Mary E. Cowperthwait, dying in 1888, by her will made her husband, Frank H. Cowperthwait, and her son, Frederick S. Cowperthwait, trustees to pay the income of her property to the former for his life, with remainders to her children and grandchildren. The questions here involved are (1) whether transfers of stock by Frank to Frederick, as trustee, for moneys diverted from the wife’s estate by Frank, and for moneys advanced by certain of the children, are fraudulent as against judgment creditors of Frank and Frederick; (2) whether Aymar' became a pledgee of certain of such stock in fraud of such creditors. Frank received and used personally $16,400 of money belonging to his wife’s estate, as follows: $2,900 from property sold October, 1904; $7,500 at a date earlier than that, and $6,000 June 29, 1904, the date of the transfer of the stocks. A judgment for $11,949.84 in favor of one Gerard recovered against Frank in 1894, was on January 21, 1897, purchased by the wife’s five children, each contributing $2,400 therefor, and the judgment was assigned to Frederick, trustee. For this Frank gave each child his note for $2,400, still unpaid, except the interest in part. This transaction is conceded. On or about June 29, 1904, Frederick suggested to his father that the sisters and brothers should he protected respecting their mother’s estate and the Gerard judgment, and on that day the father executed to Frederick eleven assignments of certificates of stock, aggregating ninety-nine shares of the Brooklyn Chair Company and three hundred and eight shares of the common stock and sixty-three shares of the preferred stock of the Brooklyn Factory and Power Com*124pany. These assignments were inclosed with a letter from father to son;
“Dear- Fred.— Enclosed are the assignments of my interest in various stocks held by different parties, that I agreed to give you when you were here on the 29th ult to execute the deed of the Waverly Ave. property. They are made out to you as Trustee of the Gerard judgment that you took up .in 1897, & I hope that in time you will realize enough from them to make you whole, incldg. interest to date of final settlement. Any excess obtained to be paid towards liquidating the other debts of mine after Nancy and Daisy are' taken care of.
“Yours, &c. ' ' FATHEB.”
The action is to set aside certain of these transfers. The original assignments and the subjects thereof were thereafter somewhat modified. All the stock as originally assigned had been issued to Frank and by him pledged to creditors, and stood on the books in the name of the pledgees, and after the assignments Frank (1) procured the release of certain stock and transferred it unincumbered to Frederick, trustee; (2) regained possession of certain of the pledged stock for the purpose of having it entered on the books in the name of Frederick,- trustee, and then returned to the creditors; (3) transferred to Frederick, trustee, additional stock and made substitutions in certain instances -for stock pledged originally. Aymar is one of such creditors. Before considering his conduct, the dealings of father and soil respecting the transfer may be- examined. The status on June 29,' 1904, was that Frederick, held, subject to rights of pledgees, of chair stock ninety-nine shar.es, of power stock three hundred and eight shares common, of power stock preferred sixty-three shares. The father, in addition to the above, hadas his remaining property fifty-two power unpledged shares which, on October 25,' 1904, he transferred to his son as trustee. Aymar held as security the following: Power stock, thirty shares; chair, forty-nine shares, and to this Frank -added on Hay 25, 1905, twenty-five shares of fifty power shares presented at that date to him by the power company, of which he was president. On November 5, 1906, Aymar delivered to Frank the thirty and twenty-five shares of the power company *125for the purpose of issuing them directly to Frederick, trustee, and to these fifty-five shares the father procured to be added five shares standing in Frederick’s (as trustee) name, and caused on November 