
    In the Matter of the Estate of Murray L. Brown, Deceased. James L, Brown, Respondent; Manufacturers Hanover Trust Company, as Executor of Murray L. Brown, Deceased, Appellant.
    Argued November 16, 1973;
    decided December 28, 1973.
    
      
      Richard J. Concannon and Thomas R. Cosgrove for appellant.
    I. An agreement to exercise a testamentary power of appointment is unenforceable; it does not create in the promisee the status of creditor regardless of whether it is created by the donee in an irrevocable inter vivas trust or by another in donee’s favor. (Farmers’ Loan & Trust.Co. v. Mortimer, 219 N. Y. 290; Kent v. Thornton, 179 Misc. 593, 265 App. Div. 904; Richardson v. Richardson, 298 N. Y. 135; Engel v. Guaranty Trust Co. of N. Y., 280 N. Y. 43; Whittemore v. Equitable Trust Co. of N. Y., 250 N. Y. 298; Matter of Maxted v. Marine Trust Co. of N. Y., 5 A D 2d 614; Matter of Ryan, 284 App. Div. 102; Hope v. United States Trust Co. of N. Y., 281 App. Div. 52; Matter of Fletcher, 57 Misc 2d 554.) II. Because EPTL 10-5.3 is applicable to . both trusts, there is no basis for objectant’s claim to “ creditor ” or “third-party beneficiary” status arising out' of the adoption agreement. (Matter of Granwell, 20 N Y 2d 91; Forman v. Forman, 17 N Y 2d 274; Kendall v. Kendall [No. 2], 200 App. Div. 706.) III. No element of unfairness is involved because there was no consideration for decedent’s unenforceable promise ; even if relief from further support payments constituted consideration or value, decedent’s consent to objectant’s adoption supports relief from such payments. (Gross v. Gross, 110 Misc. 278; Matter of Pierro, 173 Misc. 123; Matter of “ Smith ” v. “ Jones ”, 43 Misc 2d 350.) IV". Objectant lacks standing to enforce any claim; he seeks nothing less than a windfall. (Gross . . v. Gross, 110 Misc. 278; Forman v. Forman, 17 N Y 2d 274; Ben Ami v. Ben Ami, 9 AD 2d .646, 8 N Y 2d 855; Kendall v. Kendall [No. 2], 200 App. Div. 706; Magrill v. Magrill, 16 Misc 2d 896; March v. Rumish, 70 Misc 2d 24; Matter of “ Smith ” v. “ Jones ”, 43 Misc 2d 350; Kott v, Kott, 16 A D 2d 941,14 N Y 2d 971; Axelrad v. Axelrad, 285 App. Div. 903, 309 N. Y. .687; Dandridge v. Dandridge, 17 Misc 2d 356.)
    
      Henry A. Spelman for respondent.
    I. Respondent’s right to enforce Ms claim under the agreement- of 1944 against MS' father’s estate is not adversely affected by EPTL 10-5.3. (Farmers’ Loan & Trust Co. v. Mortimer, 219 N. Y. 290; Matter of Wainwright, 248 App. Div. 336; Matter of Lynn, 261 App. Div. 513; Tutunjian v. Veteigian, 299 N. Y. 315; Rubenstein v. Mueller, 19 N Y 2d 288.) II. If EPTL 10-5.3 bars enforcement of any part of the father’s promises under the 1944 agreement, the son is entitled to restitution of his benefits under the 1942 • agreement. (Matter of Bassford, 277 App. Div. 1128; Matter of Granwell, 20 N Y 2d 91; Matter of Henderson, 64 Misc 2d 280.)
   Jones, J.

We hold that the proscription of EPTL 10-5.3 renders unenforceable the agreement made by this decedent to exercise two general testamentary powers of appointment in favor of his son.

The decedent was the donee of two separate powers of appointment— one over the assets of a trust under his mother’s 1925 will, the other over the assets of an inter vivas trust he himself had created in 1927. Incident to the resolution of family dif- ■ ferences, in 1944 he agreed to exercise his powers in part in favor of his son, James, respondent herein, and at the same time executed a will making appointments in accordance with that agreement. Some 20 years later, in 1964, the decedent executed a new will in which he appointed the assets of both trusts to his estate, with no benefits flowing to the son. On his death the 1964 will was admitted to probate. In the present proceeding the son seeks to enforce his father’s 1944 agreement to exercise the powers in his favor.

Surrogate’s Court, Queens County, held the agreement unenforceable as to the assets of both trusts under EPTL 10-5.3. The Appellate Division reversed in part, holding that the 1944 agreement was enforceable against the assets of the inter vivas. trust, but agreeing that enforcement was barred as to the assets of the testamentary trust.

All of us agree that the agreement cannot be enforced as to the testamentary trust; a majority of us agree with the Surrogate that the agreement cannot be enforced as to the inter vivas trust either.

