Opinion
September, 1905.
Flamen B. Candler, for the appellants.
S.B. Livingston, for the respondent.
It is contended by the appellants that it is essential to the maintenance of this action that the plaintiffs should have first recovered judgment upon their claim in the courts of this State and have issued execution thereon and that the same were returned wholly or in part unsatisfied, and Dittmar v. Gould ( 60 App. Div. 94; 69 id. 615) and kindred cases are cited as authority therefor. The learned judge at Special Term attempted to distinguish Dittmar v. Gould upon the ground that therein there was no allegation of fraud while here there is, and that, in his opinion, equity has inherent jurisdiction of an action by a general creditor to reach equitable assets upon which neither an attachment nor an execution could be levied, and that such jurisdiction is neither limited nor controlled by the provisions of the Code of Civil Procedure (§§ 1871-1879). It is unnecessary to discuss the proposition, which received able and exhaustive consideration in Dittmar v. Gould, whether in any case a court of equity has jurisdiction before judgment in execution to entertain an action by a general creditor to reach equitable assets upon the ground of a fraudulent transfer, for its decision is not essential to a determination of this appeal and the views of the members of the court might not be in accord thereon. The facts alleged do not show either actual or constructive fraud. It does not appear that the settlor at the time she made the deed of settlement had any creditors or contemplated incurring liability; and neither the plaintiffs nor their assignors became her creditors until the expiration of thirty years thereafter. The deed was made by an American citizen in contemplation of marriage with a foreigner, a subject of Great Britain. The marriage was consummated and the parties lived abroad, doubtless as she expected. Under the common law of England, which would be controlling as to her personal property if she had not disposed of it in this or some other manner at that time, it would have become the property of the husband. Having a private fortune she desired to preserve it as against her husband and against the foreign law for her own benefit during life, for the benefit of her husband thereafter during his life and with the principal over to her issue. This was not forbidden by law and the object was commendable. The facts alleged, therefore, do not render the trust deed invalid. ( Wood v. Jackson, 8 Wend. 10-33; Beardsley v. Hotchkiss, 30 Hun, 605; S.C., 96 N.Y. 201; Johnston v. Spicer, 107 id. 185-191; Borland v. Welch, 162 id. 104; Matter of Miller, 77 App. Div. 473.)
Manifestly in no view of the case could the declaration of trust be invalid as to her issue in whom the remainder was contingently vested upon their birth and became vested absolutely upon the exercise of the power of appointment subject only to her life estate — the husband having died — and possession being postponed until her death. Nor was it void because she reserved an interest for her own benefit during life. It was not a passive trust within the provisions of the statute in force at the time (R.S. pt. 2, chap. 7, tit. 2, § 1), but rather an active trust founded on a good consideration, and the reservation of an interest for herself was only incidental and partial. ( Curtis v. Leavitt, 15 N.Y. 9, 114, 123, 147, 149, 176, 204, 295; Delaney v. Valentine, 154 id. 692-701; Rome Exchange Bank v. Eames, 4 Abb. Ct. App. Dec. 83.) Her beneficial interest might be reached in equity and appropriated to the payment of the claims of her judgment creditors, but it could not be set aside as either fraudulent or void. It was assignable absolutely or as security. ( Schenck v. Barnes, 156 N.Y. 316; Raymond v. Harris, 84 App. Div. 546.) Moreover, if the trust deed were fraudulent and void as alleged, then as to the personal property, which is all the estate now consists of, the trust deed could be disregarded and the property could be attached or an execution levied thereon the same as property fraudulently transferred by a bill of sale. In that view of the case there was no necessity of appealing to equity, and as jurisdiction could be obtained by attachment there was no possible excuse for resorting to equity. The allegations that the deed was fraudulently made, not being supported by the facts alleged, must be regarded as legal conclusions not warranted by the facts and, therefore, not admitted by the demurrer. ( Talcott v. City of Buffalo, 125 N.Y. 280, 284; Greeff v. Equitable Life Assurance Society, 160 id. 19, 29; Kittinger v. Buffalo Traction Co., Id. 377, 387.)
