Worm v. United States Trust Co. (In re Burchell's Estate)

• Decision Date: 19 July 1949
• Citation: 87 N.E.2d 293,299 N.Y. 351
• Parties: In re BURCHELL'S ESTATE. Application of THOMSON. WORM v. UNITED STATES TRUST CO.
• Court: New York Court of Appeals Court of Appeals

299 N.Y. 351

87 N.E.2d 293

In re BURCHELL'S ESTATE.Application of THOMSON.WORM

v.UNITED STATES TRUST CO.

Court of Appeals of New York.

Decided July 19, 1949.

Appeals from Supreme Court, Appellate Division, First Department.

Proceeding in the matter of the estate of Celestine A. Gardner, (Formerly Celestine A. Burchell), deceased, on the application of Celestine A. Thomson, under Civil Practice Act, s 1307 et seq., for an order requiring the Lawyers Trust Company, as successor trustee under a trust indenture executed by decedent June 22, 1891, to account, directing successor trustee to distribute the corpus of the trust between the four children of the settlor in equal shares as remaindermen and for a determination that surviving spouse of settlor had no interest in trust fund whether as an heir at law, next of kin, surviving spouse, or otherwise, opposed by Frank P. Nohowel, executor of decedent's estate, and others, and Josephine M. Burchell and others. From an order of the Appellate Division, 274 App.Div. 925, 85 N.Y.S.2d 300, affirming an order of the Supreme Court at special term, Schreiber, J., entered in New York County, granting the application, Frank P. Nohowel, as executor and others appeal.

Submission of controversy upon agreed statement of facts pursuant to Civil Practice Act ss 546-548 by Alice Macy Beers Worm, against the United States Trust Company of New York. From a judgment of the Appellate Division, by a divided court, 274 App.Div. 637, 86 N.Y.S.2d 632, in favor of defendant, plaintiff appeals. The appeals were heard together.

Order and judgment affirmed.

Appeals from the Appellate Division of the Supreme Court, first judicial department.

FULD, J., dissenting. Frank P. Nohowel, New York City, executor appellant in pro. per.

Louis J. Merrell and Edward I. Goodman, New York City, for Horatio S. Gardner, appellant.

Robert N. Errington, New York City, for John A. Burchell, respondent.

Walter M. Hinkle, Robert G. Lind and Irving I. Goldsmith, New York City, for Celestine A. Thomson, petitioner-respondent.

Martin Aigner, New York City, for appellant.

Robert A. West, New York City, for respondent.

BROMLEY, Judge.

We are again asked to determine whether a limitation over to the heirs of the grantor in an inter vivos conveyance created a remainder in the heirs or left a reversionary interest in the grantor.

The instrument of conveyance in each case is a trust agreement. In Matter of Burchell the question arises in the course of the administration of the estate of the deceased settlor. In Worm v. United States Trust Co. the settlor has attempted to revoke the trust instrument under section 23 of the Personal Property Law, Consol.Laws, c. 43, by a notice of revocation executed by her alone.

The provisions in each of the two instruments are similar. The settlor conveyed property to trustees who were directed to pay income therefrom to the settlor duringher life and upon her death to convey the principal of the trust estate to the persons whom the settlor should appoint in her will, or, in default of appointment, to the settlor's next of kin as in intestacy. In the Burchell case the trust instrument further provided that the settlor, as evidence of her consent and approval, should join in the execution of any conveyance or mortgage of any of the property, or of a lease for a period of more than three years, or of the appointment of a successor trustee or trustees.

The trustees, however, were authorized and empowered to sell, convey or mortgage the real estate and to invest and reinvest the trust funds. In the Worm case the trustee was given full power to manage, invest and reinvest the trust property, except that approval of the settlor's father was required during his lifetime. No power of revocation was reserved in either agreement nor was there any provision for withdrawal of any of the principal of the trust fund.

In each case we reach the conclusion that the future interests limited in the instrument resulted in the creation of valid remainders.

