had not exercised their discretionary powers to terminate the trust, it must still continue to be active at law. However, as there was a limitation over of the principal, in the event of the death of the child without issue, to the heirs or children, the decision may be sustained on the ground that in the event of the non-exercise of the discretion, the share in the principal would go over to a third person. The court said that the effect of the will was to give the children life estates only, with discretionary powers in the trustee to end the trust sooner. The language of the court is not altogether clear, and lends countenance to the view that a trust of an absolute interest with discretion is valid.*

Where the Cestui Que Trust Has the Entire Interest

6

539. A discretion, whether legal or absolute, as to property in which the cestui que trust has the entire interest, is void on principle as a restraint on the use and enjoyment of the property. No case exactly involving this point appears to have come before the Supreme Court. The usual case of this restraint is that of a trust of an absolute interest, which is discussed in another chapter, and the question as to discretion comes up in the shape of a clause giving the trustee discretion to terminate the trust. If a trust of an absolute interest cannot remain against the objection of the cestui que trust, a fortiori a discretion in the trustee to terminate the trust will be void. In several cases In several cases the cestui que trust was permitted to terminate the trust, notwithstanding the discretion. The point has not come before the court since the decisions in the recent cases apparently supporting the validity of a trust of an absolute interest.1 In Millard's Appeal," where there was a discretion in the trustee as to the payment of the principal to the cestui que trust, it was held that the trustee was liable to the administrator of the cestui que trust for the balance of the principal not paid to the latter in his lifetime.

8

For a further discussion of this point, see $524, ante.

5 See Chap. 22.

6 See §413, ante, for the application of the rule against perpetuities.

7 For a discussion of this, see §524, ante.

8 Penna. Co. v. Price, 7 Phila. 465 (1870);

Willard v. Davis, 3 Penny. 86 (1882), semble, for a case where the trustee terminated the trust under the discretion, see Mackrell v. Walker, 172 Pa. 154 (1895), stated $247, ante.

1 See §524, ante.

2 87 Pa. 457 (1878).

No case has been found raising the question of how far the cestui que trust can compel the exercise of the discretion in his favor.

Preliminary Discussion of Discretion as to Income

3

540. The distinction between discretion as to income and discretion as to principal is this: where there is a discretion as to principal, there is no necessity to give the estate to anyone else upon the failure of an exercise of the discretion, for the exercise of the discretion takes the property away from the remainderman and gives it to the life tenant or some one else, and the failure to exercise the discretion leaves the property where it was. In the case of income, however, if the discretion is exercised against the life cestui que trust, there is no one else entitled to the income embraced in the discretion, unless there is an express gift thereof, if the discretion is exercised, to some one else. The trustee cannot keep it himself, and he cannot add it to the principal, because that would involve an accumulation. The court must therefore either declare a resulting trust of the property which is not paid to the life cestui que trust, or compel the trustee to apply it to the latter. It is apprehended that in this case the exercise of the discretion will be a restraint on use and enjoyment by the cestui que trust, and he, therefore, can have the assistance of a court of equity to compel the trustee, notwithstanding the words of discretion, to pay the income to him. Whenever, however, there is a gift over to some one else other than the remainderman, in the event of the exercise of the discretion, there is no restraint on the use and enjoyment by the cestui que trust of his equitable estate; the exercise of the discretion destroys his estate in whole or in part. In these cases there is a material distinction between legal and absolute discretion. Where the discretion is legal, the cestui que trust can, on proof of the extrinsic circumstances, have the assistance of the chancellor. Where the discretion is absolute, he has no standing at all. No Pennsylvania case on this point has been found. There are a number of cases in which there was a trust with an

3 See discussion of accumulation under express discretion, §§671-678, post.

Confer Gray, Restraints on Alien., 2 ed. (1895), §§116-121.

5 For an illustration of a legal discretion to apportion income, see Smith's Est., 27 Super. Ct. 494 (1905).

absolute discretion in the trustee as to income. But few cases have been found in which the effect of the discretion on the interest of the cestui que trust has been passed on. These cases will now be noticed."

Donohue v. McNichol

8

542. In Donohue v. McNichol there was a gift in trust to pay a son, John, for life "such sum or sums of money as my said executor may deem proper, always allowing, however, my said son John a sufficient sum to support him respectably; and if my said son John becomes a sober, industrious man, it is my will and desire that he should receive the rents, issues and profits of all my real estate during his natural life," with limitations over at the death of John. John being dead and no question as to the life estate being before them, the court said, by way of dictum, in an opinion by Williams, J., that "It is clear that under the clause making provision for his support, the son took no interest or estate whatever in the real and personal property devised and bequeathed to the executor; and the amount he was to receive out of the personal property and net income of the real estate for his support was left to the discretion of the executor, subject to the restriction that it should be 'a sum sufficient to support him respectably.'' This is a case of a legal discretion. The dictum should perhaps be referred to as showing the origin of the notion that the life cestui que trust has no interest when there is an absolute discretion in the trustee. This notion has arisen from a failure to observe the difficulty which is present in all these cases. There is a contradiction in the terms of the trust. There is, first, a gift of the life estate, and then a discretion which may defeat the life estate. Since no one else is interested, the contradictory terms of settlement must be reconciled or one or the other must give way. It is apprehended that it is far better and more consistent with the design of the testator to enforce the life estate and ignore the discretion. The attempt to give effect to both is like an effort to blow hot and cold with the same breath.

