Tuttle v. Merchant's National Bank , 19 Mont. 11 ( 1896 )

Hunt, J.

This appeal first presents for decision the question of the jurisdiction of the court to appoint Webster as trustee to succeed Tuttle as trustee, who had died.

We regard the instruments upon which the action was brought as in effect assignments for the benefit of the creditors of Hanks & Fullerton. As debtors they evidently made the transfers by reason of business embarrassments, growing out of their inability- to pay over to the various insurance companies premiums which as agents for such companies the firm had collected. They accordingly executed the several conveyances vesting the legal and equitable title in the assignee Tuttle, subject to trusts in favor of certain creditors, and providing a method by which money could be raised with which to pay such creditors. The intervention of a trustee was expressly contemplated and a trust for the benefit of creditors was clearly created, by the debtors thus making an absolute appropriation of their property to the payment of certain of their creditors. (Burrill on Assignments, § 7; Marshall v. Livingston National Bank, 11 Mont. 351.) The instruments are similar in effect to one considered by the supreme court of Missouri in the case of The State of Missouri to Use of Holiday v. Benoist, 37 Mo. 500, where Judge Holmes for the court said:

“There was some discussion as to whether the instrument in question here was to be considered as a deed of trust in the nature of a mortgage security for a debt, or a partial assignment for the benefit of creditors. It does not purport to be a security for a debt, with power to sell if the debt be not paid when due. It conveys the property absolutely to trustees, to be sold for the payment of the debts named and preferred in it. It is clearly a partial assignment for the benefit of creditors, and not a mortgage security. Such instruments have always been treated as assignments. (Gale v. Mensing, 20 Mo. 461.”

We do not think appellant’s counsel means to dispute the correctness of these views, for in his brief he says that the instruments upon which the action is based “were not mortgages but were so far as they had any force or effect, absolute conveyances to Tuttle of all the grantor’s title to and interest in the property.” His contention, nevertheless, is that the court in the absence of statutory authority, had no power to appoint a new trustee. But in this respect we think appellant is in error.

The familiar general principle is that an express trust, validly created, must not fail for want of a trustee, and that a court of equity in its general equity jurisdiction may remove or appoint trustees under wills or other written instruments upon sufficient cause shown. This doctrine is laid down in Attorney- General v. Barbour, 121 Mass. 568. It is also recognized in The Matter of Eastern Railroad Co., 120 Mass. 412, where it was held that the supreme judicial court of Massachusetts was authorized in cases of trusts, which would not be complete until a trustee was appointed to appoint trustees for the purpose of selling, or conveying or holding and managing the property.

The rule is thus stated by Pomeroy in his Equity Jurisprudence, § .1087:

‘ ‘ Courts of equity, therefore, independently of statute, possess the inherent power and jurisdiction to appoint new trustees whenever such action is necessary to protect the rights of the beneficiaries. In the absence of any other method prescribed by the instrument creating the trust, a court of equity will appoint trustees when none at all have been named by the creator of the trust, and will appoint new trustees when those originally named refuse to accept, or when a vacancy occurs by their death, resignation, permanent residence in a foreign country, or removal from office, as heretofore described. ’ ’

The principle, as applicable to cases where the trustee, after taking possession of the property, dies without rendering any account, is sustained in the case of Gorsuch, Trustee, v. Briscoe, Trustee, 56 Md. 573. There one Eden made a deed of trust for the benefit of his creditors to one Alexander. The trustee took possession and died without rendering any account. It appeared that he was indebted to the trust estate. The creditors petitioned for the appointment of a trustee to complete and settle the trust. The court upheld the appointment of a trustee in the following language:

“We can see no objection to the appointment of a trustee by a court of equity in a case like this for the purpose of settling the trust. The former trustee had died with trust funds in his hands unaccounted for, and the appointment of another trustee to take charge of the trust estate was but the ordinary exercise of equity jurisdiction. ■ So long as there was a trust in existence, a court of equity would not permit it to fail.”

In the case of Batesville Institute v. Kauffman, 18 Wall. 151, the supreme court overruled a demurrer resting upon an objection that the trustee being dead, and no successor having been appointed, the trust recited in a deed of trust could not be enforced, saying :

* ‘ That the court has power to appoint a new trustee, and to compel the performance of the trust by him, is quite certain. It is, however, equally within the power of a court of equity to decree and enforce the execution of the trust through its own officers and agents, without the intervention of a new trustee. ’ ’

Burrill on Assignments, § 415, recognizes the rule that where an assignee dies before the trust is finally executed, the court may appoint a new assignee, or select some other person to discharge the duties of the trust.

