Hershey v. Meeker County Bank

73 N.W. 967, 71 Minn. 255, 1898 Minn. LEXIS 551

• Court: Supreme Court of Minnesota
• Decided: January 21, 1898
• Docket: Nos. 10,857-(241)
• Status: Published

Opinion

MITCHELL, J.

Under the view we take of these eases, many of the facts disclosed by the record, and several of the points argued by counsel, become entirely immaterial.

The only material facts are the following: In May, 1881, one Martin Hershey died, seised in fee simple of the lands in controversy. By his last will (stating its provisions according to their legal effect), he devised the lands to Reuben S. Hershey for life, with remainder to such persons as the said Reuben S. might direct by his last will and testament. This will was probated in this state in August, 1885. In February, 1891, and June, 1892, Reuben S. executed to the defendants, respectively, the mortgages under which they now claim liens upon the lands. These mortgages purported to convey an absolute fee, and contained full covenants of title. Reuben S. died in July, 1892, and by his last will devised the lands to these plaintiffs. This will was admitted to probate in August, 1892. In 1896 one of these plaintiffs obtained letters of administration upon the estate of Martin Hershey; and in March of that year, upon his petition, the probate court made a decree of distribution, in and by which, after reciting the provisions of the will of said Martin, and also of Reuben S., it was adjudged that, under the will of said Martin, Reuben S. had only a life estate in the lands, with power to dispose of the same upon his death by will only, and that the plaintiffs, under and by virtue of said wills, were the owners of said lands, and assigning them to the plaintiffs as such owners. The defendants did not appear in, and had no actual notice of, the proceedings in which this decree was rendered. The plaintiffs brought these actions to determine the adverse claims of the defendants under their mortgages.

The contention of the defendants is that, under the will of Martin Hershey, Reuben S. took a fee absolute, in respect to creditors and purchasers. This calls for a construction of various provisions of Gr. S. 1866, c. 44, relating to powers, which, so far as here involved, we borrowed from New York, either directly or indirectly, through the state of Wisconsin; the same being R. S. (N. Y.) 1829, art. 3, c. 1, pt. 2. Chapter 44 abolishes all powers, except as authorized and provided therein, and declares, that the creation, construction and execution of powers shall be governed by its provisions. It is therefore a complete and exclusive code on the subject of powers, and the pre-existing rules of the common law on the subject are only important as aids in construing the statute.

There can be no doubt but that the power granted to Reuben S. by the will of Martin was “general” and not special, “beneficial” and not in trust. G. S. 1894, §§ 4305, 4307. It .authorized the alienation in fee, by means of a will, to any alienee whatever; and no person other than the grantee of the power had, by the terms of its creation, any interest in its execution. Under the provisions of the will, Reuben S. had a particular estate for life. Section 4309 provides,

“When an absolute power of disposition, not accompanied by any trust, is given to the owner of a particular estate for life or years, such estate shall be changed into a fee; absolute in respect to the rights of creditors and purchasers, but subject to any future estate limited thereon in case the power is not executed, or the lands sold for the satisfaction of debts.”

Section 4312 provides,

“When a general and beneficial power to devise the inheritance is given to a tenant for life or for years [which is the present case], such tenant shall be deemed to possess an absolute power of disposition within the meaning and subject to the provisions of the three preceding sections,” which include section 4309.

The equity rule was that where a man has a genera] power of appointment over a fund, and he actually exercises his power, whether by deed or will, the property appointed shall form a part of his assets, so as to be subject to the demands of his creditors in preference to the claims of his legatees or appointees. 2 Sugd. Powers, 28. This rule applied where the power of appointment was by will only. Edie v. Babington, 3 Irish Ch. 568. The principle upon which this rested was that where persons take as volunteers, and by the bounty of the donee of the power, the fund appointed is assets of the donee. But, in order to raise this equity in favor of creditors, the power must have been exercised. This irrational rule rested upon the doctrine that equity never aids the nonexecution of a power not accompanied by a trust.

The revisers of the New York statutes, in framing provisions covering this branch of the law relating to powers, had in view two main objects: First, to do away with the irrational rule just referred to, and make the rights of creditors and purchasers rest exclusively upon the existence of the power; and, second, to guard against powers of appointment being used to shield the property of either the donor or donee of the power from creditors. As they say in their reports and notes, the most important circumstance was whether the power was to be exercised by the party for his own benefit or the benefit of others, — whether it was an interest or a trust; and it was to that distinction that the regulations which they proposed had a principal regard. They proceeded upon the principle that in reason and good sense there is no distinction between absolute power of disposition and absolute ownership; that it was an affront to common sense to say that a man has no property in that which he may sell when he chooses, and dispose of the proceeds at his pleasure.

As there might otherwise have been some doubt whether a general power to devise the inheritance annexed to a previous particular estate should be considered an absolute power of disposition, they proposed the regulation corresponding to our section 4809, and gave as a reason why such a power of disposition should be deemed absolute that

“There are obvious means by which, with the aid of this power, the tenant for life or years may acquire, even in his lifetime, the entire dominion of the property.” 5 Edmonds’ N. Y. St. at Large, Revisers’ Notes, 585, 586.

