Thurlow v. Berry

• Decision Date: 18 April 1946
• Docket Number: 6 Div. 386.
• Citation: 247 Ala. 631,25 So.2d 726
• Parties: THURLOW et al. v. BERRY et al.
• Court: Alabama Supreme Court

25 So.2d 726

247 Ala. 631

THURLOW et al. v. BERRY et al.

6 Div. 386.

Supreme Court of Alabama

April 18, 1946

Wm N. McQueen, Atty. Gen., Jas. F. Matthews, Asst. Atty. Gen and Bowers, Dixon & Dunn, Frank M. Dixon, Henry Upson Sims, and Wm. Logan Martin, all of Birmingham, for appellants.

Lange Simpson, Robinson & Somerville, Jas. A. Simpson, R. L. Lange, and Cabainss & Johnston, all of Birmingham, for appellees.

SIMPSON Justice.

Harvey G. Woodward, of Birmingham, Alabama, died November 18, 1930.

Prior to June 10, 1929, he created a corporation known as the Alabama Educational Foundation and conveyed to it certain properties and securities by way of gift.

On June 10, 1929, he executed a will, which was admitted to probate shortly after his death, in which he made the First National Bank of Birmingham trustee of a residue set up by it, with Item Tenth containing details for the management of the trust and disposition of the income. In section (g) of Item Tenth he made provision for a Board of Governors (naming them) to direct the application of the income for the educational purposes as outlined. In section (h) of Item Tenth he directed the trustee alone to invest, manage, care for and control all the property of the trust, and the Board of Governors were charged with the duty of carrying into effect the educational trusts therein provided, and directing the expenditure of the income (quoting from section (h)) 'and the principal thereof for the purposes and in the manner herein provided. To this end, I vest in said Board of Governors the power and authority to do any act or thing and to make any expenditure of funds of said trust estate which in the opinion of said Board of Governors is necessary or desirable in carrying into effect the provisions thereof, subject only to the requirement that said Board of Governors shall act in good faith.' They serve without compensation.

In section (h 4) of Item Tenth, direction is given them in making expenditure for the original school unit, whatever its size (or any subsequent unit or addition to an existing unit), that it shall be done only if and when there shall remain in the trust estate property or securities other than school properties after deducting the cost of that unit, which will produce income, after paying all expenses connected with the operation of the schools, equal to 200% of the cost of the operation of the unit or units then in operation, if any, and the estimated cost of the operation of the proposed unit, and in addition, there shall be other income producing assets (excluding school properties) of the value of $3,000,000.

In section (j) of Item Tenth, it is provided that as and when the size and condition of the trust estate will safely permit it, the Board of Governors shall establish a small school of fifteen to thirty boys, with more or less temporary buildings, which may be enlarged and others added. It was contemplated that this school, if successful, should grow to such size as to become the first of the units provided for in section (h 4), supra.

Great detail is set up as to the location, curricula, management and size of the various school units. Each unit should operate for twenty-five years before it shall be determined whether it is successful according to the standards set up. 'If the school--meaning all the units--is not successful, after twenty-five years of operation' certain restrictions may be changed (section k).

In section (m) it is provided (under conditions) that if the school be declared unsuccessful, the trustee is ordered to liquidate the school property. The estate should then be divided into two equal parts, one part to be conveyed to the Massachusetts Institute of Technology at Cambridge, Massachusetts, for educational purposes, but only on certain named conditions. The other part shall remain in trust, with the income to be used for advancements to boys under twenty-one years of a certain type to provide for the expense of their education. If the Massachusetts Institute of Technology shall not comply with the conditions, its share shall be used as is provided for in the other part.

In the last paragraph of Item Tenth it is provided that he has frequently stated his opinion and desire and made suggestions, but that it is not his intention that such statements shall be binding on the Board of Governors, but merely indicate his opinion as he then sees conditions and the final decision shall be made at a future date. One of the controversies giving rise to this appeal is the contention of some members of the Board, as against the contrary opinion of other members, that this concluding paragraph invalidated the manifest mandatory provisions of section (h 4) as to the minimum back-log requirements for the establishment of the school units.

