Tabernacle Baptist Church v. Fifth Avenue Baptist Church ( 1901 )

Hatch, J. :

There is very little dispute as to the facts in this case, and, as we view it, none whatever as to the facts essential to the determination of the questions presented. It is undisputed that the Fifth Avenue Baptist Church, the defendant, executed the contract in question ; that it took and received the mortgage bonds therein mentioned ; that for a time it performed the agreement by receiving and collecting the income and paying it over to the plaintiff as therein provided, and that at the time this action was commenced there had accrued and the defendant had received for the defaulted interest or income upon the bonds the sum of $7,123.67, which it had refused to pay over to the plaintiff.

The first defense is that so much of the gift as was for the benefit of the plaintiff was void at its inception on the ground that it violates the provision of the statute which forbids the suspension of the absolute ownership of personal property for more than two lives in being. (Laws of 1897, chap. 417, § 2, formerly 1 R. S. 773, § 1-)

There is no question as to the capacity of either of the parties to acquire and hold personal property and the income thereof for the purposes of their organization. Both are incorporated under chapter 60 of the Revised Laws of 1813, which was in force when the gift was made, but was repealed by the Laws of 1895 (Chap. 723). Section 4 of the act of 1813 provides: “ The trustees of every church, congregation or society herein above mentioned and their successors * * * are hereby authorised and empowered to take into their possession and custody all the temporalities belonging to such church, congregation or society, whether the same consist of real or personal estate, and whether the same shall have been given, granted or devised directly to such church, congregation or society or to any other person for their use * * * and also to purchase and hold other real and personal estate * * * for the use of such church, congregation or society or other pious uses.”

A religious corporation, therefore, is authorized by this statute to-take possession of personal property that has been given, granted or devised directly to it or to any other person for its use and. to hold the same for its use or to other pious uses.

This statute does not authorize a corporation created thereby to take or hold property in trust for other corporations or for individuals. (Chamberlain v. Chamberlain, 3 Lans. 348; 43 N. Y. 424; Matter of Griffin, 45 App. Div. 102; Matter of Williams, 1 Misc. Rep. 440; Adams v. Perry, 43 N. Y. 487; Cottman v. Grace, 112 id. 299; Read v. Williams, 125 id. 560.)

It must he borne in mind, however, that this agreement relates solely to personal property and that the Legislature has not attempted to define the purposes for which express trusts in personal property may lawfully be created as it has done in relation to trusts in real property. Trusts of personal property stand as they did at common law, subject only to the statutory restriction against the suspension of ownership for more than two lives in being, and subjecting the limitation of future and contingent interests in personal property to the rules prescribed in relation to like estates in. real property. (Gilman v. Reddington, 24 N. Y. 12, 13.) The only change in the statutes since the decision of this case at all relating to this subject is the provision as .to direction for accumulation of income, which does not affect this question.

Does the instrument in question violate the statutory rule forbidding the suspension of the absolute ownership of personal property % We think not, but that the legal effect of the agreement was to immediately pass the absolute title to the mortgage bonds to the Fifth Avenue Baptist Church, subject only to the payment of the income to the plaintiff for the term specified and upon the conditions expressed therein. The language used seems to us to admit of no other construction. That an absolute present gift to the Fifth Avenue Church was intended is clear from the provision that “ during the continuance of its ownership of the said bonds,” it should leave the same on deposit, etc., and the provisions of paragraph 4, by the language employed: “Upon the expiration of said, second term, or in default of a designation as above provided, then forever after to expend in every year the net annual income of the said fund for such Baptist City Mission work in the City of New York as may be lawfully carried on by the Fifth Avenue Church,” serves to emphasize the fact.

No other act or thing is required to vest the absolute title to the property in the defendant. The instrument is in form sufficient to convey the absolute title; it is signed, sealed and witnessed. It very cléarly expresses the intent to make a gift absolute and immediate. It has' been repeatedly held that an unqualified gift by will of the rents or income of real estate is, in legal effect, a devise of the property itself. (Mott v. Richtmyer, 57 N. Y. 49, 60; Jennings v. Conboy, 73 id. 230; Monarque v. Monarque, 80 id. 320, 324; Bailey v. Bailey, 97 id. 460, 470, 471.) The same rule must apply to personal property. Indeed, it is held in Mott v. JRichtmyer (supra) that “ A grant of the use and income of real or' personal estate forever 'carries the fee of the land, and the personal estate itself.” (P. 60 and cases there cited.)

