Opinion
08-07-1896
DANFORTH et al. v. MOORE et al.
J. R. English and A. S. Brown, for complainants. Frank Bergen, for defendants.
Bill by Waldo Danforth and another, executors of Edward G. Brown, deceased, against James Moore and others, for an accounting.
Heard on bill, answers, replications, and proofs.
J. R. English and A. S. Brown, for complainants.
Frank Bergen, for defendants.
EMERY, V. C. The bill in this case was filed by the complainants, as executors of Edward G. Brown, one of three tenants in common, against James Moore and John Kean, the other two tenants in common; and, John Kean having died after answer filed, the suit has been continued against his executors by an order of revivor. The common property was sold previous to the filing of the bill, under an agreement in writing made between the complainants and Moore and Kean, and the proceeds of the sale have, by virtue of the agreement, been paid over to John Kean, Jr., as trustee, who is also made party defendant in that capacity. The object of the bill is twofold: First, to recover for the complainants the disbursements which were made by Edward G. Brown in his lifetime, for the repairs and improvements made upon the common property, and in managing the property, with interest thereon, payment of these sums being claimed before any division of the proceeds of sale among the tenants in common or their representatives; and, second, to charge the defendant James Moore, one of the tenants in common, with the amount of two notes, aggregating $12,000, which were taken by him as part of the proceeds of sale, and which turned out to be worthless, and also to charge him with a certain other payment or allowance of $1,500, made by him. For these amounts the complainants claim that Moore is accountable, under the agreement of sale.
So far as relates to the claim for contribution or reimbursement of the expenditures made by the deceased tenant in common, the facts established by the pleadings and proofs are as follows: The property in question was a horse railroad on Staten Island, in the state of New York, with its appurtenances and franchises, which was purchased on or about August 22, 1871, by deed of that date, at a sale by public auction, made by a trustee under a mortgage given by the Staten Island Shore Railroad Company, and the property purchased consisted of both real and personal property. The purchase price was $31,000, and the deed conveyed the railroad franchises and all the property of the company owned by it at the date of the sale. The defendant James Moore was the sole grantee named in the deed, but the purchase was made on the joint account of Edward G. Brown, the complainants' testator, and the defendants James Moore and John Kean. About the 1st of September, 1871, and while the title still stood in Moore's name alone, Brown took charge of the railroad. No direct evidence has been given by the defendants of any express agreement made with Brown by the other co-owners when he took possession, or of the terms of any such agreement; but a recital or statement contained in the agreement for sale made between the parties to this suit throws some light upon the character of the entry, if it can be used for that purpose. This agreement, dated September 1, 1887 (Exhibit C 5), recites the purchase by Brown and Kean, respectively, from Moore, of a three-eighths interest in the property and franchises, on the 22d day of August, 1871 (the day of Moore's purchase), and then proceeds: "And whereas, afterwards, by the consent of said Kean and Moore, the said Brown (whose business fitted him therefor) assumed the control of said property, and managed the running of the horse railroad so purchased as a part of the property of said corporation, and for many years had the entire control of the receipts and disbursements of money incident thereto." This agreement also refers to a suit then pending in this court, by the complainants, as executors of Brown, against the defendants Moore and Kean, which was about to be argued, in which the complainants alleged a co-partnership between the tenants in common, in the operation of the road, and seek to recover these advances, and the last provision of the agreement is "that nothing contained in it, either in recital or agreement, should in any way abridge or estop or by any implication affect the defenses made or to be made in that suit, or on its hearing and final determination."
At the time Brown took charge, the road was not in operation, and was in such condition that it could not be operated without large expenses for repairs and improvements. The track was settled, and required raising and relaying for the whole or a large part of its entire length,—seven miles. The ties were rotten, and required replacing. It had no horses, or, at least, not more than two, and the cars were in bad repair; and, besides these and a few sets of old harness, there was no equipment or rolling stock. Brown, after assuming control, proceeded with the repair and improvement of the road, and the purchase of horses and rolling stock, and general equipment for operation, and began the operation of the road; and advanced the money necessary for this purpose, after applying the receipts of the road. He purchased, in August or September, 1871, about 20 horses, for about $2,700, and more in the following spring, all being used on the railroad. The total expenditures made by Brown previous to July 1, 1872, on the construction of the road, was $6,273.34,—for horses, $4,699.82; rolling stock, office furniture, harness, and tools, $1,139.90. The details appear in Exhibit C 1, a cash balance, dated July 1, 1872, which also shows that the receipts up to that time had not been sufficient to pay the operating expenses. Up to that time, Brown had advanced $15,849.42, for the purposes of the road, and John Kean $1,500. As to this payment by Kean,he says in his answer "that, soon after the purchase of the property, Brown suggested to him that it would be of advantage to the property to make certain repairs and improvements, which would cost a few thousand dollars, and asked him to co-operate in having the same made; that he consented to said repairs and improvements being made, and contributed his proportionate expense thereof, viz. $1,500." There is no other evidence than this admission of his answer relating to the circumstances of this advance by Kean; and, if the statement is to be taken as an admission of consent to the repairs and improvements, it must, of course, be taken as a whole, and subject to its qualifications. Moore made no advances whatever, nor does it appear that he was ever requested to contribute to this purpose. About October 16, 1872, more than a year after the original purchase, and after Brown and Kean had made their advances, Moore, in whose sole name the title to the property purchased in August, 1871, had stood up to this time, executed a deed conveying to Brown and Kean each a three-eighths interest in the railroad property, rights, and franchises, as tenants in common, in the proportions of two-eighths to Moore, three-eighths to Brown, and three-eighths to Kean. This deed has not been put in evidence by the complainants, and the only evidence as to the property conveyed or intended to be conveyed by it must be derived from the admissions of the bill and answers, which leave it somewhat doubtful whether the deed to Brown and Kean purported to convey the personal property which had been brought by Brown, and used on the railroad, after August, 1871, or whether it conveyed simply the property, which at the sale in August, 1871, belonged to the Staten Island Horse-Railroad Company. The complainants, in their bill, make the conveyance of October 16, 1872, the origin of their title and rights, and allege that Brown took possession of the railroad and made his expenditures subsequent to that date; but the evidence shows that this is a mistake, and that Brown really took possession and expended the money for which he now seeks reimbursement while the title to the property (except the personal property bought by Brown) stood in the name of Moore. No conveyance of the personal property purchased by Brown, or of any interest therein, appears to have been made by him to either of the other tenants in common. After the conveyance to him as tenant in common, Brown continued to operate the road up to the time of his death, in March, 1886; making personally whatever advances were necessary in running the road over and above the receipts, and receiving and crediting in his account whatever surplus resulted from the operation of the road. Up to about 1880 there was no surplus, and up to this time, as appears by the accounts, Brown had advanced nearly $20,000. Prom 1880 to 1886 there was a surplus over expenses, which surplus Brown received and credited to his account, but making no credit of any portion of the surplus to Kean's account for advances. At the time of Brown's death, the balance due him for advances, after applying the surplus receipts, amounted to $13,130.85, being less than the sum advanced by Brown during the year 1871, and prior to July, 1872. Up to the time of Brown's death, the only payments or advances made by Kean in connection with the road or its operation were the above payments by Kean of $1,500, admitted in his answer, and also the sum of $187.50, paid by Kean in December, 1880, as his proportionate share of a loss of $500 on the operation of the road, occasioned by an accident. At this time (December, 1880), as appears by the books, defendant Moore is also credited with $125, as contribution on the same account. Kean, in his answer, admits these advances for these purposes; but Moore alleges that he advanced the $125 to Brown as a loan, and on his promise to repay. Mr. Cunningham, the superintendent, says that he personally received $500 of the $1,500 from Mr. Kean; but beyond this no evidence has been given on either side relating to these advances, except the entries in the books kept by Brown, and these do not appear to have been seen by Moore or Kean until after Brown's death.
