Judges： Gibson
Filed Date： 4/16/1835
Status： Precedential
Modified Date： 11/14/2024
The opinion of the court was delivered by
The exception to the semi-annual balances, taken by the trustees, depends on matter involving distinct grounds of fact — the supposed proof that some of the mortgages were had at a discount — and the supposed want of proof that the accountant had paid the interest which accrued between the last day of its payment and the day of purchase.
The cause has been argued on this exception, as if the matter were res integra. The degree of weight due to a report of auditors has not I believe been determined; but the parties certainly do not stand here as they stood at the hearing. It was the business of the auditors not merely to collect proofs for adjudication by the court, but to adjudicate themselves subject to exceptions, and that they report the proofs at all, is but to assist the court in the determination of those exceptions. They may, if they think fit, refer the facts to the court upon the proofs, and when specifically instructed, it is their business to do so; but here their authority was unlimited, and they have exercised it by an adjudication which comes to us with the testimony, but possibly not with all the concessions on which it was
The compensation, which forms the subject of'the second exception of the accountant, and the third of the trustees, seems to be a reasonable one. . Though usually awarded in the form of commission, the rate is not determinable by any established practice of rule, being graduated to the responsibility incurred, the amount of the estate, and the sum of • the labour expended. It may be awarded even in a gross sum, according to a common practice in the country, which I take to be the preferable one, as it necessarily leads to an examination of the nature, items, and actual extent of the services; which the adoption’of a rate percent, has a tendency to leave out of view. To adopt the same rate in all cases, would often produce a monstrous overcharge. In the case before us, the commission is rather less than five per cent, which, for the management of a fund of some forty thousand dollars, accumulated tó a hundred thousand in twenty years, gives a sum to which, whatever be the operation by which it is attained, objection cannot be taken by either side, and this to compensate not only for labour expended, but for responsibility and expenses, incurred in litigation.
The credits for maintenance and education, and for expenses in the voyage to England, embraced in the accountant’s first exception, were properly disallowed. The whole subject was disposed of by the simple admission of the accountant’s ability. It is alleged that the admission went no further than his ability to raise the means, but not without injuriously impairing his means.of educating and supporting his other children. If the fact were so, it would undoubtedly make a fair exception to the rule, which requires a father to support his child with the father’s substance. But that is not the tone of the admission as it is reported to us; and if the’allegation that such was actually the fact be founded, it has not been shown to us. The expense of the voyage stands on the same footing. The purpose of it being a necessary one, and the means unattainable without recourse to the guardianship fund, or injustice to the other children,
The interest account is the subject of the third exception of the trustees, and of the third and fourth of the accountant. Interest is charged on the moneys collected, or that in the opinion of the auditors ought to have been collected, allowing an average of three months for investments, instead of charging the interest actually made on principal and interest received — a process which produces compound interest, though the introduction of rests has not necessarily that effect — the propriety of which, even in the most flagrant case, seems not to be entirely settled, at least by common consent. The subject was elaborately investigated in the matter of M Call’s estate, Ashm. R. 357; and though I concur in the propriety of the order of confirmation, I am unable to concur in the abstract conclusion of the auditor,that compound interest can be awarded under no circumstances, at least against an administrator; and that the decree in Schieffelin v. Stewart, is not sustained by the British authorities extant when it was pronounced. One of the latest of them, embracing the concurrent opinions of Lords Rosslyn, Eldon, and Erskine, pronounced in Raphael v. Boehm, which was elaborately argued and solemnly adjudged, twice by Lord Eldon, is direct to the point. It is but of little account that the preceding decisions had not carried the principle so far. It was at one time notoriously the course of the court to charge no interest in any case; but no one would pretend that a respect for the original practice, admitted on all hands to have been unjust, ought to raise a doubt of the soundness of that which superseded it, which giving a compensation graduated sometimes to the measure of chancery interest, and sometimes to that of legal interest, according to circumstances, was founded, so far as it went, in the immutable principles of justice. The law was in a-state of progression, and the new practice was a point gained in the inarch of improvement. But it was not the ultimate point; and it is therefore not easy to apprehend how the decree in Raphael v. Boehm was an insufficient foundation for a similar decree in the state of New York, where British precedents since the declaration of independence are not prohibited. The rule of compound interest may doubtless be thought to have been mitigated, if not abolished, in that country by subsequent decisions. But to say nothing of the fact that these decisions were by judges of inferior degree — two of
