It is settled, by repeated adjudication in this State, acquiesced in for many years, although the question does not appear to have been passed upon in the court of last resort, that, where an active trust for the care, management, conveyance and appropriation of personal property has been created, and the instrument creating the trust makes no provision for the compensation of the trustees, they are prima facie entitled to the same commissions as are, by statute, allowed to guardians, executors and administrators.
The terms of the instrument may be such as to negative the idea that any compensation to the trustees was contemplated, the relationship of the parties or other extrinsic facts may clearly indicate that the labor and responsibility of the trust were voluntarily assumed, and were intended by all parties to be gratuitously performed. (Mason v. Roosevelt, 5 Johns. Ch. 534; Mumford v. Murray, 6 id. 452.) *Page 203
The subject is discussed by Chancellor WALWORTH, in Meacham v. Sternes et al. (9 Paige, 398). The doctrine of that case is strongly re-asserted in The Matter of De Peyster (4 Sandf. Ch. 511) by Vice-Chancellor SANDFORD, and held not to require, that the property held should be converted by the trustee into money; that, though delivered in specie, and in the very form in which it came to his hands, commissions should be allowed thereon. And the Supreme Court, in Wagstaff v. Lowerre (23 Barb. 209), held the same rule, in favor of a trustee appointed by will. That the English rule and the law of this State was otherwise, prior to the statute of 1818, fixing the compensation of executors and administrators, appears in these cases, and in Manning v.Manning (1 Johns. Ch. 534). (See 2 Story's Eq. Jur. § 1268 and notes; Robinson v. Pitt, White Tudor's Lead. Cas. in Eq. Am. Notes, 70; Law Lib. p. 353 et seq.)
Without affirming that the rule is so unqualified, that the rate of compensation allowed by statute to executors, administrators and guardians must, in all cases where compensation is allowed to trustees, be the exact measure, without any consideration of the nature and extent of the duties and responsibilities imposed by the trust, or that in no case the court will inquire what less amount would be a reasonable compensation, I think the rule above stated should, in general, be regarded as reasonable and just, and, therefore, to be adopted, unless there are controlling considerations which forbid the allowance.
There is nothing, in the language of the instruments by which the trust in this case was created and declared, indicating any agreement on the subject of commissions, nor manifesting any intent that the service with its responsibilities should be assumed or borne gratuitously.
The property in question consisted of seven steamships, transferred to the appellants and their associate, Snow (now deceased), to hold for the use and benefit of the Accessory Transit company, and in trust and confidence that the trustees will account for and pay over to the company, or to whomsoever the company may appoint, all earnings, receipts *Page 204 and profits from or on account thereof, or of any or either of them, which they may receive, and any and all insurance moneys which may be received, on account of the ships, or either of them; and will assign, transfer and convey the said ships, and any of them, on request of the company, to the said company or such appointee.
It is true, that the trustees permitted the ships to be employed and run by other agents of the company, and the company received the earnings directly. But, although this may be a reason for denying to them commissions on such receipts and earnings, it would not deprive them of their just claim to compensation for the discharge of the trust, in holding the property subject to a liability to account therefor, and to convey the same, and a further responsibility to third parties, who would have a right to look to the legal title to the ships, and charge the trustees as such.
I think, therefore, that there is nothing in the nature and terms of the trust which precludes the allowance of commissions to the trustees under the general rule above stated.
But the trustees were themselves directors of the company, and, as such, were already trustees, bound to manage the affairs and property of the company for the interest of its stockholders, and, by familiar and well-settled principles of law, as well as the most obvious rules of justice, forbidden to administer its affairs for their private emolument.
There were seven directors. The creation of the trust and the designation of the trustees was authorized by a resolution, passed at a meeting of the directors, at which they were present and voted; and, although they did not constitute a majority, their voice and influence was cast in favor of the arrangement by which property, to the amount of one million three hundred and fifty thousand dollars, purchased and paid for by the company, was placed in their hands. Prima facie, this act was, itself, a breach of trust. The directors had prima facie no right to place the property in the hands of third persons, and thus put the title beyond the proper control of the board of directors, who were, by law, trustees for the control, employment and management *Page 205 of the property of the company, for the benefit of its stockholders. True, they declared a trust to hold for the use of the company, but it is no part of the proper duty and power of the directors of the company to divest the company itself of the title to its property, and subject it to the hazard of the fidelity of trustees, or make the actual benefits to be derived by the stockholders depend upon the efficiency of proceedings in court to compel the performance of such a trust.
