Opinion
No. 4342.
Argued October 6, 1954.
Decided October 29, 1954.
Where the testator's plan for distributing a portion of his estate was impossible of accomplishment in some respects and impracticable in others due to a change of circumstances, the executors were authorized to deviate from the express provisions of the will to the extent necessary to accomplish the primary objectives of the testator and without affecting the proportionate share to any devisee or transferring the share of one to another.
Although the testamentary scheme for distribution of certain of the testator's corporate assets failed there was no partial intestacy where the residuary clause provided for distribution to the same devisees and in the same proportion as under the plan that failed.
BILL IN EQUITY, for the construction of the will of Albert M. Bean and directions as to the duty of the executors. The facts alleged in the bill and found by the Court are not in dispute. The questions raised by the pleadings were transferred without ruling by Grant, J.
The testator died in 1952 leaving a will executed in 1948. The will provided that his executors were to transfer certain property to A.M. Bean, Inc., a corporation by which he carried on his logging business. The property to be transferred was (a) his real estate, consisting principally of timberlands, (b) certain personal property consisting of trucks and equipment used in logging operations, and (c) all capital stock of the corporation, A.M. Bean, Inc. Thereupon the executors were to cause the corporation to issue class A debenture notes in an aggregate amount equal to the appraised value of (a) and (b) plus the net worth of corporation minus the value determined in accordance with the actuaries combined experience tables of class B debentures if issued to his widow. The issuance of the class B debentures was conditioned on his widow electing to accept them in lieu of a $15,000 bequest, and was to provide her with an annuity of $2,500 for life. The class A debentures were to bear interest at five per cent maturing serially after ten years and were to be divided and issued in the proportions of one-sixth to each of his children and one-twentieth to each of certain named minor grandchildren. The corporate stock was to be cancelled and new no par value common stock to be issued principally for the benefit of the grandchildren Merit and Robert who were to be president and vice president of the corporation. The residue of the estate is given to the same children and grandchildren who were to take the class A debentures and in the same proportions.
In 1951 the testator, through an inter vivos agreement with his heirs presumptive and his wife, sold all the stock in the corporation and the logging equipment (b and c in the previous paragraph) to his two grandchildren Merit and Robert. Thereafter the testator had no interest in the corporation other than the collection of the deferred balance of the purchase price. No change was made in the will executed in 1948.
The widow duly waived the provisions of the will claiming a one-third interest in fee in the estate which claim has been allowed by the probate court after notice to all interested parties. The corporation, A.M. Bean, Inc., declined to buy the real estate at the price and terms stated in the will. The real estate was appraised at approximately $88,000. Subject to proper legal authorization the heirs and beneficiaries and executors have unanimously agreed to sell the real estate for the "advantageous" cash price of $130,000 offered by a prospective purchaser.
The bill in equity requested instructions concerning performance of the trust and the disposition and distribution of the trust property. A guardian ad litem was appointed for the ten minor grandchildren, who are also represented by their legally appointed guardians.
Arthur J. Bergeron and J.L. Blais (Mr. Blais orally), for the executors, amici curiae.
Nighswander, Lord Bownes (Mr. Lord orally), for the guardian ad litem.
The petitionees appeared pro se.
A will may direct a fiduciary to do the impractical but it cannot require him to do the impossible. Hayward v. Spaulding, 75 N.H. 92, 94; N.H. Anno. Restatement, Trusts, s. 165. "Sometimes the purpose for which a private express trust was created becomes impossible of accomplishment. . . ." 4 Powell, Real Property, s. 567, p. 425 (1954). In that case, depending on the provisions of the will as a whole and the circumstances, a court of equity may terminate the trust or permit the fiduciary to deviate from the terms of the trust. 2 Scott, Trusts, ss. 165, 167.
After the testator sold his stock to his grandchildren, it was obviously impossible for the executors to carry out his purpose of transferring it in exchange for debenture notes. When the corporation refused to purchase the real estate on the terms stated in the will, it was likewise impossible for the executors to comply with the testamentary directions. When the widow waived the provisions of the will and took her statutory share, the testamentary scheme of distributing the assets of the estate was further impaired. While these events defeated a basic direction and provision of the will, it by no means follows that the dominant purpose of the testator must be nullified. 2 Scott, Trusts, s. 167; 3 Bogert, Trusts and Trustees, ss. 561, 562. Equity may control the administration of a trust by permitting deviation in order to carry out its dominant purpose "particularly when changing circumstances would otherwise defeat it." Matter of Herzog, 301 N.Y. 127, 138; Wentworth, Deviations from Terms of Will, 92 Trusts and Estates 720 (1953).
