Opinion
Decided January 1, 1935.
If the continuance of a trust is not necessary to carry out any material purpose thereof, the beneficiaries, if all consent and none are under any incapacity, may compel its termination although the period fixed by its terms for its duration has not expired. Devise in trust for payment of the net income to the widow and children in designated shares with provision that on the attainment of a stated age by each child "then the amount placed to the credit . . . of each . . . shall be at the disposal of" and "turned over to" each. No provision being made for the termination of the trust or for the disposition of the share of any beneficiary who might die, and there being no residuary clause, or restriction upon the ownership of the remainder, an agreement between the widow and heirs, all being sui juris, to terminate the trust and distribute the principal will be given effect since all beneficial interests in the estate are now united in them and they are to be regarded in equity as the sole owners thereof. A spendthrift trust will not be presumed to be intended in the absence of language clearly indicative of such a purpose.
PETITION, for a declaratory judgment under chapter 86 of the Laws of 1929, by the beneficiaries of a trust created by the will of Albert H. Eastman, late of Berlin, county of Coos, asking for advice as to the validity of the trust, as to their right and title in and to the trust fund and for an order requiring the trustee to distribute the fund among the plaintiffs. The defendant, by its answer, also seeks the advice and direction of the court. The questions hereinafter stated were transferred without ruling by James, J.
The will of Albert H. Eastman, dated May 6, 1910, was admitted to probate June 18, 1912. The first four clauses contain elaborate instructions to the executors as to the manner in which the estate shall be liquidated. The fifth clause provides that as fast as the property belonging to the estate shall be converted into cash, it shall be deposited with two trust companies therein named. By the sixth clause the homestead of the testator is devised to his wife, the plaintiff, Lillian B. Eastman. Clauses seven to thirteen, inclusive, provide for annuities to seven persons named therein, payable in monthly installments "from the income to be obtained from my estate as herein directed." The will then provides as follows: "All of the net proceeds of my estate as settled by my said executors in the manner above specified, shall be turned over" to the two trust companies named in the fifth clause, which "shall receive and hold said property and administer the same in the following manner, that is to say: . . .
"The net income from such property and one per cent (1%) of the principal shall be placed semi-annually to the credit of my said wife, Lillian B. Eastman, and to my children, Harold A. Eastman, Arthur B. Eastman and Helen L. Eastman in the proportion in which property is by law distributed between widow and children in said State of New Hampshire, by carrying four individual accounts for each of the above, my wife and children, subject to withdrawal by check."
The testator then undertook to appoint the plaintiff, Lillian B. Eastman, guardian of the above named children during their minority, "with power to expend for each of them such portion of the money so deposited to their several credits, as in her judgment she shall think is for their best interest."
After providing for alternative guardians in case of the death of Mrs. Eastman, the will continues: "When either of my said children shall have reached their majority then the amount placed to the credit of each, and any amount heretofore placed to such credits not already used shall be at the disposal of the child coming into majority. . . .
"The guardians before mentioned shall have the right to use the total amounts placed to each of my children's account or any part thereof in maintaining a home until my daughter Helen L. Eastman shall reach eighteen years of age, at which time her portion shall be turned over to her and the boys at the age of twenty-one."
The will contains no residuary clause nor any specific provision for the termination of the trust therein created.
On March 31, 1919, the defendant bank was duly appointed trustee under said will and is now administering the trust therein created. The principal of the trust fund now amounts to $16,755.60. On May 5, 1933, the widow and children, who are the sole heirs at law of the testator and the only parties now interested in the trust created by the will, being all of legal age and sui juris, agreed in writing that the trust should be terminated and that the trust fund should forthwith be distributed by the trustee in the following proportions: one-third to the plaintiff Lillian B. Eastman, and two-ninths each to the plaintiffs Helen L. Luccheti, Arthur B. Eastman and Harold A. Eastman. This agreement was filed with the defendant and demand made for a distribution of the trust estate, which the defendant refused upon advice of counsel.
The following questions were transferred:
1. Does the will of Albert H. Eastman create a valid trust?
2. Does the agreement of the plaintiffs operate to terminate the trust, the trustee not assenting thereto?
3. Are the plaintiffs entitled to distribution of the funds held by the defendant?
Other facts are stated in the opinion.
Robert W. Upton and Laurence I. Duncan (Mr. Duncan orally), for the plaintiffs.
Foster Lake and Gordon S. Lord (Mr. Lord orally), amici curiae.
The language of the will is obscure and conflicting, but it seems plain that the trust was created in order to accomplish two distinct purposes, i.e., 1. to provide funds for the payment of the seven annuities created by clauses 7 to 13 inclusive of the will, and 2. to provide for the support of the testator's wife and children during the minority of the latter. It is difficult to ascertain what result the testator intended to achieve after these purposes were fully effectuated.
