Brown v. Spohr

• Decision Date: 30 December 1904
• Citation: 180 N.Y. 201,73 N.E. 14
• Parties: BROWN v. SPOHR et al.
• Court: New York Court of Appeals Court of Appeals

180 N.Y. 201

73 N.E. 14

BROWN

v.SPOHR et al.

Court of Appeals of New York.

Dec. 30, 1904.

Appeal from Supreme Court, Appellate Division, First Department.

Action by Elliot C. Brown, by Charles W. Floyd, his guardian, against John Spohr, and others, executors of Joseph H. Brown, deceased, and others. From a judgment of the Appellate Division (84 N. Y. Supp. 995), affirming a judgment for defendants, plaintiff appeals. Affirmed.

The action was brought to set aside nine deeds of trust made by Joseph H. Brown, and, in the event of their being set aside, plaintiff asks for a judicial construction of the residuary clause of said Brown's will, determining whether the funds specified in the trusts passed under that clause of the will or passed to the widow and next of kin as in case of intestacy.

For many years prior to his death Joseph H. Brown had been a member of the firm of Brown, Draper & Co., dealers in tailors' trimmings in the city of New York. The firm was composed of Brown and one Draper, who died on the 6th day of December, 1896. After Draper's death Brown continued the business under the old firm name until January 1, 1901, when two employés, named Frederick W. Roe and Wade H. Thompson, were admitted to the firm, which was continued under the old name, with Brown in sole charge of its finances. On the 22d day of December, 1893, which was three years prior to Draper's death, an account had been opened upon the books of Brown, Draper & Co. by a credit of $20,000 to Marion Smith, who was Brown's niece. This amount was transferred from the loan account of Brown against the firm for moneys advanced and profits credited apart from Brown's contribution to the firm's capital, and which concededly exceeded the amount thus credited to Marion Smith. From time to time thereafter various sums were added to the Marion Smith account by way of interest and cash credits, and it was debited with various drafts made by Marion Smith, so that on December 31, 1896, the account was credited with the sum of $21,620.37. On the last-mentioned date, which was 25 days after Draper's death, Brown drew a check in the name of Brown, Draper & Co. to the order of Marion Smith, which was debited to the latter's account. On the same day, and at the instance of Brown, Mr. Spohr, who was the firm's cashier, took Marion Smith to the Pacific Bank, upon which the check was drawn, introduced her to one of the officers, and told him that she wanted to draw the money, but would immediately redeposit the same to the credit of the firm. The check was presented, the money was drawn and handed to Spohr, who made out a deposit slip in the name of Brown, Draper & Co. and redeposited the money to the credit of the firm. The amount was debited to the Marion Smith account. A new account was then opened upon the books of Brown, Draper & Co. in the name of John Spohr and A. B. Potterton, trustees, and on January 2, 1897, the first business day after the foregoing transaction at the bank, that new account was credited with a cash item of $10,000. On the 7th day of January, 1897, Brown drew another check in the name of Brown, Draper & Co. to the order of Marion Smith for $10,000, and on that day precisely the same procedure was followed at the bank that had been taken in the drawing and redepositing of the first $10,000 on the 31st day of December, 1896. The Marion Smith account upon the books of the firm was also debited with the last-mentioned sum, and on the same day the account of the trustees was credited with a like sum, making a total credit to that account of $20,000. The balance of the Marion Smith account, amounting to $1,620.37, was transferred to Brown's loan account, and the Marion Smith account was closed. Under date of December 31, 1896, the day when the first $10,000 was withdrawn from the Marion Smith account and transferred to the account of the trustees above named, Brown also executed a deed of trust setting forth the delivery to the trustees of the sum of $20,000, in trust to loan the same to Brown, Draper & Co. upon their firm notes payable on demand, principal payable upon the death of Brown, or before his decease if the trustees should see fit in their discretion to demand such payment, and in the event of such payment to reinvest the proceeds. The income of the trust was directed to be paid to Marion Smith during her lifetime, and then to various beneficiaries in certain named contingencies. The trust deed further reserved to Brown, the trustor, the right to revoke, modify, change, or supplement the provisions thereof, and recited that the beneficiary took solely as the recipient of Brown's bounty.

