Irving Browne Isaac Grant Thompson.

The American reports: containing all decisions of general ..., Volume 36 online

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his own use till he should die; and that then, and not before, his
sons should have possession of them and own them absolutely.
That although he meant that their right to this interest in remain-
der should be vested and irrevocable from the time of the supposed
gift, yet that at no time during his life did the donees have exclu-
sive possession of the bonds or the legal right to such possession.

The declarations of the donor that he had given the bonds to his
sons must be understood as referring to the qualified gift which he
intended to make. There is nothing to indicate that he ever relin-
quished his right to the interest, and all the cir umstances of the
case show that he could not have intended to admit that he had
made an absolute gift, free from the qualification expressed in the
memoranda. The cases of Orangiac v. Arden, 10 Johns. 295 ;
Davis V. DavtSy 8 Nott & McCord> 226, and kindred cases, conse-
quently have no application. The principle of those cases was ap-
plied in the late case of Troto v. JShannoriy 78 N. Y. 446, but in that
case the gift w«s intended to be absolute. No qualification was
attached to it, and the bonds were placed where they were accessi-
ble to the donee and he had himself collected the interest for his
own use. There was nothing inconsistent with a full delivery, but
there was no direct evidence of such delivery, and the admissions
of the donor that she had given the bonds and they belonged to the
donee, were received, and weight given to them, as some evidence
from which the jury might infer that the gift had been completed
by an absolute delivery.

It is impossible to sustain this as an executed gift, without abro-
gating the rule that delivery is essential to gifts of chattels inter
vivos. It is an elementary rule that such a gift cannot be made to
take effect in possession in futuro. Such a transaction amounts
only to a promise to make a gift, which is nudum pactum. Pitts
T. Mangum, 2 Bail. 688. There must be a delivery of possession
with a view to pass a present right of property. " Any gift of chat-
tels which expressly reserves the use of the property to the donor
for a certain period, or (as commonly appears in the cases which
the courts have had occasion to pass upon) as long as the donor
shall live, is ineffectual." 2 Schouler Pers. Prop. 118, and cases
cited; Vass v. Hicks, 3 Murphey, 494. This rule has been applied
even where the gift was made by a written instrument or deed pur-
porting to transfer the title, but containing the reservation. Sut-



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640 NEW YORK,



Young V. TouDg.



tofCs Executor v. HallowMy 2 Dev. 186 ; Lance v. Lance^ 5 Jones L.
413. The only question remaining therefore is whether a valid
declaration of trust is made out

The trust contended for, if put into words, would he that the
donor should hold the bonds and their proceeds for his own benefit
during his life and to the use of the donees from the time of his
own death.

Of course no trust was created of the interest for the donor's own
life, for he was the legal owner of the income of the bonds, and
never parted with this right — nor could he be at the same time
trustee and cestui que trust. The trust then would be to hold to
the use of the donees an estate in remainder in the bonds, which
should vest in possession in the donees at the time of his death.

The difficulty iu establishing such a trust is that the donor did
not undertake or attempt to create it, but to vest the remainder
directly in the donees. Assuming, for the purposes of the argument,
that ho might have created such a trust in himself, for the benefit
of his sons, and further, that he might have done so by simply sign-
ing a paper to that effect and retaining it in his own possession,
without ever having delivered it to the donees, or any one for them,
yet he did not do so. He simply signed a paper certifying that
the bonds belonged to his sons. He did not declare that he held
them in trust for the donees, but that they owned them, subject to
the reservation, and were at his death to have them absolutely. If
this instrument had been founded upon a valuable consideration,
equity might have interfered and effectuated its intent by compell-
ing the execution of a declaration of trust, or by chai^'ng the
bonds, while in his hands, with a trust in favor of the equitable
owner. Day v. Rothy 18 N. Y. 448. But it is well settled that
equity will not interpose to perfect a defective gift or voluntary
settlement made without consideration. If legally made it will be
upheld, but it must stand as made or not at all. When therefore
it is found that the gift which the deceased attempted to make
failed to take effect for want of delivery or a sufficient transfer, and
it is sought to supply this defect and carry out the intent of the
donor by declaring a trust which he did not himself declare, we are
encountered by the rule above referred to. Story's Eq. 706, 787,
793, J. c. d.j Antrohus v. Smithy 12 Ves. 39, 43 ; Edwards v. JoneSy
1 My. & Cr. 226 ; 7 Sim. 325; Price v. Price^ 8 Eng. L. & Eq. 281;
Hughes y. Stubbs, 1 Hare, 476. It is established as unquestionable



