Risher v. American Surety Co. of New York

The following opinion was filed January 11, 1938: Martin, J. Counsel have exhaustively briefed and ably argued many questions on this appeal. There is a remarkable scarcity of authorities on the legal propositions here involved. The main contentions go to the question whether the trust created by the will of Mr. Risher is to be administered in Wisconsin or in Pennsylvania. The appellants contend that the administration of the trust is governed by the laws of Wisconsin. Respondent contends that the trust must be administered according to the laws of Pennsylvania. This is the principal and controlling issue. If the trust is to be administered in Wisconsin, under the direction of the courts of this state, then there has been no qualification by the trustee, and the executor and surety on its bond are still liable for the trust funds. There appears to be no material dispute as to the facts. The issue is one of law. The trial court has found that the testator intended the trust which he created to be executed and administered in Pennsylvania, under and pursuant to the laws of that state. We have carefully examined the evidence bearing on this finding and conclude that same is fully sustained. “In respect to the dignity of a trust created by will, the supreme test is, What did the testator intend? That being discovered it is the law of that trust. Courts have no power to frustrate it and substitute a different scheme,— there can be no substitute method.” Upham v. Plankinton, 152 Wis. 275, 284, 140 N. W. 5, 8. “The power exercised by courts of equity to' enforce the administration of trusts is a supervisory power. It is exerted to carry out the intention of the settlor. Courts of equity will do all within their power to see that the trust is executed in accordance with its terms.” Will of Stack, 217 Wis. 94, 102, 258 N. W. 324, 327. — 111 — Anything designed to defeat the intent of the testator is against public policy. Graef v. Kanouse, 205 Wis. 597, 603, 238 N. W. 377. “So we must conclude, not only that there is a constitutional right to make a will but that such right includes a right of equal dignity to have it carried out.” Will of Rice, 150 Wis. 401, 450, 136 N. W. 956, 975, 137 N. W. 778. The title and right of the trustee comes from the will itself. In McWilliams v. Gough, 116 Wis. 576, 585, 93 N. W. 550, 553, the court said of a testamentary trustee: “Title vests in the latter under the will, where the devise or bequest is to him as trustee, and the will does not contemplate an interval between the death of the testator and the vesting of the title in such trustee,— not under the probate of the will or any mere order of the court, or under the statute requiring qualification of the trustee.” “The rights and status of a testamentary trustee, as such, flow exclusively from the will and not from proceedings on the will taken in court; neither probate nor letters of trusteeship being the foundation of his trusteeship, but the will itself.” Matter of Ripley, 101 Misc. 465, 167 N. Y. Supp. 162. The trial court found: “The Pennsylvania Trust Company was fully qualified and authorized, under the laws of the state of Pennsylvania, to act in that state as trustee of the said trust and administer the same and was not required by said laws to give bond or receive appointment or letters from any court.”. Proof was made as to the authority of the Pennsylvania Trust Company to' accept and execute trusts; also the fact that said trust company was relieved from giving bond to qualify and act as trustee. The Pennsylvania statute, Pur-don’s Statutes, Annotated, tit. 15, ch.‘44, §2511, provides: “Whenever such companies shall receive and -accept the office' or appointment of assignees, receiver, guardian, execu — 112 — tor, administrator, or to be directed to execute any trust whatever, the capital of the said company shall be taken and considered as the security required by law for the faithful performance of their duties as aforesaid and shall be absolutely liable in case of any default whatever.” The language “the capital . . . shall be . . . liable,” etc., by the weight of authority means that the cestuis que trustent have a right of preference against all the assets of the trust company. Parkinson v. State Bank of Millard County, 84 Utah, 278, 35 Pac. (2d) 814, 94 A. L. R. 1112, and annotations, p. 1123. In support of their contention that the trust in question is governed by the laws of Wisconsin, the appellants cite Restatement, Conflict of Laws, § 298, which provides: “A testamentary trust of movables is administered by the trustee according to the law of the state of the testator’s domicile at the time of his death unless the will shows an intention that the trust should be administered in another state.’1 Comment c states: “If the testator appoints as trustee a trust company of another state, presumptively his intention is that the trust should be administered in the latter state; the trust will, therefore be administered according to the law of the latter state.” In view of the finding made by the