In re Seavey

• Decision Date: 01 January 1912
• Citation: 195 F. 825
• Parties: In re SEAVEY.
• Court: U.S. District Court — Southern District of New York

195 F. 825

In re SEAVEY.

United States District Court, S.D. New York.

January, 1912

The following is the opinion of Townsend, Referee:

The trustee is advertising for sale, by the official auctioneer assets of the above-named bankrupt consisting of all of the interest of the said bankrupt in the estate of William H Clement, deceased, under the will of said William H. Clement deceased, dated the 24th day of November, 1886, and thereafter and heretofore admitted to probate by the probate court of Warren county, Ohio.

The bankrupt obtained from the referee an order to show cause dated November 27, 1911, requiring the trustee to show cause why he should not be stayed from such sale until the final determination of the question as to whether or not at the time of the filing of the petition in bankruptcy the bankrupt had a vested, contingent, or alienable interest in the estate of William H. Clement, deceased, or any interest that would vest in the trustee or be reached by judicial process, and until it should be determined whether or not the bankrupt should be discharged. The bankrupt was adjudicated such on her own petition filed April 18, 1911. The only creditor scheduled is the Adirondack Trust Company of Saratoga Springs, N.Y. The note is scheduled as 'accommodation paper.' It is described as being dated December 26, 1910 and to have been made by the bankrupt and her brother, Henry S. Clement, Jr., and indorsed by James A. Seavey, the bankrupt's husband. The amount of the note is $10,000 with interest from March 26, 1910. At an adjourned meeting of creditors on June 15, 1911, Charles W. Clowe was appointed trustee in bankruptcy.

By summons dated June 23, 1911, the trustee in bankruptcy began an action in the Supreme Court of the state of New York, Saratoga county, against the bankrupt and other defendants which has been tried before Mr. Justice Kellogg of that court. Under the objection of the bankrupt, the judgment roll in that action is before me, which was entered in the office of the clerk of Saratoga county November 20, 1911.

The judgment roll entered November 20, 1911, in the action in the Supreme Court, Saratoga county, in which Edgar T. Brackett is plaintiff, and the bankrupt et al. are defendants, I do not regard as material here. The trustee's action was begun by him under section 70e of the Bankruptcy Act (Act July 1, 1898, c. 541, 30 Stat. 566 (U.S. Comp. St. 1901, p. 3452)). The complaint prays a judgment setting aside an instrument executed by the bankrupt November 19, 1908, to her mother-in-law, Mary E. Seavey, and declaring that the 'property and assets' referred to in the instrument belong to the trustee in bankruptcy, and were subject to administration in the bankruptcy court.

A copy of the instrument is attached to the complaint. The instrument purports to convey to the mother-in-law all the assignor's interest of whatever nature in the estate of William H. Clement under the will of William H. Clement. After trial, the justice signed findings of fact and conclusions of law dated November 18, 1911. The judge finds as a matter of fact the ownership by the Adirondack Trust Company of a renewal note for $10,000, made by the bankrupt and her brother, falling due March 26, 1911, the will of the bankrupt's grandfather, William H. Clement, hereafter referred to, that the trust fund created by that will in favor of the testator's son, Henry S. Clement, the father of the bankrupt, consisted partly of real estate in the village of Saratoga Springs, and partly of securities in this state, and the making by the bankrupt on November 19, 1908, of a conveyance in favor of her mother-in-law.

The first conclusion of law is that the conveyance was and is void as against the trustee in bankruptcy and the creditors represented by him. The second conclusion of law is that the interest of the assignor in the estate of her grandfather (William H. Clement) at the time of the conveyance 'was and is property and was and is assignable. ' The third and fourth conclusions of law are not here material. As stated, judgment was entered in conformity with the findings of fact and the conclusions of law.

