Carpenter v. Taylor

On the 30th day of April, 1894, the defendant executed and delivered to the plaintiff, a general assignment of all his property in trust for the benefit of creditors. The instrument contains the usual directions for the conversion of the property into money, and the distribution of the same among the creditors in the order therein designated. The last clause of the instrument is in these words: “ The said party of the second part doth hereby accept the trust created and imposed on him by this instrument, and covenants and agrees with the said party of the first part that he will faithfully and without delay execute the created trust according to the best of his skill, knowledge and ability.” The plaintiff took possession of the assigned property under this instrument and was proceeding to convert the same into money. It appears that the defendant was a harness maker and dealer in goods of that character, and for that purpose kept a store in which the business was conducted and where the property was at the time of the assignment. The plaintiff and defendant, while engaged in taking an inventory of the property, evidently supposed that there might be a surplus after paying all the debts, if the trust was judiciously administered, and to that circumstance we may attribute the present controversy.

On the 24th of May; 1894, about a month after the trust property was vested in the plaintiff and he had entered upon the execution of the trust, he procured the defendant to execute and deliver to him another written instrument which recited the fact that the general assignment had been made and that the understanding between the parties was to the effect that since the legal compensation to the plaintiff as assignee was small and insufficient for the best administration of the property, and that with proper management and diligent attention there probably would be a considerable surplus

It appears that after payment of the debts there remained a surplus in uncollected accounts and goods which, estimated at the inventory value, amounted to $7,292.90. After the trust had been executed and the plaintiff discharged, and the property remaining turned over to the defendant, the plaintiff demanded payment of the amount claimed to be due to him under the special agreement, but the defendant declined to pay the same, and thereupon the plaintiff brought this action to recover the percentages upon the surplus secured to him by the terms of the agreement. The defense was that the agreement was without consideration and was void upon principles of public .policy.

The learned trial judge submitted the case to the jury with instructions that if they found that nothing was intended by the agreement except to add to the plaintiff’s legal compensation as assignee, then he could not recover, but in case it was found that the agreement provided for the performance of services by the plaintiff in the execution of the trust beyond that imposed upon him by law, under the assignment, then he could recover. The defendant’s counsel excepted to the ruling of the court as expressed in the charge in which the intention of the parties in this respect was submitted to the jury. During the course of the trial the defendant’s counsel, by exceptions to the denial of a motion to dismiss the complaint .on the ground tliat the agreement was void, as without consideration and against public policy, and to proof of the reasonable value of the extra services claimed to have been performed by the plaintiff, and to oral proof of what the parties intended by the paper, and in various other ways challenged the validity of the instrument, upon the ground that it was void for want of any consideration to support it,

In the further discussion of the case, it may be assumed that the exceptions taken by the defendant’s counsel during the tidal and to the charge are sufficient to raise the question as to the validity of this agreement, whether resting upon the writing itself or supplemented by parol proof to show what the parties intended. There is nothing ambiguous in the language of the- instrument upon which the action was based. The intention of the parties is perfectly plain, and the legal meaning and construction of the paper was for the court and not the jury. The writing states in the plainest terms that inasmuch as the legal compensation of the assignee was small and insufficient for the best administration of the property, •and with such administration there would probably be a surplus, the parties proceeded to agree upon additional compensation and the principles upon which it was to be computed. Parol proof tending to show that the extra compensation stipulated for in the writing was reasonable, or proper, was wholly inadmissible. If the writing was otherwise valid it was enough that the parties had agreed upon the amount. If it was not valid in its general scope and purpose it could not be aided. by the opinions of witnesses tending to show that under all the circumstances the arrangement was reasonable and proper. The moment the paper was made and delivered the law impressed upon it a legal character which followed it for all time, without regard to the opinion which the plaintiff or his witnesses had with respect to its operation, whether fair and reasonable or otherwise.

But, doubtless, the most important question in the case is with respect to the validity of the written instrument. If that

It is argued by the learned counsel for the plaintiff that since his client managed the trust with such success as to leave a surplus for the assignor the agreement should be sustained. But that is precisely what he agreed to do when he assumed the trust, and what he was bound to do bylaw. This new promise by the plaintiff to do something which he was already abound to do produced no fresh advantage to the defendant or detriment to the plaintiff. We must assume that the plaintiff performed his duty as trustee with fidelity .and skill; but he assumed that obligation when he accepted the trust. It may be admitted that he performed those duties better than they are ordinarily performed by trustees in such •cases, but certainly he did not exceed the measure of his obligation to the defendant and his creditors, which was to administer the trust to the best of his knowledge, skill and ability. The .fact that trustees in some cases neglect to execute such trusts as well as they might does not furnish any legal ground for one who does his duty to demand extra compensation. The plaintiff’s standard of duty was prescribed by law and