EPTL 10-5.3 provides: Contract to appoint; power not presently exercisable, (a) The donee of a power of appointment which is not presently exercisable, or of a postponed power which has not become exercisable, cannot contract to make an "appointment. Such a contract, if made, cannot be the basis of an action for specific performance or damages, but the promisee can obtain restitution of the value given by him for the promise unless the donee has exercised the power pursuant to the contract.”

It is urged, however, that, notwithstanding that EPTL 10-2.2 specifically defines “ donee ” of a power of appointment to include a person “in whose favor a power is reserved” — obviously a grantor — EPTL 10-5.3 should not be applied where the donee of the power is also the grantor of the trust.

We recognize that the statute may have been addressed primarily to powers of appointment created by a testator or a grantor other than the donee as to property of such testator or grantor over which the donee is accorded a power of disposition only on death (e.g., Farmers’ Loan & Trust Co. v. Mortimer, 219 N. Y. 290): — here the mother’s testamentary trust. We would be disposed, however, notwithstanding the explicit termi- . nology of the' statute, to exclude from its operation inter vivas trusts of which the donee was also the grantor, if in addition, by provision, of thé trust instrument or by operation of law, the grantor had an unlimited power to revoke the trust and thus, had retained substantial dominion over the trust assets. In such instance as. a practical matter any proscription of EPTL 10-5.3 could readily be circumvented by a revocation or modificatian of the trust to assure precisely the disposition otherwise . proscribed by statute. It surely could then be argued that the Legislature could scarcely have intended to prohibit a grantor from exercising a limited power as to assets over which he otherwise had unlimited power. Further, to say that where the grantor had power to revolee and thus to recapture the trust assets, he nevertheless could not agree to appoint the same assets, would be to exalt form over substance.

That is not, however, this case. Here the decedent’s rights as grantor over the assets of the 1927 inter vivas trust must be determined under pre-195Í law. (L. 1951, ch. 180). Under the . terms of this trust instrument itself the grantor retained very limited and carefully circumscribed.powers of invasion, of prin- . • cipal, certainly no general power of revocation. Nor, in our . view, could this grantor have effected a revocation under former section 23 of. the Personal Property Law, applicable to this trust.- In this trust instrument following the reserva- .- tian of the general testamentary power of appointment, the first gift in default of its exercise was to the issue of the Grantor ’ per stirpes ”, The following and final limitation was unto the next of kin of the Grantor ’ in accordance with the laws of the State of New York, in the shares and proportions to which such next of kin would be entitled ”. While this latter limitation in default, standing alone, might be held to have created a reversion, the specific intervening gift to issue must be held to have created a remainder. (Richardson v. Richardson, 298 N. Y. 135; cf. Matter of Burchett, 299 N. Y. 351.) Thus the consent of these contingent remaindermen would have been a prerequisite to any revocation or amendment of the trust by the grantor under section 23 of the Personal Property Law. (2 Scott, Trusts [3d ed.], § 127.1, pp. 986-987.) It cannot be said that by operation of law the grantor of this trust had a power of revocation. Without a power reserved in the instrument or implied in law this decedent did not have such power of dominion over the assets of the 1927 inter vivas trust as in our view would support an argument that it should be excepted from the operative scope of EPTL 10-5.3.

Nor, in view of the explicit and distinctive provisions of EPTL 10-5.3, do we conclude that that section does not apply to trusts in which grantor and donee are the same because under the provisions of another section, EPTL 10-7.4, the creditors of such grantor-donee might reach the trust assets. We consider the rights of creditors clearly distinguishable from those of the grantor-donee.

We accordingly hold that EPTL 10-5.3 is applicable to both testamentary and inter vivas trusts in this case and that this decedent’s agreement to exercise his powers of appointment in the prescribed manner is unenforceable as to the assets of both, trusts.

We further agree with the Surrogate that on the facts in this case respondent is not entitled to any restitution under the provisions of the last sentence of EPTL 10-5.3 (subd. [a]).

Accordingly the order of the Appellate Division is reversed, the decree of Surrogate’s Court is reinstated and the case is . remitted to the Surrogate’s Court.

Gabrielli, J.

(dissenting). The question here involves the enforceability of an agreement by the donee of a postponed power of appointment under an inter vivas trust created by himself, with himself as lifetime beneficiary, to exercise his power by will in a certain way. EPTL 10-5.3 prohibits a contract to make an appointment where the power is not presently exercisable. We agree with the Appellate Division majority that EPTL 10-5.3 was not intended to apply in this situation.

