27 Misc. 2d 60 | N.Y. Sup. Ct. | 1960
By this proceeding under article 79 of the Civil Practice Act, the surviving cotrustees of an inter vivas trust seek an order (1) settling and allowing their final
The trust in question is one of two which were established by an agreement dated February 10, 1903, as part of a property settlement incident to a divorce action then pending between the settlor, Pliny Fisk, and his then wife, Mary L. C. Fisk. By that agreement, Pliny Fisk transferred certain securities therein described (of the face value then of $215,000 in each trust) to cotrustees upon two separate trusts for the primary benefit of his then wife, and for the secondary benefit of each of their "two daughters, Edith C. and Dorothy. The trust agreement (subject to provisions for the payment of income not to exceed $5,000 per annum to each daughter after attainment of majority even during their mother’s lifetime) directed the trustees to pay the net income from both of the two trusts to the wife for her entire lifetime. Thus, from 1903 to the wife’s death intestate on February 8,1937, both trusts were administered in solido. The wife was survived by her husband, the settlor, who died on March 30,1939.
Upon the death of the wife, the agreement designated the daughter, Edith 0., as the second life income beneficiary of the trust established under article I, and the daughter, Dorothy, as the second life income beneficiary of the trust established under article II. Each trust similarly provided that upon the death of either daughter (occurring, of course, subsequent to the mother’s death) the entire corpus of the affected trust was to go to her own descendants then surviving, and if none, then to the other daughter, or if she be not then surviving, then to others according to the remaining provisions for disposition of the corpus (set forth in full, infra). One daughter, Dorothy, died on July 10,1957. She had no descendants and consequently the entire principal of the trust under article II was paid over to her sister, Edith O., pursuant to the above-mentioned terms of the trust instrument. Edith C. subsequently died testate on May 17, 1959. She was not survived by any descendant of blood, but she was survived by an adopted son, George Edwin Fisk Adames, of full age and competence. Thus, the second remaining trust terminated and the corpus thereof became distributable under paragraph “Fifth” of “article I ” of the
As noted above, Edith C. died leaving only an adopted adult son, George Edwin, but no true lineal descendants. Although said adopted son has been made a party to this proceeding, he has not appeared herein nor has he at any time asserted the status of a “ descendant ” of Edith C., nor claimed any right as such to receive the corpus of the trust in question under that portion of paragraph “Fifth” (supra) which designates “ descendants ” of Edith 0. as the first class of remainderman. Moreover, the law seems quite clear that this adopted son has no standing as a “ descendant ’ ’ to assert a right to the corpus. Thus, section 115 of the Domestic Relations Law provides: “ As respects the passing and limitation over of real or personal property dependent under the provisions of any instrument on the foster parent dying without heirs, the foster child is not deemed the child of the foster parent so as to defeat the rights of remainderman. ’ ’ This section was applied to 1 ‘ descendants ’ ’ in Matter of Upjohn (304 N. Y. 366, 378) wherein it was also said: “ The rule in this state declared in New York Life Ins. & Trust Co. v. Viele (161 N. Y. 11, 20), is that the limitation will be construed to designate only those related to the named ancestor by blood if 1 there is nothing to the contrary to be found in the context of the instrument, or in extraneous facts proper to be considered ’. In other words, in the absence of any indi
Inasmuch as the daughter, Dorothy, predeceased her sister, Edith C., without descendants surviving, and the settlor had died intestate, that portion of paragraph “ Fifth ” becomes operative which finally provides that the corpus is to go “ to such persons as shall then under the laws of the State of New York, be entitled thereto as part of the personal estate of the party of the first part [the settlor].”
The court is presented with the following constructions of the appearing parties:
I. The first construction is that advanced by the settlor’s four natural children who are the issue of his second marriage to one Eleanor Hepburn Fisk, who died on April 4, 1949. These children are Eleanor Fisk Noall, Gwendolyn Fisk Halleran, Pliny Fisk, Jr., and Wilbur Fisk. They urge that the provision in question established contingent remainders whereby only those distributees of the settlor were to take who were alive upon the termination of the trust in 1959.
II. The second construction contended for, viz., that vested remainders were created in those distributees alive at the settlor’s death, is advanced by the estates of the settlor’s other distributees who died prior to the termination of the trust in 1959. This group consists of the estates of the second wife, Eleanor Hepburn Fisk, and of the two afore-mentioned life beneficiaries, Dorothy and Edith G. The executors also contend that the provision in question must be construed as reserving a reversion to the settlor and that, therefore, the trust corpus ■vested in his distributees, alive at his death, by descent rather than by purchase under the trust instrument. If the construction of either (1) a vested remainder or (2) a reversion should be adopted, a subsidiary question would be presented as to whether the settlor’s second wife can be considered a “ distributee ” since the trust agreement was executed at a time when widoivs were not regarded as next of kin. (See, e.g., Guaranty Trust Co. v. New York Trust Co., 297 N. Y. 45, 51 [1947].)
