52 A.2d 811 | N.J. Super. Ct. App. Div. | 1947
Isaac Roth, the testator, died in 1927, leaving a will of which the executors were his brothers Jacob and Moses, and his sister Mrs. Sameth. To them he gave his residuary estate in trust to pay the net income to Mrs. Sameth during her lifetime. While he left a large estate, most of the assets that were readily convertible into cash were used to pay debts, administration expenses, and legacies. The major part of the trust estate is a half interest in land which the testator had owned in common with his brother Jacob. The property was, and still is, heavily mortgaged. Ever since testator's death, the mortgagees have required amortization and since the trustees had no capital funds with which the estate's share of the payments could be made, the rents were used for this purpose. In 1944, Mrs. Sameth began pressing her brother Moses — Jacob had died some years earlier — to restore to income and pay her the amounts which had been diverted to amortization. But he did not deem it safe to do so, inasmuch as three successive accounts of the trustees in which the amortization payments were charged against income, had been approved by decree of the Orphans Court. Mrs. Sameth thereupon filed in the Orphans Court a petition praying that the decrees allowing the accounts be opened on the ground of mistake, and the accounts be resettled. When the matter came on to be heard, no testimony or other proofs were received and an order was made dismissing the petition, without the court stating any reasons for the action. From the order, Mrs. Sameth appeals.
Mrs. Sameth's petition to the Orphans Court and the order to show cause made thereon, name only her co-trustee as respondent, although the trustees have no real concern in the matter one way or another, as the petition does not seek to increase their liability. What the petitioner seeks to accomplish is the transfer of a certain sum from corpus to income. The only persons who have an opposing interest are the remaindermen, and they were not made parties to the petition and were given no opportunity to be heard.
While the remaindermen were not joined in the proceeding to open the decrees, they had been parties in the accountings *590
in which the decrees were made. The doctrine is universally accepted that the judgment of a competent court, acting within its jurisdiction, is conclusive upon the parties as to all matters adjudged, upon which the parties were, of right, entitled to be heard. This doctrine is applied to decrees of the Orphans Courts settling fiduciaries' accounts. Shearman v. Cameron,
It is the general rule that all parties to a decree or judgment, whose interest will be affected by opening or vacating it, should be made parties to a proceeding in which this relief is sought. 34 C.J. 344; Surety Building and Loan Association v.Risack,
Appellant relies on In re Slater's Estate,
The appellant also cites Orphans Court rule 28: "In proceedings for the resettlement of the account of an executor, administrator, guardian or trustee, at least five days' notice of the intended application shall be given to all parties in interest unless the court shall otherwise order." This rule does not give the Orphans Court unlimited discretion to determine what parties shall receive notice. The rule would not, for instance, justify a failure to notify the executor in a case where the object of the proceeding is to increase his liability. The authority given by the rule must be exercised in accordance with the fundamental doctrine that a party who will be directly affected by the action of the court, must be brought in.
The Roth remaindermen were necessary parties to the proceeding to open the decrees settling the trustees' accounts. Since they were not joined, the Orphans Court properly dismissed the petition. When I announced this view of the matter to counsel, the suggestion was made that instead of remitting the record to the Orphans Court, the remaindermen be brought into the Prerogative Court on the appeal, so that there might be made here a decree on the merits. After considering with some care the nature of this court's jurisdiction, I concluded that this course might properly be pursued.
The Prerogative Court has always been regarded as an ecclesiastical court. In re Coursen,
It was characteristic of ecclesiastical courts in 18th Century England that an appeal gave complete jurisdiction of the cause to the higher court and there the matter was litigated de novo. A citation brought the defendants into the appellate court and the same course of pleading was followed as if the court were sitting as a court of first instance. See Practice in the Spiritual orEcclesiastical Courts, by H. Conset (1708 ed.) 185. On an appeal from a definitive sentence, or what we would call a final decree, or from an interlocutory sentence which in result decided the whole suit, matters could be pleaded on the appeal which were not pleaded below and proofs presented which were not offered below. Conset 216. So much was the cause in the upper court treated as an original suit, that it could be instituted by one who was not a party to the cause in the lower court. Jones v.Bougett, 1 Atkyns 298; 26 E.R. 191. The question on appeal was not whether the judge below correctly decided the suit on the *593 record and proofs before him, but whether, on the pleadings and proofs in the upper court, the appellant or respondent should prevail. Conset 235.
