Second Bank-State St. Trust Co. v. Second Bank-State St. Trust Co.

• Decision Date: 06 February 1957
• Docket Number: BANK-STATE
• Citation: 335 Mass. 407,140 N.E.2d 201
• Parties: SECONDSTREET TRUST CO. et al., executors, v. SECONDSTREET TRUST CO., trustee, et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 201

140 N.E.2d 201

335 Mass. 407

SECOND BANK-STATE STREET TRUST CO. et al., executors, v. SECOND BANK-STATE STREET TRUST CO., trustee, et al.

Supreme Judicial Court of Massachusetts, Suffolk.

Argued Dec. 4, 1956.

Decided Feb. 6, 1957.

William Minot, Boston, for plaintiffs.

Richard Wait, Boston, for defendants.

Henry Parkman, Jr., Boston, for defendant guardian ad litem.

Before WILKINS, C. J., and RONAN, WILLIAMS, COUNIHAN and CUTTER, JJ.

CUTTER, Justice.

This is a bill for declaratory relief and for an accounting brought by the executors of the will of Allan Forbes (hereinafter called the settlor), late of Westwood, against the sole remaining trustee and certain beneficiaries under a declaration of trust, known as the Lonach trust, executed by the settlor May 8, 1930. A guardian ad litem was appointed to represent beneficiaries unascertained and undeterminable. The various defendants filed answers admitting the allegations of fact in the bill. A single justice of this court, without decision, reported and reserved the case on the pleadings, 'such decree to be entered as justice and equity require.'

On May 8, 1930, the settlor transferred certain securities to himself ¹ and a bank in trust to pay the income to the settlor for life and thereafter to the settlor's wife, Josephine, for life. Paragraph Third of the instrument provides in part: 'After the decease of both the' settlor and 'Josephine, the said trust estate shall be held in trust for the benefit of the children of the said Allan, and the issue of any child who may have deceased, each child to receive an equal share of the net income therefrom during his or her life. The share of any child who shall die leaving no issue surviving him or her shall be held in trust for the equal benefit of the surviving children of the said Allan, and the issue of any deceased child, taking by the stocks; and the net income therefrom shall be paid over equally to such surviving children during their lives, and to the issue of any deceased child, such issue taking their parents' share. If any child of the said Allan shall die leaving issue, his or her share shall be held in trust for the benefit of such issue, and the net income therefrom paid over to such issue, per stirpes, or to their legal guardian or guardians, until the termination of this trust. At the expiration of twenty-one years after the death of the last survivor of the children of the said Allan, this trust shall terminate, and the trust estate shall then be distributed among such issue, per stirpes, and not per capita; and until the termination of this trust, the trust estate shall be held together, and administered as one trust.'

No power of revocation or amendment is contained in the Lonach trust, which includes a spendthrift clause and trust powers. ²

The settlor has died. His widow, Josephine Forbes, and four children of the settlor are now living. One son, Robert, died before the settlor leaving two children, Elizabeth and Phyllis Forbes, both born after May 8, 1930, and now minors. After May 8, 1930, the settlor had no further children. The youngest child of the settlor was born in 1925.

This is an appropriate case for declaratory relief. The executors are immediately faced with important probate problems and possibly also Federal tax questions, ³ which the executors contend make it essential that they know now, by a decree which effectively terminates existing controversies, whether any future interests in the Lonach trust corpus belong to the estate of the settlor. Madden v. State Tax Commission, 333 Mass. 734, 735-737, 133 N.E.2d 252. See G.L. (Ter.Ed.) c. 231A, §§ 1, 2, 3, inserted by St.1945, c. 582, § 1.

The question for determination is whether the remainder interests (other than the admittedly valid life estates of the settlor's widow, Josephine, and his children) are void as in violation of the rule against perpetuities so that a resulting trust in favor of the settlor's estate may exist. This question arises, of course, because the Lonach trust is an irrevocable, inter vivos instrument as to which the period of the rule against perpetuities starts running from the effective date of the instrument, Sears v. Coolidge, 329 Mass. 340, 108 N.E.2d 563; Restatement: Property, s. 374, comment b, and not a will or a revocable trust, as to either of which the period of the rule against perpetuities would start running at the death of the testator or settlor. Restatement: Property, s. 373, comment c. See Am.Law of Property, ss. 24.12, 24.59; Gray, Rule against Perpetuities (4th ed.) s. 524.1. ⁴

