Court Opinion

ID: 8504771
Source: CourtListenerOpinion
Date Created: 2022-11-23 01:26:02.726339+00
Date Added: 2024-06-11T16:50:50.190444
License: Public Domain

Parker, C. J.
Here is undoubtedly a trust in the hands of the defendants. And the statute conferring chancery powers upon this court gives us power expressly in cases of trusts. The jurisdiction to enforce and apply the trust, in favor of those legally entitled, to the benefit of it, seems to be clear, and is not denied by the defendants. 9 N. H. Rep. 309, Parsons vs. Parsons.
If the creditors aire entitled to relief, according to the prayer of the bill, the attempt to dispose of the property, without providing for them payment, may also be treated as a fraudulent execution of the power vested in Theodore Sheafe, (he having undertaken to execute it,) against which this court should grant relief under its equitable jurisdiction in cases of fraud. 2 Ves. sen. 11.
The bill sets forth that the plaintiffs are creditors of Theodore Sheafe, deceased; that Jacob Sheafe, the father of Theodore, made a will, by which he gave one tenth of his estate to Theodore ; that by a codicil he subsequently altered the disposition of that part of his estate, and directed it to be placed in the hands of “ his executors, in trust, to appropriate and pay over such part of the net income, rents and profits thereof, at such times, and in such manner, as said executors should judge proper, for the maintenance of his said son Theodore Sheafe, and, after the decease of said Theodore, to pay said third part of the residue of his estate, or the proceeds thereof, and such surplus rents, income, issues or profits, as should have accumulated, and should then remain in the hands or possession of said executors, to the use and benefit of such person or persons as his said son Theodore should limit and appoint by his last will, or other writing by him signed and sealed for that purpose, in such parts or parcels, for such estates, and with such lawful restrictions, conditions and limitations as said Theodore should thereby direct, and in default of such appointment, then to the use of the heirs at law of said Theodore: and that the same should be paid, assigned and delivered" over accordingly;” that the defendant is surviving executor, and has the fund; that the executors applied so much of the income as was necessary to the support of Theodore Sheafe during his life; that Theodore Sheafe undertook to exercise the *307power given him in the will of Jacob, and by his will made a disposition of the property remaining, directing part to be applied to the payment pf certain specified debts, and the remainder to be distributed among certain persons named, making no provision for the debts due the plaintiffs.
The demurrer admits the facts sot forth.
The question is, whether the plaintiffs are entitled to have the trust funds applied, so far as may be necessary, to the payment of their debts.
It appears to be a well settled principle, in equity, that where a person has a general power of appointment over property, and he actually exercises his power, whether by deed or will, the property appointed shall form part of his assets, and be subject to the claims of creditors, in preference to the claims of the appointee. 4 Kent’s Com. 333, (5 Ed. 339.) The principle has been impugned in some cases, and doubts expressed whether its original introduction into the equity jurisprudence was well warranted ; but its existence, as a part of the system of equity as administered in England for a long period, is not denied. 2 Vern. 465, Lassells vs. Cornwallis; 2 Ves. sen. 1, Townshend vs. Windham, and Shirley vs. Lord Ferrers, there cited; 1 Atk. R. 466, Hinton vs. Toye; 2 Atk. R. 172, Bainton vs. Ward; 3 Atk. 269, Pack vs. Bathurst; Ditto 656, Troughton vs. Troughton; Ditto 697, Hearle vs. Greenbank; 17 Ves. 388, Thorpe vs. Goodall; 16 Ves. 135, Barford vs. Street. And we see no reason to gainsay the soundness and justice of it as above stated. Where the owner of property, who has the right to dispose of it in such manner and under such limitations as he pleases, confers upon another the general power of making such disposition of it as he pleases, or, in other words, invests him with all the attributes of ownership over it, and that other accepts the power thus tendered to him, and undertakes to exercise dominion over the subject matter, as if he was an owner ; the original proprietor, having authorized the other to treat it as if it was the property of the latter, by exorcising all the power over it which he could exert if it were actually his property ; and he having undertaken to treat it as if it was his property, by making a disposition of it *308under such a power; a court of equity may well do what the parties have done, that is, treat it as the property of the appointer, and make it subject to the incidents attending such property. The court in such case do no more than to treat it as the property of the party, who, by the express authority of the owner, has the power and right to treat it as if it were his property, and who undertakes so to do.
