Van Cott v. Prentice — 5 N.Y. St. Rep. 654

Majority

p. 654

Joshua M. Van Cott, Resp’t, v. John Prentice, et al. Ex’rs, etc., of John H. Prentice, dec’d, Appl’t.^[1]

(Court of Appeals,

Filed January, 18, 1887.)

Headnote

1. Trust — Ip fully constituted is enforceable though not supported BY A CONSIDERATION.

A trust of properly if fully constituted is not open to the objection in an action brought by a beneficiary to secure its enforcement that it is voluntary and without consideration.

2. Same — Power of revocation — What not inconsistent with completion OF TRUST.

An instrument denominated by the grantor as a deed of trust transferred to a trustee named and appointed, therein securities and funds, directing the disposition of the income during the life of the grantor to certain beneficiaries, and of the principal according to accompanying sealed instructions not to be opened till his death. A full power of revocation was reserved and it was provided as a condition of the grant, that the beneficiaries should have no legal or equitable right to the principal or income, that the trustee should hold until the grantor’s death subject to his direction and control and that an attempt at interference with the execution of the trust, or to claim the securities contrary to the conditions imposed should determine the trust. Held, that a valid trust was created by the instrument with the completion of which neither the power of revocation nor the provisions determining the trust were inconsistent, and that the provisions denying the beneficiaries any legal or equitable right to either principal or interest was merely an amplification of the idea involved in the power of revocation.

8. Trust deed — What considered as forming part of.

A paper containing instructions to a trustee as to the final disposition of trust property and which is not to be opened until the death of the person creating the trust is not testamentary in its nature, but forms a part of the deed of trust.

4. Same — Perpetuities what provisions not against statute of.

A provision of the trust deed devoted at the settlor’s death, any further income accruing to the use of Mrs. H. and her three children, — one third to her, and the residue equally to said children, or the survivor or survivors of them and directs the principal to be delivered to the said persons or survivor or survivors, in the same proportion, when the youngest, of said surviving children shall come of legal age, unless in the exercise of his discretion he shall sooner make such distribution of said principal. Held, that the survivorship referred to was that existing at the date of the death of the settlor, and that the consequent duration of the trust was during the life of the settlor, and the minority of the youngest of the three children living at his death, so that the absolute ownership was suspended only during the continuance of those two lives at most, both of which were in being when the trust was created.

■5. Amendment after trial — When not allowable.

An action was brought against the defendants in their representative capacity and the summons and complaint in an action indicated that intention, the complaint conceding that the defendants asserted another title. Held, that an amendment made after trial amending the summons and complaint, and ordering the judgment awarded to be entered against the defendants individually and de bonis propriis substituted a new and different cause of action and was erroneously granted.

Appeal from a judgment of the supreme court, general term, second department.

This action was brought against the defendants, as executors

p. 655

of the last will and testament of John H. Prentice deceased, to enforce a settlement of personal securities. The complaint alleged the plaintiff’s title as trustee of an express trust to tbe chattels, securities and interest therein described and that he was entitled to the possession thereof for the purposes of the trust, and that they were in the possession of the defendants who wrongly withheld them. The trust alleged was created by the instruments hereinafter set forth.

“ This indenture, made this fourth day of March, 1871, between John H. Prentice, of the city of Brooklyn, of the first part, and Joshua M. Yan Cott, of the same plaee, of the second part, witnesseth:

“For good and sufficient consideration the said Prentice hereby grants and assigns to the said Joshua M. Yan Cott the securities enumerated in Schedule A hereto subjoined, upon the trusts hereinafter more fully set forth, to-wit:

“ First. To. collect and receive the sums due, and to become due thereon, for principal and interest, and to discharge the same, respectively, as paid.

“ Second. From time to time to invest and reinvest the sums received thereon for principal in good bonds and mortgages, or in public securities, subject to my direction or approval.

“ Third. To pay over the interest from time to time received on such securities or investments and reinvestments to Clarence King, of New Haven, in the state of Connecticut, or to such other person or persons as I shall from time to time direct, — the said King having no title to or beneficial interest in said payments ; and the said King shall pay over said interest, as received, to the person and for the uses specified in confidential written instructions, bearing even date herewith, signed in duplicate, and to be delivered to the said Yan Cott and the said King; and it is hereby declared and made a condition of these trusts that the beneficiaries thereof have no legal or equitable right to the principal or income of said securities or investments, but receive the same only as herein provided, as proceeding solely from the bounty of said Prentice, and subject to his power to revoke the trusts hereby created.”