5,1906, two -new certificates to be issued to his son, Frederick Cowperthwait, trustee, and Frederick as trustee indorsed the same to Aymar as collateral to his debt. About December 14, 1906, Aymar returned to Frank the forty-nine shares of chair stock, the latter purchased one additional share, and caused the fifty shares, in certificates -of twenty-five shares each, to be reissued to Frederick, trustee, on December 28, 1906, and the latter indorsed them'to Aymar as security for his debt. Frank took the fifty-two shares, of power stock trans-' ferred to Frederick, trustee, October 25, 1904, indorsed by the latter, .and pledged it as collateral for a note of $5,000. February 16, 1907, Frank paid the note, caused the fifty-two shares to be reissued in two certificates of twenty-five and twenty-seven shares to Frederick, trustee, who at the father’s instance indorsed the certificate for twenty-five shares, and the former transferred it to one Boardman as security for money with which to pay the note. On June 17, 1907, Frederick, trustee,- transferred the twenty-seven shares to Frank, who transferred them again to Frederick October 19, 1907. One Bugbee held as security thirty-six power shares, one-half common and one-half preferred. October 1, 1906, Frank obtained the sixteen shares preferred and caused it to be reissued as follows: October 4, 1906, twelve shares to one Meech, to whom James sold it, six.shares October 4, 1906, to “ Frank H. Cowperthwait, trustee,” to which he added a share bought by himself, and caused on October 19, 1907, a new certificate for seven shares to be issued to Frederick as trustee. Prior to June 29, 1904, the father had placed eighty-five shares of power stock in his son’s name to be pledged to secure the son’s note indorsed by the father. It was discounted by the People’s Trust Company, and Frank took the money; on November 5, 19.06, the trust company exchanged this certificate for two, one for thirty-five shares, and one for fifty shares, issued to Frederick, trustee, and indorsed by him to the company. On June 22,1907, Frank procured a certificate of twenty-nine shares of power stock to be issued to Frederick as trustee; the latter indorsed in blank *126to the trust company in exchange for the certificate for thirty-five shares held by it; the father then, on June 22, 1907, obtained a new certificate for six shares in the name of one Crane, to whom he had. sold it. On June 29, 1904, when the assignments were made, certain chair stock stood as follows: Twenty-five shares owned by Frank, pledged to the Brooklyn Chair Company for $600 borrowed; thirteen shares owned by Frank, pledged to Yale Bank for $500 borrowed; twelve shares owned by Frank, pledged to Aymar for $500 borrowed. After the Bicknell & Sembler judgments were recovered against Frank and. Frederick in January, 1907, Frank paid all these loans and received the three certificates, aggregating fifty shares, February 4, 1907, had two certificates of twenty-five shares each to Frederick-as trustee; the latter indorsed them in blank, and February 15, 1907, Frank sold one to Boardman for $4,000 cash and in discharge of a debt for $1,200, but pledged twenty-five shares power stock to Boardman to indemnify him against loss from the transaction. This twenty-five shares of power stock was delivered as follows: Boardman’s check for $4,000 to the order of Frederick, trustee, was delivered to Frank, Frederick indorsed it, Frank paid $4,000 on the $5,000 note at the State .Bank, and so released fifty-two shares of the power stock, which was reissued in twenty-five and twenty-seven share certificates to Frederick, trustee, and twenty-five shares pledged to Boardman as security against loss on the purchase of the twenty-five shares of chair stock. On July 26, 1907, Frank holding two notes, each for $1,000, made by the United States Rattan Company, discounted them with the Herman Oapelle Company, and pledged as collateral the twenty-five shares of chair stock, issued on February 4, 1907, in the name of Frederick, trustee, and indorsed in blank by Frederick, trustee, for such purchaser.
