Opinion
April Term, 1901.
George Welwood Murray, for the appellant.
Benjamin Scharps, for the respondent.
There is very little dispute as to the facts in this case, and, as we view it, none whatever as to the facts essential to the determination of the questions presented. It is undisputed that the Fifth Avenue Baptist Church, the defendant, executed the contract in question; that it took and received the mortgage bonds therein mentioned; that for a time it performed the agreement by receiving and collecting the income and paying it over to the plaintiff as therein provided, and that at the time this action was commenced there had accrued and the defendant had received for the defaulted interest or income upon the bonds the sum of $7,123.67, which it had refused to pay over to the plaintiff.
The first defense is that so much of the gift as was for the benefit of the plaintiff was void at its inception on the ground that it violates the provision of the statute which forbids the suspension of the absolute ownership of personal property for more than two lives in being. (Laws of 1897, chap. 417, § 2, formerly 1 R.S. 773, § 1.)
There is no question as to the capacity of either of the parties to acquire and hold personal property and the income thereof for the purposes of their organization. Both are incorporated under chapter 60 of the Revised Laws of 1813, which was in force when the gift was made, but was repealed by the Laws of 1895 (Chap. 723). Section 4 of the act of 1813 provides: "The trustees of every church, congregation or society herein above mentioned and their successors * * * are hereby authorised and empowered to take into their possession and custody all the temporalities belonging to such church, congregation or society, whether the same consist of real or personal estate, and whether the same shall have been given, granted or devised directly to such church, congregation or society or to any other person for their use * * * and also to purchase and hold other real and personal estate * * * for the use of such church, congregation or society or other pious uses."
A religious corporation, therefore, is authorized by this statute to take possession of personal property that has been given, granted or devised directly to it or to any other person for its use and to hold the same for its use or to other pious uses.
This statute does not authorize a corporation created thereby to take or hold property in trust for other corporations or for individuals. ( Chamberlain v. Chamberlain, 3 Lans. 348; 43 N.Y. 424; Matter of Griffin, 45 App. Div. 102; Matter of Williams, 1 Misc. Rep. 440; Adams v. Perry, 43 N.Y. 487; Cottman v. Grace, 112 id. 299; Read v. Williams, 125 id. 560.)
It must be borne in mind, however, that this agreement relates solely to personal property and that the Legislature has not attempted to define the purposes for which express trusts in personal property may lawfully be created as it has done in relation to trusts in real property. Trusts of personal property stand as they did at common law, subject only to the statutory restriction against the suspension of ownership for more than two lives in being, and subjecting the limitation of future and contingent interests in personal property to the rules prescribed in relation to like estates in real property. ( Gilman v. Reddington, 24 N.Y. 12, 13.) The only change in the statutes since the decision of this case at all relating to this subject is the provision as to direction for accumulation of income, which does not affect this question.
Does the instrument in question violate the statutory rule forbidding the suspension of the absolute ownership of personal property? We think not, but that the legal effect of the agreement was to immediately pass the absolute title to the mortgage bonds to the Fifth Avenue Baptist Church, subject only to the payment of the income to the plaintiff for the term specified and upon the conditions expressed therein. The language used seems to us to admit of no other construction. That an absolute present gift to the Fifth Avenue Church was intended is clear from the provision that "during the continuance of its ownership of the said bonds," it should leave the same on deposit, etc., and the provisions of paragraph 4, by the language employed: "Upon the expiration of said second term, or in default of a designation as above provided, then forever after to expend in every year the net annual income of the said fund for such Baptist City Mission work in the City of New York as may be lawfully carried on by the Fifth Avenue Church," serves to emphasize the fact.
No other act or thing is required to vest the absolute title to the property in the defendant. The instrument is in form sufficient to convey the absolute title; it is signed, sealed and witnessed. It very clearly expresses the intent to make a gift absolute and immediate. It has been repeatedly held that an unqualified gift by will of the rents or income of real estate is, in legal effect, a devise of the property itself. ( Mott v. Richtmyer, 57 N.Y. 49, 60; Jennings v. Conboy, 73 id. 230; Monarque v. Monarque, 80 id. 320, 324; Bailey v. Bailey, 97 id. 460, 470, 471.) The same rule must apply to personal property. Indeed, it is held in Mott v. Richtmyer ( supra) that "A grant of the use and income of real or personal estate forever carries the fee of the land, and the personal estate itself." (P. 60 and cases there cited.)
