Summary
In Matter of Irving Trust Co. (65 N.Y.S.2d 824, 826-827), a case somewhat similar on the facts to the present case, Mr. Justice BOTEIN restated and applied this principle, saying: "Although it is well settled that events occurring after the beginning of the period prescribed under the rule against perpetuities ordinarily have no significance with respect to the validity of a limitation [citing cases], the fact that both the settlor's niece and nephew are alive and over thirty-five at the present time is nevertheless here decisive.
Summary of this case from Matter of SchuetteOpinion
October 15, 1946.
Proceeding in the matter of the judicial settlement of the final account of proceedings of Irving Trust Company (formerly Columbia Trust Company), as trustee of an express trust under deed of trust made and executed by William H. Chesebrough, dated August 10, 1916, for Nanette Wallace Chadwick Chesebrough and remaindermen, and the application of said trustee for the construction of provisions of said deed of trust and of the last will and testament of said William H. Chesebrough.
Order in accordance with opinion.
Harry A. Yerkes, Jr., of New York City, for Irving Trust Co.
L. A.U. Zinke, of New York City (Chas. W. Silver, of New York City, of counsel), for executor of Nanette W. Chesebrough's estate.
Fenner Tilden, of New York City (Israel Tilden, of New York City, of counsel), for United States Trust Co.
Root, Ballantine, Harlan, Bushby Palmer, of New York City, for Bank of Manhattan, executor of Robert A. Chesebrough's will.
Edmund B. Bellinger, of New York City, for Howard C. Davison and others.
This is a petition for the judicial settlement of a final account filed by the petitioner as the trustee of a certain deed of trust. The petitioner seeks a construction of the deed of trust and of the settlor's will to determine the persons entitled to receive the principal in the trustee's hands. The trustee also seeks certain allowances for commissions which are objected to by some of the parties herein.
The aforesaid inter vivos trust, consisting of 500 shares of stock, was created by the settlor in 1916 for the benefit of his wife. The income of the trust was to go to her for life, and upon her death to such person or persons as the settlor named by his will or, if he failed to designate anyone, the corpus was to pass as if he died intestate. The settlor died in 1917 and by will exercised the power of appointment in a manner which is concededly adequate under Decedent Estate Law, § 98.
The will contained a residuary clause creating four trusts. Under the first trust, 1/20th of the residuary estate is left in trust for the life of the settlor's sister and, on her death, the principal is to be paid to his nephew, if he be then living and over thirty-five years of age; or, if the settlor's nephew is under thirty-five at the time of the death of the settlor's sister, then that nephew is to receive the income from the trust until his death or until he arrives at that age, whichever event occurs first; and if he reaches the age of thirty-five, he is to receive the principal absolutely. The second trust created by the residuary clause is also a trust for 1/20th of the residuary estate and contains the same terms as the first clause, except that the settlor's niece is named as the successor to the trust upon the death of the settlor's sister. The other two trusts for the balance of the residuary estate need not be described in detail since no party claimed, as is urged in respect of the first two trusts, that the latter two trusts suspend the power of alienation for more than two lives in being.
The settlor's wife died on December 11, 1945, and her estate urges that the power of appointment was ineffective since, when read together with the initial inter vivos deed of trust, the first two trusts created by the settlor's will suspended the power of alienation for more than two lives in being from the time of the execution of the deed of trust. Consequently, the estate of the settlor's wife insists that it is entitled to take as if the settlor had died intestate. On the other hand, the settlor's sister premises her claim that the power of appointment was effective on the fact that she has survived her brother and that both the settlor's niece and nephew are now over thirty-five years of age. Thus, her position is that the trust fund must necessarily vest within two lives from the date of the creation of the inter vivos trust by the settlor and that the power of appointment was, therefore, effectively exercised under the settlor's will.