“ Fifth. The said Joshua M. Yan Cott shall hold the principal sums represented by the said securities and investments and reinvestments subject to the directions of the said Prentice contained in a private and confidential paper bearing even date herewith, delivered to him in a sealed envelope, to be opened by him at my death if he shall survive me, subject in the meanwhile to my direction and pleasure, and to be returned to me in the event of my surviving him, and absolutely subject to my direction and control until the event of my death.

“ Sixth. In the event that the said Clarence King, or that the said beneficiaries, or that any person or persons whatever, shall,

p. 656

by any suit or proceeding at law or in equity, interfere with the execution of the trusts herein declared, or make any claim against the said Prentice or the said Van Cott to the said securities or investments or reinvestments, or the income thereof, contrary to the provisions or conditions of the said trusts, then and thenceforth the. said trusts shall' cease, determine, and become wholly void, and the said securities, investments, and reinvestments with all the interest, income, and increase thereof, shall thenceforth belong wholly to me discharged of the said trusts.

“ In witness whereof I have hereunto set my hand and seal the day and year first above written.

JOHN H. Prentice.” [l. s.]

“Private and confidential declaration of the circumstances under which a deed of trust, of even date herewith, is executed by me to Joshua M. Van Cott, and directions to him as to the disposition to be made by him of the capital or principal sum in such trust, in the event of his surviving me, without my making any express testamentary or other disposition thereof in accordance with the condition of said trust.

“ The late George S. Howland was provisionally interested with me in a real-estate speculation in the city of Brooklyn* He failed to make the payments stipulated on his part, and. thereby was disentitled to share in the nominal profits eventually made. By reason of his failure to pay as stipulated, I collaterally and incidentally lost and was damaged beyond his nominal share of' such profits if he had legally been entitled to them* Mr. Howland’s affairs became involved, and he died apparently insolvent, leaving a widow and three children surviving him* Neither they nor the creditors of Mr. Howland’s estate have any legal claim upon me. But I am moved by my sympathy for Mrs. Howland and those three children, for whom Mr. How-land left no provision, to set apart the securities mentioned in said deed of trust, and devote the income thereof for their benefit, according to the terms of the said trust. And I now direct that, unless I shall otherwise provide in my life-time or by testamentary disposition, the said trustee shall, after my death, devote any further income from the said securities, or the rein-vestments thereof, to the use of the said Mrs. Howland and three children, — one-third to her, and the residue equally to the said children, or the survivors or survivor of them; and the principal of said securities, or the reinvestments thereof, shall be delivered to the said persons, or survivor or survivors, in the same proportion, when the youngest of said surviving children shall come of legal age, unless, in the exercise of his discretion, he shall sooner make such distribution of said principal. And he shall be held harmless for all he shall do in good faith in carrying out my intentions as herein declared, or as in said trust deed provided.

p. 657

- “ In witness whereof I have hereunto set my hand and seal this fourth day of March, 1871. JOHN Prentice.” [l. s.]

Aaron J. Vanderpoel, for appl’t. Joshua M. Van Oott, for resp’t

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. Young v. Young, 80 N. Y. 437 ; Jones v. Lock, L. R., 1 Ch. 25. By what the grantor denominated his deed of trust he transferred to the trustee named and appointed in the instrument, the securities and funds now-in question, directing the income during his life to be paid to Clarence King, to be by him appropriated to the use of Mrs. Howland and her three daughters, in specified proportions, and at his death the principal to be disposed of in oc-cordance with sealed instructions therewith delivered, but not to be opened till that event. A full power of revocation was reserved, and it was proved as a condition of the grant that the beneficiaries should have no legal or equitable right to the principal or income; that the trustee should hold subject to the grantor’s direction and control, until the event of his death, and that if any attempt should be made to interfere with the execution of the trust, or to claim the securities contrary to the conditions imposed, then the trust should at once cease and determine.