It was likewise decided in People v. Norton, 9 N. Y. 176, that the court of chancery with its general jurisdiction of all cases of trust had power by its general authority, independent of any statutes, to displace a trustee on good cause shown and to substitute another in his stead. (See also Sugden on Powers, 507.)

If additional authority were required it would be easy to add a list of cases to those we have selected, but the proposition seems fundamental and therefore need not be dwelt upon.

If the fitness of the trustees selected were questioned, or if objection to his appointment were made because the interest of the cestuis que trusts would not all be fairly looked after, or if it appeared that the execution of the trust would in any way be impeded, appellant’s position would be different. But, the objections being independent of any such considerations as those just suggested we think it was proper for the court, when advised by the appellant of the death of the trustee, to make an appointment in order that the very purposes of the trust might be carried into execution. (In re Tempest, Vol. I, E. L. R. Ch. App. cases, page 485.)

Included in the property assigned in trust to Tuttle was a frame building, situated upon leased ground, the leasehold of which had expired. This building was attached by appellant as a portion of the Hanks & Fullerton real estate — that is, the sheriff filed with the clerk and recorder a copy of the writ and a notice of attachment that certain realty and this building were attached. No actual possession was ever pretended to be taken by the sheriff, yet appellant contends that the transfer to Tuttle, as trustee, was void because there was no delivery or immediate change of possession, as contemplated by § 226, Fifth Division Compiled Statutes of 1887. As this section applies to assignments of goods and chattels, the appellant’s position is not altogether consistent. Plainly, if the property was personalty and actual possession were necessary, no valid levy was made by the appellant, while if it was realty — as appellant evidently regarded it when it attached — it was sufficiently delivered to the trustee — at least until a reasonable time elapsed — by mere delivery of the deed to Tuttle, which was found to have been before the appellant’s attachment was made. (Burrill on Assignments, § 243.) Appellant is, therefore, in no position to urge the line of argument he pursues.

Whether the assignment of this building and of the other property transferred was fraudulently made for the purpose of defrauding appellant in the collection of its judgment, and consequently was wholly void, was, however, made an issue at the trial and was found against appellant. This issue might have properly involved the question of the delivery of this building to the assignee. But the court evidently treated the building as personalty, and found that the assignors delivered possession of the same to the trustee Tuttle before the defendant bank attached. Probably the delivery was made upon the theory that the instrument of transfer to Tuttle, as trustee, was of the nature of a chattel mortgage, where possession was delivered to the trustee named; but the fact of the delivery of possession was found, and, considering the peculiar nature of the property and the impossibility of physical delivery, we cannot now say that possession of it was withheld by Hanks & Fullerton and thus imply fraud. We think the evidence fairly tends to show that by their conduct and the delivery of the written instruments, the assignors intended to give up, and did voluntarily give up, to the trustee, possession of all the property assigned, including possession of this building, for the benefit of their creditors. At least, in the absence of some circumstance tending to show fraud, we cannot deduce a fraudulent intent on the part of the assignors, solely because the assignee Tuttle did not have instantaneous physical occupation of the building.

The remaining contention of appellant is that the assignors did not deliver certain stock in the Great Falls Improvement Company to the assignee. But the evidence is that the paper delivered to the assignee, and transferred in writing to him, was the only instrument which the assignors themselves ever had evidencing their interest in the shares of the corporation, and consisted of a receipt to Hanks & Fullerton for §2,750.00, being 55 per cent, of their stock in the company. It appears that Tuttle, as trustee, afterwards voted in behalf of those shares at the corporation’s meetings and exercised full possession of the shares to which the assignors might have been entitled. Under such circumstances we think the property was delivered.

Appellant makes the further point in his brief that the delivery of this receipt was void because the written instrument of transfer was signed by only one member of the firm of Hanks & Fullerton. But as this question was not raised by an assignment of error, it was not before the district court for review, and is not before us on appeal. This disposes of all errors relied on.

The judgment is affirmed.

Affirmed.

Pemberton, C. J., and DeWitt, J., concur.