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Attorney(S)

White Case [ Ernest G. Fifield of counsel; Leonard H. Smith with him on the brief], for the appellant. Morrell, Bates Topping [A. Wheeler Palmer of counsel; Charles H. Topping with him on the brief], for the respondent.

Judges

PAGE, J.:

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Smart Summary

Case Summary: Grovene Vail Aranyi v. Bankers Trust Company

Factual and Procedural Background

On or about June 7, 1916, the plaintiff (Grovene Vail Aranyi) entered into a trust agreement with the defendant (Bankers Trust Company) by which she transferred her then-existing and after-acquired right, title and interest in the corpus of a trust fund (created under the will of the plaintiff's grandfather) to the defendant as trustee. The trust required the trustee to hold the distributive share, pay the net income to the plaintiff, permit the plaintiff certain withdrawals of principal at specified times, and to terminate upon the plaintiff reaching age thirty-five, when the trustee was to transfer the balance of principal to the plaintiff. If the plaintiff died before thirty-five, the trustee was to distribute the principal to the plaintiff's children, or, if she left no children, to such person or corporation as she might appoint by will. The trust instrument contained an express declaration that it was irrevocable.

The plaintiff brought this action seeking revocation of the trust as to the personal property. She alleged that the trustee had received the principal (by decree on August 15, 1919, upon the death of the plaintiff's mother), that she had no children or issue, that she was the only person beneficially interested in the trust, and that she had demanded cancellation and turnover of the trust personalty prior to commencing the action. The defendant answered denying that the plaintiff was the only beneficially interested person, asserting that children might be born who would have contingent interests that the trustee must protect, and asserting that the plaintiff had declared the trust irrevocable so that it had become irrevocable.

Legal Issues Presented

Whether, under Section 23 of the Personal Property Law, a creator of a trust in personal property who is the sole person in being having a vested or contingent interest may revoke that trust.
Whether a declaration in the trust instrument that the trust is "irrevocable" prevents the creator (who is the sole beneficiary in being) from revoking a voluntary trust of personalty.

Arguments of the Parties

Plaintiff / Respondent (Grovene Vail Aranyi)

The plaintiff asserted she was the only person beneficially interested in the trust (no children or issue existed).
The plaintiff demanded that the defendant cancel and terminate the trust as to the personal property and transfer the same to her, and brought the action to effect that revocation.

Defendant / Appellant (Bankers Trust Company)

The defendant's answer denied that the plaintiff was the only beneficially interested person, pointing to the trust provision that the plaintiff's children (if any born before she reached thirty-five) would receive the principal if she died before that age, giving potential contingent beneficiaries.
The defendant argued that the plaintiff's declaration in the trust deed that it was irrevocable made the trust irrevocable.
The appellant's position, as characterized by the opinion, was that unless there is a third person in existence who has a beneficial interest and is capable of giving consent, the trust is irrevocable—that a sole beneficiary/creator cannot revoke.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Cram v. Walker, 173 App. Div. 804, 806	The statute (Section 23, Personal Property Law) means that a trust in personal property is revocable by the creator upon the consent of all persons in being who are beneficially interested, and if there is no other person in being with a vested or contingent interest, revocation is effectual.	The court applied this interpretation to hold that where the trust corpus is personal property and the creator is the only person in being with either a vested or contingent interest, she may revoke the trust.

Court's Reasoning and Analysis

The court began with the text of Section 23 of the Personal Property Law (as added 1909), which permits revocation of a trust in personal property upon the written consent of all persons beneficially interested. The court cited its prior construction (Cram v. Walker) interpreting the statute to allow revocation by the creator where all persons "in being" who are beneficially interested consent, and to allow revocation where there is no other person in being with a vested or contingent interest.

The court characterized the trust in the present case as one created for the sole benefit of the creator (the plaintiff) to hold her property in trust for her benefit until age thirty-five. Any interest of the plaintiff's children was purely contingent upon her death before thirty-five and was described as testamentary in character. The court emphasized the distinction between trusts of real estate and trusts of personalty, noting revocation was sought only as to the personalty.

Applying the statutory construction and the facts, the court concluded that when the corpus is personal property and the trust is a voluntary one made by the creator for her own benefit, and she is the only person in being having a vested or contingent interest, she has the right to revoke the trust. The court rejected the argument that the plaintiff's declaration that the trust was "irrevocable" deprived her of that right, reasoning that the transfer to the trustee did not give the trustee a vested interest in the property (the trustee merely held and managed the property and received compensation). The court observed that the declaration of irrevocability was voluntary, without consideration, affected no one but the creator, and that incidental financial benefit to the trust company (commissions) did not create a vested right to the continuance of the trust.

Holding and Implications

Holding: The court affirmed the order and interlocutory judgment, with costs.

Implications (direct effect on the parties): The court's decision affirms that, under the circumstances presented (a voluntary trust of personal property where the creator is the sole person in being with a vested or contingent interest), the creator retains the right to revoke the trust despite a declaration that it is "irrevocable." The immediate consequence is the affirmation of the judgment in favor of the plaintiff, with costs awarded. The opinion does not state that it established a broader new precedent beyond its application of the statute and the cited authority.

