Newton v. Hunt

On the former appeal herein by the substituted trustees from an interlocutory judgment, overruling their demurrer to the complaint on the ground, among others, that it failed to state facts sufficient to constitute- a cause of action, this court sustained the complaint. Newton v. Jay et al., 107 App. Div. 457 , 95 N. Y. Supp. 413 . The material facts bearing upon the sufficiency of the complaint, and which have now been substantially proved as alleged, are stated in our former opinion, and may therefore, so far as pertinent to the questions presented by this appeal, be discussed without being restated. Our decision on the former appeal constitutes the law of this case, so far as this court is concerned, and it follows upon proof of the allegations of the complaint that the plaintiff is entitled to some appropriate equitable relief.

After the former decision on the appeal, answers were interposed by all of the defendants, and the issues were brought to trial. The learned trial justice found every material fact alleged in the complaint, and sustained every claim made thereon by the plaintiff with one exception. The learned counsel for the substituted trustees evidently contended on the trial, as he now does here, that the clause in the mortgage given by the defendant Anna Benkhard Hunt, Frederick Percy Hunt, Lilian Catherine Hunt, and Reginald Sidney Hunt, all of her children, excepting the respondent Rupert Herbert Hunt, who at the time of the execution of the mortgage was an infant and did not join therein, to Thomas Charles Line, made on the 1st day of July, 1898, providing that the said Anna Benkhard Hunt, at the request of and with the concurrence of her adult children, released to them and

The notice of appeal of the plaintiff is, as has been stated in the statement of facts, from many parts of the judgment, which, however, depend upon the decision of the single question as to whether the settlor has as against the owner of the indebtedness and the holder of the mortgage extinguished all right to further exercise any power of appointment with respect to directing by will or otherwise, that her children shall take the remainder in unequal shares, or that one or more shall take to the exclusion of others or another. The learned counsel for the appellants other than the plaintiff requests the court to reconsider the decision made on the former appeal, principally upon the ground that the court overlooked or failed to follow the decision of the Court of Appeals in Noyes v. Blakeman et al., 6 N. Y. 567 . On the former appeal herein, that case was cited in the points and examined by the court, but it was nbt deemed necessary to consider it in the opinion, for it was deemed inapplicable, in view of the later decision in Schenck v. Barnes, 156 N. Y. 316 , 50 N. E. 967 , 41 L. R. A. 395 , which expressly decided that, where the settlor of the trust reserves to himself the beneficial interest for his life, such beneficial interest is subject to the claims of creditors, even though he were solvent at the time he created the trust. It necessarily follows from that decision that the prohibition against the alienation by a life beneficiary of

It was stated in the opinion on the former appeal, in effect, that the settlor of the trust by her agreement with the parties in interest, as already stated herein, and by executing ■ the mortgage, extinguished any right she had to make a further appointment with respect to the division of the remainder between her children. The decision of that question was not necessarily involved, and is therefore not res ad judicata. The four justices who are voting for a modification of the decree in accordance with the views expressed in this opinion are equally divided in their views on that question, and for that reason, as well as for another to be stated presently, no opinion is expressed thereon now. In the circumstances we deem it proper to defer a decision of the question as to whether the settlor of the trust may, by will or otherwise, give any further effectual direction with respect to the shares in remainder which her children shall take until her death, and to confine our decision to an adjudication that the plaintiff; by virtue of the mortgage, has a lien upon and is entitled to the income payable under the trust indenture to the life beneficiary, and to the interest and estate in remainder which the children who joined in the mortgage had at the time of the execution of the mortgage of which they shall not have been divested by death or by the exercise by their mother of the right, if any, reserved to her to direct by last will and testament that her children shall take in unequal shares, if she has not released

