author: Ingraham, J".:

text:
    FRANCES H. DUCLOS and Another, Respondents, v. MARY S. BENNER and FRANK M. BONTA, Individually and as Executors and Trustees of HIRAM BENNER, Deceased, Appellants, Impleaded with Others, Defendants.

      Will — trusts — effect of the death of an infant before majority — remainder)', when in trust.

    A testator, by liis will, gave to liis executors and trustees a sum of money in trust, “ to pay over tlie income, interest, profits and earnings thereof” to his wife, semi-annually, during her life. The money was invested by them in bonds which, during the lifetime of the widow, -were sold at a profit.
    In an action brought for the purpose of obtaining a construction of the will:

      Held, that the widow was not entitled to receive the profit, but was entitled to have the profit invested and to receive its income during her life.

    The will directed that the residuary estate be divided into six shares, and gave to the father of an infant for the maintenance of his son the income of one share, and directed that the principal be paid to the infant at majority, The infant died, while under age, without issue. By a subsequent clause of the will the testator provided that if the infant died leaving issue they should receive the share he would have taken, but that if he died without issue “ the share which would have gone to, or have been held for his benefit, shall belong to and be divided among my surviving children, and the lawful issue of those who shall have died, in the same manner as hereinbefore provided.”
    The testator had, by former provisions of his will, created in the other five residuary shares trusts for life, or until the marriage of his children, and had provided that in the case of the death of either without issue the same disposition should be made of the share as that above stated in regard to the share of the grandson. Held, that as there was no bequest of the share to the grandson until majority, the estate in such share vested in the executors and trustees until that event.
    That the trust in respect thereto did not cease entirely with the death of the grandson; that the pro rata part of its income should be applied equally to the use of such of the surviving children as were not, by the terms of the will, as yet entitled to the principal.
    That, in the case of each of those to whom or to whose issue there had been paid under the will the principal of the shares given to such person by the will, there should also be paid one-fiftli of the principal of the share of the infant.
    That a direction by the court to the executors and trustees to pay absolutely to two of the testator’s children, who were not as yet entitled to the principal of their own shares, their proportionate part of the deceased infant’s share was error and justified an appeal by the executors and trustees from the judgment entered thereon.
    Appeal by the defendants, Mary S. Benner and Frank M. Bonta, as executrix and executor and as trustees under tbe will of Hiram Benner, deceased, from certain parts of a judgment, entered in tbe office of tbe clerk of tbe city and county of New York on the 25th day of June, 1891, as follows:
    First. From the second provision or direction in said judgment, in the following words: .
    “ Second. It is ordered and adjudged that there was no trust created in and by the last will and ■ testament of Hiram Benner, deceased, as to the plaintiffs’ shares or portions of the estate bequeathed to Hiram Benner Bonta in the event of his dying before he arrived at the age of twenty-one years without leaving lawful issue him surviving, and that the plaintiffs, Charles H. Benner and Frances H. Duelos are entitled' to receive two-fifths share thereof, out and out; and that the plaintiffs are also entitled to receive upon the death or remarriage of the said Mary S. Benner two-fifths of the share of the said sum of thirty thousand dollars which has been set apart and invested by said trustees, for her benefit, which would have been coming to the said Iliram Benner Bonta had he lived and had arrived at the age of twenty-one years at the death or remarriage of the said Mary S. Benner.”
    Second. And from the fourth provision or direction of said final judgment, which is as follows:
    • “ Fourth. It is also ordered and adjudged that the said Mary S. Benner, executrix and trustee, pay to the plaintiff Charles H. Benner, or his attorney, the sum df two thousand and thirty-nine dollars and sixty-one cents ($2,039.61), being his proportionate share in the share or portion to which the said Hiram Benner Bonta would have been entitled in said estate had he lived and arrived at the age of twenty-one years.”
    Third. And from the fifth provision or direction of said final judgment, which is as follows:

      “Fifth. It is also ordered and adjudged that the said Mary S. Benner, executrix and trustee, pay to the plaintiff Frances H. Duelos, or her attorney, the like sum of two thousand and thirty-nine dollars and sixty-one cents ($2,039.61), being her proportionate share in the share or portion to which the said Hiram Benner Bonta would have been entitled in said estate had he lived and arrived at the age of twenty-one years.”

      Fourth. And from so much of the tenth provision of said final judgment, as is in the following words :
    “ Excepting so much and such part thereof to which the said Hiram Benner Bonta would have been entitled if living and had arrived at the age of twenty-one years, and the said proportionate share being one-sixth part thereof, shall be deducted from said property, or the proceeds thereof, and said trustee who may succeed the said Mary S. Benner, shall pay to the said Charles H. Benner, or his attorney, the said one-sixth part thereof, out and out.”
    Fifth. And also from so much of the eleventh provision of said final judgment as is in the following words:
    “Excepting so much and such part thereof to which the said Hiram Benner Bonta would have been entitled if he had lived and arrived at the age of twenty-one years, and the said proportionate share being one-sixth part thereof, which shall be deducted from said • property, or the proceeds thereof, and said trustee who may succeed the said Mary S. Benner, shall pay to the said Frances H. Duelos, or her attorney, the said one-sixth part thereof, out and out.”
    Sixth. And from so much of the twelfth provision of said judgment as is in the following words:
    “ Less one-sixth part of said fifth part of said share as hereinafter mentioned ” and “ and the said one-sixth part of said one-fifth part of said share or portion, being the share or portion to which the said Hiram Benner Bonta would have been entitled had he lived and arrived at the age of twenty-one years, should be paid to the said Charles H. Benner, or his attorney, out and out.”
    And from so much of said twelfth provision as is in the following words:
    “ Less one-sixth part of said fifth part of said share as hereinafter mentioned,” and “ and the said one-sixth part of said one-fiftli part of said share, being the share or portion to which the said Fliram Benner Bonta would have been entitled had he lived and arrived at the age of twenty-one years, shall be paid to the said Frances II. Duelos, or her attorney, out and out.”
    Seventh. And also from each and every part of the said final judgment which assumes to give to the plaintiffs any portion of the share which Hiram Benner Bonta would have been entitled to under the will if lie had lived and arrived at the age of twenty-one years, out and out, instead of declaring the same to be held in trust.
    Also an apjieal by Mary S. Benner, individually, and as executrix and trustee under the will of Hiram Benner, deceased, from parts of said judgment as follows :
    First. From the third direction contained in said judgment, which is in the following language:
    “ Third. It is also ordered and adjudged that the said Mary S. Benner, as executrix and trustee, pay the plaintiffs and defendants herein named the following amounts, being their shares in the sum realized on the sale of the thirty thousand dollars United States four per cent bonds:
    “ I. That the said Mary S. Benner, as executrix and trustee, pay to the plaintiff, Frances H. Duelos, or her attorney, the sum of one thousand six hundred and ninety-three dollars and twelve cents ($1,693.12).
    “ II. That the said Mary S. Benner, as executrix and trustee, pay to the plaintiff, Charles IT. Benner, or his attorney, the sum of one thousand six hundred and ninety-three dollars and twelve cents ($1,693.12).
    “ III. That the said executrix and trustee pay to each of the defendants, Ella D. Benner, Ida T. Benner and Mary B. Benner, or their attorneys, the sum of one thousand six hundred and ninety-three dollars and twelve cents ($1,693.12).”
    And from every part thereof.
    Second. From each and every part of said final judgment which assumes to make any disposition of the sum realized on the sale of the $30,000 United States four per cent bonds, or any part thereof, and asks that, in that respect, the judgment be reversed, and that the snm of $8,165.60, the premiums arising from the sale of the $30,000 government bonds be declared to belong to this appellant individually under the provisions of the will of Hiram Benner, deceased.
    The ease was tried at the New York Special Term by the court, without a jury. The court found as facts, among other things, as follows:

      Sixth. That Hiram Benner Bonta, the grandson of the testator, died on the 21st day of May, 1888, at the age of twelve years, without leaving lawful issue him surviving.

      Thirteenth. That in and by said last will and testament the said executors were directed “ to set apart and invest in the name of Mary S. Benner and Frank M. Bonta, as executors and trustees of the last will and testament of ITiram Benner, deceased, the sum of $30,000, or one-third of the appraised value of the personal estate of the testator as the said Mary S. Benner shall elect in writing, and the income, interest, profits and earnings thereof shall be paid to the said Mary S. Benner half-yearly so long as she shall live.” That afterward the said Mary S. Benner elected in writing to have set apart and invested the sum of $30,000 in the names of said Mary S. Benner and Frank M. Bonta, as executors and trustees of the last will and 'testament of Hiram Benner, deceased.
    The will of the testator, among other things, provided as follows:

      “Second. I give, devise and bequeath unto my executors and trustees hereinbefore named, the survivors or survivor of them or those or the one who shall qualify, all the estate of which I shall be seized or possessed, real and personal, and wheresoever the same may be in trust to and for the following uses and purposes, to wit: 'To receive and collect the rents, issues and profits thereof, and to collect in, sell and realize upon my said estate, real or personal, at any time, in any manner and upon any terms which they may deem proper and advisable, and securely invest and reinvest the proceeds thereof.
    “To divide the residue of my whole estate, real and personal, into six equal parts, and
    “1. To pay the income of one-sixth of the principal thereof to my son Charles IT. Benner, half yearly, during his natural life, and upon his death to divide the said one-sixth share among his lawful issue him siirviving, per stirpes, and not per capita.

