180 N.Y. 201 | NY | 1904
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[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *207 The nine trusts attacked by the appellant and defended by the respondents are all substantially in the same form. In each case there is a deed of trust executed by the *209 trustor, and a declaration of trust executed by the respective trustees. The methods adopted in the creation of these trusts are identical, except as to certain details of form. The attack upon these trusts is supported by much learning, that has been presented with great ability and skill, but when the inquiry is reduced to its final analysis there are a few simple propositions that are decisive of the case.
The appellant contends that each of these trusts, and the acts of Joseph H. Brown designed to carry out their provisions, are insufficient in law. Before entering upon the consideration of the various objections by which this contention is fortified, it is important to note two facts that underlie the whole controversy and exert a controlling influence upon it. 1. There is no question as to the rights of creditors, since the partnership of which Brown was a member was concededly solvent. 2. The objections to the validity of these trusts proceed from the kindred of Brown, who stand in his shoes. In the light of these basic facts we are enabled to enter upon the consideration of the questions involved, free from the embarrassments which frequently arise in determining the validity of trusts when the rights of third parties are involved. It is to be emphasized, therefore, that if these trusts are invalid, they are so not because of any legal right of the appellant to the funds covered by the trusts, but because there is an alleged absence of certain formalities which our laws, dictated by public policy, have laid down as necessary for the transfer of personal property through the medium of trustees.
As stated by the court below: "There are four essential elements of a valid trust of personal property: (1) A designated beneficiary; (2) a designated trustee, who must not be the beneficiary; (3) a fund or other property sufficiently designated or identified to enable title thereto to pass to the trustee; and (4) the actual delivery of the fund or other property, or of a legal assignment thereof to the trustee, with the intention of passing legal title thereto to him as trustee." (Martin v.Funk,
The first assertion in that behalf is that the subject-matter of none of the trusts was sufficiently identified so that the legal title would pass. The evidence in regard to the Marion Smith trust discloses that on the 31st of December, 1896, and on the 7th of January, 1897, respectively, the trustor drew two checks in the firm name for $10,000 each to the order of Marion Smith. On January 2d 1897, the first business day after the first of these checks was drawn, and on the day when the second was drawn, Marion Smith went to the bank with Mr. Spohr, the trustor's bookkeeper, who introduced her to the officers of the bank. The check was then cashed, the money handed to Spohr, who immediately redeposited it to the credit of the firm. The sum of $20,000 represented by these checks was charged against the account standing to the credit of Marion Smith on the firm's books, and a new account opened and credited with that sum in the name of Spohr and Potterton, the trustees. On the following 13th of January the trust deed was acknowledged and delivered, and pinned to it were two demand notes signed in the firm's name for $10,000 each, payable to the order of the trustees. The trust deed was drawn on December 31st, 1896, several days prior to its final execution. It purported to transfer to the trustees therein named $20,000, with directions that it should be loaned to the firm on its notes. On the same day the trustees executed a corresponding declaration of trust.
In regard to the other eight trusts the facts are that on the date of each the trustor drew the firm's check to the order of himself, indorsed it and sent it to the bank by Spohr, who presented it to the paying teller, asked to see the bills, which were shown him, and then had the amount thereof redeposited to the firm's account. The amount of each check was charged against the loan account of the trustor and a new account opened on the firm's books in the the names of the trustees of the various trusts, and each account was credited with the *211 amount of the trust to which it related. Demand notes of the firm were then drawn by the trustor for the amount of the several trusts and pinned to the respective trust deeds, which were in the possession of the respective trustees at the death of the trustor. Contemporaneously with the execution of the trust deeds the trustees executed corresponding declarations of trust.
The transactions at the bank concerning the Marion Smith trust took place before the final execution of the trust deed and the delivery of the notes, but it was plainly the intention of the trustor that all the transactions should be considered as integral parts of the scheme to create a trust for the benefit of Marion Smith in the sum of $20,000. All the transactions relating to the other eight trusts were practically contemporaneous. Regarded in that light, we think it cannot be properly held, as contended by appellant, that identification failed because no trustees were in existence to whom the title to each fund could pass. Nor do we think identification failed because the amount of each trust fund was not so separated from the general mass of moneys standing to the credit of the firm that the title to any specific portion could pass. It is true that money has no ear marks, and that the particular bills that were temporarily separated in each case from the general mass could not be identified. But this fact alone would not prevent the passing of title to particular portions of the fund. Each fund was separated temporarily at least from the general fund. It was then redeposited and the firm deducted specific amounts from the loan account of the trustor and credited like amounts to the various trustees. These sums were directed in the trust deed to be loaned to the firm. This was done, in substance and legal effect, and the firm issued its notes for the several amounts loaned to it. The firm cannot be heard to say that these transactions were mere matters of bookkeeping. It assumed the duty of applying these amounts to the purposes of the trust, and so long as there were sufficient funds to meet the obligations, and there were *212
no intervening rights of creditors to be prejudiced, the firm was bound to perform its duty. (People v. City Bank of Rochester,
It is further urged by the appellant that there was no valid delivery of the subject-matter of the several trusts. It may be admitted that the transactions at the bank standing alone would, perhaps, not constitute a good and valid delivery so as to divest the trustor of ownership of the funds in question, but when these transactions are considered in connection with the trust deeds, the notes and all that entered into the general scheme, we think it is clear that there was a valid delivery.
The final question is whether there was a good legal consideration to uphold the notes. We regard the consideration in the Marion Smith trust so clearly established as to render discussion unnecessary. The evidence shows that for many years prior to the transactions in question there had been an account on the books of the firm to the credit of Marion Smith of over $20,000, upon which she drew interest and over which she exercised control. This account was wiped out, and the demand notes issued to the trustees for $20,000. This sum was concededly credited to the firm's general account so that there can be no question as to the liability of the firm to pay the notes.
The matter of consideration as to the eight other trusts is somewhat more involved. The trustor had what is known as a loan account on the books of the firm. This loan account consisted of profits which were his. These profits were not *213
a contribution to capital, but a loan which he allowed to remain in the firm's treasury and on which the firm credited him with interest. This was an individual account separate and apart from the partnership accounts. The amount credited to him on this account was more than sufficient to cover the aggregate sum of all the trusts, and he had the absolute right and power to dispose of it as he pleased. It must follow, therefore, that if there was a sufficient identification and delivery of the funds in question to transfer the legal title thereof to the trustees, the notes given in the transaction were enforcible obligations of the firm in the hands of the trustees. We think the learned counsel for the appellant is in error in assuming that no action would lie in behalf of the trustor against the other members of the firm to recover the amount of his loan account without first having a partnership accounting. Although ordinarily one partner may not sue his copartner at law in respect to partnership dealings, if the cause of action is distinct from the partnership accounts, and does not involve their consideration, it is maintainable. (Howard v. France,
If we have thus far reasoned correctly, it must follow as a logical sequence that, as these notes were enforcible demands against the firm, the case is not within the rule illustrated inHolmes v. Roper (
We think these considerations dispose of all the questions raised by the appellant which were not fully covered by the opinion of the Appellate Division, and lead to an affirmance of the judgment, with costs.
CULLEN, Ch. J., O'BRIEN, BARTLETT and MARTIN, JJ., concur; VANN, J., not voting; HAIGHT, J., absent.
Judgment affirmed.
