Townsend v. Allen — 36 N.Y. St. Rep. 523

Majority

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William H. Townsend, Resp’t, v. Robert Allen, Jr., Impl’d, App’lt.

(Supreme Court, General Term, First Department,

Filed January 13, 1891.)

Headnote

1. Teust deed—Validity.

The mere fact that at the time of the execution of a trust deed one of the trustees has the property in his hands, and that confidential relations exist between him and the grantor, will not invalidate the deed, where its provisions are not unnatural and it does not appear that the grantees are to be greatly benefited thereby; and where the grantor for many years acquiesced in it and reaffirmed it by his will.

3. Same—Convenience of settloe.

A valid trust may be created for the convenience of the settlor.

3. Same—Revocation.

A deed of property in trust to pay to the grantor a sum sufficient for his support from the income, and if necessary a portion of the principal, and at his death transfer the residue of the fund to his next of kin, cannot be held to be a deed of contingency and revoked by his will where the existence of the deed and a belief in its efficacy are distinctly manifested in the will.

4. Same—Conflict of laws.

Where the grantor resided in New Jersey at the time of executing the deed, and continued to reside there until his death, the deed is to be con

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strued in accordance with the law of New Jersey, and a provision as to accumulations void under the laws of this state, but valid under those of New Jersey, upheld.

.fpeal from judgment entered on referee’s report.

The following is the opinion of the referee:

In April, 1863, William McOoon, being a resident of the state of New Jersey, executed and delivered a certain trust-deed to three persons, viz., his brother Cornelius McOoon, Benjamin B. Sherman and William H. Townsend, who is the plaintiff- in this action. All three of the trustees above named were, at the date of such trust-deed, residents of the state of New York. That instrument set forth that said William McCoon was, on the day it bears date, the owner of a large amount of personal property, consisting of certain specified stocks and bonds, and that, as it would be irksome and inconvenient for him to have the care and management of such property, he had resolved to transfer, assign, and set over the same to the trustees in such instrument named. And accordingly, by such trust-deed, the settlor assigned such property to his trustees, to have and to hold the same to and for the objects, intents and purposes following, that is to say: To manage the fund to the best advantage according to their judgment and discretion, to collect all dividends, interest, and income arising therefrom, and, after supplying the settlor out of such income, if such income should be sufficient, with whatever money might be required by him for his maintenance and support, to invest the surplus in such securities as in their judgment might seem proper, to keep such securities, or, in their discretion, to sell the same, and, after sale, to reinvest the proceeds. For the purpose of carrying out the provisions of the foregoing instrument the grantor appointed his said trustees, and the survivor or survivors of them, his true and lawful attorneys in fact, to do all such acts as might be necessary in the premises. The deed further provided that the assignment of the property which it conveyed, and the power which it conferred, were made and granted on the express condition that said trustees would, at all times, during the natural life of the grantor, well and faithfully manage the trust fund to the best of their ability, and would, during the natural life of the grantor, furnish and pay over to him out of the income of the said property, from time to time, such sums of money as might be needed for his reasonable support and maintenance, and would, if the income should not be sufficient for that purpose, make up and supply the deficiency out of the capital of the property assigned, and would, upon his death, transfer all of the fund that should remain in their hands to and among such persons as would be entitled to the same as next of kin of the grantor, “ according to the directions of the statute of distributions of the state of New York.”

The property whose disposition was ordered by the instrument above described had been inherited by William McOoon from his father and his mother. From the time of their death it had been in the hands of his brother Cornelius, one of the persons named as trustee in the above described deed. He had managed the

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same and paid over the income, as desired, to his brother William.

