Demuth v. Kemp , 144 N.Y.S. 690 ( 1913 )

Scott, J;:

The two judgments brought up by these appeals relate to the disposition of the income derived by the defendant George Kemp from two separate trusts created by the wills of his father and mother. The two causes were tried together and were considered together by the justice who rendered the judgments appealed from. It will be most convenient also to consider the two appeals together.

The plaintiff holds a judgment against defendant George Kemp for a considerable sum of money. It was recovered on May 14, 1902, and, save for some insignificant payments, it remains wholly unpaid and unsatisfied. The defendant George Kemp is in receipt of income from two sources, under separate trusts created by his parents.

George Kemp, the elder, died leaving a will which was admitted to probate on December 27, 1893. By this will and a codicil thereto he gave to his trustees a fund of $150,000 to be held by them during the lifetime of George Kemp, the younger, the present defendant. Out of the income from this trust fund the trustees were directed to pay to George Kemp, the younger, the annual income of $6,000, with the proviso that if said fund should fail to produce said sum in any year the deficit should be made up out of other revenues of the estate. By a clause in the will, to which clause the codicil was also made subject, it was provided that the trustees need not pay any part of the income directly into the ■ hands of said George Kemp, the younger, “if, and in so far as, they shall consider it injudicious to do so, but that in the application of such net income to the use of the said George Kemp, Junior, they shall be governed by their own judgment and discretion, and shall apply the same to his- use in such way and manner as they shall consider most useful and beneficial to him.” The testator gave to his wife, Juliet A. Kemp, two-fifths of his residuary estate for her life with a power of appointment by will. Juliet A. Kemp died, leaving a will which was admitted to probate on May 28, 1897. In the attempted exercise of her power of appointment she gave to her executors as trustees such a proportion of the estate devised for her benefit by her husband as should produce a clear annual income of $9,000 to be paid to George Kemp, the younger, in equal quarter yearly payments, upon the somewhat unusual condition, however, that before any quarter yearly payment was made to him he must produce to the trustees evidence satisfactory to them that he, the said George Kemp, the younger, had “ during the three months immediately preceding the expiration of such quarter - * * applied to the use and benefit, support, maintenance and education of his two children, Chouteau Kemp and Gladys Kemp,” or the issue or survivor of them, the sum of $1,250. In default of the production of such satisfactory evidence the trustees were directed to pay the whole income of that quarter 11 to such of the children of my said husband George Kemp (other than my said son George Kemp), as shall then be living ” and to the living issue of any deceased child other than George Kemp. At the death of George Kemp the trust in his favor is to terminate, and the trust estate is to be divided between the surviving children of the testatrix and the then living issue of any deceased child other than said George Kemp, the younger. A question appears to have arisen as to the validity of this attempt on the part of Juliet A. Kemp to exercise the power of appointment given to her by the will of her husband, wherefore to set any such question at rest Marion Morgan Kemp, Juliet Augusta Tyng and Arthur Tryon Kemp, all of the children of George Kemp, the elder, and Juliet A. Kemp, except George Kemp, the younger, executed an agreement with the trustees under the will of George Kemp, the elder, and the trustees under the will of Juliet A. Kemp whereby they acknowledged and declared that the gift, devise, bequest and appointment by the will of the said Juliet A. Kemp, deceased, for the benefit of George Kemp, the younger, are in all respects valid and effectual. In the year 1900 an action was commenced in the Supreme Court by the executors and trustees under the will of George Kemp, the elder, against the trustees under the will of Juliet A. Kemp and all persons interested under the wills for a construction of the will of said George Kemp, the elder, a settlement of the accounts of the plaintiffs, a determination of the rights of the several parties, and an adjudication as to the validity of the attempted execution by Juliet A. Kemp of the power conferred upon her by the will of her husband. The final judgment in that action, entered on August 19, 1903, affirmed the validity of the attempted exercise of the power of disposition given her by her husband’s will, and of the agreement above recited executed by the children of George and Juliet A. Kemp other than the present defendant George Kemp. It was further held that said George Kemp, the younger, had no estate or interest in the lands, nor in the real or personal estate of the said George Kemp, deceased, other than as beneficiary of the trust created by the will of said George Kemp, deceased, to provide an annual income of $6,000 for his benefit during his life, and as beneficiary of the trust created by the will of Juliet Augusta Kemp, deceased, to provide an annual net income of $9,000 for his benefit during his life.

