Court Opinion

ID: 9813231
Source: CourtListenerOpinion
Date Created: 2023-08-31 22:58:42.383455+00
Date Added: 2024-06-11T15:28:10.518476
License: Public Domain

ON REHEARING.
Counsel for appellant call our attention to a fact not referred to on the argument of this case; i. e. that the assignor himself is made a party defendant, and has demurred to the complaint. As the court below overruled the demurrer as to him also, we must, to sustain its action, hold that he, as well as his creditors, is not liable for the property sold the trustee while such trustee was administering the trust. Such is our view. The instrument created a trust which placed the control of .the property and the business entirely beyond the assignor so long as the trust should continue. The trustee doubtless was accountable in equity for the faithful discharge of his duties as such trustee, and a court of *474equity might in a proper case interfere. But while the business was being managed by the trustee he was absolute master thereof, —as much as though he himself had a beneficial interest therein. The assignor could not dictate how the trustee should conduct it, what purchases or sales he should make, or have the slightest voice in its affairs. It was the business of the trustee, so long as the trust continued; the assignor having only an indirect interest in the successful management thereof. He was not the proprietor of the business, and the trustee was not his agent. It is always the case that the trustee has no interest' in the management of the affairs confided to him by the trust instrument, and that the cestui que trust is the only person beneficially interested therein. And yet it has never been held or even supposed that the beneficiary is liable for debts contracted by the trustee in so handling the trust property as to create an income for such beneficiary-. The assignor by the trust deed parted with the ownership of the property, and all control over the business he had been carrying on. While that instrument remained in force he was in precisely the same position, with respect to the fund and the business which the trustee was conducting therewith, as if a third person had created the trust, and had provided that, after the trustee had paid thereout certain debts.of the defendant, the trustee should transfer all the property to defendant. In the supposed case he would be interested in the success of the business, and yet it would not be his business. He would have no control over it, and therefore would not be liable for debts incurred in the prosecution thereof. There is no analogy between an instrument which establishes an agency and one which creates a trust. Where an agency exists, the principal may at any moment interfere; and at all times he is, in legal contemplation, in full control of the business. Not so when a party has parted with the title to his property, and has created a trust which vests in such tx-ustee the right to manage the business as the proprietor thei’eof, he being accountable to the beneficiary, not as his pifincipal, but as a mere cestui que ti'ust under the terms of the trust *475instrument. There is no hardship in the doctrine that the beneficiary is not liable in such a case. The person with whom creditor deals (i. e. the trustee) is himself personally liable. If such creditor is unwilling to trust him, such creditor can refuse, to sell him on credit. And in a proper case the creditor may resort to the trust estate itself for his pay. It would indeed be an anomaly in the law if one could be held responsible for goods, that he had not purchased or agreed to pay for, and which were' not sold to his agent, but were purchased by a third person to use; in a business carried on by such third person; the defendant having no control thereover. We hold that the assignor himself is not liable, and therefore the judgment heretofore rendered will-not be disturbed.
(75 N. W. Rep. 914.)