Katz v. Katz

• Decision Date: 30 April 1963
• Citation: 190 A.2d 425,104 N.H. 478
• Parties: Samuel KATZ v. William KATZ et al.
• Court: New Hampshire Supreme Court

Page 425

190 A.2d 425

104 N.H. 478

Samuel KATZ v. William KATZ et al.

Supreme Court of New Hampshire.

Argued Feb. 6, 1963.

Decided April 30, 1963.

Chretien & Chretien and Emile R. Bussiere, Manchester, for plaintiff, Samuel Katz.

Devine, Millimet, McDonough, Stahl & Branch, J. Murray Devine, Manchester, for defendant, William Katz.

McLane, Carleton, Graf, Greene & Brown and G. Marshall Abbey, Manchester, for intervenors, Paul George Katz and Ruth Frances Katz Honig.

LAMPRON, Justice.

Joseph and Libby Katz, father and mother of Samuel and William, were the settlors of an inter vivos trust, created June 4, 1940, of which William Katz was named the sole trustee. The entire corpus of this trust consisted of real estate situated mainly in Manchester and much of which was in a dilapidated condition and substandard.

From the net income the trustee was to pay Joseph and Libby and the survivor a minimum of $25 per week. The remaining income accruing during the first three years was to be applied as it accrued toward the reduction of existing mortgages on the trust real estate. At the end of that period, the income above the weekly payments to the settlors was to be divided quarterly, or more often if convenient, between William and Samuel in the proportion of 3/5 (60%) to William and 2/5 (40%) to Samuel.

Paragraph 3 of the trust indenture provided that 'If Samuel Katz should marry a woman who is not of Jewish faith and religion, then this interest in this trust shall thereupon cease entirely and forever' and pass forthwith to William or his representatives.

Paragraph 4 provided that at the death of the survivor of William and Samuel the trust was to terminate and the trustee was to convey 3/5 of all trust properties then held to whomsoever William by his will should appoint, and in default of such appointment, to his lawful issue. If Samuel died leaving lawful issue born of a wife of the Jewish faith and religion, 2/5 of the trust properties was to go similarly to his appointee or to his lawful issue. If Samuel died without such issue, his share was to go to William, if living, otherwise to his appointee or lawful issue.

Paragraph 6 provided that 'At the end of fifteen years from date, the Trustee may in his discretion convey absolutely free from this trust such of the trust properties as he sees fit to William Katz and Samuel Katz (subject to paragraph 3).' Any such distribution is to be made on the basis of 3/5 to William and 2/5 to Samuel and in case of their prior decease the distribution is to be made to the persons provided for in paragraphs 3 and 4.

Paragraph 13 provided that 'At any time after three years from date, both William Katz and Samuel Katz may elect not to receive all or any part of the net income of this trust which may be due thereunder in order that it may be applied toward the reduction of any existing mortgages on any real estate owned by the trust.'

Samuel is about sixty years of age and was never married. William is about sixty-three and has two children, the intervenors in this case. There is no issue with respect to the identity of the property in the trust or concerning the weekly payments to the settlors, Joseph and Libby, who are now both deceased.

The master found that there was an oral agreement between William and Samuel to terminate the trust after 15 years which taken together with William's testimony expressing his continued willingness to terminate constituted an election by him to terminate the trust in accordance with paragraph 6 thereof.

The master ordered that the ensuing distribution be made as follows: having found that William had already received a net distribution of $107,422.83, the master decreed that it will be necessary to distribute a total of $179,038.05 (the net distribution received by William being 60% of that total amount) in order to give Samuel the 40 per cent of the total distribution to which he is entitled, which amounts to $71,615.22. As Samuel has already received $10,664.36, the balance due him is $60,950.86.

The master awarded to William compensation as trustee in the amount of $14,760 for the period from June 4, 1943 to December 31, 1948 in accordance with the terms of two written agreements between the interested parties. He disallowed all compensation for the period from January 1, 1949 to December 31, 1955; the amount disallowed is $27,240. The master allowed for the period from January 1, 1956 to December 31, 1959 (the end of the period covered by the hearings) compensation in the sum of $12,480 and disallowed the greater amount claimed.

The master recommended that William be removed as trustee, he recommended Samuel, and the children of William, Ruth and Paul, as successor trustees and that, in case of objection to their appointment, a neutral person by considered by the Court.

