31 N.W.2d 20 | Minn. | 1948
The questions for decision are: (1) Whether under a testamentary trust testator's widow is entitled to support out of the corpus of a trust, if income therefrom is insufficient, where testator by his will, after directing payment of his debts, the expenses of his last illness, funeral, administration, and inheritance and estate taxes, and giving part of his estate consisting of the homestead and certain personal property outright to his wife for life, with remainder to his daughters by a prior marriage, gave the residue of his estate to trustees, if his wife survived him, in trust "to manage" his "estate" and "to pay the income of such trust" monthly in equal shares to his widow and his two daughters; but with the proviso that, if "one-third of the proceeds of said trust" should be insufficient to support the widow in the style and manner in which testator supported her, the trustees in their discretion were authorized to pay for such purpose from the "proceeds" of the "trust" such additional sums as they deemed necessary and proper, in which event "the share of the proceeds of said trust hereinbefore given" to the daughters, which was referred to in the next clause as "income" given to them, should be "decreased accordingly"; and the codicil contained identical provisions relative to the terms of the trust, except that in the proviso authorizing the trustees to pay more than one-third of the proceeds, etc., for the widow's support it used the word "estate" instead of the word "trust" wherever that word occurred in the will itself; and (2) whether, if the preceding question is answered in the negative, *446 the court may confer power upon the trustees to encroach upon the corpus of the trust for the purpose of paying for the widow's support to the extent that it exceeds the amount of the income from the trust.
The will, after a general direction that testator's debts and the expenses of last illness, funeral, and administration be paid, and a specific direction that inheritance and estate taxes be paid out of the "principal" of the estate, disposed of testator's property in part outright and in part in trust contingent upon his wife's surviving him.
Outright disposition of the homestead and certain personal property was made to the widow for life and at her death to his two daughters by a prior marriage and, if they died before his widow, to their children by right of representation. If the widow did not continue to occupy the homestead, the trustees were empowered to lease it and to pay the income in equal shares to the widow and the daughters, and if the widow and the daughters gave their written consent, to sell and convey the homestead and to distribute the "net proceeds thereof" in equal shares to the widow and the two daughters.
The residue was given in trust during the widow's life, contingent upon her surviving the testator. The trustees were directed "to manage my said estate and to pay the income of such trust" (italics supplied) monthly in equal shares to his widow and his two daughters; but with the proviso that, if one-third of the "proceeds of said trust" should be insufficient to support the widow in the style and manner in which testator supported her during his lifetime, the trustees were directed to pay to her "from the proceeds of said trust" such additional sums as might be needed for the purpose, in which event "the share of the proceeds of said trust hereinbefore given" to the daughters "shall be decreased accordingly." The codicil contains identical provisions, except that the word "estate" is used therein wherever the word "trust" occurs in the proviso in the will authorizing the trustees to pay more than one-third of the proceeds, etc., for the widow's support. *447
Upon testator's wife's death, whether she predeceased or survived him, he gave the principal and accrued interest in said trust or in the residue of his estate, as the case might be, to his two daughters. If a daughter or the daughters died before his wife, he gave "the share or portion of theincome devised to such daughter or daughters (italics supplied) to her or their children by right of representation, and if a daughter or the daughters died prior to receiving the principal and accrued interest, he made like disposition of their shares thereof to their children.
The will further provided: (a) That the trustees might retain and change investments coming into their hands as such, sell real and personal property, and "buy, sell, invest and reinvest the proceeds of said estate" (italics supplied) in securities which are legal investments for trust companies, which powers were enlarged by the codicil so as to authorize the trustees to invest and reinvest "available cash funds of the trust estate" (italics supplied) in preferred and common stocks, regardless of whether such were authorized investments for trust companies; (b) that the provisions for the benefit of the widow should be in lieu of all dower and statutory rights which she might have in the estate and not in addition thereto, except the widow's allowance during the pendency of probate proceedings; and (c) that if the widow should die before the testator, the will should be automatically revoked as to her without affecting the other provisions thereof.
The will names the corporate trustee and S.D. Balch, the husband of one of the daughters, as cotrustees. The codicil names Robert G. Reiniger, the husband of the other daughter, as an additional cotrustee.
