Jaretzki v. Strong , 98 Conn. 357 ( 1923 )

In the article of his will submitted to this court for construction, the testator gave several trust funds to certain persons named, in trust for a specified purpose, and explicitly constituted those persons trustees for that purpose. That purpose the testator declared to be the benefit of each of his grandchildren who should survive him; and by the plainly expressed terms of the trust, he provided that that purpose should be attained in a prescribed manner. The trustees particularly designated are the persons appointed to hold the trust funds separately given to them as separate funds, to invest them in specified bonds and securities, to receive the income and revenue thereof, and to "pay over the net income of said several trust funds for the maintenance, education and support of the grandchild for whom said trust fund is created and held." Thus the testator explicitly declared the purpose of this provision in his will, and the manner in which and the agents by whom he intended that his purpose should be carried on and consummated. In his language we discover no indication nor intimation of any intention to place any trust, or impose any duty, upon any person or agent except the two whom he named as trustees. Evidently no one else was designated or empowered to take and invest the trust funds, or to receive the income thereof; and it seems equally evident that no one else was directed or expected to pay out the net income of any of these funds, and thus to assume to carry out the most essential part of the trust and to perform the duty explicitly imposed upon the trustees. In them personally the testator put his trust, and on them only he relied to administer it. Certainly he showed no sign that he intended that any third person should in any circumstances strip them of their trust and undertake to substitute his judgment and discretion for theirs in the execution of its duties. But this would be the result if a person, by means of an appointment as guardian of the estate of a grandchild, may claim the entire net income of a trust fund as the property of such child, and compel the trustees to pay it over to the guardian to be disbursed by him in his discretion. If this could be done, then any person, no matter how incompetent or how much distrusted by the testator or by his chosen agents, may by virtue of a selection and appointment by a foreign court, in ex parte proceedings unknown to any representative of the testator, in effect supersede the trustees selected by him, and take charge of the disbursement of the large income from the great trusts he has created, and by ignorance, or selfishness, or lack of ability, hamper or defeat the consummation of his purpose. The admitted facts disclose that one or both of the parents of each of the grandchildren of the testator were living when he made his will and the codicil. The terms of these testaments make it plain that the testator did not intend that any of these parents should have any authority in the management of these trust funds or in the disposition of the income thereof. It appears, also, that no guardian of the estate of any grandchild had been appointed before the testator died. Manifestly, therefore, it should not be assumed that he had it in his mind to permit any guardian ever to interfere with his chosen trustees in the execution of the trust. Moreover, respecting Mrs. Salisbury, it appears that by the codicil made March 29th, 1921, Mr. Converse cut out of his will a gift of $100,000 to her, and left her no part or interest in his estate. He died April 4th, 1921. Mrs. Salisbury was not appointed guardian of her children until July 18th, 1921. These facts answer the argument of her counsel, that Mr. Converse supposed that by force of law Mrs. Salisbury would be entitled to receive the entire income of the trust funds he had provided for her children, and for that reason he did not specify that the payments should be made to her as their guardian.

It should be noted, also, that Mrs. Salisbury's guardianship over each of her children's estates will terminate when he shall reach the age of twenty-one; and that the trust by its terms may remain in existence until the child shall become forty years old. Is it to be presumed that this income should be paid over to him when he reaches his majority and his guardian's interregnum has ended? If so, it would seem that his minority was the only reason the testator had for withholding payments to him directly for an indefinite time. But evidently his minority was not the testator's reason. It was his purpose to establish a control over the application of the income of each trust fund, which should continue possibly until the beneficiary should reach the age of forty, and certainly until it should be terminated at the discretion of the trustees in a manner distinctly stated. The rights of the guardian to receive and dispose of any property or beneficial interest of a ward are no greater than the rights of the ward, although they may be exercised by the guardian only. These wards had no property or rights in the income of the trust funds created by this article of their grandfather's will, except the right of each to have the net income paid out by the trustees for his maintenance and education until he should become twenty-five, or thirty, or thirty-five, or forty years of age, unless the trustees in their judgment deemed it best to pay to him a part of the principal of the trust fund at an earlier time. Until such time should come, the testator did not direct the trustees to pay over the income to any grandchild or to any person for him. On the contrary, creating a trust for the benefit of his grandchildren and meaning their maintenance and education to be that benefit, he expressly appointed persons to carry out this particular trust, and explicitly directed them to use the net income to accomplish this purpose.

Our attention is called to the fact that the testator used the words "pay over" in the thirteenth article of his will, and in other parts the words "pay over and apply" appear in connection with language which expressly gives to the trustees discretion in the application of an income. From this difference in phraseology it is argued that the testator had in mind some distinction between this trust and the others. We think no such distinction can be reasonably inferred. We observe that in the eleventh article the testator directs the trustees in one clause "to pay over and apply the net income" of a trust fund to his son, his son's wife and their children, in such manner as they shall think fit in their discretion; and in the next clause of the same article, he directs them, upon the death of his son, "to pay over and apply" the same income for the support of the son's wife and their children, without reference to manner or discretion. Again, in article seventeen, he gave the remainder of his estate to his executors "to pay over and apply" a portion of the income to the maintenance of certain children, and another portion to "be applied to the maintenance and support" of certain children, and to "pay over" to his children another portion or so much thereof as the trustees "in their absolute discretion" might think necessary for their support. We think that the testator in this will used the phrases quoted interchangeably and with the same meaning.