The court does not interfere unless the party upon whom the power has been conferred, or to whom it is tendered, has executed it, or done some act indicating an intention to execute it. This is also settled. 7 Ves. R. 499, 508, Holmes vs. Coghill; 12 Ves. 214, S. C. on appeal.
It has been said that this distinction is a nice one, and not very satisfactory. “ Why,” it is remarked, “ when the party executes a power in favor of others, and not of himself, a court of equity should defeat his intention, though within the scope of the power, and should execute something beside that intention, and contrary to it, is not very intelligible.” 1 Story's Eq. 188, note ; 7 Ves. 499; 12 Ves. 214. But the reasons, as it seems to us, may be well explained, upon the principle before suggested. The subject matter upon which the power is to act cannot be treated as the property of the party having the power to appoint, until he, by his appointment, acts as if it were his property. Where the owner, by some instrument, authorizes another to raise a sum out of an estate, or by way of charge upon an estate, and to dispose of it to such uses as he may appoint, nothing exists in the nature of property, in him, or which can be treated as such, until he assents to what has thus been done, by an exercise of the right. Authorizing a party to create a charge upon an estate, if he pleases, does not of itself create one, nor give him any interest in it. But when he assents and creates the charge, within the terms of the power.; if the power be general, he has, by the authority of the owner, exercised all the power over the estate, to that extent that an owner could do. There is, then, in existence a fund over which he rightfully claims and exercises dominion, and equity interferes, and holds that this exercise of dominion is subject to the ordinary incidents of an exercise of dominion over *309property, so far that it cannot be given away to the prejudice of creditors. *
In several of the cases cited, the fund, or property, which the creditors sought to appropriate in satisfaction of their debts, was created only by the execution of the power, but the same principle is applied where the fund or property upon which the power is to act is already set apart and in existence.
But, in order to the application of the principle, the power must be a general power, as it is termed, and it is denied in this case that the power of Theodore Sheafe was such a power. This brings us to the question, what is to be understood by “ a general power.”
From some of the cases it might be inferred that a general power, within the meaning of the rule, existed only in cases where the party having the right to exercise the power, might, at any time after it was conferred, and in any mode, make an appointment for his own use and benefit. Such a construction is, in effect, contended for in this case, as it is objected, not only that Theodore Sheafe could not appoint to his own use, in his lifetime, but that he was restricted to a particular mode of executing it, to wit, by deed or will.
The authorities, however, which have been cited on the last branch of the defence do not seem to sustain the objection. The power may be general in its uses, purposes, objects and effects, notwithstanding it is required to be exercised in a particular way, as will appear from the authorities hereafter cited. Thus an attorney is said to have a general power to convey the lands of his principal, notwithstanding the law requires, in order to a valid conveyance, that it should be by deed.
More reliance seems to be placed upon the other position, that Theodore Sheafe had not a general power, because he could not appoint to his own use, or the use of any one to take effect in his lifetime. And there is, in the language of some of the books, matter having a tendency to support this ground of the defence. Thus in Jeremy’s Equity Jurisdiction 377, it is said, “ But it is still to be remembered that the power of appointment must be general, or such as he may execute for any purpose whatever, for *310if the power be limited in any such manner that he cannot by execution procure the benefit to himself, there is no pretence for his creditors to claim it.” For the support of this position, reference is there made to 2 Vesey, sen. 10, which is the case of Ld. Townshend vs. Windham. Other books hold a language somewhat similar.
