Case Name: Reynal et al., as Trustees, etc., v. Thebaud and Others
Court: New York Supreme Court
Jurisdiction: New York
Decision Date: 1893-04
Citations: 3 Misc. 187
Docket Number: 
Parties: Reynal et al., as Trustees, etc., v. Thebaud and Others.
Judges: 
Reporter: New York Miscellaneous Reports
Volume: 3
Pages: 187–192

Head Matter:
Reynal et al., as Trustees, etc., v. Thebaud and Others.
(Supreme Court—New York County, Special Term,
April, 1893.)
One H. bequeathed to his executors a sum of money in trust for the purpose of dividing the same into as many parts as there should be persons living of a certain class at the time of his death. Each of these parts was to be kept invested in certain securities named in the will, and the net income arising therefrom, or so much thereof as might be necessary for that purpose, was to be applied to the support, etc., of the cestui que trust during minority, and the balance to be accumulated and paid to said cestui que trust on attaining the age of twenty-one years, after which time they were to pay and apply the whole of the net interest and income arising from the part or share set apart for the benefit of such cestui que trust to his use during his or her natural life. The remainders in such parts were absolutely bequeathed upon the deaths of the cestuis que trust respectively. On accounting it appeared that the trustees had set up a “sinking fund,” which was established to make good a deficiency in the principal of the investments held for each of the cestui que trust arising from the fact that the said principal had oeen invested in securities purchased at a premium, and which premium had been gradually diminishing by reason of the approaching maturity of said securities. On objection thereto, held, that the intention of the testator was to preserve the corpus of the trust fund to the amount originally set apart, and that the trustees were authorized to add to the principal of each share sufficient of its accumulated income to restore it to that amount.
Oarter c& Ledyard, for plaintiff.
Elliott c& aS. Sidney Smith, for defendant Thebaud.
Walter Trimble, for defendant Reynal.

Opinion:
Lawbence, J.
Nathaniel Higgins died on the 11th day of January, 1882. He left a will which was duly admitted to probate by the surrogate of this county. The second clause of the will reads as follows :
" I give and bequeath unto my executors hereafter named, or to such of them as shall qualify and undertake the execution of this, my will, and the survivors or survivor of them, the sum of one million and five hundred thousand dollars in i/r'usi, nevertheless, and to and for the uses and purposes fol lowing, that is to say, to divide the same into as many parts or shares as there may be children, or children of any predeceased of my daughter ¡Nathalie Florence Reynal, living at the time of my decease, such grandchild or grandchildren of my said daughter to represent the part or share to which his or her or their parent would have been entitled to the benefit of under this clause of my will, if living at the time of my decease, and invest and keep each of said shares or parts thereof invested at interest on bond and mortgage of real estate, or in the public stocks or funded debt of the city or county of ¡N"ew York, or of the city of Brooklyn, or of the state of ¡New York, or of the United States of America, and collect and receive the interest and income arising therefrom, and pay and apply the net' interest and income arising from each of said parts or shares, or so much thereof as may be necessary for that purpose, to the support, maintenance and education of the child or grandchild for whom such part or share may be set apart and invested, until such child or grandchild shall attain the full age of twenty-one years, and accumulate the balance of such interest and income, and on such child or grandchild attaining the age of twenty-one years to pay him or her all such accumulated interest or income, and from and after the time such child or grandchild shall attain the age of twenty-one years to pay and apply the whole of the net interest and income arising from the part or share set apart for the benefit of such child or grandchild to the use of such child or grandchild during his or her natural life, and on the decease of such child or grandchild to assign, transfer and pay over such part or share to the issue of such child or grandchild surviving him or her, and to the issue of any child of him or her so dying, who may have previously died leaving issue him or her surviving, such issue to take the same part or share which his, her or their parent or parents would have taken if living. If, however, said child or grandchild shall die without leaving issue surviving him or her, then to assign, transfer and pay over said part or share held or directed to be held for the benefit of the child or grandchild so dying, to his or her brothers and sisters then surviving him or her, and to the issue of such of them as may have previously died, leaving issue surviving, such issue to take the part or share his, her or their parent would have taken if living."
