National Exch. Bank v. Sutton
| Decision Date | 07 May 1888 |
| Citation | 16 N.E. 759,147 Mass. 131 |
| Parties | NATIONAL EXCH. BANK et al. v. SUTTON. |
| Court | United States State Supreme Judicial Court of Massachusetts Supreme Court |
H.P. Moulton and F.V. Wright, for plaintiff.
The deed of conveyance from William Sutton to Eben Sutton, with the accompanying instrument executed by the defendant setting forth the purposes of the conveyance, and the obligations assumed by him in consequence thereof, if not invalid on account of fraud, constituted a trust for the benefit of all creditors of William Sutton who assented to the conveyance, which can be enforced in equity. Ward v Lewis, 4 Pick. 518; Pingree v. Comstock, 18 Pick. 46; Bank v. Lewis, 8 Pick. 113; Bouvé v Cottle, 143 Mass. 310, 9 N.E. 654. By the law of this commonwealth, voluntary assignments by a debtor in trust for the payment of debts are valid, so far as assented to by creditors for whose benefit they were made, and will protect the property or fund from attachment, to the extent of the amount due to creditors thus assenting, (Faulkner v Hyman, 142 Mass. 53, 6 N.E. 846; May v. Wannemacher, 111 Mass. 202; Bank v. Refinery, 109 Mass. 38; Pierce v. O'Brien, 129 Mass. 314;) and, as against creditors who do not assent, such conveyances are voidable only, (Edwards v. Mitchell, 1 Gray, 242.) This bill in equity sets forth sufficient assent to the conveyance on the part of the plaintiffs. No formal act of assent is necessary. Any act of adoption or affirmative acquiescence, made at any time before the commencement of suit, is sufficient. May v. Wannemacher, Pierce v. O'Brien, supra; Jones v. Tilton, 139 Mass. 418, 1 N.E. 741. The plaintiffs have not waived their rights to claim under this assignment by proving their claims against the insolvent estate of the deceased debtor before commissioners appointed by the probate court. Draper v. Putnam, 7 Allen, 173; Coverdale v. Wilder, 17 Pick. 178. In determining whether a conveyance to a trustee for the benefit of creditors is fraudulent or not, the question is not whether fraud may be committed, but whether the provisions of the instrument are such that, when carried out according to their apparent and reasonable intent, they will be fraudulent in their operation. Ward v. Tingley, 4 Sandf.Ch. 476. It is only when the authority is express to do an illegal act that the instrument will be held void. Kellogg v. Slauson, 11 N.Y. 302; Brigham v. Tillinghast, 15 Barb. 618. The discretion here given is legal and reasonable, and will be under the control of the court of equity. Benedict v. Huntington, 32 N.Y. 219; Mann v. Witbeck, 17 Barb. 388; Hollister v. Loud, 2 Mich. 309. Similar assignments have been held valid in a large number of adjudicated cases. Neally v. Ambrose, 21 Pick. 185; Whitney v. Krows, 11 Barb. 198, 201; Townsend v. Stearns, 32 N.Y. 209; Hitchcock v. Cadmus, 2 Barb. 381; Norton v. Kearney, 10 Wis. 443; Nye v. Van Husan, 6 Mich. 329. The effect of the whole instrument is to give the assignee control over the assets of the debtor, and invest him with such discretionary power as he may lawfully use for the benefit of all the creditors, without interference or control on the part of the grantor.
George Putman and L.S. Tuckerman, for defendant.
Neither the word "trust" nor "trustee," nor any equivalent for them, is used in the defendant's agreement, and the only language in it which can be asserted to establish a trust for creditors generally is that portion of the preamble which states that the conveyance of the land is made for the purpose of having the same applied in liquidation of William Sutton's indebtedness. Even if this language stood alone, we submit that it would be difficult to construe it as declaring a trust for the benefit of all the creditors of William Sutton ratably. A more reasonable construction to put upon it would be that the grantee undertook to use the property, not for his own benefit, but for the payment of the grantor's debts. But an agreement to apply property towards the payment of the grantor's debts is satisfied by applying it to any of his debts. Such an agreement does not create an obligation to distribute the property equally and ratably among all the creditors of the grantor, after a careful ascertainment of their claims. The whole transaction shows the intention of William Sutton to have been to put the property out of his own hands into the stronger hands of the defendant, in the hope that his creditors might so be more sucessfully dealt with. The defendant's agreement with William Sutton did not contemplate, much less did it require, a ratable distribution of all the property among all the creditors. If as the bill complains, the defendant has sold some of the property, and has paid some of the creditors the whole or a portion of their claims, and in so doing has exhausted all the proceeds of such sales, and advanced more than the value of the property remaining on his hands, it cannot be said to have been in breach of his agreement with William Sutton. Not only would such payments be within his agreement, but in an attack on the transaction by William Sutton's creditors, they would have been allowed him. He could not have been charged on a trustee process against William Sutton for the value of the real estate unsold, nor for the proceeds of the part sold, so far as actually applied to payment of debts, no matter what preferences he might have given. Chapman v. Williams, 13 Gray, 416; Leland v. Drown, 12 Gray, 437; Bowles v. Graves, 4 Gray, 117; Guild v. Holbrook, 11 Pick. 101; Train v. Kendall, 137 Mass. 366. And, in a proceeding to set aside the whole transaction as a fraud on creditors, he would be allowed all sums so applied. Thomas v. Goodwin, 12 Mass. 140; Bank v. Haskins, 3 Metc. 332; Crowninshield v. Kittridge, 7 Metc. 520; Hastings v. Baldwin, 17 Mass. 552. A fortiori would such advances and preferences, if any, be allowed in a suit brought, as this is, to enforce the trusts of the instrument. Yet, on the state of facts supposed, the only relief which could be sought under this bill would be to charge the defendant personally with the excess of the amounts already paid to creditors over the just proportion of those creditors on a ratable distribution of all the property, when that is ascertained. Even if the assignment to Eben Sutton is voidable, both on the ground that it is fraudulent as against creditors, and on the ground that it provides for a preference, in fraud of the insolvent law, these objections cannot be availed of in a suit to enforce the trusts of the instrument. The grantee under a fraudulent conveyance is not thereby made a trustee for creditors. How v. Field, 5 Mass. 390. The plaintiffs cannot at the same time seek the benefit of the assignment as beneficiaries provided for therein, and attack it on the ground that it is in fraud of their rights as creditors at common law or in insolvency. It is well settled that in this commonwealth a conveyance of property by a debtor to one who agrees to pay his debts generally, without specifying particular creditors, does not give any right of action to the creditors against the holder of the property. Morrill v. Lane, 136 Mass. 93; Carr v. Bank, 107 Mass. 45; Dow v. Clark, 7 Gray, 198. It has been tried in Massachusetts, contrary to the English rule, that a conveyance in trust for specified creditors may be enforced by those creditors for their own benefit, although they have not become parties to it. Arnold v. Lyman, 17 Mass. 400; Ward v. Lewis, 4 Pick. 518; Bank v. Lewis, 8 Pick. 113; Bryant v. Russell, 23 Pick. 508. The contrary English doctrine is well illustrated and enforced by the opinion of Lord Justice JAMES in Johns v. James, 8 Ch.Div. 744...
To continue reading
Request your trial