Geisse v. Beall

By the Court, Smith, J. This is a bill filed by the complainants, to remove the defendant Beall as trustee, under an assignment executed by Charles Greisse to said Beall, in trust for the benefit of the creditors of the said Charles Greisse; and for an account, injunction, and other relief. The bill is filed by William Geisse, Edward C. Geisse, Herman C. Geisse and Theodore Geisse, partners under the name and firm of Wm. Geisse & Sons and Herman C. Geisse on his own behalf, all of Philadelphia, in the State of Pennsylvania, against Samuel W. Beall, Charles Geisse, and numerous other defendants, all of whom, except Beall and Charles Geisse, are alleged to be creditors of the said Charles, and interested in the trust estate under the assignment set forth in the bill, and the only creditors. The bill alleges, that on or about the 18th day of March, 1850, the said Charles Geisse then and theretofore doing business as a merchant at Fond du Lac, in this Stale, being unable to meet his liabilities, and for the purpose of making provision for his creditors, exesuted and delivered on that day an assignment, to the defendant Beall, of all the estate of the said Charles, in trust for the benefit of his creditors, preferring some. That Beall accepted the trust, and entered into and took possession of the trust estate, to the value, as believed, of $20,000 or $25,000. That from the time of entering upon the trust, he, the said — 381 — Beall, had managed the trust estate in an indiscreet, imprudent and fraudulent manner, and had appropriated large amounts of the same to his own use, specifying instances and amounts according to the terms of the trust, and had failed to apply the same to the objects of the assignment, or to account in any man, ner for the same. The defendant Beall, in his answer, admits the making of the assignment, and that he accepted, and entered upon the duties of the trust; denies, or attempts to explain or avoid the specific allegations of indiscreet or fraudulent management of the trust estate, and denies that he has appropriated the same or any part thereof to liis own use, except as he has charged the same to himself. He also admits, that by the terms of the assignment, the complainants are the creditors of Charles Geisse, but says he has been informed and believes, that the complainants and others in said assignment mentioned as creditors of Charles have re-assigned to the said Charles, their rights and interests under the said assignment, and that they now have no interest in the trust estate, or at most a contingent interest therein, the precise nature and extent of which he is unable to state. He also denies that the said complainants have ever, by themselves or agents, applied to him for an amount of the trust property, or of his application thereof, or that he has refused to comply with such request, except that Herman C. Geisse has applied to him for money on account of said assignment, while a creditor’s bill was pending against Charles, to which he (Beall) was made a party, as trustee, with the intention of contesting the validity and lona fides of the preferences given by the assignment to H. C. Geisse and the — 382 — other complainants; that this bill was filed by Wilson <fc Slauson, defendants herein, and on the filing thereof, he believed it to be his duty to make inquirieS) ag t0 the validity of the claims of the said complainants and Herman 0. Geisse, and upon such inquiries, he believed the claims to be of doubtful validity; and that he was consulting upon his duty under these circumstances, when the present system of litigation was commenced against him, as he believes for that reason only. The defendant Beall does not directly deny the validity of the claims of any of the oestuis que trust, under the assignment, nor allege any facts or circumstances which tend to render them questionable, even if such could be made available to him, nor does he attempt to give any amount or value of the pi’operty which came into his possession, though he admits he received the trust estate, nor of the disposition made of the same, (except in two or three instances in answer to specific charges in the bill, and those of trifling amount compared with the alleged value of the whole estate) nor does he allege any reason why he does not, or ought not to account. Wilson & Slauson answer, that they are judgment creditors of Charles Geisse to the amount of $2000 and upwards. Admit the execution of the as_ signment, but allege, on information and belief, that the same is fraudulent and void, and was made to hinder and delay creditors. They also allege on information and belief, that the pretended indebtedness of Charles, to Herman C. Geisse and to Geisse & Sons, set up in the bill of complaint, has no existence in fact, but it is in whole or in part fictitious and fraudulent, and is set up for the purpose of more effectually — 383 — covering up the property of Charles Greisse. The other defendants did not answer. A large mass of testimony was taken and submitted, and upon the hearing, the Circuit Court made decree, dismissing the bill with costs. From this decree the complainants have appealed to this court. It is quite obvious, that the interests of the defendants to this bill are very different. Wilson & Slau-son only, of all the number, appear here to sustain the decree of the court below. The complainants claim as cestuis que trust, under the assignment, and seek to render the trust estate available; to remove the present trustee, and to compel him to account for the estate which has come into his hands