In re the Accounting of First Trust & Deposit Co.

The testatrix left her surviving a daughter and a son. She provided in the Fifth paragraph of her will that her

After the will was executed the testatrix made two loans to her son for sums aggregating six thousand dollars, and at her death held his promissory notes for that amount. First Trust & Deposit Company of Syracuse, named in the will as executor and trustee, has included in its petition for the settlement of its intermediate account, and in its account, the said notes as assets of the estate and has asked that it be authorized and directed “ to retain the income and principal payments otherwise due to the said Harold O. Chamberlin, beneficiary, under Article Fifth of the Will, until such time as the total of such retained income and principal payments, with interest earned thereon, equals the indebtedness of the bene'ficiary with interest as specified in the two notes aforesaid.”

At the hearing of objections filed by Harold 0. Chamberlin, the objectant showed by evidence which was not contradicted that the

The notes executed by the objectant are vahd instruments. They were executed after the will was made, and by no possible construction of the will can we read into the will an intention to forgive any indebtedness of the legatee not in existence when the will was executed, and so far as appears, not in the contemplation of the testatrix at that time. “ The matter to be determined in the construction of a will is what did the testator intend at the time of its execution? * * * Clearly, circumstances occurring long after the execution of a will could not have been within the contemplation of the testator, and could, therefore, throw no light upon the meaning of language which he then used.” (Morris v. Sickly, 133 N. Y. 456 , 459.) It seems plain to us, too, that the evidence fails to establish a valid release by the testatrix of the indebtedness or a gift to the debtor. (McCarthy v. Pieret, 281 N. Y. 407 .) The executor may, we assume, bring an action against the debtor to recover the debt; but he cannot satisfy the indebtedness of the life beneficiary out of the principal of the trust fund, for the debtor has no title to the principal. The question remains whether the trustee may be directed

Whether the trustee may retain payments which will become due to the debtor during his lifetime depends upon whether the testatrix manifested in her will an intention to provide a minimum amount which should be paid each year to her son even though he might be indebted to her estate. The applicable rule has been stated as follows: “ Where a testator leaves his estate in trust for several beneficiaries, one of whom was indebted to the testator, the interest of that beneficiary is subject to a charge for the amount of his indebtedness, unless the testator manifested an intention that his interest should not be subject to such a charge * * *. Where by the terms of the trust or by statute it is provided that the interest of a beneficiary shall not be assigned by him or reached by his creditors, in other words where the trust is a spendthrift trust, the inference is that the testator intended that the beneficiary should enjoy the whole interest given him under the trust, and that the amount of his indebtedness to the testator should not be a charge upon his interest.” (2 Scott on The Law of Trusts, p. 1436. Cf. Restatement of the Law of Trusts, § 251.)

Here the testatrix has created a spendthrift trust for her son, Harold 0. Chamberlin, but with the proviso that upon the happening of the contingency, viz., the exhaustion of another trust fund created for the benefit of her son by his father, the beneficiary should become entitled to a fixed sum per month. There is no doubt that until the contingency occurred the trust was a spendthrift trust; and the interest of the beneficiary was not “ transferable nor subject to commutation or incumbrance nor to legal process * * *.” The courts below have assumed that until then the trustee could not retain the income of the spendthrift trust. The contingency has, however, occurred; the beneficiary is now entitled to a fixed annual sum or annuity payable out of principal and the courts below have held that the “ annuity payments ” due to the beneficiary are transferable and subject to legal process and for that reason may be retained by the trustee till the annuitant’s indebtedness is paid.

We assume that the testatrix provided that upon the happening of the contingency specified in the will the life beneficiary should

In this case the intention of the testatrix to make such provision for the support of her son is implied in the will as clearly as if it had been stated in express terms. The testatrix, as we have said, established a “ spendthrift ” trust for him, but realizing that the income from the trust fund might be insufficient, in a specified contingency, for its intended purpose, she provided that in that event the beneficiary should receive the sum of eighty dollars a month. Technical distinctions between the rights of the beneficiary of an express trust and the rights of an annuitant cannot cloud the clear intent of the testatrix, by gift of an annuity payable both from income and principal of a trust fund, to provide for her beneficiary greater assurance of adequate support than he would receive through gift of the limited income which the trust fund would produce. We give to the provision made by the testatrix its clearly intended effect. The beneficiary has the right to receive payment of the annuity provided by the testatrix for his support free from any charge for the repayment of any indebtedness to the estate.

We have assumed throughout this opinion that the trustee would be required to retain annuity payments till the indebtedness was paid if the contrary intent of the testatrix were not apparent. We recognize that there may be doubt even there, and we point out that we do not decide such question now.

Loughran, Finch, Rippey, Lewis, Conway and Desmond, JJ., concur.

Ordered accordingly.