67 A.2d 918 | N.J. Super. Ct. App. Div. | 1949
[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *583
The defendants, Alexander S. Rice, individually and in his representative capacity on behalf of the estates of Bernard Strauss and Florence R. Strauss, and others moved for summary judgment in their favor on the counterclaim *584
filed by the defendants-counterclaimants, Robert Herzog et al. With the exception of the question of perpetuities, the counterclaim sets up the same allegations and seeks the same relief as did the complaint filed by the plaintiffs. The complaint was stricken by orders of the Court of Chancery, Marxv. Rice,
The counterclaimants argue, however, that the exercise of the power by Florence R. Strauss was in violation of the rule against perpetuities because the life in being specified in the will of Bernard Strauss was that of his son, Irving; that all interests must vest within twenty-one years after his death and that Florence Strauss extended the vesting of the estate beyond the life of Irving and twenty-one years thereafter. The defendants argue that Irving's is not the sole life to be considered in measuring the period under the rule; and that all the interests in Bernard's estate will necessarily vest before the expiration of the period interdicted by the rule against perpetuities.
The familiar rule against perpetuities is that all future interests, legal or equitable, must vest, if at all, within the term measured by the life or lives of a person or persons in being at the time of the creation of the interest and twenty-one years thereafter. It is the possibility that the period may be exceeded, and "not the certainty or even probability that it will be exceeded, in a given trust, which calls for the application of the rule." Graves v. Graves,
The nature of a power of appointment is thus described inRestatement, Property, Introductory Note, Topic 2, c. 27,p. 2294:
"The power of appointment is a hybrid between concepts of agency and concepts of property. To the extent that a power of appointment has been thought of as a mere authority to act for the donor in the completion of a disposition initiated by the donor, the agency factor has dominated and the doctrine of `relation-back' has been applied. To the extent, however, that a power of appointment has been thought of as giving to the donee a control over the appointive assets which *586 is the substantial equivalent of ownership, the property factor has dominated, and the validity of an attempted exercise of a power has been determined as if it had been a disposition by the donee of his owned assets."
Whenever such a power is in fact exercised, the validity of the appointment is determined by precisely the same rule as if the original testator, who created the power, had in his own will the same provision in favor of the same appointee. The donee of the power takes from the donor, the original testator, from the date of his death. With reference to the rule against perpetuities, the remoteness of an appointment depends on its distance from the creation and is to be measured or computed from the date of the death of the testator, and not from the exercise of the power.Ogden v. McLane,
In the application of the rule to a general testamentary power,Restatement, Property, § 392, declares:
"An appointment under * * * a general testamentary power * * * is invalid, because of the rule against perpetuities, only to the extent, that its limitations
(a) construed in the light of the circumstances existent when the power is exercised, but
(b) measured for the purpose of applying the rule against perpetuities, from the time when the power was created,
violate that rule."
The affidavits on the motion for summary judgment disclose that all of the cestuis of the trust established under *587 the exercise of the power of appointment by Florence R. Strauss were alive at the time of the death of the donor. Mrs. Strauss set up two funds, one for $10,000 and the other for $24,000. With respect to the $10,000 fund, she directed that the income be paid to Marian D. Marx for life and upon her death the fund be distributed between her two daughters, Paula and Fannie, with a proviso that if Paula should not be married, then two-thirds was to be paid to her and one-third to Fannie; but if Paula were married, then the fund was to be shared equally between them. Marian D. Marx died on September 15, 1946, having predeceased Irving. At the time of her death, both her daughters were married; they are still living. The counterclaimants contend that the contingency of the marriage of Paula invalidates the bequest. The contention is without merit because the fact of marriage did not affect the vesting of the interest in the appointees, but merely the extent of the interest.
The fund of $24,000 was thus disposed off: income to be paid to Moses Strauss for life and upon his death, the corpus to his children, Isidore, Daniel and Paula, in equal shares. Moses, the life tenant, predeceased Irving, having died September 25, 1926. He was survived by his three children, who are still living.
The residue of the property Florence R. Strauss directed to be sold and the proceeds divided into four equal shares, to be held in trust as follows: One share was set aside for the benefit of Bertha J.F. Rice and Joseph Rice, her son; one-third of the income was to be paid to Bertha and the remaining two-thirds to Joseph, and upon the remarriage or death of Bertha, the corpus of said share with accumulations thereon was to be paid to Joseph. Bertha died in 1942, survived by her son, Joseph, who is still living. As to the other three shares, the net income to Alexander S. Rice, Rose R. Siegel and Leah R. Fuld so long as they may live and until the death of the last survivor of them; and upon the death of the last survivor, the trust estate to be distributed in equal proportion among the children of Rose and Leah per capita. Alexander S. Rice and Leah R. Fuld are living. Rose R. *588 Siegel died on November 9, 1933, survived by two daughters, Helen S. Simpson and Alice R. Hannoch, who are still living. Leah R. Fuld, a widow, now about 76 years of age, has two children, Abram L. Fuld and Florence F. Vogel. Abram absconded about December 20, 1928, and his present whereabouts are unknown. Florence F. Vogel is living. All of the foregoing persons were living when Bernard Strauss, the donor, died.
