[84 NJSuper Page 39] This action is brought by the settlor of an inter vivos trust (1) to construe the same; (2) to review an attempted appointment of a successor trustee; and (3) to determine the validity of certain amendments to said trust as well as the validity of a purported renunciation of a life estate by plaintiff Elizabeth Wymond Clark (hereafter "plaintiff" or "settlor"). Plaintiff also seeks certain injunctive relief against and an accounting from defendant Elizabeth McClaskey Judge (hereafter Elizabeth Judge). Elizabeth Judge has counterclaimed for an accounting and for declaratory relief concerning the alleged renunciation by plaintiff as well as certain amendments to the trust. The infant defendants have also cross-claimed against defendant Elizabeth Judge for a reassignment to the trust of certain oil royalties held by her.
Plaintiff and defendant Annette Judge join in this prayer for relief.
On March 6, 1935 plaintiff, as settlor, executed and delivered a trust indenture under the terms of which she turned over to herself and two other individuals, as trustees, cash and securities valued at $750,000. The other trustees were Paul Armitage (plaintiff's attorney) and one Harold Clark (no relative). Plaintiff, a widow, had two sons, John and Gilbert, by a previous marriage. John Judge died a resident of Texas in April 1962. No children survived but he left a widow, defendant Elizabeth Judge. The latter remarried on May 24, 1962, but was recently divorced. Gilbert Judge died a resident of New York on March 20, 1959 and was survived by a widow, defendant Annette Judge, and two children of his prior marriage, defendants Louisa Judge (born in 1947) and Augusta Judge (born in 1949), who are represented by a guardian ad litem.
The 1935 agreement provided in article First for payments of income to John and Gilbert Judge of $5,000 per year for five years, and $100 a year thereafter for life. The remainder of the annual income was to be paid to the settlor.
Article Second provided as follows:
"SECOND: Upon the death of the Settlor the principal of the said trust shall be paid over by the said trustees to those persons who would be and who would answer the description of her next of kin at the time of her death and be entitled to her property, as if she had died intestate without leaving any last will and testament; but the proportionate amounts to be received by the said next of kin may be altered, changed or modified, or left in trust by the last will and testament of the Settlor."
After providing how the corpus might be invested, the settlor granted the following powers in article Sixth:
"SIXTH: The said Trustees (the Grantees and the Settlor) shall have the following additional powers:
(a) To advance and pay over to the Settlor any part of the corpus of the trust, but not to exceed in any one year 20% thereof, said 20% to be figured upon the market value of the securities or investments of
the trust, plus any securities or investments, not having a market value, at the amount fixed by a majority of the Trustees, whose decision shall be final; but no such amount shall be advanced except with the written consent of the Settlor and one of the other parties, either John Judge or Gilbert Judge; but said power shall not exist after five years from the date hereof.
(b) To make deposits in any banks, trust companies or financial institutions, domestic or foreign, and draw drafts or checks thereon, upon the signatures of two of the Trustees, one of whom shall be the Settlor, or any attorney of the Settlor authorized by her in writing to sign.
(c) To deposit securities in a safe deposit box, access to the same to be given to two Trustees, one of whom shall be the Settlor, or any attorney of the Settlor authorized by her in writing to act for her.
(d) The Trustees may pay or advance to the executrix or representatives of the Estate of Charles W. Clark any sum or sums that may be necessary or required to pay the debts of said estate, and to take the same out of principal.
(h) The Trustees shall have power to obtain legal advice or accounting assistance in connection with their performance of the trust, but the selection of such legal advisers or accountants shall be approved by the Settlor."
Articles Ninth, Tenth and Eleventh provided as follows:
"NINTH: Either or both of the Grantees may be removed as Trustees by the Settlor, at any time after two years from the date hereof, and new trustees appointed, but only with the written consent of the said John Judge or Gilbert Judge, or both. In the event of such removal the Trustees so removed shall be paid out of the corpus of the estate the sum of Two thousand five hundred Dollars ($2,500) plus Two hundred and fifty Dollars ($250) for each year in excess of two years that he has acted.
In the event of the death or resignation or incapacity of either or both of said Grantees as Trustees, at any time, a new Trustee shall be appointed in place thereof by the Settlor, the same to have the written approval of the said John Judge or Gilbert Judge, or both.
TENTH: The Settlor, at any time within four years and ten months from the date hereof, acting in conjunction with and with the written consent of either John Judge or Gilbert Judge, shall have the right to amend this instrument and the trust hereby created, in any respect whatsoever and as often as desired, and also to revoke the same in whole or in part by an instrument signed by the Settlor and either said John Judge or Gilbert Judge, and delivered to the Trustees. But no amendment shall be made in this instrument which shall in any way increase the obligations of the Trustees hereunder or change their rights or duties without their written consent.