The wife and daughters survived the testator, who died prior to May 1, 1941, when the trustees were appointed. The residue of the estate held in trust by them exceeds in value $122,000. The annual net income from the trust was about $3,900 for 1941-1942 and has decreased to about $2,900 for 1945-1946. The widow, who is now over 85 years of age, has continued to occupy the homestead and to use the household furniture and furnishings. One-third of the income *448 of the trust has been insufficient for the widow's support. From May 1941 to April 1944, the trustees paid her $200 per month for support and thereafter the entire income of the trust. In 1944 she was injured. Thereafter, it required about $6,500 per year to maintain the widow and her niece in her home and to pay doctor's and nurses' bills. The support of the niece is justified upon the ground that she contributes to the widow's care. The net income of the trust apparently is adequate to pay for the care and support of the widow in a hospital, but she objects to leaving her own home, and her doctor advises against her doing so. The court authorized encroachment upon the corpus to an extent necessary to provide in the aggregate $6,500 per year for the widow's care and support, $800 for doctor's bills, and approximately $1,000 for attorneys' fees, an aggregate of about $5,400, with leave to apply to the court in the future for still further encroachments.
The individual trustees contend (1) that under the will the widow was not entitled to support out of the corpus of the trust estate, and (2) that the power of the court to authorize a trustee to deviate from the terms of a trust does not include that of authorizing a trustee to encroach upon corpus belonging to a remainderman for the benefit of a life beneficiary. The corporate trustee contends (1) that testator intended that if the income should be insufficient for his widow's support the corpus should be used for such purpose; and (2) that if the will is not so construed "the Court has the power to grant the authority itself" and should do so.
1. The intention of the testator as expressed in his will controls in the administration of a testamentary trust. In re Trust Under Will of Jones,
2. Power to encroach upon corpus for the support of the beneficiary of a testamentary trust is nonexistent unless it is given by the will, either expressly or by implication. Annotation, 108 A.L.R. 550.
3. In construing a will, the cardinal rule is that the testator's intention is to be gathered from the language of the will itself. In re Trust Created by Will of Crosby,
"It is fundamental that the intention of a testator must be sought in the language of his will; and, if that is clear, what he meant to say and did not or what he might have said if he had thought of it is foreign to the inquiry."
4. The court does not possess the power to, and never should, rewrite or remake a will to provide by conjecture what the testator might have said if he had foreseen events occurring subsequent to his death or to escape what seems to be an undesirable result. In re Estate of Jensen,
"* * * His [testator's] preference could be based upon logic or he could act without regard for it. The will is his andcannot be redrafted by this court. Whatever the probabilities may be, we cannot indulge in speculation relating to his intent but must be controlled by the language of the entire will considered in relation to each part." (Italics supplied.)
5. Testator manifested a testamentary intention of making separate dispositions of life and remainder interests, with some exceptions, to his wife and daughters. To his wife, he gave a life estate outright in the homestead and personal property, one-third of the income of the trust during her life absolutely, and so much of the other two-thirds, which he gave to his daughters, as the trustees in their discretion might deem necessary for her support in the style and manner in which he supported her. He did not give her the property mentioned for life with the right to use or consume it for *450
her support as is frequently done (Beliveau v. Beliveau,
There are other but subsidiary intentions. Just as testator made an exception to his primary intention that there should be no encroachment upon corpus for the benefit of any beneficiary at the expense of another by providing that the trustees might encroach for the widow's support upon the two-thirds of theincome of the trust given to his daughters, he also made an exception to his intention that his daughters should have his entire estate in remainder by providing that in case of sale of the homestead the widow should have one-third of the proceeds thereof. Those exceptions show an intention that the widow should receive only what was specifically given to her, and not, as the corporate trustee contends, that she should have the right to consume his entire estate for her support if that should be necessary. Because testator had otherwise indicated an intention that his wife should not have that which he gave her by the exceptions mentioned and because the exceptions were necessary in order to give her that which they included, the exceptions were made. The other provisions of the will relate to the methods and manner of effectuating all the intentions of testator.
