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Court Looks at Construction of Charitable Trust


This proceeding was originally commenced by the son of Mrs. NED, now deceased, who was testator’s niece and one of his two distributees, for a construction that the charitable trust created under paragraph Tenth of testator’s will is invalid. The special guardian for testator’s half-sister, who was testator’s other distributee, takes a similar position. Both distributees and four other persons were given lifetime specified annual legacies under the will and codicil.

Thereafter the said son, who is a residuary legatee under his mother’s will and one of her coexecutors, in his representative capacity, and his mother’s other coexecutor made themselves parties to this proceeding by adopting, amending and supplementing the original petition. The conservator appointed for testator’s half-sister, by a separate instrument adopted the petition and the amended and supplemental petition herein.

The special guardian urges that a hearing be held to ascertain the facts surrounding the execution of an agreement dated December 12, 1936 by and among his ward, Mrs. NED, the nominated corporate executor, and the Attorney-General of the State of New York. Under said agreement the objections to probate of the testator’s will and codicil, which had been interposed by testator’s half-sister, were withdrawn, conditioned upon the payment of a substantial sum of money to each distributee, in addition to the benefits given to each of them under the will.

The corporate trustee, which has executed and administer the trust for almost 30 years, has interposed an answer alleging said agreement as a defense and, inter alia, that the petition fails to set forth sufficient facts to constitute a cause of action and moves for its dismissal.

The testator died on October 23, 1936 leaving a will dated May 22, 1930 and a codicil thereto dated October 8, 1936, which were duly admitted to probate in this court on December 21, 1936.

Westchester County Probate Lawyers said the agreement of December 12, 1936 withdrew objections to probate of the will, and recited that objections had been filed by Mrs. WIK, testator’s half-sister; that Mrs. NED was dissatisfied with the provisions made for her by said will and had considered filing objections.

On November 12, 1938 the executor filed its petition for the judicial settlement of its account containing statements of fact relative to the charitable trust created by the will and the statutory provisions pertaining thereto. Mrs. NED and Mrs. WIK voluntarily appeared in said accounting proceeding and each executed and acknowledged an instrument as ‘legatee and annuitant under the will’ consenting to a decree judicially settling the executor’s account. The decree settling said account, dated December 7, 1938, reflected the payments made to the legatees and trustee pursuant to the terms of the will, and forever discharged the executor ‘as to the facts and matters embraced in said accounting.’

Thereafter, the trustee’s first intermediate account was settled by a decree dated October 24, 1945, which directed the trustee to retain the sum of $1,661,722.24 in trust in accordance with the provisions of testator’s will. Jurisdiction over all the parties interested in that proceeding had been obtained. The trustee stated in its petition therein that after payment of the annuities pursuant to the will, the remainder of the estate’s income and principal was to be applied by it for undesignated charities.

Jurisdiction over all the parties interested in that proceeding had been obtained. The trustee stated in its petition therein that after payment of the annuities pursuant to the will, the remainder of the estate’s income and principal was to be applied by it for undesignated charities.

Mrs. NED died in 1951 and letters testamentary under her will were issued on September 28, 1951 to her son, the original petitioner herein, and to Mr. JMF. The trustee herein filed its petition for the judicial settlement of its second intermediate account on August 30, 1955. The said coexecutors under the will of Mrs. NED, deceased, had theretofore executed an instrument dated January 2nd, 1952, wherein they acknowledged receipt of the sum of $493.15 paid to them by the trustee herein in full payment of all moneys due to Mrs. NED, as deceased annuitant, covering the period from the date of last payment on August 23, 1951 to the date of her death on September 6, 1951. The said coexecutors thereby released and discharged the executor and trustee of the within estate from ‘all moneys due and owing’ to Mrs. NED, by reason of the gift provided for her under paragraph ‘FOURTH (a)’ of the testator’s will herein and consented to the entry of a decree settling the trustee’s account without further notice to either of them.

The contention of the petitioners and of the special guardian for Mrs. WIK is that neither the agreement of December 12, 1936 nor the decrees settling the executor’s account in 1938, and the trustee’s first and second intermediate accounts in 1945 and 1955 respectively, specifically put in issue the validity of the trusts created by testator’s will for the court’s determination and are therefore not a bar to the instant proceeding for a construction of the will. It is urged that testator’s will limits payment of the annuities only ‘out of income’ of the trust and that the testator’s use of the words ‘hereby intending to make such annuities a first charge upon the trust fund’ are susceptible of at least three interpretations: (1) that the income was to be used first to pay the annuities; (2) that the principal of the trust was to be kept intact so as to yield sufficient income to satisfy the annuities; and (3) that the principal could be invaded in the event of insufficient income to pay the annuities.

