21 A. 959 | R.I. | 1891
Lead Opinion
The question is, whether the trustees under the will of the late Amos D. Smith had power, more than ten years after his death, to sell and convey a portion of the trust property. The purpose of the trust, as declared by the testator, was to have the trust property used to give credit and pecuniary aid to a partnership of which he was a member, and to three manufacturing corporations in which he was a stockholder, in order that they should not suffer by the loss of his indorsement and guaranty and personal liability. Accordingly, the property was put in trust to be used to pay, secure, or extend the debts and liabilities outstanding against him at his decease, and as a basis of credit for the creation of new debts and liabilities by the trustees to take the place of them; unlimited power to sell and convey, mortgage or pledge, the property discharged of the trust being conferred upon them, and also a variety of incidental powers for its management and improvement. The language of the clause in which the trust is declared is exceedingly involved, complicated, and in some respects difficult to understand, from lack of clearness and completeness of declaration. It is provided that the trust "may continue for the period of ten years from the time of my, the testator's decease, and no longer." The contention is, that the sale of the city of Providence, having been made after the ten years expired, was invalid. There are two considerations that make strongly against this view. One is, that the trustees have authority to go on renewing their liabilities and incurring new ones on the credit of the property and in the full exercise of all *257 the powers given them for that purpose, until the expiration of the ten years; and if instantly at the expiration of that period the trust and all their powers as trustees determine, both their own interests and the interests of the creditors will be very ineffectually protected. It is not easy to believe that this was intended. But, again, it is provided that, upon the termination of the trust, the property shall be distributed and divided, and that the trustees shall convey the same discharged of said trust, as the same is devised and bequeathed in the will. But how can the trustees convey it "discharged of said trust," that is, of all liabilities attaching to it under the trust, unless the trustees have power to raise money for the payment of such of them as continue unpaid after the ten years have expired. It seems to us that the more reasonable construction is, that the ten years were allowed for the continuance of the trust for the purposes for which it was created; namely, to give credit and pecuniary aid to the partnership and the corporations, and no longer for that purpose, but that by necessary intendment the trust must continue with the powers necessary for the winding up of its affairs and the discharging of the property, so that it may be conveyed "discharged of said trust" to the devisees and legatees entitled under the will to have it so conveyed to them. In other words, we think that the word "trust" in the provision for its termination was used to signify the trust as a contrivance for giving aid and credit to the concerns aforesaid, and that in that sense the trust and the powers of the trustees were to terminate.
We are free to say, however, that in giving this construction we do so with so much doubt that we hesitate to commit ourselves to it as final at this initial stage of the trial; seeing that there are parties who have not yet been heard, and that subsequent proceedings may bring light which may modify our opinion. We will, therefore, pursue in this case the course pursued in regard to the somewhat similar matter in Lynch v.Briggs, now pending in this court, that is to say, we will overrule the demurrer without prejudice to the city, but at the same time reserve our final conclusion until after further hearing.
Demurrer overruled without prejudice.
The city of Providence, one of the respondents, after its demurrer *258 had been overruled, filed a plea, which the complainants set down for argument.
November 28, 1891.
Addendum
The bill as originally framed proceeded upon the theory that the trusts created by the will of Amos D. Smith terminated at the expiration of ten years after his decease, and prayed for an account of the trust estate in the hands of the trustees. The court having found that said trusts did not expire at the end of ten years, and that so long as the trusts continued, Amey A. Smith, the widow of Amos D. Smith, was entitled to the annuity provided in the will, and that such annuity was superior to the rights of creditors, the complainants now seek to amend the bill so as to have their claims as creditors of the estate of Amos D. Smith decreed to be a first lien upon all the estate and property now remaining of which he died seized and possessed, and all the property taken and held in lieu of that which he held at his death, subject only to the claim of his widow for dower, if any such claim she has in addition to what she has already received out of the estate; or in the alternative that such claims shall be decreed *263 to be a first lien upon that portion of the estate now remaining in the hands of the trustees, called by the testator the "trust estate," superior and in preference to any right or claim of said Amey A. Smith, or at all events second to her right or claim as the court may determine. The bill as proposed to be amended prays, among other things, that an account may be taken of what said widow has received from the estate of said Amos D. Smith, and that if she claims dower, the value of such at the decease of her husband may be ascertained, that an account may be taken of the amounts due the complainants and the other creditors of the deceased, and their lien being established, that the property may be sold, and the proceeds, after the payment of the costs, may be applied pro rata to the payment of creditors, that a receiver may be appointed for an injunction and for general relief.
