Carrier v. Carrier

• Decision Date: 08 April 1919
• Citation: 226 N.Y. 114,123 N.E. 135
• Parties: CARRIER v. CARRIER et al.
• Court: New York Court of Appeals Court of Appeals

226 N.Y. 114

123 N.E. 135

CARRIER

v.CARRIER et al.

Court of Appeals of New York.

April 8, 1919.

Appeal from Supreme Court, Appellate Division, Fourth Department.

Action by Annie O. Carrier against Cassius M. Carrier, the Fidelity Trust Company, and Frances Elis Carrier. From judgment of the Appellate Division (167 App. Div. 405,153 N. Y. Supp. 509) reversing judgment of Special Term for plaintiff and dismissing complaint, plaintiff and defendant Frances Elis Carrier appeal. Judgment of Appellate Division reversed, and judgment of Special Term affirmed as modified.

Chase, Collin, and Cuddeback, JJ., dissenting.

Adelbert Moot, of Buffalo, for appellant Annie O. Carrier.

Thomas R. Wheeler, guardian ad litem, of Buffalo, for appellant Frances Elis Carrier.

Louis L. Babcock, of Buffalo, for respondents.

CARDOZO, J.

This action was brought by the beneficiary of a trust for an accounting by trustees, and for the preservation of the trust estate.

On July 31, 1903, Cassius M. Carrier, Annie O. Carrier, his wife, and the Fidelity Trust Company of Buffalo, became parties to a written agreement. The agreement recites the desire of the parties of the first and second parts ‘to provide against the contingencies of business, and to provide further for the welfare of their two daughters,’ Olive, then of the age of 23 years, and Frances, then of the age of 5. It recites the readiness of Mr. Carrier, the party of the first part, ‘to create a fund for that purpose,’ and his desire ‘to retain a power of investment and management of the fund so erected as long as he shall live.’ It recites his ownership of the residence 789 West Ferry street, Buffalo, ‘occupied by himself and his family as a home.’ Following these recitals, a transfer is made to the trust company of four promissory notes, amounting in the aggregate to $155,000, then held by the creator of the trust. A transfer is also made of the family residence. The house ‘shall continue to be used as a home for the family precisely as if the conveyance thereof had not been made.’ No sale is to be permitted unless the parties of the first and second parts shall jointly direct. The proceeds are to be used either in the purchase of a new home, or to be added to the general fund. The fund itself ‘shall at all times be managed and controlled by the party of the first part. He shall attend to the collection of the notes,’ and, ‘the same having been converted into money, he shall attend to the investment thereof, and in the matter of investment his discretion shall be absolute and uncontrolled.’ He shall not be limited by the ‘rules governing investments by executors or trustees, and the trustee shall follow his directions with regard to investments without question or demur.’ In case the income falls below 6 per cent. of the principal, he undertakes from his own means to make up the difference.

The fund thus created and managed is to be held upon the following trusts: The income ‘is to be used for the maintenance of the family which consists of the parties of the first and second parts and their two daughters, and out of the income the expenses of maintaining the family establishment are to be defrayed.’ On the death of the party of the first part, the income is to be paid to the use of the party of the second part for her support and the support of the two daughters. After both parents are dead, the fund is to be divided into two parts, one for the benefit of each daughter. The principal is to be paid to each daughter as she attains the age of 35. In the event of her death before that age, it is to go to her issue. If there are no issue, it is to go to the other daughter or to the issue of the other; and, if there are none of these, to the heirs of the party of the first part. If both daughters die before the party of the first part, he shall have a power of appointment, and, after the death of the party of the second part, the money shall then be distributed as he shall direct. The party of the third part, the trust company, ‘shall not be responsible to anybody or in any manner for the execution of the trust,’ except for the safe preservation of any money or securities in its hands, until the death of the party of the first part. On his death, ‘it shall assume active management of the trust,’ but in making any investments it shall follow the directions of the party of the second part. ‘After the death of both the parties of the first and second parts, then the party of the third part shall be subject to the ordinary duties of a trustee.’

