Commissioners of the Sinking Fund v. Walker

Mr. Chief Justice Sharkey stated the case, and delivered the opinion of the court. I shall not stop to inquire into the correctness of the decision on the pleadings, because those questions are wholly immaterial. Both the plea of nul tiel corporation and of tender, were bad, because the plaintiffs do not profess to sue as a corporation, and a tender of state warrants was no tender at all. Much of the argument on both sides has been directed to the question of whether the plaintiffs were or were not a corporate body, but this is also foreign to the purpose, since the plaintiffs have not sued as a corporation, either quasi or proper; nor was it necessary that they should so have sued. Their character is that of trustees, and in that capacity I shall endeavor to show that they may maintain the action. The proof of this proposition involves four questions:— 1. Has the state the power by legislative enactment to appoint trustees? 2. Were the plaintiffs competent to act in that capacity? 3. Was a trust created by the act originating the sinking fund? ’ 4. Gan the trustees sue at law on a contract made by them in the discharge of their legitimate functions? First. That the state by legislative enactment may, either directly or through agents properly appointed, convey in trust and appoint trustees, is a proposition which at this day surely requires neither argument nor authority to support it. It may hold property real and personal, and convey or dispose of it either absolutely or conditionally; or it may direct its application either directly or through agents to any particular object, public or private, either in presentí or in futuro. Instances are frequent, both in England and America, in which trusts are created by legislative enactment, both for public and private purposes; hence law writers divide trusts into public and private. Trusts so declared may in all respects correspond to those between individuals, and of course the same remedies will apply. [185] Second. Were the plaintiffs competent to act as trustees in this instance? This position is as free from doubt as the preceding. Before the statute of uses, 27 Hen. VIH.- c. 10, there was a limitation or restriction as to those who could stand seized to uses; but since the passage of that statute, trusts have been adopted to supply the place of uses, and the former inability to stand seized to a use, no longer prevails. The general rule now. is, that all persons capable of confidence, and of holding real or ■ personal property, may hold as trustees. ' Corporations may' now hold as trustees, although they could not be seized to a use before the statute.. Willis on Trustees, 32, 33-8, Law Lib. Two of these trustees are officers of a corporation, and as free from objection as the entire body corporate, and if the corporation was capable of holding as trustee, surely -two of its officers may. The trust was not confided to the president and cashier as a part of their official duty, but it was so declared for the purpose, of identifying the persons who should execute the trust; and no reason can be perceived why the state might not with equal propriety appoint one of its officers as trustee. To all these officers succession was an incident, and to ‘the persons who should .fill them for the time being the execution of the trust was confided,1 with' a view to insure the execution, as it was not likely that any thing more than a temporary vacancy would occur. It was a trust confided to persons who should fill certain 'offices, not as officers, but as individuals, and as it was contemplated that the offices should be always filled, it was the more certain that the trust would be executed. Third: Was - a trust created by the act which orignated the sinking fund? A trust is said to be “an obligation upon a person arising out. of a confidence reposed in him, to apply property faithfully and according to such confidence.” Willis on Trustees, 2. To constitute a direct trust, there must be a'conveyance or transfer to a person capable of holding it: there must also be an object or fund transferred, and a cestui que trust or purpose to which the trust fund is to be applied. No particular words, are necessary to constitute a trust; but if it be the plain intention of the parties to create a trust, it will be regarded as such. By the 10th sec. of the act chartering the Planters’ bank, provision was made for the creation and management of the sinking fund. The state was [186] to execute bonds, and sell them, and apply the proceeds to the purchase of stock. It was evidently anticipated that the dividends to be declared to the stockholders would more than suffice to pay the accruing semi-annual interest on the bonds; it was therefore declared that the surplus of the semi-annual dividends, after paying the interest on the bonds, should “constitute a sinking fund under the management of the auditor, and the president and cashier of said bank, for the redemption of said bonds.” It was further provided, “that until the payment of the bonds which should first become due, amounting to two hundred and fifty thousand dollars, no part of said surplus should be applied to any other purpose than the