115 Ala. 447 | Ala. | 1896
On March 20, 1889, the Alabama Sanitarium was incorporated under the laws of Alabama. C. 0. Godfrey, A. S. Loventhal and E. W. Godfrey were the corporators. Authorized capital was $40,000, and all was subscribed for by said corporators. C. O. Godfrey was elected president. This corporation became the owner of a block of land in Fort Payne, Ala., an hotel or sanitarium building located thereon, and all the furnishings in the building, which constituted all of its property.
On June 24, 1890, said C. O. Godfrey and eight others were likewise incorporated under the name of “Fort Payne Educational Association.”
On January 23, 1891, the Sanitarium sold and conveyed by deed all its said real property to the Educational Association, for the recited consideration of $25,000, cash; and on January 27, 1891, the Educational Association executed to the First National Bank
On September 28, 1892, the Fort Payne Bank, as an alleged creditor of the Alabama Sanitarium, filed its bill in the chancery court of DeKalb county, against the Sanitarium, the Educational Association, Godfrey as trustee, and divers others alleged to be holders of the bonds, to set aside the said sale by the Sanitarium to the Educational Association as fraudulent, and to subject the property to the payment of complainant’s debt; and such proceedings were therein had that, on November 14, 1894, the complainant obtained a decree granting the relief prayed. The property was condemned to sale, and sold by the register for the satisfaction of the complainant’s demand — the threatened sale by the trustee having been enjoined.
On July 24th, 1895, the complainant in the present cause, Lou Lebeck, filed this bill against the Fort Payne Bank, the Sanitarium, the Educational Association and .Godfrey, the trustee, alleging that in the spring of 1891, he became the purchaser from A. S. Loventhal for value without notice of any infirmity, either in the bonds, or the conveyance of property to the Educational Association, of sixty of said trust bonds, paying therefor $6,000. The bonds were payable to holder and then had several years to run to maturity. They recited the execution of said trust deed for their security. The record of the former suit of the Fort Payne Bank above referred to, was made a part of the present bill, and from it, it appears that 250 of the 300 bonds when issued were de
There were assigned many grounds of demurrer to the bill. We will endeavor to state the principles decisive of those grounds to which we deem it necessary to advert.
The bill does not assail the character of the Fort Payne Bank as the creditor of the Sanitarium it professed to be, nor does it deny the alleged fraudulent character of the sale which was set aside. It is impliedly conceded that, subject to the supposed erroneous failure to provide for bona fide holders of the bonds, the said Fort Payne Bank was entitled to the relief it obtained, as against the parties to its bill, who could not defend the same as bona fide holders of bonds. So, the inquiry now is, whether Lebeck, the present complainant, is entitled to protection as a bona fide holder ; and this involves the consideration of two questions : First, whether anything appears in this bill which charges him with notice of the fraudulent nature of the disposition of its property by the Sanitarium to the Educational Association, at the time he purchased his bonds; and second, whether he is concluded by the decree in the former suit.
2. Is he concluded by the decree in the former cause? The trustee of the property was a party to that decree, and this, it is insisted, binds the complainant.
In a court of law, the trustee of another is regarded as the owner of the property. He is, there, the representative of the cestui que trust. The latter cannot properly be a party to a proceeding concerning the trust estate, in a court of law. If there is dereliction on the part of the trustee in his representative character, calculated to injure the cestui que trust; if he is incompetent to properly assert? and defend his legal rights in legal forums, or unfaithful therein, the cestui que trust may apply to equity to control his conduct and restrain the jurisdiction of legal tribunals, to the end of his full and complete protection. Hence, an action at law which proceeds to judgment against the trustee, unaffected by fraud, accident or mistake, binds the cestui que trust. Frank v. Myers, 97 Ala. 437. But, in a court of equity an entirely different doctrine obtains. There the cestui que trust is regarded as the owner of the property, and his own representative in reference thereto. He is, there, separate and distinct from the trustee, and, in a sense, the adversary of the latter. He prosecutes and defends his own interests, and shapes, through the decrees of the court, the conduct of the trustee. Hence, unless there be something special in the terms of the trust, which confers upon the trustee the power and duty to represent, in courts of equity, the beneficial interests ; unless a power of attorney, so to speak, is conferred upon him to- represent those interests, in those forums, a decree in equity affecting the trust estate, rendered against the trustee, in the absence of the cestui que trust, is not binding upon, the latter. The cestui que trust is an indispensable party to such proceedings, and he cannot
We, of course, do not refer to that class of cases -where the interested parties are so numerous that it is impracticable to bring them all in, and in which a class of persons may be brought in to represent others of similar interests. See interesting discussion of this subject in Campbell v. Railroad Co., 1 Wood’s, 368. The record in the suit of the Fort Payne Bank did not bring the case within this exception. The bill professed to make all the bondholders parties, and made no allegation, either directly, or of facts going to show it, that it was impracticable to bring them in. The case was unlike Campbell v. Railroad Co., supra, where there were 1,500 railroad mortgage bonds outstanding, and such facts shown that it was impossible to make all the holders of the bonds parties, inducing Judge Bradley to hold that the trustee in the bond mortgage was, in the litigation and decree sought afterwards to be set aside, the representative of the bondholders, and that his presence before the court bound them. We must hold, therefore, that the complainant, if the facts alleged be true, is not bound by the former decree, and is entitled to foreclose the deed of trust for the satisfaction of the bonds, unaffected, so far as his rights are concerned, by the former decree and sale thereunder. The bill is clearly sufficient, as an original bill, for this purpose. It is in no sense multifarious or repugnant, because it submits to the court, whether relief may be had under it as a bill of review, or a bill to impeach the decree for fraud on the part of the trustee.in suffering the decree, of which the bill also complains as a ground of relief. Whether, if it had appeared, as the speaking demurrer filed by the respondents undertakes to suggest, that the trustee was authorized to represent the cestui que trust in courts of equity, the bill may be considered sufficient as a bill of review, or a bill to impeach the former decree for fraud or unfaithfulness on the part of the trustee, in the matter of the defense of the former suit, which should, equitably, be visited upon the Fort Payne Bank, we need not now determine. We, of course, cannot look to the demurrer referred to, to ascertain the terms of the trust. Whether the.terms of the trust conferred upon the trustee the
The chancellor erred in sustaining the demurrers to the bill and dismissing it for want of equity, and his decree in that behalf will be reversed, and a decree here rendered overruling the demurrers, and motion to dismiss for want of equity, and remanding the cause for further proceedings. Respondents may answer the bill within thirty days, with power in the chancellor to extend the time on sufficient showing.
Reversed, rendered and remanded.