National Union Bank v. Copeland

141 Mass. 257 | Mass. | 1886

Devens, J.

The case presented involves the discussion of two questions:

1. Whether the trustees under the deed of assignment made to them for the benefit of Charles W. Copeland and Company had power to allow further time for creditors to become parties thereto by more than one writing indorsed on the deed.

2. If they had such power, whether it was well exercised after the first extension had been made to January 24, 1884, by the further extension of time until August 26,1884, indorsed in writing on the deed on May 5,1884. Since this time, the subsequent extensions have been made, each before the expiration of the time previously limited, so that there can be no question as to their formal regularity if the second extension was proper.

It is the contention of the creditors who executed the deed on or before January 24, 1884, that the power of extension expired on that date, and that the attempted extensions subsequently made are invalid, both for want of authority to extend, and by reason of non-compliance with the terms of the deed of assignment in the mode adopted.

It cannot be controverted that, when the terms of an assignment of the nature of that here in question explicitly confine its operation to those creditors only who shall become parties thereto within a limited time, the disposition of the courts in this Commonwealth has been more strict than that of the English courts in treating the time thus fixed as of the essence of the contract, and in refusing to creditors the privilege of acceding to or executing the deed after such time has elapsed. While this is conceded in First National Bank of Easton v. Smith, 133 Mass. 26, which is the latest case in which the subject is adverted to, the decision of that case is put wdiolly on the ground that it was there impossible for the creditor who had filed his bill four years after the deed of trust was made, praying to become a party thereto, then to give the consideration which the deed called for. Phenix Bank v. Sullivan, 9 Pick. 410. Battles v. Fobes, 21 Pick. 239. Dedham Bank v. Richards, 2 Met. 105. Dunch v. Kent, 1 Vern. 260. Spottiswoode v. Stockdale, G. Coop. 102. Collins v. Reece, 1 Collyer, 675. Watson v. Knight, 19 Beav. 369. Raworth v. Parker, 2 K. & J. 163. Whitmore v. Turquand, 1 Johns. & Hem. 444. In other of the United States, where there is more conflict of opinion, it would appear that the weight of authority is in accordance with the views expressed in the English cases. Bank v. Partee, 99 U. S. 325. De Caters v. De Chaumont, 2 Paige, 490. Owens v. Ramsdell, 33 Ohio St. 439. Pfeifer v. Dargan, 14 S. Car. 44. Pearpoint v. Graham, 4 Wash. C. C. 232. Coe v. Hutton, 1 S. & R. 398.

We have no occasion in the case at bar to review our cases on this subject, or to compare them with those which have been elsewhere decided. The assignment in question contained a provision for an extension of time, the construction of which must control its operation. It is contended that the right to allow further time by “ a writing ” imports only a single act, and no more, and that, the time having been extended to January 24, 1884, this right on the part of the trustees was entirely exhausted; and further, even if an extension by such single act might have been made of sufficient length to include the last extension as actually made, if such extension was reasonable, that it could not be done by a succession of acts. If such be the strict grammatical construction of the phrase “a writing,” it might properly be said that such construction is not to be followed when it would lead to a result at variance with other and apparently controlling provisions or objects of the deed. But the particle “a” is not necessarily a singular term; it is often used in the sense of “ any,” and is then applied to more than one individual object. There is no reason why a construction so limited should be adopted as that which would deprive the trustees of the power to make extensions which the exigencies of the business entrusted to them should require, and which would compel them to determine arbitrarily and in advance when the time should finally expire. The limitation of time is usually inserted to prevent, on the part of creditors, unreasonable delay, and to facilitate the closing up of the estate. It is important to observe, therefore, that this assignment did not contemplate an immediate distribution of the property. The trustees were permitted to carry on the business in manufacturing and selling boots and shoes as long as they deemed prudent, and for this purpose to use the trust funds and trust property. They were further authorized to compromise any debts against the assignors, in money, goods, or other property held in trust by them under the deed, and no limitation was placed upon the time within which this might be done. Unless imperatively demanded, no such construction should be given to the provision in regard to extension of time as should prevent the trustees from doing this by permitting the creditors to prove their claims so long as the fund is not distributed. It can hardly be necessary, to effect such a compromise, that the trustees should be compelled themselves to withdraw from the fund a sum equal to the dividend and pay it to such creditors upon obtaining a release from them, instead of permitting them to prove their claim when they were willing to be satisfied with the dividend. The largest powers are confided to the trustees in protracting the business and managing the funds, property, and goods confided to them; it was the object of the assignors that all creditors should become parties who were willing to release their debts and accept their proportion of the property assigned in settlement thereof. It is certainly not consistent with this object that a single extension of time alone could be granted by the trustees, when it was reasonably to be anticipated that contingencies would arise which would postpone any final adjustment of the claims against, or disposition of the property of, the estate.