In New Jersey, this principle of the ecclesiastical courts has been followed on appeals to the Prerogative Court at least to the extent of permitting new proofs to be presented in that court and of allowing that court to dispose finally of the matter instead of remitting the record to the Orphans Court for further proceedings there. Among the many cases in which evidence was received in the Prerogative Court, are Sayre's Adm'r v. Sayre,
In some of our decisions a distinction is drawn between a cause in which the jurisdiction of the Prerogative Court is purely appellate, and one in which the cause might have originated in that court instead of in the court below. This distinction finds no support in the English cases. The principle that the appellate court heard the cause de novo operated in full force even in the Court of Delegates, the court of last resort in ecclesiastical matters, which had no original jurisdiction at all. Temple v. Walker, 2 Hag. 394; 161 Eng. Rep. 1363.Forster v. Forster, 1 Hag. 144; 161 Eng. Rep. 504 (at p.509).
It is agreeable to the principle which I have been discussing, that new parties may be added in the Prerogative Court. This would seem to follow of course, if indeed we have jurisdictionde novo. And it does not rest only on ancient precedents, *594 but is buttressed by considerations of convenience and is a real aid to the prompt administration of justice.
The Prerogative Court is given by statute very broad power of amendment in order to prevent the failure of justice. R.S.2:30-4. On appeal, it may amend the record of the Orphans Court.Robinson v. Furman,
We turn to the merits. It is entirely clear that moneys used to reduce the mortgage debt should not have been permanently deducted from income but should have been charged againstcorpus. Thomas v. Thomas,
The first account of the trustees was filed in 1936. Nowhere does it show that payments had been made on account of the mortgages. The schedule entitled Expenses Chargeable to Income, does not include the amortization payments. This results from the fact that the income receipts with which the trustees charge themselves under the heading Income from real estate partnerships, are only the net amount received by the trustees, that is, one-half the rents after all expenses and the amortization had been deducted. The lands were managed, and the accounts relating thereto were kept on a partnership basis. In the income schedule of the second account, the accountants charge themselves with "payments out of income from partnership account for mortgage reduction," $3,375, and they pray allowance out of income for the same item. As an addition to corpus, the trustees also charge themselves with the amortization. The third account, for the period ending December 31st, 1942, in the same manner shows amortization payments of $4,050. All three accounts were approved by decree in the common form that the account be allowed and that there was a certain balance of corpus and a certain balance of income remaining in the hands of the accountants.
Mrs. Sameth was one of the accountants. But an application to open may be made by the party on whose motion the decree was made. Grant Inventions Co. v. Grant, c., Corp.,
The remaindermen urge that on the resettlement of the accounts, a depreciation reserve be created by charging income annually with a sum equal to some reasonable percentage of the value of the buildings as at testator's death. Such a course is in harmony with modern accounting practice, but generally, as between life tenant and remaindermen, the latter must bear any loss due to depreciation and obsolescence. Mrs. Sameth cannot be required to suffer a deduction from income for the creation of a sinking fund to offset such a loss. Laflin v. Commissioner, 69 Fed. Rep.
2d 460. A tenant for life is bound to repair only to the extent of preventing permissive or actual waste. Kearney's Ex'r
v. Kearney,
About the same time that Mrs. Sameth sought relief in the Orphans Court, her co-trustee, Mr. Moses Roth, filed with the same court a petition setting forth the facts and praying for an order "instructing the said executors in the premises." The Orphans Court, on this petition, ordered: "The said executors and trustees are hereby instructed that the said Carrie X. Roth Sameth is estopped by the said accounts and decrees thereon entered April 9th, 1940, and April 20th, 1943, *597 from claiming that the said payments aggregating $7,425 on account of the principal of said mortgage encumbrance be charged against the corpus of said trust; and it is further ordered that any amortization payments made on account of the principal of said mortgage encumbrance from and after the decree settling the account of said executors and trustees on April 20th, 1943, be chargeable against the corpus of said trust and not to the income therefrom." From this order also, Mrs. Sameth appeals. The question is presented whether the statute, P.L. 1920 p. 475;R.S. 3:7-77, in so far as it may empower the Orphans Court to give such instructions, trespasses upon the exclusive jurisdiction of Chancery.
A trustee has always had a right to maintain a suit in Chancery for a judicial construction of the trust instrument, and directions as to his own conduct. 3 Pom., § 1064;Attorney-General v. Moore's Ex'rs,
The remaindermen, by counter-claim, ask this court to order the trustees to sell the building. This court, equally with the Orphans Court, lacks jurisdiction in the premises. *599