Argued June 9, 1926
Decided July 9, 1926
Appeal from the Supreme Court, Appellate Division, Fourth Department.
Simon Fleischmann, Martin Clark, Adrian Block and J. Walter Heffernan for appellant.
Guernsey B. Hubbard for executor, respondent.
John C. Wheeler for Anna J. Bailey et al., respondents.
Charles L. Crane for Margaret E. Johnson, respondent. Herbert A. Heminway for Virginia J. Bailey et al., respondents.
Thomas H. Chittick died on December 3, 1922, leaving a last will and testament which has become the subject of this litigation. His relatives, so far as named in this will, are an adopted daughter, Margaret Chittick Johnson; three nephews, Thomas H. Bailey, William E. Bailey and Eugene J. Bailey, children of his sister, Anna J. Bailey.
Paragraphs 11, 12, 13, 14 have been challenged as suspending the power of disposition or of alienation beyond the time allowed by the statute. Accumulations directed by the will are conceded to be illegal. The provisions of the will referred to are as follows:
"I give and bequeath to the executor one-half of my personal property, remaining after paying said expenses and legacies, including property not so converted into personal in trust for the following purposes: At the marriage of my daughter, Margaret E. Chittick to pay to her from the principal thereof One Thousand ($1000.00) Dollars. From the income from the said one-half of my estate pay to the said daughter, Margaret E. Chittick Six Hundred ($600.00) Dollars, annually during her life time; or at the discretion of the executor, he may pay to the said Margaret E. Chittick the sum of Three Hundred ($300.00) Dollars, semi-annually. Accumulate the residue of the income, hold and invest the same as part of the principal until the death of my daughter. At the death of my daughter pay over the principal with the accumulation, if any, to her lawful descendants, per stripe (sic) at the time each shall arrive at the age of twenty-five years. And if she have no lawful descendants, to the person or persons then living who would be my next of kin in case I died at the time of her death, in the same proportions such person or persons would take as my next of kin under the laws of the State of New York. In case of the death of my said daughter before her children as such become of the age of twenty-five years, then such of her children as shall not have arrived at the age of twenty-five years shall receive Six Hundred ($600.00) Dollars, annually, to be divided between them. If any of my daughter's children are infants at the time of her death, then that infant's share shall be paid to a guardian for the said infant's benefit.
"I give and bequeath to the said executor one-sixth of my personal property, remaining after paying said expenses and specific legacies, including property not so converted into personal, in trust for the following purposes: From the income therefrom to pay my nephew, Thomas Bailey, One Hundred ($100.00) Dollars annually during his lifetime. Accumulate the residue of the income and hold and invest the same as part of the principal until the death of my said nephew. At the death of my said nephew, pay over the principal, and accumulations, if any, to the next of kin of the said nephew when they arrive at the age of twenty-five years, in the same proportion they would inherit property from him under the laws of the State of New York."
The 13th and 14th paragraphs make similar provision for the other nephews. The surrogate, with slight modification by the Appellate Division, which is not vital or material, decided:
(1) That the trust in paragraph 11th of the will is valid.
(2) That the provision for accumulation is contrary to law and void.
(3) That the income above that given to the testator's daughter Margaret should be paid to the one having the next eventual estate, in this case, Margaret's daughter, Margaret Elizabeth Johnson, who was alive and in being at the death of the testator.
(4) That in the event that Margaret Elizabeth should die, and there should be no lineal descendants of the testator's daughter, Margaret Chittick, then the income should be payable to the next of kin of Thomas H. Chittick, determined in accordance with the provisions of his will.
(5) That in case Margaret Chittick Johnson died before her children became twenty-five years of age, the income should be payable pro rata to the guardians of her infants until they became twenty-one, and to the children thereafter.
(6) As to the principal of the trust fund, it was the intent of the testator that the trust should cease at the death of his daughter, and that the principal should go to her children, payment only being deferred until they became twenty-five years of age. The surrogate said that the executor held the principal under an implied trust; the Appellate Division copying the words of Steinway v. Steinway ( 163 N.Y. 183) said that he had "an administrative title."
(7) That if Margaret Chittick Johnson died with no lawful descendant, then the trust terminated and the principal was payable to the next of kin of the testator, determined according to the provisions of his will.
In similar fashion, the surrogate construed paragraphs 12, 13 and 14 relating to the gifts to the nephews.
