Schwartz v. Gerhardt

• Decision Date: 01 March 1904
• Citation: 44 Or. 425,75 P. 698
• Parties: SCHWARTZ et al. v. GERHARDT et al.
• Court: Oregon Supreme Court

75 P. 698

44 Or. 425

SCHWARTZ et al. v. GERHARDT et al.

Supreme Court of Oregon

March 1, 1904

Appeal from Circuit Court, Multnomah County; Alfred F. Sears, Jr. Judge.

Action by Louisa Schwartz and another against Martin Gerhardt and others. From a judgment for plaintiffs, defendants appeal. Affirmed.

The plaintiffs, Louisa Scharwtz and Anna Gerhardt, are the children of the defendant Martin Gerhardt, and the stepdaughters of Frieda Gerhardt, his wife. They inherited in Germany, from Peter Hahn and Susanna Hahn, their grandparents on their mother's side, $1,725.12, which, it is alleged came into the possession of the defendant Martin Gerhardt; it being further alleged that he purchased lots 13, 14, 15, and 16, block 1, Lochinvar's Addition, Multnomah county Ore., known as the "Piedmont Property," with a portion of such funds, and took the legal title thereto in the name of his wife, with her knowledge of the conditions and that he converted the remainder to his own use and benefit. A decree is demanded that the real property described be held in trust for plaintiffs, together with an accounting. The plaintiffs having succeeded in the circuit court, the defendants appeal.

Where it was shown that property was of considerable value, and was purchased with the trust funds of plaintiffs, defendant must be held to hold the same as trustee, constructively, for plaintiffs, although the amount of the purchase price was not shown.

C.J. Schnabel and Daniel R. Murphy, for appellants.

A.L. Veazie, for respondents.

WOLVERTON J. (after stating the facts).

The defendants, at the threshold of the controversy, challenge the jurisdiction of the court to require an accounting, or to control in any manner Gerhardt's disposition of the funds, which it is insisted that he holds as the father and natural guardian of plaintiffs, and is accountable only to the court in Germany that gave him the property for administration during the minority of the plaintiffs. It is undoubtedly a well-established principle of law that a trustee appointed by a foreign court is amenable only to that court, and the fact that his residence is in another jurisdiction will not confer authority there to control the administration of his trust, or to require accountability for the trust property. The rationale of this doctrine is that, the trust relations having been created by judicial decree of another country, the trustee is accountable only to the court creating the trust. He becomes the instrumentality of the court for the administration of the property intrusted to his care and custody, which is to be considered and treated as in custodia legis; and, if other jurisdictions were permitted to interfere with and to direct the execution of the trust, it would lead to great conflict of authority and inextricable confusion, which would hinder rather than aid in the rightful administration thereof. 2 Beach, Trusts & Trustees, § 758; Campbell v. Sheldon, 13 Pick. 8; Jenkins v. Lester, 131 Mass. 355; Curtis v. Smith, 6 Blatchf. 537, Fed.Cas. No. 3,505; Woodruff v. Young, 43 Mich. 548, 6 N.W. 85; Vaughan v. Northup, 15 Pet. 1, 10 L.Ed. 639; Peale v. Phipps, 14 How. 368, 14 L.Ed. 459. Gerhardt, however, as we view the situation, is not in a position to invoke the rule. The complaint states that on or about the 13th of January, 1898, a decree was rendered by the Second Civil Department of the Grand Ducal Circuit Court of Mayence, Germany--a court of general jurisdiction, having jurisdiction of said cause and parties--to the effect that the said defendant Martin Gerhardt, as father and natural guardian of the plaintiffs herein, was entitled, under the laws of Germany, during the minority of each of the plaintiffs, to the custody and control of her respective share of the said inheritance, to the extent of three-fourths thereof, and that by such decree the said George Hahn was directed to pay over the said three-fourths share of the said inheritance to the said defendant Martin Gerhardt accordingly. This averment does not appear to have been denied by the answer, but it is alleged that a part of the money left by the grandparents, to wit, $1,145.49, was by said court of Germany decreed to be paid over to the defendant Martin Gerhardt, to be used and expended by him for said children during the time they were under the age of 21 years. The decree referred to is, in part, as follows:

"(1) The wills of Peter Hahn and Susanna, née Hambach, his wife, of Nierstein, dated November 7, 1889, July 31, 1891, and February 12, 1894, are hereby declared void in so far as they deprive the plaintiff of the administration and of the [use and enjoyment] usufruct of three-fourths of the inheritance of his children.