As we construe this instrument, it falls within the class of so-called trusts arising out of gifts and bequests to charitable and religious corporations for the promotion of some corporate purpose, which have been held not to be trusts in the legal sense. Such a gift does not create a trust in any such sense as that term is applied to property. The donor may lawfully restrain the use of the donee to the income, so as to preserve the principal from dissipation, the gift being to promote some of its chartered purposes. In an early case in this State it was held that "where property is devised or granted to a corporation, partly for its own use and partly for the use of others, the right of the corporation to take and hold the property for its own use, carries with it as a necessary incident the power to execute that part of the trust which relates to others." ( Matter of Howe, 1 Paige, 214.) This case was very like the one at bar. In the present case the corporation is directed to use the income in accordance with the law of its creation, for its own purposes, except as to the income for a limited period, and the direction as to the manner of its use, within that law, does not affect its ownership nor make it a trustee. A person may transform himself into a trustee for another, but he cannot be a trustee for himself. (Schouler Wills [3d ed.], § 610; Wetmore v. Parker, 52 N.Y. 459; Currin v. Fanning, 13 Hun, 458.) The former case involved the question of a gift by bequest to an asylum, and the question here presented was passed upon. It was contended that the gift violated the statute of perpetuities because a direction to invest the principal took away the jus disponendi, without which there cannot be absolute ownership. The court held that this principle did not apply, and said: "No mortmain law, restrictive as they have sometimes been, ever prevented the donors from making their gifts in such terms as would preserve the principal from dissipation. It does not create a trust in any such sense as that term is applied to property. The corporation uses the property, in accordance with the law of its creation, for its own proposes; and the dictation of the manner of its use, within the law, by the donor, does not affect its ownership or make it a trustee. A person may transform himself into a trustee for another, but he cannot be a trustee for himself." (P. 459.) ( Woodward v. James, 115 N.Y. 346, 357; Bird v. Merklee, 144 id. 544; Holland v. Alcock, 108 id. 312; Cottman v. Grace, 112 id. 299; Holmes v. Mead, 52 id. 332.)
One of the authorities seemingly most relied upon by the appellant is the case of Chamberlain v. Chamberlain (3 Lans. 348), but on examination the case is found not to support its contention. That case is not in conflict with the views expressed herein, nor with the authorities cited upon the point in question. On the contrary, the court in disposing of the bequest to the Chamberlain Institute (p. 369) distinctly recognizes the doctrine of those cases, and supports the rule we have enunciated. It is true that the bequest there in question was upheld on another ground, but the discussion shows that, if it had been necessary, it would have been sustained upon the ground that it did not create a trust nor suspend the absolute ownership of the money bequeathed. The decision was reversed by the Court of Appeals ( 43 N.Y. 424), but the question of the bequest to the Chamberlain Institute was not involved in the reversal.
If we are right in the construction thus placed upon the instrument in question, it was and is a valid agreement which the plaintiff has the right to enforce. But if it were not so, the defendant cannot attack it on that ground. Having accepted, covenanted and agreed to faithfully carry out the provisions of the agreement, the defendant is estopped from attacking its validity. "Acceptance of the trust estops the trustee from denying the title of the person for whom he holds." (Perry Trusts [5th ed.], § 260.)
A trustee who is in default "cannot claim as against his cestui que trust any beneficial interest in the trust estate" until his default has been made good. ( Doering v. Doering, L.R. [42 Ch. Div.] 203; Harbin v. Bell, 54 Ala. 389; Saunders v. Richard, 35 Fla. 28, 42; Chaplin Express Trusts, 161; Jones v. Butler, 30 Barb. 641.)
