source: Caselaw Access Project

author: Stevenson, Y. C.

license: Public Domain

text:
    J. Carlton Ward v. John B. Marie, Florence S. W. Marie and Richard Wayne Parker, trustee.
    [Decided December 19th, 1907.]
    1. To establish the presumption that a trust embracing substantially the settlor’s entire estate, the object of which is to yield to the settlor monthly installments for his support during his life out of the entire corpus of the estate, and to effect a disposition of any residue at his death as he may appoint by will, was intended to defeat future creditors of the settlor, it is not necessary that the possibility of future creditors of the settlor should be expressly recognized, or that an intention to bar them should be expressly declared.
    2. A trust embracing substantially the settlor’s entire estate, the object of which is to yield him monthly installments for his support during his life out of the entire corpus of the estate, “free of all claims of creditors,” and to effect a disposition of any residue at his death as he may appoint by will, and, failing such appointment, then on the further trust as directed, contemplates the possible creation of debts in the future by the settlor which he expressly undertakes to bar, and cannot be said to have been intended merely to so place the property that it would be impossible for him to contract debts, and is therefore void.
    3. A trust, the object of which is to yield to the settlor monthly installments for his support during his life out of the entire corpus of the estate, and to effect a disposition of any residue at his death as he may appoint by will, and, failing such appointment, then on the further trust to pay to settlor’s wife monthly installments, and on the death of both to pay the balance to their children, and if there be none, then to pay the balance to the next of kin, so far as it transfers personalty is a conveyance “for the use of the person making the same,” notwithstanding that after the making of the trust the settlor cannot immediately subject the entire estate to his use within 2 Gen. StfU. p. 1604 § 77, declaring conveyances of personalty for the use of the person making the same void as against creditors.
    4. The trust, so far as it transfers personalty, is a conveyance “for the use of the person making the same,” notwithstanding the remainder over in default of appointment, within 2 Gen. gtat. p. 1604 § 77.
    5. Where a husband who has made a conveyance in trust void as to his future creditors borrows money of his wife, any claim of ratification or waiver which he or his trustee may put forth to defeat the satisfaction of the wife’s indebtedness out of the transferred property must be clearly established, and, having procured the participation of his wife in the transaction set up as amounting to such ratification or waiver, he must show affirmatively that there was no abuse of the confidential relation on his part, and that as between himself and his wife his conduct in inducing or permitting her to waive her rights or alter her situation was equitable and just.
    On final hearing on bill, answer and proofs.

      Mr. John B. Humphreys and Messrs. Robert & Hepburn (of the New York bar), for the complainant.

      Mr. Cortlandt Parker, Jr., for the defendant E. Wayne Parker, trustee.
   Stevenson, Y. C.

The bill was filed by the original sole complainant, J. Carlton Ward, to collect the amount of a judgment recovered by him in the supreme court of New Jersey, on May 15th, 1905, for $1,743 and costs, against the defendant John B. Marie; execution was issued and returned unsatisfied. During the progress of the suit an order was made, with the consent of all the parties to the suit, admitting as co-complainant one Marie Girardin, who is also a judgment creditor of the defendant John B. Marie, having recovered a judgment against him in the New Jersey supreme court, on February 10th, 1906, for $14,129.43 and costs, upon which execution has been issued and returned unsatisfied. The suit has been prosecuted for the satisfaction of these two judgments out of certain securities amounting to about $38,000 in the possession and.control of the defendant Parker, as trustee. The other defendants, John B. Marie and Florence S. W. Marie, his wife, have submitted to a decree pro confesso. The defendant Parker, as trustee, practically submits to the determination of this court whether or not the estate in his hands is liable to the judgment creditors of his beneficiary, the defendant John B. Marie.

After the argument of the cause, by consent of all the parties to the suit, one Louis E. Marie, was made a co-complainant, it being admitted that he had recently, since the argument, recovered a judgment against the defendant John B. Marie, upon which execution had been issued and returned unsatisfied, and that this judgment occupies precisely the same relation to the securities held by the defendant Parker, as trustee, as the judgment of J. Carlton Ward, above mentioned. If the decree in this cause should direct the satisfaction of the judgment of the complainant Ward, out of the securities held by the defendant Parker, in trust, it is conceded that the decree should, in like manner, direct the satisfaction of this judgment of Louis E. Marie. The bill of complaint has been amended or will be amended by a supplementary addition, carrying out the consents of the parties above mentioned, and making Marie Girardin and Louis E. Marie co-complainants.

It will, I think, be unnecessary to set forth in detail a great many of the facts which have been the subject of investigation in this case. The view which I take of the case and of the rules of law and equity applicable to it, can, I think, be understood with the aid of a small portion of the testimony which has been taken.

The main question in the case is presented by the agreement and conveyance dated December 11th, 1888, by which the trust in question was created and property, real and personal, to the amount of about $45,000, was conveyed by the defendant John B. Marie to the defendant Bichard Wayne Parker, as trustee. The conveyance transferred substantially all the property of Mr. Marie — all, I believe, except some furniture. It is the validity of this trust as against the creditors, and particularly subsequent judgment creditors of John B. Marie, which is the subject of the principal contention in the cause. By the above-mentioned instrument the grantor, John B. Marie, undertook to transfer an interest which seems to have been a legal estate in fee in certain mortgaged real estate situate in the State of New York. I understand from the testimony that this land was subsequently sold in a foreclosure suit, and that nothing ever reached the hands of Mr. Parker, as trustee, from such sale as proceeds of the equity of redemption. Whether this is true or not, is, I think, of no importance, because it seems to be admitted that the trust deed conveyed to the trustee a personal estate far beyond what will be necessary to satisfy the claims of the complainant, with costs, if such claims are found to be payable out of such personal estate. At the time the conveyance was made by Mr. Marie to Mr. Parker, in trust, the estate conveyed, to a large extent, consisted of the interest which Mr. Marie had, as a beneficiary, in securities held by Mr. Parker and already vested in him in trust. Mr. Parker, by order of the court of chancery of New Jersey, had been constituted the trustee of a large personal estate, as successor to a former trustee, and Mr. Marie was one of the three beneficiaries. Mr. Parker, however, had not accounted; he had not separated the interest of Mr. Marie, much less had he paid it over. He had, from time to time, anticipating his discharge and the distribution of his trust estate, honored drafts of Mr. Marie and charged the amount against his (Mr. Marie’s) share. All the assets, however, were vested in him (Mr. Parker), a citizen and resident of New Jersey. When the trust conveyance was made, what Mr. Marie held was an undivided interest in a New Jersey trust estate, an estate vested in a New Jersey trustee by order of the court of chancery of New Jersey, in which court the trustee had yet to account. Mr. Marie, at the time of the execution of the trust agreement, resided in the State of New York. Subsequently, some few years later, I think, he became a resident of the State of Pennsylvania for a time. Still later, in the year 1901, he again became a resident of the State of New York, where he now resides.

A good deal has been said in this case about the situs of the estate which Mr. Parker holds with reference to the law applicable to it. Counsel for complainant insists that the validity of the trust is to be determined by the law of the State of New York. Counsel for the trustee argues that the law of Pennsylvania controls. There seems to me to be obvious and forcible arguments in favor of the proposition that the law of New Jersey determines the validity of this trust — that when the trust was created it was created under New Jersey law, and that subsequent changes of the domicile of the beneficiary could riot make any foreign law in any way applicable.

I think, however, that whether the law of New Jersey or the law of New York or the law of Pennsylvania is to be applied to this case, the result will be the same, and, therefore, the consideration and decision of what is perhaps a difficult question may be avoided.

The trust under investigation is set forth and declared in the agreement above mentioned in the following language:

“In trust, nevertheless, in the discretion of the party of the second part as trustee, as to the time, parcels, terms and conditions, to lease, sell, convey in fee-simple, manage, control, protect, repair and improve said property and premises, to invest any money, and collect and change investments, and generally to have full power of management, investment and disposition of said property and premises and their proceeds, and upon the further trust to pay to said John B. Marie the sum of seventy-five hundred dollars from and out of the said trust property within six months from the date hereof, and also to pay out of the same to said John B. Marie, from the date hereof during his life, the sum of two hundred dollars in each and every calendar month, which payments, monthly, the said John B. Marie shall not have power to anticipate or assign, and shall be for his support and free from all claims of creditors; and, on the further trust on the death of the said John B. Marie, to pay and distribute the trust property and premises, or the balance thereof, as said John B. Marie may, by his last will and testament, direct and appoint, free of all claims of creditors, and, failing such appointment, then upon the further trust to pay to Florence W. Marie, if she survive him, out of the said balance of said trust the sum of two hundred dollars monthly, free of anticipation, assignment and creditors as aforesaid, and on the death of the said John B. Marie and Florence W. Marie, to pay and distribute the whole balance, if any, of the trust property among the children, if any, of said John B. Marie, and such persons as legally represent them, if any of said children be then dead, and in case there be then no such children or legal representatives, then to pay and distribute said balance equally among the next of lcin in equal degrees of said John B: Marie, and such persons who represent them, provided that no representation shall be admitted among collaterals after brothers’ and sisters’ children. And upon the further trust in the discretion of the said trustee to apply part of the trust fund in the purchase of a homestead to be held by the said trustee for the use of the said John B. Marie and his family, in which case ten per cent, of the cost of said homestead shall be charged annually upon and deducted from said monthly payments, and full power is reserved to said trustee in his discretion to sell such homestead and buy another or others from time to time in the stead thereof. And upon the further trust and with full power to the said trustee from time to time by his deed to associate with himself a new trustee or trustees and to convey the trust property to be holden by himself and such new trustee in joint tenancy, with the same estate, powers, trusts and duties as if said premises had been hereby conveyed to him and said new trustee, including the like power of associating new trustees.”