It appears by the judgment roll in an action in the Supreme Court in the county of New York, brought by one of the original trustees in July, 1879, against the other two, the settlor of the* trust and her husband and her children, for leave to resign and for the substitution of William Jay and Alonzo C. Monson (respondent Rupert Herbert Hunt was not a party, for he was not born until after the termination of the litigation); that with the consent of the settlor two of the original trustees resigned in 1879, after accounting in that action, and the third then, pursuant to authority conferred upon him by the original trust agreement, named Alonzo C. Monson and William Jay as substituted trustees on the nomination of the settlor of the trust, and then the plaintiff in that action resigned as trustee with the consent of the settlor; that, before these resignations, the trustees had decided to exercise the power conferred upon them and advanced to the settlor the sum of $50,000 out of the corpus of the trust fund on condition that she should exercise the power of appointment reserved to her in the original trust indenture, which was a general power of appointment to be exercised by her by a last will and testament or an instrument in the nature thereof, and, in default of such exercise, it was provided that the remainder should pass under the laws of the state of New York with respect to intestate property; that she had exercised this power of appointment by the indenture of November 18, 1879, to which reference is made and which is more fully described in the opinion of this court on the former appeal, and that the court in and by the judgment in that action entered November 26, 1879, accepted the resignations of the trustees and the appointment of the substituted trustees, and conferred the same authority upon the substituted trustees as on the original, except as to advancing part of the capital to the settlor and naming successors, and fixing a new basis for the compensation of the trustee pursuant to the settlor’s agreement with them, and it was further therein adjudged that the settlor had by making the indenture of November 18, 1879, exhausted all right to exercise the power of appointment, and the court ratified and confirmed the disposition of the estate which she had thus made, and adjudged that her action in exercising the power of appointment by said indenture of November 18th was final and exhausted that power, and the $50,000, being the consideration for her exercise of the power of appointment, was ordered paid to her out of the principal. That judgment was, of course, binding upon all the parties, and was binding upon the issue of the settlor then unborn, as well as upon issue in being, for their interests were the same as those presumptively entitled to take, and they were necessarily represented by them. Tonnele v. Wetmore, 124 App. Div. 686 , 109 N. Y. Supp. 349 , reversed 88 N. E. 1068 . See, also, Downey v. Seib, 185 N. Y. 427 , 78 N. E. 66 , 8 L. R. A. (N. S.) 49 , 113 Am. St. Rep. 926 . It seems to me that the effect of that decree necessarily is that there remains no further authority in the settlor of the trust to exercise the original power of appointment. It would seem, therefore, in view of this decree, that there can no longer be any question with respect to the validity of this trust and the plain

The decree of the Supreme Court to which reference has been made confirms the trust indenture of November 18, 1879, which, in effect, reserves to the settlor authority to revoke by last will and testament the appointment as made in whole or in part as to one or more of the children, and to direct that another or others shall take the estate thus cut off, which might result in the children taking in unequal shares. Whether it was competent for the settlor of the trust as a condition of obtaining the loan to secure which the mortgage was given to effectually release and relinquish this reserved right to give a further valid direction by her last will and testament with respect to the shares which the children should take as between themselves is the one which we do not now decide, for the reason that it may never arise, as she may not attempt to exercise the reserved authority and the indebtédness may all be paid out of income, and, in no event, can it be determined until the death of the settlor of the trust the precise interest in remainder, if any, which will be subject to the lien of the mortgage. It appears by the trust indenture of November 18, 1879, that there is a possible interest in reversion in the settlor of the trust; for if all of the children should die during the life of their mother, without leaving lawful issue, the remainder was undisposed of, and it would revert to her estate in the absence of a will otherwise disposing of it. Baltes v. Union Trust Company, 180 N. Y. 183 , 72 N. E. 1005 ; Hotchkiss v. Elting, 36 Barb. 38 , 46. We are of opinion, also, that although each remainderman took a vested interest in the remainder by virtue of the trust indenture of November 18, 1879,. such vested interest was subject to be divested by his death during the lifetime of his mother. The same was doubtless true with respect to his father, but the father has since died, which eliminates that question. The provisions of the indenture of November 18, 1879, upon which this question depends, follow the provisions authorizing the trustees to hold the corpus of the estate during the life of the husband of the settlor, should he survive, and to pay over to him the surplus rents, issues, and profits, and, so far as material, they are as follows:

