Hutchison v. Ross

John Kenneth Ross, a resident of Montreal, married in Toronto in 1902. In anticipation of their marriage the parties entered into an ante-nuptial agreement to regulate their property rights in accordance with the law of Quebec, where they intended to reside. They still do reside there. Under the civil law prevailing in that province, there is community of property between spouses, but the parties to a marriage may by ante-nuptial agreement provide that each shall continue to have separate property. They may also by such ante-nuptial agreement provide for gifts or trusts in favor of one or the other. After the marriage such provisions in an ante-nuptial agreement may not be abrogated, modified or enlarged. Neither husband nor wife may transfer to the other, directly or in trust, any substantial part of his or her fortune.

The ante-nuptial agreement made by Ross and his prospective wife provided that the property of each should be separate, and Ross agreed in addition to provide for the support of his wife and to establish either by deed

The father of John Kenneth Boss died in 1913, leaving an estate of about $10,000,000 to his son. In 1916, during the World War, John Kenneth Boss, the son, decided that a provision of $125,000 for his family was insufficient, and he told his wife that he desired to provide for her more adequately by creating a trust fund of one million dollars, the income to be paid to his wife for life, and the principal to go to their two children upon her death. One D. M. C. Hogg, a Scotchman learned in the law of Scotland but perhaps not in the law of Quebec, had been the secretary and adviser of Boss’ father. Boss, the son, had continued to employ him in the same capacity. Boss directed Hogg to prepare or have prepared appropriate instruments to transfer to the Equitable Trust Company in the city of New York a fund of one million dollars, to be held in trust for his wife. Both father and son had kept bank deposits and had securities valued at more than half a million dollars in New York city, in the New York branch of the Bank of Montreal. Boss desired that such securities, with substitutions and additions sufficient to create a fund of one million dollars, should constitute the corpus of the trust estate.

Hogg, in accordance with what he deemed his instructions, prepared a trust deed or agreement. The trustee was to pay the income to Mrs. Boss during her life and after her death to divide the principal among the children of the marriage her surviving or their issue per stirpes or to make other disposition thereof in accordance with the provisions of the instrument. The instrument was submitted to the trust company for approval. After the trust company had agreed to act as trustee, the instrument was

For about ten years the trustee carried out the provisions of the trust indenture. During that time no one questioned its validity. In 1926 Ross retained a Montreal barrister to draw up a will. He told the barrister of the provision he had already made for his family. The barrister promptly told Ross that the trust indenture was patently invalid under the law of Quebec, and so notified the trustee. By that time most of the estate which Ross had received from his father had been dissipated. Ross was deeply involved in speculations in oil stocks. He owed large sums to some Baltimore banks. He informed the Baltimore banks that the trust he had created was invalid, and in consideration of his promise to bring legal proceedings to have the trust set aside and to deliver the trust property to the banks as collateral, they agreed not only to extend the existing loans but to make new loans to Ross. He secured the signatures of his wife and children to written consents to revoke the trust. Ross then began an action to set aside the trust on the ground that it was void at its inception and a second action for

After the actions were commenced, a petition in bankruptcy was filed against the plaintiff and the trustee in bankruptcy was substituted in his place. The defendants in the first action assert that under the law of New York the conveyance is valid and should be enforced here. In the second action they assert that the signatures to the consents to revoke the trust were obtained by misrepresentations and that issue of the settlor’s children, born and unborn, have an interest in the trust. Both actions were tried together. They resulted in a judgment in favor of the plaintiff in the first action, and a judgment on the merits in favor of the defendants in the second action. Appropriate findings were made in each action. Upon appeal the Appellate Division reversed the judgment in the first action and upon new findings dismissed the complaint upon the merits. It affirmed the judgment in the second action.

