Marx v. Rice.

• Decision Date: 10 June 1949
• Docket Number: No. 158/335.,158/335.
• Parties: MARX et al. v. RICE.
• Court: New Jersey Superior Court

67 A.2d 918

MARX et al.

v.RICE.

No. 158/335.

Superior Court of New Jersey.Chancery Division.

Decided June 10, 1949.

Suit by Abram D. Marx and others against Alexander S. Rice, individually and as surviving administrator cum testamento annexo of the estate of Bernard Strauss, etc., and others, wherein Robert Herzog and others filed a counterclaim raising the issue whether the exercise of a testamentary power of appointment violated the rule against perpetuities.

Judgment in accordance with opinion.

Aaron Marder, Newark, for the plaintiffs.

Hannoch & Lasser, Newark (Herbert J. Hannoch, Newark) for the defendants.

John G. Flanigan, Jersey City, for defendants-counterclaimants.

FREUND, J.S.C.

The defendants, Alexander S. Rice, individually and in his representative capacity on behalf of the estates of Bernard Strauss and Florence R. Strauss, and others moved for summary judgment in their favor on the counterclaim filed by the defendants-counterclaimants, Robert Herzog et als. With the exception of the question of perpetuities, the counterclaim sets up the same allegations and seeks the same relief as did the complaint filed by the plaintiffs. The complaint was stricken by orders of the Court of Chancery, Marx v. Rice, 142 N.J.Eq. 315, 60 A.2d 61 (Ch.1948), affirmed on appeal by the Supreme Court, 1 N.J. 574, 65 A.2d 48, 52 (1949). On the appeal, the defendants-counterclaimants petitioned and were granted leave to intervene, argue and file a brief. The present motion to strike the counterclaim was initiated while the appeal was pending, and because of the identity of issues I deferred decision until after the Supreme Court had made its determination. The defendants have renewed their motion to strike and the counterclaimants have moved to amend in particulars hereafter to be discussed.

I.

The remaining issue raised by the counterclaim to be determined on this motion concerns the rule against perpetuities. The facts are detailed in the opinion of the Supreme Court. For the purposes of this decision, the following are pertinent: Bernard Strauss died July 5, 1906, survived by his widow Florence, who died January 31, 1918, and their son, Irving, who died October 9, 1947, without issue. By his will, Bernard bequeathed and devised one-half of his estate to his widow absolutely and the other one-half to his son, Irving, for life. He provided that if Florence should predecease their son and if he died without issue, which happened, then he bequeathed and devised the remainder ‘to such person or persons as my said wife, Florence, shall by her last will and testament appoint and, in case she shall fail to make such appointment’, then to his heirs and next-of-kin. By her will, Florence Strauss exercised the power of appointment, by appointing her executors upon certain trusts. The Supreme Court declared her power of appointment to be general and that, although exercised by placing the property in trust, it was, nevertheless, valid, because ‘unless the doner manifests a contrary intent, the donee of a general power of appointment may make appointments in trust. * * * We perceive no manifestation of a contrary intent in the will presently before us.’

The counterclaimants argue, however, that the exercise of the power by Florence R. Strauss was in violation of the rule against perpetuities because the life in being specified in the will of Bernard Strauss was that of his son, Irving; that all interests must vest within twenty-one years after his death and that Florence Strauss extended the vesting of the estate beyond the life of Irving and twenty-one years thereafter. The defendants argue that Irving's is not the sole life to be considered in measuring the period under the rule; and that all the interests in Bernard's estate will necessarily vest before the expiration of the period interdicted by the rule against perpetuities.

The familiar rule against perpetuities is that all future interests, legal or equitable, must vest, if at all, within the term measured by the life or lives of a person or persons in being at the time of the creation of the interest and twenty-one years thereafter. It is the possibility that the period may be exceeded, and ‘not the certainty or even probability that it will be exceeded, in a given trust, which calls for the application of the rule.’ Graves v. Graves, 94 N.J.Eq. 268, 120 A. 420, 423 (Ch.1922); McGill v. Trust Company of New Jersey, 94 N.J.Eq. 657, 121 A. 760 (Ch.1923), affirmed 96 N.J.Eq. 331, 125 A. 108 (E. & A.1924); First Camden Nat. Bank & Trust Co. v. Collins, 114 N.J.Eq. 59, 168 A. 275 (E. & A.1933); Camden Safe Deposit & Trust Co. v. Scott, 121 N.J.Eq. 366, 189 A. 653, 110 A.L.R. 1442 (E. & A.1936).

