Court Opinion

ID: 8190201
Source: CourtListenerOpinion
Date Created: 2022-09-09 23:13:05.656734+00
Date Added: 2024-06-11T16:40:35.037287
License: Public Domain

Wihslow, O. J.
The fundamental question in this case is the question as to the proper construction of the agreement of December 1, 1896. Is it an absolute conveyance in trust for the benefit of ¡¿he creditors alone, or is there a trust also reserved in favor of the grantors in case the claims of creditors be fully paid and a surplus of property remain in the hands of the trustees ? The question is by no means free from difficulty. There is no clause in the agreement expressly providing that in case there be a residuum of property it shall be returned to the grantors, but the argument of the plaintiffs is that such a provision is necessarily to be implied from other clauses, and this conclusion was reached by the referee in an able opinion which is returned with the record.
The argument in this behalf starts with the proposition that if a grant of property is made in trust for a specified purpose, when that purpose is fully accomplished and there is property remaining undisposed of it necessarily belongs to the grantor. Certain clauses in the agreement are there cited and relied upon as showing that the parties contemplated that there would be a residuum of property after all claims were paid which was to be returned to the grantors. The features of the trust agreement so relied upon are the following: *626(1) the recitation that the grantors have “ample” property to pay their creditors if it be not sacrificed and if the business can. be continued with free use of the property; (2) the statement that “the services of the trustees” form a part of the consideration for the transfer, the argument being that if the transfer be,absolute and in trust for creditors only, then the trustees will perform no services for the grantors which could be any part of the consideration; (3) the direction that the business shall be continued until January 1, 1900, “unless the debts of the firm be sooner paid,” indicating that it was contemplated that the business might be profitable enough to pay the debts, thus leaving the property intact and involving the absurdity of supposing that in such case the property was expected to go to the creditors also; (4) the fact that Alexander McMillan was given an annuity to continue apparently only during the closing out of the estate, and the creditors were at the same time given power to close .out the estate within the first year, thus ending the annuity, it being argued that it is unreasonable to suppose that Alexander McMillan would consent to any such arrangement if there was to be no surplus to be returned to him when his annuity was thus ended; (5) the fact that in the certificate of acknowledgment the officer recites that there appeared before him the grantors, naming them, “to me well known to be the persons named in and who signed and executed the foregoing agreement for the appointment of W. W. Cargill, John M. Holley, and E. G. fNarner as trustees for the said parties and their creditors ” it being argued that this is an express recognition of the fact that the trustees are trustees for the grantors as well as for their creditors.
On the other hand, the defendants, in support of their contention, rely upon the following features of the agreement: (1) that there is no express provision directing the return of any surplus to the grantors, or even recognizing the possibility of the existence of a surplus; (2) that the trustees are called *627“trustees for the creditors” in the agreement, not trustees for all parties; (3) that the debts are absolutely discharged by the creditors, thus indicating that the creditors accepted the property not as collateral security but in payment of their debts; (4) that in the clause empowering the trustees to call a meeting of creditors prior to January 1, 1900, to consider what should be done, the words “realize and divide the estate” are used, indicating clearly that it was considered the estate of the creditors, to be divided among them if they chose, and not a fund to be applied in payment of debts and out of which there might be a balance to be returned to the grantors; (5) the books and accounts of the trustees were to be open at all times to the inspection of the creditors but not to the grantors.
It must be admitted that after all is said that may be said concerning the various provisions of the agreement, the fact that the parties made absolutely no provision for the return of a surplus to the grantors in an agreement which quite elaborately provided for all other contingencies is very difficult to explain upon the hypothesis that they contemplated that there wnuld be a surplus to be returned. The most that can be said in appellants’ favor from the wording of the various provisions of the agreement, taken in connection with the entire absence of any special provision for the return of any surplus, is that it seems doubtful upon the face of the paper what the intent of the grantors was in this regard.
If this be the situation, then a case is presented where it becomes proper and even necessary to consider the facts and circumstances surrounding the parties at the time of the execution of the agreement in order to arrive at its proper construction. Some very important testimony along this line was received by the referee, and was rightly considered of great significance by the circuit judge in the very helpful opinion which he filed when deciding the case.
Mr. G. M. Woodward of La Crosse was a creditor of Me-*628Millan & Sons to the amount of $4,000, and when the firm was in financial straits in November, 1896, D. D. McMillan and his son, John McMillan, consulted Mr. Woodward as to the best arrangement to be made to prevent sacrifice of the property, and get it in shape so that creditors might be paid. Mr. Woodward testifies as follows:
“D. D. McMillan and I never talked about what would be done in case there was a surplus, over and above the amount of the debts. We agreed if there should be an assignment for the benefit of the creditors and the estate should be closed out in that way probably the creditors would not get more than twenty or twenty-five cents on the dollar. He expected if they would take time enough the property might pay the debts. He and I discussed that somewhat, but I never could see more than fifty or sixty cents in it. D. D. McMillan . came in and proposed this paper to me. He suggested the' outline, and asked me to look up and see what forms there were that might be used. I took Jones on Conveyances, and a form, I think on page 216, seemed to be the one that would be easiest adapted to the purposes of this trust. That contained the express provision that after the payment of the debts, the surplus, if any, should be returned to the grantors. That was left out of this paper because there was no idea, no thought for a moment that there would ever be anything coming to the grantors. I was satisfied it never would pay and he barely convinced himself that it might pay, so that was left out. The only question was for the creditors that they might get as much as possible out of it, and that the McMillans should be discharged and free from their obligations. November 11th I wrote out a draft of this agreement with a pen. I didn’t have it typewritten, because we wanted to keep it a secret. I mailed it to D. D. McMillan. The first draft of this agreement provided for W. W. Cargill as sole trustee. This was handed to D. D. McMillan. . Sometime afterward he came back and said they wanted three trustees. He named Mr. Holley and Mr. Warner, in addition. This agreement was rewritten, putting Holley, Cargill and Warner as the trustees, and I). D. McMillan went off with it. I don’t think any other changes were made.
