Hammerstein v. Equitable Trust Co.

The complaint alleges that the defendant has become possessed of and now holds certificates for 3,998 shares of stock of the Hammerstein Amusement Company which the plaintiff owns; that he has demanded possession thereof and been refused, and asks judgment for the possession thereof, or for $100,000 damages.

The first defense sets up that the plaintiff and Malvina Hammerstein intermarried about the 7th of December, 1879, and had two children, Rose Hammerstein Tostevin and Stella Viola Hammerstein; that about the 26th of January, 1910, when plaintiff and his said wife were then living separate and apart, they entered into an agreement to live separate and apart, under the terms whereof plaintiff was to pay his wife $200 a week. That agreement is attached to the answer, and it provides, inter alia: ‘

“And it is further agreed that in case an action for an absolute divorce ■between the parties hereto is hereafter commenced by the party of the second part, all the terms and conditions of this agreement shall be deemed to have been annulled and abrogated and to be no longer binding upon the parties hereto.”

It is further alleged that on the 17th of November, 1910, Malvina Hammerstein commenced an action in the Supreme Court, Rockland ■county, against the plaintiff for absolute divorce, and that during the pendency of said action on May 3, 1911, the parties thereto and their .attorneys at the request of the defendant in that action entered into a ■certain stipulation attached to the answer. By said stipulation it was agreed:

“That in the-event fina? judgment shall be recovered by the plaintiff against the defendant in said action, the following agreement shall become of force and effect and shall stand in lieu of all alimony or provision for the support of the plaintiff and said children of the parties hereto.”

The parties signing were the plaintiff and defendant and their respective attorneys, and also the Trust Company of America, subsequently merged in the defendant herein, and it provided that the former agreement alluded to “is hereby terminated, abrogated an"d ended”; that “the party of the first part for himself, his heirs, executors and administrators promises and agrees to pay to” the Trust •Company $200 weekly for the use of his wife during the term of her .natural life; also to pay to said Trust Company from and after the

The answer proceeds to allege that said stipulation was submitted to the referee in the divorce action and introduced in evidence, and that the referee rendered a report recommending a decree of absolute divorce, which was confirmed upon submission of all the papers to Mr. Justice Tompkins, and that no specific award of alimony was given. The report of the referee contained the clause:

“Satisfactory provision having been made by the defendant for the support and maintenance of the plaintiff, no finding in that respect is submitted.”

And the decree of the court provided:

“And it is further ordered that, the defendant having made suitable provision for the support of plaintiff, no specific provision is herein made therefor, but leave is hereby granted said plaintiff at any time hereafter, on defendant’s failure to comply with his provision, to apply to this court for suitable alimony.”

It is alleged that the plaintiff herein delivered the shares sued for to the Trust Company to be held for the purpose and in the manner set forth in said stipulation, and that they are now being held by the defendant pursuant to the terms of the agreement set forth and for the purposes thereof, and that plaintiff conveyed the real property referred to in said stipulation to his daughters, and that he paid to the defendant the $200 weekly for the support of his said wife until her death, which occurred on or about January 9, 1912, and thereafter continued to pay the said sum of $200 weekly for the .use of his daughters as provided, down to and including the week ending October 12, 1912. For a second defense the answer repeats the allegations of the fourth, sixth, seventh, eighth, ninth, tenth, eleventh, and twelfth paragraphs, and alleges that by said judgment so recovered in favor of Malvina Hammerstein against this plaintiff the matters herein in litigation were finally adjudicated and settled; and that the matters herein in litigation by reason of said judgment have become, and now are, res adjudicata, and the plaintiff is thereby estopped and barred from maintaining this action. „

To the first and second defenses the plaintiff demurred upon the ground that they are insufficient in law upon the face thereof.

[1] So far as the first defense is concerned, I am of the opinion ■that there was a valid trust created upon good consideration, • which

[2] But the claim is made, as the two daughters were adults, that there was no obligation on the part of the husband to provide for their support, and, as the wife has died, there was no consideration which,, as to them, now supports the instrument.

