Summary
In Murphy v. Johnston, 190 Ga. 23 (8 S.E.2d 23), the testamentary scheme was materially different from that involved in the instant case, as pointed out in that decision.
Summary of this case from Perkins v. Citizens Southern Nat. BankOpinion
13113.
FEBRUARY 15, 1940. ADHERED TO ON REHEARING, MARCH 15, 1940.
Equitable petition. Before Judge Rourke. Chatham superior court. September 7, 1939.
Gazan, Walsh Bernstein, contra.
1. Residuary legacies in trust, held invalid as violative of the rule against perpetuities.
2. Cause of action presented by petition to declare legacies void, held not barred by statutes of limitation and laches.
No. 13113. FEBRUARY 15, 1940. ADHERED TO ON REHEARING, MARCH 15, 1940.
Under the will, a copy of which was attached to the petition, the testator left his residuary estate, which, as alleged in the petition, amounted to approximately $1700, to designated trustees and their successors, in trust, to be held at 5 or 6 per cent. interest in named savings institutions, until all such moneys and any others that might be added to the trust, with their increment, should amount to $600,000, requiring, as alleged, approximately 200 years; the trustees to "then convey" such money to a named corporation, for stated purposes indicated in the opinion, both the corporation and such purposes being non-charitable in character. The will then provided, as to a second beneficiary, that if the first named beneficiary "should . . decline to accept this bequest, or fail to comply with any or all of the conditions specified above, or forfeit their holdings" in certain described land lots, which the petition alleged had been done, "such refusal or failure is to work a cancellation of the bequest to them hereinbefore made and provided;" that "in such event it is my will and I hereby give, devise, and bequeath [the residuary estate] unto the board of trustees created and provided for by [the preceding item], in fee simple forever, in trust nevertheless and for the following uses, purposes, and trusts, to wit, to manage all of said monies and property as directed . . and to hold, control, and preserve all of [the same], its increment, and all other monies received upon the same uses and trusts as are set out in [the preceding item] . . until all of said monies and increment shall reach the sum of $450,000, when said amount . . shall be conveyed" to a named corporation for stated purposes indicated in the opinion, the corporation and most of the purposes being charitable in character. Following these alternative gifts to the first beneficiary and the second beneficiary, the will provided for a gift to a third beneficiary, as follows: "In the eventualities of the future, should it so happen that neither [the first] nor [the second] beneficiary is permitted to avail itself of the provisions of this bequest, upon the determining of that fact it is my will and I hereby direct that the said trust fund as existing at that time shall be conveyed by the trustees hereinbefore provided for to the City of Savannah and vested in the Board of Mayor and Aldermen of said city, or such other governing body as may succeed such board . . in fee simple forever, in trust nevertheless for the following uses, purposes, and trusts: to be held and preserved by said Board of Mayor and Aldermen of said City of Savannah, or its successors in office, until the said sum shall amount to $600,000, when it shall be expended by the said City of Savannah," $150,000 for the establishment of a home for old and indigent white persons of the city and county," and with directions for the use of one half of the interest in maintaining the home, and the other half in further accumulating trust funds until they again reached $600,000, when a second $150,000 was to be used for enlarging the home first provided or for the establishment of a new one, and with further directions as to the additional use and accumulation of interest and corpus, and finally for the use of a specified part "in the creation of some other beneficent institution."
The petition alleged that all three of the residuary legacies were invalid as violating the rule against perpetuities. It was also alleged that the first-named beneficiary "has no interest under said will," because, under the terms of the gift made to it, there should be a "cancellation of the bequest" made to it if it should "forfeit [its] holdings" in the described lots of land, and because it had actually forfeited such holdings, on account of a sale of the property under foreclosure proceedings. The court overruled the demurrers of the defendants, on the grounds that the petition showed no cause of action, and that it showed a bar of any right of action under the statutes of limitation and laches; the testator having died in 1915, the suit not having been brought until 1938, but the petition not indicating any adverse claim by the defendant administrator with the will annexed, or the preceding executor while holding at interest the residuary assets involved. The petition alleged that the original sum of approximately $1700 with the interest thereon then amounted to approximately $3500.