as such. This claim Wilson & Slau-son resist, so far and so far only, as it may possibly interfere with the prosecution of their judgment to satisfaction out of the same property or a sufficient portion thereof. The rights, interests and duties of the defendant Beall rest upon no such foundation. He stands in the light of a simple trustee, liable to account to any person lawfully interested in the property. As such: trustee he is bound to disclose, upon the proper complaint of the eestuis que trust, all of the trust property of every description, which may have come to his hands. It is no excuse for not accounting, that the assignment under which he holds is fraudulent and void as against creditors. It is void if void at all, as against creditors only; and it is optional with them, to treat the instrument as void and disregard the claims of the trustee or assignee, or to hold him to a rigid accountability for the trusts he has voluntarily assumed. It would be singular indeed, if an — 384 — assignee could obtain possession of the entire estate of a failing debtor, in trust for creditors, and when ^ cl.e(jftors called upon him'for an account, he should permitted to turn upon them, and say, that the instrument by which he acquired possession of the debtor’s property is fraudulent and void; or, if he were permitted to convert the property into money, and then to excuse himself from accounting under the pretext that the deed of assignment was made with intent to hinder and delay creditors, and was therefore void. And yet, how does this differ from the position assumed by the assignee in this case ? He is distinctly called upon by the bill to account for the trust property which came to his possession under the assignment, and the only reason he gives for not accounting (if, indeed he intends it as such a reason) is, that he is informed and believes that there was a fraudulent preference of the complainants as creditors, and on inquiring he is led to believe that their claim is of doubtful validity. And this, too, when the assignee was the legal counsellor and attorney, (as the proof shows,) of the assignor, and urged the latter to the execution of the assignment. Trusts of this nature cannot be permitted to fall in this way. If, indeed the assignment was fraudulent and void, so much the more eagerly will a court of equity pursue and probe the transaction, and sternly require a full disclosure from all those into . whose hands the assets may be traced. We speak here of the duty and liability of the trustee to render an account;of the trust estate which came to his hands; not of the appropriation or distribution of the proceeds. But we may here ask, what right has the assignee to question the demand of the — 385 — eestuis que trust, as declared by the assignment, or deed of trust, so long as others apparently interested do not complain ? By accepting the assignment be has admitted himself the trustee of the complainants to the amount of claim specified in the deed. If the other creditors choose to dispute the claim they may do so, but if they are content, it is not for the trustee to declare the claim of one or more of “doubtful validity” and refuse to execute the trust. By becoming a party to the instrument he has admitted the claims specified in it, and so long as all the claimants under it are satisfied, he is bound to a faithful application of the estate to the objects specified in the deed. But there is no controversy here among creditors, which can be made available to the defendant Beall. Wilson & Slauson, it is true, allege in their answer, a fraudulent preference of the complainants. But that is no reason why a court of equity should refuse to hold the trustee who has got all the property, to accountability. If the court should ever see fit to remove him, and order the proceeds in his hands to be paid into court, it would be abundantly able to protect all the eestuis que trust, and order an equitable distribution. How are Wilson & Slauson, on the one hand, or Beall on the other, to be injured ? If, Wilson & Slauson have regarded the assignment as void, (and as to creditors it be so) and have proceeded at law, and levied upon property, of course for so much Beall would discharge himself in his account rendered. If the assignee has converted the whole estate, then it is for their interest that the account should be rendered and the fund secured for legal distribution. It does not appear that they have attached the funds in Beall’s hands; and if they had, — 386 — still it is no reason wiry Ire should not account for the remainder. In any event we cannot see any reason or excuse? for discharging the defendant Beall from obligations and duties which he has assumed as trustee, and at the call of the complainants, provided the record shows them to he interested in the trust estate. It is true, Beall in his answer says, that he is informed and believes that the complainants have re-assigned their interest in the trust estate to Charles Geisse, and that they have only an uncertain or con tingent interest, but to what amount, or to what extent he cannot state; yet here is an interest, admitted by him, still remaining in the complainants, and the proof, (which we shall speak of presently,) we do not think inconsistent with the claim set up by them. We have observed, that whether this deed of as signment be void as to creditors or not, it is void as to creditors only. As to all the world except creditors it is good and valid: And it is void as to those creditors only, who choose so to consider it. The creditor who chooses to regard it as