Barnett's Appeal, 46 Pa. 392

46 Pa. 392 | Pa. | 1864

The opinion of the court was delivered, January 25th 1864, by

Read, J.

Trusts have been divided into passive or technical, and active or operative trusts; with the nature and extent of the latter of which classes it is our present purpose to deal. Amongst the active trusts has always been classed, that to receive and pay over the profits to another, in which case the land must remain in the trustee to enable him to perform the trust. So where it is the testator’s intention, or where it is necessary for the accomplishment of any object of his will, that the legal estate or possession of the land should remain in the trustee for the purpose of administering the trust. So, also, where the trustee is to dispose of the property, or pay the rents over to the cestui que trust, or apply them to his maintenance, or to make repairs, or to pay annuities, or to manage with the estate as he should think most for the interest of the cestui que trust, or to pay the rents to a married woman, or suffer her to receive them.

In all these cases the legal estate does not vest in the cestui lue trust, and the use is not executed by the statute in him. This was not only received as law in Pennsylvania, hut in some instances greater restrictions were placed on cestui que trusts than were allowed in England. In Lancaster v. Dolan, 1 Rawle 231, it was held that a feme covert is, in respect to her separate estate, to be deemed a feme sole only to the extent of the power clearly given by the instrument by which the estate is settled, and has no right of disposition beyond it; which was reaffirmed in Pullen v. Rianhard, 1 Whart. 520; Thomas v. Folwell, 2 Id. 11; Dorrance v. Scott, 3 Wh. 316; Lyne’s Ex’rs. v. Crouse, 1 Barr 111; Rogers v. Smith, 4 Id. 93; Pennsylvania Insurance Company v. Foster, 11 Casey 134; Wright v. Brown, 8 Wright 224, and is the unquestioned law of the state. In the former case Chief Justice Gibson said, p. 247: “ Nothing in the law is more to be deprecated than those decisions in which the right of a cestui que trust to dispose of his estate has been recognised. Every attempt to secure a provision to a spendthrift son must prove abortive, while the trustees are bound to follow any disposition of it which he may make. It is still more unfortunate, that, as regards their separate estates, femes covert have been regarded in equity as femes sole. It has been justly remarked that if the principle be pushed to its extent, a married woman who has trustees, will be infinitely worse protected than if she were left to her legal rights.” In the very same year, in Fisher v. Taylor, 2 Rawle 33, the court (carrying out the expressed views of the chief justice), where land was purchased by and conveyed to executors under the provisions of the testator’s will, in trust for the testator’s son, who was to have the rents, issues, and profits thereof, but the same not to be liable to any debts contracted, or which may be contracted'by his said son, and at his death the said land to vest in the heirs of the body of the said son in fee, held, that the son has not such an interest in the land as could be taken in execution and sold for his debts.

After stating that the executors necessarily took the legal estate for the purposes of the trust, in order to give effect to the testator’s intention, Smith, J., said, page 87: “A man may undoubtedly so dispose of his land as to secure to the object of his bounty, and to him exclusively, the annual profits. The mode in which he accomplishes such a purpose, is by creating a trust estate, explicitly designating the uses, and defining the power of the trustees. All this, we think, has been sufficiently effected in the case under consideration. Nor is such a provision contrary to the policy of the law, or of the Act of Assembly. Creditors cannot complain because they are bound to know the foundation upon which they extend their credit. The Act of Assembly, cited from 1 Smith’s Laws 7, does not apply, the land in question not being the land of Sample Taylor, the defendant. He has no life estate in it, nor any interest in it which is subject to be sold for the payment of his debts. The benefit he derives under the will of his father is merely the right of receiving from the trustees the rents and profits of the premises which they hold under the deed from John Graham and wife; to the perception of those rents and profits, they are in the first place entitled for the purpose of fulfilling their trust.”

The same in principle was decided in Holdship v. Patterson, 7 Watts 547, in 1838, Chief Justice Gibson delivering the opinion of the court; in 1843, by Justice Kennedy, in Ashhurst v. Given, 5 W. & S. 323, who quotes approvingly the language of the chief justice in the former ease: “A benefactor may certainly provide for a friend (and especially a child), without exposing his bounty to the debts or improvidence of the beneficiary. He has an individual right of property in the execution of the trust, and to deprive him of it would be a fraud on his generosity (parental duty). To appropriate a gift to a purpose or person not included, would be an invasion of the donor’s private dominion.” Fisher v. Taylor was distinctly affirmed in Vaux v. Parke, 7 W. & S. 19, in 1844. Sergeant, J., speaks of “ a simple trust, which gives the cestui que trust a right to the possession, control, and disposal of the lands, and a special trust, which gives him no more than the right to enforce in equity the intention of the testator to the extent of his interest. The distinction between these two classes of trusts pervades the whole doctrine of trusts, and without a due regard to it, their existence cannot be preserved.”

