McCarthy v. Pieret

• Decision Date: 21 November 1939
• Citation: 24 N.E.2d 102,281 N.Y. 407
• Parties: McCARTHY et al. v. PIERET et al.
• Court: New York Court of Appeals Court of Appeals

281 N.Y. 407

24 N.E.2d 102

McCARTHY et al.

v.PIERET et al.

Court of Appeals of New York.

Nov. 21, 1939.

Appeal from Supreme Court, Appellate Division, Second Department.

Action by Daniel McCarthy and others against Thomas Pieret and Michael Jackman, administrator of the estate of Catherine McCarthy Jackman, to recover an installment of interest on a mortgage. From a judgment of the Appellate Division, 255 App.Div. 1025, 8 N.Y.S.2d 554, which affirmed a judgment of the Special Term, awarding summary judgment to plaintiff, the second named defendant appeals.

Judgments reversed and complaint dismissed.

LEHMAN and LOUGHRAN, JJ., dissenting. Martin J. Fay and David Friedman, both of Yonkers, for appellant.

Edmund C. Reardon and Nelson A. Ball, Jr., both of Yonkers, for respondents.

CRANE, Chief Judge.

On or about the 7th day of March, 1932, the defendant Thomas Pieret executed a bond and mortgage in the sum of $3,000 to Catherine McCarthy Jackman. Subsequently, and on the 18th day of December, 1934, Catherine McCarthy Jackman entered into an extension agreement of the aforesaid bond and mortgage wherein and whereby the due date of payment of the bond and mortgage was extended to March 7, 1940. The extension agreement contained the following unusual provision: ‘And in the event of the death of the party of the first part prior to the 7th day of March, 1940, the interest is to be paid one-half to Daniel McCarthy, brother of the party of the first part and one-half to the heirs of Ellen Buckley, deceased sister of the party of the first part and the principal paid the same at time of maturity.’

Catherine McCarthy Jackman, the mortgagee, died on March 16, 1935, one week before the recording of the extension agreement. Thereafter, an installment of interest in the amount of the sum of $75 became due on the aforesaid bond and mortgage. This installment of interest was claimed by the plaintiffs, a brother, nieces and nephews of the deceased. They claimed the installment by virtue of the extension agreement. A similar claim was made by Michael Jackman, husband and administrator of Catherine McCarthy Jackman. The mortgagor Pieret, refused to pay either the plaintiff or the administrator on the ground that he was in doubt as to who was lawfully entitled to the installment of interest, which resulted in the bringing of this suit, Michael Jackman, the administrator, being impleaded.

The judgments below have held this extension agreement to be a valid disposition in the nature of a gift, and not an attempted testamentary disposition in violation of section 21 of the Decedent Estate Law (Consol. Laws, ch. 13). It is not always easy to determine whether a transaction is a gift or is testamentary in character. It depends upon the intention of the donor.

A concise statement of the rule, easy of expression but difficult in application, is to be found in 28 C.J. (p. 624, 11-e): ‘Where a gift is made effective in the lifetime of the decedent and he has divested himself of all power to recall it, such transaction is a gift inter vivos, and not testamentary in its nature. If the gift does not take effect as an executed and completed transfer to the donee, either legally or equitably, during the life of the donor, it is a testamentary disposition, good only when made by a valid will. * * * The test is whether the maker intended the instrument to have no effect until after the maker's death, or whether he intended it to transfer some present interest.’

If this question of intention of the testator is the deciding factor we must, I think, draw the inference that the mortgagee never intended to transfer a vested interest in the mortgage to the brother and the heirs of her sister. Neither did she divest herself of all control or interest in the mortgage. After March 7, 1940, the principal and interest were to be paid to her if she were alive, likewise the interest and principal were to be paid to her any time during her lifetime up to March 7, 1940. She could have satisfied the mortgage and taken the principal at any time during her life. Had the mortgagor desired to pay the mortgage he could have paid it to the mortgagee. Surely if this had been done these collateral relatives would have had no interest by reason of the extension. Their rights, at best, only arose on the death of the mortgagee prior to March 7, 1940. Suppose there had been default in the payment of taxes and interest and foreclosure was necessary. Could the mortgagee have foreclosed or would it have been necessary to join these collateral relatives? To put the question is to answer it. These collaterals had no present interest. Nothing was transferred to them. The mortgagee never intended to divest herself of all rights and control in and over this mortgage until her death. At death, and only that within a certain time, were these collaterals to receive anything. This to my mind is an attempt to provide for the passing of property at death, in the nature of a will, and contrary to the provisions of section 21 of the Decedent Estate Law.

Seaver v. Ransom, 224 N.Y. 233, 120 N.E. 639, 2 A.L.R. 1187, is no authority for sustaining the claim of the respondents here. Contracts made for the benefit of third parties are well recognized today, but they are executed contracts, where the promisee is unable to...