Estate of Howell , 180 Pa. 515 ( 1897 )

Opinion by

Mr. Justice Fell,

The assignments of error relate to the order of the orphans’ court awarding the granddaughter of the testator, who was his residuary legatee, and in case of intestacy would have been his sole heir, the accumulations of the income of a fund set apart by the executors to provide an income for life for the testator’s widow. The testator died in 1856. He bequeathed to his executors “ such a sum of money as will yield a net yearly income of $2,500 in trust to place the same at interest and keep it invested .... and to pay- over the whole of the said net yearly income ” to his wife for life. He directed that upon the death of his wife his executors or trustees for the time being should pay $10,000 of the trust fund to her appointees, and that the residue of the moneys so held by them in trust should be paid to such of the children of his brothers and sisters as might be living at the time of the decease of his said wife. He gave the residue of his estate in trust for the benefit of his granddaughter, the appellee.

In 1860, with the approval of the orphans’ court, the sum of $41,729.75 was allotted to the trustees for the benefit of the widow, and it has since been held by them. This trust fund has been so managed that the accretions to principal are $2,604.98, and the surplus income in 1890 amounted to $7,878.80. It was reduced before the death of the widow, in order to supply deficiencies in annual income, to $6,058.14, which is the fund now in dispute.

The will contains no direction to accumulate the income, and it indicates no intention to make accumulations in violation of the act of 1853. The surplus resulted from prudent management, and its retention by the trustees was a wise provision to meet deficiencies during the life of the widow. This subject is so fully and satisfactorily treated in the opinion of the learned judge of the orphans’ court that its further consideration by us is unnecessary.

It is of course conceded that when the policy of the law is violated by a direction to accumulate no effect should be given to the intention of the testator, and the distribution should be in accordance with the statute without regard to the will; but it is contended that in the distribution of accumulations which have been lawfully retained until the death of the life tenant to meet contingences the real intent of the testator with regard to them shonld be followed, although it would result in the increase of the trust fund by accumulations — that is, that as accumulations may be retained to provide a contingent fund, they may be added to and made a part of the trust fund from which they arise, if such is the testamentary intent. The fault of this contention is that there can be no real intent to accumulate beyond the limits prescribed which is not an unlawful intent. Either the testator made no provision for the excess of income that might remain after the payment of the annuity, in which event the excess would go as in case of intestacy, or must be regarded as having attempted to provide for accumulations in a manner forbidden by law.

A temporary accumulation which forms a reasonable contingent fund in anticipation of a decrease of income, whether it arises from fortuitous causes in the management of the trust or from testamentary design, may lawfully be retained. In Hibbs’ Estate, 143 Pa. 224, it was said by the present chief justice: “There are two classes of cases in which the question of accumulation has been raised in this court since the passage of the act of 1853: (a) that in which the manifest purpose of the testator was to add such accumulations permanently to, and make them take the destination of, the original trust estate: Washington’s Estate, 75 Pa. 102; McKee’s Appeal, 96 Pa. 277; Carson’s Appeal, 99 Pa. 325; Grim’s Appeal, 109 Pa. 391; and (5) that in which the accumulations were intended to be temporary and in the interest of judicious management: Eberly’s Appeal, 110 Pa. 95. The first came plainly within the prohibition of the statute, the second did not. The purpose of the statute was to prevent permanent accumulations, not to interfere with judicious management.”

This construction, without violating the statute by permitting accumulations to be added to the principal of the fund, permits the temporary withholding of the surplus income in aid of the judicious management of the trust. As accumulation except within the limits fixed by the act is prohibited, any direction to accumulate, or any provision or plan by which it is sought to accomplish it directly or indirectly, is unlawful. There cannot be an intent to accumulate beyond the prescribed limits in order to increase the corpus of the estate, or of a trust fund carved out of it, which is not an unlawful intent. When by chance or design the income is increased to an amount in excess of present demands the surplus is retained only in order to provide for future deficiences. The intent to provide for these contingencies within reasonable limits may be sustained, but the intent to add the increase to a permanent fund cannot be. It is therefore unimportant to consider whether there was an actual intent which, if found, could not be carried into effect.

As the testator left the whole of his estate in trust and disposed of the entire income for the benefit of his widow and grandchild, there is no ground for the inference of an actual intent on his part that any of the income as income should go to his nephews and nieces during the life of the widow. They were to receive nothing until her death, and they were not themselves ascertained. An intention to provide after the death of the widow for the devolution of the whole fund, principal and accumulated income, held by the trustees to secure and protect her annuity, is within the prohibition both as to time and as to parties, and any such attempt, as was said in McKee’s Appeal, supra, “ is so diametrically opposed to the intent and spirit of the statute that it cannot be sustained.” The right to the surplus income vested as it accrued in the testator’s grandchild, subject to the right of the widow to have it retained by the trustees for the judicious protection of her annuity. The facts in this case so closely resemble those in Rhodes’ Appeal, 147 Pa. 227, that in the application of the principle under consideration the cases may be considered as identical. In the opinion in Rhodes’ Appeal filed in the orphans’ court and adopted by this court it was said by Penbose, J., in speaking of the distribution of surplus income which accumulated during the life of the widow: “ It could not go to the residuary legatees, for their rights do not begin, nor indeed are they themselves ascertained, until the death of the tenant for life; it could not be held in the meantime, for accumulation, directly or indirectly, is forbidden by the act of assembly, except during an existing minority and for the benefit of the minor. Necessarily therefore, not having been disposed of by the testator, it passed under the intestate law.”

The order of the orphans’ court is affirmed at the cost of the appellant.