"The court will direct or permit the trustee to deviate from a term of the trust if owing to circumstances not known to the settlor and not anticipated by him compliance would defeat or substantially impair the accomplishment of the purposes of the trust; and in such case, if necessary to carry out the purposes of the trust, the court may direct or permit the trustee to do acts which are not authorized or are forbidden by the terms of the trust." Restatement, Trusts, s. 167 (1) and comment. The doctrine of deviation has been frequently applied in this state although not always so denominated. Brown v. Berry, 71 N.H. 241; Petition of Oliver Wolcott, 95 N.H. 23; McGill v. Young, 75 N.H. 133. While deviation is allowed only for cogent reasons and only to the extent necessary to effectuate the primary purpose of the trust (Citizens Nat'l Bank v. Morgan, 94 N.H. 284), the equitable power to permit it is clear. 1 Nossaman, Trust Administration and Taxation, s. 553. The judicial authority to permit deviation from the terms of the trust as it relates to trust property and investments where "a change of circumstances . . . would defeat or substantially impair the accomplishment of the purposes of the trust" is confirmed by the express provisions of R. L., c. 371, s. 4. That this statute is more limited than the general equitable power of the Superior Court in trust matters is evident from the last sentence of R. L., c. 371, s. 4. It provides that "This section shall not be construed to limit or restrict the general equitable jurisdiction of the court over trustees, trusts or trust funds."
While it is true that the testator knew that the stock could not be transferred to the corporation under his will, the refusal of the corporation to acquire the timberlands and the refusal of the widow to accept the will were circumstances not known to the testator and not anticipated by him. In order to carry out the primary purpose of the testator the court should authorize the trustees to distribute the assets of the, estate to the legatees and in the same proportions they would have taken if the testamentary scheme had been possible of accomplishment.
The will indicates the reason that the testator provided that his beneficiaries should receive class A debentures maturing serially after a ten-year period instead of cash at his death was to allow time for the corporation to pay for the assets of the estate which it was to receive. The purpose that Merit and Robert should acquire the stock was accomplished in the testator's lifetime. Since the widow refused to accept the class B debentures and since the class A debentures cannot now be issued on the terms stated in the will, deviation is permissible, unless it must be held that the timberlands passed intestate.
This will is both elaborate and detailed and nowhere carries the slightest hint of partial intestacy. West v. Chase, 92 N.H. 104, 106. Although the complicated testamentary scheme for distributing the corporate assets failed, the will was careful to provide in the residuary clause that the same children and grandchildren should take in the same proportions that they would have taken in the distribution of the class A debentures under the proposed corporate set-up. The situation is similar to that in Roberts v. Tamworth, 96 N.H. 223, 227, where it was said that the "detailed provisions of the will clearly indicate that the testatrix was disposing of all of her estate by will. . . ." When a will contains a detailed residuary clause this is some evidence that partial intestacy was not intended. "The fact that there was a detailed residual clause in the elaborate will supports the position that the testator did not intend to die intestate as to part of his estate." Merchants c. Bank v. Berry, 93 N.H. 388, 391.
Since the testator's plan of distributing part of his estate is impossible of accomplishment in some respects and impracticable in others, the executors are authorized to deviate from these provisions in order to accomplish the result intended. The executors are advised that no part of the property passes intestate, and they should be permitted to make immediate distribution, subject to the rights of the widow, to the beneficiaries named in the will and in proportions therein stated. The residuary clause contemplated distribution after the issuance of class A and class B debentures. Since that is impossible the trustees are authorized to make the distribution under the residuary clause forthwith. It is to be noted that the deviation permitted in this case does not change the proportion that any devisee is to receive and does not transfer the share of one devisee to that of another. It is no more than is necessary to accomplish the primary objectives of the testator, and is the type of deviation which has been frequently allowed in other jurisdictions. Anno. 80 A.L.R. 117; 4 Pomeroy, Equity Jurisprudence (5th ed.) s. 1062b; anno. 168 A.L.R. 1019, 1021.
Remanded.
All concurred.