III. The third construction advanced, that a reversion was created, is by one Samuel E. Witt who asserts a claim against
Ordinarily, the words of grant in the context of this instrument would clearly create a remainder interest (cf. Whittemore v. Equitable Trust Co., 250 N. Y. 298, 302 [1929]). However, the fact that the designated remaindermen here are the settlor’s own next of kin poses a question, born of the feudal doctrine of worthier title, as to whether the instrument sufficiently discloses an intent to create a remainder in the settlor’s heirs rather than a reversion in the settlor which heirs would take by descent rather than by purchase under the trust instrument. For it is a rule of construction which, broadly stated, holds that a grant to the settlor’s heirs results in a reversion. The proper conclusion depends solely upon the sufficiency of the settlor’s disclosed intent measured largely by the presence or absence of certain factors heretofore judicially considered (Matter of Burchell, 299 N. Y. 351, 360-361 [1949]). While the parties agree upon this broad proposition, they are apart upon the force of the indicated rule of construction and the extent to which a contrary intent must be manifested in order for a remainder to result. The rule to be applied has slowly evolved over a half century. Its true meaning and application can only be ascertained by a careful analysis of some of the cases with a due regard for their facts, as well as the judicial expressions.
At common law, the grant of a fee, limited upon a life estate, to the grantor’s heirs resulted in a reversion in the grantor (Richardson v. Richardson, 298 N. Y. 135, 138 [1948]; Doctor v. Hughes, 225 N. Y. 305, 310 [1919]). The heirs so designated merely had an expectancy, not an estate, which could be defeated by deed or will (Doctor v. Hughes, supra). This was a strict
The departure from this doctrine was expressed by Judge Cardozo in the early leading case of Doctor v. Hughes (supra). There the settlor conveyed certain real property in trust for his own benefit.during his life, and directed that upon his death the trustee was to “ convey the said premises (if not sold) to the heirs at law of the party of the first part [settlor] ”, The trustee was directed to pay the settlor a yearly income of at least $1,500, and was also empowered to pay two existing mortgages and other debts, as well as to mortgage and even sell the property. After reviewing the common-law doctrine referred to above, Judge Cardozo wrote: 1 ‘ But at least the ancient rule survives to this extent, that to transform into a remainder what would ordinarily be a reversion, the intention to work the transformation must be clearly expressed ” (p. 312, emphasis added). Observing that there was no adequate disclosure of an intent to vest the heirs with an indefeasible interest, and that the trustee was empowered to destroy the trust, the court held that, a reversion resulted in the settlor and that during his life the settlor’s daughter had no interest against which judgment creditors could levy. In the light of succeeding cases, it is important to note that here (1) the trust was for the settlor's exclusive benefit; (2) the trustee was empowered to invade and even to convey the entire corpus; (3) there were no antecedent remainders; (4) there was no intent to vary the ordinary line of succession; (5) there was no reservation of a power of testamentary disposition, and (6) there Avas no full scheme of disposition of the trust property. It should be noted also that this case represents only the early stage of the departure from the strict rule of property, and the test applied by Judge Cardozo, that the settlor’s intent must be “ clearly expressed ”, was restricted in later cases.