Decision date: June 16, 1922. Judges: PAGE, J.; CLARKE, P.J., SMITH, MERRELL and GREENBAUM, JJ., concurred.

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GROVENE VAIL ARANYI, Respondent, v. BANKERS TRUST COMPANY, as Trustee under the Trust Created for the Said GROVENE VAIL ARANYI, Appellant.

PAGE, J.:

The plaintiff, on or about June 7, 1916, entered into a trust agreement with the defendant, whereby she transferred to the defendant all right, title and interest which she then had or might at any time thereafter have in the corpus of a trust fund established under the will of plaintiff's grandfather, for the benefit of plaintiff's mother during her lifetime, with remainder over to her issue. The trust provides in substance that, when the said distributive share is received by the defendant, it shall be held by it in trust, the net income to be paid over to the plaintiff from time to time, she having the privilege of withdrawing certain installments of principal at various times therein specified, the trust to terminate upon the plaintiff arriving at the age of thirty-five years, at which time the defendant is to convey and pay over the balance of the principal of the said trust fund to the plaintiff for her own use and benefit forever. In case of the death of the plaintiff before arriving at the age of thirty-five years, then the defendant was to convey, transfer and pay over the principal of the trust fund, or such portion thereof as may remain in its hands, in equal shares to the children of the plaintiff then living; and if the plaintiff should die before attaining the age of thirty-five years without leaving children her surviving, then upon her death the defendant was to convey, transfer and pay over the said fund to such person or corporation as the plaintiff should appoint by her last will and testament. The plaintiff in said agreement declared the same to be irrevocable.

The plaintiff brought this action to revoke the said trust agreement, alleging that the defendant had on August 15, 1919, by virtue of a decree of the court, received the principal of the trust fund upon the death of her mother; that she has no children and that there is no issue of any deceased child; that the plaintiff is the only person beneficially interested in the said trust, and that before the commencing of the action plaintiff duly demanded of the defendant that it cancel and terminate the trust as to the personal property therein and transfer and turn over the same to plaintiff. The answer denies that the plaintiff is the only person beneficially interested in said trust, and by way of defense sets forth the provision of the trust agreement that, if the plaintiff should die before arriving at the age of thirty-five years, the defendant is directed to convey, transfer and pay over the principal of the trust fund to the children of the plaintiff; and that before she reaches that age, there may be children born to her who would have a contingent interest in said trust fund, which interest the defendant as trustee is required to protect. And the answer further states that the plaintiff in said trust deed declared it to be her intention that the same should be irrevocable, and that the said trust deed thereby became irrevocable. Section 23 of the Personal Property Law (as added by Laws of 1909, chap. 247) reads as follows:

"Revocation of trusts upon consent of all persons interested. Upon the written consent of all the persons beneficially interested in a trust in personal property or any part thereof heretofore or hereafter created, the creator of such trust may revoke the same as to the whole or such part thereof, and thereupon the estate of the trustee shall cease in the whole or such part thereof."

We have construed this section of the statute to mean "that a trust in personal property is revocable by the creator thereof upon the consent of all persons in being who are beneficially interested therein, and if there be no other person in being who has either a vested or contingent interest in the trust, such revocation is effectual." ( Cram v. Walker, 173 App. Div. 804, 806.)

The appellant's position would seem to be that, unless there is a third person in existence, who has a beneficial interest in the trust, and capable of giving a consent, the trust is irrevocable. That while a living third person beneficiary can, by his consent, release the contingent interest of his unborn children, the creator of the trust, being a sole beneficiary, cannot.

In the case under consideration the trust was created for the sole benefit of the creator to hold her property in trust for her benefit until she should arrive at the age of thirty-five years, when it was to be paid over to her. Her children were not in any sense to be beneficiaries of the trust. Their only possibility of interest would be in case she should die prior to the termination of the trust period, leaving such children. The trust deed as to them was testamentary in character. The learned counsel for the appellant has failed to distinguish, in his citation of authorities, between trusts created in real estate and those where the corpus is personalty. While in this case the trust deed refers to both real and personal property, it is only as to the trust in the personalty that revocation is sought. I am of opinion that, where the corpus of the trust is personal property and the trust is a voluntary one made by the creator for her own benefit, and she is the only person in being having a vested or contingent interest therein, she has the right to revoke the same. Did she lose that right by declaring that the trust was irrevocable? The transfer of the property to the trustee gave it no interest therein. It was to hold and manage the property for a term of years and pay over to the creator of the trust the net income, for doing which it was to receive a stated compensation. If she was dissatisfied with this management of her estate, why should she not be allowed to retake it into her own possession? There was no other person for whose benefit the condition should continue. If she had the right to revoke the trust agreement, in my opinion she had a right to revoke this declaration. It was voluntary, without consideration, and affected no one but herself. The incidental benefit that the trust company may derive from commissions is not of such a character as gives it a vested right to the continuance of the trust.

The order and interlocutory judgment should be affirmed, with costs.

CLARKE, P.J., SMITH, MERRELL and GREENBAUM, JJ., concur.

Judgment and order affirmed, with costs.

ARANYI v. BANKERS TRUST CO