Thistle's Estate

263 Pa. 60 | Pa. | 1919

Opinion by

Mr. Justice Moschzisker,

The correct' interpretation to be placed upon item seven of the will of Dr. Joseph L. Thistle, deceased, which disposes of his residuary estate, and the effect- of the not directly expressed but plainly implied intention that testator’s son shall not share therein, are the broad questions here for consideration; they arise out of an award of illegally accumulated income, made by the Orphans’ Court, on the adjudication of the account of decedent’s executor.

The controversy, between the three daughters of Dr. Thistle on one side and his son on the other, and the scope of the decree appealed from, are well presented by the following excerpt from the paper book of the former, who are appellants in this court: “At the audit, appellants contended they were entitled to payment of all the accumulations of income which accrued between the date of testator’s death and settlement of the account, on the portion of the estate included within item seven of the will, and also that they were entitled, presently, to payment and delivery of all the principal of this portion of the estate......Archibald Thistle [the son] contended these accumulations of income were distributable, under the intestate laws, to the three appellants and himself in equal proportions, and denied the right of appellants to payment and delivery, presently, of the principal of this portion of the estate. The auditor found and reported......that the accumulations were distributable, under the intestate laws, to appellants and Archibald Thistle, in equal proportions, and that appellants were not entitled, presently, to payment and delivery of the principal of this portion of the estate”; both of these conclusions, affirmed by the court below, are attacked on this appeal.

Before discussing the part of the will with which we are particularly concerned, it seems expedient to summarize the instrument as a whole, placing the item in question (No. 7), out of order, at the end.

The will is dated April 11, 1911, and consists of nine items: the first directs the liquidation of debts and funeral expenses; the second gives $15,000 to each of testator’s three daughters, to be paid within sixty days from his death, excepting “Mildred’s” share, which he directs shall not be paid until her twenty-first birthday, December 2, 1915; the third directs that, in addition to the $15,000 given to Mildred, his executor is to pay all her necessary expenses for support, clothing and education, to the last-named date; the fourth creates a spendthrift trust, in the sum of $25,000, for the benefit of his son, reciting that testator had already given to this legatee “considerable sums of money,” and stipulating that if any part of the fund “shall remain after the demise and burial of my said son, such remainder shall revert to my residuary estate”; the fifth bequeaths to his three daughters all of testator’s household goods, furniture, books, bric-a-brac, etc.; the sixth creates a trust fund in the sum of $25,000 for the benefit of decedent’s grandson and, “incidentally,” its mother, the former being the child of his son, the legatee named in item four; the eighth provides that “the reversionary estate, if any,” resulting from the trust created by items four and six, shall be divided and distributed among his three daughters and grandson, or their living legal descendants; the ninth names the accountant as executor, and revokes former wills; the seventh, being the item in controversy, reads thus: “All the rest, remainder and residue of my estate, real, personal or mixed, whatsoever and wheresoever, I order and direct my executor to convert into money (except such stocks, bonds and other securities as in the judgment of my executors are then safely and well invested) as soon as can conveniently and expediently be done after my decease, and for this purpose I hereby authorize and empower my said • executor hereinafter named, in its discretion as to time, to sell and dispose of all of my real estate either at public or private sale for the best price that can be got for the same, and by proper deed or deeds grant and convey the same to the purchaser or purchasers thereof. The proceeds of all such sales to be invested by my said executor at interest on bond and mortgage, or in such corporate bonds or securities as may be approved of by my said executor, and the proceeds of these sales, together with the securities approved of as safe, and all accumulations thereon, to be held in trust for the following uses and purposes: (1) To pay out of the net rents, interest and income received therefrom unto each of my three daughters aforesaid, for a period of five years, the sum of two thousand dollars per annum in quarterly payments, so that the same shall be for the sole and separate use of each of them, but the annuities thus alloted to my daughter Mildred, prior to Dec. 2, 1915, shall be retained and invested for her until that date: (2) At the expiration of five years after my death I authorize and direct my executor to pay to each of my said three daughters the sum of ten thousand dollars : (3) At the expiration of fifteen years after my decease I direct that the remainder of my estate including all the accumulations of interest and income whatsoever, excepting the two trust funds mentioned in item fourth and sixth shall be divided and distributed equally among my three daughters, share and share alike, but in case either of my said daughters shall die, without leaving lawful issue then living, prior to the date of this distribution, then her share shall go to her sisters, and the issue then living of any daughter who may have died prior thereto shall take his or her mother’s share.”

It will be noted that, when the references to accumulations are left out of consideration, the only provision' for the payment of income contained in item seven, is the direction to give each daughter $2,000 per annum for five years, in quarterly payments; and the fund here in question represents income (over and above that used for this purpose) accumulated during the period between testator’s death, May 5, 1917, and the settlement of his executor’s account, December 12,1917. It may be noted also that the other sections of the instrument shed no controlling or helpful light upon our inquiries as to the meaning of item seven; in which respect this case differs from Ferguson’s Est., 223 Pa. 530, 534.

