Richardson v. Richardson

• Decision Date: 16 July 1948
• Citation: 298 N.Y. 135,81 N.E.2d 54
• Parties: RICHARDSON v. RICHARDSON et al.
• Court: New York Court of Appeals Court of Appeals

298 N.Y. 135

81 N.E.2d 54

RICHARDSON

v.RICHARDSON et al.

Court of Appeals of New York.

July 16, 1948.

Appeal from Supreme Court, Appellate Division, First Department.

Action by Jane C. Richardson against David L. Richardson and another, as trustees under an inter vivos trust agreement made by the plaintiff, to revoke the trust. There was a submission of the controversy on an agreed statement of facts pursuant to the Civil Practice Act, ss 546-548. From a judgment, entered July 3, 1947, on an order of the Appellate Division of the Supreme Court, 272 App.Div. 321, 71 N.Y.S.2d 1, directing judgment in favor of plaintiff, the defendants, by permission of the Court of Appeals, appeals.

Judgment of Appellate Division reversed and judgment directed in favor of defendants. Leonard A. Blue, Albert B. Maginnes, and Hancock Griffin, Jr., all of New York City, for appellants.

William F. Bleakley, Arthur C. Patterson, and Collier Platt, all of New York City, for respondent.

CONWAY, Judge.

There has been submitted to the Appellate Division a controversy upon an agreed statement of facts involving an inter vivos trust which the settlor now seeks to revoke. We must now determine whether a reversion or a remainder was created by the trust instrument.

On September 30, 1924, plaintiff-settlor executed a trust agreement in which she placed securities of substantial value in trust. She was then unmarried and had she died on that date her mother, Irene P. Currier, would have been her sole next of kin. Four days later, on October 4, 1924, she married David L. Richardson. By the terms of the trust instrument the trustees were directed to pay the income to plaintiff for life and ‘Upon the death of the party of the first part (plaintiff), the trust herein provided for, shall cease and determine, and the trustees shall thereupon pay over and deliver the corpus of said trust together with any undistributed income thereon, to such person or persons as the party of the first part may designate by her will, or by instrument executed in accordance with the requirements of the State of New York for a last will and testament, and failing such designation, the trustees shall, upon the death of the party of the first part, turn over the principal of said trust estate, together with any undistributed income thereon to Irene P. Currier, the mother of the party of the first part, if she be then living, and if the said Irene P. Currier be not then living, then said principal shall go to such persons as would be entitled to the same under the intestacy laws of the State of New York.’

Plaintiff's mother died in 1943, leaving plaintiff as her sole next of kin.

On April 3, 1947, plaintiff executed and served a notice of revocation of the trust upon defendants. At that time her husband and three children (aged 21, 18 and 15) were entitled by law to take her property had she then died intestate.

Section 23 of the Personal Property Law, Consol.Laws, c. 41, provides: ‘Upon the written consent of all the persons beneficially interested in a trust in personal property or any part thereof heretofore or hereafter created, the creator of such trust may revoke the same as to the whole or such part thereof, and thereupon the estate of the trustee shall cease in the whole or such part thereof.’

Defendant trustees urge that plaintiff is not the sole person ‘beneficially interested’ in the trust property within the meaning of the statute because she created a remainder to the persons who will be entitled to take her property in the event of intestacy. Plaintiff on the other hand claims that she created only a reversion to herself.

It is now settled that the solution of the problem presented is dependent upon the intention of the settlor as expressed in the trust agreement. Doctor v. Hughes, 225 N.Y. 305, 311, 312, 122 N.E. 221, 222;Whittemore v. Equitable Trust Co. of New York, 250 N.Y. 298, 301-303, 165 N.E. 454, 455, 456;Hussey v. City Bank Farmers' Trust Co., 236 App.Div. 117, 258 N.Y.S. 396, affirmed 261 N.Y. 533, 185 N.E. 726;City Bank Farmers Trust Co. v. Miller, 278 N.Y. 134, 143, 15 N.E.2d 553, 554;Engel v. Guaranty Trust Co. of New York, 280 N.Y. 43, 19 N.E.2d 673;Matter of Scholtz v. Central Hanover Bank & Trust Co., 295 N.Y. 488, 68 N.E.2d 503.