court below, that Mr. Risher intended the trust to be executed and administered in Pennsylvania, under and pursuant to the laws of the state of Pennsylvania, and in view of the comment above quoted, it would appear that this trust comes within the exception in the Restatement, § 298. Said section and comment appear to support the respondent’s position. In In re Chappell’s Estate, 124 Wash. 128, 213 Pac. 684, the court said: “The general rule undoubtedly is that, as applied to personal property, the law of the domicile governs, Various — 113 — reasons have been given for this rule, but none seems to us more satisfactory than that the testator is presumed to be familiar with the laws of his domicile; to have prepared his will in the light of those laws, and to apply any other law would be at great risk of defeating his intent, unless it is manifest that the testator had the laws of some other place, or country, in view.” Mr. Risher made his will in Pennsylvania. He was then a resident of that state. He left the residue of his estate in trust to the South Side Trust Company of Pittsburgh (now the Pennsylvania Trust Company), to invest, manage, etc., until the youngest child reached twenty-one years, then to be divided among his wife and children. The will further provides, that in the event of the prior death of his wife and children, the income should be “divided among and quarterly paid to those who would be entitled to receive the same under the intestate laws of the state of Pennsylvania.” ' The will further provides, as to principal, that in case of the prior death of both wife and children “the principal thereof shall be distributed among and vest in those who would-be entitled to take the same under the intestate laws of the state of Pennsylvania.” Section 299 of the Restatement, Conflict of Laws, provides: “The administration of a trust of movables is supervised by the courts of that state only in which the administration of the trust is located.” Illustrations: “(2) A, domiciled in state X, dies bequeathing his personal property to B Trust Company, a corporation of state Y, upon trust. The B Trust Company applies to a court of Y, for directions. The directions will be given.” The location of the administration of a trust, or the situs of a trust, means the place of the performance of the active — 114 — duties of the trustee. Comment a, Restatement, Conflict of Laws, under section 297, says: “. . . The administration by the trustee is the action of the trustee in carrying out the duties of the trust. In what securities can he invest? What interest should he receive on investments? To whom shall he pay the income? To whom shall he render an account? These are questions of administration.” 2 Beale, Conflict of Laws (1935), p. 1023, § 297.1, says: “. . .If the trustee is a bank or trust company, the almost inevitable inference is that the seat of-the trust is at the principal office of the bank.” This author says: “Any question which arises after the trust has come into being is a question of the administration of the trust. Such questions relate to the trustee’s duties, the investments he may make, to whom he must pay income or principal, where he must account. . . . All matters of administration are determined by the law of the situs or seat of the trust. The situs of a trust must be determined by an interpretation of the words by which the trust is created. ... As has been seen, all indications are considered, such as the intention of the parties, the place of business or domicile of the trustee, the location of the trust res, and other similar matters. The seat of the trust having been determined, the law of the state in which the trust is located will apply to its administration.” Vol. II, p. 1024, § 297.2. In Greenough v. Osgood, 235 Mass. 235, 237, 126 N. E. 461, 462, a single woman, residing in the state- of New York,.in contemplation of her marriage to a man residing in California, .executed in Massachusetts a declaration placing in- trust what she had inherited from her mother, who had resided in Massachusetts, and which consisted of real estate in Massachusetts, notes .secured, by .mortgages on. real estate in Massachusetts., and securities which were kept in Massachusetts in the hands of trustees who were Massachusetts — 115 — residents. One of the provisions of the declaration was that, in certain contingencies, the property should go to such “person or persons as would, by the laws of the commonwealth of Massachusetts, have been or be entitled to the same.” After the marriage, the donor and her husband lived for many years in California, then for many years in Massachusetts, and then in New York, where she died and her will was proved. Upon a bill in equity by the trustees for instructions, it was held that the donor intended that the trust should be administered by the laws of' Massachusetts, and therefore that the Massachusetts court had jurisdiction of the suit. On this state of facts the court said (p. 237) : “When the antenuptial agreement and trust were executed in Massachusetts Hannah P. Newell resided with her ■father in the city, county and state of New York and Edward S. Osgood was domiciled in San Francisco, California. Immediately upon the marriage, Hannah P. Osgood and her husband removed to California, where they resided for many years. Subsequently she removed with her husband to Boston, where they resided for many years. Finally she removed to New York, where she died on October 9, 1918, leaving a will which was duly proved and allowed by the surrogates court in and for the county and state of New York. Although the donor in her declaration of trust was not domiciled in Massachusetts, we think it plain that she intended that the trust should be administered under the laws of that state, by the appointment of the trustees who were residents of Massachusetts, by the fact that the trust property consisted very largely of real estate and real estate mortgages, located entirely in Massachusetts, by the provision of the trust instrument that the property in certain contingencies should go to the ‘person or persons as would, by the laws of the commonwealth of Massachusetts have been or be entitled to the same,’ and by the further fact that the Massachusetts trustees or trustee could at no time have been compelled to account for the property in trust, in any state other than Massachusetts. Sewall v. Wilmer, 132 Mass. 131; Codman v. Krell, 152 Mass. 214, 218; Russell v. Joys, — 116 — 227 Mass. 263. It follows that the Massachusetts courts have jurisdiction over the matters in issue.” The capacity of the Pennsylvania Trust Company to take and administer the trust is determined by the laws of its domicile,— the laws of Pennsylvania. 2 Wharton, Conflict of Laws (3d ed.), p. 1326, § 591(b); Minor, Conflict of Laws, p. 139, § 70; 91 A. L. R. pp. 491 to 508; Restatement, Trusts, § 96; In re Hauge’s Estate, 92 Mont. 36, 9 Pac. (2d) 1065. The Restatement, Trusts, § 96, says: “(2) The extent of the capacity of a corporation to administer a trust depends upon the extent of the powers conferred upon it by law.” Appellants cite section 306 (b) of the Restatement, Conflict of Laws, to the proposition that the capacity of the legatee to take,- — in the instant case, the Pennsylvania Trust Company, — must be determined by the laws of Wisconsin, and they quote as follows: “The law of the state of the domicile of a testator determines his capacity to make a will, the form necessary to make a valid will, the validity of a particular provision in the will, the nature of the estate created, and the capacity of a legatee to take his legacy.” However, an exception is stated, and is as follows: “In case of a legacy to a -corporation, the question whether the acceptance of the terms of the gift is within the purposes of incorporation is determined by the law of the state of incorporation.” The Wisconsin statutes on appointment and qualification of trustees and supervision of administration apply only to trusts requiring or involving administration in Wisconsin. The trial court found that: “Said trustee did not, in and about the acceptance and handling of said trust and trust assets, do any of the business of said trust in the state of Wisconsin.” — 117 — The appellants’ contention that no matter where the trust was to be administered, it was the duty of the trustee to comply with the Wisconsin statutes, sec. 323.01, sec. 223.12, and sec. 223.02, and to receive appointment as such trustee by the county court of Washburn county, cannot be sustained. If that were the law applicable in every trust, there could be no foreign trust established or recognized in the probate of a will in this state. If the trustee must give bond and qualify as provided by the Wisconsin statutes, to receive and execute a foreign trust, it follows that the trust would have to be executed under the direction of the Wisconsin court. Only' such trust investments could be made as are permitted under the Wisconsin law. If there was a resignation of the trustee or trustees, the Wisconsin court would be called upon to name the successor or successors to execute the foreign trust. We agree with the conclusion of the learned trial judge that the trust in question must be administered under the laws of the state of Pennsylvania. The Pennsylvania Trust Company was authorized and qualified to receive the trust assets when paid over to it on July 25, 1931, by the executor. The investments to which the appellants objected, and which comprised the item of surcharge against the executor’s account in the citation proceedings, were made by the Pennsylvania Trust Company as trustee and not as executor. No objection was made to the executor’s final account, nor to the final judgment as entered thereon in July, 1931. Pursuant to the final judgment, all of the personal estate was assigned to the trust company in its capacity as trustee under the will. The citation proceedings resulting in the surcharge against the executor’s account in the sum of $32,331.50 were approximately five years after the entry of final judgment. The decision of the trial court is correct and must be affirmed. By the Court. — Judgment affirmed.