Graves v. Waterman

11 N.Y. Sup. Ct. 687

• Court: New York Supreme Court
• Decided: June 15, 1875
• Status: Published

Opinion

Learned, P. J.:

. The first claim of the administratrix of Erastus C. Root, is, that the assignment was void, because it was made to hinder, delay and defraud creditors. The referee does not so find ; and there was no evidence of such actual intention. Although no consideration passed at the time of executing the assignment, yet the assignee, Mrs. Root, had supported the assignor for two years, and had paid his expenses in attending medical lectures. It is not shown how much she had paid. But we cannot assume that it was so inadequate as to indicate fraud. The assignment was’ public. Creditors seem to have made no attack on its validity for the six years, from its execution till the death of Erastus C. Root. And it must be remembered that the share which was assigned, was not payable until the death of Mrs. Root, so that its value, estimated at the time of the assignment, was much less than it now is.

Second. It is suggested that Erastus C. Root was entitled to his support from the estate under the third clause of the will. But a fair construction of the whole is, that the support was only till he was of age. The widow, as guardian, was to educate and support the children “ while under lawful age.” A legacy of $4,000 to each child was to be paid to the sons as they came of age. It is reasonable to understand that the claim for support was then to cease.

Third. But the real ground of the claim made by the administratrix, and that upon which the referee has decided in her favor, is, that the assignment was void, because it was “ such a dealing with the property in trust as is forbidden by law.” The administratrix urges that Mary Ann Root was a trustee, and that a trustee may not deal with the subject of the trust. This is undoubtedly a well settled rule. Its meaning is, that a. trustee, holding trust property, cannot, by any transaction with himself, change that property into his own. He cannot make a bargain with himself. This principle is thoroughly explained, and numerous cases are cited, in Gardner v. Ogden (22 N. Y., 327). The trustee, by making what purports to be a sale of the trust property to himself, does not change the character in which he holds the property. And so if, as trustee, with trust moneys, he buys from himself, the sale is invalid. And the principle is so well settled, that the courts will not inquire, at the instance of the trustee, whether the bargain may not, in fact, have been beneficial to the cestui que trust but will hold it to be void.

But that rule does not apply to the transaction in question. Mary Ann Root, as executrix, did not attempt to sell to herself, in her own right, any trust property. Nor did she, in her own right, attempt to buy from herself, as executrix, any trust funds. If she had, as executrix, sold and transferred to herself in her own right, a part, of the whole, of the securities which she held, that would have been a transaction within the rule ; and at the instance of Erastus C. Root, the cestui que trust, it could have been declared void.

A single consideration will show the distinction. In all' these' instances, where dealing with trust property by a trustee has been held void, it has been done on the application of the cestui que trust. If he chooses to affirm the transaction, he may; and he can thus hold the trustee to the attempted bargain. Now in the present instance, Erastus C. Root was the very party with whom the transaction was had. He affirmed it when it was made. His executrix cannot disaffirm.

But furthermore: a purchase by a trustee from his cestui que trust, of the latter’s interest in the trust property, is not in the least within the rule above mentioned, or within its reason. It is not a buying from himself. It is not a dealing with the trust property. It is a dealing simply with the cestui que trust. The rule is often said to rest on the inconsistency of permitting the same person to be both buyer and seller. That inconsistency does not exist in a case like this. We may put this in another light. Could not Mary Ann Root have paid Erastus C. Root his share, at that time, if she had chosen so to do ? And if she had done this, would the transaction have been affected, by her taking an assignment to herself of his interest ? For we must notice that the claim of the administratrix is not that Mary Ann Root did not pay enough to her son ; but that she could not buy at any price. The rule on which the administratrix insists, correctly stated, is not that the trustee shall not deal with the cestui que trust, but that he shall not deal with the trust property. The distinction may be illustrated by reference to the case of Gardner v. Ogden. In that case the plaintiff had made the defendant his agent to sell land. The agent (or rather his clerk, who of course stood in the same position) negotiated a sale to this clerk. The plaintiff did not know that if was his agent’s clerk who was making the purchase, and the sale was declared void. But let us suppose that the agent, operil/y and i/n his own name, had made an offer to the plaintiff for the land, and the plaintiff, knowing that it was his agent who made the offer, had accepted it, would such a sale have been held void ? Clearly not. It would have lacked the very element which made the actual transaction in that case objectionable.

Fourth. But there is another principle applicable to this present case, which the court below may have confounded with that above discussed. That principle is, that a court of equity will scrutinize carefully all transactions between persons standing in' a confidential relation, one to the other. And, therefore, the circumstances under which this assignment was made, may be examined in order to see whether undue advantage was taken. Now, on this point it is important to observe, that no claim of this sort was made by the administratrix. Her position seems to have rested solely on the alleged illegality of the transaction. Nor is there any evidence to lead to the conclusion that Mary Ann Root took advantage of her son in obtaining this assignment. He was a man of full age; capable, so far as appears, of taking care of himself. She was his mother, apparently desirous to aid him in his troubles. She continued to supply his expenses after the assignment, and, furthermore, purchased his outfit in the army, so that there was no apparent intention to do him wrong. Indeed, it would seem probable that, in fact, he received the full value of his interest. Twelve years after the assignment, his interest in the estate is found to be about $3,700. If we deduct interest for that period, its value at the time of the assignment would be not more than half that amount. He seems to have received about two years’ board and clothing and the expenses of medical lectures, before the assignment, and other board and expenses afterward, besides the outfit of $300 to $400. Under all the circumstances, therefore, there is no reason to set aside the assignment on the ground of actual fraud or imposition.

The judgment should be reversed, so that after the payment of costs to all parties out of the fund, including costs of appeal, the balance should be paid to the defendant Rensselaer Waterman, administrator.

Present — Learned, P. J., Boardman and James, JJ.

Ordered accordingly.