As we construe this instrument, it falls within the class of so-called trusts arising out of gift's and bequests to charitable and religious corporations for the promotion of some corporate purpose, which have been held not to be trusts in the legal sense. Such a gift does not create a trust in any such sense as that term is applied to property. The donor may lawfully restrain the use of the donee to the income, so as to preserve the principal from dissipation, the gift being to promote some of its chartered purposes. In an early case in this State it was held that “ where property is devised or granted to a corporation, partly for its own use and partly for the use of others, the right of the corporation to take and hold the property for its own' use, carries with it as a necessary incident the power to execute that part of the trust which relates to others.” (Matter of Howe, 1 Paige, 214.) This case was very like the one at bar. In the present case the corporation is directed to use the income in accordance with the law of its creation, for its own purposes, except as to the income for a limited period, and the direction as to the manner of its use, within that law, does not affect its ownership nor make it a trustee. A person may transform himself into a trustee for another, but he cannot be a trustee for himself. (Schouler Wills [3d ed.], § 610; Wetmore v. Parker, 52 N. Y. 459; Currin v. Fanning, 13 Hun, 458.) The former case involved the question of a gift by bequest to an asylum, and the question here presented was passed upon. It was contended that the gift violated the statute of perpetuities because a direction to invest the principal took away the jus disgponendi, without which there cannot be absolute ownership. The court held that this principle did not apply, and said : “ No mortmain law, restrictive as they have sometimes been, ever prevented the donors from making their gifts in such terms as would preserve the principal from dissipation. It does not create a trust in any such sense as that term is applied to property. The corporation uses the property, in accordance with the law of its creation, for its own purposes; and the dictation of the manner of its use, within the law, by the donor, does not affect its ownership or make it a trustee. A person may transform himself into a trustee for another, but he cannot be a trustee for himself.” (P. 459.) (Woodward v. James, 115 N. Y. 346, 357; Bird v. Merklee, 144 id. 544; Holland v. Alcock, 108 id. 312; Cottman v. Grace, 112 id. 299; Holmes v. Mead, 52 id. 332.)

One of the authorities seemingly most relied upon by the appellant is the case of Chamberlain V. Chamberlain (3 Lans. 348), but on examination the case is found not to support its contention. That case is not in conflict with the views expressed herein, nor with the authorities cited upon the point in question. On the contrary,'the court in disposing of the bequest to the Chamberlain Institute (p. 369) distinctly recognizes the doctrine of those cases, and supports the rule we have enunciated. It is true that the bequest there in question was upheld on another ground, but the discussion shows that, if it had been necessary, it would have been sustained upon the ground that it did not create a trust nor suspend the absolute ownership of the money bequeathed. The decision was reversed by the Court of Appeals (43 N. Y. 424), but the question of the bequest to the Chamberlain Institute was not involved in the reversal. •

If we are right in the construction thus placed upon the instrument in question, it was and is a valid agreement which the plaintiff has the right to enforce. But if it were not so, the defendant cannot attack it on that ground; Having accepted, covenanted and agreed to faithfully carry out the provisions of the agreement, the defendant is estopped from - attacking its validity. “ Acceptance of the trust estops the trustee from, denying the title of the person for whom he holds.” (Perry Trusts [5th ed.], § 260.)

A trustee who is in default “ cannot claim as against his cestui que trust any beneficial interest in the trust estate” until his default has been made good. (Doering v. Doering, L. R. [42 Ch. Div.] 203; Harbin v. Bell, 54 Ala. 389; Saunders v. Richard, 35 Fla. 28, 42; Chaplin Express Trusts, 161; Jones v. Butler, 30 Barb. 641.)

It would be an anomaly to say that the defendant could accept the performance of this agreement, enter upon the discharge of the trust imposed by its agreement by paying over the income, and then take advantage of an alleged legal impediment to reap the whole benefit of the gift to itself to the exclusion of the other beneficiary. It can have no standing in principle to do this, and all considerations of equity forbid it. Nor is the position of the defendant aided by the assignment from the donor, Mr. Rockefeller, offered in evidence and excluded rightly, we think, by the court. This assignment added nothing to the title of defendants to the bonds. As already seen, their title was already absolute, and this assignment, having been procured after the commencement of this action, could take away no right of the plaintiff if the defendant had not before acquired title.

Having thus disposed of the legal questions involved, we come to the- discussion of the only remaining question which we regard as material to the determination of the appeal. The defendant resisted payment of the plaintiff’s alleged claim upon the further ground that, as the plaintiff is now disqualified by the terms and conditions attached to the gift from receiving income for the future, such disqualification also debars it from its right to accrued income (assuming it ever to have had that right), for it cannot apply the income in the way prescribed by the donor. The agreement provides that the income of the bonds should be paid over to the Tabernacle Church “ only for its work at Second Avenue, between Tenth and Eleventh Streets, in the City of New York,” and that “if that Church ceases to be a member of the Southern New York Baptist Association, or its successors, in either event the Fifth Avenue Church may, in its discretion, thenceforth discontinue payments of income to the then beneficiary, and such discontinuance shall be taken as ending the term then current.”

