Opinion
No. 4975.
Argued January 3, 1962.
Decided March 6, 1962.
1. The Superior Court has jurisdiction to entertain a petition for termination of a testamentary trust and the authority to permit where the circumstances warrant a deviation from the express terms of the trust or cy pres.
2. Where it was apparent from the terms of a will that the main objective of the testator was to benefit a particular charitable hospital by directing that the income from the testamentary trust corpus consisting of an undivided half interest in certain revenue-producing real property be used for certain of its corporate purposes and that the only purpose in creating the trust was to protect a relative and her interest in the remaining half of the property so long as she lived, the reason for creation of the trust ceased upon the relative's death and after the hospital had acquired her half interest.
3. In such case, where the testamentary trust has served the only objective for which it was created and its continuance will tend to defeat and substantially impair rather than accomplish the design of the testator, it should be terminated, and in consistence with the charitable hospital's charter and the statute (RSA 292:18, 19 (supp)) authorizing such institutions to maintain and operate common trust funds, the property should be turned over to the hospital to be held by it in trust and the net income expended for its corporate purposes.
4. Where a testamentary trust has accomplished the purpose for which it was created and has been terminated and the assets of the trust turned over to the charitable hospital beneficiary to be held by it in trust with the net income to be used for its corporate purposes, the corporation is not required to qualify as trustee in the probate court in the absence of an indication that the testator desired it to do so.
5. In such circumstances, the corporate hospital holding the property for its charitable purpose is not required by the provisions of RSA 7:28 to make written report to the Director of Register of Charitable Trusts.
Petition by the Portsmouth Hospital and trustees under the will of John J. Pickering asking for the termination of a trust established by that will for the benefit of the Portsmouth Cottage Hospital, now the Portsmouth Hospital, for permission to transfer the corpus of the trust to the hospital, and for permission to deviate from the terms of the trust by application of the cy pres doctrine. The following facts have been agreed upon by the parties.
1. That John J. Pickering, late of Portsmouth, died December 23, 1904, testate, his will with four codicils being duly filed with the probate court for the county of Rockingham and State aforesaid and proved in common form January 3, 1905, and in solemn form February 13, 1905.
2. That although no inventory was ever filed, among the assets of the estate of the said John J. Pickering was a certain undivided one-half interest in the brick block and stores located at the corner of Daniel Street and Market Street, comprising the premises now known as number 1 to 25 Market Street and number 22 Daniel Street in said Portsmouth.
3. That under paragraph 22 of said will the decedent bequeathed the residue of his estate to trustees, to among other things, pay an income to his sisters, Abbie Pickering and Elizabeth W. Parrott for life with certain gifts over as are hereinafter set out.
4. That by paragraph 33 of the first codicil (dated May 7, 1902) of the will of said John J. Pickering he did provide as follows:
"Thirty-third — After the death of both my said sisters I give and bequeath to Calvin Page, John H. Bartlett and William C. Walton all of said Portsmouth the sum of Forty Five Thousand Dollars to be used by them, as trustees for me, in erecting, finishing and furnishing an Annex to the Portsmouth Cottage Hospital building to be known as, and called the "Picketing Annex," and I direct that no bond or surety be required of them as Trustees for holding using and expending this fund. And I desire that they erect and furnish this annex substantially in accordance with suggestions that I have attempted to outline and shall leave with my Executors in writing, not intending however to bind and instruct them in every detail, but giving them wide latitude and discretion as may be found necessary or proper in following my plans and suggestions as aforesaid."
5. That paragraph 34 of the first codicil (dated May 7, 1902) of the will of said John J. Pickering provides:
"Thirty-Fourth — The one half part of the brick block and stores at the corner of Daniel Street and Market Street in said Portsmouth, which I own in common and undivided with Annie F. Jenness, bounded northerly by land of the National Mechanics and Traders Bank, easterly by land of the estate of Charles H. Mendum, southerly by Daniel Street and westerly by Market Street, I give devise and bequeath to said Portsmouth Cottage Hospital, to hold the same to it and its successors and assigns forever, the net income to be used and applied for paying the expenses of running, managing and maintaining said Annex to said Hospital."
