Court Opinion

ID: 3603155
Source: CourtListenerOpinion
Date Created: 2016-07-05 23:49:13.423298+00
Date Added: 2024-06-11T12:26:53.515017
License: Public Domain

I cannot vote to affirm the judgment below. The facts, as settled by a unanimous decision of affirmance, require the intervention of a court of equity.
Samuel Freeman died in Saratoga Springs in December, 1870, leaving a will appointing defendant his executor and trustee; the defendant duly qualified. The will provided that the income of the residuary estate should be paid to the plaintiff, his daughter, with a limitation not now important, and at her death the trust fund "to go and belong to her child, or children or descendant," and in default of any to "go and belong to the next of kin of testator." The daughter was given the power to dispose of one-half of the trust fund by will.
The residuary personal estate was about $100,000 and the real estate about $10,000.
The plaintiff was the only child of testator and the wife of a clergyman; at that time she had two children who still survive; recently a child was born to one of said children. The defendant never took possession or charge of the assets of the estate, but allowed the husband of testator's daughter, under oral authority, until June 28th, 1872, to retain the securities of the estate and manage the same. On the last-mentioned date defendant gave a written power of attorney to the daughter's husband to take possession of the property of the estate, real and personal, and manage the same.
The business of the estate was so conducted, with the daughter's consent, until September 12th, 1889, when she and her two children, the latter then of age, ratified the acts under the power of attorney and released defendant from liability. On the same day the defendant conveyed all the real estate included in the trust and acquired by deed, foreclosure or otherwise, to plaintiff individually. The plaintiff or her husband had been in possession of the real estate of the trust practically since testator's death.
The trial court finds the releases were executed freely, voluntarily and with full knowledge of all the facts, and without fraud, actual or constructive, on part of defendant; that no portion of the estate, real or personal, is in the hands of defendant or plaintiff's husband; that $50,000 of the personal *Page 605 
estate has been invested in real estate in New Jersey and title is now in plaintiff as trustee or individually. Numerous facts are found in detail by the referee and the trial judge as to the manner in which plaintiff and her husband mismanaged and wasted the estate, real and personal, belonging to the trust, to which reference need not now be made.
It appears that all the exhibits are not printed, and it was stipulated nevertheless that they could be read on argument of the appeal.
The Appellate Division in its statement of facts recites that at least since 1872 defendant did not take any active part in the management of the estate; that it is conceded he has never accounted as executor or trustee, and that his accounts as such were never judicially passed upon by either court. It also appears in this statement, and in a general way in the findings of the trial judge, that on the ninth of June, 1894, on petition of plaintiff's children, the Supreme Court made an order accepting the resignation of defendant as executor and trustee and appointing plaintiff in his place.
On this state of facts the trial court dismissed the complaint, with costs, granting the defendant an extra allowance of $2,000. The Appellate Division unanimously affirmed the judgment, but struck out the provision for an extra allowance.
The conclusions of law by the trial judge were, in substance, that plaintiff ought to account before asking defendant to account "for something which he never had;" that the releases extinguish any cause of action of plaintiff, or her children, against defendant; that the relation between the defendant and the beneficiaries of the trust was not that of trustee, but of life tenant and remaindermen; that plaintiff is a debtor to the trust fund in a much larger sum than her income could possibly amount to, and if she could recover the trust fund she could apply no portion of it to her own use; that plaintiff is not trustee for remaindermen, or contingent remaindermen, and is not charged with any active duty in their behalf; that no action fordevastavit can be maintained by the trustee, but only by the remainderman when his estate vests; that the complaint should be dismissed.
A reference to the opinion of the Appellate Division is necessary *Page 606 
before stating my views as to the proper disposition to be made of this cause.
The learned judge who expressed the views of the court referred to these points, among others, viz.: That the appointment of plaintiff as sole trustee was incompatible with her position ascestui que trust, but her appointment cannot be attacked collaterally; that it was the duty of the defendant to preserve the corpus of the estate, make it produce an income if practicable, and, although he was not an express trustee for the remaindermen, the law implies a trust in their favor, making it incumbent upon him to preserve the principal and account therefor at expiration of trust; that by statute every conveyance in contravention of a trust is void; that as against the plaintiff individually and her children, upon the facts stated, the equities are all with the defendant; that defendant while acting in good faith was guilty of a breach of trust; that the principal breaches of trust occurred twenty-five years before the commencement of this action; that assuming, without deciding the question that the trustee may maintain a suit for devastavit
for the benefit of remaindermen, yet as to the contingent remaindermen, in view of the great hardship and injustice that would result to defendant, and considering also that plaintiff, if not wholly liable, is jointly liable with defendant to such remaindermen, it is proper for the court to withhold such relief and leave it to such contingent remaindermen should they ever take a vested interest, to redress the wrong for themselves; that this action should have been brought by plaintiff individually as well as trustee, but issues raised by pleadings involve her rights individually and the decision binds her in each capacity; that defendant cannot be required to restore the trust fund for the sole purpose of enabling plaintiff to receive her annuity in future; that the doctrine of estoppel and laches applies to plaintiff and that to award her relief would permit her to receive a second time money that she once has had; that the conclusions thus reached are not in conflict with the authorities holding that a trust may not be abrogated, that the beneficiary interest is not assignable, and that as against parties who are not innocent purchasers, *Page 607 
a beneficiary or trustee may disaffirm an act in contravention of the trust and recover the property.