The situs of personal property in a jurisdiction other than that where the owner of the property is domiciled has given rise to many difficulties and perplexities. The maxim “ mobilia sequuntur personam ” cannot always be carried to its logical conclusion. Practical considerations often stand in the way. Physical presence in one jurisdiction is a fact, the maxim is only a juristic formula which cannot destroy the fact. Within territorial limits, the jurisdiction of the courts of each state or nation is limited only by constitution or treaty. The courts of each jurisdiction determine all judicial questions by the law of that jurisdiction. When the owner of personal property authorizes its removal from his domicile or acquires property elsewhere, he must be deemed to know that his property comes under the protection of, and subject to the laws of the jurisdiction to which it has been removed, and that appeal may be made to the courts of that jurisdiction for the determination of conflicting rights in such

The courts of the various jurisdictions have with substantial unanimity adopted certain rules. “ Capacity to make a valid conveyance of a chattel is determined by the law of the state where the chattel is situated at the time of conveyance.” (American Law Institute, Tentative Restatement, Conflict of Laws, § 275.) “ The essential validity of a conveyance of a chattel is determined by the law of the state where the chattel is situated at the

For the same reasons the rule should be and generally is applied to other intangible personal property, at least when “ no one can get the benefits of ownership except through and by means of the paper ” which evidences such intangible property. (Disconto-Gesellschaft v. United States Steel Co., 267 U. S. 22 , 28.) Intangible property, like shares of corporate stock or debts, may for practical purposes be merged and embodied in documents like stock certificates or bonds, which like bills and notes are “ instrumentalities of trade and commerce.” “ They pass from hand to hand and properly are governed by the rule relating to the transfer of tangibles.” (Cf. American Law Institute, Tentative Restatement, Conflict of Laws, §§ 53, 57, 281, 282.) Such documents and the personal property merged or embodied in them have, like tangible chattels, a situs apart from the domicile of the owners. Under the Constitution of the United States, such situs may be insufficient to empower the State, where such documents are situated, to impose a property tax on them, though the owner resides in a sister State of the Union. (Farmers Loan & Trust Co. v. Minnesota, 280 U. S. 204 ; First Nat. Bank v. Maine, 284 U. S. 312 .)

Nevertheless the physical presence of such documents

The rules that both the capacity to make a valid conveyance of tangible chattels and securities and the essential validity of such conveyance are determined by the law of the State where the chattel is situated at the time of the conveyance have been generally applied to conveyances inter vivos. They are not generally applied to passage of title by will or the intestacy of a decedent owner. With possible limitations, not relevant to the question here presented (Cf. Chamberlain v. Chamberlain, 43 N. Y. 424 ; Hope v. Brewer, 136 N. Y. 126 ; Cross v. United States Trust Co., 131 N. Y. 330 ), the rule is well established that the essential validity of a testamentary trust must be determined by the law of the decedent’s domicile, and the same rule often is applied to trusts established as part of a marriage settlement. The plaintiff urges that the same rule should be applied to a conveyance in trust inter vivos, especially where such trust is established for the benefit, of the wife and children of the settlor.

It cannot be gainsaid that there are expressions in the opinions of the courts of this State which support the plaintiff’s contentions. In considering the effect of these expressions, we must give due weight to the circumstances under which they were made. The paucity of old judicial decisions upon conveyances in trust inter vivos, compared with the number of decisions upon testamentary trusts, shows that conveyances in trust inter vivos were com

Analogy furnishes no satisfactory guide, for analogy in either case is imperfect and incomplete. Dicta in earlier opinions are certainly unreliable, because the rule announced is assumed rather than considered. Nevertheless the fact that the rule has been assumed is not without significance.

We have considered all the cases in this State, called to our attention, which deal with trusts inter vivos, even though space forbids complete analysis here. They have been painstakingly analysed in the valuable article by Professor Cavers (“ Trusts Inter Vivos and the Conflict of Laws, 44 Harvard Law Review, 161). In Sullivan v. Babcock ( 63 How. Pr. 120 ) the court, at Special Term, sustained a conveyance in trust of personal property in the State of New York on the ground that such conveyance was valid in New Jersey where the settlor resided and where the trust indenture was executed. The case was not appealed to this court and is significant mainly because the court apparently relied, as authority for the rule applied, exclusively on Story on Conflict of Laws, which asserts broadly “ that the laws of the owner’s domicil should in all cases determine the validity of