It is manifest that the effect of the proposed amendments will be to make a new and different case from that which we have already heard and decided, in which nothing remains to be done but to enter a decree conformable to our decision. To grant the motion to amend as proposed is not permissible under the settled rules of equity practice. Amendments, the purpose of which is to bring before the court other parties to the controversy, or to strengthen, elucidate, or explain the case made by the original bill, or to put in issue some material fact which may directly or indirectly affect the case so made, however considerable, will be freely allowed at any stage of the proceeding, but where the effect of the amendment is to abandon the case originally made and to substitute a new and different one, and especially when it is not asked for until after the case has already been heard or even set down for a hearing, a different rule governs the discretion of the court. In such a case it will generally be found more consonant with justice to leave the complainant to bring a new suit, if so advised. Pratt v. Bacon, 10 Pick. 125, 128; Lambert v. Jones, 2 Patton Heath, Va. 144, 163;Walden v. Bodley, 14 Pet. 156, 160; Snead v. McCoull etal. 12 How. U.S. 407, 421; Shields et al. v. Barrow, 17 How. U.S. 130; Fenno v. Coulter,
The motion to amend is denied and dismissed. *264
Decree entered April 30, 1892. "This cause came on to befurther heard at the above named term of said court and wasargued by counsel, and thereupon it is on consideration thereofordered, adjudged, and decreed:
"That the complainants are not entitled to any prior orsuperior rights to other creditors of the trust estates describedin the pleadings, by reason of their having obtained judgments asdescribed in the answer of the respondent trustees against thesaid Francis M. Smith and Charles Morris Smith in theirindividual capacities.
"That the complainants' petition for an injunctive orderagainst the respondent trustees, Francis M. Smith and CharlesMorris Smith, filed January 1, 1892, asking that they berestrained from making any sales of any part of the trust estatesheld by them under the will of Amos D. Smith is denied anddismissed.
"That the annuity to the widow, Amey A. Smith, given by thesaid Amos D. Smith by his will, and the needful expenditures forrepairs, insurance, and taxes on the estates given to the saidAmey A. Smith for her life by the said Amos D. Smith by his will,are a first lien on all the trust estates held by the saidFrancis M. Smith and Charles Morris Smith, as trustees under saidwill of Amos D. Smith.
"That the said trustees, Francis M. Smith and Charles MorrisSmith, have power and authority to make, at public or privatesale, sales of the trust estates held by them to pay saidannuity, and the repairs, insurance, and taxes on the real estategiven by the said Amos D. Smith by his will to the said Amey A.Smith for her life, and to pay repairs, insurance, and taxes, andother expenses incident to the proper care and management of saidtrust estate, and they are further directed to make sales as soonas practicable of such portions of the trust estate in theirhands as are unproductive and bring in no income.
"That the motion to amend the bill of complaint filed by thecomplainants March 23, 1892, is denied and dismissed."
Thomas C. Greene, James Tillinghast, Joseph C. Ely John T.Blodgett, for complainants.
