Kahn v. Rockhill

• Citation: 28 A.2d 34,132 N.J.Eq. 188
• Decision Date: 26 August 1942
• Docket Number: 139/384.
• Parties: KAHN v. ROCKHILL et al.
• Court: New Jersey Court of Chancery

28 A.2d 34

132 N.J.Eq. 188

KAHN

v. ROCKHILL et al.

139/384.

Court of Chancery of New Jersey.

Aug. 26, 1942.

[Copyrighted material omitted.]

Syllabus by the Court.

1. By the Bankruptcy Act, 11 U.S.C.A. § 110, the trustee in bankruptcy is vested with the title of the bankrupt as of the date of the filing of the petition of bankruptcy to property which prior to the filing of the petition the bankrupt might by any means have transferred and to contingent remainders which were nonassignable prior to bankruptcy and which, within six months thereafter, became assignable interests or estates.

2. An estate contingent as to the person in whom it may vest is not assignable at law in New Jersey. R.S. 46:3-7, N.J.S.A. 46:3-7.

3. A testamentary gift to testator's widow and daughter for life and upon the death of the survivor of them, unto his grandchildren, then living, and the issue of any one or more of such grandchildren as shall be then deceased, creates a contingent remainder, contingent as to the persons in whom it may ultimately vest.

4. Although a remainder contingent as to the person in whom it will vest is not assignable, at law in our state (R.S. 46:3-7, N.J.S.A. 46:3-7), it will be enforced in equity, provided it was executed for a valuable consideration and there was no fraud, when the contingent remainder has changed into a vested interest or possession.

5. Our own reported cases relating to the assignability of contingent remainders in equity have not created a distinction between remainders contingent as to event and those contingent as to person.

6. It is the appropriate function of the federal courts to interpret the words "could by any means have transferred" in the Bankruptcy Act.

7. However, local law governs the question whether or not an interest is assignable, transferable or leviable. Therefore, transferability under the local law is the determining factor.

8. Equitable Life Assur. Soc. v. Patzowsky, 128 N.J.Eq. 579, 17 A.2d 794, discussed.

9. A remainder contingent as to the person is not, while contingent, an interest which under our law the contingent remainderman "could by any means have transferred."

Suit for an accounting by Albert B. Kahn, trustee in bankruptcy of the estate of Fred Davis Rockhill, against Fred Davis Rockhill and others. On motion by defendants to strike the first alleged cause from the bill.

First alleged caused of action struck.

Perlman & Lerner, of Trenton, for complainant.

Harry G. Lenzner, of Trenton, for defendants.

JAYNE, Vice Chancellor.

The bill of complaint in this cause was previously scrutinized in the consideration of a motion to strike the answer of the defendants. Kahn v. Rockhill, 131 N.J. Eq. 279, 25 A.2d 4. The pleadings being thereby exposed to examination, the motion addressed to the answer was denied because it seemed evident that the first alleged cause in the bill failed to exhibit a cause of action maintainable by the complainant as the trustee in bankruptcy of the estate of Fred Davis Rockhill. It was accordingly announced that a motion would be entertained to strike the first alleged cause from the bill. Such a motion has now been made and it is ardently resisted on behalf of the complainant. The sufficiency of that part of the bill is now directly challenged and the subject will accordingly be more exhaustively considered.

Succinctly stated, the conclusion previously entertained was that the interest of the bankrupt originating in his ancestor's will was not vested as alleged in the bill but contingent as to the person or persons who shall take at the death of the surviving life tenant and that such an interest did not vest by statute in the trustee in bankruptcy.

To sustain the sufficiency of the bill, it is now proposed (1) that the interest of the bankrupt is vested; (2) if contingent, it is contingent as to event and not as to person; and (3) a theme not previously suggested, that if contingent as to person it is assignable in equity despite our statutory provisions (R.S. 46:3-7, N.J.S.A. 46:3-7) and "transferable" within the meaning of the federal statute (11 U.S.C. A. 110, sub. a (5), hence within the grasp of the trustee in bankruptcy. It is therefore requested that the bill (first cause) be permitted to stand albeit the interest of the bankrupt, perhaps, was erroneously described.

