Opinion
September Term, 1893
Trustee — Power of, to Compromise Suits Affecting Trust Estate.
1. A trustee may compromise a suit brought against him affecting the assets in his hands, and he will not be liable to the cestui que trust, provided he acts with due care and, in good faith, does what, under the circumstances that surround him, seems best for the interest of those whom it is his duty to serve; therefore,
2. Where a trustee, who in good faith and under advice of his counsel and of counsel employed by a creditor of the trustor, compromised a suit affecting the trust estate, he will not be held liable for loss accruing to such creditor, although the latter's counsel had no general or special authority to consent to such compromise.
ACTION, heard upon exceptions to the report of a referee at April Term, 1893, of WAYNE, before Brown, J.
Fuller Fuller for plaintiffs.
S. A. Woodard for defendants.
(184) The judgment rendered by his Honor was as follows:
"The principal exception argued before me was as to the alleged want of authority by Grainger to Mann to compromise the suits of Claflin et al. v. S. Weil, trustee, etc. It appears that Grainger represented Mann's firm of Locheimer, Mann Co. in that suit, although they were not parties to the record. It appears that he was associated with Weil's counsel, and the two agreed to a certain judgment. Inasmuch as Locheimer, Mann Co.'s counsel consented to the judgment, it is binding, whether Grainger had authority to agree to that judgment or not. Grainger's estate is admitted or found to be solvent, and the plaintiff's remedy is against that, if they have any. It seems that Grainger had general authority to represent interest of plaintiffs in the suit. After considering the testimony, I see no reason to overrule any of the referee's findings of fact, and I see no error in any of his legal conclusions. The report is therefore confirmed and the several exceptions overruled. The judgment is affirmed."
From this judgment plaintiffs appealed.
Other facts necessary to an understanding of the case are stated in the opinion.
The plaintiffs are creditors of a firm, Stern Sax, which in 1879 made an assignment to the defendant Weil to secure the distribution of their assets among their creditors, with (185) certain preferences therein provided for, and in this action they required of him a settlement of his trusteeship. The facts found by the referee have been confirmed by his Honor, and are thus conclusively determined. We find no error in the conclusions of law which were drawn from those facts.
As is stated in the judgment, the contention of the plaintiffs is that the defendant trustee should be held liable to them for the value of a portion of the property assigned to him, which had been attached by two of the creditors of Stern Sax, to wit, H. B. Claflin Co. and Armstrong, Cator Co. It is found that the suits brought by these two creditors, in which warrants of attachment were issued and a portion of the assigned property was seized and sold, were compromised by the trustee, and, by the terms of the compromise so made, the attaching creditors were allowed to have about two-thirds of the proceeds of the attached goods, while only one-third was paid over to the trustee.
The plaintiffs had a right to demand that the defendant trustee should be diligent and faithful in the management of the estate committed to his charge, in part for their benefit, but his compromising the suits mentioned above was not at all incompatible with either good faith or due diligence. A trustee may compromise suits brought against him affecting the assets in his hands, and he will not be liable to the cestui que trust, provided he has acted with due care, and in good faith has done what under the circumstances that surrounded him at the time seemed best for the interest of those whom it was his duty to honestly serve.
It may be conceded that an attorney has no authority to compromise his client's cause that has been committed to his charge without special authority so to do. That is well settled. A general employment as attorney does not include such authority. But that recognized principle does not fit the case before us. Here is a question of diligence (186) and fidelity on the part of the defendant trustee. The charge against him is that he sacrificed assets committed to him by the compromise of these suits — that he allowed one thousand dollars of the assets to be, by that compromise, diverted from the creditor to whom it belonged — to the plaintiffs in those suits, and his reply to this charge is that he acted in this matter in good faith and with due diligence, and to prove this he asserts that this compromise was made by counsel whom he had employed to represent the interest of the creditors, and after consultation with an attorney in whose hands the appellants had placed their claim against Stern Sax for collection.
We repeat that the question here is not whether an attorney, under a general authority to conduct a suit, has authority to compromise his client's cause (which, of course, must be answered in the negative), but whether a trustee who, under advice of his own counsel, and after consultation with and by the consent of counsel employed by the creditor, compromises suits affecting the trust estate, is chargeable by that creditor with lack of good faith and proper diligence because he made that compromise. We think that this query must also be answered in the negative, and there is no error in the judgment.
Affirmed.
(187)