Decedent married his first wife Muriel in 1931. Their son, objectant herein, was born in 1934. Subsequently the couple separated and in 1942 they entered into a separation agreement in which decedent promised certain monetary support to objectant, which was never given. Subsequent to a divorce, and in November, 1943 Muriel obtained a judgment on behalf of objectant for the unpaid support. In February, 1944, decedent and Muriel having remarried others, an agreement was made between them, joined in by their respective spouses, which provided that Muriel and her new husband Herman Maier would hold decedent harmless from making any further child support payments and that Herman Maier would adopt objectant. In return, decedent agreed that he would exércise powers of appointment, of which he was donee under two trusts, in his will so as to procure for his son a share of the principal of those trusts equal to that received by any of decedent’s children by his second marriage, or, if there were no more children, the principal would be divided equally between objectant and his surviving wife. It was expressed in the agreement that it was entered into for the purpose of amicably adjusting differences which had arisen between the parties.

Pursuant to the agreement and on the same day the agreement was concluded, decedent executed a will in which he utilized his powers of appointment in favor of objectant as provided for in the contract. Simultaneously, Herman Maier finalized his adoption of objectant.

Twenty years thereafter, and in September, 1964, decedent made a new will in which he exercised his powers of appointment in favor of his estate. His will then disposed of his entire estate to his second wife and a daughter born of that marriage. In the present proceeding, decedent having died in 1968 and the executor having made application to settle the account, objectant seeks to enforce his claim to the estate as third-party beneficiary of the 1944 agreement. Of the two trusts in question one was set up in the will of decedent’s mother executed in 1925. A corpus of $25,000 was to be held in trust for decedent’s lifetime to furnish him income and was to be disposed of by decedent in his last will as he should see fit. The second trust was set up by decedent in 1927 with his own funds amounting to $75,000. He was to be lifetime income beneficiary and reserved the power to appoint the corpus in his last will. At the time decedent’s 1964 will was admitted to probate in 1968 the assets in the testamentary trust created by decedent’s mother amounted to $15,186.53. The assets in the inter vivas trust created by decedent were worth $129,385.58. Objectant claimed entitlement to one third of each trust corpus since, under the 1944 agreement, decedent’s surviving wife and daughter would each be due one third.

The Surrogate ruled that EPTL 10-5.3 made the 1944 agreement unenforceable with respect to both trusts. That statute states: ‘ ‘ Contract to appoint; power not presently exercisable, (a) The donee of a power of appointment which is not presently exercisable, or of a postponed power which has not become exercisable, cannot contract to make an appointment. Such, a contract, if made, cannot be the basis of an action for specific performance or damages, but the promise can obtain restitution of the value given by him for the promise unless the donee has exercised the power pursuant to the contract. ’

The majority opinion in the Appellate Division affirmed the Surrogate’s holding insofar as the mother’s testamentary trust was concerned, a result with which we are in accord, but' held . that EPTL 10-5.3 did not apply to the inter vivas trust where the donee of the power is also the donor, a result which also meets with our approval.

The definitive appraisal of the sort of thing sought to be guarded against is found in Farmers’ Loan & Trust Co. v. Mortimer (219 N. Y. 290). There, John Mortimer, the béneficiary of a trust created in his mother’s will, was given a general power of appointment to be exercised in his own will. The donee procured a loan on his promise to exercise the power of appointment in favor of the creditor and he made a will to that effect. Later, however, he made a new will in which he appointed in favor of his children. Judge Cabdozo held the agreement with the creditor to be unenforceable. The exercise of the power, he said, was to represent the final judgment of the donee as asserted in his final will. Up to the last moment of his life he was to have the power to deal with the share as he thought best [citation]. To permit him to bargain that right away would be to defeat the purpose of the donor. Her command was that her property should go to her son’s issue unless at the end of his life it remained his will that it go elsewhere. It has not remained his will that it go elsewhere; and his earlier contract cannot nullify the expression of his final purpose ” (219 N. Y., at pp. 293, 294). . Furthermore, allowing the donee to bargain with the power would frustrate statutory provisions that a power of appointment by will may not be exercised by grant (Real Property Law, former §§ 167, 168).' After discussing the inapplicable case where a contract to make a will of one’s own estate is enforceable by imposition of a trust against the property in the estate, Judge Cabdozo significantly states: But in this case the subject-matter of the power is not the property of the promisor. It is the property of his mother. The promisor was not the owner of any legal estate. He was the beneficiary of a trust. In such circumstances a power of appointment does not involve that absolute power of disposition which is equivalent to a fee [citation]'. Those who tahe under this power have received nothing that was the property of John Mortimer.” (219 N. Y, at p. 295; emphasis supplied.)

