Connor v. Hart

• Decision Date: 10 December 1968
• Citation: 253 A.2d 9,157 Conn. 265
• Court: Connecticut Supreme Court
• Parties: Jean M. CONNOR et al., Executors (ESTATE of Ida E. McKINNEY) v. Sarah G. HART et al.

Page 9

253 A.2d 9

157 Conn. 265

Jean M. CONNOR et al., Executors (ESTATE of Ida E. McKINNEY) v. Sarah G. HART et al.

Supreme Court of Connecticut.

Dec. 10, 1968.

Francis J. McNamara, Jr., and John F. Spindler, Stamford, with whom, on the brief, was Gayle B. Wilhelm, Stamford, for plaintiffs.

Palmer S. McGee, Jr., Hartford, with whom was Charles W. Page, Hartford, for defendant Oakwood School, Inc., and others.

Alexander M. Hart, with whom was Marcia B. Smith, Torrington, for named defendant, and others.

William J. Murray, Stamford, pro se as guardian ad litem; with him, on the brief, was John P. Bigda, Bristol, for defendant Alexander R. Hart, and others.

F. Michael Ahern, Asst. Atty. Gen., appeared for defendant Robert K. Killian, attorney general.

Before KING, C.J., and ALCORN, HOUSE, THIM, and RYAN, JJ.

KING, Chief Justice.

This is an action seeking advice as to the trustees' powers in the administration of a testamentary trust, hereinafter referred to as the Oakwood trust, which was created for the benefit of the Oakwood School, Inc., in subdivision I of paragraph second of the second codicil to the will of Ida Ethelyn McKinney, deceased. Each defendant admitted the allegations of the complaint, and, on the resulting agreed statement of facts, the parties stipulated for advice in the form of answers to two stated questions.

Miss Mckinney, a spinster, died on June 18, 1964, a resident and domiciliary of Greenwich, leaving a gross estate in excess of thirteen million dollars. Her will, dated March 14, 1955, and three codicils thereto, respectively dated December 7, 1956, October 5, 1959, and January 27, 1961, were duly admitted to probate by the Probate Court for the district of Greenwich on June 23, 1964, and on the same date the plaintiffs Mrs. Jean McKinney Connor, who was the testatrix' niece, next of kin and sole heir at law, and the First National City Bank were approved and duly qualified as coexecutors of the will and codicils.

On July 30, 1964, the plaintiffs Jean McKinney Connor, the First National City Bank, and Howard S. Tuthill were appointed trustees of what will be referred to as the Connor trust, which was created under Article Eleventh of the will itself.

The will, in Article Eleventh, provided that the residue of the estate, which constituted its major portion, should be held in trust for the Connor family, which now consists of Mrs. Connor, the defendant Mrs. Sara G. Hart, who is Mrs. Connor's only child, and the defendants Alexander Rene Hart, born May 25, 1965, and Bret Gordon Hart, born March 5, 1967, children of Sara G. Hart. Each of the foregoing members of the Connor family is, in one way or another, an actual or potential beneficiary of the Connor trust.

The first and third codicils are not, and are not claimed to be, material in the determination of this controversy and need not be specifically discussed. The second codicil is material. It revokes Article Eleventh of the will and provides, in a substitute Article Eleventh, that one-third of the residue should be severed and separately established as the Oakwood trust, leaving the balance (two-thirds) of the residue for the Connor trust. It is provided that this Oakwood trust is to run for a period of twenty years and one month from the date of the testatrix' death, that during that period 'the net income' shall be paid to the Oakwood School, Inc., hereinafter referred to as Oakwood, and that at the end of that period the corpus shall be returned to, and become a part of, the residue and thus in turn become a part of the Connor trust corpus. It was further provided that if Oakwood should, during the duration of the trust of which it is the beneficiary, cease to exist or function as an educational institution, the trustees should have the power to pay the net income of the Oakwood trust to such tax-exempt charitable institutions as the trustees 'in their absolute discretion shall select and determine'. See General Statutes § 45-80.

Oakwood is an educational institution located in Poughkeepsie, New York, and for well over a century has been owned and operated as a Quaker school although it accepts pupils of any religious persuasion. There is no claim by anyone that Oakwood, as an institution, does not qualify as a charity under the Internal Revenue Code.

