Court Opinion

ID: 3607732
Source: CourtListenerOpinion
Date Created: 2016-07-05 23:52:45.779094+00
Date Added: 2024-06-11T14:23:45.181198
License: Public Domain

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The first of the questions we shall consider is one which arises upon the appeal of the executrix. She made a personal claim, amounting to $127,123.16, which the surrogate allowed; but which the General Term, upon appeal, disallowed. The facts upon which it was based are these: In 1879, a few years before the death of Mr. James, he executed and delivered to his wife two bonds; one of which was conditioned for the payment of $43,920, one year after date, and the other for the payment of $30,720, one year after date. Both bonds bore interest and were secured by mortgages upon lands in the state of Iowa; the legal and record title to which was in Mr. James. A few days afterwards, Mr. James conveyed all of the lands covered by these mortgages to a grand-nephew of Mrs. James; at the time an infant of the age of nine years. It was found with respect to this latter transaction that it was advised as a mode of delaying, and to enable legal proceedings to be taken to defeat, the payment of taxes, which *Page 93 
had been laid upon them and which were believed to be illegal. In 1882 a suit was commenced to foreclose the mortgages by Mrs. James; who made her husband and the infant Wheeler, the grantee of the lands, parties defendant. Process in the suit was served outside of the state of Iowa upon the defendants, but Mr. James did not appear. In 1883, judgment of foreclosure and sale was entered, in which the amount due to Mrs. James upon the bonds was fixed at $94,973.83. No sale was made during the lifetime of Mr. James under the decree; but, after his death and in 1885, Mrs. James caused a sale to be made, at which the mortgaged premises were sold for the sum of $5,280. The decree of foreclosure and sale gave no judgment against Mr. James personally, forasmuch as the District Court in Iowa had acquired no jurisdiction to render judgment in personam upon a service without the state and without personal appearance of the party served. The claim of the executrix is for the whole sum secured by the two bonds, with interest from their date, less the amount realized upon the sale of the lands. The surrogate found, with respect to the delivery of the bonds and mortgages, that they were a gift by Mr. James to his wife and that he was not indebted to her at the time in any sum whatsoever. He allowed her claim on the ground that they were enforcible obligations in the hands of Mrs. James against the estate of her husband, regarded either as a gift, or as a provision for her in addition to the bequests of the will. I think that the General Term correctly held that the executrix had no claim upon these bonds, which she could enforce against the estate in her hands, and that she had obtained all the relief in the foreclosure suit to which she was entitled. These bonds amounted, simply, to the promise of Mr. James to pay, at some future day, the sum mentioned, without any consideration to support that promise. Such a voluntary promise cannot be enforced against the donor, or against his executors or administrators. (See Pomeroy's Equity Jurisprudence [sec. 1148]; Story's Equity Jurisprudence [sec. 987].) By the latter authority, it is stated as follows: "The general *Page 94 
principle is established, that in no case whatsoever will courts of equity interfere in favor of mere volunteers, whether it be upon a volunteer contract, or a covenant, or a settlement, however meritorious may be the consideration, and although they stand in the relation of a wife or child."