Because of a direction in paragraph second of the will to turn all the real property into personalty, the estate left by the testator has been dealt with below and by the counsel as personal property.
The question of accumulation is out of the case, as all sides have agreed to the disposition below that the provisions for accumulation are void.
This will as fairly construed violates section 11 of the Personal Property Law (Cons. Laws, ch. 41), which says that the absolute ownership of personal property shall not be suspended by any limitation or condition for a longer period than during the continuance and until the termination of not more than two lives in being at the death of the testator. Chittick in making his will had in mind accumulation up to an age of twenty-five for the legatees. He was a layman, and apparently unfamiliar with the law regarding accumulations or the suspension of the power of alienation. He creates a trust in paragraph eleven to pay Margaret E. Chittick, his daughter, $600 annually, and to accumulate the balance of the income. The courts below have taken out this accumulation provision, as it is void, and have given the income over the $600 to the testator's granddaughter, having the next eventual estate.
At the death of the daughter, the testator directs his executor to pay over the principal to the daughter's lawful descendants at the time each shall arrive at the age of twenty-five years. The daughter, at the time of the testator's death, had one child living, Margaret Elizabeth Johnson. If she were the only child to be born to the daughter, and mentioned in the will, there would be no difficulty. If the daughter should die now, the income could be accumulated by the executor for the granddaughter until she was twenty-one (Personal Property Law, sect. 16), and thereafter paid to her until she was twenty-five, when she would receive the principal. If the trust should continue until the daughter was twenty-five years of age, paying her the income until that time, the principal with power of disposition would only be suspended for two lives in being at the death of the testator, his daughter and the granddaughter living at his death.
The difficulty arises over the attempt of the testator to make provision for all the children of his daughter, including those who may subsequently be born, and not in being at the time of his death. If the daughter should die and the granddaughter should die, and then the disposition of the principal should be suspended for twenty-five years during the life of a grandchild born after the death of the testator, here we would have the power of alienation, or the suspension of disposition for more than the two lives in being — the two lives having gone out, the power of disposition would be suspended until the child or children born after the testator's death arrive at twenty-five.
We, therefore, must hold that the trust for the daughter is good, but otherwise void. It seems to have been the intent of the testator to continue the trust through the twenty-five-year period.
The courts below, however, have said that when the daughter died, then the trust ended. If she had five children surviving her, they took a vested equal interest in the principal; that it was simply the payment to them that was suspended until they arrived at twenty-five years of age; that they could dispose of this principal by willing it away or assigning it to any one they pleased. If the power of disposition be suspended, then it is conceded that the statute is violated. It has been said that money like this may be given to a legatee so as to pass title, and also the power of disposition, although payment of the amount may be postponed, citing Bliven v. Seymour ( 88 N.Y. 469, 478); Quade v. Bertsch ( 65 App. Div. 600; affd., 173 N.Y. 615) ; Vanderpoel v. Loew ( 112 N.Y. 167, 180). Such cases, however, reach the limit of construction. The intent in this case is not only to postpone payment but also to suspend the absolute ownership in the interval.
The courts have gone quite far to avoid the consequences of applying these provisions of the Personal Property and Real Property Laws (Cons. Laws, chaps. 41 and 50). What we have said in one case cannot be strictly applied to another where from the wording of the will and the family surroundings the intent is apparently different. Our statutes must be applied to the facts as they are. I think that taking into consideration the provisions for accumulation with no attempt to pay over the income until the principal was to be paid at twenty-five years of age, the testator intended to and did create a trust for this purpose; that the provisions of paragraph eleven of the will are all one trust; that when the daughter died, he intended to continue the trust for her children until they arrived at twenty-five years of age. Such continuation was void.
The trusts following those for his named nephews were also void and the principal — remainder — is payable on the death of each said nephew to his next of kin. ( Kalish v. Kalish, 166 N.Y. 368. )
The order appealed from should be modified by adjudging that the trust following that for the testator's daughter, Margaret E. Chittick (Johnson) is invalid, and the remainder or principal at the death of the said daughter is payable to her descendants, or, if none, to the testator's next of kin as provided in his will and as so modified affirmed, with costs to appellant payable out of the estate.
HISCOCK, Ch. J., CARDOZO, POUND, McLAUGHLIN, ANDREWS and LEHMAN, JJ., concur.