
    Carrie Herzig, Appellant, v. Milton A. Herzig and Others, Respondents.
    First Department,
    November 4, 1910.
    Parties—action, by settlor to set aside trust—judgment creditors of settlor — unlawful accumulation of income—payment of income on principal of mortgage — when valid and invalid portions of trust interdependent.
    Judgment creditors of the settlor of a trust who have brought a suit against her to have their judgments declared a lien upon lands which are part of the trust estate are not necessary parties to a suit brought by the settlor against her trustees and the beneficiaries to have the trust declared null and void.
    A conveyance of lands in trust to apply the rents and profits to the payment of the principal of mortgages on the lands creates an unlawful accumulation of income and is void under section 61 of the Real Property Law.
    
      Such trust -will be declared to be void in toto at the suit of the settlor, although the trust also provides that the net income, after deducting the sums paid on the mortgage, is to be paid to the settlor for life. The provision for the payment of the income to the settlor cannot be sustained on the theory that it is independent of the void portion of the trust, for the two are inseparably connected in that the amount payable to the settlor depends upon the amount the trustees in their discretion apply upon the principal of the mortgage. The entire trust is void even though the trustees exercised a power of increasing the capital by the application of income.
    Appeal by the plaintiff, Carrie Herzig, from an order of the Supreme Court, made at the New York Special Term and entered in the office of the clerk of the county of New York on the 16th day of Hay, 1910, denying the plaintiff’s motion for judgment on the pleadings.
    
      John A. Garver, for the appellant.
    
      Abraham G. Meyer, for the respondents.
   Laughlin, J. :

This action is brought by the settler of a trust against the trustees and the beneficiaries to have it adjudged that a conveyance made by the plaintiff to the trustees and a declaration of trust made by them to her and executed by her also, are null and void, and that they be canceled and discharged of record, and that the trustees be required to reconvey the premises and to account for the rents, income and profits thereof. Hone of the beneficiaries under the declaration of trust, excepting the infant defendant, Gertrude C. Herzig, interposed an answer, and all excepting the infant favor the annulment of the trust. The infant interposed the usual answer, but pending the action she attained her majority and her special guardian representing her appeared on the argument and stated that she also is in favor of having the trust annulled. The trustees are not beneficiaries. They interposed an answer in which none of the allegations of the complaint are denied, excepting allegations with respects to the rents, income and profits received and disbursed by them, which relate only to an accounting. The trustees also allege as separate defenses that before the commencement of the action a judgment was recovered against the plaintiff upon which an action lias been brought and is still pending against her and the tnistees for the cancellation of the declaration of trust, and to have the judgment declared a lien upon the land which is the subject of the trust; that the judgment creditors are necessaxy parties to this action, and that the relief sought herein may be obtained in the other action.

The only property conveyed to the trustees, and to which the trust relates, is a parcel of real estate situate on the northerly side of One Hundred and Seventh street, commencing 450 feet westerly from Amsterdam avenue, having a frontage of 50 feet and extending northerly in depth to the center of the block, a distance of 100 feet 11 inches.

On this appeal no attempt was made to sustain the order on these alleged separate defenses. It is evident that the rights of the judgment creditors will not be prejudiced by the relief herein sought which is the same as that prayed for in the action brought by them. If the plaintiff succeeds in this action the title will be restored to her unaffected by the declaration of trust and the judgment against her will be a liexx upon the land, and there will be no necessity of trying the action brought by the judgment creditors. The beneficiaries under the declaration of trust are not parties to the judgment creditors’ action, but it is manifest that they are necessary parties to any action affecting the validity of the declaration of trust. The alleged defenses are, therefore, frivolous, and the only question requiring special considei’atioix is that argued and to be decided on the appeal with respect to the validity of the declaration of trust.

