Bailey v. Buffalo Loan, Trust & Safe Deposit Co.

107 N.E. 1043, 213 N.Y. 525, 14 Mills Surr. 275, 1915 N.Y. LEXIS 1471

• Court: New York Court of Appeals
• Decided: January 12, 1915
• Status: Published

Opinion

Hogan, J.

Upon the first trial of this action the trial justice held (75 Mise. Eep. 23) that the fourth clause of the will of the testator was void, and judgment was accordingly entered requiring the trustee to pay over to the plaintiff the .trust fund and accumulations thereof then on hand.

- ■ Upon appeal from that judgment, the Appellate Division held (151 App. Div. 166) that the provision of the will in question for the children of the plaintiff contravened the statute against perpetuities; that the provision for the continuance of the trust for twenty-five years with limitation over was unlawful; that the provision for Alanson 0. Bailey and Mary A. Swain were annuities chargeable against the income, and that the trust fund need not on that account be extended beyond the life of the plaintiff, as the present value of the annuities could be ascertained at his death, paid, and the fund freed from the claims of the annuities, and the remainder, might then be distributed under the residuary clause of the will; that as to the surviving annuitant, Alanson 0. Bailey, Mrs. Swain being dead, whatever grounds had theretofore existed for questioning the provision to Alanson 0. Bailey were removed by the death of Mrs. Swain, and the trust having been thereafter continued for years and recognized by plaintiff as valid, his acts, while not amounting to an equitable estoppel, were sufficient to support a finding that after the death of Mrs. Swain the plaintiff waived any objection to the validity of the provision of the will for the surviving life annuitants and thereby confirmed the original trust „to the life beneficiaries, so there was now a valid and existing trust for their benefit as the will provides except as to the provision for Mrs. Swain which had been fully carried out. The judgment was reversed and a new trial ordered.

Upon the retrial of the case, the trial justice found as matter of law:

“ That the fourth clause of the will attempts to suspend the absolute ownership of the trust fund referred to therein and made the subject of the trust for a period beyond the termination of two lives in being at the death of the testator.

“That the fourth clause of ’the will attempts to suspend the power of absolute alienation of the fund that is made the subject of the trust for a period beyond the termination of two lives in being at the death of the testator.

“ That the fourth clause of the will contains directions for the accumulations of income for periods and for purposes not sanctioned by either the first or second subdivisions of section sixteen of the Personal Property Law.”

The court further found that the question of the validity of the fourth clause of the will was not in any manner involved in the proceeding .for the probate of the will or in the proceeding by which the executors were discharged as such; that the provisions of the will, so far as the same provided for the payment of income to Alanson C. Bailey and Mary A. Swain, having been fully executed as to the provision for Mary A. Swain -up to the time of her death in October, 1899, and thereafter the trust having been continued without objection for upwards of eleven years and administered according to the terms and provisions of said will and recognized by the plaintiff as a lawful and valid trust, constituted a valid and lawful trust for the surviving life beneficiaries named in said will, Harlow W. Bailey and Alanson 0. Bailey, consequently any legal objections the plaintiff might have urged against the validity of-the trust created by the fourth paragraph of the will as constituting an unlawful suspension of the power of alienation prior to the death of Mary A. Swain, have been waived and abandoned by him, and by- his acquiescence in the administration of said trust fund after the death of Mary A. Swain lie had ratified and confirmed the original trust and yielded to the trustee and the life beneficiaries their respective rights therein as defined by the provisions of the will. The complaint was dismissed upon the merits. The judgment entered was unanimously affirmed by the Appellate Division.

Counsel for the trust fund in his brief concedes that the provisions contained in the will relating to the holding of the trust fund in certain remote contingencies for a period of twenty-five years, and the contingent limitations over, are illegal and void, but asserts that the illegal and void provisions have no relation to the primary trust for the benefit of the plaintiff and his children and are separable therefrom.

Counsel for the respondent Alanson C. Bailey makes the same concession in the brief presented in his behalf and insists that the illegal portion of the fourth clause of the will may be separated from the earlier clause and the latter provision for the payment of an annuity to Alanson C. Bailey he sustained.

The guardian ad litem filed a brief in which he urges estoppel by plaintiff by reason of laches and acquiescence. He also adopted the argument presented by the briefs of the co-respondents and urged that the will should' be upheld as creating a trust for the benefit of plaintiff which would result in the ultimate protection of the infants.

All of the respondents plead the Statute of Limitations.

We concur in the conclusion of the trial justice that the fourth clause of the will of the testator is invalid in that it contravenes the statute inhibiting the suspension of the absolute ownership of the fund of $60,000 for a period of more than two lives in being at the time of the death of the testator. In view of that determination in connection with the concession of counsel for the respective respondents it will he only necessary to treat of the remaining questions decided by the trial justice which were affirmed by the Appellate Division.