extinguishment of the principal of said bonds.” By a subsequent act of the legislature, provision was made for the execution and sale of other bonds, the proceeds of which were to be applied to the purchase of an additional amount of stock, and any surplus that might remain after paying for the stock was to be paid over to the commissioners of the sinking fund, and become a part thereof. Here there was a particular fund placed under the management of the plaintiffs, by an act of the legislature, for a particular purpose. It was by them to be managed, not merely kept; and it was so placed upon a confidence that it would be properly managed for the benefit of the state. If it was to be kept only, why not select the vaults of the bank as a safe depository. It is evident, when we look at the object which the legislature had in view, that the design was to make this fund profitable; hence it was placed under the “management” of the plaintiffs. The power to manage implies the power to control. It allows the exercise of a discretion. It could not be managed without the power to do so, and by requiring the one, the other was conferred. To manage money is to employ or invest it. It requires no other-management. The word manage, when applied to money placed in the hands of another, is a word of trust and confidence. The plaintiffs had the legal custody of this fund,'and they were required to manage it for the purpose of subserving a particular end; but it was not to be diverted from that end; and under this limitation, it could be managed in no other way than by loaning. The bonds would not become due for many years, and it was policy to make this fund profitable in the mean time. We can not doubt, from [187] the language employed by the legislature, and the object they had in view, but that it was the intention that this fund should be loaned. There was an obligation on the plaintiffs then, arising out of a confidence reposed in them, to manage and apply the sinking fund faithfully and according to such confidence. There was a legal conveyance of the sinking fund, to persons capable of holding it, for the use and benefit of the state in the extinguishment of a certain debt; hence we conclude that there was a trust created by the act incorporating the Planters’ bank, and that the plaintiffs as trustees were acting strictly within their power in loaning the money. It is said to be the duty of a trustee to invest trust money on good security, although no special power be given for that purpose; Willis on Trustees, 126. The power of the trustee is commensurate with the purposes of the trust, and he may always exercise such power as a prudent man would in his own affairs, keeping in view the purposes of the trust: ib. 127; 1 Saunders on Uses and Trusts, 364. That the plaintiffs did not transcend their authority is shown by the acquiescense of the legislature. They were informed by the auditor’s report, perhaps more than once, that the sinking fund had been loaned at interest, and the act received at least their implied assent and approbation. Indeed, after they were so informed, a further sum was raised and "attached to the sinking fund to be disposed of in the same way. Fourth: Can the trustees sue at law on a contract made by them in the discharge of their legitimate powers? It is admitted that the plaintiffs are not without a remedy, but it is also said that they have not adopted the appropriate one. Now supposing them to be trustees, and that the defendants have come legally into possession of a part of the trust fund with a knowledge- of the trust, this in many cases would make the defendants trustees also; but this rule cannot apply when such possession is acquired in the course of a due and proper execution-of the trust; for instance, if a trustee be authorized to sell, the purchaser holds free from the trust. The remedy then must be at law. In the case of Newman v. Montgomery, 5 Howard, 742, it was decided by this court, that a trustee could maintain an action of detenue for a slave held in trust, even against his cestui que trust. The trustee is regarded as the legal owner, and having the possession of real estate, or the [188] constructive possession of personal property, he may maintain an action of trespass, and he may sue at law to recover a debt for the use of the party beneficially interested. Indeed, the rule seems to be general, that the remedy at law is with him in all cases concerning the trust property or fund. Willis on Trustees, 2Q6; Saunders on Uses and Trusts, 341, 363. This, it seems from the face of the note, was a contract made with the trustees for a loan of part of the trust fund, and it is surely competent for them to recover it back, and the court below therefore erred in ruling out the note. The plaintiffs have properly declared as commissioners of the sinking fund, for the plain reason that the trust was not conferred on them by name; it was vested in the individuals who should fill certain offices; it was therefore necessary that they should aver themselves to be the incumbents of these offices, in order to entitle them to the action. This they have done, and it is admitted by the pleading. The judgment must be reversed, and a venire de novo awarded-