For some time prior to the execution of the trust agreement of December 11th, 1888, Mr. Marie had been, to a certain extent, addicted to habits of intemperance, and had shown a tendenc_y to squander his estate. According to the terms of the original trust the assets above mentioned held by Mr. Parker as trustee under appointment of this court, had, by reason of the death of the life tenant who took the entire income, become distributable among a class, of which Mr. Marie was one. The interest of Mr. Marie was vested, and the duty of the trustee was simply to account and pay over to Mr. Marie the share to which he was entitled, and about which there was no dispute. Mr. Marie’s estate was. therefore, although still vested in the trustee, practically under his control, and manifestly was subject to the claims of his creditors. Hardenburgh, v. Blair, 30 N. J. Eq. (3 Stew.) 645; Wells v. Ely, 11 N. J. Eq. (3 Stock.) 172.

1. The actual object which Mr. Marie had in view in creating this trust is not, it seems to me, a matter of doubt. He wanted to go into a stage-coach business in the Adirondacks, in which he thought he would make money, but concerning which Mr. Parker had doubts. The business, in fact, proved to be a failure, although it does not appear that when Mr. Marie closed it up there was much, if any, loss. Mr. Parker’s apprehensions in regard to this business were proved by the result, to be well founded. The relations between Mr. Parker, on the one hand, and Mr. and Mrs. Marie, on the other, though springing out of business transactions alone, soon became friendly, and Mr. Parker took a great personal interest in this young couple and all their affairs. No doubt Mr. Parker, out of purely disinterested motives, desired to do all that he could to prevent Mr. Marie from squandering his property, and thereby bringing hardship and suffering upon himself and the young woman whom he had recently married. The evident purpose of Mr. Marie in creating this trust and of Mr. Parker in accepting ii, was to place Mr. Marie’s entire estate, after he had taken out the $7,500 which he required for the establishment of his stagecoach business, where it would be secure from all the dangers which would besot it if it were liable to be affected by his extravagance and improvidence.

It is urged in defence of the trust that the purpose was not to place property where future creditors could not reach it, but to so place property that there would be no future creditors. In my opinion, the purpose of Mr. Marie in making this settlement cannot possibly be limited to such a narrow object. Men are presumed to contemplate and intend the natural consequences of their acts. They must be presumed to contemplate future conditions which their own experience, if not the experience of others, enables them to perceive as liable to occur. How can we believe that an intelligent man, fond of spending money and addicted to contracting debts, will look forward with reasonable certainty to a long life in the future in which he will create no debts which he will not be able, ready and willing to pay, because he has placed his entire estate where it cannot constitute the basis of any credit which otherwise he would enjoy. It is a matter of common knowledge and experience that men, disposed to contract debts and squander money, and go into imprudent ventures to a certain extent, succeed in obtaining credit although they may not be financially responsible to the extent of a dollar. When a spendthrift puts Ms estate in the hands of a trustee for his (the spendthrift’s) benefit, it is true that he may in good faith contemplate that the device will destroy Ms credit to such an extent that it will be difficult for him in the future to contract any debts, but in my opinion, in view of the facts of human nature open to the observation of all mankind, it must be presumed that the spendthrift looks forward to the probability that he will at some time in the future contract some debt or debts for the payment of which he may not have sufficient ready money and therefore he must be presumed to have in view the protection of his estate from the attacks of any such possible future creditors. The whole purpose of such a trust is necessarily twofold, viz., to protect the estate of the spendthrift against any future creditors by creating conditions under which (1) it will be difficult for the spendthrift to contract any debts, and under which (2) any future debts which, nevertheless, may be contracted, will be uncollectible out of the spendthrift’s estate.

If the view above stated requires some modification I think it is clear that this spendthrift trust was created by Mr. Marie when he was distinctly contemplating the possible creation of debts in the future which he intended to render uncollectible out of the trust estate. In other words, the settlor was putting property where future creditors could not reach it. This purpose is distinctly disclosed as to the whole estate which would remain after Mr. Marie should receive the first payment of $7,500 in the provision which was inserted in the trust agreement to the effect that the stipend of $200 a month which Mr. Marie was to receive during his lifetime was to be “for his support and free from all claims of creditors.” How can it be said that this trust was created with the bona fide expectation that the effect of it would be to prevent the existence of future creditors when future creditors axe distinctly contemplated as possible, and the express purpose is declared that in case there shall be such future creditors they shall have no claims upon the spendthrift’s monthly stipend.

The provision that in case Mrs. Marie should survive her husband and he should make no appointment by will, the monthly stipend payable to her should be “free of anticipation, assignment and creditors as aforesaid,” may be referred to as indicating how distinctly future creditors were in the minds of the settlor and his counsel when the terms of this trust were defined even if it be conceded that the creditors referred to in this clause were creditors of Mrs. Marie and not creditors of her husband. However this may be, it would seem that the further provision that the trustee should, upon Mr. Marie’s death, distribute any balance of the trust estate then remaining as he (Marie) might by will direct and appoint, “free of all claims of creditors,” cannot be construed as relating to the creditors of the appointees but must be understood as relating to the creditors of Mr. Marie. The scheme of the trust is perfectly clear. As long as Mr. Marie lived and the trust estate remained unexhausted he (Marie) was to have $200 a month for his support, and this monthly stipend was to be beyond the reach of his creditors. When Mr. Marie died whatever residue of the trust estate might then be left was to pass under Mr. Marie’s will to appointees whom he should see fit to select, and these appointees were to take free from all claims of Mr. Marie’s creditors. Thus the entire estate would be enjoyed by Mr. Marie in the manner and to the extent defined by him during his lifetime, and upon his death what was left would be disposed of by his testamentary appointment, while all debts which Mr. Marie might contract were expressly barred from satisfaction out of any part of the trust estate. But if it may be supposed that Mr. Marie and his able and learned counsel intended to provide for the distribution to the appointees of shares which should be beyoiid the reach of the creditors of tire appointees, if it may loe argued that such was the actual intention of the instrument however difficult or impossible of being carried out, it seems to me that the plainly expressed intention that Mr. Marie’s monthly stipend should be “for his support and free from all claims of creditors” is of. itself sufficient to fix the character of the whole instrument. There is great significance, I think, in the fact that the monthly installments were payable out of both principal and interest. The $7,500 manifestly had to be paid largely out of the principal. Half the estate might be lost by lawful but unfortunate investments; the $200 per month would si ill be payable to the exhaustion of the estate. The case would not have been legally different if the agreement had provided that Mr. Marie was to receive $1,000 per month until the estate should be exhausted, and that such installments should be free from the claims of his future creditors.

It is, I think, unnecessary to discuss the testimony of Mr. Marie and Mr. Parker in regard to the actual objects and purposes of the trust deed. This testimony strongly supports the conclusion whhh has been reached from the examination of the express provisions of the trust agreement. Mr. Parker’s testimony, which is both lucid and frank, points directly to this conclusion.

The result is that this conveyance of December 11th, 1888, must be held void as against all present and future creditors of Mr. Marie, because it was made by him with intent to place 1ns property where his creditors could not reach it. In my opinion this conclusion may be based upon the general proposition that a trust like this, embracing substantially the settlor’s entire estate, the object of which is to 3d eld to the settlor monthly installments for his support during his lifetime out of the entire corpas of the estate, and to effect a disposition of any residue which may remain at the settlor’s death as he may appoint by will, must be presumed to have been intended to accomplish the defeat of such future creditors of the settlor as might come into existence after the creation of the trust. It seems to me that it is not necessary for the establishment of this presumption that in the instrument creating such a trust, the possibility of future creditors of the settlor should be expressly recognized, or that an intention to bar such possible future creditors should be expressly declared.

It hardly seems to be necessary at this point of the inquiry to discuss the rights or the possibilities of the persons who will take in the event of the settlor’s refraining from making an appointment b]r his will. These persons are mere donees. As to them the conveyance is purely voluntary, and hence void if the intention of the conveyance was to delay, hinder or defraud the donor’s future creditoi's. The fact is that the entire estate in a case like this is either enjoyed — used up by the settlor in his lifetime, or passes to the beneficiaries whom he names in his will. The situation, as most authorities, I think, point out, is one in which a man endeavors to place his estate where it will be his to enjoy, his to consume and his to distribute at his death, but not his for the purpose of being answerable to such debts as he may succeed in contracting.

Whether the presumption above mentioned is rebuttable— whether special circumstances may overthrow such presumption, I do not propose to consider. It certainly would be difficult to overcome such a presumption when the instrument, as in this case, expressly undertakes to b'ar future creditors. There is no evidence in this case that I can discover which can possibly be held to overcome the presumption which arises upon the face of this instrument. *

If casting all questions of presumption aside we must infer the actual intent of the settlor in a case like this from all the circumstances of the case, including the express declaration .of the trust agreement, I think it is very clear, from the evidence in this case, that the actual purpose of this spendthrift’s trust is to put property where future creditors of the settlor would be unable to reach it in satisfaction of their debts. The evidence, I think, excludes the theory that Mr. Marie went into ibis scheme intending in good faith merely to create conditions for his future life, under which it would be impossible for him to contract debts. His express provision in the trust deed protecting, or attempting to protect, his stipend against creditors of itself makes such a theory untenable.