It is by no means clear that he intended that the trust should continue after all his children became of age. The provision that when the daughter shall reach eighteen years of age "her portion shall be turned over to her and the boys at the age of twenty-one," if it stood alone, would indicate an intention that distribution of the trust fund should be made when the children reached the ages specified, but the context of this clause together with other provisions of the will appear to indicate a purpose that the trust shall continue for a longer period.
There is, however, no language in the will which indicates that the testator intended to set up a spendthrift trust, and in the absence of words clearly indicating such a purpose, a conclusion that a trust of that kind was created is not permissible, since it will not be assumed that the testator had in mind a purpose in conflict with the general policy of the law against restraint upon the power of alienation. 1 Perry, Trusts (6th ed.) ss. 386, 386a; 65 C.J. Tit, Trusts, 542; Sears v. Choate, 146 Mass. 395; Rowley v. Company, 144 Va. 374. See Hunt v. Wright, 47 N.H. 396, 400.
The elaborate character of the will, the provision that "all the net proceeds" of the estate should go into the trust fund and the failure to include in the will a residuary clause, all point to the conclusion that the testator intended to dispose of his whole estate and did not intend that intestacy as to any part of it should result. The will provides that the principal of the trust fund shall be paid to the plaintiffs over an extended period. No provision is made as to the disposition of the share of any who might die during the period. The intent of the testator to dispose of his whole estate and to exclude all except the plaintiffs from sharing therein is convincingly expressed.
The parties are in agreement as to the fact that after payment of the annuities provided for in the will, it was the testator's purpose to benefit no one except the plaintiffs. In other words, it was his intent that the plaintiffs should have the entire benefit of the residue of his estate. Obviously the trust, if administered strictly according to its terms, could not accomplish this result, for it is plain, as suggested by plaintiffs' counsel, "that distribution of the income and one per cent of the principal may be made semi-annually for an infinite period of time without exhaustion of the trust res." It is argued that under these circumstances the will should be construed as creating a trust to endure for the lives of the wife and children and that "the remainder undisposed of passes by intestacy or to the owners of the equitable life interest by way of remainder." The alternative of intestacy being excluded for the reasons set forth above, it would follow from this argument that the plaintiffs are now owners, not only of equitable life estates in the trust fund, but of the remainder as well. This is only another way of stating the position of the plaintiffs that they "have absolute, vested rights in and to the entire trust estate." This conclusion we accept as sound.
The equitable life interests of the plaintiffs are unrestricted. They are assignable as completely as though they were legal instead of equitable in character. No restraint upon their enjoyment was imposed by the testator or by the law. Their owners may do with them as they please. White v. Weed, ante, 153. The ownership of the remainder is similarly unrestricted. The plaintiffs may dispose of it as they see fit, and since all the beneficial interests in the estate are now united in the same persons, they are in equity to be regarded as the sole owners thereof. Ib.
Under these circumstances the right of the plaintiffs to have the trust terminated seems to be clear. "The beneficiaries of a trust, if all consent and none is under an incapacity, can compel its termination if the continuance of the trust is not necessary to carry out a material purpose of the trust, although the period fixed by the terms of the trust for its duration has not expired." 2 Am. Law Inst., Restatement of Trusts, s. 337, Comment a; 2 Perry, Trusts, (6th ed.) s. 920; Lewin, Trusts, (13th ed.) 657. Numerous decisions sustaining the rule above stated are collected in the note to Rowley v. Company, ( 144 Va. 374) in 45 A.L.R. 738, 743. For judicial statements of the rule special reference may be made to the following cases: Tilton v. Davidson, 98 Me. 55; Ackerman v. Company, 90 Conn. 63; Rowley v. Company, supra. This is not a principle authorizing the exercise of discretion by the chancellor in the termination of trusts. It states the necessary result of the union of all beneficial interests in the same hands.
Since the plaintiffs appear to be the only parties now beneficially interested in the present trust, since they are all of legal age and sui juris, and have agreed to terminate the trust, and since all the other ascertainable purposes of the testator except that to give the plaintiffs the benefit of his entire estate, have been fully accomplished, it follows, in accordance with the foregoing principle that the third question submitted to us for decision must be answered in the affirmative.
It is argued that this court "has adopted the rule that a trust continues as long as the testator intends that it shall," and that the above conclusion conflicts with this rule. Particular reference is made to the case of Herrick v. Slocombe, 84 N.H. 413, where the court said with reference to the facts then before it, "The trust continues as long as he [the testator] intended that it should." As pointed out above, the purpose of this testator with reference to the duration of the trust is extremely dubious, but even if it were clear, our conclusion would not conflict with the decision in Herrick v. Slocombe, supra. The point of that decision was that the trust must continue until the purposes for which it was created were accomplished. White v. Weed, supra. Nothing more was intended by the language above quoted.
In view of the result reached above, it is unnecessary to answer specifically the first and second questions transferred by the superior court. A decree should be entered ordering the trustee to distribute the trust fund and any accumulated income to the plaintiffs in accordance with their agreement.
Decree for the plaintiffs.
All concurred.