President & Trustees of Bowdoin College v. Merritt

54 F. 55 | U.S. Circuit Court for the District of Northern California | 1893

HAWLEY, District Judge,

(orally.) My conclusions are that, when all the facts alleged in the bill, including the exhibits incorporated in oo* attached to the hill, and made part thereof, are considered, it affirmatively appears that the subject of the entire negotiation between Catherine M. Garcelon and her nephews, James P. and Frederick A. Merritt, was the' real and personal property which was owned toy Samuel Merritt at the time of his death; that the sole contention between the parties which resulted in. the compromise was in relation to this specific property; that the contracts, conveyances, and promises made by them had reference to this property, and to no other; that the references therein made to the property which Mrs. Garcelon now owns or may hereafter acquire, either by deed or last will and testament, was intended, and must have been, understood by the parties, as having reference to the property which she derived from the estate of Samuel Merritt, deceased, and not as having reference to any other property which she might own or possess at the time of her death, and that it should not be treated, as claimed by defendants J. 1*. Merritt and F. A. Merritt, as a contract and agreement renouncing their status as heirs of Mrs. Garcelon, and, if right in this conclusion, it would, in my opinion, necessarily follow from the averments in the bill that the contracts and agreements were valid, and made upon sufficient consideration. I am of opinion that this court has jurisdiction to enforce the covenants and agreements entered into by the said J. P. and F. A. Merritt with Mrs. Garcelon, and that the beneficiaries of the trust have such an interest in the -performance of the trust as enables them to maintain this suit. The remedies in the courts of the United States are to be according to the practice and principles o? equity jurisdiction as established in English jurisprudence, and the rules and decisions are the same in all the states. Defendants rely upon the provisions of section 868 of the Civil Code of California, which reads an follows:

“Every express trust in real property, valid as such in its creation, vests the whole estate in the trustees, subject only to the execution of the trust. The beneficiaries take no estate or interest in the property, but may enforce the performance of the trust.”

If this section ⅛ controlling upon this court, it is only so to the effect oí declaring that complainants have no title in the property, either legal or equitable. It is conceded by defendants’ counsel that they have an equity in the proceeds of the trust property, and they are certainly interested in the performance of the trust. '

It is claimed that under the declaration of trust the trustees have an uncontrollable discretion for five years to take, or abstain from taking, any steps they please towards the execution, of the trust. The trust deed, however, provides—

“That immediately after the expiration of said fifteen years from the date hereof, or immediately after the death of the party of the first part hereto, should, such death sooner occur, the parties of the second part hereto, or their successor or successors in this trust, shall proceed, with all the dispatch that In their uncontrolled discretion the interest of the trust estate will permit, (but within five years from and after the end of said fifteen years, or from and after the death of the party of the first part,) to convert the whole of said trust estate into money or interest-bearing securities or savings-bank deposits.”

By the acts of the defendants J. P. and F. A. Merritt the trustees are deprived oí the uncontrollable discretion given by the trust deed.

It is claimed by defendants that tbe bill fails to state a cause of action for removing a cloud on tbe title of tbe trustees, or for quieting tbe title. Tbe complainants in tbis action are not seeking tbis relief upon tbe ground that tbey have any legal title to tbe property to be quieted. Wbat tbey do claim is that tbe title and possession of tbe property is in tbe defendants Stanly and Purrington, and that it is held by them in trust for complainants, and for tbeir benefit; and it is this title and tbis possession which it is sought in tbis suit to have quieted, and tbe cloud created thereon by tbe acts of tbe defendants J. P. and F. A. Merritt removed therefrom. If tbe beneficiary of a trust is allowed to go into court to enforce tbe performance of tbe trust and to protect tbe trust property, then it must necessarily follow that be is entitled to tbe advantage and benefit of every position which could be taken or maintained by tbe trustees themselves if tbey bad instituted tbe suit in tbeir own names. It would be idle to bold that tbe cestui que trust could maintain an action to “enforce tbe performance of tbe trust,” and then to declare that in order to remove or dissipate any cloud upon tbe title to tbe property, or to do any other act or procure any decree necessary for tbe enforcement of tbe trust, it must first , appear that-be has a legal title to tbe property. The suit, in my judgment, is sustainable upon tbe ground that tbe beneficiaries of the trust are entitled to tbe.same rights, privileges, and decrees that tbeir trustees would have been entitled to if tbe suit bad been instituted in tbeir own names. Tbe trustees bad tbe right to bring tbe suit, and, if brought by them, full relief could have been granted. They refused to do so. Tbe beneficiaries under tbe trust therefore claim tbe right to do wbat tbe trustees have declined to do; any judgment or decree which tbey may be able to secure will simply be such as tbe trustees would have been entitled to if tbey themselves bad instituted tbe suit. Tbe beneficiaries of tbe trust are not required to stand idly by when tbe property is threatened with injurious litigation, or by the assertion of wrongful and illegal claims thereto; but tbey have tbe right, in my opinion, to' appeal directly to a court of equity for tbe protection of the property, in order to prevent tbeir rights from disturbance or destruction. Tbey are not required to await tbe action of tbeir trustees. If tbe trustees decline to take any steps to protect tbe property tbey will be permitted to act themselves. If, therefore, tbis suit is to be treated as one to remove a cloud upon or quiet tbe title to tbe property, I am of opinion‘that it can be maintained.