It appears that so many complications arose as to the estate and the property assigned that creditors might well be confused in determining whether the plan proposed could be carried through, or whether the estate would be settled finally by some different compromise, or through the Court of Insolvency, and that the various extensions of time have not exceeded what was reasonable under all the circumstances.

Some of the creditors contend that, if the provision on this subject is construed as authorizing repeated extensions, it is fraudulent and void, and that, being an independent clause, it may and should be rejected, while in all other respects the assignment may be sustained. But the right given to the trustees to extend the time within which creditors may become parties, even if it may be exercised more than once, is not indefinite nor unlimited, but is a right thus to extend for a reasonable time, having regard to all the circumstances of the case. It is not a purely arbitrary power, but one with which the trustees are invested that they may accomplish the objects of the trust. If they persistently continued to extend the time after all creditors had ample opportunity, with full knowledge of the condition of affairs, to become parties, and practically refused to close the trust when its objects were accomplished, and to distribute the assets, we do not think the creditors who had assented would be without remedy on proper application to this court. Even if, in the first instance, the expediency or propriety of measures to be adopted in the management of a trust is to be determined by the trustees, yet an abuse of their powers may be inquired into and remedied by a court of equity. Woodward v. Marshall, 22 Pick. 468. To exercise arbitrarily, and without regard to the rights of the creditors, a power to extend the time of proof of claims, conferred upon the trustees in order to carry out the objects of the trust and only as incident to this, would be to abuse it.

It is further urged, that, if it be conceded that the time might be extended repeatedly, this could not imply a power to reopen the extension after it had once expired, without any additional extension having been made; that the extensions must be made continuously, and that the power is exhausted if a break therein occurs. It is found that both creditors and trustees, after January 24,1884, when the first extension expired, treated the right to become parties to the assignment as still existing, and the time to do so as extended, although no indorsement in writing to that effect was made on the assignment deed until May 5, 1884. It would be unfortunate if we were compelled to hold that, under such circumstances, the failure to indorse this extension would operate to deprive .those creditors who subsequently signed the deed of their right to do so. Nor can it be said, upon these facts, that the creditors who became parties before January 24 present any strong equitable claims to appropriate the entire trust fund assigned, to the amount, at least, of their respective debts.

But the duty and authority of the trustees to indorse the extension in writing aré intended not so much to prescribe the mode in which the extension shall be made, as to prescribe the method by which it shall be shown that the trustees have assented that the creditors shall be allowed to prove, notwithstanding the time originally provided for has passed. We have heretofore called attention to the fact, that the trustees may at any time, while their trust is unfulfilled, compromise with creditors, as tending to show that they may extend the time for proof to any reasonable period. It equally indicates that, if the time limited by an extension has actually expired, and has proved insufficient for the proof of claims, in the judgment of the trustees, reasonably exercised, in view of all the contingencies of the case, they may still further extend it, in order to accomplish the object of the trust. While the cases in this Commonwealth give force to the limitation of time prescribed in a deed, and treat it as essential, where a definite time is fixed within which a creditor must come in, that he should assent within that time, this affords no reason for any strict construction of a provision giving to trustees the power to extend, but rather the reverse. Phenix Bank v. Sullivan, ubi sufra. Battles v. Fobes, 21 Pick. 240. Dedham Bank v. Richards, 2 Met. 113.

In the cases referred to, it is deemed that the creditors, by their assent within the time limited, have vested rights to share in the assigned property without further participation, as their agreement inter sese and with other parties to the instrument is that the property shall be divided between those who come in within the time limited. But where the agreement authorizes an extension, it is also true that they have agreed to share with all who may come in within the time as it may be extended by the trustees in the proper exercise of their authority.

It is found that the failure to indorse the second extension before May 5 was inadvertent, that it had always been the desire and intention of the trustees and debtors, whenever they have had the subject in mind, to keep the trust indenture open to admit all creditors who might wish to come in and participate, and that, from the date of the trust deed up to the time of the hearing by the master, in dealing with creditors relative to becoming parties thereto, the trustees and debtors always acted on the assumption that it was open for this purpose, and believed that it was so open. When power to extend the time of proof is given to carry out the objects of the trust, and to achieve the intention of the assignor, we should be reluctant to hold that an accident such as, in the case at bar, was the failure by the trustees to indorse in writing the extension, should destroy their power, and thus materially injure or wholly disappoint those entitled to the benefits intended. But we are not disposed to place the matter upon so narrow a ground. So long as the trust remained unfulfilled, even if the original extension had expired, the proper construction of the provision relating thereto, in view of the objects of the deed and the other powers conferred thereby, entitled the trustees to make a further extension, provided the same was reasonable under all the circumstances. The plaintiff was therefore entitled, and was properly permitted, to become a party to the trust, although after the first extension of time, and is entitled to participate in the distribution of the trust fund.

The questions whether the trust shall be declared closed, and whether the trustees shall be ordered now to distribute the fund, are not presented upon the evidence as it has been taken.

Decree accordingly.