Opinion
08-31-1897
BLYTHE et al. v. GREEN et al.
William M. Lanning, for complainants. Elmer E. Green, for defendant Ellen G. Green. Edward D. Duffield, for defendant E. E. Duffield and others. Depue & Parker, for other defendants. Rutherford Coleman, for guardian Phillip Kissam. Henry W. Green, for guardian ad litem.
Bill by Margaret Blythe and others against Ellen G. Green, executrix, and others, for an accounting, a new trustee, and the distribution of a trust fund. Accounting had, trustee appointed, and conditional decree rendered.
William M. Lanning, for complainants. Elmer E. Green, for defendant Ellen G. Green. Edward D. Duffield, for defendant E. E. Duffield and others.
Depue & Parker, for other defendants. Rutherford Coleman, for guardian Phillip Kissam. Henry W. Green, for guardian ad litem.
REED, V. C. This bill is filed by certain cestuis que trustent for the purpose of getting—First, a new trustee; second, an accounting; third, a decree directing the payment to the complainants of the accumulated income, as well as the future income, of the corpus of the trust property. The complainants are the unmarried daughters of Ellen H. Green, deceased, who was a sister of John C. Green. The trust was created by John C. Green, who on September 18, 1874, executed an instrument in the following form: "To All to Whom These Presents shall Come, John C. Green, of the City and State of New York, Sends Greeting: Whereas, it is my purpose and desire to make some provision for the support and maintenance of Margaret Blythe and Elizabeth C. Blythe, unmarried daughters of my deceased sister, Ellen M. Blythe, and with that view to settle and secure the stock and securities hereinafter mentioned for their use and benefit: Now, know ye, that I, the said John C. Green, in consideration of the premises, and of the sum of one dollar to me in hand paid by Caleb S. Green, of the city of Trenton, and state of New Jersey, have, and by these presents do give, grant, assign, transfer, and set over unto the said Caleb S. Green twenty-five mortgage bonds of the Lehigh Valley Railroad Company, of the denomination of one thousand dollars each (Nos. 301-325, both inclusive), all dated June 1st, 1868, and payable June 1st, 1898, and one hundred shares of the capital stock of the South Branch Railroad Company of New Jersey, of the par value of one hundred dollars each, now standing in the name of the said Caleb S. Green, as trustee (the whole of the said bonds and stock, at the par value thereof, amounting to thirty-five thousand dollars), to have and to hold the same unto the said Caleb S. Green, his executors, administrators, and assigns. But nevertheless upon the trusts and to and for the uses and purposes following: That is to say, upon trust, in the first place, to collect and receive the interest and dividends of the said trust fund, and the net annual income thereof, or so much thereof as he may deem necessary, at his discretion, from time to time to pay to the said Margaret and Elizabeth, to and for their own sole and separate use and benefit, free from the debts or control of any husband either of them may at any time hereafter have, or otherwise, at his discretion, to pay and apply the same to their support and maintenance in such shares and proportions, and in such manner, as their several necessities may require, and as he may deem best and proper; it being my wish that my said nieces shall both share in the benefits of the said trust fund, without restricting their trustee to an equal division of the income thereof. And, in case the whole of said income shall not be needed or used for the support of my said nieces, then I authorize and empower the said trustee to apply the surplus, or any part thereof, to and for the use and benefit of any other child or descendant of my deceased sister, Ellen, or to invest and accumulate the same as part of the principal of the said trust fund. And in case either of my said nieces die, leaving lawful issue her surviving, then upon the further trust to pay and divide one equal moiety or half part of the principal of said trust fund to and among the children of her so dying, in equal shares, the issue of any that may be deceased to take their parent's share; and upon the death of the other of my said nieces, leaving issue, then to pay and divide the remaining moiety or half part of said trust fund to and among her issue in manner aforesaid. But, in case either or both of my said nieces die without leaving lawful issue, then upon trust, if but one of them so die, to pay and assign one equal moiety or half part of said trust fund; and, if both so die, upon trust to pay and assign the whole of said trust fund to any other child or children, descendant or descendants, of my said sister Ellen, or of my brothers, or any of them, as he, in his discretion, may deem expedient, and in such shares and proportions as he, under then existing circumstances, shall think right and proper. And upon the further trust that the said Caleb S. Green shall and may, at his discretion, at any time, sell and dispose of the bonds and stock above mentioned, and the proceeds of such