
    Charles W. Clowe, as Trustee, Etc., Plaintiff, v. Elizabeth S. C. Seavey and Others, Defendants.
    (Supreme Court, Saratoga Trial Term,
    November, 1911.)
    Assignments — Expectant estates — Contingent remainders.
    Bankruptcy — Validity of transfers and preferences by bankrupt and proceedings to annul such transfers — Preferences fraudulent in part — Sustaining transfer as to residue.
    Wills — Interpretation and construction — Disposal óf the entire estate — Eules and implications — Implications from general dispositive expressions.
    Where a testator gives a share of his residuary estate to trustees for the sole use and benefit of his son and his son’s wife during their lives and the life of the survivor, for the maintenance of themselves and their lawfully begotten children, and directs the net income to be paid to them for such purpose, or, in the event of the son’s death and his wife’s remarriage, to be paid to. such children, and further provides that, after payment . of “ all the special bequests and devises, as heretofore stated, the remainder of my estate, real, personal and mixed, shall, be divided into four equal parts, and disposed of in the manner and form herein pro-’ vided and directed,” the fair interpretation of the provision is that during the life of the testator’s son and the latter’s wife, or the survivor of them, their share should be held in trust for the benefit of themselves and their children, and that, after the death of the testator’s son and his son’s wife or her remarriage, the principal of such one-fourth of the residue of the estate should be delivered and paid to the children of his son or their descendants.
    , The interest of the daughter of the son of th^ testator under the will is assignable whether it be a vested or a contingent remainder.
    Where, after several loans to the testator’s granddaughter from her mother-in-law, the latter declined to make a further loan except upon an assignment of the former’s interest in her grandfather’s estate, which was made accordingly, the assignment should be upheld so far as it was given to secure the money loaned at that time, though as to the former loans it was invalid as a preference and must be set, aside as against the trustee in bankruptcy of the. granddaughter, appointed upon the latter’s adjudication as a bankrupt within four months after the execution of the assignment.
    Action to set aside an assignment of a future interest in an estate as in fraud of creditors.
    
      Hiram C. Todd (Edgar T. Brackett and W.'E. Bennett, of counsel), for plain tiff..
    Beardsley, Hemmens & Taylor (Henry J. Hemmens and George Tiernan, of counsel), for defendants.
   J. A. Kellogg, J.

The plaintiff has been appointed trustee in bankruptcy of Elizabeth S. C. Seavey, one of the defendants, and by this action seeks to have set aside a certain instrument executed Hovember 19, 1908, whereby the said Elizabeth S. C. Seavey purported to assign to the defendant Mary E. Seavey, her mother-in-law, her interest under the will of her grandfather, William H. Clement, deceased.

Elizabeth S. C. Seavey and Henry S. Clement, Jr., are the only living children of Henry S. Clement, who also is living. Their mother, Julia Y. Clement, is dead. William H. Clement, late of Warren county, Ohio, died in or about the year 1887, leaving a last will and testament which was admitted to probate at the place of his residence, and afterward recorded in the surrogate’s office in Saratoga county in the State of Hew York.

The eighth and eleventh clauses of said will, which are pertinent in this controversy, are as follows:

“I will and bequeath to my son, John B. Clement, and my friend, John Cox, of the City and State of Hew York, in trust and as trustees, for the sole use and benefit of my son, Henry S. Clement, and his wife, Julia Y. Clement, for and during the period of their natural lives, or during the lifetime of the survivor of the said Henry S. or Julia Y. Clement, for the purpose of supporting and maintaining them and their children lawfully begotten and born to my said son by his said wife, Julia Y., or in the event of her death before his, to the support and maintenance also of such children lawfully begotten and born to my said son in wedlock, by another marriage or marriages, and for no other purpose, one undivided one-fourth part of the said remainder of my said estate. And I further order and desire my said son, John B. Clement, and the said John Cox, as Trustees aforesaid, to collect said moneys herein devised by this bequest, and all the rents, profits and income of the same, during the lifetime .of my said son, Henry S. Clement, or during the lifetime of my said son’s wife, Julia Y. Clement, and to pay the net income or residue of ¿11 such money collected, after paying taxes, insurance, and all.the other necessary expenses or charges due on, or connected with the said trust estate, during the continuance of the said trust, to my said son, Henry S. Clement, during his lifetime; and after his death, to his said wife, Julia Y., during her lifetime, should she survive him, if she remain the widow of my said son, for the uses and purposes aforesaid.

In the event of' the death of my said son and the remarriage of his said wife, should she survive him, I desire and direct my said trustees, John B. Clement, and John Cox, to pay to my said grandchildren, lawful children of niy son, Henry S. Clement, or their descendants, all the estate hereby devised to my son, Henry S. Clement, and his children as aforesaid, herein expressed.’-’

“Item 11th. That is to say, after paying all the special bequests and devises, as heretofore stated, the remainder of my estate, real, personal, and mixed, shall be divided into four equal parts, and disposed of in the manner and form .herein provided and directed. And I further direct and desire that in the event of the death of any of my said children, Henry S., John B., Florence P., -Clement, or Caroline W.Soteldo, before my decease, leaving no lawful lineal descendants, then, in that event, the portion of my estate, and each and every part thereof herein devised or bequeathed to such child or children, dying without lawful issue, before me, shall pass to, and vest in equal parts in my said own children living at the time of my decease and the lawful issue of any of my deceased children, and the lawful children of their children, shall take and receive the portion of its deceased parent in the manner provided in this my last Will and 'Testament.” '

Under a narrow and literal construction there is no disposition by the will of the testator of the remainder after the termination of the trust, except in the event of the death of Henry S. Clement and the re-marriage of his widow.

