45 N.Y.S. 543 | N.Y. App. Div. | 1897
Lead Opinion
The question to be determined on this appeal is that involved in the controversy between the defendants entitled by the terms of the trust deed to the principal of the trust estate, and the personal rej)resentatives and some of the legatees of Walter Langdon, who was entitled to the income, as to certain transfers from income to principal, and the charges against income of the amount of premiums paid for the government bonds upon the change of investment made during the trust term. It is urged that this question is to be resolved by some hard and fast rule, such as has been laid down by certain English authorities, which hold that no part of the income of a trust fund can be taken from a life tenant to make good to the remaindermen the premium-paid in making the investment, which rule, it is claimed, has been applied in two leading cases in the State of Massachusetts (Shaw v. Cordis, 143 Mass. 443; Hemenway v. Hemenway, 134 id. 446); or by the rule claimed to have been established by legal authorities in this State, that where, in the investment of the principal of a trust fund a premium is paid on the purchase of securities, such premium is in the nature of an advance from principal which the remaindermen are entitled to have repaid to the principal (People ex rel. Cornell v. Davenport, 30
.That.no universal rule can be formulated, and. that each case' should be dealt, with as it. arises, we think, becomes evident, not alone from, the various views entertained in particular cases, but from a consideration of the elements that should be taken into account'with respect to each particular case, only a few of which need be mentioned. As in wills, so in the construction of trusts, the first thing.to be ascertained is the intention of the creator of the trust. When this is clear and explicit it-is the duty of the trustee to carry out such intention regardless of whether it may be., to the advantage of the ,'life tenant or -the remainderman.. Thus, if the trust instrument provides that a fixed sum or fund shall be invested •in United States bonds, then selling at a premium, and that the- ■ entire income arising therefrom shall be paid to the life tenant,, it is ■the duty of the trustee to purchase such securities,, paying therefor whatever premium is necessary, and without, diminution pa’y the entire income to the cestui que trust. Cases, however, arise where explicit directions are not given to the trustee, and where the.intent is not clearly expressed, and then the rule to be adopted must be one that will secure substantial- justice as between ■ the life tenant and ; the remaindermen. Here the primary. motive- of Hr. Astor was undoubted solicitude for. his grandson, the life tenant, Walter Lang-don, for whose benefit the trust was originally - intended, and to whom was given.the right -by will to apportion among his children: the corpus of the fund after his death. The deed of trust provided ' that the' investments to be made by the trustee should be with the consent and approval of Walter. Langdon, the life tenant, and it is to be inferred from the facts.appearing that it was' so. done, The deed of trust, while permitting an.' investment in United States securities, did not limit the trustee to such ait investment, but upon .. a change of investment allowed him to reinvest “in the stock of the United States or of the State of New York or of the city of New York, or in bonds secured by mortgage of improved, and productive1
This last was apparently the course adopted, because we find that (with one exception, when part was drawn) all of the income was allowed to remain in the hands of the trustee and was invested by him and carried ■ along in the same account. The form of such account shows that when an investment of the accumulated income was made by the trustee lie charged it to principal; and thus the accounts were kept, presumably with the knowledge and assent of the life beneficiary. This method of bookkeeping, however, and a letter which appears in the record, wherein we find that Langdon upon receiving a statement of the account writes to the trustee, saying “ all of which I accept,” have been made the foundation for the conclusion reached by the learned, referee that Langdon thereby ■intended to assent to the application of his entire income to the increase of the capital of the trust fund so that upon his death it went to his next of kin who were entitled as remaindermen to the corpus of the fund.
Apart from the disputed question as to whether a portion of the income should go to make good the sum paid for premiums, it is conceded that the balance was the property of Langdon, to which
The principles applicable to ratification and acquiescence are well stated in Adair v. Brimmer (74 N. Y. 539). ' And in' Cumberland Coal & Iron Co. v. Sherman (30 Barb. 575) it is said : “ 2. The confirmation must be a solemn and deliberate act — not, for instance, fished out from some .expressions iii a letter”,—that the court will watch it with the utmost strictness and will not allow it to stand but on the very clearest evidence; that -the cestui que trust must be honestly made acquainted with the material circumstances of the case — “ The confirming party must not be ignorant of the law / that is, he must be aware that the- transaction is of such a character that he could impeach it id a court o.f -equity.”