There are, however, dicta in opinions in this court in cases dealing with testamentary trusts, which do indicate that, at least, at the time when these cases were decided this court would have applied the same rules to trusts inter vivos as to testamentary trusts. (Parsons v. Lyman, supra; Cross v. United States Trust Co., 131 N. Y. 330 ; Dammert v. Osborn, 140 N. Y. 30 .) That is the construction which courts of other jurisdictions have placed upon these dicta. (Liberty Nat. Bank & Trust Co. v. New England Investors Shares, Inc., 25 Fed. Rep. [2d] 493; Swetland v. Swetland, 107 N. J. Eq. 504 , affg. 105 N. J. Eq. 608 .) None the less, now that we are called upon to decide that question, we must weigh other considerations not then apparent to the courts which seem to point logically to the need for differentiation between the rule to be applied to testamentary trusts and the rule to be applied to trusts inter vivos.

In all the affairs of life there has been a vast increase of mobility. Residence is growing less and less the focal point of existence and its practical effect is steadily diminishing. Men living in one jurisdiction often conduct their affairs in other jurisdictions, and keep their seeuri

Our courts have sought whenever possible to sustain the validity even of testamentary trusts to be administered in a jurisdiction other than the domicile of the testator. (Cf. Chamberlain v. Chamberlain, 43 N. Y. 424 ; Hope v. Brewer, 136 N. Y. 126 ; Cross v. United States Trust Co., supra; Dammert v. Osborn, 140 N. Y. 30 .) In regard to other conveyances or alienations of personal property situated here, they have steadfastly applied the law of the jurisdiction where the personal property is situated. The maxim that movable personal property follows its owner is restricted to the field within which the State, where that property is found, chooses to apply other laws than its own, and modern conditions have caused a limitation of that field to narrow bounds. That is true in other jurisdictions as well as here. Where a non-resident settlor establishes here a trust of personal property intending that the trust should be governed by the law of this jurisdiction, there is little reason why the courts should defeat his intention by applying the law of another jurisdiction. (Cf. Dicey on Conflict of Laws, [4th ed.] pp. 591 and 713.)

We balance the weight of such considerations against the weight of the dicta in old cases. We may throw in the balance also expressions of public policy by the Legislature of this State. It has provided that: “ Whenever a person being a citizen of the United States, or a citizen or a subject of a foreign country, wherever resident, creates a trust of personal property situated within this State at the time of the creation thereof, and declares in

It is said that the statute establishes a public policy only where there is an express declaration of intention in the instrument that it shall be construed and regulated by the laws of this State. Here there is no express declaration of intention, but the intention is implied in every act and word of the parties. The statute makes express declaration of intention conclusive, but a construction which would deny effect to intention appearing by implication would be unreasonable. Indeed, since the statute in terms applies even to residents of this State, such construction would be almost impossible. It follows that the validity of a trust of personal property must be determined by the law of this State, when the property is situated here and the parties intended that it should be administered here in accordance with the laws of this State.

The instrument creating the trust is not, in form, merely an assignment of personal property upon specified trusts, nor is it merely an agreement between the settlor and the trustee. Mrs. Ross is a party to the instrument, and at least in form it constitutes, in addition to a deed or

Though the validity of the conveyance in trust be determined by the law of the State of New York, there can be no doubt that the validity of the provisions of the agreement for the revocation of the contract of marriage settlement and for the renunciation of the benefits which might accrue to the defendant under the marriage settlement must be determined by the law of Quebec. There the parties were domiciled and there the marriage- contract was made and will be enforced. In the Province of Quebec these provisions of the agreement will be given no effect. The attempted renunication of the marriage settlement is a futile act, and the courts of this State are powerless to give it effect. The parties to the contract by appeal to our courts have subjected themselves to the jurisdiction of those courts, but the decrees of our courts have no extraterritorial effect and cannot alter the domiciliary marital status of parties not domiciled here, or direct the courts of the jurisdiction where the parties are domiciled in the enforcement of marital rights there;

There is, nevertheless, no rule of law which would preclude the courts of this State from determining in accordance with the rules of law of this jurisdiction, the validity of a conveyance of real or personal property contained in a bilateral agreement, even though the remainder of the agreement be governed by, and is void under, the law of another jurisdiction, provided the conveyance be separable from the other parts of the contract. Concededly that would be true if the conveyance were of real estate here. It is equally true of personal property