It would be an anomaly to say that the defendant could accept the performance of this agreement, enter upon the discharge of the trust imposed by its agreement by paying over the income, and then take advantage of an alleged legal impediment to reap the whole benefit of the gift to itself to the exclusion of the other beneficiary. It can have no standing in principle to do this, and all considerations of equity forbid it. Nor is the position of the defendant aided by the assignment from the donor, Mr. Rockefeller, offered in evidence and excluded rightly, we think, by the court. This assignment added nothing to the title of defendants to the bonds. As already seen, their title was already absolute, and this assignment, having been procured after the commencement of this action, could take away no right of the plaintiff if the defendant had not before acquired title.
Having thus disposed of the legal questions involved, we come to the discussion of the only remaining question which we regard as material to the determination of the appeal. The defendant resisted payment of the plaintiff's alleged claim upon the further ground that, as the plaintiff is now disqualified by the terms and conditions attached to the gift from receiving income for the future, such disqualification also debars it from its right to accrued income (assuming it ever to have had that right), for it cannot apply the income in the way prescribed by the donor. The agreement provides that the income of the bonds should be paid over to the Tabernacle Church "only for its work at Second Avenue, between Tenth and Eleventh Streets, in the City of New York," and that "if that Church ceases to be a member of the Southern New York Baptist Association, or its successors, in either event the Fifth Avenue Church may, in its discretion, thenceforth discontinue payments of income to the then beneficiary, and such discontinuance shall be taken as ending the term then current."
The trial court has found, upon practically undisputed evidence, that the plaintiff occupied all of its premises on Second avenue and conducted its work there during the period from December 1, 1891 (the date of the gift), and prior thereto and up to on or about December 19, 1896; that the plaintiff did not at any time during that period of time cease to occupy its said premises and to conduct its work there. These facts are abundantly supported by the testimony. It is further found that the plaintiff ceased to be a member of the Southern New York Baptist Association on or about September 26, 1898, which is conceded. There is no proof that the plaintiff has ever ceased to be a church or to do church work, or to do Baptist city mission work, and the trial court found that for a long time prior to December 1, 1891, and ever since that time, the plaintiff has been and still is a church. It further appears that the plaintiff conducted its services and church work from some time in December, 1897, to June, 1899, in the parish house, which was a part of its premises on Second avenue. Upon the trial counsel for plaintiff waived all right to an accounting for funds received after the commencement of the action, November 26, 1898, and the recovery had covered only the period from June 1, 1893, the date of the default by the railroad company, to December 19, 1896, when plaintiff ceased to conduct its services and carry on its work at Nos. 162 to 168 Second avenue, in the same manner and under the same conditions as when the agreement was executed. Assuming, then, as seems to have been assumed at the trial, that by reason of these facts the plaintiff forfeited its rights to all income after December 19, 1896, does it follow, as a necessary consequence of such forfeiture, that it has also lost the right to recover the income which concededly had accrued up to that time, and which had been paid over to the defendant but had not been received by the plaintiff? We think not, clearly. The statement of the proposition is its own refutation. This is an action in equity, and we know of no equitable principle which works a result so inequitable. Counsel for appellant first contends that the gift is void in law, as a trust, and then, in the same breath, urges that it is charged with a "certain sort of trust," which, because of a suspicion that the gift may be used for purposes foreign to the intention of the donor, renders it necessary to apply so harsh a rule to deprive plaintiff of what it seems to us it is in equity clearly entitled to receive. Even the law looks with disfavor upon a forfeiture and it is never favored in equity.
It is urged that there is no claim that the plaintiff has incurred obligations in its work at Second avenue in anticipation of its right to the income of this fund. But this proposition is without force. Non constat that it has not incurred such obligations. It does appear that during the period for which recovery is had, all the conditions were complied with which entitled the plaintiff to receive this income. If defendant relied upon such facts as are now urged to defeat the claim, the onus was upon it to show them. Presumptively the plaintiff was entitled to recover upon the facts alleged and proved by it.
