Matthews v. Thompson

• Decision Date: 20 May 1904
• Parties: MATTHEWS v. THOMPSON et al. THOMPSON et al. v. SAME.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

186 Mass. 14

71 N.E. 93

MATTHEWS v. THOMPSON et al.

THOMPSON et al. v. SAME.

Supreme Judicial Court of Massachusetts, Suffolk.

May 20, 1904

COUNSEL

Romney Spring and Roger S. Warner, for plaintiff Matthews.

Charles E. Shattuck and F. M. Ives, for plaintiffs Henry Thompson and others.

G. W Anderson and W. A. Rollins, for defendants.

OPINION

KNOWLTON C.J.

Edward Thompson, the intestate of the plaintiff in the first suit became indebted from time to time in a considerable sum to his unmarried sisters, Elizabeth B. Thompson and Frances M Thompson, who were old ladies, unfamiliar with business. Of his own motion, he made to them, as security, a mortgage of the real estate in question, subject to other mortgages which together amounted to about $37,000, and afterwards he caused them to foreclose this mortgage. A conveyance of the property, subject to the prior mortgages, was made to his son, who held it as agent of these sisters of the intestate. Subsequently the intestate caused his son to convey the property to the intestate's nephew, one Eldridge, who executed a declaration of trust for the benefit of the old ladies, to secure them for their previous mortgage debts, and also for the benefit of their brother, Henry Thompson, to secure him for any advancements that he might make to Edward Thompson, and any other claims that he might hold against Edward. The declaration of trust also provided that after the payment of these debts the trustee should pay the balance, if any, to Edward Thompson. This declaration was not acknowledged or recorded. It was understood that Edward Thompson was to have the entire management of the property, and these arrangements for security were made at his suggestion. At the end of about a year and a half, at his request, a paper was signed by the beneficiaries, and sent to Eldridge, as follows: 'September 16, 1896. Mr. William T. Eldridge--Dear Sir: We hereby request and authorize you to convey to Edward Thompson, the real estate in Boston conveyed to you by Frederick P. Thompson. Henry Thompson. Elizabeth B. Thompson. Frances Mary Thompson.' The intestate inclosed this paper to Eldridge, and asked him for a conveyance of the real estate. Thereupon, on October 6, 1896, Eldridge conveyed the land to Edward Thompson by a deed which was duly recorded, and which contained no reference to a trust. The deed was in the form of an ordinary quitclaim, purporting to be for a consideration of one dollar paid by Edward Thompson, not describing him as trustee; and it contained a warranty that the premises were free from all incumbrances made or suffered by Eldridge, and a warranty against the lawful claims and demands of all persons claiming by, through, or under him. This deed was delivered by Eldridge to Edward Thompson, and was duly recorded. After this conveyance Edward Thompson held the land as if it were his own, mortgaged it several times for his own debts, had repeated negotiations for the sale of it, and treated it in all respects as if he were the absolute owner of it. The first question in the cases is whether he held it charged with a trust in favor of his brother and sisters, so that it still remains subject to this trust in the hands of his widow, to whom it was afterwards conveyed in his lifetime.

In reference to the transfer from Eldridge to the intestate, the presiding justice found 'as a fact that the intention of all parties interested, including that of the retiring trustee, Mr. Eldridge, was not that Mr. Edward Thompson should hold as a trustee.' He found 'that the intention of his brother and sisters and of the retiring trustee was that the title should go back to him (Edward Thompson), and that the brother and sisters relied upon his saying what he would do in regard to their debts, not because he was a trustee, but because he was their brother, and they were willing to trust him.'