    “ 2. To pay the income of another sixth part thereof to my daughter Frances Duelos, the wife of James M. Duelos, half yearly, during her natural life, and upon her death to divide the said one-sixth share among her lawful issue her surviving, per stirpes, and not per capita.

    “ 3. To pay to my said wife for the support, maintenance and education of my daughter Ella Benner, the income of another sixth part thereof, -each and every year during her minority ; such payments to be made quarterly or oftener as my executors and trustees may determine, and upon attaining the age of twenty-one years, or upon the marriage of my said daughter Ella, whichever event shall first happen, to transfer and pay over to my said daughter the said share or part of my estate.
    “ 4. To pay to my said wife for the support, maintenance and education of my daughter Ida Benner, the income of another sixth part thereof each and every year during her minority, such payments to be made quarterly or oftener as my executors and trustees may determine, and upon attaining the age of twenty-one years or upon the marriage of my said daughter Ida, whichever event shall first happen, to transfer and pay over to my said daughter the said share or part of my estate.
    “ 5. To pay to my said wife, for the support, maintenance and education of my daughter Mary Benner, the income of another sixth part thereof, each and every year during her minority, such payments to be made quarterly, or oftener as my executors and trustees may determine, and upon attaining the age of twenty-one years, or upon the marriage of my said daughter Mary, whichever event shall first happen, to transfer and pay over to my said daughter the said share or part of my estate.
    “ 6. To pay to my son-in-law- Frank M. Bonta, for the support, maintenance and education of my grandson Hiram Benner Bonta, the son of my deceased daughter Laura and said Frank M. Bonta, the income of another sixth part thereof, each and every year during his minority, such payments to be made half-yearly, or oftener as my executors and trustees may determine, and upon attaining the age of twenty-one years, to transfer and pay over to my said grandson the said share or part of my estate.

      “ Fifth. Should any of my children die before me leaving lawful issues, such issue shall take and receive the principal of the share which the parent would have received, or would have had the benefit of; but should either of my children die without leaving lawful issue him or her surviving, the share which would have gone to, or been held for the benefit of the one so dying, shall belong to and be divided among my surviving children, and my said grandson and the lawful issue of those who shall have died, in the same manner as hereinbefore provided. Should my said grandson die leaving lawful issue him surviving, such issue shall shall take and receive the principal of the share which he would have received or would have had the benefit of, but should he die without leaving lawful issue, him surviving, the share which would have gone to or been held for his benefit, shall belong to and be divided among my surviving children and the lawful issue of those who shall have died in the same manner as hereinbefore provided.
    “ Seventh. I hereby, nominate, constitute and appoint my said wife Mary S. Benner, my son-in-law Frank M. Bonta, and my friend "William Pinkney, the executrix and executors and trustees of this my last will and testament, with power to carry the same into effect, and I do hereby authorize and empower my said executors and trustees, the survivors and survivor of them or those, or the one who shall qualify, to sell at public auction or private sale, my said estate, either real or personal, upon such terms and conditions as in their discretion shall seem proper, and to sign, seal, execute, acknowledge and deliver to the purchaser or purchasers thereof good and sufficient deeds, conveyances and transfers, or other instruments in writing necessary in the premises.
    Charles H. Benner and Francoise M. Duelos were parties to the action.

      ■James A. Shoud/y, for the appellant.

      <C. Bamhridge Smith, for the respondents.

       See Matter of Claris, ante, page 276

   Ingraham, J".:

This is an appeal from a judgment entered on the decision of the court at Special Term, construing the will of Iliram Benner, deceased, and two questions are presented on the appeal.

First. Whether the defendant, Mary S. Benner, is entitled to the premiums or surplus arising on the sale of $30,000 United States four per cent bonds, the sum of $30,000 which the will directed should be held for the benefit of the appellant having been invested in such bonds.

The will gave to the executors and trustees all of the testator’s estate in trust, and then contained the following provision :

“ To set apart or invest the sum of thirty thousand dollars ($30,000) or one-third of the appraised value of my personal estate, as my said wife may elect in writing, and pay over the income, interest, profits and earnings thereof to my said wife half yearly so long as she shall live.”

The appellant elected to have the sum of $30,000 invested for her benefit, and the trustees under the will invested said sum, with other moneys of the estate, in United States bonds, upon which the widow has received the annual interest. The bonds were subsequently sold at a profit over and above the amount paid for them of $8,465.62, and the appellant claims that that profit upon the investment should be paid to her.

The rules applicable to questions of this character have been settled by the Court of Appeals in the Matter of the Accounting of Gerry (103 N. Y., 449), Rugbr, C. J., delivering the opinion of the court, says:

“The primary rule for the determination of questions arising upon the construction of wills, is the ascertainment of the intent of the testator, from a consideration of its provisions. In the case in hand the will provides specifically for the interest which the legatee for life was to take in the fund, and it is limited to the ‘annual interest, income and dividends thereof.’ All beyond this must, from necessity, have been intended to go to the remaindermen, for there are no other persons who could lawfully take it.”

Looking at the will in question, to determine the intent of the testator, it is clear that the appellant was to receive the .yearly income of the trust estate. The trustees were to pay over “the income, interest, profits and earnings thereof to my said wife half yearly, so long as she shall live.” What was to be paid was the income, interest, profits and earnings which accrued upon the fund so invested each half year.

Whether the securities in which the fund was invested increased or decreased in value during each half year had no effect upon the interest, profits, income and earnings during that half year. As was stated in the Matter of Gerry (supra): “ The theory of the will did not contemplate any trafile in securities by the trustee, but a permanent investment in interest-bearing obligations, subject to be sold or exchanged only when the exigencies of the trust required it to be done.” It is quite clear that the life tenant could not have compelled tbe trustee to sell securities lawfully purchased, and held upon the ground that their market-value had appreciated in his hands, any more than he could have compelled her to make good any deficiency in the value of sucn securities.

The addition of the words, “profits and earnings,” does not show that the testator had any other intention than that stated in the Matter of Gerry.

What the appellant, Mary S. Benner, was to receive was the regular income from the securities in which the trust estate was invested, and as that was to be paid to her each half year it is clear that the regular interest paid upon such securities was that which the testator intended she should receive.

It would be inxpossible to administer a trust of this character upon any other principle; for if the contention of the appellant is correct in case the securities in which the trust funds were invested, at the end of the half year had enhanced in value, the cestui que trust would be entitled to have the amount of such enhancement during the six months paid to her, and that would be impossible without selling the securities in which the trust funds were invested. It is plain that a sale, at the end of each six months, of the trust securities would be contrary to the obvious intent of the testator.

Nor is there any principle upon which the appellant can claim that she is entitled to legal interest upon the trust fund, or any sum save the yeaily income that the securities in which the trust fund was invested realized.

But we think that the appellant was entitled to have the whole fund, including surplus, invested, and receive the income thereof pending the trust. No division of the trust fund is to be made until after the death of the decedent; and it was the evident intention of the testator that the said fund should be invested and the income of the investment paid to the life tenant as long as she lived.

It is clear that if there had been a fall in the securities in which the trust fund was invested and a loss occasioned, and that instead of the fund being increased it had been diminished, that the life tenant could only have - received the income derived from the investment of the diminished funds.

There is no provision for supplying any deficiency which might arise from the depreciation of the securities in which the fund was invested by taking any other part of the estate. The $30,000 was to be invested and the income received.

If there had been a provision in the will that the $30,000 should be invested in a house, and the rent received from the letting of the house applied to the use of the life tenant, it certainly would not be claimed, if the house increased in value and the rent increased in proportion, that the life tenant would not be entitled to the whole amount derived from the corpus of the fund, although it had greatly increased in amount.

The $30,000 tó be invested for the benefit of the wife was the corpus of the fund, and the income arising from any increase thereof the life tenant was entitled to receive. If this was not so, then the executors would have to hold the excess until the death of the life tenant, as there is no provision in the will for a distribution until the happening of that event.

The second question presented upon the appeal of the defendant executors from that portion of the judgment that provided that the share held in trust for the testator’s grandson, Iiiram B. Bonta, be equally divided between his surviving children.

The will directed the executors to pay to the son-in-law of the testator, Frank Bonta, for the support, maintenance and education of his grandson, Hiram B. Bonta, the ' son of his deceased •daughter Laura and said Frank M. Bonta, the income of another .sixth part of his residuary estate, each and every year during his minority, such payments to be made half-yearly or of tener as his •executors and trustees should determine; and upon attaining the age ■of twenty-one years, to transfer and pay over to his said grandson the said share and part of his estate. And by the fifth clause of the will it was provided as follows : Should my said grandson die, leaving lawful issue him surviving, such issue shall take and receive the principal of the share which he would have received or would have had the benefit of, but should he die without leaving lawful issue him surviving, the share which would have gone to or been held for his benefit shall belong to and be divided among my surviving children, and the lawful issue of those who shall have died, in the same manner as hereinbefore provided.”

