Case Name: Edward C. M. Kemp et al., as Trustees under a Trust Made by Margaret K. Buchanan et al., Appellants, v. Margaret J. E. J. Paterson, Appellant; Margaret R. J. Paterson et al., Infants, by Milton Pollack, Their Guardian ad Litem, Respondents, et al., Defendants
Court: New York Court of Appeals
Jurisdiction: New York
Decision Date: 1959-05-21
Citations: 6 N.Y.2d 40
Docket Number: 
Parties: Edward C. M. Kemp et al., as Trustees under a Trust Made by Margaret K. Buchanan et al., Appellants, v. Margaret J. E. J. Paterson, Appellant; Margaret R. J. Paterson et al., Infants, by Milton Pollack, Their Guardian ad Litem, Respondents, et al., Defendants.
Judges: 
Reporter: New York Reports
Volume: 6
Pages: 40–49

Head Matter:
Edward C. M. Kemp et al., as Trustees under a Trust Made by Margaret K. Buchanan et al., Appellants, v. Margaret J. E. J. Paterson, Appellant; Margaret R. J. Paterson et al., Infants, by Milton Pollack, Their Guardian ad Litem, Respondents, et al., Defendants.
Argued January 21, 1959;
decided May 21, 1959.
George J. Schaefer for Edward 0. M. Kemp and another, as trustees, and Edward C. M. Kemp, individually, appellants.
I. The action of the trustees in exercising their power was in accordance Avith the intention of the settlor. (Matter of Erwin, 277 App. Div. 378; Schreyer v. Schreyer, 101 App. Div. 456, 182 N. Y. 555; Matter of Clark, 280 N. Y. 155.) II. The action of the trustees in exercising their poAver was for the best interest of the settlor’s daughter. III. The poAver granted to the trustees is clear, definite and broad in scope. (Matter of Bisconti, 306 N. Y. 442; Matter of Ahrens, 301 N. Y. 701.) IV. The exercise of the power was not limited upon need or emergency. (Matter of Perkins, 245 N. Y. 478.)
Donald Vail for Margaret J. E. J. Paterson, appellant.
I. The decision of the trustees to transfer the entire principal of this trust to the life beneficiary was proper and authorized. (Matter of Woollard, 295 N. Y. 390; Matter of Clark, 280 N. Y. 155; Matter of Bisconti, 306 N. Y. 442; Matter of Fabbri, 2 N Y 2d 236; Cabell v. Markham, 148 F. 2d 737; Spencer v. Childs, 1 N Y 2d 103; April Prods. v. G. Schirmer, Inc., 308 N. Y. 366.) II. The decision of the trustees, made in good faith, to pay over the entire principal to the life beneficiary is conclusive. (Matter of Perkins, 245 N. Y. 478; Hamilton v. Drogo, 241 N. Y. 401; Cushman v. Cushman, 116 App. Div. 763.) III. The transfer of the entire principal to the life beneficiary as decided upon by the trustees would not be harmful to the infant children of the life beneficiary who are represented by the guardian ad litem. (Matter of Schrier, 157 Misc. 310.) IV. The transfer of the entire principal to the life beneficiary as decided upon by the trustees would be for the best interest of the life beneficiary. (Helvering v. Clifford, 309 U. S. 331; Helvering v. Horst, 311 U. S. 112.) V. The trust in question may be terminated by the transfer of the principal to the life beneficiary. (Schreyer v. Schreyer, 101 App. Div. 456, 182 N. Y. 555; Matter of Fowler, 263 App. Div. 255, 288 N. Y. 697; Carrier v. Carrier, 226 N. Y. 114; Matter of Krooss, 302 N. Y. 424; Matter of Sand v. Beach, 270 N. Y. 281; Ransom v. Ransom, 70 Misc. 30; Locke v. Farmers’ Loan & Trust Co., 140 N. Y. 135; Crooke v. County of Kings, 97 N. Y. 421; Matter of Gallien, 247 N. Y. 195.)
Milton Pollack, in person, and Joseph A. Doran and Irving K. Rubin for Milton Pollack, guardian ad litem for Margaret ft. J. Paterson and others, infants, respondents.
