Speth v. Speth

• Decision Date: 15 June 1950
• Docket Number: No. C--1470,C--1470
• Parties: SPETH v. SPETH et al.
• Court: New Jersey Superior Court

Page 587

8 N.J.Super. 587

74 A.2d 344

SPETH v. SPETH et al.

No. C--1470.

Superior Court of New Jersey

Chancery Division.

June 15, 1950.

Augustus S. Dreier, Plainfield, for the plaintiff.

Ralph J. Smalley, Jr., Plainfield, for the defendants.

JAYNE, J.S.C.

The object of the present action is to elicit a judicial construction of the will of Mabel Clair Hand, who died on September 19, 1947, and a declaration of the interest of James Gustave Speth in the residue of the decedent's estate. In re Ungaro's Will, 88 N.J.Eq. 25, 102 A. 244 (Ch. 1917); R.S. 2:26--68, N.J.S.A.

The inquiry is primarily addressed to the second article of the will, which is here exhibited:

'Second: All of the rest, residue and remainder of my estate both real, personal and mixed of every kind and description and wheresoever situate which I shall own or be entitled to at the time of my death, I give, devise and bequeath to The Plaintiff Trust Company and James Gustave Speth, In Trust Nevertheless, for the following purposes; to invest and reinvest the rest, residue and remainder of my estate both real, personal and of every kind and description and wheresoever situate, and to collect and receive the income thereon and to pay over the net income thereof to my brother, James Gustave Speth of Orangeburg, South Carolina for a period of ten years on a quarterly basis and at the end of the ten year period of this Trust then such corpus and principal shall be paid in full to my brother, James Gustave Speth, as aforesaid.

'(a) I further direct my Trustees hereinbefore named that should some unusual circumstances arise, then my Trustees are directed to use in addition to the income, such portion of the principal for the benefit of my brother, James Gustave Speth.'

It is at once observed that the interest of the plaintiff in the entire residue is undoubtedly vested both as to income and corpus. A gift to a trustee is regarded in equity as a gift to the cestui, and since the residuary estate vested in the trustee at the death of the testatrix, so it vested in the cestui que trust. Neilson v. Bishop, 45 N.J.Eq. 473, 17 A. 962 (Ch. 1889); In re Collins' Estate, 99 N.J.Eq. 333, 133 A. 188 (Prerog. 1926); Traverso v. Traverso, 99 N.J.Eq. 514, 133 A. 705 (Ch. 1926), affirmed sub nom. Traverso v. McMillin, 101 N.J.Eq. 308, 137 A. 919 (E. & A. 1927); Byrne v. Byrne, 123 N.J.Eq. 6, 195 A. 848 (Ch. 1938), affirmed 124 N.J.Eq. 273, 1 A.2d 464 (E. & A. 1938); Skovborg v. Smith, 8 N.J.Super. 424, 72 A.2d 911 (Ch. 1950). It is also significant to notice that the sole beneficiary is not the sole trustee. Cf. Morgan v. Murton, 131 N.J.Eq. 481, 26 A.2d 45 (Ch. 1942).

The complaint alleges that the plaintiff has the entire beneficial interest in the residue of the estate held by the trustees and prays that the trust may be terminated and the corpus and accumulated income be forthwith transferred to him.

True, there are adjudications concluding that where is a trust estate the beneficiary, sui juris, has the entire vested interest, both in the income of property held by the trustees for his benefit and in the property itself, there being no limitation of the estate in any contingency to any other person, there being no discretion delegated to the trustees, and no provision that the income or estate shall not be alienable by the beneficiary or attachable by his creditors, equity may exercise the power to terminate the trust.

In displaying the state of the decisional law of New Jersey relative to the subject here projected, it is unnecessary to explore beyond the case of Huber v. Donoghue, 49 N.J.Eq. 125, 23 A. 495 (Ch. 1891), in which a testamentary trust created for the period of ten years was in the circumstances terminated. That decision manifestly recognized the opinion in Sears v. Choate, 146 Mass. 395, 15 N.E. 786, 4 Am.St.Rep. 320, to be an influential precedent. In ascertaining the authoritative pertinency of the ruling in the Sears case, one must recognize that there the sole ownership became vested in the beneficiary by reason of an unanticipated occurrence subsequent to the death of the testator. Similar decrees were granted in Brooks v. Davis, 82 N.J.Eq. 118, 88 A. 178 (Ch. 1913), and in Pedrajas v. Bloomfield Trust Co., 101 N.J.Eq. 105, 137 A. 86 (Ch. 1927), affirmed 101 N.J.Eq. 803, 139 A. 18 (E. & A. 1927). Vide, Camden Safe Deposit & Trust Co. v. Guerin, 89 N.J.Eq. 556, 105 A. 189 (E. & A. 1918).

