Ajax Electrothermic Corp. v. First Nat. Bank of Princeton

• Decision Date: 07 May 1951
• Docket Number: No. A--104,A--104
• Parties: AJAX ELECTROTHERMIC CORP. et al. v. FIRST NAT. BANK OF PRINCETON.
• Court: New Jersey Supreme Court

Page 82

7 N.J. 82

80 A.2d 559

AJAX ELECTROTHERMIC CORP. et al. v. FIRST NAT. BANK OF PRINCETON.

No. A--104.

Supreme Court of New Jersey.

Argued March 19, 1951.

Decided May 7, 1951.

John F. McCarthy, Sr., Princeton, argued the cause for the appellants (McCarthy & McCarthy, Princeton, attorneys).

Ralph S. Mason, Princeton, argued the cause for the respondent (Montgomery & Mason, Princeton, attorneys).

The opinion of the court was delivered by

VANDERBILT, C.J.

This is an action for the acceleration and termination of a trust set up in the will of Edwin Fitch Northrup, who died on April 29, 1940. From a judgment of the Chancery Division of the Superior Court dismissing the complaint the plaintiffs took an appeal which we have certified on our own motion.

The determination of the appeal depends upon the intent of the testator as expressed in his will and it is therefore necessary to quote from it at some length:

'Eighth: All the rest, residue and remainder of my property whether real, personal or mixed, whatsoever and wheresoever situate, including any legacies that may lapse, fall or be ineffective, I give, devise and bequeath, to the First National Bank of Princeton, my executor and trustee, in trust nevertheless as hereinafter provided.

'Ninth: In lieu of dower, I direct that all the net income of the trust herein created be paid to my wife, Margaret J. S. Northrup, during her natural life. If it shall appear that the net income shall not be sufficient for the proper care and maintenance of my wife, the principal of said trust, or such portion thereof as my trustee shall deem necessary, may be disposed of by my trustee for that exclusive purpose.

'Tenth: I direct that upon the death of my wife, Margaret J. S. Northrup, that an amount not exceeding One Hundred and Fifty Dollars ($150.00) monthly be paid to my sister, Edith Northrup, during her natural life, out of the net income from the aforesaid trust and not otherwise, and that the balance of the net income from the trust herein created be paid over to the Ajax Electrothermic Corporation, to be used directly and not indirectly for the sole benefit of the officials and employees of the Ajax Electrothermic Corporation, such determination and distribution to be made by the Board of Directors of said Corporation.

'Eleventh: I direct that upon the death of my wife, Margaret J. S. Northrup, and my sister, Edith Northrup, that the trust herein created shall terminate and the balance of the interest and principal remaining be paid over to the Ajax Electrothermic Corporation, absolutely, to be used directly and not indirectly for the sole benefit of the officials and employees of the Ajax Electrothermic Corporation, such determination and distribution to be made by the Board of Directors of said Corporation.

'Twelfth: In the event that the Ajax Electrothermic Corporation is merged, amalgamated, reorganized, sold, or combined with some other corporation or institution, then, upon the occasion of any of the aforesaid events of this paragraph, I direct that my trustee shall determine to the best of its ability if the personnel of the aforesaid Ajax Electrothermic Corporation remains intact, substantially as a whole, either independently, or in connection with others, and upon such determination pay over to such organization, institution, or otherwise, funds and property as herein provided in substitution to the said Ajax Electrothermic Corporation. It is definitely understood that any action of my executor and trustee under the provision of this paragraph shall be final without liability or responsibility to any party or parties whatsoever.

'Thirteenth: I direct, in the event that the said Ajax Electrothermic Corporation, or such other parties as determined by my executor and trustee entitled to benefits hereunder in accordance with item tenth hereof cannot be assembled or ascertained, refuses or is prohibited to accept any or all of the benefits hereby created, that my estate shall be disposed of as follows, namely: That my executor and trustee is hereby authorized to give and bequeath the rest, residue and remainder of my estate to some worthy charity, or charities, at the discretion of my executor and trustee, except that the term charity, or charities, as used herein shall not be construed to include any Church, or religious organization of any kind whatsoever. It is definitely understood that any action of my executor and trustee under the provision of this paragraph shall be final, without liability or responsibility to any party, or parties, whatever.

'Fifteenth: I direct that my executor and trustee shall not dispose of the stock of which I die seized of the Ajax Electrothermic Corporation, unless it be deemed necessary, in its discretion, for the maintenance and support of my wife; or unless the corporation is dissolved, merged, amalgamated, reorganized, bankrupt, or by any operation of law ceases to exist, in that event my executor and trustee may exchange or sell the stock, accepting or retaining other stocks or securities in its place and stead. It is definitely understood that any action of my executor and trustee under the provisions of this paragraph shall be final without liability or responsibility to any party or parties, whatsoever.'