2. Apart from the question of fraud, in my opinion the conveyance of December 11th, 1888, so far as it transferred the personalty, is void as against Mr. Marie’s creditors under the express provision of the statute which makes conveyances of “goods or things in action made in trust for the use of the person making the same” void as against his creditors. 2 Gen. Stat. p. 160k § 11- I shall not discuss this point at length, although it is well worthy of the elaborate treatment which it has received in the argument of counsel. The only question as to the applicability of the statute above cited to the present case arises in respect of the remainder over in default of the exercise of the power of appointment by Mr. Marie. While we have no direct authority on this subject in New Jersey, the great weight of authority elsewhere, and also sound reasoning and common sense, in my opinion, support the view that a conveyance like this of practically all the settlor’s property must be deemed a conveyance, “for the use of the person making the same.” The remainder over in default of appointment does not, in my opinion, alter the plain character of such a settlement. The whole estate is made subject to the “use” of the person creating, the trust. He regulates at the start the amount of the installments which are to be paid to him from time to time, and the frequency with which such installments are to be paid. Whether he provides for the payment of the income only, or, as in this case, provides for arbitrary installments payable out of principal as well as income, all that he gets is plainly subjected to his use. ' All that he leaves he may, if he sees fit, dispose-of by his will precisely as if his conveyance in trust had never been made. The mere fact that after the making of the trust he cannot immediately subject the entire estate to his use does not, in my opinion, afEect the charaeter of the conveyance; it still remains true that either by payments of installments to him, the settlor, from time to time, or by a distribution in accordance with his appointment after his death, the entire estate is subjected to his use. All that he has done by stripping himself of his power over his estate amounts to a mere regulation made by himself of the manner in which in the future he will use his estate.

Of course, the above statements ignore the effect of the possible remainder over. I accept that doctrine which seems to me to be sound, that the gift over, which can only become operative in case the settlor does not use up the entire estate in the installments payable to him during his lifetime, and then refrains from using and enjoying the balance by appropriating such balance to appointees named in his will, has no effect in the way of altering the character of the settlement as one “in trust for the use of the person making the same.”

3. The judgment for $14,129.43, recovered by the complainant Marie Gerardin, is conceded to represent an indebtedness from Mr. Marie to his wife which was assigned for purposes of collection to Mrs. Gerardin. It has been urged that, even if other creditors may successfully attack the trust deed, Mrs. Marie is not in a position to make such attack. It does not seem to me to be necessary to examine the various transactions relating to this trust estate in which Mrs. Marie was concerned during the seventeen years which followed its execution. Three instruments executed during this period have been offered in evidence. The first of these, dated December 13th, 1899, was not executed by Mrs. Marie. The last of these instruments, dated April 26th, 1905, was executed by Mr. and Mrs. Marie, and by its terms Mr. Marie acknowledges his indebtedness to his wife and admits that he has “no defence to the same either in law or in equity.” All these transactions of Mrs. Marie, when invoked to place her at a disadvantage as compared with other creditors of her husband, must, in my judgment, be regarded in the light of the.confidential relation which existed between Mrs. Marie and her husband. Mr. Marie, having to a large extent destroyed his credit by this trust deed among persons who would deal with him at arms’ length, succeeded in borrowing large sums of money from his wife. He owed her, according to his statement, about $2,000 when the trust deed was executed. This indebtedness grew through a series of years until it reached the very substantial proportions indicated b}r Mrs. Gerardin’s judgment. The indebtedness amounted to about $9,000 when the instrument, dated December 13th, 1899, was executed by Mr. Marie and Mr. Parker as trustee. Where a husband has made a conveyance which in the eye of the law is void as to his future creditors, and then borrows large sums of money from his wife, any claim of ratification or waiver which he or his trustee may put forth to defeat the satisfaction of the wife’s indebtedness out of the transferred property must be clearly established. Where he has procured tire participation of his wife in the transactions which he sets up as amounting to such ratification or waiver, I think that he must show affirmatively that there was no abuse of the confidential relation on his part, and that as between himself and his wife his conduct in inducing or permitting her to waive her rights or alter her situation was equitable and just. It is quite plain, it seems to me, that this young woman, inexperienced in business, did not understand at any time that what her husband and debtor was doing through these various instruments affecting the trust estate, had the effect to leave that estate exposed to the claims of all other creditors while she alone was left out in the cold.

I cannot, however, give this subject the minute and elaborate discussion which any exhaustive treatment of it would involve. At many points in such a discussion the distinction would have to be borne in mind between the status of the trust deed as fraudulent, and its status as a conveyance of personal property .“in trust for the use of the person making the same.” In view of the reasonable limitations upon the extent of this opinion, it will, I think be sufficient to state the conclusion that there is nothing in my judgment in the evidence in this case which warrants any discrimination against the indebtedness of Mrs. Marie, as compared with any indebtedness due from Mr. Marie to a stranger. The point must be kept in view that we are now dealing with the status of this indebtedness of Mrs. Marie as against her husband, as against the instruments or transactions by which he or his trustee may claim that she has ratified or waived all objection to a conveyance of her husband’s property which originally prior to such ratification or waiver, was void as to her. As far as the trustee himself may have changed his position on the strength of Mrs. Marie’s conduct, the situation is entirely different. If the trustee in equity has a right to protection against Mrs. Marie’s claim by reason of anything that Mrs. Marie has consented to or done, such protection can be provided for upon settlement of the decree. I do not unclerstand that the payment of the two judgments held by the complainants respectively out of the trust estate in Mr. Parker’s hands, will exhaust that estate or expose the trustee to any loss.

4. Owing to the lack of direct authorities in New Jersey controlling the questions which have been discussed, and the fact that decisions in other states must be examined in the light of the local statutes, I have not so far undertaken the citation and discussion of any authorities. The following authorities may be referred to as sustaining or tending to sustain the conclusions above set forth: Ghormley v. Smith, 139 Pa. St. 584; 21 Atl. Rep. 135 (1891) ; Mackason's Appeal, 42 Pa. St. 330; Warner v. Rice, 66 Md. 436; 8 Atl. Rep. 84 (1887); Brown v. McGill, 87 Md. 166; 39 Atl, Rep. 613 (1898); Scott v. Kean, 87 Md. 709; 40 Atl. Rep. 1070 (1898); Pacific Bank v. Windram, 133 Mass. 175 (1882); Jackson v. Von Zedlitz, 136 Mass. 342 (1884); Young v. Heermans, 66 N. Y. 374 (1876); Schenck v. Barnes, 156 N. Y. 316 (1898); In re Pearson, L. R. 3 Ch. Div. 807 (1876); 26 Am. & Eng. Encycl, L. (2d ed.) 147, ¶¶ 7, 8, and cases cited in notes.

It does not seem to me to be pertinent to any present inquiry to cite the numerous and conflicting decisions which deal with spendthrift trusts where the trust estate has not belonged to the beneficiary, where the trust has been created by a third party.

A decree will bo advised providing for the satisfaction of the respective judgments of the complainants out of the trust estate. All questions in regard to costs or counsel fees will be disposed of upon settlement of the decree.


author: Teaming, Y. C.

text:
    Land Title and Trust Company, &c., v. Norman Kellogg, &c.
    [Submitted October 17th, 1907.
    Decided October 18th, 1907.]
    1. Where, pending foreclosure, a receiver was appointed, after due notice to the mortgagor, on application by the receiver for an order directing the distribution of the rents collected by him, the evidence to determine the validity of the appointment will not be reviewed.
    2. A first mortgagee has the right to the appointment of a receiver, pending foreclosure, to collect the rents and profits of the premises for his benefit, where his security is uncertain, and the mortgagor cannot be made to respond to any deficiency which-may arise at the foreclosure sale, whether the inadequacy of the security has been caused by the wrongful act of the mortgagor or not.
    3. Where a mortgage exempts the mortgagor from personal liability, the question of his solvency is not involved on an application by the mortgagee for the appointment of a receiver pending foreclosure.
    4. A first mortgagee in a mortgage which, after describing the premises, provides “together with all * * * the buildings * * * rents, issues and profits,” and which exempts the mortgagor from personal liability, and restricts the recovery of the debt to the premises described, is entitled, in case of deficiency on foreclosure sale, to the rents collected by the receiver appointed pending foreclosure; the right of a mortgagee to sequester the rents through a receiver emanating from the inadequacy of the security and from the inequity of permitting the mortgagor to receive the rents.
    On application of receiver, appointed pending foreclosure, for an order distributing funds.
    Pending the foreclosure of a mortgage held by complainant against defendant a receiver was appointed by this court to collect the rents and profits of the mortgaged premises. The receiver now applies for an order directing the distribution of the rents collected by him.
    The mortgage foreclosed was a first mortgage and was the only lien against the mortgaged premises. It contained the usual clause, after the description of the mortgaged premises:

      “Together with all and singular the buildings, improvements, woods, ways, rights, liberties, privileges, hereditaments and appurtenances whatsoever to the same belonging or in anywise appertaining, and the reversion and reversions, remainder and remainders, rents, issues and profits thereof.”
    It also contained a clause restricting the recovery of the principal and interest of the mortgage to the lands and premises described and exempting the mortgagor from personal liability. The amount of the decree was something over $400,000, and at the sale the property was purchased by complainant for $125,000.
    The claim is now made, upon the part of mortgagor, that the rents collected by the receiver cannot be properly applied to the payment of the mortgage debt.