Next came the exceedingly pertinent comment of Vice Chancellor Leaming in Martin v. Martin, 106 N.J.Eq. 258, 150 A. 338, 339 (Ch. 1930): 'The authorities are in harmony to the effect that no doubt can exist as to the power and duty of this court to decree the termination of a trust, where all the objects and purposes of the trust have been accomplished, where the interests under it have all vested, and where all parties beneficially interested desire its termination. * * * But this will not be done where its effect will be to override and put an end to an active and irrevocable express trust and thus defeat a testator's or donor's intention, if the objects of the trust have not been fully accomplished and the trustee stands ready and able to execute the trust in good faith.'

Then ensued the familiar decision in Newlin v. Girard Trust Co., 116 N.J.Eq. 498, 174 A. 479, 480 (Ch. 1934), in which it was resolved that a trust to pay the income to children and the corpus to their executors or administrators may be terminated before the period of distribution of the corpus in the circumstances there present. It is significant to note that the learned Vice Chancellor was careful to state: 'There is no discretion in the trustees, either as to the payment of the income or the principal * * *.'

The situation resulting in the merger of the life estate and the remainder in Dreyfuss v. Kahn, 137 N.J.Eq. 158, 43 A.2d 887 (Ch. 1945) is not ignored.

The more recent adjudication is Ampere Bank & Trust Co. v. Esterly, 139 N.J.Eq. 33, 49 A.2d 769 (Ch. 1946), in which the previous decisions are collated and reviewed. The testamentary trust in that case may be said to be in its essential characteristics similar to the one under present consideration. Acceleration was decreed.

This ingenious judicial method of accelerating the termination of such a trust is of English ancestry. The Masters of the Rolls were its progenitors. Gray's Restraints on Alienation; Gray on Perpetuities, 3d Ed., § 120; Josselyn v. Josselyn, 9 Sim. 63, 59 Eng. Reprint 281 (1837); Saunders v. Vautier, 4 Beav. 115, 49 Eng. Reprint 282 (1841).

There is no idiomatic chestnut more constantly repeated in our reports than that in the construction of wills the intention of the testator must prevail unless such intention is inimical to an established rule of law, and yet in a case like the present one, to declare the immediate termination of such a trust obviously vanquishes the manifest intention of the testatrix.

I concede it to be the English conviction that the sole beneficiary of a trust whose absolute title thereto is vested, is entitled to terminate it if he is not under a legal incapacity to execute a valid discharge, even though the testator has expressly provided that the trust should not be terminated until the beneficiary reaches a designated age or until a specified period has elapsed. Rocke v. Rocke, 9 Beav. 66, 50 Eng. Reprint 267 (1845); Re Jacob, 29 Beav. 402, 54 Eng. Reprint 683 (1861); Gosling v. Gosling, Johns. V.C. 265, 70 Eng. Reprint 426 (1859); Re Couturier, 1 Ch. (Eng.) 470 (1907); 33 Halsbury's Laws of England 114, § 203. But as a result of my research I venture the statement that the more cogitative and persuasive decisions of the courts in the United States are expressive of a contrary view. The most notable case is Claflin v. Claflin, 149 Mass. 19, 23, 20 N.E. 454, 3 L.R.A. 370, 14 Am.St.Rep. 393 (1889).

The American cases recognize primarily the privilege of the donor to qualify his gift as he pleases within legal limits. Cujus est dare ejus est disponere. The English courts concentrate their predominant attention upon the situation of the beneficiary who being substantially the owner of the trust estate should be permitted in their judgment to deal with it as he wishes.

I pause to state that in this discussion I am not alluding to a case in which some subsequent eventuality unforeseen by the testator has vested the cestui with the sole ownership. Sears v. Choate, supra. Nor am I referring to a trust created for successive beneficiaries in which the only purpose of the settlor in originating the trust was to enable the beneficiaries to enjoy the property in succession; nor to dry trusts executed by the statute of uses, Supreme Lodge Knights of Pythias v. Rutzler, 87 N.J.Eq. 342, 100 A. 189 (E. & A. 1917); nor to those violative of the rule against perpetuities. I have in mind a trust comparable to that established by this testatrix in which the settlor expressly, deliberately, and evidently for some rational reason postponed the beneficiary's full enjoyment of the corpus for so moderate a period as ten years. Such a purpose is normally and legally accomplished through the instrumentality of a trust in which the trustee is meanwhile to govern, control, manage, and administer the corpus.

The American decisions which have terminated such a trust seem merely to be pinned fast to the English originality. Neither the English nor the related American decisions supply any logical or legally sound explanation. Any endeavor to discover a satisfactory legal basis for the rule in the aspect in which Professor Gray has stated it is a disparate undertaking. About a half century after the inaugural decision in Saunders v. Vautier, supra, the same rule was presented to the House of Lords for consideration. Lord Hershell remarked, 'The point seems in the first instance to have been rather assumed than decided.' The House concluded, however, that the 'doctrine has been so long...