The bankrupt's grandfather, William H. Clement, died in 1887, leaving a will dated November 27, 1886. The bankrupt's father, Henry S. Clement, still alive, is a son of William H. Clement. The wife of Henry S. Clement died in January, 1911. The bankrupt and her brother, Henry S. Clement, Jr., are the only children of Henry S. Clement. The bankrupt has only one child, Arthur Clement Seavey. Those parts of the will of William H. Clement here material are set out in the second finding of fact made by Mr. Justice Kellogg in the action referred to. After establishing a trust for the sole use and benefit of the testator's son, Henry S. Clement, and his wife, Julia Y. Clement, during their natural lives or during the lifetime of the survivor, item 8 of the will provides as follows: 'In the event of the death of my said son, and the remarriage of his said wife, should she survive him, I desire and direct my said trustees, John B. Clement and John Cox to pay to my said grandchildren, lawful children of my son, Henry S. Clement, or their descendants, all the estate hereby devised to my son, Henry S. Clement, and his children as aforesaid, herein expressed. ' Item 11 provides as follows: 'That is to say, after paying all the special bequests and devises, as heretofore stated, the remainder of my estate, real, personal and mixed, shall be divided into four equal parts, and disposed of in the manner and form herein provided and directed. And I further direct and desire that in the event of the death of any of my said children, Henry S., John B., Florence P. Clement, or Caroline W. Stoledo, before my decease, leaving no lawful lineal descendants, that in that event, the portion of my said estate, and each and every part thereof herein devised or bequeathed to such child or children, dying without lawful issue, before me, shall pass to, and vest in equal parts in my said own children living at the time of my decease, and the lawful issue of any of my deceased children, and the lawful children of their children, shall take and receive the portion of its deceased parent in the manner provided in this, my last will and testament.'

Judge Kellogg's opinion (pages 3 and 4), after remarking that the provisions of the will are very clumsily drawn, holds that it was the testator's intent as evinced by the context of the will that the trust should exist during the joint lives of Henry S. Clement and his wife, unless shortened by the remarriage of the latter, and that, upon the termination of the trust, the property should be delivered to the descendants of Henry S. Clement, of whom the bankrupt is a daughter. Judge Kellogg's construction of the will would be my own independent construction. Judge Kellogg's opinion (page 5) also holds that it is unnecessary to determine whether the interest of the bankrupt as a daughter of Henry S. Clement under the provisions of the will was a vested or a contingent remainder, for the reason that whether the remainder was vested or contingent the interest was 'plainly assignable,' and therefore a proper subject-matter for the trustee's action.

As setting at rest the question, the judge cites the late case of National Park Bank v. Billings, 144 A.D. 536, 129 N.Y.Supp. 846, affirmed by the Court of Appeals upon the opinion of Miller, J., below.

The trustee's action as stated was brought under section 70 of the Bankruptcy Act. That section is entitled 'Title to Property,' and provides that the trustee shall be vested by operation of law with the title of the bankrupt, as of the date of adjudication, to all (4) property transferred by him in fraud of creditors, and (5) property which prior to the filing of the petition he could by any means have transferred or which might have been levied upon and sold under judicial process.

The Billings Case was decided by the Appellate Division in the First Department in May, 1911, and is to be found in 144 App. Div., and 129 N.Y.S. Its affirmance will be found in 203 N.Y. 556, 96 N.E. 1122. The action was brought by the bank under section 1871 of the Code of Civil Procedure. This section provides that a judgment creditor may maintain an action against a judgment debtor, after return of an execution wholly or partly unsatisfied, to compel discovery of anything in action or 'other property' due to him, and to procure the satisfaction of the plaintiff's demand as prescribed in section 1873.

Two questions were before the Appellate Division, to wit: Whether the judgment had been properly granted on the pleadings, and whether the defendant, Henry Billings, had such an interest under the will of his father, Chester Billings, as could be reached by a judgment creditor under section 1871 of the Code of Civil Procedure and was 'property' within the meaning of that section. 144 A.D. 540, 129 N.Y.Supp. 849. Two of the judges concurred in the opinion of Judge Miller that the interest of Henry Billings been granted on the pleadings and also that the interest of Henry Billings was 'property' within the meaning of section 1871 of the Code of Civil Procedure.

Judge Miller's conclusion (which was adopted by the Court of Appeals in its recent decision handed down October 24, 1911) that the interest of Henry Billings was property that could be reached within section 1871 of the Code, seems to have been reached on the broad ground that the future interest of Henry Billings in the personal property constituting the principal of the trust, whether vested in him or not during the lifetime of his mother, was a property interest which he could assign, which would pass to a trustee in bankruptcy, and...