“And upon Ms death shall assign, transfer, convey, and set over all and singular the said estate real as well as personal unto such children of the party of the first part as shall then be living and to the issue of such of them as shall have died in egual shares per stirpes and not per capita absolutely and forever. And this indenture further witnesseth that the party of the first part hereby reserves to herself the right to- vary the disposition hereinbefore made of the said trust estate by her last! will and testament or by an instrument in the nature thereof hereafter to be executed by her by directing that a certain part of such annual income shall be paid to her children during the lifetime of her said husband if she shall so desire, and also by directing and appointing that the said estate upon her said husband’s death shall be assigned, transferred, conveyed and set over unto one or more of her children or to their issue to the exclusion of other of her children and their issue or that such estate be assigned, transferred, conveyed and set over unto said

children and to their issue in such unequal shares as she may desire and as she may hereafter determine.

“And, in the event of there being no child or children of hers nor issue of a child or children living at the time of the death of the party of the first part, then she reserves to herself the absolute right of disposing of the said trust estate by her last will and testament or instrument in the nature thereof, to any person or persons whomsoever, as she may desire, and she also reserves to herself the right to dispose by last will and testament or by instrument in the nature thereof, all and singular the said trust estate in the event of all her children departing this life without issue during the lifetime of her said husband, anything herein contained to the contrary in any wise notwithstanding.”

It seems quite clear, in view of these provisions, that any child who predeceases his mother would become divested of any interest in the estate, and that the same would vest on the death of his mother in his issue, and, in the event of his leaving no issue then living, in the other children or their issue then living (Matter of Hogarty, 62 App. Div. 79 , 70 N. Y. Supp. 839 ); but they would take under the indenture, and not from him. The construction of the indenture in this regard was not presented for adjudication on the former appeal, and the court' did not decide the question. The observation in the opinion on the former appeal, that, “upon the execution of the deed of appointment and the relinquishment of the right to further exercise the power of appointment, the interests of the children, which were theretofore contingent, became vested subject only to the life estate of their mother, the legal title, however, being in the trustees” ( 107 App. Div. 457 , 468, 95 N. Y. Supp. 413 ), was made with reference to the extinguishment of the right of the settlor to further exercise the power of appointment. . The question as to whether the remainder vested absolute in the children or was subject to be divested was not only not necessarily involved in a decision of the appeal, but the court was not asked by either party to pass upon the question, and both counsel in their points assumed and expressly claimed that the remainder vested absolute in the children so far as the question now under consideration is concerned —they litigated the question as to the right of the settlor to exercise the authority reserved—and that theory of the construction of the indenture is still asserted by the plaintiff, and not questioned by the defendants. On this point counsel for the defendant trustees, who were the appellants on the former appeal, stated in his points as follows:

“The rights of the children of Mrs. Hunt under the terms of the marriage settlement, as resettled, became vested, and cannot be taken from them except by their consent. It must be borne in mind that the claim in this action is against Mrs. Hunt and all her children. Two of her children, Lilian Catherine Hunt and Reginald Sidney Hunt, were parties to the mortgage, but her other son, Rupert H. Hunt, was not a party to the mortgage, and the plaintiff has no claim against him, except that the plaintiff is endeavoring in this action to take from him some of his vested rights. Under the deed of trust as resettled, the corpus of the estate vested absolutely in the children, subject to Mrs. Hunt’s life estate and that of her husband, but she expressly reserved to herself the right to dispose by will of the corpus in such shares as she might see fit, and so she can now give to Rupert H. Hunt the entire corpus of this estate.”

Counsel for the plaintiff, who was the respondent, stated in his ■points as follows:

“But, in addition to the interest of Mrs. Hunt, we have also an assignment of the interests of two of her children in the trust estate. That these expectant interests in remainder are assignable needs no argument. They are vested remainders; the possession only being postponed. * * * The power of appointment does not interfere with the vesting.”

