156 Wis. 294 | Wis. | 1914
The following opinion was filed December 9, 1914:
When this will was before us for construction upon the former appeal (Stephenson v. Norris, 128 Wis. 242, 107 N. W. 343), the following language was used
“There can be little or no doubt as to tbe general character of that' scheme. Tbe testator was a man of great wealth. He evidently viewed his estate as a great business enterprise, an entity which he desired should be kept substantially intact for many years after his death. He therefore placed it' in the hands of trusted persons with the most full and carefully specified powers, for the benefit, ultimately, of his father’s descendants. His desire that it' should remain an entity, presumably as a great corporation, with the beneficiaries as stockholders, is very apparent. The duration of the trusteeship as contemplated might be well towards a century. Many of the ultimate beneficiaries were yet to be born, and of their character or abilities he could know nothing, and so, in order to conserve the property, save it from dissipation by unknown beneficiaries, and insure its enjoyment by the members of his father’s family, with due regard to their various needs and abilities, he evidently intended to vest unusually broad and comprehensive powers in his trustees and their successors.”
The re-examination of the provisions of the will which we have been compelled to make upon the present appeal has not changed in any respect our estimate "of the testator’s intentions, but' rather tended to confirm the conclusions then expressed. Those conclusions may perhaps be said to be the keynote, not only of the former decision, but of the present
There are many assignments of error, but we do not find it necessary to state them in detail. Many of them involve the same question and the remainder may be classified into a few general groups, and the propositions involved may be treated abstractly rather than concretely.
The most important questions arise under item 23 of the will, and relate to the division of the dividends received from various corporations. The executors a.t the end of each year of their administration divided the dividends received by them during the preceding year from certain of the corpora
It will not be necessary or useful to make any detailed or exact statement of these various transactions. Mr. Wells owned large amonnts of stock in various lumbering and mining corporations at the time of his death, from which his executors received very large dividends during the accounting period. One of the lumber companies (the II. Witbeck Company) was closing out its business during that time, while another (the N. Ludington Company) was largely reducing its acreage of timber lands by extensive cutting of timber and manufacturing and selling the same. The executors each year determined what percentage of the dividends received by them from the various corporations was really income and what percentage represented sales of corporate property, and withheld the latter percentage from the life tenants, and added the same to the principal or corpus of the estate. In the case of the Homestake Mining Company there was an equal division between corpus and income; in the case of the lumber .companies named, as well as some others, the percentage credited to principal was very largely in excess of the percentage credited to income.
It is admitted that' in making these divisions the executors acted in good faith, but it. is claimed on the part of the life tenants that they possessed no authority to make any such division, and that even if they had such authority they acted
In support' of these contentions it is first said that the corporations referred to in item 23 of the “will axe the corporations which the executors are directed or authorized to create by the terms of the will* and not the corporations in which Mr. Wells owned stock at the time of his death. We reject this contention without discussion. It is perfectly apparent to our minds that this is not what the testator meant.
It is next argued in substance that the words "capital invested” mean capital stock, and not the property or means of the corporation, and that the direction as to division of dividends only applies when a corporation has sold some large portion or the whole of its property and has made, either formally or practically, division of the proceeds of the sale among the stockholders. We deem this contention also untenable and will briefly state the considerations which lead us to this conclusion.
The intent of the testator to carefully conserve and keep intact the principal or corpus of his magnificent estate during, the entire trust period is apparent' in almost every line of the will. He was manifestly proud of .this great creation of his own industry, and he felt that desire to have it perpetuated as a great' business enterprise and an enduring monument to his own memory that many men similarly situated seem to have. The income was very large and every beneficiary would be very generously treated under any theory of the provisions of the will. Mr. Wells was a lawyer himself, and the will bears evidences of having been drawn with the utmost care by an experienced lawyer. If it was meant that the executors were to make a division of corporate dividends only when the corporation had made salé of its property and formally or practically divided the proceeds among stockholders, it would have been very easy to say so, and indeed there would, in that case, have been little need of the elaborate pro
The principle is sometimes stated thus: “If dividends are not paid out of earnings, but are really divisions of the capital of the corporation, they constitute a part of the principal of the trust and should not be treated as income in the absence of a contrary intention of the creator of the trust.” Howes, Am. Law Relating to Income and Principal, p. 17; Heard v. Eldredge, 109 Mass. 258.
