The Chancellor.
As the plaintiff took no exception to the testimony taken before the master, and has not shown, by affidavit, what that testimony was, nor called upon the master to report the facts, I have a right to presume, that the master had sufficient evidence before him to warrant the conclusion, that the plaintiff had used and employed the money belonging to the estate in his business or trade. The master says, that the fact of the appropriation of the assets by the plaintiff to his own use, appeared from the vouchers submitted in taking the account, and from the examination of the plaintiff. How can I say, then, that this allegation is not correct and true 1 lam bound, as the case is now before me, to consider every fact stated in the report to have, been duly established by competent proof; and the only real question in the case is, whether the charge of compound interest be proper.
It has been settled, by repeated decisions, that executors and administrators are not entitled to any commission for executing their trust; and it is equally well established, that they must, at all events, pay interest upon moneys of the estate converted to their use. These two points I was led to examine, with much care, in the cases of Dunscomb v. [624]*624Dunscomb,
No just complaint can be made of the time from which con)pUtation of interest began. The plaintiff was allowed nearly two years to settle the estate, without being ’chargeable with, interest. For a considerable part of that time he had a large balance in hand, and the time was amply sufficient, in this case, to close the concerns of the administration, and the debts were all paid within that time, with, one or two trifling exceptions. It was the duty of the plaintiff, from that time forward, to have made distribution of the assets, or placed them in a situation to become productive, and to accumulate for the heirs. He did neither, but employed the money in his own business, or trade, or in making large loans for his own benefit; and as he has not disclosed (as he might have done to the master) what were the profits of the assets so employed, it appears to me, as well on principle as on authority, that he is justly chargeable with the interest contained in the report. The only way for the plaintiff to avoid this conclusion, was by fairly disclosing 'what he had made by the use of the money.
The courts were, anciently, quite lax on the subject of these personal trusts, and allowed executors to convert the moneys of the testator to their own use, without any account for interest. This must have been the source of great abuse, and was unjust towards the cestuy que trust. With such a pecuniary privilege, the office of trustee, as Lord Loughborough "expressed himself, would be canvassed for. This blemish in the English jurisprudence was corrected as early as the case of Ratcliffe v. Graves, (1 Vern. 196. 2 Ch. Cas. 152.,) in which the Lord Keeper held, and, as it is said, against many precedents, that the administrator must •> pay interest for the moneys of the estate employed in his own business; and he laid down this principle, which runs [625]*625through all the subsequent cases, that an executor ought not to turn the money to his own private advantage. The rate of interest is not stated; and, from different reports of that case, it is uncertain whether the money was employed by the administrator in trade or in loans. The recognition of the principle was, however, a great improvement; but the modern cases have felt the necessity of explaining and defining the duties and responsibility of the trustee with more precision, in order to give greater efficacy to the just and salutary doctrine, that a trustee shall never be permitted to make gain to himself of the trust property.
