Field v. Fidelity Union Trust Co.

• Decision Date: 20 December 1939
• Docket Number: No. 7055.,7055.
• Citation: 108 F.2d 521
• Parties: FIELD v. FIDELITY UNION TRUST CO. et al.
• Court: U.S. Court of Appeals — Third Circuit

108 F.2d 521 (1939)

FIELD v. FIDELITY UNION TRUST CO. et al.

No. 7055.

Circuit Court of Appeals, Third Circuit.

December 20, 1939.

Russell C. MacFall, of Ridgewood, N. J., for appellant.

Francis F. Welsh and Hood, Lafferty & Campbell, all of Newark, N. J. (Wallace R. Chandler, Jr., of Newark, N. J., of counsel), for defendants-appellees, Fidelity Union Trust Co and Minton H. Twinch, executors of Edith M. Peck, deceased.

Before BIDDLE, JONES, and BUFFINGTON, Circuit Judges.

BIDDLE, Circuit Judge.

This appeal involves the construction of the New Jersey Act validating tentative trusts with respect to saving bank deposits; and the extent to which our court must or should follow two decisions of the Court of Chancery of New Jersey, not a court of final resort, holding the Act void.

Edith M. Peck on January 2, 1935, transferred a savings account with United States Savings Bank of Newark to "Edith M. Peck, in trust for Ethel Adelaide Field". Peck died on January 6, 1935. This transfer was made after she had told the assistant trust officer of Fidelity Union Trust Company, one of her executors, that she wanted Field to get the deposit when she died. The Savings Bank refused to pay Field the deposit, and she accordingly filed her bill of complaint against it and the executors. The Savings Bank paid the money into court. The District Court for the District of New Jersey awarded the fund to the executors.

There has been a conflict in the cases as to whether so-called "tentative trusts", in the form of "A in trust for B", create rights in the beneficiary. Obviously such deposits do not fulfill the strict requirements of true trusts. However, they have been accepted as trusts by the weight of authority.¹ But the New Jersey Courts have rejected them, chiefly on the ground that no true trust is created where the donor or settlor still exercises control over the gift. Stevenson v. Earl, 65 N.J.Eq. 721, 55 A. 1091, 103 Am.St.Rep. 790, 1 Ann.Cas. 49; Nicklas v. Parker, 69 N.J. Eq. 743, 61 A. 267 (Court of Chancery) affirmed by the Court of Errors and Appeals, 71 N.J.Eq. 777, 61 A. 267, 71 A. 1135, 14 Ann.Cas. 921.

In 1903 the New Jersey legislature passed an act modifying the law.² Although the controlling facts in the Nicklas case occurred after the 1903 statute had been adopted, the court made no reference to the act. This statute is substantially identical with the Act of 1932, which we are called upon to consider, except that the earlier Act provided that the money in the deposit "may be paid" to the intended beneficiary; whereas the statute before us requires such payment. Apparently because of this phrase, the New Jersey courts, still reluctant to admit a change in the basic law, held that the 1903 Act merely protected payment by the bank to the intended beneficiary, but gave him no rights.³

In 1932 the New Jersey Legislature, evidently with the intention of changing the law so as completely to validate tentative trusts, adopted the following statute: "1. Whenever any deposit shall be made with any savings bank, trust company or bank by any person in trust for another, and no other or further notice of the existence and terms of a legal and valid trust shall have been given in writing to the savings bank, trust company or bank, in the event of the death of the trustee, the same or any part thereof, together with the dividends or interest thereon, shall be paid to the person in trust for whom the said deposit was made, or to his or her legal representatives and the legal representatives of the deceased trustee shall not be entitled to the funds so deposited nor to the dividends or interest thereon notwithstanding that the funds so deposited may have been the property of the trustee; provided, that the person for whom the deposit was made, if a minor, shall not draw the same during his or her minority without the written consent of the legal representatives of said trustee."⁴

This statute was considered twice in 1936 by the Court of Chancery of New Jersey, a court of original jurisdiction, in Thatcher v. Trenton Trust Company, 119 N.J.Eq. 408, 182 A. 912, and Travers v. Reid, 119 N.J.Eq. 416, 182 A. 908. The facts in these two cases cannot be distinguished from those here in question. The Thatcher case involved two bank accounts, the first of which was opened prior to the passage of the act, and the second thereafter. Both cases held that the statute did not change the pre-existing law. It is not clear to what extent the cases consider the statute unconstitutional. Before examining more closely the reasoning and result of the cases, we should determine to what extent their decisions bind us.