It will thus he seen that the question- as to whether the estates of the remaindermen were vested absolute or subject to be divested by their death during the life of their mother was not presented for decision on the former appeal, but would be necessarily involved if the court should now undertake to decide the precise interest in remainder that will be subject, on the death of the settlor of the trust, to the payment of this indebtedness; and, since the interests of the mortgagor-remaindermen are subject to be divested by their death during the lifetime of their mother, it cannot now be known whether any share or interest in the remainder will be applicable to the payment of the indebtedness,, and, since we are not in accord on the question as to whether the settlor may, by her last will and testament or otherwise, affect the interest in remainder which any child will take, we have reached the conclusion that we should merely declare the mortgage a lien upon the interest of the mortgagors in the estate at the time of the execution of the mortgage of which they shall not become divested by -their death during the lifetime of their mother, or by the exercise of the authority or power reserved to the settlor by the trust indenture of November 18, 1879, and not cut off or relinquished by the agreement and mortgage to which reference has been made.

The effect of the foreign adjudication was, we think, properly decided by the learned trial justice, and needs no further consideration here. We agree with the learned trial justice that the income can be reached as it accrues from time to time in the hands of the substituted trustees. The contingent estates in the remainder of the other mortgagors might perhaps be presently reached by directing a sale thereof; but that relief does not appear to have been asked, and no objection is-made to deferring relief against the remainder until the expiration of the trust.

We think, however, that the court erred in adjudging that the substituted trustees are accountable to the plaintiff for all income received after notice of the claim made by plaintiff under the mortgage. The plaintiff took no further step toward asserting or enforcing his claim after giving this notice until he commenced this action some four years thereafter. In view of the fact that the Supreme Court in resettling the trust commanded the trustees to pay the income to Mrs. Hunt, I think they were justified in continuing to pay it after such notice until the plaintiff obtained an injunction, the appointment of a receiver, or a judgment of a court of competent jurisdiction, declaring' that the lien of the mortgage attached to the income as it accrues. The judgment, therefore, should also be modified by requiring the trustees to account only from the date of the decision of the trial court herein.

The judgment should be modified as herein indicated and by inserting appropriate provisions showing that it is not to be deemed an adjudication on the question as to whether or not it is competent for thesettlor of the trust to direct by last will and testament that the remain

PATTERSON, P. J., and CLARKE and SCOTT, JJ., concur.

(dissenting). There are several interesting questions presented by this appeal, and I wish, first, to state my conclusion without considering how far the court is concluded by the former decision on the appeal from the judgment overruling the demurrer to the complaint. 107 App. Div. 457 , 95 N. Y. Supp. 413 . By the original deed of trust, dated the 31st day of July, 1872, it is quite clear that a valid trust was created. By that instrument the defendant Anna B. Hunt, then Anna Benlchard, granted, bargained, assigned, transferred, and set over unto the parties of the second part the property described which consisted of real and personal property, “to have and to hold the above-described premises with the appurtenances, unto the parties of the second part, and their successors and assigns upon the trusts nevertheless and to and for the uses and purposes following, that is to say.” The trustees were to sell and dispose of the real and personal property at such time and upon such terms as the trustees should deem projber, to invest and keep invested from time to time the net profits thereof, collect and receive the interests, incomes, rents, issues, and profits therefrom, and pay and apply the net interest, income, rents, issues, and profits to the use of Anna Benkhard, the creator of the trust, for and during her natural life, and, after her death, to pay and divide the real and personal estate or the proceeds thereof among such person or persons or body corporate and in such relative shares, estates, or proportions as the said party of the first part should, by her last will and testament or instrument in writing in the nature of a last will and testament, designate and appoint, and, in default of any lawful designation or appointment, then to pay and divide the said real and personal estate or the proceeds thereof among such person or persons as under the laws of the state of New York should then be the heirs at law of the party of the first part. This created an express trust under section 55 of the Statute of Uses and Trusts. 1 Rev. St. (2d Ed.) p. 723, pt. 2, c. 1, tit. 2. Under section 60 of that statute every express trust, valid as such in its creation, except as therein otherwise provided, “shall vest the whole estate in the trustees, in law and in equity, subject only to the execution of the trust. The person for whose benefit the trust is created, shall take no estate or interest in the lands, but may enforce the performance of the trust in equity.” Section 63 provides that:

“No person beneficially interested in a trust for the receipt of the rents and profits of lands, can assign or in any manner dispose of such interest.”

