Babbitt v. Fid. Trust Co.

• Decision Date: 17 May 1907
• Citation: 66 A. 1076,72 N.J.E. 745
• Parties: BABBITT v. FIDELITY TRUST CO. et al.
• Court: New Jersey Court of Chancery

66 A. 1076

72 N.J.E. 745

BABBITT

v. FIDELITY TRUST CO. et al.

Court of Chancery of New Jersey.

May 17, 1907.

Suit by Anna D. Babbitt against the Fidelity Trust Company and others. Conclusions by court.

See 63 Atl. 18.

On the 19th day of July, 1898, Charles G. Campbell, by appropriate instruments, transferred all of his property of every description to the Fidelity Trust Company of Newark, as trustee. The latter, on that date, executed a declaration of trust with respect to the said property. In said instrument it "declares that it holds the property, real and personal, this day conveyed to it by Charles G. Campbell in trust for the following uses and purposes: (1) To hold and possess or dispose of and convey the same by proper instruments of conveyance, as in its Judgment may be deemed advisable, and to collect the principal of securities and reinvest the same from time to time. (2) To collect the income from the personal property, and the rents, issues and profits from the real property." By other provisions it undertakes to attend to the taxes and repairs upon the real estate, to the payment of interest on outstanding notes and other obligations, and to their reduction and cancellation, and to pay the proper expenses arising in the execution of the trust. The net income is to be paid monthly, in certain stated amounts, to the settlor, his sisters, his son, Charles B. Campbell, his daughter, Anna D. Graham (since intermarried with Babbitt), and the father of a deceased daughter's children. Upon the death of Charles G. Campbell, certain sums are to be paid to his sisters, and the balance is to be divided among his heirs at law according to the intestate laws of this state; the personal property according to the statute of distributions, and the real property according to the statute of descent. There are other provisions which will be stated as occasion requires it.

Charles G. Campbell died on the 29th day of May, 1905, and left, him surviving, his daughter, the complainant; Charles B. Campbell, a son; and Robert C. Denny, Walter B. Denny, and Julia Denny, children of Jennie B. Denny, deceased, who was the daughter of Charles G. Campbell and the wife of Edward B. Denny. The bill in this case is filed by Anna D. Babbitt. She obtained loans from certain nonresidents, and made certain assignments of her interest in the estate of her father to secure the same. The bill in this case was framed not only to secure an accounting from the Fidelity Trust Company, the trustee, but also sought to litigate certain questions between the complainant and those to whom she had executed the assignments. These latter, being then represented by nonresident executors, filed a plea to the bill, and the issue raised was disposed of by this court adversely to the complainant. The report will be found in 63 Atl. 18 (Garrison, V. C, 1906). The suit thereupon proceeded as one of accounting between trustee and cestui que trust. All of the other beneficiaries under the declaration of trust, or their assignees, are parties to this suit. The trustee, in addition to filing an answer and account, also filed a cross-bill, praying, among other things, for a construction of certain portions of the declaration of trust, and for directions concerning its duty under certain provisions thereof. The complainant filed exceptions to numerous items of the trustee's account. Issues were properly joined and are to be herein disposed of.

Henry H. Fryling and Chandler Riker, for complainant. S. W. Beldon, for defendant Fidelity Trust Company. Edw. D. Duffield and J. J. Burke, for defendant Chas. B. Campbell. G. R. Dutton, for defendant Florence Joel.

GARRISON, V. C. (after stating the facts). The property which Charles G. Campbell had, and which on the 19th day of July, 1898, he turned over to the Fidelity Trust Company as trustee, was of varied character and of large value. It consisted of real estate, mortgages, bonds, stocks of companies, furniture, pictures, bric-a-brac, money in bank, and other characters of personal property such as an active business man of large means would possess. The face value exceeded the actual value by many thousands of dollars, because among the property turned over were interests in real estate which could not be realized upon, and in some instances the real estate could not be located; and, also, among the property, were bonds and stocks of various companies, which latter were defunct, or, if in existence, the stock of which had no value. The realized value exceeded $400,000, with some items still undisposed of in the trustee's hands. The account of the trustee is a very long one, and shows total receipts, principal and interest, of over $700,000; among the numerous items of disbursement being advancements made to the various parties to this suit on account of their distributive shares. A number of the questions raised under the exceptions were disposed of at the hearing by consents or arrangements between the parties, and only need to be stated without discussion. Others of the exceptions may be grouped, and so much of the trust deed as requires construction for the purpose of determining the rights of the parties need not be discussed separately, but will be dealt with in connection with the subject-matter which it concerns.