The question of the validity of a gift, in the form of a promise to pay, only, without consideration, was elaborately considered in Harris v. Clark (3 N.Y. 93) and it was there held, to quote the language of Judge RUGGLES, "that a voluntary promissory note without consideration is not, as the law now stands, the subject of a valid gift by the maker, either as a present donation, or as a gift to take effect at the death of the donor." The fact that in that case the subject of the gift was a bill, or draft, does not affect its application to the case of a bond; inasmuch as no presumption of a valuable consideration obtains from the presence of the seal, in view of the findings of fact that the bonds were executed and delivered as a gift and not because of any indebtedness. In Whitaker v. Whitaker (52 N.Y. 368), the question discussed was whether a meritorious consideration was sufficient in equity to sustain a promissory note given by a husband to his wife, as against his collateral heirs; and the conclusion reached by Judge PECKHAM (in which all his associates concurred), after a review of the English authorities, was that the law was well settled, contrary to the doctrine in the early case of Wright v. Wright (1 Cow. 598), "that a meritorious consideration, or the duty to provide for a wife or child, is not sufficient to support an executory covenant." The case of Hunt v. Johnson, (44 N.Y. 27), was referred to in the opinion and deemed to be without the rule; because it was a case of an executed sale or transfer of real estate, to uphold which natural affection is undoubtedly a sufficient consideration. Nor does the fact that the gift inWhitaker v. Whitaker was of a promissory note, which the husband made in his lifetime for the purpose of making a provision for his wife, affect the question as an authority in point; for the same reason that I have mentioned in reference to the case of Harris v. Clark. *Page 95 
It is unnecessary to discuss a question which has been well treated at the General Term, further than to say that I think that they were right in holding that, while the Iowa judgment of foreclosure had no effect to create a personal liability upon the bond, it was conclusive as to the ownership of the mortgages and the right of Mrs. James to have the lands therein described sold and the proceeds applied upon the amount represented by the bonds. The importance of that holding seems to be that the contestants upon the accounting are precluded from inquiring either as to the right of the executrix to sell the land, or as to whether she held the mortgage in trust for the firm of F.P. James  Co.
Another question, as to which the executrix has appealed, is with reference to the payment to her of $2,500 upon the day of the testator's death. It seems that, in the morning of that day and while Mr. James was in fact dying, a clerk of F.P. James 
Co., holding a power of attorney to sign checks for the firm, was requested by some one, acting as a messenger from the residence, to draw two checks for Mrs. James' account, one for $1,000 and the other for $1,500. Upon the clerk's demurring to the request, he was assured that it was all right and he then drew the checks, which the messenger caused to be cashed and deposited to the individual credit of Mrs. James. The surrogate found that these checks were delivered to Mrs. James by her husband's authority; but the General Term has reversed the surrogate in that respect; holding that there is no evidence to sustain the finding. I think their conclusion was correct and that the facts of the transaction would not warrant any inference that the authority of the clerk, under the power which he held from the firm, had been validly called into exercise. If the transaction had been merely one, as to which all we knew was that the clerk had delivered the checks to Mrs. James, an inference might have been possible, which is quite rebutted by the circumstance that the clerk only drew and delivered them when moved to do so by a messenger; whose source of authority to make the request was not shown to be in Mr. James. *Page 96 
One of the most important questions raised upon the accounting was, whether dividends received upon the stocks of certain railroad construction companies should be treated as capital, or as income. Two of the companies constructed railroads and upon their sale received land grants in payment. The other company also constructed and sold a railroad, but received in part payment a certificate of indebtedness secured by a mortgage upon land. The surrogate apportioned the dividends, paid by these corporations since the death of Mr. James, by holding so much as were derived from the purchase price of lands sold to be capital and so much as were derived from interest on deferred payments on contracts of sale, or upon the certificate of indebtedness, he held to be income. The General Term reversed that ruling and held that all the dividends were income. If there was nothing in the language of this will, which evidenced an intention on the part of the testator that his widow should have and enjoy as income whatever actually came into the estate eo nomine and as he had been himself in the habit of receiving, I should hesitate very much to say that the General Term were correct. Undoubtedly, the dividends declared by these companies were from their capital, because they had no source of income other than from their sales of land and dividends could not be derived in any other way. These corporations were peculiar, in that their only business, after the expenditure of their capital in the construction of railroads, was to sell the lands received in payment and to divide the proceeds, as received, among their stockholders. In that respect, of course, there was a distinction between them and corporations which are engaged in ordinary business enterprises and receive returns in the way of earnings upon the invested capital. Their dividends were, in truth, ordinary and not extraordinary; for the reason that they were the only ones which they could, in the nature of things, make. I think, however, we may consider the question before us upon a broader ground, where, in connection with kindred questions, it may be disposed of by the application of the rule of intention. Whether the rule, with *Page 97 