The language of Lord Chancellor Sardwicke, in the case cited by Jeremy, if taken disconnected from the facts to which it refers, would undoubtedly appear to sustain the principle asserted. He refers to Shirley vs. Lord Ferrers, and other cases, “ which have established the doctrine, that where there is a general power of appointment of a sum of money to charge the estate of a third person, which it is absolutely .in his pleasure to execute or not, he may do it for any purpose whatever, and appoint the money to be paid to himself or his executors, if he pleases.” And he then proceeds to say, “ If he executes it voluntarily, without considerar' tion, for the benefit of a third person, this shall be considered as a part of his assets, and his creditors have the benefit of it. Nor does it differ, whether it is a power to charge a sum of money on land, or to create a chattel interest out of land; for it will depend upon the same foundation, provided it is a general power, which he may execute for any purpose; for if it is a power to appoint a sum among other persons who are at all described by the power, so that it is not absolutely in his power to do it for himself, there is no pretence that his creditors could have the benefit of it.” 2 Vesey, sen. 10.
• But it is perfectly evident, on adverting to the facts of the case, that the Lord Chancellor was then considering the distinction between a power where the persons or objects, in whose behalf, or for whose benefit the appointment was to be made, were, to some extent, limited or restricted, and one where there was no limitation in this particular. If the party having the authority is restricted as to the objects in whose favor the appointment is to be made, it is very clear that the power is not a general one within the rule, for in that case he has not the right to act as if he was the owner. The restraint precludes him from treating the subject matter as if it was his property, at any time.
*311The facts of that case, and the decision upon them, show conclusively that Lord Hardwicke is not to be understood as asserting that it is necessary, in order to constitute a general power within the meaning of the rule, that the appointor should have the right to reduce the subject matter into his own possession, or the right to appoint, so that he may take a beneficial use of it himself in his lifetime.
The bill was by the creditors of Joseph Windham Ash, the testator, to have an account and satisfaction out of his assets, lie was entitled to a large estate for life, remainder to his sons successively in tail, remainder to his nephew, William Windham, in tail, with limitations over. Having no sons, the testator executed an indenture of demise, in 1734, and thereby, in performance it was said of certain promises made before the marriage of his nephew William, let him have possession, immediately, of part of his estate, without paying anything for it; but William covenanted that if, hy the testator’s death without issue male, it should happen that William, or any heirs of his body, should come into possession of this estate, he would permit such person as the testator should, by deed or toill, in his lifetime, appoint for that purpose, to enter and receive the rents and profits of the estate, for as long a time as William should enjoy it in the testator’s life. In 1742, the testator, by deed, directs all and singular the lands, &e. and all his estate, title, right, and interest, to Y. Comyns,his heirs, &c. to take the profits thereof, from and immediately after the death of the testator, in trust nevertheless, to and for the sole and separate use of his daughter Catherine, her heirs, &c.; and died in 1746.
“ The question was, whether this twelve years’ interest in William’s estate was part of the assets of the testator, or a good appointment to the daughter.”
It is apparent, from the statement of that case, that the testator had no power of appointment, by the exercise of which he could take any tiling to his own use in his lifetime, for the exercise of the power was, by the terms of it, to become operative only after his decease. There was no attempt to support the lull upon any property, or right of the testator, prior to the de*312mise, or to subject the property to the creditors upon any other ground than the right of the testator under the power of appointment. It was argued, for the plaintifis, that this was part of his personal assets; that a general power was so considered in that court, if executed without a valuable consideration, (let it be to whatever persons or uses,) because it is that over which he has an absolute property, and shall not therefore give away from his creditors after his death; that if the power was to limit only to particular persons or uses, that, when exercised, is not assets,, because to a particular use, &e.; that no power could be more general than the one then in question, as to persons and uses; that the testator might have sold or mortgaged this property, though he could not actually enjoy it In his life; and that, if there was no appointment, it would have gone to the general assignees at law of the testator, the old ownership resulting. Lassells vs. Lord Cornwallis, 2 Vern. 465 ; Pre. Chan. 232, Shirley vs. Lord Ferrers ; and Bainton vs. Ward, were cited.
For the daughter, it was urged that this being to arise on a contingency after the testator’s death, there were no words in the conveyance reserving the estate to him, nor of covenant to his executors, but merely to such as he shall appoint, which alone made it different from the cases cited, and that if there was no appointment, it could not devolve on his personal representatives.
