Summary
In Ullman the testamentary trust instrument required the trustee to pay the life tenant the whole or any part of the trust assets that he desired for the purpose of engaging in business.
Summary of this case from In re KreissOpinion
Argued October 19, 1906
Decided November 13, 1906
M.H. Kiley for appellant. T.B. Merchant and L.M. Merchant for respondents.
That the plaintiffs were under no legal disability, such as infancy, lunacy or the like, and, hence, had a legal capacity to sue, cannot be seriously disputed according to the authorities, which make a clear distinction between "incapacity to sue" and "insufficiency of facts to sue upon." ( Ward v. Petrie, 157 N.Y. 301, 311; Bank of Havana v. Magee, 20 N.Y. 355, 359.)
The appellant, however, contends that the receiver is not a proper party defendant because he should have been the sole plaintiff, and that the respondents are not proper parties plaintiff inasmuch as the cause of action, if any is set forth, belonged exclusively to the receiver.
If the trust is invalid as to creditors, title to the property covered thereby vested in Charles E. Cameron, the judgment debtor, in January, 1900, when his wife died, at least so far as the claims of creditors are concerned. The plaintiffs recovered their judgment in July, 1901, and during that month the most of the property was converted into real estate through the conveyance of the land covered by the mortgage to the trustee. The plaintiffs' judgment thus became a lien upon said real estate in July, 1901, and they had a cause of action in equity to set aside the trust as to them and enforce their lien. In February, 1902, the receiver was appointed, but that did not transfer the lien of the plaintiffs' judgment to him. He took the land subject to their lien. They still owned it and had a right to enforce it. They had a cause of action for that purpose which was exclusively their own, and in which he had no interest. They did not assign their judgment to him by procuring his appointment, nor did they thereby assign their lien to him, or estop themselves from enforcing it. Conceding that the property which was still personalty when the receiver was appointed vested in him with the exclusive right to appropriate it to the payment of the plaintiffs' debt, still he had no right to the lien of the plaintiffs' judgment on the real estate, and, hence, they had a cause of action, which never vested in him. He could acquire a lien by filing a bill in equity, while they already had one but needed equitable aid to enable them to enforce it. They could sell under execution and sue afterwards to clear the title, but he could not. The parties named had different rights as to the real estate, and were entitled to separate remedies. ( Gere v. Dibble, 17 How. Pr. 31; Bennett v. McGuire, 58 Barb. 635.)
The final question is whether the complaint sets forth a cause of action, independent of the questions already passed upon. That question was considered by the Appellate Division upon an appeal from a judgment rendered for the defendants upon the merits before the complaint was amended. ( Ullman v. Cameron, 92 App. Div. 91. ) We adopt the language of the learned presiding justice, when, speaking for the court and referring to Charles E. Cameron, he said: "Now he was evidently entitled to the possession of such fund if he demanded it for the purpose of engaging `in any business or enterprise;' and it seems to me that such a purpose is so broad and so personal to the beneficiary that it is equivalent to a direction that he is entitled to it whenever he asks for it."
The intention of the testatrix, as we glean it from the will, was to give the property to her husband and yet keep it from his creditors. The trust was an obvious pretext for that purpose. There was but a single trust, for the gift was of all the property to one person in trust for one person during his life with remainder over to others. The "uses and purposes" named as the object of the trust include the right of the beneficiary to take the corpus of the estate at will, by simply notifying the trustee that he wishes to engage in some business or enterprise. He is not obliged to actually engage in any business or enter upon some enterprise, but simply to say that he desires the property for either purpose, when the trustee has no discretion, but is required to pay over whatever is asked for, even to the extent of the whole fund. Although possession and title are thus subject to his control, it is insisted that until he calls for possession the property is not liable for his debts. The law will not endure this when creditors ask its aid to prevent it, but will declare the estate vested as to them as we did in Wendt v. Walsh ( 164 N.Y. 154). Whether the trust should be sustained as to the persons named in the will, as distinguished from the creditors, need not now be passed upon. Unlike the case cited, which held the trust then under consideration to be a naked trust, in this case a trust term is defined and it may be that any property left at the death of the chief beneficiary will pass to the remaindermen and the intent of the testatrix thus carried out as far as possible. As to creditors, however, the trust cannot stand, for it is opposed to public policy as declared by statute and by the decisions of the courts. (1 R.S. 727; Real Prop. Law, §§ 71, 72, 73 and 129; Hallett v. Thompson, 5 Paige, 583; Frazer v. Western, 1 Barb. Ch. 220; Wendt v. Walsh, supra; Chaplin on Trusts, 585.)
In Hallett v. Thompson, Chancellor WALWORTH declared that it was "contrary to sound public policy to permit a person to have the absolute and uncontrolled ownership of property for his own purposes, and to be able at the same time to keep it from his creditors." That case was cited and the language of the chancellor substantially quoted with approval by Judge RAPALLO in Williams v. Thorn ( 70 N.Y. 270, 273), and it has received the approval of many courts in this state and elsewhere.
The doctrine is sound and applies to this case, for, as to my creditors, property is mine which becomes mine for the asking, and no words can make an instrument strong enough to hold it for me and keep it from them.
The order should be affirmed, with costs, and the questions certified answered in the negative.
CULLEN, Ch. J., HAIGHT, WERNER, WILLARD BARTLETT and HISCOCK, JJ., concur; GRAY, J., absent.
Order affirmed.