      Messrs. Thompson & Cole, for the complainant.

      Mr. Ulysses G. Styron, for the defendant Kellogg.

      Mr. William M. Glevenger, receiver, pro se.

   Teaming, Y. C.

The validity of the order appointing the receiver is now questioned by defendant on the ground that such appointment can only be justified where it is shown that the mortgage security has become uncertain or precarious because of something done or omitted to be done by the mortgagor of a nature to cause a diminished value of the mortgaged premises. The receiver was appointed after due notice to defendant and the evidence then before the court will not be now reviewed; but as the power of appointment is questioned an examination of the cases supporting its exercise may be of interest.

The early practice of this court appears to have been to refuse the appointment of a receiver at the instance of a first mortgagee unless some special grounds for the appointment appeared other than inadequacy in value of the mortgaged premises coupled with the insolvency of the mortgagor. Cortleyou. v. Hathaway, 11 N. J. Eq. (3 Stock.) 39; Best v. Schermier, 6 N. J. Eq. (2 Halst.) 154 Frisbie v. Bateman, 24 N. J. Eq. (9 C. E. Gr.) 28. I am satisfied, however, that a consistent application of equitable IDi’inciples should extend to a first mortgagee the right to the appointment of a receiver to collect the rents and profits of the mortgaged premises for his benefit in all eases where it appears that his security is uncertain or precarious and that the mortgagor cannot be made to respond to any deficiency which may arise at the foreclosure sale. This view is, I think, fully supported by the more modern practice in this state. Mahon v. Crothers, 28 N. J. Eq. (1 Stew.) 567; Leeds v. Gifford, 41 N. J. Eq. (14 Stew.) 464; New Jersey Title Guarantee and Trust Co. v. Cone, 64 N. J. Eq. (19 Dick.) 45; see, also, Warwick v. Hammell, 32 N. J. Eq. (5 Stew.) 427; Conover v. Grover, 31 N. J. Eq. (4 Stew.) 539; Brasted v. Sutton, 30 N. J. Eq. (3 Stew.) 462. Under the modern conception of mortgages and the practicable means for their enforcement no reason can exist for the application of a different rule between mortgagor and his first mortgagee and a mortgagor and his subsequent mortgagee. As it is the inadequacy of the security and legal remedy which affords the equitable ground of relief, it is also necessarily immaterial whether such inadequacy has been caused by wrongful acts of the mortgagor. In the present case, the fact that the property sold for less than one-third of the amount of the mortgage debt appears to sufficiently vindicate the action of the court in making the appointment. As there was no personal liability of the mortgagor the question of his solvency was not involved.

It is further claimed that by reason of the restrictive stipulation contained in the mortgage the debt was extinguished by the sale and that it is now too late to appropriate the rents to the mortgage debt. I am unable to accept this view. The right of a mortgagee to sequester the rents of the mortgaged property, through the medium of a receiver emanates primarily from the inadequacy of the security. It is a privilege extended to the mortgagee by reason of the inequity of permitting the mortgagor to receive the rents accruing during the pendency of the foreclosure proceedings. Mahon v. Crothers, supra. The want of personal liability of the mortgagor for the payment of the mortgage debt contributes to the necessity for equitable relief. The rents are collected by the receiver for the use of the mortgagee and can only be applied to his use in ease the mortgaged premises fail to realize the amount of the mortgage debt. The right to thus collect the rents necessarily includes the right of their application in case of deficiency. See, also, 2 Jones Mort. § ISM.

.1 will advise an order directing the receiver to pay the complainant the rents collected by him.


author: Leaming, Y. C.

text:
    Edward J. McMullin et al. v. McArthur Electric Manufacturing Company.
    [Submitted October 21st, 1907.
    Decided October 23d, 1907.]
    1. An application for the appointment of a receiver of a corporation on the ground of its insolvency is not defeated by proof that the misfortunes of the corporation are due to the wrongful conduct of complainant; any creditor or stockholder having a statutory right to apply for a receiver, and an application not being for the individual benefit of the applicant.
    2. Where an application for the appointment of a receiver of a corporation on the ground of insolvency is filed, the court must ascertain whether insolvency exists and whether a receivership is necessary, or whether the corporation will be able to resume its business with safety to the public and advantage to its stockholders, and, where the evidence justifies the belief that the creditors will be paid and the business of the corporation resumed if a receiver is not appointed, a receiver will not be appointed.
    On bill for receiver.

      Mr. Louis II. Miller, for the complainants.

      Mr. Henry S. Alvord, for the defendant.
   Leaming, Y. C.

The affidavits filed on behalf of defendant company are mainly devoted to an effort to show that the misfortunes of the company are due to wrongful conduct on the part of complainant. Matters of that nature are wholly immaterial in a proceeding of this character, as this court is in no way concerned with the motives of complainant. Any creditor or stockholder, however, unworthy, has a statutory right to apply for a receiver. The application is not treated as one for his individual benefit. When such an application is filed the duty of this court is to ascertain whether insolvency exists and whether a receivership is necessary to secure to the creditors an equal distribution of the assets, or whether, on the other hand, the company will be able in a short time to resume its business with safety to the public and advantage to its stockholders. The affidavits supply but little data to aid the court in this important inquiry. I entertain the view, however, that the evidence supplied is sufficient to justify the belief that the creditors will all be paid and the business of the company resumed if no receiver is appointed.

I will advise an order discharging the order to show cause.


author: Leaking, V. C.

text:
    James Coyle et al. v. James Coyle et al.
    [Submitted October 15th, 1907.
    Decided October 23d, 1907.]
    1. The word “issue,” in its ordinary legal meaning, embraces grandchildren and remoter descendants, as well as children. When used in a will, a more restricted meaning may be attributed to it, if, from the terms of the testamentary disposition, it appears that the testator used the word in a particular meaning less general than the ordinary meaning.

      2. Testator devised his residuary estate in trust for his wife for life, and directed that at her death the same should be divided equally, share and share alike, between his three children, “or such of them as shall survive my said wife, but if any of my said children shall have died, leaving issue, such issue shall take the share the parent would have taken if living.” A child died after the c death of the testator and before the wife, leaving children and children of a deceased child. — Held, that the word “issue” was equivalent to “children,” and the grandchildren of the deceased child of the testator took nothing.
    On bill for partition. On demurrer.
    Patrick Coyle, deceased, devised and bequeathed his residuary estate in.trust for the benefit of his widow for life and directed that after her death the property should be sold by the trustee and, after payment of a small legacy, the residue should be divided among his three children. The present controversy arises by reason of the language used by testator in directing the division between the children. The language of the will material to the present controversy is as follows:
    “The residue of said proceeds to be divided equally, share and share alike, between my three children, John, James and Margaret, or such of them as shall survive my said wife, but if any of my said children shall have died, leaving lawful issue, such issue shall take the share their parent would have taken if living.”
    John died after the death of testator and before the widow, leaving children and children of a deceased child. The widow is now dead. The question for determination at this time is whether the children of the deceased child of John have an interest in the property. This question is raised by a demurrer to a bill for partition and accounting filed by the grandchildren of .John.

      Messrs. Badgley & Badyley, for the complainants.

      Mr. Waller L. McDermott, for the demurrants.
   Leaking, V. C.

The contention, in behalf of the grandchildren of John (children of his deceased son) is that they are the “lawful issue” of John within the meaning of testator. The contention in behalf of the children of John is that the word “issue,” as used by testator, is limited in its significance by the subsequent use of the word “parent,” and in consequence refers only to the children of John.

The word “issue,” in its ordinary legal meaning, embraces grandchildren and remoter descendants, as well as children. When used in a will a more restricted meaning may be attributed to it if from the terms of the testamentary disposition it clearly appears that the testator used the word in a particular meaning less general than the ordinary meaning. This is the rule as stated by the chancellor in Inglis v. McCook, 68 N. J. Eq. (2 Robb.) 27, 39. The present inquiry is, therefore, whether it appears from the will in question that testator used the word “issue” in a restricted sense which includes children only. The only part of the will- which affords assistance in the ascertainment of testator’s intention is that part above quoted. The difficulty which is encountered in attributing to the word “issue” the significance of descendants, when used as it is here, used, is at once apparent. The expression, “such issue shall take the share their parent would have taken if living,” suggests that testator, in using the words, “their parent” referred to children only as issue. I do not think I should feel at liberty to adopt the view that this language discloses the intent of testator to use the word “issue” in the restricted sense referred to with sufficient clearness to warrant a court in disregarding the natural significance of the word, were it not for the fact that eminent jurists have in the past adopted that view. In Sibley v. Perry, 7 Ves. Jr. 523, Lord Eldon held the word “issue” similarly used in a will in collocation with the word “parent” to be used in the restricted sense of children to the exclusion of grandchildren. I think it may be fairly said that this determination of Sibley v. Perry does not appear to have been wholly free from the influence of considerations arising from other provisions of the will and circumstances surrounding it; but the case appears to have always stood as authority for the rule of construction stated, though it has not escaped severe criticism. See criticism in Ralph v. Carrick, L. R. 11 Ch. Div. 873. Sibley v. Perry is followed in Pruen v. Osborn, 11 Sim. 132, 138, and Heasman v. Pearse, L. R. 8 Eq. 299, and is referred to in Ralph v. Carrick, L. R. 5 Ch. Div. 984, 987; Kenyon v. Birks, 1 Ch. 703, 706 (1899), and Kenyon v. Birks, 1 Ch. 417, 419 (1900). It may be said, therefore, that in England it is a settled rule of construction that the word "issue,” when used in connection with the word "parent,” in the manner it is used in the will now under examination, will be understood as meaning children and excluding grandchildren. In Massachusetts the same view is adopted. King v. Savage, 121 Mass. 303, 306. As to New York, see Palmer v. Horn, 84 N. Y. 516, 519; Drake v. Drake, 134 N. Y. 220, 225; Murray v. Bronson, 1 Dem. (N. Y.) Surr. Rep. 217. In this court Sibley v. Perry has been cited in approval of the general rule that in a will the word "issue” may mean children. Price v. Seisson, 13 N. J. Eq. (2 Beas.) 168; Inglis v. McCook, 68 N. J. Eq. (2 Robb.) 27, 40. In view of the support given by the eases above cited to the view that the language used by testator clearly imports an intention upon his part to use the word “issue” with a restricted meaning equivalent to the word “children,” I am compelled to hold that the grandchildren of John take nothing.

