Where an assignee of a claim upon a foreign government, holding
it under an assignment supposed to be good but afterwards adjudged
invalid, prosecuted the claim to a successful result and was
subjected to costs and expenses in protecting the fund from rival
claimants, and thereby preserving it, he was entitled to a
reimbursement of these costs and expenses by the true owner upon a
final settlement of accounts between them.
Being placed in the position of a trustee, it was his duty to
defend the title, and the expenses for so doing were properly
chargeable to the estate.
The assignee ought also to have been allowed a compensation for
his trouble and personal exertions in the prosecution of the claim,
and under the special circumstances of this case, the circuit court
having allowed thirty-five percent of the sum realized, this Court
is not prepared to say it is too much.
An objection that the executors of the assignee had distributed
a portion of the money in the regular course of administration
should have been made when the cause was before this Court upon its
merits. After a mandate has gone down, and the cause came before
the circuit court for a settlement of accounts, the objection comes
too late.
No objection can be made to the circuit court allowing a
supplemental answer to be filed when the mandate went down. It was
like a petition to bring before the court the facts which were
proper to be known before instructions were given to the master as
to the mode of settling the accounts.
These were cross-appeals from the Circuit Court of the United
States for the District of Maryland. In the report, the first case
only will be mentioned,
viz., that of Williams against
Oliver's executors.
The case was formerly before the court, and is reported in
58 U. S. 17 How.
239.
The facts are stated in the opinion of the Court.
The decree was for $9,686.33 in money, and $19,215.95 in stock,
instead of $22,866.94 in money, and $32,847.77 in stock, as claimed
by the appellant.
MR. JUSTICE NELSON delivered the opinion of the Court.
A bill was filed in the court below by Williams, the present
appellant, to recover of the defendants the proceeds of the
share
Page 61 U. S. 536
of complainant's intestate in what is known as the Baltimore
Company, which had a claim against the Mexican government that was
awarded to it under the treaty of 1839. The proceeds of the share
amounted to the sum of $41,306.41. The history of the litigation to
which the award under the treaty gave rise in the distribution of
the fund among the claimants or the assignees composing the
Baltimore Company will be found in the report of four of the cases
which have heretofore come before this Court.
52 U. S. 11 How.
529;
53 U. S. 12 How.
111;
55 U. S. 14 How.
610;
58 U. S. 17
How. 233,
58 U. S. 239. That
of
Williams v. Gibbes, in 17 How., contains the report of
the present case, when formerly here. This Court then decided that
the claim of the executors of Oliver to the share of Williams was
not well founded, that the interest of Williams in the same had not
been legally divested during his lifetime, and that his legal
representative then before the court was entitled to the proceeds.
The decree of the court below was reversed and the cause remanded
for further proceedings in conformity with the opinion of the
court. Upon the cause's coming down before that court on the
mandate, the defendants, the executors of Oliver, set up several
charges against the fund which it was claimed should be received
and allowed in abatement of the amount.
1. For certain costs and expenses to which they had been
subjected in resisting suits instituted against it by third
parties. The history of these suits will be found in the cases
already referred to in this Court, and need not be stated at
large.
2. For services and expenses of Oliver in his lifetime in the
prosecution of the claim of the Baltimore Company as its attorney
and agent before the government of Mexico from the year 1825 down
to the time of his death in 1834.
The court below allowed to the executors the costs and expenses
to which they had been subjected in defending the suits mentioned,
and also thirty-five percent of the fund in question for the
services of Oliver.
The case is one in many of its features novel and peculiar.
James Williams, the intestate and owner of the share in the
Baltimore Company, became insolvent in 1819 and took the benefit of
the insolvent laws of Maryland, and in 1825 the insolvent trustee
of his estate sold and assigned to Robert Oliver the share in
question in this company, and from thence down to the year 1849,
Oliver in his lifetime, and his executors afterwards, did not doubt
but that a perfect title to the share had passed by virtue of this
assignment. In that year, the Court of Appeals of Maryland decided,
in a case between the executors and an insolvent trustee of
Williams, that no title passed to Oliver by this assignment, and as
a legal consequence
Page 61 U. S. 537
it was held by this Court in 17 How. that the interest remained
in Williams at his death, and of course passed to his legal
representative, the complainant.
All the services and expenses, therefore, of Oliver in his
lifetime in the prosecution of the claims of the Baltimore Company
against the government of Mexico and of the litigation since
encountered by his executors in respect to the share have resulted
in securing the proceeds of the same to the estate of Williams, the
original shareholder. Williams in his lifetime, and his legal
representatives since, down till the fund was in court awaiting
distribution, had taken no steps for its recovery, nor had they
been subjected to any expense. The whole of the services had been
rendered and expenses borne by Oliver and his executors, and the
question is whether, upon any established principles of law or
equity, the court below were right in taking into the account in
the settlement between the parties these services and expenses. We
are of opinion they were.