Neither the power of revocation nor the provisions determining the trust in the event of a legal interference, on the death of the trustee in the life of the settlor, are in the least inconsistent with the trust, as completely and perfectly constituted. They both assume its separate and effective existence, and provide merely for its termination upon the happening of specified contingent events. But attention is called to the clauses in the deed which -require the trustee to hold and manage the fund subject to the direction and control of the settlor, and deny to the beneficiaries any legal or equitable right to either principal or interest. The latter provision is, plainly, but an amplification of the idea involved in the powet_ of revocation, for the grantor adds that the beneficiaries shall take what they receive as proceeding from his bounty, and subject to his right to revoke at any moment. It is made by the statute an element of such a trust, when the subject is real estate, that the beneficiaries shall take no estate or interest in the lands, but may simply enforce the trust in equity. 1 Rev. Stat, 729, § 60. The beneficiaries in the present trust must have such equitable right, but measured and limited by the lawful terms and conditions of the deed; and when, therefore, it was provided that they should “ have no legal or equitable right to the principal or income ” of the transferred securities, the clause unexplained might seem to some minds a denial of the equitable right to enforce the trust, and so

p. 658

inconsistent witb its necessary and essential qualities as sucb. But that equitable right of enforcement is not in terms denied, and the language withholding a right in the fund is not stronger than that of the statute when it denies a right to the land and vests the whole legal and equitable estate in the trustee.

We ought not to put the creator of this trust in the attitude of deliberately nullifying his own evident purpose. That he meant to create an effective trust is beyond all question, and a construction which makes him destroy, in the very effort to create, should not prevail if there be any other rational interpretation. He gives us his own explanation. After saying what right the beneficiaries shall not have, he specifies what right they shall have in the phrase “ but receive the same only as herein provided, as proceeding solely from the bounty of said Prentice, and subject to his power to revoke the trusts hereby created.”

Since he intended to create an effective trust, and declared he had done so, and delivered the possession and passed the title of the fund to the selected trustee, we are bound to understand his denial of an equitable right to the benficiaries as meaning only to emphasize Ins own control flowing from the voluntary character of his act and his reserved power of revocation, as a supposed and actual result of his own right to end his bounty at any moment, and not as a denial of the right of the beneficiaries to enforce the trust, as against the trustee, while it should remain in existence and the settlor, withholding his power of revocation, should permit it to stand. His meaning undoubtedly was that, as against himself and his own freedom of action, the beneficiaries should possess no legal or equitable right, and not that, as against the trustee, while the settlement stood unrevoked, there should be no equitable recourse. I think that the phraseology in which the settlor forbids an interference with the trust confirms that construction. The language of the deed is :

“ In the event that the said Clarence King, or that the said beneficiaries, or that any person or persons whatever, shall by any suit or proceeding at law or in equity interfere with the execution of the trusts herein declared, or make any claim against the said Prentice or the said Van Cott to the said securities or investments or reinvestments or the income thereof, contrary to the provisions or conditions of the said trusts,” then the trusts shall cease and determine.

The motive of this provision doubtless was a fear that some creditor of Howland might attack the trust fund as being in truth a debt due him paid to his wife and children ; and that fear explains the reiteration by the settlor of the idea that the fund came wholly from Ms bounty, and was purely voluntary. But wliat he guards against in the clause quoted is an outside interference preventing the execution of the trust, and .a suit,

p. 659

legal or equitable, to enforce a claim contrary to its provisions ; and this, for the benefit and protection of the beneficiaries. A suit by them against the trustee to enforce the trust according to its terms he does not forbid. I am therefore quite strongly of opinion that a just construction of the trust deed did not prevent its enforcement by the beneficiaries according to its terms.

What has just been said is also quite applicable to the other provisions which have been the subject of comment, and which require that the trustee shall hold the fund subject to the direction and control of the settlor until his death. That language only repeats, in another form, the effect of the reserved power of revocation. The existence of that inevitably leaves in the settlor an absolute control, since at any moment he may end the trust, and resume possession of the fund as his own. The trustee is directed to hold the fund and invest and reinvest, and pay over as ordered, but is to do all this subject to the settlor’s absolute control. This cannot mean that the trustee is to have no title; and the trust no effective existence, and the property remain the settlor’s, but that the trust and the title, good and effectual while it stauds, is nevertheless to continue and exist only at the will and pleasure of the settlor. Its continued existence was to be absolutely subject to the direction and control of Prentice, — a result always inevitable where a power of revocation is reserved. We discover nothing in the provisions of the deed, properly construed, inconsistent with a completely constituted trust, wholly voluntary and benevolent, and subject- to revocation by the settlor at any moment, — a kind of trust of Avhich the books furnish many instances, and which, indeed, are .sometimes subject to doubt and suspicion if the power of revocation is absent.

But other questions argued grow out of the sealed and confidential paper to be opened only on the settlor’s death, and which, when opened, disclose the final disposition to be made of the trust fund.