E. g., Still v. Spear, 45 Pa. 168 (1863).

7 Discretion as to income while the cestui que trust is a minor stands on

a somewhat different footing and is valid.

8 61 Pa. 73 (1869).

9

At p. 77.

Keyser v. Mitchell

543. In Keyser v. * income or so much thereof as the trustees may think proper and expedient, under all the circumstances of the case, to and for the maintenance and support of my son Charles during all the term of his natural life, with the intent and purpose that the said trustees may either pay the said income or such portion thereof as he may think proper into the hands of my said son, or disburse the same in such way as, to the said trustees, may seem best, for his comfortable support and maintenance, such payments and disbursements to be at all times at the sole and absolute discretion of the trustees." It seems, although the report is obscure on this point, that Charles had only a life estate, and the principal went over. A judgment creditor of Charles sought to attach the income in the hands of the trustee. The court below held that the income was not liable to attachment, which, on appeal, was affirmed. Thompson, C. J.," in delivering the opinion of the court, said: "It was no doubt intended by the testator that a comfortable maintenance should be provided from the trust estate for her son, but that was to be in both amount and mode 'at the sole and absolute discretion of the trustee.' This is an express condition of a trust, and until that discretion has been exercised the cestui que trust has nothing. Hill on Trustees, 494495. In such case chancery will not interfere to control the trustees' discretion." The passages quoted, however, hardly sustain the learned Chief Justice's remarks. So long as there is no direction to pay to anyone else the discretion seems to be void as against the cestui que trust. The learned judge also said:1 "We cannot but regard this form of trust to be as effectual in guarding a trust and its income against the prodigality of its beneficiary as would be a positive exclusion of creditors in the will of the donor." This is a strong decision against the right of the cestui que trust to compel the exercise of the discretion in his favor.2

Mitchell 10 the trust was "to pay the

10 67 Pa. 473 (1871).

11 At p. 477.

1 At p. 477.

2 The case has been approved by Hawkins, P. J., in Krebs's Est., 184 Pa. 222 at 225 (1898); stated $519, ante; Paxson, J., in Millard's App., 87 Pa. 457

at 459 (1878); referred to by Woodward, J., in Huber's App., 80 Pa., 348 at 358 (1876), where the learned judge said: "The extent and character of a devisee's estate depend on the qualities stamped on it and the powers conferred over it by the testator, and not alone in the parties in whom

Hay v, Price

544. In Hay v. Price 3 Henry H. Price conveyed all his property in trust, and inserted in the trust deed a provision that the trustee "will apply so much of said property, including the rents, issues and profits and the interest arising from said investments, according to his best judgment, for the proper care, comfortable support, maintenance and reasonable happiness of him, the said Henry Hamilton Price, during the whole period of natural life of him," etc., followed by a clause prohibiting voluntary and involuntary alienation. The discretion applied both to the income and the principal, and there was a gift over of the principal remaining at the death of the grantor to the persons entitled after the death of Henry under the intestate laws. The trustee was garnisheed under a judgment against Henry. It did not appear whether the judgment was recovered on a debt contracted before or after the date of the deed. The court, in an opinion by Willson, P. J., held that the creditor could recover. The learned judge based the decision on Mackason's Appeal, and the provisions of the Statute of 13 Elizabeth. Of course, if the Statute of 13 Elizabeth applied, the whole settlement was void, and no question as to the discretion arose. If the Statute of 13 Elizabeth did not apply, the creditor could recover only on the ground that the discretion was void as against the cestui que trust and could be compelled by him, and, therefore, the creditor could, if the cestui que trust refused to act himself, compel the exercise of the discretion and recover the amount of his judgment.

4

Statement of the Law as to Absolute Discretion as to Income 545. No statement can be ventured as to how far the ces

the title is formally vested." While the exact connection of the last phrase with what goes before is not clear, it is conceived that if the learned judge has been rightly understood, he has misapprehended the point. The extent of the qualities of and power to be exercised with reference to an estate are established by law, and the estate which may be created is further limited and specified. The question as to which one of the estates the donee is

to take is answered by the words of the gift. The question as to what he may do with that estate is answered by the law, and that law further says that any attempt by the donor to interfere with those legal incidents is void. See also remarks of Penrose, J., in Barker's Est., 159 Pa. 518 at 525 (1894).

3 32 Pa. C. C., 197 (1906), s. c. 15 D. R. 144.

4

* 42 Pa. 330 (1862). See §278, n. 7, ante.