9 N.Y.S. 641 | N.Y. Sur. Ct. | 1888
This accounting was commenced before the late Surrogate Suffern, in the year 1875, and the matter was sent to an auditor, before whom a considerable mass of testimony was taken. The last hearing before the auditor appears to have been had in 17ovember, 1876. After that date the proceeding seems to have been allowed to sleep until revived in the spring of 1886. In the mean time John Butler, one of the executors, died; also John and Richard Butler, legatees, and children of the testator. Proceedings were then had by which Anastasia Butler, the executrix of the will of the deceased executor, was brought in as a party. Administrators of the respective estates
The first claim made by the contestant’s counsel is that the executors should not be credited with the loss on the loan to Judge SuEern upon his bond and mortgage of the date of November, 1874, for $7,500. This matter I shall consider in two respects: First, Is it shown that the instrument considered up to the time of the completion of the loan was made under such circumstances as to show that a loss resulted therefrom for which the executors should be held liable? Second. Is it shown that the conduct of the executors subsesequent to the making of the loan was such as to make them liable for the loss, and, if so, to what extent? The rule of responsibility of trustees is that the trustee is bound to exercise such diligence and such prudence in the care and management of the estate as, in general, prudent men of discretion and intelligence in such matters employ in their own like affairs. King v. Talbot, 40 N. Y. 76-85.
As to the first of the above inquiries, after careful consideration, I have arrived at the conclusion that the executors should not be held liable for the loss, if any, based upon the claim of lack of that degree of care and prudence which the law imposes upon one acting as a trustee. The burden of proof to sustain this issue rests upon the contestants, and, under all the circumstances, I am inclined to the judgment that the proof has not reached the requisite point of clearness, and my mind is not brought to the conviction that the executors should be held liable for such loss, if any. One of the executors was the brother of the testator; the other, his chosen friend and business associate. It is right to assume that the testator had selected them to administer his estate because of his confidence in their integrity, business capacity, and experience, and that he regarded them as men of fidelity, diligence, and prudence. At the time of making this loan in 1874, only a few years had elapsed since the testator’s death, and there is no evidence of nor claim made that they were not men of the same methods of business, care, and prudence as at the time of the testator’s death. The loan was made to the legal adviser and confidential friend of the testator. He was the surrogate of the county, and one in whom the executors had a right to place explicit confidence, and upon whom they might rely to speak the truth, and to permit them to commit no error in the management of the estate, at least wherein he was a participator; and while granting that, in this matter, it was an improper thing for the executors to loan to the surrogate, and for him to receive, the same, still, upon the question of good faith and prudence, it must go very far in excuse of the conduct of the executors that they believed they were entitled to make the loan, and to place perfect reliance upon and confidence in the surrogate. They had a right to expect that the surrogate would check them in any wrongful administration of the estate wherein he was an actor; still more not
The safety of the investment was somewhat confirmed by the prompt payment of the interest thereon for several years, and confirmatory of the judgment of the executors that the value of the property was sufficient at the time to secure the loan. Again, it must be remembered that this security was taken for moneys which had come to Judge Suffern’s hands as the result of an action commenced by the testator himself. The moneys had never been in the hands of the executors. They obtained security for that which therefore was not secured. Another circumstance showing the prudence of these executors is the fact that, in making loans for the estate, no loss has come to the estate out of any other of the many investments made by them.
