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Fidelity Union Trust Co. v. Margetts

Decided: June 29, 1951.


For reversal -- Chief Justice Vanderbilt, and Justices Case, Heher, Oliphant, Burling and Ackerson. For affirmance -- None. The opinion of the court was delivered by Case, J. Vanderbilt, C.J. (concurring). Vanderbilt, C.J., and Heher, J., concurring in result.


The appeal was originally taken by the executor of the last will and testament of Edwin H. Colpitts, deceased, and is from the assessment of the transfer inheritance tax laid against the estate by the State Treasurer, acting as Director, Division of Taxation, Department of the Treasury of the State of New Jersey. The executor has been replaced by Fidelity Union Trust Company (named in the will as alternate executor and as trustee), substituted administrator c.t.a. The appeal was to the Appellate Division of the Superior Court and is brought before us on our own motion.

Appellant presents as its major heading that the decedent's widow, Grace P. Colpitts, was the sole beneficiary of the [7 NJ Page 559] residuary trust estate under paragraphs Seventh and Eighth of the will. We have no disagreement with that proposition, but the argument made thereunder and in support thereof presents a quite different question, namely, that the beneficiary takes absolutely. Mrs. Colpitts is the sole beneficiary under the seventh and eighth paragraphs, but she does not, as we shall find, take absolutely. Appellant's brief asserts that "Fidelity Union Trust Company has declared in writing under oath its acceptance of the trusteeship pursuant to paragraph Eighteenth of the will and has been duly appointed such trustee by the Essex County Surrogate's Court. Since it is the duty of the trustee to preserve the trust, any effort to terminate the trust will be resisted by Fidelity Union Trust Company, as trustee as aforesaid." Notwithstanding that protestation the cases cited by appellant and the principle of law upon which it relies lead, if accepted, to the result that the entire residuary estate of the testator vested at once in the widow and thus in effect terminates, if she so demands, the testamentary trust; this notwithstanding the provision of the will that the residuary estate be set up as a trust, the income to be paid quarter-yearly to the decedent's widow during her life, with gift over to the executor or administrator of the widow at her death. We are constrained to understand as the essence of the point that which is clearly and variously stated in the argument thereunder as for illustration: "The New Jersey cases find support in the English decisions where it has been uniformly held that a bequest to A for life, with remainder to his executors and administrators or to his personal representatives, is a gift of an absolute interest to A" and the quoted excerpt from 2 Jarman on Wills (7 th ed.), p. 1156: "A bequest to A for life, with remainder to his executors and administrators or to his personal representatives, is a gift of an absolute interest." Therefore, if we accept appellant's argument, we accept that which is an incident to the principle of law for which it contends, namely, that Mrs. Colpitts, at her demand, becomes entitled absolutely to her husband's entire residuary

estate and that any continuance of the trust is at her tolerance; and we address our study to that conception. If appellant were to include within the proposition -- which it does not and under the facts of the case cannot -- that the beneficiary is a party to the proceeding and desires or consents to the termination of the trust, it would come within the reach of some respectable authorities which it cites but with which, on that point, we do not agree. The argument thus presented under the first point is grounded, not in our tax statutes, but in the general law of estates, and upon the quantum and nature of the gift or gifts bequeathed by the will. If the tax is to be laid upon the assumption that under the law of estates the testator's residuary estate became absolutely and forthwith the property of his widow, we must hold not only for the assumption but for the law and facts as assumed. And if we so hold, then any continuance of the trust or of the trustee is because Mrs. Colpitts desires the continuance and not because of any force imputed to the will of her husband.

The will appears to have been drawn with care. It has every indication of stating, in precise legal terms, exactly what the testator desired to accomplish. It contemplated that as between the testator and his wife the wife might die first, or the testator might die first, or the two might die in a common disaster under such circumstances that it would be impossible to say which of them died first; and explicit directions were based upon those several eventualities.

The trust was established and the remainder disposed of by the seventh and eighth paragraphs of the will as follows:

"SEVENTH: If my wife, Grace P. Colpitts, shall survive me, I give devise and bequeath all the rest, residue and remainder of my estate of whatsoever nature and kind and wheresoever situate to my Trustee hereinafter named, In Trust Nevertheless, to invest and reinvest the same from time to time and to receive the income therefrom and to pay such income in quarterly installments to my wife, Grace P. Colpitts, during her life, and I direct that the income from my residuary estate, received during the interim period of administration of my estate and before the said trust account shall be established

under this my last will and testament, shall be payable to my wife, Grace P. Colpitts.

EIGHTH: If my wife, Grace P. Colpitts, shall survive me, I direct that at her death all the rest, residue and remainder of my estate in whatever form the same shall then be held, shall be paid over in kind by my executor or my trustee, to her executor or administrator, free of the trust provided for in paragraph numbered 'SEVENTH' of this my last will and testament and the same shall constitute a part of the estate of my wife, Grace P. Colpitts, at the time of her decease; and I so give, devise and bequeath the same absolutely."

The will authorized the trustee, in its discretion, to sell any or all property. It gave the trustee "all of the general powers" of a trustee and further provided:

"THIRTEENTH: I hereby authorize and empower * * * my Trustee hereunder, in * * * its discretion:

(1) To retain and hold any bonds or stocks or other investments or securities held by me at my death, even though the same be of a speculative or semi-speculative character or unsuitable for trust investment.

(2) To change the investment of funds in my estate from time to time in his or its discretion and without reference to the limitations otherwise provided by law for investments by trustees, and without being under any duty to diversify investments.

(3) To invest in any stocks, bonds, or other securities he or it may select.

(4) To register corporate stock or other securities held hereunder, in his or its own name or in the name of its nominee, or to hold the same in bearer form.

(5) To assent to or participate in any reorganization, merger or other corporate proceedings of any corporation in which I shall at the time of my death hold shares of stock, bonds or other securities or in shares of stocks, bonds or other securities which shall be acquired by my Executor or Trustee hereunder, and to exercise any right of subscription or any other rights which may be conferred upon or which may attach to such stock or other securities, and to make the necessary payments therefor from the principal of the funds in his or its hands, or to sell such rights in his or its discretion.

(6) To exercise personally or by limited or general proxy the voting rights attaching to any shares of stock, bonds or other securities in my estate.

(7) To sell, transfer, convey, any or all of my property, real as well as personal, in his or its hands.

(8) To borrow money and to give security therefor out of my estate for the purpose of raising funds to pay taxes with respect to my ...

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