This is a bill in equity, brought by a copart-nership, as merchandise creditors of J. C. Littlefield, Inc., in their own behalf and in behalf of all other creditors who may desire to join, against J. C. Littlefield, Inc. (hereinafter called the corporation), one Solari, to whom the corporation made an assignment for the benefit of its creditors, and one John R. Littlefield, an officer and the principal stockholder of the corporation. The bill alleges that the corporation made this assignment to Solari (hereinafter referred to as the assignee) on December 5, 1932; that the plaintiffs assented to the assignment, relying upon an agreement of Littlefield that his claim for loans made by him to the corporation would be subordinated to the claims of the other general creditors; that notwithstanding this agreement the assignee intends to allow and pay this claim of Littlefield, which will result in decreasing the dividends payable to the other general creditors; that the assignee, contrary to a well recognized custom of the woolen trade that an assignee will not charge or accept compensation for his services, intends to pay himself $500 for such services; that the assignee contemplates turning over to Littlefield, without charge, all or substantially all of the stock of woolens in the possession of the assignee; and that the assets have been impaired by the neglect and mismanagement of the assignee. The bill prays for an injunction restraining the assignee from transferring assets; for an accounting by the assignee; for the appointment of a receiver; for an order denying compensation to the assignee for his services; for the establishment of the claim of Littlefield; for an order subordinating his claim to the claims of the other general creditors; and for general relief.
The case was referred to a master. We summarize the facts appearing in his report. The corporation was engaged in the tailoring business in Boston. When the assignment
The assignee took possession of the business and assets of the corporation. On December 5, 1932, he gave a power of attorney to Littlefield to indorse for collection and to draw checks and drafts upon the credit of the assignee. The assignee, who was seventy-three years of age and engaged in the silk business, was a friend of Littlefield. He devoted but little time to the business of the corporation after he became assignee, and from the date of the assignment until March 1, 1939, Littlefield was in as complete control of the property and the business as if he were the owner. From December 5, 1932, to March 1, 1939, the period during which the assignment was in force, the cash receipts of the business exceeded the expenses by $45,456.77. This sum has not been reasonably accounted for by the assignee or by Littlefield. The assignee permitted Little-field to use the funds of the business in substantial amounts for Littlefield’s personal use, for which neither the assignee nor Littlefield has furnished any satisfactory accounting. On March 1, 1939, the assignee turned over to Littlefield certain woolens, the entire stock of trimmings, and the furniture and fixtures of the corporation for the sum of $3,250. The assignee contended that he, the assignee,
Only the defendants Solari and Littlefield excepted to the master’s report and appealed from the interlocutory decree overruling their exceptions and confirming the report. All three defendants appealed from the final decree ordering each of them jointly and severally to pay the plaintiffs’ claim in the amount found by the master.
The exceptions of the assignee, Solari, and Littlefield to the master’s report were properly overruled. Many of them were based upon the failure of the master to make further findings of fact or upon certain findings alleged to be vague and indefinite and not supported by the evidence. An exception based upon facts or testimony not appearing in the report but resting upon the assertion of counsel cannot be sustained. This principle applies when it is contended that the report should have contained additional findings or that some of the findings are wrong in point of fact.
The defendants Solari and Littlefield filed a motion to recommit the master’s report for further findings upon various matters, many of which related to items that would be included in an accounting by each of them. The report did not state the account sought by the bill, which was brought for the benefit of all the creditors who assented to the assignment. The names and amounts due to each of these creditors should have been determined by the master in order that their distributive shares in the proceeds of the trust property should be established. The master dealt only with the claim of the plaintiffs, although he found that there were not more than eight unpaid creditors. He did not find the amount due from either Solari or Little-field. The report set forth numerous breaches of trust by the assignee and the mismanagement of the trust estate by Littlefield, but the findings are inadequate to compute the amount due from each of them. The motion to recommit
The judge should have heard further evidence to enable him to state the account in his decree, or should have recommitted the master’s report to him with instructions to state the account with mathematical certainty showing the balance due. Daniels v. Daniels, 240 Mass. 380. Gad-reault v. Sherman, 250 Mass. 145. Cutter v. Arlington Casket Co. 255 Mass. 52. Instead of adopting this course, the judge followed the report and entered a final decree establishing the plaintiffs’ claim and ordering all the defendants, jointly and severally, to pay it. This decree did not touch any matter of accounting. Upon a bill for an accounting the final decree should, in its ordering part, state and adjudicate the account and show the balance due from one party to the other. The final decree must be reversed. Davidson v. Zieman, 283 Mass. 492. Arwshan v. Meshaka, 288 Mass. 31. Zuckernik v. Jordan Marsh Co. 290 Mass. 151. Chopelas v. Chopelas, 294 Mass. 327; S. C. 303 Mass. 33, 34. Dow v. Brookline Trust Co. 308 Mass. 90.