I would add, however, that I am strongly impressed that testator’s purpose may have simply been to secure to the line of any child who should predecease the life tenant, leaving descendants, the one-third share which such child would have received if living at the termination of the life estate, or in other words, that the share should descend according to law if lineal descendants existed. Had testator simply provided that at the termination of the life estate the property should be divided between John, Henry and Margaret, John would have enjoyed a vested remainder in the undivided one-third of the property. That estate would have been subject to alienation, and if not disposed of in his lifetime by will or conveyance, it would have descended to his heirs-at-law in the event of his death prior to the termination of the life estate. But the testator was not content with that provision. He added': ■ ■ ■

“or such of them as shall survive my wife, but if any of my said children shall have died, leaving lawful issue, such issue shall take the share their parent would have taken if living.”

Tliis added provision destroyed the possibility of any person inheriting from either of the children who should die before the termination of the life estate unless such person was the issue of the one so dying. Should one of the three die without issue the surviving took under the will and not through the one so dying. The added provision in like manner destroyed the power of absolute alienation. These provisions, taken together, and the consideration of their effect, suggest to me a general purpose upon the part of testator to preserve the one-third share of a deceased-son dying during the term of the life estate to his line, if such line should exist, rather than a specific purpose to vest the share in the children of one so dying to the exclusion of the children of a deceased child; that the issue should take in the well understood manner of ordinary descent. A contrary intent would seem to call for some clear and specific statement of a contrary purpose. But as already stated I am impelled to give to the language used the force which the adjudicated cases seem to require.

I will advise an order sustaining the demurrer.


author: Lbaming, Y. C.

text:
    Louisa D. Voorhees, executrix, &c., v. Caroline H. Singer et al.
    [Decided October 31st, 1907.]
    .1. A will left a life estate in certain property to R., the remainder to her son A., or A.’s surviving lawful issue, if any, but, if A. died without lawful issue, then the remainder was to go to testator’s three sons, 0., B. and W., in equal shares, or to their lawful issue, respectively. R. survived B., who had survived A., but both A. and B. died without lawful issue--Held, that the remainder to A. did not vest because of the gift over, neither did the remainder to B. vest because of the gift over to his issue, in case R. survived him, and also because of its liability to be defeated by A. surviving R. Hence, B.’s interest being a contingent remainder, his will conveyed no interest in the property in question.
    2. At B.’s death a one-third share in the remainder lapsed, and, in the absence of a defined inclusive residuary bequest, testatrix died intestate as to that portion.
    8. Under the circumstances the lapsed bequest would go to testatrix’s next of kin in accordance with the statute of distribution.
    4. A vested remainder is one that is limited to a person in being and ascertained so that it is capable of taking effect in possession or enjoyment on a certain determination of the particular estate, without requiring the concurrence of any collateral contingency, and uncertainty as to enjoyment by the remainderman will not render the remainder contingent, providing he has by the limitation a present absolute right to have the estate the instant the prior estate shall determine, but the absence of such present absolute right renders the estate a contingent remainder.
    5. The principles governing the distinction between a vested and contingent remainder are applicable to personal property as well as to realty.
    On bill for construction of will.
    Tlie will of Caroline C. Hull, deceased, provided as follows:
    “I do give, devise and .bequeath to my said executors and the survivors and survivor of them the remaining one (1) share in trust that they during the natural life of my son Richard Cooper Hull will invest and re-invest from time to time the said one share in such securities as they may deem best and most judicious, and pay over the rents, profits, incomes and dividends thereof at reasonable intervals to my said son Richard for his own use and support, in such way as not to be liable in any way for his present and future debts, and on his decease leaving his son Richard A. him surviving, then to pay over the same to the said Richard A., or to his lawful issue, if he shall have died leaving lawful issue, but if he shall have died without leaving lawful issue him surviving, then that they pay over the said share to my said sons, Charles W., Robert B. and Wajer X, in equal shares, or to the issue of such one of them as shall have died leaving issue surviving, each one of my said sons taking one equal share, and the lawful issue of any deceased taking the share of the parent, if one solely, if more than one jointly and equally.”

      Eichard A. Hull' died without issue, June 5th, 1878. Eobert B. Hull died without issue, February 6th, 1891. Eichard Taylor Hull (the life tenant) died July 24th, 1905. The bill seeks instructions as to the disposition to be made of the share of the trust property which would have been payable to Eobert B. Hull had he survived the life tenant.

      Mr. George Reynolds, for the complainant.

      Mr. Ephraim, Tomlinson, for the defendant Caroline H. Singer.

      Messrs. Wilson, Carr & Stackhouse, for the defendant Ellen F. Hull.'

      Mr. G. Dore Cogswell, for the defendant Bessie Hull Baker.

      Mr. W. Holt Apgar, for the defendant Ida M. Hull.
   Lbaming, Y. C.

I am unable to discern any element of uncertainty or doubt in the solution of the question here presented. The interest of Eobert B. Hull in the trust bequest was that of a contingent remainder. He having died without issue prior to the termination of the life estate, one-third of the trust bequest lapsed at his death. In the absence of a defined inclusive residuary bequest testatrix died intestate as to this one-third of the trust property. In such case the next of kin of testatrix at her death take this one-third in accordance with the statute of distribution. Mulford v. Mulford, 42 N. J. Eq. (15 Stew.) 68, 74.

The distinction between a vested and contingent remainder, in a case like the present one, is well defined. The former is one that is so limited to a person in being and' ascertained that it is capable of taking effect in possession or enjoyment on a certain determination of the particular estate, without requiring the concurrence of any collateral contingency. The uncertainty as to the remainderman ever enjoying the estate, which is limited to liim by way of remainder, will not render such remainder a contingent one, providing he has, by such limitation, a present absolute right to have the estate the instant the prior estate shall determine, but the absence of such present absolute right renders the estate a contingent remainder. Weehawken Ferry Co. v. Sisson, 17 N. J. Eq. (2 C. E. Gr.) 475, 478. These principles are applicable to personal property. 2 Kent Gom. *852. Thus, in the present case, the remainder to Eichard A. Hull is not vested because testator made provision for a gift over in the event of his dying without issue before the life tenant, and the remainder to Eobert B. Hull is not vested both because of the gift over to his issue in the event of his death without issue prior to the termination of the life estate, and also because of the liability of the remainder being defeated by the death of the life tenant before the death of Eichard A. Hull. An illustration of the latter condition, given by Washburn (2 Washb. Beal Prop. (Ifth ed.) 5p8, *228), is as follows: “If the limitation be to A for life, remainder to B, B has the capacity to take this at any moment when A may die.” B therefore has a vested remainder. “But if it had been to A for life, remainder to B after the death of J. S., and J. S. is still living, B can have no capacity to take till J. S. dies.” B’s remainder is, therefore, contingent. At the death of Eichard A. Hull without issue before the termination of the life estate and prior to the death of Eobert B. Hull, the latter’s interest would have become a vested remainder but for the limitation over to his issue. As a vested remainder is subject to alienation and a contingent remainder is not, the-will of Eobert B. Hull is ineffective to vest an interest in the trust created by the will of Caroline C. Hull.

I will advise a decree directing the trustees to make distribution of the one-third of the trust property now in question in the manner in which it would be distributed had Caroline C. Hull died intestate.


text:
    Charles Shaler v. John McAleese et ux.
    L Submitted November 7th, 1907.
    Decided November 9th, 1907.]
    1. The statutory authorization of a street improvement assessment, levied because of benefits received by property adjacent to a public street which has been improved, being an exercise of the sovereign prerogative of taxation, any statutory construction seeking an ascertainment of legislative intent must necessarily have especial regard to the public necessities on which the exercise of the power is based.
    2. The legislature may provide that the lien of a tax or street improvement assessment shall have priority over liens or encumbrances existing prior to the inception of the statutory lien.
    3. Under act of March 24th, 1897, section 58 (P. L. 1897 p. 1(6), as amended by act of March 30th, 1900 (P. L. 1900 p. 42), making a street improvement assessment in certain cities a first lien upon land assessed from the confirmation of the assessment, and under section 59 of the 1897 act (P. L. 1897 ¶. 75), providing for the redemption of land sold under such an assessment by any mortgagee or by any person havinf an estate therein, a street improvement assessment is superior to that of all other liens or encumbrances, whether they are prior or subsequent in time to the date of the confirmation of the assessment.
    On bill to foreclose.
    The bill is filed to foreclose a mortgage against certain real estate in Ocean City. The answer raises the question whether the lien of a certain street improvement assessment which was assessed by Ocean City against the mortgaged premises after the mortgage had been executed and recorded operates as a lien paramount to that of the mortgage. The legislative act under which the assessment was made was passed prior to the execution of the mortgage.