In Newton v. Bennet, (1 Bro. 359.,) the executor mixed the testator’s money with his own, and applied it in the course of his trade; and the master, in taking the account, made rests every year, and reported a large balance against the defendant; and the question was, whether he should pay interest for the sums, from time to time, in his hands, and it was decreed that he should. In this case I should conclude, that compound interest was allowed, though the making of periodical rests, in taking an account, seems not, of itself, necessary to imply it. Accounts have frequently been directed to be taken with annual rests; (2 Atk. 410. 534. 6 Bro. P. C. 319. old edit.;) perhaps, to see whether interest ought to be charged, or to relieve the defendant in the application of his payments; and in one instance they were expressly directed to be made without prejudice to the question of interest. (16 Vesey, 97.) Whatever might have been the fact, in the case above cited, it is certain that the allowance of compound interest is often essential to carry into complete effect the principle of the court, that no profit, gain, or advantage, shall be derived to the trustee from his use of the trust funds. All the gain must go to the cestuy que trust. This is the true equity doctrine. It secures fidelity, and removes temptation; and it is the ground of this allowance of annual rests, in the taking of the account, where the executor has used the property, and does not dis[626]*626close the proceeds. The principle was more clearly enforced in Treves v. Townshend, (1 Bro. 384.,) which was the case of the assignee of a bankrupt who suffered the money of the estate to lie idle for years with his private banker. The Chancellor considered money so placed as answering tlie purpose of credit and trade, and though 4 per cent, was the usual interest of the court, in a case of mere neglect to pay, yet it was presumed that the money was worth 5 per cent, to the assignee, and he was held to account for all the gain; and 5 per cent, interest was, accordingly, decreed, with costs. The same rule appears in a variety of other cases, (1 Vesey, jun. 89. 4. Vesey, 620. 11 Vesey, 58.,) in which the increase of interest to 5 per cent, was given to meet a presumed gain. In Pocock v. Reddington, (5 Vesey, 794.,) an executor having been guilty of a breach of trust by selling out stock, and dealing improperly with the trust monéy, the cestuy que trust was allowed the option to have the stock replaced, or the proceeds of the sales, with interest at 5 per cent., or more, if more had been made by it. The observations of Lord Mvanley, in that case, are strong and impressive. The defendant “ had very imprudently, and, he must say, very improperly, taken upon himself to lend the money of his ward to his own friends, and upon personal security, and for that purpose he sold out stock,” &c. “ That was a transaction that it was impossible to permit to pass without animadversion. He had no right to put it in that hazard. No man is justified in putting the property, of which he is trustee, in jeopardy. Therefore, he must answer for the money with what he may be supposed reasonably to have made; and if he made more, he must answer for that too.”
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The Chancellor.
As the plaintiff took no exception to the testimony taken before the master, and has not shown, by affidavit, what that testimony was, nor called upon the master to report the facts, I have a right to presume, that the master had sufficient evidence before him to warrant the conclusion, that the plaintiff had used and employed the money belonging to the estate in his business or trade. The master says, that the fact of the appropriation of the assets by the plaintiff to his own use, appeared from the vouchers submitted in taking the account, and from the examination of the plaintiff. How can I say, then, that this allegation is not correct and true 1 lam bound, as the case is now before me, to consider every fact stated in the report to have, been duly established by competent proof; and the only real question in the case is, whether the charge of compound interest be proper.
It has been settled, by repeated decisions, that executors and administrators are not entitled to any commission for executing their trust; and it is equally well established, that they must, at all events, pay interest upon moneys of the estate converted to their use. These two points I was led to examine, with much care, in the cases of Dunscomb v. [624]*624Dunscomb,
No just complaint can be made of the time from which con)pUtation of interest began. The plaintiff was allowed nearly two years to settle the estate, without being ’chargeable with, interest. For a considerable part of that time he had a large balance in hand, and the time was amply sufficient, in this case, to close the concerns of the administration, and the debts were all paid within that time, with, one or two trifling exceptions. It was the duty of the plaintiff, from that time forward, to have made distribution of the assets, or placed them in a situation to become productive, and to accumulate for the heirs. He did neither, but employed the money in his own business, or trade, or in making large loans for his own benefit; and as he has not disclosed (as he might have done to the master) what were the profits of the assets so employed, it appears to me, as well on principle as on authority, that he is justly chargeable with the interest contained in the report. The only way for the plaintiff to avoid this conclusion, was by fairly disclosing 'what he had made by the use of the money.
The courts were, anciently, quite lax on the subject of these personal trusts, and allowed executors to convert the moneys of the testator to their own use, without any account for interest. This must have been the source of great abuse, and was unjust towards the cestuy que trust. With such a pecuniary privilege, the office of trustee, as Lord Loughborough "expressed himself, would be canvassed for. This blemish in the English jurisprudence was corrected as early as the case of Ratcliffe v. Graves, (1 Vern. 196. 2 Ch. Cas. 152.,) in which the Lord Keeper held, and, as it is said, against many precedents, that the administrator must •> pay interest for the moneys of the estate employed in his own business; and he laid down this principle, which runs [625]*625through all the subsequent cases, that an executor ought not to turn the money to his own private advantage. The rate of interest is not stated; and, from different reports of that case, it is uncertain whether the money was employed by the administrator in trade or in loans. The recognition of the principle was, however, a great improvement; but the modern cases have felt the necessity of explaining and defining the duties and responsibility of the trustee with more precision, in order to give greater efficacy to the just and salutary doctrine, that a trustee shall never be permitted to make gain to himself of the trust property.
