53 Conn. 299 | Conn. | 1885
At the time of the transfers in question in November, 1881, the grantor and donor, Martin L. Blackman, was about sixty-eight years of age, and during his life had accumulated in a small tin shop and hardware business property valued at about-$36,000, of which $20,000 was in real estate, and $3,000 deposited in savings banks, the remainder being his stock in trade and appliances for carrying on his business. He was childless. His first wife had died in December, 1880, and on the 8th of May, 1881, he married again, and on the 3d of November, in the same j'ear, his wife instituted proceedings for a divorce, claiming alimony, and attached his property for $20,000. He made an arrangement with his wife’s attorney by which he gave to the attorney, as trustee for his wife, a note for $9,000, secured by mortgage upon his real estate, and payable at his death. He was at this time, it is found, “ in a feeble physical condition; he was miserly and penurious; his wife had contracted debts in his name, and without his knowledge,” and was threatening suit for support. “ These things, together with the complaint for divorce and attach*
William McCarthy is a nephew of Blackman, and Mary Ann McCarthy is‘the wife of William. Said William, and especially Mary Ann, appear to have largely enjoyed the confidence of Blackman, and, excepting his counsel, they are the only persons with whom he consulted.
Blackman claiming that his arrangement with his wife had failed in its purpose, at his request William and Mary Ann went Avith him to consult counsel with reference “to disposing of his property, setting aside said note and mortgage of $9,000, and instituting proceedings for a divorce from his Avife,” and William and Mary Ann “ each rendered him such assistance as they Could,” and appear to have been fully advised as to his wishes and purposes.
As the result of such conferences with counsel on the 9th day of November, 1881, Blackman executed and delivered to Mary Ann a trust deed of all his real and personal estate; This deed Avas accepted by William and Mary Ann McCarthy, and by the terms of the deed Mary Ann became a trustee, and Blackman a beneficiary of the trust. The deed is expressed to be in consideration “ of the conditions and trusts hereinafter recited.” It is drawn with deliberate care, Avith full appreciation of the circumstances and conditions relating to the present and future life of the grantor, the amount and situation of his property, and the persons Avhom he desired to make objects of his bounty. The conditions of the deed provide for a monthly payment by the grantee to the grantor of the sum of $87, that the amount and condition of the personal property conveyed shall be kept good by the grantee, and that the title to the personal property should not become absolute in the grantee until all the conditions of the deed were complied with. The money payments and trusts named in the deed are charged upon all the property conveyed.
The grantor reserved to his own personal life use some portion of the real estate, and by the fifth clause he provides that at his death one half of the appraised value of
By the sixth clause he provides that the' grantee shall keep the buildings at all times painted and in as good repair and condition as they now are, that she shall keep them insured, and that the insurance shall be assigned to the grantor as collateral security for the performance of the trusts and conditions therein named, and that she shall also keép the taxes and assessments on the lands and property paid up. And then, at the conclusion of the deed, super-added to all these repeated attempts to charge and bind the property to the performance of these trusts and conditions, the grantor further provided as follows:—
“But to this deed there is this additional condition, viz.:—If the grantee shall fail and neglect to fulfill any of the conditions of this deed specified above to be performed in the life time of the grantor, and he should decide to avail himself of such breach by giving notice thereof to the grantee, then this deed shall become void; otherwise, to remain in full force forever.”
Under the facts stated in the finding of the committee and the provisions of this deed Mary Ann McCarthy was a trustee and Blackman a cestui que trust of the rights and interests reserved to and provided for Blackman in and by the deed. She and her husband, by their own volition, occupied confidential relations as to the disposition of his whole property, and were.giving him, and he receiving from them, aid and advice respecting the same, and from their personal and family relations a state of personal confidence existed.
This being the state of affairs on the 9th of November, 1881, on the 17th day of the same month Blackman executed and delivered to Mary Ann a warranty deed of all his real estate, and on the 19th he executed and delivered to her a bill of sale of all his personal property. These conveyances were without consideration and are claimed as gifts.