The claim of the executors for the deduction, as a charitable gift, of the discounted value, computed to amount to over two million dollars, of the Oakwood trust income was, however, disallowed, in toto, by the District Director of Internal Revenue at Hartford, on September 15, 1967, in a communication stating that '(t)his (Oakwood) bequest is not allowable as a charitable deduction under Section 2055 of the (Internal Revenue) Code as charity's interest is not presently ascertainable and hence not severable from the non-charity interest.' See Int.Rev.Code of 1954 § 2055 (26 U.S.C. § 2055). The claim that the discounted value of the Oakwood interest is not ascertainable seems to be wholly predicated on certain discretionary powers given the trustees which the beneficiaries of the Connor trust claim would permit the trustees to increase or decrease, in their discretion, the net income which would otherwise be distributed to Oakwood during the term of the trust.

The testatrix provided that, if for any reason it should be determined in the federal tax proceedings in her estate that the Oakwood trust would not qualify for a charitable deduction, that trust should terminate and the corpus should pass to the Connor trust as though it had originally formed a part of the corpus of that trust. Thus, if the ruling of the District Director stands, Oakwood receives nothing, and the Connor trust is left as it would have been had the Oakwood trust not been created.

The plaintiffs instituted this action, making the beneficiaries of the Connor trust and the Oakwood trust parties defendant and seeking a construction of the pertinent provisions of the will and the second codicil to determine whether, as the District Director claims, Oakwood's discounted interest is unascertainable and thus not deductibe. The attorney general was made a party defendant because of his duty, under § 3-125 of the General Statutes, to 'represent the public interest in the protection of any gifts, legacies or devises intended for public or charitable purposes'.

The parties defendant also included a guardian ad litem appointed to represent the interests of the two minor children of Sara G. Hart and of persons not in being or not ascertained who may have any interest in the construction of the will and codicils.

All parties stipulated that this court be requested to answer, on the basis of the admitted allegations of the complaint, the two following questions:

'(a) Did Miss McKinney intend by the provisions of her Will, as amended by its Codicils, to authorize her Executors and Trustees to exercise any or all of the powers, authorities and discretions conferred upon them thereunder, for the purpose or with the effect of materially altering the value of the respective beneficial interests of the income beneficiary and remaindermen in the Oakwood School Trust, to the detriment of the income beneficiary?

'(b) May the Executors and Trustees exercise the powers, authorities and discretions conferred upon them by the Will, as amended by its Codicils, in such a manner as would deprive Oakwood School, Inc. of substantially that degree of beneficial enjoyment of the Oakwood School Trust property which the principles of the law of trusts accord to a person who is unqualifiedly designated as the income beneficiary of a trust?'

The attorney general, Oakwood, and Smith College (made a party defendant as a remote, contingent beneficiary of any residue not effectually disposed of) each claim that both questions should be answered in the negative. The other defendants, beneficiaries of the Connor trust, claim that each question should be answered in the affirmative.

Of course, the taxability of the Oakwood trust bequest is a matter which, if contested, must ultimately be determined by the federal courts. But in this particular case taxability will almost certainly depend on the powers, in the light of Connecticut trust law, accorded the trustees with respect to the management of the Oakwood trust, and especially the power given in paragraph 13 of Article Sixteenth of the original will. These powers may properly be determined by this court as a matter of construction of a Connecticut trust. Where, as here, there is an adversary proceeding prosecuted in good faith, we should expect that our decision would be accepted by the feceral taxing authorities, as well as by the federal courts as a correct determination of Connecticut law. See cases such as Commissioner of Internal Revenue v. Estate of Bosch, 387 U.S. 456, 465, 87 S.Ct. 1776, 18 L.Ed.2d 886; Doty v. Commissioner of Internal Revenue, 148 F.2d 503, 505 (1st Cir.); Old Colony Trust Co. v. Silliman, 352 Mass. 6, 8, 223 N.E.2d 504; Industrial National Bank of Rhode Island v. Rhode Island Hospital, 99 R.I. 289, 293, 207 A.2d 286.

It will be recalled that the will itself, in Article Eleventh, made the entire residue the corpus of the Connor trust and that the second codicil revoked Article Eleventh of the will and made a new, substitute disposition of the residue. Subdivision I of the substitute Article Eleventh provided that one-third of the residue should form the Oakwood trust, and subdivision II provided that the balance (two-thirds) of the residue should form the Connor trust.

Article Sixteenth of the will conferred upon the trustees broad powers of administration of any trusts including, in paragraph 13 of that Article, the powers 'in their sole discretion' to determine what shall constitute gross and net income and what shall constitute principal and to allocate any charge to principal or to income or partly to each. It is probably this paragraph...