Opinion
1999LT49A.
Decided April 7, 2004.
Jon L. Schumacher, Esq., for the Petitioner and Trustee, JP Morgan Chase Bank. James A. Vazzana, Esq. As Guardian Ad Litem for potential remainderpersons who are under a disability. Robert G. Greene, Esq. For Katharine Brahm, presumptive remainderperson.
These construction proceedings were brought by the Petitioner by way of two petitions, both filed in the Monroe County Surrogate's Court on October 3, 2003. While the two petitions relate to separate Trust Agreements involving different settlors, both Agreements share the same beneficiaries, trustee and class of remainderpersons. Additionally, the language to be construed in each Agreement is parallel to one another. As such, and in the interest of judicial economy, the Court entertained the proceedings simultaneously and appointed one Guardian Ad Litem to represent the interests of those potential remainderpersons who are either infants or incapacitated.
The passing of Katharine S. Hawks on June 13, 2003 necessitated the judicial settlement of both Trusts established for her benefit under the Agreements, one executed by Mary F. Motley and the other by Katharine M. Sage. In the process of settling each of the trusts, the Trustee reexamined the Agreements and discovered an issue has ripened as to how and to whom the remainder of each trust shall pass. The remainder provisions of both Agreements leave open the question as to whether the remaining assets of each trust shall pass to each beneficiary's lineal descendants by per stirpes distribution or in equal shares to all of the beneficiary's descendants, per capita. The Agreements ultimately created a total of six lifetime trusts, two of which were established for the benefit of Katharine S. Hawks and the others for the benefit of her two siblings, and although the remaining two life beneficiaries are alive today, these construction proceedings shall also apply to their respective Trusts since they share the same genesis.
The Mary F. Motley Trust was created on December 26, 1935 when the settlor entered into an irrevocable trust agreement with Lincoln-Alliance Bank and Trust, the Petitioner's predecessor in interest. The Agreement established four lifetime trusts, one for the benefit of Mary Motley's daughter, Katharine M. Sage, and one each for the benefit of the settlor's grandchildren, Katharine S. Hawks (formerly known as Katharine Farley Sage), Anne Motley Sage, and George Motley Sage. Upon the death of Katharine M. Sage, the corpus of her trust was split equally amongst the three remaining trusts established for the benefit of the settlor's grandchildren.
Paragraph Four of the Trust Agreement executed by Mary F. Motley sets forth who takes the remainder of each Trust's corpus upon the death of the beneficiaries. It reads as follows:
"4.Upon the death of each such grandchild, the principal of its trust shall be paid over to its lineal descendants, if any, and, if none, to my other said grandchildren, in equal shares, the lineal descendants of either who shall have theretofore died leaving lineal descendants to receive the share which such grandchild would have received if living. If either of such other grandchildren shall also be dead and leave no lineal descendants, then the whole of the trust theretofore held for the grandchild so dying shall pass to the other grandchild or its lineal descendants, if such other grandchild be also dead."
The Katharine M. Sage Trust Agreement was executed on July 14, 1939. In that Agreement, Katharine M. Sage, the daughter of Mary F. Motley, created a lifetime trust for herself. Upon her death, the settlor directed the Trustee, Lincoln-Alliance Bank and Trust (once again, the Petitioner's predecessor in interest) to divide the trust estate into three equal and separate trusts for the benefit of her three children, Anne S. Wells, George M. Sage and Katharine S. Hawks, (formerly known as Katharine Farley Sage). The Agreement directs the Trustee to pay the income of each Trust to its respective beneficiary and upon their death, Paragraph 3 of the Agreement sets forth the distribution of the remainder as follows:
"3.Upon the death of each such child, the principal of its trust shall be paid over to its lineal descendants, if any, and if none, to the others of my said children, in equal shares, the lineal descendants of either such others who shall theretofore dies leaving lineal descendants, to receive the share which such child would have received if living. If either of such other children shall also be dead and leave no lineal descendants, then the whole of the trust theretofore held for the child dying shall pass to the other child or its lineal descedants, if it also be dead."
As stated above, with the recent passing of one of the income beneficiaries, Katharine S. Hawks, an issue is presented as to whether the remainder provision of each her trusts should be distributed to the her nearest generation lineal descendants per stirpes or in equal shares to all of her descendants per capita. The two distinct formulas for distribution present two separate classes of remaindermen. At her death, Katharine S. Hawks left seven children, sixteen grandchildren, and fifteen great-grandchildren.
In a per stirpes distribution, the property is divided into as many equal shares as there are surviving issue in the generation nearest to the decedent which contains one or more surviving issue, and those deceased issue in the same generation who left themselves surviving issue, if any. EPTL § 1-2.14. Each surviving issue in such nearest generation receives one share and the share of the deceased issue in such nearest generation who left surviving issue shall be distributed in the same manner. EPTL § 1-2.14. Thus, under a per stirpes distribution, the remainder of the trusts established for the benefit of Katharine S. Hawks would pass only to her children in seven equal shares.
When property is distributed in a per capita fashion, each person takes, in his or her own right, an equal portion of the property. EPTL § 1.2.11. Under a per capita distribution, each of the remainders of the would be split into thirty-eight equal shares amongst the children, grandchildren, and great-children of Katharine S. Hawks.