The subject was discussed in 1847 by Coulter, J., in Norris v. Johnston, 5 Barr 287, in which he compares the English rule with our rule. In both the creditor loses ; but by ours the intention of the testator is carried out in favour of the object of his bounty; ours is a humane rule, whilst the English one is harsh and unnecessarily severe, and has been largely affected by the bankrupt law, which has no existence with us.

In Eyrick v. Hetrick, 1 Harris 491 (1850), Bell, J., said: “ The fact that the conveyance was made to assume the form of a trust, and for the special purpose of keeping John’s creditors at bay, makes nothing against its validity, so far as the latter are concerned, for neither policy nor equity prohibits- a parent to make such provision for the maintenance and comfort of an insolvent child; on the contrary, these trusts are favoured and sustained by the law, as suggested by the best,feelings of our nature, and doing harm to no one: Fisher v. Taylor, 2 Rawle 83; 7 Watts 547; 5 W. & S. 323.”

In Brown v. Williamson’s Ex’rs., 12 Casey 338, in 1860, several of these cases are distinctly approved by the learned judge in the court below, and by my brother Strong, in affirming the judgment. All these cases were decided with a full knowledge that they were not in conformity with the English decisions.

A similar policy prevails in Connecticut; 2 Rev. of Swift’s Digest (1853), pp. 121, 122; and is affirmed in Leavitt v. Beirne, 21 Conn. 8, 9: “A provision may be made for the support of a child, relation, or other person, by vesting a fund in trustees to be applied to that purpose. In this way a man may provide for a daughter who has an improvident husband, or for an improvident child, and may make a permanent provision for the support of a family.”

So the legislature of Pennsylvania, seventy-one years ago, converted a naked authority to executors to sell, into an estate in the land, and the executors into trustees, and the policy has been carried out by the courts in good faith.

In New York, where a systematic chango in the doctrine of trusts was made by legislative authority, by which all uses and trusts, except as therein modified and authorized, were abolished, and all estates and interests in lands were made legal estates, except when otherwise provided, certain express trusts were allow'ed to be created; amongst these was a trust “ to receive the rents and profits of lands, and apply them to the use of any person during the life of such person, or for any shorter term:” 3 Rev. Stat. 16.

The Revised Statutes provide that every express trust, valid as such in its creation, except as therein otherwise provided for, shall vest the whole estate in the trustees, in law and equity, subject only to the execution of the trust. The persons for whose benefit the trust is created, shall take no estate or interest in the land, but may enforce the performance of the trust in equity; and no person beneficially interested in a trust for the receipt of the rents and profits of lands, can assign or in any manner dispose of said interest: Id. 21.

The security of the cestui que trust is complete, and under no circumstances can he be deprived of a maintenance. The case of Noyes v. Blakeman, 2 Selden 567, is one of the strongest instances of the inflexibility of the rule in preventing a feme covert from rendering her interest liable. “It is an error,” says Justice "Welles (p. 579), “therefore, it seems to me, to call this right a separate estate. It is no estate whatever.” And such iA the general rule as to all cestui que trusts, wrho are strictly only entitled to enforce an execution of the trust, but have no estate in the land.

The only question of importance in the case before us, is the nature of the estate vested in his executors by the will of James Bell. The fifth clause in the will devises and bequeaths to his executors all the residue of his estate, real and personal, to hold to them and the survivor of them in trust for certain uses and purposes — these are, to lease the real estate, keep invested the persona] estate in bond and mortgage, or other safe and substantial securities, collect and receive the rents, interest, and income, and profits thereof; and out of the said income pay all expenses attendant, necessarily incurred in keeping the said real estate in good order and repair; and all taxes and lawful charges that may be assessed or levied, as well upon the ,said real estate as the said personal estate; and also all expenses attendant upon the collection of the said rents and income, and pay over and distribute the income of the said estate, real and personal, as follows: One third part to his son James Bell, for and during all the term of his natural-life ; one third part to his son John Bell,, for and during all the term of his natural life; one third part to his daughter Eliza Eield, for and during all the term of her natural life, for her own separate use, so that the same shall not be taken for the payment of the debts of her present or any future husband; then follow certain provisions looking to the death of the survivor of his three children, as the period at which the devisees are to be ascertained, who should be entitled to the capital of his property. In case all his children died without lawful issue them surviving, his said estate, real and personal, is to descend and be vested in such persons as by the laws of Pennsylvania is directed, concerning the estates of intestates. In case of the decease of one or two of his children not leaving lawful issue, then one moiety of the said net income to be paid to each, of the survivors, or the whole thereof to the survivor, as the case may be, during the natural life of the said survivors or survivor.

In case of the decease of one or two of his children, leaving lawful issue, then the portion of the said interest and income that was paid to such parent prior to his death, to be paid to such issue in equal proportions, if there'be more than one, during the natural lives or life of the survivors and survivor of his said children.