After this general review of transactions subsequent to the transfer of June 29, 1904, it. is necessary to examine critically the final status of Frederick, trustee, what was in fact done by James, and whether the plaintiff’s rights became superior to those of the beneficiaries and Aymar by reason of a fraud tainting their holdings. Any intelligent conception and judgment of the transaction must keep in constant foreground that *127all of the stock in the assignments of June 29,. 1904, was held by creditors, and that mere equities were carried to Frederick, trustee, which could he saved from extinction and made valuable only by most prudent and skillful financiering, and if the father, best equipped for that duty by experience and relation to the industries involved, and the trustee honestly co-operated for that end, their action would not amount to a fraud that would undo the original assignments. October 25, 1904, the father transferred fifty-two shares power common to Frederick, trustee, and received it back indorsed by the latter and raised $5,000 on it at the State Bank. The father had a right to give to Frederick, trustee, only the equity in the manner adopted. Follow these shares: February 16, 1907, Frank paid the note and had the fifty-two shares reissued to Frederick, trustee. June 17, 1907, for a purpose not appearing, Frank took the twenty-seven shares and held them until October 19, 1907, and returned them to Frederick, where they remain. The twenty-five shares power were transferred to one Boardman on February 16, 1907, to indemnify him against loss in the purchase at the time of twenty-five shares of trusteed chair stock made at the time and for an existing debt of $1,200, and the $4,000 was used to pay the State Bank as above stated. Mindful that the father intended to transfer only an equity in the fifty-two shares, I discover no- fraud in this transaction whereby the trustee finally retained free twenty-seven shares of power stock, and twenty-five more pledged as collateral as stated. Take the next act indicating fraud as alleged in the order alleged by plaintiff’s counsel. In this, Frank, haying procured from Bugbee, pledgee, eighteen shares power preferred, which was subject to the assignment of June 29, 1904, sold twelve shares to Meech, put the remaining six shares in his own name as trustee on October fourth, and on October nineteenth transferred them, with an additional share, to Frederick, trustee. The result of this manipulation is that the trustee lost his equity in eighteen shares pledged to Bugbee and got seven shares free, so far accomplishing the necessary purpose of clearing the incumbrances on the assigned stock. What the twelve shares to Meech brought I do not discover, but it is noticeable that the father paid the State Bank $1,000 more *128than he received from Boardman. June 29, 1904, Frank had assigned his equity in thirty shares power and forty-nine shares of chair held by Aymar as collateral, and to Aymar’s holding Frank had added twenty-five shares power issued to him. in May, 1905. Aymar permitted Frank to reissue to Frederick, trustee, this stock, adding five shares received from Frederick, trustee, whereupon it was returned to Aymar, who has it. Analyze "this act. In all the stock returned by or to Aymar, save the five shares of power, the trustee had an interest subject to the rights of Aymar, and the only change was one of form, the .trustee taking the certificates directly and then trans • ferring to Aymar. But it is said that the trustee subjected five shares to Aymar’s debt. So he did, but he received the equity in twenty-five shares of power that he had not had, and one additional share of chair stock. I find here no evidence that the father, or trustee, or Aymar, were robbing the trust, or that Aymar did an improper thing. In the matter of the People’s Trust Company the father procured the exchange of the eighty-five shares power,- pledged before June 29, 1904, for the father and son’s obligation for the father’s debt for two certificates, issued to the trustee and by him indorsed, and later Frank procured the surrender of thirty-five shares by depositing twenty-nine, and sold the six remaining shares to Crane, to whom they were issued. Undoubtedly this transaction was to get six shares released to sell to Crane for cash. "I do not find from the evidence as to whether Frank made any payment to the trust company to procure the release. Whether the trustee received an equivalent at that or any time for his equity in these six shares will be considered. But at this juncture it may be claimed that the father was indebted therefor to the trustee, although it should be observed that somebody, presumably the father, was paying the interest necessary to carry the loans for which all the stock was pledged. It has been noticed that the father in February, 1907, had two certificates of chair stock, twenty-five shares each, issued to the trustee, which Frank had caused to be reissued in place of ' shares pledged severally to the Brooklyn Chair Company, the Yale Bank and Aymar, for amounts aggregating $1,600.. There seems in this to be no fraud upon the trust so far, except that *129the father has paid a debt and