ELEVENTH: The situs of this trust shall be deemed the State of New Jersey, and all the securities shall be deposited in the State of New Jersey and the deposit or bank account kept therein; but the Settlor and either one of the Grantees, at any time, may by written agreement change or alter the situs of the trust to any other state, and change or remove the place of deposit of securities or bank account to any other state, territory or country."
The period of four years and ten months from the execution of the original trust indenture expired on January 6, 1940. Six amendments were executed during this period. These amendments basically related to changes in the allocation of income between the settlor and her two sons. The evidence indicates that the settlor signed the amendments upon the advice of her counsel, who desired to effectuate certain tax savings. On December 27, 1940 (which was after the four year and ten month period referred to in article Tenth of the 1935 agreement) an agreement was executed by plaintiff and Messrs. Armitage and Clark which purported to amend and partially revoke the 1935 trust agreement. Among other provisions, John and Gilbert were given life incomes of $7,500 per year and the original agreement was amended to allow amendment or revocation, in whole or in part, by an instrument signed by plaintiff and both John and Gilbert or the survivor of them. Subsequent amendments, dealing primarily with changes in income, were made between December 27, 1940 and October 22, 1946. An amendment on the latter date purported to restate substantially the terms of the trust and to change drastically the distribution of corpus upon the death of the settlor. Of particular relevancy is article Second (c) which provided:
"(c) Upon the death of both of my sons, JOHN JUDGE and GILBERT JUDGE dying before the Settlor, then the whole income of the Trust shall be paid over to the Settlor during her life, and upon her death the Trust shall cease and determine, and the principal of the Trust with all accumulations shall be paid over by the said Trustees (1) to those persons or bodies corporate designated by both of my sons in a written instrument executed according to a deed, under the Laws of the State of New York, but my sons may from time to time jointly cancel any such written designation, and such designation
is to be filed with the Trustees; or, (2) on both of my sons' failure to execute such a designation, to those persons who would be and who would answer the description of the next of kin of my sons dying before me at the date of their respective deaths, as if they had each died intestate without leaving a Last Will and Testament."
The original trust agreement provided that upon the death of the settlor the trust corpus was to be paid to her next of kin in accordance with the provision of article Second. However, the contingency in article Second (c)(2) occurred whereby the settlor survived her sons, who failed to designate persons to take after the death of the settlor. By reason of said failure, the persons to take upon the death of the settlor were those persons who would be and who would answer the description of the next of kin of the sons at the date of their deaths as if each had died intestate. If the original trust is sustained and the 1940 and 1946 amendments are found invalid, the entire corpus would go to the infant defendants by virtue of all of the possibly applicable statutes. See N.J.S. 3A:4-2 and N.Y. Decedents Estate Law , § 83. If the 1940 and 1946 amendments are sustained, the corpus would be divided among the defendants Elizabeth Judge, Annette Judge and the infant defendants.
Subsequent amendments were made up to and including February 6, 1959. However, they largely related to changes in income and did not purport to modify article 2(c)(1) of the 1946 agreement.
Over the years other trustees were substituted for Mr. Clark and Mr. Armitage. By January 17, 1951 plaintiff, John and Gilbert were the trustees. Upon Gilbert's death in 1959, plaintiff and John acted as the only trustees. By a document dated April 8, 1960 John purportedly appointed his wife, defendant Elizabeth Judge, as trustee in Gilbert's place, but she never attempted to exercise any powers as trustee until on or after April 1962.
The remaining issues concern (1) a purported renunciation and relinquishment of plaintiff's life estate by virtue of a written document signed by her in 1956, and (2) the ownership
of certain overriding oil royalty interests in Louisiana which were purchased by the trust in 1939 for $10,650. Plaintiff, defendant Annette Judge and the infant defendants all contend that a purported transfer of the oil royalties to defendant Elizabeth Judge by her husband was void because the royalties were the property of the trust. These parties also seek an accounting from defendant Elizabeth Judge for any royalty income received by her from November 1961.
Plaintiff also attacks the validity of a document dated January 17, 1962, whereby John Judge purported to assign to defendant Elizabeth Judge his interest in trust corpus or income.
THE DOCTRINE OF WORTHIER TITLE
The initial issue which must be determined is whether the trust instrument created a reversion in the settlor so that she could amend or revoke the trust beyond the four year and ten month period, or whether a remainder was created rendering the trust irrevocable and not amendable after the four year and ten month period except with the consent of all the beneficiaries.
As framed, the issue resolves itself into a question of whether the trust falls within the strictures of what is commonly known as the Doctrine of Worthier Title. The doctrine has application where a grantor gives a life estate in property with a gift over to his "heirs" or "next of kin." Under the English common law the heir or next of kin was considered to take by descent or distribution and not by purchase. Under the common law, a man could not, by an inter vivos conveyance, make his rightful heir a purchaser. Since title by descent or distribution was considered "worthier" than a title by purchase, the heirs were to take by that title which was worthier. Thus, the common law considered an attempt to ...