In accordance with the terms of the trust, the testator's widow received the net income therefrom until her demise on May 8, 1945, and since that time the testator's sister has received $150 a month out of the net income and the balance thereof has been paid to the Ajax Electrothermic Corporation for distribution to its officials and employees. On August 11, 1950, Ajax and Edith Northrup, the testator's sister, commenced this action by filing a complaint in which it was alleged that Ajax had purchased for Edith Northrup an annuity of $200 a month and that in return therefor she renounced her interest under the will. The plaintiffs prayed for judgment terminating the trust.

On October 28, 1950, the defendant served a notice of motion for the entry of judgment dismissing the complaint for lack of indispensable parties. On November 3, 1950, the return day of the motion, the plaintiffs filed with the court an agreement between Ajax and Edith Northrup which stated that the corporation had purchased for her for $33,490 an annuity of $200 a month, in consideration of which she had executed and delivered to the trustee an unconditional release of her life interest under paragraph 10 of the will. Along with this agreement the plaintiffs filed a release which recited that: 'I, Edith Northrup, * * * do hereby for myself, my heirs, executors and administrators, remise and release my respective life estate to which I have or may become entitled by virtue of the said last will and testament of Edwin Fitch Northrup, my brother, so as to terminate said life estate, and I do hereby relieve, release and forever discharge the said First National Bank of Princeton, New Jersey, Executor and Trustee of aforesaid, from all further duties and obligations of their said office concerning my right, title, and interest in my respective life estate in said trust property.'

This release, executed on October 30, 1950, simultaneously with the memorandum agreement, provided further that it take effect 'immediately and unconditionally.' On November 17, 1950, the trial court entered judgment granting the defendant's motion and dismissing the action. It is from this judgment that the plaintiffs have appealed.

The principal question argued on this appeal is whether or not the release and renunciation by Edith Northrup operate to permit the acceleration and termination of the trust itself. This question must be answered in the negative. It is well settled that where a settlor provides that the corpus of a trust shall go to the remainderman on the death of the life tenant, distribution to the remainderman will be made prior to the death of the life tenant, if the life estate is sooner terminated by other means, in the absence of some controlling equity or an intention of the testator, expressed or implied, to the contrary. Beideman v. Sparks, 61 N.J.Eq. 226, 47 A. 811 (Ch.1901), affirmed o.b., 64 N.J.Eq. 374, 55 A. 1132 (E. & A.1902); Anthony v. Camden Safe, Deposit & Trust Co., 106 N.J.Eq. 41, 42--43, 149 A. 822 (Ch.1930); Carter v. Martin, 122 N.J.Eq. 262, 270--271, 193 A. 704 (Ch.1937); Bennett v. Fidelity Union Trust Co., 123 N.J.Eq. 198, 196 A. 375 (Ch.1938); Walter v. Thielke, 127 N.J.Eq. 402, 404, 13 A.2d 649 (Ch.1940); Simpkins v. Simpkins, 131 N.J.Eq. 227, 230--233, 24 A.2d 821 (Ch.1942); Provident Trust Co. of Philadelphia v. Osborne, 133 N.J.Eq. 518, 522--523, 33 A.2d 103 (Ch.Div.1942); Lawrence v. Westfield Trust Co., 1 N.J.Super. 423, 432--434, 61 A.2d 899 (Ch.Div.1948); Hackensack Trust Co. v. Barkerding, 9 N.J.Super. 595, 602--603, 76 A.2d 36 (Ch.Div.1950). See also Mesce v. Gradone, 1 N.J. 159, 165, 62 A.2d 394 (Sup.Ct.1948); Restatement, Trusts, § 337.

An examination of the will in the instant case shows that to permit an acceleration and termination of the trust prior to Edith Northrup's death would defeat the intention of the testator. First, by paragraph 10 of the will the officials and employees of Ajax are entitled to the benefit of the net income of the trust in excess of $150 a month during the life of Edith Northrup. The testator must have realized that the officials and employees of Ajax would necessarily be changing from time to time and that the net income after the payment of $150 a month to his sister would therefore go, not to the officials and employees of Ajax at his death, but to those who were officials and employees of Ajax at the time or times that the net income was available for distribution. If his intent had been to benefit only those who were with Ajax at the time of his death rather than the men who were officials and employees of Ajax when each successive payment of income was made to...