aided the trust by the amount paid. Twenty-five shares of this stock the father sold to Board-man for $4,000, and to discharge a debt for $1,200, and applied the money on the $5,000 indebtedness to the State Bank, a transaction already noticed, and one entirely proper in every phase of it. In the following July, 1907, Frank pledged the other .twenty-five shares, reissued to the trustee as above, to the Herman Capelle Company as collateral to two notes for $1,000 each, held by Frank, and received $1,880. This transaction analyzed is this: Pledged to creditors fifty shares of stock for $1,600; redeemed by father personally, and twenty-five shares pledged for $1,880 to the Capelle Company and twenty-five shares pledged as collateral to Boardman to raise $4,000 used to release the fifty-two shares of stock held by the State Bank, with the result that the trustee held twenty-seven of those shares free, and the other twenty-five shares subject to any loss that might come to Boardman. The result of the several changes is that, while the trustee released finally and Frank used some twelve pledged shares power preferred sold to Meech and six shares common sold to Crane, it was replaced by fifty-two shares power common, twenty-seven being left free, thirty shares power common and one share chair. From deficiency in the evidence I cannot ascertain how much Frank’s cash payments exceeded his receipts, but excluding unshown payments of interest, which must have been considerable, the sum does not seem to exceed $1,220 as shown by defendant’s statement. If the correct View be that the father, owing honest debts to his children, could only keep the collateral in trust therefor unaffected by fraud by leaving the assigned shares untouched by him, and leaving Frederick to straggle with the load and escape the burden of it as best he could, then the assignments were fraudulent. But, as will appear later, the debt was honest; its payment was sacredly obligatory. The father’s property interests were fragmentary and in precarious condition. The son was twenty-four years of age, and it required the resources of the father to readjust the loans, paying one here and contracting’ another there, borrowing anew and selling stock where a little could be set free. Had' it not *130been done, all would have been sacrificed. I do not regard the father’s vigilance and interposition as an evidence of fraud, but as, exhibiting a sense of just, obligation. It is true that the assignments were made in June after actions begun in May against Frank and Frederick to recover judgments for causes of action based on negligence arising in February, 1904, whereon judgments were recovered in January, 1907, upon which were executions returned unsatisfied, and following which were proceedings supplementary to execution and the receiver was appointed in December, 1907. These facts must be considered in arriving at a judgment concerning the nature of the acts of the defendants. The Gerard judgment against Frank was recovered in 1894; it was assigned to Frederick, trustee; the five children paid each $2,400; the judgment was a debt on June 29, 1904; Frank had some $16,400 of the mother’s estate. Why should Frank not undertake to secure these debts ? And. he did. The matter was urged by the son, and the father made, the assignments. They were assigned for the purpose stated in the letter of July 6, 1904, inclosing them, viz., to enable the trustee to realize the amount of the Gerard judgment and to apply the excess, if any, to liquidating the father’s other debts “after Nancy and Daisy are taken care of.” The other debts referred to relate to money owing the estate. The father made these assignments to effect payment of an existing indebtedness to his children, and he was quite justified legally (Lehrenkrauss v. Bonnell, 199 N. Y. 240) and morally. It may be that he feared those judgment creditors would seize his property, and that he preferred to pay other creditors, even his children. Preference of creditors is not fraud. (Maass v. Falk, 146 N. Y. 34, 40.) Although Frederick, the trustee named in the assignment of the Gerard judgment had not asked the security. Frank could make legal provision for it, and much the more so without the request or consent of the beneficiaries. (National Bank v. Bonnell, 46 App. Div. 302 [see opinion, Hirschberg, J., 26 Misc. Rep. 541]; Clements v. Beale, 53 App. Div. 419.) It may be that the, assignment will result in the payment of the children creditors and leave his later creditors unprovided for, but that does not taint with fraud the *131transfers. (Dodge v. McKechnie, 156 N. Y. 514.) Even if the father made the transfers with a fraudulent motive, the son did not participate in his guilty intention, and if the father did what he did to secure his children their debt and to make compensation in whole or in part for what he had taken from the mother’s estate, his act well and honestly done is beyond other assailing creditors, although he afterwards made substitutions in the subject of the trust. (Cohnfeld v. Tanenbaum, 176 N. Y. 126.) The father’s statements on his examination in supplementary proceedings, contrasting with his testimony in this action, may make against