Possible invalidity of the remainder interests under this irrevocable inter vivos trust would not be prevented by the provision in paragraph Third for ultimate termination of the trust and distribution of the corpus at 'the expiration of twenty-one years after the death of the last survivor of the children of the said 'Allan.' We assume that an appropriate provision (see Simes and Smith, Future interests [2d ed.] s. 1295; Am.Law of Property, Sup. s. 24.7) for (a) termination of all the trusts under paragraph Third at the end of a period of twenty-one years after the death of specified or ascertainable persons living at the effective date of the trust in 1930 and (b) for distribution of the corpus at the date of such termination to persons then ascertainable, would have assured the validity of all the gifts in paragraph Third, even if those gifts might otherwise have been in violation of the rule against perpetuities. However, if the term 'the children of the said Allan' refers to all the children ⁵ of the settlor, whether born before or after the effective date of the trust instrument then the provision for ultimate termination of the trusts and distribution of the corpus, actually found in paragraph Third (because of the possibility existing in 1930 that further children of the settlor might be born thereafter) does not necessarily limit termination to the expiration of twenty-one years after lives in being in 1930. Viewed as of 1930, this termination could conceivably take place more than twenty-one years after the death of the last survivor of the settlor's children living in 1930. For example, a son of the settlor might have been born in 1932. If that child turned out to be the last survivor of the widow and all the children of the settlor, the vesting of an interest under paragraph Third twenty-one years after his death would be at too remote a time.

The executors in effect rest their contentions upon the possibility, just mentioned, that the termination date (viewed as of the effective date of the trust in 1930) might occur at too remote a date. They seem to construe the fourth sentence of paragraph Third as giving the corpus of the trust at the termination date to a general class consisting of the settlor's issue, then living, per stirpes. This gift, they say, is void 'because it was possible that the class * * * could both increase and decrease in number for a period beyond that allowed by the' rule against perpetuities. We think, however, that paragraph Third is not to be viewed as making a general class gift, but that it contains limitations governed by the doctrine of severable or severed shares. Merriam v. Simonds, 121 Mass. 198; Hills v. Simonds, 125 Mass. 536, 539-541; Dorr v. Lovering, 147 Mass. 530, 532-536, 18 N.E. 412; Minot v. Doggett, 190 Mass. 435, 436-437, 77 N.E. 629; Leverett v. Rivers, 208 Mass. 241, 242, 94 N.E. 470; Restatement: Property, s. 389. ⁶ See Commissioner of Corporations and Taxation v. Bullard, 313 Mass. 72, 80-81, 46 N.E.2d 557, 146 A.L.R. 772.

We view paragraph Third as setting up a separate share of the trust corpus for each child of the settlor and such child's issue, with the devolution of that share to be dealt with separately from the devolution of the order shares. On our construction of paragraph Third, no remainder interest in any share of the trust corpus will vest later than the death of a child of the settlor. As all the children of the settlor were living at the effective date of the trust in 1930, all remainder interests will vest within the period of the rule against perpetuities. They thus will be unaffected by the possibility (which existed in 1930 but which never eventuated) that the settlor might have children born later in whose separate and severable shares the remainder interests might vest more than twenty-one years after the end of lives in being in 1930.

We are guided to this construction of paragraph Third by the principle that if there are two or more reasonable interpretations of a dispositive scheme, one of which does not result in holding the remainder interests void under the rule against perpetuities when others do so, the interpretation leading to a holding of validity should be adopted, if consistent with the settlor's general intention and with the public policy ⁷ behind the rule itself. New England Trust Co. v. Wood, 326 Mass. 239. 244-245, 93 N.E.2d 547. Restatement: Property, § 243, comment n; § 375. However, apart from this general principle, paragraph Third shows that the settlor and his draftsman intended to set up a separate share of the trust property for each child of the settlor and that child's issue. This is apparent (a) from the frequent use of the word 'share' in the early sentences of the paragraph, see Shattuck v. Wall, 174 Mass. 167, 169-170, 54 N.E. 488; Boyd v. Bartlett, 325 Mass. 206, 209-210, 89 N.E.2d 772; (b) from the provision that until 'the termination * * * the trust estate shall be held together, and administered as one trust,' which would have been unnecessary ⁸ if the settlor had intended the remainder interests to be a single general class gift (instead of gifts of severable shares); and (c) from the direction that, at termination, the trust estate shall 'be distributed among such issue, per stirpes,' which continues the concept of a separate share for the line or stock of...