In the tenth edition of Story’s Equity Jurisprudence, vol. 1, § 307, this language is held:—“ Let us, in the next place,pass to the consideration of the second head of constructive frauds; namely, of those which arise from some peculiar confidential or fiduciary relation between the parties. In this class of cases there is often to be found some inter-mixture of deceit, imposition, overreaching, unconscionable advantage, or other mark of direct and positive fraud. But the principle on which courts of equity act in regard thereto stands, independent of any such ingredient, upon a motive of general public policy, and it is designed, in some degree, as a protection to the parties against the effects of overweening confidence and self-delusion and the infirmities of hasty and precipitate judgment.” And after commenting upon the relation of parent and child, attorney and client, guardian and ward, the author proceeds in section 321 as follows:—“ In the next place, with regard to the relation of trustee and cestui que trust or rather beneficiary. In this class of casés the 'same principles govern as in cases of guardian and ward, with at least as much enlarged liberality of application and upon grounds quite as comprehensive. Indeed, the cases are usually treated as if they were identical. A trustee is never permitted to partake of the bounty of the party for whom he acts, except under circumstances which would make the same valid if it were a case of guardianship.” And in section 319 the author quotes approvingly the language of, Lord Eldon. “ There may not be (says he) a more moral act, one that would do more credit to a young man beginning the world or afford a better omen for the future, than if, a trustee having done his duty, the cestui que trust, taking the matter into his
And in section 811 it is stated that the incapacity of a trustee to purchase of his beneficiary is so absolute that the cestui que trust may set aside the transaction at his own option.
In the second volume of Pomeroy’s Equity Jurisprudence, section 955, it is said:—“The single circumstance now to be considered is the existence of some fiduciary relation, some relation of confidence subsisting between two parties. No mental weakness, old age, ignorance, pecuniary distress, and the like, is assumed as an element of the transaction.” And in section 957 :—“ There are two classes of cases to be considered which are somewhat different in their external forms, and are governed by different special rules, and which still depend upon the single general principle. The first class includes all those instances in which the two parties consciously and intentionally deal and negotiate with each other, each knowingly taking a part in the transaction, and there results from their dealings some conveyance, or contract, or gift. To such cases the principle literally and directly applies. The transaction is not necessarily voidable, it may be valid; but a presumption of its invalidity arises, which can only be overcome, if at all, by
In Perry on Trusts, vol. 1, § 168, the general rule is stated thus:—“Constructive trusts may be divided into three classes, to be determined according to the circumstances under which they arise. First, trusts that arise from actual fraud practised by one man upon another. Second, trusts that arise from constructive fraud. In this second class the conduct may not be actually tainted with moral fraud or evil intention, but it may be contrary to some rule established by public policy for the protection of society. Thus, a purchase made by a guardian of his ward, or by a trustee of his cestui que trust, or by an attorney of his client, may be in good faith, and as beneficial to all parties as any other transaction in life; and yet the inconvenience and danger of allowing contracts to be entered into by parties holding such relations to each other are so great that courts of equity construe such contracts prima facie to be fraudulent, and they construe a trust to arise from them.”
In section 194:—“ At law, fraud must be proved; but in equity there are certain rules prohibiting parties, bearing certain relations to each other, from contracting between themselves; and if parties bearing such relations enter into contracts with each other, courts of equity presume them to be fraudulent, and convert the fraudulent party into a trustee. And herein courts of equity go further than courts of law, and presume fraud in cases where a court of law would require it to be proved; that is, if parties within the prohibited relations or conditions contract between themselves, courts of equity will avoid the contract altogether without proof, or they will throw upon the party standing in this position of trust, confidence and influence, the burden of proving the entire fairness of the transaction. Thus, if a parent buys property of his child, a guardian of his ward, a trustee of his cestui que trust, an attorney of his
In section 195:—“ These principles are applied in their full vigor to all contracts and sales between trustee and cestui que trust. The trustee is in such a position of confidence and influence over the cestui que trust that the contract or bargain will either be void or he will be a constructive trustee, at the election of the cestui que trust, unless the trustee can show that the contract was entirely fair and advantageous to the cestui que trust. The general rule is, that the trustee shall not take beneficially by gift or purchase from the cestui que trust, even although the supposed trustee and purchaser is a mere intermeddler and not a regularly recognized trustee.” In section 197 the author declares that “ it i's thus seen that the rule against purchasing by trustees amounts almost to prohibition.”
