Potter v. Couch Hale

[Syllabus from pages 296-298 intentionally omitted]

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 20 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 uephew, 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; and so much of the facts as is necessary to the understanding of the questions of law decided was as follows: It was contended by some of the parties that the real estate devised by this will was owned jointly by the testator and his brother, James. But upon the whole evidence it clearly appeared that although James lived with the testator, and helped 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 will, appointed them to be trustees for the benefit of herselfand 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 8 per cent. 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 lese t hereof 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 10 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, 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 busbnad, 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 incumbrance 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 mean time 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 authorized Wood, on and after January 28, 1877, to enter upon and take possession of all the real estate devised; to rens it, and to collect

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, nd 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 eighthclau ses, 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 pid 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 thereon were forth with 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 contemporanous 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.

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 thecour t; and on November 18, 1887, after the various paries 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.

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 20 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 20 years from the testator's death. The five appeals were submitted together on printed briefs and arguments.

Henry B. Mason, for Potter.

Monroe L. Willard, for Hale.

D. K. Tenny, for George B. Johnson.

Charles H. Aldrich, for children of Caroline E. Johnson.

John S.C.ooper and John G. Reid, for James Couch and Elizabeth G. Couch.

Charles H. Wood, for Ira Couch, son of James.

William H. Wood and C. Beck with, for the trustees.

Mr. Justice GRAY, after stating the facts as above, delivered the opinion of the court.