Trustees of the Internal Improvement Fund v. Gleason

WESTCOTT, J., delivered -the opinion of the court. The appellants have alleged that the contract set up in the bill is illegal and void, is beyond their power as trustees, and that a court of equity will not decree performance upon their part. A trustee, who comes into a court of [398] equity alleging want of power and illegality in his contracts in reference to the trust committed to his care, and who asks a court, for this reason, to deny relief to a- party who alleges performance upon his part, occupies a position which cannot'be commended. The trustee, however, is yet to be heard from, and his answer may explain all the circumstances. In such a case the specific performance might perhaps be denied, in the interests and in behalf of the cestms^que trust, and the party left to such a remedy against the property of the trustees as the laws afforded him, if any. But is it true that the contract here is ultra wres, as to the trustees ? Under the provisions of the act of January 6, 1855, all the swamp and overflowed lands granted to this State by the Federal Government, and the proceeds to be .realized from sales thereof, were, with what is known as the internal. improvement lands, set apart and declared a distinct and separate fund, called the Internal Improvement Fund. These lands were vested in five trustees: The duties of the trustees as to the management and investment of the trust fund were prescribed, and certain improvements were designated as proper to be aided from the fund, and the manner of extending such aid was indicated in the act. In regulating the manner in which this trust estate should be administered, and directing the. means through which the land was to be made useful' to the fund, the law required that the price of the saleable lands should be fixed with reference to their location and value, and that, as to the swamp and overflowed lands, they should make such arrangements for their drainage as, in their judgment, was most advantageous to the Internal Improvement Fund, and the settlement and cultivation of the land. These swamp lands, therefore, are a trust estate, and it is the duty of the trustees, under this act, to improve the trust property by drainage. The error of the defence here made by the trustees is the conception that a contract to improve the trust [399] estate, by rising a portion of it to render the balance more valuable, in a manner authorized by .the act — in other words, using a portion of the fund, or ■ a part of the land itself, to make the other of more advantage — is á violation of the trust. The construction contended for would render these trustees powerless to drain one acre of the millions of acres of swamp lands now in their hands, thus preventing their improvement, and would prevent them from carrying out the manifest policy and spirit of the law upon the subject. As a matter of course, the interest of the cestuis-que trust are not to be disregarded in this matter, nor is the simple element of drainage in a contract' enough to secure its approval and enforcement by a court-.of equity. The performance of this contract involves, so far as appears from the face of the bill, no diversion of the trust fund. It is its simple improvement in a manner authorized by the law of the trust. As the case now stands, we must presume that the contract is advantageous to the fund. Our attention has been called to the case of Bailey vs. The "Trustees, 10 Ela., p. 112, and it has been contended that the matter there decided covers this case. This, we think, is incorrect. In' that case the- trustees sought to appropriate the fund to. deepening the channel of a river. That is the case stated by the Justice delivering the opinion. The deepening of the channel'of this river was nowhere'declared to be a proper improvement to be aided by the fund, and the court enjoined such a use of the fund. In this ease the court should not proceód further without requiring the cestms ,que trust to be made parties. Where trustees enter into contract in their character as trustees, and in behalf of the trust estate, and for the benefit of the, cestuis que trust, the cestuis que trust for whose .benefit the contract was made ought to be parties to the suit. (Perry on Trusts, § 871; Story’s Eq. Plds., § 208.) There are perhaps exceptions to this rule, as originally announced by Sir John Leach, but we think the presence [400] of the cestms que trust here .is advisable and necessary. The trustee here apparently assumes an attitude hostile to the cestms que trust, and it is best that they should be heard as to their rights. The judgment upon the demurrer is affirmed, and the case is remanded for further proceedings not inconsistent with this opinion and conformable to law.