I am of opinion that the action may be maintained upon the theory that the plaintiffs had a lien upon the trust property for the repayment of the loan and that they are entitled to have their liens declared against the trustees and the securities in their possession, and to have the trustees directed to pay the same, as the beneficiaries of the trust all appear satisfied should be done. The facts concerning the loan and the execution of the mortgage are all pleaded, and they clearly show that an equitable lien was given upon all of these trust funds so far as the mortgagors could give the same. The mortgage represented every interest except the interest of one of the children, who was then an infant. Upon the execution of the deed of appointment and the relinquishment of the right to further exercise the power of appointment, the interests of the children, which were theretofore contingent, became vested subject only to the life estate of their mother, the legal title, however, being in the trustees. The interest, therefore, of the mother and other children in these trust funds was subject to the lien of the mortgage, payment of which may be enforced against their interests. ( Raymond v. Harris, 84 App. Div. 546; R.S. pt. 2, chap. 1, tit. 2, §§ 11, 13, 28, 33, 35.) There are conflicting allegations in the complaint, in that the existence of the lien in favor of the plaintiff is quite fully and at length alleged, and then at the close it is alleged that the trust deed was fraudulent and void; and there are inconsistent conflicting demands for relief, in that it is prayed that the trust deed be set aside as fraudulent and void, and it is also prayed that the plaintiffs' lien be established against the trust funds, and that the trustees be decreed to pay the claim therefrom. There being no facts alleged to warrant relief upon the ground of fraud, and there being facts alleged to warrant the equitable relief demanded, I am of opinion that the complaint should be sustained upon the theory that it is a suit in equity to establish and enforce the lien of this equitable mortgage. It matters not that the action is not in form to foreclose a lien upon real estate, for it does not appear that any of the trust property consists of real estate at the present time, or when the mortgage was executed. The mortgage does not appear to have been recorded, and it is, perhaps, too general in its description of the property to be recorded, or if recorded either as a mortgage on realty or by filing it as a chattel mortgage to afford protection to the mortgagee as against innocent purchasers. Moreover, it was not given by the trustees who hold the legal title, and, therefore, the aid of a court of equity is required to establish it as a lien upon these trust funds. As has been observed, the trust funds appear now to consist of personal property only. The trustees are under the direction of the court, and if the lien be established against the trust funds it will be competent for the court to give directions to the trustees concerning the payment thereof out of the interest against which the lien is established. The lien is valid as between the parties, and is enforcible in equity. This is not an action over on the judgment recovered in the English court. The allegations of the complaint concerning the recovery of judgment should be construed as mere allegations of ownership of the claim by the plaintiffs, and that the amount of the liability has been conclusively established between the parties. It is doubtful whether the costs in the English judgment are recoverable in this action, as the lien only covers the money loaned and interest; but the extent of plaintiff's right of recovery is not now before us for decision.
It is contended that the plaintiffs have no legal capacity to sue. According to the allegations of the complaint the plaintiffs do not sue here in their representative capacity as executors. Being foreign executors they could not sue as such in this State. The indebtedness for which the mortgage was security merged in the foreign judgment, which, aside from the costs, fixes the amount of the lien, for the collateral followed the debt (3 Pom. Eq. Juris. [3d ed.] § 1210) and established ownership in them as executors. The action is brought, therefore, not by virtue of the foreign letters, but by virtue of this ownership of the debt the same as if they had as executors or trustees loaned the money and were suing to enforce the security, and not like administrators or executors suing in their representative capacity for the estate. ( Bonilla v. Mestre, 34 Hun, 551; Matter of McCabe, 84 App. Div. 145; affd., 177 N.Y. 584. See, also, Maas v. German Savings Bank, 73 App. Div. 524, 527; affd., 176 N.Y. 377; Mabon v. Ongley Electric Co., 156 id. 196; Toronto General Trust Co. v. C., B. Q.R.R. Co., 123 id. 37.)
The learned counsel for the appellants further contends that the allegations of the complaint are insufficient to show ownership in the plaintiffs as trustees, and urges that the provisions of the will should have been set forth. It is alleged that the mortgage and the indebtedness were assigned to their testator; that after his death they as his executors recovered a judgment against the mortgagors establishing the liability and extent thereof; that by virtue of the provisions of the will this security, claim and judgment became part of the residuary estate which passed to them as trustees, and that the claim, judgment and mortgage are now owned by them as trustees. We are of opinion that these allegations are sufficient. In alleging the ownership of personal property, chattels or choses in action it is not necessary to allege the facts showing the source of title further than has been done in the case at bar.
It follows, therefore, that the judgment should be affirmed, with costs.
O'BRIEN, P.J., and HATCH, J., concurred; PATTERSON, J., concurred in result.
Judgment affirmed, with costs.