On September 30th of each year, trial balances and balance sheets were made out, which showed the advances made by Brown and Kean, and copies of these were given to Mr. Brown; but there is no evidence that any of these statements were ever received by either Kean or Moore, or that any statements or accounts of the expenditures were ever submitted to either of them by Brown during his management, except in one instance. The bookkeeper, Rogers, on September 30, 1879, in addition to the balance sheet for the year, made out a statement in connection with it, called "Statement of Cost of the Staten Island Shore Railroad" (Exhibit C 32), as follows:
September 30, 1879.
Original cost at auction, year 1871.. $31,000 00
Expended on road since........... 22,032 96
$53,032 96
Interest a/c.
Interest on the original
cost, 8 years.......$17,600 00
Interest on the expenditures since, 7 8/10 years....... 12,040 25
- 29,640 25
$82,673 21
Length of road, 7 1/4 miles.
13 passenger cars; 39 horses.
This statement came to Mr. Moore's hands, as appears by an indorsement in ink in his handwriting, "Staten Island Shore Railroad, Sept. 30, 1879," and by a lead pencil note in his handwriting at the bottom of the statement, referring to an introduction of aMr. Haynes. Moore, although called as a witness, was not examined as to his receipt of the statement, and no proof was given of the time of its receipt. The statement was produced by the complainants, and would therefore seem to have been returned by Moore to Brown, or some one for him, after his indorsements. In reference to Brown's disbursements in managing the road, it should also be stated that no evidence has been produced by the complainants of any express contract by the other co-tenants with Brown agreeing to contribute to the expenses for repairs and improvements; nor is there any evidence that previous to 1885 either Kean or Moore had been informed by Brown that his expenditures had not been reimbursed from the receipts of the road. The answers admit that about that time the other co-tenants received this information, but, in connection with this admission, allege that, on being informed, they denied Brown's right to reimbursement or contribution as a first charge or debt of the road.
After Brown's death, in 1886, the defendant Moore took charge of the road and its property, including all the personal property used in operating it, and operated the road; and both Moore and Kean made advances for its operation, over and above the receipts of the road. Shortly after Brown's death, his administrator pendente lite (as appears by the recitals in the agreement of September 1, 1887), before any division or sale of the common property, either real or personal, commenced a suit against Brown and Kean, seeking to charge them as co-partners, for the amount of the advances made by Brown in his lifetime. To this suit, the present complainants, after the probate of the will, succeeded as complainants; and, pending the suit an agreement for the sale of the common property and the disposition of the proceeds of sale was executed under the seals of the executors of Brown and the defendants Moore and Kean. This agreement, dated September 1, 1887, recites the purchase by Moore, on August 22, 1871, of the rights, properties, and franchises of the Staten Island Shore Railroad Company; the purchase thereupon by Kean and Brown of a three-eighths interest each in the said interests, franchises, and properties; that, by the consent of Kean and Moore, Brown assumed control of the property, and managed the running of the horse railroad so purchased as a part of the property of the corporation, and for many years had entire control of the receipts and disbursements of money incident thereto; that, before a settlement between the parties interested in such purchase, Brown died; that suit had been brought, and was pending, by Brown's representatives, alleging a co-partnership in the management of the road, and claiming recovery for his advances, in which suit Kean and Moore denied the co-partnership, and also denied the allegation of advances; that Moore had managed the railroad since Brown's death, and he (Moore) and Kean had advanced and paid moneys for this purpose; that Moore and Kean had interested themselves to procure a purchaser for the said rights, franchises, and properties, with a view of discharging all obligations incident thereto, and procuring the moneys advanced by them, with such profit as the sale might afford, and considered that they had found a purchaser for the sum of 550,000, being the Staten Island Belt Line Railroad Company, to be paid as specified; that this purchaser, in concluding such arrangement, insisted that the complainants, as executors as aforesaid, should join in the execution of the conveyance to them of the rights, franchises, and properties aforesaid; that the executors, at the request of Kean and Moore, were willing to do so if the execution would forward a settlement of the conflicting claims in the matter, and especially would not defeat their claims in the pending suit; and finally reciting as follows: "And whereas, it is deemed advisable by said Kean, Moore, and said executors that the question of amount claimed by said administrator in and by his said bill of complaint, and now claimed by said executors, shall be paid out of such purchase money when the same shall be procured, if the claim shall be correct, and, if not, that such proportion of the same, if any, as shall so prove to be correct, shall be so paid, and that abundant latitude should be extended for an investigation of the same, either judicial or friendly; and it being conceded by said Kean and Moore that, when such investigation shall have resulted in a determination satisfactory to them, the amount found to be due to said executors shall at once be paid to them, and be beyond the contingencies of further judicial proceedings." The agreement, after these recitals, then provided (1) for a conveyance to the Staten Island Belt Line