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APBIL TERM, 1880. 641

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law that a court of equity cannot by its authority render that gift
perfect which the donor has left imperfect^ and cannot convert an
impei*fect gift into a declaration of trust merely on account of that
imperfection. HeartUy v. Nicholson^ 44 L. J. Ch. App. (N. S.)
279. It has in some cases been attempted to establish an exception
in favor of a wife and children on the ground that the moral obli-
gation of the donor to provide for them constituted what was
called a meritorious consideration for the gift, but Judge Stort
(2 Eq. Jur., § 987, and vol. 1, § 433) says that that doctrine seems
now to be overthrown, and that the general principle is established
that in no case whatever will courts of equity interfere in favor of
mere volunteers, whether it be upon a voluntary contract or a cov*
enant, or a settlement, however meritorious may be the considera-
tion, and although the beneficiaries stand in the relation of a wife
or child. Holloway v. Headingto:i^ 8 Sim. 325; Jefferys v. Jefferys,
1 Craig & Phillips, 138, 141.

These positions are sustained by many authorities. To create a
trust the acts or words relied upon must be unequivocal, implying
that the person holds the property as trustee for another. Martin
V. Funk, 75 N. Y. 134; s. c, 31 Am. Rep. 446; per Church, 0. J.
Though it is not necessary that the declaration of trust be in terms
explicit, the donor must have evinced by acts which admit of no
other interpretation that such legal right as he retains is held by
liim as trustee for the donee. HeartUy v. Nicholson, 44 L. J. Ch.
App. (N. S.) 277, per Bacon, V. C. The settler must transfer the
property to a trustee, or declare that he holds it himself in trust.
Milroy v. Lord, 4 De G. F. & J. 264, per Loi-d Knight Bruce.
In cases of voluntary settlements or gifts the court will not impute
a trust where a trust was not in fact the thing contemplated.
The distinction between words importing a gift and words creating
a trust is pointed out by Sir Geo. Jessel in Richards v. Delbridge,
L. R., 18 Eq. Cas. 11, as follows: '^The making a man trustee
involves an intention to become a trustee, whereas words of gift
show an intention to give over property to another, and not to
retain it in the donor's hands for any purpose, fiduciary or other-
wise.'*

The words of the donor in the present case are that the bonds

are owned by the donees, but that the interest to accrue thereon is

owned and reserved by the donor for so long as he shall live, and at

his death they belong absolutely to the donees. No intention is

Vol. XXXVI-81



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642 NEW YORK,



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here expressed to bold any legal title to the bonds in trust for the
donees. Whatever interest was intended to be vested in them was
transferred to them directly, subject to the reservation in favor of
the donor during his life, and free from that reservation at his
death. Nothing was reserved to the donor to be held in trust or
otherwise, except his right to the accruing interest which should
become payable during his life. It could only be by reforming or
supplementing the language used, that a trust could be created,
and this, as has been shown, will not be done in case of a voluntary
settlement without consideration. There are two English cases,
where indeed the circumstances were much stronger in favor of th«
donees than in the present case, which tend to sustain the position
that a settlement of this description may be enforced in equity by
constituting the donor trustee for the donee. They are Morgan v.
Malleson, L. R., 10 Eq. Cas. 475, and Richardson v. Richardson,
L. R., 3 Eq. Cas. 086. In the first of these cases, Morgans. Malle-
son, L. R., 10 Eq. Cas. 475, the intestate signed and delivered to
Dr. Morris a memorandum in writing : *' I hereby give and make
over to Dr. Morris one India bond," but did not deliver the bond.
Sir John Romilly sustained this gift as a declaration of trust.
The case is referred to by Church, C. J., in Martin v. Funk, as an
extreme case. In Richardson v. Richardson, an instrument pur-
porting to be an assignment, unsupported by a valuable consideration
was upheld as a declaration of trust. In speaking of these cases in
Richards y, Dalbridge, L. R., 18 Eq. Cas. 11, Sir Geo. Jessel, M.R.,
says : " If the decisions of Lord Romtlly (in Morgan v. Malleson),
and of V. C. Wood (in Richardson v. Richardson) were right, there
never could be a case where the expression of a present gift would
not amount to an effectual declaration of trust.*' And it may be
added that there never could be a case where an intended gift,
defective for want of delivery, could not, if expressed in writing,
be sustained as a /leclaration of trust. Both of the cases cited are
now placed among overruled cases. Fisher Ann. Dig. (1873 and
1874), 24, 25. In Moore v. Moore, 43 L. J. Ch. App. (N. S.), 623,
Hall, V. C, says: **I think it very important indeed to keep a
clear and definite distinction between these cases of imperfect gifts,
and cases of declarations of trust; and that wo should not extend
beyond what the authorities have already established, the doctrine
of declarations of trust, so as to supplement what would otherwise
be mere imperfect gifts." If the settlement is intended to be



