Div. II. CHAPTER II. Costs of appli Where a petition is presented by cestuis que trusts, or by the bank- PART III. rupt trustee himself, for leave to prove against the estate for the amount of a trust fund, the petitioners will not be liable to pay to the assignees their costs of the petition (k). And on the other hand a bankrupt trustee, who has been guilty of a breach of trust, will not be entitled to his costs of appearance on a similar petition by the cestuis que trusts for leave to prove against his estate (1). cation for leave to prove. In some cases the bankrupt himself has been allowed to prove against By bankrupt his own estate for a debt due to himself as trustee (m). But an order himself. must be obtained to sanction that course (n); and the court will guard against the possibility of any misapplication of the dividends, by ordering them to be paid into court (o), or to the credit of the cause, if any be pending for the administration of the assets (p). trustees. Where two co-trustees are both implicated in a breach of trust by Where there having joined in a transfer of the trust fund to one of them, by whom are several coit has been lost, there is a joint and several debt, and the cestuis que trusts may prove for the whole amount against the estate of the trustee, who joined in the transfer, without having recourse first to the estate of the trustee, by whom the fund was received and wasted, although his estate is primarily liable (q); or the proof may be made against both estates (r). And if one of two trustees misapply the trust fund, and become bankrupt, an order may be obtained by the cestui que trust, to prove for the amount against his estate, although the other trustee is solvent (s). Again where the trust fund is misapplied by one of several co-trustees without the concurrence of the rest, and that one becomes bankrupt, the solvent trustees may prove for the amount against the estate of the defaulting trustee (t). But if the co-trustees have not acted, or accepted the trust, the court on the petition of the cestuis que trusts will appoint some other person to prove (u). And if one or more of several co-trustees have been compelled to make good to the cestuis que trusts the amount of the trust fund, which had been appropriated or otherwise misapplied by their bankrupt co-trustee, they will be entitled to prove for the amount against the bankrupt's estate (x). It may be observed, that where a trustee, who is indebted to the (k) Ex parte Heald, 12 Law Journ. N. S., Bankr. 37; ex parte Snowlton, ib. (1) Ex parte Harris, 11 Law Journ. N. S., Bank. 16. (m) Ex parte Snowlton, 12 Law Journ. N. S., Bank. 37; ex parte Richardson, 3 Mad. 138; ex parte Watson, 2 V. & B. 414; ex parte Atkins, Buck. 479; sed vide ex parte Moody, 2 Rose, 413. (n) Ex parte Shaw, 1 Gl. & J. 127, see 163; ex parte Collindon, 1 Mont. & Ch. 156; ex parte Thring, 1 M. & Cr. 75. (0) Ex parte Leake, 2 Bro. C. C. 596; How far debt from bankrupt PART III. Div. II. trust estate, is made a defendant in a suit for the administration of the estate, and he afterwards becomes bankrupt or insolvent, he will notwithstanding be entitled to his costs incurred subsequently to the banktrustee may be set off against ruptcy or insolvency, to be paid to him out of the trust estate, although the costs incurred before he became bankrupt or insolvent will be set off against the debt: for the previous debt is extinguished by the bankruptcy or insolvency, while the right to receive his costs remains (y). costs due to him. Liabilities of trustee trading with trust assets. Danger of un trust. A trustee, who carries on any trade with the trust assets for the benefit of the cestuis que trusts, will be responsible to the creditors not only to the extent of the trust assets, but also with the whole of his own property, and he may be made bankrupt, and proceeded against in the same manner as any other trader (2). And it is immaterial, that the trade is carried on by him in consequence of an express direction in the trust instrument; although the trust property will doubtless be primarily liable to the creditors, and will be first applied as far as it will go in discharge of the liabilities (a). Where the amount of the trust funds, to be employed in trade, is expressly fixed by the author of the trust, it will be a breach of trust in the trustees to employ any further portion of the funds in the business, and neither the trustees nor their creditors in case of