Equity Jurisdiction, To enforce trust for benefit of creditors. Trust. Equity Pleading and Practice, Parties, Motion to dismiss, Appeal, Waiver by answer and proceeding to hearing on merits.
In a suit in equity by a creditor against a corporation and one to whom it had conveyed the proceeds of a sale of all of its assets in trust to pay creditors, the essential facts alleged in the bill were found to be true and it was found that all the creditors of the corporation excepting two, one of whom was the plaintiff, had been paid from the fund and that a large percentage of the fund had been distributed to stockholders of the corporation. A decree ordering that the plaintiff be paid from the fund was entered and the defendant trustee appealed. Held, that
(1) No objection as to want of parties could be urged on the record in this court on the appeal;
(2) How far other beneficiaries of the fund should be made parties rested largely in sound judicial discretion;
(3) By answering and proceeding to trial on the merits, all right of the defendant to complain for want of equity or because there was a plain and complete remedy at law had been waived;
(4) The plaintiff, who was one of those for whose benefit the trust was established, had a right to avail himself of its advantages and institute proceedings to enforce its terms.
RUGG, C.J.
This is a suit in equity. Stated summarily, the allegations of the bill are that the plaintiff is a creditor of the corporate defendant, which sold all its personal property and caused the proceeds to be paid to the individual defendant on the trust to pay a portion thereof in specified amounts to its creditors; that the individual defendant has paid all such creditors except the plaintiff and one other, and that he holds a sum sufficient to pay the claim of the plaintiff in trust for it. The prayers of the bill are that the plaintiff's claim against the corporate defendant be established and that the individual defendant be decreed to hold a sum adequate to pay its claim as trustee for the plaintiff, and for general relief.
The defendants severally filed answers. More than six months thereafter the individual defendant filed a motion to dismiss the cause on the ground of want of proper parties. This was denied rightly. Such motion is not the proper way to take the objection that necessary parties have not been joined. Noyes v. Bragg, 220 Mass. 106, 110.
The case was heard by a judge of the Superior Court, who filed a statement of his findings. The facts thus found were that the directors, constituting practically all the stockholders, of the corporate defendant sold all its property and stock for $6,830, which sum was placed in the hands of the individual defendant in trust for the purpose of having him pay all the creditors of the corporate defendant and distribute the balance, after deducting $100 for his own services, among its stockholders. The total amount of bills due to such creditors was $1,592.87. All the creditors have been paid except the plaintiff and one other, whose total claims are $610.57. Manifestly considerable payments were made to the stockholders, but after all payments were made the individual defendant had a balance in his hands of $622.25. Under the terms of the trust deposit he had no right to distribute anything among stockholders until he had paid creditors, including the plaintiff, in full.
A decree was entered to the effect that the plaintiff is entitled to receive from the individual defendant the amount of its claim with interest and costs. His appeal brings the case here.
The evidence not being reported, the findings of fact must be accepted as final. The only question is whether the decree conforms to the allegations of the bill and rightly could have been entered on the facts found. First Baptist Society in Brookfield v. Dexter, 193 Mass. 187. Gordon v. Borans, 222 Mass. 166. Jacobs v. Anderson, 244 Mass. 125.
No objection can be urged successfully at this stage of the case, upon the facts shown, for want of parties. There were ample funds placed in the hands of the individual defendant to pay all the creditors of the corporate defendant. The bill might be treated as brought in behalf of all parties in interest. The court ordinarily takes pains to see that all parties interested in a trust fund are given an opportunity to be heard. But how far such persons should be made parties rests largely in sound judicial discretion. Smith v. Williams, 116 Mass. 510. Crowell v. Cape Cod Ship Canal Co. 164 Mass. 235. The case at bar is distinguishable from Gregory v. Merchants' National Bank, 171 Mass. 67, and similar decisions. By answering and proceeding to trial on the merits, all right to complain for want of equity or because there is a plain and complete remedy at law has been waived. Creely v. Bay State Brick Co. 103 Mass. 514. Driscoll v. Smith, 184 Mass. 221. Bauer v. International Waste Co. 201 Mass. 197, 201. Manifestly the Superior Court had jurisdiction of the cause of action. Maker v. Bouthier, 242 Mass. 20, 24.
The individual defendant, having received this money in trust, was bound to distribute it according to the terms of his fiduciary agreement. The plaintiff does not appear to have been a direct party to that trust or to have assented to its terms except by bringing the present suit. A trust may be created for the benefit of third persons without their knowledge or consent. One for whose benefit a trust is established may avail himself of its advantages by instituting proceedings to enforce its terms. Boston v. Turner, 201 Mass. 190, 194, 195, and cases there collected. Forbes v. Thorpe, 209 Mass. 570, 581, 582. It is not necessary to inquire whether some remedy at law might have been available to the plaintiff. Mellen v. Whipple, 1 Gray, 317, 322. Johnson v. Johnson, 120 Mass. 465. Chase v. Perley, 148 Mass. 289, 294. It cannot now be urged that such remedy was exclusive upon the facts here disclosed.
The facts found plainly show that the individual defendant has money in his hands which he ought to apply in payment of the plaintiff's claim.
Decree affirmed with costs.