I have endeavored, as briefly as possible, to make clear the precise position of the courts below. I wish to say at the outset that I have great sympathy for the learned and aged defendant, who has honestly, but mistakenly, allowed his heart to dominate his judgment in this transaction, extending over more than a quarter of a century. Nevertheless, it is the plain duty of this court to apply those familiar principles of equity that are clearly applicable to the amazing situation here disclosed, and see to it that a hard case does not make bad law.
I am of opinion that the undisputed facts require a court of equity to retain jurisdiction of the case and ultimately enter a decree adjudicating the rights and liabilities of all the parties.
The first error in the decision below is the determination that the contingent remainderman is not represented by the plaintiff as trustee, and that the latter owes him no active duty of protecting his interests.
The next error is, that assuming the trustee does represent the contingent remainderman, yet owing to the acts of the plaintiff in her individual capacity and the hardship of defendant's present position, a court of equity ought not to take jurisdiction, but leave the contingent remainderman to redress his own wrongs in an action brought at some remote period when his rights become vested and he is entitled to immediate enjoyment.
The fact is that this case has been practically decided as if it were a litigation between the defendant and the life tenant, individually, as sole beneficiary under the trust and entitled to the entire trust fund. The complaint has been dismissed for the reason that the plaintiff, individually, was estopped from making any claim against the defendant. It is quite possible that when a proper accounting is had the plaintiff, individually, may be placed in a position where as between her and the defendant, she is not entitled to make any claim for income, but is liable to make good a large sum to the corpus of the trust. *Page 608 
The main difficulty is that the dual capacity of the plaintiff, while not overlooked, has been practically ignored. I agree with the Appellate Division that while the plaintiff sued as trustee, the issues framed, tried and decided involved her individual rights to some extent.
The trial court found that a child had recently been born to one of the plaintiff's children, and it was so stated on the argument, and appears in the briefs of both counsel, that the event happened since this action was commenced. The advent of this child had a most important bearing on this litigation, as there is now in being a person who may be entitled, ultimately, to the entire corpus of the trust fund, provided the plaintiff's children do not survive her; a person who is not bound in any way by the releases and various transactions found by the trial court.
It is the undoubted rule that a court of equity will not undertake to adjudicate the rights of possible parties in interest, not in esse.
The suggestion of respondent's counsel that the plaintiff should not be permitted to avail herself of any possible cause of action in favor of the contingent remaindermen who are at present uncertain and unknown, is contrary to the fact as well as to principle and precedent.
A contingent remainder in real estate is a vested right, descendible as property, by statute and at common law. (Hennessy v. Patterson, 85 N.Y. 91, 103.)
"Expectant future estates, as defined in the statute, do expressly include all remainders, whether vested or contingent." (Moore v. Littel, 41 N.Y. 66, 84.) They are, by statute, descendible, devisable and alienable. "In general it seems that contingent interests pass to the real and personal representatives, according to the nature of such interests, as well as vested interests, so as to entitle such personal representatives to them when the contingency happens." (Fearne on Contingent Remainders, 364; Kenyon v. See, 94 N.Y. 563, 568.)
In the case at bar, while the interests of the remaindermen are vested, their enjoyment is as much dependent upon contingencies as are the rights of the contingent remainderman. *Page 609 
The rights of all are property that the trustee is required to protect against that day when the lawful remainderman shall come to his own.
The intention of the testator may well be resorted to at this point. He made a will clear in scheme and legal in conception; he selected his executor and trustee with more than usual judgment and caution, naming an able jurist and lawyer to fill that responsible position. The defendant accepted the trust, thereby covenanting with the dead to carry out his testamentary provisions in letter and in spirit. The testator gave simply income to his daughter for life; he bequeathed nothing to her husband; he provided for the disposition of the residuary estate at his daughter's death to the last possible contingency, thus requiring the preservation of the corpus of the trust estate until the time of final distribution.
From the death of the testator, by a series of acts, the defendant has wrought the complete subversion of the trust, and the contingent remainderman has succeeded to a barren property right unless a court of equity can aid him now, while the actors in this suit, principals and witnesses, are living, to place in the hands of a responsible and vigilant trustee the wreckage of this trust estate if it can be discovered and rescued.
In Western R.R. Co. v. Nolan (48 N.Y. 517) this court said: "The trustees are the parties in whom the fund is vested, and whose duty it is to maintain and defend it against wrongful attack or injury tending to impair its safety or amount. The title to the fund being in them, neither the cestui que trust
nor the beneficiaries can maintain an action in relation to it, as against third parties, except in case the trustees refuse to perform their duty in that respect, and then the trustees should be brought before the court as parties defendant."