We are here concerned with what is sometimes called the doctrine of ‘worthier title’ as applied to inter vivos transfers. See 3 Restatement, Property, s 314; Wilcoxen v. Owen, 237 Ala. 169, 185 So. 897, 125 A.L.R. 539, 548; 48 Yale L.J. 874; 39 Col.L.Rev. 628, 656, 665. At common law the direction to transfer an interest in land to the heirs of the grantor and as the rule was later extended by the courts, an interest in personalty to the next of kin did not create a remainder in the heirs or next of kin. The direction was disregarded, and it was held that the grantor had expressed merely a reversion to himself. The doctrine arose from the common-law preference to have real property pass by descent rather than purchase. See 3 Restatement, Property, s 314, pp. 1777-1778; 125 A.L.R. 548-553, 558. Although the feudal purposes of the rule have long since disappeared, we stated in Doctor v. Hughes, 225 N.Y. 305, 311, 122 N.E. 221, 222, Cardozo, J. that the rule persisted ‘at least as a rule of construction, if not as one of property.’ We said that the rule survived at least to the extent ‘that, to transform into a remainder what would ordinarily be a reversion, the intention to work the transformation must be clearly expressed.’ In that case we found ‘no clear expression of such a purpose.’ 225 N.Y. at page 312, 122 N.E. at page 222. (Emphasis supplied.)

Later in Engel v. Guaranty Trust Co., 280 N.Y. 43, 47, 19 N.E.2d 673, 675, supra, we said (Loughran, j.): ‘But this rule (as the Doctor and Whittemore cases show) is with us no more than a prima facie precept of construction which may serve to point the intent of the author, when the interpretation of a writing like this trust agreement is not otherwise plain. Inasmuch as for us that rule has now no other effect, it must give place to a sufficient expression by a grantor of his purpose to make a gift of a remainder to those who will be his distributees.’ (Emphasis supplied.)

We have more recently applied the rule in Matter of Scholtz v. Central Hanover Bank & Trust Co., 295 N.Y. 488, 68 N.E.2d 503, supra. There the settlor was a widow whose only child was an adult son, unmarried and without issue. The trust instrument directed the trustee to pay the income to the son for life and on his death to pay the principal to the son's surviving descendants and if none “to transfer, assign and pay over the same to the Settlor's next-of-kin under the laws of the State of New York at the date of her said son's death, per stirpes and not per capita.” 295 N.Y. at page 491, 68 N.E.2d at page 504. It should be noted that the settlor did not reserve to herself any testamentary power of appointment and did not provide for the contingency that her son might predecease her. In construing the language of that trust instrument as creating a reversion rather than a remainder we said (Lewis, J.):

‘We apply here the rule which was decisive in Doctor v. Hughes, supra, 225 N.Y. at page 312, 122 N.E. at page 222: ’* * * that, to transform into a remainder what would ordinarily be a reversion, the intention to work the transformation must be clearly expressed. Here there is no clear expression of such a purpose.'

‘Our decision in the present case is not inconsistent with the rulings in Whittemore v. Equitable Trust Co. of New York, 250 N.Y. 298, 165 N.E. 454, and Engel v. Guaranty Trust Co. of New York, 280 N.Y. 43, 19 N.E.2d 673 where the language of the trusts involved led this court in each instance to conclude that it was the intention of the grantor to create a remainder rather than to reserve a reversion.’ 295 N.Y. at pages 492, 493, 68 N.E.2d at page 505.

Thus direction to transfer trust property to one's next of kin is insufficient in and of itself to create a remainder. There must be additional factors, i. e., other indications of intention in order that there may be found ‘sufficient’ or ‘clear expression’ of intention on the part of the settlor to create a remainder to his next of kin.

In our decisions we have attached considerable importance to at least three factors which are present in the instant case, viz.: (1) that the settlor has made a full and formal disposition of the corpus of the estate, i. e., disposed of the principal on several contingencies other than having it revert to himself, (2) that the settlor has made no reservation of a power to grant or assign an interest in the property in his lifetime, and (3) that he has reserved only a testamentary power of appointment.

In Whittemore v. Equitable Trust Co., of New York 250 N.Y. 298, 165 N.E. 454, three settlors placed property in trust for two named beneficiaries for life, and on their death the trust estate was to be returned to the settlors in equal shares, but if any of the settlors was then dead his or her share was to be paid to his or her appointee by will, or in default of appointment, to such persons as would take in the event such deceased settlor died intestate. Judge Crane writing for the court (and referring to the settlors and life beneficiaries in the singular) pointed out in 250 N.Y. at pages 301-303, 165 N.E. at page 455, 456:

‘Taking this agreement in its simplest form, we have a trust created in personal property for the life of the beneficiary. At the death of the life beneficiary, the trusteeis directed to do one of three things: pay the principal of the estate to the settlor, if he be alive; or, if he be dead, to pay it as directed in the settlor's last will and testament; or, if the settlor leave no will, to pay it to the persons who would then take under the statute of distributions. No provisions is made to pay the principal of the trust estate to the grantee or assignee of the...