Opinion
File No. 1975-443/B
09-24-2021
In the MATTER OF the Judicial Settlement of the Account of HSBC BANK, US, N.A. (formerly known as Marine Midland Bank- Rochester) as Trustee of the Trust under Article Eleventh of the Last Will and Testament of Dorothy Schlegel Rice, Deceased.
Bond, Schoeneck & King, PLLC (Cressida Dixon, Esq.) for HSBC Bank US, N.A., Petitioner and Trustee; Woods Oviatt Gilman LLP (Lorisa D. LaRocca, Esq.) for Respondents, James L. Reid, Catherine R. Ellwanger, and Elizabeth M. Corregedor; Boylan Code, LLP (Michael F. Buckley, Esq. and Diane K. Donnelly, Esq.) for Respondent, Peter Pulsifer.
Bond, Schoeneck & King, PLLC (Cressida Dixon, Esq.) for HSBC Bank US, N.A., Petitioner and Trustee; Woods Oviatt Gilman LLP (Lorisa D. LaRocca, Esq.) for Respondents, James L. Reid, Catherine R. Ellwanger, and Elizabeth M. Corregedor; Boylan Code, LLP (Michael F. Buckley, Esq. and Diane K. Donnelly, Esq.) for Respondent, Peter Pulsifer.
Christopher S. Ciaccio, S.
BACKGROUND
Trustee of a residuary established under the decedent's Will has offered its final account for judicial settlement. In the context of the accounting proceeding, Trustee seeks construction of the Will to determine the distribution of the trust remainder. Article Eleventh of the Decedent's Will created a residuary trust providing each of her three daughters one-third of the trust net income during their lives. Upon the passing of each daughter, their share of the income would then be payable to their "issue in equal shares per stirpes." The Will also authorized the Trustee the discretion to distribute trust principal for stated purposes to any of the daughters or any dependent children of the daughters, without regard to equality of distribution among the daughters or their respective issue. The Will states the Trust is to terminate upon the death of the last surviving daughter.
The decedent passed on January 24, 1975, and was survived by her three daughters, Rosemary Reid, Barbara Pulsifer, and Carol Norris. Decedent's Will, dated August 22,1972, was admitted to probate by this Court on February 28, 1975. The Trust was funded on or about March 10, 1976. As set forth in the petition, Rosemary Reid passed away on October 28, 1993, survived by her three adult children, James L. Reid, Catherine R. Ellwanger, and Elizabeth M. Corregedor. Carol R. Norris died on July 23, 2019, survived by five adult children. Barbara Pulsifer passed away on May 14, 2020, survived by seven children, among them Peter Pulsifer. Pursuant to the terms of the Will, the Trust terminates with the passing of Barbara. The Trustee has offered its final account covering from February 4, 2005 to June 30, 2020, (the Trustee's intermediate account was settled by a decree of this Court dated March 16, 2006) showing a gross value of trust assets to be $4,377,548.
The final paragraph of Article Eleventh [C] of the decedent's Will directs that the Trust shall terminate upon the death of the survivor or her three daughters. The last sentence of that paragraph reads: "All principal remaining in such trust at the termination thereof shall be transferred and paid over to the issue of my said three daughters in equal shares per stirpes. "
Trustee opines that the phrase "per stirpes" as used in that section of Will is unclear as to whether it refers to the issue of the decedent's three daughters or to the daughters themselves. Under the former, the remainder would be distributed in equal shares among the decedent's fifteen grandchildren. The later interpretation would divide the remainder into three parts and then distribute those shares among the issue of the daughters, in which case Rosemary's children would each get one-ninth of the remainder, Carol's children would each receive one-fifteenth, and each of Barbara's seven children would be paid one-twenty-first share.
While no one has contested the account as offered by the Trustee, Answers have been filed as to the construction of the Will as it impacts the final distribution of the trust remainder. The account reflects there is roughly $4,300,000 to distribute among the decedent's grandchildren. An equal distribution among all fifteen would amount to each grandchild receiving roughly $287,000, whereas should the distribution be made at the daughter's level, Rosemary's three children would each get almost $478,000 and Barbara's seven children would each receive roughly $205,000. The remainder shares of Carol's children are unimpacted by either construction of the Will.
In their Answer, Rosemary's three children (herein after referred to as the Reid Respondents), allege the Trustee previously advised them in writing that the remainder would be divided at the daughter's and therefore they would receive a larger portion of remainder and that the Trustee should be bound by that representation.