There was no provision in the will making any bequest of the one-sixth part of the estate in question to the grandson until his arrival at the age of twenty-one. Prior to that time that portion of the estate vested in the executors; the income was to be paid to the father of the grandson.

Upon the death of the grandson, before arriving at the age of twenty-one, the trust had not terminated and there is nowhere expressed an intention of the testator that the trust should then terminate; but from the language used in the fifth clause of the will, it would rather appear to have been his intention that this one sixth should be applied to the use of his other five children in the same maimer that he had provided that the portion of the estate specifically bequeathed or devised to each was to be, by the will, held for them. All of the estate was held in trust, one-sixth to each of the testator’s five children, and one-sixth for the grandson, and upon the death of the grandson, his shai’e was to be divided among the testator’s surviving children and the lawful issue of those who should have died, in the same manner as before provided in the will, or, in other words, one-sixth of the grandson’s share was to go to each of his surviving children or their lawful issue in the same manner that he had before provided in his will, such child’s one-sixth was to go-to him. If that manner was that it was to be held in trust for such child, then the one-sixth of the grandson’s share was to be held in trust for such child. If, on the other hand, by the terms of the will, such child’s one-sixth had already been jaaid to her or to her lawful issue, then the one-fifth of the grandson’s share should be paid to such child or to his lawful issue.

The plain intent of the testator as to his son Charles IT. Benner and his daughter Frances Duelos, was that their share of the testator’s estate was to be held in trust during their lives, while, as to his three unmarried daughters, their share was to be paid to them on their marriage or upon the arrival at the age of twenty-one; and I think it was also his intention that the one-fifth of the grandson’s share should be disposed of in the same manner.

No other construction will give effect to the words “in the same manner as hereinbefore provided,” for if the testator had intended that the estate should be simply divided among his children those words were superfluous. •

As by this construction of the will the estate of the trustees in the shares of the son of Charles II. Benner and Frances Duelos had not terminated, and as tbe judgment of the courts below directed them to pay absolutely to the two sons the trust estate, I think they had a right to appeal from the judgment directing such payment..

It is not necessary to determine what effect this construction will have upon the trust fund of $30,000 for the benefit of the testator’s widow. When that'fund is to be distributed after the death of the-widow, the question as to its distribution can be determined.

1 think, therefore, the judgment should be modified so as to provide that the trust as to the share of the grandson continue until the children of the testator or their lawful issue would be entitled to receive the one-sixth of the estate held for them respectively, and as so modified affirmed, with costs to the plaintiff, and the defendant executors to be paid out of the estate. '

Yan Brunt, P. J., and Daniels, J., concurred.

Judgment modified as directed in opinion, and as modified affirmed, with costs to the plaintiff, and -the defendant executors to be paid out of the estate.


source: Caselaw Access Project

author: Barrett, J.:

license: Public Domain

text:
    WILLIAM FOERSTER and Others, Respondents, v. JOSEPH GALLINGER and Another, Appellants.

      Sales — entire contract, deliveries by installments — credit — a contract innocent in its inception, not affected by subsequent frcmd — evidence of fraud.

    A firm brought an action upon contract, against the vendees named therein, to recover . the contract-price of certain goods sold. It appeared that the contract, which was made in February, was entire, but that the deliveries were to be by installments, and that a credit of three months was given upon each installment. The vendees failed about November thirtieth, and upon December sixteenth, and before the credit upon the last installments had expired, the firm brought the action. The firm never rescinded the sale, but upon December eighth they wrote to the vendees that because of their failure the firm would sell, for account of the vendees, the last installment of goods which had not been delivered.
    The court submitted to the jury the question whether the vendees had been guilty of fraud in receiving the goods under the contract. The jury found that there was fraud perpetrated by the defendants at about the date of the assignment “ by the fraudulent conversion of a portion of their assets,” and the plaintiffs recovered judgment.

      Held, that this was improper.

      That as the contract of sale was made in good faith in February, it could not be rescinded because the vendees fraudulently converted their property in the following November.

      Arnold v. Shapiro (29 Hun, 478) limited.
    That a preconceived design not to pay for goods purchased might be evidenced by a fraudulent disposition of property thereafter made, but that this rule did not apply to such a disposition not contemplated at the time of making the contract. Semble, that while a vendor may rescind a contract without also rescinding a credit given thereon, yet when it is considered that a price is usually determined to some extent by the length of the credit, it would, in practice, be difficult, if not impossible, to sustain the contract and annul the credit.
    Appeal by the defendants, Joseph Gallinger and Samuel Gal-linger, from a judgment of the Supreme Court, entered in the office of the clerk of the city and county of New York on the 14th day of March, 1891, upon a verdict for the plaintiffs for $4,029.51, at a trial before the court and a jury at the New York Circuit; rendered on the ground that the jury “ believe that there was fraud perpetrated on or about November 30, 1888, the date of the assignment by the defendants, by the fraudulent conversion of a portion of their assets,” also from an order, entered in said clerk’s office on the 26th day of March, 1891, denying the defendants’ motion to set aside the verdict and for a new trial.

      Adolph L. Sa/uger and Louis Marshall, for the appellants.

      Blumensüel do LLirseh, for the respondents.
   Barrett, J.:

This action is for goods sold and delivered at agreed prices. The defense is, in substance, a credit which had not expired when the action was brought. The plaintiffs went to trial conceding the unexpired credit, but claiming an avoidance of the credit on the ground of fraud. The material facts are these: The contract was for future deliveries. It was made on the 21st of February, 1888. It reads as follows:

„ _ New York, Féb. 21st, 1888.

Order.

Given by Gallinger & Co., 36 Barclay St., N. Y. abt.

5 Cases Sept. 1st. 5 c. abt. Sept. 15. Abt. Oct. 1st.

5 Oct, 15th. 5 abt. Nov. 1st & 5 abt. November 15th.

Subject to change of Tariff. with privilege of calling for ten cases of the above after July first, by giving the notice of six weeks thirty cases full cut three inch TJ Drop of 10,000 each case.

Price, One Dollar sixty-two one-half cents.

Terms, 3 mths. Acceptance,

¥M. FOERSTER & 00.

This contract resulted from personal solicitation on the part of one of the plaintiffs, and there is no pretense anywhere in the ease that the defendants induced the plaintiffs to enter into the contract or to part with their goods. There was no evidence that the defendants were insolvent at this time, nor was there any evidence of fraud in the making of the contract, either by way of active misrepresentations, fraudulent concealment, preconceived design to cheat or otherwise. This was explicitly stated by the learned judge in the . opening of his charge, and the jury were then requested to determine whether the defendants were subsequently guilty of fraud in receiving the goods under the contract. The jury gave a verdict for the plaintiff, adding, as the ground, that they believed that there was fraud perpetrated on or about November 30, 1888, the date of the assignment by the defendants, by the fraudulent conversion of a portion of their assets.”

The goods sued for were all delivered before the 30th of November, 1888, and, consequently, the ''jury found that the defendants were guilty of fraud in receiving goods (which they were legally bound to take) because of the fraudulent conversion, at a subsequent period, of a portion of their assets; Even if this special appendage should be stricken from the record, the utmost that can be claimed in support of the verdict is, that the defendants were buying goods fraudulently from other people at the time they were called upon to fulfill their contract with the plaintiffs; also, that they were then insolvent, and that if they had not remained silent on that head, the plaintiffs might have exercised the right to hold the goods, in analogy to stoppage in trcmsitu, until the notes given for the purchase-price were paid. We do not think, however, that either of these positions is tenable. The only contract between the parties was that made in February. Such contract was entire, and it was of binding obligation in its entirety. The deliveries under it were alone divisible. If the contract had amounted to a mere option, as in Ames v. Moir (138 U. S., 306), we agree that it would have been a fraud if the defendants, with the preconceived design of securing possession of the goods without payment, had made a call under such option. Here, however, the defendants were bound by the terms of the contract to take the goods at certain specified dates, and it appears that they substantially begged the plaintiffs (without success, however) to relieve them from their obligation on- that head. It is idle to talk of rescinding the delivery of the goods. The delivery was not the contract, but in execution of it; and the contract cannot be rescinded, because it was not tainted with fraud. A contract of sale, made innocently and in good faith, cannot be rescinded because the vendee subsequently purchases goods from other people with a design to cheat them. If the contract of sale was made in contemplation of such fraudulent acts, and with the intent, before the credit expired, to make such fraudulent disposition, that would be a different thing. That would show a preconceived design to cheat and defraud. But, where nothing of the kind was contemplated when the contract was made, it is difficult to see how a subsequent change of heart is to relate back and make that fraudulent which was originally innocent. There is an .observation in Arnold v. Shapiro (29 .Hun, 478), upon which the learned judge at circuit felt constrained to submit this question of subsequent fraud to the jury. This case is not fully reported, and it is not quite clear whether all that was there said was necessary to the decision. The rule laid down seems to have been that fraud in contracting the debt may be predicated of a fraudulent disposition of the debtor’s property in contemplation of making the contract. In other words, that a preconceived design not to pay for goods purchased may be evidenced by a fraudulent disposition of property already made or contemplated, as well as by other facts. It was also held that this principle is equally applicable to avoiding an existing credit obtained by a concealment of such fraudulent disposition or contemplated disposition. ¥e entirely agree with this view, when limited to a fraudulent disposition of property made prior to, or even contemplated at the time of, obtaining the credit. The same result could scarcely have been intended to apply to a subsequent disposition of property not contemplated at the time of making the contract. The observation is, it is true, broad enough to cover this latter proposition; but it may, without a strained interpretation, be limited to a subsequent disposition fraudulently contemplated when the contract was made. The text of this observation is, that “ the same effect should also follow such a disposition of the debtor’s property after he has contracted the debt a/nd secured the credit.” The reason given for this view is, that it is always implied in such transactions that the debtor will make no disposition of his property which will operate as a fraud upon his creditor. This means, we presume, that business is done with the general idea that people will not thereafter cheat their creditors. But that understanding can scarcely be said to be impliedly engrafted upon all contracts so as to alter their legal effect in case one of the parties shall subsequently do something which may militate against due performance. An agreement to do something at a given time cannot well be varied into an agreement to do it at another time by an implication of a condition subsequent to act honestly. We think the ease on this head was erroneously presented to the jury. The plaintiffs did not rescind the contract, and the action was not for the value of the goods said to have been fraudulently received by the defendants. On the contrary, the plaintiffs deliberately affirmed the contract, and it is probable that they did so with knowledge of the defendants’ fraud. They certainly did so with knowledge of the defendants’ insolvency. After the failure, they notified the defendants that they intended to sell the remaining goods on their account. On the 8th of December, 1888, the following letter was sent to the defendants:

