202 Misc. 373 | N.Y. Sur. Ct. | 1951
One of the objections interposed to the account of the trustees is to the credit taken for a loss that resulted upon the sale of the trust estate’s half interest in realty located on Broad Street, Newark, New Jersey. The property was acquired by the testator through a mortgage foreclosure shortly before his death. In the foreclosure proceeding title was taken in the name of testator’s nominee who conveyed to the accounting trustees in November, 1934. The remaining half interest in the property is held by the trustees under the will of Mary C. March, deceased. The trustees under that will are the same persons who are here accounting as trustees under the testator’s will. When the trustees acquired the property the improvements on it were old and in poor condition and the property’s value was chiefly in the land. The
The established rule governing testamentary trusts is that realty taxes are payable from trust income in the absence of a contrary intent expressed in the will (Matter of Albertson, 113 N. Y. 434; Matter of Jackson, 258 N. Y. 281; Martin v. Kimball, 86 N. J. Eq. 10; Outcalt v. Appleby, 36 N. J. Eq. 73; Green v. Green, 134 N. J. Eq. 479). Here the trustees speak of payment of taxes as throwing good money after bad. They justify their failure to pay taxes upon the ground that so long as the other half owner made no contribution to the taxes it would have been foolhardy for the accounting trustees to pay the portion of the taxes allocable to this trust. The fact remains, nevertheless, that so long as income was available for the purpose it was applicable to the taxes and that, if there was justification for withholding tax payments, the amounts withheld did not accrue to the benefit of income. The realty was not worthless but had a value that was realized upon the sale. The tax arrears affected the sales price and in so doing diminished the corpus of the trust.
The law of the situs of the property determines whether or not the will effects an equitable conversion of the realty. (Decedent Estate Law, § 47; Clarke v. Clarke, 178 U. S. 186; Matter of Good, 96 N. Y. S. 2d 798, affd. 278 App. Div. 806; Fidelity Union Trust Co. v. Ackerman, 123 N. J. Eq. 556; 1 Davids on New York Law of Wills, § 502.) Since the proceeds of the sale of the realty are here in the State of domicile, this court has jurisdiction to determine the issues raised by the objections to the account even though reference to foreign law may be necessary (Butler v. Green, 65 Hun 99, 108).
It appears to be the usual rule in New Jersey that while non-income producing realty remains unconverted ordinary taxes and maintenance expenses are to be charged to estate income in the absence of a contrary intent in the will (Outcalt v. Appleby, supra; Green v. Green, supra). In connection with unproductive
In the instant case the trustees did not conduct a salvage operation of property acquired through their own foreclosure of a mortgage. The trustees never owned the mortgage but obtained the realty shortly after deceased’s acquisition of title through foreclosure. In some sense the trustees were executing the final stage of a salvage operation but they were not confronted with the multiple problems incidental to the usual salvage operation since their task was limited to an administration of the realty until the time when it could be disposed of advantageously. The circumstances of their acquisition of the property were unique and whether the theory of equitable conversion be employed or it be said that while they held title to the realty it was a joint venture between the life tenant and the remaindermen, the equities of the situation now require an apportionment of the sale proceeds between income and principal interests in the trust. Utilization of the formula contained in section 241 of the Restatement of the Law of Trusts will attain an equitable result and the accounting trustees are directed to make an apportionment in accordance with that formula. Such computation will include the necessary adjustment of the unpaid taxes and other carrying charges.
The prior account of the trustees contained information as to the operation of this property and as to the disposition of
A part interest in property located on Mulberry Street, Newark, New Jersey, was received by the trustees from the executors of the estate who had foreclosed a mortgage on the property. From the time of such acquisition the income from the property always was inadequate to meet the operating expenses and tax arrears had accumulated prior to the foreclosure. The present account carries forward a balance of income and reports certain small gross receipts during the accounting period. The earlier account stated that the property was without value and the summary in the decree settling that account did not attribute any value to the property. Objection has been made to the failure of the trustees to pay taxes on this property. The objection is overruled. The trust’s interest in this property is stated in the account to be without value and, although there is some indication that all interest of the estate was wiped out by foreclosure of a tax lien, the property is reported in the schedule of assets on hand as valueless. The objectant does not question the representation that, as was found in the earlier account, the property is valueless. It cannot be said that the nonpayment of taxes on worthless property has adversely affected the interests of the objectant. The objection raises no other issue as to this property.
The first and second objections are sustained to the extent that the trustees will be required to make an apportionment
The fees of the attorneys will be fixed upon the submission by them of affidavits setting forth the extent of their services. Proceed accordingly.