On the next day (June 11, 1929) after the execution of the will the Alabama Educational Foundation made a declaration of trust to itself as trustee with the same uses and purposes as expressed in Item Tenth of the will, and providing that the Foundation, as trustee, shall have all the rights, duties and powers and discretion given the First National Bank as trustee under said Item Tenth; that, during the lifetime of Harvey G. Woodward, the trustees of the Foundation shall act and have the same powers as provided for the Board of Governors in said will; after his death, the First National Bank shall become trustee in lieu of the Foundation, with the same force and effect as set up in Item Tenth of the will setting up the testamentary trust. The trustees of the Foundation (aside from Woodward) were among those designated in Item Tenth as the Board of Governors. There is doubt expressed whether that declaration by the Foundation had the effect without a deed to the bank, upon the death of Mr. Woodward to make the bank trustee of both trusts with the same terms and conditions applicable to each, and with the Board of Governors having the same authority in respect to each trust. Reese v. Ivey, 162 Ala. 448, 50 So. 223; Allison v. Little, 85 Ala. 512, 518, 5 So. 221.

Certain principles of law ought to be understood in anticipation of the construction of the trust instruments. § 146, Title 47, Code 1940, limits trusts for accumulation only (with exception not here material) to ten years, and has application to charities. 48 C.J. 997, § 86. The statutory rule as to perpetuties in respect to land prevailed when the trust will became effective, December 23, 1930, and when the Alabama Educational Foundation made its declaration of trust, January 11, 1929. §§ 6922, 6921, Code 1923 (§§ 16 and 17, Title 47, Code 1940). But neither the statute nor common law applicable to perpetuities affects a trust for charities so long as the property vests in the trustee immediately, even though its charitable use may be postponed. 48 C.J. 986, § 78, 947, § 16.

Authorities seem to agree that after the ten year limit under § 146, supra, has expired, the accumulations cannot ordinarily be a permanent addition to the corpus (48 C.J. 995, note 41), but 'the trustee may make temporary accumulations as are a reasonable provision against future payments to be made by them' according to the trust instrument, or be used to replenish the corpus on account of depletions. Id., note 42; Livingston v. Tucker, 107 N.Y. 549, 14 N.E. 443. See Henderson v. Henderson, 210 Ala. 73, 97 So. 353.

This trust will contains no express provision for accumulations only. At the time it was executed testator had an estate, including the foundation, which was probably sufficient to justify the conclusion that it would not need additions to the corpus to carry out his purposes. Annuities were provided to be payable out of the trust for his wife and others. She dissented from the will and thereby depleted the corpus to a large extent. In construing a will to determine whether accumulation merely is provided, the court gives a constructional preference in favor of a finding that income is 'undisposed of' rather than to be 'accumulated'; in favor of 'finding that retention of income is in the course of judicious management of the turst, rather than an accumulation.' Restatement of the Law of Property, § 446(b), Chapter 36.

The will contemplates addition to the trust corpus otherwise than by accumulations.

It has been since July 1, 1932, that the testamentary trust has accumulated; but since July 11, 1929, that the Foundation trust became effective. The accumulations from neither have been sufficient to restore the depletions alleged in the pleadings to have occurred. It would seem difficult to conclude from the pleadings, as framed, that the will provides for accumulations only.

If the conditions stipulated in section (h 4) of Item Tenth of the will have not now occurred, having had a reasonable time to replenish depletions in the corpus of the trust property in the process of 'judicious management,' the board should proceed to handle the income otherwise than on the conditions there provided. Not knowing just what they should do with it, they seek the guidance of equity, both in the original and cross-bill. This, as we will show, is the appropriate procedure for them. The original bill expresses the view of two of the Board members that one course should be pursued, and the cross-bill expresses a different view, that of the majority. They both assume in one aspect of their contentions that the conditions set forth in section (h 4) of Item Tenth of the trust will for the construction of the first or original unit may not be met in the reasonable contemplation of the Board which is charged with the duty of establishing it. But cross-complainants seem to wish to have that matter carefully determined by the court upon a full hearing.

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