Guar. Trust Co. of New York v. New York Trust Co.

• Decision Date: 02 July 1947
• Citation: 297 N.Y. 45,74 N.E.2d 232
• Parties: GUARANTY TRUST CO. OF NEW YORK v. NEW YORK TRUST CO. et al.
• Court: New York Court of Appeals Court of Appeals

297 N.Y. 45

74 N.E.2d 232

GUARANTY TRUST CO. OF NEW YORK

v.NEW YORK TRUST CO. et al.

Court of Appeals of New York.

July 2, 1947.

Appeal from Supreme Court, Appellate Division, Second Department.

Action by Guaranty Trust Company of New York as trustee under a deed of trust dated February 14, 1916 against New York Trust Company as executor and trustee under the will of Cornelius J. Sullivan, deceased, and others to settle an account and for judgment declaring the rights of defendants to principal of the trust upon termination of the life interest therein. From a judgment of the Appellate Division of the Supreme Court in the second judicial department, 270 App.Div. 937, 62 N.Y.S.2d 845, entered May 23, 1946, affirming so far as appealed from a judgment of the Supreme Court in favor of plaintiff and Helen Sullivan and others entered in Westchester County upon a decision of an official referee, J. Addison Young, defendants appeal by permission of Court of Appeals.

Affirmed. Chester Bordeau, of New York City, for New York Trust Co., as executor and trustee under the will of Cornelius J. Sullivan, deceased, appellant.

John Lane and Gerald Donovan, in pro. per., George W. Bacon and Edward A. Silliere, both of New York City, for Gerald Donovan and another, as executors of Mary Sullivan, deceased, appellants.

Eli Whitney Debevoise and Harold C. Jesse, both of New York City, for respondents.

FULD, Judge.

This appeal presents a controversy as to persons entitled upon termination of a life interest to receive the principal of an inter vivos trust set up under a trust agreement executed on February 14, 1916, by two attorneys at law, Cornelius J. Sullivan and Paul M. Herzog.

It is conceded by all the parties that the life beneficiary of the trust one Blanche Malli had, or claimed to have, a cause of action against an undisclosed client of Sullivan, that the trust was created solely for the purpose of freeing him from annoyance by the beneficiary, and that he the undisclosed client was the original owner and source of the securities which formed the corpus of the trust as created.

The trust agreement provides that, upon the death of the life beneficiary, the principal is to be paid over to Sullivan, if living, or to such person as he may nominate in a specified manner; if, at his death there has been no such nomination, then the principal shall pass ‘to such person or persons as may be entitled to receive the same as specific or residuary legatees under the Last Will and Testament of the said nominator, and in default of any such Last Will and Testament, then to such of the next of kin of said nominator as would be entitled to receive the same under the statute of distributions of the State of New York if the said principal had been owned by him at the time of his death intestate with respect thereto.’

The beneficiary is still alive. Sullivan, however, died in April, 1932, survivied by his widow and his four sisters. By his will, he left his residuary estate ‘including all property over which I may have or hereafter acquire power of appointment’ to his executor upon a trust made dependent upon the lives of his widow and his youngest surviving sister.

The courts below have held the residuary clause of Sullivan's will invalid to the extent that it suspends for three lives in being the absolute ownership of the principal of the inter vivos trust, Personal Property Law, Consol. Laws, c. 41, s 11. It is now urged that Sullivan, as creator of the trust, retained a reversionary interest in the corpus. If that be so, the residuary clause incorporating that reversion in a testamentary trust must, of course, be considered separate and apart from the inter vivos trust agreement, and hence, would not entail an unlawful suspension of absolute ownership. New York Life Insurance & Trust Co. v. Cary, 191 N.Y. 33, 83 N.E. 598.

The claim advanced must be rejected. Section 39 of the Real Property Law, Consol. Laws, c. 50, contains the statutory definition of reversion, which also applies with equal force to personal property. Personal Property Law, s 11; see Davies v. City Bank Farmers Trust Co., 248 App.Div. 380, 288 N.Y.S. 398. That section declares: ‘A reversion is the residue of an estate left in the grantor or his heirs, or in the heirs of a testator, commencing in possession on the determination of one or more particular estates granted or devised.’ At its inception, then, ownership of a reversion must remain in the grantor or testator or in those who take from him by descent since it can arise only in the hands of the original owner; a reversion, by definition, cannot be created by an instrument purportedly conveying or transferring it to another.

Any conclusion, therefore, that Sullivan's interest in the trust corpus constituted a reversion must necessarily depend, in the first instance, upon a determination that he was a ‘grantor’ or ‘testator’ within the...