As all the parties were of full age, and as the trust was created by an arrangement to which the trustee and the cestuis que trust were the only parties, there is no doubt that they could terminate it at any time. Smith v. Harrington, 4 Allen, 566; South Scituate Bank v. Ross, 11 Allen, 442; Sears v. Choate, 146 Mass. 395; Brown v. Cowell, 116 Mass. 461. Upon the findings of the judge, it is plain that they undertook to terminate it, and supposed that they had terminated it. The plaintiffs in the second suit, the former cestuis que trust, rely upon Pub. St. 1882, c. 120, § 3 (Rev. Laws, c. 127, § 3), which provides that 'no estate or interest in land shall be assigned, granted or surrendered unless by such writing [an instrument in writing signed by the grantor or by his attorney], or by operation of law.' The kind of instrument in writing required under this section depends upon the nature of the interest to be assigned or surrendered. In the present case, not only the legal estate, but, by the record title, an absolute estate in fee, including equitable interests as well as legal, was in Eldridge. This title was affected only by an unacknowledged and unrecorded paper. By his deed to Edward Thompson, Eldridge assigned and conveyed, according to the record, a perfect title, subject to prior mortgages. This deed was an instrument in writing. The only additional instrument required by the statute was a writing which would relieve the grantor from the consequences of what would have been a breach of trust if he had acted without authority from the cestuis que trust. Nothing more was needed to pass a title which was free from equities. As applied to conditions like the present, we are of opinion that the assignment of the equitable rights of the plaintiffs in the second suit, made by a deed of one who held of record a perfect title, and who acted under their authority given in writing, was a compliance with the statute. If we consider it as a surrender of equitable rights, we are of opinion that the paper which they signed was all the instrument required by the statute; it being given as an authority to be acted upon, and which was in fact acted upon, by the trustee who held of record an absolute title. The principle is analogous to that which has been applied to the surrender and cancellation of an unrecorded deed of defeasance given in connection with an absolute deed to constitute a mortgage. When this is done in good faith, and is subsequently acted upon by the person to whom the surrender is made, the original holder is estopped from setting up the surrendered instrument against the existing title. Trull v. Skinner, 17 Pick. 213; Falis v. Conway, etc., Insurance Company, 7 Allen, 46-49. See, also, as to parol waiver by cestuis que trust under the statute of frauds, Appeal of Kline, 39 Pa. 463; Miller v. Pierce, 104 N.C. 389, 10 S.E. 554; Garrell v. Alspaugh, 120 N.C. 362-368. The action of the parties, taken in good faith, makes it impossible, in equity, for the cestuis que trust to hold the trustee for a violation of his duty in making the conveyance, or to charge the conscience of the grantee, having knowledge of the previous trust, with a duty to hold subject to the trust.

The suggestion that the trust could not be discharged without the action of the prior mortgagees is not well founded. They are not cestuis que trust, under the declaration, but the reference to the mortgagees and the payment of their debts is only a recognition of the prior incumbrances, subject to which the trust must be executed, and the payment of which would be a necessary preliminary to the payments to the sisters and brother.

We are of opinion that Edward Thompson took the property discharged from the trust, and that the second bill must be dismissed.

The second question in the first case is whether the conveyance from Edward Thompson to his wife as a trustee is fraudulent as against his creditors. There was no valuable consideration for the deed. There is nothing to indicate that his wife's release of dower was made as a consideration for anything that she was to receive or that he was to give. It did not enter into the transaction as a contractual element, but it was like the ordinary release of dower by a wife as an incident to a contract between others, to which she was not a party. If such a conveyance is set aside as fraudulent, the release falls with it, and the wife regains her right of dower. Stinson v. Sumner, 9 Mass. 143, 6 Am. Dec. 49; Robinson v. Bates, 3 Metc. 40; Walker v. Walker, 101 Mass. 169.

The mere fact that a conveyance is voluntary, especially if it is founded on a consideration of love and affection, as in the case of a gift from a husband to his wife, or from a parent to his child, does not necessarily render it fraudulent against creditors. Whether it is fraudulent or not depends upon the circumstances under which it is made. Cook v. Holbrook, 146 Mass. 86, 14 N.E. 943; Clark v. McMahon, 170 Mass. 91, 48 N.E. 939; Blossom v. Negus, 182 Mass. 515, 65 N.E. 846. It is ordinarily a question of fact whether a conveyance was made with intent to hinder, delay, or defraud creditors. But in considering such cases the principle is applied that one is presumed to intend the natural consequences of his act. If the known conditions are such that the effect of the act will be to hinder, delay, or defraud creditors, the inference follows as matter of law, unless there is something else to control it.

In the present case the conveyance was of substantially all the grantor's property. Both he and his wife, to whom through a third person the conveyance was made, knew that he was insolvent. In fact, he owed about $75,000. The conveyance was in trust to manage the property, with a power to sell and convey or mortgage all or any part of it, and to apply the net proceeds to the payment of taxes and...