New York, Dec. 8, 1888.

Messrs. Gallinger & Go., Pittsburgh:

Gents. — Owing to your failure we propose to sell 5 cases Prismen for your a¡c by the 15th, inst., unless you redeem them by that date or furnish guarantee that they will be paid for in cash less Disct.

Respectfully.

WM. FOERSTER & CO.

And one of the plaintiffs testified as follows: “They did not accept them (these five cases) by the fifteenth of December and we then sold these goods for their accoxontr This’action was brought the next day, December sixteenth, which is the date of the summons. It is a further affirmation of the contract. For the complaint is upon the contract. It is not for the value of the goods delivered, but for the prices agreed upon in the contract. It is plain, therefore, that the only rescission which has been attempted is of the credit. It must be conceded that, under the authorities in this State, the plaintiffs had a right to rescind the credit without rescinding the contract of sale. (Wigand v. Sichel, 3 Keyes, 120; Roth v. Palmer, 27 Barb., 652.) As, however, the agreed prices were made with relation to the credit, it is difficult to perceive how the one can stand and the other fall. Non constat, but the prices would have been lowered for cash. The rule laid down in these cases amounts, at least, to punishing the defendants’ fraud by an arbitrary fine of the interest on the contract-price for the unexpired term of credit. There would be no practical difficulty with the more logical rule that the contract of sale should be rescinded in toto. For, then, in case the goods were still in the possession of the vendee, they could be restored to the vendor by replevin, or an action for conversion would lie upon refusal to restore them on demand. And in case the goods had been sold or otherwise used by the debtor, an action for their value would lie, for in case of such use the law would imply a promise to pay the value. In the case last cited, IIogbboom, J, made this observation : “ Indeed, I think the plaintiffs might properly and preferably have prosecuted simply for goods sold and delivered, and allowed the rest of the transaction to come out as a matter of evidence. If he had done so, the order of proof would have been as follows: The plaintiffs would have proved that they delivered goods of a cei’tain value to the defendant, and that the latter received the same or that they were afterwards shown to be in his possession. From this evidence the law would imply a promise to pay the value and the plaintiffs might properly have rested.”

The answer to this is said to be that where there is an express contract the law will not imply one, and that, consequently, if the whole contract is avoided the vendor must bring trover. Without acceding to the doctrine laid down in the above quotation, we may safely say that the rule against an implication where there is an •express contract need cause no practical embarrassment, for where ¡the whole contract is avoided because of the vendee’s fraud, the express contract lias ceased to be. It is as though it had never existed, and as though the parties simply stood in such relations and implications as flow from the delivery of goods by the one, and theii receipt and possession by the other. It may be that from the delivery of the goods by the vendor, and their receipt and possession by the vendee standing alone, the law would not imply a sale and a promise to pay the value. • But froiii such delivery and possession, followed by the use of the goods by the vendee as his property, a promise to pay the value would certainly be implied.

But without dwelling further upon this branch of the case, we think that the complaint should have been dismissed because of the failure to show that the contract was entered into fraudulently, or in contemplation of any fraudulent purpose.

The judgment should be reversed and a new trial ordered, with costs to the appellants to abide the event.

Yak Brunt, P. J., and Andrews, J., concurred.

Judgment reversed-and new trial ordered, with costs' to the appellants to abide the event.


author: Andrews, J.:

text:
    JENNIE E. WOOD, as Administratrix, with the Will Annexed of SAMUEL WOOD, Deceased, Plaintiff, v. ROBERT M. NESBITT, Defendant.

      Will — implied power of sale — when it passes to an administrator with the will annexed — when the power survives — equitable eormersion.

    One Samuel Wood, by bis will, after providing for certain legacies to be paid immediately; gave the-rest of his estate to his executors, and the survivors of them, to them and their successors, forever, in trust, "to invest and provide for the payment ” of certain life annuities created by his will, and to create, endow and maintain a college of music. He required them to invest the money of the annuitants in personal securities. The estate consisted almost wholly of real properly, the personal estate being insufficient to pay the legacies directed to be paid immediately.
    The executors sold the real estate, squandered much of the proceeds, and never set aside the sums specified in the will for the annuities. The trust relative to the musical college was declared void.

      Tlielast executor having been removed, an administratrix, -with, the will annexed, was appointed, who entered into a contract to sell certain real estate, which the vendee refused to perform.
    ' In an action brought by the administratrix to compel a specific performance of the contract:

      Held, that the executors had an implied power of sale, as the provisions relative to the annuities could not be carried out without a sale of the real estate.
    That this power of sale was annexed to the office of executor, and passed to an. administratrix with the will annexed.
    That this view was confirmed by the fact that the word “ successors ” was used in the clause devising to the executors the residuary estate.
    That the fact that the executors sold sufficient real estate to provide for the annuities did not extinguish the power of sale, as the. power, by its terms, was not confined to the satisfaction of the annuities.
    That the fact that executors may have disposed of enough of the realty to satisfy legacies or annuities does not relieve the estate from their burden where the executors have not paid the beneficiaries in full.

      Semble, that where there was no personal estate applicable to the purpose a devise to executors of the residuary estate, in trust, “to invest and provide for the payment ” of certain annuities, constituted a conversion of the estate into personalty, at least so far as the executors were concerned.
    Submission of a controversy between Jennie E. Wood, as administratrix, with the will annexed, of Samuel Wood, as plaintiff, and Robert .M. Nesbitt, as defendant, under the Code of Civil Procedure (§ 1279 et seq!)

    Tlie question in difference, submitted to the court, was: Whether the said Jennie E. Wood, as such administratrix, was entitled to recover judgment against Robert Nesbitt for tbe sum of one hundred dollars cash and for the execution of a bond and mortgage for the balance of the purchase-money of a certain parcel of land, a deed of which had been duly tendered to said Nesbitt, in pursuance of a contract for the purchase thereof by him from such administratrix.

      Magner <& Hughes, for the plaintiff.

      Oharles F. Halstead, for the defendant.
   Andrews, J.:

This action comes before the court upon an agreed case containing a statement of the facts upon which the controversy depends. The plaintiff is the administratrix, with the will annexed, of Samuel Wood, deceased. The defendant is a purchaser from her of certain real estate, of which said Wood died seized. The defendant objects to the title of said real estate upon the ground that the plaintiff has no power to sell it, and this action is brought to compel the defendant to accept the title and pay the purchase-price.