After the execution of the deed Cornelius continued to manage ■the property for some two years. Then, on account of his ill health, he transferred the same to this plaintiff. The plaintiff continued to collect the income and to apply the same to the use of William McCoon until the latter’s death, on December 27, 1877. It appears in evidence that William continued to reside in the .•state of New Jersey from the time he executed the trust agreement until he died. "He left an instrument purporting to be his last will and testament, which has since been admitted to probate as such in the proper court of the state of New Jersey. By that will he gave to Rachel Trafford, wife of John Trafford, “ the sum •of $5,000 out of the moneys or property I heired or am entitled to out of or from the estates of my deceased sisters, Amelia Mc■Coon and Phcebe McCoon,” and to his nephews, Edwin S. Townsend and Frank W. Townsend, “ $5,000 apiece out of the moneys ■or property I heiréd or am entitled to, or may be entitled to out of •or from the estates of my deceased sisters; ” and to Margaret T. Trafford $500 “ out of the moneys or property I heired or am entitled to, or may be entitled to, out of or from the estates of my said deceased sisters.” All the residue of his property he gave by his will to Edwin S. Townsend, Frank W. Townsend and Rachel Trafford, to be divided between them share and share alike.

At the time of his death the persons who constituted, according "to the statute of distributions of the state of New York, his next of kin were: (1.) Mary A. McCoon, his sister; (2.) Annie A Waterbury, Caroline A. Gunther and James H. McCoon, children of his deceased brother, Cornelius; (3.) Edwin S. Townsend and Frank W. Townsend, two of the residuary legatees under the will afore.said, children of his deceased sister, who was the wife of the plaintiff in this action. Upon this state of facts rival contentions have .arisen. On the one side.-it is claimed that, under the provisions of the trust deed, the fund here in question should be distributed among William McCoon’s next of kin. In opposition it is insisted : First, that the trust agreement itself is invalid and inoperative, and that, accordingly, all the property of which it undertakes to dispose must be distributed according to the directions of the settlor’s will; and second, that even though the agreement' is not invalid in toto, so much of the fund here accounted for as represents accumulations of income must be held to have been suffered to accumulate pursuant to an unlawful direction of the ■settlor of the trust, and must be distributed, therefore, as part of his residuary estate, in accordance with the directions of his will.

It_ appears that the property transferred by the deed of 1863 •consisted entirely of personalty. In view of that fact, and of the further facts that,- at the time of the execution of such deed, William McCoon was a resident of the state of Hew Jersey, and continued to be a resident of that state uninterruptedly until his •death, I hold that the validity and effect of the disputed instrument must be determined in accordance with Hew Jersey laws. 'The circumstances that .Cornelius McCoon had in his hands, at "the time the trust deed was executed, the property to which it

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relates,-and had, for a considerable period theretofore, managed and controlled the same for the use and benefit of his brother William, and the other circumstances which are referred to in the brief of counsel for one of William’s executors, as supporting his claim that the evidence establishes such relation between the settlor and his brother as to create a presumption, not rebutted and overthrown by opposing evidence, that the transfer to Cornelius was fraudulent and void, are not, in my judgment, sufficient to warrant the findings in that regard for which such counsel contends. There is no evidence tending to show that the making and execution of the trust agreement were induced by any influence exerted by Cornelius. Any benefit that Cornelius could have derived from the agreement was contingent upon his surviving his brother, and, even in that event, he would have taken under the trust agreement no more than the statute of distributions would have awarded to him in case his brother had died intestate. William McCoon continued to recognize the validity and effectiveness of the trust deed for more than twenty years after Cornelius gave up the control and management of the fund, and the language which he used in his will, executed about four years after that control and management had been surrendered, strongly tends to show that he then considered that the property which he had derived from his father and his mother was no longer subject, to his disposition. If the construction of the trust deed were dependent upon the laws of New York, it may be that its direc-tion regarding the disposition of surplus income would be invalid’ as directing an unlawful accumulation; but as such direction is-not prohibited by the laws of New Jersey, I hold that the income accumulated must follow the principal fund, and be distributed by the trustee to William McCoon’s next of kin, as determined by the New York statute of distributions.