It is said, first, that the paper was testamentary in its character, and so not legally executed. The contention compels a view of the instruments delivered which is unsound in several particulars. It assumes, what is onot true, that the title to the securities constituting the trust fund was never vested in the trustee, but the property was the settlor’s at the moment of his death, and that the sealed paper alone, and by itself, is to be the subject of consideration, and took effect solely at the death of the signer. The three papers executed and delivered together, and at the same time, constituted the trust deed, and cannot be separated in determining their effect. The sealed paper was a component part of the declaration of trust, and spoke from that date. If it had been open, and its contents disclosed, there would have been no doubt that a trust was created whose dura

p. 660

tion extended beyond tbe death of the settlor, and depended in part upon the eontingencjr of that death; but the instrument would not thereby have become testamentary. The result is not-changed by the ignorance of the trustee as to the contents of the paper. It was not necessary to his duty that he should know those contents in advance of the time when they were to guide his action. It is not at all uncommon that trustees are ignorant of the persons who are to be beneficiaries by reason of contingencies which only the future can develop. The trustee accepted this trust, with full knowledge that he was to learn the contents of the sealed paper only at the settlor’s death, and has steadily and continually performed the duties of the trust from the date of its creation in accordance with .its terms. It is immaterial that the beneficiaries were ignorant of the trusts for their benefit until disclosed at the death of Prentice. Cumberland v. Codrington, 3 Johns, ch. 261; Shepherd v. McEvers, 4 id. 137. It is sufficient that when disclosed they claim its benefit. The trustee knew when he took the sealed paper, because he was told that'it contained an ultimate disposition of the trust securities. His ignorance was confined to the character and objects of that, disposition, and that only during a period when the knowledge was unnecessary. He could as he did accept the trust, and the obedience to its terms was entirely possible, since he was permitted to know them all in ample time for his necessary action.

But when the paper was opened at the death of the settlor, the disposition made was found to be of a character to raise another question which had been quite earnestly debated. The appellant contends that the trust created was void because contrary to the statute against perpetuities. It first devotes at the settlor’s death any further income accruing “ to the use of Mrs. Howland and her three children, one-third to her and the residue equally to the said children or the survivors or survivor -of them,” 'and the principal is directed to be “ delivered to the said persons or survivors or survivor in the same proportions when the youngest of said surviving children shall come of legal age, unless in the exercise of his discretion he — -the trustee — shall sooner make such distribution of said principal.” We are of opinion that the survivorship thus referred to is that existing at. at the date of the death of the settlor, and that the consequent duration of the trust is during the life of the settlor and the minority of the youngest of the three children living at his death, and so the absolute ownership is suspended only during the continuance of those two fives at the most, both of which were in being when the trust was created. It is claimed that the language used is nearly identical with that passed upon in Hawley v. James, 16 Wend, 60 , but the difference is very marked and clear. There the suspension was not until the youngest of the grandchildren should attain the age of twenty-

p. 661

one years, but until tbe youngest of those who attained that age should reach it, and it was well suggested that the trusts might continue during thirteen minorities by reason of deaths occurring before the prescribed age was attained. That vicious element is not present in the limitation before us. The deaths of any of the three children of Mrs. Howland during the life of the settlor, had such occurred, would have been immaterial, as his own and not theirs was one life measuring the duration of the trust, and at its termination the life or minority of the youngest of the three then living is the only other life bounding such duration. So far, therefore, as the defendant’s appeal is concerned, we discover no error, and the judgment should be affirmed, with costs.

But the plaintiff also appeals from an order of the general term reversing an order of the special term permitting an amendment of the summons and complaint. The action was brought against the defendants in their representative capacity as executors of Prentice. The summons and complaint was so entitled, the use of the word “ as ” indicating that intention. The complaint alleged that the defendants held the property in their representative capacity, which the latter admitted, and the issue presented by the pleadings was whether the executors had title or the trustee. The complaint conceded that the defendants asserted no other title or claim. After the trial a motion was made and granted amending the summons and complaint, and ordering the judgment awarded to be entered against the defendants individually and de bonis propriis. On appeal the general term reversed the order, and we think correctly. The amendment substituted a new and different cause of action, and the defendants as individuals had beeu furnished with no opportunity to defend. The order appealed from by the plaintiff should be affirmed, with costs.

All concur, except Raparlo and Earl, JJ., not voting.