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APRIL TERM, 1880. 643

Jessap V. Carnegie.

effectaaied by gift, the court will not give effect to it by construing
it as a trust If it is intended to take efiect by transfer, the court
will not hold the intended transfer to operate as a declaration of
trust, for then every imperfect instrument would be made effectual
by being converted into a i>erfect trust. Milroy v. Lord^ 4 De G.
F. & J. 264.

The case of Martin v. Funk and kindred cases cannot aid the
respondent. In all those cases there was an express declaration of
trust. In the one named the donor delivered the money to the
bank, taking back its obligation to herself in the character of
trustee for the donee; thus parting with all beneficial interest in
the fund, and having the legal title vested in her in the character
of trustee only. No interposition on the part of the court was
necessary to confer that character upon her ; nor was it necessary
by construction or otherwise to change or supplement the actual
transaction. None of the difficulties encountered in the present case
stood in the way of cariying out her intention. It was capable of
being executed in the form in which it was expressed.

The question whether a remainder in a chattel may be created
and given by a donor by carving out a life estate for himself and
transferring the remainder, without the intervention of a trustee,
is learnedly discussed in the appellant's brief; but the views we
have expressed render it unnecessary to pursue that inquiry. We
are satisfied that it is impossible to hold that the facts, as they
appear, establish a valid transfer of any interest in the bonds in
question to the donee, and that the attempted gift cannot be sus-
tained as a declaration of trust It follows that the judgment of
the General Term must be reversed, and the decree of the surrogate
affirmed. Costs of all the parties in this court and in the Supreme
Court to be paid out of the estate.

Judgment reversed.

All concur.



Jessxtp v. Gaxsjsgvbl

(80 N. Y. 441.)
OamUy — corutruction of statute of another 8tat&.

An action was brought in New York, to render a stockholder of an Iowa cor-
poration Individually liable for a debt of the corporation on account of the
failure to file the articles of incorporation in the ofBce of the secretary of



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644 NEW YOEK,



Jeaaup v. Carnegie.



State, as required by the Iowa law in the case of all corporations except
railroad companies. The statute prodded this remedy after execution
should be returned unsatisfied against the corporation. The Iowa Supreme
Court in a similar action against another stockholder of the same corporation
had held, by a divided court, after the commencement of this action, that
the filing was not requisite because the corporation in question was a rail-
road company. No judgment had l>een obtained against the corporation.
Held, that this action could not be maintained.

ACTION upon promissory notes. The opinion states the facts.
The plaintiff had judgment below.

James Bmofi, for appellants.

Joseph H. GhoatSi for respondents. The special provisions of
the Iowa statute contained in §§ 1172, 1173 and 1174, can form no
obstacle to the exercise of jurisdiction by this court to enforce the
personal liability of the stockholders here asserted. Corning v. Mo
Culhughy 1 N. Y. 56. The courts of this State are not bound to
follow the decision of the Iowa court. First Nat. Bank of Iowa v.
Davies, 43 Iowa, 435; Hoi/t v. Sheldon, 3 Bosw. 302 ; Butz v. City of
Muscatine, 8 Wall. 575; Von Hoffman v. Citt/ of Quincy, 4 id. 535;
Rowan v. Runnels, 5 How. 134 ; Ohio Life Ins, and Tr, Co. v. De-
holt, 16 id. 431, 446; Gelpcke v. City of Dubuque, 1 Wall. 175;
Chicago v. Sheldon, 9 id. 60; City v. Lamson, 9 id. 477, 685 ; Lee
County V. Rogers, 7 id. 181.