The decision of the question presented depends upon the construction to be placed upon certain portions of the will of Samuel Wood. By that will the testator, after providing for certain legacies to be paid immediately, gave all the rest of his estate to his executors and the survivor or survivors of them, and to them and each of their successors, forever, in trust, to provide for the payment of certain life annuities, and the ultimate legacies depending thereon, and to create, endow and maintain an institution to be called the Samuel Wood College of Music. The testator directed and required his executors to set apart out of his estate, and to securely invest in good interest-paying securities, preferring mortgages on unincumbered real estate, and to keep securely invested to pay such annuities, the several sums of money given to the annuitants. The will provided for twenty-three annuitants, and the several sums which the executors were required to invest for their benefit amounted to about $198,000, Where the annuitants had children the trust to pay the income was limited to two lives, and on the termination of the second life the principal was in most instances given absolutely in remainder. In cases where there were no children of annuitants, the principal was to become a part of the residuary estate, on the death of the annuitant. Of the $198,000 the sum of $99,000 was to go to remaindermen, and the sum of $99,000 was to revert to the residuary estate. Nearly all of testator’s property, both when the will was made, and at the time of his death, consisted of real estate. The will gave $53,500 in legacies, payable absolutely and immediately^ and the personal property of the testator was not sufficient to pay such legacies and the' valid claims against the estate. Most of the real estate was sold, and the money received therefor was placed in the general bank account of the executors, and was drawn upon by them for all the purposes of the estate. According to the statement of facts, the executors appear to have misappropriated a large amount of such money in various ways, which amounted to a devastmii of the estate. Among the various payments which they made were $150,000 for salaries to themselves, and over $150,000 for attorney and counsel fees and expenses of litigation. There were originally four executors, three of whom died, and the fourth was removed. No sums of money were ever set apart or invested by the executors for the purpose of producing the annuities, but sums of money were paid to the annuitants, once in six months, as if for interest, and were drawn out of the bank from the principal of the proceeds of the sales of the real estate. The annuitants were, for the most part, ignorant of the fact that no investments had been made for them. The trust created for the College of Music was declared void by the Court of Appeals (People v. Simonson, 126 N. Y., 299), so that the testator died intestate as to all his residuary estate, and his sole next of kin and heir-at-law was one Abraham Hewlett. Said Hewlett was an annuitant, and appears to have been a party to the devastmit, and knew that no investments had been made for the annuitants. After a large portion of the real estate had been sold, and before the decision of the Court of Appeals above mentioned, the said Hewlett entered into a written agreement with the then two surviving executors, which contemplated a settlement with the annuitants, and a division of the remainder of the estate between the three parties to that agreement.

Thereupon, in consequence of various misrepresentations made to them, many of the annuitants released .their claims, but, afterwards, finding that they had been deceived, demanded a surrender of such zaleases ; and the z’emoval of the last executor Simonson was based, in part, on his misconduct towaz'd such annuitants. Subsequent to ■the obtaining of the releases Hewlett died, and his only heirs-at-law, who az’e collateral descendants of a paternal grandfather in many degrees removed, are scattered through different States, and az’e neaz’ly one hundred in mzzzzber. Some of the aiznuitants, and azzzong them one Joseph F. Wood, have never been settled with, nor have they executed z-eleases, nor have they had any funds set apart for them. Upon the removal of the last executor plaintiff was appointed administi'atrix with the will amzexed, and she entered into a written agreement for the sale to the defendant of a parcel of land of which the testator died seized, by the teznns of which agreement defendant was to pay for the land $ 100 in cash, and $400 was to be secured by a bond and mortgage, executed to the plaintiff, her successors and assigns, in trust for said Joseph F. Wood during his life, and for his heirs after his death.

The first objection made on behalf of the defendant to the title is that an administratrix with the will annexed has no power to sell real estate. This objection is not well founded. It is true that an administrator, with the will annexed, has no power to sell real estate by virtue of his office merely; neither has an administrator nor an executor such power. It is only by virtue of some direction in the will that either obtains such power; and where the will gives the executor a discretionary power of sale such power does not pass to the administrator, with the will annexed. In the case at bar, however, the power to sell was not a discretionary one, for the provisions of the will in regard to the annuities could not be carried Out, except by a sale of the real estate, pursuant to the power expressly given to the executors by the eighth paragraph of the will.

In Mott v. Ackerman (92 N. Y., 539), Finch, J., who delivered the opinion of the court, said: “We have no doubt, therefore, that where a power of sale is given to executors for the purpose of paying debts and legacies, or either, and especially where there is an equitable conversion of land into money for the purpose of such payment, and for distribution, and the power of sale is imperative, and does not grow out of a personal discretion confided to the individual, such power belongs to the office of executor, and, under the statute, passes to and may be exercised by'the administrator with the will annexed.”

In the case at bar there was no personal property whatever which could be invested to provide the annuities, and a sale of the real estate was absolutely necessary in order to make provision for them. The power to sell was, therefore, not a discretionary one, and upon the removal of the last executor passed to the plaintiff as administratrix with the will annexed.

The case of Cooke v. Platt (93 N. Y., 35) does not apply, for in that case the trust, which the testator attempted to create, was held to be invalid ; the power given to sell was not imperative, and if the discretionary power of sale, which was given, had been exercised, the only effect would have been to distribute the proceeds among heirs, who were already vested with the title to the real estate.

Moreover, it may be plausibly claimed that, assuming that the testator’s property retained its character as realty, the power to sell such realty is given to the plaintiff, in terms, by the will itself. The devise of the residuary estate, contained in the seventh clause, is not made to the executors only, but to their and each of their successors; ” and the express power of sale, given by the eighth clause, is given, not to my executors ” only, but also u to their successors.” The only successor ” to an executor is an administrator with the will annexed, and it would seem that the will thus expressly confers the power to sell all the real estate upon any one who should succeed the executors in their office.

The second objection to the title is, that, because the original executors sold enough of the realty to have provided sufficient investments for the annuitants, therefore, the power of sale is at an end. Neither is this objection well founded. The will gave the executors power to sell not merely enough of the estate to provide for the annuities, but “ all and every part of the estate.” It also contained directions about the disposal of the proceeds of the entire estate, and neither the power, nor the duty, to sell ended until the necessary funds had been actually set apart and investments had been made for the annuitants. It was not until ten years after the testator’s death that it was decided that the trust for the School of Music was invalid, and there are no grounds upon which it can be claimed that the real estate, so far as if* was disposed of by the executors, was sold merely for the purpose of raising funds to be invested for the annuitants.

The entire proceeds of the real estate sold were not required to raise the annuities. It was the duty of the executors to have applied part of such proceeds in executing the trust to endow and maintain the college of music. It is impossible to say now whether the moneys wasted were those which should have been used to raise the ■annuities, or those which should have gone to create a fund for such ■college. Where annuities are charged on realty generally the entire estate of the testator is liable until the charge has been satisfied. The rule contended for by the defendant, that “ as soon as an executor has disposed of enough of the property of the testator to satisfy legacies the general estate is relieved of their burden, and that the legatees’ claim is against the executors personally,” would be a very harsh and unjust one. Ordinarily it would be wholly impracticable for legatees to keep themselves informed of all the proceedings of an executor, and they are not bound to do so under peril of losing their interest in the estate. Until, the beneficiary of a trust fund has his fund separated from the general funds of the estate, and set apart for his benefit, he is not divested of his right to look to the general estate for his satisfaction. An executor cannot be regarded as an agent of a legatee or an annuitant • until the fund is set apart from the rest of the estate and invested separately for the beneficiary. If the fund has been so separated and set apart and is then misappropriated, the loss must fall upon the cestui que trust, but until the fund is separated from the general funds of the estate the executor represents such estate only. 'In the case at bar a large number of the annuitants were infants, and others were aged and infirm persons, and it would be a great injustice if they are to lose all benefits under the will because of the misconduct of executors over whom they had no control, and if the proceeds of the remaining real estate are to go to the distant relatives of Abraham Hewlett, who was himself a party to the devastavit of the estate, and largely profited thereby. Moreover, the only person who, if living, could object to the sale made by the plaintiff to the defendant would be the said Hewlett, and his participation in the misconduct of the executors would estop him from raising such objection; and those claiming under him are in no better position than he would be, if alive.

Again, there is another view which may be taken of the case which would seem to render any discussion about the power to sell real estate unnecessary.

The language of the will is: “I give, devise and bequeath all the rest, residue and remainder' of my estate, real, personal and mixed, * * * to my executors * * * in trust, * * * to invest and provide for the payment of the life annuities hereinbefore created.” There was no personal estate which could be applied to raising the annuities, and in order to carry out this and other provisions of the will, it was absolutely necessary to sell all the relator’s real estate, it would seem, therefore, that there was an equitable conversion of all of the testator’s real estate, and that the same must be regarded as personalty from the time of the testator’s death, so far as the rights of annuitants and the duties of the executors are concerned. (Byrnes v. Baer, 38 N. Y., 220; Kalbfleisch v. Kalbfleisch, 67 id., 364; Greenland v. Waddell, 116 id., 234.)

The question as to the rights of those annuitants who have executed releases is not before the court, but we are of the opinion that, for the .purpose of providing money to raise the annuity given by the will to Joseph Wood, the plaintiff had the power to sell the property in question to the defendant, and to execute to him a valid deed thereof.

Judgment should, therefore, be entered in favor of the plaintiff against the defendant for the sum of $100, and requiring the defendant to execute the bond and mortgage provided in the contract of sale. No costs should be allowed to either party.

Yan Brunt, P. J., and Barrett, J., concurred.

Judgment for plaintiff against the defendant for $100, and defendant required to execute the bond and mortgage provided in the contract of sale, without costs to either party.


author: Barrett, J. :

text:
    MARCUS NATHAN and Another, Appellants, v. COLES MORRIS and Others, Individually and as Executors of J. JOSEPHA NEILL, Respondents.

      Specific performance — when not decreed — a restriction against building on part of a lot is a substantial incumbrance — parol evidence to vary a written instrument — • no allegation of mistake or demand to reform.

