Tumlin v. Troy Bank & Trust Co.

61 So. 2d 817, 258 Ala. 238, 1952 Ala. LEXIS 78

• Court: Supreme Court of Alabama
• Decided: December 18, 1952
• Docket: 4 Div. 538
• Status: Published

Opinions

FOSTER, Justice.

This is the second appeal in this case (see, Henderson v. Troy Bank & Trust Co., 250 Ala. 456, 34 So.2d 835). The same legal questions are presented and argued. The changes made in the allegations of the hill do not alter the result or control in the consideration of the legal questions.

The provisions of the will and the contentions of complainants are set out on former appeal, to which reference is here made, and they will not be repeated here in detail.

We see no occasion for appellants’ counsel to express the desire that we “face the issue squarely” since we have manifested no disposition not to do so. We simply and plainly did not agree with the contentions then made and now repeated.

The brief asserts that the “heart of this case” .hinges around that feature of the will which provides (Item V) “At the expiration of twenty years after my death and after all bequests herein shall have been paid as herein directed, my said trustee shall cause to be formed an association to be known and styled as ‘The Charles Henderson Educational Association.’ This association shall have no capital stock, have its principal place of business in Troy, Pike County, Alabama, and its purpose shall be to encourage and foster education by the erection and equipment of school buildings as hereinafter set forth.” It further provides that the directors or managers of said association shall be three bona fide citizens of Pike County, Alabama, elected annually by the directors of the Troy Bank and Trust Company (which is the trustee). This association shall receive from the trustee the income of the trust estate. The corpus shall be held and managed by the trustee. This income shall be used by the association for the construction and equipment of school buildings within the county of Pike, Alabama. Specific direction is given as to the location of the buildings and their material and the conditions existing to justify any specific location.

Item VI is in substance that at the expiration of twenty years from the date of the organization of said Charles Henderson Educational Association, it shall cease to erect school buildings, and another organization shall be formed called the “Charles Henderson Memorial Association,” which shall- be self-perpetuating and continue indefinitely and its purpose shall be the construction and maintenance of a hospital for the treatment of crippled children. The organization shall be composed of a governing board of six people to be appointed by the trustee. The expiration of their respective terms shall be one, two, three, four, five and six years, and the remaining members shall select the successors. The trustee is directed to continue to manage the corpus and' only the income shall be turned over to the association for the construction and maintenance of the hospital, and be expended by the governing board for crippled children according to minute directions.

Quoting from appellants’ brief, they “contend that tho-se directions to pay to ‘The Charles Henderson Memorial Association’ a non-existent association to be formed at a remote time — violate the rule for the same reasons applicable to the previous directions concerning the Educational Association; that the principle of ‘gift over from one charity to another’ is not applicable first because of the invalidity of the first gift; secondly, because of the non-charitable character of the first gift, and, thirdly, because of the indefinite lapse of time after the expiration of the life of the Educational Trust and before the possible taking effect of Item Six through the formation of the Memorial Association.”

The argument first advanced by appellants, which we will certainly “face squarely” as we did on former appeal, is based upon their contention that the question involved is controlled by the principle of cy pres. The argument made now, as before, is that the trust is violative of the rule against perpetuities unless it can be aided by that principle. And that principle stood repudiated in Alabama, though later adopted in the Code of 1940, Title 47, section 145.

The argument is that the Charles Henderson Educational Association is not to be organized until twenty years after the death of Charles Henderson and there is no compulsory process to force its organization provided for either in the will or by law. The argument quotes from Carter v. Balfour’s Adm’r, 19 Ala. 814, as follows:

“I do not recognize the doctrine of ‘cy pres,’ which in substance is, if you cannot find the society specified in the will, or apply the fund to the charity intended by the testator, the court will then apply it to some other charity as nearly analogous to it as possible. The bequests should be paid only to the societies specified in the will, or their authorized agents. If the societies, or either of them did not exist at the time of the testator’s death or cannot now be found, organized or known as above stated, then the bequest, to such society or societies should be considered and disposed of as lapsed legacies.”

That statement of the principle has been adhered to, but the doctrine of equitable approximation or' deviation now also aided by statute (Code of 1923, section 10438, Code of 1940, Title 58, section 57) has always obtained here and distinguished fromcy pres. In many cases the courts draw a distinction between prerogative cy pres and judicial cy pres. Erskine v. Whitehead, 84 Ind. 357; 10 Am.Jur. 676. In our cases what other courts call judicial cy pres, we call equitable approximation. Lovelace v. Marion Institute, 215 Ala. 271, 110 So. 381; Williams v. Pearson, 38 Ala. 299.

