Opinion
June 15, 1906.
George W. Carr, for the appellant Charles Stockton Halsted.
Edgar J. Nathan, for the trustees, respondents.
William T. Gilbert, for the guardian ad litem of the infant respondents.
The principal grievance of the appellant is that the referee refused to construe the will so as to determine what should become of the trust estate after the termination of the life beneficiary; but the question as to who will be entitled to this estate upon the termination of the interest of the life beneficiary can be properly determined only when the time arrives at which the estate is to be disposed of. Upon this accounting there is no question that requires any construction of the will or a determination as to who would be entitled to the estate upon the happening of one of the contingencies upon which that determination will depend. The appellant complains that the referee refused to accept the life beneficiary's suggestion as to a new trustee, but recommended the appointment of a trust company. Under this will it was undoubtedly the intention of the testatrix that the trust should continue so long as the present wife of her son lived, and as she is still alive the trust still continues. The interest of appellant is as a beneficiary under the trust. If he dies before his wife, exercising the power of appointment, the appointee of the power would take directly under the will. If the life beneficiary did not exercise the power of appointment the estate would then pass to the personal representatives of the next of kin of the testatrix; but in either event the trust would have to continue until the death of the beneficiary unless his wife died before him. The learned referee considered the recommendation of the life beneficiary as to the substituted trustee, and his conclusion was that the interest of all parties would be best preserved by appointing a trust company as trustee. While the trust is to continue the court is bound to see to it that a trustee is appointed who will preserve the trust estate. The interest of a life beneficiary and a remainderman are often conflicting as to the investments, for an investment which is proper for such a trust produces much smaller returns than other investments which the life beneficiaries might think safe and desire; and it is proper to consider the relations of the life beneficiaries with the proposed trustee and how much he would be influenced by the beneficiary. We think, therefore, that under all the circumstances the referee was justified in his recommendation and the court justified in confirming it.
One other question is presented. It seems that the trustees invested $20,000 of the money of this trust in a mortgage on a brickyard at Keyport, N.J. They were compelled to foreclose this mortgage and buy in the property, which they have since held, being unable to find a purchaser. The actual disbursements of carrying this property is about $570 a year, exclusive of the interest on the amount invested. This amount of $570 has been deducted from the income realized from the balance of the trust estate, and thus the income to which the life beneficiary is entitled has been reduced by that amount each year. This seems quite unjust to the life beneficiary. It seems to be conceded that no income can ever be obtained from this unfortunate investment. What is paid to protect this property is clearly for the benefit of principal. It is not in any way to produce income, as the only object of protecting the property is to preserve it so that it can be sold for something which will increase the principal of the trust.
I think, therefore, that the decree should be modified so as to provide that the actual disbursements for the care of this New Jersey brickyard should be charged to principal, and the bill for legal services in relation to it should also be charged to principal and not to income.
The order appealed from must be modified as before indicated, and as modified affirmed, with ten dollars costs and disbursements of this appeal to the appellant, to be paid out of the principal of the estate.
O'BRIEN, P.J., PATTERSON, LAUGHLIN and CLARKE, JJ., concurred.
Order modified as directed in opinion, and as modified affirmed, with ten dollars costs and disbursements of appeal to appellant, to be paid out of principal of the estate. Settle order on notice.