Norton v. Phelps

1. Trust and Trustee. Advances for trust estate. Creditor's remedy in eqidty by subrogation. While persons dealing as creditors with a trustee must look to him personally, an,d not to the trust estate, yet, where the trustee procures expenditures to be made for the benefit of the trust estate, which it has not paid for directly or indirectly, and the estate is- indebted to tho trustee on account thereof, or otherwise, or would be if he should pay the advances, and the trustee is insolvent or .non-resident, so that tho creditor who makes the expenditures cannot recover his demand from him here, the creditor may enforce the demand, by bill in chancery, directly against the trust estate. Clopton v. Gholson, 53 Miss. 460, cited. 2. Same. Expenses of executing the trust. Bight of trustee to reimbursement. Trustees have an inherent right to be reimbursed all expenses properly incurred in the execution of the trust, and no express declaration in the trust instrument is requisite to create that right. 3. Same. Liability of trust estate. Agent of trustee appointed by trust-deed. Under a conveyance of property to a trustee, which provides that he shall permit one as his agent to superintend, possess, manage and control said property, with power to sell and exchange, but shall be exempt from personal responsibility for such agent’s acts, expenditures incurred by the agent in the management of the trust property should be borne by the trust estate. 4. Account Stated. Statute of Limitations. Case in judgment. An account was presented toa trustee by creditors for supplies and money advanced for the trust estate and cestui que trust, showing a balance at the date of the account of $7,631.16, which was admitted by him to be “ correct, due and owing.” Held, that it was an account stated between the creditors and the trustee, which would require six years to bar it. McCall v. Nave, 52 Miss. 494, cited.

Appeal from the Chancery Court of Washington County. Hon. E. Stafford, Chancellor. On April 17, 1869, M. O. H. Norton & Co. filed this bill against A. J. Phelps and his wife Mary B. Phelps, formerly Vick, to subject a plantation in their possession to an account for supplies and money advanced to Henry W. Vick and Jonathan Pearce, trustee, for the plantation, Henry W. Vick, and Mary B. Vick, the cestui que trust. The trustee Pearce was not made a part}*- to the suit until 1870. In 1850 Sarah Vick conveyed the plantation to Pearce in trust, as indicated in the opinion. Henry W. Vick having died in April, 1861, Pearce took possession of the place in the following June, and became guardian of Mary B. Vick, the cestui que trust. On Nov. 28, 1865, Pearce, as guardian and trustee, exhibited to the Probate Court his account, showing that the estate was indebted to him $3,000, and to Norton & Co. $10,000, composed of $6,000 contracted by Henry W. Vick, and $4,000 contracted by himself in the course of his guardianship. This account, having been exhibited to Mary B. Vick after she became of age and before she married, was approved by her; and Pearce being discharged as guardian, surrendered the plantation to her, and became a non-resident of this State. On Oct. 3, 1866, Norton & Co. rendered Pearce-an account of that date, showing a balance of $7,631.16, which he admitted to be “ correct, due and owing.” This account was exhibited to Mary B. and A. J. Phelps, who admitted it to be a proper charge against them, and a liability for which the trust estate was bound. The complainants appealed from a final decree on the merits dismissing the bill. . 1. Under the deed the corpus of the estate is charged with the liberal support of Henry W. Vick, and the proceeds with the maintenance of the plantation and family. 2. While the Probate Court had no jurisdiction to discharge Pearce as trustee, yet the settlement was known to the cestui que trust and her husband, and ratified by both of them. 3. While, generally, persons advancing to the trustee will be confined to personal remedy against him, and have not the benefit of his lien on the corpus of the estate, there are exceptions to the rule; and this case is one. Manigault v. Deas, Bailey Eq. 283 ; Hill on Trustees, 570 et seep 4. The. cestui que trust having taken the estate from the trustee, took it burdened with the obligations which the trustee had incurred for advances for the trust estate. Hill on Trustees, 579 et seq., 583. 5. The counsel then reviewed the testimony, citing Pármele v. McGinty, 52 Miss. 475 ; 6 Rich. Eq. 75 ; Riddle v. Mande-with, 5 Crancli, 350 ; Guphill v. Isbell, 1 Bailey (S. C.), 230; Hill on Trustees, 570 ; 2 Perry on Trusts, § 910 ; contending that each of the items of the account were properly of use to the trust estate, and within the power of the trustee to procure ; that the trustee had been discharged, and was a non-resident, and the trust estate was now in possession of the cestui que trust; and that the complainants’ only remedy was by a bill in chancery. 6. The counsel then reviewed at length the decisions in this State relied upon by the counsel for the appellees, contending that they failed to sustain their positions, each being either distinguishable from the case at bar, or in accord with the views of the appellants. 7. The suggestion of the Statute of Limitations barring the remedy is without force. The account was a stated account. i 1. The bill should have been dismissed. (1.) A trustee himself has a lien upon the estate for any balance that may be found to be due him upon settlement with the Chancery Court, and will not be compelled to surrender the property until it is paid; but this lien does not extend to those who deal with him with reference to the trust property. (2.) If there is a balance due to the trustee from the estate as above stated, creditors of the trustee, as such, may reach such balance in equity by subrogation, but have no further remedy against the trust property. (3.) To become entitled to such recourse, the bill should allege and prove the insolvency of the trustee himself, or of his estate, if deceased, and that the trust estate is indebted to him. Nardioig v. Evans, 3 Porter, 221; Simms v. Norris, 5 Ala. 42 ; Johnson v. Graines, 8 Ala. 791; Jones v. Dawson, 19 Ala. 672 (in which the case of Ooopwood v. Wallace, 12 Ala. 790, was overruled) ; Sanford v. Noward, 29 Ala. 684, 692 ; Trusts and Trustees, by Tiffany & Bullard, 683 ; Gruerry v. Gapers, 1 Bailey Eq. 159; Manigault v. Deas, 1 Bailey Eq. 283; Adams v. Mackey, 6 Rich. Eq. 76 ; 2 Williams on Executors, 1625, 1626 ; Pettibone v. James, 25 Miss. 495 ; Woods v. Ridley, 27 Miss. 119,153,154; Ward v. Narrington, 29 Miss. 238; Nagan v. Barksdale, 44 Miss. 186 ; Earley v. Not'd, 45 Miss. 96, 105. 2. The estate was not legally in court until Pearce, in whom alone the legal title was vested, was made a party. This was done long after the limitation had expired. Clearly Pearce was released by the bar; and if he is released in the same suit wherein the appellees or their estate is to be held charged, what recourse could thejr have against the trustee if the debt was one that he would not have been allowed for in his accounts ? Being himself released, he would no longer be impelled to defend the suit, and creditors ought not to be enabled to impose the burden of resisting their claims upon the cestui que trust, when by their laches they have released the trustee. 3. The ratification amounts to nothing. (1.) It was without consideration. The Probate Court had no jurisdiction to discharge the trustee. Mary B. Phelps was not a party to his settlement as guardian. (2.) It was not by writing signed by the minor after becoming of age. Code 1857, p. 360, art. 8. (3.) The admission after her marriage was void by the married woman’s law. 4. Counsel then reviewed the facts at length, and replied to the brief of adverse counsel, contending that the account was in fact not a charge against the estate. contended that, even if the decree dismissing the bill was reversed, the case would have to be remanded for an account; that the proof showed clearly that under no state of ease could all the account be a charge on the trust estate; but that the decree should be affirmed, because, among-other reasons, the pleadings made no case for subrogation to the rights of an insolvent or non-resident trustee.