We think, also, that the agreement is invalid on the ground of public policy. A trustee who holds the title to property for the benefit of others cannot use his position for his personal advantage. He cannot make profit for himself in the execution of the trust. He cannot ordinarily deal with the beneficiaries or parties interested in the estate so as to acquire the ownership of the trust property. We are now dealing with a case where the extra compensation was not given by will nor by the trust instrument, but by an agreement between the trustee and beneficiary after the former had accepted the trust and become vested with the title to the trust property. The learned counsel for the plaintiff has cited cases which contain dicta that would seem to support his contention, but in no one of them was the precise point involved. In most, if not all óf them, the court referred to cases where extra compensation was given by will or by the trust instrument. It is, doubtless, true, as these cases hold, that a person may do what he will with his own. He may dispose of what he owns by gift or any other mode of transfer, if the transaction is free from fraud and can be said to be his voluntary act. The principle applies to parties who deal with each other on terms of equality, or, as it is sometimes expressed, at arm’s length. But it has no application to the case of a trustee who bargains with the beneficiary for a greater share or interest in the trust estate than he would be otherwise entitled to. In such cases the trustee occupies the dominant position, and the beneficiary or person interested in the estate is, in some respects, subject to his power and influence. For obvious reasons the disability of the trustee to bargain with the beneficiary for a share or interest in the property, whether in the form of compensation or otherwise, is absolute in order to avoid the possibility of fraud. In such cases the law acts upon the principle that the temptation of self-interest is too powerful and insinuating to be trusted. (Perry on Trusts, §§ 129, 196, 209, 427;

The plaintiff held all of the assigned property in trust, first for the benefit of creditors, and the surplus, if any, for the assignor. While occupying this position he bargained with the defendant for a large share of the surplus, if any, without any other consideration than the performance of services which he had already undertaken to perform for the statutory compensation. When the beneficiary is called upon to perform a contract entered into under such circumstances, as the defendant is in this case, he may resist the claim, and the courts cannot sustain such an agreement without encouraging obvious abuses in the administration of trusts.

The officer, or other person, to whom a fee or other compensation is allowed by law for any services, is forbidden by statute to charge or receive a greater fee or reward for that service than is so allowed. (Code, § 3280.) It was held that this statute applied to a claim by a court stenographer for extra compensation based upon an agreement, the consideration of which was his undertaking to furnish minutes more expeditiously, than otherwise would be required. (McCarthy v. Bonynge, 12 Daly, 336 ; affirmed, 101 N. Y. 668 .) We see no reason why it does not apply with equal force to the agreement in this case. When a statute forbids a person to ask or receive compensation for services in an official cr trust capacity, greater than that prescribed by law, an agreement to pay such extra compensation creates no binding obligation. (Hatch v. Mann, 15 Wend. 44 ; Crofut v. Brandt, 58 N. Y. 106 ; Moss v. Cohen, 158 N. Y. 240 .)

One of the defenses which the defendant interposed to the plaintiff’s claim was that the agreement was made under some kind of duress, but this was negatived by the verdict of the jury. We have assumed that it was freely made, but it was, nevertheless, open to the defendant to assail it upon the grounds that have been discussed.

The judgment must be reversed and a new trial granted, costs to abide the event.

I concur in the opinion of Judge O’Brien. I take this occasion to remark: The unanimous decision of the Appellate División, that there is evidence tending to support the verdict, is based upon the assumption that that court rules correctly upon the question of law applicable to the case. Both law and fact must support a verdict to give it validity; whence it follows that lacking either support it must fail. And where the supporting force of the law has been duly challenged during the trial, as in this case, the question of law is re viewable here, although the question of fact is not. The opposite doctrine seems to rest upon the theory that it is inconceivable that where the evidence supports a verdict, it can be reviewed upon the law without also reviewing it upon the.facts. Such is not the view of the .Constitution, for it does not preclude a review of the verdict or finding, but only of the unanimous decision of the Appellate Division that there is evidence supporting or tending to sustain it. It regards such decision as upon a question of law, otherwise there would be no need to exclude it from our jurisdiction to review questions of law. It excludes no' oth.er question of law,' although it enables the legislature to do so by enabling it- to further restrict our jurisdiction.

How, a review of the question whether there is evidence supporting or tending to sustain a verdict or finding is not a review of that other question of law, namely, what judgment does the law require upon the settled facts. We may concede that if the course of the trial has been such that we cannot tell by an inspection of the record whether the facts as found require the legal result which the verdict declares, we have •no question of law presented to us; but that is a mere question of practice. If, by an inspection of the record, we can see just what the facts are that have been settled, and also see that the question of law as to the verdict which the law requires thereon was distinctly presented, then, I think, we have jurisdiction to review it. Such is this case.