In my opinion the stipulation created a valid, irrevocable trust in favor of the two daughters and a special property in the certificates-of stock in the defendant as trustees.

“There are four essential elements of a valid trust of personal property r (1) A designated beneficiary; (2) a designated trustee, who - must not be the-beneficiary; (3) a fund or other property sufficiently designated or identified to enable title thereto to pass to the trustee; and (4) the actual delivery of the-fund or other property, or of a legal assignment thereof to the trustee, with the intention of passing legal title thereto to him as trustee.” Brown v. Spohr, 180 N. Y. 201 , 209, 73 N. E. 14 , 16.

All of these essential elements exist in the instrument in question. The certificates of stock are expressly assigned to the trustee, and it appears from the answer that after the making of the stipulation and in performance thereof the plaintiff delivered to the Trust Company 3,998 shares of the capital stock of the Hammerstein Amusement Company to be held by the said Trust Company for the purpose and in the-manner set forth in the agreement; that said certificates of stock here-sued for are now being held by the defendant herein by virtue of the terms of the agreement and for the purposes thereof. It also appears, that the plaintiff conveyed the real property referred to in the stipulation to his said daughters, and that he performed his agreement by the payment of $200 weekly for the support and maintenance of his wife until her death, and thereafter paid the said sum weekly for the

[3] Trusts in personalty may be created by deed, will, or parol and no particular language is necessary to constitute a trust. Matter of Carpenter, 131 N. Y. 86 , 29 N. E. 1005 .

[4] Trusts of personalty for third persons may be created for any lawful purpose, as the statutes do not define their purposes as they do in express trusts of real estate. Gilman v. Reddington, 24 N. Y.. 9 , 12; Hirsh et al. v. Auer, 146 N. Y. 13 , 19, 40 N. E. 397 . A trust, covering personal property only may embrace, “any purpose not unlawful, subject only to the law of perpetuity.” Matter of Wilkin, 183-N. Y. 104, 75 N. E. 1105 .

In Robb v. Washington & Jefferson College, 103 App. Div. 327 , 93 N. Y. Supp. 92 , Mr. Justice Laughlin, citing numerous cases, said:

“As in the case of wills, so in the construction of declarations of trusts, the intention of the settlor, if not violative of any statute or rule of law, is controlling and must be given effect; and it is to be gathered from a consideration, not -of the precatory words alone, but of all the provisions of the instrument in the light of any circumstances shown that have a bearing thereon.”

[5,6] Testing the instrument at.bar, the settlor “promises and' agrees to pay to the party of the third part the sum of $200 per week for the use of the party of the second part,” etc., “and after the death of the latter for the use of the daughters.” It uses the words “so long as the said trust shall remain in force,” and “the party of the first part hereby declares, covenants and agrees” the assignment of the certificates is to the party of the third part “absolutely and forever, in trust, nevertheless, and for certain uses and purposes.” . Further indication is shown of the settlor’s intention in the provision that, the trustee agrees that at the termination of the trust hereby created it will reassign. The settlor further agrees to transfer the Brooklyn property to his daughters, in trust, however, to pay the rents, issues, and profits-thereof to Malvina Hammerstein during the term of her natural life, and thereafter to have and to hold the same to themselves. And further, if the settlor should exercise the right to terminate the trust by the payment of $175,000 in cash to the trustee, the latter is to receive-the said sum in trust, to invest and reinvest the same in securities in which trustees are authorised by the laws of the state of New York to invest and to pay over the income to the party of the second part during her natural life in quarterly payments, and upon her death to pay the said sum of $175,000 or transfer and convey and deliver securities in which the same may have been invested in equal shares to the said Stella and Rose, whereupon said trust shall cease.

In Roe v, Vingut, 117 N. Y. 204 , 22 N. E. 933 , Peckham, J., after stating that the intent is to be gleaned from a perusal of the whole instrument, said:

“Upon such perusal, if a general scheme can be found to have been intended and provided for in the instrument, and such general scheme is consistent with the rules of law, and so may be declared valid, it is the duty of courts to effectuate the main purpose.”

