124 Misc. 15 | N.Y. Sur. Ct. | 1924
The trustees appointed by the testator’s will apply for a construction of its provisions, and particularly paragraph 12, as to the power vested in them to sell certain securities in the trust funds. The will directed the setting up of six separate trusts for the benefit of certain of his relations by the bequest to the trustees of specifically named securities, to wit, the first mortgage sinking fund six per cent twenty-year gold bonds of the United States Light and Heat Corporation. The will further directed, by paragraph 11, that the residue and remainder of the estate-, after the payment of certain pecuniary legacies and the setting up of the trusts hereinbefore mentioned, be given to his trustees with instructions to divide the residuary estate into “ three' separate, distinct and equal trust funds.” The first residuary trust was created for the benefit of his wife for life; the second and third for the benefit of his sons Edward and Richard respectively.
Under paragraph 2 the testator provided: “ In all matters involving the administration of my estate, the sale, investment, or reinvestment of my property or monies, and the execution of this will, the decision of a majority of my executors or their successors shall prevail.” That paragraph likewise appointed a trust company, the testator’s wife and one James Chambers as executors and trustees of the estate.
The paragraph particularly sought to be construed here reads as follows:
“ Twelfth. I hereby empower my executors and trustees herein-before named to sell any of the bonds, securities and properties in which the principal of the trusts hereinbefore set forth are invested only when non-income producing and then only if and when a majority of my executors and trustees deem it advisable, and to invest and reinvest the proceeds of such sale in such manner and securities as trustees and savings banks, under the laws of the State of New York, are permitted to invest trust funds in.”
The securities taken over by the trustees under the residuary clause consisted of common stock and preferred stock of various corporations and in part of bonds which do not constitute legal investments for trust funds under section 111 of the Decedent Estate Law or the provisions of section 239 of the Banking Law. Many of these investments are highly speculative and have been subject to wide fluctuations in value. The trustees state that they are in doubt as to their right to sell any of these securities and request the instruction of the surrogate as to their powers.
(1) In my opinion the language of paragraph 12 relating to the sale of securities only when “ non-income producing ” has no
Under the provisions of paragraph .2 of the will, authority had been vested in a majority of the three executors and trustees to administer the estate and to conduct the sale of investments and the reinvestment of the proceeds. The testator must have contemplated the sale of sufficient stocks and bonds to pay his debts and to pay the general pecuniary legacies. He also must have intended the sale of sufficient securities to equalize the three residuary trust funds as directed in his will. The gift of the residue of an estate to executors or trustees is not a gift of the specific securities owned by the decedent at his death, nor does it restrict the ordinary right and duty of the executor or trustee to sell the securities. (Matter of N. Y. Life Insurance & Trust Co. [Estate of Saxer], 86 App. Div. 247.) Paragraph 12, therefore, must be held not to prohibit the sale by the trustees of any of the securities taken over by them and now constituting part of the residuary trusts.
(2) Nor am I of the opinion that the language of paragraph 12 prohibited the sale of the United States Light and Heat Corporation bonds in the six specific trusts. The beginning of that paragraph imports discretion and authority rather than an absolute prohibition against the sale of the securities before they become non-income producing. It is a matter of common experience that securities greatly depreciate in value in advance of an actual suspension of dividends or cessation of payment of interest on bonds. If the language of that paragraph were construed as compulsory rather than advisory, the life tenants and remainder-men of the trusts were bound to sustain serious losses, if not an entire destruction of the trust funds. While the exact point involved here does not appear to have been passed upon by the authorities in this State, it does appear that somewhat similar provisions contained in a will have been construed by the courts from the standpoint of the protection of trust funds rather ■ than blind obedience to the language used by the testator. Thus in Bigelow v. Tilden (52 App. Div. 390) the First Department in construing the will of Samuel J. Tilden held that somewhat similar language
It is significant in this will also that in each one of the paragraphs in reference to the trusts of the United States Light and Heat Corporation bonds that there was a direction to pay over at the termination of the trust the “ said bonds or the proceeds thereof if sold,” thereby showing an expectation by the testator of a sale of the securities during the period of the trust.
Under the special provisions of this will and for the purpose of safeguarding the trust estate, I hold, therefore, there is a complete power of sale in the trustees over the United States Light and Heat Corporation bonds before the securities reach the non-income producing status. If sold the proceeds should be reinvested in only those investments authorized by law for trustees. My deter-
Submit decree construing the will accordingly.