6. That by a second codicil (dated August 8, 1902) to said will, said thirty-fourth clause of the first codicil was revoked by the said John J. Pickering and in its stead the one-half interest in said real estate was devised as follows:
"First: I hereby strike out, revoke and annul the thirty fourth item of the said codicil to my said will and, instead thereof, make the following and direct that it be inserted in place thereof. The one half part of the brick block and the stores at the corner of Daniel Street and Market Street in said Portsmouth, which I own in common and undivided with Annie F. Jenness, bounded northerly by land of the National Mechanics and Traders Bank, Easterly by land now or formerly of the estate of Charles H. Mendum, Southerly by Daniel Street and Westerly by Market Street, I give, devise and bequeath to my Trustees named in the said first codicil to my said will, Calvin Page and William C. Walton, and their successors and assigns forever, in trust that they rent, lease and use the same and apply the net income thereof for paying the expenses of running, managing and maintaining said Pickering Annex to said `Portsmouth Cottage Hospital,' and pay over said net income to the Trustees of said Hospital, from time to time, as required; and, should my said Trustees or their successors find it necessary or proper, in their judgment, at any time, to sell and dispose of said real estate, they are hereby authorized and empowered to do so, and by their deed to give a good and sufficient title to the purchaser, without obtaining any license from any probate court, or otherwise, and the purchaser shall not be answerable for the application of the purchase money, and the net proceeds of such sale shall be invested by my said Trustees, or their successors, in such safe securities as they shall approve, and the net income thereof be applied and used for paying the expenses of running and managing said Annex, in the same manner as the net income of said real estate would have been used, had said real estate not been sold. I make this change, by this provision of this codicil, in order to be sure to protect my sister-in-law, Annie F. Jenness, and her estate, in her ownership of one common and undivided half of said premises, and give to her the preference to purchase my said one half from said Trustees in case of a sale."
7. That by legislative act (Laws 1895, chapter 263) the Portsmouth Cottage Hospital was incorporated for the following stated purposes:
"Sect. 6. The Portsmouth Cottage Hospital is hereby empowered to receive and hold in trust, for the purposes of establishing and maintaining a general hospital for the treatment and care of the sick or injured, and for the establishment and maintenance of a training-school for nurses in connection therewith, and of supplying trained nurses to the sick at their homes, all the property, real and personal, heretofore held in trust for the hospital by the trustees of the Chase Home for Children and Cottage Hospital, and all gifts and legacies that may hereafter be made to them; and, for the purpose of aiding in the support of said hospital and training school, may charge and receive from patients such fees as may be established by the State Hospitals Association of this state, varied by the necessity of each case and the ability of the patients to pay, but for no other purpose whatever, being a charitable institution for the alleviation of suffering; without profit to any person." That thereafter by Laws 1911, c. 255 the name of the corporation was changed to "Portsmouth Hospital."
8. Under his will the testator named two executors to administer his estate, without bond or surety, namely: Calvin Page and William C. Walton, both of Portsmouth (par. 25, as amended by par. 37, 1st codicil).
9. The testator nominated varying groups of trustees to administer the several trusts created in his will, directing them to render and settle their accounts semiannually, to wit:
(a) Calvin Page and John H. Bartlett, both of Portsmouth, to administer without bond or surety a $2,000 trust fund "for the purpose of aiding and assisting in the maintenance and keeping up of the homestead place . . . in Greenland . . . both principal and income [to be used] . . ." (par. 9, 1st codicil, hereinafter referred to as the homestead trust).
(b) Calvin Page and William C. Walton to administer the residuary trust fund for the benefit of Abby Picketing and Elizabeth W. Parrott, and others (par. 22, as modified by par. 36, 1st codicil, hereinafter referred to as the residuary trust).
(c) Calvin Page, John H. Bartlett and William C. Walton, following the death of the survivor of two sister life beneficiaries under the residuary trust, to administer the subsequent trust of $45,000 "to be used by them, as trustees for me, in erecting, finishing and furnishing an Annex to the Portsmouth Cottage Hospital building to be known as and called the `Pickering Annex' . . ." (par. 33, 1st codicil, hereinafter referred to as the Picketing Annex Building Fund).
(d) Calvin Page and William C. Walton (residuary trustees) to administer the one-half part of brick block stores in Portsmouth owned in common and undivided with Annie F. Jenness, to "apply the net income thereof for paying the expenses of running, managing and maintaining said Pickering Annex to said `Portsmouth Cottage Hospital'. . ." (par. 34, 1st codicil, as amended by par. 1, 2nd codicil, hereinafter referred to as the Picketing Annex Endowment Fund.
10. Said Abby Pickering died at Portsmouth on March 22, 1909 and said Elizabeth W. Parrott died at Portsmouth on March 14, 1917.