Although not expressly so stated in the will, it is apparent, from the provisions previously made for Archibald Thistle and family, that his father did not intend him to have any part of the residuary estate, either corpus or income; but, so far as the allotment of income illegally accumulated is concerned, “no effect should be given to [this] intention of the testator, and the distribution should be in accordance with the statute [intestate law] without regard to the will” (Howell’s Est.,. 180 Pa. 515, 519); unless, indeed, the three daughters can be held to have taken, at the death of their father, such a vested interest in the corpus of the trust estate, from which the income in question is derived, as (disregarding the implied direction for accumulation) would entitle them to such income, from time to time, when received by their trustee. If, under decedent’s will, appellants have such an interest, then they must be awarded the whole of the present fund; but, if not, it passes under the intestate law; and, as before said, their brother will share in the distribution thereof, even though testator intended otherwise.

The conclusion last stated is inevitable; just as in any other case where one who has made a will, purporting to dispose of his entire estate, through some transgression of law, happens to die intestate as to a portion of his possessions, and these, under the statutes of distribution, go, in whole or in part, to persons whom it is apparent, from the body of the will, testator did not mean to benefit. For example, where persons entitled as heirs under the statute, are inténtionally omitted from a will, but, subsequently, through enforced intestacy, take property the testator never intended them to have; which, as we all know, frequently occurs.

Appellants admit, as they must, that “the accumulation of income impliedly directed by testator......is forbidden by the Act of 1853, and is illegal.” This is the transgression in the present case: What is its effect?

Section 9 of the Act of April 18, 1853, P. L, 503, 507, against undue accumulations of “rents, issues, interest or profits,” provides, inter alia, that, in each instance, all such income “shall go to and be received by such person or persons as would have been entitled thereto if such accumulation had not been directed”; with reference to this provision, that eminent jurist, the late Judge Pen-rose, in White’s Est., 8 Dist. B. 33, 35 (quoted and approved in Weinmann’s Est., 223 Pa. 508, 510, 513), states: “The striking down of the illegal accumulation leaves the will as if it had been silent on the subject, and future gifts are not accelerated; if the accumulation relates to a vested interest taking effect in possession, the released income goes at once to the beneficiary— if to an interest not vested in possession, the income goes to the residuary legatee or devisee, unless the residuary estate itself be the subject of the provision, in which case the income goes under the intestate laws to the next of kin,” citing authorities.

Here, “the residuary estate itself is the subject of the provision”; so the controlling question on this branch of the case is, do the accumulations in controversy represent income accruing on a “vested interest taking effect in possession”? In other words, have the daughters the. present beneficial ownership of the principal from which .this income was derived; or, stating it another way, are they the sole parties for whom the trustee holds the accumulated income, with nothing standing between them and the right to receive such income save the illegal direction, express or implied, that it shall be accumulated?

Examination of the testamentary disposition under discussion will show appellants have no such estate. In the words of the learned c.ourt below, “The daughters are not the only persons interested in the trust; their shares, even if vested, are, as the auditor expresses it, ‘not absolutely vested’; there are contingent interests in favor of others; the share of each daughter, assuming it to be vested, is defeasible, in certain alternative events, in favor of her own issue, born and unborn, or in favor of the issue, born and unborn, of her sisters, as well as in favor of the sisters themselves. The events upon occurrence of which such defeasibility is to operate are contingent events to occur at a future time fixed by the testator ; he unquestionably intended that, if at that future time certain contingencies shall occur, the estate, or one or more shares thereof, shall go to distributees other than a daughter or daughters.” This being the case, appellants are not in a position to claim the income as legatees under their father’s will.

For cases, in addition to those already cited, where testators are held to have died intestate as to accumulations accruing through the operation of trusts created by will, see Martin’s Est., 185 Pa. 51, which has some points of similarity to the case at bar; Walters’s Est., 223 Pa. 598, 600, 602; Washington’s Est., 75 Pa. 102, as explained in Wright’s Est., 227 Pa. 69; 73, 74 (which latter in effect overrules Farnum’s Est., 191 Pa. 75); Sternbergh’s Est., 250 Pa. 167; Neel’s Est., 252 Pa. 394, and Nagle’s Est. (Ño. 1), 63 Pa. Superior Ct. 93.

King’s Est., 210 Pa. 435, 436, is an instance where (after the testamentary provision, the working of which caused an illegal accumulation, was stricken out) the legatees named in the will were, under the law, still in a position entitling them, as such, to receive the income brought forward for immediate distribution. There testator left one-third of his estate in trust during his son’s life, he to be paid the income ; but, by a subsequent provision, these payments were limited to $5,000 per annum, all over that amount to be accumulated and added to principal, and, at the death of the son, such principal, with the accumulation, to go to the latter’s children and their heirs. Afterwards by a codicil, these grandchildren were substituted in their father’s place as payees of the income. It was held (p. 439) that “even conceding accumulation was part of the [testamentary] scheme,” the trust must continue pur autre vie (i. e. for the life of the son) and, in the meantime, the released, illegally accumulated, income should go to those for whom it unquestionably was eventually intended — the son’s children; but it will be noted that the equitable limitation was to such children and their heirs, with no limitation over on default of heirs. Hence, in that case (with the direction that brought about the illegal accumulation stricken out), the children, respectively, were vested with an immediate interest in their shares of the trust estate, which, pending the time for ultimate distribution, was not liable to defeat by any contingency; and this drew to it the released income. All of which is quite different from the case at bar.