The difficulty in this case is that on the face of the contract the conveyance in trust seems to have been made, at least partly, in consideration of the revocation of the provisions of the marriage contract and according to the recitals “ in lieu of the provisions * * * contained in said contract of marriage settlement.” Though an executed deed or conveyance in trust requires no consideration (Stiébel v. Grosberg, 202 N. Y. 266 ), yet if made for a promised consideration which fails, the conveyance may be revoked. Though apparently that question has never heretofore been presented to any court, it would seem clear that a conveyance valid under the law of New York, might be unenforceable and subject to rescission if the consideration fails because the laws of Quebec effectually preclude the enjoyment of the promised consideration. Upon the face of the agreement the wife’s renunciation is the consideration for the husband’s conveyance in trust. Invalidity in either, it is said, renders the other unenforceable or subject to rescission.

The Appellate Division has, however, found that the defendant Mrs. Ross never “ knowingly consented to revoke any of the conditions or provisions for her benefit contained in the said marriage settlement, and never knowingly renounced any benefit which might accrue to her thereunder ” and that “ no consent to revoke, or agreement to renounce, or renunciation, by the defendant Ethel Adine Ross * * * was intended to induce, or did induce, the plaintiff Ross to transfer the securities ” included in the trust. The evidence on this point was elicited from the parties themselves. It could not be directly contradicted, and is sufficient to sustain the findings even though perhaps not sufficient to justify a reformation of the written agreement. It does not appear, and the court has not found, that the plaintiff Ross did

The plaintiff maintains that so limited they are irrelevant and immaterial. That raises a novel question. Deeply imbedded in the judicial decisions of every common-law jurisdiction is the rule that the terms of a written agreement cannot be varied by parol and that in construing the agreement “ it is not the real intent but the intent expressed or apparent in the writing which is sought.” (2 Williston on Contracts, § 610.) Thus, except for the purpose of having a contract reformed, a party to a written agreement may not assert its validity and at the same time deny that the writing embodies the actual contractual rights and obligations which the parties intended to make. The written agreement defines conclusively the contractual rights and obligations of the parties. It does nothing more. Recitals, even recitals of consideration, unless intended themselves to embody a contractual right or obligation, may be contradicted. “ The consideration of a written instrument is always open to inquiry, and a party may show that the design and object of the agreement was different from what the language, if alone considered, would indicate.” (Baird v. Baird, 145 N. Y. 659 , 664; Cf. Juilliard v. Chaffee, 92 N. Y. 529 .) The principle precludes denial, limitation or extension of a contractual right embodied in a writing. It extends no further. (McCrea v. Pairmount, 16 Wend. 460 .) Here there is no such attempt. The plaintiff seeks

The decisive consideration on this branch of the case is not whether the defendant intended to renounce the benefit of the marriage contract but whether the failure of such intention requires the court to apply the law of another jurisdiction to the conveyance of property situated here or creates an equitable right in the plaintiff to rescind the conveyance. The parties undoubtedly

In the second action brought to revoke the trust with the alleged written consent of all the interested parties, the plaintiff, indeed, describes the instrument creating the trust only as a “ trust deed.” Interesting questions are raised in that action as to whether unborn or infant parties may not have an interest in the trust. We do not reach those questions, for the courts below have found that the consents which have been signed by the wife and children were obtained by misrepresentation. The trier of the fact, on the evidence produced, might reasonably have refused to make such findings. We cannot say that there is no evidence to sustain them. The doctrine that those who negligently sign an instrument without reading it may be estopped or precluded from showing that in fact they never assented to its terms (Pimpinello v. Swift & Co., 253 N. Y. 159 ) does not apply here.

The judgment in each action should be affirmed, with costs.

The trust instrument is self-styled an “ Agreement ” to which the plaintiff John

For these reasons, without going into the merits of the question whether the laws of this State or the laws of Canada should be applied herein, which I think extremely doubtful, I dissent from the decision to be made by the court.

Pound, Ch. J., Crane, O’Brien and Hubbs, JJ., concur with Lehman, J.; Kellogg, J., dissents in opinion in which Crouch, J., concurs.

Judgments affirmed. (See 262 N. Y. 643 .)