In Newton v. Bennet, (1 Bro. 359.,) the executor mixed the testator’s money with his own, and applied it in the course of his trade; and the master, in taking the account, made rests every year, and reported a large balance against the defendant; and the question was, whether he should pay interest for the sums, from time to time, in his hands, and it was decreed that he should. In this case I should conclude, that compound interest was allowed, though the making of periodical rests, in taking an account, seems not, of itself, necessary to imply it. Accounts have frequently been directed to be taken with annual rests; (2 Atk. 410. 534. 6 Bro. P. C. 319. old edit.;) perhaps, to see whether interest ought to be charged, or to relieve the defendant in the application of his payments; and in one instance they were expressly directed to be made without prejudice to the question of interest. (16 Vesey, 97.) Whatever might have been the fact, in the case above cited, it is certain that the allowance of compound interest is often essential to carry into complete effect the principle of the court, that no profit, gain, or advantage, shall be derived to the trustee from his use of the trust funds. All the gain must go to the cestuy que trust. This is the true equity doctrine. It secures fidelity, and removes temptation; and it is the ground of this allowance of annual rests, in the taking of the account, where the executor has used the property, and does not dis[626]*626close the proceeds. The principle was more clearly enforced in Treves v. Townshend, (1 Bro. 384.,) which was the case of the assignee of a bankrupt who suffered the money of the estate to lie idle for years with his private banker. The Chancellor considered money so placed as answering tlie purpose of credit and trade, and though 4 per cent, was the usual interest of the court, in a case of mere neglect to pay, yet it was presumed that the money was worth 5 per cent, to the assignee, and he was held to account for all the gain; and 5 per cent, interest was, accordingly, decreed, with costs. The same rule appears in a variety of other cases, (1 Vesey, jun. 89. 4. Vesey, 620. 11 Vesey, 58.,) in which the increase of interest to 5 per cent, was given to meet a presumed gain. In Pocock v. Reddington, (5 Vesey, 794.,) an executor having been guilty of a breach of trust by selling out stock, and dealing improperly with the trust monéy, the cestuy que trust was allowed the option to have the stock replaced, or the proceeds of the sales, with interest at 5 per cent., or more, if more had been made by it. The observations of Lord Mvanley, in that case, are strong and impressive. The defendant “ had very imprudently, and, he must say, very improperly, taken upon himself to lend the money of his ward to his own friends, and upon personal security, and for that purpose he sold out stock,” &c. “ That was a transaction that it was impossible to permit to pass without animadversion. He had no right to put it in that hazard. No man is justified in putting the property, of which he is trustee, in jeopardy. Therefore, he must answer for the money with what he may be supposed reasonably to have made; and if he made more, he must answer for that too.”
But there are cases which not only contain the general principle, that a trustee using the trust money must account for all the profit of it, but, in order to reach that profit when it is not otherwise ascertained, they adopt the very rule of computation contained in the report before us.