, Lord Hardwiche said it was insisted for the plaintiffs, that this is such a hind of interest granted as the testator would be entitled to the benefit of, although he had made no particular appointment ; but, on consideration, he was of opinion that without making a particular appointment, neither the testator nor any in his place could have the lenefit of this covenant; that no action of covenant could have been maintained by the executors of the testator, upon the deed, until he made an appointment; that when the testator came to execute the power, and nominate an appointee, then it became complete, and operated as a grant of the land, for that chattel interest, to take effect out of his remainder in tail,, from that time; that the meaning was to leave it in the uncle’s power, or option, to make use of it or not; and that the next consideration was, supposing this ivas not such an interest as *313could lake effect until the power was executed, and that without particular appointment the executors of the testator could have no benefit, whether this differs from the other cases on the execution of general powers, when executed by the party, as Shirley vs. Ld. Ferrers, and others. And then follow the remarks first cited. He is reported to have said, subsequently, in the same case, “ Here the testator had a power to appoint the benefit of the covenant, or in the other light this chattel interest in the land, to take effect out of the remainder in tail, generally to any person, or to take it to himself; he appoints it not to himself, but merely voluntarily to a daughter, to take effect after his death, as it could not be otherwise; in respect of his creditors it must be considered as part of his. estate at the time of his death; he having executed so as to gain the interest to himself and attempted to pass it at the same time to his daughter, the court will not suffer it, saying he has been guilty of a fraud as to them, being indebted at the time.” Perhaps there maybe some error in the language of this part of the report, as it is clear, not only from the statement of the case, but from other parts of the opinion, that there was nothing that the testator could take to himself, into his own possession, in his lifetime, or that any one could take through him, except upon his appointment, to take effect after his decease. If the language quoted was used, Lord Sardwicke by the words, “ take it to himself,” could only have intended that he might appoint it to such use after his decease as he should by some other instrument direct, which w'ould not affect the principle of the case.
The decision was in favor of the creditors, and the case is therefore a direct authority against the objection urged in behalf of the defendant, for the reason before stated, that it shows that it is not essential, in order to constitute a general power, that the party should have the right to make a disposition which will take effect immediately, or oven one through which he may receive anything to his own use, in his lifetime.
A power, then, is general or not, within the meaning of the rule, according to the persons or uses to which the property may be appointed under it, and not according to the time when its *314exercise takes effect in possession, or the instrument by which its exercise is to be manifested.
We are satisfied that if the principle is once admitted, it must lead to this result. To hold that creditors should come in, where the party had a power to dispose of the estate to whom he pleased, taking effect in Ms lifetime, and that they were shut out if the power extended only to dispose of the estate as he pleased, taking effect at Ms decease, would be makmg a distmction without any sound difference, and we should come to such a conclusion only, upon finding that we were thus limited by the authorities. If a party may by will or deed dispose of property to whom and for such uses as he pleases, to take effect at Ms death, and may thus apply it to the payment of Ms debts, or direct any other disposition to be made of it, he has as great a power of disposal as he has over Ms own estate, to take effect at the same time; and havmg undertaken to exercise the authority, it may well be treated as a part of Ms estate, upon Ms decease, so far as to require that he should first provide for Ms debts out of it; and if he fails so to do, eqrnty may apply it as a part of Ms estate, so far as it is necessary for that purpose. UndertaMng to exercise a power,. wMch authorized Mm to appropriate , the property to the payment of Ms creditors by a mere gift or legacy, without making provision for them, is a fraud upon them. It is no answer to tMs to say, that the property is a part of the estate of Jacob Sheafe, and that Theodore Sheafe had merely a right to designate what disposition should be made of it upon Ms decease. That unlimited right of disposition, with the act of Theodore m exercise of it, makes it part of Ms estate.