It is, however, not necessary to say that there may not be circumstances in the condition of an incorporated company, which will warrant the transfer of its property, or portions of it, to trustees, for purposes which are lawful and consistent with the duty owed to the company. I do say, however, that the creation of such a trust requires some legal and sufficient purpose to excuse it.
I find no facts stated in the case agreed upon here, as the reasons for creating the trust in question. The company was incorporated by the "State or Republic of Nicaragua." Its "corporate object and business was the transportation of passengers and freight from the city of New York to certain ports on the Pacific, and it was necessary, in order to carry out the objects of its incorporation, that the said company should own or have the control of several steamships running on either side of the Isthmus of Nicaragua."
Nothing in the case agreed upon indicates, that the company could not own, hold and run steamships agreed to be "necessaryto carry out the object of its corporation," to wit, "the transportation of passengers and freight."
What was, then, the impediment? It is suggested, in argument, that the laws of the United States prevented the company, a foreign corporation, from taking and holding the title to these ships. The case states, that, in July, 1854, an act of congress was passed authorizing this company to hold steamships in their own name.
And the argument is therefore this: At the time this trust was created, the company could not, by law, take the legal title to itself. The conveyance to the trustees was *Page 206 therefore necessary; and, if necessary, then, as between the trustees and the company, was proper, in order to carry out the objects of the incorporation, and secure to the stockholders the means of carrying on the business for which it was created, and the profits and emoluments derivable therefrom.
It is, doubtless, true, that a foreign corporation cannot take title to a vessel, and retain her registration as a vessel of the United States, entitled to the privileges and protection of a national as distinguished from a foreign ship. But I find no warrant for saying, that the Accessory Transit company had not legal capacity to take the title to these steamships, and hold and employ them for all purposes for which citizens of Nicaragua may hold and employ vessels, and, among other purposes, the running them between their own ports, and the ports of the United States, subject to all the disadvantages, of course, of being treated as foreign vessels, and restricted in their trade by all the disabilities to which foreign ships are subject. The objects of their incorporation declared in their charter import the power to hold and employ such ships.
The question thereupon arises, may a foreign corporation, in order to obtain and keep all the advantages derivable from a trade which can only be advantageously carried on in American vessels, registered as such, under a system which makes a fraudulent registry a forfeiture of the ship, and which requires the oath, that no foreigner has any interest in the ship, — purchase and employ ships for the sole use and benefit of the corporation, and with expressed authority to direct and control their use and disposition, and cover the ownership under a trust in American citizens, they taking the title for that purpose.
I cannot resist the conclusion, that this is not only an evasion, but a fraud upon the laws of the United States, which ought not to be sustained or sanctioned, directly or indirectly, and that no court should hold, that a trust for such a purpose should be upheld either to give compensation to the trustees or for any other object. *Page 207
If there was any other purpose, or any other ground upon which the propriety of the trust may be vindicated (and, for the purposes of this case, it is not necessary to say that there may not have been), it is at least true, that there was legal capacity in the company to take the steamships; and the expediency and propriety of doing so was a proper subject of consideration by the board of directors. Whether it was for the interest of the stockholders to pay the purchase price, and leave the title in third persons, subject to a charge by way of compensation therefor, and subject to any of the hazards consequent thereupon, was a subject of grave consideration, in reference to which, the directors, as trustees, were not at liberty to act under the influence of selfinterest.
In this aspect of their relation to the subject, the appellants and their associates were not in a situation permitting them to secure to themselves a personal advantage in the matter. The stockholders and creditors were entitled, not only to their vote in the board, but to their influence and argument in the discussion which led to the passage of the resolution, in pursuance of which they took title as trustees.
This brings the case within the rule, which rests in the soundest wisdom, and is sustained by the best consideration of the infirmities of our human nature, and called for by the only safe protection of the interests of cestuis que trust, or beneficiaries, viz.:
That trustees, and persons standing in similar fiduciary relations, shall not be permitted to exercise their powers, and manage or appropriate the property of which they have control, for their own profit or emolument, or, as it has been expressed, "shall not take advantage of their situation to obtain any personal benefit to themselves at the expense of their cestuisque trust." (Story's Eq. Jur. § 466 a; Hill on Trustees, 535.)
This by no means assumes, that the trustees were not, in this case, in the actual exercise of the highest integrity. I cannot for a moment doubt that, in reference to the particular *Page 208 case before us; but the principle is one of great importance, and it forbids any inquiry into the honesty of a particular case. If it would have been competent to select their trustees disconnected from the company, still it was not competent for the directors themselves to create a trust of this description, consider and determine its expediency, and thereby create a claim to compensation in their own favor for the performance of its duties.
For these reasons, I think the judgment should be affirmed.