The careful provisions of item 23 make it very clear to our minds that the testator did not intend anything contrary to this legal principle, but that he did intend to charge his executors and trustees with the affirmative duty of keeping the principal of the estate at all times intact, and of seeing that moneys which, though called income or dividends, in truth represented a diminution of the property of the estate should not be paid out to the life tenants.
The argument that the words “capital invested” should be construed as meaning capital stock does not seem to us of any serious force. The word “capital” is sometimes used as the equivalent of capital stock, but it is probably more frequently used to mean the corporate property. This subject was quite fully treated in the case of Wells v. Green Bay &
It is doubtless true that the executors in dividing the dividends received by them between income and corpus took good care to make such a division as would render it certain- that the estate should not be diminished, and it may well be that in some instances it has turned out, or may in the future turn out, that' the corpus has been actually increased by placing too large a percentage of dividends to its credit. This result, however, does not call for any criticism of the acts of the executors, nor for any interference by the court with their conclusions. The testator placed the most implicit confidence in them, and gave them the fullest and freest control over the property, subject only to the definite limitations which he deemed necessary in order to accomplish the results which he wished to accomplish, and he further said specifically in item 23 that “the judgment and deeision of my said executors and trustees respectively shall be final in ascertaining how much of every dividend received upon any shares of capital stock shall be considered as income received from the profits of the corporation for that year upon the capital invested.” It would seem that words could go no further in the effort to place absolute discretionary powers in the hands of his executors in this regard. Doubtless he appreciated that the questions arising under this power would be 'delicate and difficult questions, not capable of mathematical certainty of decision, but requiring the weighing and balancing of probabilities without reaching any absolutely accurate result. Apparently he appreciated also the probability of legal contests
The circuit court, while holding that the corporations referred to in item 23 of the will were the corporations in which Mr. Wells owned stock at the time of his death and that the executors had power under the will to make division of the dividends between income and corpus, took considerable testimony as to the circumstances under which t'he various dividends were declared, the condition of the various corporations at the time of the declaration of the dividends, the' sources from which the money used in paying dividends was derived, and the value of the property of each corporation, especially the value of the stumpage owned and cut by. the lumber corporations. Upon this testimony the court made findings disapproving of the apportionment between corpus and income made by the executors of the dividends received from the Homestake Mining 'Company, the N. Ludington Company, and the- II. Witbeck Company, and determined that in each case considerably larger sums represented profit and should be credited to income than had been credited by the executors. Had these questions been ordinary questions of fact to be originally determined by the court from the evidence before it, we should have no difficulty in approving the conclusions reached by the court, but such was not the case. The apportionments already made by the executors were final and conclusive unless made fraudulently or arbitrarily or as the result of a mistaken conception of their duty. The sit-'
So much of the judgment of the circuit court as sets aside or changes the apportionments between corpus and income made by the executors and has been appealed from in this appeal must be stricken out, and the conclusions of the executors reinstated and approved.
The next important question to be considered is the question as to the proper division between income and corpus of the fees of the executors during -the administration. Both the county and the circuit courts properly held that under the provisions of item 22 of the will the fees and expenses of the executors incurred in carrying out their duties as trustee5-
Complaint is made of tbe conclusions of tbe circuit court as to tbe disposition of tbe sinking funds created by tbe executors in order to meet possible shrinkage in value of United States bonds held by them. Those conclusions were that as to certain United States bonds held by the deceased and which were still owned by tbe estate, which according to tbe appraisal of tbe estate commanded a considerable premium at tbe time of tbe decease, tbe executors rightfully set aside and credited to corpus a portion of tbe annual interest received upon them to meet tbe shrinkage on their value as they approach maturity; but that as to bonds which bad been resold by tbe executors (whether owned by tbe deceased at bis death and appraised at a premium, or afterwards purchased by tbe executors at a premium), so much of tbe sinking fund previously set aside by them as was not needed to make good tbe difference between tbe appraisal (in case of bonds owned by tbe deceased) or tbe cost (in case of bonds purchased by the executors) and tbe sales price, should be taken from corpus and credited to income.