Before taking up the next matter for consideration, it may not be amiss to- call attention to the fact that testator’s intention that no one should enjoy any part of the income now distributed until “the expiration of fifteen years” after his death, and his daughters not even then, unless alive, is as plain, if not plainer, than the intent not to give his son any share whatever therein, insisted upon by appellants and hereinabove discussed; but both of these purposes are defeated because, in: making his will, decedent transgressed the plain letter of the declared public policy of the State. As a consequence, until the date for final distribution of the principal arrives, all testator’s children will share such income, as those entitled at law; for, as already noted, no one is in a position to lay claim thereto under the will. In so ruling, the court below did not err: see Rhodes’s Est., ,147 Pa. 227,231,232.

,We shall now consider appellants’ contention that they “are entitled, presently, to payment and delivery of all the principal,” composing the portion of the estate upon which the income here in question accrued. In doing this, it may aid to recite anew the seventh item of the will, eliminating all phraseology found therein which is not necessary to an understanding of the immediate point under discussion, and placing all references to accumulations in parentheses, so, for present purposes, the latter may be treated as stricken out. When the will is thus read, it will appear that testator, after directing the conversion of his residuary estate into money, vesting his executor with power of sale over real estate, and authorizing the latter to retain such personal securities-as in its “judgment” might be deemed safe, provides that the fund shall “be invested by my said executor at interest on bond and mortgage, or in such corporate bonds or securities as may be approved of by my said executor”; then,-that all “proceeds” of sales and “securities approved of as safe” (“and all accumulations thereon”) are “to be held in trust for the following uses and purposes”: First, to pay out of such income, to each daughter, “for a period of five years, the sum of $2,000 per annum in quarterly payments.” Next, “at the expiration of five years” after testator’s death, to pay to each of his daughters the sum of $10,000. Finally, he provides, “at the expiration of fifteen years after my decease I direct that the remainder of my estate (including all the accumulations of interest and income •whatsoever) shall be divided and distributed equally among my three daughters, but in case either of my said daughters shall die without leaving lawful issue then living, prior to the date of this distribution, then her-share shall go to her sisters, and the issue then living of any daughter who may have died prior thereto- shall take his or her mother’s share.”

The Act of 1853, supra,.does not provide or intend that a testamentary disposition containing a direction for, or which necessarily brings about, unlawful accumulations shall be void in toto, but merely that “such direction shall be null and void,” in so far as it transgresses the law, or, in the words of the statute, “in so far as it shall exceed the limits of this act.”

It is quite clear that, leaving out of the will the parts above enclosed in parentheses, which are the void directions, the above testamentary provisions (aside from their effect in bringing about an unlawful accumulation of income, which also must be treated as though it were a direction exceeding the limit of the act, and, therefore, void: Neel’s Est., 252 Pa. 394, 409, 414), create a valid active trust to care for and keep intact the corpus of decedent’s residuary estate until the time set by him for final distribution. To again quote from the opinion of the court belów, “The estate being personalty, the only way that he could insure the carrying out of this purpose [the distribution of principal, fifteen years after testator’s death] was to have the estate held in trust, and withhold it from his beneficiaries until it shall be determined, by the occurrence of the events to which the will refers, who shall become entitled to receive it”; and the fact that the executor is not termed a trustee makes no material difference in this regard: see Sheets’s Est., 52 Pa. 257, 266.

There is no ground which would justify a ruling that the sole purpose of decedent was to create a trust for accumulation of income; since, disregarding the provisions with reference to such accumulations, the will indicates an unequivocal desire on the part of the testator that his residuary estate shall not be finally distributed for fifteen years, and that, during such period, it is to be held in trust and conserved by the corporation named as executor, upon whom he places active duties. This is sufficient to create a valid subsisting trust, which the court would hesitate to disturb, even at the instance of all parties in interest; and which could not be set aside when, as here, those so requesting may not, when the time comes for final distribution, be the ones entitled to participate therein. For cases upon this general subject see those summarized by Mr. Justice Mestrezat, in Henderson’s Est., 258 Pa. 510. We conclude that the learned court below did not err in declining to declare the trust at an end.

The discussion, contained in the arguments of counsel, the report of the auditor and the opinions of the court below, ranges over a large field, and many authorities dealing with the subject of contingent and vested remainders have been cited to us; but, in the words of the last-mentioned tribunal, since “it seems clear testator intended the gift to his daughters, even if vested sub modo, to be a future gift, within the meaning of White’s Est., supra, just as truly as if he had given a precedent life estate, he undoubtedly intended that the contingencies upon which the limitations over depend shall be determined before distribution is made, and that the daughters shall not be entitled to take the estate beneficially before that time.” This being so*, it matters not, for purposes of the present case, how the estates, or interests, of appellants may be technically termed; and therefore we have not, and shall, not, enter upon a discussion of that subject.

The assignments of error are overruled, and the decree is affirmed at cost of appellants.

Frazer, J., dissents.