    The executors of J. Josepha Neill entered into a contract, under seal, for the sale of certain premises, by which they agreed to give their vendees an executors’ deed, with a covenant against their own acts, for the conveying and assuring to the vendees of the fee simple, free from all incumbrances, except leases then existing and expiring on May 1, 1891, and the taxes for 1890. The executors subsequently tendered a deed which contained no covenant relative to incumbrances, except one against their own acts. This the vendees refused to accept for the reason that there existed in an old deed of the premises a restriction against building upon ten feet of the frontage of the lot.
    The vendees brought an action for specific performance, and asked as alternative relief the repayment of their expenses under the contract, and upon the trial thereof parol evidence was admitted, on behalf of the defendants, to show that the plaintiffs signed the contract with full knowledge of the restriction, and that they agreed to purchase the premises subject thereto; and such knowledge in the plaintiffs was found as a fact by the court, which decided, as matter of law, that the existence of the restriction did not excuse performance by the plaintiffs.

      Meld, error.
    That the restriction was clearly a substantial incumbrance.
    That the covenant in the contract to convey free of incumbrances, except as stated therein, being express, clear and unambiguous, parol evidence could not be admitted to vary the instrument.
    That as the defendants did not ask to reform the instrument, or allege mistake either of law or fact, they had no grounds for relief.
    ■ Appeal by tbe plaintiffs, Marcus Nathan and Samuel Cohn, from a judgment in favor of tbe defendants, entered in tbe office of tbe clerk of the city and county of New York on tbe 22d day •of June, 1891, dismissing tbe complaint on tbe merits, witb costs, after a trial by tbe court at tbe New York Special Term.

      Charles Strauss and Arthur Nwrst, for tbe appellants.

      Edgar J. Nathan, for tbe respondents.
   Barrett, J. :

Tin's action was brought by tbe plaintiffs, as vendees of a piece ■of real estate in this city, known as 105 Bleecker street, against tbe defendants, as vendors, for the specific performance of a contract of purchase, and, in case of inability on the defendants’ part to deliver a proper deed, for tbe return of tbe sum paid on account of tbe purchase-money, together witb tbe expenses of examining tbe title. By tbe terms of tbe contract, which was under seal, tbe defendants agreed to give tbe plaintiffs “ an executor’s deed, witb covenant against their acts, for tbe conveying and assuring to them (tbe plaintiffs) tbe fee simple of the said premises free from all incumbrance, except leases now existing, which expire the 1st day of May, 1891, and the taxes on said premises for the year eighteen hundred ..and ni/netyP

Upon the day when tbe contract was to be performed tbe parties •met, and tbe defendants tendered a deed which contained no covemant against incumbrances other than those of the grantors’ creation. ’The plaintiffs declined to receive the deed or to pay tbe balance of •the purchase-price upon tbe ground rhat the property was subject •.to an incumbrance in the nature of a restriction against building upon ten feet of the frontage of the lot. That this restriction existed under a deed made as far back as the year 1829 is conceded; and that it amounted in law to an incumbrance is entirely well settled. (Roberts v. Levy, 3 Abb. [N. S.], 311; Huyck v. Andrews, 113 N. Y., bottom of page 86; Anonymous, 2 Abb. N. 0., 56 ; Wetmore v. Bruce, 118 N. Y., 319; Same case below, 54 Superior Court, 149.) The learned judge, under objection and exception,, admitted parol evidence to prove that the plaintiffs signed the contract with full knowledge of this restriction, and agreed to purchase the premises subject thereto. There was a conflict of evidence-on that head, which was solved in the defendants’ favor, and thereupon the learned judge made the' following finding of fact:

Seventh. At the time of the execution of said contract of sale, the plaintiffs had actual knowledge of the existence, extent and effect of such restriction, and agreed to purchase said premises subject thereto.”

Upon this it was held, as a conclusion of law, that the existence of the restriction was no valid ground for the refusal of the plaintiffs to accept the title tendered by the defendants, and, accordingly, the complaint was dismissed.

"We are of opinion, in view of the clear and unambiguous covenant embodied in the contract under consideration, that this was error. "Where an obligation depends upon implication, or where the language used is of doubtful import, parol evidence of notice may be admissible. It is then permitted for the purpose of showing what was in the minds of the parties when the contract was made. It is not permitted for the purpose of varying the contract, but by reading it in the light of the surrounding circumstances to get at its true intent and meaning; in other words, to enable the court to-ascertain what the written contract really was. If, however, the written contract is precise and clear, if it leaves nothing to implication, parol evidence is unnecessary to ascertain the exact bargain and if admitted, it can only be to vary the contract. This, clearly* cannot be done, and however unfortunate it may be that the contract under consideration was not drawn to cover the parol understanding, the court cannot go behind the deliberate engagement which the parties chose to sign and seal. It is difficult to imagine a clearer covenant than that now before us. The fee is to be conveyecl free from all incumbrances, except two which are distinctly specified. The defendants wish the court to except a third, which was not specified, and to do this upon evidence that the exception was verbally made. If this were admissible, why might not the contract be further varied by a fourth or a fifth exception, covering a mortgage or an easement, or both ?

We are referred to certain cases which hold that trifling incumbrances upon the title, which were known to the vendee at the time he contracted to purchase, will not prevent a decree of specific performance. (Ten Broeck v. Livingston, 1 Johns. Ch., 357; Winnie v. Reynolds, 6 Paige, 407.)

In two respects these cases are plainly distinguishable from the present. In the first place, the incumbrances there were trifling. In Ten Broeck v. Livingston the proportion of the quit-rent which would have fallen on the plaintiff’s farm, if it was then to be collected, would have been but fifty-four cents a year. It was, as Chancellor Kent said, nothing more than a recognition of manorial seigniory, which in early days was deemed a matter of some importance. There was no evidence that this rent had been demanded or paid for sixty years prior to the making of the contract. It was upon these facts that the chancellor held that the quit-rent was never within the contemplation of the parties as an obstacle to title. In Winnie v. Reynolds there was a pre-emption right of purchase which Chancellor Walworth treated as a partial restriction upon the power of alienation. “It is,” said the chancellor, “a remnant of feudal vassalage which a freeman would not be willing to have his land subjected to, although the actual injury to the owner of the land would amount to very little in a pecuniary view.” In the case at bar the restriction is by no means trifling. On the contrary, the proof was that the restriction impaired the value of the lot to the extent of some $13,000.

The second and decisive point of distinction is, that in neither of these cases was there an express covenant with regard to incumbrances. This was specially referred to by Chancellor Walworti-i in Winnie v. Reynolds. This is his language: “ It is evident that the defendant, under the decree in this case, will have the same title which he expected to obtain when he entered into this contract with the complainant. And as the evidence of the previous knowledge of the defendant of the state of the title does not contradict anything contained in the agreement itself ’ the vice-chancellor was right in decreeing a specific performance.” The distinction between an express covenant that the property shall be conveyed free from incumbrances, and the implication on that head which arises from the covenant to give a good title is clearly pointed out by Chancellor Runyon in Newark Savings Institution v. Jones (37 N. J. Eq., 451). “The agreement is silent (he observes), as to the character of the title to be given, and while in such case, in the absence of proof to the contrary, the implication arises that the title to be conveyed is a good one and, therefore, free from incumbrance that implication maybe rebutted. Notice is sufficient to rebut the mere implication and parol proof is on this ground admissible.” In such a case, that is, where there is no express covenant and what was intended is left to implication, the vendee “must,” to quote the language used in James v. Lichfield (L. R., 9 Eq., 51), “ be taken to have had present in his mind all those things of which he had notice.” ' Where, however, nothing has been left to’implication or to doubtful phraseology, there is no reason why an express covenant in such a contract should be affected by notice of easements, restrictions or other incumbrances any more than if the covenant were contained in an ordinary deed of conveyance. That knowledge or notice of the existence of an easement on the part of a grantee would be no defense to an action against the grantor for the breach of a covenant against incumbrances was expressly held in Huyck v. Andrews (113 N. Y., 81), where the language of Bronson, J., in Mott v. Palmer (1 N. Y., 564), was quoted with approval. Judge Bronson there said, it was a proposition too plain to be disputed, that parol evidence was inadmissible to control the legal effect and operation of a deed, and that if the plaintiff had been told at the time that Brown owned the rails, and more, “if the rails had been expressl/y excepted by parol from the operation of the grant and covenant, it would have been no answer to the action.”

There are exceptional cases where the covenant may be reformed or rectified upon the ground of mistake, clearly and conclusively established. In such a case, as is said in Dart on Vendors and Purchasers (6th ed., 886), the fact of notice “ may be used as the basis of an inference that it could not have been the intention of the parties that the covenant should include a defect of which both were equally aware.” It was undoubtedly with reference to such a case that Mr. Justice Parker, in Weimiore v. Bruce (supra), observed that “ it might have 'availed the plaintiff, could he have shown that the defendant had notice of the restriction and purchased with full knowledge of its existence and effect.” • The defendants here made no claim to reform or rectify the covenant. They asked no affirmative relief, nor did they state any facts which could serve as a basis for such relief. They did not pretend that the restriction was omitted by mutual mistake or mutual oversight. On the contrary, they said that the contract was drawn as it is, advisedly and deliberately, after the parol agreement was made. They insisted, and still insist, that there was no mistake even of law, for the reason that, in their judgment, then and now, the plaintiffs, by the contract as drawn, agreed to take subject to the restriction. They also claimed, and they still claim, that the property was described by its ward number as well as by its street number, and that the words more or less ” were added to the specified dimensions with reference to the restriction in question. It is needless to say that neither of these formalities can have any bearing upon the real question, namely, the effect of the express covenant. Indeed, these suggestions merely evoke the natural and pertinent inquiry why, if it had been intended to convey subject to the restriction, such pointless methods were resorted to rather than the few plain words which would have been conclusive.