In short, this means that when the execution of the trust cannot be administered exactly in accordance.with the terms of the trust instrument (the beneficiary being ascertainable), a court of equity may vary such details of administration to secure the object for which the trust was created. Thurlow v. Berry, 247 Ala. 631, 25 So.2d 726; Id., 249 Ala. 597, 32 So.2d ; Heustess v. Huntingdon College, 242 Ala. 272, 5 So.2d 777; Lovelace v. Marion Institute, supra; King v. Banks, 220 Ala. 274, 124 So. 871; Noble v. First National Bank, 236 Ala. 499, 183 So. 393; Dunn v. Ellisor, 225 Ala. 15, 141 Ala. 700.

Many authorities do not distinguish between cy pres and approximation in the use of terms. 14 Corpus Juris Secundum, Charities, §§ 51, 52, page 512, notes 46, 47, 50 and 51, page 514, note 63. In those cases which declare that cy pres is necessary to sustain the trust, it will be noted on proper analysis that the court is applying what we call approximation (which is judicial cy pres), and in some use the words indiscriminately. Erskine v. Whitehead, supra; City of Philadelphia v. Girard’s Heirs, 45 Pa. 9, 25, 9 Wright, Pa., 9, 25, 84 Am.Dec. 470; Codman v. Brigham, 187 Mass. 309, 72 N.E. 1008, 105 Am.St.Rep. 394; Quinn v. Peoples Trust & Savings Co., 60 N.E. 281, 157 A.L.R. 885; Reasoner v. Herman, 191 Ind. 642, 134 N.E. 276; 2 Perry on Trust, section 728, see page 1242, note 54.

It is only the prerogative cy pres which our Court had repudiated. Universalist Convention of Alabama v. May, 147 Ala. 455, 41 So. 515; Carter v. Balfour’s Adm’r, 19 Ala. 815; Williams v. Pearson, 38 Ala. 299. We are not now called upon to give effect to section 145, Title 47, Code.

When this situation is understood, it is not difficult at all to maintain the position which the Court in agreement with Justice Stakely stated on the former appeal that the principle of cy pres has no application, meaning of course thereby that principle which this Court has repudiated and called cy pres and which was not an exercise of the judicial power. But this Court has consistently held to the principle that a court of equity in administering a charitable trust has a right to vary the details of such administration so that the trust may be used for the beneficiaries which are. named or designated by description. It is wholly immaterial whether that power is called cy pres, as it is in some states, or approximation as it is in Alabama.

Now with respect to the Charles Henderson Educational Association, we note that it is not to be incorporated but to be composed of three men who will be the directors and managers. It will own or hold no property of the trust. It will only receive the income which the trustee shall turn over to it to invest in the construction and equipment of school buildings in Pike County, whose title shall be in the State of Alabama. In no sense is this association of three persons a beneficiary of the trust. The charity intended by the testator is not this association. Such association is but an administrative agency of the trust, — a detail in the process of securing the object for which the trust was created, — building and equipping school houses. It comes squarely within the principle of equitable approximation when a court of equity will appoint the members to constitute such association if it is not done exactly according to the terms of the trust will. The association is but an aid in the administration of the trust, not a beneficiary of it. Codman v. Brigham, supra. The beneficiaries are the public in Pike County to be benefited by the State school buildings.

It is evidently intended to be a part of the public school system of the State and County by constructing and equipping suitable school, buildings in said county where needed. We do not doubt that it is a charitable trust to benefit all members of the public in said county who are usually benefited by public schools. It is an ascertainable object designed and expressed by the donor. It is no objection to such a trust that the trustee (or some administrative agency) is presently incapable of taking on the duties. Since the object is clear and clearly described, the want of a trustee or his assistant will be 'supplied by a court of equity. Williams v. Pearson, 38 Ala. 299; Brigham v. Peter Bent Brigham Hospital, 1 Cir., 134 F. 513.

The trustee is the fiscal manager of the corpus of the trust fund to hold the legal title to it and earn income from it. That is not the purpose for which the trust is set up. After certain beneficiaries are provided for out of the income, it is for charitable purposes. When so, it is not affected by the fact that the selection of the particular beneficiaries is left to the trustee or to an agency not interested in the trust. Tarver v. Weaver, 221 Ala. 663, 130 So. 209; Johns v. Birmingham Trust & Savings Co., 205 Ala. 535, 88 So. 835. Such is also the nature of the Woodward will. See, Thurlow v. Berry, supra.

