Brown v. Fid. Union Trust Co.

• Decision Date: 07 November 1939
• Parties: BROWN et al. v. FIDELITY UNION TRUST CO. et al.
• Court: New Jersey Court of Chancery

9 A.2d 311

126 N.J.Eq. 406

BROWN et al.

v. FIDELITY UNION TRUST CO. et al.

Court of Chancery of New Jersey.

Nov. 7, 1939.

[Copyrighted material omitted.]

Syllabus by the Court.

1. Where a will gives the residue of testatrix' estate to trustees in trust to pay the income to testatrix' only sister (who was also her sole heir at law and next of kin) for life with power of appointment by will in the sister over a substantial portion of said residue, and there is no gift over of that portion of the residue in the event of a failure to exercise the power, the remainder interest therein vests in the sister as next of kin immediately upon testatrix' death, subject to voluntary divestment by exercise of the power. Such remainder vests in the sister by operation of law because of partial intestacy, and not by virtue of the will.

2. The personal estate of a person dying intestate vests in those who are his next of kin at the time of his death and not to those who are such at the time distribution is made.

3. The words "All my property * * * not disposed of * * * by this my last will * * * I hereby give, devise and bequeath to such person or persons, association or corporation, as my beloved sister, M. T. S. shall nominate and appoint to receive the same in and by her last will and testament", confer a general power of appointment under which the donee of the power has the right not only to select the appointees to receive the property but also to determine the quantum of the estate to be apportioned to each of such appointees.

4. The doctrine of illusory appointments has not been adopted by the courts of this state.

5. The question whether an instrument is in execution of a power or not depends solely upon the intent of the donee. This Intent must be clearly shown in the instrument purporting to execute the power.

6. The general rule is that where an appointee dies before the donee of a general power of appointment, the appointment lapses unless saved by statute.

7. Our statute (R.S.1937, 3:2-18, N.J. S.A. 3:2-18) respecting lapsed gifts does not apply to cousins and therefore an appointment to a first cousin who dies before the donee of the power (the appointor) lapses and the representatives of such appointee take nothing.

8. Upon the transfer of estate accounting proceedings from the Orphans' Court to the Court of Chancery, this Court has as complete control over those proceedings as though originally begun here and may make such orders and decrees therein as justice and equity require. That decrees challenged here were entered in another court is no bar to the exercise of this court's jurisdiction.

9. The judgment of a competent court acting within its jurisdiction is conclusive upon parties and privies as to all matters adjudged upon which the parties were of right entitled to be heard.

10. In this case M. T. S. had a vested estate in remainder, subject to voluntary divestment by the exercise of a general power of appointment, as well as a right to receive the income for life. She was also one of three trustees to whom the residue was bequeathed in trust to pay the income to her for life. Her appointees are in privity with her and decrees of the Orphans' Court approving the trustees' accounts are res adjudicata and binding upon such appointees. These appointees not having been ascertained at the date of the decrees, were not entitled to notice of the accountings thereby approved.

11. The established rule of equity practice is that estates limited over to persons not in esse are represented by the living owner of the first estate of inheritance. A vested remainder after a life estate is an estate in inheritance. Where, therefore, the owner of a vested estate is before the court, the interests of a contingent remainderman will be bound although he may not be formally made a party.

12. Where, upon an accounting, the benefactor of an unascertained beneficiary of an estate is a party to the proceeding and is content or fails to object, such beneficiary will not be heard to complain. If the benefactor is estopped so, also, is the beneficiary.

3. An unwise investment by a trustee cannot be repudiated by the person inducing it nor by anyone claiming through him. A fortiori, where the trustee is the predecessor in title and makes the unwise investment.

14. Where the exercise of a general power of appointment by the donee of the power is optional, investments by the donee, who is also the trustee, cannot be challenged by his appointee. Being under no obligation to prospective appointees, he owes them no duty and consequently can commit no fraud against them.

15. Until the death of the donee of a general testamentary power of appointment, it is impossible to determine, with finality, whether there will be an appointee, and if so, who he will be. Possible appointees have no title or interest in the corpus of a trust subject to the power.

16. An estoppel against one trustee who is also the life tenant and remainderman with an optional general testamentary power of appointment inures to the benefit of his co-trustees.

17. The fraud which will justify the opening of decrees approving trustees' accounts is fraud in the procurement of the challenged decree and not fraudulent acts or investments which have been thereby approved.