[627]*627In Foster v. Foster, (2 Bro. 616.,) the defendant was executor of a receiver, and the money was derived from the rents and profits of land ; and the master was directed to compute interest, at 4 per cent., on the balance he should each year find in the hands of the receiver, and, also, of the executor. In Raphael v. Boehm, (11 Vesey, 92.,) the direction was to take an account against the executor, who was a trader, and to compute interest, at 5 per cent., on moneys in his hands from the time he received it, and in such computation to make half yearly rests for the very purpose of allowing compound interest. This was carrying the rule far beyond the present report, and the case led to a full and able discussion of the whole principle ; and the general rule was sanctioned by Lord Eldon, under the influence of all that caution and anxious inquiry for which he is distinguished. It was declared, in that case, to be the general understanding of the masters, that where rests were directed to be made in taking an account, they were to be made with the view of computing compound interest; and it was admitted by the counsel, who opposed the allowance, that if a trustee had made, or if there were ground to infer that he had made, compound interest, or more, he must account accordingly. The Chancellor observed, that the charge of compound interest, in that case, was consistent with every view of moral justice: and that the court would shamefully desert its duty to infants, by adopting a rule that an executor might keep money in his hands without being answerable as if he had accumulated. The same rule was, afterwards, adopted by Sir Wm. Grant, in Dornford v. Dornford, (12 Ves. 127.)
It would be easy here to show, as was done in that case, the injustice to the infants in denying compound interest, and the direct gain that would be permitted to the plaintiff Thus, in July, 1805, he had in hand 33,000 dollars of moneys belonging to the estate, and no debts to pay. In July, 1806, he received, (as we must presume,) for the use of that fund, in his trade and by his loans, at least, the simple [628]*628interest, or 2,310 dollars. That sum he will, then, retain in his business for nihe years, or to the taking of the account, free of interest. The next year, or July, 1807, he receives another year’s interest, and will then have in hand, of interest, 4,620 dollars, to be used for his own advantage, for eight years, free of interest. The third year he will have in hand near 7,000 dollars, to be retained for seven years, without interest, and so on down to the date of the report. The fund, instead of accumulating for the benefit of the infants, accumulates for his benefit. In this way, as Lord Eldon observed, the property would be nearly as beneficial to the executor as to the infant, and this would overthrow the principles of the court. Such a consequence cannot be endured. A man in trade could afford a large premium for letters of administration upon a rich estate, especially if the infant heirs were very young. What temptation would thus be held out to delay and negligence in rendering an account! What inducements to trustees to employ the trust moneys in their own private speculations and trade, to the hazard of the loss of the whole fund !
In the ordinary case, between debtor and creditor, compound interest is not recoverable. This point I had occasion to examine fully in the case of The State of Connecticut v. Jackson.* But here a charge of such interest becomes indispensable to enable us to reach the gain'or profit which the plaintiff ought to refund.
It cannot be amiss to observe, at the conclusion of this opinion that the civil law was not forgetful of the justice and necessity of such a strict provision against trustees who converted the trust moneys to their own use. While it gave ordinary interest against the tutor, who suffered the pupil’s money to lie idle; yet, if he converted it to his own purposes, he was held responsible for interest non ex more regionis, (as 5, or 4, or 3 per cent.,) sed gravissimas vel maximas usuras, which different commentators fix at 12, or 8, or 6 per cent., while 4 per cent, was the ordinary interest. (Dig. [629]*6293. 5. 38 Ibid. 26. 7. 7. 6. and 10. (Code, 5. 56., with the notes of Gothofredus, and Voet's Comm. ad. Pand. lib. 26. tit. 7. s. 9.) Such concidence, on this particular point, between two such systems of jurisprudence, serves, of itself, to show that the principle adopted has a clear foundation in natural justice, or, at least, is recommended by the obvious dictates of public policy. Indeed, it appears to me to be an interesting fact, that the refusal of compound interest, in ordinary cases, between debtor and creditor; the denial of compensation to executors and other trustees 5 the charge of simple interest against them when they negligently suffer the trust moneys to lie idle 5 and the charge of extraordinary interest against them when they convert it to their own use, are distinct principles, not only well-settled in the English law, as I have abundantly shown in this, and in the other cases referred to, but they all existed as known principles in the civil law of Rome. And those • principles, from the prevalence of that code, are now, probably, acknowledged and settled, as part of their common law, in most of the continental nations of Europe.
This historical fact is calculated to inspire us with much respect for these principles, independent of their practical utility in securing the diligence and fidelity of trustees.
The exceptions to the report must, accordingly, be overruled.
Exceptions overruled.
Ante, p. 508.