Von Hesse v. . MacKaye

32 N.E. 615, 136 N.Y. 114, 49 N.Y. St. Rep. 76, 91 Sickels 114, 1892 N.Y. LEXIS 1724

• Court: New York Court of Appeals
• Decided: November 29, 1892
• Status: Published

Opinion

Finch, J.

The validity of the trust for Edith is contested, not by creditors, but by the personal representatives of the settlor; and the evidence drives us to a choice between two. alternatives. We must regard the arrangement^ either as a trust for her benefit with a power of revocation reserved, or as a fraudulent scheme to cover the settlor’s real ownership with the. semblance of an outstanding title. Of course, we are not justified in the inference of a fraud or a falsehood when an honest explanation is possible, and should not turn an apparent trust into a sham except under the stress of a clear necessity.

I do not think the alternative of a meditated fraud is forced upon us by the proof. There was a delivery of the bonds to William Mackaye, by Colonel Mackaye, with the intent of vesting in the former the full and absolute legal title. ¡Repeatedly, the latter declared, that he meant the transfer to be of such a character and so complete that William could swear that he had no property of the settlor in his hands. We are not at liberty to suppose that the Colonel intended to have his son swear to a lie if a question of title should arise. We are bound to believe that the settlor intended a transfer which actually and in truth took the title out of him, and so effectually that the trustee could say under oath that the settlor had wholly parted with his ownership of the bonds. The character of the transfer, as originally made, is evidenced by the receipt which William gave, and which accords with his father’s declared intent. It is in these words: “¡Rec’dof my father, James Mackaye, ten Kansas Pacific bonds of one thousand dollars each, to be held by me in trust for his adopted daughter, Theodora Edith Mackaye, and for her sole benefit and behoof; said bonds, for and during his life, to be subject to the order of my father.” In a letter written at a later date, the Colonel gives his reasons for “putting the bonds in trust for Edith,” as he had already and previously explained. It was to ward off any more blackmail suits, by so divesting himself of this property in his son’s hands, as to take away that temptation to begin them. This was one motive for instituting the trust. It may be conceded that it was the primary and principal reason operating upon the settlor’s mind, and that a provision for Edith was subordinate and secondary. And yet each motive separately and both combined, required an actual trust for her benefit, and not a mere agency disguised as a trust. There was a reservation of a control in the settlor, equivalent to a power of revocation, and the existence of that power, and the use made of it, furnish the principal material for the ai’gument of the appellant. Undoubtedly the settlor ** did mean to reserve a power of revocation. The bonds were to be subject to his order; he speaks of withdrawing them from the trust; of retaining control over them; of a right to divert them to other uses; but at the same time invariably declares that so far as he does not exercise that control, so far„ the trust shall stand and remain for the benefit of Edith. He did withdraw some of the bonds from the trust, and so fro * t<mto revoke it; but few things are better settled than that the " reservation of such a power is entirely consistent with the trust, and does not work its destruction where the rights of creditors are not involved. It is true that the authority reserved over the fund is expressed in such terms as to admit of the contention that instead of a gift with a power of revocation, there was no gift at all, but merely an agency. That theory falls very far short of explaining all the facts, and fastens upon the settlor a purely fraudulent purpose, while the construction of an intended trust for the benefit of Edith, with a power of revocation partially in fact exercised, and having, as the chief motive of its creation, a dread of attempted blackmail, harmonizes all the facts and incidents which appear upon the record, and consistently with good faith and honest intention. It is strengthened, also, by Colonel Mackaye’s later correspondence with his friend and attorney, in which he recognizes these bonds as already held in trust for Edith, while planning another and more extensive one for her benefit. Upon a consideration of all the facts, we are inclined to agree with the courts below, that a valid trust was created and sufficiently proved.

The judgment should be affirmed, with costs.

All concur, except Pbckham, J., not voting.

Judgment affirmed.