11. Executors' Administration. On January 3, 1905 the probate court appointed Calvin Page and William C. Walton, both of Portsmouth, to serve as executors under the will of John J. Pickering in accordance with testamentary direction. On February 13, 1905 said court appointed John H. Bartlett, of Portsmouth, as agent to protect the interests of those residing out of state and as guardian ad litem for all minors not otherwise represented. The first and only executors' account was filed with the probate court on June 19, 1923 as a "final" account by William C. Walton and John H. Bartlett, surviving executors (Agnes Page joining as executrix under the will of Calvin Page, who died December 12, 1919), which was allowed August 10, 1923 by the court. There is no probate record of the appointment of John H. Bartlett as executor.
12. Homestead Trust. On April 1, 1905 Calvin Page and John H. Bartlett were appointed trustees of the Homestead Trust, without bond or surety, in accordance with testamentary direction. No accounting of said trust was ever filed with the probate court.
13. Residuary Trust. On April 1, 1905 Calvin Page and William C. Walton were appointed trustees of the Residuary Trust "for the benefit of Abby Pickering and Elizabeth W. Parrott and the survivor of them for life," without bond or surety, in accordance with testamentary direction. The said Calvin Page and William C. Walton never transferred the residue of said estate to themselves as trustees but continued to administer all the assets of the estate as executors from the date of their appointment in 1905 to 1923 when a first and final executors' account was filed, as referred to in paragraph 11 of this agreed statement.
14. Pickering Annex Endowment Fund and Pickering Annex Building Fund. On May 25, 1920 John H. Bartlett, William C. Walton and G. Ralph Laighton were appointed trustees under the will of John J. Picketing, without bond or surety, of "certain estate therein named . . . for certain charitable uses and purposes on certain conditions and subject to certain contingencies, expressed in said will. . . said Calvin Page. . . lately deceased," for the benefit of the Pickering Annex Building Fund and presumably for the Pickering Annex Endowment Fund. On August 10, 1923 the probate court allowed the final account of John H. Bartlett and William C. Walton, surviving trustees (Calvin Page having since deceased) reporting the amount of $45,000 paid to "Trustees of the Portsmouth Cottage Hospital on account of erecting the `Pickering Annex' in accordance with the terms of said will," together with interest earned of $4,050, leaving no balance on hand.
15. Pickering Annex Endowment Fund. No accounting was ever made in the probate court by the trustees of the Pickering Annex Endowment Fund, all of whom are now dead. On December 10, 1957 the probate court appointed Richman S. Margeson, and Norman E. Rand, both of Portsmouth, as trustees of the Pickering Annex Endowment Fund.
16. The said Pickering annex was duly constructed by said hospital and continued to be so operated until such time as the growth of said hospital necessitated the enlargement of said building and construction of additional facilities, which reconstruction so incorporated the original Pickering annex into the remodeled and enlarged structure that the same no longer is distinguishable as a separate annex to Portsmouth Hospital, and further that said hospital has continued to use and occupy said building so altered, renovated and constructed for the same uses and purposes as thereto fore.
17. That the other undivided one-half of the brick block and stores (referred to in paragraph 34 of the 1st codicil, and paragraph 1 of the 2nd codicil) was owned by Annie F. Jenness, the sister of the late wife of said John J. Picketing, and that said Annie F. Jenness survived said John J. Pickering and died at Portsmouth on August 6, 1930, testate.
18. That under her will the said Annie F. Jenness devised the interest she had in said real property to her nephew and two nieces, who by three deeds delivered on or about January 22, 1937 did convey the said undivided one-half interest formerly owned by Annie F. Jenness to said Portsmouth Hospital.
19. That in the lifetime of Annie F. Jenness the said William C. Walton, one of the trustees before mentioned, served as agent of said Annie F. Jenness for the superintendence and care of her interest in said brick block and stores, and that he continued to supervise and manage said real property until his decease on or about April 26, 1941.
20. That the said William C. Walton, trustee as aforesaid, was during his lifetime and the term of his trusteeship also treasurer of Portsmouth Hospital.
21. That the said hospital avers that it received from said William C. Walton the net income from said property to which it was, from time to time, entitled, and now makes no claim on account of said income.
22. That on and after the decease of said William C. Walton the succeeding treasurer of said Portsmouth Hospital took over the care and management of said real property, renting the same and collecting the rents therefor as though said property were the sole property of said hospital, and applying the revenue to the uses and purposes of said hospital, and said treasurer continued to do so until December 10, 1957 when your petitioners, Richard S. Margeson and Norman E. Rand, were appointed trustees of said trust for the purposes of sale of the real estate as hereinafter set forth.