In our opinion, however, the testator in this article gave his trustees the widest discretion. He has stated and defined the terms of the several trusts in one sentence. Therein he declares that the persons named shall hold and invest the funds, and receive and pay over the income thereof for the maintenance and education of his grandchildren, with power to pay over parts of the principal to each grandchild when he shall reach a certain age, and with power to decline to make any such payment, or to reduce the amount of any such payment, or, in certain conditions, to double the amount of any payment; and to these clauses, which are separated from each other only by commas, he added, after another comma and a dash, the words: "all as in their judgment said trustees may deem for the best interest of the several beneficiaries." It seems to us plain that this clause was intended to apply to all the preceding clauses of the sentence of which it was the concluding and qualifying part. Reading this and all parts of this will, we are drawn to the conclusion that the testator has given to his trustees the widest discretion in respect to every provision.

But the authority of the trustees to dispose of the income of these several trust funds is not unrestricted. The article in question explicitly gives them power to use it for the maintenance, education and support of each grandchild, and for no other purpose. It is hardly conceivable, however, that all of the net income of each of these separate trust funds could reasonably be expended for such purpose as fast as it will accumulate. In the will the number and amount of payments, and any period of time and the time when payments shall be made, are not specified nor even suggested; nor is it indicated that the net income in any period of time should be used entirely in that particular period. All these matters are evidently left to the discretion of the trustees. It is probable, if indeed it is not certain, that upon the net income of each of these funds there will be accumulations, after the trustees have expended what in their judgment is reasonable for the purpose of the trust from time to time. These accumulations, being a part of the net income, may be applied only to the same purpose for which the whole net income may be paid out. They may not be added to the principal or given to a beneficiary for his own use. Whether they shall be expended in any current year or in the next, or in some year or years in the future, is for the trustees to determine. If at the termination of the trust, there shall be in their hands any accumulations of income from that trust fund, the trustees shall pay them over to the designated beneficiary of that trust. There is no other obligation nor restriction upon them, nor any other power given to them. But no one of the separate trusts will terminate when the grandchild for whom it is held shall reach the age of twenty-one; for nothing is more apparent in this will than that the testator had no respect nor consideration for the artificial line between a child's minority and his majority, or for the need of any protection or assistance from the guardian of any minor's estate. The trust for each grandchild is to be held until he shall reach the age of forty years, unless in their discretion the trustees shall sooner exercise their power to "advance the time" under the conditions and manner specified in the article which creates and defines the trust. Until the time when the several trusts shall thus be terminated, the duties and powers of the trustees relating to the several incomes and their accumulations will continue to exist and should be enforced and carried on by themselves.

Examination of this will demonstrates that whenever the testator gave any portion of his property directly to any person, he stated that he gave it to him or her by name or as one of a class; that whenever the testator created a trust fund, the income of which he intended a person to receive in hand, he directed his trustees to pay over such income to the beneficiary named; that whenever he set apart a trust fund, the income of which he intended for the support, or for the support and education, of any person, he directed his trustees themselves to pay over and apply, or to pay over, or to apply, such income for the purpose specified; and that, while in some cases payments are controlled by or conditioned upon the beneficiary's reaching a certain age, as twenty-five or thirty years, in no case is it stipulated that any payment shall depend upon or be affected in any way by his reaching the age of twenty-one years. These facts support the inferences we have drawn.

These conclusions are also in line with principles which have determined the decisions of this court in other cases. Leavitt v. Beirne, 21 Conn. 1; Watson v.Cleveland, 21 Conn. 538; Holmes v. Bushnell, 80 Conn. 233,67 A. 479; Bridgeport Trust Co. v. Bartholomew,90 Conn. 517, 97 A. 758; Hewitt v. Hicock, 96 Conn. 176,113 A. 172. See also: New York Trust Co. v.Black, 178 N.Y. App. Div. 4, 164 N.Y.S. 967;Matter of Connolly, 71 Misc. (N. Y.) 388; 2 Perry on Trusts Trustees (6th Ed.) § 622.

The advice of this court upon the questions submitted by this reservation is as follows: —

First. Discretion is vested in the trustees during the whole period of each separate trust as to the amount of net income of that trust fund to be expended by them for the maintenance, education and support of the grandchild for whose benefit that trust fund was created and is held. (a) The trustees themselves should expend such amount of the net income of each separate trust fund as in their judgment they may deem for the best interest of the grandchild for whose benefit the trust fund was created and is held. (b) If any part of the net income of any separate trust fund shall not be so expended by the trustees during any period of time, the trustees shall retain that part and apply it from time to time thereafter, during the existence of that trust, for the maintenance, education and support of the grandchild for whose benefit that trust fund was created and is held; and at the termination of any separate trust, if any part of its net income remain unexpended, the trustees shall pay over such part to the grandchild for whom that trust was created and held.