Howe v. Handley

25 Me. 116

Opinion

The opinion of a majority of the Court, Whitman C. J. dissenting, was drawn up by

Siiepley J.

The defendants were the trustees in a deed of assignment made by the plaintiff as an insolvent debtor for the benefit of his creditors. They assumed and had partly executed the trust, when the property not disposed of, was reconveyed to the plaintiff by an agreement between him and those of his creditors, who had become parties to the assignment. This suit is against both the trustees to recover damages for an alleged neglect and refusal to collect and pay certain demands assigned to them. One of the defendants is known to be an attorney, part of whose regular business it is to collect debts for others. The other is not an attorney. Trustees are often designedly selected from men engaged in different kinds of business, that the knowledge and skill of each in his own business may be made useful in the execution of the trust. In such cases it is usually well understood by all parties, without any express agreement to that effect, that each trustee will attend only to that part of the business, to which he has been accustomed. An attorney would not in such cases be expected to be active in making arrangements for the disposition of merchandize and lumber. Nor would a person accustomed to such business be expected to attend to the collection of debts, when one of the trustees was an attorney. It could not in such cases be expected, that one trustee should be responsible for the diligent attention of another to that part of the business, of which he had little or no know-ledge, and of whose faithful attention to his business he would be very illy qualified to judge. The law does not therefore ordinarily hold trustees responsible for the conduct of each other in the management of the trust property. They are separately and not jointly liable for any default or unfaithfulness ; unless they have expressly agreed to be jointly liable, or have performed some act jointly, or have in some mode given countenance to, or aided another in, the alleged default.

In the case of Churchill v. Hopson, 1 Salk. 318, Lord Chancellor Harcourt stated the “ rule of law to be, “ if two trustees join in a receipt, and one receives the money, he only, that receives shall be liable.” Such was stated to be the law in the case of Fellows v. Mitchell, 1 P. Wms. 81. And such appears to be the settled doctrine without further variation, than to hold the receipt to be prima facie evidence of a receipt of the money by both, subject to be rebutted by proof, that it was received by one. Monell v. Monell, 5 Johns. Ch. R. 283. In the case of Leigh v. Barry, 3 Atk. 584, such was stated to be the law, when there were no negative words in the deed creating the trust. The provisions of the deed of assignment are not stated in the report of the case of Ward v. Lewis, 4 Pick. 518, but it was there stated as a general "proposition, that “ trustees are liable only for the money, which they have actually receivedand the trustee, who had not received any of the property, was not charged. In the case of Worth v. McAden, 1 Devereux & Battle’s Eq. 199, it appears to have been held, that á trustee was chargeable with money, which ought to have come to his own hands, or which passed through them, or which had been wasted or misapplied by his co-trustee with his concurrence. But a mere neglect to withdraw money from the hands of a co-trustee was not considered to be such a concurrence as to make him chargeable.