The trustees became vested with title to the property transferred, and the interest in the trust property of those for whose benefit the trust was created was the right to enforce the performance of the trust in equity. At the time of the creation of this trust Anna Benk

Subsequent to the execution of these two instruments, judgment was entered in the action commenced by the remaining trustee and to which the said Anna B„ Hunt, her husband and all of her children, except the defendant Rupert Herbert Hunt, who was then unborn, were parties. That judgment recited the conveyance by the plaintiff to the substituted trustees, the indenture by which the defendant Anna B. Hunt had received the sum of $50,000 on condition that she should exercise the power to her reserved of appointing by her last will and testament or otherwise the manner in which the remainder of the said trust estate should be vested and divided at her death; that the said Anna B. Hunt, in consideration of such payment, had so exercised the power, and had, by an instrument duly executed under her hand and seal, duly appointed the manner in which said trust estate should be vested and distributed at her death. It was ordered, adjudged, decreed, and declared that the power of the defendant Anna B. Hunt reserved by the said trust deed of appointing and directing the manner in which said trust estate should be paid over and divided at her death had been duly and effectually exercised and exhausted by her execution of a

The effect of this instrument ratified and confirmed by the judgment was to limit the power of appointment reserved by Anna B. Hunt so that it thereafter could only be exercised according to the terms of the instrument judicially declared to be effectual and irrevocable. It bound all the parties to that action, including Anna B. Hunt, in whom the power to dispose of the remainder of the property had theretofore existed. It still reserved, however, to Anna B. Hunt the right by a last will and' testament, or instrument in the nature of a last will and testament, to distribute the remainder among her children as she wished, .either in unequal proportions or by excluding one or more' of her children, and appointing one or more of them to receive the entire trust estate upon her death. It was adjudicated that a valid trust existed, that the legal title of the corpus of the trust was in the trustees, and that the right of the beneficiaries was restricted to an enforcement of the trust in equity. The trust existing, the trustees .holding the title to and possession of the property in July, 1898, the indenture upon which this action is based was executed. The defendant Anna B. Hunt and her children were therein described as residents of Paris, Prance. She and her children who were of age united in what was called a mortgage to secure the sum of £9,200. This instrument recited the trust indenture of July, 1872, and also the indenture of the 18th of November, 1879. It also recited that the said Anna’B. Hunt had reserved a power to vary such disposition by her will .by appointing such trust estate to her children in unequal shares, or to one or more children or their issue to the exclusion of the others. It then provided that the mortgagors jointly and severally covenanted to pay to the mortgagee the sum of £9,200 with interest thereon; that the mortgagors as ■to the share which she or he was or should become entitled to under the said indenture of the 31st of July, 1872, and the 18th day of November, 1879, or in any oilier manner whatsoever, and as beneficial

I can find nothing in this instrument which, either directly or by necessary implication, assigned or attempted to assign the future income from the trust property to accrue to Anna B. Hunt during her life. The whole transfer relates to the real and personal estate and all other of the trust estate comprised in and subject to the trust to continue during Anna B. Hunt’s life. It is the trust estate that is subject to the trust that is assigned and transferred to the mortgagee, and full effect can be given to every covenant and agreement in this instrument by construing it as transferring the interest of those executing it in the remainder, and excluding from the effect of the mortgage, which it nowhere attempts to assign or transfer, the income upon the trust property during the continuance of the trust. After default had been made in the payment of the amount loaned, the plaintiff commenced an action at law in the courts of England to recover the amount

