First National Bank v. Smith

133 Mass. 26 | Mass. | 1882

Devens, J.

If we assume, in favor of the plaintiff, that the assignment to trustees was one to the benefit of which any creditor of Upham and Draper was entitled, the question is jaot, as stated by the plaintiff, whether a creditor, who has not executed a trust assignment within the time specified, can be allowed, under any circumstances, to come and sign after the time has elapsed, he having failed to execute the same because of accident, mistake or want of notice. The assignment to trustees was not an assignment of property simply for the benefit of creditors, of which they were entitled to avail themselves without, upon their own part, subjecting themselves to any obligations. The property in trust was thus placed by an instrument of February 1876, to secure the payment of certain new notes, which were given to those creditors who became parties to the instrument, and who covenanted not to sue their original demands unless default was made in the payment of such new notes at their maturity. This contract operated to give to the debtors a large extension of time, during which it was believed that their property and the profits anticipated therefrom would enable the trustees to pay the new notes. It was, on the part of the debtors, an agreement with certain creditors for an extension of time in the hope of avoiding failure or bankruptcy, and involved on the part of the creditors a substantial concession, as during the period that the new notes were maturing they could not enforce their demands. It is hardly possible to say that the plaintiff would have ever entered into the obligations imposed upon those creditors who became parties to the instrument, had the opportunity of signing been offered to it. It is certain that some who had the opportunity declined.

All those new notes have long since matured, the last becoming due in August 1878. One of the debtors has been discharged in bankruptcy, and the other has ceased to be a resident of this State. In May 1880, the plaintiff filed this bill. New notes such as the agreement contemplates cannot now be given, for the debtor cannot be compelled to assume liabilities from which he has been discharged by bankruptcy. Could this be done, the plaintiff itself cannot give the consideration in the extension of time which the debtors were to receive, and if it were possible, as one of them is in bankruptcy, it would be useless. During all the period also that intervened between the date of the agreement and the filing of this bill, the plaintiff has preserved every legal right which it had against its debtors. The question properly stated is therefore whether a creditor may have the benefit of a trust assignment, when he cannot deliver the consideration therefor, and has enjoyed all the privileges of which the contract, had he entered upon it within the time specified, would have deprived him. It is a question probably of more importance to the other creditors than to the debtors, whether one who cannot now bear the burden they have borne, and who has enjoyed rights antagonistic to theirs, may now claim a portion of the trust property.

That conveyances by a debtor may be made to creditors by way of preference, or that they may be made to trustees for the benefit of creditors assenting thereto, and that such conveyances are valid, except when repugnant to the provisions of the insolvent or bankrupt laws, will not be controverted. National Mechanics' & Traders' Bank v. Eagle Sugar Refinery, 109 Mass. 38.

Where a time is specified in such a deed within which a creditor must become a party in order to avail himself of its benefits, the English courts have apparently been more indulgent than those of this Commonwealth in treating the time as not of the essence of the contract, and in permitting creditors to accede to or to execute the deed after the time limited has elapsed. Phenix Bank v. Sullivan, 9 Pick. 410. Battles v. Fobes, 21 Pick. 239. Dedham, Bank v. Richards, 2 Met. 105. Whitmore v. Turquand, 1 Johns. & Hem. 444; S. C. 3 DeG., F. & J. 107. In re Baber's trusts, L. R. 10 Eq. 554. Biron v. Mount, 24 Beav. 642.

We have no occasion to compare these cases, or to consider whether the law in this Commonwealth has been held too strictly to the.words in such an instrument by which time is limited. We certainly do not intend to intimate that it has. But the present case has the important element that the deed contemplated that the creditor would assume important obligations which would be for the benefit of. the debtors, and also for the benefit of the other assenting creditors, as the arrangement made by it could not then be disturbed by any action of his. The English cases recognize that where a deed is a trust for the benefit of such creditors as shall come in and become liable to the obligations entered into on the part of the creditors executing it, and when in order to become cestuis que trust they must do this, they cannot become such until they are bound by the covenants contained therein. If they cannot put themselves in the situation to give the consideration contracted for, they cannot entitle themselves to the benefit of the deed. Biron v. Mount, ubi supra. Whitmore v. Turquand, ubi supra. Field v. Donoughmore, 1 Dr. & War. 227. Forbes v. Limond, 4 DeG., M. & G. 298.

If it be true that the plaintiff accidentally failed to make this contract, or would have made it if notified of its right so to do, the fact still remains that it cannot give the required consideration for the contract, and that it has enjoyed rights it would not have possessed had it become a party to the contract.

Bill dismissed.