Bailey v. Wood

211 Mass. 37 | Mass. | 1912

Braley, J.

The trustee in bankruptcy of James A. Wood brings these suits against Caroline A. Wood and Mercy L. Wood, who are respectively the wife and daughter of the bankrupt, to set aside certain conveyances alleged to have been fraudulently made by him, to Mercy L. Wood of his interest in three parcels of real property, and for such further relief as may be necessary to vest the title in the plaintiff. By the statute the assignment conveyed the property of the bankrupt, and, although the conveyances in question were made nearly two years before the date of bankruptcy, the plaintiff was clothed with the rights of creditors to reach as assets of the estate property fraudulently conveyed at common law. U. S. St. 1898, c. 541, § 70. Knowlton v. Moseley, 105 Mass. 136.

The mortgages which were assigned by the conveyances were found by the master to have been at her death the sole property of Sarah B. Wood, a sister of the bankrupt, who was her only heir at law and upon her decease was duly appointed administrator of her estate. If through inheritance he took the property charged with a trust, and the conveyances were in performance of the trust, and for no other purpose, it could not have been seized by creditors, and the plaintiff has not succeeded to any enforceable interest. Sibley v. Quinsigamond National Bank, 133 Mass. 515, 522, 523. Low v. Welch, 139 Mass. 33. Stratton v. Edwards, 174 Mass. 374. Emery v. Boston Terminal Co. 178 Mass. 172, 184. King v. Cram, 185 Mass. 103, 104.

