Matter of Isabel Scriba Charitable Remainder Unitrust dated December 12, 1995 and Restated December 20, 2006 (2009 NY Slip Op 50276(U))

Matter of Isabel Scriba Charitable Remainder Unitrust dated December 12, 1995 and Restated December 20, 2006

2009 NY Slip Op 50276(U) [22 Misc 3d 1124(A)]

Decided on January 27, 2009

Sur Ct, Nassau County

Riordan, J.

Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.

This opinion is uncorrected and will not be published in the printed Official Reports.

This is a petition pursuant to section 8-1.1 of the Estates Powers and Trusts Law for an order modifying the provisions of an inter vivos trust.

The instrument under consideration is a "charitable remainder unitrust" executed on December 12, 1995. A "restatement" of trust was subsequently executed on December 20, 2006. The settlor (who died on November 18, 2007) was a domiciliary of the State of New York and the corpus of the trust is located in New York.

The settlor's designation of New York law as the law to be applied to determine the validity, construction, and administration of the trust controls (Bogert, Law of Trusts and Trustees §297 [2d rev ed]).

The Attorney General of the State of New York has appeared in the proceeding on behalf of the ultimate charitable beneficiaries (EPTL 8-1.1[f]) and has stated no opposition to the relief requested.

The threshold question is whether this court has jurisdiction to entertain a petition under section 8-1.1 of the Estates Power and Trust law to modify the terms of an inter vivos trust. EPTL 8-1.1[c] limits jurisdiction of the Surrogate's Court to dispositions under a will probated in the court. However, section 209 (6) of the Surrogate's Court Procedure Act confers jurisdiction on the Surrogate's Court to determine all matters relating to inter vivos trusts and Article VI [*2]

§2 [d] of the Constitution of the State of New York confers jurisdiction on the Surrogate's Court as to all matters relating to the affairs of a decedent. The court concludes, therefore, that it has jurisdiction to entertain a petition pursuant to EPTL 8-1.1 to amend an inter vivos trust (Matter of Kramer, 20 Misc 3d 383 [Sur Ct, Nassau County 2008]; In re Fleet Natl. Bank, 20 Misc 3d 879 [Sup Ct, Albany County 2008]).

The trust provides for termination within a reasonable time following the death of the settlor and upon termination the principal and income remaining are to be paid:

"A. One-third (1/3) to the Endowment Fund of MONTGOMERY MUSEUM OF FINE ARTS, located at One Museum Drive, P.O. Box 23819, Montgomery, Alabama 36123-0819.

B. One-third (1/3) to the Endowment fund of HUNTINGDON COLLEGE, located at 1500 East Fairview Avenue, Montgomery, Alabama 36106.

C. One-third (1/3) to the Educational Broadcasting Corporation (Thirteen/WNET), located at 356 West 58th St, NY, NY 10019."

Huntingdon College is a charitable institution created and administered under the laws of the State of Alabama.

The approximate amount distributable to the college is $565,946.55 of which $450,000.00 has been distributed to the college and deposited in a separate account pending a determination in this proceeding.

The college seeks a determination that the trust instrument should be amended to provide that the funds in question be paid to the college's Annual Fund and utilized for scholarships, without any restriction. The college advances the following arguments in support of the petition: (1) the trust fails to identify a fund at the college as there is no fund specifically entitled "endowment fund," (2) the settlor intended an unrestricted gift both as to expenditure of the fund and the purpose for which it is to be applied, and (3) as the gift is an unrestricted gift, it cannot be paid to and administered by the college's restricted fund.

The college concedes that it maintains a restricted fund entitled "Permanently Restricted Asset Class" as to which funds are held in perpetuity. The fund is commonly referred to as the college's "endowment fund." The court therefore rejects the argument that the instrument fails to identify a fund maintained by the college.

The college argues that the failure of the settlor to include specific language restricting expenditure of income and limiting the purpose for which the fund is to be applied indicates an intention to make an unrestricted gift.

The settlor made an unrestricted gift as to purpose. As the trust does not indicate a specific purpose, the gift is regarded as one for the charitable purpose contained in the college's charter or articles of incorporation (15 Am Jur 2d, Charities, §77 [2008]).

The settlor imposed restrictions with respect to the duration of the fund. In New York, the words "endowment fund" were traditionally understood to mean the bestowment of money as a permanent fund, the income of which is to be used in the administration of a proposed work (St. [*3]Joseph's Hosp. v Bennett, 281 NY 115 [1939]; Matter of Pelton, 190 Misc 624 [Sur Ct, Herkimer County 1947]). This is the universal definition of an "endowment fund" (Black's Law Dictionary, 7th edition, 1999). The term "endowment fund" is now defined by statute in New York as "an institutional fund or any part thereof, not wholly expendable by the corporation on a current basis under the specific terms of all applicable gift instruments" (N-PCL §102 [a][13]). It was therefore unnecessary for the settlor to include additional language concerning duration of the fund in order to convey an intention that the gift be maintained as a permanent fund. An endowment fund is, by definition, a permanent fund.

The extrinsic evidence submitted by petitioner is inadmissable to modify the unambiguous language of the instrument. Where the language is unambiguous, the settlor's intention must be determined solely from the language of the instrument itself (Mercury Bay Boating Club, Inc. v San Diego Yacht Club, 76 NY2d 256 [1990]).

The administration of the funds as part of the "Permanently Restricted Fund" will be governed by the laws of the State of Alabama. Specifically, the restrictions to be applied to expenditures from the fund are set forth in section 19 of the Alabama Code (Ala. Code 1975 §19-3c-4 [effective January 1, 2009]).

The court concludes that the settlor intended a gift to the college's "Permanently Restricted Fund." As the gift can be effectuated without modification of the terms of the trust, the petition to amend the trust is denied.

The attorneys for the college, on this petition, represent the successor trustee as well. The college is the only beneficiary with an interest in the relief sought. As the court finds no basis upon which to grant the application, attorneys' fees and expenses in connection with the petition are to be paid by the college, not the trust.