Vought's Estate, In re

• Decision Date: 21 December 1973
• Citation: 351 N.Y.S.2d 816,76 Misc.2d 755
• Parties: In re ESTATE of Chance VOUGHT, Jr. Surrogate's Court, New York County
• Court: New York Surrogate Court

Page 816

351 N.Y.S.2d 816

76 Misc.2d 755

In re ESTATE of Chance VOUGHT, Jr.

Surrogate's Court, New York County.

Dec. 21, 1973.

Copal Mintz, New York City, for plaintiffs, Bernard Snyder and others.

Frederick Siegmund, New York City, for defendant Eugenie A. Vought, administratrix c.t.a.

S. SAMUEL DiFALCO, Surrogate.

These four separate actions against the administratrix c.t.a. which have been tried by the court arise out of transactions between decedent and plaintiff's predecessors in interest (hereinafter called original assignees) in 1959 and 1960 and relate to the decedent's remainder interest in one-half of the principal of a testamentary trust created by his father.

In a prior decision involving the father's estate, this court held that the decedent's remainder interest was vested and that the purported assignments of the principal were void and unenforceable because the will provided that the remainder was inalienable. This decision was affirmed by the Appellate Division and the Court of Appeals. (Matter of Vought's Estate, 57 Misc.2d 396, 293 N.Y.S.2d 34, affd., 30 A.D.2d 805, 292 N.Y.S.2d 991, affd., 25 N.Y.2d 163, 303 N.Y.S.2d 61, 250 N.E.2d 343, mot. for rearg. den., 25 N.Y.2d 959, 305 N.Y.S.2d 1027, 252 N.E.2d 864.) Thereafter plaintiffs instituted these four actions in Supreme Court, New York County which now have been transferred to this court upon motion by the estate. In all of the actions plaintiffs sought the identical relief, viz: To impress a trust upon the remainder interest payable to decedent's estate; for damages for breach of contract and for restitution. This court granted motions by the estate to dismiss the first cause of action in all of the complaints which sought to impress a trust, but denied the motions to dismiss and for summary judgment as to the remaining causes of action for breach of contract and restitution. (Matter of Vought's Estate, 70 Misc.2d 781, 334 N.Y.S.2d 720, adhered to on reargument N.Y.L.J. October 12, 1972).

The causes of action for breach of contract are based upon a provision in each of the instruments of assignment wherein decedent agreed that if the sum assigned 'is paid to me by operation of law or by reason of the trustee's refusal or failure to pay the said sum directly to the said assignee or its successors or assigns, or if for any reason whatsoever the said sum shall come into my hands, then and in such case, I shall hold the same in trust for the benefit of said Assignee, and forthwith pay the said sum over to it without further demand or direction.'

The court after examining New York law, that of other jurisdictions, as well as opinions of eminent authorities, held that there exist causes of action to recover damages for breach of contract based upon decedent's personal obligation to pay over the fund. The court did not hold that a cause of action exists for specific performance or that the agreement may be treated as a lien against the assigned property but only that the cause of action is to recover damages for breach of the decedent's promise. To enforce specific performance or to attach a lien to the trust property in this situation, would completely nullify the spendthrift provisions in the father's will (cf. Kelly v. Kelly, 11 Cal.2d 356, 79 P.2d 1059).

The court pointed out, however, that there is a question as to whether, under our public policy, such a promise should be enforceable and also whether the defenses of usury, fraud and unconscinable contract, preclude such enforcement. The matter has now been tried before the court.

It is undisputed that decedent executed instruments purporting to be bills of sale and assignments of his remainder interests which all contained his personal obligation as follows:

(a) On October 27, 1959 to Inheritance Estate Ltd. in the sum of $450,000;

(b) On October 27, 1959 to Allied Investment and Discount Corp. in the sum of $150,000 subject to the prior assignment;

(c) On January 8, 1960 to Lex Co., Inc. in the sum of $500,000 subject to the prior two assignments (which was reassigned to Leonard P. Levy) and

(d) On August 11, 1960 to Leonard P. Levy, all of his remaining interest in the principal subject to all three prior assignments.

