The opinion
Leech, /., concurring: The conclusion of the majority and the reasoning generally upon which it is based seem to me to be sound. I think, however, there is another and compelling ground supporting that conclusion. The several trusts with which we are here concerned as members of the alleged partnership are controlled by the law of Pennsylvania. The law of that state recognizes the rule against perpetuities. This rule applies, of course, only to contingent estates and not to vested estates. In re Lilley’s Estate, 272 Pa. 150 ; 116 Atl. 392 . But there would seem to be no reason to doubt that the interests of the children here were future contingent interests. No division of corpus and accumulated income was to be made until the termination of the trusts. The remainders were therefore not to vest until that time. See In re Lilley’s Estate, supra.
The rule against perpetuities was restated by the Supreme Court of Pennsylvania (the highest appellate court of that state) in the case of In re Friday’s Estate, 313 Pa. 328 ; 170 Atl. 123 , at page 125, as follows:
A clear statement of the rule against perpetuities is made by Gray in his authoritative discussion of Perpetuities (3d Ed.) sec. 201: “No interest is good unless it must vest, if at all, not later than twenty-one years after some life in being at the creation of the interest.” The rule was stated by this court in Re Johnston's Estate, 185 Pa. 179, 183 , 39 A. 879, 880 , 64 Am. St. Rep. 621 , as follows: “The law allows the vesting of an estate or interest, or the power of alienation, to be postponed for the period of lives in being and twenty-one years and nine months thereafter; and all restraints upon the vesting that may suspend it beyond that period are treated as perpetual restraints, and therefore as void, and consequently the estate or interests dependent upon them are void; and nothing is denounced by the law as a perpetuity that does not transgress this rule.” Lockhart's Estate, supra; City of Philadelphia v. Girard’s Heirs, 45 Pa. 26 , 84 Am. Dec. 470 . While we have stated that the rule is grounded on freedom of alienability of property (Lilley’s Estate, supra; Feeney’s Estate, 293 Fa. 273, 142 A. 284 ), the rule in fact deals with the remoteness of the vesting of the title. See Perry on Trusts and Trustees (7th Ed.), volume 1, sec. 381, page 636; Yard’s Appeal, 64 Pa. 95 . * * * The rule prohibits the creation of future interests, legal or equitable, which by any possibility (not probability) may not vest within the lawful period. Feeney’s Estate, supra ; Lillcy’s Estate, supra, 272 Pa. at page 150 , 116 A. 293 , 28 A. L. R. 366. Probability that the future interest will vest within the period is not enough; if, at the creation of the interest, by any circumstance or happening, it is a possibility that it may not vest within the lawful period, the rule is operative and the interest destroyed.
It is obvious that the rule applies with equal rigidity to both inter vivos and testamentary transfers. Barton v. Thaw, 246 Pa. 348 ; 92 Atl. 312 ; Bogert, vol. I, § 214, p. 634.
Under the trusts here, the prior estates were limited merely upon a term of years and not a life in being. The rule applying in such cases in Pennsylvania has been stated in the Lilley case as follows: “If an absolute term is taken, and no anterior term of a life in being is referred to, such absolute term cannot be longer than twenty-one years.”
Under the terms of each of the respective trusts, unless the trustee died and the period was thereby shortened, the trust was not to terminate and its corpus, the interest in the business, was not to vest until the beneficiary became 40 years of age. The age of the eldest child of either of petitioners, at the time the trusts were created, was 18 years. Thus, except upon the death of the trustee, which obviously w’as not a certainty, the possible term of the shortest trust was 40 minus 18, or 22 years. Therefore, I think that all the transfers of “interests in the business” by the petitioners to the several trusts were void because vi-olative of the rule against perpetuities and the title thereto remained in the respective grantors by virtue of the resulting trust. In re Lilley's Estate, supra. It may be that, despite this fact, the right to the income passed. But that was all.
Such a situation, I think, brings the case squarely within the scope of Losh v. Commissioner, 145 Fed. (2d) 456, affirming 1 T. C. 1019 , and Rose Mary Hash, 4 T. C. 878 , and emphasizes the distinction between it and Robert P. Scherer, 3 T. C. 776 .