Pingree v. Comstock

Wilde J.

delivered the opinion of the Court. The first and principal question raised by these facts is, whether the two defendants, Comstock and Raymond, the trustees named in the indenture, are bound by the trusts they undertook to perform, so that they can be enforced against them by the plaintiff. And it is the opinion of the Court, that they are so bound. It is expressly provided as one of the trusts, that all the creditors may come in and become parties to the indenture, and it is admitted, that the plaintiff was entitled to execute the indenture, and that he was requested by the trustee so to do. It is averred in the bill and admitted in the answer, that the plaintiff applied to the trustees within the time limited, and requested them to allow him to execute the indenture, and that the trustees refused to permit him so to do ; but the trustees deny that this refusal was prior to the cancelling of the indenture, as set forth in the answer. But this fact is immaterial, unless for the reasons set forth in the answer the defendants had a right to cancel the indenture. If this right cannot be maintained, we think it very clear that the trustees were bound to perform the trusts according to the terms of the indenture, and that the *51plaintiff has a right to enforce the performance of them, or to recover an equitable compensation. This right is fully maintained by the cases of Ward v. Lewis, 4 Pick. 518, and New England Bank v. Lewis, 8 Pick. 113. In both of these cases it was held, that where a trust is created for the benefit of third persons, even without their knowledge, they may, if they choose, affirm the trust and enforce its execution. And these decisions are in conformity to well established' principles of equity, and the current of the authorities on the subject of trusts.

The trustees in this case were, therefore, bound to allow all the creditors to come in and become parties to the indenture, and their refusal to allow the plaintiff so to do, was clearly a breach of trust, for which they are responsible, unless, as before remarked, they had a right to cancel the trust deed. Several grounds are relied on by which the defendants attempt to justify this act.

It has been urged, that the parties who had executed the indenture had a right to rescind it without consulting the other creditors. But in a court of equity there is no distinction between the creditors who had become parties to the indenture, and those who were entitled to become parties. All were interested in the trust, and it could not be rightfully defeated without the consent of all the creditors who were disposed to come in and claim the benefit of the trust fund. To decide otherwise, would open a door for fraudulent preferences, and other schemes and shifts, by which honest creditors might be wronged, without any remedy either at law or in equity. It is to be regretted that an insolvent debtor has the power to make any preferences. It is a power which may be grossly abused, and ought not to be extended or encouraged.

It is averred in the answer, that the assignment was null and void by reason of the fraudulent misconduct of Wiley, the insolvent debtor; that he had withheld the evidences of debts due to him, had refused to deliver to the trustees a part of the proj erty assigned, and had fraudulently wasted the trust fund, by paying some of the creditors in full, who, by the terms of the trust, were not to be paid until after the preferred creditors. These fraudulent practices, it is contended, authorized the de *52fendants to set aside and annul the trust, and to secure theix demands by attachments. ■ But this, we think, they were not authorized to do without the consent of the other creditors interested in the trust. It was the duty of the trustees to enforce the trust by all the means in their power, instead of securing their own demands to the prejudice of the other creditors.

The trustees, therefore, must be held responsible for all damages caused by this breach of trust, and must account not only for all the property assigned which came to their hands, but for that also which might have been obtained from the fraudulent debtor. They must account also for the real estate which passed by the assignment. The objection, that there is no particular description of the lands granted, cannot'be main tained. The debtor gives, grants, sells and conveys to the trustees, all his lands, tenements and hereditaments. The intention of the parties, therefore, that all the real estate should pass, is manifest, and a particular description of the lands conveyed is not required.

Upon these principles, the case is to be referred to a master, to ascertain the amount of the trust fund, including not only that part which is admitted to have been received by the trustees, but the residue so far as it might have been reduced to possession by the use of due diligence on the part of the trustees ; and to ascertain also what other creditors, if any, have assented to the trust, and the amount of all the claims on the trust fund, and to state an account.