sale invest in such other manner and in such securities as he shall think proper and best for the interest of my said nieces, which new securities shall go and remain upon the same trusts and for the same purposes as the securities so sold as aforesaid: provided, always, and it is hereby declared, that it shall and may be lawful for me, the said John C. Green, and I do hereby reserve the right and power, at any time during my life, by writing under my hand and seal, to alter, change, revoke, annul, and make void all and every the uses, estates, and trusts hereby created, limited, and declared, and any other use, estate, or trust of and concerning the said fund to limit, appoint, and declare as I shall think meet and proper: provided, also, and it is likewise declared, that it shall and may be lawful for the said Caleb S. Green, at any time after my death, to settle and secure the principal of the said fund in trust for the separate use of my said nieces and of their respective issue in such shares and with such limitations and provisions as he may deem expedient, or otherwise to nominate and appoint some other fit and proper person or persons to be trustee or trustees in his place and stead, and the principal of the said trust fund to assign and convey to him or them upon the same trusts hereinbefore set forth, or upon such further and other trusts, and to and for such other uses and purposes, and with such other limitations and provisions, as he, in his discretion, may then deem fit and proper, and in as full andample a manner as I myself could do if then living: provided, also, and it is further declared, that it shall and may be lawful for any trustee or trustees under this deed of trust from time to time to retain, and to pay to himself or themselves, out of the income of the said trust estate, all necessary charges and expenses, with reasonable fees and commissions (not exceeding those allowed by the laws of New Jersey to trustees under a will) for their services and trouble for or by reason of the trusts hereby created, or transacting anything pursuant thereto "
The bonds and securities mentioned in the deed of trust were delivered to the trustee. John C. Green, the settlor of the trust, died April 29, 1875, without having altered or annulled the same. Caleb S. Green, the trustee, died on February 19, 1891, testate, leaving his widow his sole executor and legatee, and without having settled the principal of the trust fund, or appointed any trustee in his place. During his life, he, as trustee, paid the complainants about $6,000 out of the income of the trust property, and invested the rest of the income. Since his death his executrix has received and invested all the income. It is now desired by the executrix of Caleb S. Green, the trustee, that she may be relieved of the duties cast upon her by reason of her position as executrix and universal legatee of her husband. It was stated at the time of the argument that the court would accede to this desire, and appoint a new trustee in her stead. It was also, at the time of the hearing, directed, by the desire of all parties, that an account should be taken of the transactions involved in the past execution of the trust. It was also announced at the time of the hearing that the investments which the trustee had made of such portion of the income of the trust estate as was not paid over to the complainants by him were to be regarded as accumulations,—as a part of the principal of the trust fund. The question left for present decision is in respect to the disposition of the income which has accumulated since the death of the original trustee, and which will accrue until the termination of the trust. The insistence of the complainants is that this income should be paid to them. The counter insistence of the defendants is that the complainants are only entitled to receive such parts of the income as they may need for their maintenance, and that the remainder of the income is to be added to the corpus of the estate. The ground upon which the complainants put their claim to the entire income is that they (the complainants) constitute a class in whose favor the settlor of the trust manifested a general intention, with a particular intention in favor of such of the class as the trustee should select, which particular intention has failed because the selection was not made; that such being the conditions, and the trustee, in his lifetime, having failed to make any selection of the beneficiary, and failed to apportion the income between the complainants, the court will now do so, by apportioning the income equally between them. 2 Lewin, Trusts, par. 840; 1 Perry, Trusts, pars. 250-255; Burrough v. Philcox, 5 Mylne & C. 73-92; Brown v. Higgs, 18 Ves. 192. The basic fact upon which this argument is erected is, of course, that the complainants constitute a class, in respect to the members of which the general favor of the testator is confined. In support of this insistence, attention is called to the express purpose of the settlor, viz. to make some provision for the support and maintenance of Margaret Blythe and Elizabeth C. Blythe, and