In deeds of assignment inter partes, each party, often including more than one person, usually enters into the same covenants. To prevent such joint covenants from having the effect to impose upon the trustees a liability more extensive than the law would impose, and greater, than the parties intended, the best forms of such deeds of trust contain some clause, substantially like the one found in this deed, to declare, that their liability shall continue to be several and not joint. And such clause is often used to limit their liability more strictly, than it would be by law. Hence such a clause is found in this deed. And it should receive a construction which will effectuate the design of its introduction. It is not perceived, that full effect can be given to all the words contained in the clause without limiting the liability of the trustees to an individual and sole liability. The clause is in these words. “ It being expressly declared and agreed, that they, the said party of the second part, or other the trustee or trustees, under this indenture, shall be answerable only for their individual receipts, payments, and wilful defaults, and not otherwise; and that they shall receive a reasonable compensation for their services.” This language plainly states, that they shall not be otherwise answerable, than for their individual receipts, payments, and wilful defaults. The argument, that they are solely liable for these, and that they remain jointly liable for their joint receipts and payments, and for other neglects and defaults, than those denominated wilful, is attended with this difficulty; that it wholly overlooks and disregards the words, “ and not otherwise.” The effect of which words is to declare, that they shall not be answerable otherwise, that is, in any other manner, than individually, for their receipts, payments, and wilful defaults. Such a construction, as is insisted upon, cannot be made without a violation of the rule of law, which requires, that full effect should be given to all the language of a deed, if it be possible; or without a departure from the plain and obvious meaning of the language by some forced construction. There is no occasion for any other than a literal construction for the purpose of securing to the plaintiff all his just rights. If there have been joint receipts of money, which is not alleged, both the trustees cannot have the custody of it, and each may be held accountable for that portion of it, which he has. And each may also be separately answerable for that held by the other, if he have in any manner countenanced any improper detention or misapplication of it; for he would then be guilty of a wilful default. It might be difficult, in certain cases, to procure and introduce testimony in an action at law to prove, that a particular trustee had received the money. If so, the objection does not reach the rights of the parties. It applies only to one remedy; and that one is by no means the most appropriate. For it would seem to be more suitable to call upon the trustees to account for the property by a bill in equity, so that they might have an opportunity to state the manner, in which they had managed it. In such a mode of seeking redress, there would be found little difficulty in ascertaining all the facts in relation to the receipt of money. It would be attended by this advantage, that all the trustees could be called upon by one suit, and yet each be made separately liable for his own proceedings. In case of improper payments made by them jointly, the default must, in the sense of the law, be wilful; and each would be liable separately. If it were the pleasure of the parties to make the trustees liable only for their “ wilful defaults,” and not for other and less culpable omissions and neglects of duty; the Court can have no just right by a strained construction to make them otherwise liable. It is not unreasonable, that trustees who undertake the performance of such trusts, should insist upon being liable only, for what are denominated wilful defaults. Prudent men, who are diligent and attentive to their own business, may at times allow those of their debts, which are not payable at any particular time, to remain so long uncollected, that they would, after their debtors have become less able to pay, charge themselves with neglect. For such neglect a trustee, who is not expected to neglect his own business by devoting his whole time to the execution of a trust, may properly refuse to be made liable. He would be but claiming the same protection by a stipulation in the deed, which Lord Hardwicke, in the case of Knight v. the Earl of Plymouth, 3 Atk. 480, said, the law would afford him without it. He is reported to have said in that case, “ if there was no mala fides, nothing wilful in the conduct of the trustee, the Court will always favor him.” And in case of mala fides, or gross neglect, the trustee would be liable as for a wilful default. Mr. Maddock, in bis treatise on the principles and practice of the Court of Chancery, says, “ a trustee is only answerable for fraud or gross neglect, which is equal to fraud.” 2 Mad. 121. In the case of Pybus v. Smith, 1 Ves. Jr. 193, Lord Chancellor Thurlow said, “You cannot affect the trustees with more, than they actually received without wilful default.” Mr. Justice Story, after an examination, says, the result would seem to be, “ that where a trustee has acted in good faith in the exercise of a fair discretion and in the same manner, as he would ordinarily do in regard to his own property, he ought not to be responsible for any losses accruing in the management of the trust property.” 2 Story’s Eq. § 1272. And that he would seem to be “ bound only to good faith and reasonable diligence, and, as in case of a gratuitous bailee, liable only for gross negligence.” ib. <§> 1268. By the insertion of a provision for their reasonable compensation, it could not have been intended to increase their liability, or to change the law in relation to it; especially when the same clause appears rather designed to restrict it.

Whatever may be the true construction of the deed of assignment in this case, the trustees, according to the authorities, can be liable in this action only for such an omission to collect the debts claimed, as would amount to culpable negligence ; and such negligence would in law be considered a wilful default. Shepherd v. Towgood, 1 Tur. & Russ. 379. In that case the defendants were trustees under a deed of assignment, made by insolvent debtors for the benefit, of their creditors. One of the assignors, by a marriage settlement, was entitled to the interest accruing on a certain sum of money during his life. The trustees had omitted to collect it, for a long time. The bill, among other alleged defaults, charged this to be gross negligence and a breach of trust. The answer of one of the trustees stated, that the trustee under the marriage settlement, from whom the interest should have been collected, had deceased, that there had been negotiations with her executors respecting it; other excuses were offered for the omission, and it was stated, that a suit had finally been commenced to recover it, but it admitted, that it had not been collected. The trustees were held to account further, but were made liable only for losses occasioned by their wilful neglect or default. The decree stated, that the creditors were entitled to a further account of the effects of the assignors, “ which, without the wilful neglect or default of the said John Tow-good and John Ingram, or either of them, might have been received or possessed by them or either of them.” A master was appointed to take the account with instructions “ not to take over again or disturb any account, which has been already taken by him, farther or otherwise, than may be necessary to let in any charges of wilful neglect or default, which the plaintiffs in this cause may be able to substantiate.” It does not appear from the report of that case, that the liability of the trustees was regulated by any provision in the trust deed.

If the trustees in this case are liable for neglecting and refusing to collect and pay the debts, as alleged in the declaration, they are only liable to be called upon separately in an action at law, and as for a wilful default; and the nonsuit should be confirmed.