On February 29, 1904, the daughter Olive died. Soon afterwars, Mr. Carrier abandoned his wife, and since then has refused to live with her. The family home was sold in 1905. The proceeds were placed in the trust company, and are still there with the accrued interest. Interest at the rate of 6 per cent. per annum has been paid also upon the four promissory notes. The income thus earned has been in part accumulated and in part devoted to the purposes of the trust. The personal and living expenses of the husband do not exceed $2,000 a year. He has a yearly income of about $4,700 from other sources. The payments made to his wife for the support of herself and her child have ranged from $3,600 to $5,000 a year. A large surplus of income, amounting to about $19,000, has been accumulated. Almost the entire principal of the estate has been reduced to cash. The promissory notes have been collected to the extent of $144,045.39. Only one note, for $10,868.92, is outstanding. The estate is thus in a form in which it may readily be withdrawn from the jurisdiction of the court. Since 1909 the husband has been a resident of Florida. He has substantially no property in New York. He is engaged in highly speculative ventures. In 1912 he made a contract to buy over 128,000 acres of timber land in Florida. The total price was $867,000. Most of it is still unpaid. The profitable development of the land requires the construction of a railroad and other improvements at a cost of about $1,200,000. The finding is that Mr. Carrier ‘claims that he has the right under said trust agreement to use said trust fund as his own money in paying for said Florida lands, and intends to use all of said trust fund to make said payments if the same is needed for that purpose.’ The wife is fearful that this use may dissipate the fund. In 1911 she sued her husband in two actions. One was an action for separation. It was tried immediately before this one, and was decided by the same judge. Separation was decreed, and an award of alimony was made for the support of the plaintiff and her child at the rate of $6,000 a year. Payments from the income of the trust were to be credited on the award. The second action is the one before us. The plaintiff alleges that the trust fund is in peril, and likely to be lost to her and her daughter or removed beyond the jurisdiction of the court. The court is asked to preserve it.

Upon these facts the trial court has granted a judgment restricting the powers of the trustees in the administration of the trust. Mr. Carrier and the trust company are enjoined from investing the principal fund or any part of it in securities other than those in which trustees are authorized by law to invest trust funds, unless thirty days' notice of intention to invest in other securities is given to the plaintiff. Upon receipt of such notice the plaintiff may apply to the court for an order restraining the defendants from making any such investment on the ground that the safety of the trust may be imperiled thereby, unless a bond is given by Mr. Carrier with prescribed conditions. Out of the income of the trust the sum of $6,000 is to be paid to the plaintiff for herself and her daughter. The rest of the income is to be paid to the husband for his own use. Limitations are imposed upon his power to borrow the principal. The trust company may loan the principal to him for his life or for a shorter period, but only upon his executing a surety company bond for its return when due, and for the payment of $6,000 of income to the plaintiff annually during her life. On his death the fund is directed to be held in trust for the plaintiff and her daughter, and thereafter it is to be held and distributed as provided in the trust agreement.

An appeal to the Appellate Division followed. That court of its own motion raised the objection that the trusts were void. Upon the trial Mr. Carrier had admitted that they were valid. The Appellate Division found an illegal suspension of the absolute ownership Personal Prop. Law, § 11; Consol. Laws, c. 41. There was first a trust for the joint lives of husband and wife. Then there were other trusts for the benefit of the daughters with contingent remainders to their issue. The valid and invalid limitations were held to be inseparable. On that ground the judgment was reversed and the complaint dismissed.

[1] At the threshold stands the question of the validity of the trusts. The grantor no longer concedes that his conveyance is valid. If he did, his concession could not coerce us. The statute limiting the suspension of the absolute ownership is an expression of the public policy of the state. Matter of Walkerly, 108 Cal. 627, 659, 41 Pac. 772, 49 Am. St. Rep. 97. In that respect it is like the rule that governs accumulations of income and restraints on alienation. Matter of Wilcox, 194 N. Y. 288, 289, 297,87 N. E. 497. These are the ‘modes adopted by the common law for forwarding the circulation of property, which it is its policy to promote.’ Gray on the Rule of Perpetuities, § 2a. The welfare of society, it is thought, does not tolerate limitations that will last throughout the ages. The living may not dictate, without restriction, the forms of ownership for posterity. Stanley v. Leigh, 2 P. Wms. 686; Marlborough v. Godolphin, 1 Eden, 404, 416; Taylor I. Atkyns v. Horde, 1 Burr. 60, 115; Bascom v. Albertson, 34 N. Y. 584, 614;...