Potter v. Couch
141 U.S. 296 (1891)

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U.S. Supreme Court

Potter v. Couch, 141 U.S. 296 (1891)

Potter v. Couch

Nos. 1063-1067

Submitted October 30, 1889

Decided May 25, 1891

141 U.S. 296

Syllabus

A testator gave all his estate, real and personal, to his executors for the term of twenty years, "in trust, and for the uses, objects and purposes hereinafter mentioned," and authorized them to make leases not extending beyond the twenty years, and to lend money on mortgage for the same period, and, "after the expiration of the trust estate vested in my executors and trustees for the term of twenty years after my decease," devised and bequeathed one-fourth part of all his estate, subject to the payment of debts and legacies, to his widow, one-fourth to his daughter, one-fourth to his brother, and one-fourth to nephew; gave certain legacies and annuities to other persons; directed his executors to pay a certain part of the income to his brother "until the final division of my estate, which shall take place at the end of twenty years after my decease, and not sooner;" that no part of his estate should

"be sold, mortgaged (except for building) or in any manner encumbered until the end of twenty years from and after my decease, when it may be divided or sold for the purposes of making a division between my devisees as herein directed;"

and also that, in the event of any of the legatees or annuitants being alive at the end of the twenty years, there should then be a division of all his estate,

"anything herein contained to the contrary notwithstanding, and in such case my executors, in making division of the said estate, shall apportion each legacy or annuity on the estate assigned to my devisees, who are hereby charged with the payment of the same according to the apportionment of my said executors;"

and further provided as follows:

"It is my will that my trustees aforesaid shall pay the several gifts, legacies, annuities and charges herein to the persons named in this will, and that no creditors or assignees or purchasers shall be entitled to any part of the bounty or bounties intended to be given by me herein for the personal advantage of the persons named, and therefore it is my will that

Page 141 U. S. 297

if either of the devisees or legatees named in my will shall in any way or manner cease to be personally entitled to the legacy or devise made by me for his or her benefit, the share intended for such devisee or legatee shall go to his or her children in the same manner as if such child or children had actually inherited the same, and in the event of such person or persons having no children, then to my daughter and her heirs."

He also declared it to be his wish that W., one of his executors, should collect the rents and have the general supervision during the twenty years, and further provided that the share devised to his daughter should be conveyed at the expiration of the twenty years, for her sole use, to three trustees to be chosen before her marriage by herself and the trustees named in the will, and the net income be paid to her personally for life, and the principal be conveyed after her death to her children or appointees, and that, in the event of his wife's marrying again, the share devised to her should be held by his trustees for her sole use.

Held:

(1) That the powers conferred and the trusts imposed were annexed to the office of executors, and that they took the legal title in fee, to hold until they had divided the estate, or the proceeds of its sale, among the devisees of the residue.

(2) That an equitable estate in fee in one-fourth of the residue of the estate vested in the brother and the nephew, respectively, from the death of the testator.

(3) That the limitation over, in case of alienation, was intended to apply to the residuary devises, but was void because repugnant to the estates devised.

(4) That by the law of Illinois, such an equitable estate could not be taken at law or in equity, for the debts of the owner.

(5) That a conveyance thereof by such owner, in consideration of an agreement of the grantee to buy up outstanding judgments against the grantor and to sell the interest conveyed and pay one-half of the net proceeds to the grantor's wife, no part of which agreement was performed by the grantee, gave him no right which a court of equity would enforce.

(6) That these conclusions were not affected by the following facts: the daughter was married ten years after the death of the testator, having first, by indenture with the trustees named in the will, appointed them to be trustees for the benefit of herself and her children. Just before the end of twenty years from the testator's death, a mortgagee of all the real estate agreed with the trustees under the will to postpone payment of the principal and to reduce the rate of interest of the mortgage debt, provided the whole estate should continue to be managed by W., and thereupon the testator's widow, brother, nephew, daughter, and her husband, individually, and the widow, brother and W., as trustees of the daughter, made to W. a power of attorney, reciting that by the will the testator devised his whole estate in trust for the period of twenty years, which was about to expire, and upon the termination

Page 141 U. S. 298

of that trust to the widow, brother, nephew and daughter in equal parts, and that it was deemed advantageous to the devisees, as well as to the mortgagee, that the estate should continue to be managed as a whole, and therefore authorizing W. to take possession, to collect rents, to pay taxes, debts against the estate, and expenses of repairs and management, and to sell and convey the whole or any part of the estate at his discretion.