There was evidence that decedent was, at the time of these transactions, an alcoholic suffering from chronic relapsing pancreatitis and diabetes and was addicted to the use of drugs as a result of the suffering caused by this condition. It further appears from this evidence that these conditions caused some impairment of judgment, and that he was at the worst point physically at the time of the transactions. He had been in the hospital for a four day period ending October 23, 1959, saw his physician on the 26th and was back in the hospital on the 31st of October just four days after the execution of the documents. Decedent's financial circumstances were no better than his physical and mental condition. He was in the words of one witness in 'desperate financial straits' being pressed by creditors and by his wife for alimony and child support. He had previously tried unsuccessfully to borrow against the estate.

Robert I. Morris, an attorney from Philadelphia was the individual who introduced decedent to Samuel Cohen, also of Philadelphia. Cohen was the broker who arranged these agreements and who was also a principal stockholder of Allied Investment and Discount Corp., one of the original assignees. Morris was a lodge brother of Cohen. Cohen and the other original assignees had been in the business of making loans upon estate interests for many years and had wide experience in this area. At the time of the agreements, the market value of one-half of the trust principal was over $900,000 and was invested in diversified high grade stocks and bonds. The original assignees had acquired information as to these matters prior to execution of the assignments.

It appears that there was little, if any, bargaining involved in the actual transaction. Whatever offer was made, decedent accepted in light of his financial condition and the restrictions of the spendthrift clause in his father's will. Morris, purportedly represented the decedent in the transaction. His advice to decedent seems to have been limited to the necessity for decedent to obtain money.

While the decedent's interest was valued at $900,000 it was subject to a life estate. The life income beneficiary, decedent's mother, was 62 years old at the time of the assignments. She was a frail, petite woman who was not very healthy and was obviously very much affected by her son's condition. An actuarial expert testified that according to the 1959 Mortality Table published by the Department of Commerce, her life expectancy was 17.8 years and that it was 14.78 years under the commission's standard ordinary table (C.S.O.). The actuary testified that the present value in 1959 of a $450,000 fund based on 6 per cent interest and a life expectancy of 17.8 years was $159,457 and that the present value of a $600,000 fund based on the same interest and life expectancy was $212,729. While the Court of Appeals has held in Hartley v. Eagle Insurance Co., 222 N.Y. 178, 118 N.E. 622 that mortality tables are only slight evidence of life expectancy, the evidence in this case as to the life income beneficiary's actual physical and mental condition supports the conclusion that her actual life expectancy viewed at that time was in the area of 17 years. It is noteworthy that the life income beneficiary actually died six years after the execution of the assignments.

The testimony offered on behalf of the plaintiff was that $66,000 was paid for the assignments of $450,000. It appears, however, that checks totalling only $61,000 were payable to decedent. The court finds that these checks were not endorsed by decedent but were signed by someone else and deposited in Morris' trustee account. From these monies, $6,000 was paid to Cohen as a broker's fee. His was a dual role as broker and agent of the original assignees; $500 was used to form Lex Co. a corporation used by the assignees to act as assignee of the third assignment and that $500 was paid to Morris and Cohen as reimbursement for alleged cash advances which were not proven. It appears that the actual consideration paid to Vought or in his behalf was in the area of $54,000. The court cannot exactly determine from the evidence what amount was actually received by decedent or paid on his behalf. An amount of approximately $24,500 was paid to decedent's creditors and a $2,000 fee was paid to Morris as attorney's fee and the balance was purportedly advanced to decedent and deposited to his account. Morris, however, could not give a breakdown of any advancements nor produce any cancelled checks. Plaintiffs were unable to establish by competent and credible testimony or by documentary proof whether any amounts were paid for the remaining assignments.

Upon consideration of all of the evidence the court is of the opinion that at least the first two and that possibly all of these agreements were but one transaction and supported by the one consideration. The court has difficulty understanding how these original assignees, aware as they were of possible litigation over the spendthrift clause, could have destroyed any documentary proof that would support the consideration paid for these last three assignments. In any event inasmuch as no consideration was established for the last two agreements, upon which the Colligan action is based, that cause of action for breach of contract must be dismissed. (Matter of Gurlitz, 105 Misc. 30, 172 N.Y.S. 523, mod. sub nom., In re Lynde's Estate, 175 N.Y.S. 289, affd., 190 App.Div. 907, 179 N.Y.S. 933; 1 Scott on Trusts, 3rd ed. § 86.1). The cause of action for restitution contained in that action was dismissed upon the motion made at the conclusion of the trial.

The court is also of the opinion that the causes of action for breach of...