As to the second inquiry, I am of the opinion that a loss has resulted from the failure of the executor Wiles to exercise that degree of diligence required of him in looking after this investment. The executors, even though the security was sufficient at the time of making the loan, were not relieved from exercising supervisory care over the investment thereafter. They were still bound to be watchful; to keep themselves informed as to whether or not a depreciation in value of the security was taking place from any cause; to see that the interest was paid with a reasonable degree of promptness; to keep informed as to the pecuniary responsibility of the obligor; and, in fact, to keep themselves informed, and to take notice, of all these things affecting the investment which a man of fair judgment, care, and prudence would take and keep into consideration in a matter of a loan of his own money, and likewise to take all lawful means, with a fair degree of promptness, to recover the debt, and thereby, and by all prudent means, prevent a loss coming to the estate. Herein I think the evidence shows that the executor Wiles has clearly failed in his duty. As early as the year 1877, Judge Suffern began to fall behind in the payment of interest. While the interest was payable semi-annually, he did not pay the interest due November, 1877, until May, 1878. Interest accrued from November, 1877, to the time of the judge’s death, in March, 1881, a period of upward of three years; and on account of which was paid, according to the accounts, at different times and in various sums, in the aggregate about $557, the last of which seems to have been paid more than a year prior to his death; thus leaving unpaid, when the last payment was made in February, 1880, more than two years’ interest. This falling behind and neglect to pay, as heretofore, was something to put the executor upon inquiry as to the safety of the investment, yet he appears to have made none in any respect. His attempt to collect seems to have been limited to demand only. No legal proceedings were taken to enforce payment until October, 1882; thus leaving some four years’ interest unpaid before legal measures were taken to recover the debt. This long delay is inexcusable. Nothing is offered that can be taken as a sufficient explanation of so long delay - Even if it be granted that the executor was not called upon to initiate legal proceedings to enforce payment immediately upon default of payment of the interest, on the other hand the limit of delay is not indefinite. Between these two-extremes lies the medial line, where the law says the executor should, in the-exercise of ordinary prudence, go forward to protect the trust-estate, or, in de
I am of the opinion, also, that the executor should be held for the difference between the price at which the mortgaged premises were knocked down at the sale, being $3,200, and the price at which the same were subsequently sold, ($5,000,) and the interest such difference has since earned, deducting the expenses incurred in bringing about the sale of the $5,000 and other expenses, such as taxes, up to the time of the sale. If Mr. Wells bid as agent or in behalf of Mr. Wiles, then, under the well-settled rule that one acting in a fiduciary capacity cannot deal with the trust-estate to his own personal benefit, applies, and the purchase must be deemed to have been made for the trust-es-tote, and Mr. Wiles must charge himself with this profit. 3 Redf. Wills, 234, 403. On the other hand, if the executor entertained the judgment that he always claimed that he did as to the value of the mortgaged premises, then the exercise of proper care for the estate, I think, called upon him to purchase the property for the estate, and thus prevent a loss which in a measure might have been averted. His attorney regarded it as a “pity that the property did not bring more,” and therefore took occasion to purchase the same, and if he purchased for himself it must have been because he thought it.a speculation to do so at the extremely low price at which it was being sold. Here was property that the executor, unless he confesses his own delinquency, believed to be fair security for $7,500 principal, and upwards of $2,000 interest, cran aggregate of upwards of $9,500, whiehhe permits to be sold for $3,200, and, standing by, neglects, in the exercise of a discretion vested in him, to purchase the property in behalf of the estate, and in view of the heavy loss that must come to the estate if he permitted the same to go to a stranger. 3 Redf. Wills, 234, and cases there cited. Id. 555. Indeed, it was his duty to purchase under the circumstances. Clark, v. Clark, 8 Paige, 152.
Objection is made to the credits for clerk hire. I think the exception is well taken. The evidence does not show payment to a clerk, but a retention of funds by the executor Wiles for his own services in that respect. No vouchers or receipts are produced, as required by section 2734 of the Code. In such case payments for clerk hire are not allowable. Lent v. Howard, 89 N. Y. 179, and cases cited. In Collier v. Munn, 41 N. Y. 143, compensation was refused an executor for legal services that he had rendered the estate, and in Clinch v. Eckford, 8 Paige, 412, compensation to an executor for services rendered by him as clerk was disallowed. The reason of the rule precluding such allowances is equally applicable, even though the firm of A. M. &. W. H. Wiles were compelled to hire a clerk to perform the services
I am convinced that the affairs of the estate were such as to permit the executors to employ a clerk, and to charge the estate with payments therefor, and I am not prepared to hold that the fact that the accounts have not been kept in a skillful form would preclude the allowance of the payments, if they had been made to a clerk; but no clerk is shown to have been employed or paid. The executor rendered this service, and I am bound by the authorities to disallow any claim of compensation therefor. As was observed by Judge Woodruff in Collier v. Munn, supra: “With the unreasonableness of the resistance to this claim of the appellant, which, in this case, is for a valuable service, rendered in good faith, far beyond what his duties as executor required, or with the eminent propriety of payment * * * for a service from which they have apparently derived so considerable a benefit, we cannot deal.”