23. That recently the trustees of Portsmouth Hospital voted to sell said brick block and stores in the belief that it was for the best interest of the hospital to do so. Thereafter they received an offer for the major portion thereof, and it was not until an examination of title was made that they learned that the trustees under the will of John J. Pickering were in truth and fact holders of the legal title of said undivided half of said property, and in order to give the purchaser a good and sufficient title thereto it was then necessary that trustees be appointed to said trust and that they furnish bond, which said appointment was made on December 10, 1957 by the probate court for Rockingham county, as stated in paragraph 15 of this agreed statement.
24. That the said trustees, Richman S. Margeson and Norman E. Rand, have since obtained a license from the probate court of Rockingham county for the sale of said premises and have now sold the same in three parcels, viz.: One parcel to Kimball Realty, Inc. on February 5, 1958; One parcel to One Market Street, Inc. on December 31, 1958; One parcel to W. S. Evans on March 18, 1959.
25. That the said trustees now hold mortgages, cash and securities in place of said real estate.
26. That said hospital and its trustees aver that they are satisfied that said hospital has received all the income from said property to which it was from time to time entitled, and further aver that all said income was used for the uses and purposes of the hospital, and that the trustees of the hospital now make no claim to the contrary.
The following questions are transferred without a ruling:
"1. Has the Superior Court original or concurrent jurisdiction to entertain the petition for termination?
"2. May this testamentary trust be terminated and its assets transferred to the Portsmouth Hospital corporation for administration?
"3. If the answer to the second question is in the affirmative, must the charitable corporation qualify for appointment as trustee in the probate court?
"4. If the hospital corporation may be permitted to administer this trust without accountability to the probate court, is it required to account to the Register of Charitable Trusts in the office of the Attorney General?
"5. Now that the Pickering annex of Portsmouth Hospital is no longer identifiable as a separate structure because of reconstruction and remodeling of the hospital plant, may the income from this trust fund be used for the expenses of running, managing and maintaining said Portsmouth Hospital and all its facilities, present and future?"
Reserved and transferred by Keller, J.
Boynton, Waldron Dill (Mr. Wyman P. Boynton orally), for the plaintiffs.
Maurice J. Murphy, Jr., Attorney General, and Ernest R. D'Amours, Director of Register of Charitable Trusts (Mr. D'Amours orally), for the Attorney General.
McLane, Carleton, Graf, Greene Brown (Mr. Kenneth F. Graf orally), amicus curiae.
Arthur H. Nighswander (by brief and orally), amicus curiae.
Franklin Hollis, amicus curiae.
The first question transferred is whether the Superior Court has "jurisdiction to entertain the petition for termination" of the testamentary trust. The plaintiff trustees' bill in equity contained a prayer for termination, and implicit in the transferred questions are the issues of whether the situation is a proper one for the application of a deviation or the cy pres doctrine. In such cases we have not hesitated to hold that the Superior Court has jurisdiction of the matter and unquestioned authority to permit either a deviation or cy pres. Opinion of the Justices, 101 N.H. 531, 533; Pittsfield Academy v. Attorney General, 95 N.H. 51; Citizens National Bank v. St. Peter's Lodge, 102 N.H. 352.
That the testator's main objective here was to benefit the plaintiff hospital by directing that the income from the testamentary trust be used for certain of the corporate purposes of the hospital is made clear by the language of paragraph 34 of the first codicil and paragraph 1 of the second codicil. In the explanatory statement to the second codicil, wherein the controversial clause 34 is amended, he says he desires to alter his previous disposition "slightly." After so doing by providing for the first time for the appointment of trustees for the management of one-half of the brick block and stores property involved, he then states: "I make this change, by this provision of this codicil, in order to be sure to protect my sister-in-law, Annie F. Jenness, and her estate, in her ownership of one common and undivided half of said premises, and give to her the preference to purchase my said one half from said Trustees in case of a sale."
It thus appears that the purpose, and the only purpose of the testator in creating the testamentary trust, was to protect his sister-in-law and her interests so long as she lived. She is now deceased, and from the testator's specific language quoted above and the whole tenor of the will and codicils, it is obvious that the reason for the creation of the trust relationship has ceased.
It will, if continued, encumber the efficient, direct and economical implementation of the wishes of the testator. Since the testamentary trust has served the only objective for which it was set up and its continuance will tend to defeat and substantially impair, rather than accomplish the design of the testator, it should be terminated. Restatement (Second), Trusts, s. 336, comment a.
It is further apparent that the purpose of the testator can now best be accomplished if the institution itself holds and administers the trust assets. This it is expressly authorized to do by the statute under which it was organized, Laws 1895, c. 263, s. 6, and by RSA 292:18, 19 (supp), whereby any charitable corporation organized by an act of the Legislature may maintain and operate common trust funds.