By the judgment of the Court of Appeals of Maryland, Oliver was
at no time the true owner of this share, as, notwithstanding the
assignment by the insolvent trustee, it still remained in Williams.
Oliver thereby became trustee, instead of owner, of the share and
of the proceeds, as did also his executors, and they must be
regarded as holding this relation to the fund from their first
connection with it. In that character the executors have been made
accountable to the estate of Williams, and have been responsible
since the fund came into their possession for all proper care and
management of the same. In defending these proceeds, therefore,
against suits instituted by third parties to recover them out of
the hands of the executors, they have done no more nor less than
they were bound to do as the proper guardians of the fund if they
had known at the time the relation in which they stood to it and
that they were defending it for the benefit of the estate of
Williams, and not for that of Oliver. The services rendered and
expenses borne could not have been dispensed with consistent with
their duties as trustees.
But it is said that these suits were defended by the executors
while claiming the fund in right of their testator, and hence for
the supposed benefit of his estate; that the defense was not made
in their character of trustees, and cannot therefore be regarded as
a ground for charging the estate of Williams with the costs of the
litigation.
The answer to this view is that although in point of fact the
defense was made under the supposition that the fund belonged to
the estate of Oliver, yet in judgment of law it was made
Page 61 U. S. 538
by them as trustees, and not owners, as subsequently judicially
ascertained, and as the costs and expenses were properly incurred
in the protection and preservation of the fund, it is but just and
equitable they should be made a charge upon it.
The misapprehension as to the right cannot change the beneficial
character of the expense when indispensable to its security.
The duty of a trustee, whether of real or personal estate, to
defend the title, at law or in equity in case a suit is brought
against it is unquestioned, and the expenses are properly
chargeable in his accounts against the estate. 2 Story Eq.Juris.,
sec. 1275
Another principle which we think applicable to this case is to
be found in a class of cases where a
bona fide purchaser
for a valuable consideration without notice has enhanced the value
of the property by permanent expenditures, and has been
subsequently evicted by the true owner on account of some latent
infirmity in the title. It is well settled, if the true owner is
obliged to come into a court of equity to obtain relief against the
purchaser, the court will first require reasonable compensation for
such expenditures to be made, upon the principle that he who seeks
equity must first do equity. 2 Story Eq., secs. 799 and 7996; 6
Paige 403-404; 1 Story 494-495.
A kindred principle is also found in a class of cases where
there has been a
bona fide adverse possession of the
property tacitly acquiesced in by the true owner. The practice of a
court of equity in such cases does not permit an account of rents
and profits to be carried back beyond the filing of the bill.
21 U. S. 8 Wheat.
78; 27 E.L. & E. 212; 7 Ves. 541; 1 Ed.Ch. 579. This principle
is applicable where the person in possession is a
bona
fide purchaser, and there has been some degree of remissness,
or negligence, or inattention, on the part of the true owner, in
the assertion of his rights.
Courts of equity, it would seem, do not grant active relief in
favor of a
bona fide purchaser, making permanent
meliorations and improvements by sustaining a bill brought by him
against the true owner, after he has succeeded in recovering the
property at law. 6 Paige 390, 403-405; 1 Story 495;
21 U. S. 8 Wheat.
81-82.
The civil law in this respect is more liberal, and provides a
remedy in behalf of the purchaser even beyond an abatement of the
rents and profits for such expenditures as have enhanced the value
of the estate, cases above, and indeed generally applies the
principle in favor of any
bona fide possessor of property
who has in good faith expended his money for its preservation
Page 61 U. S. 539
or amelioration; otherwise, it is said, the true owner
appropriates unjustly the property of another to himself.
Touillier, 3 B., tit. 4, ch. 1, secs. 19, 20.
Now in the case before us, Oliver, in 1825, purchased this share
in the Baltimore Company for the consideration of $2,000, its full
value at the time. The purchase was made from the insolvent trustee
of Williams, whom all parties concerned believed had the power to
sell and transfer the title. Williams, down till his death in 1836,
set up no claim to it, nor did his representative after his death
till August, 1852, when this bill was filed. Oliver and his
executors had been in the undisturbed possession, so far as
respects any claim under the present right, for the period of
twenty-seven years. And although it may be said in excuse for any
remissness and by way of avoiding the consequences of delay that
Williams and those representing him had no knowledge of the defect
in the title till the decision of the Court of Appeals of Maryland,
it may be equally said on the other hand that Oliver and his
executors were alike ignorant of it, and had in good faith expended
their time and money in recovering the claim against the government
of Mexico, and afterwards in defending it against a long and
expensive litigation.