Railroad Company, to be executed by Kean, Moore, and the complainants, as executors of Brown, "of all the rights, franchises, and properties aforesaid"; (2 and 3) for the delivery of the conveyance on the payment of $50,000 to the grantors or a trustee nominated by them, with provisions for delivery without payment in cash; (4) that, on the completion of its sale, the payments should be made to John Kean, Jr., who should become the trustee of the fund, and should dispose thereof as follows: "(a) He shall deduct his reasonable charges therefrom, (b) He shall pay to said John Kean, James Moore, and executors of Edward G. Brown, dec'd, the respective amounts found to be due to them, as debts, which shall be adjudicated by such court of New Jersey as the said trustee shall choose finally to appeal to, or which shall be agreed to by such parties, to be evidenced by the personal signatures of all of them, as saidparties all have claims since the death of said Brown, made to assist the running of said railroad, (c) After such payments, such trustee shall divide the balance of such moneys, if any there shall be, among such parties, in the proportion of three-eighths to said Kean and to said two executors each, and to said Moore two-eighths." It was further agreed that in case the rights, franchises, and properties failed to be sold for a sufficient sum in hand to pay all the debts, in law or equity, due by Brown at his death, contracted in behalf of said railroad, the agreement should stand for nothing, and the complainants should have the right to proceed with the suit referred to, subject to the defenses Kean and Moore would have had if the executors had not become parties to the agreement or such defenses as had been set up in their answer. The defendant John Kean, Jr., was constituted the trustee under the agreement, and he accepted the trusts by a writing annexed to the agreement. The agreement recited that the suit referred to was about to be argued, and the concluding clause was a provision "that nothing in these presents contained, either in recitals or agreement, shall in any way abridge or estop, or by any implication affect, the defenses made or to be made by said Moore and Kean in the suit aforesaid, or on the hearing and final determination of the same." Pursuant to this agreement, and to carry out the sale, Moore, Kean, and the complainants, as executors of Brown, by deed dated September 1, 1887, conveyed to the Staten Island Belt Line Railroad Company "all the property, rights, and franchises of the Staten Island Shore Railroad Company of which the said James Moore became possessed by virtue of the conveyance to him by the said Caleb C. Norvell, as trustee, by the aforesaid deed, bearing date the 22d day of August, 1871, or which are now possessed by the parties of the first part hereto, the same to be free and clear of all incumbrances, debts, liens, and liabilities; that is to say, its railroad, from Holland's Hook to the southern terminus of New York avenue, in the county of Richmond, including the right of way thereof, with the superstructure and all rails or other materials used therein or procured therefor, and all horses, cars, harness, machinery, bridges, viaducts, culverts, fences, stables, depot grounds, and buildings erected thereon, and shown in the inventory hereto annexed, and all rights therein, tolls and revenue to be had or levied therefrom, and all the franchises, rights, and privileges of the Staten Island Shore Railroad Company of, in, or to, or concerning the same, together with all and singular the rights, titles, privileges, members, hereditaments, and appurtenances to the same belonging or in any wise appertaining; also, all rights of action against corporations or individuals, officers, or employes at any time acquired by the parties of the first part hereto during the ownership of said James Moore, John Kean, and Edward G. Brown, or his executors, or either of said parties; also, all books of accounts and papers of said Staten Island Shore Railroad Company, covering from the date of said firstmentioned purchase of James Moore to the present time." The inventory annexed to the deed, and referred to in it, was called an "inventory of the property of the Staten Island Shore Railroad Company," in possession of the parties of the first part hereto, including the franchise, and specified 45 horses, 11 cars, and a long list of other personal property. The deed was one of bargain and sale, without covenants, and the will of Brown was not proved, so that it could be known whether his executors, as such, were authorized to convey his interest in the real estate, as a tenant in common. Neither Brown's heirs at law nor devisees were parties to the conveyance. The consideration of the conveyance was first mortgage bonds of the Belt Line, etc., Company, to the extent of $100,000, and $200,000 in stock, and $2,810 in cash. The bonds and stock were afterwards, by agreement made September 19, 1887, between the complainants, as executors, Moore, and Kean, of the one part, and A. W. Beasley & Co., of the other, agreed to be sold to the latter for $50,000, payable in cash installments. Beasley & Co. paid $10,500, gave notes for $12,000 more, and, in the spring of 1888, defaulted in the payments, after having received $30,000 in bonds and $9,000 in stock. The entire balance of the stock and bonds was in April, 1872, by consent of the parties, sold to one Graves, for $10,000, part of this ($4,000) being in note not yet collected, but secured by collateral, and claimed to be good and collectible. The trustee, John Kean, Jr., under the agreement, and by consent of all the parties thereto, has paid out to the defendant James Moore $2,400, on account of his advances in the maintenance and operation of the road since the death of Brown, and $1,200 to the defendant John Kean, for his advances for the same purpose during that time, and now has in hand cash and securities (considered good) amounting to $14,698.30, held by him under the agreement.