At common law, a devise to "issue" or descendants" was presumed to have meant for those individuals to take equally, per capita. New York Life Ins. Trust Co. v. Winthrop, 237 N.Y. 93, 105 (1923); Schmidt v. Jewett, 195 N.Y. 486, 491 (1909); Soper v. Brown, 136 N.Y. 244 (1892). However, the enactment of the Decedent Estate Law § 47-a in 1921 abolished that common-law presumption and created a statutory presumption in favor of a per stirpes distribution. DEL § 47-a provided that should a person make a bequest or devise to an issue of himself or another, that issue shall take per capita only if they are in equal degree of consanguinity, however if they are in unequal degree, they shall take per stripes unless a contrary intent is expressed.
While the common-law presumption applied to gifts to both "issue" and "descendants", the language DEL § 47-a contained only the term "issue" and its application to gifts made to "descendants" was left to question. Matter of Phares, 38 Misc. 2d 1 (1963); Matter of Walbridge, 192 Misc. 746 (Surr.Ct. Monroe Co. 1948). However, a majority of courts across the State have held that the terms "issue" and "descendants" are synonymous and have applied the statute to "descendants" in their respective cases. Matter of Schoellkpopf, 21 Misc. 2d 564(Surr.Ct. New York Co. 1960); In re Russell's Estate 133 N.Y.S. 2d 52 (Surr. Ct. Wayne Co. 1954); Matter of Outerbridge, 91 Misc. 2d 686 (Surr Ct. New York Co. 1977).
In Matter of Goodwin, Surrogate Pulver went so far as to procure the bill jackets of the EPTL, the successor to Decedent Estate Law § 47-a, a review of which yielded no indication that the Legislature intended to have the statute apply only to the term "issue" and not to "descendants". Matter of Goodwin, 190 Misc. 2d 601 (Surr.Ct. Greene Co. 2002). Additionally, Surrogate Pulver discovered one memorandum in the 1992 Bill Jacket that used both terms as synonyms stating "whenever a disposition of property is made to `issue', such `descendants' take `by representation'." Id. (citing Mem of Assembly in Support, Bill Jacket, 1992, ch 595).
Although the language of DEL § 47-a referred to wills and testamentary gifts, many courts have applied the statute to the construction of inter vivos trusts. Matter of Libby, 206 Misc. 723 (Spec. T. New York Co. 1954); Matter of Farmers' Loan Trust Co., 213 N.Y. 168, 174 (1914). In light of Surrogate Pulver's findings and the case law, it is clear to this Court that DEL § 47-a creates a presumption for a per stirpital distribution to descendants unless another formula for distribution is stated in the Trust Agreements.
With the application of DEL § 47-a to both Trust Agreements, there is the presumption that the remainder of each of the six trusts created by the two Agreements will pass per stirpes upon the death of the respective beneficiary. However, that presumption of per stirpes distribution must give way to any contrary intent expressed by the settlors in their respective Agreements. DEL § 47-a. To ensure there is no contrary intention, the Court must construe each of the Trust Agreements upon a sympathetic reading of each Agreement in its entirety. Matter of Fabbri, 2 N.Y. 2d 236, 240 (1957). The Court must be mindful not to read too much into the instrument's language without a clear indication that such an interpretation expresses the intention of the settlor. Matter of Wiggins, 45 A.D. 2d 604 (4th Dept. 1974) aff'd 39 N.Y. 2d 791.
A complete review of both the Mary F. Motley Trust Agreement and the Katharine M. Sage Trust Agreement yields no indication of an intent to have a per capita distribution the remainders of the trusts. Nowhere in either of the Agreements do the words "per capita" or "in equal parts" or "share and share alike" appear. This is relevant especially in light of the relatively recent enactment of DEL § 47-a, which reversed the common-law presumption of per capita distribution, at the time each Agreement was executed. Had either Ms. Motley or Ms. Sage intended a per capita distribution, then surely the attorney preparing the Agreements would have been so careful to include it in their respective Agreements. The equal distribution of the corpus from the Trust established for the benefit of Mary's daughter, Katharine M. Sage, solely into the each of the three grandchildren's trusts indicates an intent to have a per stirpital distribution. Similarly, upon her death Ms. Sage distributed the remainder of her own trust exclusively to her children's trusts, an act that suggests per stirpital intent. Additionally, the income from each trust is paid to that beneficiary for his or her lifetime as opposed to an equal payment to the beneficiary and their own descendants. Also, the second contingency in both Paragraph 4 in the Motley Agreement and Paragraph 3 of the Sage Agreement provides payment of the remainder is directed to the lower generation of lineal descendants as representatives of the other deceased beneficiary should that beneficiary die without descendants, which suggests per stirpital intent.
If anything, both Agreements are sprinkled with hints of an intent that the remainders of each trust pass per stirpes. These sprinklings provide a "glimpse" to rebut the common-law presumption of per capita distribution if this Court were to have found that DEL § 47-a did not apply. Ferrer v. Pyne, 81 N.Y. 281 (1880); Matter of Farmers' Loan Trust Co., 213 N.Y. 168 (1914); Central Hanover Bank Trust Co. v. Pell, 268 N.Y. 354 (1935). Matter of Young, 62 Misc. 2d 86 (Surr.Ct. Kings Co. 1969). Conversely, there is no clear indication in either document of an intent to distribute the remainders per capita or in any other manner other per stirpes. DEL § 47-a; Matter of Outerbridge, 91 Misc. 2d 686 (Surr Ct. New York Co. 1977).
In light of the statutory presumption created by DEL § 47-a, and there being no clear evidence of an intention of the contrary in either the Motley Trust Agreement or the Sage Trust Agreement, the remainder of each Trust shall pass to the respective beneficiary's lineal descendant per stirpes. Matter of Good's Will, 304 N.Y. 110 (1952).