Court Opinion

ID: 6413597
Source: CourtListenerOpinion
Date Created: 2022-06-25 11:54:30.021712+00
Date Added: 2024-06-11T15:51:27.575803
License: Public Domain

Hoar, J.*
We shall have no occasion to decide the question which has been argued in this case, whether the assignment by Edward Belknap to the Union Bank was of any validity whatever ; because it is very clear, upon principle and authority, that the estate in the hands of the trustee is bound in equity to discharge the legacies to the other cestuis que trust, before he or his assigns can claim any part of it, if the estate has been diminished by a violation of his duties as trustee. The equities of those to whom he is bound by his assumption of the trust are prior and superior to any which he can create in the trust fund by contract. As it was held in Fuller v. Knight, 6 Beav. 205, a trustee cannot bargain away his power to make good a deficiency in the trust fund, arising from his breach of trust.
The doctrine is very succinctly stated in Morris v. Livie, 1 Y. & Coll. 380, of which the marginal note is as follows: “ If an executor assigns bis reversionary legacy, the assignee takes it subject to the equities which attached to the executor; and therefore if the latter, though subsequently to the assignment, wastes the testator’s assets, the assignee cannot receive the legacy till satisfaction has been made for the breach of trust.”
That case was very elaborately argued and carefully considered, and seems more directly in point than any other which has been cited. Though not binding upon this court as an authority, we are satisfied that it rests upon sound principles of equity.
A distinction has been strongly pressed by the counsel for the *472Union Bank, supposed to arise from our statute provisions which require security to be given by executors and trustees for the faithful performance of their trusts. But it is difficult to see any equity which the assignee of a trust fund which is to remain in the hands and under the management of the assignor can have against the sureties on his official bond. The assignor certainly has no claim on the surety to make good to him any loss by his own unfaithfulness. If there were no assignment, equity would obviously require the trustee to pay everything due to others _ beneficially interested in the fund, if the fund were diminished by his dishonesty, before applying any further part of it to his own use. And there seems to be no good reason why the assignee should be put in a better condition than the assignor. It would be in effect to allow the assignor to take to his own use his share of the trust fund, and by contract with a third party to cast upon his official surety the burden of making it good to a purchaser.
The Union Bank, when they took the assignment, knew that it was of a fund held by Edward Belknap in trust, and which was to continue under his care and management. They took it subject to all the risks of such a condition of things ; subject to all equities in favor of the other cestuis que trust, arising from the fact that the assignor was trustee; and they acquired no equitable rights against the sureties in the probate bond, be cause their grantor had none which he could convey.
It does not appear that the defalcation by Edward Belknap is equal to the share of the estate of which he is entitled to the income. If it is not, it is equally for the interest of the bank, and of those who may be entitled to the reversionary interest, if he should not survive his mother, that his share of the income should be applied to make good the capital.
The decree will therefore be, that the assignment shall have no force or effect against any persons beneficially interested in the estate, other than Edward Belknap.'
The commissions which have been retained as belonging to Edward Belknap are to be applied first to the payment of the charges and expenses of the receiver. If there is any part *473remaining, it is next to be applied to the costs of the suit; and the remainder, if any, is to be distributed as income.
The income belonging to Edward Belknap must be applied to make good the deficiency in the trust fund which he has caused. He must be removed from the trust, and a new trustee appointed, and the case sent to a master to take an account; and all other questions, including that of the ultimate rights of the Union Bank under the assignment, except so far as already determined, be reserved.

 Bigelow, C. J. did not sit in this case.