We think the thepry of appellants’ counsel on the cy pres principle is erroneous in assuming that Alabama has never adopted the equivalent of judicial cy pres under the name of approximation, and that the educational association is the beneficiary of the trust. But neither is the fact.

The same principle applies to the Memorial Association charged with the duty to' erect and maintain in Pike County a hospital for crippled children. The crippled children are the beneficiaries as stated in Williams v. Pearson, supra, and Tarver v. Weaver, supra. The Memorial Association, as the Educational Association, is but an instrumentality to see that the crippled children receive the benefits intended to be provided for them. Thomas v. Bryant, 185 Va. 845, 40 S.E.2d 487, 169 A.L.R. 257; Codman v. Brigham, 187 Mass. 309, 72 N.E. 1008, 1009, 105 Am.St.Rep. 394; Brigham v. Peter Bent Brigham Hospital, supra.

The will does not pass anything directly to the educational association or the hospital; and, as pointed out in Codman v. Brigham, supra, they are mere details of administration. This status is different from one in which the will passes property to trustees of a named institution supposed to be then in existence, but which is not in existence or its existence has permanently terminated. For a court then to name some other charitable institution as the beneficiary is prerogative cy pres not in existence in Alabama except by recent statute. King v. Banks, 220 Ala. 274, 124 So. 871.

But when the will provides for the creation of an association or other authority to which the trustee shall pass funds to be used by that authority to distribute for the specified charitable use, such authority is a detail of administration and, the court has the power to provide for its creation and when proper to deviate from the prescribed method. That is judicial cy pres or equitable approximation available in Alabama.

It is also a fallacy to say that this gift to charity is based on an uncertain contingency. For the benefit of schools, it is based on the certainty that twenty years will expire after the death of testator. There is no contingency or uncertainty about that. The charity is not conditional upon the formation of the Educational Association to' execute it. The devotion of the entire income to charity, the construction and equipment of school buildings, is a fixed and vested dedication of all the income to that purpose. The particular ■ agency which shall administer it may be uncertain. Certain qualifications are set up-to justify the use of the fund at any given place. This is like certain qualifications that may be set up to entitle persons to have the benefit of certain charities, as crippled children, or standards for school benefits, as set up in the Woodward will (Thurlow v. Berry, supra). But the ■fund is completely and unconditionally and irrevocably vested for those benefits in such persons as are designated to hold the title. There of course must be in existence such person to hold the title at the death of the testator, or the court will appoint one. The gift here is not to a charity which is not in existence and whose coming into existence, is uncertain or contingent upon an uncertain event. The charity is not the association.

Here, the gift is not on any condition whatever. It is irrevocably dedicated to the building and equipment of school houses. There are certain standards set up to justify its application to a certain situation. But. a failure to comply is not a condition to the charity. If one locality does not comply another may. It is only when there is a complete inability to use the fund for the purpose set up that it will lapse. If the trust is set up on a condition that certain things shall happen, it is contingent. That is not this trust.

It is trite to say that the trust funds may vest immediately although the time of their enjoyment is postponed. If the title vests immediately on the death •of the testator and standards are set up for the qualifications of those members of the public who are to enjoy the benefits, and under those standards persons probably ■exist and are fully qualified, the charity vests at once for their benefit and it is not contingent. This theory is upon established principles. Thurlow v. Berry, 247 Ala. 631, 25 So.2d 726.

While “it is essential to the constitution of a valid trust that its objects be so designated or described that they may be definitely known or ascertained from the provisions of the instrument purporting to create it. But uncertainty as to the individual whom the benefit may reach will not defeat a gift to charity— that character of uncertainty is one thing that distinguishes a public from a private trust. * * * To constitute a charitable use, it must confer a public benefit, open to an indefinite number of persons. Festorazzi v. St. Joseph’s Catholic Church, 104 Ala. 327, 18 So. 394, 25 L.R.A. 360, 53 Am.St.Rep. 48. But the general doctrine is that the beneficiaries of a public charity must be designated as a class, ascertainable with reasonable certainty, from which the trustee may be authorized to select the immediate persons or objects to receive the special benefits. * * * And it has been repeatedly held that a charitable trust will not fail on account of any uncertainty as to the ultimate beneficiaries, within a properly designated class, if there is a competent trustee to make a selection and thereby render certain the beneficiaries who are to enjoy the bounty provided by the trust.” Johns v. Birmingham Trust & Savings Co., 205 Ala. 535, 88 So. 835, 836.

