Court Opinion

ID: 9810854
Source: CourtListenerOpinion
Date Created: 2023-08-31 22:01:48.890637+00
Date Added: 2024-06-11T13:40:16.828849
License: Public Domain

Clarkson, J.
This is an equitable action, brought by plaintiff against the defendants, petitioning the court to determine certain questions relative to the disposition of certain property. This is admissible. Bank v. Alexander, 188 N. C., 668; Finley v. Finley, 201 N. C., 1 (14); Spencer v. McCleneghan, 202 N. C., 662 (669).
*342The contention of defendants, appellants, is “that a careful reading of the will will show that while there is no expressed provision in the will determinative of this question, a fair inference is that there was an implied direction that this $11,946.13 should be treated as income and paid to the life beneficiaries. That the $11,946.13, which is income that accrued on that portion of the estate used in the payment of specific legacies, debts, and costs of administration, should be paid to the life beneficiaries as income and not added to the corpus of the estate.”
The contention of appellees is: “That the sum of $11,946.13 should be added to the corpus of the estate for the benefit of the remaindermen.”
The well settled rule in the construction of wills is set forth in Morris v. Waggoner, 209 N. C., 183 (186): “That the primary purpose in construing a will is to ascertain the intention of the testator from the language used in the will, and that in ascertaining such intention consideration should be given to the condition of the testator and his family and to all of the attendant circumstances surrounding the execution of the will.”
We must construe the will and codicils to the will together so as to ascertain the intention of the testator. It goes without saying that when the testator made his will, his four children were the primary objects of his bounty. As to them he said, “I give, devise, and bequeath all the rest and residue of my property and estate of whatsoever nature and wheresoever the same may be to said Wachovia Bank and Trust Company, as trustee, to be by it held, used, and disposed of in trust for the benefit of my four children” (naming them). “To divide quarterly the net income then on hand from said trust estate into as many equal shares as there shall be then living child of mine named above,” etc. No particular provision was made for the fund in controversy, yet the will says “the net income then on hand”- — that is, at his death. Would it not be reasonable to conclude that the fund in controversy is net income and not corpus?
From a careful search we can find no direct authority on this question in North Carolina. There are two lines of authorities, one known as the Massachusetts Rule and one known as the English Rule. The appellants contend that the Massachusetts Rule should be followed in this case and the income accruing on that portion of the estate used to pay specific legacies, debts, and costs of administration should be distributed among the life tenants as income. And contends that the Massachusetts Rule is based upon the following theories: (1) That the residuum of the estate is formed at the death of the testator and is subject to the payment of any specific legacies, debts, and expenses of administration. (2) That the testator has the interest of those closest to him more at heart, and if he could contemplate a situation of this *343kind, that he would wish for those closest to him to receive the amount in question' — that is, that he would want his children and their children to receive the total income accruing on the entire estate from the time of his death.
We think the Massachusetts Eule preferable to the English Eule, and we believe more consonant with justice and reason. The residue of the estate is formed at the time of the testator’s death and is subject to the payment of debts and legacies, and that the income from that should be paid to the beneficiaries, and is not corpus.
The matter is so thoroughly discussed by Rugg, C. J., in Old Colony Trust Co. v. Smith (266 Mass., 500), 165 N. E., 657, that we quote copiously from that opinion, as follows: “The testamentary words ‘rest, residue, and remainder’ comprehend the whole of the estate of every description left by the testator subject to all deductions required by operation of law or by direction of the testator. They signify a complete disposition of all property of the testator (citing authorities). In the absence of controlling words to the contrary, ‘this residue must be considered as formed at the time of the decease of the testator.’ Where the gift of the residue is after the payment of debts and similar charges and nondeferred legacies, the residue is to be formed subject to such payments, even though actually made at a later time. Treadwell v. Cordis, 5 Gray, 341, 348, 352, 358. It was expressly stated by Chief Justice Shaw in Minot v. Amory, 2 Cush., 377, 386, that trustees in making up their accounts should credit to income ‘all sums received as income, either through the executors or by themselves, after receiving the capital’; and again in Lovering v. Minot, 9 Cush., 151, 157, that where the words of the will are ‘the income,’ ‘with nothing to restrain them,’ they include nothing less than ‘the whole income.’ In each of these decisions the learned Chief Justice reviewed the English cases, including Angerstein v. Martin, Turn. & Russ, 232, which is the foundation of the English Rule; Allhusen v. Whittell, L. R., 4 Eq., 295, 303; In re McEuen (1913), 2 Ch., 704, and examined Williamson v. Williamson, 6 Paige Ch. (N. Y.), 298, which is the foundation of the New York Rule; Matter of Accounting of Benson, 96 N. Y., 499, 48 Am. Rep., 646; Lawrence v. Littlefield, 215 N. Y., 561, 577, 109 N. E., 611, and declined to follow the rule established by those cases. That rule, in substance, is that income from money paid for debts and legacies is not income from the residue, but income from property which never becomes a part of the residue because given to other uses, and hence that it is itself a part of the residue. That was the rule followed by the accountant. But it is not the rule established in this Commonwealth by the leading case of Treadwell v. Cordis, 5 Gray, 341, 348, 352, 358, which rests upon strong adumbrations if not express adjudications of earlier *344decisions. It was said by Gray, J., in Sargent v. Sargent, 103 Mass., 297, 299: ‘In this Court, the general rule is established, that the tenant for life is entitled to the income of a residue given in trust, from the time of the testator’s death; because any other rule would take away the income from the tenant for life, and apply it to the increase of the capital for the benefit of the remaindermen. Lamb v. Lamb, 11 Pick., 371; Minot v. Amory, 2 Cush., 377, 388, 389; Lovering v. Minot, 9 Cush., 151, 157.’ In McDonough v. Montague, 259 Mass., 612, 157 N. E., 159, the question presented was as to the proper disposition of substantial ‘income earned by the moneys used to pay debts and expenses of administration.’ It there was said: ‘There is nothing in the will which indicates an intention to make a change from the accepted rule that a tenant for life is entitled to the income from the time of the testator’s death.’ ”
The Massachusetts Rule was followed by Rhode Island in 1933—City Bank Farmers Trust Co. et al. v. Taylor, 53 R. I., 126, 163 Atl., 734. New York followed the English Rule, and this was recently changed by statute. N. Y. L., 1931, c. 706, added sec. 17 (b), to the Personal Property Law (Consol. Laws, c. 41), which reads as follows: “Unless otherwise expressly provided by the will of a person dying after this act takes place, all income from real and personal property earned during the period of administration of the estate of such testator, and not payable to others or otherwise disposed of by the will, shall be distributed pro rata as income among the beneficiaries of any trusts created out of the residuary estate of such testator and the other persons entitled to such residuary estate. None of such income shall, after such distribution, be added to the capital of the residuary estate, the whole or any part of which is devised or bequeathed in trust or for life or for a term of years, but shall be paid ratably to the life beneficiary of a trust, or to the life tenant, or to the absolute residuary legatee as the case may be. Unless otherwise directed in the will, income shall be payable to the life beneficiaries of trusts, or to life tenants from the date of the testator’s death. Nothing contained in this act shall affect the right of any person to income on any portion of the estate not part of the residuary estate of such testator.”
The above quoted statute, in effect, makes the New York law identical with the law which has been followed in Massachusetts and several other jurisdictions, including Rhode Island, for many years.
We follow the Massachusetts Rule. The judgment of the court below is
Reversed.
Devin, J., took no part in the consideration or decision of this case.