George Kemp, the younger, failed to produce to the trustees under the will of Juliet A. Kemp, deceased, satisfactory evidence that he had expended during* any quarter for the use and benefit, support, maintenance and education of his children the sum which his mother, by her will, had directed that he should expend as a condition of receiving the quarterly installment of income. The trustees thereupon, and on December 18, 1903, began a proceeding in the Surrogate’s Court of the county of New York for a settlement of their accounts, and incidentally for a construction of the will of Juliet A. Kemp, deceased, and for instructions. To this proceeding all persons interested in the estates of George Kemp, the elder, and Juliet A. Kemp were made parties. On December 1, 1905, a decree in said proceeding was made in said Surrogate’s Court, wherein among other things it was adjudged as follows: “Ordered, adjudged and decreed, by way of construction of the said trust of $3^5,000 as aforesaid, that during the life of George Kemp as to all quarter yearly payments of $2,250 hereafter payable from said trust fund beginning with the one payable November 1st, 1905, the accountants, as trustees, on production by any one in behalf of said Chouteau and Gladys Kemp, the survivor and their issue of evidence satisfactory to such trustees showing that during three months immediately preceding the expiration of such quarter there has been applied to the use and benefit, support, maintenance and education of Chouteau and Gladys Kemp, or if either of them shall have died, to the use, benefit, support, maintenance and education of the survivor of them and the issue of the one of them who shall have died or if both of such children shall have died to the use and benefit, support, maintenance and education of the issue of such children, or if one of them shall have died without leaving issue who shall at the time being be living, of the issue of the other of them of the sum of $1,250 or that it has been properly deposited in the bank account kept by said general guardian of said infants, and each of them, or that it has been invested in securities authorized by law by the said general guardian for said children, and each of them, or after they and each of them become of age it has been satisfactorily shown that each has used his or her share for the above mentioned purposes, the said trustees shall pay the sum of $1,250 for each quarter directly to the general guardian of said infants for the purposes aforesaid or if the. said children shall then be of age, to said Ohouteau and Gladys Kemp or the issue of either or both of them for the same purposes.

“The balance of each said quarterly payment, to wit, $1,000 shall be paid by said trustees directly to George Kemp; and that such payments of quarter yearly instalments in the manner herein directed shall be deemed and taken to be a full compliance with the intent and purpose of the testator as expressed in her will.”

Lilia Kemp, the wife of George Kemp, the younger, began an action for a separation against him in the Supreme Court, and on June 10, 1903, an order was made allowing her temporary alimony of $2,500 a year, and directing that it be paid to her by the trustees under the will of George Kemp, the elder, out of the income provided by that will to be paid to George Kemp, the younger. This alimony was increased to $3,000 per annum by an order dated July 4,1905. These orders are still in force.

In September, 1910, the plaintiff herein issued an execution to the sheriff of Kings county, under the provisions of section 1391 of the Code of Civil Procedure, directing said sheriff to collect from the trustees under the will of George Kemp, the elder, and the trustees under the will of Juliet A. Kemp, ten per cent of the income by said wills directed to be paid to George Kemp, the younger. The said trustees have accordingly withheld and now hold said ten per cent. The financial situation of George Kemp, the younger, defendant herein, at the time of the commencement of this action, may, therefore, be summarized as follows:

He owed the plaintiff a large sum upon an unsatisfied judgment.

He was entitled under the will of his father to an annual income of $6,000, of which $3,000 was required by the order of the court to be paid directly to his wife.

He was entitled under the will of his mother to an annual income of $9,000, of which $5,000 was required to be paid or expended for the benefit of his two children.

An execution was outstanding under which $1,500 per annum, being ten per cent of his income from all sources, was impounded under section 1391 of the Code of Civil Procedure, to be applied to the payment of plaintiff’s judgment. This left to the said George Kemp, the younger; from both trust funds a net income of $5,500, being $2,400 from the trust fund created by the will of George Kemp, the elder, and $3,100 from the trust fund created by the will of Juliet A. Kemp.

The court at Special Term, by the orders appealed from, has held:

First. That the alimony of $3,000 per annum shall continue to be paid to Lilia Kemp, the wife of said George Kemp, out of the income derived from the trust fund created by the will of George Kemp, the elder.