It but serves to confirm tMs view of the matter, in tMs particular case, that, by the will of Jacob Sheafe, if Theodore failed to act upon Ms power of appointment, the property was to be distributed, on the decease of Theodore, among Theodore’s heirs at law. That, however, would not have authorized the' creditors to mterfere with it, had Theodore declined to exert Ms power over it, as it would then have passed to Ms heirs by the will of Jacob Sheafe alone, and they would have taken as legatees under the will.
*315If, on account of the phraseology to which we have adverted, in the case Lord Townshend vs. Windham, any farther authority is desirable in support of the principle which we have deduced from that case, relative to the construction of the term, “ general power,” it may bo found in Jenney & a. vs. Andrews & a., 6 Maddocks Ch. R. 264, in which it was held, that whore a party, having a power of appointment over money, to be executed only by will, made his will, disposing of the property, and then became bankrupt, and afterwards obtained his certificate, and died without revoking his will, the appointee by the will was a trustee for the creditors of the bankrupt, who became such after he had obtained his certificate.
The facts of the case wore, that by a settlement in April, 1808, made previously to the mamiage of Henry Humphries, and Jane his wife, a moiety of .£5999 12s. 9d. three per cents, became vested in trusts, for such uses (if there should be no children of the marriage,) as Henry Humphries should by his last will and testament in writing, or any writing in the nature of a will, or any codicil or codicils executed by him in the presence of and attested by two or more credible witnesses, direct, limit, or appoint, and for want of such direction, limitation and appointment, in trust, for the plaintiff Jane Humphries, her executors and administrators. Henry Humphries being indebted to the plaintiff, Edward Jenney, in the sum of ¿64500, assigned or appointed his interest to Jonney, by indenture, 21st August, 1815, as a security for the debt. On the 15th November, 1815, a commission of bankruptcy issued against Henry Humphries ; the defendants, Taddy and Tulloclc and Newman, were chosen assignees; and Andrew's and the plaintiff Jenney, the trustees under the settlement; proved a debt under the commission, on account of a bond given to them by the bankrupt, for securing a sum of money, as part of the trust funds of the marriage settlement; and received a dividend winch was added to the trust property, a moiety of which the bankrupt had power to appoint by his will.
Henry Humphries, in order more effectually to secure Jenney, on the 29th August, 1815, made his will in the presence of two witnesses, and thereby appointed his interest in the trust moneys *316to Jenney, Ms executors, administrators and assigns, in trust, to raise the said sum of ¿64500, and interest, and subject thereto, in trust for the plaintiff Jane Humphries.
Henry Humphries died on the 10th May, 1820, without issue, having previously obtained his certificate, and Jane Humphries, the plaintiff, proved the will. The plaintiff, Jane Humphries, claimed the absolute interest in the money, and the prayer of the bill was accordingly. On the other hand, the assignees of Humphries, the husband, claimed the money.
The counsel for the plaintiffs contended that the bankrupt had a power of disposal only by will, and that the property appointed could not, therefore, be assets till after his death. But as the bankrupt obtained his certificate, this property, acquired subsequently, could not pass to the assignees.
The vice chancellor said, “ where there is a general power of appointment by will, and an appointment is made, the appointee is a trustee for creditors; but it is not for creditors at the time of the execution of the will, but at the death of the testator. The certificate of the bankrupt deprives the assignees of all claims for the benefit of the creditors under the commission.”
The power of appointment in the above case could be exercised by will only, which of course could not take effect until after the decease of the party appointing; but no doubt is expressed on that account, and it was regarded as a general power.
And in Townshend vs. Windham, the power was to be executed, as in this case, by deed or will. See, also, 1 P. Wms. 149, 171, Tomkinson vs. Dighton; 1 Tamlyn 396, Green vs. Spicer.
Upon these authorities we are of opinion that the power given to Theodore Sheafe was a general power, within the meaning of the rule. It enabled him to treat the subject matter of it as his property, at his decease. He assumed in virtue of the power to make a disposition of it, to take effect at that time, as if he had the ownership, and the court must thereupon treat it as if it was his property, so far as' to subject it to the discharge of his debts.

Demurrer overruled.

Leave to file an answer.