bankruptcy can enforce any claim upon the trust estate beyond the prescribed amount (b). In the present state of the law on this point no trustee could be dertaking such advised under any circumstances to undertake the responsibility of carrying on any trade or business in trust for others. For by so doing he adopts the same risks and liabilities as persons, who trade on their own account, while he can participate in none of the profits, and as a matter of ordinary prudence a trust for such a purpose should unhesitatingly be declined. Appointment of new trustees in place of those becoming bankrupt. Or insolvent. There has already been occasion to consider the jurisdiction of the court of review to appoint new trustees in the place of those becoming bankrupts, as well as the mode, in which that jurisdiction will be exercised (c). No power of appointing new trustees has been conferred by the legislature on the insolvent debtors' court in case of the insolvency of trustees, but in such cases a bill must be filed in the Court of Chancery for the removal of the insolvent, and the appointment of a new trustee in his place; and the insolvency would unquestionably be sufficient foundation for such an application (d). And in the meantime where (y) Samuel v. Jones, 2 Hare, 246; Gibbons v. Hawley, ib. n. (z) Ex parte Garland, 10 Ves. 119; ex parte Richardson, 3 Mad. 157. (a) Ex parte Garland, 10 Ves. 110, 119; ex parte Richardson, 3 Mad. 138, 157. (b) Ex parte Garland, 10 Ves. 110; er parte Richardson, 3 Mad. 157; Thompson v. Andrews, 1 M. & K. 116; Cutbush v. Cutbush, 1 Beav. 184. (c) Ante, Pt, I. Div. III. Chap. I. Div. II. CHAPTER II. Receiver ap Effect of bank. ever the exigencies of the trust require it, a receiver will be appointed, PART III. and an injunction granted, prohibiting the receipt of the trust assets by the insolvent trustee (e). A receiver has also been appointed on the bankruptcy of an executor and trustee, and although the testator at pointed. the time of appointing him knew, that the commission had issued (ƒ). Where one of three co-trustees becomes bankrupt after an order of the court for payment of money to them, the proper course is, to apply to the court to vary the order by directing the payment to be made to the two solvent trustees only (g). And in case of the bankruptcy of a sole trustee, under similar circumstances, the appointment of a new trustee should first be procured, and an application then made to the court, to vary the order by directing the payment to the new trustee. Mansfield v. Shaw, 3 Mad. 100. (g) Gage v. Whatmough, 10 Law Journ. N. S., Chanc. 234. ruptcy of trus for payment of money to him. PART III. CHAPTER III. Trustees cannot CHAPTER III. OF THE DISABILITIES OF TRUSTEES. It is one of the settled principles of courts of equity, that trustees obtain any per- shall not take advantage of their situation to obtain any personal benefit to themselves at the expense of their cestuis que trusts. sonal benefit. Unless it be ex them. However this rule does not extend to prevent a trustee from enpressly given to joying any benefit or advantage, which is expressly given to him by the creator of the trust. And we shall see in a future chapter, that a trustee may be entitled to charge for professional services, &c., when duly authorized to do so (a). Legacies given Unless the legacy be given to them personally. Incapacity of trustees to pur chase the trust estate. 1st. Where the purchase is made directly from themselves. And trustees are of course entitled to legacies expressly given to them by the testator. Although where the legacy is given to them only as trustees, or as a remuneration for their trouble, &c., they cannot claim it, if they do not accept the trust (b). And it is immaterial that the trustee is prevented from acting by age or infirmity (c). But if the legacy be given to the trustee personally without regard to the office imposed on him, he will be entitled irrespectively of his acceptance of the office (d). And where a testator appointed two trustees, and gave them 1007. each "as a mark of his respect for them," and afterwards made a codicil, appointing two other trustees in the place of the first two, and by the codicil he also gave 1007. to each of the substituted trustees "as a mark of his respect for them," the legacies to the first trustees were held not to be revoked by implication by the codicil (e). The equitable disability of trustees to become the purchasers of the trust