Wright v. Caney River Railway Co.

66 S.E. 588, 151 N.C. 529, 1909 N.C. LEXIS 316

• Court: Supreme Court of North Carolina
• Decided: December 23, 1909
• Status: Published

Opinion

Hoke, J.,

after stating tbe case: Tbe defendant company was organized under a charter conferring tbe power of eminent domain and tbe privilege of constructing tramways, railways, etc., for the transportation of passengers and freight, including logs, lumber, timber, etc.; and while its chief purpose was, no doubt, to exploit certain timber lands and market tbe timber growing Ihereon, for all purposes relevant to the present inquiry it is considered and held as a railroad and subject to the regulations and liabilities affecting such companies, including the statute known as the Fellow-servant Act (Hemphill v. Lumber Co., 141 N. C., 487) ; and from this it follows that the defendant railway and the trustee in charge and control at the time are responsible for actionable negligence done in the operation of the road under the lease and in the exercise of the franchise. Mabry v. Railway, 139 N. C., 388, citing Harden v. Railroad, 129 N. C., 354; Logan v. Railroad, 116 N. C., 940; Aycock v. Railroad, 89 N. C., 321.

It is chiefly urged for error that the defendant C. J. Morrow, trustee, has been held liable in his official capacity and the trust fund subjected to the payment of this claim; but we are of opinion that, on the facts presented here, the objection cannot be sustained. It is true, as a general rule, that a trust fund cannot be subjected to legal liability by reason of the torts of the trustee or his agents and employees, but this doctrine ordinarily exists in the case of passive trusts, or, when active, in those instances where the power and duties of the trustee are so defined and restricted hy the law, or the provisions of the instrument under which he acts, that the principle of imputed responsibility similar to that which obtains in the case of principal and agent does not and cannot prevail.

Thus, in McLean v. McLean, 88 N. C., 394, and several cases of like import cited and relied upon by defendants, it was held that a liability arising out of a transaction with an executor or administrator is personal in its nature, and will not, as a rule, be considered as an obligation of the estate. This is on the ground that these officers act under power conferred by the law for the purpose of settlement and distribution according to facts and conditions existent at the time of the death of the deceased; and the power to charge’the estate or create liabilities against it is not recognized unless contained in the will. Though, even here, if it is shown that an obligation has been assumed by an executor for the protection of the estate, and has inured to its benefit, its payment will usually be allowed him in an account with the dis-tributees. But no such limitation can be allowed on the facts presented here. It appears that the Wood-Galloway Company, a corporation, owners of large timber interests in the counties of Mitchell and Yancey, and elsewhere, and also of large amounts of lumber placed in various yards in said counties, estimated at several millions of feet, having become embarrassed, on 7 June, 1907, conveyed the same to 0. J. Morrow, trustee, with power to haul out and market said lumber and dispose of the timber lands and other property conveyed, and distribute tbe proceeds among the creditors mentioned and described in the deed; that on 5 June, 1907, two days before the date of the said deed, "William Whitmer & Sons, Incorporated, one of the principal creditors of the Wood-Galloway Company and cestuis que trust in the said deed, sublet to the trustee in same the railroad company for carrying out the purposes of the trust, and the trustee took charge of the road and was using and operating the same in hauling out the lumber and otherwise carrying out the purposes of the trust when the intestate was killed. Among others, the instrument contains the following provisions :