Suit by Sallie Ann Brown and Roy R. Knight against the Fidelity Union Trust Company, surviving trustee, etc., and others for construction of the will of Susan E. Urie, deceased, and of Mary T. Sheldon, deceased, for the removal of all proceedings touching the Urie estate from the Monmouth County Orphans' Court to the Chancery Court, for an injunction against the trustees and their representatives from proceeding with their final accounting of the Urie estate in the Monmouth County Orphans' Court, for an accounting of the corpus and income of the Urie estate from the Fidelity Union Trust Company, surviving trustee, and for full discovery of the details of the trustees' investments and transactions covering the entire period of administration of the Urie estate.

Decree in accordance with opinion advised.

William Elmer Brown, Jr., of Atlantic City, for complainants Sallie Ann Brown and Roy R. Knight.

Hood, Lafferty & Campbell, of Newark, for defendant Fidelity Union Trust Co., trustee, etc.

Walter E. Cooper, of New York City, for defendant City Bank Farfners Trust Co., executor of will of Mary T. Sheldon, deceased, trustee under will of Susan E. Urie, deceased.

Parsons, Labrecque & Borden, of Red Bank, for defendant Monmouth Memorial Hospital.

William Hartshorne, of Freehold, for respondent Fifth Avenue Hospital.

Walter Carson, of Camden, for defendant Susan Neidler, sometimes known as Susan Knadler.

BERRY, Vice Chancellor.

This suit involves the construction of two wills; the first that of Susan E. Urie, who died a resident of Monmouth County, New Jersey, on July 23, 1918, and the second, that of Mary T. Sheldon, who died a resident of New York on September 15, 1935. The bill also seeks the removal of all proceedings touching the Urie Estate from the Monmouth County Orphans' Court to this court; an injunction against the trustees and their representatives from proceeding with their final accounting of that estate in the Monmouth County Orphans' Court; an accounting of the corpus and income of the Urie Estate from the Fidelity Union Trust Company, the surviving trustee, and full discovery of the details of the trustees' investments and transactions covering the entire period of the administration of the Urie Estate.

Although the construction of the two wills is involved in this proceeding, I think its primary purpose is to surcharge the surviving trustee and the estates of the two deceased trustees with anticipated losses from alleged illegal investment of trust funds.

After making a number of specific bequests for general legacies, Susan E. Urie by her will provided as follows:

"Fourteenth: All the rest, residue and remainder of my estate, both real and personal, of whatever the same may consist and wherever the same may be situate, I give, devise and bequeath unto my sister, Mary T. Sheldon, of New York, Dr. James F. Ackerman, of Asbury Park, New Jersey, and Fidelity Trust Company, a New Jersey corporation located in the City of Newark, New Jersey, and the survivors and survivor of them, to have and to hold the same upon the following trust; To invest and reinvest the same and to pay the net income therefrom, semiannually, unto my sister, Mary T. Sheldon, for and during the term of her natural life.

"Fifteenth: At and after the death of my said sister, Mary T. Sheldon, I direct my said executors and trustees, hereinafter named, the survivors and survivor of them, out of the corpus of my estate to make the following payments which I give and bequeath: To Mary Wade the sum of Ten Thousand Dollars, and to Eugenie Maroney the sum of Ten Thousand Dollars, which bequest is in addition to the legacy herein given to her in the Fifth paragraph of this my Will; if either the said Mary Wade or Eugenie Maroney should predecease my said sister, Mary T. Sheldon, then I direct that the survivor of them shall receive both of said legacies of Ten Thousand Dollars; to my cousin, Sarah Brown, wife of Elmer W. Brown, of Northfield, New Jersey, the sum of Five Thousand Dollars; to my cousin, Levinia Fryer, the sum of Five Thousand Dollars; to my cousin, Delia Knight, the sum of Five Thousand Dollars; to the Woodland Cemetery Company of Philadelphia, the sum of Four Hundred Dollars to be used for the perpetual care and maintenance of the S. Townson lot in Section F of said Cemetery; and I order and direct, after the burial of my said sister and myself there in, that the said lot be securely sealed so that no bodies can thereafter be interred therein.

"The above bequests to Mary Wade, Eugenie Maroney, Sarah Brown, Levinia Fryer and Delia Knight in this Fifteenth paragraph contained are to...