relation to the respective rights of the life tenant and remaindermen, shall so apply, in the case of a testator's estate, as that the personalty shall be converted and invested in such permanent and legally recognized forms as shall benefit both the tenant for life and the remainderman, may depend upon the form and language of the will. It seems to me that in this case the intention of the testator, that his personal estate shall remain in specie, the income of which should be received and enjoyed by his wife as it had been by himself, is manifest. At the time when he made his will he had no children, nor descendants of children. The will was drawn at his own dictation and peculiarly expresses his great affection for his wife and his desire that her enjoyment of his estate and the benefits which she was to derive from it were to be without any regard to those who, after her death, were to have the reversion of his property and whom he defines by the very general and generic term of his "legal heirs." In the first place, his language is "I give and bequeath to my beloved wife Julia, for her sole use, enjoyment and benefit during her life, without restraint, deduction or interference in any manner whatsoever, as follows: First. One-half of the income of all my property of every kind of which I may die possessed." He then gives her the use of his town and country residences and makes the absolute bequest of all household furniture, pictures, plate, books, ornaments, horses, carriages, farm implements and property of every description, in, or upon, or appertaining in any manner to the two houses and residences. He then proceeds as follows: "I give, devise and bequeath to my legal heirs the remainder of the income from my property during the life of my wife after the payment and discharge of all taxes, etc. * * * except as hereinafter provided in case of interference. I give, etc., to my legal heirs * * * the reversion and ownership of all my estate and property after the death of my wife, with the reservation, exception and direction, that in the event of any of my legal heirs making any attempt directly or indirectly, in any manner or form, *Page 98 
to interfere with or restrain in any manner my beloved wife from full enjoyment, use, management and direction and disposition of the property and income of my estate, as herein devised, then and in that event such one of my legal heirs as shall do or perform or aid or abet the performance of such an act, or cause the same to be done, shall be forever debarred from any part, parcel, interest or ownership, or inheritance to any of my property. * * * I authorize and direct my executrix in her discretion to sell and convey such portion of my property as may be requisite or necessary to pay and discharge my just debts and obligations."
It stands out very clearly from the peculiar and strong language selected by the testator, that the interest which was to be enjoyed by his "legal heirs" in the estate was subordinated to the interest of his wife. To him she was everything and they were, merely, kindred, having by law certain claims which he was not indisposed to recognize and which he provided for in the manner described. Although in the case of Woodward v. James
(115 N.Y. 346), we held that a legal trust was created of the testator's real and personal estate, not given to the widow absolutely for her life, we reached that conclusion, inasmuch as it was necessary, because of the authority and duty imposed upon the widow, that the legal title should be vested in her as trustee. Of course there was nothing in the language used in the will, which conveyed the idea that the testator intended or thought of a trust; but the exigencies of the situation, in our judgment, required the creation of a trust by implication. The question might have been a very different one, if the language of the will spoke of a trust, or indicated the notion of the testator that his wife, with respect to the management and use of the property, should be clothed with the duties of a trustee and guided by the strict rules to which trustees are subjected. In this case, while a trust is created by implication, all of the stringent injunctions of the testator with respect to his widow's use, enjoyment, or control, of the property, remain with all their meaning. The one-half of the income of "all of his property of every kind," *Page 99 
of which he might die seized, is given to his wife "without restraint, deduction or interference in any manner whatsoever." Such language, in connection with that subsequently used, enjoining his legal heirs against attempting to interfere with the "full enjoyment, use, management and direction and disposition of the property and income of his estate," under penalty of being excluded from any interest or share therein, contains most significant expressions of an intention that his widow should have a half of the income of his property "of every kind," which could not be cut down and which she was fully to enjoy and manage. It is also significant that the direction to sell is only in the event of a sale becoming necessary to discharge debts. I cannot read this will without, not only inferring the intention of the testator to have been that his property should remain in specie for his wife's benefit and subject to her uncontrolled management, but also seeing therein that intention to be plainly expressed. It is inconceivable that Mr. James, in drawing a will in such language, had the intention that his widow should at once convert and capitalize the estate in such forms of investment as the law sanctions, by rules established for the construction of wills colorless as to any expression of intention. To quote the words of Lord Chancellor COTTENHAM, in Pickering v. Pickering (4 My.  Cr. at p. 300), "I think it would be a violation of the testator's intention not to allow the wife to enjoy the income of the property as it is." This case differs from others which have been cited, in that the testamentary disposition was not strictly of an estate to be enjoyed in succession by different persons. One-half of the income of the testator's property is given to his legal heirs and though it may have proved to be, as counsel has put it, an illusory gift, because of the burdens imposed upon their share of first discharging thereout all the taxes and charges against the estate, nevertheless, the situation was, and is, that of a division of the income of the property between the widow and the testator's legal heirs. To the extent that their half of the income is applied in payment of taxes and other charges, their reversionary *Page 100 