Upon the pleadings and proofs, as they stood upon the trial, we think the plaintiffs were entitled to the relief prayed for, and the judgment appealed from should, therefore, be reversed and a new trial ordered, with costs to the appellants to abide the event.

Yan Brunt, P. J., and Andrews, J., concurred.

Judgment reversed and new trial ordered, with costs to the appellants to abide event.


author: Daniels, J.: Ingraham, J.

text:
    EMILY B. VON HESSE, as Administratrix of WILLIAM H. MacKAYE, Deceased, Plaintiff, v. THEODORA EDITH MacKAYE, Respondent, and CHRISTIAN VON HESSE, as Executor of JAMES MacKAYE, Deceased, Appellant.

      Trusts — of personal property — grantor retaining the use and control of the trust fund, for his life — motive not rnatmal.

    In January, 1887, one James MacKaye, who resided in Paris, delivered to his son, William EL MacKaye, ten bonds, and at the same time the son delivered to him a receipt, which stated that the son held the bonds in trust for the adopted daughter of William II. MacKaye, and that during the life of the father the bonds should be subject to his order.
    In April, 1887, James MacKaye directed his son to borrow money upon some of the bonds, and at this time returned the receipt to the son with a statement indorsed on it to the effect that he had authorized the loan. Such a loan was made and was subsequently paid by the father.
    In January, 1888, he wrote a letter to his son from Paris, in which he stated that his object in placing the bonds in the son’s hands in trust was so that the son might swear, if necessary, that he had no property of his father in his possession in case a black-mailer should again attack the father. He, however, reiterated the trust, and his intention to retain during his life power over the bonds. The father died, and a few weeks later the son died.
    In an action of interpleader between the adopted daughter and the executor of the estate of the father:

      Held, that a valid trust was created in favor of the adopted daughter, subject only to the right of the testator to use the bonds or their interest during his lifetime. That the reservation of their use did not invalidate the trust.
    That they went into, and remained in, the possession of the son until his death; were at all times subject to the trust, and were at no time used in a manner inconsistent with it.
    That the motive for the trust, to avoid possible black-mail, was not material. (Ingraham, J., dissenting.)
    Appeal by the defendant Christian Yon Hesse, as executor of James MacKaye, from a judgment, entered after a trial by the court at the New York Circuit, in the office of the clerk of the city and county of New York on the 27th day of April, 1891, establishing a trust in favor of Theodora Edith MacKaye in certain bonds formerly belonging to James MacKaye, and which, at the time of the death of William H. MacKaye, were in his possession, and direct- - ing their deposit in a trust company until a trustee was appointed for said Theodora, now an infant.

      The court found, among other things:

      “First. James MacKaye, being the owner of ten Kansas Pacific bonds of $1,000 each, on the 21s£-day of January, 1887, delivered the same to his son, 'William EL MacKaye, and took a receipt therefor, signed by said William EL, as follows :
    New York, Jany. 21, 1887.
    EJec’d of my father, James McKaye, ten Kansas Pacific bonds of one thousand dollars each, to be held by me in trust for his adopted daughter, Theodora Edith McKaye, and for her sole benefit and behoof, said bonds for, and during his life, to be subject to the order of my father. (Signed.) W. EL MoKAYE.

      Fifth. James MacKaye directed said William EL MacKaye to obtain a loan of money on three of the said ten bonds as collateral security, and, subsequently, to pay off the loan and receive the three bonds, which was done.

      Sixth. All the said ten bonds, together with said receipt, were in the possession of said William EL MacKaye at the death of his father, undisposed of by any order or request of said James MacKaye, and so remained, except three of the said bonds, at the death of the said William EL MacKaye. The seven bonds so remaining are the bonds mentioned in the complaint.-
    Which said paper writing of January 21, 1887, above set forth, said James MacKaye retained in his possession at Paris, Prance, until on or about the 18th of January, 1888, when he returned the same by mail to the said William EL MacKaye, and the same remained in the possession of William EL MacKaye until his death, which occurred at the city of New York on or about the 21st of April, 1888, when the same was found among other papers and effects left by the said William EL MacKaye, deceased, by Emily B, Yon Hesse, administratrix with the will annexed of the said William H. MacKaye, deceased, and the plaintiff in this action, and the same is now in her possession.-

      Tenih. That after the giving of the receipt of the 21st of January, 1887, by William H. MacKaye, the interest on the said bonds was collected, and some of the bonds were hypothecated for a loan at the instance and by the direction of the said James MacKaye, and such interest and loan were paid to the said James MacKaye.

      George H. Starr, for the appellant.

      Noah Davis, special guardian, and Charles Francis Stone, for the respondent.
   Daniels, J.:

The testator, James MacKaye, in his lifetime, was the owner of ten Kansas Pacific bonds for the sum of $1,000 each. He resided in Paris, and his son William H. MacKaye resided in the city of New York. And on the 21st of January, 1887, at the instance of the testator, William H. MacKaye executed and transmitted to him a receipt for these bonds, declaring that they were to be held in trust by him for the adopted daughter of James MacKaye, who was Theodora Edith MacKaye, and for her sole benefit and behoof, but which bonds, during the life of the testator, were subject to his order. After his decease and the decease of his son, which followed that of the father very closely, the plaintiff was appointed the administratrix, with the will annexed, of the estate of William H. MacKaye, deceased. And in that capacity she brought this action to settle the title to these bonds which were claimed by Theodora Edith, the adopted daughter, and also by the executor of the estate of James MacKaye. In support of the title of the adopted daughter it was claimed that the receipt which was given for the bonds, then in the possession of William H. MacKaye, created a trust in her favor subject to the right of -the executor to use the bonds during his life in case such use should become desirable or necessary. And in April, 1887, at the suggestion of William H. MacKaye, this receipt was returned by the testator, and a copy of it was also transmitted to William H. MacKaye, with a statement subscribed by the testator relative to the use of the bonds, to obtain a loan of $2,000 upon their security for him. This receipt and direction are as follows:

New York, Jan’y 21, 1887.

Kec’d of my father James McKaye, ten Kansas Pacific bonds of one thousand dollars each, to be held by me in trust for his adopted daughter Theodora Edith McKaye,'and for her sole benefit and behoof, said bonds for, and during his life, to be subject to the order of my father.

(Signed.) W. H. McKAYE.

April 1st, 1887, I directed my son ~W. H. McKaye, to borrow for me $2,000, and to nse as a security therefor two of the above mentioned bonds. • J. MoKAYE.

In a letter written by the testator relating to these bonds, he stated tp his son that the object of placing them in the hands of his son in trust for Edith, was that he might swear, if necessary, that he had no property in his hands belonging to the testator in case a black-mailer should again attack him. In this letter, which was written on the 18th of January, 1888, he added further, that he never meant to part with the right to dispose of the bonds during his life. But as his son seemed to be worried about the receipt given by him, he returned it to him. He then said, however, “ But let the understanding between us be that, at all times, any portion of the bonds that may remain in your hands, undisposed of, by my order or request, you hold for the benefit of Edith, and as her guardian and trustee, so that you can, at all times, swear that you have no property of mine in your hands.” And by a postscript to the letter he suggested to his son that he should keep a copy of the receipt in his tin box, which he might show if such a thing should be found expedient. On the 27th of September, 1887, he also ■wrote a letter to his son, stating that he desired, about the middle of October, to draw on him for about $500, $300 of which he would be enabled to reimburse himself for with the coupons on the Kansas Pacific bonds, and the other $200 were expected to be obtained from another source. And in October he did draw upon his son for this sum of money, as he himself said, against the Kansas Pacific bonds, and the $200 expected to be obtained from a Mr. Burwell. In November of the same year, by a letter then written, he referred to a loan of $2,000, and then suggested that if he concluded to borrow the money in London, he would allow the interest money due him to be applied to the payment of that loan, and then the ten bonds would be free, and he could have them sent over to London if necessary. In the letter he further added, that his only hesitation about having the bonds sent to London was that he might want them sent back to New York. And that he would write Mr. Lowrey by the next mail in regard to the trust, and ask his advice about having all the bonds returned to New York.