“The objection that the trust here sought to be enforced was voluntary and without consideration has no weight, if it was, in fact, fully and completely constituted.” Van Cott v. Prentice, 104 N. Y. 45 , 10 N. E. 257 .

The fact that, as to the daughters of the settlor, it was voluntary, and without other consideration than that of natural love and affection with power to terminate the trust in the manner provided in the instrument and the reservation of the right to the income in the stock, and the right to vote it, does not invalidate the trust. Von Hesse v. MacICaye, 136 N. Y. 114 , 32 N. E. 615 ; Schreyer v. Schreyer, 101 App. Div. 460 , 91 N. Y. Supp. 1065 , affirmed 182 N. Y. 555 , 75 N. E. 1134 . The plaintiff as settlor cannot by his own act revoke it. That can o.nly be done upon the written consent of all the persons beneficially interested. Personal Property Law (Consol. Laws 1909, c. 41) § 23.

[7] It is provided by the Personal Property Law, § 11, that the absolute ownership of personal property shall not be suspended by any limitation or condition for' a longer period than during the continuance and until the termination of not more than two lives in being at the date of the instrument containing such limitation or condition; or, if the instrument be a last will and testament, for not more than two lives in being at the death of the testator. In other respects limitations of future or contingent interests in personal property are subject to the rules prescribed in relation to future estates in real property. The rule against perpetuities in this state is now a rule wholly directed against the suspension of the absolute ownership or power of alienation. Unlawful suspension of. the absolute ownership or power of alienation of personal property exists only where there are no persons in being by whom an absolute, unqualified interest in possession can be conveyed. The mere creation of a trust does not ipso facto suspend the power of sale.

The absolute ownership and power of alienation is not suspended in this case because there were at all times persons in being who could convey an absolute title in possession; (1) the settlor himself, with the written consent of the beneficiaries; (2) the settlor himself, if he avails himself of the right to change the trust property to a cash fund of $175,000; (3) the annuitants acting in conjunction with the trustee and settlor could convey the estate to the settlor who is the remainderman; (4) the settlor, the beneficiaries, and the trustee could convey to a third person, and if the beneficiary and the settlor should unite in an assignment the trustee would be obliged to convey to the assignee; (5) the trustee alone, in the event of a sale after default in the payments provided to be made by the settlor.

In Wells v. Squires, 117 App. Div. 502 , 102 N. Y. Supp. 597 , affirmed on opinion below 191 N. Y. 529 , 84 N.

“If then there are persons in being who can, unitedly, give a perfect title, there is no suspension of alienation. The plaintiff's contention is that the title cannot be transferred, because the annuitants could not lawfully transfer their interests. This contention cannot be sustained. The prohibition against the assignment by a beneficiary of the right to enforce the performance of a trust of personal property is limited to cases where the trust is one to receive the income and apply it to the use of any person. The statute expressly provides that ‘the right and interest of the beneficiary of any other trust in personal property may be transferred.’ Pers. Prop. Law, Laws of 1897, c. 417, § 3, as amended by chapter 87, Laws 1903. The trust in the present case is distinctly not a trust to receive the income and apply it to the use of any person, and cannot be construed as such by any known rule of construction. Consequently the interests of the beneficiaries are alienable and do not suspend the absolute ownership of the fund. Kane v. Gott, 7 Paige, 521; Id., 24 Wend. 641 [ 35 Am. Dec. 641 ]. The annuitants, acting in conjunction with the trustee, could convey the estate to the remainderman, or they, with the remainderman, could convey to a third person. And if the annuitants and the remainderman united in an assignment, the trustee would be obliged to convey to the assignee. Coster v. Lorillard, 14 Wend. 265 .”

So far as the first defense is concerned, I think it states facts sufficient in law, and that the demurrer thereto was properly overruled.

[3] As to the second defense, res adjudicata, I do not think that is so. What was determined in the divorce suit was that this plaintiff had been guilty of adultery and that his wife was entitled to an absolute divorce. It was also determined that as suitable provision had been made for the wife no provision in regard to alimony would be inserted in the interlocutory or final judgment, but that if the defendant failed to comply with the provisions of his agreement further application might be made to the court. I cannot see that the validity of the instrument, so far as the daughters’ interests are concerned, was passed upon either directly or indirectly by that payment. Nothing was said about the daughters or their support. As they were of age, indeed one of them married, there was no legal obligation enforceable at the time, under which provisions for their support ought to have been made by the final decree. I cannot perceive in what way the question here put can be considered res adjudicata.