In the instant case, of course, those who take under the power created in the inter vivas trust receive what is, was and always has been decedent’s property. The rationale in Mortimer, from . which EPTL 10-5.3 draws meaning, was constructed to protect ■ the intent of the donor of the power against rash utilization of the power by the donee. As stated by Justice Shapiko in his opinion in the Appellate Division (p. 278), “ Since the power of appointment was reserved by the creator of the trust to himself, can it be seriously contended that his purposeful action as donee in contracting to exercise the power in the objectant’s behalf was at the same time defeating his intent as the donor of the power? ”

That this sort of inter vivas trust would have been excepted out of EPTL 10-5.3 but for apparent legislative oversight is illustrated by the provision in EPTL 10-7.4 (subd. [a], par. [1]) that property covered by a general power of appointment is reachable by the donee’s creditors where the power was created by the donee in favor of himself. The fact the Legislature left such self-created powers vulnerable to the donee’s creditors renders it inconceivable that it intended to immunize situations where the donor-donee would choose to bargain with his power.

If it could be said that this inter vivas trust was the sort over which decedent had, in effect, a fee interest contemplating a reversion of the corpus, then, of course, there would be little sense in seriously considering a contention that EPTL 10-5.3 should be applicable. As Scott puts it: u At any rate, regardless of his wisdom or folly in creating the trust, since nobody but he has at any time any beneficial interest in the property, he should be permitted to do as he likes with it, if he is not under a legal incapacity.” (4 Scott, Trusts [3d ed.], § 339, p. 2699). In the subject inter vivas trust, however, the corpus, in default of the exercise of the power, was to go to decedent’s “ issue ”, and if no issue, then to his next of kin.” There is authority that a contingent gift to “ issue ”, even where there is a general power of appointment (or, because of such power), creates a remainder beneficiary or beneficiaries whose consent would be needed were the settlor-donee-life beneficiary of a mind to conclude the trust during his lifetime (op. cit., § 127.1, pp. 986-987). Other cases subject this construction to some doubt.

It seems to us clear that in Mortimer Judge Cardozo’s concern was that the holder of a power of appointment over property given him by another should not be allowed to. defeat the donor’s interest by his ability to bargain with the power. Even assuming there exists a contingent remainder interest upon failure to appoint, a question we need not decide, the Legislature would have had no discernible reason for preventing a donor-donee from dealing with the power however he saw fit, especially when, as was actually accomplished in this case, he can appoint the corpus to his estate and actually effect a reversion. Even if it be deemed that decedent did not have interest sufficient to revoke and that there was a remainder interest, such fact should not alter the use which could be made of the power of appointment. Certainly remaindermen contingent upon default in the exercise of the power should have no say as to how the power is exercised by the donor-donee. Thus, it could not have been with their interests in mind that EPTL 10-5.3 was enacted. Bather, the statute was enacted to protect the interests of the settlor-donor. So, where the settlor-donor and donee are the same the statute should have no application.

The order should be affirmed.

. Chief Judge Fuld and Judges Breitel and Jasen concur with Judge Jones; Judge Gabrielli dissents and votes to affirm in a separate opinion in which Judges Burke and Wachtler concur.

Order reversed, with costs to all parties appearing separately and filing separate briefs payable out of the estate, and matter remitted to Surrogate’s Court, Queens County, for further proceedings in accordance with the opinion herein. 
      
      . The Surrogate correctly held that objectant’s cases such as Forman v. Forman (17 N Y 2d 274) and Matter of Granwell (20 N Y 2d 91), which, hold that a third-party beneficiary under a separation agreement may sue to enforce his rights, would not apply where the agreement itself is so directly and totally outlawed by statute. But see Ferro v. Bologna (31 N Y 2d 30) where the separation agreement relieved the husband of the obligation to support his wife (in contravention of General Obligations Law, § 5-311) in return for which he promised to provide insurance benefits for their two children. ■In a suit by the children to enforce their rights to insurance proceeds we held that although the agreement would not have prevented the wife from seeking support, the.insurance provision was severable and the children’s rights became vested when the husband named them beneficiaries under his policies, regardless of the fact he later changed the beneficiaries to his sister and her husband. The instant case obviously differs since the statute in question renders unenforceable the very agreement sought to be enforced whereas in Ferro there was no statutory restriction on an insured’s right to contract away his right to name beneficiaries under his policies.
     
      
      . The existence of a testamentary power of appointment, curiously, has been an aid to finding a remainder rather than a reversion since, had settlor intended a reversion the reservation of the power would be superfious (Matter of Burchett, 299 N. Y. 351, 360 and see then Judge Fuld’s dissent; Richardson v. Richardson, 298 N. Y. 135, 143). Cases interpreting intention through words used in the trust instrument in .trusts created since the amendment to section 23 of the Personal Property Law (now EPTL 7-1.9) in 1951 are in some conflict as to whether disposition to heirs, next of kin, children,' issue, etc., should be treated as remainders or reversions. Compare Matter of Warren v. Cropsey (29 A D 2d 290) on the one hand with' Matter of Bodge (25 N Y 2d 273) and Matter of Fletcher (57 Misc 2d 554) on the other.
     