The trial court has found, upon practically undisputed evidence,, that the plaintiff occupied all of its premises on Second avenue and conducted its work there, during the period from December 1,1891 (the date of the gift), and prior thereto and up to on or about December 19, 1896; that the plaintiff did not at any time during that period of time cease to occupy its said premises and to conduct its work there. These facts are abundantly supported by the testimony. It is further found that the plaintiff ceased to be a member of the Southern New York Baptist Association on or about September 26,1898, which is conceded. There is no proof that the plaintiff has ever ceased to be a church or to do church work, or to do-Baptist city mission work, and the trial court found that for a long time prior to December 1, 1891, and ever since that time, the plaintiff has been and still is a church. It further appears that the plaintiff conducted its services and church work from some time in December, 1897, to June, 1899, in the parish.house, which was apart of its premises on Second avenue. Upon the trial counsel for plaintiff waived all right to an accounting for funds received after the commencement of the action, November 26, 1898, and the recovery had covered only the period from June 1, 1893, the date of the default by the railroad company, to December 19, 1896, when plaintiff ceased to conduct its services and carry on its work at Nos, 162 to 168 Second avenue, in the same manner and under the same conditions as when the agreement was executed, Assuming, then, as seéms to have been assumed at the trial, that by reason of 'these facts the plaintiff forfeited its rights to all income after-December 19, 1896, does it follow, as a necessary consequence, of such forfeiture, that it has also lost the right to recover the income-which concededly had accrued up to that time, and which had been paid over to the defendant but had not been received by the plaintiff % We think not, clearly. The statement of the proposition is. its own refutation. This is an action in equity, and we know of no-equitable .principle which works a result so inequitable. Counsel for appellant first contends that the gift is void in law, as a trust, and then, in the same breath, urges that it is charged with a ((certain, sort of trust,” which, because of a suspicion that the gift may be used for purposes foreign to the intention of the donor, renders it necessary to apply so harsh a rule to deprive .plaintiff of what it seems to us it is in equity clearly entitled to receive. Even the law looks with disfavor upon a forfeiture and it is never favored in equity.

It is urged that there is no claim that the plaintiff has incurred obligations in its work at Second avenue in anticipation of its right to the income of this fund. But this proposition is without force. JVon constat that it has not incurred such obligations, It does appear that during the period for which recovery is had, all the conditions were complied with which entitled the plaintiff to receive this income. If defendant relied upon such facts as are now urged to defeat the claim, the onus was upon it to show them. Presumptively the plaintiff was entitled to recover upon the facts alleged and proved by it.

The cases cited by appellant upon this question are not in point, and furnish no authority against our conclusion. So far as it goes the case of Associate Alumni v. General Seminary (26 App. Div. 144) is a holding in favor of our view. It was there held that a trust was created which the defendant had violated by refusing to apply and use the fund according to the terms upon which it was offered and to which it assented when it received the same, and the plaintiff had judgment.

The rule quoted from Locke v. Farmers’ Loan, & Trust Co. (140 N. Y. 135), “ that trusts end when their intended purposes are accomplished and when they are no longer necessary to effect the designed results,” has no application to this question. That rule was applied by the trial court in limiting the recovery to the sum accrued and received by the defendant during the period in which the plaintiff complied with the conditions of the gift. It is no authority for the proposition that plaintiff may not now recover the income which accrued and which it might have recovered during that period. Especially is this so in view of the fact that the amount recovered is the defaulted interest, none of which had been paid or received by the defendant until June, 1896, and that plaintiff’s recovery was limited to the period ending December 19, 1896. Would it have been possible for plaintiff to secure a recovery against defendant before it had received the interest ? Or was the plaintiff bound to sue foi each installment as it fell due? Suppose, as an illustration, a trust to pay income annually to a minor until he arrives at majority, upon ■certain conditions ; that the conditions were complied with, but for the last four years of the minority the trustee failed to pay the income. Would the cestui que trust, after arriving at majority, be prevented from recovering because the trust had ended and its “ intended purposes ” had been accomplished ? No one would so contend, nor- is there ground for such contention here. The considerations urged furnish no defense to the cause of action.

It seems to us that the plaintiff has fully established its right to the income in question, and that the judgment should be affirmed, with costs.

Rumsey and O’Brien, JJ., concurred; Van Brunt, P. J., and Ingraham. J., dissented.