In Richardson v. Richardson, 298 N.Y. 135, 81 N.E.2d 54, decided only last year, we reaffirmed the rule, first announced in Doctor v. Hughes, 225 N.Y. 305, 122 N.E. 221, that the nature of the future interest where an estate is limited to heirs of the grantor is dependent upon the intention of the settlor as expressed in the trust agreement. We stated, 298 N.Y. page 139, 81 N.E.2d page 56: ‘Thus direction to transfer trust proeprty 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.' We tabulated certain additional factors which had been considered of significance in earlier cases in pointing the intention of the grantor to create a remainder. The reservation of only a testamentary power of appointment, together with “full and formal disposition of the principal of the trust estate”, 298 N.Y. page 141, 81 N.E.2d 57, and the failure to reserve a power to grant or assign an interest in the property, led us to conclude that the interest limited in that case was a remainder and the settlor's attempt to revoke the instrument was ineffective since presumptive remaindermen were not parties to the revocation.

The trust agreement in the Richardson case, surpa, differed only slightly from those now before us. There, the settlor, then unmarried and her mother, her sole next of kin, directed the trustees named to pay the income to the settlor for life and at her death to pay over the corpus to such person or persons as the settlor should appoint by will, and in default of appointment the principal should be paid over to her mother, but should her mother predecease her the principal was to be paid to her next of kin as in intestacy. Settlor's mother predeceased her and settlor attempted to revoke. The immediate power of appointment, followed by a limitation to a named person rather than a designation of a remainder followed by a power of appointment, cf. Engel v. Guaranty Trust Co. of New York, 280 N.Y. 43, 19 N.E.2d 673, was not deemed significant enough to warrant an opposite conclusion from that reached in the Engel case.

In the instant cases it is true there was no grant of a remainder interest to a named individual and the limitation to the heirs was only upon default in the exercise of the power of appointment. But whether a remainder is created or a reversion left in the grantor is not dependent upon the number of contingent or vested limitations created. A valid gift may be made to a designated class; so also may a valid remainder be created subject to be divested by a reserved power of appointment; and a valid remainder interest may be created though the naming of specific takers is reserved for future announcement under a testamentary power of appointment.

Confusion as to the nature of an estate when that estate is limited to heirs of the grantor arises because of the existence in our modern jurisprudence of remnants of the ancient doctrine of worthiner title (46 Harv.L.Rev. 993). Prior to our decision in Doctor v. Hughes, 225 N.Y. 305, 122 N.E. 221, supra, a conveyance by a grantor with a limitation over to his heirs was said to be governed by that doctrine, under which a limitation over to a grantor's heirs resulted in an automatic reversion in the grantor and nullified the limitation over.

The doctrine had its origin in the feudal custom of awarding certain valuable incidents to the overlord upon the descent of property held by a feoffee. These incidents did not accrue if the property was acquired through purchase, and, in order to obviate this means of curtailing the payment of incidents, title by descent was declared to be more worthy than title by purchase. If a gift over might pass to an heir by descent rather than by gift, he took his title through inheritance. Although the reason for the rule disappeared with the disappearance of feudal customs, the rule itself remained as part of the common law. Its effect was to deny the intent of the grantor and to cut out entirely the limitation to the heirs, thus accelerating the reversion which remained in the grantor. See Warren, A Remainder to the Grantor's Heirs, 22 Tex.L.Rev. 22;Matter of Brolasky's Estate, 302 Pa. 439, 153 A. 739. The doctrine was abolished in England in 1833 by a statute which allowed an heir to take title as purchaser where property passed to him by devise (3 & 4 Wm. IV. ch. 106, s 3). In this country the doctrine remained as part of the common law but has been principally applied where a limitation is made to heirs under an inter vivos conveyance. The intent of a grantor is said to be the controlling element and the common-law rule is not applied where the grantor clearly indicated his intention to grant a remainder to his heirs (3 Restatement, Property, s 314). Doctor v. Hughes, 225 N.Y. 305, 122 N.E. 221, supra, announced that such was the rule of this State. We said in that case, 225 N.Y. pages 311-312, 122 N.E. page 222: ‘in the absence of modifying statute, the rule persists to-day, at least as a rule of construction, if not as one of property. * * * We do not say that the ancient rule survives as an absolute prohibition limiting the power of a grantor. * * * There may be times, therefore, when a reference to the heirs of the grantor will be regarded as the gift of a remainder, and will vest title in the heirs presumptive as upon a gift to the heirs of others. * * * But at least the ancient rule survivies to this extent: That, to transform into a remainder what would ordinarily be a reversion, the intention to work the transformation must be clearly expressed.’

The use of the old doctrine as a rule of construction results in either (1) a shift from an absolute rule against remainders to heirs of grantors to a rule...