Such, however, was clearly not the intention of the testator.

The provisions are very clumsily drawn, but I think their fair interpretation, in the light of the evident intent of the testator, is that during the life of his son, Henry Si Clement, and his wife, Julia T. Clement, or the survivor of them, this one-fourth of the residue of his estate should be held in trust for the benefit of his son and his son’s wife and their children; and that, after the death of his son and his son’s wife or her re-marriage, the principal of such one-fourth of the residue of the estate should be delivered and paid to the children of his son or their descendants.

This was the manifest scheme of the testator, clearly apparent from a reading of the sections quoted.

The well established canon of construction is announced by Judge Brown in Tilden v. Green, 130 N. Y. 29, as follows: “At the threshold of every suit for the construction-of a will lies the rule that the court must give such construction to its provisions as will effectuate the general intent of the testator as expressed in the whole instrument. It may transpose words and phrases and read its provisions in an order different from that in which they appear in the instrument-, insert or leave out provisions if necessary„ but only in aid of the testator’s intent and purpose. Never to devise a new scheme or to make a new will.” Pp. 51, 52.

The testator’s intent and purpose and his scheme as evidenced by the context of the will compel the conclusion that the trust should exist during the joint lives of his son and his son’s wife, unless shortened by the re-marriage of the latter; and that, upon the termination of the trust, the prop- • erty should be delivered to the remaindermen, descendants of Henry S. Clement.

Much discussion has been had as to whether the interest of the children of Henry S. Clement, one of whom is the defendant Elizabeth S. C. Seavey, which they take under the provisions of this will is a vested or a contingent remainder.

It is unnecessary to determine this somewhat involved . question for the reason that, whether this remainder was vested or contingent, it was plainly assignable and, therefore, becomes proper subject matter for an action of this nature. Whatever doubt may have heretofore existed upon this subject, if any, is certainly laid at rest by the late decision in the ease of National Park Bank v. Billings, 144 App. Div. 536, affd. by the Court of Appeals October 24,. 1911, upon the opinion of Justice Miller.

The contention of the learned counsel for the defendants, that the interest of the bankrupt is so shadowy and intangible as not to be assignable, and, therefore, not subject to an. action of this nature, is entirely at variance with his presumed opinion at the -time he drafted and supervised the execution of the assignment in question.

If the interest would not have passed to a trustee in bankruptcy, it could not have been assigned to a third person. In 1907, the defendants Elizabeth S. C. Seavey and Henry S. Clement, Jr., were appointed substituted trustees of the trust •in question by the Probate Court of Warren county, Ohio.

The trust estate consists of -an undivided interest in real property situated at Saratoga Springs, N.'T., and of securities physically present within the State.

The assignment of the interest which it is in this action sought to set aside, recited “ that the party of the first partj in consideration of the covenants hereinafter contained to be performed by the party of the second part, and of all the advances in money heretofore made by the .party of the second part to the party of the first part,” etc.

The covenant contained in the agreement, referred to as a portion of the consideration, was: “And as a further consideration of the foregoing sale, transfer, assignment and conveyance the party of the second part doth hereby, for herself, her executors, administrators and assigns, agree with the' party of the first pant that she will, upon the execution and delivery of this agreement, make, execute, publish and declare a last will and testament, in which she will give, devise and bequeath, all the said estate hereby conveyed to her, as well as all of her other estate, both real and personal, of whatever name and nature and wherever situated, of which she may be seized or possessed, in trust, for the sole use,' benefit and. support of her son, J ames Arthur Seavey, of the City, County and' State of New York, and his wife, Elizabeth S. C. Seavey, of the City, County, and State of New York, for and during the period of their natural lives, and during the life of the survivor of the said James Arthur Seavey, and said Elizabeth S. C. Seavey, and the remainder to their son, Arthur Clement Seavey, of the City, County and State of New York.”

In accordance with this covenant, a will was subsequently executed and published by Mary E. Seavey.

On or about September 30, 1901, the bankrupt had signed, as a joint maker with her brother, a note for $10,000 payable to Edgar T. Brackett, which note was renewed from time to time, and at one of these renewals acquired the additional security of the indorsement of James A. Seavey. The last renewal of this note is held by the Adirondack Trust Company, and has been put in judgment, and is the only claim 'against the bankrupt’s estate which has been proved in, the bankruptcy proceedings.