The pertinent paragraph of the will was set forth in the former decision but, for convenience, it may be again recited:

"Sixth,—From and immediately after the decease of my said daughter Mary, (and of my said wife, in case she shall survive our said daughter,) I give, devise and bequeath all of the principal of my said residuary estate, of whatever the same may consist and wherever situate, then remaining, unto my grandchildren, children of my said daughter Mary, then living and the issue of any one or more of such grandchildren as shall be then deceased, leaving lawful issue, him, her or them surviving, share and share alike. Such issue to take the parents share or shares."

The Bankruptcy Act, 11 U.S.C.A. § 110, ordains that the trustee in bankruptcy is vested with the title of the bankrupt as of the date of the filing of the petition of bankruptcy to

"(5) property, including rights of action, 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 against him, or otherwise seized, impounded, or sequestered;

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"(7) contingent remainders, executory devises and limitations, rights of entry for condition broken, rights or possibilities of reverter, and like interests in real property, which were nonassignable prior to bankruptcy and which, within six months thereafter, become assignable interests or estates or give rise to powers in the bankrupt to acquire assignable interests or estates."

Our statute (R.S. 46:3-7, N.J.S.A. 46:3-7) concerning the transferability of estates of expectancy contains the following restrictive provisions:

"This section shall not be construed to have empowered or to empower any person to dispose of any expectancy which he may have had or have as heir of a living person, or any contingent estate or expectancy, where the contingency is as to the person in whom, or in whose heirs, the same may vest * * *.

"This section shall not be construed to render any contingent estate or other estate or expectancy herein mentioned liable to be levied upon and sold by virtue of an execution."

The problem initially to be considered is whether the interest of the bankrupt is vested or contingent.

The primary division of remainders is into (a) vested, and (b) contingent. A vested remainder is one in which there is a present fixed right to future enjoyment of the property. A familiar illustration is an estate to X for life, remainder to Y, who is a living person. Here, while Y cannot possess and enjoy the land until after the death of X, yet his right to such future enjoyment is not affected by any contingency or uncertainty. The interest is unquestionably his. Only his possession of the property in which the interest exists is postponed until the termination of the particular precedent estate.

A contingent remainder is one in which either the person to take it is not in being or not ascertained, or the event upon which it is to be enjoyed is uncertain, or both; and so the right to the future enjoyment of the property is not fixed. Simple illustrations are an estate to X for life, remainder to his unborn son or to such of his children as may be living at the time of his death; an estate to X for ten years, remainder to Y and his heirs forever if he marries Z. A contingent estate is frequently defined as an uncertain right to future enjoyment.

Of course it does not necessarily follow in all cases that every estate in remainder which is subject to a contingency or condition is a contingent remainder. The contingency or condition may be either precedent or subsequent. If the former, the estate is contingent; if the latter, the remainder is vested subject to be divested by the happening of the condition subsequent. To distinguish between a contingent remainder and one that is vested, subject to be divested by a condition subsequent, is often a matter of difficulty, but the general rule recommends that this latter problem can best be considered and determined in each case as a question of construction of the instrument creating the interest. Assuredly, to be a vested remainder, the remainder must be free from all conditions precedent as to it.

In the present case the testator made his testamentary gift to his widow and daughter for life and upon the death of the survivor of them, unto his grandchildren, children of his daughter, then living and the issue of any one or more of such grandchildren as shall be then deceased, leaving lawful issue, to him, her or them surviving, share and share alike. Such issue to take the parents' share or shares.

Chancellor McGill, in Wilkinson v. Sherman, 45 N.J.Eq. 413, 417, 18 A. 228, 230, affirmed, Wilkinson v. Scudder, 47 N. J.Eq. 324, 21 A. 955, exemplified this essential distinction between certain and uncertain takers as follows: "The person who was to take, Frederick, was certain. That which was uncertain and dubious was the happening of the deaths in the order necessary to give him the estate. Sir William Blackstone (2 Bl.Com. 169) defines the case of limitation to a dubious and uncertain person by the illustration of a limitation to A for life with remainder to B's eldest son (then unborn) in tail. There the person was uncertain, because it could not be said that there would ever be a son of B. He further (page 170) defines certainty of person and uncertainty in event by instancing the limitation of land to A for life, and, in case B survives him, then the remainder to B in fee. B was certain, but the event of his surviving A was uncertain."

Commenting on this decision, Clapp in his...