1. The first exception concerns a series of promissory notes, all excepting two of which were made by Charles B. Campbell, the son of Charles G. Campbell (or by firms of which Charles B. Campbell was a member) and indorsed by Charles G. Campbell; the money going to Charles B. Campbell. After the making of the deed of trust, these notes were renewed, and such renewed notes were paid by the trustee. The two notes not coming within the above statement are one made by Denny Bros, and indorsed by Charles G. Campbell, and one made by Campbell & Osborne and indorsed by Charles G. Campbell, and paid to the Merchants' National Bank. The point of the exception is that, under the declaration of trust, the trustee, if it paid such notes, must hold them and charge the amount thereof against the distributive share of the maker of the note. This, of course, depends upon the proper construction of the declaration of trust. This instrument has two claims which concern this matter of obligations of Charles G. Campbell existing at its date, the fourth and the tenth clauses. The fourth clause is as follows: "(4) To pay the interest on outstanding notes, bonds, mortgages, etc., given or indorsed by the said Charles G. Campbell, and to provide from time to time for the reduction and cancellation of the same, as may be deemed advisable, provided it be done, so far as possible, without interfering with the execution and performance of the trusts hereinafter set forth." The tenth clause is as follows: "(10) To hold and retain, without action and without collecting interest thereon, all notes and securities given to Charles G. Campbell by Charles B. Campbell, Anna D. Graham and Edward B. Denny, and now held by assignment by Fidelity Trust Company until the death of the said Charles G. Campbell, and then to cancel and deliver them without charge to the said Charles B. Campbell, Anna D. Graham and Edward B. Denny, their respective heirs, executors and administrators."

At the time of the making of the declaration of trust, there was held by the settlor and delivered to the trustee a mortgage of E. B. Denny, the settlor's son-in-law, for $2,100, and notes of his for $8,710. At the same time there was held by the settlor and delivered to the trustee company a bond of Anna D. Graham, the complainant, for $20,970.51. Under the provision of the tenth clause, these two obligations were canceled at the time of the death of Charles G. Campbell, and the amounts thereof thus became gifts by the settlor to each of the persons named. There were no notes or other securities of Charles B. Campbell held by the settlor and transferred to the trustee; but there were between $16,000 and $17,000 worth of notes of Charles B. Campbell, indorsed by Charles G. Campbell, outstanding in the hands of those who had discounted them.

It is evident that it was with these notes in mind that the fourth clause was inserted. The exceptant contends that the proper meaning to be ascribed to this fourth clause is that the trustee is to reduce the notes, if it deems advisable, and if, by reduction, they are finally paid off, the trustee is to hold the paid-off note, and charge it, after the death of Charles G. Campbell, against the distributive share of the maker of the note. I do not think that this is the correct construction of this clause, or that it was the meaning of the settlor. I think it clear that this settlor, who was disposing of all of his property, and had clearly in mind that which he wished to do with it, desired to treat his son Charles, his daughter Anna, and his deceased daughter's husband and her children with similar bounty. At the time of the making of the instrument he had advanced money to his son-in-law, and to his daughter, and had obligated himself upon the notes of his son. I think it entirely clear that by these two clauses he intended that, where he had actually made advances and held an obligation therefor, such obligation was to be retained by the trustee without action, and was, at the distribution of the estate, to be canceled and delivered to the obligor; and, similarly, he intended that the obligation which he had undertaken for his son by indorsing his notes should be met by the trustee from time to time, and, when met, the note should be canceled. I cannot conceive of any meaning to be given to the word "canceled," in the fourth clause, excepting the well-known one "to render null and void." This works out the scheme of equity which I think was in the mind of the settlor. I hold, therefore, that, when this estate is to be distributed, the trustee is to be credited with the payments of the notes of Charles B....