The provision for the trust showed an intention to separate income from corpus. 3 Page, Wills (Lifetime ed.) § 1156. The creation *452
of a trust to pay the income to the widow during her life and at her death to pay over to the daughters the corpus and any accrued income was the appropriate manner of creating a trust for life with remainder over. First Am. Nat. Bank v. Higgins,
"* * * It is given as the current avails of a fund," and, "As to her husband then, there is nothing to show an intention in the testratrix that the corpus of the estate should be taken for his use; rather the contrary is shown, that he is to have only annual rents, profits and income, though they vary in amount, from year to year."
While in such a case the absence of a gift over does not betoken an intention that corpus may be encroached upon for the support of the life beneficiary, as was held in the Delaney case, the presence of a provision for a gift over indicates an intention that the corpus is to be kept intact for the remaindermen without diminution by encroachment for the benefit of prior takers. Lynn Safe D. T. Co. v. Martin,supra; First Nat. Bank v. Levy,
The power of the trustees under the will to sell and reinvest the proceeds of any sale also indicates an intention to keep the corpus intact for the purpose of earning income. This it cannot do if it is to be consumed by encroachments upon it. Einbecker v. Einbecker,
Our decision in Wheaton v. Woell,
6. The word "proceeds" in the proviso authorizing the trustees to use part or all of the proceeds of the trust and of the estate for the widow's support, following the directions to pay the "income" of the trust to the widow and the daughters, does not mean corpus. The provisions authorizing the use of "proceeds" for the widow's support authorize the use of income, but not of corpus. In support of the view that the word "proceeds" as here used means "corpus," the corporate trustee argues that, while the trustees are directed to distribute "income" to the widow and to the daughters, the proviso in both instances authorizes the use of "proceeds" for the widow's support; that the change from the word "income" to that of "proceeds" indicates a change of meaning, which under the circumstances can only mean that the word "proceeds" is used as referring to "corpus" rather than to "income"; and that an intention that the corpus should be used for the widow's benefit is confirmed by the provision in the will that in case of a sale of the homestead she was to receive one-third of the "proceeds thereof."
In determining the meaning of the word "proceeds" here, our aim should be to discover the meaning with which the testator used the word in expressing his testamentary intention. A word means what it manifests. This depends upon all factors that may shed light on the question, such as the etymology of the word, the subject matter to which it is applied, the context in which it is set, and the circumstances and time of its use. Hiber v. City of St. Paul,
Here, we think that testator used the word "proceeds" in some parts of the will as meaning "corpus" and in others as "income." For example, where he refers to the proceeds of a sale of the homestead and to the proceeds of a sale of assets of the trust, directing the reinvestment of the proceeds of said estate, he obviously means corpus, because the proceeds in such cases are what was received upon a sale. Barnum v. White,
Where the word "proceeds" is used to denote money or something else issuing or accruing from a fund or property which is to be maintained intact, it means "income." In cases where proceeds of a fund or property are to be paid to a life beneficiary with gift over of the fund or property as the remainder, an intention is manifested that the word "proceeds" is used as synonymous with "income" and that the fund or property is not "proceeds," but rather is the corpus from which the "proceeds" arise. In Browning v. Ashbrook's Executor,
In Thomson's Appeal,
"* * * Its construction depends very much upon the context and the subject-matter to which it is applied. If a testator should direct his property to be sold, and the proceeds to be disposed of or distributed in a certain manner, no one could doubt that the whole *457 corpus or principal was intended. But should he order it to be rented or invested, then proceeds would necessarily be limited to the net income, especially if the interest given was for life only. Here, the first provision made by the testator, was a gift and bequest of all his estate, real and personal, to trustees, 'the income from which shall be devoted to the purposes' thereinafter mentioned, with power 'to sell any of his property and re-invest the proceeds whenever in the judgment of the trustees the interest of the trust will be promoted.' When, therefore, immediately there follows, the direction that so much of the proceeds of the said property shall be paid to Mrs. Thomson as she may deem 'necessary for the maintenance of herself and his niece, they living in such style as she may think best to promote their happiness and comfort during her lifetime,' it is impossible to refer the word 'proceeds' to anything but the income which he had just before devoted to the purposes of his will." (Italics supplied.)