I. Termination of this trust to enable the income beneficiary to make a gift of the principal is not within the scope of the power granted to these trustees. (Sweeney v. Warren, 127 N. Y. 426; April Prods. v. G. Schirmer, Inc., 308 N. Y. 366; Matter of Durand, 250 N. Y. 45; Matter of Wentworth, 230 N. Y. 176; Roosevelt v. Roosevelt, 6 Hun 31, 64 N. Y. 651; Commissioner of Internal Revenue v. Robertson’s Estate, 141 F. 2d 855; Matter of Donlin, 177 App. Div. 184; Matter of Morse, 280 App. Div. 171; Matter of Hadden, 178 Misc. 939.) II. The termination of the trust merely to make the beneficiary a conduit for a. gift of the principal to others is not within the permitted service of the “ best interest ” of the beneficiary. (Stocker v. Foster, 178 Mass. 591; Vincent v. Putnam, 127 Misc. 647, 221 App. Div. 211; Vincent v. Rix, 248 N. Y. 76; Terry v. Rector, etc., St. Stephen’s Church, 79 App. Div. 527; Matter of Briggs, 101 Misc. 191, 180 App. Div. 752, 223 N. Y. 677; Matter of Wentworth, 230 N. Y. 176; Matter of Close, 281 App. Div. 147; Matter of Britt, 272 App. Div. 426; Matter of Niles, 122 Misc. 17, 211 App. Div. 826; Matter of Lane, 201 Misc. 1003; Matter of Pollack, 134 Misc. 212; Matter of Flood, 127 Misc. 797, 216 App. Div. 711, 243 N. Y. 598; Matter of Cushman, 143 Misc. 432.) III. The power of inva sion may not be exercised to alter the benefits from and the devolution of the trust corpus. (Matter of Carroll, 274 N. Y. 288; Matter of Caswell, 185 Misc. 599, 269 App. Div. 809; Matter of Wentworth, 230 N. Y. 176; Matter of Freiberger, 177 Misc. 592; Matter of Bowers, 2 Misc 2d 482; White v. White, 197 Misc. 322; Matter of Knauss, 204 Misc. 207.)

Opinion:
Fuld, J.
In 1934, Margaret Buchanan executed a deed of trust, creating the trust now before us. Insofar as pertinent, it provided that, when the settlor's daughter, Margaret Jane, reached the age of 21 years, the settlor then being dead, the trustees were to pay over to such daughter " all of the net income annually during the rest of her life and so much of the principal sums of the trust from time to time as the Trustees may deem for [her] best interest ". And, upon Margaret Jane's death, the trust deed continued, the corpus was to be transferred to her issue then living and, if there were none, then, to certain other designated persons. The settlor died before the daughter became 21 and, since 1950, when she attained that age, the daughter has been receiving the income. The trustees, pointing to the provision above quoted, decided, in the best of faith and for reasons which seemed to them good and sound, that they had the power to pay the entire corpus to Margaret Jane and thereby terminate the trust. Accordingly, after obtaining her consent, they brought this action in which they seek judicial sanction for what they wish to do.
The court at Special Term believed that the trustees possessed the power to terminate the trust and rendered the judgment requested. The Appellate Division, however, took a different view and reversed, Since we agree with the conclusion reached by that court and with its rationale, we may be quite brief.
The provision, authorizing the trustees to invade so much of the principal " from time to time as [they] may deem for the best interest " of the life beneficiary, does not empower them to turn the entire corpus over to her under the circumstances disclosed. (Cf. Matter of Bisconti, 306 N. Y. 442.) There is here no express or implied authority to terminate the trust and, while there may conceivably be a situation where the trustees would be privileged to employ all of the principal for the daughter's " best interest," the present is not such a case. Nor may the rights of the remainder interests he ignored or disregarded. In short, the power to use the principal of the trust may not be enlarged into a power to terminate it.
The judgment of the Appellate Division should be affirmed, with costs to all parties appearing separately and filing separate briefs payable out of the trust funds.