“For the purpose of carrying this trust into effect, it shall be the duty of O. J. Morrow, trustee, aforesaid, after giving a bond in the sum of $15,000, with good and sufficient security, to be approved by the Unaka National Bank and City National Bank, of Johnson City, Tennessee, to at once take charge of all said property for the benefit of said creditors, to take an invoice of the whole of said property as early as practicable and as convenient, and to furnish.a copy of said invoice to each of the creditors above named; to immediately deliver said lumber, on sticks, in piles or other conditions, on board the cars at Huntdale, North Carolina, from there to be shipped, under the direction of William Whitmer & Sons, Incorporated, or other persons whom the majority of the creditors in money may select, for which said William Whitmer & Sons, Incorporated, are to receive five per cent, commission on entire sale of lumber and trade discount two per cent, thirty days for shipment; the said trustee making copies, one of which shall be preserved by said trustee, one to be forwarded to the said Whitmer & Sons, Incorporated, and the third to be deposited in the Unaka National Bank, of Johnson City, Tennessee, for the use and benefit of the said creditors herein above named, and further copies with each of the other creditors above named. It shall be the duty of the trustee, aforesaid, to make an estimate of the quantity and value of all the standing timber or timber remaining uncut, of every character and description, and to furnish a copy of said estimate" to William Whitmer & Sons, Incorporated, and deposit one copy with the Unaka National Bank, of Johnson City, Tennessee, and each of the above creditors above named, for the use and benefit of the creditors hereinbefore named, and retain a copy of same in his own offices, which shall be subject to the inspection and examination by said creditors at any and all times, to be done at as early a date as practicable and convenient; to sell all the said standing-timber remaining uncut for cash, to the best advantage to all the parties therein concerned; and, to make.sale and disposition of the aforesaid timber, it shall be the duty of the trustee, aforesaid, before any offer for said timber shall be accepted, to submit the price, in writing, to the creditors hereinbefore named; that the said trustee shall make monthly statement of the amount realized from the sale of said lumber and timber, on or before the first day of each month, and he shall at no time retain in his possession or control a sum greater than $5,000 of the proceeds of said sale, but he shall at all times deposit and keep on deposit at the TJnaka National Bank, of Johnson City, Tennessee, proceeds of said sale of the said timber and lumber, and shall distribute and prorate the money arising from said sale among the creditors herein named, less the expense of handling the same and the operating expenses of the Caney Biver Eailway Company, which he may deduct from any moneys in his hands, furnishing an itemized statement, on or before the first of each month, of all expenses in conducting the said operation; and whenever he shall have on hand a sum equal to $5,000, the same shall be distributed among the creditors herein named, by prorating the amount according to the respective amounts due and owing each of the creditors above named.

“The said trustee shall receive as a salary the sum of $125 per month and his expenses from the time he enters upon his duty and until he discharges his trust, the same to be deducted and retained monthly in his monthly statement of expenses.

“It is further understood and agreed between the Wood-G-allo-way Company and the bank creditors, above named, that the said creditors shall have the right, and it shall be their duty, to furnish a competent inspector to inspect said lumber, whose duty it shall be to inspect and grade all such lumber, observing the rules, prescribed by the National Hardwood Lumber Association; and the books and records of said trustee and inspector, aforesaid, shall at all times be open to the inspection of any or all of said parties concerned, their agents or representatives, to this trans-faction.”

It will thus be seen that, under a lease to him, in his capacity as trustee, and under the powers contained in this deed, inter partes, the defendant C. J. Morrow, in the use and operation of the railroad, was acting throughout with the sanction and for the benefit of the creditors, the cestuis que trust, and to a large extent under their supervision and control, and should be held responsible, certainly to the extent of the property conveyed and in evidence, for both the contracts and torts of their trustee, made and committed within the scope of his powers and in fur therance of their interests. Sawyer v. Railroad, 142 N. C., 1; Jackson v. Tel. Co., 139 N. C., 347.

Not only is this true under the general principles of imputed responsibility indicated in these cases, but on authority more directly apposite, the defendant Morrow should be held liable in his official capacity. Thus, in Mersey Docks Board v. Gibbs, Lord Westbury lays down the position that trustees may render the property of their beneficiaries liable to third persons for an act done by them in the exercise of their trust. And in Bennett v. Wyndham, De Gex Fisher & Jones, Vol. IV, p. 259, it was held that trustees should be indemnified out of the trust estate, by reason of a recovery had against them for negligence of employees in carrying out an order given in the management of the estate.

Applying the same principle in the case of Miller v. Smythe, 92 Ga., 154, the Court held: “1. Where a trustee legally and rightfully assumes in his representative capacity the relation of landlord, he is liable, in that capacity, to answer to the tenant for the violation of any duty which the general law attaches as an incident to that relation. Accordingly, where a trustee, duly authorized, rented a store belonging to the trust estate, and in the contract of rental agreed to keep the shelving in the store in thorough order and repair, the trust estate is liable for damages occasioned by his failure so to do.”