estate originates in the principle of the court just referred to. And this disability is twofold-1st, Where the trustee attempts to purchase directly from himself—and 2ndly, Where the purchase is effected by contract or agreement between the trustee and his cestui que trust. In the first case the disability is much more strictly enforced than in the other. Indeed it was laid down by Lord Erskine, with regard to a trustee selling to himself, that "without any consideration of fraud, or looking beyond the relation of the parties, that contract is void " (f). However the authorities scarcely bear out that assertion in its fullest (a) Vide post, Ch. [Allowances]. (b) Harrison v. Rowley, 4 Ves. 216; Stackpoole v. Howell, 13 Ves. 421; Read v. Devaynes, 3 Bro. C. C. 95; Dix v. Reed, 1 S. & St. 239; Barber v. Barber, 3 M. & Cr. 688; Pigott v. Green, 6 Sim. 72; Calvert v. Sebbon, 4 Beav. 222. (c) Hanbury v. Spooner, 5 Beav. 630. (d) Humberston v. Humberston, 1 P. Wms. 333; Cockerell v. Barber, 2 Russ 585; Griffiths v. Pruen, 11 Sim. 202; Christian v. Devereux, 12 Sim. 264. (e) Burgess v. Burgess, 1 Coll. N. C. C. 367. (ƒ) In Morse v. Royal, 12 Ves. 372. extent (g); for such sales (though primâ facie invalid) have frequently been supported in equity, where it has been shown that the fiduciary relation of the purchaser had absolutely ceased previously to the purchase (h), or that the purchase was made with the full concurrence and consent of the persons beneficially interested (who in that case must of course have been competent to give their assent (i)). Or where the cestuis que trusts by their laches or acquiescence have debarred themselves from their right of questioning the transaction (k). A purchase by a trustee under the sanction of the court is also necessarily excepted from the operation of the general principle (1). But wherever one or more of these corroborative circumstances cannot be established, a purchase of this nature, however fair, open, and honest in itself, will invariably be set aside in equity on a bill filed for that purpose by the cestuis que trusts (m). And it is immaterial that the purchase is made by the trustee at a public sale by auction (n), or in the name of another person as his agent (o). Moreover it is unnecessary for the cestui que trust to shew, that the trustee has obtained any profit or advantage by the purchase (p), although that would of course be an additional reason for the interference of the court against the trustee, who would be decreed to account for the profits thus made (q). PART III. CHAPTER III. Div. II. Purchase in valid, though derived no pro trustee has from it. Burden of proof lies on trustee to sup chase. It rests with the trustee, who relies upon any corroborative circumstances in support of his purchase to prove those facts. And even where such circumstances are established in evidence, the court will port the purlook into the whole transaction with infinite, and the most guarded jealousy, for the law supposes the trustee to have acquired all the knowledge respecting the trust estate, which a trustee may acquire, and which may be very useful to him, but the communication of which to the cestui que trust the court can never be sure he has made (r). trustee at the On the other hand a purchase of this nature, though voidable at Purchase bindthe option of the cestuis que trusts, will be enforced against the trus- ing on the tee, if that course be most for the benefit of the trust estate. And option of cestui accordingly the decree in these cases usually directs the estate to be que trust. put up for sale again at the price given by the trustee, and if more be (g) See ex parte Lacey, 6 Ves. 625; Downes v. Grazebrook, 3 Mer. 208. (h) Ex parte Bennett, 10 Ves. 393; ex parte Lacey, 6 Ves. 626; Downes v. Grazebrook, 3 Mer. 208. (i) Downes v. Grazebrook, 3 Mer. 208; Randall v. Errington, 10 Ves. 428. (k) Campbell v. Walker, 5 Ves. 678. (1) See Campbell v. Walker, 5 Ves. 681, 2. (m) Campbell v. Walker, 5 Ves. 678; ex parte Lacey, 6 Ves. 625; Lister v. Lister, ib. 631; Downes v. Grazebrook, 3 Mer. 200. (n) Campbell v. Walker, 5 Ves. 678; Lister v. Lister, 6 Ves. 631; Sanderson v. Walker, 13 Ves. 601; Downes v. Graze- (0) Whelpdale v. Cookson, 1 Ves. 9; (p) Ex parte James, 8 Ves. 348; ex parte Bennett, 10 Ves. 393; ex parte Lacey, 6 Ves. 627. (q) Fox v. Mackreth, 2 Bro. C. C. 400; Whichcote v. Lawrence, 3 Ves. 740. (r) Ex party Lacey, 6 Ves. 626 ; ex parte Bennett, 10 Ves. 394. |