with that view to secure the stock and securities mentioned for their use and benefit. The further language employed by the settlor of the trust is also pointed out, viz. that the trustee shall pay the net annual income thereof, or so much thereof, as he may deem necessary, at his discretion, to the complainant, and, in case the whole of said income shall not be needed or used for the support of the complainants, then to apply the surplus, or a part thereof, to the use of any other child of Ellen, or to invest or accumulate the same as part of the principal. The argument is that this language confers upon the complainants a vested interest in all the income, subject only to divestiture by the act of the trustee during his life, in applying it to the use of the other children of Ellen, or investing it as part of the principal. I am unable to find in this language a manifestation of a general intention in favor of the complainants alone. The primary object of the settlor in creating the trust, as expressed, was a desire to provide for the two unmarried daughters of his sister Ellen; but in carrying out his primary purpose he included others within the pale of the benefits which might flow from the trust, and the benefits which those others might receive was also dependent upon the particular favor of the trustee. These others were the other children of Ellen, and indirectly, through the power to accumulate, also the issue of the complainants, or next of kin of the settlor. The degree of favor manifested towards the complainants differs from the degree of favor exhibited towards the others, in this: that the former had the right to the exercise of the judgment of the trustee, upon the existence of a need that any part of the income should be applied to their support. If there were need, and the trustee refused to exercise his discretion, or to aid them, in such a way as to show mala fides, then this court would have compelled the trustee to perform his duty, or the court itself would have executed the trust. Apart from this particular, the complainants stood upon an equal footing with the other parties included within the scope of the settlor's general intention. The trustee, as to the selection of any of them as the objects of his particular favor, had an absolute discretion. He could have given the entire income to one or both of the complainants, to one or all of the other children of Ellen, or could have added all of it to the corpus of the trust property.In my judgment, tie complainants do not constitute a class which entitles them to any part of the income in excess of what they may need to maintain them in their position in life. Again, the provision for the accumulation of that part of the income which the trustee did not choose to assign to the complainants or to the other children of Ellen Blythe contained within it an implied limitation over of the portion of the income so unapplied. The power of the trustee was of two kinds: He was first to exercise his discretion in regard to the propriety of the application of the income, or any part of it, to the complainants, or to the other children of Ellen, or to its accumulation. Having exercised that discretion, and accumulated a portion of the income as part of the principal of the trust fund, his power over the latter ceased until revived by a subsequent event. If both nieces should die, leaving lawful issue, the deed of trust itself provided for the course which the corpus would take. If either or both of the nieces should die without leaving lawful issue, then one-half or all of the corpus became subject again to the power of the trustee, to pay the whole of said trust fund to any other child or descendant of Ellen, or child or descendant of the settlor's brothers, as the trustee, in his discretion, might deem expedient, and in such shares and proportions as the trustee might think right. There was therefore a limitation over of the income in case the trustee did not think it advisable or discreet to pay it to the complainants, or the other children of Ellen. By the act of accumulation, which was the only contingency left the trustee, the income became a part of the corpus, which was contingently limited over to the issue of the complainants, and also further limited over to become subject to the power of the trustee to select and distribute finally among the descendants of the brothers and sister of the settlor. Now, if, after the manifestation of the general favor of the settlor towards a class, with power in a trustee to select out of the class, there is a limitation over of the fund upon the failure of the trustee to appoint among the class, the doctrine that the court, upon the failure of the trustee to appoint, will execute the trust in favor of the class, is manifestly inapplicable. There is no evidence that the complainants are in need of any portion of the income. The Income which has accrued since the death of the original trustee should be accumulated; and, unless it be shown that the complainants are in need, I think any income that may accrue in the future should be accumulated as a part of the corpus.