interest is protected, and benefited, and they can only complain of the testator's subordinating their interests so completely to those of his widow. The counsel for the heirs has made a very able and ingenious argument, which he has fortified by reasoning upon cases in the English courts, as well as upon some in this country; but all the cases that I have seen recognize that the rule of intention must always override established rules of construction. It is only where the instrument fails to express, or to disclose, an intention, that we must resort to the rules which have been established by the decisions of the courts. That an intention is manifest in the will in question, I have endeavored to show. We have only to put ourselves in the testator's situation, when he was making his will and therein providing for the enjoyment of his estate by his wife, to be impressed with the conviction that he had no idea of constituting a technical trust, with all its duties and obligations; but, without children, or descendants, he draws a will in his own strong language, making what he supposed to be an ample provision for his wife during her life and one in harmony with the conditions under which she had lived. He cares little for others, in comparison, if we may judge from the language of his will; but he recognizes the claims of that general class designated as his "legal heirs."
I deem it of considerable significance, when considering this case in connection with others, to which our attention has been referred, and in addition to the difference in the facts and phraseology upon which I have commented, that this testamentary disposition was not that of a gift of the residuary estate to trustees; although even in such a case a plain intention discoverable in the will would prevail against an arbitrary rule of law. In Jarman on Wills, (p. *613), it is said with reference to a residuary devise that the same principle applies, "if an intention that the property shall be enjoyed in specie can be collected from the terms in which either the life interest, or the ulterior subject of disposition, or both these interests, is or are bequeathed." In this case, as in every other case where a will is the subject of construction, it is the intention *Page 101 
of the testator and not the rule of construction which is to govern, when they come in conflict. In Redfield on Wills (2 vol. *478), it is said that, "Where there is anything in the will from which it may fairly be inferred that the testator expected the tenant for life to enjoy the property specifically, it cannot be converted into money or public funds; but the remainderman must take his chance of anything remaining after termination of the life estate.' These latter remarks were made with reference to the case of Howe v. Earl of Dartmouth.
Howe v. Earl of Dartmouth, (7 Ves. 137), is considered to be the leading case in England, upon the question whether property bequeathed by a testator shall be retained in specie, or whether, if of the perishable class of securities, it shall be converted in such a way as to produce capital bearing interest. The rule as laid down by Lord Chancellor ELDON in that case, as explained by subsequent decisions, among which is particularly to be mentioned that of Lord COTTENHAM in Pickering v.Pickering, (supra), is this; that where there is a residuary bequest of personal estate, to be enjoyed by several persons in succession, a court of equity, in the absence of any evidence of a contrary intention, will assume that it was the intention of the testator that his legatees should enjoy the same thing in succession and, as the only means of giving effect to such intention, will direct the conversion of personalty into permanent investments of a recognized character. Lord ELDON laid down the rule in that case, because of the absence of language in the will from which the direction of the testator might be inferred that his estate should continue as it was. Some difference of opinion has existed among the English judges with respect to the application of the rule laid down in Howe v.Earl of Dartmouth, which, in the recent case of Macdonald v.Irvine, (L.R., 8 Ch. D. 101), is adverted to in the opinion of Lord Justice THESIGER. In the previous case of Hinves v.Hinves (3 Hare, 611), Vice-Chancellor WIGRAM had said: "The court in applying the rule has leant against conversion as strongly as is consistent with the supposition *Page 102 
that the rule itself is well founded." In Morgan v. Morgan
(14 Beav. 72), the master of the rolls, Sir JOHN ROMILLY, said that, "the effect of the later cases has been to allow small indications of intention to prevent the application of the rule." Lord THESIGER, referring to the leaning of these judges, with others, against the application of the rule, adopts the following words of Lord ROMILLY: "That unless there can be gathered from the will some expression of intention that the property is to be enjoyed in specie, the rule in Howe v. Earl of Dartmouth is to prevail. It is therefore incumbent on the persons contesting the application of that rule, and on the court which forbids that application, to point out the words in the will which exclude it, and if this cannot be done the rule must apply. * * * In almost all, if not all, the cases which have been cited in argument, where such an intention was found to exist, * * * we find either words in their natural and literal sense importing use or enjoyment of the property in the state in which the testator left it at his death, or directions contained in the will as to the conversion of the property which were inconsistent with a conversion by the court taking place upon the death of the testator." In that case the lords justices divided in opinion, as to whether any of the elements existed in the will under consideration to show the intention of the testator that the case should be taken out of the general rule; but they all agreed, if there was a sufficient indication of intention in the will itself to that effect, that the personalty should remain in specie until after the death of the testator's wife. While there the testator gave to his wife for life "all the income, dividends and annual proceeds of his entire estate," there were not present these significant words of injunction against any "deduction," or any interference with her use, enjoyment, or management.
