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Guar. Tr. Co. v. N.Y. Tr. Co. - 297 N.Y. 45, 74 N.E.2d 232 (1947)

Rule:

N.Y Real Prop. Law § 39 contains the statutory definition of reversion, which also applies with equal force to personal property. That section declares: A reversion is the residue of an estate left in the grantor or his heirs, or in the heirs of a testator, commencing in possession on the determination of one or more particular estates granted or devised.

Facts:

This appeal presents a controversy as to the persons entitled - upon termination of a life interest - to receive the principal of an inter vivos trust set up under a trust agreement executed on February 14, 1916, by two attorneys at law, Cornelius J. Sullivan and Paul M. Herzog. The trust agreement provided that, upon the death of the beneficiary, the principal was to be paid to the decedent's attorney, if living or to such person as nominated in a specified manner; if, at his death, there was no such nomination, then the principal passed to such person or persons as may be entitled to receive the same as specific or residuary legatees under the attorney's will. The attorney died, leaving the residue of his estate to his heirs. The beneficiary was still alive. This is an appeal to the judgment of the Appellate Division of the Supreme Court in the Second Judicial Department (New York), which affirmed a judgment of the trial court, in favor of respondents, company and beneficiary, awarding the beneficiary the principal of an inter vivos trust.

Issue:

Did the attorney’s interest constitute a reversion?

Answer:

No

Conclusion:

The court affirmed the judgment of the trial court, which was affirmed by the appellate division, and held that the residuary clause of the attorney's will was invalid to the extent that it suspended for three lives in being the absolute ownership of the principal of the inter vivos trust, under N.Y. Pers. Prop. Law § 39. Since the attorney's interest did not constitute a reversion, the residuary clause of his will was an attempted exercise of the power of appointment granted him by the inter vivos agreement. Thus, the residuary trust was invalid to the extent that it suspended the absolute ownership of the inter vivos trust corpus for more than two lives in being.

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