These were appeals from a decree in equity by various persons asserting claims to the real estate devised by Ira Couch, who died January 28, 1857, to his brother, James, and to his nephew, Ira, by his will dated November 12, 1855, and duly admitted to probate March 21, 1857, by which he appointed his wife, Caroline E. Couch, his brother, James Couch, and his brother-in-law, William H. Wood, executors and trustees, and devised and bequeathed all his property, real and personal, to them in trust for the term of twenty years, and for certain uses and purposes, and then, after payment of debts and legacies, in equal fourths, to his wife, to his daughter and her children, to his brother, James, and to his nephew, Ira, the son of James, with devises over in case of alienation. The material provisions of the will are copied or stated in the margin, *

Page 141 U. S. 299

and so much of the facts as is necessary to the understanding of the questions of law decided was as follows:

Page 141 U. S. 300

It was contended by some of the parties that the real estate devised by this will was owned jointly by the testator and his

Page 141 U. S. 301

brother James. But upon the whole evidence it clearly appeared that although James lived with the testator, and helped

Page 141 U. S. 302

him in his business, they were not partners, and, as James knew, all the real estate was bought and paid for by the testator out of his own money, and the deeds were taken in his name. The property belonged to the testator, and James had no title in it, legal or equitable, except under the will. Caroline E. Couch, the testator's daughter, was married January 28, 1867, to George B. Johnson, having before her marriage, and by indenture with the trustees named in the

Page 141 U. S. 303

will, appointed them to be trustees for the benefit of herself and her children under the twentieth clause of the will. Three children of this marriage were born before 1877.

The testator left real estate worth about $1,000,000, consisting of nine lots of land in the heart of the City of Chicago, on two of which stood the Tremont House, and left personal property to the amount of $11,000, and owed debts amounting to $112,000, besides unpaid taxes on real estate. The trustees under the will -- Wood collecting the rents and having the principal management -- improved the real estate so as to produce a large net income, until the great fire of October, 1871, destroyed all the buildings. In 1872 and 1873, the trustees erected new buildings on the property at an expense of $1,000,000, of which they borrowed $750,000 on mortgage executed by the trustees, as well as by the widow, James, Ira, and the daughter and her husband, individually, of all the nine lots, payable November 1, 1877, with yearly interest at eight percent.

On the completion of the new Tremont House, the trustees being unable to find any person, not interested in the estate, who would undertake to pay a fair rent and provide the necessary furniture, a lease thereof was made on November 15, 1873, by the widow, James Couch, and William H. Wood, as trustees under the will and as trustees of the daughter, and by the widow, James, Ira, and the daughter and her husband, individually, for ten years, to James Couch, who agreed to furnish in and carry it on as an hotel, and to pay one-tenth of the gross amount of his receipts therefrom until February 1, 1877, to the widow and Wood as joint trustees with himself under the will, and after that date to pay to the widow, to Ira, and to the daughter's trustees three-fourths of such tenth, retaining the other fourth himself. James Couch carried on the hotel accordingly, but unsuccessfully, until January 18, 1879, when his lease was terminated, and the hotel was leased to another person.

In December, 1876, the mortgagee agreed with the trustees named in the will to extend the term of payment of the principal of the mortgage debt, and to reduce the rate of interest,

Page 141 U. S. 304

provided the whole estate should continue to be managed as before, and Wood should remain in the principal charge and control thereof.