This court has definitely adopted tbe principle that where a trust is created in funds of which the income is to be paid to certain beneficiaries for life and tbe principal to others on tbe termination of tbe life estate, and tbe trustees invest a part of tbe funds in securities at a premium, tbe trustees should take from tbe annual income and add to tbe corpus such sum as will under established rules at tbe maturity of tbe securities repay to tbe corpus tbe amount paid as premium, and pay to tbe life tenant tbe balance only of tbe annual income. As only tbe face of tbe obligation will be paid at maturity, it is evident that tbe corpus of tbe estate will lose tbe amount paid as premium unless some such course be pursued. In other words, when securities are at a premium the annual
“There can ordinarily be no better test of the true income which a sum of money will produce, having regard to the rights of both the tenant for life and the remainderman, than the interest which can be received from a bond which sells above par, and is payable at the termination of a fixed time; deducting from such interest, as it becomes due, such sums as will at maturity pay the premium.”
It is also held in the case cited that even though the securities may appreciate in value, so that they would sell for a larger sum than would be necessary to restore to the corpus of the estate that which was taken from the estate to purchase them, still the rule is not changed, because this would give the profit occasioned by the rise in market value to the life tenant, although such tenant is not responsible for the loss if the market goes the other way. The life tenant is .not entitled to the chance of profit unless he also bears the corresponding chance of loss.
It is true that it has been held by the supreme court of New York (McLouth v. Hunt, 154 N. Y. 179, 48 N. E. 548), that, in case of trust securities transmitted by the testator, the question whether the depreciation of the premium resulting from approaching maturity of the bonds should be borne by the life tenant is to be determined by the intention of the testator as gathered from the will in the light of the relationship of the parties and the surrounding circumstances. In that case the will provided that the life tenants should receive the “full income,” and it was held that the intention of the
It is unnecessary in this case to decide whether there is any logical difference in the rules of law which should apply' to securities held by the deceased at a premium and to securities purchased by the executors at a premium. We are quite well convinced that the will in the present case shows very clearly that the testator intended primarily that the principal or corpus of the estate should at all hazards he preserved intact. The use of the words “net income” in indicating the amounts paid to the life tenants and the abundant powers which he gave to his executors to finally determine the amount of the “net income” are very persuasive. Our conclusion is that as to both classes of securities the sinking funds were properly created and added to the corpus, and should have remained in the corpus notwithstanding the subsequent sale of some of the securities at a price which left a small balance in the sinking fund. In this respect'the judgment of the circuit court must he modified as indicated.
When the appeal in this case reached the circuit court there was filed by the appellant Daniel Wells Norris a long petition asking that certain alleged issues he tried and determined upon the appeal. Some of these issues were academic in their nature, and contemplated that the court' should answer a series of questions as to the proper construction of certain parts of the will, and give its opinion as to the rights and duties of the trustees, the life tenants, and the remaindermen under the will. So far as these questions were legitimately involved in the settlement of the final account, the petition was unnecessary, for all those questions were brought before the court by the appeal. So far as those questions were not necessarily or legitimately involved in the settlement of the final account, they had no proper place in the trial.
Certain new matters were, however, presented to the court
Briefly and without entering into details, the facts alleged were in substance that the directors of certain of the corporations in which the estate was largely interested as stockholder did not annually distribute the earnings of those corporations, but added the same to the surplus account, thus enhancing the value of the stock, and the claim was made that the amount of enhancement to the stock held by the estate in each case should be taken from the corpus and apportioned to income by the executors, and paid out by the executors to the life beneficiaries who were such October 31, 1906, with interest from that date. This claim was founded on the proposition that inasmuch as the executors as individuals owned stock in the corporations which, together with the stock owned by the estate, •constituted a majority of the stock, they should have compelled the declaration of dividends by the corporations, and not having done so may be compelled in this proceeding to account to the life beneficiaries as if dividends had actually been declared.
We pass the objection made by the executors, that these •claims are new matter and cannot be brought into the case on the appeal because they were not suggested or claimed in the county court, with but one remark. The question before the county court was the proper settlement of the final account of the executors. The whole subject of their handling of the estate from start to finish was open for consideration in both county and circuit courts. To hold that because certain items which should have gone into the account in the county court could by virtue of that omission be barred from consideration upon the appeal in the circuit court would be little short of ridiculous. The case comes to the circuit court for a trial de novo of all questions relating to the dealings of the •executors with the trust funds, and none of those dealings can
There are a number of minor contentions made on the merits of the case which have been examined, but are not considered meritorious, and which are overruled .without comment.