In Blann v. Bell (2 De Gex, Macn.  G. 775), the principle was distinctly recognized that the intention in the will should govern upon the question of the retention of property in specie and that where it is seen to exist the case will be *Page 103 
taken out of the general rule. In Collins v. Collins (2 My. 
K. 703), the language of the gift to the wife is not unlike, in its effect, to that in the present case. The testator there gave "all and every part of his property in every shape and without any reserve and in whatever manner situated, for her natural life," and at her death the property was to be divided among his father, brothers and a sister. Sir JOHN LEACH, M.R., held the rule in Howe v. Earl of Dartmouth did not apply. In this state the rule laid down in the Earl of Dartmouth's case was early adopted, as applicable in the absence of any indication of an intention on the part of the testator that the legatee for life should enjoy the property in its then state. (See Spear v.Tinkham, 2 Barb. Ch. 211, and other cases cited on brief for heirs.) In every case, in this, or any other state, however stringently that rule is applied as between a tenant for life and remainderman, it is the absence of manifest or plain intention which sets it in operation. In Clarkson v. Clarkson (18 Barb. 646), the decision of the question of the disposition to be made of extraordinary dividends was referred to the discoverable intention of the testator. The case of King v. Talbot
(40 N.Y. 76), frequently cited, has no application. The question discussed was with reference to how the discretion of trustees is prudently and lawfully exercised in the investment of moneys held for the benefit of minors and a very strict rule was laid down.
What I have said is applicable to the question of the right of the widow to retain in specie the personal estate bequeathed and to her right to have and to enjoy the income from it, as it had been received by the testator in his lifetime.
The testator knew about his investments. They were spread out on his books and the comprehensive words of a gift of his "property of every kind," "without restraint, deduction or interference in any manner," are especially significant of the intention that his widow should have whatever came into the estate in the form in which he left it.
The point is, also, made by the contestants that certain interests and dividends, collected upon certain stocks and *Page 104 
bonds prior to his discharge by the receiver, who was appointed of the firm property, should have been carried to capital, instead of being credited to, and distributed as, income. The question concerns the receiver's liquidation of the partnership affairs. In an action brought within a few months of the testator's decease by a creditor of the firm, for the protection and distribution of its assets, a receiver was appointed; who continued until December, 1885, when a judgment in the action was rendered, settling his accounts and directing him to deliver over the assets in his hands to Mrs. James; who was entitled, in her capacity as executrix of the surviving partner, to settle with the legal representatives of the deceased partner. Under the provisions of Mr. James' will his executrix became vested at once with the title to all of his estate, in the capacity of a trustee for the purposes mentioned. Included in the property of the estate was the testator's interest in the firm of F.P. James 
Co. The direction as to his widow's right to one-half of the income applied, of course, as well to that species of property. For the reasons I have just expressed, she was under no obligation to convert and to capitalize those assets, or the income received thereon. The interest of Mr. James' partner, Mr. Taylor, was in one-fifth of the profits of the business and that interest, which, upon his death, vested in Mrs. Taylor as his executrix, has been settled with. So far as the question of the winding up of the partnership business is concerned, I fail to find any substantial ground for the objection of the contestants as to the treatment by the receiver of the income and expenses. The evidence is that twenty per cent of the income was credited to the Taylor account; to which was, also, charged its due proportion of the expenses of the receivership. That seems to me to have been a proper method of liquidating the business. The decree in the receivership action passing on the accounts is not open to attack in this proceeding and, with respect to the right of the executrix of Mr. James to treat as income the particular moneys collected by way of dividends and interest and paid over to her by the receiver, I do not see how the next of kin *Page 105 
can be heard to complain. That was her right under the provisions of the will and indirectly, if not directly, they were benefited by all that was income to the estate.
