Court Opinion

ID: 6392089
Source: CourtListenerOpinion
Date Created: 2022-06-25 00:20:05.790445+00
Date Added: 2024-06-11T15:50:45.336353
License: Public Domain

Opinion Concurring in Part and Dissenting in Part
Klein, P. J. and Bolger, J.,
June 21, 1963. — The division in the court arises because the auditing judge and those of our colleagues who agree with him appear to have concluded that section 6 (b) (1) of the Estates Act of 1947, as amended 1956, P. L. (1955) 1073, 20 PS §301.6 (b) (1), must be interpreted strictly and literally regardless of bow unreasonable the direction to accumulate income may be. Such a construction could easily lead to an absurd result, which the legislature obviously did not intend as, for example, a direction to *28accumulate the income on a trust principal of $10,000 for a period of 10,000 years.
This section of the Estates Act was enacted primarily to harmonize the law respecting accumulations of income in private trusts to conform to the changes in the rule against perpetuities respecting disposition of principal made in the statute. Subsection (1) in extraordinarily terse terms appears to authorize the accumulation of all or unlimited sums of income accruing from any amount of principal for an unlimited period or periods of time. Clearly, the draftsman of this section paid insufficient attention to the gravity and importance of the vastly expanding subject of charitable trusts.
Charitable trusts are favorites of the law because they are in relief of the public burden. The principal of such gifts is exempt from the imposition of State inheritance and Federal succession and gift taxes, and from current State and local, including school, personal property and real estate taxes, as well as generally from Federal income taxes. Obviously, the purpose of these exemptions is to encourage charitable gifts, whether direct or in trust. These benefactions have risen on a national scale to more than eight billions of dollars in principal annually. Clearly, these enormous private contributions to the national welfare and the income derived from those given in trust must, in many areas, result materially in the reduction of what would otherwise be the public or governmental responsibility in these enlightened times of almost universal social consciousness. Such benefactions in the past have awakened and still quicken and give direction to governmental appropriations in this area. It follows necessarily from this legislative favoritism that the legislative intent inherent therein is that the benefits flowing from such gifts in trust should directly, currently and reasonably perform their function and not *29be .unduly postponed. Therefore, it is the duty of this court, in furtherance of its visitorial powers over charitable trusts, to implement this intent. The adjudication and the majority opinion overlook this basic aspect of the case.
The following definition is found in section 1 of the Estates Act: “(1) ‘Charity’ or ‘charitable purposes’ includes but is not limited to the relief of poverty, the advancement of education, the advancement of religion, the promotion of health, governmental or municipal purposes, and other purposes the accomplishment of which is beneficial to the community.” This is substantially the same definition as is found in Restatement of Trusts §308. See also Hunter’s Pennsylvania Orphans’ Court Commonplace Book, vol. 1, 2d ed., p. 176, “Charities” 1(a). Any attempted benefaction which does not meet this test is void. It is with this background that we must view the legislative intent as expressed in this act.
The principal of charitable trusts may be held for any period of time, even in perpetuity. A literal reading of this statute would authorize the perpetual accumulation of income as well as of principal. Obviously, this was not the legislative intent. Such gifts would be ineffectual,- would achieve no charitable purpose and would consequently be void as charitable gifts, since no direct benefit would ever flow from them; their term would be uncertain: Girard Company v. Russell, 179 Fed. 446. We must imply that the legislative intent was to further charitable purposes and not to void them. It would, therefore, appear that if income cannot be accumulated perpetually, there must be some stage during the operation of a trust short of perpetuity when the accumulation of income shall cease. At what stage of its operation such event shall occur must be a judicial function in the absence of any legislative direction relating thereto.
*30For these reasons, the act must be held to be ambiguous and not the clear declaration of legislative intent requiring a literal interpretation. Therefore, the act must be liberally construed; such construction should be consistent with the Pennsylvania legislative intent of its tax-exempting statutes and thus brought into line with the law in practically all of the other States of the Union, all of which subscribe to the “reasonableness doctrine” as set forth in Judge Lefever’s dissenting opinion.
The will provides that all of the income be accumulated for successive periods of 20 years, and at the end of each such period to distribute one-half to the charity, but for a period of 220 years after death to add the remaining one-half to principal and thereafter for an additional period of 180 years, each 20 years to add one-quarter of income to principal.
In our opinion, the direction to accumulate income for 20 years is not unreasonable and should be upheld as valid. Often the annual distribution of income is of no substantial benefit to a charitable trust, whereas, if it be accumulated for a period of 10 or 20 years, the receipt of the increased sum could be used for necessary capital improvements or other essential needs which have not been met currently because of lack of funds.
We believe, further, that the direction to add one-half of the income to principal for 220 years and thereafter one-quarter of income to principal is unreasonable and should be stricken down and the income so accumulated paid to the designated charitable beneficiary at the expiration of each 20-year period, pursuant to the provisions of section 7 of the Estates Act of 1947, as amended, which provides that “Income subject to a void direction or authorization to accumulate shall be distributed to the person... in whom the right to such income has vested by the terms of the instrument or by operation of law”.
*31It is not necessary for the court to await future events to determine whether the accumulation provisions of this trust prove absurd or unreasonable. The inevitability of such result is now apparent.
In summary, we are of the opinion that a reasonable disposition of the troublesome problem confronting us is to direct the accumulation of all the income for 20 successive periods of 20 years, all of the accumulated income to be distributed to the designated charitable beneficiary at the expiration of each 20-year period. As there is no prohibition against the direction to keep the principal intact, it should be held for 400 years as testator directed when it would be distributed in accordance with his instructions and the trust terminated.
For these reasons we would modify the readjudication in accordance with this opinion.