Barnard v. . Gantz , 140 N.Y. 249 ( 1893 )

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] In this case the General Term has reversed the judgment in favor of the defendants, entered upon the report of a referee dismissing the complaint, upon questions of fact. It is, therefore, one of the cases where this court is authorized and required to review the facts. (Code, § 1338.) In order to sustain the reversal of the decision of the referee, it must appear that his findings are against the weight of evidence, or that the proofs so clearly preponderate in favor of a contrary result that it can be said with a reasonable degree of certainty that his conclusions were erroneous. (Baird v. Mayor, etc., 96 N.Y. 567;Aldridge v. Aldridge, 120 id. 614; Devlin v.Greenwich Savings Bank, 125 id. 756; Roosa v. Smith, 17 Hun, 138.)

There is practically no dispute in regard to the main facts upon which the plaintiff demanded relief. On the 24th of August, 1883, Ann E. Crouse, then eighty years of age, and being the owner of certain railroad bonds of the value of $33,000, executed and delivered to one Washington Hall, her son-in-law, who was and for some time had been her trusted and confidential financial adviser and agent, and to her son, the defendant John T. Gantz, an instrument under seal, called a trust deed, by which she transferred to them the bonds mentioned, to have and to hold the same upon the following trust: To receive and collect the income arising therefrom and pay the same over to her during the term of her natural life, and after her death to pay the income of $10,000 of the bonds to her son George H. Gantz during his natural life, and upon his death then to be distributed equally between the trustees to whom the transfer was made, or their legal representatives. To pay the income of $10,000 more of the bonds to her son Joseph W. Gantz during the term of his natural life, and upon his death to divide and distribute them equally to the trustees or their legal representatives. The balance of the bonds, amounting to $13,000, were to be delivered to Hall or his legal representatives. The deed upon its face reserved no power of revocation in the settlor. On February 8, 1885, Hall died, leaving a will in which the defendant Susan E. Hall was named as executrix, and on April 2, 1885, Mrs. Crouse, by another instrument under seal and acknowledged, appointed the defendant Starkey trustee in his place. On the 13th day of July, 1890, she executed an instrument revoking, annulling and declaring void the trust deed and the appointment of Starkey as trustee. She then brought this action to reform the trust deed by inserting therein a power of revocation in order to conform to her intention, and that of all the parties when it was executed Subsequently, and on the 19th of June, 1891, while the action was pending, she died, leaving a will in which the plaintiff was named as one of the executors. He was subsequently appointed temporary administrator of her estate, and by an order of the court the action was revived and continued in his name upon a supplemental complaint which he was permitted to file and serve. The complaint stated all the facts, including the revocation of the deed, and the appointment of the new trustee. The relief demanded was that the instrument be reformed as above specified, and that the trustees, Gantz and Starkey, deliver to the plaintiff the bonds, or any property substituted for them, and account and pay over to the plaintiff the income not previously paid to Mrs. Crouse in her lifetime, and for such other relief as might be just and equitable. The order of the court permitted the plaintiff to serve a supplemental summons and complaint "as he may be advised," and the allegations to the effect that the trust deed and appointment of Starkey to succeed Hall had been revoked by Mrs. Crouse in her lifetime, were new, as no such allegations were inserted in the original pleading. As these allegations did not relate to matters which had transpired subsequent to the commencement of the action, it is doubtless true that they were not properly inserted in a supplemental pleading, but it does not appear that the defendants made any motion to correct it, and it does appear that upon the trial the plaintiff requested the referee to permit an amendment to the complaint by inserting the same allegations, and the request was granted without any objection or exception. If this is still to be regarded as an action to reform the instrument so as to permit the power of revocation to be exercised, the death of the party who made the transfer would probably be an answer to it, as that power, if it was within the intention of the parties, was personal and would not survive. But, as the pleadings now stand upon the record, the action may be regarded as one to make an actual revocation of the two instruments by Mrs. Crouse in her lifetime effective and to recover the property transferred. If it appears that the power to revoke should have been expressed in the instrument, a court of equity will now regard as done whatever the parties really intended, and which in good conscience should have been done, and thus the relief will be adapted to the exigencies of the case. (Van Rensselaer v. Van Rensselaer, 113 N.Y. 208, 214; Bell v. Merrifield, 109 id. 202, 207; Murtha v. Curley, 90 id. 372; Valentine v. Richardt, 126 id. 272; Code, § 1207.)

The most important question, however, arises upon the evidence which was before the referee, and upon which his judgment denying the relief sought was based. It cannot be said that his conclusion is not sustained by any evidence so as to make the question before us one of law. But, we think, the evidence was of such a character as to warrant the General Term, in the exercise of its undoubted power to review his findings, in arriving at a contrary result. The referee found that Mrs. Crouse did not, at the time of making and delivering the instrument, know that its legal effect was to make the disposition of the bonds irrevocable, and thus place the title beyond her control. This is equivalent to a finding that she did not understand the nature and effect of the instrument to which she attached her signature. The bonds were then and for some time before had been in the possession and custody of Hall, one of the assignees and trustees, who was not only connected with her by marriage, but for many years had been her confidential adviser, and occupied relations of trust and confidence to her, and the other assignee and trustee was her son. The evidence tends to show that at the time she signed the deed she also executed her will, though the bulk of her property was apparently disposed of under the deed. What the contents of the will were does not distinctly appear, as the proof tended to show that it had been destroyed, but as she executed one instrument which was clearly revocable and another which apparently was not, it is easy to see how she may have been confused and misled. Considering her advanced age, the relations of the parties to whom the transfer was made to her, the confidence which she evidently reposed in them and their interest in the transaction, the case comes fairly within the equitable rule which casts upon the parties who were benefited by the transaction, the burden of showing that the transfer was the voluntary, intelligent act of the party who made it and that its nature and effect was fully understood. In order to get a clear view of the application and extent of this doctrine, it is only necessary to refer to the expressions of opinion in this court, notably in two cases. In Cowee v.Cornell (75 N.Y. 99), Judge HAND, for the court, stated the rule in the following language:

"It may be stated as universally true that fraud vitiates all contracts, but as a general thing it is not presumed, but must be proved by the party seeking to relieve himself from an obligation on that ground. Whenever, however, the relations between the contracting parties appear to be of such a character as to render it certain that they do not deal on terms of equality, but that either on the one side, from superior knowledge of the matter derived from a fiduciary relation, or from overmastering influence, or on the other, from weakness, dependence or trust justifiably reposed, unfair advantage in a transaction is rendered probable, then the burden is shifted, the transaction is presumed void, and it is incumbent upon the stronger party to show affirmatively that no deception was practiced, no undue influence was used, and that all was fair."

In a subsequent case Judge ANDREWS stated the rule in these words, which sufficiently show the wide extent to which the principle has been applied in cases of this character:

"Undue influence, which is a species of fraud, when relied upon to annul a transaction inter partes, or a testamentary disposition, must be proved, and cannot be presumed. But the relation in which the parties to a transaction stand to each other is often a material circumstance, and may of itself, in some cases, be sufficient to raise a presumption of its existence. Transactions between guardian and ward, attorney and client, trustee and cestui que trust, or persons one of whom is dependent upon and subject to the control of the other, are illustrations of this doctrine. Dealings between parties thus situated, resulting in a benefit conferred upon, or an advantage gained by the one holding the dominating situation, naturally excite suspicion, and when the situation is shown, then there is cast upon the party claiming the benefit or advantage, the burden of relieving himself from the suspicion thus engendered, and of showing, either by direct proof or by circumstances, that the transaction was free from fraud or undue influence, and that the other party acted without restraint and under no coercion, or any pressure, direct or indirect, of the party benefited. This rule does not proceed upon a presumption of the invalidity of the particular transaction, without proof. The proof is made in the first instance when the relation and the personal intervention of the party claiming the benefit is shown. The law is not so impracticable as to refuse to take notice of the influence of greed and selfishness upon human conduct, and in the case supposed it wisely interposes by adjusting the quality and measure of proof to the circumstances, to protect the weaker party and, as far as may be, to make it certain that trust and confidence have not been perverted or abused." (In re Smith, 95 N.Y. 522.)

The principle has been applied to a great variety of contracts and dispositions of property between persons standing in the same or similar relations to each other. (Nesbit v. Lockman,34 N.Y. 167; Marx v. McGlynn, 88 id. 357; Green v. Roworth, 113 id. 462.)

The learned referee, we think, failed, in disposing of the facts, to give such application to this rule as the testimony and the circumstances of the case required, and, hence, the General Term was warranted in reversing the judgment. The burden was cast upon the defendant of showing that the nature of the transaction was fully understood and comprehended by the other party, and the proofs did not warrant that conclusion.

It is said that the deed was ratified by the instrument of April 2, 1885, appointing Starkey as trustee in the place of Hall. It is not shown that Mrs. Crouse had then any knowledge or information that the paper was not in its terms and legal effect what she intended it to be. In order to effect a ratification of such an act it is necessary to show that the party intended such a result after knowledge of all the facts, and especially the important fact, that it did not conform to her intentions. If there was any ratification whatever it applied to the instrument as intended and understood, and not to the instrument as it was.

It is urged that the instrument of revocation is inoperative to annul a deed, as it was not under seal and was not delivered, upon the principle that a deed can only be modified or revoked by an instrument of equal solemnity. The signature to the paper is followed by the letters L.S. in brackets. She evidently intended to seal the instrument, and where that intention is manifest upon the paper itself, a court of equity will assume that it is sealed or grant the same relief as though a common-law seal was attached. (Town of Solon v. Williamsburgh Savings Bank,114 N.Y. 134.) The instrument, however, which transferred the bonds to the trustees and beneficiaries, though under seal, was a mere assignment of personal property, and would have been precisely as effectual if no seal had been affixed. The seal, therefore, added nothing to the solemnity, force or effect of the instrument, and if a provision for future revocation was intended to be inserted, so as to make it revocable in fact, that result could have been accomplished by any instrument, in writing, signed by the party authorized to revoke. Delivery was not essential to the validity of the revocation. The instrument was not a contract between parties, but an act manifesting the intention to exercise a power conferred or reserved. If there was any question here in regard to the validity of the acts of the trustees with respect to the property, or their good faith in acting under the deed, or the rights of third persons, then the question of delivery and notice might be important, but the only question is whether enough was done to effect a revocation as between the parties. In the absence of some provision in such an instrument pointing out the way in which it is to be revoked, that result is accomplished by the execution of any instrument intended for that purpose, and which sufficiently expresses the intention of the party executing the same.

The other questions appearing upon the record disclose no grounds for disturbing the judgment, and it should be affirmed, with costs, and judgment absolute ordered for the plaintiff.

All concur.

Judgment affirmed.