Second. That it was the intention and true construction of the will of Juliet A. Kemp that the provision therein made for the use and benefit, support, maintenance and education of Chouteau Kemp and Gladys Kemp, children of George Kemp, the younger, should continue only during the minority of said children, and, since they have both attained full age, all payments to them or for their benefit should cease.

Third. That all the income derived from both trust funds, less $3,000 per annum to be paid to the wife of said George Kemp, the younger, and $3,000 per annum to be paid to said George Kemp for his own support and maintenance, shall be paid to plaintiff on account of her judgment.

Fourth. That the execution against ten per cent of the income of said George Kemp, the younger, be withdrawn and the proceedings to collect said ten per cent by execution be discontinued.

The plaintiff by her appeal calls in question the continued payment of alimony to the wife of George Kemp and also the amount ($3,000 per annum) allowed to said George Kemp for his separate maintenance. She also objects to the requirement that the proceedings under section 1391 of the Code of Civil Procedure be discontinued.

The defendant George Kemp and the defendants trustees appeal generally from both judgments.

We are met at the threshold of the case with an objection by the defendant George Kemp, which goes to the right of the plaintiff to maintain the action. It is said that the complaint is insufficient to sustain the judgment because it is not alleged nor was it proven that an execution upon plaintiff’s judgment had been issued and returned unsatisfied in the manner required by sections 1871 and 1872 of the Code of Civil Procedure. This objection was taken at Special Term both at the opening of the case and at its close and decision was reserved. No express decision was made unless the action of the court in rendering judgment in favor of the plaintiff may be considered as in effect overruling the objection. The point is a serious one. The actions are brought under section 98 of the Eeal Property Law (Consol. Laws, chap. 50; Laws of 1909, chap. 52), which provides : “ Where a trust is created to receive the rents and profits of real property, and no valid direction for accumulation is given, the surplus of such rents and profits, beyond the sum necessary for the education and support of the beneficiary, shall be liable to the claims of his creditors in the same manner as other personal property, which can not be reached by execution.” It is well settled that this provision also applies to income derived from trusts of personal property. It was questioned at one time whether or not the Code provisions relating to the issue and return of an execution against the property of the judgment debtor as a prerequisite of a creditor’s action applied to an action brought to reach surplus income under this section, but it was finally determined that they do and this is now accepted as the settled law. (Dittmar v. Gould, 60 App. Div. 94; Sherman v. Tucker, Id. 127; Butler v. Baudouine, 84 id. 215; affd., 177 N. Y. 530.) The allegations of the complaint, admitted by the answer of the defendant Kemp, are that said Kemp is a resident of Paris, France; that plaintiff’s judgment was recovered in the Supreme Court in the county of Kings and that the judgment roll was filed in the office of the clerk of Kings county; that a transcript of said judgment was filed and said judgment docketed in the office of the clerk of the county of New York; that an execution on said judgment was issued to the sheriff of the county of New York and returned unsatisfied. No evidence to the contrary of these facts appears in the record nor does it appear that said Kemp has or had an office for the regular transaction of business in the county of New York. These allegations do not show that the prerequisites prescribed by statute for the maintenance of an action like the present have been complied with. Section 1872 of the Code of Civil Procedure provides as follows:

“To entitle the judgment creditor to maintain an action as prescribed in the last section, the execution must have been issued as follows:

“ 1. If, at the time of the commencement of the action, the judgment debtor is a resident of the State, to the sheriff of the county where he resides.

“2. If he is not then a resident of the State, to the sheriff of the county where he has an office, for the regular transaction of business in person; or, if he has no such office within the State, to the sheriff of the county where the judgmént-roll is filed, unless the execution was issued out of a court, other than the court in which the judgment was rendered; in which case, it must have been issued to the sheriff of the county where a transcript of the judgment is filed.”

It seems to be plain that the plaintiff failed to lay the necessary foundation for this action. To do so, under the circumstances of the case, the execution should have been issued to the sheriff of Kings county, for it was in that county that the judgment roll was filed. The objection of the defendant Kemp is, therefore, fatal to the maintenance of the action.

But even if this objection were not fatal we should still be unable to affirm the judgment appealed from. It is clear that the Special Term was correct in affirming the right of George Kemp’s wife to be paid the alimony awarded to her by the orders of the court. Certainly she was entitled; as his wife, to support out of his income. (Wetmore v. Wetmore, 149 N. Y. 529.) The orders fixing the amount of alimony are, while unreversed, conclusive adjudications that the sum of $3,000 per annum is a reasonable sum to be allowed the wife for her support, and they certainly cannot be ignored or set aside in a collateral proceeding, especially in the absence of the wife, who is not a party to the action.