And a ruling substantially similar has been made by our own Court in Cheatham v. Rowland, 92 N. C., 340. In that case it was held that the trust fund could be subjected to a liability created by the trustees in the performance of their duty concerning the trust ..property, and that the trustees only were required to be made parties in order to afford appropriate relief. The cases cited and relied upon by counsel for defendant, or some of them, seem to have proceeded on the principle that the acts of the trustee by which a liability was sought to be imposed upon the trust estate were not within the scope of the powers contemplated and conferred by the deed, or they were cases where the estate and the entire dominion over it for the purjoose of the trust were placed in the trustee, and the beneficiaries had no right of interference and control in its management. In Parmenter v. Barstow, 22 R. I., 245, plaintiff, passing along the highway, had her eye injured by chips and pieces of stone flying in her face, and attributed to the negligence of defendant’s “agents and servants,” engaged in cutting and chiseling stone on the premises. The facts of this case are not given with sufficient fullness to enable us to consider it satisfactorily in reference to the question presented here, but it does not appear in any report of the case to which we have access that the trustees were occupying the premises or carrying on the business indicated in furtherance of the trust, or that the beneficiaries had any direct interest in or control over it of any kind; and so, in Falardeau v. Students’ Association, 182 Mass., 405, the entire interest in a lease on a building was assigned to trustees for the remainder of the term, and responsibility of the corporation, the assignor, for negligence of the employees and servants of the trustees in the management of the building was denied, because it appeared that the trustee had the entire and exclusive control of the property,, and the employees could in no sense be considered the agents of the corporation.

But in our case the beneficiaries were parties to the deed; the operation of the road for their benefit was clearly contemplated, its expenses provided- for, and they were expressly given the right of interference and control in the main purpose of the trust, -to-wit, the disposition of the lumber, etc.

Other decisions apparently adverse were rendered, on the ground that the claim was asserted in a court of law, and a recovery could not be made effective without threatening the integrity of the trust fund and the entire frustration of its chiefest purposes; but no such objection can obtain here, in a court having full jurisdiction of legal and equitable issues, and where a part of the trust fund is in the control and custody of the court and available in satisfaction of the claim.

We must not be understood as questioning in any way the position upheld in Taylor v. Mayo, 110 U. S., 163, and Mitchell v. Whitlock, 121 N. C., 166, to the effect that a trustee is personally bound for his contract or acts done in the management of the estate, unless it is otherwise expressly or clearly stipulated.

In Mitchell v. Whitlock, supra, the principle referred to is thus stated: “A trustee, purchasing goods or incurring any other liability, is personally liable for the payment thereof, unless his liability is limited by an agreement, expressed or implied, with the creditor.”

In Taylor s case, supra, it appeared that Charles Davis, a retiring trustee, having a claim for fees and expenses, giving him a lien on the trust assets, turned over the fund to his successors, who gave him their written obligation, signed as trustees, that they would'apply the funds of the estate in payment of his claim, as they came to hand. The estate having become insolvent and the assets exhausted in suit by the administratrix of Davis, the trustees were held individually liable, and the principle was declared: “That if a trustee, contracting for the benefit of the trust, wants to protect himself from individual liability in the contract, be must stipulate, that be is not to be personally responsible, but that tbe other party is to look solely to the trustee.”

But in neither of these cases was it held that the trust estate could not also be held responsible to the creditor, or that the defendants, the succeeding trustees, on payment of the demand, could not be reimbursed from the funds of the estate, if there had been such funds available for the purpose. And in the present case, no doubt, the defendant Morrow could have been sued and held liable as an individual, because the intestate was one of his employees; but responsibility also attaches to the trust estate, and will be imputed to the beneficiaries, who are parties to the deed and were allowed and took part in its actual management and control.

There is no merit in the other exceptions, and they were very properly not insisted on. The amendment allowed made no substantial change in the nature of the demand, and wo have seen at the outset that our act as to fellow-servants applies to the defendant road and its lessees, operating the same, as well. Further, the declarations of a person, on a question of domicile, as to his intent in going to a given place, are always considered relevant, certainly when reasonably free from suspicion. 1 Green-leaf, 162c. And the charge of the court as to the burden of j>roof is in accord with our recent decisions on the subject. Overcash v. Electric Co., 144 N. C., 576; Stewart v. Railway, 137 N. C., 687.

There is no reversible error shown, and the judgment below will be affirmed.

No error.