Subsequent to Whittemore, the Court of Appeals affirmed, without opinion, the holding of the Appellate Division, First Department, which found a reversion was created in Berlenbach v. Chemical Bank & Trust Co. (235 App. Div. 170, affd. 260 N. Y. 539 [1932]). There, the plaintiff settlor established a trust for his own benefit for life but not to exceed 20 years. At the end of 20 years, the corpus was to return to the settlor. However, in the event of his death prior to the expiration of 20 years, the corpus was to be paid to those persons named in the settlor’s will; or, if none be so appointed, the corpus was to pass under the residuary clause of his will; or, if he died intestate, then “ to the persons entitled to receive his personal property in case of intestacy” (235 App. Div. 171). About five years after the trust was established, the settlor attempted unilaterally to revoke the trust although he then had a wife and son. The Appellate Division, holding that a reversion was created and the revocation effective, laid great emphasis upon the fact that the trust was established for the settlor’s own benefit and that it clearly was not intended to create present rights in anyone else. The court also stressed the fact that the trustee was without power to change the investments constituting the trust principal without the settlor’s consent. Many years later, the Court of Appeals gave as its reason for affirming the Appellate Division
In Richardson v. Richardson (298 N. Y. 135 [1948], supra) Judge Conway (later Chief Judge) reviewed all the cases in a manner later described by Judge Bromley as “ admirable ”. (Matter of Burchell, 299 N. Y. 351, 359 [1949], supra.) In Richardson, the settlor created a trust of securities with the direction that the income should go to her for her life. Upon her death, the trustees were directed to pay over the corpus and undistributed income to those persons designated in her will or, failing such appointment, to the settlor’s mother if then surviving or, if she should not survive, ‘ ‘ then said principal shall go to such persons as would be entitled to the same under the intestacy laws of the State of New York ”, The settlor also had the power to name a substitute trustee, a fact to bear in mind because of the facts of the instant case. The settlor’s mother predeceased the settlor who thereafter served a notice revoking the trust. At the time of the attempt to revoke, the settlor had a husband, one adult child, and two minor children. The trustee objected that the settlor was not the sole person beneficially interested and could not, therefore, revoke the trust. The Court of Appeals held the revocation inoperative. After reviewing the cases, Judge Conway said (pp. 139-140):
“ Thus direction to transfer trust property to one’s next of kin is insufficient in and of itself to create a remainder. There must be additional factors, i.e., other indications of intention in order that there may be found ‘ sufficient ’ or ‘ clear expression ’ of intention on the part of the settlor to create a remainder to his next of kin.
‘ ‘ In our decisions we have attached considerable importance to at least three factors which are present in- the instant case, viz.: (1) that the settlor has made a full and formal disposition
And in holding a remainder was created in Richardson, he wrote (p. 144): “To summarize, therefore, we believe the settlor evidenced her intention to give a remainder to her next of kin because she (1) made a full and formal disposition of the principal of the trust property, (2) made no reservation of a power to grant or assign an interest in the property during her lifetime, (3) surrendered all control over the trust property except the power to make testamentary disposition thereof and the right to appoint a substitute trustee, and (4) made no provision for ■ the return of any part of the principal to herself during her lifetime. ’ ’ Thus, the court in Richardson attempted to lay down definite criteria which, when present, will be deemed sufficient to establish an intent to create a remainder. And despite the reference to the “ clear expression ” test, the force of the rule of construction favoring a reversion seems to have been limited as it had been previously in Whittemore. As the court said: “ It is now settled that the solution of the problem presented is dependent upon the intention of the settlor as expressed in the trust agreement” (p. 138). And the true utility of the rule of construction referred to seems to have been essentially confined to a bare direction to transfer trust property to one’s next of kin (p. 139). The presence of the factors enumerated is sufficient to supply the intent to create a remainder with the implicit qualification, of course, that such a result must be in accord with the trust instrument as a whole.
The last case of significance decided by the Court of Appeals was Matter of Burchell (299 N. Y. 351 [1949], supra). There the settlor established a trust whereby she was to receive the income for her life and upon her death the principal was to go to the persons named in her will, or failing such testamentary disposition, to such persons as would be entitled thereto if she had died intestate. The settlor also reserved the power to join in (1) the execution of any conveyance, mortgage or lease over three years, and (2) the appointment of successor trustees. In holding that a remainder was created, the court placed great emphasis on the fact that the sole control retained by the settlor was by a testamentary power of appointment (p. 360). The court stated: ‘ ‘ The fact that the trust agreement reserved a power of appointment is evidence that the settlor believed she had created an interest in the property on the part of others
The Burchell case gives us, in light of predecessor cases, a rather clear approach which so far as it can be expressed as a rule, may be summarized thusly: Where the language of the trust instrument creates what would normally be a remainder, it will be given effect if there are other evidences of intent to support that result. Such other evidence need not establish the intent independently, but merely “ buttress ” the language employed in the trust instrument. It need not be “ overwhelming ”, but merely “ sufficiently ” corroborative. Only in the absence of such supporting indicia does the rule of construction become operative and result in a reversion. With respect to
Under the foregoing cases, the conclusion seems inescapable that the settlor, Pliny Fisk, intended to create a remainder. To begin, the trust instrument employs language which ordinarily operates to create a remainder interest. Our inquiry, then, is whether there is sufficient other evidence to buttress that language and allow it to take effect.