*629“He brought it to me subsequently after it bad been signed by a number of others. I signed it. I don’t remember what date. I understand all the creditors signed it except Leonard Lottridge, who was left out by some oversight. He had a $500 claim against Alexander McMillan, and threatened to garnishee the trustees. He came in by an oral agreement with the trustees. I do not know of any agreement to pay back the surplus in case there was one after the payment of the debts. I only talked with D. D. McMillan.”
Eeference to Jones’ Forms in Conveyancing (2d ed.) pp. 27 6-279, will show that a part of the form there found contains an express provision of reverter, and that a substantial part of the form was used by Mr. "Woodward in the preparation of the agreement in question, but that the reverter provision was not incorporated. This testimony is certainly of much weight and seems to indicate very clearly that the re-verter clause was purposely excluded. Mr. Woodward, however, did not see Alexander McMillan, who owned the real estate in question here and whose representatives are bringing this action, and it is quite evident that the testimony quoted has considerably less weight as against Alexander and his representatives. Here, however, another very significant fact develops, and that is that the matter of a reverter was in the minds of Alexander, D. D., J ohn, and 8am McMillan (the plaintiff) before the execution of the present agreement, and was the subject of discussion with Mr. A. E. Bleekman of La Crosse, who was the legal adviser of Alexander.
This is demonstrated by the testimony of Sam McMillan, himself one of the plaintiffs and son of Alexander McMillan. He identified a written memorandum entitled “Outline of Plan of Appointment of Trustee,” which was shown to be in the handwriting of J ohn McMillan and which he saw in his father’s office before the execution of the present agreement. This memorandum provided as follows: (1) All property of Alexander McMillan, H. D. McMillan, and the firm, except exemptions, to be transferred to trustee to manage for the *630mutual benefit of all concerned.; (2) tbe idea is to prevent sacrifice of property, pay debts as rapidly as possible, with the idea of such reorganization of the affairs of each as may be possible and satisfactory; (3) creditors to agree to extend time until expiration of trusteeship and consent that trustee may run the business as before; (4) trustee to allow Alexander a proper and sufficient income to be agreed on later; (5) at the expiration of trusteeship all remaining property to be retransferred to Alexander and D. D. McMillan, according to original ownership. 8am McMillan further testified that he conversed with his father, Alexander, and with his uncle, D. D. McMillan, about the paper at the time; that they told him it was a general plan, and that they handed it to him and he took it to Mr. Bleekman and asked him what he thought about it.
It will be noticed that the agreement outlined in this memorandum is radically different from the agreement finally made. It contemplated simply a temporary placing of the business in the hands of a trustee, with merely an extension of time for the payment of debts and an ultimate return of the remaining property intact to the grantors. Now it appears that the agreement finally made was considered for some weeks after the first draft and evidently in connection with the memorandum just referred to, but it differed from the memorandum in many ways and in no way more significantly than in its absolute silence as to any retransfer of property at the close of the trusteeship. We cannot escape the conclusion that the omission was deliberate rather than accidental, and that it means that all the grantors had abandoned hope of saving anything out of the wreck and were content to absolutely transfer their property to their creditors in consideration of a release from their overwhelming load of debt. The widespread depression in business at the time of the transfer and for some years thereafter tends to make this conclusion more reasonable, as well as the fact that as late as 1900, when the *631trustees attempted to dispose of the real estate, they found no market for it and were practically compelled to take it themselves rather than allow it to be sacrificed. It is common knowledge that real-estate values have advanced much since that time, and it may well be that in the light of present-day values it may seem that the creditors made a good bargain, but the matter must be viewed as it presented itself to the minds of the parties in 1896 and in the light of the business conditions and property values then prevailing.
The conclusion which we reach is that the circuit court was right in holding that no trust for the benefit of the grantors was reserved in the assigned property by the agreement under consideration. Upon this question authorities are of little assistance. It was entirely competent for the grantors and their creditors to agree that the property should be absolutely transferred to the trustees in consideration of a release of indebtedness, and it was competent for them to agree that it should be transferred subject to a reversion of the residue after the creditors had received the amount of their claims. The question as to which plan was adopted depends entirely on the language used in the agreement when given its proper construction, and upon this question decided cases give us no help, because no case has presented this agreement executed under like circumstances. The English case of Cooke v. Smith, L. R. 45 Ch. Div. 38, and 1 App. Gas. [1891] 297, approaches the nearest to the present case of the eases cited to our attention, but we have not considered it as at all controlling. Upon the language of the agreement here, construed in the light of the circumstances, we are entirely satisfied that no reverter was intended, and hence the defendants were not trustees for the grantors, and not subject to render any account to them for their acts.
By the Oowrt. — Judgment affirmed.