It is difficult to present a stronger case for the protection of
a
bona fide purchaser from loss who has expended time and
money in enhancing the value of the subject of the purchase, or a
case in which the principle more justly applies that where the true
owner seeks the aid of a court of equity to enforce such a title,
the court will administer that aid only when making compensation to
the purchaser. We are therefore of opinion that the court below was
right in allowing in the account the costs and fees paid to counsel
by the executors in the defense of the suits.
In respect to the thirty-five percent allowed for the
prosecution of the claim against the government of Mexico, it
stands, in principle, upon the same footing as other services and
expenses incurred in protecting and preserving the fund after
possession was obtained. The amount of compensation depends upon
the proofs in the case as to the value of the service, and which
must, in a good degree, be governed by the usual and customary
charges allowed for similar services and expenses. As this claim
was prosecuted with others by Oliver when he supposed and believed
that he was the owner, and that he was acting on his own behalf,
and not as trustee for Williams, the rate of compensation must rest
upon all the facts and circumstances attending the service. There
could have been no agreement as to the compensation. And for the
same reason, it cannot
Page 61 U. S. 540
be expected that an account of the service and expenses was kept
so as to enable the court to arrive with exactness at the proper
sum to be allowed, as might have been required if Oliver had been
chargeable with notice of the trust. The proofs show that Oliver
appointed agents to represent him at the government of Mexico as
early as March, 1825, and that these agencies were continued from
thence down till his death in 1834, and that during all this time
he kept up an active correspondence with them and others, and with
our ministers at Mexico, and with his own government, on the
subject. The justice of these claims had been acknowledged by the
government of Mexico as early as 1823-1824, but no provision was
made for their payment. They were regarded as of very little value,
from the hopelessness of their recovery, and it is perhaps not too
much to say upon the evidence that in the absence of the vigorous
and efficient prosecution of them by Oliver, they would have been
worthless. In the result, for the share in question, which was sold
in 1825 for $2,000, there was realized from the government of
Mexico, under the treaty of 1839, the sum of $41,306.41. The estate
of Williams has never expended a dollar towards recovering it, nor
has Oliver ever received any compensation for his services. The
amount may seem large, but we cannot say the court below was not
warranted in allowing it upon the proofs in the case of the great
service rendered, and of the customary charges in similar
cases.
It has been urged by the executors of Oliver that they had paid
over three-eighths of the fund in the distribution of the estate
before the filing of the bill in this case, and that they are not,
therefore, liable for that portion of the fund. It is claimed that
it was shown before the master that this portion was paid over in
the regular course of administration, and as in duty bound by the
laws of the State of Maryland. If this had appeared when the cause
was heard upon the merits, and the question as to the right to this
fund was determined, the ground now taken might possibly have been
a good defense to that portion of the fund, and the complainant
would have been sent to the distributees to recover it. This,
however, may not be entirely certain, for there is authority for
saying that a trustee having notice that it is doubtful if the
trust fund should be distributed according to the trusts under
which he holds it, he should apply to the court for its direction
before he executed the trust by paying over the fund. 27 E. L.
& Eq. 302. In this case, the executors of Oliver had notice of
the defect of the title of their testator after the decision of the
Court of Appeals. But be this as it may, we think the question of
liability, to the extent of the whole of the fund,
Page 61 U. S. 541
was disposed of in the case when before us on the merits, and
was not reserve for the hearing on the adjustment of the accounts
before the court below, on the coming down of the mandate.
58 U. S. 17
How. 257.
An objection has been made by the counsel for the appellant,
Williams, in respect to the order of the court below, permitting a
supplemental answer. We suppose this question rather a matter of
practice than otherwise, resting in the discretion of the court
below, and as a matter of convenience preparatory to the taking of
the account before the master. The answer -- and, for aught we see,
the object in view might as well have been attained by a petition
to the court, stating the facts -- was put in for the purpose of
bringing to the notice of the court the matters relied on in the
adjustment of the accounts, and by way of charges to be deducted
from the amount claimed. The proceeding enabled the court to give
in advance directions to the master in making the settlement, and
thereby narrow the grounds of controversy before him and facilitate
the hearing. It could work no prejudice to either party, for no
claim by way of abatement of the account thus set up in the answer
or petition should be allowed by the court but what was pertinent
to the subject of examination before the master.
Upon the whole, we are satisfied the decree of the court below
was right, and ought to be
Affirmed.
MR. JUSTICE GRIER dissented.