The trustee and the Attorney-General of the State of New York contend that the testator intended to create annuities payable out of income and principal with the remainder payable to religious and charitable corporations; that the trust corpus vested in the trustee as of testator’s death, subject to the charge of the annuities for the benefit of charities; and that the duration of the trust is not measured by the lives of the annuitants and is not invalid though the charitable beneficiaries are indefinite and uncertain.

The intention of the testator must not be drawn from a single word or phrase but from a sympathetic reading of the will as a whole and in the light of all the facts and circumstances under which it was framed and when the testator’s intention is ascertained it controls unless it is contrary to statute or public policy. The clear language used in a will must be given effect without a strained construction. In the absence of a showing that the terminology used is ambiguous, no extrinsic evidence is admissible to supply, contradict, enlarge or vary the written words.

The assets of the testator consisted principally of negotiable securities, which were subject to fluctuation in value from time to time. The testator had no way of being assured what the value of his assets would be at the time of his death or at any other time thereafter during the administration of the trust by the trustee. As a matter of fact, at the time that the executor filed its account in 1938, the appraised value of testator’s assets had decreased by $390,620.92, an amount approximately one-third of the total estate. The testator owned a considerable amount of diverse securities and apparently was cognizant of their fluctuation in value.

The annuities provided for the six beneficiaries under his will aggregated $24,600 per annum. In addition, several general legacies were given under the will. The testator could not have ascertained whether his securities after his death would yield sufficient income to pay the annuities intended for his beneficiaries. It was therefore advisable to make the payment of the ‘annuities a first charge upon the Trust Fund.’ To avoid any mistake as to his intention, the testator took pains to clearly state that he created ‘legal and not equitable estates.’ The quoted words are found under paragraph ‘FOURTH’ of the will and paragraph ‘FIRST’ of the codicil. Again, in providing for payment of the remainder to religious or charitable organizations, the testator was careful to state that the gift to the charities was ‘subject to the charge of the annuities aforesaid.’

The six legatees, who were given annual legacies, were the testator’s prime concern. The language used by the testator in making such gifts clearly indicates that he did not restrict their payment to the income from the trust corpus. He intended that payment be made from both income and principal, when necessary. He created true annuities. The Court so holds.

The lifetime of annuitants are not considered as measuring lives as to the duration of a trust. An annuity differs from an ordinary trust, whether the payments are to be made out of income and/or corpus, since the annuitant is deemed to have a vested right to payment of the stipulated amounts out of income as well as the corpus. The power of alienation is not suspended. The annuitant may assign, sell or transfer the annuity which may be computed and paid outright. The annuitant is entitled to the stipulated amount irrespective of the income derived from a particular corpus or fund.

The fact that the remainder of the income or corpus is payable to unnamed religious or charitable corporations does not render such gift invalid by reason of indefiniteness of beneficiaries Moreover, charitable trusts are to be liberally construed so as to give effect, if possible, to the testator’s benevolent intentions. The court determines that the trust created by testator’s will for religious and charitable purpose does not violate the statutes and constitutes a valid disposition of the residuary estate subject to the payment of the annuities to the beneficiaries.

In the absence of a showing that the terminology of the will is ambiguous, no extrinsic evidence is admissible to contradict, vary or enlarge the written words used by the testator. The special guardian’s application that a hearing be held to ascertain the facts surrounding the execution of the agreement dated December 12, 1936 is denied.

Moreover, the coexecutors of Mrs. NED are bound by the receipt and release executed by them on January 2, 1952, as are the conservator and special guardian for Mrs. WIK, who executed on August 16, 1955 a waiver of issuance of citation and consent to the settlement of the second intermediate account of the trustees.

The petitioners’ motion to strike out specified defenses of the trustee, for an order granting summary judgment and for an order to take depositions pursuant to Article 31 of the CPLR, is denied. The motion of the respondent-trustee to dismiss the petition is denied, and the testator’s will and codicil is construed as herein indicated.

The trustee shall continue to make annuity payments to the conservator’s and special guardian’s ward and to the other surviving annuitants named in the will.

A trust us one of the effective way to preserve the property of the decedent in favor of its beneficiaries. This is most used by testator who has a large size of property.

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