Upon the decease of the survivor of his children, then his executors or the survivor of them to divide, pay, assign, and distribute his said estate, real and personal, to and among the issue of his said children in equal shares; such issue and their descendants, if any, taking and receiving only such part or share thereof as his, her, or their deceased parent would have been entitled to if then living.

The executors were also authorized to sell either at private or public sale or let on ground-rent, such parts of said real estate as they thought, ought to be sold, and to convey the same. All ground-rents reserved by the executors, to be held by them and the survivor of them, to the uses and purposes before set forth; and all purchase-money to be invested in other real estate, or ground-rents, or bond and mortgage, or in some other safe and substantial security, to be held for the same uses and purposes.

It is clear, therefore, that the testator intended his executors to be invested with a trust estate, which should not expire until the death of the survivor of his three children. The trust was an active one, demanding the personal attention of the trustees, and being restricted to three lives actually in being at the death of the testator, does not infringe upon the rule against perpetuities ; nor is there any prohibition against alienation by the cestui que trusts. Upon the death of the surviving child this active trust ceases, and the estates become vested in the parties entitled to it at that period. The estate, therefore, in the cestui que trusts, is an equitable one during the lives of the three children, and of their survivors and survivor. Whatever may be the estates to which any one may become entitled at the death of the survivor, they are legal according- to our law.

The auditor, however, entertained a different opinion, and at the date of his report, the devisees were James Bell and Eliza Field, then a widow, and James Bell, a minor child of John II. Bell, deceased, called John Bell in the will; the said James Bell - being born after the death of the testator. The auditor, upon the authority of Kuhn v. Newman, 2 Casey 227, held that there is no trust whatever, and that, in other words, the trust is executed. This decision of the auditor renders nugatory all the careful provisions of the testator, made to preserve his estate during the lives of his three children; and this obliges us to consider the grounds upon which that case was decided. It has been complained of at the bar as unsettling the law of trusts in Pennsylvania, and has been the subject of grave criticism.

The principal error is in laying down as the law of Pennsylvania, that a trust to receive rents and pay them to another is executed, although not an use executed by the Statute of Uses, but arising from some general principle inherent in the common law of the state. This is not supported by authority; for in Pullen v. Rianhard, 1 Whart. 521, it was distinctly held, that in such case the legal estate must continue in the first devisee, so that he might perform the trust; because, without having the control of the estate, he could not receive the rents and pay them over as directed. This was clearly the law then, and there was no act of the legislature changing it between that decision and the one under discussion — a lapse of only twenty years.

The general observations as to the futility of restraints upon property, must be limited by the law, as emphatically declared in the two classes of cases commencing with Lancaster v. Dolan and Fisher v. Taylor, nor is the jurisdiction of the Orphans’ Court, which has existed, with various powers, from the foundation of the province, a sufficient reason for annihilating the settled law of trusts for minors, and depriving a parent of the power of choosing the persons who shall control and manage the estate he gives to his child. That this is not the law is clearly shown by two cases of undoubted authority. In re John Wilson’s Estate, 2 Barr 325, the testator had, by his will, in 1825, given his estate among Lis nephews and nieces ; the share of William Wilson, one of his nephews, he gave to his executors thereinafter named, and to a majority of them who might take on themselves the execution of his will, and to the survivor in trust, to invest and apply the income to his maintenance, with authority at discretion, to pay him part or the whole of the principal. In 1845, William Wilson was found a lunatic, and a Mr. Corson was appointed committee of his person and estate, who claimed to take the share of the lunatic. Chief Justice Gibson (page 329), said : “ Again, Mr. Corson’s demand of William Wilson’s share, as his committee, was properly disregarded.”

“ The testator devised his estate to his executors in trust, to invest the share in stock, or put it at interest, and apply the incomo to the lunatic’s use, or p&j him the whole or part of the principal, at their discretion.

“ By what law, then, could the appointment of a committee take this ti’ust out of the hands in which the testator had placed it, and vest it in one who can exercise no greater or other right than could, were he sane, be exercised by the lunatic himself? The estate .was devised to the trustees qua executors; and if the distinction were material, it would consequently be clear that the appellant succeeded to the trust vested in his wife by succeeding to her executorship, with which it was indivisibly joined. But whether the appellant or his wife be the trustee, it is certain that Mr. Corson is not; and it is enough to prevent him from getting the direction of the lunatic’s estate, that there is a trustee either in esse or posse. The testator had a right to appoint his own trustee; and if the office were vacant, the proper course would be to fill it by appointment, for which the lunatic’s committee, whose business it is to call the trustee to account, would be the most improper person that could be selected.”

