Von Hesse v. Mackaye

The validity of the trust for Edith is contested, not by creditors, but by the personal representatives of the settlor; and the evidence drives us to a choice between two alternatives. We must regard the arrangement either as a trust for her benefit with a power of revocation reserved, or as a fraudulent scheme to cover the settlor’s real ownership with the semblance of an outstanding title. Of course, we are not justified in the inference of a fraud or a falsehood when an honest explanation is possible, and should not turn an apparent trust into a sham except under the stress of a clear necessity.

I do not think the alternative of a meditated fraud is forced upon us by the proof. There was a delivery of the bonds to William Mackaye by Colonel Mackaye with the intent of vesting in the former the full and absolute legal title. Eepeatedly, the latter declared that he meant the transfer to be of such a character and so complete that William could swear that he had no property of the settlor in his hands.

We are not at liberty to suppose that the colonel intended to have his son swear to- a lie if a question of title should arise. We are bound to believe that the settlor intended a transfer which actually and in truth took the title out of him, and so effectually that the trustee could say under oath that the settlor had wholly parted with his ownership of the bonds. The character of the transfer as originally made is evidenced by the receipt which William gave, and which accords with his father’s declared intent. It is in these words: “Eec’d of my father, James Mackaye, ten Kansas Pacific bonds of one thousand dollars each, to be held by me in trust for his adopted daughter, Theodora Edith Mackaye, and for her sole benefit and behoof, said bonds for and during his life to be subject to the order of my father.” In a letter written at a later date the colonel gives his reasons for “putting the bonds in trust for Edith,” as he had already and previously explained. It was to ward off any more blackmail suits by so divesting himself of this property in his son’s hands as to take away that temptation to begin them. This was one motive for instituting the trust. It may be conceded that it was the primary and principal reason operating upon the settlor’s mind, and that a provision for Edith was subordinate and secondary. And yet each motive separately, and both combined, required an actual trust for her benefit, and not a mere agency disguised as a trust. There was a reservation of a control in the settlor equivalent to a power of revocation, and the existence of that power, and the use made of it, furnish the principal material for the argument of the appellant. Undoubtedly the settlor did mean to reserve a power of revocation. The bonds were to be subject to his order; he speaks of withdrawing them from the trust; of retaining control over them; of a right to divert them to

It is true that the authority reserved over the fund is expressed in such terms as to admit of the contention that instead of a gift'with a power of revocation there was no gift at all, but merely an agency. That theory falls very far short of explaining all the facts and fastens upon the settlor a purely fraudulent purpose, while the construction of an intended trust for the benefit of Edith with, a power of revocation partially in fact exercised, and having as the chief motive of its creation a dread of attempted blackmail, harmonizes all the facts and incidents which appear upon the record, and consistently with good faith and honest intention. It is strengthened also b'y Colonel Mackaye’s later correspondence with his friend and attorney in which he recognized these bonds as already held in trust for Edith while planning another and more extensive, one for her benefit. Upon a consideration of all the facts we are inclined to agree with the courts below that a valid trust was created and sufficiently proved.

The j udgment should be affirmed, with costs.

All concur, except Peckham', J., not voting.