Case Name: LYNDE v. LYNDE et al.
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1906-06-08
Citations: 99 N.Y.S. 283
Docket Number: 
Parties: LYNDE v. LYNDE et al.
Judges: 
Reporter: West's New York Supplement
Volume: 99
Pages: 283–288

Head Matter:
LYNDE v. LYNDE et al.
(Supreme Court, Appellate Division, Second Department.
June 8, 1906.)
Wills—Construction—Income ob Pbincipal of Fund.
"Where a will authorized a fund to be invested in bonds of the United States for the benefit of each of the testator’s daughters whom he should leave surviving, the income to be received by the executors and paid to his daughters, for whose benefit the investment should be made, for their natural life, with remainder to their children, the entire income of a daughter’s share of the bonds was properly paid to her, notwithstanding the loss to the fund due to the wearing away of the premium on the bonds.
Gaynor, J., dissenting.
Appeal from Special Term, Suffolk County.
Action by Charles W. Lynde against Rollin H. Lynde and others, as executors of the will of Augusta H. Lynde, deceased. From a judgment in favor of defendants, plaintiff appeals.
Affirmed.
Argued before HIRSCHBERG, P. J., and HOOKER, RICH, MILLER, and GAYNOR, JJ.
George S. Ingraham, for appellant.
Tallmadge W. Foster, for respondents. •

Opinion:
HIRSCHBERG, P. J.
This appeal requires the determination of the question whether, upon the settlement of the estate of the testator, the loss to a trust fund invested under the provisions of the will for the benefit of a daughter of the testator during life, with remainder to her children, occasioned by the wearing away of the premium on government bonds, is chargeable to the income or to the principal. It was decided at Special Term that the primary purpose of the testator in the creation of the trust was not the preservation of- the corpus of the trust fund for the benefit of the remaindermen, but its investment for the benefit of the life beneficiary. The fund was invested, as specifically authorized by the will, in bonds of the United States, to quote the language of the will:
"So as to constitute a separate and distinct estate for the benefit of each of my daughters whom I shall leave me surviving; and the interest, income and profit of such share shall be received by my executors and paid to the daughters for whose benefit such investment shall bé made for and during her natural life, for her own use, upon her separate acknowledgment or receipt therefor, free from the debts, control, or interference of her husband; and at her decease, I give and bequeath such share to and among her children share and share alike, forever."
There is nothing in the record tending to indicate that at the time . the will was executed the daughter in question had any children.
The general rule is undoubted, and was applied in the decision of New York Life Insurance & Trust Co. v. Baker, 165 N. Y. 484, 59 N. E. 257, 53 L. R. A. 544, namely, that the capital of a trust should be kept intact, and that to that end an adequate proportion of the annual income should be set apart to make good the amount paid in premiums in order to secure a proper investment, and that it is accordingly the duty of the trustee, generally, who has invested the funds in bonds purchased at a premium, to set apart out of the income payable to the life beneficiary a sufficient sum each year to form a sinking fund adequate to keep the principal of the trust unimpaired. This general rule, however, is qualified by the equally undoubted general rule that the intention of the testator in the creation of the trust must govern, where such intention can be fairly deduced from the language employed or the surrounding circumsfances. That qualifying rule was stated in the prevailing opinion in the Baker Case, 165 N. Y. 488, 59 N. E. 258, 53 L. R. A. 544, to require the court to "consider all the surrounding facts and circumstances attending the execution of the will, and if as a result of such examination the conclusion should be reached that it was the intention of the testator that his daughter should have all the income arising from the investment, without allowing any abatement therefrom for the purpose of keeping intact the capital of the trust estate, then such construction should be given to the will, notwithstanding its phraseology, in obedience to that rule of construction which, as has often been said by this court, makes the intention of the party the polar star of construction." It does not appear whether the testator in that case authorized investment in government bonds. Such investment, however, had been made by a preceding trustee. So far as the language of the will could throw any light upon the intention of the testator, it could only operate to suggest the conclusion that it was the intention of the testator that the principal should remain intact, and that the entire income was not necessarily to be paid to the life tenant. The language of the will is that after the death of the life tenant "I give, devise and bequeath the whole of said share, with all arrearages of income," to the remainder-men. It seems to me that under the authorities, which much be regarded in connection with the Baker Case, supra, there is sufficient in the case at bar to justify the conclusion that what the testator had chiefly in mind was the creation of a trust primarily for the benefit of his daughter, and that she should be permitted the use of all the income which it might earn, regardless of the fact, which must be assumed to have been known to. the testator, that the authority conferred to invest in government bonds would necessarily cause the payment of a premium which in time would shrink away.
This conclusion is deducible, not only from the authority conferred to make investments of the character considered, but also from the express provision- that the income received by the executors should be paid to the daughter for whose benefit the testator declared in express terms that the investment should be made. I cannot see how the direction that the testator should pay over the income which he received without a suggestion that there might be any arrearage of income can be distinguished in principle and effect from that employed by the testatrix in the case of McLouth v. Hunt, 154 N. Y. 179, 48 N. E. 548, 39 L. R. A. 230. In that case it does not appear that there was either a direction or authority to invest in government bonds, but securities of that character were transmitted by the testatrix oh her death and retained by the trustees, and the direction was for payment to the life tenants "annually from their arriving at age the full income," and there was a suggestion, perhaps remote, that some of the income might remain unpaid at the end of the life period by the provision that the share to be paid -to the remaindermen should be "together with any accumulation thereupon which may remain." Nevertheless, the court held that the direction for the payment of the "full income" was sufficient to indicate that the intention of the testatrix was that the life tenants should receive the whole annual interest on the bonds without diminution to meet depreciation in their market value through their approaching maturity.
I think the view that there is no difference between a direction to pay over the full income and one to pay over the income received is strengthened somewhat by the decision in Matter of Hoyt, 160 N. Y. 607, 55 N. E. 282, 48 L. R. A. 126. There the direction was that the trustees should apply the income of the trust fund to the use of the testator's daughter for and during her life "in the most bounteous and liberal manner, as to expenditure, and so as to promote her convenience and comfort and gratify her reasonable desires." It is to be observed that nothing was given to the daughter and nothing directed to be paid over to her. The trust, so far as made for her benefit, was limited to an application for her use by the trustees of the income collected: and, while the language employed was certainly broad enough to include it all, there was not only no express direction to that effect, but the will further provided that at the end of the life estate it was the will of the testator as to the trust fund that "the securities in which the same shall be invested, and any surplus of income therefrom, if any, which shall not have been applied to her use during her natural life, shall, on the death of my said daughter, go and be distributed to and among my nephews and nieces." Nevertheless the court held that it was the intention of the testator, derived from the face of the will and the surrounding circumstances, to impose the loss of the premium upon the remaindermen.
It seems to me that very slight indications are sufficient in this class of cases to support the view that a testator ordinarily intends in the creation of a trust to benefit his children to the extent of the full income in the popular and ordinary sense, where he directs or authorizes an investment in government bonds for the benefit of such children, especially where there is nothing tending to prove the existence oí the remaindermen at the time of the making of the will. The fact must be obvious to a testator that the effect of such an investment is to give to the remaindermen the very highest security for the preservation of the principal of the fund, and the high character of the security necessarily tends to reduce the amount of the income which it pays. In such circumstances it is inequitable in a sense to further penalize the life tenant in existence by charging him with the payment of a premium for the benefit of remaindermen, possibly not in esse at the time of the creation of the trust. I think the judgment can be, and should be, affirmed.
•Judgment affirmed, with costs.
HOOKER, RICH, and MILLER, JJ., concur.