So it is here. What else can the word "proceeds" refer to? How can there be a gift over of the trust estate in remainder to the daughters or their children, if the trust estate can be encroached upon or entirely consumed for the widow's support?
The reference in the proviso to the daughters' shares of the income of the trust as "proceeds," followed immediately in the gift-over clause by a reference thereto as "income," also plainly shows that testator used the word "proceeds" as meaning "income." The plain language of the will and codicil, as has been pointed out, gives the widow a right only to the income during her life, and gives the corpus over in remainder to the daughters or their children.
7. Nor can we hold, as the corporate trustee contends we should, that the provisions for the widow's support constitute a so-called "demonstrative" legacy of such amount from income or from both income and corpus as the trustees deem necessary for such purpose. The argument in support of this view is that because the provision is one for the widow's support it is payable at all events without regard to the directions contained in the will to pay out of income and to the rights of the daughters as remaindermen. It is characteristic *458
of a demonstrative legacy (a) that it is one for a certain sum of money payable out of a certain fund, and (b) that there be an intention that it is to be paid at all events. In In re Estate of Douglas,
"* * * A demonstrative legacy is a money gift, made a charge on a specific fund and directed to be paid out of that fund, but payable at all events even if the fund fails, if the residue be sufficient. * * * In the event of failure of the fund, such a legacy becomes a general legacy. A specific legacy, on the other hand, fails if the specific fund or thing given fails."
Here, the provisions for the support of the widow did not constitute a demonstrative legacy, for the reasons that (1) no specified sum of money was given for the purpose — the amount was uncertain, because it depended upon the amount of income earned and because the amount of income to be paid to the widow in excess of the one-third thereof to which she was entitled absolutely was to be determined by the trustees in their discretion; and (2) it was not to be paid at all events, butonly out of income. In re Estate of Douglas, supra; Spencer v. Spencer,
In Matter of Velie,
"* * * So here, the testator's intention is evidenced by the use of the words 'such a portion of my estate as is necessary to guarantee *459 an annual dividend of $12,000,' and by the words 'income created from this fund' in item 1. It is to be noted, also, that the word 'income' was repeated by him in the 3d paragraph of the will. The provisions of the will indicate no intention to prefer the widow over his children who are designated as the remaindermen of this fund. If the corpus was permitted to be invaded to make up the deficiency, the entire fund would, in all probability, be exhausted before the death of the widow."
8. The corporate trustee urges that decision here is controlled by cases like Longwith v. Riggs,
The case of Longwith v. Riggs,
"We think that a careful study of all the cases will show the existence of the distinction here pointed out; that is to say: where the terms of the will show the intention of the testator to be, that, at the death of the annuitant, the entire fund set apart for the payment of the annuity shall pass to those who are to take after the death of the annuitant, then thecorpus cannot be drawn upon to make up deficiencies in the annuity; the terms of the will in the case at bar show such an intention on the part of the testator; but where the will provides, that the residue of the fund shall go to those who are to take after the death of the annuitant, or where it provides, that the fund shall be paid over 'subject to' the payment of the annuity, or 'after the payment' of the annuity, then the corpus will be liable for arrearages; there is no such provision in the will in the case at bar."
The Einbecker case has been followed in Illinois (Chicago T.
T. Co. v. Morey,
In Elder v. Elder,
"It was manifestly the intention of the testator, 'that the privilege and assistance' of his minor children, till they should be able to support themselves, should be secured by a charge on the estate, before any division should be made."
Such being the case, it followed, as the court held, that it was a case where the amount ultimately to go to the beneficiary was "to be broken in upon" and diminished for the benefit of the infant beneficiaries. Of course, because of the difference between the wills, the one here involved is not susceptible of the same construction. Nor would it be, under the decisions of the Maine court, which has held that, where the will provides that payments for support are to be *463
paid out of income and the income is insufficient, support cannot be paid out of corpus. Wight v. Mason,
"There is, however, another class of cases of equal authority with those just considered, and in fact, not inconsistent with them, in which it is held that a legacy when payable out of a specified fund, as from an income, whether an annuity or otherwise, is not a charge upon the principal from which that fund is derived, but must stand or fall with the fund itself. This is when both the legacy thus to be paid and that by which the principal is disposed of, are either, or both specific."