Defendant William and the intervenors, Paul and Ruth, objected to these findings, rulings and recommendations made by the master, to their acceptance by the Court and to the Court's decree in accordance therewith.

We will consider first the master's ruling that the trust be terminated in accordance with the election of the trustee, William, under paragraph 6 of the trust instrument. This paragraph provided that 'At the end of fifteen years from date the Trustee may in his discretion convey absolutely free from this trust such of the trust properties as he sees fit to William Katz and Samuel Katz (subject to paragraph 3)'.

This ruling resulted from the following findings made by the master which were warranted by the evidence: 1) 'There was an oral agreement between William Katz and Samuel Katz that the income was in general to be retained in the trust to pay the mortgages during the first fifteen years, at the end of that time, that is, in 1955 or thereafter, the trust would be terminated and a division made.' An election by both William and Samuel not to receive the income due them and to apply it toward the reduction of trust mortgages was authorized by paragraph 13 of the indenture. 2) 'Samuel Katz relied on William's promise that he would terminate the trust, and allowed his money to be left in the trust, to be used to pay mortgages and improve the real estate being unaware of the extent to which money was being withdrawn by William Katz.' 3) 'William Katz has expressed a willingness to terminate the trust at this time or to have it terminated by the Court.'

The main arguments advanced by the defendants against the order for termination of the trust are that it frustrates the intention of the settlors as expressed in the trust instrument and amounts to an exercise by the Court of the discretion which is reserved to the trustee.

It is well established law in this jurisdiction that our courts have shown a signal regard for the intention of the parties to an instrument, be they the settlors of a trust, the parties to a conveyance or a testator. Merchants National Bank v. Curtis, 98 N.H. 225, 230, 97 A.2d 207; Citizens Nat. Bank v. St. Peters Lodge, 102 N.H. 352, 355, 156 A.2d 758. We cannot subscribe, however, to the proposition that a termination of the trust in this case by discretion of the trustee in accordance with paragraph 6 would frustrate the intent of the settlors.

William argues in his brief that the trust instrument has as an ultimate material purpose to keep the trust property within the family line and that every provision of the trust is tailored to effect this object. He argues further that by making the trustee's power to terminate under paragraph 6 subject to the provisions of paragraph 3 the settlors intended Samuel to have no absolute interest in the trust corpus unless he should first have married a Jewish wife.

The trust by its own terms is not that tightly insulated against its corpus going outside the family line. Under paragraph 4 if Samuel dies leaving no issue born of a wife of Jewish faith and religion his interest is to pass to William if living, otherwise to whomsoever William by his will appoints and in default of such appointment to his issue. This same paragraph provides that William's share at his decease is to go to his appointee or to his issue in default of an appointment. William's power of appointment is so general that his share and all of the trust corpus remaining at the decease of the survivor of William and Samuel could go to persons who are not members of the Katz family or of the Jewish faith. Restatement, Property, s. 356; 41 Am.Jur., Powers, s. 4, p. 808; See Fiske v. Warner, 99 N.H. 236, 237, 109 A.2d 37.

Furthermore the contention that Samuel cannot have an absolute interest in the trust corpus unless he has first married a Jewish wife would emasculate William's right, during Samuel's life, to terminate the trust in his discretion which is specifically granted to him in paragraph 6 of the indenture. Consequently a termination of the trust by William in accordance with the provisions of paragraph 6 could not be said to thwart the purposes expressed by the settlors in the trust instrument. In re Simard Estate, 98 N.H. 454, 456, 457, 102 A.2d 508.

It is also well settled law in this jurisdiction, as argued by the defendants, that while the exercise of discretion granted to a trustee is subject to court supervision, his discretion can in no sense be exercised for him by the court. Woodward v. Jolbert, 94 N.H. 324, 326, 52 A.2d 641; Hanford v. Clancy, 87 N.H. 458, 460, 183 A. 271; Hills v. D'Amours, 95 N.H. 130, 139, 59 A.2d 551; Athorne v. Athorne, 100 N.H. 413, 418, 128 A.2d 910.

The record reveals that the master was aware of this principle of law and acted accordingly. He stated during the hearings 'As I understand the Trust, I have no power in this case to terminate the Trust.' The language of his finding and ruling is to the same effect. 'It is, therefore, found that the oral agreement, together with William Katz's testimony, is an election to terminate the trust, as he was empowered to...