The evidence quite clearly shows that, shortly before the making of the assignment in question, correspondence of a very vigorous nature was had with the bankrupt which must very forcibly have called' her attention to the fact that this note upon which she was liable was outstanding, and her attention had also been directed to the fact, or at least to the claim, that she owned an assignable interest in her grandfather’s estate. She, must have had both of these conditions largely in mind; and, unless this assignment was founded upon adequate and fair consideration and did not violate well known principles of law, it cannot he upheld as against creditors, or as against the trustee in bankruptcy who has succeeded to the rights of such creditors and who is empowered under the law'to enforce such rights. It is claimed in defense of the assignment, however, that, at various times from 1891 down to the time of the execution of the instrument, the elder Mrs. Seavey loaned the bankrupt various sums of money which, prior to November, 1908, aggregated the sum of $1,600 and that, in that month, the daughter-in-law applied for a further loan, which the elder Mrs. Seavey declined to make unless she was secured, and that, as a result of this demand upon her part, another advancement of $1,000 was made and the assignment was executed.

There is nothing whatever in the evidence of either of the ladies from which it could be found that the provision contained in the assignment- as to the making of the will was any portion of the' consideration for the assignment. Such provision evidently was inserted by the attorney for the palpable purpose of fortifying the instrument and making it less subject to successful attack, by including in the terms and upon its face an additional consideration for its execution; but it was not at all within the contemplation of the parties when they made their agreement, according to their own statements.

Although the evidence quite clearly discloses an intent upon the part of the bankrupt to hinder and delay her creditors by placing her interest in her grandfather’s estate, which was her only property of value, beyond their reach, such assignment cannot be set aside, unless there be also legal fraud upon the part of the grantee. Although both Elizabeth S. C. Seavey and Mary E. Seavey testified that the various advances prior to .November, 1908, were made as loans, the cross-examination of Mary E. Seavey disclosed the fallacy of this theory. The circumstances also indicated distinctly the contrary. M-ary E. Seavey had one only son, James A. Seavey, the husband of the bankrupt.

From time to time extraordinary expenses, due to sickness, surgical operations and childbirth, had to be met in the family of this her son; and at these times, at the request of her daughter-in-law, she advanced sums of money. They evidently were not advanced with any expectation of repayment, and no portion of them ever was repaid, and against many of them the Statute of Limitations had run. They were very clearly, in my opinion, gifts rather than loans and were advanced to the daughter-in-law, neither with the belief nor the agreement that she would repay, but because the elder Mrs. Seavey considered that the disbursements would be more economically made by her than by her son.

The incapacity of the bankrupt to repay the loan was frequently reiterated by both parties to the assignment, and her future interest in the estate of her grandfather, which was her only property interest, was considered by both to be of little or no value.

When, in November, 1908, however, a further advance was demanded, the idea of malting an assignment as security was.to some extent prominent in the minds of the parties, if they are to be believed; and, when the elder Mrs. Seavey demanded security for an advancement at that time of $1,000, and had no knowledge of the involved financial condition of her daughter-in-law, she is entitled to this extent to be protected by the assignment. The court was very much impressed by the honesty of her testimony, although the theory which she at the trial sought to assert to the effect that the prior advances had been loans, was incorrect, and had evidently' come to her, not by reason of actual recollection of the transactions at the time, but by suggestions of other parties in interest more lately made, which had become impressed upon her memory. She was simply mistaken in her recollection and was not attempting knowingly to falsify.

As has been noted, the condition in the assignment as to the making of the will was not in the mind of either of the women prior to the making of the written assignment. The $1,000 was advanced, and it was agreed that the daughter-in-law should 'assign her interest in her grandfather’s estate as security therefor. This was the agreement and all of it. The writing itself was drawn some days later and contained matters not within the agreement; and, therefore, as to those additional matters, the paper had no force or effect in law.

The provision as to the will was embodied in the written paper, probably without thorough comprehension on the part of either of the parties, certainly without such comprehension on the part of the assignee, for the evident purpose of serving as an additional “ anchor to windward ” to, if possible, preserve the assignment through the stress and storm which it would evidently thereafter be called to weather.

It is most clear that the written assignment did not express the intention of the parties. It was merely intended as security, and it should serve as security for the $1,000 advanced shortly before the time it was executed and for which security it was demanded and promised. It should not serve for security for prior advances which evidently were in the nature of gifts.

In this view the assignment should be set aside, except so far as it must be preserved to protect the advances of the defendant Mary E. Seavey, of $1,000 with interest from its date, November 19, 1908.

In this decision, the action of the court in Lazarus v. Rosenberg, 10 App. Div. 105, approved in White v. Fromme, 120 id. 182, is followed, so far as the facts permit. ■

His costs of the action, including an additional allowance of $250, should be paid to the plaintiff out of whatever.funds may be realized -from the disposition of the interests' of the bankrupt under the will of William H. Clement, deceased. The taxable costs of the defendant Arthur Clement Seavey, an infant, who was impleaded in the action, and was entitled to defend by guardian ad Liiem, and has so defended, should also be paid out of said funds. After the payment of such costs, the amount of $1,000, with interest from November 19, 1908, should be next paid to the defendant Mary E. Seavey from said funds; and the balance thereof should be disposed of by plaintiff in the administration of his trust.

Judgment accordingly.  