Arnold Green, for the respondent trustees. *265
Addendum
This cause is before us on the question of the sufficiency of the plea of the city of Providence to the amended bill. The plea sets up in bar to so much of the bill as prays for discovery and relief from the city of Providence, that at the time the trustees sold and conveyed to it the real estate referred to in the amended bill, and that it paid therefor the sum of $45,048.10 to the trustees, there was due from them to Amey A. Smith, the widow of the deceased, a much greater sum on account of the annuity provided for her in his will, and that the sum thus due and owing to her was by the terms of the will a charge and lien upon the estate so sold and conveyed, prior to, and of a higher nature than, the liens of the complainants, or any of them, and that the sum so paid to the trustees by the city of Providence was needed for, and was wholly applied to, the payment in part, and in reduction, of such lien and charge for such annuity.
We think the plea is sufficient.
The complainants object to its sufficiency because, as they claim, the provision for the annuity in lieu of dower gives to the widow no lien superior to their rights as creditors. If these complainants had not accepted the provisions of the trusts created by the testator in their favor, and were proceeding against the widow, legatees, and trustees named in the will, to enforce the statutory lien for the payment of their claims, notwithstanding the provisions of the will, there would be force in their claim. The cases which they cite are of that nature; but such is not the nature of the present bill. This bill is framed upon the theory that the trust created by the will had terminated at the expiration of the ten years limited in the will for its continuance, and that the powers of the trustees, including the power to sell the trust estate, had ceased upon the termination of the trust. At a former term we held that though the trust, so far as it related to the incurring of obligations by the trustees so as to charge the trust estate, expired with the ten years so limited, yet it continued for the purpose of enabling the trustees to wind up its affairs, and that they had an implied power to sell and convey the trust property for the purpose of discharging the liens and claims for which it was charged; since they could not *259 otherwise convey the portions of the trust estate not required for that purpose to the devisees and legatees entitled under the will to such portions, "discharged of said trust," as directed by the will. By the terms of the will the annuity in favor of the widow was made a lien upon the trust estate superior to any lien arising under the trust, and the estate conveyed to the trustees was expressly made "subject to the devises and bequests and charges for payments," previously made in the will. Among the charges for payments, to which the devise and bequest of the trust estate was thus made subject, is the annuity to the widow. The complainants refer to a subsequent clause in the will to the effect that all undertakings, engagements, and accommodation made or entered into by the trustees shall be as binding upon the trust estate as if made or entered into directly by the testator in his lifetime, as evidence that the testator intended to confer upon creditors rights superior to those of the widow. It will be seen, however, that such undertakings, engagements, and accommodation are made binding only on the trust estate, which, as already shown, is subject to the prior charge for the payment of the annuity. It is apparent, therefore, that under the provisions of the will the trustees had no alternative but to apply the purchase-money received by them from the city of Providence from the real estate sold to it, to the payment of the annuity which was a charge upon the land prior to any liens under the trust, and if they had no alternative but to so apply it, and did so apply it, it was properly applied, and the purchaser, assuming that it was bound to see to the application of the purchase-money, cannot be held liable to account, nor the land be charged, for its payment.
It does not appear that any steps had been taken by the complainants to disaffirm the trust created by the will, and to which they had assented, prior to the sale and conveyance of the land in question to the city of Providence, on March 28, 1888. This bill, even if it could be regarded in that light, was not filed until November 25, 1889, more than eighteen months after such sale and conveyance. Assuming that the complainants have power to disaffirm the trust created in the will, after assenting to and going on under it during the ten years limited for its continuance, we think they would be estopped from proceeding against the trustees, or purchasers *260 of the trust estate, for moneys applied to the purposes specified in the will, or property disposed of in accordance with the provisions of the will, prior to such disaffirmance. They cannot stand by, apparently assenting to such acts of the trustees or purchasers by not dissenting, and then seek to charge the trustees or purchasers therefor.