It is important to a clear understanding of the nature of the bankrupt’s title to refer to the master’s explicit findings, to which on this question no exceptions were taken. Sarah B. Wood for many years was a member of his household, and during the four or five years immediately preceding her death frequently expressed to him a desire that whatever property she might leave should go to his wife and two children. But, being an invalid, she could not anticipate how much of her savings might be required for her comfortable support, and for this reason was averse to making a testamentary disposition of the estate, while she fully realized that upon intestacy he would come into possession as her heir. It was during these interviews that she requested him to distribute the estate between his wife and children in such proportions as in his discretion he deemed advisable. The master’s conclusions, that a definite understanding and agreement were reached that she should not make a will, but that the property was to pass by descent to be distributed between his wife and children, and that she refrained from making a will in their favor, relying upon his assurance that, if he survived, distribution would be made as she had requested, are decisive as to the facts. The intention of the parties, that when received the property was to be disposed of in a particular way and for the sole benefit of those who had been designated as beneficiaries, being manifest, no precise form of words was necessary to create a trust, and the terms “ trust ” and “ trustee ” were unessential. Packard v. Old Colony Railroad, 168 Mass. 92. Sawyer v. Cook, 188 Mass. 163, 165. Nor was it necessary to inform the beneficiaries that a trust existed in their favor, as they would have been clothed with the equitable, when he became vested with the legal title. Woodward v. James, 115 N. Y. 346, 356. Fletcher v. Fletcher, 4 Hare, 67, 74. It has been held under R. L. c. 74, § 1, cl. 4, and c. 147, § 1, that an express trust concerning land, if executory, must be evidenced by an instrument in writing, or it cannot be enforced. Tourtillotte v. Tourtillotte, 205 Mass. 547. Kennerson v. Nash, 208 Mass. 393. And if the oral agreement had been reduced to writing and signed by the parties, or if at her death he had executed and recorded a proper declaration, an effectual trust would have been established against all persons claiming under him. Urann v. Coates, 109 Mass. 581, 585. Blodgett v. Hildreth, 103 Mass. 484, 486. Holmes v. Winchester, 135 Mass. 299, 305. Barrett v. Joy, 16 Mass. 221. Silvers v. Potter, 3 Dick. 539. Gardner v. Rowe, 2 Sim. & Stu. 346; S. C. 5 Russ. 258. But, having come into a court of equity for redress, the plaintiff must recognize the equitable rights of the defendants which are to be ascertained as of the date of bankruptcy. The agreement was entered into in good faith. It was not illegal or a mere nullity. It could be proved by paroi evidence; and in reliance on its terms Sarah B. Wood died intestate. Cahill v. Bigelow, 18 Pick. 369, 372. Coughlin v. Knowles, 7 Met. 57. Potter v. Kimball, 186 Mass. 120. The master reports that James A. Wood considered himself bound to distribute the property thus inherited as his sister had requested and he had promised; and that in performance of what he considered to be his plain duty, and without any intent to hinder, delay or defraud creditors, distribution of the entire estate was made between his wife and children, including the portion conveyed to Mercy L. Wood. See Haigh v. Kaye, L. R. 7 Ch. 469. It was said by this court spealdng through Chief Justice Gray in Olliffe v. Wells, 130 Mass. 221, 225, that “where a trust not declared in the will is established by a court of chancery against the devisee, it is by reason of the obligation resting upon the conscience of the devisee, and not as a valid testamentary disposition by the deceased.” The transaction may be none the less fraudulent in a court of equity, where the sole heir at law induces the ancestor to die intestate, honestly intending at the time to comply with his requests as to the distribution of the estate, but upon receiving the inheritance changes his mind, and in disregard of his express promise deliberately appropriates the property to his own use. Jones v. Bradley, L. R. 3 Ch. 362, 363, 364. McCormick v. Grogan, L. R. 4 H. L. 82, 88, 97. French v. French, [1902] 1 I. R. 172, 187, 224, 225. The statute of frauds and the statute of wills have been held not to bar relief in cases springing from the perpetration of fraud. Potter v. Kimball, 186 Mass. 120. Young v. Peachy, 2 Atk. 254. Rolfe v. Gregory, 4 DeG., J. & S. 576, 579. Jones v. Bradley, L. R. 3 Ch. 362, 363, 364. But we need not consider whether the fiduciary relations were such that a constructive trust existed, which the defendants could have enforced if Wood had acted unconscientiously. Nor is it of importance what effect, if any, the doctrine of the common law which prevails in this Commonwealth, that the mortgagee as between himself and the mortgagor is seised in fee of the premises, would have upon an executory agreement resting in paroi for the transfer of the interest of the mortgagee. Ewer v. Hobbs, 5 Met. 1, 3. Ayres v. Waite, 10 Cush. 72, 74. Adams v. Parker, 12 Gray, 53. Or whether, the mortgages having been in equity merely security for the payment of the mortgage debts in which an express trust, notwithstanding the provisions of R. L. c. 147, § 1, could be created by parol, James A. Wood, who as administrator was vested under R. L. c. 150, § 7, with the legal title of the mortgagee as personal property, held it subject to the trust. Sturtevant v. Jaques, 14 Allen, 523, 527. Childs v. Jordan, 106 Mass. 321. Thacher v. Churchill, 118 Mass. 108, 109. Currier v. Studley, 159 Mass. 17, 29. Potter v. Kimball, 186 Mass. 120. Look v. Kenny, 128 Mass. 284, 286. 1 Perry on Trusts, (4th ed.) § 86. And the defendant Mercy L. Wood, having the equitable title to the mortgage debts, could have compelled their transfer with an assignment of the mortgages. Barnes v. Boardman, 149 Mass. 106,114. The paroi trust or agreement, having been fully executed, was unaffected by the statute of frauds, which cannot be invoked to defeat the estate conveyed. Stone v. Dennison, 13 Pick. 1,4, 5. Coughlin v. Knowles, 7 Met. 57. Bush v. Boutelle, 156 Mass. 167, 170. Blackwell v. Blackwell, 196 Mass. 186, 190. Tillinghast v. Coggeshall, 7 R. I. 383, 393. Robbins v. Robbins, 89 N. Y. 251. Silvers v. Potter, 3 Dick. 539. Janes v. Falk, 5 Dick. 468. Sackett v. Spencer, 65 Penn. St. 89, 99. First National Bank of Appleton v. Bertschy, 52 Wis. 438, 454, 455. McCormick Harvesting Machine Co. v. Griffin, 116 Iowa, 397. Neves v. Scott, 9 How. 196. Bowen v. Chase, 94 U. S. 812, 818. Gardner v. Rowe, 2 Sim. & Stu. 346; S. C. 5 Russ. 258. Milroy v. Lord, 4 DeG., F. & J. 264, 274.