The cases cited by appellant upon this question are not in point, and furnish no authority against our conclusion. So far as it goes the case of Associate Alumni v. General Seminary ( 26 App. Div. 144) is a holding in favor of our view. It was there held that a trust was created which the defendant had violated by refusing to apply and use the fund according to the terms upon which it was offered and to which it assented when it received the same, and the plaintiff had judgment.
The rule quoted from Locke v. Farmers' Loan Trust Co. ( 140 N.Y. 135), "that trusts end when their intended purposes are accomplished and when they are no longer necessary to effect the designed results," has no application to this question. That rule was applied by the trial court in limiting the recovery to the sum accrued and received by the defendant during the period in which the plaintiff complied with the conditions of the gift. It is no authority for the proposition that plaintiff may not now recover the income which accrued and which it might have recovered during that period. Especially is this so in view of the fact that the amount recovered is the defaulted interest, none of which had been paid or received by the defendant until June, 1896, and that plaintiff's recovery was limited to the period ending December 19, 1896. Would it have been possible for plaintiff to secure a recovery against defendant before it had received the interest? Or was the plaintiff bound to sue for each installment as it fell due? Suppose, as an illustration, a trust to pay income annually to a minor until he arrives at majority, upon certain conditions; that the conditions were complied with, but for the last four years of the minority the trustee failed to pay the income. Would the cestui que trust, after arriving at majority, be prevented from recovering because the trust had ended and its "intended purposes" had been accomplished? No one would so contend, nor is there ground for such contention here. The considerations urged furnish no defense to the cause of action.
It seems to us that the plaintiff has fully established its right to the income in question, and that the judgment should be affirmed, with costs.
RUMSEY and O'BRIEN, JJ., concurred; VAN BRUNT, P.J., and INGRAHAM, J., dissented.
I do not concur in the affirmance of this judgment.
Assuming that the transfer of these bonds to the defendant was valid, that the title thereof vested in the defendant, and that upon the acceptance thereof it was bound to appropriate the income of the bonds as therein required, it seems to me entirely clear that the plaintiff had no right to the specific income for which judgment has been given it. This was a gift of a large sum of money for charitable purposes. Mr. Rockefeller, the donor, was under no obligations to provide money for the continuance of the church work, and it is his intention in making the gift that we are to ascertain and carry into effect.
It was not his intention that these bonds nor the income realized from them should be used for the personal or individual purposes of anybody, but the plain intention was to provide an income to be used for church purposes. To carry out that intention he selected as donee the defendant, a religious corporation engaged in church work in the city of New York, and then provided that the income realized from the fund should, during a stated period, be paid over to another religious corporation of the same denomination. The provisions of the instrument were clearly intended to provide an income to be applied to the work which the plaintiff was then doing in the particular locality specified. This appears from the whole instrument. It provides that the defendant during the term of ten years from December 1, 1891, should "pay over the income received from the said bonds * * * semi-annually, to the Tabernacle Baptist Church of the City of New York, a corporation organized under the laws of the State of New York, and hereinafter called the Tabernacle Church, for use by the Tabernacle Church only for its work at Second Avenue between Tenth and Eleventh Streets, in the City of New York." Here is a distinct limitation of the use to be made of this income, which it appears was the intention of the donor in making the gift. Then after making provision for the extension of this term, the instrument continues: "If during the two terms above mentioned, the Fifth Avenue Church shall become satisfied that the income paid to the beneficiary thereof for the time being is not used in accordance with the terms of this instrument * * * the Fifth Avenue Church may, in its discretion, thenceforth discontinue payments of income to the then beneficiary, and such discontinuance shall be taken as ending the term then current."
It would seem that the donor endeavored to prevent this money from being used in any way except as was expressly provided. The injunction was that when the income was paid to the plaintiff it was to be used only for its work on Second avenue, between Tenth and Eleventh streets, in the city of New York, and if the defendant should become satisfied that the income paid to the beneficiary for the time being was not used for that purpose or in accordance with the terms of the instrument, then the defendant, in its discretion, should discontinue payment of the income. There was thus an obligation laid upon the plaintiff to use the income for this particular work, and a duty imposed upon the defendant to see to it that the income was so used, and, if it should become satisfied that the income was not so used, it was to discontinue payment of the income.
