186 Misc. 857 | N.Y. Sur. Ct. | 1945
This proceeding was brought for the judicial settlement of the intermediate account of the executor. Questions as to the construction of the will are also presented. Further issues have been raised by the very numerous objections filed to the account.
The first question of construction set forth in the petition of the executor relates to the scope of the authority of the directors of the Maranwood Corporation. It is a personal holding corporation which was formed by the testatrix for the purpose of buying, selling and trading in stocks and bonds. Just prior to her death she owned all of the superior class of the stock, having exclusive voting power and preference as to dividends. Other stock, with subordinate rights to participate in profits, was and is owned by members of her family. The executor has retained all the stock left by the testatrix. The corporation holds common and preferred stocks and bonds worth several hundreds of thousands of dollars. In general they do not come within the class of investments which are legal for fiduciaries.
The petition requests an answer to the question: “ Can further investments be made by Maranwood Corporation in nonlegal securities? ” That question is answered “ yes ”. In article third of the will the executor and trustees were generally
Necessarily within a brief time and perhaps after the executor completes the final administration of the estate, the trustees will take over the stock of this corporation. Responsibility is cast upon them to administer its affairs under the rules of prudence and vigilance stated in King v. Talbot (40 N. Y. 76). The present situation whereby the life tenants of the residuary trusts, none of whom is a trustee under the will, are the only members of the board of directore should be corrected. The public policy of our State in testamentary trusts is aimed at the avoidance of placing the selection of investments upon life beneficiaries because of the temptation to obtain a high yield of income at the risk of the impairment of the security of capital. (Greene v. Greene, 125 N. Y. 506; Woodbridge v. Boches, 170 N. Y. 596; Weeks v. Frankel, 197 N. Y. 304; Matter of Connolly, 158 Misc. 93; Matter of Riggs, 158 Misc. 95.) By that rule the rights of remaindermen are intended to be safeguarded.
A second question with two subdivisions is further presented for answers in the seventh paragraph of the petition. They read: “ If Maranwood Corporation is liquidated then (a) Can any non-legal securities constituting the assets of Maranwood Corporation be retained by the estate? (b) Must the proceeds of sales of the assets of Maranwood Corporation be invested in legal securities? ”
More specifically expressed these questions relate only to securities distributed in kind by the corporation, as a result of a partial or complete liquidation. These questions need not be answered at the present time because they are academic. The executor and trustees state that they intend to continue the Maranwood Corporation. No present plan for its liquidation is contemplated. No distribution of its securities has been made in ldnd to the estate as a stockholder. If and when a partial or total distribution of assets in kind is made, these questions may be raised in an appropriate proceeding for instructions to the executor or trustees, or in a proceeding for the construction of the will, or in a subsequent accounting proceeding of the executor or trustees.
A further question of the construction of article second, subdivision (F), of the will has been presented by the claim of Mary Woodin Miner, a daughter of the testatrix and a life tenant of one fourth of the residuary trust. The provisions of this subdivision of the will vest discretion in the trustees to supplement the income of a beneficiary in any year by paying over under certain tests a sum not exceeding $10,000 from principal. Mrs. Miner in her claim asserts that she incurred expenses in the year 1942 amounting to .the sum of $9,579.20 for which she should be reimbursed by the trustees out of principal of the trust held for her benefit. Many of the items of her claim do not come within the language.of the will which authorized invasion: “ If by reason of accident, sickness, marriage of a
Where the will vests discretion in a fiduciary, the courts will not interfere with the exercise of such discretion. (Matter of Hayden, supra; Matter of Littman, 165 Misc. 285; Ireland v. Ireland, 84 N. Y. 321; Hamilton v. Drogo, 241 N. Y. 401, 404; Bloodgood v. Lewis, 209 N. Y. 95; Matter of Sand v. Beach, 270 N. Y. 281; Matter of Hilton, 174 App. Div. 193; Matter of Shea, 234 App. Div. 176; Matter of Cowen, 148 Misc. 35.) Where bad faith, abuse of discretion, arbitrary action or fraud is shown, judicial action may be exercised. (Matter of Hayden, supra; Matter of Martin, 269 N. Y. 305; Matter of Flood, 127 Misc. 797, affd. 216 App. Div. 711, affd. 243 N. Y. 598; Rezzemni v. Brooks, 236 N. Y. 184; Matter of Gatehouse, 149 Misc. 648.) None of these grounds exists here.
There are two items of Mrs. Miner’s claim, however, which come within the terms of the will as emergency expenditures: one in the sum of $150.27, the other is an item of $450, or a total of $600.27. In accordance with the consent of the fiduciaries this total may be paid to Mrs. Miner out of the principal of her part of the trust. Her claim is allowed to that extent only. The remaining items are disallowed.
(Other directions included in the original decision of the Surrogate omitted because of their subordinate importance.)