Respondent Pulsifer filed an Answer in which he avers the Will is unambiguous and directs the remainder of the Trust to be divided equally among the fifteen grandchildren and that the decree settling the intermediate account of the Trustee did not address the distribution of the remainder.
After a series of conferences with the Court, and all sides agreeing that this issue is a matter of law, the answering parties submitted papers in support of their proposed construction of the Will. The Trustee takes a position other than to ask for a construction of the Will.
It is well established that the court's ultimate mission in a construction proceeding pursuant to SCPA § 1420 is to ascertain the intent of the testator where there is some ambiguity or confusion in the language of the will. (see Matter of Carmer , 71 NY2d [1988]; Matter of Phillips , 101 AD3d 1706 [4th Dept 2012] ). Careful construction entails a sympathetic reading of the will in its entirety, as opposed to a reading based upon isolated words or phrases. ( Matter of Fabbri , 2 NY2d 236 [1957] ; Matter of Falvey , 15 AD2d 415 [4th Dept 1962] ). Various canons and rules of grammatical construction may be utilized to assist in determining the testator's intent, but are not dispositive, and always subordinate to the intent of the testator. (Matter of Gourary , 34 Misc 2d 486 [Sur Ct, New York County 2011] ).
The court's task in a construction proceeding is made more complicated by the fact that there is no clear burden of proof. Appellate case law indicates that there is an equal burden on both parties ( Matter of Revson , 86 AD2d 872 [2d Dept 1982] ).
As it relates to the decedent's Will, EPTL § 2-1.2[a] provides that "whenever a disposition of property is made to ‘issue’, such issue, if in equal degree of consanguinity to their common ancestor, take per capita, but if in unequal degree, per stirpes, unless a contrary intention is expressed."
The Reid Respondents argue that this statutory presumption is overcome when the Will is read as a whole and reveals the decedent's intent to treat her daughters equally and the grandchildren are limited an equal share of only their own mother's portion of the estate. Certainly, there are many distinct elements to the testamentary scheme set forth by the decedent in her Will and shall be taken in turn sequentially.
The Reid Respondents cite Article Third of the Will in their first memorandum of law wherein the decedent leaves her personal property to her three daughters "or the survivor of them." It is argued that the decedent's intention was to have her three daughters share in the personal property equally, and if one had pre-deceased, that daughter's issue would have taken only that one-third share of their mother. The Reid Respondents argue this language ensures the equality of distribution among each daughter's family unit. However, in reading the Will this Court agrees with Respondent Pulsifer who opines that the term "them" refers only the daughters who survived the decedent would take the decedent's tangible personal property. None of them grandchildren would receive personal property unless all the daughters pre-deceased the decedent, which belies the assertion that the decedent's intent to consistently divide her estate into thirds for each of her daughters’ families. This argument is not contested in subsequent filings by the Reid Respondents.
Article Sixth of the Will creates a trust for the decedent's husband and was funded with one-half of the net estate. Upon the death of her husband, the decedent directs one-third of all shares of stock in Schlegel Manufacturing Company then held by the spousal trust to her three nephews in equal shares per stirpes with the proviso that the issue of her nephew Kenneth, in the event he predeceased the beneficiary, would consist only of his children born of his wife Carol. The remaining two-thirds of the Schlegel stock was directed, "in equal shares per stirpes" to the three daughters, who are each referred to by name. The Reid Respondents maintain the language used in the Will demonstrates the decedent was extremely deliberate as to who she wanted to receive her assets and in what proportion. They aver that Article Sixth reflects an intent that the daughters each get an equal share of the remaining Schlegel stock and if a daughter happened to die before the trust was terminated, only her share would go to her issue.
In Article Seventh of the Will, the decedent exercised a power of appointment under her father's Will wherein she makes three legacies of $10,000 each to her daughters "otherwise to her issue in equal shares per stirpes." Article Tenth of the Will disposes any shares in Schlegel stock not going to the spousal trust in the same manner as Article Sixth and directs the remaining two-thirds of the Schlegel stock be distributed "in equal shares per stirpes to Rosemary R. Reid, Barbara A Pulsifer and Carol R. Norris. The Reid Respondents advocate that such language demonstrates the decedent's intent to treat each daughter's family unit equally.
Finally, the Reid Respondents interpret Article Eleventh as creating three residuary separate trusts, one for each daughter. They assert that if the distribution were to be made at the grandchildren's level, then the would be no reason to include the phrase "my said three daughters" when directing the distribution of the remainder and maintain when the Will is read as a whole, a per stirpital division as the daughter's level is consistent with the decedent's testamentary scheme of treating each daughter's family equally.