"(2) It is further found that the plaintiff is entitled to the administration and [use and enjoyment] usufruct of these three-fourths until the children have completed their eighteenth year, and that it is the duty of George Hahn, the defendant, to surrender the plaintiff three-fourths of his children's property, if in his possession; the right to ascertain the amount in detail being reserved."

This is all the evidence to be found in the record tending to show that Gerhardt is a trustee of plaintiffs and their property. The opinion of the court in Germany indicates that the father is not only entitled, under the laws of that country, to the right of administration of the property of his minor children coming to them by inheritance, but that he has a right to the use and enjoyment, or the usufruct, of such property during the time of their minority; the term "usufruct" signifying "the right of enjoying a thing, the property of which is vested in another, and to draw from the same all the profit, utility, and advantage which it may produce, provided it be without altering the substance of the thing." Bouvier, Law Dict. Some criticism as to the correct translation of the term in German standing for "use and enjoyment," or "usufruct" is made, but, by reading the court's decree, together with its opinion in the decision rendered, we are convinced that the father is entitled to the usufruct; that is, the profits or earnings of his children's estate during their minority, and not to the corpus thereof, or any part of it. While Mr. Gantenbein was on the stand as a witness for plaintiffs, it was developed on cross-examination that he had the Codes of the German Empire of 1898, consisting of 10 or 12 volumes, in his office, in the city of Portland; that he had never looked into them to ascertain whether a bond was required of a guardian where there was a fund to be distributed, but that he had good reason to believe, from a letter written by a judge of the court in Germany, that such a bond was required, and proffered to offer the letter in evidence if defendants desired, but it was not offered. When asked to produce the Codes, the witness demanded proper notice to do so. Here the case rested, without a production of the Codes, or their being introduced in evidence. We have therefore the simple record, showing the inheritance of the plaintiffs in Germany, which a competent court of that country directed to be surrendered to the defendant Martin Gerhardt, their father, he being entitled thereto under the laws of that country for

the purpose of administration, with a right to the profits or earnings arising therefrom during their minority; that is, until they arrive at the age of 18 years. The findings and decree of the court contain no order or direction that he give or furnish any bond or other security for the faithful performance of his trust, nor do they require that he account to the court for the funds thus directed to be delivered or surrendered to him; and the Codes and laws of that country regulating the manner or disposition of such property are not before us. Are we to assume, in the light of this evidence, that the property is in custodia legis, or should we take it that the order of the German court introduced made a final disposition thereof, in so far as it was authorized to control and direct its administration, and the trustee's accountability therefor to that tribunal? It was said at the argument that this court would presume that the laws of Germany in respect to the guardianship of the estates of minors would be the same as our own; therefore, that a bond was required of the guardian, and that he was accountable to the court appointing him. We have enough before us, however, to indicate that the laws there in the respect mentioned are not the same as our own, and hence the presumption cannot hold good. The father there is entitled as of right to both the administration and the profits or earnings of the property during the minority of his children. Not so here. The natural guardian has the preference, if he apply for it, to appointment as guardian of the minor's estate, but has no right whatever to the profits arising therefrom, and is held to a strict accountability to the county court or the ward for the entire property intrusted to him, with all accumulations of profits and earnings. The presumption invoked cannot, therefore, avail the defendants; and, under the evidence, we think the better view is that the decree of the German court finally disposed of the fund when it ordered unconditionally, as it did, that the property be surrendered to the father. When he took possession, it ceased to be in custodia legis, and he only became accountable to the plaintiffs for the faithful execution of his trust. The trust was therefore subject to equitable cognizance in this jurisdiction.

This brings us to a consideration of the rightful ownership of the realty in controversy. That depends upon whose money was used in its purchase. Plaintiffs say it was theirs, and,...