” to the trustee. Trustees have a' right to claim a reimbursement of all expenses properly incurred in the execution of then1 trusts; and also a suitable allowance for their own services. The duties of the trustee in the present case were limited to the preservation of the properly, the payment of the debt to the Frierson estate, the purchase and locar cation of school warrants upon the farm, and the raising of a crop for the year 1856. All expenses incurred for these purposes have been reimbursed to him. The evidence in the case does not show much active participation of the trustee in the supervision over the farm whilst a crop was being raised in 1856, or much expenditure of time or labor in the purchase and location of school warrants. One thousand dollars, under the circumstances, we think ample compensation to him, and that sum is allowed, payable, according to the declaration of trust, after all the claims of the second and third class are satisfied. We are speaking now of the allowance for services immediately and properly connected with the execution of the trust, as established by the papers executed in January, 1856. With reference to the services in raising crops afterwards, under the authority, or rather without the objection of certain of the beneficiaries, he may be entitled to be reimbursed all the expenses which he has incurred, and to an allowance of the amount found by the referee; but for such expenses and services he cannot make any claim upon the trust property. He must look, as the parties who dealt with him must also look, to the results of the undertaking upon which they entered, or furnished the means for others to enter: that is, to the proceeds of the crops.
As to the expenses incurred in the present litigation, they have been occasioned in a great degree by matters not properly relating [38]to the execution of the trust, but by matters growing out of the subsequent action of the trustee, taken with the consent of a portion of the beneficiaries. The allowance to him, therefore, for the litigation must be limited, not by the actual expenses, but by such expenses as would reasonably be incurred in closing up the estate after the crop of 1856 was raised. One thousand dollar's we think quite sufficient&emdash;one-half to be applied to the payment of the disbursements and the fees of counsel employed by the trustee in the lower Court, and the other half to the payment of like disbursements and fees in the appellate Court. TMs item is payable out of the proceeds before distribution is had to the beneficiaries.
It is unnecessary to consider the transactions of the trustee or of parties with him, in relation to the crops after 1856. Operations upon a farm, exceeding in extent three thousand acres, could not be carried on without large expenditures of money each year. Had those operations proved successful, there would probably have been little or no complaint at the investments made. Those operations having failed, the usual complaint, and censure, and charges of improvident conduct, consequent upon failure of an undertaking, have followed. It would subserve no good purpose to examine into these matters, for it is admitted by all the parties that the proceeds of the entire trust estate will not pay the cestuis que trust beyond those of the fifth class, even if they reach to that extent. We will therefore direct, by our decree, a sale of the real property, and distribution of the proceeds to the payment of the cestuis que trust, whose claims we have passed upon, and reserve any judgment upon the rights of the same or other parties to any proceeds which may remain after such payment.
The judgment of the Court below must be reversed, and the report of the referee set aside, and the Court below directed to enter a decree to the following purport: first, directing the trustee to sell the real property belonging to the trust estate&emdash;after due and proper publication of the time and place of sale&emdash;a survey of the same having been first made into parcels of not less than one hundred and sixty acres, nor exceeding three hundred and twenty acres each; second, directing the payment of the expenses of the survey and sale, and the payment of one thousand dollars for the [39]expenses of the present litigation; third, directing a distribution of the proceeds to the several beneficiaries entitled thereto, according to the views expressed in this opinion—D. 0. Mills & Co. taking and applying to their own demands the proceeds, which, but for the power and mortgage referred to, (and consent of Winans) would be first applied upon the claims of the beneficiaries Haworth, Clark, Davis and Winans of the second class, to W. T. Grissim of the third class, and to Hatch of the fifth and seventh class; fourth, reserving the right of all parties, whether named or otherwise, to litigate with reference to any proceeds which may remain after the payment of the several beneficiaries mentioned in the declaration of trust. Each party will pay his own costs of the action, both in this Court and in the Court below.
By a supplementary opinion, the decree was modified so as to direct, upon the stipulation, of the parties to that effect, the appointment of a commissioner to sell the real property belonging to the trust estate, and to distribute the proceeds; and so as to direct the payment of the costs of the several parties to the suits, other than the trustee, (for whose costs and disbursements provision was previously made) out of the proceeds. The decree was also modified so as to direct the Court below to take further proceedings for the disposition of any personal property belonging to the estate, and the distribution of its proceeds.
AI Brief
AI-generated · verify before citing
Holding. The court held that the trustee lacked authority to pledge trust property for unauthorized farming operations, and that a defectively executed mortgage intended to secure debts could be reformed by equity to reflect the parties' intent to subordinate certain beneficiaries' claims to those of the mortgagees.
Issues
Whether debts incurred by the trustee for farming operations after 1856 constitute secured claims under the declaration of trust.
Whether a mortgage executed by the trustee that deviated from the terms of the authorizing power is valid and enforceable in equity.
What priority should be assigned to the claims of the mortgagees versus the beneficiaries who consented to the mortgage.
Disposition. reversed
Quotations verified verbatim against the opinion
“The trustee could not in this way pledge the property conveyed to him upon specified trusts, so as to give priority to the claim in question over any previously existing claims.”