The trust instrument contains all of the factors deemed significant in the cited cases as supporting the intent to create a remainder. (A) The settlor retained no power to sell, assign or otherwise disturb or affect the corpus during his life. The trustees were vested with complete power to invest and reinvest the trust property. (B) The only power of disposition retained by the settlor was by testamentary appointment. And, indeed, even that power could be defeated by the occurrence of any of several specified contingencies, viz., (1) the survival of descendants of Edith, which could reasonably have included settlor’s grandchildren or even great-grandchildren; (2) the survival of Edith’s sister, Dorothy; and (3) the survival of descendants of Dorothy, which again could reasonably have included grandchildren or even great-grandchildren of the settlor. (0) The trust was created for the sole benefit of the settlor’s then wife and two daughters. He derived no benefit whatever therefrom. Indeed, the express purpose of the trust was to provide support and maintenance for the wife and daughters. (D) Most importantly, it cannot be questioned that this instrument very clearly constitutes a full and formal disposition of the trust property. This factor alone is of great significance. (See, e.g., Whittemore v. Equitable Trust Co., supra; Richardson v. Richardson, supra; Matter of Ryan, 284 App. Div. 102 [1st Dept., 1954]; Fish v. Chemical Bank & Trust Co., 270 App. Div. 251 [1st Dept., 1945].) The trust was to span two generations. It may be noted, as the court is informed, that at the time the trusts were established the settlor’s daughters, Dorothy and Edith, were 16 and 17 years of age, respectively. The settlor meticulously provided for alternative disposition of the corpus upon the termination of the trust estates. Upon the failure of three designated classes of contingent remaindermen, the corpus was to go to the settlor in the unlikely event he should survive. The further provision
Although these factors do not ipso facto conclude the question of the settlor’s intent in all cases (Matter of Burchell, supra, p. 361), they certainly do in this case, particularly in light of the instrument read as a whole, the circumstances surrounding its execution, and other factors. The preamble of the trust instrument, after referring to the wife’s life estate, recites “ the ultimate disposition of such fund to be as hereinafter provided.” (Agreement, p. 2, emphasis added.) Such a recital, though ambiguous when considered in vacuo, acquires some significance when taken together with the painstakingly complete provisions thereafter for disposition of the trust corpus. It lends additional support to the conclusion that by this instrument the settlor intended to make final disposition of the corpus* and if all the antecedent conditioned grants should fail, his next of kin (whenever ascertained) should take under the instrument and not by descent.
Another factor arises out of the unreasonable result which would arise if a reversion were held. The provision for next of kin could become operative only after the death of both daughters without a single surviving descendant between them. To hold a reversion was created would require us to attribute to the settlor an intent in 1903 to benefit persons, not even of remote lineal descent — complete strangers — equally with such other next of kin as he might acquire, and did acquire, during what then must have seemed many years to come. Furthermore, such a holding would conflict with the provision which, specifically applied, prevented the daughter, Dorothy, from taking the corpus of Edith’s trust if she predeceased her. And finally, such a conclusion would require us to attribute an intent to the settlor that a substantial portion of the trust property should go into estates, one of which might have long since been closed, and be subjected to additional expenses and possible additional taxes. Such intent cannot be attributed to the settlor who was so scrupulous about the disposition of the corpus and who had made generous provisions for his daughters and their descendants. It seems clear that he intended to benefit no one claiming through his deceased daughters other than their surviving descendants.
That the settlor did not intend to benefit his daughters’ estates is supported by other evidence indicating a clear purpose
All the foregoing factors considered together in the whole context of the instrument clearly establish that the settlor intended to grant a remainder only to those next of kin who survived the trust. The only persons here answering that description are his four natural children by his second wife, and each is entitled to an equal share of the corpus.
On the question of whether the remainders were vested or contingent, it is argued generally that the law favors the vesting of estates. This is true, but it is only a rule of construction which “ cannot be applied when it is found that by so doing the intention of the testator [here, settlor] would not be carried out.” (Salter v. Drowne, supra, p. 212.) This settlor’s intention to postpone vesting was clearly established. It is argued
Due consideration has, of course, been given to the factors stressed by some of the parties as pointing to a reversion or vested remainder. However significant their presence might be in another instrument, it is clear that their potential force is entirely lost in light of the numerous other indications here clearly expressing a purpose to give the corpus only to those next of kin of the settlor who might be alive upon termination of the trust. The entirety of the trust instrument requires this result which, in my opinion, is the most equitable one. Accordingly, the trust principal and accumulated income should be distributed equally among Pliny Fisk’s four surviving children, viz., Eleanor Fisk Noall, Gwendolyn Fisk Haller an, Pliny Fisk, Jr., and Wilbur Fisk. No objection having been taken to the trustees’ account, it is approved.