The duty to make the selection and determine if the qualifications have been met and to see that the requirements are complied with is committed to the association which shall perform some of the functions of the trust, and is to that extent a trustee or administrative agent and is not to any •extent a beneficiary. This is “likewise illustrated in Tarver v. Weaver, 221 Ala. 663, 130 So. 209.

There is a clear distinction between those parts of the instrument which (1) declare the gift and its purpose, and (2) those which direct the mode of its administration. Vidal v. Girard’s Ex’rs, 2 How. 127, 11 L.Ed. 205; Morris v. Edwards, 227 N. Y. 141, 124 N.E. 724; Codman v. Brigham, 187 Mass. 309, 72 N.E. 1008; Brigham v. Peter Bent Brigham Hospital, 1 Cir., 134 F. 513.

Accumulations.

Section 146, Title 47, Code, provides under a title of “Accumulation merely” that “no trust of estate for the purpose of accumulation only can have any force or effect for a longer term than ten years” (except for the benefit of minors). On former appeal we gave a complete history of this statute and its setting.

Of course significance must be accorded the words “.only” and “merely” meaning in substance the same idea. Under that statute a trust accumulating income for a longer period than ten years is permissible if it is either partly or wholly for some other purpose than mere accumulation.

We have given consideration to this statute in some of our cases as pointed out on former appeal. Henderson v. Henderson, 210 Ala. 73, 97 So. 353; Ramage v. First Farmers & Merchants Nat. Bank, 249 Ala. 240, 30 So.2d 706; Goodwyn v. Cassels, 207 Ala. 482, 93 So. 405; Watters v. First National Bank, 233 Ala. 227, 171 So. 280; Thurlow v. Berry, supra. We have said that accumulation means the addition of the interest or income from a fund to the principal or corpus so as to prevent expenditures of such interest or income. Ramage v. First Farmers & Merchants Nat. Bank, supra; Henderson v. Henderson, supra; 41 Am.Jur. page 92.

In their brief appellants’ counsel say “we attack that requirement of the will which commands that this excess be made a permanent addition to the permanent corpus. This requirement has no other purpose than accumulation.”

Our cases and the history of this statute support what we held on former appeal, and consider the proper construction of the statute, that the trust shall not be set up with the intention to impound all the income to accumulate for no other purpose than as an accumulation to be added to the principal for a period longer than ten years, except as provided in it or having that effect.

If there is provision for substantial expenditures of income or substantial legacies payable out of income, then the income is not to be used for accumulation only while such expenditures or legacies remain unpaid, provided they are not colorable to hide the real intent of the testator to set up a trust for- accumulation only. We think that when a trust provides for large amounts to be paid out of annual income with an accumulation of the balance added to- the corpus, it is not while that status exists a trust for accumulation only. Henderson v. Henderson, 210 Ala. 73, 97 So. 353; Ramage v. First Farmers & Merchants Nat. Bank, 249 Ala. 240, 30 So.2d 706.

On former appeal we gave what we then and now -consider good and sufficient reasons for the conclusion that the trust here in question was not for the purpose of accumulation only and had no such present effect and was not, therefore, controlled by section 146, Title 47, Code.

' So that the income not being for accumulation only, the principle applicable to accumulations as it existed at the common law prevails. Ramage v. First Farmers and Merchants Nat. Bank, supra; Henderson v. Henderson, supra. That principle under no aspect makes accumulations illegal for a period of twenty-one years after testator’s death, whether or not the estate had vested. It is the rule against perpetuities at common law which also applies to accumulations. This requires a trust whether private or charitable to vest within said period. If the trust is charitable and vests in the trustee at death of testator and payable according to directions in the will for the benefit of charities then or thereafter ascertainable, it vests within the meaning of the common law so as not to be affected by the principle of remoteness, as we have fully here discussed the subject. When a chraitable trust has vested, accumulations not inhibited by the statute are not invalid. St. Paul’s Church v. Attorney General, 164 Mass. 188, 203, 41 N.E. 231; 10 Am.Jur. section 21, page 600, notes 17, 18 and 19; 2 Sims on Law of Future Interests, page 508, section 591; Codman v. Brigham, supra.