The complainants, for reasons hereafter stated, claim that the defendant Moore should also make good to the trust fund the sum of $12,000 and interest, represented by the worthless A. W. Beasley & Co. notes, and $1,500, allowed by him to Beasley & Co. at the time of the second payment for the purpose of paying the commission of the agent or agents who had effected the sale. In reference to the claim for advances, the complainants base the right to charge the balance due to Brown for his advances as a first lien upon the proceeds of sale upon two grounds: First, upon the rights of one tenant in common to recover, in equity,such expenditures out of the proceeds of sale of the common property; and, secondly, upon the effect of the agreement of September 1, 1887, relating to the disposition of the proceeds of sale. It is not claimed that there is evidence of any express contract for repayment or contribution of these advances by Brown, nor do I think circumstances sufficient to raise an implied contract have been shown. The recital in the agreement of September 1, 1887, that Brown, by consent of Kean and Moore, assumed control of the property, and managed the running of the road, is not sufficient to authorize an inference that expenses for construction and improvements, amounting to half the purchase price of the road, were intended to be included within its terms, or that improvements could be made at Brown's own pleasure, and charged as a debt on the property, without the consent of his co-tenants. The defendants, in their answers, allege that Brown, on taking possession, expressly agreed to operate the road at his own expense, and without charge to his co-tenants. The only evidence offered by the defendants to establish this allegation is that of Charles K. Moore, a son of the defendant James Moore, who had a conversation with Brown in 1873, in which Brown said substantially that neither Col. Kean nor Col. Moore would lose a dollar in that property, as it was a good speculation, and he could sell it at a profit, and that be anticipated selling it at a profit at not a very remote date. He further stated (in reply to a direct question) that Brown then told him he was operating the road entirely at his own expense. This evidence is clearly insufficient to establish a contract on the part of Brown not to demand repayment or allowance for his expenses, or to prove the allegations of the answer. The case must therefore be treated as one in which the disbursements were made, without any contract in relation to them on either side, and the rights of the parties are to be determined upon the rules applicable to tenants in common, except so far as these rights are modified by the agreement for sale and division of the proceeds.
The right of the complainants to recover their proportion of these expenditures, made by Brown, from the other tenants in common, cannot, it seems to me, be based on the first ground alone, for the rule is clear, both at law and in equity, that in the absence of a contract to pay, either express or implied, on the part of the co-tenants, no remedy exists for money expended in repairs or improvements by one tenant in common so long as the property is enjoyed in common. Leigh v. Dickeson, 15 Q. B. Div. 60, 67; Parrington v. Forrester [1803] 2 Ch. 461, 478; Freem. Co-Ten. pars. 261, 262. In such cases, where necessary repairs and improvements have been made in good faith by one tenant in common, but without any contract or agreement for repayment or contribution, the only remedy of the tenant who has made the disbursements is in the court of equity, where, on a partition or sale of the common property, an equitable adjustment is made to the tenant, either by assigning to him the part of the property which he has improved in good faith, or where such partition is impracticable, and the property is sold at an increased value, by reason of the repairs or improvements, by making an equitable allowance for what has been expended in order to obtain this increased value. The former course was followed in Hall v. Piddock (1871; Zabriskie, Ch.) 21 N. J. Eq. 311; Doughaday v. dwell (1856; Williamson, Ch.) 11 N. J. Eq. 201; Brookfield v. Williams, 2 N. J. Eq. 341; and Obert v. Obert, 5 N. J. Eq. 307. Lord Justice Cotton, in Leigh v. Dickeson, 15 Q. B. Div. 67, says: "No remedy exists for money expended in repairs by one tenant in common so long as the property is enjoyed in common; but in a suit for partition it is usual to have an inquiry as to those expenses, of which nothing could be recovered so long as the parties enjoyed their property in common. When it is desired to put an end to that state of things [the ownership in common], it is then necessary to consider what has been expended on improvements and repairs; and, whether the property is divided or sold by the decree of the court one party cannot take the increase in value without making an allowance for what has been expended in order to obtain that increased value. In fact, the execution of the repairs and improvements is adopted and sanctioned by accepting the increased value. There is therefore a mode by which money expended by one tenant in common for repairs can be recovered, but the procedure is confined to suits for partition." Brett, M. R. (page 65), also says: "The only remedy which exists either at law or in equity is when the rights of the tenants in common go into chancery on suits for partition or sale. If the law were otherwise, a part owner might be compelled to incur expense against his will. The refusal of one co-tenant to bear any part of the cost may be unreasonable. Nevertheless, the law allows him to refuse, and no action will lie against him." See, also, cases cited in Ward v. Ward (W. Va.) 29 Lawy. Rep. Ann. 452, notes; s. c, 21 S. E. 746.
The cases in our own courts above referred to, which are relied on by complainants, are not authority for the recovery of a proportionate share of the advances made by Brown, as of a debt due to him, for so much money, but only for an equitable partition of premises which have been improved by one tenant in common. And, if the complainants' right of recovery is to be put upon the basis of a debt or claim for which Brown had the right of recovery at once, either at law or in equity, it is difficult to see why the claim is not barred by laches. Theclaim, on this basis, was due not later than July, 1872, while the bill in this case was not filed until September, 1893; and the debt, not being due by contract under seal, was, by analogy with the statute of limitations and upon the ground of laches, barred before Brown's death. After this delay, and in the absence of any express contract or of circumstances from which a contract for reimbursement can be implied, the complainants' right to recover must be based on their equities as representing the deceased tenant in common, and succeeding to such rights, modified, as they were, by the agreement for sale. Independent of this agreement for sale, the equity of the complainants was to have such equitable allowance made on a sale of the property as would, out of the increased value of the property, derived from Brown's expenditures for improvements, reimburse him to the extent of his advances (in connection with Kean's). But the common property having been sold by agreement of the parties, without application to any court for partition or sale either in New York (where the property was located) or in New Jersey (the domicile of the owners), it has been rendered impracticable to adjust the equities on this basis. And in making the sale, under this agreement, the parties have treated the advances made by Brown, if recoverable at all, as the personal property of Brown's estate; whereas, for all the expenditures which relate to the real estate, the heirs at law or the devisees of the tenant in common, and not his executors as such, are the successors to the rights of the deceased tenant in common, and entitled to the allowance for improvements on the real estate. So that in the present case the defendants and the complainants, by selling all the property as common property, owned as such by themselves, and themselves only, have pursued a course which has made the usual course of inquiry either impracticable or altogether unsatisfactory. It would be difficult, if not impossible, to ascertain now, by a reference, what increased value, at the time of the sale, in 1887, existed in the property, both real and personal, by reason of the repairs and improvements made by Brown in 1871 and the years following up to 1880, and to ascertain, further, what proportion of this increase was due to the complainants, as succeeding to the personal estate of Brown. And if the rights of the parties to this suit were to be settled purely on the basis of the rules of equitable allowance, for the increased value, the fairest rule to be applied, on the evidence in this case, would be, as it seems to me, to treat the advances made by Brown and Kean as additions to the cost of the road, and to treat them as adding their proportion, along with the original cost, to the value at the time of the sale. This seems to have been the basis on which the statement of September 30, 1879, was made up; the original cost and the additional expenditures each being put on the same basis as to interest. This would increase the proportion of Brown and Kean in the proceeds of sale over their original three-eighths, until the balances due for advances were repaid. But in view of the express provisions as to the disposition of the purchase money, made by the agreement of sale, and of the radical changes which that agreement made in the equitable status of Brown's estate, and especially of his personal representatives, I do not consider that I have the right to remit the complainants to what would have been their strict equitable rights if a court of equity had ordered a sale. The complainants, as Brown's executors, succeeded certainly to his rights in all the personal assets conveyed, including choses in action, accounts, etc., and, by reason of Brown's original ownership of all the personal property purchased by him, and which does not seem ever to have been conveyed to the other co-tenants, had, perhaps, exclusive ownership (at least in equity) of all the valuable per sonal property which replaced his original purchases. When, therefore, the defendants, desiring to convey the whole property, real, personal, and choses in action, as one common property, procured the complainants to join in the sale, and thus change altogether their existing equitable status, it was entirely competent for the parties to treat the property as a common property in its then-existing state, without reference to the proportionate value to it of Brown's repairs and improvements; and to provide, by their agreement, for another method of protecting Brown's right to reimbursement for his advances.