I submit that a party should not lose liis right of review of a question of law essential to his protection by a tribunal

Parker, Ch. J. (dissenting). Two insuperable legal barriers should bar this court from considering whether the defendant was at the close of the trial entitled to judgment:

First. The defendant did not move at the close of his testimony or at the close of the case for the dismissal of the complaint or" the direction of a verdict in his favor. The legal effect of that omission was recently stated by this court in Pollock v. Pennsylvania Iron Works Co. ( 157 N. Y. 699 ) as follows: “ The legal effect of the omission of the defendant at the close of the testimony to move either for a dismissal of the complaint or the direction of a verdict in its favor was to consent to the submission of the case to the jury. We are, therefore, prevented from considering whether the defendant was entitled to judgment.” (See, also, Hecla Powder Co. v. Sigua Iron Co., 157 N. Y. 437 , and the later case of Hopkins v. Clark, 158 N. Y. 299 , where the authorities upon this branch of the practice were considered and the reason for the rule adopted by this court given.)

Second. The Appellate Division has unanimously affirmed the judgment entered upon the verdict of the jury, which was not directed. That the recent amendment to the Constitution of this state in such a situation deprives this court from considering whether a defendant was entitled to judgment has been often held by this court. It has been said in the discussion of the question that this court cannot review the ruling of a trial court in denying defendant’s motion for a nonsuit even “ if it be true that the trial court erred in holding that the evidence was sufficient to require the submission of the case to the jury and the Appellate Division was wrong in deciding that the evidence sustained the verdict.” (Szuchy v. H. C. & I. Co., 150 N. Y. 219 , 222.) “We have no power to examine the record even to see if there is any evidence to

The complaint alleges that the defendant was financially distressed with creditors pressing him for payment but with a considerable stock of goods on hand which he feared “ would

It is contended that a certain written agreement introduced in evidence by the plaintiff is against public policy and void. Without at all consenting to that contention, but assuming for the sake of argument that it may be so, we cannot hold that the defendant was entitled to judgment, for, as we have seen, we cannot even look into the record to see whether the verdict is supported by evidence nor whether there is any or sufficient evidence for we are bound “ to presume that there was sufficient evidence to sustain the facts found by the jury.” It is difficult to understand a process. of reasoning by which the conclusion is reached that, .while we cannot look into the record to see whether there is any evidence to support a finding by the jury, but must presume that there was ample evidence for that purpose, still, if we do look and find some evidence, we may condemn it as worthless arid then hold, notwithstanding the unanimous affirmance of the Appellate

The only questions of law, therefore, that can come before this court on this review must be presented by exceptions taken to rulings of the court in admitting or rejecting evidence and to. the charge of the court. (Ayres v. D., L. & W. R. R. Co., 158 N. Y. 254 , 258.) And exceptions to the charge, which present merely the question whether or not there was evidence to warrant a finding ora verdict, cannot be considered, for it but presents in another form the question of law disposed of in the determination of the court to submit the case to the jury. That question was before this court in Cronin v. Lord ( 161 N. Y. 90 ) where the court was requested to instruct the jury that there was no evidence whatever of fraud or duress, and this court, in holding that the refusal of the court to so charge could not be reviewed in this court, the Appellate Division having unanimously affirmed the judgment entered on the verdict of the jury, said : “ It is not reviewable in this court whatever may be the form of the exception, whether to a ruling submitting the case to the jury, refusing a. nonsuit, or to a charge that there is or is not evidence, as the case may be,

' There were but three exceptions taken either to the charge as made or to the refusal of the court to charge as requested by the defendant. The first request was that the jury should be instructed that, if the general assignment was accepted by the plaintiff with the understanding at that time he was to perform all the duties contemplated by the contract of May 24, 1894, then that contract was without consideration. The court declined to vary its charge in that respect, and an examination of the main charge discloses that the court had already fully and fairly instructed the jury in relation to that question. The court, after instructing the jury generally as to the memorandum of agreement, submitted to them whether “ in entering into it the parties contemplated and intended to agree to start out to do something more than the mere legal requirements upon the assignee in carrying out the administration of the assigned estate in.ordinary cases ? If you so find upon the whole evidence in the case that the agreement does provide for more than was the duty of the assignee, then I charge you that it was such an agreement that the parties might properly enter into and provide for; that the defendant in this case would be responsible then for the compensation which he had agreed should be paid to the plaintiff. If, on the other hand, you- come to the conclusion that nothing more was contemplated by this agreement than simply adding to the legal fees, then the plaintiff in this action cannot recover, and your verdict must be for defendant.” The only other request to charge related to the same general question and need not be referred to, as it was fairly covered by that portion of the charge of the court to which reference has already been made. It should be observed, perhaps, that in the very able brief of the counsel for the appellant it is not claimed that the • court erred in its refusal to charge as requested or that the only exception taken to the charge in chief presents error.

The judgment should be affirmed, with costs.

Bartlett, Haight, Landon and Cullen, JL, concur with O’Brien, J., for reversal; Vann, J., concurs with Parker, Oh. J., for affirmance.

Judgment reversed, etc.