The decided cases support these doctrines of, equity stated by text writers to the fullest extent, and in all cases where a contract or gift is claimed adversely to the beneficiary in the trust relation, as cestui que trust, client, ward; &c., courts of equity not only require of the trustee, attorney, guardian, &e., the most ample and convincing proofs of the entire fairness of the transaction, and possession of full information, knowledge and intentional action on the part of the beneficiary, after competent and independent advice and deliberate consideration, but courts also set
This presumption of inequality in dealing, and the casting of this burden of proof upon the cestui que trust, guardian, attorney, &c., arises from the trust relation itself. Cowee v. Cornell et al., 75 N. York, 100. In Curran v. Belmontly, 3 H. L. Cas., 742, a contract was set aside because it was “improvident, and hastily carried into execution.” And see remarks of Lord Justice Turner in Baker v. Monk, 4 De Gex, Jones & Smith, 392. In Morgan v. Minett, L. R., 6 Ch. Div., 648, a gift by client to solicitor was set aside, and Bacon, V. C., said that the rule absolutely prohibited such gifts. This may be a somewhat stronger statement of the rule than prevails in other jurisdictions. But the settled doctrines of equity make it. almost impossible that such a gift can prevail.
The case of Savey v. King, 5 H. L. Cas., 655, (Cranworth, L. C.), was of a gift by a son after arriving at full age to his father. The father was required “ to justify what has been done ; to show, at all events, that the son was really a free agent, that he had adequate independent advice, that he was not taking an imprudent step under parental influence, and that he perfectly Understood the nature and extent of the sacrifice he was making, and that he was desirous of making it.”
In Rhodes v. Bate, 1 Ch. App. Cases, 257, the language of the court is:—“ I take it to be a well-established principle of this court that persons standing in a confidential relation towards others, cannot entitle themselves to hold benefits which those others may have conferred upon them, unless they can show to the satisfaction of the court that
The case of Archer v. Hudson, 7 Beavan, 560, was of a gift by a niece, who had just come of age, to her uncle, who was regarded as standing in loco parentis. It is there said that the court “will take care (under the circumstances in which the parent and child are placed before the emancipation of the child) that such child is placed in such a position as will enable him to -form an entirely free and unfettered judgment, independent of any sort of control.” See also Maitland v. Backhouse, 16 Sim., 58.
The case of Anderson v. Elsworth, 3 Giff., 154, illustrates the extent and rigor of application of the doctrine in England. A voluntary deed made by a woman “ of about seventy years of age and not incompetent, was set aside after her death for the reason that the deed was improvident, and because it did not appear affirmatively that she understood the whole nature and effect of the deed. This decree was made after the death of the grantor and in favor of volunteers, and although the court found ‘that Elizabeth Marston (the grantor) certainly had a distinct intention to give her property to Mary Elsworth, who takes it by this deed to the exclusion of all other persons.’ ”
In all these classes of cases when such contracts and gifts are set aside, it is assumed that the intent to make them exists. But the question is not “ whether she knew what she was doing, had done, or proposed to do, but how the intention was produced.” Lord Eldon in Huguenin v.
The books are full of cases holding substantially the same language.
Can the deed of November 17th and the bill of sale of the 19th be vindicated, tested by these rules ?
These conveyances, regarded as they evidently were as one transaction, were a voluntary conveyance of all the grantor’s property to another. It is said in Anderson v. Elsworth, 3 Giff., 169 :—“ Nothing could be more improvident than for a woman at her time of life to dispose of the whole of her property so as to leave for herself nothing. No doubt the gift was to a person with whom she was living and who was kind to her.”
Did the grantor and donor “ fully understand the nature and effect of the transaction ? ” He had but eight days before made an entirely different disposition of his property, for the purpose of arranging with his'wife, and not as a gift, whereby his property was secured for his own use, and for the ultimate benefit of the children of his adopted daughter, by which his interests were fully protected by a large number of carefully drawn provisions, having the interests of himself and those children in view, charging all his property with these trusts and conditions ; and notwithstanding all the controlling inferences to be drawn therefrom, it is said that he within these eight days voluntarily released all of these safeguards, gave away his power to provide for himself in his old age so carefully provided for in the first deed, relinquished all idea of providing for the
Moreover, it is found that the grantee and her husband have no other property except this so conveyed to them. Intrinsically viewed, could anything be more irrational than to say that the grantor did this thing with full knowledge and with a settled intent?
There is absolutely nothing in the case to indicate any real change of mind on the part of the grantor as to the disposition of 1ns estate. Is it to be believed that this miserly and penurious old man would, under any circumstances, voluntarily and intentionally give away all his property, and especially that he did so on November 17th after so distinctly declaring his contrary intent by the deed of November 9th?