Miller, J. This action was brought against the defendants,
upon certain promissory notes made and issued in the name of the
Davenport Railway Construction Company, for railroad iron de-
livered to the said company. The company was intended to be in-
corporated under the laws of the State of Iowa, and proceedings
were taken for that purpose; but it is alleged that they were not in
accordance with the provisions of the statu tes i*elating to that sub-
ject ; that by reason of a non-compliance therewith they failed to
accomplish the object intended, and that in consequence thereof,
the defendants, who were stockholders of the proposed corporation,
became individually liable for the debts of the company, including
the demand which is now the subject of controversy.

The laws of the State of Iowa provide that persons may associate
themselves and become incorporated for the transaction of any law-
ful business; and it is declared by the Eevised Code, ch. 52, Laws



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APRIL TERM, 1880. 645

Jessap y, Carnegie.

of 1860, as amended by ch. 172, Laws of 1870, § 1162, that " pre-
TiouB to commencing any business, except that of their own organi-
zation, they must adopt articles of incoi*poration, which must be
recorded in the office of the recorder of deeds of the county where
the principal place of business is to be, and in the office of the sec-
retary of State, in a book kept for that purpose.'' Provision is also
made for the publication of notice (§§ 1154, 1165); and by section
1156 ^' the corporation may commence business as soon as the arti-
cles are filed in the office of the recorder of deeds, and their doings
shall be valid, if the publication in the newspaper is made and the
copy filed in the office of the secretary of State within three months
from such filing in the recorder's office." By a further provision
(§ 1166) the individual property of the stockholders is made liable
for corporate debts in case of a failure to comply with the forego-
ing requisitions.

The proof upon the trial established that the defendants in seek-
ing to organize a corporation omitted to file the articles of incorpo-
ration in t]ie office of the secretary of State within three months
after the filing of the same in the recorder's office, but that they
were so filed more than four months prior to the commencement of
this action. The claim of the plaintiffs is, that by the omission to
file as required according to the law of Iowa, and by well-established
rules, the defendants acted without any authoritj as a body corpo-
rate under the laws of that State, and became and were liable for
the debts and liabilities incurred by the company.

As the question involved arises under the statutes of Iowa, the
liability of the defendants depends upon the construction to be
placed upon those statutes. The questions to be determined are:
First, whether certain provisions of the Iowa Code apply to a cor-
poration of this description or it is excepted therefrom; and second,
whether a failure to comply with the provisions requiring certain
conditions to be observed in organizing a corporation renders it in-
valid and imposes a personal liability upon the corporators and
stockholders. In determining the interpretation to be placed
upon the statutes of a State it is important to ascertain whether
the courts of the State where they were enacted have considered
the subject, and the construction, if any, which has been placed
upon them. If the courts of Iowa have passed upon the question
now presented the courts of this State ordinarily would feel bound
to respect the decision thus made and should not reconsider the



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6(6 NEW YORK,



Jessup V. Carnegie.



subject, 80 as to decide de novo whether the adjudication was
erroneous and should be disregarded. This course has been sub-
stantially pursued^ we think, in the State and Federal courts, and
any other or different rule would lead to confusion, operate injuri-
ously in many cases, and would be in direct hostility to the comity
which is due to the authority and power which is conferred upon
the lawfully constituted tribunals of a sovereign State. If a statute
existing in the State of Now York, which had been interpreted by
the highest tribunal having jurisdiction in this 5tate, in such a
case could be construed differently in another State, individuals
who might be subject to its operation would have no security
against a different construction elsewhere, and thus liabilities
might be incurred which were never contemplated by the legisla-
ture of the State which passed the statute, and great injustice done.
Any such a rule enforced in different States according to the kr
loci would bo an infringement upon the rights of individuals, and
at war with the policy of the law that no man should be subject to
liability at the same time by reason of different and conflicting
constructions of the same law in different localities. Tie general
current of authority is in conformity with the rule stated, and at a
very early period in the judicial annals of the country the Supreme
Court of the United States sustained and sanctioned the doctrine
that the decisions of the courts of a State arc controlling in refer-
ence to its local statutes, except in special cases which are men-
tioned; and it has been universally followed since up to the present
time. In Elmendorf v. Taylor y 10 Wheat. 152, 160, Marshall,
C. J., in laying down the rule that the courts of every government
have exclusive authority of construing its local statutes, and that
their construction will be respected in every other country, says:
" The construction given by the courts of the several States to the
legislative acts of those States is received as true unless they come
in conflict with the Constitution, laws or treaties of the United
States." The same rule is upheld in Shelby v. Guyy 11 Wheat.
367, and it is laid down "that a fixed and received construction of
their respective statute laws in their own courts makes in fact a
part of the statute law of the country." The late decisions are
entirely harmonious with those to which we have referred. In
Town of South Ottawa v. Perkim, 94 U. S. 260, 267, Bradley, J.,
citing section 34 of the Judiciary Act, says : " And this court
has always held that the laws of the States are to receive their