In a creditor’s action it is undoubtedly the rule that judgment against the debtor is conclusive evidence to establish the existence and amount of the loan from the debtor to the creditor. The cases upon this question are reviewed in Nicholas v. Lord, 121 App. Div. 924 , 106 N. Y. Supp. 1139 , affirmed by the Court of Appeals in 193 N. Y. 388 , 85 N. E. 1083 ; but what was established by the English judgment, and all that was established by it, was the existence and amouht of the debt of the mortgagors to the mortgagee. In Nicholas y. Lord thé debtor transferred certain property to trustees in trust to pay any just debts which the grantor then owed. The action was brought against the trustees to recover a debt which the debtor then owed and which has been established in an action in this state by a judgment in favor of the plaintiff against the transferrer of the property; and it was held that the recovery of that judgment was conclusive evidence as to the existence of the debt and its amount as against the trustee. Undoubtedly, in an action to foreclose this mortgage, the English judgment would be conclusive evidence that the mortgagors were indebted to the plaintiff, and as to the amount of the indebtedness and in a judgment creditor’s action to reach the equitable assets of a judgment debtor the English judgment would be conclusive evidence to the same extent. It seems to me, however, that this action cannot be sustained as a creditor’s action. It is not alleged in the complaint, nor is it claimed, that the plaintiff has exhausted his remedy at law against the defendants. No judgment has been recovered in this state against the defendants, and no judgment has been recovered in France, where the debtors reside. A judgment creditor’s action cannot be founded upon the English judgment, for the debtor did not reside there, and assumably had no property there; and in no. case has it been held that a judgment recovered against a debtor in a foreign country in which the debtor was not domiciled can be the basis of a creditor’s action in an

In my view this judgment is erroneous so far as it applies the income accruing to the defendant Anna B. Hunt, for the reasons before stated, that her income is not charged with a lien in favor of the plaintiff. It is also erroneous in directing the trustees to pay out of the principal of the trust upon the death of. Anna B. Hunt the amount of the debt due to the mortgagee, as it seems that the proper relief to which the plaintiff would be entitled would be a judgment foreclosing the mortgage and directing a sale of the mortgagor’s interest in the trust property. In an action to foreclose the mortgage there would be presented the question as to whether or not there ever was a valid mortgage or lien created upon this property; and I do not understand that the English judgment is sufficient to prove the actual existence and delivery of the mortgage. Upon the trial the defendants attempted to show that the mortgage was delivered to a solicitor for the purpose of obtaining a loan of money, but no loan of money was ever obtained, and no money paid to the defendants by either the mortgagee or by the solicitor to whom it was delivered for the purpose of obtaining a loan of money. All of this testimony was excluded by the learned trial judge upon the ground that the English judgment was conclusive as to the delivery of the mortgage, and that the plaintiff legally acquired title thereto. Considering the form of the English judgment and the sole question presented to the court upon the trial of that action, I do not think that the force of the English judgment applied so as to estop the defendants from proving that there was never a valid delivery of the mortgage, and that as between the mortgagor and the mortgagee, it never became a valid and existing lien upon the mortgaged property. Full effect and credit can be given to the English judgment as establishing a common-law liability in favor of the plaintiff against the defendant without extending the force of that judgment to the existence of a valid lien in favor of the creditor upon the defendants’ interest in this trust property. There is no question of estoppel, as the plaintiff’s testator never saw this mortgage or heard of it until aftér he had advanced the money to the English solicitor and the solicitor had become bankrupt, and neither the plaintiff’s testator nor the mortgagee advanced any money on the mortgage or any recitals therein. It is perfectly apparent from the evidence that the plaintiff’s testator’s money which was placed in the hands of the so

We are then presented with the question as to how far the former decision of this court upon the appeal from the judgment overruling the demurrer to the complaint disposes of the questions heretofore discussed. I do not understand that the court determined the form of the judgment to which the plaintiff would be entitled if the facts alleged in the complaint were proved. Nor do I understand the court to have decided that this judgment was conclusive evidence of the validity of the mortgage and that it created a lien upon the defendants’ interest in the estate. The court did decide that there was a good cause of action alleged in the complaint. The complaint alleged the execution and delivery of the mortgage and that the plaintiff was the owner and holder thereof. The questions that I have discussed, I do not think, therefore, were directly presented to the court on the former appeal; nor do I understand that the court determined these questions.

My conclusion is that the judgment appealed from must be reversed and a new trial ordered, with costs to the appellant to abide the event.