But it is said that the committee find that these conveyances were voluntarily made, and without importunity from anyone; that Blackman had sufficient mental capacity to transact business, and that he understood the business he was doing.
As a matter of course the gift was voluntary ; that is the assumption in all cases of this character. But was it fair, equitable, made upon competent and adequate advice, and looking at all the facts and circumstances? Did these conveyances embody his real intent ?
He was feeble in body, and greatly excited for fear of losing his property because of threatened litigation. Has this trustee, this donee of trust property, shown to the satisfaction of a court of equity that this gift was not the result of his feebleness and of tbe condition of his mind greatly excited over the contemplated loss of his property? Why this great excitement at the prospective loss of his property if all he desired was to rid himself of its burden?
Additionally, the conduct of all these parties for a long
Mary Ann McCarthy, the donee, took part in the transactions that resulted in this so-called gift. She was a party to them, and assisted in the consummation of some of the details of the transaction after the first deed. She was in the full confidence of Blackman, the trust relation continued both as a presumption of- law and as a matter of fact, and now this donee of a trust estate says she can hold the trust property because she did not advise the gift, but that it was made through the advice and influence of one Michael Kenney, “ a Michigan lawj'er.” There is no such finding in the case, and it is only by inference that this is claimed. But courts of equity will not resort to inferences to find facts not expressly found to sustain gifts of this kind. The burden of proof is on the donee to prove clearly and satisfactorily all things essential to sustain the gift.
Plainly the advice of Kenney to Blackman, if such advice Was acted upon, was wholly incompetent and inadequate, unless there are other reasons than those appearing in the case; and if there are other facts and reasons tending to sustain this gift the donee must prove them.
Even if it should be admitted that the dealings of Kenney with Blackman constituted the independent advice so strongly insisted upon in the books, and even if that advice had been competent and adequate, she fails to fill the measure of proof requisite as to the fairness and equity of the gift; and certainly the evidence as to a real intent to deliberately and freely give is weak, doubtful and unsatisfactory.
The finding of the committee that he had sufficient mental capacity to transact business, and that he understood the business he was doing, is not conclusive upon the question of intent, and is too brief, narrow and inconclusive; for this language is used in connection with references to his ordinary business; and even if he did know that he was executing a. warranty deed and bill of sale, there is no evidence that he fully realized the whole scope and effect of his acts.
It is claimed on the part of the defendants that the conveyances made by Blackman were made to evade a threatened attachment of his property in a suit to be brought by his wife for her support, and that, even though the case be one where in other circumstances a court of equity would set aside the conveyances, yet it will not lend its aid to a party to recover property conveyed away for such a purpose.
It is a well settled rule that where a debtor understandingly and deliberately conveys away his property to defraud or hinder his creditors, a court of equity will not lend him its aid to recover the property back. But this is a defense which it is certainly very inequitable for these defendants to make, standing as they do in a confidential relation to the grantor. It is not perhaps an established qualification of the rule mentioned, that a person who, in retaining property conveyed to him, is himself guilty of a fraud, cannot
In conclusion, we think it apparent that this gift of a cestui que trust to the trustee was improvident and irrational, hastily made, not upon due consideration, nor with competent, independent advice, wanting the elements of fairness and equity, that the presence of a real intent to give freely and deliberately is not proved, or that he was mentally unable to make a valid gift to his trustee.
Assuming, then, that the committee did refuse to so find, it must have been on the theory that it was not important; and it is upon this theory that the court below went in overruling the remonstrance. If that advice, as claimed, was given, and Blackman did, in fact, make these last conveyances, not for the purpose of making a gift to Mary Ann McCarthy, but, being so advised, in order to obtain relief from threatened litigation, then that fact is conclusive against the validity of this gift; for, as has been said so often, unless the gift is really and freely made, with the real, deliberate intent to give, the transaction cannot be sustained. The committee should have found one way or the other on this subject, if there was evidence in the ease pertinent thereto and a finding was claimed, and this is alleged in the remonstrance, and, for the purposes of this case, admitted.
The court erred in overruling this part of the remonstrance ; but it is understood upon the argument of this case that the plaintiff now only seeks to set aside the deed of November 17th and bill of sale of November 19th ; and as we are of opinion that, upon the facts found and stated in the committee’s report, those conveyances must be set aside, the judgment of the Superior Court is reversed.
In this opinion the other judges concurred.