Metcalfe v. Union Trust Co. of New York

• Citation: 181 N.Y. 39,73 N.E. 498
• Parties: METCALFE v. UNION TRUST CO. OF NEW YORK et al.
• Decision Date: 21 February 1905
• Court: New York Court of Appeals

181 N.Y. 39

73 N.E. 498

METCALFE

v.UNION TRUST CO. OF NEW YORK et al.

Court of Appeals of New York.

Feb. 21, 1905.

Appeal from Supreme Court, Appellate Division, First Department.

Action by Helene Rochat Metcalfe against the Union Trust Company of New York, trustee of the estate of Francis J. Metcalfe, deceased, and others. From a judgment of the Appellate Division (84 N. Y. Supp. 183,87 App. Div. 144) in favor of defendant trust company on a submission of the controversy, plaintiff appeals. Affirmed.

The following are the material facts which are set forth in an agreed statement by the parties upon the submission of their controversy to the Appellate Division in the First Department. The defendant, the Union Trust Company, holds, as trustee under the will of Francis J. Metcalfe, deceased, and by direction of a decree of the Supreme Court construing the testator's will, a fund, the income of which it is required to pay to the plaintiff, Helene R. Metcalfe, the testator's widow, during her life, or until she remarry. The principal of the fund, upon the happening of either event terminating the trust, is to be paid over to the four children of the testator, also defendants, in the proportions, as to each, specified in the will. The children, being a son and three daughters, having become of age, as remaindermen, by an instrument in writing and under seal, in February, 1903, assigned and transferred all their right, title, and interest in and to the remainder in the trust fund to the plaintiff, who thereupon by another instrument in writing, released to herself, as the person entitled to the entire remainder, all of her interest in the income of the fund. Thereafter she demanded from the Union Trust Company the payment of the trust funds, offering a release from its liability as trustee. Her demand was refused by the trustee, upon the grounds that the trust had not been terminated, and that the release would not protect it from liability. The trustee declares its willingness to relinquish the corpus of the trust if it be decided that the trust was terminated by the transactions mentioned.

The question, as defined by the submission, is whether the trust has terminated, and whether the fund, with all its accrued income, is now payable to the plaintiff. The testator died in 1892, having provided for his wife and four children by a will, which gave his residuary estate (with an unimportant exception) to the trust company upon trusts for their benefit. In an action for the judicial construction of the provisions of the will, it was adjudged, so far as it is material to this controversy, that the trust for the widow's benefit is valid, and ‘entitles her to the income of one-third of the entire estate during her life, or until she remarry.’ The trust provisions for the children were adjudged to be ineffectual, and the distribution of the estate, remaining after setting apart one-third for the widow's trust, was directed to be made to the children. In this adjudication all parties have acquiesced. According to the will, which was thus construed, the trusts for the testator's three daughters were intended to continue for their lives, with remainders over to issue, or, failing issue, to survivors, while the son's trust was to terminate at his majority. The testator, when providing with respect to the trust for his widow, expressed his ‘desire,’ in the event of her remarriage or death, ‘that the interest of her one-third be used to increase the investments made for my children’; either all, naming them, or the survivors.

The Apellate Division directed judgment against the plaintiff upon the question in difference between the parties.

Cullen, C. J., dissenting.

TRUSTS-MERGER OF ESTATES-RELEASES BY REMAINDERMEN-VALIDITY AND EFFECT.

1. Laws 1897, p. 507, c. 417, s 3, relating to trusts of personal property created to provide an income to the beneficiary, and providing a way in which the principal fund may be merged in the beneficiary and the trust estate cease, applies only to trusts created after its enactment, and takes the place of Laws 1893, p. 939, c. 452, which was applicable ‘to any trust heretofore or hereafter created,’ such words not appearing in the law of 1897.

TRUSTS-MERGER OF ESTATES-RELEASES BY REMAINDERMEN-VALIDITY AND EFFECT.