void, may pursue his remedy at law and satisfy his debt out of the debtor’s property in case the assignment proves to be fraudulent. But his option is not compulsory upon other creditors. They may hold the deed as valid, and hold the trustee to the faithful management and application of all of the estate which becomes available to him under the assignment. Nor can the fact be made available to the trustee^ in avoidance of his liabilities as such, that the creditors, or cestuis gue trust, have made arrangements in regard to the distribution of the estate, different from that prescribed by the assignment. And this brings us to the consideration of the instrument, under date — 387 — of 29th of June, 1850, executed by the creditors and of the 23d of July, 1850, executed by William Geisse and Sons. Here is a mutual agreement between William Geisse and Sons on the one hand, and the rest of the creditors, or most of them on the other. William Geisse and Sons, a firm of which Herman C. Geisse was a member, were preferred by the assignment, as was also Herman C. Geisse individually as creditors of the first class. The debt of the former was declared to be some |4354, and that of the latter some $10,850, In consideration of Wm. Geisse & Sons relinquishing their right in the assignment, the other creditors agree to and do assign their interest therein, to Charles Geisse, in trust, to pay Herman in fall, and the other creditors the residue of the estate pro rata. And Wm. Geisse & Sons, in consideration of such agreement, do relinquish unto Charles Geisse their interest and share in the assignment, in trust for the purposes declared by the other creditors. It is claimed, that, by this arrangement, one of the leading trusts, declared by the assignment, that in favor of Wm. Geisse & Sons, was extinguished, by voluntary relinquishment, and that therefore it ought not to be executed at all. We do not so understand the arrangement. William Geisse & Sons do not absolutely relinquish their interest in the assignment, but by the instrument of the 23d of July, 1850, they simply declare another trust of their share or interest, that is, they relinquish their share unto Charles Geisse in trust for the purposes expressed in the deed of the other creditors of the 29th of June, 1850. They have still an interest in the original assignment in the application of the estate to the purposes of the trust created by them. Authorities need not be quoted to — 388 — Prove that the assignor of an estate, may maintain a bill against the assignee, to compel the performance of the trust, as well as to account. Beall was not a party to the arrangement between the creditors. His duties and obligations remained the same. William Greisse & Sons did not relinquish to Beall, or release him from performance, but on the contrary, they specifically direct the application of their share of the trust estate, and they still remained interested in the carrying out of the trusts to which they had appropriated their share. So far, therefore, from relinquishing their trust in the assignment, so as to excuse the execution of it, they expressly recognize and claim it, and direct the appropriation of it. It no where appears, that the defendant Beall had assented to this subsequent arrangement, or had had notice thereof, or in any way become a party thereto. The manda-tors, G-eisse & Sons, of the last trust, retained an interest in the estate in the hands of the mandatary of the first trust, Beall, and in its application to the purposes of the new trust created by them, nor could the trust in their favor created by the assignment, become extinguished, until the estate should be applied according to the terms of the assignment; or in satisfaction of the trusts created by the subsequent arrange, ment of the creditors. (See Story's Eq. Jur. § 1044 to 1047.) The- duties and obligations of the trustee, are created by the assignment, and they can neither be enlarged, diminished, or varied, by any arrangement between the cestuis que trust, without his consent. In any aspect of the case, we do not perceive that the relations of the defendant Beall to the creditors or any of them, are in the least affected by the con — 389 — tract between VVm. Geisse & Sons and theother creditors. Nor are we able to perceive, that the duties or obligations of the trustee are removed by the agreement of the creditors for the appointment of another trustee. He held his appointment under the assignment, and the creditors, by assenting to the assign-medt, ratified his appointment, and they could not remove him and substitute another trustee without his consent, or the intervention of a court of equity. The appointment of Charles Geisse, therefore, as the common trustee of all the creditors, to receive and distribute the funds under their agreement of the 29th June, 1850, by no means released Beallfrom his obligations as trustee. Nor was it necessary that Charles Geisse should become complainant to enforce the trust committed to him. He might decline to act at all, and there is no evidence of his acceptance of the trust. The duty of the defendant to account to the cesiuis que trust named in the assignment must therefore.remain the same, for the trusts declared followed the property by him received and attached to it, or the proceeds thereof. And in the event of his removal, the trust could not fall, for it is a maxim in equity, that “ a court of equity never wants a trustee.” Without pursuing this branch of the subject further, we think the complainants have made a case, which entitled them to an account from the