Griffith v. Dale

Henry, J., delivered the opinion of the.Court. Edith Tyler Griffith, one of the appellants, was the owner by assignment of a first mortgage, executed to secure a loan of $15,000 to John T. Dale, appellee, on .the leasehold property of the said Dale, situated on South Howard Street, in Baltimore City. Default having been made by the mortgagor in complying with the covenants of the mortgage, Alfred J. Shriver, one of the appellants, was on the 2nd day of April, 1907, under the provisions of the'mortgage, containing an assent on the part of the mortgagor to the passage of a decree for the sale of the mortgaged property, in conformity with the local law for Baltimore City, by the Circuit Court Ho. 2 of said city, appointed trustee to sell the property in said mortgage described and conveyed. By virtue of this decree, the trustee on the 2nd day of July, 1907, sold the property at public sale for $16,650, Mrs. Griffith being the ⁶⁹⁹ purchaser, and this sale, upon exceptions filed by John L. G. Lee and Helen Earned, holders of a junior mortgage, was on November 13th, 1907, after the taking of much testimony, set aside and annulled by the Court.

Thereafter on the 9th day of December, 1907, the same trustee again sold the property in question at public sale to Mrs. Griffith for $17,000, and this sale on February 28th, 1908, was finally ratified and confirmed by the Court. In the distribution of the proceeds of sale, and of rents collected from the property by Shriver amounting to $2,282.54, the auditor stated two accounts, one known as audit “A,” according to his own ideas of what was proper, and another, known as audit “X,” under the direction of Shriver, the trustee. The Court, on May 26th, 1908, ratified the former account, with the exception of an allowance of 5% commissions to the trustee on the rents collected by him, and rejected the latter account. In the audit as adopted the expenses of the first sale were allowed, but a fee of $150 paid by the trustee to Charles Morris Howard, as counsel, in resisting the exceptions made to the ratification, and a fee of $50 paid to' Frank G. Caughy, an expert witness in the proceedings, were rejected, as was also a claim of $8.65 claimed on account of insurance premiums paid.

In said audit there was also deducted from the mortgage claim of Mrs. Griffith the sum of $62.50, being for a proportionate part of the fee charged by the stenographer in the proceedings on the exceptions. Because of the aforegoing, both Shriver, the trustee, and Mrs. Griffith have taken an appeal here from the order of the lower Court in ratifying the auditor’s report. The record in the case is an extensive one, dealing principally with the evidence adduced in support of and in opposition to the exceptions filed to the ratification of the first sale. As no opinion was filed by the lower Court, we are not advised of its reason for sotting aside this sale, but whether it was rightfully or wrongfully done is not before its, and we have no concern with it except so far as the good faith of the trustee in conducting the same may bear upon the pro ⁷⁰⁰ priety of' allowing the expenses thereof ont of the proceeds of the second, s'ale.''' It' is sufficient for -us to say that after an examination of the testimony we find no evidence of intentional' wrongdoing on the part of the trustee, however much he may have misconceived his duty in some respects, but his conduct appears to have been characterized by entire good faith, with a view of saving from loss the junior incumbrancers who afterwards successfully attacked the sale: The case of The Real Estate Trust Company v. Union Trust Co., 102 Md. 41 , whéie-"á resale was ordered because a trustee, acting upon the'advice of Counsel; failed to file a bond before selling thó property, is "'authority for the 'general statement' that’ in the absene'e "of bad' faith'An the part of a trustee the "expenses of"a’'first'salé';should be paid out'of the proceeds of a second: "' The case of South Baltimore Company v. Kirby, 89 Md. 52, also Sustains this point! ■But accepting the foregoing as" correct, thé question arises as ‘tó whether' an attorney’s fee, such as was paid in this case, is a proper item of' expenditure tó be charged against the common fund. ■ There is no authority for such'an allowance in-the niortgage itself, which merely provides for' the payment of the costs and expenses of the sale, and the same provision in a power of' sale mortgage has been' held by' this Court to include the cost of advertising,' the' services of an auctioneer and such other éxpénses 'as are necessary tó make an advantageous sale,' but does not even include the payment'of commissions to the party making the sale, much less of a fee to' an attorney for defending the ratification of the sáme.

Johnson v. Glenn, 80 Md. 369 . There seems to'be no inflexible rule of law on the subject, but the general principle,, which is justified by sound reasoning and by authority, is that where a trustee employs an attorney tó render necessary services for the benefit of all the parties interested in the estate, or seeks advice for the proper administration of his trust, that a reasonable fee, though not specially provided for in the decree, is tobe allowed for such services out "of "the common fund in his possession.” In this ⁷⁰¹ case the attorney did not represent all the parties. On the contrary, he was distinctly hostile to the position taken by the two junior mortgagees. He was employed either by Shriver, the trustee, or by Mrs. Griffith, the purchaser at the sale, or by both of them, and we think should look to them for payment for his services .To allow his fee of $150 out of the fund in hand, would practically be making the exceptants in the proceedings in the lower Court pay for the services of counsel employed by the other side.

In the ease of Mahoney v. Mackubin, 54 Md. 277 , which was cited with approval in the later decision of Shaw v. Smith, 107 Md. 523 , where the mortgagee, under a power contained in the mortgage, made sale of certain real estate, he was refused an allowance of $150 paid to an attorney for successfully defending exceptions to the ratification of the sale. We understand that in this case the sale was made by a trustee, appointed under the statute,. rather than by a mortgagee under a power, but the case above referred to is worthy of mention as showing that the Court does not consider the employment of an attorney as a usual expense, but rather as an extraordinary one, to be paid for by the person procuring the same, and only allowed out of a common fund when the services, rendered are for the benefit of all the parties interested, and not in hostility to part of them. As shown in this case, the attorney was unsuccessful in maintaining the sale against the exceptions of the two persons immediately interested in the property, and we feel that it would be improper to .make them contribute in whole or in part to the payment of his fee. Miller’s Equity, sec. 564; McGraw v. Canton, 74 Md. 554 ;; 11 Cyc. 97.

We likewise think the lower Court correct in refusing to allow the trustee the sum of $50 paid by him to Frank J. Caughy, an experienced real estate dealer, who was called as an expert witness to controvert the allegation in the exceptions to the effect that the property sold for an inadequate price. To sanction a fee of this character would be opening the door to extravagant expenditures and inviting trustees to ⁷⁰² an abuse of the confidence reposed in them. If sucb a fee were allowed to one witness, it could be allowed to several, or to many, until in tbe discretion of tbe trustee he bad produced sufficient evidence to maintain tbe point at issue, and by such practice an estate might be squandered in litigation, to tbe detriment of tbe mortgagor or to other claimants of tbe property. Tbe only safe course is to hold trustees to a strict accountability, allowing sucb proper costs as are incident to tbe sale, but forbidding the wasting of a fund by extraordinary expenses in litigation.

In respect to tbe claim of $8.95 for difference in allowance for insurance, we see no merit. In audit “A” the trustee was allowed $39.91 on