Hale v. Dressen

BUCK, J. The questions raised in this case came to this court upon demurrer to the complaint, which it is claimed does not state facts sufficient to constitute a cause of action. It appears from the complaint that certain funds and property were conveyed to tw7o trustees by a deed of trust, to manage the property and to invest and reinvest the funds, in their discretion, for the benefit of the cestuis que trustent. The deed of trust provided for the appointment of a successor to either trustee in case of the death or resignation of either. One of the trustees died, and no successor was appointed. The surviving trustee, William EL Rollins, invested $1,800 of the trust fund in a note and mortgage made by the defendant Dressen, taken in the name of William H. Rollins, trustee for the estate of Alfred W. Haven. The' defendant company, before the delivery of said note, for value duly guarantied the payment thereof in writing on the back of said note. Subsequently, and before the maturity of the note or default in the payment of interest, and while Rollins was the only trustee, he, without consideration, gave the defendant company a writing under seal, purporting to release it from its guaranty. Haven did not authorize the release, or know of it until shortly before the bringing of this action to set it aside and enforce the guaranty. The trial court overruled the demurrer as to the defendant Dressen, and sustained it as to the David C. Bell Investment Company. The plaintiffs appeal from that part of the order sustaining the demurrer. The appellants contend that the release does not release the defendant company from its liability as guarantor, because (1) the [280] trustee Rollins had no power to bind the estate without the joint action of the co-trustee; and (2) because there was no consideration paid by the investment company for such release, and that it was not relieved from its liability to the trust estate. We do not think it necessary to pass upon the first proposition, as the case must be reversed upon the erroneous ruling of the trial court upon the second proposition. It is admitted that the investment company, for a valuable consideration, guarantied the prompt payment of the interest due upon said note, according to the terms thereof, and payment of the principal of said note within two years after its maturity. It is also admitted by the demurrer that the investment company paid no consideration for the release. There is no explanation why this release was so executed by Rollins and the investment company. Each signed this written release, and it recites the fact that Rollins was acting as trustee. It must therefore be deemed to have full knowledge of the capacity in which Rollins was acting, and to have knowingly participated in the fraud by which it was sought to deprive the Haven estate of the right to enforce this valuable guaranty. This trustee — and in this respect it would make no difference if two trustees had been acting — had no power to give up and surrender a valuable right without an equivalent benefit accruing to the estate. The guaranty was impressed with an express trust, and exists for the benefit of the Haven estate, and the trustee could not 'destroy or release it, as in doing so he would not in any manner be acting in line with, or in the execution of, or carrying into effect, the terms of the trust. The act was not one of mistake, but an intentional violation of Rollins’ duty as a trustee, and, as the investment company was a party to the fraudulent transaction, the estate or guaranty must he regarded as still held in trust as against the investment company; and these plaintiffs, who are the duly appointed and acting trustees of said estate, have the lawful right to follow said guaranty as a living and legally existing obligation against said company, and to fasten the trust upon it. See Third Nat. Bank v. Stillwater Gas Co., 36 Minn. 75, 30 N. W. 440. The respondent seeks to evade this rule of law by invoking the doctrine of the common law that the release was under seal, and [281] that such seal imports a consideration. A trustee, without power or authority to act, cannot join with a guarantor with notice, and render the written guaranty invalid, by merely attaching a seal to their joint agreement. Such a rule might enable the trustee to deplete the trust estate. The respondent says: “Counsel say they did not get the dollar, but we invoke again the doctrine that the court conclusively presumes that they did get it, or some better consideration, and the allegation that the consideration was not paid is of no consequence, in view of the fact that the instrument which was made was under seal.” But this is an equitable action, and “equity, disregarding such form and looking at the reality, always requires an actual consideration, and permits the want of it to be shown, notwithstanding the seal, and applies this doctrine to covenants, settlements and ex-ecutory agreements of every description.” 1 Pomeroy, Eq. Jur. § 383. The respondent cites McMillan v. Ames, 33 Minn. 257, 22 N. W. 612, in support of his contention, but that was an action at law for breach of contract, where the plaintiff sought to recover damages for such breach, and the instrument sued upon was sealed by the -defendant himself, and it was there said, at page 260, that “Except for fraud or illegality, the consideration implied from the seal cannot be impeached for the purpose of invalidating the instrument.” But the facts in this case show a fraudulent and illegal transaction on the part of Rollins and the investment company. If at • common law the seal imports unimpeachable'consideration, it is in cases where the seal is itself legally affixed in the first instance, not in cases of forgery, or without any lawful authority or fraudulently. The legal effect of a party voluntarily affixing a seal to an instrument may sometimes be binding upon him as to the consideration, but this is not such a case. It was affixed without authority, and intended by both parties to operate as a fraud against the Haven •estate. Signing the instrument was equally as fraudulent as affixing the seal. There was no apparent authority for this act of seal [282] ing or signing the release. Both were the offspring of an intentional wrong, participated in by both parties, and, as affixing the seal was invalid, so was the signing and delivery of the release. Order reversed.