trustee. This, though specifically required, he has utterly failed to do. He has neither stated an account himself nor exhibited facts which would enable the complainants to state one. He has wholly neglected to answer the bill in this particular, or to render any excuse for not doing so. Yet he admits his character — 390 — as fo'ustee> and his having receiyed the trustee estate For the purpose of accomplishing the object for which ^rug^ was created, we think the bill ought to paye peen retained. The next question presented is, whether from the bill, answer and proofs, a court of equity ought to interpose its authority for the removal of the trustee. It is not necessary to cite authorities here in support of the power of a court of equity to remove a trustee, when the safety of the fund, or the due execution of the trust shall require it. The cases cited by counsel and others, leave no room for doubt. We do not deem it necessary, either, to recapitulate the evidence in this case ; for it seems to us apparent, as well from the relations of the parties, as from the conduct of the defendant, that to ensure the due execution of the trust, a change in its administration is indispensable, and the facts in the case render the exercise of this power of the court an imperative duty. It remains only to consider the equities of the defendants Wilson and Slauson. The defendants set up in their answer that the assignment was made to hinder, delay and defraud the creditors of Charles Geisse, and for that reason void, and also is void on account of the fraudulent admission of a debt as due to Wm. Geisse & Sons. We are not aware of any proof offered to sustain these allegations contained in the answer, but there is proof tending to show the genuineness of the indebtedness referred to. Unless, therefore, the assignment is void for reasons appearing on its face, the defence cannot stand upon these grounds. But we do not deem it necessary to decide whether this assignment comes within the rule laid down in — 391 — Hutchinson us. Lord, 1 Wis. 286. The creditor must either treat the assignment in such cases as altogether valid or altogether void. He cannot hold it void in part and good in part. He cannot recognize and act npon it as valid, and afterwards repudiate it and treat it as void. The execution of the instrument of the 29th of June, 1850, on the part of Wilson & Slauson, is sufficiently proved. We are not informed as to the objections made to the testimony. We have examined the papers carefully, but have been unable to discover any objections taken to the interrogatories filed, or to the answers, when the commission was executed, or upon the hearing in the court below, though it is quite probable that among papers so various and voluminous it may have been overlooked. But it is objected, that the testimony, if admitted, shows a case contradictory to that made by the bill, and hence shows the complainants out of court. We have already given our views in regard to the arrangement made between the creditors themselves, so far as the defendant Beall is concerned. Those remarks will, in a measure, apply to the case of the defendants, Wilson <fe Slauson. It did not change the relations of any of the creditors with the trustee. It affected only the distribution of the estate, and might very properly be set up by the creditors defendant for that purpose. But, as it seems to us, it could have this effect; and no more. Again, it is contena ed, that the instrument of the 29th of June is inoperative, as no delivery thereof to Charles Greisse is proved.' But we do not think such proof necessary. This arrangement was among the creditors only. Charles might accept the trust or he — 392 — aot. he should refuse, and a trust fund should become apparent to be affected by the agree-men^ the trust would not be permitted to fall for want 0f a trustee. The instrument of the 29th of June, on the part of the creditors, and of the 23d July on the part of Wm. Geisse & Sons, must be regarded as one contract. The execution of the one on the part of Wilson & Slauson, and its possession and production by the complainants, we regard as prima facie evidence of delivery. We also regard it as a recognition of the validity of the assignment by Charles Geisse, and that Wilson & Slauson are thereby estopped from now declaring that assignment to •be void. When they executed their deed of June 29th, 1850, they made apparent their option to hold the assignment valid, and by such option they must abide. Nor do we see any objection to the availability of this evidence on the part of the complainants, in the fact that Charles Geisse is made a party defendant, instead of being a party complainant. This bill is not filed to enforce the trust created by the last agreement among the creditors, but to procure an account and to save the trust estate, and to enforce the trusts created by the assignment of Charles Geisse to Beall ; and, unless the former shows the complainants Wm, Geisse & Sons, to be devoid of interest therein, it cannot be said to show them out of court. We have already attempted to show that they had a remaining* interest in the application of that trust estate, and hence were competent parties complainant. Charles Geisse was, indeed, a necessary party to the suit, not on account of his relations created by . the agreement of the creditors of the 29th of June, 1850, but on account of his — 393 — position and interest as the original assignor, or creator of the trusts, and trust estate. He might, perhaps, have joined as complainant; so might perhaps all the cestuis que trust. But