In the United States, as in England, it is embarrassed by conflicting opinions. Schieffelin v. Stewart stands unimpeached by subsequent decision in the state of New York. It is recognized as furnishing the rule by Vice Chancellor M’Coun, in the late case of Garniss v. Gardiner, 1 Edwards’ R. 130; and it is not impugned by Jones v. De Peyster, 2 Wendell, 77, which was a case of omission, and whatever the court may have thought of the doctrine in cases of corruption, not a legitimate subject of it, though more than compound interest seems to have been given in fact. In South Carolina, the legality of it in extraordinary cases, seems to be conclusively established by the court of the last resort in Wright v. Wright, 2 M‘Cord’s Ch. R. 200, and Myers v. Myers, id. 266, in which the doubts about it that had been entertained in that state, were put at rest. In Maryland, also, it is established by the highest tribunal of the state, in Ringgold v. Ringgold, 1 Harris & Gill, 79, and Diff fenderfer v. Winder, 3 Gill & Johns. 345; and in Massachusetts by the Supreme Court in Robbins v. Hayward, 1 Pickering, 345, where the doctrine as decided in Fay v. Howe, (in notis) is recognized and assented to. In Virginia alone it seems to have been rejected. In our own state we have no decision directly on the point. Harvey v. English, 2 Rawle, 308, was a case of negligence, and therefore not
And why should it not be sustained on principle? It is a fundamental rule of equity that a trustee shall not make profit of the fund for himself; and the substitution of interest for profits not ascertainable, is but a modification of it. Such being the admitted basis of the rule, no colourable reason can be assigned why it-should not be applied as well to an administrator who has used the trust moneys without having accounted for the profits, as to an executor or trustee bound by instructions, or the nature of his office to invest for accumulation. If he trade with the moneys of the fund, he shall, like any other trustee, make good the loss or render the gain; and where it is indeterminate by reason of his refusal to account, (always an index of fraud) the presumption is, that it was at least equal to simple interest for the year, and that being in his hands at the end of it, it became capital and made gain in its turn. If it were no greater in fact than simple interest for the period, he has no more to do, in order to get rid of the presumption of compound profits, than to show the truth by exhibiting the accounts. While he stands out, the presumption that he made more than the sum obtained by the method of computation employed against him, is an irresistible one, else the result would make it worth his while to disclose the truth. If he kept no accounts, he cannot murmur at the adoption of that rule of computation which is most beneficial to the fund, and but a reasonable penalty for his negligence. Interest is payable periodically; and the matter resolves itself into a question, whether a trustee may superinduce a state of things that shall give him the benefit of its earnings in prejudice of the fund. Take the case of an executor plainly bound to accumulate, who deliberately disregards his testator’s directions to re-invest, and becomes a borrower from the fund at simple interest: shall not the interest as it falls due, be principal in his hands as it would have been had he received it from a stranger ? In such a conjuncture it is impossible to conjecture how the fund can be rightfully left in a less prosperous condition than it would have attained, had he re-invested according to the terms of the will. To suffer a trustee to elude the conditions of the trust, by borrowing from it at simple interest, and using the proceeds for his own advantage, would offer an irresistible temptation to mal-administration by enabling him to benefit by his own wrong. That interest should not bear interest, is not a dictate of justice, but the effect, in particular cases, of arbitrary enactment founded, it is thought by some, in a questionable policy; and in a case distinctly out of the purview of the statute, where the statutory measure is arbitrarily but necessarily assumed for the computation of profits, there is no imaginable reason why the product should not be compounded where there is reason to believe that the profits were compounded; or why the
Granting then that compound interest maybe assumed as the rate of computation in extreme cases, what is the character of the case before us? A decisive feature of it is, that there is not a particle of proof that the accountant traded with the moneys of the trust, or employed them in his business, at least without charging interest as principal; or that he refused to render fair accounts of all his transactions. The auditors say that it was not shown that he had kept the trust moneys separate and distinct from his own; which however would make but a case of negligence. But neither was there evidence of commixture; and whatever may have been the state of the proof before, them, or the consequences of it in reference to the onus, it certainly has been distinctly shown here, that the moneys were regularly deposited in bank'tothe credit of the trust; whence they were drawn on checks for investment or re-payment of advances made to secure an advantageous purchase when the moneys on hand were insufficient -to complete it. These purchases were made in the name of the guardian; and hence an argument that the bargain was susceptible of being set down to his own account when a good one, and to the account of the ward when it proved otherwise. But the evidences of the transaction, always accessible to the ward, would show the purchase to have been made with his money, and defeat an attempted fraud by creating a resulting trust for him. In conclusion, it is but just to say, that the estate has been managed with an uncommon degree of fidelity, care, and discretion, the fruit of which is an accumulation of it to more than twice its original amount in a period of twenty years, and without the loss of a dollar; that there has been no unnecessary delay in the business of investing; and that the omission to invest a part, was produced by a mistaken but honest belief, that the maintenance and education of the ward were to come from it. The accounts are- therefore remanded to the auditors with directions to charge the accountant, with the interest actually made on sums invested, computed from the date of each investment; and with simple interest on the uninvested sums retained in his hands, computed from the receipt of each: but with no more.
Ordered accordingly.