The payments to Mr. Hoffman, counsel for the contestants, in excess of $500, do not seem to hava been made by their authorization, and cannot, therefore, be allowed. The first $500 was paid under written authority; the others not. Why did not the executors require the like authority as to the others? It appears to me that they should have required clear direction or permission, in view of the fact that they were paying the attorney of the adverse party. More than five years elapsed between the last payment of the first $500 and the first payment of the last $500. This disconnects the latter payment from the order under which the first $500 was paid. The letters and receipts of Mr. Hoffman submitted to me rather indicate that these latter payments were not made under any authority, but were for services rendered the executor Wiles in prosecuting the claims against the executor John Butler. As to these payments, the burden is upon the executors to establish authority to make them, and I do not find sufficient evidence of it. If there were, I should allow them, as the loss to the executor is an unfortunate one, which justice calls upon the court to prevent, if possible; but I think that the matter is one that I should have clearly established, inasmuch as the payments were to the adverse attorney. Of course, I have nothing to do with the amount of compensation that Mr. Hoffman should have from his clients.
The payment by the. executor Wiles to his co-executor for commissions cannot be allowed. It is a well-settled rule that commissions cannot be paid or retained until judicially allowed. Wheelwright v. Rhoades, 28 Hun, 57; Trust Co. v. Bixby, 2 Dem. Sur. 494; Freeman v. Freeman, 4 Redf. Sur. 211. And if retained or paid, the executor is liable for interest thereon. In re Peyser, 5 Dem. Sur. 244. The matter of proportioning the commissions as between the executors, so as to protect the executor Wiles against this error, may be adjusted on settlement of the decree.
Objection is taken to the allowance to the executors of certain payments made to the legatees John and Bicliard Butler and Honora Dinan, because of the same having been made while these legatees were infants. These items are $500 to Mrs. Dinan, October 20, 1875; items aggregating $6,259.98 to or for John Butler, between August 10 and November 22, 1875; and to some 20 items to or for Bichard Butler, aggregating $1,282.90, of which $441.50 was paid by the executor Butler, and the balance, of $791.40, by the executor Wiles. The payment to Mrs. Dinan was made by the executor Wiles j ust prior to her arrival at 21 years of age, for her “weddingoutfit.” I think that she does not claim that the payment was not one for necessaries. This being so, it is allowable, within the rule cited by her own counsel from Hyland v. Baxter, 42 Hun, 9. It does not appear that the widow, Mrs. Butler, was either able out of the income or willing to make this provision for Honora’s marriage. Besides, her failure to repudiate the payment, and long acquies
The payments to John Butler should be allowed to stand as stated in the accounts, if for no other reason than that while this account was pending he expressly assented to the same in writing, and thereafter received other payments based upon the provisions of such writing. I think his administratrix is barred by his acts in that respect, inasmuch as no claim of error or mistake is made. The sole ground of objection being infancy at the tim.e of payment, these payments were thus confirmed by him after he arrived at maturity. The executor Wiles should receive credit for all of these payments made by him, as also the executor Butler for his payments, exceptas to such payments as were made out of or on account of the proceeds of the $30,000 mortgage or other alleged indebtedness, or connected therewith, which payments should stand over, as hereinafter indicated, as to like payments made to Mrs. Dinan.
As to Richard Butler, of the amount of $791.40 paid by Mr. Wiles there were three items, aggregating $14.25, which seem to have been for necessary traveling expenses and physician’s bills. These should be.credited. The balance of the sum appears to have been paid for Richard’s burial expenses. As to these items Mr. Wiles had no legal right to make such payments upon the death of Richard. He should have ceased paying on account of his estate until the appointment of an administrator therefor, who would be authorized to receive Richard’s estate, and out of the same to pay the burial expenses. Instead of so doing, the payment was made direct by Mr, Wiles. This avoided circumlocution, but was not in accordance with legal -• nirement. Thepayments were no doubt made in good faith, and in cqu.ty Mr. Wiles should be reimbursed. Can he be allowed to retain tB:-- ansie; out of Richard’s estate, or must he pay the whole estate to his administrn'.tix, anti Uiv n oek reimbursement from that source? The expenditures are -ooi challen;-; , in any other ground thaninfancy. Surely the necessity of incurring burl»: •> :p -;?r:escannofc beeontroverted. The amount is not attacked as exoia,siv;>, a n- \ - , Vvere, the extent of his estate, he being unmarried, and being a minor a- , hihaving no creditors, I think the expenses cannot be said to bo Loo Í cannot, therefore, escape the conviction that justice and oquily ciii Mr an allowance of these payments. It has been held that the strict i imLs are not inflexible as to such expenditures, and that in case of a deportara from his legal duty by a trustee in the event of entire good faith, and ahai there are equities in Ills favor, and the expenditures have been made to servo the ncs"ssitfes of the minor, equitable considerations will bo applied to reimburse the trustee. Hyland v. Baxter, 42 Hun, 9, 98 N. Y. 610.