it was not essential that all should so join. All who are interested in the object of a suit in equity, ought to be made parties to t he suit. But it is in general sufficient if they are brought before the court, either as complainants or defendants. Brown vs. Pratt, 2 Wis. 299, and authorities there cited. Nor does it follow, that because some are complainants and others defendants, their interests are necessarily antagonistic. In this suit, in many respects, the interests of Charles Greisse, and those of the cestms que trust, are harmonious, if not identical, and in some respects the interests of all the creditors are the same, though in others they may be different or adverse. All are alike interested in preserving the trust estate, in procuring an account, in discovering its character, quality, amount and value, and the disposition made of it, or its proceeds, &c. &c. And for thatreason, among others, it is necessary to make them all parties, but their interests are the same respectively, and relatively, whether they are complainants or defendants, for all being before the court, complete equity may be done. We dr not understand the object in the introduction of this proof to be, to set up a new and different right or title from that claimed by the bill, but merely to show that Wilson & Slauson had recognized the assignment of Charles Greisse as valid. For this purpose it was competent, as proving the acts and declarations of these defendants. What effect the last agreement may have in determining the respective right and equities of the cestuis que trust, perhaps in the — 394 — Pre0en^ S^age of the case, it is not necessary to inquire. Even if it never took effect by delivery, and even if Wilson &¡ Slauson were not thereby estopped from fa-eating the assignment void, we still think the court erred in dismissing the bill, and Wilson & Slauson are proper parties to itj although they may have proceeded at law for the collection of their debt. The other creditors have a right to know from them, the amount and Iona fides of their claim (W. & S. repudiating the assignment,) the amount and kind of the trust property which they may have caused to be ap propriated to its satisfaction, &c., &c. Therefore, we think as the case now stands, the bill ought not to have been dismissed, even as to these two defendants. Especially if the agreement of the 29th of June, 1850, was invalid for want of delivery, it is as invalid for one party as another, and one party ought not to be turned out ofcourt by its potency, while the other is . held absolved from its terms and requirements. It has not been our intention, at this time, even if the case were prepared for it, to attempt to adjudicate upon the respective rights of the cestvds que trust named in the assignment, any further than was absolutely necessary to dispose of the several questions raised on the appeal. These we have endeavored to discuss and decide, so as to indicate, in some degree, some necessary proceedings when the case shall have gone back. It has seemed to us highly important, that the court should exercise its authority in the preservation of this estate, and not allow the trusts to fall, for want of a trustee, responsible, competent, and willing to perform the duties thereby imposed. It is also clear that a full, minute and complete account should be rendered of all and — 395 — singular this estate, since the whole or any part of it came to the hands of the trustee defendant in this case. It is also apparent to us that this defendant is unwilling to abide by the legal rules which the law has prescribed for the’’ regulation of the conduct of trustees. It is evident that many principles of the law applicable to trusts and trustees have been violated. It is not necessary to specify them. A trustee is bound to account both to the mandator and the cestuis que trust, at all reasonable times, and particularly to state his account, or so to specify facts and details as to enable the complainants to state it, It is illegal for him to appropriate the trust property to his own use, although he may charge himself with the cost price thereof. He cannot become a purchaser at his own sales, public or private. He has no right to barter or traffic with the trust property. He has no right to use for his own benfit, the money arising from the sale of the estate, though he thinks himself, and though he actually be, solvent. He cannot become the judge of the value of his own services, and offset the money or goods appropriated from the estate against the same in gross without specification and detail, even where compensation is provided. His compensation must be awarded upon account rendered. These are familiar principles, so clearly addressed to the reason and conscience, that no one need to err in their application. All of these and more are suggested by the bill, answer and proof, and we think their faithful application requires of the court the removal of the defendant as trustee, and the holding him to a speedy, full and complete accounting in the premises, and to the paying over and relinquishment, under the direction of the court, of all and sin396 guiar the property, goods, monies, or effects, that have come to Ms hands as such trustee. "We &0 not perceive that it is necessary for us to jntimate any further, our views of this case. No account has been rendered, and the subject of distribution did not come up in the court below. When the court shall become possessed of assets, the case will assume new features. The decree of the Circuit Court must be reversed, and the cause remanded.