In my judgment, and as I construe this agreement, the parties have made this change in the status existing at the time of the sale, and have, by this agreement, and for the purposes of dividing the proceeds, agreed to treat the advances made by all of the co-tenants as debts to be first paid out of the proceeds of sale. The advances made by Moore and Kean, after the death of Brown, and before the agreement, were, so far as appears, of precisely the same nature as those made by Brown, and have no higher equity. These advances by Moore and Kean, equally with those made by Brown (when the latter were judicially determined), are treated, for the purposes of the agreement and division, as debts, the language of the agreement being: The trustee "shall pay to John Kean, James Moore, and the executors of Edward G. Brown the respective amounts found due to them as debts," etc. For the purposes of this division, the parties treated advances made by either tenant in common as a debt, and not merely as a claim for equitable allowance, based on benefits actually conferred in the property. As the parties were competent to deal with the proceeds on any basis they chose, a court of equity should carry out thesettlement on the basis of the advances provided for them in the agreement, especially in view of the fact that the agreement and sale thereunder have made it impossible to adjust the rights of the parties on their original equitable basis. In reference to this claim for reimbursement, therefore, I conclude that the complainants and Kean are to be first repaid, out of the funds remaining in the hands of the trustee, the balances due them, respectively, for their advances prior to Brown's death. This allowance, however, will be made only on the principal of the claims, with interest thereon from the time of filing the bill. The agreement makes no express provision in regard to the interest, and the mere characterization of these advances as "debts" in the agreement for division of the proceeds of sale will not so change their nature as to make them debts payable when the advances were made, and with interest from that time. The advances, as I have above said, cannot be treated as debts of this character, for then both principal and interest would be barred by Brown's laches.
Complainants claim interest at least from 1885, the time when, as defendants' answers admit, Brown notified them of his advances, and that he would ask payment out of the proceeds of sale; but the defendants also state that, at the time of the notice, they denied his right to reimbursement, and that Brown agreed they should be paid only after the original cost had been repaid. These admissions are not sufficient to charge them with interest from that date, nor, in view of the agreement of sale and its effects on the equitable rights of the parties, do I see any basis of allowing interest on any debt for advances payable to complainants under this agreement, until demand made for it, under the agreement which in this case was by filing the bill in this cause.
The second question in the cause relates to the right of the complainants, under the agreement of sale, to charge the defendant with certain notes of A. W. Beasley & Co., one for $4,000, and one for $8,000, and an allowance to them of $1,500 for commissions to the agent who effected the sale; the claim being that Moore received and allowed these in violation of the agreement, which provided that cash should be paid, and that the commissions were not payable until the whole purchase price was paid. Moore, in his answer, alleges that the notes were taken, and the allowance of the $1,500 made, with the consent of the complainants; and it is claimed by his counsel that the proofs establish that the $4,000 note and the $1,500 allowance for commission was made by the verbal authority of the complainant Ryder, one of the executors, and that the $8,000 note was taken by authority of Danforth, the other complainant executor. The agreement of September 1, 1887, above referred to, provided for a conveyance to the Staten Island Belt Line Railroad Company, and that this conveyance should not be made until the sum of $50,000 was paid into the hands of the vendors, or a trustee named by them, or until each and every of the vendors affixed their hands and seals to the conveyance; but it was then provided that in order to facilitate the sale, if the purchaser desired the conveyance, preparatory to an issue of bonds, for the purpose of raising the purchase money, then the vendors might deliver the conveyance at their option, without payment of the $50,000, but only with the concurrence of all of the vendors, to be evidenced by their seals set to the conveyance. This conveyance to the Belt Line Railroad Company was executed, as above stated, by all the vendors; and first mortgage bonds to the amount of $100,000, and full-paid capital stock for $200,000, were issued to the vendors for the purchase money. This method of converting the common property into bonds and stock was adopted in order to carry out the sale of the property for $50,000 to the firm of A. W. Beasley & Co. The owners, after the death of Brown, authorized Thomas Moore, son of the defendant James Moore, to sell the road for that price; and he procured an offer in writing from Beasley & Co., on June 1, 1887, which proposed this method of carrying out the purchase, and that $50,000 in cash should be paid within 90 days after the transfer to the new company, the stock and bonds meanwhile to be held by a trustee in escrow, to be delivered up pro rata as fast as paid for, it being also understood that the road was to be transferred clear of all debts, liens, and incumbrances.