In the case at bar the defendant, as trustee, resigned by permission of the court, and the plaintiff, for the time being, at least, is the trustee upon whom rests the obvious duty of preserving the trust estate. (2 Pomeroy's Eq. Jur. [2d ed.] §§ 1065-7; Upham v. Wyman, 89 Mass. 502.) In the case last cited, the learned judge writing, said: "The court is bound to look beyond the rights of those immediately *Page 610 
interested in the subject-matter of the suit, and to take care that the trust fund is protected from loss, and preserved, as far as possible, unimpaired for those who will be ultimately entitled to it. A court of equity will not turn cestuis que trust in remainder over to the personal responsibility of a trustee, to obtain a remedy for his neglect or misconduct, or that of a tenant for life, when it has means of redress within its reach by which a trust fund can be restored or kept unimpaired."
This court in Wetmore v. Porter (92 N.Y. 76) held that it is no defense to an action brought by an executor as such, to recover assets of the estate in the hands of a defendant, or for the conversion thereof, that plaintiff in his individual capacity acted in collusion with the defendant in despoiling the estate; that whoever receives property knowing that it is the subject of a trust and has been transferred by the trustee in violation of his duty or power, takes it subject to the right, not only of thecestui que trust, but also of the trustee, to reclaim possession or to recover for its conversion.
RUGER, Ch. J., said (at page 85): "We see no reason why a trustee, who has been guilty even of an intentional fault, is not entitled to his locus penitentiæ and an opportunity to repair the wrong which he may have committed." Again (at page 82): "It is an alarming proposition to urge against the legal title which a trustee has to trust funds that his recovery of their possession may be defeated by a wrongdoer, upon the allegation that the lawful guardian of the funds colluded with him in obtaining their possession. * * * The dual character maintained by an individual who is also engaged in the administration of a trust involving the control and custody of another's property, is not only recognized by numerous decisions in the courts, but has also been the subject of frequent statutory enactments."
The fallacy of the holding by the trial court that the only relation existing between the trustee and the remaindermen was that of life tenant and remaindermen, is further demonstrated by the fact that the real estate in this trust has been conveyed, changes in investment have been made by strangers to the trust and the funds generally wasted. *Page 611 
It is true that, in case of a trust in real estate creating a life estate and remainder over, that on the falling in of the life estate no conveyance is necessary from the trustee to the remaindermen, as the office of trustee ceases and the title is transferred by operation of the statute. (Matter of Livingston,34 N.Y. 555.) The rule has no application to this case, under its peculiar facts, and an active duty rests upon the trustee to rescue the estate. The fact that plaintiff's interest as trustee and individually are conflicting only makes clear the gross impropriety of the order appointing her the successor to the defendant in the trust.
I have reached the conclusion that when the Appellate Division decided that it was proper to withhold relief from the contingent remainderman and remitted him to a remote and uncertain remedy, against a trustee without assets, it was in conflict with the law that a trust may not be abrogated (Douglas v. Cruger, 80 N.Y. 15), and that as against parties who are not innocent purchasers, a beneficiary or trustee may disaffirm an act in contravention of the trust and recover the property. (Sherman v. Parish,53 N.Y. 483; Wetmore v. Porter, 92 N.Y. 76; First NationalBank v. National Broadway Bank, 156 N.Y. 459.)
The unqualified dismissal of the complaint should not be upheld, as this judgment is a stumbling block in the way of the contingent remainderman, even if it be assumed he is not technically bound by it. If affirmed by this court the judgment is a controlling authority against him.
The trial court was advised of the existence of the contingent remainderman, as it has found the fact, and it should have allowed the cause to stand over, on its own motion (Code of Civ. Pro. § 452), on such terms as were equitable, until the plaintiff brought in the contingent remainderman as a necessary party and properly amended her complaint.
The infant party ought to be represented by separate and competent counsel, who should not only submit his rights to the court, but affirmatively attack the order which accepted the resignation of the defendant as executor and trustee and appointed the plaintiff as his successor, and pray that it be set aside and a new trustee appointed; also pray that the *Page 612 
defendant, as executor and trustee, and the plaintiff, both as executor and trustee and individually, account for the corpus
of the trust estate; also pray for personal judgments against them in favor of the estate for so much of the assets as have been wasted; also pray that any assets of the estate, real or personal, be conveyed and transferred to the new trustee to be appointed; also pray for such other relief as may be proper. In the present status of this estate the contingent remainderman is the only person who is not involved in the irregular transactions disclosed by the findings and in a position to rescue the trust estate, or recover judgments for the benefit thereof, if the assets are hopelessly wasted.
The judgments of the Trial Term and Appellate Division should be reversed, with costs to abide the event, a new trial ordered to take place and a general accounting to be had after the infant contingent remainderman is brought in as a defendant and issue joined, according to the directions contained in this opinion.
PARKER, Ch. J., HAIGHT and VANN, JJ., (and O'BRIEN, and MARTIN JJ., in result), concur with GRAY, J.; BARTLETT, J. dissents.
Judgment accordingly.