Freeman v. Freeman

| N.Y. Sur. Ct. | Feb 15, 1880

The Subbogate.—The exception of the executors, Kellogg and Williams, respecting the uncollected notes of Freeman -and Williams, above referred to, cannot be sustained, for the reason, first, that such notes must be regarded as assets in the hands of the executors (3 R. S., 91, § 14, 6 ed.) ; and, second, because each of said executors appears to be entitled to commissions, exceeding the amount of their respective notes, and it will be their duty to apply such commissions, when allowed, towards the payment of such indebtedness ; hence the proceeds of those notes, though the makers are insolvent, will become assets in the executors’ hands. The case would have presented a question of more embarrassment, if the commissions had been insufficient to pay the notes, for while the statute provides that such indebtedness shall be regarded as assets in the hands of the executors, yet it is quite clear that the other executors ought not to be charged therewith, when they have been unable to realize the same, by reason of the insolvency of the makers. The proper mode, therefore, of stating the account, would be to enter the claims as uncollected and uncollectible, except by application of the commissions to be allowed.

The exception, by the same parties, to the charge of interest on sums withdrawn, must be overruled, because, by 3 R. S., 101, section 71 (6 ed.), the executors were only entitled to commissions on the settlement of their account, and the allowance thereof by the Surrogate thereon. They must be held, therefore, to have improperly appropriated the funds of the estate to their personal use, and to be chargeable with interest thereon, from the time of such misappropriation to the time of entering the decree, when the appropriate allowances may be made, and provision made therewith, to liquidate any indebtedness of the respective executors to the estate.

The exception of the general guardians to the finding o£ the auditor, refusing to charge the executors with compound interest upon the sums loaned upon two mortgages upon real estate in Mew Jersey, one for $4,000 and another for $1,000, it appearing that the interest is in arrear, cannot be sustained under the facts of the case. It appears that the mortgage for $4,000 is upon property devised to decedent’s daughter, Amy H., estimated by him to be worth $8,000. There is no other evidence in the case as to the value of the property. It also appears that, pursuant to the terms of the will, the mortgage was set aside and held in trust for decedent’s sister, and that the $1,000 mortgage has been paid with interest, to the executors, pending this proceeding. Without regard to the provision of the will that the executors should invest the said $4,000 on bond and mortgage on real estate in the city of Mew York or its vicinity, I am of the opinion that the executors, having acted in good faith, and with proper prudence, were entitled to make the loan upon adequate security upon real estate in the state of Mew Jersey. For though the executors may have been remiss in not recording the will, yet as there is no real defect in the title that record may now be made, and provision therefor may be inserted in the decree. Besides, compound interest.is only allowable in cases of gross delinquency, or intentional violation of duty. (Redf. Surr. Pr., 400 ; Tucker v. McDermott, 2 Redf. 312.)

The exception to the refusal of the auditor to charge . the executors with sums paid out of the general funds Of the estate to the sister of decedent, because of the nonpayment of interest on the $4,000 mortgage set apart for her, should, in my opinion, be sustained, though the auditor finds, in substance, that the mortgagor has sufficient interest undistributed in the estate to pay the interest in arrear. If this mortgage, as seems to be conceded, was set apart for the benefit of decedent’s sister, pursuant to the terms of the will, it became a separate trust, and the balance of the estate could not be used, either to pay the interest thereon or supply any loss of the principal. The executors had, therefore, no right to use the general funds of the estate to supply the deficiency of income from such mortgage. They should be charged therewith, with leave to retain sufficient of the interest of the mortgagor in this estate, to reimburse them.

The next exception to the refusal of the auditor to charge the executors, for the alleged improper investments in the mortgages mentioned, has been sufficiently considered, and should be overruled.

The exception in behalf of the grandchildren, remaindermen, that in the computation of the net income, between July 15, 1876, and July 15, 1878, the auditor neglected to charge to the income account ordinary repairs and assessments upon the real estate, and the funeral and other expenses, does not seem to me to be material, for the reason that that computation was only made for the purpose of ascertaining the shares of Edward M. and Lorrain 0. Freeman, which, under a1 prior agreement should go to Mrs. Dixon, and when those sums shall be paid, the repairs, assessments, &c., would seem to be properly chargeable to the body of the estate, as, under the eleventh clause of the will, no division^ of the residuary estate would appear to be contemplated until after the death of the beneficiaries provided for in the preceding clauses of the will. Hence, the expenses referred to would seem to be properly chargeable upon the body of the estate, although temporary repairs and ordinary taxes are usually chargeable to the life tenant, and assessments are either chargeable wholly to the interest of the remaindermen, or' apportioned according to their respective interests. But why the life tenants should be charged with the funeral expenses, is not appreciated. This exception should b.e overruled.

With the modification above suggested, the auditor’s report should- be confirmed.

Ordered accordingly.