Iii December of the same year, by another letter, he also reiterated what he terms to have been his principal object in putting these bonds in trust for Edith. And, then referring to these and other bonds, stated that his idea was to have all the bonds sent to New York to be held under the care of his son in the safe deposit company. In January, 1888, he also wrote to his son that he expected to consult with Mr. Lowrey about a trust deed of the bonds that were in London, and then added, as he had stated before: “ As I have already written you, I put the ten bonds you hold in New York in trust for Edith to enable you to swear at all times that you had no property of mine in your hands I did not intend to put the bonds in any such position as that I could not use them during my life, and I do not now believe in any such construction of the receipt.” After that he stated further : “ I do not want you to feel uneasy about the matter, so as soon as I see Lowrey I will send you another form of receipt so that you shall be relieved of all responsibility under the trust.” This was followed by a letter referring to the ability of the son to borrow for the testator the sum of $2,000 on the security of the bonds he had in his hands. He also wrote to Mr. Lowrey in October, 188T, aletter containingthe inquiry as to other bonds, “ How would it do if my wife were to redeliver to me these bonds, and then that I should put them with those now held by "William, in trust for Edith, into the possession of three trustees of which my wife should be one, together with yourself and my son ¥m ? ”

It is not necessary to consider the admissibility of the statements of the testator, subsequent to the time when the bonds were placed in the hands of his son, as they were stated to have been by the receipt subscribed by him and transmitted to the testator. For throughout the correspondence the trust is substantially acknowledged to have been created as the receipt expressed that to have been the design of the testator. And when this receipt was to be returned the understanding was reiterated in the letter of the 18th of January, 1888, that the bonds were to be held and remain in the hands of the son for the benefit of Edith, as her guardian and trustee. These statements are unequivocal evidence of the intention of the testator to _ place the bonds in the hands of his son, there to remain for the benefit of this adopted daughter, unless during the lifetime of the testator they should be used by him. And that, in judgment of law, did create a valid trust for lrer benefit. (Jones v. Clifton, 101 U. S., 225, 230.) And to the same effect is the conclusion that was reached in Van Cott v. Prentice (104 N. Y., 45).

The trust was created for the benefit of this adopted daughter, subject only to the contingency, and the right of the testator creating it, to use the bonds, or- the interest accruing upon them, during his lifetime; and that circumstance, as these authorities settle the law to be, did not invalidate the trust. It is true that possession of the bonds by the trustee was essential to the creation of the trust, as that was substantially held in Martin v. Funk (75 N. Y., 134); Phipard v. Phipard (55 Hun, 433), and in the Matter of Crawford (113 N. Y., 560); Jackson v. Twenty-third Street, etc., Railway Company (88 id., 520); Young v. Young (80 id., 430). But all that these authorities require to create a legal gift of the bonds in trust was established by the evidence, for they went into the possession of William H. MacKaye, the trustee, and remained subject to his control, and the declaration of trust contained in the receipt, up to the time of his own decease. They were at no time removed from that possession with a view of abrogating the trust, and at no time used for the benefit of the testator in such a manner as to be inconsistent with its existence.

After the decease of the testator three of the bonds were used to provide the sum of $3,000 for the embalmment of his body, and its return to and burial in the State of New York. This evidence was objected to on behalf of the executor; but, inasmuch as it was no part of the design of the evidence to create a demand against him for the amount of the bonds which had been so used, the exception became entirely unimportant. What was claimed in behalf of the beneficiary, the adopted daughter of the testator, was that she should be assured the title to the seven bonds which afterwards remained. And as no claim was made or included in the judgment for the three bonds, or any part of their proceeds, the executor was in no manner injured by the production of this evidence.

The uncontradicted evidence given upon the trial, as well as that contained in the letters of the testator, proved the fact to be that he not only intended, but did create, a trust for the benefit of his adopted daughter in these bonds. They were in the possession of his son, subject to that declaration and arrangement; and the motive he had for placing them subject to this trust was of no controlling importance in the case. Even if he did design, by means of the trust, to place his son in a position where he could swear that he had no property of the testator in his hands, and that was a leading object he had in view, still, as he did create a trust for the benefit of this adopted daughter, it was legal and valid, notwithstanding the existence of this motive or inducement. And ias the bonds, to the extent of seven, remained subject to the trust at the time of the decease of the testator, the title to them, as the beneficiary of the trust, vested in the adopted daughter Theodora Edith..

The judgment from which the appeal has been taken should be affirmed, with costs.

Yan Brunt, P. J., concurred.

Ingraham, J.

(dissenting):

I think the evidence in this case fails to show a delivery of the bonds to William H. MacKaye, as trustee, sufficient to sustain a gift. There is ho evidence as to the circumstances under which the bonds were delivered to William H. MacKaye; all that appears is that, at the time of his death, they were in his possession, and there was also in his possession a receipt which he appears to have given to his father, but which had been subsequently delivered by his father tb him, whereby he stated that he received from the father the bonds to be held in trust for the defendant, Theodora Edith MacKaye, for her sole use and benefit and behoof, and which then contained the following provision: “ Said bonds for and during his life to be subject to the order of my father.”

It does appear that the testator used the interest on the bonds during his life,-and never parted with the right to control their use. He appears to have exercised all acts of ownership, and to have treated the bonds as his own property.

In Jackson v. Twenty-third Street Railroad Company (88 N. Y., 526), the court says: “ The delivery must be such as to vest the donee with the control and dominion over the property, and to absolutely divest the donor of his dominion and control, and the delivery must be made with the intent to vest the title of the property in the donee.”

The terms of the receipt given would indicate that there was no intention of the testator to divest himself of the dominion and control of the bonds,- and his statements, acts and declarations, if they are admissible at all, as against the respondent, all tend to show that he never did intend to divest himself of the ownership of the bonds, or of the power to use and control them in any way he saw fit.

I am unable, therefore, to concur in the affirmance of this judgment.

Judgment- affirmed, with costs.


author: Van Brunt, P. J.:

text:
    GEORGE MUNDORF, Respondent, v. THE NEW YORK ELEVATED RAILROAD COMPANY and THE MANHATTAN RAILWAY COMPANY, Appellants.

      Negligence — elevated railroads — the possibility of fire is not a proper element of damages.

    In an equitable action brought to restrain the elevated railroads of the city of New York from maintaining and operating their road in front of the premises of the plaintiff, the plaintiff was allowed to introduce evidence tending to show that the house had been set on fire from something which came in the window, the evidence leaving its source undetermined.

      Held, that such evidence was incompetent.
    That as the complaint contained no allegation of negligence in the manner in which the roads were managed, and as unusual' damages of this nature, even if possible, were not an element which could properly be considered in fixing the value of the easement, the evidence, though indefinite in its character, should not have been admitted.
    Appeal by the defendants, the New York Elevated Railroad Company and the Manhattan Railway Company, from a judgment,1 entered, after a trial "before a referee, in the office of the clerk of the city and county of New York on the 4th day of June, 1891, in favor of the plaintiff for $476.66 damages, and granting an injunction in case of the failure of the defendants to purchase the easements used by them at a specified price.

      Ernies, Short & Townsend, for the appellants.

      E. A. Hibbard, for the respondent.
   Van Brunt, P. J.:

This action was the ordinary equity action to restrain the defendants from maintaining and operating their railroad in front of the plaintiff’s premises, No. 72J Ninth avenue.

It seems to us that a fatal error was committed in the admission of testimony upon the trial of this action. A witness, who had formerly been a tenant of No. 712 Ninth avenue, a building at a considerable distance from the one in question, was asked: “Do you know about the old frame house catching fire ? A. Yes, sir. Q. How did it catch fire?” This question was objected to, and admitted under exception. The witness then answered as follows : “A. Well, it was in the summer time, about the 5th of July, and I couldn’t say whether it was from, the sidewalk or the elevated station, or whether there was something thrown in through the windows ; I couldn’t tell whether it was from the station or not, but I know it was right in the locality of the station; but I couldn’t say whether it was from the walk or the station; the fuse, or whatever it was, came into the bed-room and set fire to the bed-room; I was ■in bed in the other room at the time; I don’t know what it was, or ■where it came from; the room was set on fire, anyway, whether it was mischievous boys or uot; this was on the floor above the ¡store ; it was a bed-room for the children; it was used for a part of xny family; but whether it was a fire-cracker that set it on fire op not, I don’t know.”

The admission of this question seems to have been entirely unjustifiable, because there was no allegation in the complaint of negligence in the manner in which the defendants managed their railroad ; and there being nothing in this proceeding by which the plaintiff could compel the defendant to pay for the right to negligently cast fire towards the plaintiff’s premises in the future, there was no such element of damage to be ascertained in determining the value of the easement in question. And, furthermore, it was evidence in respect to other premises than those in question.

If it be said that the answer was indefinite as to the cause from which the fire came, it is sufficient to say it is impossible for us to determine whether the referee was of the opinion that the fire came from the elevated road or not. He deemed it important to show that other premises had been endangered by the negligence of the company in the management of their road, and that the danger of setting on fire the premises-bordering on the road was a fact to be taken into consideration in determining the measure of damages.

It is a familiar principle that in proceedings of this character the damages which may possibly result from the negligent or unskillful operation of the road must be excluded from consideration. Such damages may never be sustained, and if they did occur the party aggrieved may have, an independent remedy therefor. It is only the ordinary damages or risks not resulting from negligence that can be taken into consideration in estimating damages to the land only.

The judgment must be reversed, and a new trial ordered before another referee, with costs to appellant to abide event.

Daniels and Barrett, JJ., concurred.

Judgment reversed and new trial ordered before another referee, with costs to appellant to abide event.