In discussing the leading case of Baker v. Baker, 6 H. L. Cases, 616, 56 Eng. Com. L. R. 691, holding that where an annuity to testator's widow was payable out of income it could not be paid out of corpus, the court further said (
"* * * The testator [in the Baker case] clearly intended that his wife should have the annual income of two hundred pounds during life or widowhood. It is equally clear that he intended that his brothers and sister should have the principal from which that income was to be obtained, that the principal should not be diminished while producing the income. Both these intentions could not be carried out. Which should fail? Evidently that [the provision for the annuity out of income] which of necessity must fail, that for which no sufficient means had been provided."
In Brown v. Berry,
"A dominant idea of the residuary clause and of the whole will is, that the testator's grandchildren shall have the bulk of his estate. Not less dominant or less manifest is his determination that C. and H. shall not have it. His intent would not have been plainer if he had inserted a declaration that the grandchildren's remainder should not be transferred from them to C. and H. by judicial construction."
The case of Woody v. Christian,
"It is contended by plaintiffs, appellants, that from examining the will that the intent and primary purpose of the testator in providing the trust estate was to see that his four sons were comfortably provided for during their lives. This contention is true, but the clear language of the will of the testator limits and shackles the trustee." *465 Here, while we cannot find that testator had any "primary" intention to provide for the widow's support without regard to the provision he made for his daughters, the clear language of the will limits and shackles the trustees as in the Woody case.
9. It being impossible to interpret the will as authorizing the trustees to encroach upon the corpus for the widow's support, the question remains whether the court can confer upon them the power to do so. In support of the affirmative it is argued that where a trustee lacks power to do an act either because the trust instrument did not grant it or because it even forbade it the court may grant the power, and, as it said, authorize the trustee to "deviate" from the terms of the trust. As applied here, the court would confer power upon the trustees to take the corpus from the daughters as the remaindermen to provide for the widow as one of the beneficiaries of the income of the trust during her life. The consequences of the application of the rule strongly suggest that it is nonexistent. The daughters took vested remainders of the corpus at testator's death. First Am. Nat. Bank v. Higgins,
In certain cases, under M.S.A.
We do not deem it necessary to define the limits within which a court may confer power upon a trustee to deviate from the terms of the trust. Inaccuracy and misleading implication lurk in the expression "deviation from the terms of the trust." Rightly understood, it has no such meaning as the corporate trustee contends it has here. The same may be said of such expressions as that a court of equity *466 has the capacity of a "universal trustee." See, 54 Am. Jur., Trusts, § 276.
The primary function of the court in exercising jurisdiction over trusts is to preserve them and to secure their administration according to their terms. Just as the court lacks power to remake a will, it also lacks the power to remake a trust. It cannot take from one beneficiary and give to another; it cannot change the rights of the beneficiariesinter se by enlarging the rights of some at the expense of others. Hughes v. Federal Trust Co.
"* * * The court will not, for example, order a sale of realty which was to go to a remainderman cestui and thus alter the nature of his enjoyment, when no emergency calls for this decree. It will not under any circumstances increase the size of the cestui's interest, as where it is asked to order a sale of capital in order to pay part of the proceeds to a life tenant who was given income only."
As said in 54 Am. Jur., Trusts, § 279:
"* * * Equity may interpose its protective authority whenever it appears that the trustee is perverting his powers to the detriment of the cestui que trust. It will assume jurisdiction in a proper case to compel the trustee to administer the trust, or to appoint a substitute or successor trustee. But a court should exercise its jurisdiction over the administration of a trust, as a general rule, not to remake the trust instrument, reduce or increase beneficial interests created thereby, or accord beneficiaries more advantage than the trustor intended, but rather to effect the administration of the trust in accordance with its terms and directions in the manner laid down by the *467 trustor. Certainly a court should not substitute its judgment for the judgment and wishes of the trustor."
