Jessup v. Smith

• Decision Date: 26 March 1918
• Citation: 119 N.E. 403,223 N.Y. 203
• Parties: JESSUP v. SMITH et al.
• Court: New York Court of Appeals Court of Appeals

223 N.Y. 203

119 N.E. 403

JESSUP

v.SMITH et al.

Court of Appeals of New York.

March 26, 1918.

Appeal from Supreme Court, Appellate Division, First Department.

Action by Henry W. Jessup against George W. Smith, as trustee, and others. From judgment of Appellate Division, affirming judgment for defendants (170 App. Div. 605,156 N. Y. Supp. 553), dismissing complaint on the merits, plaintiff appeals. Reversed.

1. TRUSTS k320-COMPENSATION OF TRUSTEE-LIEN.

A trustee who pays his own money for services beneficial to the trust has a lien for reimbursement.

2. TRUSTS k250-ATTORNEY FEES-REMEDY FOR COLLECTION.

Where a trustee employs an attorney to perform services beneficial to the trust, but is unable to pay him, such attorney may sue to charge the estate for his services, since the trustee, not having made a disbursement, is not entitled on his accounting under Code Civ. Proc. ss 2726, 2731, 2732, 2753, to a credit for the amount of the fees.

3. TRUSTS k211-CONTRACTS OF TRUSTEE-EMPLOYMENT OF COUNSEL.

Services of an attorney to a trust estate in resisting an effort to remove one of two trustees, and in procuring the appointment of a third trustee, thereby breaking a deadlock, were beneficial to the estate.

Henry W. Jessup, of New York City, for appellant.

E. De T. Bechtel, of New York City, for respondents.

CARDOZO, J.

In October, 1913, George W. Smith was one of the trustees under the will of Samuel J. Tilden. Lewis V. F. Randolph was a cotrustee. The two trustees had power to select a third to fill the vacancy created by the death of John Bigelow. They could not agree upon a choice. They differed also in respect of other problems of administration. A deadlock had been reached, which threatened, as the findings state, the orderly and efficient execution of the trust.

Some of the beneficiaries under the will, in union with Mr. Randolph, began a proceeding in the Supreme Court for the removal of Mr. Smith, and for the appointment of Mr. Cornelius B. Tyler as his successor. They alleged that there was lack of harmony between the trustees which was injuring the estate, and they charged Mr. Smith with inefficiency and misconduct. Upon the service of this petition, Mr. Smith retained the present plaintiff, Mr. Jessup. He told Mr. Jessup that he was poor, and unable to pay the fees of counsel, who would have to look to the estate for payment. The finding is that Mr. Jessup ‘agreed to accept such retainer, and to render his professional services in the premises on the faith of the trust estate and with knowledge of the poverty of the defendant, George W. Smith, as trustee, and his inability personally to pay for such service.’

Under that retainer, Mr. Jessup opposed the application for the removal of his client. He made at the same time a cross-application to appoint a third trustee. In all that he did, he was successful. The application to remove was denied. The cross-application was granted. The Hon. Charles F. MacLean, for many years a justice of the Supreme Court, was named as the third trustee. On appeal to the Appellate Division, the order was affirmed. The plaintiff then began this action, joining as defendants all persons interested in the estate, and praying that the value of his services be declared a charge upon the trust, which consists of money and securities. The trial judge found that the services had been rendered; found that the opposition to the attempted removal was just and reasonable; found that the value of the services was $1,750; but held that the services were beneficial to Mr. Smith personally, and not to the estate. Judgment was therefore granted dismissing the complaint. At the Appellate Division the judgment was affirmed by a divided court. The affirmance was put upon the ground that the contract of retainer bound the client personally. Ferrin v. Myrick, 41 N. Y. 315;Austin v. Munroe, 47 N. Y. 360;Parker v. Day, 155 N. Y. 383, 49 N. E. 1046;O'Brien v. Jackson, 167 N. Y. 31, 60 N. E. 238. The client, it was held, must pay the counsel fees himself, and seek reimbursement from the estate upon the settlement of his accounts.

[1][2] We reach a different conclusion. Undoubtedly, the general rule is as the Appellate Division has declared it. But there are exceptions as settled as the rule itself. A trustee who pays his own money for services beneficial to the trust has a lien for reimbursement. But if he is unable or unwilling to incur liability himself, the law does not leave him helpless. In such circumstances, he ‘has the power, if other funds fail, to create a charge, equivalent to his own lien for reimbursement, in favor of another by whom the services are rendered.’ Schoenherr v. Van Meter, 215 N. Y. 548, 552,109 N. E. 625, 626;New v. Nicoll, 73 N. Y. 127, 131,29 Am. Rep. 111;Noyes v. Blakeman, 6 N. Y. 567;Van Slyke v. Bush, 123 N. Y. 47, 51,25 N. E. 196;O'Brien v. Jackson, supra, 167 N. Y. 36, 60 N. E. 238; Clapp v. Clapp, 44 Hun, 451; Randall v. Dusenbury, 39 N. Y. Super. Ct. 174; Id., 63 N. Y. 645. That is exactly what this trustee assumed to do. He was unable to pay; he explained the situation to the plaintiff; he was exonerated from personal liability; and the acceptance of the retainer was, by express agreement, on the credit of the estate.

[3] The question remains whether the services were beneficial in the preservation of the trust. We have no doubt that they were. Mr. Smith had been named in the will as a trustee. He owed a duty to the estate to stand his ground...