Opinion
04-18-1888
WYCKOFF v. WYCKOFF et al.
J. G. Shipman, for complainant. William H. Morrow, for respondent.
(Syllabus by the Court.)
On hearing on demurrer.
J. G. Shipman, for complainant. William H. Morrow, for respondent.
VAN FLEET, V. C. The question presented for decision in this case arises on a general demurrer to the complainant's bill. The suit is brought by one of the two executors of the will of Simon F. Wyckoff, deceased, against the testator's widow and the other executor. One of the executors is made a defendant because he refuses to join in the suit. The widow demurs. The material facts alleged in the bill may be summarized as follows: Simon F. Wyckoff died testate November 25, 1868. His will was admitted to probate in December following, and letters testamentary granted thereon to the complainant and his co-executor. By his will, the testator gave his widow, during her life, the interest of $13,000, and directed that the first year's interest should be considered due on the day of his death, and that thereafter the same should be paid to her annually. His will then says: "In order that her annual interest may be rendered secure to her, I order and direct my executors to sell, at public sale, all my real estate, and secure by bond and mortgage on the farm on which Michael Roseberry now lives, from the purchaser, the interest on $6,500, to be paid to her annually during her life, and the principal to be paid to my executors at the death of my wife." Direction for the investment of another sum of $6,500 of purchase money, on another farm, is then given in language substantially identical. This provision for the widow was made, as the will states, in lieu of dower in the testator's realestate, and also of any right which she was entitled to by law in his personal estate. The widow accepted the provision. Both farms were sold and conveyed pursuant to the direction of the will; the one on which Michael Roseberry lived to Charity Race, and the other to John C. Miller. The executors took from each of the purchasers a bond and mortgage for $6,500, conditioned for the payment of interest and principal as the will directs. The papers bear date April 1, 1869. The bill says: "The bonds and mortgages provided for the payment of the just and full sum of $6,500 on the day of the death of Sally C. Wyckoff, together with lawful interest thereon from the 1st day of April, 1869, to be paid on the 25th day of November, 1869, and so on, on the 25th day of November of each and every year thereafter, for and during the natural life of the said Sally C. Wyckoff." Since the 1st of April, 1869, the complainant has taken a conveyance of the farm purchased by Charity Race, and the other executor has taken a conveyance of the other farm. Each took title subject to the mortgage, and assumed the payment of both the principal and interest thereof. The complainant claims, in consequence of the change in the rate of interest made by legislation taking effect July 4, 1878, reducing the rate from 7 to 6 per cent., that the widow, since that date, by the true construction of the testator's will, is entitled to only 6 per cent., and he brings this suit to procure a decree so adjudging. The defendant, by her demurrer, says that the facts above stated do not lay the slighest foundation for judicial action of the kind which the complainant seeks.
I am quite strongly of that opinion. The bonds and mortgages, which the executors hold for the benefit of the widow, are contracts to forbear demanding the payment of money in consideration that interest shall be paid; and, where that is the case, the sum recoverable, if default be made in payment, is interest proper, and not damages. The law regulating the rate of interest which will accrue under such a contract, notwithstanding a change in rate may be effected by legislation subsequent to the date of the contract, is definitely settled in this state. Chief Justice BEASLEY, speaking for the court of errors and appeals, in Jersey City v. O'Callaghan, 41 N. J. Law, 353, said: "Interest proper arises whenever money is lent or forborne, with an understanding, express or implied, that an equivalent shall be given for its use; and in such case the rate of interest agreed upon, or, if none such be agreed upon, the rate then existing by law, is, in the absence of any new agreement, the rate to be paid until the return of the money." And this will be so, notwithstanding any change in the rate which may be made by legislation between the date of the contract and the return of the money. The other pertinent cases are Ackens v. Winston, 22 N. J. Eq. 444; Bowne v. Hitter, 26 N. J. Eq. 456; and Wilson v. Cobb, 31 N. J. Eq. 92. There can be no doubt, that, under the legal rule in force in this state, the mortgage debts which the complainant and his co-executor hold for the benefit of Mrs. Wyckoff, bear interest at the rate of 7 per centum per annum; and, in my judgment, it is equally certain that, inasmuch as the contracts on which interest accrues were made by persons standing in the position of trustees for Mrs. Wyckoff, the rate, as between her and her trustees, is unalterably fixed by the contracts, and cannot be changed except with her consent.
Parties dealing for themselves may enter into contracts by which the rate of interest to be paid shall change whenever the legal rate changes. In Mucklar v. Cross, 32 N. J. Law, 423, the plaintiff claimed that, by the condition of the bond sued on, the defendant became bound, on the change in the rate of interest made in 1866, from 6 to 7 per centum, to pay the higher rate. The defendant, by the condition of his bond, had bound himself to pay interest annually, at such rate as, at the date of his bond, was or should thereafter be fixed by the legislature as the legal rate. The court decided that the plaintiff, after the change in rate, was, under the terms of his contract, entitled to the higher rate. "This result," said the court, "is only reached because of theexpress agreement of the parties that the interest should be payable in accordance with the fluctuations in the legal rate. Obviously, a different result would have been arrived at if the stipulation had been for interest payable according to law, or for lawful interest. In that case the agreement would have been that the interest should be such as was lawful when the contract was made; and it would have been unaffected by the act of 1866." The competency of the complainant and his co-executor to make a contract, in respect to the fund which they were directed to invest, by which the rate of interest should vary with each change in the legal rate, may, I think, be successfully denied. The only power they possessed is that conferred by the will. The testator directed the $13,000 to be invested as a life provision for his widow. The provision was not an act of bounty, but was made in lieu of dower. The rate of interest in the testator's mind when he made the provision was 7 per centum. He made his calculations on that basis; so did his widow when she decided to yield what the law gave her, and take what the will gave her; and the direction of the will, it will be observed, is that $13,000 of the purchase money of the two farms shall be so invested as that the interest thereon shall be paid annually to the widow, during life, and the principal to the executors on her death. The language of this part of the will puts the testator's meaning beyond doubt. He meant that the two farms should, during the widow's life, stand as security for the payment of her interest. His purpose, as his will declares it, is "in order that her annual interest may be rendered secure to her;" and, to accomplish that end, he directs that the $13,000 shall be so invested as that the principal shall not be payable during her life, but that the interest shall in the mean time be paid to her annually. His meaning, in that regard, is so entirely clear that I think if his executors had disregarded it, by attempting to make a contract by which the rate of interest would have been subject to be changed, to the prejudice of the widow, they would have rendered themselves subject to judicial control at her instance. But in addition, under the language of the contracts and the law, there can be no doubt that the contracts bear interest at the rate of 7 per centum, and will continue to do so while they remain in force, unless the widow shall consent to a change. Although the contracts were made by the complainant and his co-executor, as one of the contracting parties, still they made them as trustees for Mrs. Wyckoff, and hold them for her benefit. She is the owner, in equity, of the interest they produce, and the rate cannot, therefore, be changed without her consent. Especially is this so, so far as the complainant is concerned. He, it will be observed, has voluntarily placed himself in a position where his interests stand in antagonism to those of his cestui que trust, and where he is subject to a temptation to betray her interests to advance his own. There is strong reason to believe that this suit had its origin in this conflict of interest. A trustee cannot use his position to make a profit out of his cestui que trust. Where his interests come in conflict with those of his cestui que trust, his must yield.
The complainant's bill is, in my judgment, without the least equity, and must therefore be dismissed, with costs.