In Erie R. Co. v. Tompkins⁵ it was held that there was no such thing as federal "general" or common law, and that federal courts must apply not only the statutory state law, but the common law of the state as well. The doctrine of Swift v. Tyson, 16 Pet. 1, 10 L.Ed. 865, had recognized not only the application of state laws, but, necessarily, the application of the state cases construing them. "Rights and titles to things having a permanent locality, such as the rights and titles to real estate"⁶ fell, too, into the rule. Four years later the Supreme Court in Beals v. Hale,⁷ in construing two apparently conflicting Michigan statutes, arrived at a conclusion similar to that adopted by an inferior state court; and, in emphasizing the principle laid down in prior cases, that the federal courts are bound by the constructions of state statutes by state courts, made it clear that such acceptance was to be accorded only to the highest judicial tribunals. "Had that decision been made by the highest judicial tribunal of the State, or been shown to accord with a settled usage and practice under these statutes affecting the titles to real estate, we should have felt bound to conform to it, as a part of the local law." The court cited supporting cases all decided before Swift v. Tyson, supra. However these decisions do not seem to have crystallized the law to a point where it could be said that only the pronouncements of the highest tribunal of a state are binding.⁸ But definitely this is what the court meant in the Beals case, for the opinion continues: "But, though entitled to respect and weight, that case Weed et al. v. Lyon et al., Har. (Mich.) 363 (1845), decided by the Chancellor has not been treated as a precedent to control this, because the judgment was not in a court of the last resort, and is said to have been appealed from, but further proceedings defeated by some accident."

In Erie R. Co. v. Hilt, 247 U.S. 97, 100, 38 S.Ct. 435, 436, 62 L.Ed. 1003, a New Jersey statute forbade recovery to a person injured while walking or playing on any railroad. The trial court, affirmed by the Circuit Court of Appeals for this Circuit, allowed the case to go to the jury, construing the act not to cover the plaintiff who was a child seven years old. The Supreme Court, in an opinion by Mr. Justice Holmes, reversed on the ground that: "The words of the statute seem to us to require a different construction from that adopted and they have been given their full literal meaning by the Supreme Court of the State in the case of an infant younger than the plaintiff. Barcolini v. Atlantic City & Shore R. Co., 82 N.J.L. 107, 81 A. 494." The court added: "In view of the importance of that tribunal in New Jersey, although not the highest Court in the State, we see no reason why it should not be followed by the Courts of the United States, even if we thought its decision more doubtful than we do." Mr. Justice Day and Mr. Justice Clarke dissented, "in the absence of a decision of the highest Court of New Jersey holding otherwise."⁹ It should be noted that the court did not express the view that the matter was stare decisis, but followed the decision of the Supreme Court of New Jersey, sitting as an intermediate appellate court, "in view of the importance of that tribunal". Members of the Supreme Court of New Jersey are also members of the Court of Errors and Appeals, the court of last resort of the state, and not, as in our case, trial judges unconnected with any appellate tribunal. And the Hilt case does not say that the federal courts must follow the decisions of a trial court of New Jersey in construing a New Jersey statute.

A similar conclusion based on the Hilt decision was reached by our court in Berlet v. Lehigh Valley Silk Mills, 3 Cir., 287 F. 769, 772, where we followed a decision of the Superior Court of Pennsylvania in holding unconstitutional as class legislation the Act of Pennsylvania of May 23, 1907, P.L. 228, as amended, 6 P.S. §§ 21, 22, giving throwsters of silk a lien. But the Superior Court is an important appellate tribunal, whose decision is final (subject to certiorari) in a very broad field of jurisdiction; and the case did not go to the length of saying that its decision was stare decisis, and must be followed. Recently referring to the Superior Court, in Taplinger v. Northwestern Nat. Bank, 3 Cir., 101 F.2d 274, 278, we used, perhaps, somewhat broad language when we said: "However, since it was squarely raised by the facts of the Kauffman & Baer Case, Kauffman & Baer v. Monroe Motor Line, 124 Pa.Super. 27, 187 A. 296, the decision in that case amounts to a construction of the statute by a Pennsylvania appellate court of high authority which we must accept as binding upon us, even though if the matter were open for our consideration a different conclusion might well be reached."

In North Philadelphia Trust Co. v. Smith, 3 Cir., 13 F.2d 585, 586, our court followed the decision of the Supreme Court of New Jersey in construing the Negotiable Instruments Law, N.J.S.A. 7:2-1 et seq., which was in conflict with the Pennsylvania decisions construing that uniform instrument. We said: "This was a decision by the Supreme Court of New Jersey, not by the Court of Errors and Appeals. That court, however, though not the highest ...