The order appealed from should therefore be modified by affirming so much thereof as overruled the demurrer to the first defense, and reversing so much as overrules the demurrer to the second defense and sustaining the demurrer thereto, with leave to plaintiff to withdraw his demurrer to the first defense, without costs to either party on this appeal.

INGRAHAM, P. J„ and McLAUGIiLIN and LAUGHLIN, JJ.' concur.

(dissenting). The plaintiff sues in replevin to recover certain certificates for shares of stock in the Hammerstein Amusement Company claimed to belong to him, possession of which is withheld by defendant.

“It is the intention of the parties hereto that the assignment of the shares of stock as hereinbefore made shall be only and solely for the purpose of this indenture, and that nothing herein contained shall deprive the party of the first part of any dividends or income from said shares of stock as the owner of said shares of stock or of his voting power as such owner, provided however, and the party of the first part so covenants, that he will do nothing to impair the value of said stock, except as to the mortgage to Edward F. Albee as set forth above.”

Provision is made for the sale of said security in case of plaintiff’s default. There are many other provisions in the agreement not affecting the questions now presented.

It is alleged that this agreement was submitted to the referee before whom the divorce action was pending, and read in evidence and spread upon the minutes and duly approved by said referee. It is also-alleged that it was submitted to the court before whom the referee’s report came for confirmation, and approved by it to the extent that no provision was made, in the decree of divorce, for alimony because suitable provisions had been made therefor by said agreement. The referee’s report and the decree of divorce are attached to and made a part of the answer. It is alleged that Malvina Hammerstein, plain

A second separate defense in which the decree of divorce above referred to is pleaded as res adjudicata of every question involved in this action is also demurred to.

The case as made by the answer is briefly this: That plaintiff made an agreement with his wife and a Trust Company that he would pay to his wife, or to the Trust Company for her use, the sum of $200 per week, and that after her death he would pay to two adult daughters, ór to the Trust Company for their use, the sum of $100 per week each for their respective lives, and that as security for the fulfillment of this he deposited with the Trust Company the securities now sought to be replevied. So far as the wife is concerned, the agreement has been fully executed and carried out, and the sole question remaining is whether the plaintiff is under any legal obligation to further execute and carry out the agreement for the payment of a weekly sum to, or for the use of, his daughters, who are not parties to the agreement. This is clearly not the case of the creation of a trust. There is no conveyance to a trustee of any property to be devoted to the use of the daughters, and a corresponding parting with ownership thereof by the plaintiff. There is nothing more than a promise to pay in the future, and a deposit of stock as security with a reservation to plaintiff of the beneficial interest in the stock until default. In the baldest terms there is only a promise to pay each of his daughters $100 a week for life. I am unable to see that this promise is sustained by any consideration. As has been said, the daughters were not parties to the' agreement, and when it was made they were both of full age, and neither plaintiff nor his wife owed to them any duty of support. No consideration moving from the daughters is mentioned in the agreement, and, while the natural love and affection which a parent is presumed to entertain for a child will support a gift inter vivos, a deed of conveyance, or an executed trust, I do not understand that it will support a bare promise to make a gift in the future, so far as the promise remains unexecuted. Fink v. Cox, 18 Johns. 145 , 9 Am. Dec. 191 . I am therefore of the opinion that the agreement imposed no obligation upon plaintiff to continue to make payments to, or for the use of, his daughters; that he had the right to discontinue such payments at any time; and, having elected so to discontinue, that he had a right to retake possession of the securities pledged to insure the fulfillment of his agreement.

So far as concerns the second separate defense, it is manifest that the judgment of divorce between plaintiff and his wife determined nothing respecting plaintiff’s agreement to pay to his daughters after his wife’s death, and therefore is not res adjudicata of the only question involved in this action.