The formal agreement settling the manner of payment for the bonds and stock was made September 19, 1887, between Moore, Kean, and the complainants, of the first part, A. W. Beasley & Co., of the second, and Thomas Moore, the agent, of the third; the latter being a party only so far as related to his position as agent, and to his commissions for making the sale. This agreement recited Thomas Moore's authority from the vendors to sell the railroad property for $50,000, and no less without obtaining permission; and that about June 3, 1887, Thomas Moore received from A. W. Beasley & Co. a proposition for purchase, which he submitted to the vendors; and that since that date, by general understanding and co-operation of all the parties, certain transactions had been carried out looking to the consummation of the sale, essentially as proposed by A. W. Beasley & Co., so that the Staten Island Belt Line Railroad Company had been incorporated, and the vendors had become the owner of capital stock of the company, amounting to about $200,000 par value, and $100,000 par value of first mortgage bonds of the company. It was thereupon agreed, in order to fully consummate the proposition essentially as made, that the vendors should sell and deliver the entire amount of stock and bonds for $50,000;and Beasley & Co. agreed to purchase and pay this sum for the stock and bonds, in the following manner: "The bonds to be delivered to and held by James Moore as custodian, and the stock to remain as at present upon the books of the company; and whenever eight thousand dollars is paid in to John Kean, Jr., who has been designated and chosen by the parties of the first part to receive the purchase money above mentioned, there shall be ten bonds of $1,000 each delivered in exchange therefor, together with a certificate for thirty shares of full-paid stock of the company; and payment may be made of not less than eight hundred dollars at one time, with corresponding delivery of one bond and three shares of stock therefor; and, after forty-eight thousand dollars in money and sixty bonds shall have been thus exchanged, then, upon payment of the remaining two thousand dollars to John Kean, Jr., said custodian shall deliver to the parties of the second part all the remaining forty bonds going to make up the one hundred bonds aforesaid, and all the balance of said stock going to make up the two hundred thousand dollars aforesaid; and as soon as eight thousand dollars shall have been paid under this agreement as aforesaid to the said John Kean, Jr., he, the said John Kean, Jr., shall pay to the party of the third part (Thomas Moore) the sum of two thousand dollars; and as soon as the whole purchase price of fifty thousand dollars shall have been paid to John Kean, Jr., he shall pay the further sum of three thousand dollars, making five thousand dollars in all, to the said Thomas Moore, in full of all commissions and expenses of himself and associates connected with this sale, including the cost of organization of the Staten Island Beit Line Railroad Company in full, the preparing of the mortgage and the bonds and stock certificates, and the trust company's charge for certifying to said mortgage and indorsing said bonds, one hundred in number, and all payments and expenses, of every kind soever, amounting to about one thousand dollars." Beasley & Co. agreed to complete the agreement, and pay the $50,000, on or before January 15, 1888. By a supplement to the agreement, bearing the same date, and executed by all the parties, it was agreed that the first payment of $2,000 to Thomas Moore should be by check made payable to him, and, further, that James Moore, the custodian of the bonds and stock, would deliver the same to A. W. Beasley & Co., according to the foregoing agreement, from time to time, as requested by said firm, receiving in payment therefor checks payable to the order of John Kean, Jr. Thomas Moore, the agent of the owners for making the sale, had previous to this agreement, and on June 14, 1887, made a contract with A. W. Beasley & Co. and one Arents, by which they were all to share the profits of this purchase of the road after paying the $50,000 to the owners.
At the time of the execution of this contract of September 19, 1887, in which Thomas Moore, the agent, joined, none of the owners, except James Moore, appear to have known of Thomas Moore's interest in the purchase. James Moore denies that he knew it, but his evidence on this branch of the case is not satisfactory. A. W. Beasley, who was called as defendant's witness, says that he told James Moore of his son's interest in the purchase about the time the contracts were made with his son. I think there is no doubt that neither of the complainants knew of Thomas Moore's interest in the purchase, either at the time of agreeing to make the sale, or until after the Beasley & Co. contract had been abandoned. Under the agreement of September 19, 1887, James Moore delivered to A. W. Beasley & Co., about September 23, 1887, 10 of the bonds ($10,000) and 30 shares of stock ($3,000), receiving therefor a check of $6,000 to John Kean, Jr., the trustee, and a check of $2,000 for Thomas Moore's commissions. Beasley & Co. failed to make any more payments before the time limited by the contract January 15, 1888. On February 24, 1888, Mr. James Moore delivered 10 additional bonds and 30 shares of stock to A. W. Beasley & Co., upon receiving from them $4,000 in their note at 90 days, $2,500 in cash, and allowing them a cash payment of $1,500, which they were to retain on account of Thomas Moore's commissions. His commissions beyond the $2,000 first received were not due under the agreement until the entire $50,000 was received in cash; and it is evident that, by reason of the secret agreement between Beasley & Co. and Moore and Arents, the retention of this sum probably inured to the benefit of the Beasleys also. No proof has been made that Thomas Moore received any portion of it. The defendant James Moore insists, both in his answer and his evidence, that the complainant Ryder consented to his taking the notes for $4,000, and also the allowance of $1,500, to be credited as a cash payment Ryder positively denies giving such consent and the burden of proof to show consent is upon the defendant So far as relates to the acceptance of $4,000 in notes, instead of cash, on delivering the second installment, I think the defendant has established by the weight of evidence that Ryder authorized Moore to consent to this. This is established by Moore's testimony, confirmed by that of A. W. Beasley, a witness to the conversation of February 23, 1887, when the whole situation as to the condition of the road, the inability of the Beasleys to market the bonds, by reason of the bad condition of the road, or to make the payments required, was talked over at a meeting at Beasley's office (which was also the office of the road), in New York, and at which meeting Moore, Ryder, and A. W. Beasley were present. It was understood on that day, so defendant's witnesses say, that the Beasleys could not make the entire cash payment butno agreement was arrived at, and the final adjustment was adjourned until the following day, when the Beasleys would be able to tell them how much they would pay. Ryder, on leaving, said, to use Moore's words: "He didn't think he would be able to come on next day, but any bargain I made with them would be satisfactory to him." Beasley's statement is substantially the same, while Ryder has no recollection of any special conversation on the 23d, and denies generally and positively any consent at any time. Moore's statement that at least $4,000 in notes was to be given is corroborated by the fact that, although Ryder knew shortly after the payment that only $2,500 had been paid in, and talked with Moore about it, the only fault, according to his own account, which he found with Moore, was that the $4,000 had not been paid in cash, but only $2,500. It is also shown that, at that time, Ryder was acquainted to some extent with the Beasleys' financial condition; that he lent them $1,000 to help them in the enterprise; and that shortly after, in March, 1887, on Moore's proposing to rescind the contract, he advised giving them time to carry out the contract, for which he relied to some extent on representations made by Arents as to arrangements he had made for placing a large number of the bonds. In view of these facts and evidence, I think the defendant Moore has sufficiently established by the weight of evidence that the delivery of bonds for the $4,000 of notes, instead of cash, was by the authority of Mr. Ryder. But this authority, given by Ryder to Moore, as testified to by the latter, to make the best bargain he could, was no authority to deliver any bonds without any payment, either in cash or in notes, by the Beasleys, under the agreement, or to deliver any bonds to Beasleys by way of payment or allowance for the commissions of Thomas Moore, which were not due or to be paid until the whole $50,000 was paid. Even admitting that Ryder, as one of the executors, had authority to bind the estate, by authorizing such an allowance to be made, it should certainly appear satisfactorily that he specially authorized it to be made, and that he did so with as much knowledge of the relations between Thomas Moore and the Beasleys as the defendant James Moore could have communicated to him before making this allowance for unearned commissions. As to so many of the bonds, therefore, as were to be delivered to the Beasleys for this $1,500, the defendant must be held to account.