On January 8, 1877, James Couch and wife, the testator's widow, the daughter and her husband, and Ira and his wife, in their individual names, and the widow, James Couch, and William H. Wood, as trustees of the daughter, executed and delivered to Wood a power of attorney, containing these recitals:

"Whereas, by the will of Ira Couch, deceased, all of his estate, both real and personal, was devised and bequeathed to James Couch, Caroline E. Couch, and William H. Wood, in trust, for the period of twenty years from the time of his death, which period will expire the twenty-eighth day of January, 1877, and, upon the termination of said trust, to the said James Couch and Caroline E. Couch, and to Ira Couch, son of said James Couch, and Caroline E. Johnson, daughter of said testator and now the wife of George B. Johnson, one-fourth thereof to each of said devisees, . . . and whereas the said Caroline E. Johnson did, prior to her marriage and pursuant to the provisions of said will, by her deed of trust appoint the said James Couch, Caroline E. Couch, and William H. Wood trustees of all her share and interest in said estate, and whereas, by reason of the destruction of the buildings belonging to said estate, and situate upon said lands, by fire, the said trustees under said will have, as such trustees, incurred a large indebtedness in rebuilding the same, and for other purposes beneficial to said estate, and which indebtedness is a lien or encumbrance thereon, and whereas it is deemed advantageous to the undersigned, devisees as aforesaid, as well as to the creditors of said estate, that the same should, from the time of the expiration of said period of twenty years, be managed as a whole by some person appointed and agreed upon by the parties interested, to the end that sales of said estate, or parts thereof, may be made from time to time to meet the said indebtedness, that said estate may in the meantime be kept rented, and the income therefrom applied to the payment of the interest on indebtedness, the taxes, premiums on insurance, and the expenses for repairs, and for the management of the estate."

This power accordingly

Page 141 U. S. 305

authorized Wood, on and after January 28, 1877, to enter upon and take possession of all the real estate devised, to rent it, and to collect the rents, and also all arrears of rent under leases made by the trustee under the will, to pay taxes and assessments, and the interest and principal of debts against the estate, and all expenses of repairs, preservation, and management thereof, and to borrow money when necessary for these purposes, and to sell and convey the whole or any part of the estate whenever and upon such terms as in his judgment should be for the best interest of the constituents, and provided that it should be irrevocable, except that after January 28, 1880, a majority of them, or, on giving six months' notice in writing, any one of them might "revoke this power of attorney and annul this agreement."

By reason of the embarrassment caused by the financial panic of 1873, the real estate depreciated in value, so that it was worth less than the sum due on the mortgage, and during the years 1876, 1877, and 1878 the income was insufficient to pay the interest on the mortgage debt, taxes, insurance, and expenses. The estate afterwards increased in value until 1884, when the income had become sufficient to pay annual expenses and interest and a large part of the principal.

The testator's debts, and the legacies given by the twelfth and thirteenth clauses of the will, as well as the annuities to the testator's sister and to his mother-in-law under the seventh and eighth clauses, were all duly paid before 1877, those annuitants having died before that time. The annuities to his widow and daughter under the tenth clause were paid until the fire of October, 1871, but were not paid in full after \wards, and his brother, James, was paid more than his share of the income under the eleventh clause.

The estate was never divided by the executors among the devisees of the residue, because of the impossibility of making partition of the most valuable lots, or of selling them except at a great sacrifice. On February 15, 1879, judgments to the amount of $6,000 were recovered against James Couch in a court of the State of Illinois on debts contracted since January 28, 1877, and executions

Page 141 U. S. 306

thereon were forthwith taken out and returned unsatisfied. On February 24, 1879, one Sprague, who recovered two of those judgments, amounting to $1,097.85, brought a suit in equity in that court, upon which a receiver was appointed, to whom, by order of that court, on March 29, 1879, James Couch executed a deed of all property, equitable interests, things in action, and effects belonging to him. In 1881 and 1882, James Couch's undivided fourth of the real estate devised was levied on and sold by the sheriff on pluries executions issued on Sprague's judgments at law.

On May 10, 1879, one Brown, as trustee for Howard Potter, recovered judgment in the circuit court of the United States against James Couch for $15,038.92 on a debt contracted in 1874, and in 1881 caused an alias execution thereon to be levied on the same undivided fourth, and purchased the same at the marshal's sale on execution.