Objection was made by the contestants to the settlement which was effected by the executrix as to the interest of her husband's former partner, Mr. Taylor. He predeceased Mr. James by a few days only, leaving his widow sole executrix. Pending the administration of the receiver, who had been appointed of the partnership property, Mrs. James commenced negotiations for a settlement with Mrs. Taylor as to the claims of the Taylor estate. They eventually agreed upon the sum of $27,000, after varying more or less widely in their estimates of what was due upon the Taylor interest. The settlement was not, however, consummated between them. Mr. Jansen then became the purchaser from Mrs. Taylor and took from her a transfer of all claims, which the Taylor estate had against the assets of F.P. James 
Co.; including certain lands in Iowa and Texas. However this arrangement was brought about, is only matter of inference. There is nothing to show that Mrs. James had any interest in the Jansen purchase. She doubted her right to complete her negotiations with Mrs. Taylor and the latter was advised by her counsel not to sell to Mrs. James, either individually, or as executrix. After Jansen became the representative of the Taylor interest, and when Mrs. James had become possessed of the assets upon the discharge of the receiver, a settlement was reached, upon statements made by an accountant as to the firm affairs, which were based upon figures showing what was due to the James estate, what was due upon the Taylor interest and what was the total cost of the securities as shown by the firm books. The increase in the figures of the statements, upon which the settlement was made with Jansen, over those in the statement made at the time of the proposed settlement with Mrs. Taylor, was accounted for by reason of the advance in value of the securities. Mrs. James then transferred to Jansen one-fifth of all the securities of the late firm and received back from him, in cash, the difference between one-fifth of their *Page 106 
cost price and the amount which had been found due from the firm to the Taylor estate. Upon examination of the facts upon which an adjustment of accounts and interests was reached and this settlement was made, and which are quite complicated, I am satisfied that the surrogate reached a correct conclusion and that the evidence supported the findings which he made. The contestants have not shown that any wrong principle was adopted; or that the facts were wanting to justify that part of his decree upon the accounting. The General Term has reviewed his decision and the question must stop there.
With respect to the question of the propriety of crediting Mr. James' capital with interest to the time of the final settlement, there is no evidence of any agreement to allow interest and the fact that, in making up previous accounts between the partners, interest had been credited is not sufficient evidence of usage to dispense with the necessity of proving a special agreement. There were no articles of co-partnership and all that was found with respect to the partnership interests was that Mr. Taylor was to have one-fifth of the profits and was, to bear one-fifth of the losses of the business. When their association of interests was dissolved by death, there was nothing upon which a right to claim interest on Mr. James' capital could rest.
As to the claims of Jansen, as assignee of Taylor's executrix, with reference to the lands in Iowa and Texas, they do not seem to have been comprised within the settlement. Such claims must be the subject of future arrangement.
The questions which I have considered with respect to this accounting are all which demand any review by us. The record is very voluminous and has required much time for its consideration. Without further discussion of the matter, I am satisfied with the correctness of the conclusions reached by the General Term, in its order upon the surrogate's decree, and I, therefore, advise its affirmance; with costs to all parties who have appeared by counsel and have filed briefs upon this appeal, to be paid out of the estate. *Page 107 
All concur, BARTLETT, J., upon all points except as to the alleged dividends of the construction companies, so called, he holding the judgment should be entirely reversed so far as it decides the dividends paid by the companies to be income and the accounts changed accordingly; FINCH J., not voting.
Ordered accordingly.