Reynolds v. Bank of Va.
Reynolds v. Bank of Va.
Opinion of the Court
The first question which I shall consider in this case, is, whether the Circuit court erred in overruling the appellant’s demurrer to the bill of the complainants.
The bill was filed by the appellees, in behalf of themselves, and numerous other creditors secured by the deed of trust executed by the appellant, to obtain relief in consequence of the refusal to act of the trus
It is a rule of equity that a trust shall never fail for want of a trustee, and therefore if the trustee dies, or refuses to accept the trust, or is incapable of performing it, a Court of equity will give to the cestuis que trust the proper relief, either by executing the trust or appointing a trustee for that purpose. The substantial object of such a suit is to obtain the performance of the trust, and the mode of accomplishing it is a proper matter for the sound discretion of the Court. In a case like the present, where the conveyance is an incumbrance for the security of creditors, with power to the trustee to sell the property conveyed and apply the proceeds to the discharge of the debts, and the cestuis que trust sue in equity for relief, the usual course of the Court is to treat the security as it would a mortgage, and cause a sale to be made of the trust property by a commissioner appointed for the purpose, and acting under its direction and control; and to dispose of the proceeds by its decree according to the rights of the parties. And it would be difficult to conceive a case of the kind where the cestui que trust comes before the Court with proper parties to his bill, in which it would be error to proceed in that mode, instead of merely appointing a trustee, and dismissing the subject to his individual judgment and discretion.
It is true that in this case the specific relief prayed for in the bill, is the appointment of trustees in place of those named in the trust deed, but who have refused to accept the trust. But the bill concludes with a general prayer for such other and further relief in the premises as to the Court may seem meet and proper, and equity and good conscience require. Now, the general rule is, that though the plaintiff may not be entitled to the
Whether the Court decided correctly at the hearing, in merely appointing trustees and clothing them with all the powers and duties conferred by the trust deed upon the trustees therein named, or ought to have directed the proper steps in order to the execution of the trust under the instructions and control of the Court, is therefore a question that does not arise upon the demurrer, which was properly overruled, unless it appears from the bill that the plaintiffs have failed to make the proper parties thereto.
In regard to the necessary parties to a suit in equity, it is impracticable to lay down any rule free from qualifications and exceptions. The best general rule, perhaps, to be deduced from the numerous authorities is, that all persons having material interests in the subject, which are to be affected by the object of the suit, must be made parties to the bill, either as plaintiffs or defendants. But there are various classes of cases to which the application of the rule would be attended with such delay, inconvenience and expense, as would be found intolerable in the administration of justice. Amongst these are suits brought by creditors against the representative of a deceased debtor, for an account of the assets of his estate, and the application thereof to the
I think, therefore, that although the bill would have been demurrable if the plaintiffs had sued for themselves alone, not having made the other creditors parties to the bill, yet that inasmuch as they sued for the benefit of all, and it was competent for the Court to make the rest substantial parties, by the proper proceedings in such cases before a master, that the demurrer was properly overruled.
It is urged, however, on the part of the appellant, that the Court, on overruling his demurrer, ought to have directed him to answer the bill. This would have
The effect of this act of 1826, was to dispense with the decree nisi, which was nothing more than the taking of the bill for confessed in Court or at the rules, with a declaration that the Court would proceed at a fu
In this case the defendant being in default, the law attached to his pleading, demurring, or answering, the condition that his doing so should not delay the cause ; and this condition was expressed in the order of the Court receiving his demurrer. If the defendant had answered instead of demurring, the plaintiff would have been entitled to a trial without delay, and equally so though a demurrer was filed instead of an answer. The overruling of the demurrer placed him in no better condition than he was before : he had still a right to answer, but subject to the same condition. If the mere filing of a demurrer is to entitle a defendant, in default, to the allowance of two months to answer, it will enable him in every case, without any reason whatever, to obtain a continuance beyond the term; which is directly in the teeth of the plain words of the statute, and against its true spirit and meaning.
The case of Sutton v. Gatewood and wife, 6 Munf. 398, cited for the appellant, was decided under the old law, which the act of 1826 was designed to reform. There the decree nisi was set aside ; and leave granted to demur, without any condition imposed, either by law
The case of Bassett's adm'r v. Cunningham’s adm'r, 7 Leigh 402, also cited for the appellant, occurred since the act of 1826; but the question we are considering did not arise at all; the only question of practice being, whether in Virginia a defendant in chancery may, at the same time, answer and demur to the same matter in the bill. Some of the Judges, in discussing that question, refer incidentally to the provision in 1 Rev. Code, ch. 66, § 100, p. 211, already noticed, that upon a demurrer overruled, the defendant shall answer within two months after. And such is the law now, where the defendant is not in default when he files his demurrer; but the question here is, whether a defendant in default is by filing a demurrer to the bill entitled to a continuance, and to that question the minds of the Judges were, in the case cited, in no wise directed.
