Sherman v. . Parish

53 N.Y. 483, 1873 N.Y. LEXIS 427

• Court: New York Court of Appeals
• Decided: October 7, 1873
• Status: Published

Opinion

Folger, J.

It is plain that the complaint was framed in mistake of the facts of the case. So far from there having been an omission by the trustees to invest any part of the fund as directed, the whole of it was invested at first, in the prescribed kind of security. Afterward, though that kind of security was not sought, yet nearly the whole fund has been kept invested in sound securities, yielding income, which has been applied for the benefit of the plaintiff. The case alleged in the complaint has not been made out. But the proofs gone into have disclosed the whole case; and it may be disposed of as it exists, and as though the pleadings had been conformed thereto, in such manner as will save the rights of all concerned.

The defendant and Kernochan, for the most part, did not participate actively in the execution of the trust. They permitted their co-trustee to manage it alone. He was acceptable to the primary cestui gue trust, and of such pecuniary ability that no loss will result. His management was, in some respects faulty, from a disregard of the directions given. Yet the fund can be followed into sound securities, or found in the hands of responsible persons, or recovered from his estate, and brought again under a management in strict accord with the directions of the will. The power to mismanage was given to the acting trustee, by the acts of Kernochan and the defendant, devolving the sole management upon him. These acts were innocent in themselves, and in the orderly course of the matter. But without them he could not have acquired sole possession and control of the fund, and could not, of his own will, and without their knowledge, have made the unauthorized investments of the fund, or other disposition of it. .There has been no fraudulent conduct on the part of any trustee; neither has been guilty of any tort. There has been inattention to the duty imposed and accepted, and thus a chance for mismanagement given to the active trustee. It is a general rule that one trustee shall not be liable for the acts or default of his co-trustee. This rule has limits. But the majority of the court do not think, that by anything appearing in this case, is the defendant made liable to the plaintiff, for the acts of his co-trustee Henry Parish. And, if he were, when called upon to account, if held chargeable, he should be afforded his remedies against his co-trustees, and any third persons^, who have been accessory. Although he is not personally liable, yet, as it is evident that there has been a departure from the directions of the will, and as it is proper that they should be conformed to, and, as the defendant is, as sole surviving trustee, the only one who can perform this duty, there seems to be no reason, why this action may not be used to enable him, and the plaintiff through him, to effect that end, with proper safeguards of his rights. Hence it is, that the first question arising is, whether the plaintiff is not in fault, in not bringing before the court all the parties necessary for a determination of the whole case, so as to protect the defendant as well as the plaintiff. It is quite clear, that if the defendant had been held to answer in the first instance to the plaintiff, he should have recompense from the estate of the active trustee, contribution from that of the co-trustee equally in fault, and be enabled to pursue and recover the fund in the securities in which it has been put, and in the hands of the third parties receiving it with knowledge. (Lockhart v. Reilly, 1 De Gex & Jones, 464; Lingard v. Bromley, 1 Vesey & Beames, 114; Greenwood v. Wakeford, 1 Beav., 580.) It is convenient that those whom he may thus call upon should be parties in the action. Thus multiplicity of suits is avoided. The evidence affecting him in favor of the plaintiff will have its légitimate effect in his favor against others, and so diverse results in different actions be escaped, and one judgment in one action, upon one hearing, end all. It is the principle of courts of equity in cases of breach of trust, where no general rule or order of the court interferes, and when the facts of the case call for a contribution or a recovery over, that all persons who should be before the court, to enable it to make complete and final judgment, are necessary parties to the action. (Hill on Trustees, * 520, 521; Perry on Trusts, §§ 875, 876,877; Lewin on Trusts, *845 ; Munch v. Cockerell, 8 Simons, 219; Perry v. Knott, 4 Beav., 179; Shipton v. Rawlins, 4 Hare, 619; Cunningham v. Pell, 5 Paige, 607.) Nor has our mode of procedure abrogated this rule. The Code says that any person may be made a defendant, who is a necessary party to a complete determination or settlement of the questions involved in the action. There are certain exceptions to this rule, but none of them comes into this case.

There should have been, parties to this action, the representatives of Henry Parish, the representatives of Joseph Kernochan, also Allen M. Sherman and Ann Parish. At the least these. That they are not, is the fault of the plaintiff. The defendant raised, the point as soon as he could, which was by answer. He established the averments of his answer by his proofs.

It is said that a bill is never dismissed for want of parties, as that would be to increase or prolong litigation, thereby thwarting one of the very ends sought, by compelling the bringing in of all necessary parties. The cause is, therefore, often allowed to stand over when the lack of parties appears, that they may come in or be brought in. This practice is not universal nor rigid. If, after timely objection of want of parties, the plaintiff does not bring them in, the complaint may, in the discretion of the court, be dismissed, but without. prejudice to a new action. (Van Epps v. Van Deusen, 4 Paige, 64.)