It is alleged in the complaint that on the 13th day of February, 1908, the plaintiff conveyed the premises to the trustees in trust for the uses and pui’poses expressed in a declaration of trust simultaneously executed by them; that there were two mortgages on the premises, a first mortgage for $65,000, due November 1, 1909, and a second mortgage for $23,000, due July 15, 1910, no part of the principal of which has been paid. The declaration of trust recites the conveyance of the premises and that it was agreed that the con-, veyance thereof was to h¿ upon the condition that the premises were to be held by the grantees in trust for the uses and purposes therein specially set forth; that the trustees had accepted the conveyance upon said conditions, and thereby declared “that they hold the premises above described in trust for the following uses and purposes: To collect the rents, income and profit, and pay the expenses and disbursements together with the interest and so much of the principal upon the existing mortgages according to the tenor thereof as may be necessary, therefrom ; also to maintain and sustain and make such repairs and improvements and alterations upon the said premises as may be necessary; to pay over the- net income after deducting the foregoing therefrom to the said Carrie Herzig, for and during the term of her natural life, to replace existing mortgages, or so much thereof as may be remaining unpaid, with other mortgages, for such an amount as may be necessary to replace and satisfy the then existing mortgages, and for such a rate of interest and upon such terms as can best be obtained by them at the time when it shall be necessary to replace said mortgages, and upon the death of said Carrie Herzig to convey the fee simple of the said premises subject to the mortgages,and indebtedness then remaining unpaid thereon or which shall have been contracted for or shall have accrued during the time when the premises aforesaid shall have been so held by them as trustees either for repairs, alterations improvement or from any other source in connection therewith whether a lien upon the premises or not but which are hereby declared to be and are considered as a lien thereon, unto their sisters and brothers, the children of said Carrie Herzig, who shall survive her, share and share alike.” In the declaration of trust the settler on her part consented and agreed to the provisions thereof, “and to the final disposition of said premises free and unencumbered by any other restrictions or condition whatsoever, and further agrees that she will execute, acknowledge and deliver or procure the same to be done of any further papers or documents necessary to carry the foregoing into full force and effect, and assist in all ways in carrying out the same.”

.The law lias been' authoritatively settled in this jurisdiction that a trust to apply rents, issues and profits to the payment of the principal of a mortgage constitutes an unlawful accumulation of income .and is void under our statute. (Real Prop. Law [Gen. Laws, chap. 46; Laws of 1896, chap. 547], § 51, subd. 1; reenacted by Real Prop. Law [Consol, Laws, chap. 50; Laws of 1909, chap. 52], § 61, subd. 1; Hascall v. King, 162 N. Y. 134.) The learned justice at Special Term was of opinion, however, that notwithstanding the invalidity of the provision of the declaration of trust with respect to the payment of the principal of the mortgages from the income, the other provisions of the declaration of trust are valid and not dependent thereon and can, therefore, be sustained. Somewhat- similar trusts have been sustained where the primary purpose of the trust was to provide for the support and maintenance of a beneficiary for life, notwithstanding the fact that a subsequent provision of the instrument creating the trust provided for the application of surplus rents, issues and profits to the payment of mortgages was invalid. (Hascall v. King, supra ; Hafner v. Hafner, 62 App. Div. 316; affd., 171 N. Y. 633.) Tliose cases, however, are distinguishable from the case at bar in that there the amount directed to be paid to the life benetícia¡y was fixed and detennined by the instrument containing the trust and was not affected by the application of income to the payment of the principal of mortgages, vidiile here no fixed sum is directed to be paid to the life beneficiary, and the amount which she is to receive necessarily depends upon and is affected by the amount which the trustees in their discretion apply toward the payment of the principal of the mortgages, or reserve to create a fund for that purpose. It cannot, therefore, be said that the trust for the life beneficiary, which would otherwise be valid, is not inseparably connected with the void provisions for the application of income to the payment of the principal of mortgages, for the latter provisions are here a material part of the scheme which the settlor evidently had in mind and attempted to carry out by the declaration of trust, and, therefore, the entire trust is void, regardléss of whether the trustees exercised the power of increasing the capital by the application of income. (Matter of Butterfield, 133 N. Y. 473 ; Rice v. Barrett, 102 id. 161; Dresser v. Travis, 39 Misc. Rep. 358; affd., 87 App. Div. 632; Herzog v. Title Guarantee & Trust Co., 177 N. Y. 86.)

It follows, therefore, that the order should be reversed, with ten dollars costs and disbursements, and motion granted, and an interlocutory judgment entered in favor of the plaintiff decreeing that the declaration of trust is void, and directing the defendants to reconvey the premises to the plaintiff, and appointing a referee to take and state the accounts of the defendants.

Ingraham, P. J., McLaughlin, Clarke and Scott, JJ., concurred.

Order reversed, with ten dollars costs and disbursements, and motion granted as stated in opinion. Settle order on notice.  