The nature of a power of appointment is thus described in Restatement, Property, Introductory Note, Topic 2, Chapter 27, Page 2294: ‘The power of appointment is a hybrid between concepts of agency and concepts of property. To the extent that a power of appointment has been thought of as a mere authority to act for the donor in the completion of a disposition initiated by the donor, the agency factor has dominated and the doctrine of ‘relation-back’ has been applied. To the extent, however, that a power of appointment has been thought of as giving to the donee a control over the appointive assets which is the substantial equivalent of ownership, the property factor has dominated, and the validity of an attempted exercise of a power has been determined as if it had been a disposition by the donee of his owned assets.'

Whenever such a power is in fact exercised, the validity of the appointment is determined by precisely the same rule as if the original testator, who created the power, had in his own will the same provision in favor of the same appointee. The donee of the power takes from the donor, the original testator, from the date of his death. With reference to the rule against perpetuities, the remoteness of an appointment depends on its distance from the creation and is to be measured or computed from the date of the death of the testator, and not from the exercise of the power. Ogden v. McLane,73 N.J.Eq. 159, 67 A. 695 (Ch.1907); Camden Safe Deposit & Trust Co. v. Scott, supra; Central Hanover Bank & Trust Co. v. Helme, 121 N.J.Eq. 406, 190 A. 53 (Ch.1937), and cases therein cited; Minot v. Paine, 230 Mass. 514, 120 N.E. 167, 1 A.L.R. 365 (Mass.Sup.Ct.1918); Fiduciary Trust Co. v. Mishou,321 Mass. 615, 75 N.E.2d 3 (Mass.Sup.Ct.1947); Bartlett v. Sears, 81 Conn. 34, 70 A. 33 (Conn.Sup.Ct.1908); Mifflin's Appeal, 121 Pa. 205, 15 A. 525,1 L.R.A. 453, 6 Am.St.Rep. 781 (Pa.Sup.Ct.1888); In re Warren's Estate,320 Pa. 112, 182 A. 396, 104 A.L.R. 1345 (Pa.Sup.Ct.1936); Gray, Perpetuities, 4th Ed., Sec. 473, 474.2, 526, 963; Notes, 1 A.L.R. 374;101 A.L.R. 1282; 104 A.L.R. 1352.

In the application of the rule to a general testamentary power, Restatement, Property, Sec. 392, declares:

‘An appointment under * * * a general testamentary power * * * is invalid, because of the rule against perpetuities, only to the extent, that its limitations

‘(a) construed in the light of the circumstances existent when the power is exercised, but

‘(b) measured for the purpose of applying the rule against perpetuities, from the time when the power was created, violate that rule.’

The affidavits on the motion for summary judgment disclose that all of the cestuis of the trust established under the exercise of the power of appointment by Florence R. Strauss were alive at the time of the death of the donor. Mrs. Strauss set up two funds, one for $10,000 and the other for $24,000. With respect to the $10,000 fund, she directed that the income be paid to Marian D. Marx for life and upon her death the fund be distributed between her two daughters, Paula and Fannie, with a proviso that if Paula should not be married, then two-thirds was to be paid to her and one-third to Fannie; but if Paula were married, then the fund was to be shared equally between them. Marian D. Marx died on September 15, 1946, having predeceased Irving. At the time of her death, both her daughters were married; they are still living. The counterclaimants contend that the contingency of the marriage of Paula invalidates the bequest. The contention is without merit because the fact of marriage did not affect the vesting of the interest in the appointees, but merely the extent of the interest.

The fund of $24,000 was thus disposed of: income to be paid to Moses Strauss for life and upon his death, the corpus to his children, Isidore, Daniel and Paula, in equal shares. Moses, the life tenant, predeceased Irving, having died September 25, 1926. He was survived by his three children, who are still living.

The residue of the property Florence R. Strauss directed to be sold and the proceeds divided into four equal shares, to be held in trust as follows: One share was set aside for the benefit of Bertha J. F. Rice and Joseph Rice, her son; one-third of the income was to be paid to Bertha and the remaining two-thirds to Joseph, and upon the remarriage or death of Bertha, the corpus of said share with accumulations thereon was to be paid to Joseph. Bertha died in 1942, survived by her son, Joseph, who is still living. As to the other three shares, the net income to Alexander S. Rice, Rose R. Seigel and Leah R. Fuld so long as they may live and until the death of the last survivor of them; and upon the death of the last survivor, the trust estate to be distributed in equal proportion among the children of Rose and Leah per capita. Alexander S. Rice and Leah R. Fuld are living. Rose R. Siegel died on November 9, 1933, survived by two daughters, Helen S. Simpson and Alice R. Hannoch, who are still living. Leah R. Fuld, a widow, now about 76 years of age, has two children Abram L. Fuld and Florence F. Vogel. Abram absconded about December 20, 1928 and his present whereabouts are unknown Florence F. Vogel is living. All of the...