      Mr. James M. E. Hildreth, for the complainant.

      Messrs. Thompson & Gole, for the defendants.
   Leaking, V. C.

The statutory authorization of a street improvement assessment, levied by reason of benefits received by a property adjacent or near a public street which has been improved by a municipality, being an exercise of the sovereign prerogative of taxation, any statutory construction seeking the ascertainment of legislative intent must necessarily have especial regard to the public necessities on which the exercise of the power is based. Sigler v. Fuller, 34 N. J. Law (5 Vr.) 227, 230; Agurs v. Newark, 35 N. J. Law (6 Vr.) 168, 171. It is well settled that it is within the legislative power to provide that the lien -of a tax or street improvement assessment shall have priority over liens or encumbrances existing prior to the time of the inception of the statutory lien. Morrow v. Dows, 28 N. J. Eq. (1 Stew.) 459, 463; Trustees v. Trenton, 30 N. J. Eq. (3 Stew.) 667, 676; Vreeland v. O’Neil, 36 N. J. Eq. (9 Stew.) 399; S. C., Vreeland v. Jersey City, 37 N. J. Eq. (10 Stew.) 574; S. C., Providence Institution v. Jersey City, 113 U. S. 506. The opinion of Mr. Justice Davis, in Osterberg v. Union Trust Co., 93 U. S. 424, appears to proceed upon the theory that prior encumbrances are subordinated to the lien of a tax assessment unless it is" otherwise directed by the statute under which the tax is levied, but in this state it has been uniformly held that the lien of a tax or street improvement assessment created by a statute will not have that effect unless such a legislative purpose is clearly manifest by the terms of the act. Dows v. Drew, 27 N. J. Eq. (12 C. E. Gr.) 442, 444; Morrow v. Dows, 28 N. J. Eq. (1 Stew.) 459, 464; Trustees v. Trenton, 30 N. J. Eq. (3 Stew.) 667, 679.

The assessment here in question was levied pursuant to the terms of the act of March 24th, 1897 (P. L. 1897 ¶. 46), as amended. As amended March 30th, 1900 (P. L. 1900 p. 4%), section 58 of the act provides that

■“all such assessments * * * shall be and become a first and paramount lien upon the land and real estate so assessed from the date of confirmation of said assessment until the same shall be paid.”

Bearing in mind that assessments of this class are not burdens imposed on an individual for governmental ends, but spring from special benefits conferred upon the particular land which is charged with the lien by reason of the construction of an authorized public work, and also the imperative necessity that the expenditures so made shall be collected from the land benefited to the extent of the benefits so conferred, I think the language of the act above quoted clearly manifests a legislative purpose that the lien of the assessment shall be superior to that of all other liens or encumbrances, whether such other liens or encumbrances are prior or subsequent in time to the date of the confirmation of the assessment. If the lien of a mortgage which is executed and recorded prior to the date of the confirmation of the assessment is to be regarded as paramount to that of the assessment, it is manifest that in many cases the collection of the assessment must be rendered impossible. The necessities which give character to the legislation forbid the assumption of such a legislative purpose.

But if any doubt may be said to exist as to the force of the language of the act above quoted, such doubts are removed by an examination of the subsequent provisions of the act. Section 59 of the act makes specific provisions for the redemption of the land sold under the assessment by any mortgagee of the land or by any person having an estate therein. This provision clearly manifests the legislative purpose to make the lien of the assessment paramount to that of a pre-existing mortgage. Nó satisfactory reason can be found for this provision upon any other theory. In the language of Justice Dodd, speaking for the court of errors and appeals, in Paterson v. O’Neill, 32 N. J. Eq. (5 Stew.) 386, 388: “If his estate (that of the prior mortgagee) were intended to be left unaffected by and paramount to the tax, why should he need to redeem. Why redeem or buy back what had not been sold away.” This court has repeatedly treated the existence or absence of similar redemption clauses in similar acts as manifesting the legislative intent1 in the respect here under consideration. Hopper v. Malleson, 16 N. J. Eq. (1 C. E. Gr.) 382, 388; Dows v. Drew, supra; Vreeland v. O’Neil, 36 N. J. Eq. (9 Stew.) 399, 401; Hand v. Startup, 38 N. J. Eq. (11 Stew.) 115, 117.

I will advise a decree to the effect that the lien of the assessment is paramount to that of the mortgage.


author: Beaming, Y. C.

text:
    Mary A. Ostheimer v. Gustav Single et ux.
    [Submitted October 23d, 1907.
    Decided November 9th, 1907.]
    1. Under the statute of frauds, requiring an express trust in land to be manifested by some writing signed by the parties to be charged, parol evidence as to an agreement for the purchase of certain lands is insufficient to establish an express trust in relation thereto.
    2. When a person purchases land with his own money and takes title in his own name, a trust cannot be raised in favor of another by a parol agreement of the purchaser that he would make the purchase for the benefit of another and permit the other to thereafter make payment, since when the alleged beneficiary sets up a resulting trust in himself, the conveyance being to another, he must show that the land was bought with his own money and not merely for his benefit, and a subsequent payment of the money will not by relation attach a resulting trust to the original purchase.
    3. Where a purchaser borrowed money to purchase land, agreeing that defendant might thereafter pay for one-third thereof and take title to that portion, the transaction was not a loan of one-third of the money to defendant, but the purchaser bought the land with his own money.
    4. O., W. and S. agreed orally to buy a tract of land in partnership. O. mortgaged his own property and with the proceeds bought the land, taking title in his own name, but agreeing orally to hold two undivided thirds for W. and S., and to convey to them on payment of their shares. Later O. executed a written agreement, in the form of an ordinary contract of. sale, to convey to W. and S. each one-third of the land; free of encumbrance, on payment of their respective shares of the purchase price. The wife of O. did not join in this agreement, nor in the deed subsequently made to S. in obedience to a decree for specific performance obtained by S. against O. — Held, that the facts did not raise a constructive trust ox maleficio in O. for the benefit of S., so as to prevent O.’s widow from claiming dower in S.’s one-third.
    5. The existence of the written agreement of sale made by O. to S., which S. enforced as an agreement of sale to the extent of procuring a decree for its specific enforcement, was. also inconsistent with the existence of any trust.
    6. Where complainant’s husband bought land and later conveyed a one-third interest in the same to defendant, complainant not joining in the conveyance, she does not lose her dower right therein, though sole devisee of her husband, by failure to file a dissent under the Dower act, section 16 (Gen. Stat. p. 127S), the section providing that the widow’s dower is barred by a failure to file the dissent only as to lands devised by hei- husband’s will.

      7. O. agreed, in writing, to "convey land to S. free of encumbrance. O.’s wife did not join in the agreement, nor in the deed subsequently made to S. by O. in obedience to a decree of specific performance. After the death of O. his widow sued for her dower in the lands conveyed to S-, who claimed that, since rhe deed to him from O. was not free of the encumbrance of her dower, he had a claim against the estate of O. and his widow as sole devisee for the amount of the encumbrance which he was entitled to set off against the widow’s claim of dower. — Held, that ihe set-off could not be allowed, since that would necessitate an adjudication that the estate of O. was liable, which could only be made at law after a claim filed, and none had been filed, and would also necessitate an adjudication that O.’s widow had received assets to the amount of the claim which could not be determined till the administration was closed.
    8. There is no liability of a widow as sole devisee of her husband for a claim against his estate based on the failure of the husband to comply with a decree of specific performance of a contract to convey an interest in certain land, unless she receives assets to the amount of the claim.
    On bill for clower.
    Herman Ostheimer (the husband of complainant), George Walker and defendant Gustav Single were intimate friends; Ostheimer and Single were connected by marriage and Walker was a member of the family of Single. They determined to purchase a tract of land "'in partnership,” each to own an undivided one-third interest. Neither having ready money Ostheimer borrowed the necessary money by executing a mortgage on other property then owned by him, and with his money (except as to $10 prior to that time paid by Walker to bind the bargain) paid for the land and took title in his own name, stating to his associates that he would hold the title for them as to the undivided two-thirds of the land purchased and convey to them one-third when they should thereafter pay their respective shares of the purchase price. Walker was instrumental in procuring the loan for Ostheimer; but does not appear to have made himself liable for its repayment. No written agreement or memorandum was executed by the parties. Some weeks after title was taken by Ostheimer he executed an instrument, in the ordinary form of an agreement for the sale of land, wherein he agreed to convey to Walker and Single each one-third of the land so held by him free from encumbrance upon the payment by either of them of one-third of the purchase price. In this agreement complainant — wife of Ostheimer — • did not join. Walker subsequently paid to Ostheimer his one-third of the purchase-money and a deed was made by Ostheimer and his wife to Walker for an undivided one-third of the land. Defendant Single subsequently paid to Ostheimer his one-third of the purchase-money, but for some reason Ostheimer refused to convey as agreed, and a bill for specific performance was filed by Single, based on the agreement of sale above referred to, and a decree procured wherein Ostheimer was directed to convey to Single an undivided one-third of the land free from encumbrance. This deed was made by Ostheimer pursuant to the decree, except that the wife of Ostheimer (complainant) did not join in the deed, and to that extent the conveyance was not free from encumbrance. Subsequently a partition of the land was had in this court, and the one-third shares of Ostheimer, Walker and Single, respectively, were set off in severalty. Ostheimer is now deceased, and the present bill is filed by his widow to recover her dower in the one-third which was in the partition suit set off to defendant Single.