At the time of the testator's death there were four children of his daughter, Nathalie F. Reynal, all of whom were minors. One of these cliildren has since died, and the amount of the trust has been since held by the plaintiffs as trustees for the three surviving children, who are the defendants in this action. This action is brought for the purpose of obtaining a judicial settlement of the accounts of the plaintiffs as such trustees since the 10th day of January, 1890, the date of the previous settlement of the accounts in the Surrogate's Court. The defendant, Mathilde Eugenie Thebaud, became of age on the 3d day of February, 1891, and the defendant, Nathaniel Claude Reynal, on the 15th day of February, 1892, and as to those defendants the time has arrived when the plaintiffs must account in respect to the trust fund created by the second clause of the testator's will. It is conceded that the accounts of the investments and payments made by the plaintiffs are correct, but it is objected that the trustees were not authorized to set up what is termed in said accounts a " sinking fund." This fund,' as is stated by plaintiff's counsel in his brief, was established by the trustees to make good a deficiency in the principal of the investments held for each of the said defendants, arising from the fact that the said principal has been invested by the trustees in interest-bearing government and city bonds and stocks purchased by them at a premium, and which premium has been gradually diminishing by reason of the fact that said bonds and stocks are approaching maturity. It appears that during the first eight years of the administration of these trustees, from 1882 to 1890, the trustees made no effort to maintain a sinking fund. In 1890, when they began to prepare for the accounting which would be requisite in 1891 (when Mathilde Eugenie Thebaud attained the age of twenty-one years), the trustees diseovered that the principal of the three trust funds held by them had been impaired by the shrinkage in the values of the securities held by them. This shrinkage is shown on pages 7, 8 and 9 of the first account, and amounted to $7,090.48 in each trust.
The trustees accordingly transferred from the accumulated income in their hands $7,090.48 to principal in the case of each of the trusts and began to establish a sinking fund for each security so as to prevent further shrinkage in the principal of these funds.
It is the action of the trustees in making the above transfer and in establishing this sinking fund which is now criticised.
The question involved in this case, therefore, is whether the plaintiffs, as trustees for the defendants under the will of their grandfather, Nathaniel D. Higgins, should pay over to the defendants, as life tenants, the whole amount of the income collected by them in each year, or whether they should retain out of the income, which accrued prior to the time when each of the defendants became or becomes of age, a sufficient amount to gradually retire the premiums paid by them for the securities in which they have invested the trust funds, and pay over to the defendants as cestuis que trusts the net income or interest after deducting that amount.
This case has been very thoroughly discussed by counsel in the briefs which they have submitted, and authorities conflicting, or apparently conflicting, have been cited by them to sustain their respective positions, but after all, the case must be determined by following the elementary rule as to the construction of wills, by ascertaining the intention of the testator from the language used by him. Applying that rule, I think that it is clear that the testator intended to preserve the corpus of the trust fund for the benefit of his grandchildren.
It must be assumed that a man of large fortune who was competent to make and did make a will, executed as far back as March 2, 1878, knew that the government bonds and city stocks, in which he directed his executors to invest the $1,500,000 fund, could not be purchased without paying large premiums therefor, and that unless provision was made by the trustees from year to year to meet the shrinkage in the value of the securities which must ensue as they approached maturity, the corpus of the fund would be most materially impaired. Having this knowledge, what does the testator direct the trustees to do ? He directs them to " collect and receive the interest and income arising from each of sandparts or shares and pay and apply the net interest and income arising from each of said parts or shares to the support, maintenance and education of each of said children until each of said children shall attain the full age of twenty-one years, and accumulate the balance of such interest or income, and from and after the time such child shall attain the age of twenty-one years to pay and apply the whole of the net interest and income arising from the part or share set apart to the use of said child, and on the decease of such child to assign, transfer and pay over such part or share to the use of such child."
It will be observed that upon one of the children attaining majority the trustees are not directed to pay to such child the whole of the accumulated interest or the income, but the whole of the net accumulated interest or income. The net interest or income is to be applied to the support and maintenance of each child, and the accumulation of such net income over and above the sum required for its support is to be paid to the child when majority is attained. The direction as to the payments to be made to each of the children after they have become of age is, also, to apply the whole of the net interest or income arising from each share, and when the child dies the trustees are directed to pay over such part or sha/re to the issue of such child.
There is nothing in the will from which it can fairly be inferred that the testator when he used the word " net " meant " gross " income. And where in the direction of the final payment to the issue of each child upon the death of the child, the testator refers to " such pcm't or share" there is nothing from which it can be inferred that he did not mean the whole share, unimpaired and unreduced. The sum which he had directed the trustees to invest in the bonds and stocks mentioned in the second clause of the will was $1,500,000, which he directed to be divided into as many shares or parts as there might be children of his daughter. It is the amount of one of the shares resulting from the division of that sum by the number of children of Mrs. Reynal that the testator intended should go to the issue of each child upon the death of the child.
I have examined the various authorities relied on by counsel with care, but deem it sufficient to say that where a result apparently different from that at which I have arrived has been reached, the judgment of the court has been based upon the fact that from the language of the testator it was clear that he intended that the loss resulting by shrinkage in the value of the securities for which a premium had been paid should fall upon the remaindermen. As I read the will in this case no such intention is manifest.
Draw findings accordingly and settle on notice.