Opinion
January 28, 1929.
March 18, 1929.
Wills — Construction — Income — Trusts and trustees — Lunacy of beneficiary.
1. All of the income of a trust estate created by a will for a son is distributable to the committee in lunacy of the son adjudged a lunatic after testator's death, where the will gives a sum-stated to the son to be held by trustees, "the income of which is to be paid to him quarterly during his natural life," with a further direction that, after the death of the son, the income shall be paid to the son's child or children, but with no gift of unexpended income over, and a codicil further provides that the sum given to the son was to be held in trust to pay the income to the son, but with absolute power, discretion and authority in the trustees as to "whether they pay any part of or all of said income, such payment to depend upon his conduct and life."
2. The words "conduct and life" are to be construed as meaning the son's showing a disregard of his position in life, where testator in another part of his will says, "my son having conducted himself in a manner which meets with my disapproval and having shown himself regardless of the responsibilities of his position in life," etc., and also says "in case he [the son] does not observe truly these instructions, my trustee may retain all or any part of his income, which shall revert to my residuary legatees."
3. In such case, where the income of the fund, even though withheld and not paid on account of the son's bad conduct, is bequeathed to him, and, on his conduct becoming exemplary, is payable to him, the trustees have power to withhold it if his life and conduct are not proper, but they cannot divert it from the person to whom it was bequeathed.
4. The power of the trustees to pay or withhold income dependant on the son's conduct and life, ceased as soon as he was judicially declared a lunatic and a committee was appointed of his person and estate; and the income became then payable to the committee.
5. When the law declared the son incompetent and took away his control over his person and estate, it suspended the exercise of the trustees' discretion dependent on his conduct and life, until he should be judicially declared of sound mind.
6. The fact that there is no gift over, at the death of the son, of unexpended income, is a recognition of the fact that, subject to the discretion vested in the trustees to withhold the income under certain circumstances, it belonged to the cestui que trust, and that it is not subject to any absolute power on the part of the trustees which enabled them, under the circumstances, to withhold the income from the named beneficiary or his committee.
Before MOSCHZISKER, C. J., FRAZER, WALLING, SIMPSON, KEPHART, SADLER and SCHAFFER, JJ.
Appeal, No. 18, Jan. T., 1929, by County Trust Co. of White Plains, New York, committee of the person and estate of Edwin E. Everhart, a lunatic, from decree of O. C. Lackawanna Co., No. 441, Year 1911, dismissing exceptions to adjudication, in estate of Isaiah F. Everhart, deceased. Reversed.
Exceptions to adjudication. Before SANDO, P. J.
The opinion of the Supreme Court states the facts.
Exceptions dismissed. County Trust Company of White Plains, New York, committee of Edwin E. Everhart, a lunatic, appealed.
Error assigned, inter alia, was decree, quoting record.
Alfred N. Keim, with him Carroll R. Williams and W. S. Diehl, for appellant. — Power, discretion and authority of trustees to pay or withhold income to Edwin E. Everhart are abrogated by the lunacy of beneficiary arising subsequent to the death of the testator: Everhart v. Everhart, 87 Pa. Super. 184.
Title and ownership of income, current and accumulated, vested in beneficiary, Edwin E. Everhart, under the will of Isaiah F. Everhart, deceased: Earp's App., 28 Pa. 368; Nirdlinger's Est., 290 Pa. 457; Ruddy's App., 20 W. N.C. 241; Partridge's Est., 241 Pa. 158; Baeder's Est., 190 Pa. 606.
H. W. Mumford, of Welles, Mumford Stark, with him Townsend, Elliott Munson, for appellee. — This discretion should be exercised by the trustee named by the testator and creator of the trust: Wilson's Est., 2 Pa. 325; Ruddy's App., 20 W. N.C. 241; Pleasonton's Est., 232 Pa. 381.
The right of property in respect of the income from the spendthrift trust in the hands of the trustee, is the right of the testator and not the right of the beneficiary: Thackara v. Mintzer, 100 Pa. 151; Board of Charities v. Lockard, 198 Pa. 572; Com. v. Thomas, 65 Pa. Super. 275.
Argued January 28, 1929.
This appeal involves construction of the will of Isaiah F. Everhart, who died May 26, 1911, a widower, leaving as his sole surviving issue a son, Edwin E. Everhart. After the death of testator, this son was adjudged a lunatic, and is now confined in the Bloomingdale Asylum at White Plains, New York. The County Trust Company of White Plains, New York, is the committee of the person and estate of Edwin E. Everhart, and the appellant in this case. The appeal is from an order of the court below denying the application of the committee to have certain accumulated income paid to it, to be used for the living expenses and benefit of the lunatic. The position assumed by the court below in denying the application is tersely put, at the end of its opinion, thus: "The trustee and not the committee . . . . . ., is entitled to hold and disburse the income for the benefit of the cestui que trust."