McLaws, McLaws Brennan, A. Leopold Alexander, H. Wiley Johnson, Lawton Cunningham, Spence M. Grayson, J. C. Hester, and Girard M. Cohen, for plaintiffs in error.
1. It is well settled in this State, that, not only in express or implied trusts but in other fiduciary relations, the statute of limitations will not begin to run so long as the trust or duty with regard to specific property continues and is acknowledged to subsist, and there is no change of status to show an adverse holding by the person in possession; that during such time the owner has the right to treat the possession of the other person as his own; and that the statute will not begin to run until such person has given the owner notice of his adverse claim, or there are circumstances which would be the equivalent of such notice. Reynolds v. Dorsey, 188 Ga. 218 (2, 3), 220 ( 3 S.E.2d 564), and cit. Accordingly, this petition by the executor of the sole heir at law of a testator, against the testator's administrator and the parties at interest in the testator's estate, to declare the residuary clause of the will void as violating the rule against perpetuities, and to recover such estate, was not barred by the statute, since it showed no adverse claim by the administrator and his predecessors. Nor did it show laches, under the Code, §§ 3-712, 3-713, rendering "the ascertainment of the truth difficult" ( Citizens Southern National Bank v. Ellis, 171 Ga. 717 (3, c), 156 S.E. 603), since the essential questions presented were matters of law determinable from the will itself. Hill v. Hill, 161 Ga. 356, 359 ( 130 S.E. 575); Citizens Southern National Bank v. Clark, 172 Ga. 625 (2, 3), 629 ( 158 S.E. 297).
2. Under the rule of the Code, "Limitations of estates may extend through any number of lives in being at the time when the limitations commence, and 21 years, and the usual period of gestation added thereafter," otherwise a perpetuity arises, which is forbidden. Code, §§ 85-707, 85-801; Robinson v. McDonald, 2 Ga. 116 (3), 121, 122. When no life in being forms any part of the period of suspension or postponement of the time when the estate or interest is to become vested, the limit of time under the rule against perpetuities is twenty-one years. 1 Perry on Trusts (7th ed.), 634, 635 (§ 380), and cit.; 48 C. J. 939, 941, and cit.
3. The early English rules as to charitable trusts have been almost fully adopted in Georgia (Code, §§ 108-201-108-204, 113-807, 113-815; Beall v. Fox, 4 Ga. 404 (2-4), 422; Beckwith v. Rector c. of St. Philip's Parish, 69 Ga. 564 (1, 2, 4), 569), and it has been said that the rule against perpetuities does not apply to charities (Jones v. Habersham, 107 U.S. 174, 185, 2 Sup. Ct. 336, 27 L. ed. 401). "This is true when the gift is made in such a way that the interest vests in the charity immediately or within the time permitted for the vesting of future interests, and in such cases a public or charitable trust may be perpetual in its duration, and the property may be left to trustees who may be self-perpetuating." Regents of the University System v. Trust Co., 186 Ga. 498, 512 ( 198 S.E. 345, 121 A.L.R. 125); 21 R. C. L. 310 (§ 38), and cit. By the great weight of authority, the law allows an estate, even though it be for a charity, to be accumulated previously to its vesting only for the period allowed by the rule against perpetuities; and a grant or devise for a charitable use, which is conditioned upon its vesting only after the termination of a trust for accumulation, is void for remoteness, if the period of accumulation may possibly exceed that prescribed by the rule. Girard Trust Co. v. Russell, 179 Fed. 446, and cit.; Andrews v. Lincoln, 95 Me. 541 ( 50 A. 898, 56 L.R.A. 103); First Camden National Bank v. Collins, 114 N.J. Eq. 59 ( 168 A. 275, 276); 21 R. C. L. 343, § 83; 48 C. J. 989, 990, § 80, and cit. Accordingly, if by the terms of a gift for charitable uses its vesting is postponed beyond the period of the perpetuity rule, this rule will be applied just as in cases of the creation of other future interests. The rule just stated, however, does not seem to have application where a devise to one charity is limited over after a devise to another charity. 10 Am. Jur. 597, § 18, and cit.; 21 R. C. L. 310, 316, 322, §§ 38, 46, 55, and cit. Cases where the gift does in fact vest in the charity immediately on the death of the testator or within the period required by the perpetuity rule are not in conflict with the rule here stated. Even though it should be true that an accumulation provision in a grant or legacy to a charity might be taken as invalid for the reason that it extends the period of accumulation for an unreasonable period, and might thus become subject to control by a court of equity, any such invalidity of such an accumulating provision would not operate to invalidate the grant or legacy, where the grant or legacy itself is made to vest unconditionally in the charity within the period required by the perpetuity rule. See Perkins v. Citizens Southern National Bank, post, 29, where the gift vested immediately in the named charity, and where from the testamentary scheme it did not appear that the prescribed accumulation must be taken as a condition precedent to the vesting in proesenti of the gift.