      Mr. Adam B. Sloan, for the complainant.

      Mr. Charles S. King, for the defendants.
   Beaming, Y. C.

It is urged on behalf of defendant Single that the title of Herman Ostheimer was a trust title as to the one-third share now held by defendant, and that in consequence no dower right in that share' has been acquired by complainant. I am entirely satisfied that it was the original intention of the three parties named (Herman Ostheimer, George Walker and defendant) that the land should be regarded as owned by them as tenants in common. Had they taken the precaution to properly reduce their trust agreement to writing no difficulty would now be encountered in giving effect to the intention of the parties to the transaction. But the statute of frauds requires that an express trust in land must be manifested and proved by some writing, signed by the party to be charged. The effect of this statute is to render the evidence offered insufficient to establish an express trust in favor of defendant.

It is also manifest that a resulting trust will not arise from the circumstances proven. When a person purchases land with his own money, and takes title in his own name, a .trust cannot be raised in favor of another by reason of the existence of a parol agreement upon the part of the purchaser that he would make the purchase for the benefit of another and permit the other to thereafter make payment. One who sets up a resulting trust in himself, the conveyance being to another, must show that the land was bought with his money, and not merely that the purchase was made for his benefit or on his account. A subsequent payment of the money will not by relation attach a resulting trust to the original purchase, for a resulting trust arises from the fact that the money of the real and not the nomina] owner formed the consideration of the purchase at the time and became converted into land, 3 Reed St. Frauds §§ 911, 922; 3 Pom. Eq. Jur. § 1037; Howell v. Howell, 15 N. J. Eq. (2 McCart.) 75; Cutler v. Tuttle, 19 N. J. Eq. (4 C. E. Gr.) 549, 562; Tunnard v. Lettell, 23 N. J. Eq. (4 C. E. Gr.) 264, 267; Krauth v. Thiele, 45 N. J. Eq. (18 Stew.) 407, 409; Whitley v. Ogle, 47 N. J. Eq. (2 Dick.) 67, 69; Botsford v. Burr, 2 Johns. Ch. 405, 409; Bailey v. Hemenway, 147 Mass. 326. In view of these well-settled principles it is manifest that no trust resulted in favor of defendant unless a portion of the money which was by Ostheimer paid for the land may be regarded as having been defendant’s money. I am unable to so regard the-facts. The money which was paid for the land at the time of the execution of the deed to Ostheimer was Ostheimer’s money. Itwas money raised by the execution of a mortgage by him on land of his own. While it appears that his purpose in borrowing this money was to enable him to purchase the land in question for the benefit of defendant as to the undivided, one-third of it in order that defendant could thereafter pay the one-third and take title to that portion, yet'it is clear that the ’ transaction cannot properly be considered or treated as a loan of one-third of the money to defendant. Had defendant failed to subsequently pay Ostheimer one-third of the purcba.-e price of the bind, it is clear that the latter could not have maintained an action on contract for the money based on the irmsaetions antecedent to the purchase.

It is also manifest that the facts proven do not raise a constructive trust ex maleficio. @ Pom. Bq. Jur. § 10&6.

I also entertain the view that the existence of the written agreement 'wherein Ostheimer agreed to convey to defendant the one-third part of the property purchased operates to defeat any claim of a trust estate. This instrument has been enforced by defendant as an agreement of sale to the extent of the procurement of a decree for specific performance. Its terms are also inconsistent with the existence of any trust estate.

It is further urged on behalf of defendant that as complainant is sole devisee of the estate of Herman Ostheimer and has filed no dissent under section 16 of the Dower act (Gen. Stat. ¶. 1278) she cannot now claim a dower right in the premises in -question. The section cited does not have the effect contended for. By the language of that section the widow’s dower is barred -only in other lands devised by her husband’s will.

The further claim is made on behalf of defendant that inasmuch as the decree for specific performance, to the effect that Ostheimer should convey to defendant free from encumbrance, has not been complied with in that complainant did not join in the deed executed pursuant to that decree, a claim now exists in favor of defendant against the estate of Ostheimer to the ■extent of the value of the dower interest of complainant.' This claim defendant asks to have set off against the present claim for dower by reason of the fact that complainant is sole devisee of the estate of Ostheimer. I doubt the right of this court to -enforce such an offset, and especially so in the present condition of the record. To do so involves an affirmative adjudication that the estate of Ostheimer is liable on such a claim. That ■adjudication properly belongs to a law court after a claim shall have been filed with the executrix of the estate. I do not understand that such claim has been filed.' It involves also an affirmative adjudication that complainant has, as devisee, received assets to the amount of the claim. That fact can only be finally ascertained at the conclusion of the administration of the estate. If the claim against the estate can be established and the assets of the estate are large enough to charge complainant as devisee with the amount of the debt, then defendant is entirely secure from loss. In case of failure of assets there is no liability upon the part of complainant as devisee.

I am obliged to advise the assignment of dower in favor of complainant.


text:
    George Buchanan et al. v. Reba Buchanan et al.
    [Submitted January 11th, 1908.
    Decided January 17th, 1908.]
    1. Next of kin may enjoin misappropriation of decedent’s personalty in the hands of a stranger before an administrator has been appointed.
    2. By making defendant their witness complainants precluded themselves from impeaching her credibility, but not from establishing facts contradicting her testimony.
    3. That complainants assert defendant’s credibility by offering her as their witness does not require the court to accept her testimony as true as against complainants.
    4. In a suit by next of kin to enjoin the disposition of personalty by a stranger, evidence held to show the-personalty belonged to decedent and’ not to defendant.
    5. Though fraud is not presumed and must be proved, it may be deduced from circumstances and conditions which afford strong presumptions of its existence.
    On bill, answer, replication and proofs.
    The bill is filed by the son and daughter of Dr. John Buchanan, deceased, as his next of kin and sole heirs-at-law. It avers that. defendant, while acting as clerk of Dr. Buchanan, in á business - conducted by him under the name of Buchanan & Company, at and prior to his death, wrongfully appropriated to her own use the profits of the business as well as his entire estate, and that she now holds the same in her possession and under her control. The bill seeks to enjoin defendant from disposing of the property referred to.
    The answer asserts that the business referred to in the bill, as conducted under the name of Buchanan & Company, was in fact the business óf' defendant, and that Dr. Buchanan had no interest therein; that the property now held by defendant is her individual property and has been'acquired by her, in part, in'the-business referred to and in part as an artist and authoress; that Dr. Buchanan resided with her until his death and was an object of her charity, and that he died penniless'.

      Mr. John W. Wescoti, for the complainant.

      Messrs. Qarrow & Kraft, for the defendant.
   Lbaming, Y. C.

It is urged in behalf of defendant that as no administrator of the estate of Dr. Buchanan has yet been appointed, this court should not, at the instance of the next of kin, exercise jurisdiction over any personal property’which may have belonged to him at his decease. While it is true that personal property of a' deceased intestate must pass to a personal representative and be distributed under order of court to the next of kin of deceased, it is not true that the next of kin are without interest in the protection of the property before an administrator is appointed. Where, as in this case, it is alleged by the next of kin that the personal property of a deceased intestate is being misappropriated by a stranger, it is the peculiar province of this court to protect the property and preserve its present status until an administrator shall have been appointed. To await the appointment of an administrator and an application by him to this court for the protection of the property, might, in many cases, result in the loss of the property. This court may, in such cases, appropriately appoint a receiver to -take possession of1 and protect the property in controversy. This was determined in Flagler v. Blunt, 32 N. J. Eq. (5 Stew.) 518, where relief was sought by a creditor. A similar right on the part of .the next of kin is supported in Hansford v. Elliott, 9 Leigh 79; see, also, 4 Pom. Eq. Jur. § 1332.

At the hearing complainants called defendant as their witness and examined her at great length. It is now urged, in behalf of defendant, that complainants are, in consequence, bound by her testimony so far as it is responsive to the questions asked. That is not the effect of calling an adverse-party as a witness. By making defendant their own witness complainants were precluded from impeaching her credibility. That is, they could not offer evidence for the purpose of showing that she was unworthy of belief as a witness. But they were not precluded from introducing evidence to establish facts the contrary of facts to which defendant testified while testifying as complainants’ witness. Such evidence would tend to discredit, and might entirely discredit and wholly destroy, the force of the evidence given by defendant and in that manner affect her credibility; but the rule of evidence which denies to parties the right to impeach their own witnesses does not prevent impeachment in that manner. The rule against impeachment denies the right to impeach the general reputation of the witness for truth, but does not deny the right to show that the whole or any part of the testimony of the witness is untrue. 1 Greenl. Evid. §§ 442, 443; Skellinger v. Howell, 8 N. J. Law (3 Halst.) 310; Ingersoll v. English, 66 N. J. Law (37 Vr.) 463; Thorp v. Leibrecht, 56 N. J. Eq. (11 Dick.) 499. Nor does the fact that complainants assert the credibility of defendant in offering her as their witness in any way require the court to accept the testimony as true as against complainants. As is stated by Vice-Chancellor Van Fleet, in Daggers v. Van Dyck, 37 N. J. Eq. (10 Stew.) 130, 132, and in Second National Bank v. O’Rourke, 40 N. J. Eq. (13 Stew.) 92, 94, evidence, to be believed, must not only proceed from the mouth of a credible witness, but it must be credible in itself — such as the common experience and observation of mankind can approve as probable under the circumstances. In the present case defendant’s testimony must be weighed as other testimony is weighed, and it may be accepted in whole or in part or disregarded as its intrinsic merit shall appear when it is considered in the light of all the circumstances of the case. I dwell at this length upon this feature in view of the arguments made at the hearing and the extraordinary story related by defendant.