Deviation may be authorized with respect to matters of administration, but not of beneficial rights of parties. Stewart v. Hamilton,
Where an unanticipated situation arises preventing execution of the trust according to its terms, deviation is permitted to preserve the corpus by changing its form, but not to change the rights of the parties under the trust, or in case of extreme exigency to enable a beneficiary of income to anticipate corpus to which he is ultimately entitled. For example, in Mayall v. Mayall,
"If trustees disclose a situation of their trust in which a slavish adherence to the terms of the trust will operate to wholly prevent the benefits intended by its creator, and they seek instructions and directions as to their duty, I think that instruction and directions for a course of conduct which, though differing from that prescribed *468 by the terms of the trust, will actually carry out the intent of the creator, may well be grounded upon and sustained by the necessity of the case. The benefits intended for the beneficiaries are the main subjects of consideration. The modes in which those benefits may be attained are incidental, and necessity may require a change of mode to produce the intended effect. The power of the court may well be exercised in a case of evident necessity."
But where a sale is authorized as a deviation from the terms of the trust, the rights of the parties remain the same, except that they are transferred from the property to the proceeds of the sale thereof. Beliveau v. Beliveau,
"* * * The power of the court is exercised, not to defeat or destroy the trust, but to preserve it. Even in case of an absolute sale, the trust is not destroyed. * * * The proceeds are impressed with the trust, and are to be administered in accordance with its terms, under the direction of the court."
Anticipation of corpus — that is, encroachment upon the corpus of the trust estate in advance of the time of distribution fixed by the trust instrument — is permitted in cases of extreme emergency, such as where the needs of an infant and sometimes of an adult beneficiary are involved, but the doctrine is strictly limited to present use of property to which the beneficiary is ultimately entitled. In re Lucey,
"* * * The source of the power it is easy to trace. It is found in the fact that the infant is the absolute owner of the property, no other person having either a present or prospective legal interest *469 in it, and that, if the present enjoyment of the property is withheld, the infant must suffer, possibly for the advantage of some person who has no interest in the infant, and was never thought of by the testator as a possible recipient of his bounty."
Anticipation of corpus has been said to "merely touch the management or mode of user." Bennett v. Nashville Trust Co.
"* * * The court's power does not extend to the case where the trustee requests that he be allowed to take the property of cestui A and give it to cestui B, or where he seeks to make a contingent future interest a present vested one."
It follows as a necessary corollary that where income given to a surviving spouse or child is inadequate and the corpus is given over, there can be no encroachment upon corpus to make up deficiencies in income to take care of the needs of such spouse or child. First Nat. Bank v. Levy,
The cases cited by the corporate trustee either are not in point or should not be followed for other reasons. In Hardy v. Bankers Trust Co.
"Payments, whether authorized in advance or afterwards ratified by a competent court, can only be lawfully made out of the property of the beneficiary to or for whom the advances are made. They can never be paid to the tenant of a particular estate out of the corpus of property which is to go to remaindermen after an estate for life or years."
In Matter of Bostwick, 4 Johns. Ch. (N.Y.) 100, the advancement was authorized for infants out of property to which they were ultimately entitled.
The case of Matter of Muller, 29 Hun (N.Y.) 418, sustains the corporate trustee's contention. We refuse to follow it because it was rejected as an authority in Matter of Renn,
"As to the Muller case, supra, it cannot be reconciled with the firmly grounded and consistent holdings, as illustrated by the cases, supra, to the effect that the court is wanting in authority to permit an invasion of the corpus of the trust funds, and I feel that in the circumstances this court should bow to the overwhelming weight of authority. I am of the opinion that to direct the deviation sought would amount to a destruction of the trust."
Our own view is that the Muller case so far as it is opposed to the views herein expressed is unsound in principle. Since the courts of the state where that case gained currency have seen fit to reject it as an authority, we should do likewise in view of the fact that the case is opposed to sound principle.
McAfee v. Thomas,
We think that we have referred to the other cases cited by the corporate trustee in other parts of the opinion. Except for the Muller case, which we have discussed and refuse to follow, none of them sustain its contentions.
Our conclusion is that under the will the widow's support cannot be paid out of corpus and that it was error to order it to be so paid.
Reversed with directions to proceed in accordance with the opinion.
Execution sale. §
Mortgage foreclosure sale. §
Partition sale. §
Probate sales. §§
Sale of personal property. Landis v. Olds,