I think here may be found the basis for an allowance of the payments, and a retention of the same out of Richard’s estate. Ho injustice will be done to any party by so doing, and the payments are accordingly allowed.
As to the payments made by the executor B abler, I am not convinced of their necessity, except as to the items for clothing and tuition. Ho vouchers are produced, and no evidence as to the purposes of the payments has been adduced, except such as may be discovered from entries in the accounts. Nothing appears to show the purposes for which the moneys were paid. Most of the payments were cash to the minor. These items should have been explained, for the executor had no legal right to make them. lie could only be justified on equitable considerations and grounds of the minor’s necessities. The executor' was certainly not at liberty to hand over money to the minor without knowing of and approving the purposes for which it was to be used. Kelaher v. McCahill, 26 Hun, 148. Especially in this matter is the executor called upon to establish his claims for these allowances by the clearest proofs, inasmuch as the testator contemplated by his will the making of ample provisions for the support, maintenance, and education of bis children, through the provisions for payment of all income to the widow to be applied by her for all
I am of the opinion from the evidence that the payments made by the executor Butler to Mrs. Dinan were made out of the proceeds of the $30,000 mortgage, or because of the receipt thereof by him. He took no receipts for the payments, which gives the impression that he did not pay as executor, especially when, leaving out of consideration the mortgage moneys or the book-account, he had no estate funds out of which to pay. But, as there is an action pending to recover the $30,000 from the estate of the executor Butler, I think these payments to Mrs. Dinan should stand over for allowance or disallowance, either in that action or in a final judicial settlement of the estate.
The' contestants object, also, to the allowance of certain payments not appearing in the accounts, but testified to by the executor Wiles, on July 1 and July 2,1887, to have been made by his firm for the estate to the legatees. They are as follows: One hundred and fifty dollars to John Butler, legatee; and this, I think, should be allowed. But lias not credit been given in the account by the payment of $200 credited on the same day? Two hundred dollars to Mr. Hoffman, December 19, 1876, and $210 to him March 19, 1877,— these being payments to the contestant’s counsel,—the first of which has been allowed as part of the $500 order, and the latter, being one of the payments in excess of that sum, must be disallowed, for reasons above assigned as to other unauthorized payments. I may here add that I have not nor do I consider the status of the claim of Mr. Hoffman as against his clients for compensation. There is no check for a payment of $200 to Bridget Butler, 2sTo-vember 21, 1876. There is one February 21, 1876. The executor, however, is credited for a payment of that sum in his accounts on the same date, and I believe it to be the one made by the check of A. M. & W. H. Wiles. But one receipt is produced. The payment of $81.09 to John Butler is sustained by his receipt, but it is already credited in the accounts. The $200 to Mrs. Butler, September 26, 1876,1 think must be allowed; as also $500, August 8, 1881. They are sustained by vouchers. The former is known already, credited in the account, and may not the latter payment be included in the $800 credit of the same date? If not, there is no voucher for it. I do not see that the payment to Mr. Wiles of $200, August 23,1881, and $150, March 9,1881, on the “Murkey” investment, are to be considered, as the executors may have already been once credited with the funds invested in the security. I shall not pass upon these items at present, but reserve them until settlement of the decree. A payment to Mrs. Butler of $500, July 24,1882, is already credited in the accounts, and a voucher filed therefor. I think this must be the same. The payment of $75 to C. P. Hoffman, June 3, 1884, has already been disallowed.
We come now to the consideration of the questions of interest with which the contestants claim that the executors should be charged.