In Vanartsdalen v. Same and Cornell’s Appeal, 2 Harris 884, a grandfather appointed his executors guardians of his grandchildren, and gave them, the executors, the management of the estate devised by him to his grandchildren, and the father waived his parental right. It appeared that the father, after waiving his parental rights, applied to the Orphans’ Court, and had a guardian appointed for his children, who discontinued an ejectment for the children commenced by the executor, who was appointed by their grandfather’s will their guardian.

Judge Kogers, delivering the opinion of the court (p. 387), said: “Even conceding the testator has appointed a guardian for the persons of his grandchildren, as well as a trustee or curator for the estate devised, yet the appointment would be good, inasmuch as the father has submitted to the -will by an enjoyment of the estate devised in right of his wife during her life. For it is only since her decease he has acted in opposition to the will.” “ It is plain the testator does not mean to interfere with the natural right of the father to the custody and care of his children; all that is intended is to commit the management of the estate to his executors, who are appointed guardians of the children. It is of no sort of consequence that he designates them as guardians rather than as trustees or curators of the estate, for the benefit of the infants. The will must receive such a construction as is beneficial to the minors, at the same time carrying out the intention of the testator. The disposition in the will does not require the assent of the father, as none of his rights are affected by it, nor is it in his power to defeat its provisions, or by any opposition work a forfeiture of the estate, as perhaps might be the case if the grandfather had undertaken to deprive him of the care and management of his children. What right has he to complain when a grandfather or mother, or even a stranger, devises an estate to his children, coupled with a condition that its care and management shall be intrusted to another rather than to him ?

“ The Orphans’ Court have disregarded this distinction. They have treated the appointment by the grandfather as null and void, and have proceeded to appoint a stranger as guardian, without any notice whatever to the testamentary guardian. But so far from being void, it is not even voidable, except on proof of fraud or gross mismanagement, or some personal disability of the guardian. This we think is altogether irregular and erroneous, and for this reason the proceedings in the Orphans’ Court must be reversed.”

This decision is supported by the case of Smithwick v. Jordan, 15 Mass. 113, where, under almost entirely similar circumstances, the sanie doctrine is laid down by Chief Justice Parker. There the devise was to a minor of seven years in fee, but he was not to come into possession, occupy, or have any advantage of said estate during his minority, except through his guardian. The testatrix appoints her executor to be guardian of the minor until he shall attain the age of twenty-one years, if he shall so long live; directs the guardian to lease, occupy, and improve the estates, and from the rents and profits to maintain and educate the minor. The court said: “ A present estate in fee was devised, and it was the possession only which was postponed." “ And the words of the will are sufficient to create a trust estate in the tenant (the guardian), by which he may hold the estate for the purpose for which the trust was created, until, by the will, the devisee can take possession for himself.”

In Steacy v. Rice, 3 Casey 75, the trust for the married woman was not for the trustee to receive and pay over, but simply for her use; and the husband having died, the court held that the life estate of the widow became a legal one, which does not touch the present question. In Bush’s Appeal, 9 Casey 85, twTo judges dissented. In Kay v. Scates, 1 Wright 31, my brother Strong evidently jmoceeds on the authority of Kuhn v. Newman.

In Massachusetts, our old settled doctrine prevails: Cleveland v. Hallett, 6 Cushing 403; Fay v. Taft, 12 Id. 448; 15 Mass. 113, above cited. In re Birtlc’s Estates, 32 L. Jour. Ch. 439, the lords justices, on the 25th of May last, decided in a case like the present, that the trust estate remained in the trustees during a life or lives in being, and on the expiration of the last life, it vested in persons in fee simple, who were not ascertained until that event happened. In this case, property was by will limited to trustees during the life of the longest liver of the testator’s wife and five children, and from the death of such longest liver, to the respective issue then living of his children, in undivided fifth shares as tenants in common in fee, with cross-remainder limitations. The longest liver of testator’s wife and five children died in 1861, when the property vested absolutely in fee in undivided shares in numerous individuals. The absolute vesting was thus postponed for six lives in being at the death of the testator, and might have been carried twenty-one years further: Pownall v. Graham, 9 Jurist, N. S. 318.

The question then is, shall the settled law of Pennsylvania, as to trusts, remain as it was understood by all our tribunals and by the bar, and had been received since the foundation of the province to within the last eight years, or are we, without the sanction of the legislature, entirely to uproot it, and substitute a new system which has been the subject of serious criticism and constant complaint ?

We do not approve of such judicial legislation, and are therefore of opinion that the auditor and the court below erred in declaring that there was no estate vested in the trustees of the testator’s will, and, so far, their decree must be reversed.

It is therefore ordered, decreed, and adjudged, that so much of the decree as declares that there is no estate vested in the trustees of the testator’s will, be and the same is hereby reversed; and all proceedings upon that declaration are reversed, and the residue of the said decree is affirmed. The costs to be paid by the estate in the hands of the trustees.