Cleveland Trust Co. v. McQuade

• Decision Date: 26 April 1957
• Citation: 6 O.O.2d 493,106 Ohio App. 237,142 N.E.2d 249
• Parties: , 76 Ohio Law Abs. 324, 6 O.O.2d 493 The CLEVELAND TRUST CO., as Trustee, etc., Appellee, v. Virginia McQUADE et al., Appellees. Jos. C. Hostetler, as Guardian ad litem of Stephen Bonsal, a minor, etc., Appellant, and Richard Mills Osler, a minor, etc., New Party Defendant.
• Court: Ohio Court of Appeals

Page 237

106 Ohio App. 237

142 N.E.2d 249, 76 Ohio Law Abs. 324, 6 O.O.2d 493

The CLEVELAND TRUST CO., as Trustee, etc., Appellee, v. Virginia McQUADE et al., Appellees.

Jos. C. Hostetler, as Guardian ad litem of Stephen Bonsal, a minor, etc., Appellant,

and

Richard Mills Osler, a minor, etc., New Party Defendant.

Court of Appeals of Ohio, Cuyahoga County.

April 26, 1957.

Squire, Sanders & Dempsey, Cleveland, for appellee The Cleveland Trust Co., as trustee, etc.

Von Herzen & Laidig, Los Angeles, Cal., for appellee Virginia McQuade.

Van Aken, Whiting, Arnold & Nash, Cleveland, for appellees Charles George Newcomb and Madge Pentony Newcomb.

Arter, Hadden, Wykoff & Van Duzer, Cleveland, for appellees Shirley Newcomb Kelsey, Doris A. Newcomb Frick, and Richard C. Weiss, as Guardian ad litem of Charles Newcomb Kelsey and Robert S. Frick, Jr.

Marshman, Hollington & Steadman, Cleveland, for appellee Richard R. Hollington, as guardian ad litem of Cherie Kelsey, and others.

Baker, Hostetler & Patterson, Cleveland, for appellant, and for Jos. C. Hostetler, as guardian ad litem of new party defendant Richard Mills Osler, a minor, etc., and for all others similarly situated.

DOYLE, Judge.

The questions presented for decision in this case, on appeal from the Probate Court of Cuyahoga County, were succinctly stated by Judge Kinder, the Trial Judge in that court, as follows:

'This is an action for a declaratory judgment brought by The Cleveland Trust Company in its several capacities as (a) trustee under a trust agreement, dated February 27, 1922, with Anne Baldwin Schultze, and (b) as executor and trustee under the will of Gouverneur Morris, who died on August 14, 1953, his will having been executed on April 2, 1952. The action involves the interpretation and legal effect to be given the Schultze trust agreement, hereinafter called the Trust, and the will of Gouverneur Morris of April 2, 1952, hereinafter called the will, and turns on the question of the effect, if any, of the rule against perpetuities in respect of these documents and the interests sought thereby to be created.'

1. The Schultze trust agreement, to which reference is above made, directed that upon the death of the settlor the corpus of the trust should be treated as composed of two equal shares--one to be held for the benefit of the settlor's nephew, Gouverneur Morris, and the other for the benefit of her niece, Henrietta Morris Bonsal, with the net income from each share to be paid to the named beneficiaries for life.

On July 11, 1922, several months after its creation, the trust became irrevocable, as a result of the death of the settlor, and the beneficiaries commenced to receive the income.

There was incorporated in the instrument a general power of appointment, exercisable only by will, for Gouverneur Morris over that share of the corpus in the hands of the trustee set apart for him. In the event of his failure to exercise the power, the settlor then directed that the Gouverneur Morris share should be added to the share set aside for the niece, Henrietta Morris Bonsal.

The exact terms are:

'Upon the death of my said nephew, Gouverneur Morris, the share of the trust estate, or the balance thereof remaining, held for his benefit, shall vest in and be distributed to his nominees and appointees by his last will and testament. In the event of his death without exercising such power of testamentary appointment his said share, or the balance thereof then remaining, shall be added to and become a part of the share of the trust estate held for the benefit of my niece, Henrietta Morris Bonsal, to be held and disposed of as is herein provided for her said share.'

On August 14, 1953, Gouverneur Morris died, in the state of New Mexico. By his will, which was admitted to probate in Cuyahoga County, Ohio, he sought to exercise the power given by the trust in awarding interests in the income from the trust property to various individuals, and finally the awarding of the corpus to various persons under and upon diverse and various conditions.

