154 Pa. 307 | Pa. | 1893
Opinion by
P. R. Weed, who died April 1st, 1882, by his will devised all his property real and personal and mixed whatsoever the same majr be and wheresoever the same may be to his brother Mills B. Weed in trust nevertheless for the following uses and purposes, to wit: That he shall possess, hold and manage the same and conduct, carry on the business and trade, barter and buy and sell and do all things that may appertain to said estate, its business or its products, and make such investments and purchases for the property real and personal as he may deem for the best interests of the property. If he shall deem it judicious to do so he is authorized to make sale of any part or parts óf the estate hereby devised and give title therefor, and with proceeds of such salé he is authorized to make such investments, and generally to do such acts and things incident to the carrying on of the business for the benefit of the cestui que trusts hereinafter named as he may deem judicious. That said Mills B. Weed in consideration of the services rendered by him shall receive a reasonable support out of the trust funds for personal services rendered. The trust was to continue-during life of Mills B. Weed. After deducting all the expenses, he was directed to pay out of the net income annually to the testator’s wife one fourth, the wife of Mills B. Weed one fourth, to his son one fourth, and one fourth to the education of the children of Mills B. Weed and Mary Weed.
At the time of the death of F. R. Weed he was engaged in conducting a banking business as F. R. Weed & Company, a lumber business in firm name of Weed & Allen, and also did business at Trout Run, having a country store there. Mills B. Weed, as trustee of the estate thus devised, continued these several branches of business in which the testator had been
Two questions arise in this case, whether the said trustee, the estate being insolvezit, could by confessing the judgments in question enable the pez-sons. to whom they were given to obtain a preference over other creditors of the trust estate, and whether the trustee had aziy authority to execute the deed of assignment of the trust estate for the benefit of its creditors.
The business of F. R. Weed deceased was continued by Weed as trustee for the estate. The character and nature of the different kinds of business required large credits. The basis of a banking business is necessarity credit. That of the lumbering business by reason of the magnitude of the operations demands a resort to credit, and that of a large country store almost by necessity requires extensive credit. These credits thus required in the business were obtained by the trustee in conducting the same, azzd the creditors, upon the faith of the trust estate, gave them. The trustee so dealt with them for the trust estate, and his authority to do so was contained in the will creating the trust. He was authorized by it tp conduct and carry on busizzess and trade, barter, buy and sell in and for all things that pertain to said estate, its business or its products. As a trustee he had complete power to deal with the trust estate to aziy extent that he- might deem for its best interests in obtaining credit for the conduct of the business. Occupying this
In Matthews v. Stephenson, 6 Pa. 496, it was said: “We cannot doubt but that it was the intention 'of the grantor to give the power of contracting debts upon the credit of the fund or property. Such power would seem to be necessarily implied in a general power to carry on a store. More especially as he ex presses the most unbounded confidence in his son, who was the trustee, and that he would conduct the whole business for the benefit of the beneficiaries and of the objects of the grantor’s bounty. It would be monstrous to hold that the trustee and the agent himself, altogether without property as appears from the deed of trust, should be allowed to carry on business on the strength of the trust property, according to the custom of the country, and then permit him or any one else to allege that the trust property was not liable because he was not expressly authorized to contract debts in so many words. The stock of the beneficiaries was repaired and renewed by these debts contracted; they got the benefit of them and the trust property ought to be liable.” In Baskins’ Ap., 34 Pa. 272, it was said: “As the trust funds in his hands are by the term of the deed charged with the remaining debts incurred by Thomas Stephenson under the power granted to him by that instrument, Mr. Baskins
The purpose of the trust was to conduct and carry on the business, and by the insolvency of the estate this purpose .was at an end. Such being the case, the duty of the trustee was to file his account and terminate the trust by the distribution of its assets among the creditors pro rata. Instead of doing this, he, after the doors had closed upon the business, with intent to prefer and transfer a large portion of .said estate to Crocker and the bank, confessed these judgments to them and they accepted them with the intent to accomplish that purpose. In violation of a duty cast upon him, it was an attempt on his part and that of these creditors to secure a part of the trust estate to the exclusion of others who stood upon an equality with them, and whose rights were the same. It is' not the case of a creditor dealing with a solvent estate and with the right to sue and obtain judgment. It is not the case of a trustee of a solvent estate confessing judgment for a debt due by it. It is not the case of a simple contractual relation with rights that spring from it, but it is an effort of certain creditors, and of a trustee himself insolvent,
It is said that only the cestui qüe trusts named in the will can compel the trustee to file his account, that the creditors cannot do so, and therefore their only remedy is by action at law and by proceedings upon judgments obtained in such action, and that the trustee may waive adverse proceedings and give creditors the preference, which they could obtain by an action at law. In Brown’s Appeal, 12 Pa. 335, the jurisdiction of the orphan’s court is considered in regard to testamentary trusts given nominatim, and the conclusion was reached that both the common pleas court and the orphans’ court have concurrent jurisdiction. The creditors who thus occupy the relation as shown to the trust estate can compel the trustee to file his account. It is claimed that as the relation between the creditors and the trustee is a contractual one, the trustee had a right to give mortgages or confess judgments. Where the estate however has become insolvent and the rights of creditors have intervened and the estate should be held intact for distribution, a trustee has no right to confess judgments with intent to prefer creditors by giving them the right to issue execution and sell the property : Mason v. Pomeroy, 151 Mass. 164.
On March 19, 1891, Mills B. Weed, as trustee, made a deed of assignment to J. J. Crocker and J. Clinton Hill, conveying all the real and personal property of the trust estate to them. In this deed of assignment it is provided that “ they shall sell and dispose of the lands, tenements, goods and chattels of the said trust estate of the said Mills B. Weed, trustee, collect and recover all outstanding claims and debts of him the said Mills
The duty of the trustee was to conduct and manage the business. It was intrusted to him because of the confidence reposed in him by his brother, and the will did not authorize him to delegate the duty to anybody else. “ The duty and power of a trustee cannot be delegated to others unless there is express authority for that purpose given in the instrument creating the trust. It follows. therefore that a power to appoint a new trustee can seldom or never exist except in express trusts created by deed or will. The person who creates the trust may make it in whatever form he pleases, he may therefore determine in what event and upon what condition the original trustee may retire and new trustees he substituted.” Perry on Trusts, § 287. The estate being insolvent and by reason thereof the trust about to be terminated, this deed was an attempt to transfer to Crocker and Hill all the duties that were cast upon the trustee by the will while at the same time it continues the trust. He had no authority to do so by it. It is no answer to say that this is' but a method of payment and that no person but the cestui que trusts named in the will could object. The relation existing between the trust estate and the creditors places them in a position to object.
It may be said in conclusion that upon every principle of equity this trust estate should be held intact for the benefit of all its creditors, according to their respective rights, and free from any preferences.
Decree affirmed and appeal dismissed at cost of appellants.
See also the next case.