When the checks above referred to were drawn, demand notes for the same amounts, dated on the days when the moneys were received by the firm and credited to the trustees, were drawn in the name of Brown, Draper & Co. to the order of the trustees, and pinned to the deed of trust. The trustees executed a declaration of trust bearing the same date as the deed of trust, wherein they acknowledged the receipt of the sum of $20,000 in trust for the purposes therein specified, and covenanted to execute the trust. Spoher, one of the trustees, took possession of these instruments, and placed them in a part of the safe of Brown, Draper & Co. where he kept his own papers. These notes and trust deeds have ever since been in the possession of Spohr, and have never been in the possession of or under the control of Brown, or any member of the firm of Brown, Draper & Co. Thereafter, and from time to time, the account of the trustees was credited with the interest earned by that fund, and such interest was paid by the firm to the beneficiary, Marion Smith, until the fall of 1901. On the 4th day of October, 1901, Brown executed a modification of the trust deed, which provided, among other things, that the income of this fund should be paid by the trustees to Brown during his life, and after his death to Marion Smith during her life, and upon her death the principal of the trust fund should be paid to the issue her surviving, or, in default of such issue, then to the ‘Chapin Home,’ and in other respects reaffirming the trust, including the reserved power of revocation. At the same time the trustees signed and delivered to Brown a declaration accepting the trust according to its terms.

Between January 28, 1901, and May 2, 1901, Brown executed eight other deeds of trust for various amounts aggregating $75,000. These were as follows: (1) For the benefit of Alfred Potterton, dated and acknowledged January 28, 1901, in the amount of $25,000. (2) For the benefit of Louisette H. Smith, dated and acknowledged February 4, 1901, in the amount of $5,000. (3) For the benefit of Isable H. Smith, dated and acknowledged February 4, 1901, in the amount of $5,000. (4) For the benefit of Ainsworth Brown, dated and acknowledged March 28, 1901, in the amount of $10,000. (5) For the benefit of Ruth Sawyer, dated and acknowledged March 28, 1901, in the amount of $5,000. (6) For the benefit of Alfred B. Potterton, dated and acknowledged April 29, 1901, in the amount of $10,000. (7) For the benefit of Etha J. Sawyer, dated and acknowledged April 29, 1901, in the amount of $10,000. (8) For the benefit of John Spohr, dated and acknowledged May 2, 1901, in the amount of $5,000. These eight deeds of trust are, excepting the beneficiaries and trustees, all in the same form, and provide, in substance, that the respective sums therein mentioned are given to the trustees for the following purposes: To loan the same to Brown, Draper & Co. upon their firm notes, payable on demand, with interest, and upon the death of Brown, or before his decease, in case the trustees see fit to do so, to demand payment of said notes, and to reinvest the ppoceeds thereof; the income of the several trust funds to be paid to Brown during his life, and after his death to the beneficiaries therein named, and upon the death of the beneficiaries to divide the principal as therein directed. These several trust deeds also provided for a substitution of trustees in case of vacancies, and reserved the same power of revocation expressed in the trust first above mentioned for the benefit of Marion Smith. In each of the eight cases referred to Brown drew the check of Brown, Draper & Co. to his own order for the amount of the proposed trust, and after indorsement by him the check was handed to Spohr, who, at the request of Brown, presented it for payment at the bank, with the explanation that it was intended to redeposit the money, but he wished to see the actual bills. The amount of money called for by the checks having been shown to Spohr, he made out deposit slips for the same amounts in the name of Brown, Draper & Co., and handed them to the receiving teller of the bank, and the deposits were entered in the passbook of Brown, Draper & Co. The amount of these checks was charged in the firm books to the loan account of Brown. New accounts were opened with the trustees, who were credited with the proceeds precisely as if the cash had been loaned. Demand promissory notes of Brown, Draper & Co. for the several amounts were executed by Brown and pinned to the respective trusts, and handed to the trustees, who in each case executed corresponding declarations of trust. These trust deeds and promissory notes were in the possession of the respective trustees at the time of Brown's death, and were never after their delivery in the custody or under the control of Brown or of Brown, Draper & Co. The transactions relating to each of such eight trusts were completed on the respective days on which they are dated, and on each of said days Brown's loan account with the firm of Brown, Draper & Co. had to its credit a sum, excluding his share of the firm's capital, greater than the aggregate of all the checks drawn as above set forth.

In January, 1902, checks were drawn to the order of the respective trustees for...