The will of decedent provides for Edwin E. Everhart, first, in the second clause thereof, by gift directly to him of "$100,000, to be held in trust by the Provident Life Trust Co. of Philadelphia, Pa., the income of which is to be paid to him quarterly for his support during his natural life"; next, in the nineteenth clause, by a provision that, after the death of Edwin E. Everhart, the income of the fund in question shall be paid for the support of his child or children; and, at this point, testator again speaks of the $100,000 devise, as one to his son, on which "the income" is "to be paid to him quarterly for his support." (The italics are ours.) A codicil provides as follows: "I hereby ratify and confirm the bequest for the benefit of my son Edwin E. Everhart, contained in the second and nineteenth clause of my said will, with the following modifications, to wit: I give and bequeath the sum of $100,000.00 dollars there mentioned to my trustees, to be held by them in trust to pay the income thereof to, or for the benefit of my said son, in quarterly payments, but with absolute power, discretion and authority to said trustees whether they pay any part of or all of said income, such payment to depend upon his conduct and life."
The body of the will contains another reference to Edwin E. Everhart, which throws light on what testator meant by the expression "conduct and life." The provision in question states: "My son Edwin E. Everhart having conducted himself in a manner which meets with my disapproval and having shown himself regardless of the responsibilities and duties of his position in life," etc. This, to our mind, signifies that testator meant by "conduct and life," conduct by Edwin E. Everhart showing a disregard of his position in life.
The paragraph of the will which contains the indication to which we have just referred, after stating certain penalties which the devisee would suffer if he endeavored in any manner to disturb his father's testamentary dispositions, ends by a recognition that the income of the $100,000 set aside for the benefit of Edwin E. Everhart belonged to him. As to this, the testator said: "In case he [the devisee] does not observe truly these instructions . . . . . . my trustees . . . . . . may retain all or any part of his income, which shall revert to my residuary estate." (The italics are ours.)
The same general question now before us, as to whether the committee is entitled to an award of the income from the fund here involved, was passed upon by our Superior Court, in Everhart v. Everhart, 87 Pa. Super. 184, 188, where, in disposing of a foreign attachment against accumulated income from the same fund, the court correctly held that the testator, in another clause of his will, not necessary to quote, had subjected this fund and all other funds held under the will to spendthrift restrictions, but that, subject thereto, the income on the fund in question belonged to the devisee, saying in this regard: "The income of the fund, even though withheld and not paid, on account of Edwin E. Everhart's bad conduct, is bequeathed to him, and upon his conduct becoming exemplary is payable to him. . . . . . The trustees have power to withhold it if his life and conduct are not proper, but they cannot divert it from the person to whom it was bequeathed. . . . . . The codicil, when considered in connection with the second and nineteenth clauses of the will, which it specifically ratifies and confirms, makes this plain. . . . . . The power, discretion and authority in the trustees to pay or withhold income, dependent on Edwin E. Everhart's conduct and life, ceased as soon as he was judicially declared a lunatic and a committee was appointed of his person and estate. That clause necessarily related to the voluntary acts of one compos mentis. When the law declared him incompetent and took away his control over his person and estate, it suspended the exercise of the trustees' discretion, dependent on such conduct and life, until he should be judicially declared of sound mind. . . . . . [There is no] general and absolute authority in the trustees to pay [or not to pay] income . . . . . . to the cestui que trust, or to apply the same in whole or in part for his maintenance and support as they in their discretion may see fit, but rather a discretion to pay part or all of the income, depending upon his conduct and life; and, if that is irreproachable, the duty is to pay all."
The above excerpts from the opinion of the Superior Court sufficiently cover the question now before us, and we need add thereto only the observation that, while the will provides what shall happen, on the death of Edwin E. Everhart, to the corpus of the fund set aside for his benefit, there is no gift over at his death of unexpended income; this is another recognition of the fact, shown by the will, that, subject to the discretion vested in the trustees to withhold the income under certain circumstances, it belonged to the cestui que trust, and that it is not subject to any absolute power on the part of the trustees which enables them, under present circumstances, to withhold the income here in question from the named beneficiary or his committee. See Act of April 13, 1868, P. L. 94, and the Fiduciary Act of June 7, 1917, P. L. 447, section 58, subdivision (g).
The decree of the court below is reversed, and it is directed that a decree be entered in accordance with the views expressed in this opinion; costs to be paid out of the fund for distribution.