Respondent Pulsifer argues the Will contains no ambiguity and that the remainder should be divided equally among all fifteen grandchildren as directed by EPTL 2-1.2[a]. He suggests that the decedent's distribution of the Schlegel stock among her daughters and nephews pursuant to Articles Sixth and Tenth, in which each are specifically referred to by name, reflects an intent that decedent knew the appropriate language to use to make her daughters the generation to divide those assets per stirpes.
Given the specificity set forth by the decedent in Articles Third, Sixth, Seventh and Tenth of her Will, Respondent Pulsifer argues if the decedent wished to create separate trusts for each daughter, in which each daughter's family would be treated equally, she and the scrivener of the Will would have done so with purpose and same exactitude set forth in those aforementioned sections of the Will. The general provisions of the residuary trust in Article Eleventh are distinctive from other aspects of the decedent's testamentary scheme in Articles Third, Sixth, Seventh and Tenth as those sections dispose of specific assets to specific people who are referred to by name.
While the Reid Respondents assert that there are three residuary trusts, one for each daughter and her family, there is but a single trust created under Article Eleventh. Sub-paragraphs A, B, and C of Article Eleventh do not create separate trusts, they merely direct that the trust income be split into three equal shares to be paid over to the decedent's daughters and upon their death, continue to a one-third of the income to their respective issue until the last surviving daughter of the decedent passes.
The daughters (and their issue) were also entitled to receive discretionary invasions of principal "without regard to equality of distribution among my said daughters or their respective issue." Throughout Article Eleventh, the decedent refers to the trust as a single entity including the direction "this trust shall terminate upon the death of the survivor of Rosemary R. Reid, Barbara R. Pulsifer, and Carol R. Norris." If each daughter's family was to be treated as a separate unit, there would have been separate trusts. Here the single residuary trust is a "pot trust" to benefit multiple generations — so it is logically consistent to treat the grandchildren the same when the trust is collapsed. In this regard, the court is guided by the rules that words should be given their ordinary meaning and that meaning consistently applied (see Matter of Gustafson , 74 NY2d 448, 547 N.E.2d 1152, 548 N.Y.S.2d 625 ), including that where a class gift requires survivorship after the death of the life tenant, the class is generally ascertained at the time of distribution (see In re Astor's Will , 5 Misc 2d 722 [Sur Ct. Columbia County 1957] ).
Indeed, broadly speaking, the underlying theme throughout the will as a whole evinces a desire by the decedent to insure an equality of treatment of the beneficiaries.( Matter of Parrish , 2008 NY Slip Op 33733[U], *4 [Sur Ct, Suffolk County 2008]). To divide the remainder at the daughter's level would be contrary to the established intent of the testator and effectively marginalize the shares of the decedent's grandchildren born into larger families. If decedent's intent is to treat her daughters equally during their lifetimes, why would the decedent then deviate and treat her grandchildren unequally when the trust remainder is divided among them?
Upon review of the decedent's Will and EPTL 2-1.2[a], the presumption for an equal distribution at the level of the decedent's grandchildren has not be overcome by the Reid Respondents. The language "to the issue of my said three daughters in equal shares, per stirpes," is only susceptible to one interpretation, that the distribution begins with the testator's grandchildren. ( In re Magnor , 286 AD2d 502, 503 [2d Dept 2001] ). "The employment of the concise expression [to be construed] cannot be regarded as either an indifferent use of language or a labor-saving device. On the contrary, the expression must be considered as having the precise definition acquired by it from long usage in the vocabulary of the law." ( In re Morgan , 193 Misc. 405, 408 [Sur Ct, New York County 1948] ).
Based on the foregoing, the remainder of the residuary trust under Article Eleventh is to be distributed into fifteen equal parts among the decedent's fifteen grandchildren. ( In re Estate of Murphy , 103 Misc 2d 719 [Sur Ct, Queens County 1980] ; In re Estate of Austin , 2018 NYLJ LEXIS 4222 [Sur Ct, New York County]; In re Deutsche Bank Trust Co. Del. , 2018 NYLJ LEXIS 4087 [Sur Ct, Suffolk County]; In re Bank of NY , 1992 NYLJ LEXIS 8283 [Sur Ct, New York County 1992]).
Trustee is directed to file a proposed decree settling the account and distributing said remainder in accordance with this decision.