J. B. Tresidder, for app’lt; T. De Witt, G. B. Bonney and William Man, for resp’t.

In view of the complete statement of facts contained in the referee’s opinion, it is not necessary to state the same in detail here, and we might very well rest our decision upon the opinion of the referee, were it not, perhaps, proper to note one or two objections which are urged with great persistency upon the-part of the appellant.

It is claimed that the deed in question was void because of the fiduciary relations which existed between one of the trustees and the grantor in the trust deed. This might be true were the provisions of the trust deed unnatural, considering the relation of the parties to the same, or had there been any evidence from the nature of the instrument that the grantees therein were to be greatly benefited thereby.

We find from the evidence in the case that the grantor in the deed recognized its existence for twenty-four years after its execution, and, by a will made shortly before his death, clearly had in mind the existence of this instrument, and in no way intended to dispute its validity. The grantor of the deed having so long-

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acquiesced in its existence, having by his will reaffirmed its validity by the peculiar nature of the provisions of the will showing that he had the trust deed in mind, and that he knew that he had thereunder disposed of the estate of which it treated, how can his personal representatives be now permitted to undo that which the testator supposed he had effectually done, and defeat the very purpose which he had in mind at the time of making his will ? It .seems to us under these circumstances, with not the slightest particle of proof attacking the good faith of the trustees in this matter, it would be carrying the doctrine of presumption to a most dangerous extent to hold that a trust deed so long recognized, acquiesced in and reaffirmed should be set aside simply upon presumption.

And it is urged further that the agreement does not create a "valid trust for the next of kin because it was made for the personal convenience of the settlor. We are not aware that the personal convenience of the settlor does not form a good consider.ation for the creation of a valid trust. If any authority were needed for the purpose of showing that a valid trust may be created for the convenience of a settlor, it is found in § 2468 of the Code, where the right of a party to convey property in trust to his own benefit is expressly recognized, where it provides that the article in reference to special proceedings shall not apply to any money, thing in action or other property held in trust for a judgment debtor where a trust has been created by or the fund so held in trust has proceeded from a person other than the judgment debtor; -a clear recognition of the right of a party to convey trust property, the beneficiary use of which may be in himself. The instrument in question conveys the property to his trustees, and although he appoints them his attorneys in fact, it is simply for the purpose of aiding them in the execution of this trust and gives direction for the disposition of the property upon the termination of the trust by the death of the settlor.

The claim that no estate vested in the next of kin, that the instrument was simply a deed of contingency, and the direction therein contained testamentary and was revoked by his will, is entirely unsupported by the language of the instrument, and by the fact that in the will of the settlor the existence of this deed and a belief in the efficacy of its provisions is distinctly manifested.

The objection that the deed contains a direction for the accumulation of personal property in contravention of the statute is one of greater weight. It may be doubtful whether the provisions of this deed can be treated as a direction for the accumulation of income. By its provisions the settlor is to have all the money required for his support which the estate may produce, and if necessary such part of the principal as may be required.

To be sure there is no provision for the payment over to the settlor of any excess of income which he might not require for his support, but as he is the judge by the terms of the deed as to the amount which he shall require, and the provision in regard to reinvestment only applies to that which he shall not draw, there

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does not seem to be any contravention of the statute in the provisions of the deed.

Furthermore, the settlor at the time of the execution of this deed was a resident of New Jersey. It would appear that he lived, there until his death; his will was probated in that state, and the executor here contesting is the executor appointed under that-will by the probate court of Monmouth county, New Jersey..

The distribution of the personal property is made according to-the laws of the domicil of its .owner, and although this property was actually situate within the state of New York, yet its legal status was at the domicil of its owner in the state of New Jersey. Such being the condition, it would seem that the laws of the state of New Jersey should govern in respect to the validity of the provisions of this deed, and not the laws of the state of New York; and it is conceded that under no circumstances are the-provisions of the deed in respect to the accumulation of income in contravention of the laws of the state of New Jersey.

The judgment appealed from should be affirmed,-with one bill of costs.

Daniels, J., concurs.