Case Name: Augusta Doctor and Ludwig Scholem, Respondents, v. Augustus S. Hughes and Elizabeth L. Hughes, Appellants, Impleaded with James Frank, as Trustee in Bankruptcy of Elizabeth L. Hughes and Others, Defendants
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1916-11-17
Citations: 174 A.D. 767
Docket Number: 
Parties: Augusta Doctor and Ludwig Scholem, Respondents, v. Augustus S. Hughes and Elizabeth L. Hughes, Appellants, Impleaded with James Frank, as Trustee in Bankruptcy of Elizabeth L. Hughes and Others, Defendants.
Judges: 
Reporter: Appellate Division Reports
Volume: 174
Pages: 767–774

Head Matter:
Augusta Doctor and Ludwig Scholem, Respondents, v. Augustus S. Hughes and Elizabeth L. Hughes, Appellants, Impleaded with James Frank, as Trustee in Bankruptcy of Elizabeth L. Hughes and Others, Defendants.
First Department,
November 17, 1916.
Real property—deed of trust for benefit of creator—provision that at beneficiary’s death trustee shall convey to heirs —when deed does not create vested or contingent interest in heirs which is alienable — when judgment creditor of heir cannot sue to subject property to judgment — election of heirs to take under the statute rather than by trust deed.
A deed of trust of real estate executed for the benefit of the grantor, who is to be paid from the income a certain sum yearly, unless in the discretion of the trustee he shall deem it most for the benefit of the grantor that a larger sum be paid, which further provides that the trustee, if he desires, may relinquish the trust and reeonvey the premises to the grantor, or may appoint another trustee in his place, and which further provides that upon the death of the grantor the trustee shall convey the premises not sold to the heirs at law of the grantor, or the balance remaining if a sale of the lands has been made, does not create any vested or contingent interest whatever in the grantor’s heirs at law, during his lifetime, which is descendible, devisable or alienable.
Hence,' a judgment creditor of an heir at law and of his wife to whom he had assumed to convey his interest in the trust estate during the grantor’s lifetime cannot, while the grantor is still living, by a suit in equity subject the interest in the trust funds to the payment of the judgment upon the theory that the judgment debtor has a present interest in the real estate.
Under such deed of trust the heirs would not be bound to accept a deed from the trustee, but might stand upon their legal rights and take by inheritance rather than under the deed.
Page, J., dissented, with opinion.
Appeal by the defendants, Augustus S. Hughes and another, from a judgment of the Supreme Court in favor of the plaintiffs, entered in the office of the clerk of the county of New York on the 14th day of January, 1916, upon the decision of the court after a trial at the New York Special Term.
Burt D. Whedon, for the appellants.
Mark O. Holstein, for the respondents.

Opinion:
Scott, J.:
This is an action in equity by judgment creditors of Augustus S. and Elizabeth L. Hughes to reach what is claimed to be the present interest of said defendants in certain real estate.
The property in question appears to have belonged, prior to January 9, 1899, to James J. Hanigan, who on that date conveyed it by a trust deed to Abram Bassford. Under the terms of the deed Bassford was to hold and manage the property during the lifetime of Hanigan, and to receive the rents, issues and profits thereof, out of which, after paying taxes and expenses, he was to pay the grantor the sum of $1,500 yearly, "unless in the discretion of the said party of the second part [the trustee] he shall deem it most for the benefit of the said party of the first part [Hanigan] to exceed said sum of Fifteen Hundred Dollars." The trustee was empowered to mortgage the real estate for the purpose of paying off existing mortgages and was also empowered to sell the property, the proceeds to be used and applied for the purposes expressed in the trust deed. It was also provided that if the trustee at any time wished to relinquish the trust and to be released therefrom, he might reconvey the premises to the party of the first part, or might appoint another trustee or trustees in his place, in which latter case the substituted trustee or trustees, upon acceptance of the trust in writing, should be bound by all of the provisions of' the deed of trust.
The clause of the trust deed upon which plaintiffs base their claim reads as follows: "Fifth. Upon the decease of the said party of the first part, the said party of the second part shall convey the said premises (if not sold) to the heirs at law of the party of the first part. In case, however, the said premises shall have been sold, as herein provided, then the balance of the avails of sale remaining unexpended shall be paid to the heirs at law of the said party of the first part."
The only children of James J. Hanigan, and the only persons who in case of his death would be his heirs at law, were when the trust deed was made, and are at present, his two daughters, Elizabeth L. Hughes, and her sister, Sarah E. Techt. On June 12, 1902, the said Elizabeth L. Hughes undertook, by a bargain and sale deed, to convey the real estate in question to her husband, Augustus S. Hughes. James J. Hanigan, the creator of the trust, then was and still is living, and the sole question in the case is whether or not Mrs. Hughes took under the trust deed any estate, vested or contingent, which she could convey to her husband or which can be reached by his or her creditors.
I can see no distinction between this case and Whittemore v. Equitable Trust Company (162 App. Div. 607), decided by an unanimous court in 1914, except that in that, case the trust related to personal property and here it relates to real estate. There as here the trust term was for the life of the grantor, and the direction to the trustee was to distribute, at the end of the term, to the persons who would have been entitled to take if no such direction had been made. As was pointed out in that case, the question whether the trust deed created a present interest in the persons who were ultimately to receive the property was one of construction, and in my opinion the same rule of construction that we applied in the Whittemore case should be applied to the present, and unless we were wrong then the present judgment must be reversed. Upon a reconsideration of the question involved I am convinced that we were not wrong. An examination of the deed from Hanigan to Bassford shows very clearly, as I think, that the dominant purpose in making the deed was to relieve the grantor from the burden of caring for the' property, and perhaps tó protect himself against the consequences of his own possible improvidence. That it was not intended that the trust was necessarily to be permanent even during the lifetime of the grantor is evidenced by the provision that the trustee might relinquish at any time. Furthermore, the deed contains no words of gift to the heirs. There is- merely a direction that when the trust term ended by the death of the grantor the trustee should convey to the heirs, being the persons who would inherit in the absence of such a conveyance. This direction was doubtless unnecessary, but it should not for that reason be given a strained significance. It was probably inserted out of abundant caution, lest at the end of the trust term some difficulty should be found in clearing up the title of record. The heirs will not be bound to accept a deed from the trustee, and acceptance is as essential to the validity of a disposition by deed as is a delivery. If they choose to refuse to accept such a deed and stand upon their legal rights they will take by inheritance and will take nothing under the deed. But merely as prospective heirs at law they acquire no estate during the lifetime of their ancestor which is descendible, devisable or alienable.
If, as I consider, the deed gave to the heirs no estate vested or contingent it is unnecessary to discuss the rule in Shelley's Case (1 Coke, 104a) or Moore v. Littel (41 N. Y. 66) and kindred cases.
In my opinion Mrs. Hughes took no estate or interest whatever in the land under the deed from her father to Bassford, and, consequently, her deed to her husband conveyed nothing. There is, consequently, nothing which the creditors of Mr. and Mrs. Hughes can reach in this action.
For these reasons the judgment appealed from should be reversed and judgment directed in favor of the defendants dismissing the complaint upon the merits, with costs in this court and the court below.
Clarke, P. .J., Laughlin and Dowling, JJ., concurred; Page, J., dissented.