It only remains for me to consider whether the decree rendered by the Circuit court is in itself erroneous.
I have already intimated that if the plaintiffs had sued for themselves alone, it would have been a matter for the sound discretion of the Court, whether it would merely appoint trustees to carry out the provisions of the deed according to their own views and judgment, or would take the proper steps to have the trust executed under the direction and control of the Court. But upon that question, in that frame of the case, the other creditors secured by the deed would have had a right to be heard, for they were materially interested both in the subject and the object of the suit. And
It cannot be doubted that if the plaintiffs had, upon the case stated in their bill, specifically prayed for the proper proceedings before a master, and a sale of the trust property, and a disposition of the proceeds according to the rights of those concerned, it would have been competent for the Court to have directed such proceedings, and to have granted such relief. And I have shewn that the omission of such a specific prayer was immaterial, because, in the first place, such a course and mode of relief would have been proper under the general prayer of the bill, and in the next place, would have been in truth nothing more than a conditional or qualified grant of the specific relief actually prayed in the bill.
On the other hand, I think it clear that the plaintiffs having sued in behalf of the other creditors named in the deed, as well as themselves, it was neither necessary nor proper to make them defendants to the bill, the appropriate mode of bringing them before the Court being by the usual proceedings before a master, and the relief consequent thereupon being the adjustment of the rights and priorities of the several creditors, and the sale of the trust property and the application of its proceeds under the direction and control of the Court. Nor was it competent for the Court in a case so sued to adopt any other mode of proceeding or relief. It would
I think, therefore, that in this suit, brought by the plaintiffs in behalf of themselves and the other creditors secured by the trust deed, the Court ought to have adopted the usual proceedings before a master, with a view to the execution of the trust under its own direction and control; and that it was not competent for the Court merely to appoint trustees to carry out the provisions of the trust. There is no reason for saying that such proceedings and relief would have been improper, and in the actual state of the case it had no discretion on the subject. But suppose it had, then I think its discretion was improperly exercised.
The case made by the bill, (which was taken for confessed,) and the exhibit therewith, was that of a conveyance by a debtor to trustees of property, real and personal, to secure debts to a large amount, to numerous creditors, all of whom, with two exceptions, had recovered judgments. By the provisions of the deed, time was allowed the grantor, who covenanted to pay the moneys secured, in instalments of one, two, three and four years. The creditors, including those by judgments, were divided into three classes, and priority of satisfaction was to be made according to those classes. The deed was executed by no one besides the grantor and his wife, and she was not privily examined. The bill alleges that the trustees named refused to undertake the trust, but does not aver that it was accepted by the creditors intended to be secured ; and the only parties to the bill are the plaintiffs, the grantor and his wife, the trustees named in the deed, and two persons,
Now, for aught that appears, some of the creditors may be unwilling to accept the provisions of the deed, and choose to stand upon their judgments, or other legal priorities ; nor can it be ascertained without adjustment of the demands of the numerous creditors, what payments may have been made on account of their debts, nor of course what will be the aggregate amount chargeable upon the trust fund. Nor, in the present state of the cause, can it be known that the terms of notice and sale prescribed by the deed, may not require alteration, in order to prevent a sacrifice of the property. And though parties concurring in such a deed may have been willing to confide the performance of the trust to the trustees originally selected for the purpose, yet when the aid of a Court of equity is invoked in such cases, it ought to be extended in such wise as will best promote the purposes of justice, settle the rights of the parties, and prevent future litigation. It is true the substituted trustees are directed by the decree, in the event of a sale of the trust property, to report their proceedings to the Court, which seems to
I think that the decree ought to be reversed, and the cause remanded to the Circuit court, with directions to proceed therein according to the principles above indicated ; and to allow the appellant, at any time before a final decree, to answer the bill of the plaintiffs, if he shall offer to do so, but without delaying the case, unless for good cause shewn.
The other Judges concurred in Judge Baldwin’s opinion.
The decree was as follows:
The Court is of opinion, that the Circuit court did not err in overruling the demurrer of the appellant to the bill of the complainants, nor in proceeding to hear the cause, without further delay, upon the bill taken for confessed and the exhibits therewith: but that it did err in the relief granted by its decree; instead of directing the usual proceedings before a commissioner, after notice duly published, with the view of ascertaining and adjusting the rights and priorities of the creditors named in the trust deed, and the balances due to them respectively, in order to the execution of the trust under the direction and control of the Court, by the sale of the trust subject, on a reasonable credit, and the application of its proceeds, according to the rights and interests of those concerned. It is therefore decreed and ordered, that the decree of the Circuit court be reversed and annulled, with costs to the appellant: and the cause is remanded to the Circuit court for further proceedings as above indicated, with permission to the appellant to answer the bill, if he shall offer to do so
Case-law data current through December 31, 2025. Source: CourtListener bulk data.