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APRIL TERM, 1880. 647



Jessap V. Carnegie.



authoritatiye construction from the State courts, except where the
Federal Constitution and laws are concerned." See, also, Peik v.
Chicago and N. W. Ry. Co., id. 164; County of Leavenworth y.
Barnes, id. 70 ; Adams v. Nashville, 95 id. 19 ; Township of Elm-
wood V. Marcy, 92 id. 289. In a recent case in the same court not
yet reported {Fairfield \. County of Gallatin), it is said "that it is
the pbculiar province of the Supreme Court of a State to interpret its
organic law, as well as its statutes, and that it is the duty as well as
the pleasure of this court to follow and adopt that court's interpreta-
tion." jifter stating that at an early day this rule was announced,
the opinion cites numerous cases, and the rule is laid down that
the interpretation of the courts of a State will be accepted as the
true interpretation, whatever may be the opinion of its original
soundness.

The case of Biitz v. City of Muscatine, 8 Wall. 575, is cited and
relied upon by the counsel for the respondent; but we are unable
to discover that it sustains the position contended for. In that case
the question was as to the construction of certain provisions of the
laws of the State of Iowa, which had been construed by the State
courts. These decisions Avere overruled upon the ground that wiiere
the statute in question affects the remedies of creditors which aiv
protected by the Constitution, the court will exercise its own judg-
ment on the meaning of the statutes, irrespectively of the decisions
of the State courts, and that such remedy cannot be taken away,
as respects previously existing contracts, by erroneous decisions of
such courts. The case last cited is brought directly within some
of the exceptions stated in the authorities referred to in the opinion,
and therefore is not in point. It may also be remarked that we do
not find that this case is cited as authority in any subsequent
decision, and as we have seen, there is no ground for claiming hero
that the decision of the Supreme Court of Iowa, interpreting the
statute in question, operated to deprive the plaintiffs of any remedy
which formed a part of the contract originally existing between the
parties. The contract here was not made upon the faith of any
prior decisions which had become rules of property, and no rights
have been lost to the plaintiffs by reason of a reliance on any such
decisions.

Some other cases are cited by the respondents' counsel, but a
careful examination of them discloses that they have no application
to the facts presented in the case under consideration. In Rowan



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648 NEW YORK,



Jeesap v. Carnegie.



V. Bunnels, 5 How. 134, the remarks cited from the opinion in re-
gard to giving a retroactive effect to the decisions of the courts of
a State, and allowing them to render invalid contracts entered into
with the citizens of other States, cannot apply to this case, as the
decision of the Supreme Court of Iowa, as will hereafter be seen,
could have no such effect. In Ohio L. Ins. and T. Co. v. Deboli,
16 How. 416, the remarks of the judge which are relied upon relate
to the duty of the court to follow decisions of the State courts
which had given a uniform and unquestioned construction to the
Constitution and laws of a State for nearly half a century, and it
was very properly held that if the contract was valid by the laws
of the State as then expounded, its validity could not be impaired
by subsequent legislation or the decisions of the courts altering the
construction of the law. This rule does not affect the decision of
the State court of Iowa upon the question considered, as will here-
after be seen, as no such case was presented. In Gelpcke v. City of
Dubuque, 1 Wall. 175, it was held that where by a series of decisions



Online LibraryIrving Browne Isaac Grant ThompsonThe American reports: containing all decisions of general ..., Volume 36 → online text (page 72 of 123)