In re Wentworth

• Decision Date: 31 December 1920
• Citation: 129 N.E. 646,230 N.Y. 176
• Parties: In re WENTWORTH.
• Court: New York Court of Appeals Court of Appeals

230 N.Y. 176

129 N.E. 646

In re WENTWORTH.

Court of Appeals of New York.

Dec. 31, 1920.

Cross-Appeals from Supreme Court, Appellate Division, Third Department.

In the matter of the application of Grace H. Wentworth, as executrix, etc., of the estate of John W. Wentworth, deceased. Cross-appeals from an order of the Third Appellate Division (190 App. Div. 829,181 N. Y. Supp. 442), modifying the decree of the surrogate of Chemung County settling the accounts of one Armstrong, as executor and trustee.

Order affirmed.

Hogan and Crane, JJ., dissenting.

Powell Crichton, of New York City, for petitioner.

Martin S. Lynch, of Oswego, for Clifford.

HISCOCK, C. J.

By these appeals we are required to pass upon the obligations of one Armstrong, now deceased, as trustee of one Wentworth, also deceased. It is claimed in behalf of the cestui que trust and thus far has been held that the trustee in violation of his trust executed a conveyance of real estate which was the subject thereof, and as a result of which said trust property was subsequently lost, and that now the trustee should be required to account therefor. The claims in behalf of the trustee are first that he was authorized by the terms of the trust to execute the conveyance which he did, and second that the cestui que trust, who was of age and competent, so consented to the conveyance that he and those now representing him are estopped from questioning its validity.

The trust was created by the will of one Mary E. Armstrong, who was the wife of the trustee and the sister of the cestui que trust, she also leaving her surviving a mother and sister, whose survivorship is a fact of some materiality in the controversy which we have before us. As has already been stated, the subject of the trust was an interest in real property which was situate in the city of New York. The testatrix died, and her will was admitted to probate in 1901, that date being of importance.

By the provisions of the will, so far as involved in this controversy, the testatrix devised to her husband, Armstrong, the real estate in question in trust to pay over two-thirds of the income thereof to her mother during life and on her death to sell the same and to retain the proceeds of one-fourth thereof in trust for the benefit of the brother upon the terms:

‘That he [the trustee] keep the same invested and pay over to my said brother from time to time as in his judgment his needs require the income thereof and such portions of the principal as he may think best from time to time to give him for his support and maintenance and personal needs and used, and at his death to pay over to himself, my said husband,for his own personal use and enjoyment any unexpended portion of said fund thus held in trust by him for the benefit of my said brother.’

Then provision was made for the contingency that the husband died before the mother. It was provided that in such case his successor in trust should pay over the income of the net proceeds arising from the sale of the entire real estate to the mother during life and accordingly as the latter was survived by both the sister and brother of the testatrix or only by the brother, a half or all of the proceeds of said real estate should then be held in trust for the benefit of the brother as before provided, with remainder to the sister or the next of kin of the testatrix accordingly as the sister did or did not survive the mother. Said will also empowered the trustee to sell, mortgage or exchange said real estate whenever in his judgment the interest of the estate would be promoted thereby.

The trustee took possession of the real property and until 1909 continued to carry out the provisions of the trust. In January of that year, as has been found, he--

‘as such trustee conveyed said real property * * * to Lizzie C. Wright [sister of the testatrix], said deed reciting a consideration of $60,000, and that it conveys all the estate in the premises ‘which the party of the first part has or has power to dispose of, whether individually or by virtue of said will or otherwise.’'

At this time the mother was not dead and the trustee at most had a remainder in the property subject to be divested should he predecease her. Subsequently and in accordance with that we may assume was a general plan the grantee in that conveyance executed a mortgage on the premises for $40,000, which was subsequently foreclosed and the property wiped out. Figures have been found which we do not understand to be disputed, if the theory of the representatives of the cestui que trust is correct, that his interest in said property on the basis of the purported purchase price after providing for certain mortgages, taxes, etc., was $13,185.75. He received from his trustee nothing on account of this transfer, and if the action of the trustee was legal the trust fund was entirely lost by the transfer and subsequent foreclasure of the mortgage.

The surrogate found that the cestui que trust did not in any manner request or consent to this transfer or to the mortgage subsequently executed upon said property, but the Appellate Division upon evidence which we think authorized it to take such view reversed these findings and affirmatively found that--

Said cestui que trust ‘consented to the sale, the execution of the mortgage, and the disposition of the moneys raised thereby, and acquiesced in an arrangement whereby one-fourth of the parcels conveyed, or the proceeds therefrom should be held by the grantee for his benefit, or used for or paid over to him in lieu of its retention by the grantor, under the terms of the trust created for his benefit by the will.’

We thus come to a consideration of the reasons already referred to which it is urged made the conveyance by the trustee of the trust property valid and effective and relieved him of any further responsibility on account thereof.

[1] It is said that the trustee had the right to make this conveyance because under the terms of the trust he was authorized, in his discretion, to apply principal as well as income to the support and maintenance of the cestui que trust, and that the conveyance is to be regarded as having been made in the execution of that power. It may, of course, be conceded that the trustee might have disposed of the trust property for the purpose of paying to the cestui que trust such portions of the principal as he might think best from time to time to give him ‘for his support and maintenance and personal needs and uses,’ as in the will provided. But it is equally true and obvious that the trustee could not use this power, confided for the purpose specified, as a cover for some other and unauthorized purpose and intent. He could not use it, for instance, as a cover under which to make a conveyance of the trust property for his personal benefit or to enable the cestui que trust to secure the property freed from trust provisions in order that he might embark upon a course of dealing with it which was not authorized by the will.

As we interpret them, there is amongst the findings none to the effect that the cestui que trust at the time this conveyance was made needed the principal of the trust fund for his support and maintenance or that the conveyance was made to accomplish any such purpose. The trial court expressly refused to find that the cestui que trust needed a certain specific sum per month, and the fact that out of this conveyance by the trustee not a dollar was realized for the benefit of the cestui que trust would seem to be a pretty conclusive argument against the proposition now being considered.

[2] We are not entitled to scan the evidence for the purpose of inferring additional findings as a basis for reversal of the decree rendered. But if we were, and should examine the testimony in the light of the very argument made by the appellant's counsel, we should conclude that the purpose of the executionof the conveyance was to effectuate a plan by the trustee, the cestui que trust, and his sister to buy out the trustee, and to free the property from the trust provisions to the end that the cestui que trust and sister might embark upon a program of more or less speculative treatment of the property which it was hoped would realize greater proceeds and greater returns than could be secured by a compliance with the trust.

The remaining proposition is the one that because the cestui que trust consented to and acquiesced in this conveyance of the trust property he and his representatives were and are estopped from complaining thereof. This proposition involves the consideration of several elements.

We are all agreed upon what seems to be an obvious view that if the interest of the cestui que trust in and under this trust was by statute inalienable the prohibition of the statute could not be circumvented by any process of estoppel. If the statute prohibited alienation by the cestui que trust of his interest by direct conveyance he could not...