The clause of the will of Mr. Bailey as the same appears in the record is embodied in a single paragraph and must he considered as a whole. The rule is well established that when some of the trusts in a will are legal and Some illegal, if they are connected together so as to constitute an entire scheme, so that the presumed wishes of the testator would be defeated if one portion was retained and other portions rejected, or if manifest injustice would result from such- construction to the beneficiaries or some of them, then all of the trust provisions must be construed together and all must be held illegal. (Manice v. Manice, 43 N. Y. 303; Knox v. Jones, 47 N. Y. 389; Van Schuyver v. Mulford, 59 N. Y. 426; Kennedy v. Hoy, 105 N. Y. 135; Tilden v. Green, 130 N. Y. 29.)

Respondents ask us to apply the rule which permits unlawful trusts to be eliminated from a will, and those which are lawful to be enforced. The court will at all times give full effect to the intention of the testator, provided always that such intent does not violate provisions of the statutes or well-established principles of law. It is not permissible for the court to violate the intention of the testator or interfere with the general plan created by the .testator for the disposition of his property.

An examination of the will discloses that the intention of the testator was to provide generous bequests to his wife and his sister, and the residue of his estate to his only child, the plaintiff in this action, who was then married and had one child about two years of age. His paramount purpose in the creation of the trust fund was to provide for his grandchildren living at the time of his death or thereafter born, the income from the same to be paid fifty dollars per month to his brother, Alanson C. Bailey, during his life, thirty dollars per month to Mary A. Swain, a friend, during her life, and the remainder of the income to the plaintiff during his natural life “ or until the trust shall terminate as hereinafter stated.” In the event of the death of Alanson C. Bailey or Mary A. Swain, their proportions of the income were to.be paid to the plaintiff, but in case of his death his share was. to be added to the principal sum of the trust. The scheme of a distribution of income, as will be observed, was .to pay over the same during a period extending beyond the termination of two lives in.being at the tes tator’s death unless the trust should terminate as thereafter stated in the will, which termination is provided for in a later portion of said fourth clause as follows: “In case there he no child of my said son Harlow W. Bailey living at the time of my decease, or in case the children then living shall die before arriving at the age of twenty-one years, then I direct that the trust hereby created shall continue for twenty-five years from the date of this will, and if at that time there shall be any children of my said son Harlow W. Bailey living I direct that the trust hereby created shall cease and be determined.”

The principal of the trust sought to be created was to be held .for the children of the plaintiff, each child to receive his or her proportion upon- attaining the age of twenty-one years, the proportion to be dependent upon the number of children, minors, then living. The right of any child or children of the plaintiff to a portion of the principal was contingent upon each child attaining the age of twenty-one years. As minors the child or children of plaintiff would not be entitled to a distributive share of the fund. The death of any of said children during- his or her minority would not result in an estate therein descendible as the interest of such child in the fund was contingent, rather than a vested remainder in the same.

The trust for a payment of the income of the trust fund was subordinate to the disposition made of the principal, consequently the creation of the trust fund and disposition of -the same, both income and principal, was so closely allied that they are inseparable. The testator in his earnestness to provide for his grandchildren surrounded the disposition of the trust by provisions in violation of the statutes relating to perpetuities and ownership and alienation of personal property. As the predominating purpose for which the trust attempted'to be created was dependent upon the validity of the whole trust, which cannot be carried out, the trust as to the income must also fall. It is not permissible to eliminate language of a will so closely intermingled with the general plan the same was .intended to cover, to make and thereby create a valid trust, where the clause of the will seeks to establish a trust which by its provisions is wholly invalid. (Central Trust Co. of N. Y. v. Egleston, 185 N. Y. 23.)

The suggestion that the income provided for Mary A. Swain having been paid to her down to the time of her death, and thereafter the trust having been administered according to the terms of the will, without opposition on the part of plaintiff, constituted the trust sought to be created a lawful trust for the surviving life beneficiaries, cannot be sustained. Such was not the expressed intent of the testator. The validity of the trust must be determined as of the time of the probate of the will, rather than after the death of one of the beneficiaries named therein. (Matter of Wilcox, 194 N. Y. 288.) The court is powerless to make valid a provision in a will which in its inception contravenes the statute, and which it had found as matter of law did violate the provisions of the statute.

The defendants cannot defeat this action upon the ground of estoppel by reason of the proceedings in the Surrogate’s Court upon the probate of the will and the . decree on the final accounting in connection with the alleged acquiescence of plaintiff in the distribution' of the income. Upon the probate of the will or upon the final accounting by the executors, the surrogate was not asked to, neither did he construe the provisions of the will of the testator. The only issues determined by the surrogate were, first, the capacity of the testator to make a will and that the same was properly executed; secondly, that the executors had properly accounted for all of the property of the testator.

The right of plaintiff to the amount of the trust fund as residuary legatee by reason of the invalidity of the fourth clause of the will, was not an issue before the surrogate or determined by him in either of the proceedings. The decrees .made by the surrogate did not involve the questions at issue in this action, and were not operative as an estoppel. (Rudd v. Cornell, 171 N. Y. 114.)