The first of these claims is that the executors should be.eharged with interest on the balances of interest in hand at the end of each year in excess of the balance in bank. This proposition assumes, as matter of fact, that the evidence shows such balances. I am not so convinced. Mr. Wiles testifies that all moneys collected by him were deposited in the executor’s bank account;
As to the claim that there were uninvested balances of principal funds, and that the executors should be charged with interest on the same, I cannot so hold upon the proofs; certainly not, unless some data are submitted to me based upon the proofs, showing such balances, and that opportunity to invest was offered, or that the executor himself used the funds, if such they were, or in some other way disposed of them to his personal benefit. Mr. Wiles denied all of these propositions or allegations, and no one contradicts him, except as to opportunity to invest, by.Mrs. Butler; but Mr. Wiles says that he had no funds to answer such demand. Besides, these applications were made, some of them at least, while these proceedings were pending, and I think he could properly refuse, and hold the funds in the trust company, as he did, to await the determination of this accounting. If Mr. Wiles is in error about there being no uninvested balances, it must appear from an investigation of the investments at stated periods; but, until such appears to be the fact, I must assume that there were none, except during short intervals, awaiting investment. The cases cited by the learned counsel for the contestants do not sustain his contentions in these matters. The principles enunciated in them are sound and salutary, as applicable to the particular case determined. Ho general principle can be laid down that will be applicable to all cases, and indeed scarcely in a second case, because of the diversity of facts and circumstances. As was said by Mr. Justice Churchill in Thorn v. Garner, 42 Hun, 507-515, there is no uniform rule of redress in cases of this kind, but each calls for the exercise of the judicial discretion of the court. The rule laid down in Spear v. Tinkham, 2 Barb. Ch. 211, was one of justice, as applied in that case.
As to the loans made to the firm of A. M. & W. H. Wiles, the executors must be charged with interest on the same, with annual rests, except in cases of payments on account exceeding interest due at the time of payment, in which instances rests must be also had at the time of any such payment. The rate of interest should be 7 per cent, to January 1, 1880, and 6 per cent, thereafter. But upon so much of the debts as was paid by the deposit of the $6,000 in the trust company, June, 1886, the estate is entitled to only interest at the rate earned in that institution. This proceeding was then pending, and the executor was justified in holding the funds in readiness to abide the determination of this accounting, and therefore was excused from making a permanent investment. This, it seems to me, the contestants have a right to claim, and is no more than compensatory. The executor has no just ground to complain of this ruling. It is no answer to say that, if the interest had been paid annually, it might have remained uninvested, for the firm neglected making the payments, and "thus cut oil the opportunity to invest. The following authorities sustain the conclusion I have reached: Jones v. Foxall, 15 Beav. 388; Morgan v. Morgan, 4 Dem. Sur. 353.
The claim that the executor Wiles is liable for any moneys due from his co-executor has not been pressed, and I therefore dismiss that question without consideration.
I come, now, to the claim that the exeeutri" the will of John Butler, the deceased executor, who was brought in as a party to this proceeding, should be charged in this accounting with the indebtedness of her testator to this estate. Prior to the amendment of section 2606 of the Code of Civil Procedure in 1884, it was settled by authority that an executor of a deeeased'exeeutor could be called to an account only for, and directed to pay over, such as
But can the question of the justness of the claim be litigated in this court, and in this proceeding, after the death of the deceased executor? Section 2606, as amended, provides that this court shall have the same jurisdiction to compel the executor of the deceased executor to account which it would have against the decedent if his letters have been revoked by a surrogate’s decree; and by section 2724 et seg. it is enacted that, in case of the revocation of letters, power is given to give a full accounting, as in other cases of judicial settlements. So that it would seem that, if the debt were due prior to the death of the executor Butler, the same had then become assets in his hands, and that his executrix might be called upon to account for the same in like manner as her testator might have been if living, and his letters had been revoked. In such case he would have been obliged to litigate the question of the justice of the demand in this court, and to give force to the provision quoted above from section 2606. It would follow that the executrix must also try that question here. Furthermore, this claim was litigated in this proceeding without objection, during the life-time of the executor, and most of the testimony bearing upon that question taken while he was still living. I shall, however, defer finding upon the question of the establishment of the claim until the settlement of the decree. The pleadings in the action brought against the estate of the deceased executor are not before me, and I am not, therefore advised whether or not this claim of $9,000 is sought to be recovered in that suit. I think that the whole matter of debits and credits of the deceased executor should, if practicable, be disposed of as one subject-matter, and in the same proceeding or action, either upon a continuance of this accounting or in the pending action.
As to the written agreement or stipulation entered into between the legatee, John Butler, and the executors, June 11,1877,1 think it should be given