In support of tbe conclusions I have reached I shall only refer to a few cases. In tbe Baptist Church v. Branham, 90 Cal. 22, 27 Pac. Rep. 60, tbe court held that, where tbe trustees of a corporation bold property in trust for its uses, tbeir ownership and possession is tbe ownership and possession of tbe corporation, and tbe corporation has a sufficient interest in tbe property to bring an action in its corporate name to quiet title thereto, and to restrain by injunction a threatened interference with tbe possession. And in tbe course of tbe opinion it is said:

“While the dry, naked, legal title to the property may not be in plaintiff, yet its trustees hold it in trust for the uses of plaintiff, and their ownership and possession is the ownership and possession of the plaintiff. We cannot understand how it is material to the interests of defendants in the action whether the plaintiff or its trustees is technically seised of the legal title to this realty; the plaintiff certainly has sufficient interest to bring this action.”

In Fleming v. Holt, 12 W. Va. 143, the court held that the cestui que trust might bring a suit in equity for the specific execution of a contract, made by a third party with the trustee ⅛ a deed of trust, for the purchase of a tract of land conveyed by the deed of trust, and make tbe trustee and purchaser of the land and grantor in the deed of trust defendants. The court in its opinion said:

“The trustee holding the legal title must be made a party in a suit in equity concerning the trust subject, and the cestui quo trust must generally be also made partios. But it is very often regarded by a court of equity, though never by a court of law, that it is immaterial whether a particular party in certain eases is made a, plaintiff or defendant. In the present case it seems to me immaterial whether the trustee, Conrad, was a party plaintiff or defendant. In suits of this character he has frequently been made a party defendant without the bill’s assigning any reason why he was not made a, plaintiff. Thus in Cope v. Parry, 2 Jac. & W. 538, Cope made a covenant with Jones, a trustee, to convey certain property to him in trust for certain parties. They instituted a suit against Cope’s assignees to enforce a specific performance of Cope’s covenant with their trustee, but they not only did not join the trustee, Jones, as a coplaintfi'f with them, hut did not even make him a defendant. The court did not dismiss the bill on that account, but simply required the plaintiffs, the cestui que trust, to make the trustee, Jones, a party defendant. In Hook v. Kinnear, 3 Swanst. Ch. 417, it was contended by counsel ‘that a chancery coral never decrees a specific execution of an agreement but at the instance of tin, party with whom the contract was made.’ But the lord chan-cello • to Ms decision says: ‘It is certain that, if one person enters into an agreement, with another for the benefit o" a third person, such third person may come into a court of equity and compel a specific performance.’ And this point was so expressly decided in Cooke v. Cooke, 2 Vern. 36. While the trustee, Conrad, might more appropriately have joined with the cestui que trust, Linn’s administrator, as one of the plaintiffs in this cause, still, as he has been made a defendant, this is sufficient.”