4. Applying the principles set forth to the facts in this case, none of the residuary bequests in the will were valid. With respect to both the first bequest and the second bequest, there was no vested gift in proesenti or one vesting within the period required by the rule against perpetuities; but, on the contrary, the testamentary scheme necessarily implied that the purpose of the testator was to affix as a condition to the bequest of a small sum of money, approximately $1700, that it should be held in trust by the trustees to accumulate for approximately two hundred years, in order that it might reach the amount of $600,000 in the first instance, and $450,000 in the second instance, before it was to be conveyed by the trustees to the respective beneficiaries. In the first instance, it was specified that approximately $100,000 should be expended to acquire land, and that other large sums were to be expended to erect extensive buildings. In the second instance, still larger sums were specified for acquiring land, erecting buildings, and other stated purposes. It is apparent that, since the will provided that the $1700 and its increment be withheld by the trustees in both instances until the required accumulation had been completed, before the funds could be conveyed by the trustees to either beneficiary, and since it is manifest that the purposes stated could in no wise be attempted until such accumulation had been effected, it follows that the accumulation by the trustees, provided for in the will, constituted a necessary condition precedent, which prevented either the first or the second bequest from vesting either immediately or within the period required by the perpetuity rule.
( a) With respect to the first beneficiary, it took no interest under the will, for the additional reason that its bequest was expressly made contingent upon its continuing to hold certain described realty, which under the allegations of the petition it had failed to do.
( b) As to the second beneficiary, it could take no vested interest under the will, for the additional reason that its bequest was expressly made contingent upon the failure of the bequest to the first beneficiary, because of its loss of the described realty, the vesting of which future interest might have been postponed beyond the period required by the perpetuity rule.
( c) While it is true that under the terms of the will the municipality, as the third beneficiary in the event the first two should fail, was to receive the fund from the trustees upon the determination of such fact, and the accumulation to the extent of the $600,000 was to be effected, not by the trustees, but by the municipality, nevertheless the bequest to the city as such contingent beneficiary was also invalid. This is true not only for the reason that the gift, not being one vested in proesenti or vesting within the period prescribed by the perpetuity rule, was contingent on the failure of the two preceding gifts, but for the reason that the gift was also expressly made contingent "upon the determining of [the] fact" that neither of the first two beneficiaries would be "permitted to avail itself of the provisions of this bequest," before the trustees were directed to convey to the city the trust fund "as existing at that time." Since the right to question the existence of a perpetuity as to the first two beneficiaries was one which could be asserted only by "one having an interest in the property," and such a right is one which "may be lost upon the ordinary principles of estoppel" (48 C. J. 1036, §§ 171, 172), and since the right of the city to take depended, not on the invalidity itself, but upon a determination thereof, which might or might not occur within the perpetuity period, under any view as to the contingent nature of the city's rights it took no valid interest under the will.
5. Under the preceding holdings, the judge did not err in overruling the demurrers of all the defendants to the petition on the ground that it stated no cause of action.
Judgment affirmed. All the Justices concur.
ATKINSON, P. J., concurs in the conclusion, but not in all that is said in the opinion.