2. Testator established by his will a trust fund to provide an income for his wife during her life or until she should remarry. His children duly assigned to the widow all their interest in the remainder of such fund, and she, by a subsequent instrument in writing, released to herself, as entitled to the remainder, all her interest in the income. Held not to terminate the trust and release the trustee from responsibility under Laws 1897, p. 507, c. 417, s 3, where the will was made in 1892, in which year the testator died, at which time 1 Rev. St. (1st Ed.) p. 730, pt. 2, c. 1, tit. 2, s 63, was in force, making the interest of the beneficiary of such a trust inalienable, and the will clearly restricting the widow's interest to the income during her life or until she remarried.Lester & Graves (Harmon S. Graves and Charles S. Yawger, of counsel), for appellant.

Hoffman Miller, for respondent.

GRAY, J. (after stating the facts).

The judgment rendered in the action brought for the construction of the will has settled, as the law of the case, that the trust created for the testator's widow was valid for her life, or until her remarriage, and the only question for our consideration is whether that trust had ceased as the result of the assignment by the remaindermen of their right to the remainder and of the release by the widow of the interest in the income. When the trust was created, in 1892, section 63 of the statute of uses and trusts was in force (1 Rev. St. [1st Ed.] p. 730, pt. 2, c. 1, tit. 2), applicable alike to real and personal property, which prevented the beneficiary of such a trust from assigning or disposing of his interest. Subsequently, in 1893 (Laws 1893, p. 939, c. 452), that section of the Revised Statutes was amended so as to permit a ‘person beneficially interested in the whole or any part of the income of any trust heretofore or hereafter created for the receipt of the rents and profits of lands or the income of personal property,’ who ‘shall have heretofore become or may hereafter be or become entitled’ to the remainder in a trust fund, to release to himself all his interest in the income of the trust estate, and thereafter the estate of the trustee was to cease and determine. In 1897 chapter 417, p. 507, Laws 1897 (the personal property law) was enacted, section 3 of which repealed previous statutes upon the subject, and read that: ‘The right of the beneficiary to enforce the performance of a trust to receive the income of personal property, and to apply it to the use of any person, cannot be transferred by assignment or otherwise; but the right and interest of the beneficiary of any other trust in personal property may be transferred. Whenever a beneficiary in a trust for the receipt of the income of personal property is entitled to a remainder in the whole or a part of the principal fund so held in trust, subject to his beneficial estate for a life or lives, or a shorter term, he may release his interest in such income, and thereupon the estate of the trustee shall cease in that part of such principal fund to which such beneficiary has become entitled in remainder, and such trust estate merges in such remainder.’

It is upon this enactment that the appellant rests her right to have the trust declared terminated. It is interesting to note, and I agree with Mr. Justice Patterson of the Appellate Division in his expression of satisfaction that the Legislature, by chapter 88, p. 239, of the Laws of 1903, has restored the state of the law to its earlier condition under the Revised Statutes, whereby the interest of a beneficiary in such a trust is rendered inalienable.

The Appellate Division has denied the right of the plaintiff to a decree, declaring that the trust had terminated, upon two grounds. It was held, in the first place, that, as ‘the legal estate in the trust fund is in the trustee, it thereby became property in his hands,’ of which the Legislature could not constitutionally deprive him without his consent; and, in the second place, that, as the widow's interest was for her life or until she remarries, it was not an absolute estate, but was conditional in its nature, and hence not within the purview of the statute.

I am not disposed to take the view of the unconstitutionality of the act of 1893, although forcibly presented in the opinion of the very learned justice who spoke for the court below. It impairs no contract. Cochran v. Van Surlay, 20 Wend. 365, 32 Am. Dec. 570. Although the legal estate is in the trustee, he but possesses a naked right, which is to be exercised, not for his own benefit, but for that of another. His estate is commensurate with the trust duties imposed upon him, and it ceases when they are performed or when they are at an end. The whole beneficial proprietorship or interest is in the cestui que trust, for whom he holds the estate, and who has the right to enforce the performance of the trust. At common law, when the latter had the equitable fee, he could call for the conveyance of the estate by the trustee and extinguish the trust. Lewin's Trusts, *486. At common law, and under our Revised Statutes, the trustee's tenure has been under the supervisory power of courts of chancery or of equity, and it was dependent upon conditions having no relation to any interest of his in the estate. If he has a right to commissions, it was given to him by statute only. The argument that the constitutional guaranty against the deprivation of one's property without due process of law has its application to the case of this trustee is, in my opinion, unsound. That guaranty exists for the protection of the citizen's property against...