Stewart v. Ackley

| N.Y. Sup. Ct. | Dec 2, 1867

By the Court, Miller, J.

The main question which arises in the case at bar relates to the validity of the trust created by the indenture executed by "William Ackley, and wife, to John Ackley, for the benefit of Tamson Ackley, the wife of Lot Ackley.

The evidence shows, and the referee has found, that the property embraced in the deed creating the trust formerly belonged to Lot" Ackley, and was conveyed by him to his brother William, without consideration, and o for the purpose of hindering, delaying and defrauding the creditors of said Lot Ackley. And that the deed from William Ackley and wife to John Ackley was executed and delivered without consideration, and for the same purpose; and that Tamson Ackley knew, at the time thereof, that such deed was so executed and delivered for such purpose. It also appears, and was found, by the. referee, that the trustee never took .actual possession of the trust property, or any part of it; but the whole of it, by the assent and direction of Tamson Ackley, was left in the possession of Lot Ackley and was managed by him with the knowledge and by the direction of his said wife. There was also evidence to prove that John Ackley, the trustee, acted in the execution of papers, when required, but the trust fund was submitted to the management of the husband of Mrs. Ackley, who had possession of it. And the referee found that a considerable portion of the fund had been consumed and used by Tamson Ackley and under her direction.

I think that the deed of the property having been made with the intent to defraud .creditors, and the property embraced in it never having passed to the actual possession of the trustee, but being left in the possession of Lot Ackley, the plaintiffs cannot maintain this action. It would have been held invalid in an action instituted by a creditor to set it a side, as a fraudulent conveyance; and the rule is well settled that where two or more persons are engaged in a fraudulent transaction to injure another, neither law nor equity will interfere to relieve either of the persons as against the other, from the consequences of their misconduct. (See Bolt v. Rogers, 3 Paige, 157.)

This court has had occasion, quite recently, to consider the question which is here involved, or one of a similar character, in the case of Sweet v. Tinslar, (ante, p. 271,) where all the authorities are fully cited. The action was brought to compel the defendant to render an account of his receipts and expenditures, and to convey certain real estate, to the plaintiff, which he held under a deed and a trust agreement which was entered into for the plaintiff’s benefit, and the object of which was to prevent a creditor of the plaintiff from enforcing and collecting certain judgments and demands held against him. And it was held, upon demurrer to the complaint, that within the principle of the authorities to which I have referred, the action would not lie.

It is evident that under the circumstances attendant upon- the present case, the action could not have been maintained by the trustee claiming under the deed, to recover possession of the property; and the transaction being tainted with fraud, the court would not have aided him in its enforcement. It is also equally clear that the original cestui que trust stands in no better position than the trustee. She was a party to the fraud, acquainted with its object and purpose, was a particeps criminis throughout, and would thereby occupy precisely the same attitude as the grantor and the trustee. The present plaintiffs, I think, must take the place of their predecessor, Tamson Ackley, from whom they derive the only title which they even claim to the fund in question, and are entitled to no greater rights than she would enjoy if she was the plaintiff in this action. They are not innocent parties, but persons claiming through a fraudulent conveyance which could not be enforced as between the grantor and grantee and the immediate beneficiary.

In my opinion there is no good reason why the successor to a trustee, or the heirs at law of a grantor or grantee, in a fraudulent conveyance, should enjoy and have the benefit of a better position than the original party to the instrument.

If the trustee had actually received the trust property and disposed of it, improperly, he might perhaps be chargeable in an action brought for a breach of the trust; but it happens in this action that the trustee never actually had possession or control of the property, and the action is not brought upon the theory that the trustee committed a breach of trust, but upon the ground that he is accountable for the property as actual trustee, although he never received it.

I have entertained some doubt whether the trust deed was not in the nature, of an executed contract, instead of an executory one, which would authorize the maintenance of this action. The facts as conceded and found indicated, however, that the trust created was never fully executed and carried out, as the trustee never reduced the property to possession. So far as relates to the receipt of moneys, it would also seem to have heen executory and incomplete, and if the trustee is liable at all, he is made so for the reason that he was nominally named in the instrument, and not because he actually assumed and performed the duties of the office.

[Albany General Term, December 2, 1867.

As the trustee' has not received the property, and the object of the arrangement was to defraud .creditors, it cannot, I think, be upheld in this action.

The result of my examination in this case establishes that the referee was wrong in his decision, and that the judgment entered upon his report must be reversed, and a new trial granted, with costs to abide the event.

Peekham, Miller and Ingalls, Justices.]