In Grant v. Insurance Co., 121 U. S. 112, 7 Sup. Ct. Rep. 841, the supreme court said:

“The objection made is that the bill does not show a right in the plaintiff to maintain the suit; that each trustee vests in its trustees a legal title to the property covered by it, with power to sell; that the interest of the cestui quo trust is represented by the trustees, who must entorne the trust; and that unless the Mil shows a failure on their part to do so, through incapacity or otherwise, the cestui quo trust has no standing in court in its own right. The bill alleges that in 12 of ihe deeds of trust executed January l, 1872, to Gai-laudet and i’sfiue as ti astees, the length oí notice of the time and place of kale by advertisement is left blank; that this would prevent the trustees from executing such power of sale, but that in a court of equity the deeds would he considered as mortgages. It is urged on the part of Grant that this defective power of sale renders it the more necessary that the trustees, rather than the cestui que trust, should act, in either seeking a correction of the defect or in enforcing the trust; but wo think there ⅛ nothing in the objection thus raised. The case is one clearly of equity cognizance, for the reasons ahoye set forth, and those contained in the opinion of the general term, above quoted. No objection is made on the part of any of the trastees to the maintenance of the suit. Tbe hill is taken as confessed as to all of them, and there is no possible prejudice to tbe defendant Grant in the bringing of the bill in its actual shape by the cestui que trust.”

In Harrison v. Rowan, 4 Wash. C. C. 206, Justice Washington, in delivering the opinion of the court, in a case where the trustee and others claiming the benefit of the trust were joined as plaintiffs, said:

“That the trustee might maintain an ejectment against, the defendants to recover the possession of the lands now in controversy, on the trial of which suit the validity of the disputed will might, and necessarily would, be decided, cannot be denied; nor does the court think it necessary to decide whether, were this suit brought by the trustee alone, he would or would not be entitled to the relief prayed for. The real plaintiffs in this cause are those who claim a beneficial equitable interest in the land devised by the will, and it will not, nor has it been, denied that the court of chancery has a clear, original jurisdiction in such a case. Not only so, but that jurisdiction is exclusive; the cestui que trust having no remedy at common law, either against the trustee, or against any other person holding adversely the fund charged with the trust. It is true, as has been observed, that the trustee has a1 remedy at law to recover the possession, and thus to enable him to execute the trust. But are the cestuis que trusts obliged to wait until this course has been pursued? They are at all times competent to assert their equitable demands, however well Or ill inclined the trustee may be to perform his duty. It was not, indeed, denied by the defendants’ counsel but that this bill might have been maintained by those persons if the trustee had been a defendant in the cause, but it seemed to be supposed that this acknowledged equity is tainted by the co-operation of the trustee. If, indeed, there was any weight in this argument, the court would dismiss the bill as to the trustee; but surely it could afford no good reason for dismissing it as to the other plaintiffs, who can claim relief nowhere but in equity. But there is in reality nothing in the objection. The jurisdiction of the court of chancery, upon the application of a cestui que trust, to enable the trustee to execute the trust, and to compel him to do so, stands upon the same ground. In both cases the trustee must be a party to the suit, either as plaintiff or defendant, in order that he may be bound by the decree, and that the cestui que trust may thereby have the full benefit of it.”

The objection, made by tbe demurrer that certain beneficiaries of tbe trust, some of whom are shown by tbe bill to be residents of tbe state of California, are not made parties, does not deprive complainants of tbe right to maintain this action. Tbe rule applicable to this question is clearly stated by tbe supreme court in Hotel Co. v. Wade, 97 U. S. 20, as follows:

“Holders of such securities, otherwise entitled to sue in the circuit court to foreclose the mortgage or trust deed, 'are not compelled to join as respondents other holders of similar securities, if resident in other states, even if they refuse to unite as complainants, as the effect would be to oust the jurisdiction of the court. Gases of the kind frequently arise, and the rule is that such a party, if he refuses to unite with the complainant, may be omitted as a respondent, unless it appears that his rights would be prejudicially affected by the decree. But it is suggested that the proper parties for a decree are not before the court, as the bill of complaint shows that there are other holders of (he securities besides the complainants. It is true, beyond doubt, that all persons materially interested in the fund to be distributed should be made parties to the litigation; but this rule, like all general rules, will yield whenever it becomes necessary that it should be modified in order to accomplish the ends of justice. Authorities everywhere agree that exceptions exist to the general rule; and this court decided that the general rule will yield if the court is able to proceed to a decree, and do justice to the parties before the court, without injury to others not made parties, who are equally interested in the litigation. Payne v. Hook, 7 Wall. 425.”

.Numerous authorities might be cited to the same effect.

In the consideration given to this case I have confined myself to the questions relating to the real estate only. If upon the trial of the case it should, from any cause, appear that the personal property should be more definitely described, leave to amend in that particular will, of course, be granted. The demurrer is overruled.