Acquiescence, .therefore, with full knowledge, of -all the 'facts implies active consent, and' is not to be spelled out from doubtful or ambiguous acts. We find, no evidence to' show, that Langdon thought that his' legal right to the accumulated income-in the hands of the trustee would be in ■ any way affected or impaired by the method adopted by the trustee in keeping the accounts, or that he ' knew .or understood that the trustee was making an illegal application of his money. Kór do we think the trustee was. making . such1 application, because, taking into consideration tlié acts and ■ conduct of the trustee and Langdon, the whole transactions are susceptible of a different and more reasonable -construction. Lang-don in liis lifetime had a perfect right, to allow the .income which belonged to him to accumulate and to remain in the hands of the
After the sale of the Ohio bonds, the investment in government bonds, for which a high premium was paid, shows that the trustee with Langdon’s approval selected the highest class of securities, and to provide against the possibility of any loss by reason of the payment of such premium, Langdon left in the hands of the trustee this accumulated income, which was invested and remained with the trustee. Beyond an amount sufficient to protect the trustee, Lang-don had the right to claim, and could at any time have claimed and withdrawn, such moneys or the securities into which they were converted. It is a fair presumption that the intention of leaving such income with the trustee was to prevent at all time the capital of the estate from being in any way diminished or depleted and to save harmless the trustee from any possible liability.
We do not think, therefore, that the facts. support the presumption indulged in by the learned referee, that Langdon transferred or assigned or gave his income to the trustee to be added to and made a part of the principal. Unless he had done so by some formal act or in some way by which he was estopped—- and none of the elements of a gift or estoppel are present — we fail to see why it would not have been entirely competent for Langdon at any time to withdraw his income accumulated over and above an amount sufficient to protect the trustee and-to leave the principal of the fund intact. If we take this latter view, which is the more natural and reasonable one, instead of assuming that he turned over or assigned his income to the trustee, then the letter, which is regarded as creating in some way a ratification, a "gift or an estoppel, is made clear and unambiguous. • If the trustee was investing the trust fund, and
Our conclusion, therefore, is that,, in accordance with the intend ' tion of the life, tenant .and trustee, and in accordance with''a rule that works substantial justice, so much of such accumulated income as is needed to keep intact the fund of $150,000 should be applica
The judgment should be accordingly modified by directing payment to the executors of Langdon, less commissions to the plaintiff, of the amount in excess of $150,000, with costs to the appellants.
Williams and Parker, JJ., concurred.
Concurrence Opinion
I concur with Mr. Justice O’Brien in the conclusion at which he has arrived. Under the deed of trust, there was transferred to the trustee $150,000 of the public debt of the State of Ohio. The income of the securities thus constituting the corpus of the trust was undoubtedly payable to Walter Langdon so long as the trust fund remained invested therein. These specific securities constituted the trust fund, and the trust deed having directed that the interest and income thereof should be paid to Mr. Langdon, the market value of such securities became entirely immate'rial. What Mr. Langdon was entitled to receive was the income realized from such specific securities which constituted the trust fund. When, however, the amount due upon those securities was paid, the trustee received the sum of $150,000, and that'sum of money then constituted the corpus of the trust. Mr. Langdon was entitled to receive the net income, not of any specific securities in which a trust fund had become invested, but the income received from that fund of $150,000. To realize such income, the trustees were required to invest the fund in one of four classes of securities — in the stock of. the United States, the stock of the State of New York or of the city of New York, or in bonds secured by mortgage on real estate. Upon the investment of that fund in securities of the character mentioned, Mr. Langdon was entitled to receive the income of the fund thus invested. He was not entitled to receive the principal, or any part of the principal, but the income only. That was the income upon the trust fund, viz., $150,000. When it became necessary to invest that trust fund in the securities directed by the trust deed, if such securities were at a premium, which premium would decrease as the securities approached maturity, it is quite clear that the payment of the whole of the interest received by the trustee upon such securities could
We are now dealing with .the case of’ a sum of money in the hands of the trustee which he was bound, to invest, and to pay the -income from that sum of money or trust fund to the beneficiaries. . In this , case such investment - was made, but instead of investing, the trust fund,, viz., $150,000, in such United States -bonds, receiving the interest from such bonds and retaining a sum sufficient to- make good the impairment of the,capital of the trust, upon the payment of the bonds at maturity, the trustee, with- the. assent of the beneficiary, took.the money of the beneficiary and invested'it with the trust fund, thereby securing a'larger amount- of United States bonds' than the trust fund alone.'.would furnish. It is clear that,the result of this proceeding would be that the amount of bonds held by the trustee would include a certain amount of bonds -belonging to the trust fund,, -and in addition thereto am amount-belonging to the beneficiary. " As the income was received by-the trustee it would have been entirely justified in -paying over to the beneficiary the total
The judgment should be modified accordingly, and as modified,, affirmed. • ■ . -
Van Brunt, P. J., and Parker, J., concurred.
Judgment modified by directing payment to the' executors of Langdon of the amount in excess of $150,000, -less commissions to-the plaintiff, with costs to the appellants, and.as modified, affirmed-