The complainants object to the plea on the ground that it is double. We do not think that it is open to this objection. It sets up but one defence, to wit, the application of the purchase-money to the payment of the arrears of the annuity. It is true that it goes on to recite that the widow and the devisees and legatees named in the will joined in the conveyance, but it does not purport to set up this fact as a defence. Its apparent purpose is to show that the sale and conveyance were with the assent and approval of those joining in the conveyance. We fail to see how the statement of this fact in any way strengthens the plea. Doubtless it would have been better pleading if the statement had been omitted. As, however, it does not constitute a defence and does not appear to have been inserted with that view, we do not think its insertion renders the plea double.
After this opinion the respondent, the city of Providence, by consent withdrew its plea and filed an answer. The case then came on for hearing on bill, answers filed by the different respondents, and proof.
February 20, 1892.
Addendum
In our opinion of November 28, 1891, ante, page 258, we held that the annuity to the testator's widow was a lien upon the trust estate superior to any lien arising under the trust in favor of creditors. We see no reason to change our opinion as then expressed.
That annuity is given to the widow during her life; and it must, therefore, continue during her life, unless she consents to its earlier termination, or unless it is in the power of the court, upon a proper bill for that purpose, to terminate the trust and the lien of the annuity on the trust estate under the will, by the application of the property to the payment of the debts. Assuming that such a bill could be maintained, the present bill prays for no relief against the widow, nor does it contain any allegations upon which as against her we can give the claims of creditors priority over the *261 annuity. As the annuity, unless terminated in one or the other of the ways mentioned, must continue, and constitutes a lien on the trust estate, the trust cannot be wound up and its affairs settled during the life of the widow. Whether, technically, the trustees have power to pay the annuity to the widow or not is immaterial, for if they do not pay it, the court, upon the application of the widow, would be bound to decree the sale of so much of the trust estate as might be needed for its payment, and what the court would be bound to decree, it will sanction if done by the trustees.
Money is required, also, for the payment of taxes, insurance, repairs, and other expenses incident to the proper care and management of the trust estate. The money required for these purposes can be raised only by sales of the trust property. In making sales, however, it is the duty of the trustees to regard the interests of creditors as well as of the annuitant, and if, as is conceded, the debts are largely in excess of the value of the trust property, and the expenses of carrying the property exceed the income from it, prudent management would dictate the retention of that part of the property which is productive, and the sale, as soon as practicable, of the unproductive portions.
For this reason, and also as it is alleged that, upon a proper accounting, it will be found that the trustees have in their hands money which will be applicable to the payment of the annuity and expenses of the trust, we will, pending the taking of the account, enjoin the sale of the fourteen shares of the stock of the R.I. Hospital Trust Co., reserving to the trustees the right to move for a modification or dissolution of the injunction, should the exigencies of the trust require.
The case does not show that either the city of Providence or Frederick S. Hodges were cognizant of the application of the purchase-money paid by them respectively for the real estate purchased of the trustees, other than to the payment of the annuity and other charges under the will upon the trust estate, and if not, we do not think that they are to be held liable for its application, even if, as the complainants allege, it has been misapplied. For if we assume that the provision in the will that no purchaser shall be obliged to see to the application of any purchase-money is to be limited, as *262
the complainants insist, to sales by the trustees during the ten years nest after the death of the testator, the power of the trustees to sell is not limited to a particular or definite purpose, but extends to the purposes of the trust generally. In such oases a purchaser is not bound to see to the application of the purchase money. The rule is well stated in Bispham's Principles of Equity, § 277, as follows: that "whenever a trust or charge is of a definite or limited nature, a purchaser must himself see that the purchase-money is applied to the proper discharge of the trust; but whenever the trust is of a general or uncertain nature, he need not see to it." And see Clyde v.Simpson et al.
We do not think that the complainants are entitled to any prior or superior rights to other creditors of the trust estate by reason of having obtained judgments at law against the trustees individually.
A decree was entered dismissing the bill as against the city of Providence and Hodges. The complainants then filed a motion to amend the bill of complaint. This motion was opposed by the respondent trustees.
April 30, 1892.