The decree upon the accounting is conclusive upon the plaintiff upon the distribution of the funds of the estate up to- the time of the entry of the same, and .equity requires that the income of the trust fund distributed by the trustee down to July 1st, immediately subsequent to the commencement of this. action should remain unquestioned by him. The trial justice found- as matter of fact “that in making the payments to Alanson 0-. Bailey and Mary A.. Swain, the defendant trust company did not consult plaintiff and received no express directions from him to make said payments;”

That the plaintiff did .not earlier discover his legal rights and contest the validity of the fourth clause of the will by the terms of which the trust was sought to be established is not sufficient to defeat the action. Under the circumstances of this case the Statute of Limitations is not" a bar to the maintenance of this action in favor of any of the defendants.

The trust company insists upon .its right, to hold the fund and distribute a portion of the income to the respond' ent Alanson 0. Bailey. The subject-matter of this action is to compel the trustee to account by reason of the invalidity of the fourth clause of the will. The trust being void, the trustee holds the fund for, the persons to whom the law -or other provisions of the will give. undisposed property to. (O’Connor v. Gifford, 117 N. Y. 275.)

As such trustee, the trust company cannot assert any claim adverse to the cestui que trust or deny his title. It does not hold the fund under any claim of ownership. As the attempted trust was invalid the funds constituting the same passed under the will to the plaintiff as residuary legatee. As against him the trust company has no claim or. right to the fund. It will be protected in a payment of the fund to the plaintiff by the judgment of the court. Had it held the fund and accumulations .for a period of eleven years, could it as trustee retain the same as against the beneficiaries by reason of the Statute of Limitations ? That question is susceptible of but one reply. (Matter of Camp, 126 N. Y. 377; Zebley v. Farmers’ L. & T. Co., 139 N. Y. 461; Perry on Trusts [6th ed.], § 433.)

In favor of the infant defendants the Statute of Limitations is not a bar. Under the terms of the will they were not possessed of a vested interest in the attempted trust fund. They had merely a contingent interest in the same which might never mature into a vested estate.

The defendant Alanson 0. Bailey cannot defeat the right of the plaintiff to an accounting by the trustee and a construction of the will by reason of the Statute of Limitations. The income received by him was paid to him by the trust company without consultation with or the direction of the plaintiff.

In Read v. Williams (125 N. Y. 560, 566) Judge Andrews writing for this court, referring to the jurisdiction of a court of equity to entertain an action in behalf of the next of kin of a testator for the construction of a will disposing of personal estate, where the disposition made by the testator was claimed to be invalid, said: “ It is true that in such cases the next of kin claim in hostility to the will, but the executors, in case the disposition made by the testator is invalid or cannot take effect, hold the personalty upon a resulting trust for those entitled under the Statute of Distributions, and thereby the jurisdiction to bring an equitable action for construction and to have the resulting trust declared by the court attaches as incident to the jurisdiction of equity over trusts. The Code of Civil Procedure (§ 1866) has extended the remedy so as to include suits for construction of devises in behalf of heirs claiming adversely to the will, and it would not be consistent with the spirit of this legislation to narrow the jurisdiction in cases of beqúests of personalty.”

Applying the principle of law stated in that case to the case at bar we conclude that the trust company holds the fund in controversy upon a resulting trust for the plaintiff as the residuary legatee under the will of the testator. The plaintiff seeks in this action to compel the trustee to accouht to him for that fund by reáson of the invalidity of the fourth clause of the will. The plaintiff, beneficiary of such fund, has a continuing right to maim tain such action so long as any portion of the fund ór the accumulations thereof remain undisposed of- and unaccounted for by the trustee. (Miner v. Beekman, 50 N. Y. 337; De Forest v. Walters, 153 N. Y. 229; Lammer v. Stoddard, 103 N. Y. 672.)

We, therefore, determine, first, that the fourth' clause of the will was invalid and in contravention of the statute against perpetuities and the ownership and alienation of personal property; second, that the plaintiff herein as residuary legatee under the will of Daniel E. Bailey is entitled to the avails of the trust fund now in the hands of the defendant Buffalo Loan, Trust and Safe Deposit Company, together with any'accumulations thereon from the first day of July subsequent to the commencement of this action, after the deduction of legal commissions to which the trust company is entitled for the disposition of said fund; third, that the' defendant Alanson C. Bailey is not entitled to any further payments under the will of Daniel E. Bailey, but is entitled to hold and retain the income paid to him down" to July 1st, subsequent to the commencement of this action fourth, that the plaintiff is not entitled to recover from Alanson C. Bailey or the representatives of Mary A. Swain any income from the trust fund paid under the will of Daniel E. Bailey to either of said parties prior to the first day of July subsequent to the commencement of this action; fifth, that the infant defendants had no vested right under the fourth clause of the will of Daniel E. Bailey.

The judgments of the Appellate Division and Trial Term should be reversed, and the case remanded to the Trial Term for a decision and judgment directed in accordance with this opinion, with costs to the plaintiff and guardian ad litem in all courts, payable out of the fund.

Willard Bartlett, Oh. J., Chase, Collin, Miller, Cardozo and Seabury, JJ., concur.

Judgment accordingly.