On February 9, 1881, James Couch and Elizabeth G. Couch, his wife, executed a deed of all their interest in that fourth to William E. Hale, expressed to be for a nominal consideration, but the real consideration for which was a contemporaneous agreement between the wife and Hale, by which Hale agreed to buy up the judgments existing against James Couch, and to sell the interest conveyed to him by the deed, and, after reimbursing himself for his expenses, to pay one-half of the proceeds to her, and hold the other half to his own use. Hale bought up the judgments recovered February 15, 1879, being about one-third of the judgments against Couch, as well as the title under the sheriff's sale aforesaid; but on November 16, 1882, sold them again to Potter, and never bought up any of Potter's claims or paid anything to Elizabeth G. Couch.

Ira Couch, the testator's nephew, came of age January 9, 1869, and never had any children. His interest in the estate of the testator was conveyed by him, being insolvent, on January 29, 1877, to one Dupee, as a trustee for his creditors, with authority to sell at private sale; by Dupee, on November 26, 1881, to one Everett, in consideration of the sum of $1,000 paid by Elizabeth G. Couch, mother of Ira; by Everett, on November 28, 1881, to her, and by her, on February 28, 1886, back to Ira.

Page 141 U. S. 307

On March 9, 1885, Caroline E. Johnson, the testator's daughter, conveyed to her husband all right, title, and interest she might or could have in real estate under the nineteenth clause of the will. On July 5, 1885, she died, leaving her husband and three children surviving her.

On July 14, 1884, James Couch, Caroline E. Couch, and William H. Wood, being the executors and trustees, and the first two of them devisees named in the will, filed a bill in equity in the state court to obtain a construction thereof, to which Caroline E. Johnson and her husband and children, Elizabeth G. Couch, Potter, Hale, Ira Couch, the judgment creditors of James Couch, and the receiver appointed in Sprague's suit in equity, were made parties.

On August 4, 1884, Potter filed in the circuit court of the United States a bill for partition of the real estate of the testator, making all other parties interested defendants. On October 23, 1884, the bill for the construction of the will, and on May 15, 1885, the bill of Sprague, were removed into that court. On August 3, 1885, these three causes were consolidated by order of the court, and on November 18, 1887, after the various parties had filed answers stating their claims, it was ordered that each answer might be taken and considered as a cross-bill.

No question was made as to the share devised to the wife by the second clause, or as to the share devised to the daughter and her children by the third and twentieth clauses of the will.

The claims to the various parties to the shares devised to the testator's brother, James, by the fourth clause, and to the testator's nephew, Ira, by the fifth clause, were as follows:

Potter claimed the share of James under the judgments and the sales on execution against him.

Hale claimed the same share under the deed to him from James and wife.

James claimed his share under the fourth clause of the will.

Ira claimed his share under the fifth clause, and also claimed the share of James, on the ground that, by reason of the alienations thereof to Potter and to Hale, the devise over in the nineteenth clause to his children took effect.

Page 141 U. S. 308

The daughter's husband and her children, respectively, claimed the shares of both James and Ira, contending that, by reason of the alienations thereof, they vested, under the ultimate devise over in the nineteenth clause, in the daughter and her heirs, the husband claiming under his wife's deed to him, and the children claiming under the twentieth clause of the will be reason of her death.

By the decree it was declared that the devised estate vested at the expiration of twenty years from the testator's death, one-fourth in fee in the widow, one-fourth in fee in James, one-fourth in fee in Ira, and the remaining fourth in the daughter for life, with remainder in fee to her children, and the claims of Potter, of Hale, and of the daughter's husband and children to the shares of James and of Ira, and of Ira to the share of James, were disallowed. Potter, Hale, the daughter's husband, and her children, respectively, appealed from the disallowance of their claims, and James Couch appealed from so much of the decree as declared that legal title under the residuary devises vested at the expiration of twenty years from the testator's death. The five appeals were submitted together on printed briefs and arguments.

Page 141 U. S. 309

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