Although it is well settled that events occurring after the beginning of the period prescribed under the rule against perpetuities ordinarily have no significance with respect to the validity of a limitation (Matter of Wilcox, 194 N.Y. 288, 87 N.E. 497; Bishop v. Bishop, 257 N.Y. 40, 177 N.E. 302, 80 A.L.R. 1198; Restatement, Property, vol. 4, App. A, par. 30), the fact that both the settlor's niece and nephew are alive and over thirty-five at the present time is nevertheless here decisive. For, as is indicated in Walsh, Future Estates in New York (1931), § 30, p. 175: "In any case in which the future estate as limited may vest or the suspending trust be ended on the happening of any one of two or more different contingencies the New York courts follow the common law rule * * * that if the testator has separately limited the gift on each contingency, the gift is valid should the vesting take place on the happening of any such contingencies which must happen within the rule * * *." This analysis of the New York law is in conformance with the case law (Schettler v. Smith, 41 N.Y. 328, 336; Fowler v. Depau, 26 Barb. 224; Matter of Trevor's Will, 239 N.Y. 6, 17, 145 N.E. 66, 69; Tiers v. Tiers, 98 N.Y. 568, 573; Church v. Wilson, 152 App.Div. 844, 850, 137 N.Y.S. 1002, 1006; Matter of Von Deilen's Estate, 154 Misc. 877, 884, 278 N.Y.S. 689, 696 [Wingate, S.]), and is clearly applicable here, since the residuary clause imposes separate, alternative limitations upon the gift of each 1/20th of the residuary estate by way of separate sentences and provisions. The provision conveying the corpus absolutely to each of the children of the settlor's sister, who shall have attained the age of thirty-five before the death of the settlor's sister, is separate from and alternative to that provision whereby the sister's children receive the income of the trust upon the death of the settlor's sister until such time as each of them, respectively, dies or reaches the age of thirty-five. Of these two separate rate limitations, the alternative which is valid under the rule against perpetuities has eventuated. The devolution of the corpus of each of the two 1/20th shares will not be suspended beyond the death of the settlor's sister, since both the settlor's niece and nephew are now over thirty-five. The corpus of the deed of trust may, therefore, properly be treated in the manner prescribed by the residuary clause of the settlor's will.
The first of the objections raised with respect to the commissions claimed by the trustee is directed to the trustee's application of $415.60 of the income it received in 1945 and 1946 as commissions for the years 1933 through 1937 and as payment on account for 1938. During these periods no income was earned by the trust and no fees were received by the trustee. Although the trust provided that the trustee is entitled to $75 per year "from the rents, profits, dividends, interest and income received by it for its fees thereunder," the estate of the settlor's wife argues that the foregoing application of $415.60 is unwarranted. The objection apparently is bottomed upon a construction of the deed of trust to the effect that the fees provided for under that deed of trust are non-cumulative and conditioned upon the earning of income by the trust. Since the remaindermen are entitled to "any rents, profits, interest, dividends or income not paid over" to the settlor's sister, it is significant that the remaindermen raise no objections to the foregoing application of the $415.60 income of 1945 and 1946. In any event, the objection must be dismissed. The trustee was performing services in the execution of the trust. Consequently, it would be error to treat the trustee's right to compensation as some investment interest to be conditioned upon the earning of income in some particular year. Indeed, as I read the deed of trust, it provides for the payment of the trustee's fees out of income, not conditioned upon income. It was, therefore, quite proper for the fees to be accrued and paid when sufficient income was earned by the trust fund.
Finally, objection is made to the trustee's claim for additional statutory commissions of $810.95 on principal. The only provision for compensation of the trustee under the deed of trust is the aforesaid $75 per year. This amount comes to less than one-half of the statutory commissions allowable on the income collected and the trustee claims that the parties could not have contemplated that the $75 would also cover commissions on principal. The full answer to the trustee's contention is the language of Section 1548, subd. 7, Civil Practice Act, which states that "where a specific compensation to a trustee of an expressed trust is provided by the instrument creating the trust, he shall not be entitled to any other allowance for services * * *." See also Miami Valley Gas Fuel Co. v. Mills, 157 App.Div. 542, 546, 142 N.Y.S. 862, 865, mod. 216 N.Y. 687, 110 N.E. 1044; 2 Scott on Trusts, § 242.2. This makes it plain that the trustee cannot now claim any additional compensation on principal. In Smith v. Lansing, 24 Misc. 566, 575, 53 N.Y.S. 633, 640, the trustee was permitted a commission on principal where the will was found to provide for commissions for the investment of the fund and the collection of income. But that case is not inconsistent with the suggested application of the Civil Practice Act, § 1548, subd. 7, to the trustee's claim for compensation here. For there the commissions were found to be compensation for those particular services, and no provision was made for any other commission. There was, therefore, no general provision for compensation which would preclude any other payments to the trustee under Section 1548, subd. 7, Civil Practice Act. In the case at bar, however, while commissions are payable out of income, they are not payments for the earning of income. Indeed, I have already found, at the trustee's insistence, that the payment of commissions is not even conditioned upon the earning of income. Thus, the $75 annual fee must here be considered as the intended exclusive commission of the trustee, and the further commissions on principal claimed by the trustee cannot be allowed.
Settle order in accordance with the foregoing.