On April 20, 1888, the defendant Moore made another delivery of 10 bonds and 30 shares of stock to the Beasleys, this delivery being made without receiving any cash at ail from them, but receiving their note at 90 days for $8,000, they also agreeing to extend that amount in betterments and repairs on the road. In reference to this delivery, the defendant had no conversation with Ryder at all, and his authority to make it was given, as he says, by the complainant Danforth. Moore's statement is that on the 19th of April he came on to New York on the cars with Mr. Danforth, who, not being able to go with him that day, told him he should go to the Beasleys, and make the best bargain he could with them, "knowing we were not to get all money," and further stating that he (Danforth) had seen Mr. Ryder two days before, and that they would be content. After this interview with Danforth, Moore went on to New York, saw the Beasleys, and talked with them about the payment, but finally came home without making any agreement. "1 was to decide," Moore says, "what 1 would take"; and on the 20th of April he went to New York, and, without any further communication with either Danforth or Ryder, delivered the third installment of bonds ($10,000) and stock ($3,000) upon receiving their note of $8,000 at 90 days, with an agreement that they should spend the same amount for betterments on the road. Mr. Danforth recollects the interview on the train, but denies positively any authority to Moore, stated by him, to make the best bargain he could, and, on the contrary, says that in that conversation he advised Moore not to let the Beasleys have the bonds. "Moore told me that be was going to let them have them, and wanted me to consent, but I did not and would not consent. He wanted to take their note for the $8,000, but I refused to consent to it, nor did I ever tell him that Mr. Ryder consented to letting the Beasleys have the bonds for promissory notes." The statements of these two witnesses are the only evidence in the case bearing on the consent to delivering the third installment of bonds and stocks for notes, instead of cash; and, upon the whole, I consider the evidence of Mr. Danforth upon this point as entitled to the greater credence. He had but few transactions with Mr. Moore in relation to the estate. It seems probable that he would recollect this particular interview, and the occasion of it, viz. Mr. Moore's desire to procure his consent; and, in his statement of the details of the interview, his recollection corresponds better than Moore's with the facts as they actually occurred. Moore told him the Beasleys desired to give notes for the entire $8,000, and that this was what Moore desired him to consent to. This was in fact what was done, although Moore says that, when he interviewed Danforth, he did not know how much was to be paid. Danforth's credibility is not impeached in any way, and, taking into consideration Moore's direct personal interest, his unsupported statement is not sufficient to overcome that of Danforth in reference to this transaction. I conclude, therefore, upon this second branch of the case, that it is sufficiently established that the defendant Moore, in violation of the complainants' rights under the agreement, delivered bonds and stock for the $1,500 on the second installment, and the $8,000 on the third installment, without receivingthe cash therefor, and, as the notes are admitted to be valueless, is responsible to the complainants for the loss they have sustained from such violation, unless the further claim of the defendant that he was afterwards released from this liability is sustained. This question arises as follows: After the default of the Beasleys in their purchase, in 1888, the vendors retained the remaining stock and bonds along with the control of the road, which soon after became involved in litigations arising out of foreclosure of the mortgage and other claims, and a receiver or receivers of the road were appointed. The sale of the bonds and stock of the Belt Line road still remaining in Moore's hands for the common benefit was made in April, 1892, on the proposition of Mr. Ryder, contained in the following letter: "Elizabeth, N. J., April 1st, 1892. James Moore: There is a remote prospect of getting $10,000 for the bonds of the S. I. B. L. R. R. If we can all agree to it Are you willing to accept that amt.? It is that or nothing. If we accept, it will end all further litigation. Please let me know right away, and, if you think favorably, appoint a time and place to meet now. S. B. Ryder." Mr. Moore mailed a reply to this letter, of which reply a duplicate or copy was retained by him, and was put in evidence after a call for the original letter, which was not produced. Mr. Ryder, being afterwards examined, did not, however, deny the receipt of the letter. The reply was as follows: "Elizabeth, N. J., April 1st, 1892. Seth B. Ryder—Dear Sir: Yours of this date is rec'd, informing me 'that there is a remote prospect of getting $10,000 for the bonds of the S. I. B. L. R. R. if we can all agree to It,' &c. In answer, I say that I will agree to that or any other sum that the parties in interest will agree to, provided, however, that I am forever thereafter relieved from any further responsibility or liability in any way relative to said railroad or the securities thereof. I directed Mr. R. C. Swan, of 115 B. Way, N. Y., to call upon you, with English, the other day, to consult about the sale of the road, and informed him that I would agree to any arrangement that the estate of Brown & Col. Kean would agree to. If well enough, I will call at your office on Monday next, a. m. Yours, truly, James Moore." The bonds and stock were soon afterwards sold by the owners for $10,000,— $5,000 in cash, and $5,000 in notes, with security,—and delivered by Mr. Moore, pursuant to this offer referred to. It is now claimed that, this sale being made upon the condition specified in Mr. Moore's letter, he is relieved from all previous liability as trustee or custodtan under the agreement; and at the hearing, before the examination of Mr. Moore, an amendment was permitted to be made to his answer setting up this defense. At the time of the letter, it is shown that several litigations were pending against the Belt Line Company, and that in some or one of them the organization of the railroad and the validity of the bonds held by the owners were attacked. This was undoubtedly the litigation referred to in Ryder's letter, and, reading Ryder's letter in connection with Moore's reply, I do not think that the provision in the latter that Moore "was to be forever thereafter relieved from any further responsibility or liability in any way relative to said railroad or the securities thereof" can fairly be construed as covering or intended to reach to Moore's liability as trustee or custodian under the agreement of September 1, 1887, for previous violations of its provisions made while it was in force. If Moore intended it to be used for that purpose, this intention should have been specially called to his cestui que trust's attention.