the probity of his motive, but that does not affect the son’s integrity in receiving the transfers. Frank did state, it appears, that he used the dividends to some degree for his personal expenses; on the trial he stated that all were used for payments of interest or principal upon loans; but beyond this testimony as first given by Frank, not available against Frederick and the other defendants, I find no evidence that any moneys received from stocks were used for Frank’s own purposes. It may be that Frank was beguiling his own children, as well as seeking to defraud other creditors, and that his claims and declarations present too many varieties to exculpate him, yet when I look at what he wrote and did on June 29 and July 5,1904,1 find that he made a valid trust, which neither he nor Frederick could undo and which could not be wrecked by any changes or manipulations that either permitted. The beneficiaries acquired interests which were beyond disturbance by misconduct on the part of the trustee or his father. It would be a dangerous doctrine that a trust may be found fraudulent because the trustee abused his office. It is urged that upon former appeals all questions here involved have been decided favorably to respondents. The appeals were from judgments dismissing the complaint. (134 App. Div. 617; 137 id. 94.) The testimony relating to the transfer was the evidence of the father in supplementary proceedings and on the trial. The court was undoubtedly influenced in its decision by the infirmities of the father’s evidence, whereon the dismissal was dependent, but the present record shows by documentary evidence, aided by the evidence of the son, what the transaction was, and while *132it may not reconcile the father’s testimony, it does establish a legal status on the part of the beneficiaries that is not affected by the father’s intention or action., The opinion of the court (137 App. Div. 94) relates to the appeal.by Aymar, The evidence did not show that Aymar’s stock was returned for a special and temporary purpose consistent with the continuance of the lien. But the present record shows that the; stock was returned for the purpose of reissuing it to Frederick, trustee, and then returning to Aymar. The purpose and acts are clear and credible, inasmuch as the testimony of Frank is substantiated, as to the forty-nine shares, by the correspondence. The matter is simple. Aymar held the certificates •directly from Frank. Frederick, trustee, held assignment (save twenty-five shares of, power stock) of the pledgor’s interest. The same result in a preferable form was secured by reissuing the stock, .the trustee actually bettering himself by seeming the equity in the twenty-five shares of power stock.Aymar received again precisely what was his own; the trustee lost nothing save five shares subjected to Aymar’s lien, and made the gain stated. There is not the slightest evidence that. Aymar had any knowledge of any fraud contemplated or effected.. His action was, so far as I can discover, beyond criticism. In this connection it will be noted that much of the¡ evidence upon which reliance is placed to find fraud on the part-of the father and son is not admitted as against Aymar and the Herman Oapelle Company, another pledgee of .stock accused of a fraudulent holding. This is so. as to Frank’s evidence in supplementary proceedings, received against him alone; so as, to Frank’s agreement with Boardman; so especially as to. Aymar, the transaction with Boardman that followed, arid the transaction with the United States Rattan Company; so as to. much of the above history of the fifty-two shares pledged to the State Bank;' so as to Capelle, the delivery of the twenty-five shares to Aymar and the exchange of certificates by Aymar;, so as to Aymar and Capelle, the exchange of the eighty-five shares with the People’s Trust Company; so as to Aymar and Capelle, the transaction with the Bugbee stock. It would appear that it was the executed purpose of the trial court to. exclude, as to Aymar and Capelle, all evidence of subsequent, *133dealings with the stock by Frank, save as they were severally privy to it. With such matter absent from the record, the case against Aymar has no support, and in my judgment the finding of fraudulent participation by the trustee is not sustained. The letter from Frank to the son, dated July 6, 1904, states that the assignments are specifically to realize money to pay the Gerard judgment and to apply any excess to his indebtedness to the estate, giving a preference over the last purpose to Nancy and Daisy, Frederick’s sisters. The suggested provision for Nancy and Daisy seems to. have been to meet individual indebtedness of Frederick. But Frank’s property could not be appointed to that purpose. So the -trust is effectual only to reimburse those advancing the money for the Gerard judgment and for the several sums earlier stated, to wit, $2,900, $6,000 and $7,500, so far as they shall appear to have been used at the time of the assignment by Frank H. Cowperthwait for his individual purposes.
The judgment should be reversed and a new trial granted, costs to abide the final award of costs.
Carr, J., concurred.
Judgment affirmed, with costs.