It is true that this duty imposed upon the defendant must be exercised in good faith, and there must be facts that would justify the defendant in the conclusion that the income would not be used for the specific purpose provided by the agreement; but if the defendant in good faith and upon sufficient foundation found that this money was not to be used for the specific purpose, it would be not only justified in refusing to pay the income over to the plaintiff, but was bound to refuse, and the plaintiff would not be entitled to such income.
Now what was the situation at the time the defendant received this income? For it was the conditions then existing which the defendant was bound to consider in determining whether or not the income, if it was actually paid to the plaintiff, would be applied as required by the instrument. This instrument was dated December 1, 1891, and it seems to have been executed about that time. The income received on these bonds was paid to the defendant from December 1, 1891, to June 1, 1893, and paid over by the defendant to the plaintiff. Subsequent to June 1, 1893, the railway company, the obligors, defaulted in the payment of the interest, and such default continued until June 23, 1896, when certain cash and securities were paid in lieu of the interest for this period, amounting to $7,123.67, which was paid to the defendant by the obligors in lieu of interest upon the bonds from June 1, 1893, until June 23, 1896. It cannot be claimed that the defendant was liable to pay the income to the plaintiff until it had been received, and it was not until the income was actually received and in the hands of the defendant that the question could arise whether or not the money, if paid to plaintiff, would be used for the purposes specified in the agreement.
At the time that this instrument was executed and the bonds delivered the plaintiff was a religious corporation, occupying an edifice on Second avenue, between Tenth and Eleventh streets, and carrying on church work in that locality. There was a mortgage upon this church property, and prior to January, 1896, the corporation had got into difficulties, the nature of which it is not necessary to discuss; but in January, 1896, nearly six months before the payment of this income was made to the defendant, proceedings had been commenced to foreclose the mortgage, and in July, 1896, just after this income had been received by the defendant, judgment of foreclosure was entered directing the sale of the church property, in pursuance of which judgment the property was sold, and after some litigation the possession of the church property was taken from the plaintiff. So the situation, at the time that the defendant had to determine whether or not this income should be paid to the plaintiff, was that an action to forclose the mortgage was pending, a trial had been had, and just about the time that the interest was paid to the defendant a judgment of foreclosure was entered directing the sale of the property occupied by the plaintiff in its church work. Under such circumstances, what was the duty of the defendant? It had undertaken to pay this money to the plaintiff corporation for use only for its work on Second avenue between Tenth and Eleventh streets in the city of New York, and it was to determine whether or not such income would be used for that work, and if in good faith it determined that this money would not be used in such work, it was then not to pay it. The continued occupation of the premises by the plaintiff was necessary to comply with the conditions of the instrument transferring these bonds.
I think it clear that not only was the defendant justified under the circumstances in determining that the income would not be used in accordance with the terms of the instrument, namely, only for its work on Second avenue between Tenth and Eleventh streets in the city of New York, but that any other determination under these facts would have been a breach of duty which would have been a violation of its obligation; but at least the defendant was justified in holding on to the money until it could ascertain from subsequent events whether or not the plaintiff would continue its church work at the place specified; and when it became evident that it would not so continue its work and had lost the means of doing the work to which the donor intended this income should be applied — as must have been apparent upon the sale of the property in the following December, 1896, when the plaintiff was ejected from the church edifice — this defendant was bound not to pay this money to the plaintiff.
This action was not commenced until 1898, and until after the plaintiff had been ejected from the property and had lost all title to it and after its work had ceased at the place named in the agreement. Certainly when this action was commenced there was not the slightest justification for the claim that this income would be applied by the plaintiff to the purposes specified in the instrument, namely, the plaintiff's work on Second avenue between Tenth and Eleventh streets in the city of New York. It seems to me that to affirm this judgment will be to appropriate money to a use directly in violation of the expressed intention of the donor, and under the form of law to compel the defendant to violate its trust and misappropriate the money paid to it for religious purposes.
I think the judgment should be reversed.
VAN BRUNT, P.J., concurred.
Judgment affirmed, with costs.