Of course the vital factor in a. perpetuity is that the date of its vesting is. postponed beyond the period prescribed.. Within that period before vesting an accumulation is not a perpetuity. It is not an unlawful perpetuity at any time after-the estate becomes vested. City of Philadelphia v. Girard’s Heirs, 45 Pa. 9, 9 Wright, Pa., 9, 84 Am.Dec. 470.

It is said in Reasoner v. Herman, 191 Ind. 642, 653, 654, 134 N.E. 276, 280: “Where a charitable gift vests, a direction, for accumulation, being for the management of the fund and not of the essence of the gift, will not, even if invalid, affect the validity of the gift,” citing many cases. And on page 654 of 191 Ind., on page 280 of 134 N.E.: “Appellees talk of * * *- accumulation as going through the ages, until it becomes a public menace. There is no occasion for alarm; for this may be-limited by a court of equity, so that it will not be a public mena-ce, and so that it will' best subserve the main purpose, charity.” It is also said in the Herman case, 191 Ind. page 652, 134 N.E. page 280, that this is. controlled by the cy pres doctrine of liberal, construction which will cause courts to be-keen to discover whether the main purpose-is charity and, if it is, to treat the testator’s. machinery of administration not as conditions precedent to vesting, but as suggestions regarding the management. It also states that it is applying the cy prés rule of liberal construction as observed in this Country, not the prerogative cy pres as applied in England, and that this distinction has been made to the point of satiety in. all the states. 191 Ind. page 653, 134 N.E. page 280.

It is apparent that the power of a. court of equity with respect to the machinery of administration, sometimes called. judicial cy pres, is sufficient to enable such .a court to take care of any menace that may .arise from accumulations, if any should occur after the death of testator, when the estate then vested. St. Paul’s Church v. Attorney General, 164 Mass. 188, at page 204, 41 N.E. 231; 2 Bogert, Trust and Trustees, § 353, pages 1082, 1083; 3 Scott on Trusts, section 401.9 (page 2142); Perry on Trusts, section 399; 3 Page on Wills, page 678; 2 Sims on Law of Future Interests, page 508, section 591.

The will of Gov. Henderson provides that after twenty years from his death all the income' for twenty years thereafter shall be used annually for the first charity provided, and it is only if any -of such income should not be so used in any year that it must be added to the -corpus.- This merely provides for a contingency occurring contrary to his direction during a period of twenty years beginning at the expiration of twenty years after his -death, and after the vesting of the estate, and is in no sense an accumulation such as will probably be a public menace “through the ages”. But if it should be so administered as to be such a public menace a court -of equity, under its powers of approximation or deviation sometimes called judicial cy pres, could then correct the evil in some manner not necessary to be here declared, to promote the charity specified dependent upon the situation then existing, but not by distributing it among the heirs.

The authorities agree that a court of equity has such power whether it is called equitable deviation or judicial cy pres. 2 Perry on Trusts, section 728, page 1242. It is not prerogative cy pres. They do not support the theory that such income is subject to distribution among the heirs of the testator, but to the beneficiaries of the charity. St. Paul’s Church v. Attorney General, supra, 164 Mass, page 205, 41 N.E. page 237; Brigham v. Peter Bent Brigham Hospital, supra (7), see 134 F. pages 524 and 525.

The same principle has application to the provision for the maintenance of crippled children in a hospital directed to be constructed and maintained beginning twenty years after the organization of the educational association.

We think the trust estate vested at the death of Gov. Henderson both as to the legal and beneficial interests, and that the accumulations are not controlled by our statute and are not violative of the common law- rule in that respect.

There is nothing before us in respect to the guardian ad litem fee. The court dismissed the cause after sustaining the demurrer and taxed the complainants with the costs. In doing so the court expressed the view that it was by authority of section 65, Title 11, Code, which provides for the court to use his discretion in so doing. Nothing has been done in respect to the guardian ad litem fee. There has been no proceeding to have it fixed. The trial court must, first act on it in a direct proceeding for that purpose. That action may then be reviewed. It is not necessary to remand the case for that purpose. It is supplementary to the final decree.

Affirmed.

STAKELY, J., concurs. LIVINGSTON, J., concurs in the result. LAWSON, J., concurs specially as noted by him below. BROWN and SIMPSON, JJ., dissent.