That a general and beneficial power to devise the inheritance annexed to a previous estate for life or for years was an absolute power of disposition, within the definitions of the statute, is so clear that it has never been questioned in New York, but has been assumed without much discussion. Jackson v. Edwards, 7 Paige, Ch. 386-400; Freeborn v. Wagner, 49 Barb. 43; American v. Stark, 45 How. Pr. 161; Leonard v. American, 35 Hun, 290; Brown v. Farmers, 51 Hun, 386, 4 N. Y. Supp. 422; Hume v. Randall, 141 N. Y. 499, 36 N. E. 402. The next section (4313) provides that

“Every power of disposition shall be deemed absolute by means of which the grantee is enabled in his lifetime to dispose of the entire fee for his own benefit.”

The plaintiffs contend that a power of disposition by will only, which can only take effect upon death of the testator, is not absolute, within this definition. But this section is not an exclusive definition of an absolute power of disposition, neither is it a limitation upon the provisions contained in the preceding sections; but it is added as an independent provision applicable to a case not included in or covered by those which precede, viz. where the general power of disposition is not annexed to a previous estate for life or years in the grantee of the power. In Cutting v. Cutting, 86 N. Y. 522, so much relied on by counsel, there was no particular estate for life or years in the grantee of the power. The title was vested in trustees for his benefit during his natural life. He had no power of disposition over this life estate. It was on this ground that it was held that the power of disposition was not absolute. According to our understanding of the very learned and exhaustive opinion of Justice Folger, he recognizes the fact that, if the power to devise the fee had been annexed to a prior life estate vested in the grantee of the power, the power of disposition would have been absolute, under the provisions of section 84 of their statute, which corresponds with section 4312 of ours. In Hume v. Randall, supra, Justice Peckham, in referring to Cutting v. Cutting, and other similar cases, says, at page 505:

“These are cases where the legal title was in the trustee, and they are the foundation for the claim that, where the tenant for life has no power to alien his life estate, the case does not come within the above statute, although the tenant may have a power to dispose of the fee by will. The argument is founded upon the assumption that the life tenant has no power to alien his life interest. If he have that power, the argument is inapplicable.”

Our conclusion is that Reuben S. Hershey’s power of disposition was absolute, and hence, under the statute, his estate was changed into an absolute fee, in respect to the rights of creditors and purchasers.

2. It is contended, however, that the probate court has, by its decree of distribution of the estate of Martin Hershey, construed his will otherwise, and that the decree, although erroneous, is conclusive against the defendants. It may be conceded that whatever estate the plaintiffs took they took as purchasers under the will of Martin.

It is undoubtedly true that the probate court had jurisdiction to determine who were entitled to Martin’s property as devisees or legatees, and, as incidental and ancillary to the determination of that question, to construe his will. But the decree is a conclusive adjudication that the persons to whom the distribution is made are the only persons entitled to the property distributed as devisees or legatees under the will, and of that fact only. And the construction which the court placed on the will is only effectual and operative as to that question. For any other purpose, or upon any other question, it is coram non judice. But there is nothing in the decree in this case which is inconsistent with the legal principles laid down in the previous part of this opinion. The will of Martin did give Beuben S. a life estate (and nothing more), with power to devise the inheritance. The latter did by will exercise this power of appointment in favor of plaintiffs. The statute relating to powers changed the life estate of Beuben S. into an absolute fee only as to purchasers and creditors. Therefore, whatever may have been the rights of the defendants as creditors or purchasers, the property was properly assigned to the plaintiffs as appointees under the will of Beuben S.

Whatever rights the defendants might have in the property under the statute relating to powers was a matter to be determined in the district court, in appropriate litigation between them and the plaintiffs. In the administration and distribution of Martin Hershey’s estate, the probate court had no jurisdiction to adjudicate upon these rights, any more than it would to pass upon the rights of a purchaser from a devisee. If it had assumed to pass upon plaintiffs’ rights, its adjudication would have been without jurisdiction and void. Hence plaintiffs took the property, under the decree of distribution, subject to any rights of the defendants as purchasers from Reuben S., and that decree does not conclude them from asserting these rights in this action.

3. In 1896 the defendant Willis had commenced proceedings to foreclose his mortgages by advertisement, whereupon the plaintiffs brought an action against him to enjoin the foreclosure, and to have the mortgages adjudged null and void, and set aside, as clouds on their title. They obtained judgment as prayed for by default against Willis, which upon his motion the court vacated and granted him leave to answer. From the order vacating and setting aside this judgment the plaintiffs appealed to this court, giving a supersedeas bond. That appeal is still pending and undetermined. The plaintiffs contend that the effect of their appeal was to reinstate the judgment in that action, so as to render the invalidity of Willis’ mortgages res adjudicata between him and the plaintiffs.

The weight of authority is that an appeal by the party against whom a final judgment is rendered suspends its operation as an estoppel, and renders it no 'longer admissible as evidence in any controversy between the parties. On this question, however, there seems to be some conflict of opinion. Freeman, Judgm. § 328. But we apprehend that no case can be found holding that when an order has been granted, vacating a judgment, it can any longer be respected as res adjudicata merely because the party in whose favor the judgment was rendered hás appealed, either with or without a supersedeas bond, from the order setting it aside. An appeal accompanied by a supersedeas bond saves, pending the appeal, all the rights of the appellant, in the action, affected by the order or judgment appealed from. But that is very different from holding that in this case the appeal reinstated the vacated judgment, so as to constitute an estoppel as to the issues determined by it.

Order affirmed.