We cannot accede to the further contention of the plaintiff, that if Wood was insolvent the conveyances necessarily must be treated as fraudulent. The bankrupt’s insolvency at the date of the transfers must be determined from all his indebtedness, both primary and contingent, and from the very full statements in the master’s report we have no doubt that he was unable to meet his outstanding financial obligations as they might mature in the ordinary course of business. Chipman v. McClellan, 159 Mass. 363, 368, 369. A conveyance, however, by an insolvent debtor without any valuable consideration moving from the transferee, may or may not be fraudulent. It is primarily a question of fact as was said in Matthews v. Thompson, 186 Mass. 14, 22, 23, where many of our cases are collected and reviewed. See also Lerow v. Wilmarth, 9 Allen, 382, 386; Draper v. Buggee, 133 Mass. 258, 262; and Anderson v. Metropolitan Stock Exchange, 191 Mass. 117,121. In the case of Deshon v. Wood, 148 Mass. 132, on which the plaintiff places much reliance, the insolvent debtor made and carried out a marriage settlement with intent to defraud his creditors, and the transaction was set aside by a majority of the court, although the wife did not participate in the fraud. The transfers of the mortgages in controversy were not in payment of antecedent debts or to withdraw assets from the reach of creditors; nor were they intended as conveyances of the bankrupt’s estate, but to convey only the legal title to property which now must be treated as having been held under a valid trust and conveyed lawfully prior to bankruptcy in execution of the trust. Stratton v. Edwards, 174 Mass. 374, 378. Sackett v. Spenser, 65 Penn. St. 89, 99.

In the last two suits at bar it appears that all the property transmitted came originally from Sarah B. Wood, and the plaintiff’s exceptions to the master’s report having become immaterial by our decision, they must be overruled, and the bills severally dismissed with costs.

But in the first suit, while the first mortgage was properly assigned to the defendant Mercy L. Wood, the conveyance to her of the equity of redemption was not in execution of the trust. The effect of the sale for non-payment of taxes upon this title need not be considered, as the conveyance of the tax title to the defendant Caroline A. Wood before the period of redemption expired, the master apparently finds, was only to protect the outstanding mortgages, which would have been extinguished if the tax title had been permitted to ripen. Abbott v. Frost, 185 Mass. 398. By the foreclosure of the second mortgage James A. Wood therefore acquired title to the equity of redemption, and, Caroline A. Wood not having retained any adverse interest, the bill as to her must be dismissed with costs. It is sufficiently plain that by reason of the trust there was no merger of the respective titles in James A. Wood, when having acquired the equity he succeeded to the rights of the first mortgagee by inheritance. Evans v. Kimball, 1 Allen, 240. The master’s report contains no reference to the circumstances under which the estate acquired by the foreclosure was deeded by him to Mercy, whose rights if this deed is set aside to have the first mortgage which has not been paid decreed to be an existing incumbrance notwithstanding the discharge by James A. Wood as administrator, can be fully protected in the adjustment in the Superior Court of the equities between the parties. Crosby v. Taylor, 15 Gray, 64. Tucker v. Crowley, 127 Mass. 400, 401. It will be incumbent on that court to ascertain the circumstances and to determine whether she holds the estate otherwise than in mortgage, by a title which is valid against the plaintiff. Lerow v. Wilmarth, 9 Allen, 382, 386. Draper v. Buggee, 133 Mass. 258, 262.

Decree in each case accordingly.