We first consider the liability of the assignee. Upon the acceptance of the assignment of the corporation’s property for the benefit of its creditors, the assignee held the property in trust, to be distributed proportionately up to the amount of their claims to those creditors who should become parties to the assignment by assenting thereto. Draper v. Putnam, 7 Allen, 172. Collector of Taxes of Boston v. New England Trust Co. 221 Mass. 384. Davoren v. Nolan, 244 Mass. 357. B. B. Noyes Co. v. Ballard, 253 Mass. 340. Williston, Contracts (Rev. ed.) § 350. The assignee was bound to administer the trust in accordance with the provisions of the assignment and in the interests of the assenting creditors, who were entitled to an accounting and to recover damages that had been sustained by them from a breach of trust by the assignee. Libby v. Norris, 142 Mass. 246. Andrews v. Tuttle-Smith Co. 191 Mass. 461. Boston
The assignee did not give the time and attention required for the proper and faithful administration of the trust. The acceptance of the trust carried with it the obligation to act in good faith, to collect the assets, to convert them into cash, to distribute the proceeds proportionately among the assenting creditors as far as possible toward satisfying their indebtedness, and to transfer'any surplus not needed for that purpose to the assignor. Solari was assignee for more than six years, and when he quit on March 1, 1939, he abandoned assets amounting to more than $15,000. A trustee may avail himself of the services of others for the performance of administrative details in order promptly and expeditiously to close up a trust. He secured the services of Littlefield, but he could not delegate his authority as trustee to Littlefield nor commit the entire administration of the trust to him. Morville v. Fowle, 144 Mass. 109. Ashley v. Winkley, 209 Mass. 509. Davoren v. Nolan, 244 Mass. 357. Boston v. Curley, 276 Mass. 549.
The assignment provided that the assignee “shall not be accountable for any loss or damage not occasioned by his willful neglect or gross negligence.” Trust instruments containing similar and other exculpatory provisions purporting to restrict the general obligation ordinarily assumed by a fiduciary have frequently been before the court. Warren v. Pazolt, 203 Mass. 328. Digney v. Blanchard, 226 Mass. 335. Anderson v. Bean, 272 Mass. 432. North Adams National Bank v. Curtiss, 278 Mass. 471. Peterson v. Hopson, 306 Mass. 597. We need not pause to determine the extent of immunity given by the present provision because the master has found that considerable loss resulted from the wilful neglect and gross negligence of Solari in administering the trust. That finding, which was made upon unreported evidence and is not inconsistent with the subsidiary
The conduct of the assignee is thus shown to have been not only worthless to the beneficiaries but also detrimental to them. A denial of compensation to the assignee for services was warranted. Robertson v. Hirsh, 276 Mass. 452. Brackett v. Fuller, 279 Mass. 62. Spilios v. Papps, 288 Mass. 23. Raymond v. Davies, 293 Mass. 117.
The participation by the defendant Littlefield in breaches of the trust by Solari and the wrongful use of the trust property by Littlefield were fully tried before the master. Evidence of the dealing of this defendant with the trust property was competent in settling the account of Solari; but as to the liability of Littlefield, the findings upon this evidence went beyond the scope of the bill, which did not seek any accounting from him. It does not appear that he requested the master to limit this evidence to an accounting by Solari, or that he filed any objection to the report on the ground that such evidence should not have been considered upon his liability to account. And the various grounds set forth in the joint motion of Littlefield and Solari to recommit warrant the inference that the suit was tried before the master as one for an accounting from both of them. Littlefield was the treasurer and general manager of the corporation and its principal stockholder. Upon findings of the master he continued, uninterrupted by the assignment to Solari, in the active management of the business and has continued in it since March 1, 1939, when the assignee ceased to act in that capacity. The master further found that the assignment, which was made ostensibly for the benefit of the creditors, was in fact more for the benefit of Littlefield; that he had failed to account properly for cash receipts amounting to $45,456.77; that he had used funds belonging to the assignee for his own personal use for which he has not accounted; that he had also received certain assets to which he was not entitled; that he knew of the assignment and that the property was held in trust for the benefit of the creditors; that he participated in the mismanagement of the trust, and misappropriated funds
The defendants sought a new trial on the ground that the principal witness for the plaintiffs had been convicted of forgery and larceny in the State of New York. There was no error in denying the motion. Barrett v. O’Connell, 295 Mass. 515. Boston v. Santosuosso, 307 Mass. 302, 353.
The master found that the mismanagement of the assignee and the misconduct of Littlefield have not only resulted in great impairment of the corpus of the trust but have prevented the termination of the trust which has now been pending for several years, and that when Solari ceased on March 1, 1939, to act further as assignee, he abandoned trust property worth more than $15,000, the present location or final disposition of which is not fully disclosed by the record, although the master reports that there is grave danger that the remaining assets of the trust will be dissipated to the point where the creditors will receive little
Further hearings must be held to settle the account of Solari and to determine the balance due from him. The plaintiffs during the argument before this court offered a motion to amend the bill seeking to establish the liability of Littlefield to the plaintiffs "for the losses sustained by” the corporation on account of his misconduct "between February 5, 1932, and March 1, 1939.” We assume December 5, 1932, the date of the assignment, was intended instead of February 5, 1932, and that the period intended to be covered was the time during which Solari was acting as assignee. The motion is not consistent with the frame of the bill of complaint. The plaintiffs are enforcing their rights as beneficiaries under an express trust and not as creditors of the corporation. The measure of Littlefield’s liability is the loss sustained by the trust estate and not that sustained by the corporation, which had conveyed all its property in trust for the benefit of its creditors and was not entitled to share in the trust until after the expenses of the administration of the trust had been paid and the claims of the creditors satisfied. The motion in its present form is denied. Littlefield, however, should account for his mismanagement of the trust property, and if an appropriate amendment to the bill seeking an accounting from him is allowed by the Superior Court within thirty days after rescript, then further hearings should be held to fix the amount for which he is to be held liable. If no such amendment is allowed, then his liability is to be limited to the matters alleged in the bill. Westfield Savings Bank v. Leahey, 291 Mass. 473. Royal Indemnity Co. v. Perry, 296
The interlocutory decree confirming the report of the master and the order denying the motion to recommit, which we deal with as an interlocutory decree, are affirmed. The final decree is reversed and the suit is remanded to the Superior Court for further proceedings not inconsistent with this opinion.
Ordered accordingly.