The court scrutinizes closely releases from a cestui que trust to a trustee, and the cestui que trust must have full knowledge of the circumstances of the case. 2 Perry, Trusts, § 851. This would include, I think, knowledge of the purpose for which the release was to be used in relation to the breach of trust. No consideration appears for the release from any previous liability as trustee, because Moore says in the letter that he is willing to sell the bonds and stock for the $10,000 or any other sum the other parties would agree to; and, if a release had been actually intended to be executed by the complainants on the terms of Moore's letter, it is doubtful whether a court of equity would have required its execution by them, if intended to cover the previous default as trustee, which was not expressly called to the attention of the parties. And inasmuch as no release has actually been executed, and the whole defense upon this point rests on the basis of equitable estoppel, the provision or condition in the letter should, in equity, be applied to the responsibilities and liabilities of Moore, which were evidently in the minds of both parties, and should not be construed to protect him against liabilities for breach of duty as trustee under the agreement, as to which no litigation had then been commenced. I conclude, therefore, that the question of Moore's liability in this suit based on the agreement, is unaffected by this correspondence or action under it.
The defendant Moore being, then, liable to make good to complainants their loss by reason of the wrongful delivery of the bonds, the next question is as to the amount of the loss with which he is to be charged. This depends upon the value of the bonds at the time of their delivery, but what this value was it is difficult to determine satisfactorily from the evidence. Prima facie, as it seems to me, the bonds, as against the defendant who offers no proof of their values, must be taken as worth the amount which the vendors would have realized for them under the agreement, i. e. $50,000, less $5,000, commission for the whole $100,000 in bonds, or at the rate of 45 per cent. of the par value. The Beasleys sold some of the first and second installmentsof bonds at about 90, but there was no regular market value, and it would not be just to take these special sales (the circumstances of which are not known) as the basis of the loss which the complainants sustained by Moore's improper delivery of the bonds to the Beasleys. Nor, on the other hand, can the sale of the remaining bonds and stock made by the parties four years later, and after the new company had failed, and the road was in the hands of a receiver, and while numerous litigations were in progress, be taken as a standard for proving the value in 1888, when the road, although not in good condition, was free from debt. In the absence of direct evidence as to value, it seems to me that the sum fixed on, near the time, by all the parties as their value, may fairly be taken as prima facie the basis from which to establish the amount of loss. It must be borne in mind, however, that it has been shown that, at the time of the delivery of these bonds, the road was in bad repair, and that, by reason of its condition, the Beasleys found it difficult or impracticable to dispose of more bonds; that this need of expenditures for improvements was one reason given by them for their lack of funds to pay for the bonds; and that, upon giving the notes for $4,000 and $8,000, they agreed to expend these amounts in improvements on the road, which seems to have been treated by the vendors as under the control of the Beasleys, for this purpose at least. These moneys are proved to have been expended by the Beasleys upon the road pursuant to their agreement; and therefore, to the extent of this expenditure, the vendors, as holders of the remaining bonds, and by reason of the delivery to the Beasleys, have been benefited along with the other bondholders, by having the security still held bettered to that extent. This expenditure and benefit must therefore also be taken into account in estimating their loss by reason of the delivery of the bonds; and, in order to arrive at the allowance which should be made for this, I can see no more fair or equitable method than to treat this amount as really expended, or necessary to be expended, by the vendors, upon the road, in order to realize upon the remainder of their securities. Deducting, then, the $12,000 from the total sum of $45,000, which was to be realized, the bonds would stand as worth 33 per cent. This is the best estimate I can form on the evidence submitted. I omit all reference to the stock in estimating the values, for the reason that, this being a road whose stock did not have any selling price in the market, it was in fact worth little or nothing, unless the bonds were worth par. The defendant Moore, on this basis, would be chargeable, in favor of the complainants, with bonds to the par value of $1,875, being the proportionate amount to which the $1,500 allowance was entitled on the second installment, and with bonds to the par value of $10,000 on the third installment. At 33 per cent. of their face value, the charge would therefore be of $718.75 on the delivery of February 20, 1887, and $3,300 on the delivery of April 20, 1887. This charge, however, in taking the accounts, is to be made only in favor of the complainants, and not in favor of the defendant John Kean or his representatives. In his answer, this defendant makes no claim that Moore's action in the matter was without his authority or consent; and Moore, in his evidence, called as a witness for the defendants, states that he had absolute carte blanche authority from John Kean to deal with the Beasleys under the contract. The accounting, therefore, will be upon the basis that, in favor of the complainants, the defendant James Moore will be chargeable with three-eighths of the above amounts, $718.75 and $3,300, and with so much more thereof as may be necessary to reimburse the trust fund sufficiently to pay to the complainants the amount which they are entitled to receive for the advances made by Brown in his lifetime, and allowed them, with interest. The accounts of the trustee John Kean, Jr., not being disputed in any respect, the final decree can be made on the evidence already in, unless either party applies for a reference to a master to state the account in conformity with this opinion.