The counterclaimants urge that the exercise of the appointment as aforesaid is violative "of the rule against perpetuities because of the possibility of children being born to * * * Leah beyond the period measured by the life in being (Irving Strauss) and twenty-one years. It is also violative of the rule because there is no vesting of the interest until the death of the survivor of Alexander, Rose and Leah, and there is no certainty that this will happen within a period measured by twenty-one years after the death of Irving." The fallacy of the contentions lies in the fact that the Supreme Court has construed the power to be a general, and not a special or limited, power. The provisions of the will of Bernard creating the power are to be read together with the will of Florence exercising the power. Applying the standard that the exercise of a general testamentary power should be "construed in the light of the circumstances when the power was exercised" but "measured for the purpose of applying the rule against perpetuities from the time when the power was created," there is no violation of the rule. Irving who was the life tenant under Bernard's will and all of the persons appointed by Florence under her will were living at the date of death of the donor. Measured by all those lives in being at and from the time of the creation of the power, there will be an absolute vesting within the prescribed period. Thus, reconstructing the provisions, we have the following: Income to A (Irving) for life; thereafter, income to B, C and D (Alexander Rice, Rose Siegel and Leah Fuld) during their lives, and upon the death of the last survivor of them, corpus to be divided among the children of C and D (Rose and Leah) in equal shares. A, B, C and D being alive at the death of *589
the testator, there must necessarily be a vesting within the period measured by their lives in being, and twenty-one years thereafter. Rose being dead, the only person whose heirs may be increased is Leah, who is a widow, 76 years of age. While in theory and contemplation of law, the possibility of issue is always supposed to exist, 2 Bl. Com. 125; In re Smith,
The defendants further argue that even if the exercise of the power in trust in some respects violates the rule against perpetuities, which they deny, the counterclaimants cannot benefit because they are heirs-at-law and next-of-kin of Bernard Strauss, the donor, and not related to Florence R. Strauss, the donee. The defendants' contention is in this respect well-founded. The recognized principle is thus stated by Professor Scott in Trusts, § 426, p. 2208: "Where a person upon whom a general power of appointment is conferred makes an appointment to a trustee upon a trust which fails, the trustee holds the property upon a resulting trust for the estate of the donee of the power, unless it was otherwise provided in the instrument by which the power was created or unless the donee of the power manifested a different intention." See, also,Restatement, Trusts, c. 12, § 426; Fiduciary Trust Co. v.Mishou, supra; Gray, Perpetuities, § 540.1. The donor provided that only in case the donee should fail to appoint was the property to be given to his heirs and next-of-kin. However, the donee did not fail to appoint. According to the general rule, therefore, if in the exercise of the power the trust or some part of it should fail for remoteness, there is nothing in the donor's or donee's will to manifest an intention that the property should not become part of the donee's estate.
The defendants are entitled to summary judgment on the counterclaim. *590
The plaintiffs and the counterclaimants allege the foregoing facts in their respective pleadings, charging that the proceedings initiated by the beneficiaries were in violation of the forfeiture clause. The cause of action was designated as the second cause of action in plaintiffs' complaint, which was dismissed by the Court of Chancery, affirmed by the Supreme Court. Marx v. Rice, supra. The Supreme Court held that *591 the foregoing proceedings did not constitute a violation of the forfeiture clause for the reason that "A judicial proceeding instituted to obtain an interpretation of a will has for its object the fulfillment of the testator's intention and not the avoidance of it."
The counterclaimants wish to amend their counterclaim to assert that the diversion of some of the income from Irving for the benefit of other beneficiaries under the will and the payment of the sum for settlement of the appeal violated the eighth paragraph of Florence's will, and therefore these acts amount to an avoidance of her will and a forfeiture under Paragraph Twelve thereof. The difficulty with the application is the argument by counterclaimants that the issue which they propose to raise has not already been considered and disposed of. The facts which they desire to allege in the amendment were before the Court of Chancery as well as the Supreme Court. A reading of the Supreme Court's opinion will show that the court did consider the diversion of income from Irving to others and also the moneys paid for abandonment of the appeal, declaring:
"Thus the recitals in the decree and the allegations of the present bill of complaint clearly show that the income available to Irving from his father's and mother's estate was far in excess of any of his possible needs and he consented that a portion of the income from his mother's estate be advanced to the life beneficiaries who would succeed to the income at his death, and in this consent he was joined by the remaindermen. Irving was primarily interested in this income and he was sharing the surplus not needed by him with those who would take life estates after him and were then in great need. This was done with the approval of the court. * * * `The forfeiture clause relates to a hostile proceeding, not to a gift. * * * She (Mrs. Strauss) did not intend to prevent a fair compromise of divergent interpretations of the will, especially a settlement approved by the court.' And by the same token the payment to some of Bernard's kindred to abandon an appeal from the consent decree under the circumstances hereinabove related, did not work a forfeiture."
The construction placed by the Supreme Court on the acts of the parties and its decision thereon are binding here. The case ofAlper v. Alper,
The basis for the application of the counterclaimants to take depositions to establish that Irving was harassed into and gave his consent unwillingly and as the price of peace to the decree of May 2, 1930, is to be found in the opinion of Vice-Chancellor Bigelow,
Judgment will be entered in accordance with the foregoing conclusions.