In re the Accounting of Luckenbach

303 N.Y. 491 | NY | 1952

Desmond, J.

Lewis Luckenbach, in 1936, assigned to three trustees (Londres, Barnett and Wente) the whole of his vested remainder interest in a testamentary trust set up by his grandfather’s will, which had been probated many years before. In this accounting proceeding, begun in 1938, on that testamentary trust of the grandfather, Lewis Luckenbach, as well as his three trustees-assignees, were made parties, and all appeared by the same firm of attorneys and filed objections to the account. By a Surrogate’s decree entered and served in December, 1950, those objections were overruled. Meanwhile, in February, 1950, Wente, one of the three trustees to whom Lewis Luckenbach had conveyed his remainder interest in the testamentary trust, had resigned, or attempted to resign, as a trustee of Lewis Luckenbach’s trust, by sending Lewis Luckenbach a letter to that effect, but Wente has never accounted, or been formally discharged as trustee. In January, 1951, within the time limited for an appeal, Lewis Luckenbach, together with his two trustees Barnett and Landres, served and filed, through newly substituted attorneys, a notice of appeal to the Appellate Division, from the Surrogate’s decree. The name of Wente, the trustee who had resigned or attempted to resign, was not signed to this notice of appeal, but it appears without dispute that the notice of appeal was served on Wente by delivering a copy thereof to the attorneys who had previously appeared for Wente in the accounting proceeding. The Appellate Division, on motion, has dismissed that appeal, on the ground that the notice of appeal was a nullity since made in the name of two only of the trustees. The Appellate Division held that the purported appeal taken by Lewis Luckenbach individually was a nullity, also, since he had previously transferred all his interest in the testamentary trust to his three trustees — and with that part of the Appellate Division decision we agree. This opinion, therefore, deals with so much only of the Appellate Division’s order as holds that Lewis Luckenbach’s two remaining trustees could not, without the third, take any appeal. Such a dismissal is, for our jurisdictional purposes, treated as an affirmance (see Guaranty Trust Co. v. State of New York, 299 N. Y. 295, 299).

The Appellate Division’s determination means, of course, that Lewis Luckenbach’s trustees can never have a hearing in any appellate court on the issues on which those trustees were defeated in the Surrogate’s Court, although the appeal therefrom was timely taken by the only persons then actually representing the trust. “ Our law considers it an essential right of a suitor to have his cause examined in tribunals superior to those in which he considers himself aggrieved” (Yates v. People, 6 Johns. 337, 364). So valuable a right should not be declared forfeited except in the clearest of cases. We do not think this was such a case.

This inter vivas trust created by Lewis Luckenbach provides, among other things, that it is to be governed by the laws of California. However, as we see it, nothing turns upon that, since, as the Appellate Division pointed out, the rule on which that court relied for dismissal — that all trustees must act together and collectively — obtains in both New York and California (see Cooper v. Illinois Central R. R. Co., 38 App. Div. 22; Anthony v. Janssen, 183 Cal. 329). But the rule which requires united action has a number of exceptions, the first and most obvious one being that unanimity of trustees is not requisite where the trust indenture itself provides otherwise (3 Bogert on Trusts and Trustees, § 554). Indeed a California statute (Civil Code of Cal., § 2268) states that exception. In the trust we are dealing with, this appears: “In the event of a disagreement among the Trustees as to a course of conduct or a policy to be followed, then the will of the majority of the Trustees shall control and be binding upon the third Trustee.” Here the third trustee (Wente) had announced in advance that he did not intend any longer to act as such — in other words, that he did not intend to come to any agreements, in the future, with his two associates. That should, for these purposes, be treated osa“ disagreement ’ within the meaning of the indenture’s proviso above quoted.

To the rule that all trustees must, ordinarily, unite in any action taken on behalf of the trust, there is another well-established exception, equally applicable here, to the effect that in a case of emergency, some of the trustees, to protect the trust, may act in behalf of all (Restatement, Trusts, § 194, comment a ; 3 Bogert on Trusts and Trustees, § 554, p. 439; 2 Scott on Trusts, p. 1054, citing Anonymous v. Gelpcke, 5 Hun 245, and Busse v. Schenck, 12 Daly 12, both of which old New York cases seem to recognize this exclusion from the rule). An emergency did arise in the matter of taking this appeal for this trust, when the new attorneys, retained just before the time to appeal expired, learned that one of the three trustees had previously announced his withdrawal and declination to act any longer, but had not been formally discharged. Suppose he had been in the armed forces at the battle front, or had been gravely ill in a hospital, or could not be found. Would any court then say that the two others could not take an appeal?

We must remember that this united action rule as to trustees was created by the courts to safeguard trusts. It should not be so applied as to deprive a trust of necessary protection.

The order should be reversed, with costs, insofar as it dismisses the appeal taken by Landres and Barnett, as trustees, and their appeal to the Appellate Division should be reinstated.

Loughran, Ch. J., Conway, Dye, Fuld and Froessel, JJ., concur with Desmond, J.; Lewis, J., dissents and votes for affirmance upon the grounds stated in the Per Curiam opinion at the Appellate Division on the motion for reargument.

Order reversed, etc.