Before closing this opinion we are compelled, however, to consider the question as to the propriety of the allowances made by the circuit court to the various guardians ad litem who represented the interests of the minor beneficiaries in that court. By the judgment the following sums were allowed to the guardians, viz.:
Frank B. Van Valkenburgh. $4,349 75
John M. W. Pratt. 800 00
Charles A. Vilas. 135 00
*314 John F, Harper. $1,150 00
Guy D.' Goff. 1,100 00
William D. Van Dyke. 335 00
William W. Wight. 500 00
F. H. Bottum. 165 00
G. D. Van Dyke. 800 00
All of these sums (except the sum allowed to Mr. Wight) were ordered to be paid out of the corpus of the estate, because the minors respectively had no available property out of which the court could direct payment. Mr. Wight’s ward having a present available interest in the estate, his fees were made a lien upon that interest and no appeal has been taken from that part of the judgment.
It is admitted that the court had power under the provisions of ch. 261, Laws of 1901 (now sec. 4041b, Stats. 1911), to make an order of this nature, but the question is whether the sums allowed can be held to be proper sums under the terms of that statute.
The statute says that the guardian may be allowed “compensation” for his services out of the body of the estate if the ward have no available property out of which such payment can be directed by the court. In a series of decisions this court has announced in no uncertain terms what “compensation” as here used means.
It means a reasonable charge, not measured by the high salaries or rewards for services which large establishments and wealthy clients may voluntarily pay to lawyers of their choice, but measured more nearly by the compensation which the law allows to public officers having similar duties. The reason is that guardians ad litem are in a true sense public officers, and not merely that but public officers of justice. The cases laying down this general doctrine are Speiser v. Merchants’ Exch. Bank, 110 Wis. 506, 86 N. W. 243; Richardson v. Tyson, 110 Wis. 572, 86 N. W. 250; Will of McNaughton, 138 Wis. 179, 118 N. W. 997, 120 N. W. 288. We do not deem it necessary to quote from these cases or state again the
We would not be understood as minimizing in any respect the ability and industry of the gentlemen who have faithfully represented their infant wards in the present litigation. The interests involved were very large, the questions were numerous, and the time necessarily consumed in the various trials, and in preparation has been considerable. The circuit court found that Mr. Yan Yalkenburgh had spent, fifty-eight days in the circuit court, two and one-half days in county court, and one hundred and thirty-five days out of court in performing his duty as guardian; Mr. Pratt, twenty-four days in court and one day out of court; Mr. Charles A. Yilas, three days in court and two days out of court; Mr. Harper, thirty-two days in court and five days out of court; Mr. Goff, thirty days in court and six days out of court; Mr. W. D. Yan Dyke, five days in court and ten days out of court; Mr. G. D. Yan Dyke, twenty-four days in court; Mr. E. H. Bottum, three days in court and four days out of court. Granting all this to be true; and granting also that many of these gentlemen could easily have earned much larger sums if they had spent their time in the regular practice of their profession, we are still forced to the conclusion that the compensation has not been awarded upon the true basis, namely, the amount which the law would allow to public officers having similar duties. We regard these sums as too large under the principle which has been applied by this court in the cases cited.
The work is primarily and chiefly the performance of a duty imposed by the court upon one of its own officers to aid - it in the administration of the law, and only incidentally is it the performance of work for a pecuniary compensation. The compensation which is deemed sufficient for somewhat similar services by the lawmaking power is exemplified by the sums allowed to bar examiners, viz. $10 per day, to counsel ap
Roughly speaking, it seems that the trial court allowed $33 per day for days spent in court and $11.50 per day for days spent out of court.-
Without enlarging further upon the subject, we shall simply state our conclusion that the sums allowed are too large by nearly or quite fifty per cent, and must be reduced to the following amounts: F. B. Van Valkenburgh (including expenditures), $2,179.75; J. M. W. Pratt, $400; Charles A. Vilas, $70; John F. Harper, $600; Guy D. Goff, $550; W. I). Van Dyke, $170; G. D. .Van Dyke, $400; and F. H. Bottum, $85.
Complaint is made as to the costs allowed to Mr. Norris in the circuit court, but it is not considered that the decision of the circuit court in this regard should be changed.
By the Gourt. — Judgment modified as indicated in this opinion and as so modified affirmed, the costs of printing the case and the fees of the clerk of this court to be taxed and paid out of the estate. Each guardian ad litem who filed a brief in this court is allowed $150 as compensation, and the cost of printing his brief, to be paid from the body of the estate. No other costs are allowed.
Motions for a rehearing made on behalf of the appellant Daniel Wells Norris and by Frank B. Van Valkenburgh, guardian ad litem for certain infants, were denied on March 17, 1914, with $25 costs to be taxed in favor of the executors and against the appellant Norris.