Opinion ID: 364881
Heading Depth: 1
Heading Rank: 1

Heading: Appellants' Authority to Maintain the Action

Text: 9 The district court granted summary judgment for Holiday on the basis that under the trust, appellants lacked the necessary authority to maintain the action. In order to determine the correctness of this ruling, we must first examine the characteristics of a nominee trust in Massachusetts. 10 A nominee trust is an entity created for the purpose of holding legal title to property with the trustees having only perfunctory duties; upon termination of the trust, the beneficiaries accede to title as tenants in common in proportion to their beneficial interests. R. Birnhaum and J. Monahan, The Nominee Trust in Massachusetts Real Estate Practice, 60 Mass.L.Q. 364 (Winter 1976). 11 The declaration of trust provided that (e)xcept as herein provided in case of the termination of this trust, the Trustee shall have no power to deal in or with the trust estate except as directed by all of the beneficiaries. It further stated that (a)ny three Trustees may exercise the power of all Trustees hereunder. Where a trust instrument requires a specified number of trustees, a lesser number cannot act validly on behalf of the trust. Loughery v. Bright, 267 Mass. 584, 588-89, 166 N.E. 744, 746 (1929); Downey Co. v. Whistler, 284 Mass. 461, 465, 188 N.E. 243, 244 (1933); Restatement (Second) of Trusts § 194. It is undisputed that the instant action was authorized neither by all of the beneficiaries nor by three of the trustees. 12 Appellants argue that this limitation does not apply because Holiday's alleged breaches constituted a default under the Joint Venture Agreement, which caused the joint venture as well as the trust to be dissolved, leaving appellants free to pursue legal remedies against Holiday. This argument is based on three premises; first, that the nominee trust was merely an entity for holding legal title to the trust property for the sole benefit of the joint venture; second, that a nominee trust cannot exist without a beneficiary; and third, that Holiday's alleged breaches dissolved the joint venture with the resulting extinguishment of the trust, leaving the parties free to sue without the consent of a majority of the trustees. 13 Before we examine the default clause of the Joint Venture Agreement and the merits of appellants' argument, we must deal with the fact that this position was never advanced below. Holiday's motion for summary judgment was framed in terms of the absence of the requisite number of trustees or all of the beneficiaries as required by the trust instrument and the Joint Venture Agreement. It stated: There is no genuine issue of material fact as to the plaintiffs' authorization to maintain this law suit on behalf of the Trustees of Flying Cloud Trust and that the defendant is entitled to judgment as a matter of law. In the district court, appellants met Holiday'sargument by contending that the limitation upon the powers of the trustees relate only to business transactions affecting the trust estate, a theory that they have abandoned on appeal in favor of the argument that the trust was terminated by the breach or default of Holiday. 14 It is by now axiomatic that an issue not presented to the trial court cannot be raised for the first time on appeal. Roto-Lith, Ltd. v. F. P. Bartlett & Co., 297 F.2d 497, 500 (1st Cir. 1962); Demelle v. Interstate Commerce Commission, 219 F.2d 619, 621 (1st Cir. 1955). Although this rule is not absolute, it is relaxed only in horrendous cases where a gross miscarriage of justice would occur. Newark Morning Ledger Co. v. United States, 539 F.2d 929, 932 (3rd Cir. 1976); Hormel v. Helvering, 312 U.S. 552, 556-57, 61 S.Ct. 719, 85 L.Ed. 1037 (1941). In addition, the new ground must be so compelling as virtually to insure appellant's success. Dobb v. Baker, 505 F.2d 1041, 1044 (1st Cir. 1974). 15 We see no reason here for relaxing the rule against appellate review of a position not advanced in the court below. The record discloses that appellants were experienced businessmen and the possibility of a deadlock was recognized during negotiations. An uncontroverted document 3 submitted by Holiday in support of its motion for summary judgment clearly shows that appellants would not accept any of several proposed methods for resolving the potential for deadlock inherent in the trust agreement and, in fact, insisted that none be included. 16 Ingenious as appellant's new position is, it is not properly before us. We do not find that failure to consider it would result in a gross miscarriage of justice nor is it so compelling as virtually to insure appellant's success. Dobb v. Baker, supra. The default clause of the Joint Venture Agreement provided: 17 Default. In the event of breach or default in the performance of this agreement by either party, or in the event of bankruptcy, insolvency, the appointment of a receiver for, or the termination of legal existence of either party hereto, by mutual agreement of both parties the joint venture shall be dissolved and its assets liquidated, debts discharged, and any remaining assets distributed to the parties in proportion to their capital accounts at the date of dissolution, provided that in any event a non-defaulting party shall have customary legal remedies against a defaulting party for damages for breach of contract. 18 Appellants argue that the insolvency of the joint venture which led to the default of the mortgage loan effectuated the dissolution of the joint venture and, in turn, the trust since there was no longer any beneficiary. This argument ignores the language of the default clause which is couched in terms of the insolvency of the parties, I. e., appellants and Holiday-Mass., neither of which were insolvent. Moreover, the clause specifically provides that the dissolution of joint venture shall be by mutual agreement of both parties. Concededly, this phrase could mean that the parties were in agreement as to the events triggering dissolution, but this is by no means certain, especially in light of the provisions of the nominee trust. The critical question, however, which is laden with uncertainty is whether the dissolution of the joint venture automatically compels the extinguishment of the trust, which was set up specifically for the purpose of holding title to the restaurant. Posing the issues raised by the appellant before us for the first time shows the wisdom of the rule requiring that appellate review be limited to what was raised and argued in the trial court. By not agreeing to any of the proposals that would have eliminated the deadlock contingency in the trust agreement, appellants have hoisted themselves on their own petard. 19