The court erred in ignoring the .surrogate’s decree construing the will of Juliet A. Kemp and in holding that the provision made in that will for the benefit of the two children of George Kemp was intended to provide for them only during infancy. In the first place the Surrogate’s Court had ample jurisdiction, as incidental upon its authority to pass upon the trustees’ accounts, to construe the will (Garlock v. Vandevort, 128 N. Y. 374), and the decree construing it was a valid exercise of that authority. It is not open to collateral attack, especially in the absence of the children affected. In the second place we find no support in the will of Juliet A. Kemp for the assumption that she intended that the children of George Kemp should benefit from the trust estate only during their minority. The question is not whether George Kemp “is required, either in morals or law, to support adult children who have married and who do not live with him ” (79 Misc. Rep. 516), to quote from the opinion of the learned justice at Special Term, but what provision did Juliet A. Kemp, the creator of the trust, intend as to the benefit her grandchildren should derive from the trust estate. The provision for the payment of $5,000 a year to the two children of George Kemp is not in terms limited to the support and education during infancy, but is made for their use and benefit, support, maintenance and education without limitation of time except the duration of the trust which will terminate at the death of George Kemp. While the necessity for their education may or may not have terminated with their minority, the necessity for their support and maintenance did not end then, nor the desirability of having a fixed income appropriated to their use and benefit. A significant indication that Juliet A. Kemp did not intend that the provision for the benefit of her grandchildren should continue only during their minority is to be found in the fact that the provision is in terms extended to the issue of either of said grandchildren who might die.

We are also of the opinion that the court erred in fixing arbitrarily, without evidence, upon the sum of $3,000 per arm mm as a reasonable amount to be paid to George Kemp for his support and maintenance. There are two rules which seem to be well settled in cases like the present. The first is that the beneficiary of the trust is entitled to receive an income sufficient to support him in the manner in which he has been brought up and to which he has been accustomed to live and in the manner in which the creator of the trust evidently intended that he should live. (Genet v. Beekman, 45 Barb. 382; Stow v. Chapin, 4 N. Y. Supp. 496; Moulton v. de ma Carty, 6Robt. 533.) The case of Tolles v. Wood (99 N. Y. 616, more fully reported in 16 Abb. N. C. 1), upon which plaintiff much.relies, is not to the contrary because in that case it appeared that the amount necessary and reasonable for the judgment debtor’s support had been agreed upon, and the agreement acted upon for some years before the commencement of the creditor’s action, and the court merely adopted the sum thus agreed upon.

The second rule is that the burden rests upon the plaintiff to show what is reasonably necessary for the proper support of the judgment debtor in accordance with the foregoing rule. The presumption is that the creator of a spendthrift trust, such as are both of these before the court, calculated the amount that would be necessary to support the spendthrift in the manner and station that such creator desired his beneficiary to be supported in. If his provision was larger than after-wards proved to be necessary it is for the judgment creditor to prove that fact. (Kilroy v. Wood, 42 Hun, 636; Card v. Meincke, 72 id. 299; Bunnell v. Gardner, 4 App. Div. 321; Stow v. Chapin, supra.) The plaintiff made no attempt to sustain this burden of proof, beyond offering some obviously insufficient evidence which was properly rejected. In fact neither party produced evidence upon the subject, and the conclusion at which the court arrived as to the proper amount to be allowed is wholly without any evidence to support it. Such a finding cannot be sustained. Under all the circumstances we certainly cannot say that the net clear income left to the defendant after the payments required to be made to his wife and to or for the benefit of his children is so large as to be unreasonable, although proper evidence might show that it is.

We are not called upon to determine upon what sum. the ten per cent execution operates. That can more properly be determined in an action brought to enforce the execution. It follows, from the insufficient allegation and proof as to the issue and return of an execution against the defendant Kemp’s property, that the complaint must be dismissed, with costs in each action in all courts to the defendants, trustees.

Ingraham, P. J., Clarke, Dowling and Hotchkiss, JJ., concurred.

Judgments reversed and complaints dismissed, with costs in each action in all courts to the defendants, trustees.