Commercial Trust Co. of N.J. v. Millard

• Decision Date: 10 June 1937
• Parties: COMMERCIAL TRUST CO. OF NEW JERSEY et al. v. MILLARD et al.
• Court: New Jersey Court of Chancery

193 A. 814

122 N.J.Eq. 290

COMMERCIAL TRUST CO. OF NEW JERSEY et al.

v. MILLARD et al.

Court of Chancery of New Jersey.

June 10, 1937.

Suit by the Commercial Trust Company of New Jersey and another, as trustees under a deed of trust, against James C. B. Millard, as executor of and trustee under the will of Jay Gould, deceased, and others.

Decree for defendant.

McCarter & English, of Newark, for complainant S. Neilson Rice. J. Fisher Anderson, of Jersey City, for complainant Commercial Trust Co. of New Jersey. Edward S. Sanford, of Newark, guardian ad litem for Jay Gould, Jr., solicitor pro se. Harrison & Roche, of Newark, for defendant Anne Gould Strotz et al. Knowles & Hack, of New York City (W. Durward McCloskcy, of Lakewood, of counsel), for defendant James C. B. Millard, executor of Gould's Estate.

KAYS, Vice Chancellor.

On October 19, 1922, Jay Gould entered into a trust agreement with Commercial Trust Company of New Jersey and S. Neilson Rice as trustees. This agreement was amended on November 10, 1922. (It is not necessary to set out the entire provisions of these trust agreements for the purposes of this case.) By this trust Jay Gould reserved the right to receive the income of the funds set up during his lifetime. Upon his death the principal of the trust fund was to be paid to the lawful descendants of the said Jay Gould as designated by his will or, if he failed to so designate, then the fund was to be paid to his descendants per stirpes and not per capita. Mr. Gould died January 26, 1935, testate, a resident of Ocean county, N. J., where his will was probated. He did not exercise the power of designation in his will, as he had the right to do under the trust agreement. The trust fund, therefore, vested at his death in his three children, Eleanor Gould Stevens, Anne Gould Meador, and Jay Gould Jr. The trust agreement also provided that Jay Gould might by will charge the trust fund with the payment of the income or any part thereof for the use and benefit of his wife during her lifetime or for any shorter period. This power, under the trust agreement, was exercised by him under paragraph 9 of his will as follows: "* * * I hereby charge the principal of the trust fund created in and by said agreement, with the payment of the entire income therefrom, accruing thereon, after my death, for the use and for the benefit of my wife, Anne G. Gould during her life, and I direct that all the said income from the principal of said trust fund be paid to her accordingly." Anne G. Gould is now Anne Gould Strotz. It therefore appears that the trust fund set up by Jay Gould in 1922 reserved to himself the income for life, and after his death by his will the income to his wife, now Anne Gould Strotz, with vested remainders in the principal of said trust fund in his three children, Eleanor Gould Stevens, Anne Gould Meador, and Jay Gould, Jr. Jay Gould by his will made certain cash bequests aggregating $30,000 and set up two trust funds of $50,000 each to Margaret and Peggy May McGrew. The will also set up a trust fund with respect to stock of the Furlow Development Company, made specific bequests of his household goods, furniture, and personal belongings, and left the residue of his estate in trust for his wife for life with remainder to his children.

The complainants filed the bill in this case praying for instructions as to their duties as trustees under the deed of trust dated October 19, 1922, as amended, relative to the payment of the federal estate taxes and the New Jersey inheritance and transfer taxes which have been assessed against the estate and for which the executor under the will of said Jay Gould has demanded payment of the trustees in writing. The demand made by the executor is for the payment of the portion of said taxes which may be assessed against the principal of the trust fund in the hands of the trustees. The bill also asks for instructions as to the method, manner, and source of payment of said taxes against the various rights, titles, and interests of the estate. The taxing authority of New Jersey included, in the gross estate of the said decedent, the principal of the trust fund amounting to $1,126,174.78 and fixed the inheritance tax at $45,101.12, and on said fund a compromise tax on the contingent legacies of $2,719.38, making a total of $47,820.50. It was estimated at the hearing that based on the values placed by the New Jersey taxing authorities the federal tax would amount to about $188,000.

The will of Jay Gould contained the following clause, the effect of which clause is important in this case, to wit: "Eighteenth: I direct that all transfer, inheritance and estate taxes which may be imposed upon my estate be paid out of the principal of my residuary estate." It might also be well to mention here that the fourteenth clause of the trust agreement provided as follows: "Fourteenth: It is the intention of the parties hereto that this instrument and all questions as to the construction, validity, effect and administration thereof shall be governed by the laws of the State of New York."

It is contended by the executor, and not seriously disputed by the other parties to this suit, that if the executor must pay the transfer inheritance taxes and...