The value of the property, real and personal, which the evidence discloses to be now held by defendant, is not definitely shown, but it may be said to be about $15,000 or $20,000. Defendant claims that this property belongs to her. To account for the possession and ownership of this property, defendant relates the history of her life, which may be briefly outlined as follows: Until a young lady, she lived with Rece and Ann Hurffi, at Roadstown, New Jersey, believing them to be her parents. Mrs. Iiurff then disclosed to her that she was not her mother. Later, she went to live with Dr. Stitts, at Salem. While living there she learned that her real father was Dr. John' Buchanan. In 1885, she went to New York City and there established the business of a manufacturing chemist and engaged m compounding and selling proprietary medicines under the business name of Buchanan & Company. Shortly thereafter she sent fox Dx. Buchanan, who was then in Philadelphia, and in destitute circumstances, to come and make his home with her. From that time until his death Dr. Buchanan was supported by her in her home, first, in New York City and later in Brooklyn. At his death, January 20th, 1905, Dr. Buchanan had no property and was buried by defendant at her own expense. In her answer defendant accounts for the property which she has by the statement that it represents, in part, the profits from the business conducted by her under the name of Buchanan & Company, and in part, earnings by her as an artist,and as an authoress. In her testimony she claims an additional source of revenue. She states that a heavily veiled woman would call upon her from time to time and present her money; that this woman claimed to be her mother and refused to permit defendant, at any time, to see her face or to know her name. The aggregate amount of the gifts received from this unknown woman is estimated by defendant at about $10,000. Defendant claims that the money so given to lier was invested by’her in the capital stock of banks. She now holds, according to lier testimony, stock in five several national banks of Philadelphia, which stock, she says, was purchased by her at various times named by Ker’from 1898 to 1905, inclusive. The aggregate number of shares of bank stock disclosed by her is seventy. These shares, she says, are now locked up in a safe deposit vault in'New York City, under the care of a retired gentleman by the name of J. C.‘ Marshal, whose address she does not know,, and who is now abroad. She says she has money deposited in four or five banks but can only name two. In the Cumberland National Bank, at Bridgeton, New Jersey, she has about $3,000 and in the Ctreénwieh Bank, of New York City, about $500 or $600.’ Since the’decease of Dr. Buchanan, defendant has purchased a residence in Bridgeton, New Jersey, for $4,500. She testifies that she has made considerable money from the sale of pictures painted by her. She claims to have learned to paint within the past fifteen years and to have sold many pictures. The second picture she painted she claims to have sold for $1,000. She cannot state to whom she has sold any of her paintings. She'testifies also’that she wrote and published a work called “The Germicide” and refers to this as' another source of income. The' work, produced by complainants as an exhibit, is a medical work covering over one thousand octavo pages. When examined, touching lier knowledge= of' tlie contents of the book she explained that' it was lárgely copied from other medical works and not wholly written by her.

It is manifest that, if defendant’s testimony is true, Dr. Buchanan died’ without property, and the property now controlled by defendant belongs to her. I am, however, unable to believe her statements. While the general story of her life may be within the bounds of possibilities, so many of her statements conflict and’ so many are otherwise manifestly untrue that it seems impossible to rely upon the most material parts of her testimony. The evidence offered in behalf of complainants entirely satisfies me that defendant is not the illegitimate daughter of Dr. Buchanan, but that she is the daughter of Mr. and Mrs. Beee Hurff. Daniel Hurff testifies that he was the second of nine children of 'Bece and Ann Hurff, and that defendant had always been known in the family as the next younger child. They were reared together from childhood and until this trial he had never heard it questioned but that she was his own sister'. His parents are now both dead, but he produced their family record of births and deaths in which defendant is recorded as the third born under date of November 2d, 1852. In view of the evidence thus offered it is impossible to believe that defendant’s mother ever declared to defendant her illegitimacy, or that Dr. Buchanan ever claimed her as his child, or that an unknown woman ever claimed to be her mother and contributed $10,000 in the manner stated. The statements of defendant touching the medical publication are not only conflicting but are manifestly untrue. At first she claimed its authorship, while her later qualifications of that claim and her manner in testifying upon the subject would go far to satisfy anyone of her want of truthfulness. But, in addition, it is entirely apparent that defendant is not mentally qualified to write or even compile- such a work, or to edit a medical pamphlet which was published by Buchanan & Company during the progress of that business. It is also difficult to accept defendant’s testimony touching the revenues which she claims to have received from her paintings. She undoubtedly painted, but I am unable to believe that her paintings were a source of any considerable amount of revenue. I am entirely satisfied that defendant’s source of revenue, and her only source of revenue, was from the business conducted under the name of Buchanan & Company, and that the property she now has represents the profits'of that business. In this view the controlling question is whether that business belonged to her, as she claims, or whether it belonged to Dr. Buchanan, -as claimed by complainants.

The evidence offered in behalf of defendant clearly establishes the fact of defendant’s activity in the management of the business of Buchanan & Company. She appears, to have had practically the entire charge of the.business. . She handled’the cash and deposited it in bank to the account of Buchanan & Company and dr.ew all checks against that account... Places where the business was at times conducted were rented by herv The ex-pressman who shipped the products.of the business testifies that he transacted all of his business with defendant. The evidence shows that while Dr. Buchanan, was usually in the place of business he was, as a rule, engaged in writing, though at times engaged in compounding remedies. Incident to the business there was also the publication of a medical pamphlet and current price-list. In this manner the business of Buchanan & Company was conducted, a business which included the manufacture and sale of proprietary medical remedies and the publication of current medical literature. It is impossible for me to believe that this business belonged to defendant. The circumstances of the case seem to forbid that belief, notwithstanding the important acts which defendant appears to have been permitted to perform in connection with the business which might indicate that she was its owner.- She claims to have gone to New York and there established the business for herself, alone and without aid. If so, why did she then adopt the business name of Buchanan & Company ? She was not known by the name of Buchanan and is now unable to give any satisfactory reason for the adoption of that business name. But far more important is the fact that it is impossible for me to believe that defendant was mentally capable of establishing that business. I do not think that anyone could have listened to her testimony and believed that she ever established or was able to have established the business of a manufacturing chemist or to have supplied the knowledge necessary for its maintenance. On the other hand; the ability of Dr. Buchanan in that line cannot be questioned. The various medical works of which he is the author attest an active and progressive intellect on his part. He was, at that time, under a cloud by reason of his conviction of crime in Philadelphia. His business prospects in that city were practically destroyed. That he should undertake the establishment of a business in New York was natural; that he should go there as an object of charity of defendant is, under the evidence, impossible of belief. I am convinced that the business of Buchanan & Company must have been established and maintained by the brains and skill of Dr. Buchanan, and that whatever the relation of defendant to that business may have been, it was not as its proprietor. The evidence, considered in the light of all the circumstances of the case, convinces me that the business was his. Defendant appears to have been trusted to almost an unlimited degree in the affairs of the business. In view of his studious habits and advanced age, and the manifest necessity of his attention to the technical needs of the business, it is more or less natural that he should have entrusted defendant with the entire supervision of the accounts and cash. The result has been that at his death he is found penniless with defendant in affluence. From time to time during the progress of the business she has drawn money from the account where the moneys of the business were deposited and invested them for her own use as has already been shown, and fifteen days before his death, at a time when he was helpless, she closed out the account of Buchanan & Company and deposited the balance — then $2,000 — in her own name as R. R. Russell. To that account she has deposited since his death over $13,000, and drawn out all but a balance of a little over $600. The conclusion forces itself upon my mind that she has been unfaithful to the trust reposed in her and has wrongfully appropriated to her own use the profits of a business which rightfully belonged to Dr. Buchanan, and that she should now account to the estate of Dr. Buchanan for the money thus wrongfully appropriated both before and since his death. I have thought that, perhaps, under the evidence, there might be grounds for the conclusion that Dr. Buchanan has advisedly acquiesced in all that defendant has done, but I am satisfied that, in yiew of his age and habits and surrounding circumstances, such a conclusion cannot be justified. Even a formal gift from him to her of all of his earnings, in view of their relations, would probably fall within that class of cases where independent counsel is necessary to support the act, as is exemplified in Slack v. Rees, 66 N. J. Eq. (21 Dick.) 447.

It'is earnestly urged in behalf of defendant that fraud is not to be presumed, but that it must be established by proofs. The rule is as stated by counsel, but positive and express proof of fraud is not required. Fraud may be deduced from circumstances and conditions which afford strong presumptions of its existence. It is not impossible for courts of equity to relieve against fraud which is established by presumptive evidence only. 1 Story Eq. Jur. § 190; 3 Greenl. Evid. § 254; Torrey v. Buck, 2 N. J. Eq. (1 Gr. Ch.) 366, 375. To my mind the evidence in this case justifies and requires the finding of fact here made.

I will advise a decree enjoining defendant from making any disposition of the property in her possession and under her control other than its-surrender, to an administrator,of the estate of Dr. John Buchanan, when an administrator shall have be.en appointed.