It is claimed, among other things, that the power of appointment was not validly exercised, because the estates appointed might not vest within the limitations of the rule against perpetuities; and that, as a result thereof, the share of the corpus of the trust set over to him for appointment must be now added to the Henrietta Morris Bonsal share.

Attention will be first directed to the legal question of whether the period for the rule against perpetuities started to run in 1922, on the effective date of the Schultze trust, or whether it started in 1953, at the time of the death of Gouverneur Morris, at which time the power was sought to be exercised under the terms of his will.

The rule against perpetuities has been codified in this state as follows:

'Sec. 2131.08, R.C. 'No interest in real or personal property shall be good unless it must vest, if at all, not later than twenty-one years after a life or lives in being at the creation of the interest. All estates given in tail, by deed or will, in lands or tenements lying within this state, shall be and remain an absolute estate in fee simple to the issue of the first donee in tail. It is the intention by the adoption of this section to make effective in Ohio what is generally known as the common law rule against perpetuities.'

While this statute was enacted in 1932, and applies to both real and personal property, nevertheless this state has recognized the common law rule against perpetuities as applicable to personal property, and such was the rule both at the time of the creation of the power as well as at the time at which the will became effective. The estate under consideration is treated as consisting entirely of personal property.

Sec. 8622, G.C., which was in effect at the time of the creation of the power, applied only to realty.

The trial court, in a scholarly opinion in which many authorities are cited and discussed, expressed the thought 'that most discriminating treatment from the standpoint of the case law on the subject lies with the conclusion that, in so far as a general testamentary power is concerned, the period provided for by the rule runs from the time of its exercise rather than the date of its creation.'

The court cited the treatises of scholars as well as the case of Miller v. Douglass, 192 Wis. 486, 213 N.W. 320, as authorities sustaining its views. There was also cited Minot v. Paine, 230 Mass. 514, 120 N.E. 167, 1 A.L.R. 365, as an authority holding to the contrary.

No reported Ohio decision has been found in which a determination of this question was essential to the judgment reached. We have, therefore, a legal question of first impression.

We must determine the common law of Ohio in respect to the question before us. Not only the statute, Sec. 2131.08, R.C., requires it, but the case law as well. 9 O.Jur.2d, Common Law, Sec. 1, et seq., and cases therein cited.

For the common law, we must look to that general system of law which prevails and prevailed in England, and in the United States by adoption, and "the best evidence' of what that law is, 'is to be found in the decisions of courts of justice, contained in books of reports, and in the treatises and digests of learned men." Board of Commissioners of Hamilton County v. Mighels, 7 Ohio St. 109, 110, at pages 120-121, quoting Chancellor Kent.

A review of the many cases in sister states, as well as leading articles by men learned in the profession, shows a diversity of thought. We are of the opinion, however, that the weight of authority supports a view contrary to that of the trial court.

In 'The Law of Future Interests,' Simes and Smith, Sec. 1275, the authors speak as follows and cite many authorities in support of their text 'There has been some controversy over the question whether, in determining the validity of an appointment under a general power to appoint by will, the period should be calculated from the creation of the power or from the time of its exercise. The weight of authority in the United States, and, it is believed, the better reason, is in favor of the view that a general power to appoint by will should be treated as a special power in this respect, and that the period should be computed from the time of the creation of the power. It has been argued that, since the donee of a geenral power to appoint by will may appoint to his own estate or to any person for a consideration, he is in substance the owner to almost the same extent as if he had a general power to appoint by deed as well as by will, and that, being substantially the owner, the rule should only apply from the time the power is exercised. It is believed, however, that from a practical standpoint the position of the donee of a general power to appoint by will is very different from that of the donee of a power to appoint by deed. Wills are not, as a rule, commercial transactions. And, the fact that a man has an unrestricted power to appoint property by will does not mean that he is likely to put the property on the market and sell it. * * * The property, during the existence of this power, is, from a practical standpoint, removed from commerce. And it is proper, in determining remoteness, to count the period from the creation and not from the exercise of the power.'

Again, in Gray, The Rule Against Perpetuities (Fourth Ed.), at page 498, may be found the statement that----

'3. The remoteness of an appointment depends on its distance from the creation and not from the exercise of the power.' The author then explains, in Sec. 514, that----

'If this were not the case, estates for life with powers of appointment by will might be created; the tenants for life might appoint for life, with powers to the appointees to appoint by will; these appointees might, in their turn, appoint in the like manner, and so an indefinite series of life estates could be created.'

See also, Sec. 948 et...