In the case before us, the learned referee dismissed the complaint with costs, finding, as a conclusion of law, that the plaintiff had no cause of action against the defendant. He did not found his judgment upon the want of necessary parties. The General Term affirmed the judgment of the referee. Its judgment was not upon that ground alone. This is noticed here, because the defendant makes a point, that the dismissal of the complaint, for such cause, is in the discretion of the court below, the exercise of which may not be reviewed by this court. There is a discretion, whether a complaint shall be dismissed or the cause stand over; but there is not a discretion to dismiss, save to dismiss without prejudice to the right, to bring another action for the same cause. An unqualified judgment, dismissing a complaint for want of proper parties, it is held, is erroneous, as that might bar another suit in which the proper parties are brought before the court. (Van Epps v. Van Deusen, supra; Miller v. McCan, 7 Paige, 451; and see Hutchinson v. Reed, Hoffm. Chy. R., 316.) Here the dismissal is absolute, reserving no right. It is not the exercise of discretion merely, on account of the absence of necessary parties, and is subject to review* Considering the facts in reference to this question alone, it is not demanded by them that the complaint should be dismissed absolutely for the lack of necessary parties, nor even that it should be dismissed without prejudice to the right of the plaintiff) to bring a new action for the same cause against all the proper parties. It is plain that the directions of the will, as to the investment of the trust fund, have not been adhered to; that the income from the fund, though it has gone to the benefit of the plaintiff, has not been paid out in exact accordance with the will, and it is not certain but that some part of the fund is beyond recovery from the hands into which it has gone. Hnless the acquiescence of the plaintiff relieves her trustees, they, or the estate of some or one of them, are liable to respond. It is needlessly harsh, needlessly dilatory, and needlessly prolongs litigation to dismiss the complaint, though without prejudice, and put the plaintiff to a new action, when the same end may be reached, by allowing the cause to stand over on such terms as are equitable, until the plaintiff shall bring in all the necessary parties. It is claimed, however, by the defendant, that the plaintiff has acquiesced in all the dealings with the trust fund of the active co-trustee, and of Allen M. Sherman; and that such acquiescence relieves the defendant from liability to her. It is found, by the learned referee, that the plaintiff fully assented and acquiesced in the exclusive control and management of the co-trustee after May, 1846, and especially with the disposition of the $18,000, after it was paid on the Van Schaick mortgage. It is also found or shown by the test!-' mony, that she did this with knowledge of all important and material facts and circumstances. It is also apparent, from the testimony, that she was not the subject of fraud, compulsion, undue influence or the like. I am satisfied, from a careful reading of the case, that the findings in this regard are sustained. It is stated generally in the text-books that acquiescence, by the cestui que trust, in a breach of trust by the trustee, will bar a recovery therefor. (Hill on Trustees *525 et seq.; Perry on Trusts, §§ 467, 849 ; Lewin on Trusts * 773, 774.) And this proposition is sustained by the authorities cited, of which see Brice v. Stokes (11 Vesey, Jr., 325). This generality is stated to be so limited, as that the cestuis que trust must be sui juris and capable of acting for themselves ; so that married women, minors and others thus under disability cannot be bound by alleged acquiesence, or even by urgent requests. This, again, is qualified to the extent, that a married woman may acquiesce in an unauthorized investment of trust property, given to her sole and separate use, in such manner as to bar her, after complaint of the investment as improper, so as to affect her trustee personally. ( Walker v. Shore, 19 Vesey, Jr., 387; Jaques v. Meth. Epis. Ch., 17 J. R., 548.) Such is the case here.

These being the facts, and this the law, the defendant is, in this wise, again relieved from a personal liability to the plaintiff for the acts of his co-trustee in making unauthorized investments of the trust fund, and in paying over the income from the fund to her husband to be expended for her benefit. And yet this acquiescence of the plaintiff does not cover all the contingencies. In case of her death before that of her husband, the fund is to be distributed among her children, if she have any; or if she have none, among her next of kin. Her acquiescence may not bar them of a right to inquiry of, or through the defendant after the trust fund, and of an account and of a restoration from parties liable thereto. Furthermore, I know of no reason why, if the plaintiff is now dissatisfied with her own conduct and that of the active co-trustee, she may not so far reconsider, as to seek a withdrawal of the principal of the fund from the unauthorized investments, and the placing of it in the kind of securities sanctioned by the will, and may pursue such portion of the principal as has gone into the hands of third persons, to the same end; and may, in the use of the fund, and in the payment for her benefit of the income, restore it to a proper course of management. And if, through the conduct of the active co-trustee and her concurrence, any of the principal has been lost, it may be replaced from her own estate existing outside of the trust or by his estate, as shall be adjudged.

This action, when all persons have been brought in as parties who are necessary to a complete determination, may be used for that purpose if she be so advised. This must be done at her own cost and expense, so far as the defendant now in the action is concerned; and his entire costs of the action should be paid by her.

In this view of the case, it is not necessary to pass upon the question raised, of whether the statute of limitations creates a bar to the action of the plaintiff. We hold that she cannot have a judgment which will affect him personally. But he is still trustee. He still has a duty to perform in regard to the trust fund, which is to reduce to possession the securities in which it is invested; to change them into such securities as will accord with the directions given to him; and to pursue and recover any part of the fund which has gone into the hands of third parties, and who are liable to restore it.

It is in this view that we think that the action should proceed with the defendant as a party, and such new parties as are necessary or proper.

The judgment of the referee and of the General Term, should be modified accordingly.'

All concur.

Judgment accordingly.