It is agreed that the Picketing annex has of necessity been so incorporated into the remodeled and enlarged Portsmouth Hospital that it is no longer distinguishable as a separate unit, but that the trust funds have been and are being used for the purposes designed by the testator. It is to be presumed that this situation will continue under the management of the Portsmouth Hospital. The property should therefore be turned over to it to be held in trust and the net income expended for hospital purposes. Pittsfield Academy v. Attorney General, 95 N.H. 51; Adams v. Page, 76 N.H. 96. See Opinion of the Justices, 101 N.H. 531.
We have, then, a situation where a testamentary trust having been terminated, its assets will go to a charitable corporation, in this case the plaintiff hospital, to be held by the corporation in trust the net income to be used for its corporate purposes. In these circumstances, as well as when a testamentary gift is made directly to a charitable corporation for any of its corporate purposes, it has not been considered necessary for such a corporation to qualify as trustee in the probate court, and we are unaware of any case under our law which supports such a requirement. Roberts v. Corson, 79 N.H. 215, 216. There is no indication that the testator desired the hospital to do this. The expense, the delays, and the effort required for this and similar institutions or schools and colleges with their innumerable continuing bequests, large and small, to qualify as trustees in the probate court are too obvious to require delineation.
When the question arose in Massachusetts, the court found no difficulty in holding that a charitable corporation is not subject to appointment as trustee in the probate court. American Institute Architects v. Attorney General, 332 Mass. 619, 624-625. Such, too, appears to be the better rule. See Restatement (Second), Trusts, s. 348, comment f, p. 212; IV Scott on Trusts (2d ed.) s. 348:1, p. 2559.
Authorities cited by the Attorney General, such as Glover v. Baker, 76 N.H. 393, 402, and Fernald v. Church, 77 N.H. 108, to the effect that the hospital should qualify as trustee in the probate court, are not applicable. In these decisions, the court made it clear that the basis of its holding was that the testatrix did not bequeath the property for the general purposes of the Christian Science Church, but for the specific purpose of promoting and extending Christian Science as taught by her to all parts of the world, and furthermore that she wished the property to be administered in trust for such a purpose. Glover v. Baker, supra, 401, 425; Fernald v. Church, supra, 109. No like intent of the testator appears in our case, but rather, as previously stated, a design to create a trust only for a specific limited purpose, which has now been fulfilled.
The Attorney General also relies upon RSA 7:28 to prove that the hospital is bound to report to him. The section provides: "Any fiduciary holding property subject to equitable duties to deal with such property for charitable or community purposes shall annually, on or before July first" make a written report to the director.
However, section 21 reads thus: "The words `charitable trust' as used in this subdivision shall mean any fiduciary relationship with respect to property arising as a result of a manifestation of an intention to create it and subjecting the person by whom the property is held to equitable duties to deal with the property for charitable or community purposes. There are excluded from this definition and from the operation of this subdivision all charitable corporations holding property or funds for their corporate purposes and trusts created inter vivos until such time after the death of the settlor or donor as the charitable or community purpose expressed in such trust becomes vested in use or enjoyment." It seems clear to us the Legislature intended that the plaintiff as a charitable corporation holding property for its charitable purposes should not be subject to section 28.
In this connection the history of the act sheds light upon the legislative purpose. Laws 1947, c. 94 (RSA 7:21) originated in H. B. No. 150. In its original form it defined charitable trust as: "Definition. The words `charitable trust' as used in this subdivision shall mean any fiduciary relationship with respect to property arising as a result of a manifestation of an intention to create it and subjecting the person by whom the property is held to equitable duties to deal with the property for charitable or community purposes, whether vested or contingent." This provision was not adopted and the bill as finally passed disclosed an obvious design to deny the Director of Charitable Trusts control of such corporations, although it did give him additional limited jurisdiction over inter vivos trusts, which formerly he did not possess. See Laws 1943, 181:1, par. 13-b. We fully recognize the desirability of reasonable control by the State over charitable trusts and charitable corporations and the substantial advances made here in this direction commencing in 1943. D'Amours, State Supervision of Charities: Present Status, N.H. Bar. J. Vol. 4, p. 76. However, it is unquestionably the legislative prerogative to decide where to draw the line in the matter of this control and they have done so here by their exclusions.
Our conclusion therefore is that the Superior Court may decree termination of the probate trust administered by the individual trustees, its assets to be transferred to the hospital upon allowance of the final account of the trustees in the probate court. The plaintiff does not have to qualify as trustee in the probate court and it may administer and utilize the net income of the funds in trust for the corporate purposes of the hospital without accounting to the Director of Register of Charitable Trusts.
Remanded.
All concurred.