148 Misc. 510 | N.Y. Sur. Ct. | 1933
Upon the death of the life beneficiary of the two trusts under the will of this testatrix the executor and trustee now accounts for his transactions as such since 1928, leaving nothing but the general legacies outstanding and abiding an agreement as to the settlement of the estate.
One trust was created under the fourth paragraph of the will, whereby testatrix gave to her executor and trustee, in trust, all the Kodak (common) stock she might own at the time of her death, to “ pay the income ” therefrom to her sister for the life of the latter, and upon her death to “ pay the principal ” over to the beneficiary’s two children. These two persons have just become the owners of this particular residue, worth about $90,000, as well as the owners of the general residue of the estate, subject to the payment of the general legacies. The whole estate was taxed at $169,201.
The second trust was on this general residue of the estate, to “ pay the income ” to the same life beneficiary, and on her death to “ pay the principal ” residue to the two persons above mentioned, with certain alternative provisos that now are important only as disclosing in outline the task testatrix imposed on her trustee.
The accounting party is confronted with three objections — that he has no right to commissions on the “ principal ” of the first trust on the common stock of the Kodak company; that a prior decree bars any allowance to him now for his legal services; and that he has no cause of action against the estate of the life tenant for the latter’s defaults. As to the last, the facts are that for some years before her death, the life beneficiary chose to go into actual occupancy of the real estate, instead of receiving the net income therefrom, under the second trust. During the period of her actual occupancy, the beneficiary paid out of her own pocket, as any life tenant ordinarily would, the current taxes thereon, with the exception of the last few levies or installments, amounting to $695.78. For these defaults, it seems to me, her estate is now liable to the executor and trustee (See Keeley v. Clark, 125 Misc. 541); and likewise for a fire insurance premium of $25 that the life tenant should have paid also. The trustee is entitled to protection against any future liability therefor. The
Next, it is urged that no allowance can be made to the trustee herein for such of his service, as a lawyer, as was rendered to the trust estate and in accounting therefor, .on the special ground that he was precluded by an agreement as to his legal services, made in January, 1932, in connection with the entry of a decree of intermediate judicial settlement of this whole estate that came to be entered in July, 1932, after considerable negotiation had resulted in the trust estate loaning the general estate enough cash to finance that proceeding, in order to avoid selling the stock of the American Telegraph and Telephone Company for three years. The account sets out that, above the $500 already paid for probate, etc., there had been paid the balance of $3,535 for “ attorney fees for entire work on estate;” against which $2,000 had been drawn, leaving $1,535 in the special deposit which had been opened to obtain credit for the gross amount on the Federal tax. The final agreement, however, split the $1,535 by allowing only $1,035 to be paid on the entry of the impending decree of July, 1932, and by deferring payment of the $500 until the time of the final accounting. The decree contains a clear order to that effect. The trustee now claims the $4,000 was to pay for his legal service, both as executor and trustee, but only up to and including the then pending settlement ending in the decree of July, 1932. The comparative difference in recollection presents a very difficult problem. I prefer to say that, in the circumstances, the language of the decree should be read to bar the trustee’s claim for legal service on this accounting or to the trust estate.
Lastly, as to commissions — the objectants’ admission that the trustee rightfully retained commissions for paying out the “ income ” received from what the testatrix named the “ principal ” of the trust she initiated on the Kodak common stock — whereas they object only to his having commissions on the “ principal,” as if the accessory did not partake and follow the nature of its principal — seems to increase the confusion, as I see it, besetting the ground on which they seek to deprive the trustee of commissions on the “ principal,” by resort to the rule that there can be no commissions on a “ specific ” legacy. One must ask, then, whether this term should be detached from its context and history, and be applied literally to these facts, so as to require this court to say to the trustee that for all his four years of care and effort with this fund
The testatrix must have known that the responsibility she placed upon her trustee was enormously greater than is that of a mere messenger boy to pick up here a package of trifling value, and forthwith deliver it there to a definite person. This trustee’s responsibility was first to find this stock and obtain possession of it; then of having it taxed and transferred.to the name of the trustee as such; of ever safe-keeping, not merely the stock certificates, but also the “ principal ” or value thereby symbolized, and of preserving that value through the years of suspension; of ascertaining whether it be needed to supply a lack of general assets, at any time; and of deciding whether its preservation called for its conversion, from time to time, in the economic changes likely to occur in the course of the long haul of the lifetime of the beneficiary; and finally, the responsibility of ascertaining who are, in fact, the proper recipients of it; and then of “ paying ” it over to them in the proper proportion, and filing their quittances to relieve his bond, taken in the sum of $170,000.
Trustee service was, for a time, regarded in England as an office of friendship, or neighborly courtesy that one landed gentleman might be expected to render to the bereaved family of another; but their old Chancery practice, not to make any award therefor, was early found to be ill adapted to our new and uncultivated Colonial conditions; and accordingly, it was enacted in our Laws of 1817 (Chap. 251) that it be lawful for our Court of Chancery, in the settlement of the accounts of guardians, executors or administrators (trustees are not mentioned), to make a reasonable allowance to them for their services as such, over and above their expenses, the rate of such allowance to be settled by the chancellor. (See Green v. Sanders, 18 Hun, 308.)
¡ Public opinion thus placed the right to commissions on the basis of quantum meruit; and on that basis it will be found to stand today in every State of the Union. The failure to mention trustees in 1817 reflects the infrequency of trusts in those days, when our wealth lay in land rather than in monetary symbols. The chancellor then proceeded to continue a practice, which he himself had already initiated, of compensating the reasonable value by a percentage method. (Collier v. Munn, 41 N. Y. 143.) Although
The words, “ sums of money,” fell under the literalistic manner of reading that blighted and retarded the betterment of surrogate practice for nearly a century. The same narrow attitude was taken and maintained toward wills and the Statute of Wills. The surrogate in 1829 was little more than a conservator and auditor; and the disposition was to keep him so, rather than enlarge his powers. So, the enacting and the construing of laws touching him, through the last century were characterized by this retarding narrowness, down almost to the recent burst into the efficiency of modern equity powers in this field. While that legalistic spirit held sway, it is not surprising to read of the court solemnly declaring that perfectly good “ bonds ” were not “ money.” (Hall v. Tryon, 1 Dem. 296.) In that case an executor was denied recompense for receiving and delivering unsold bonds; for the reason that they had to be delivered “ as bonds,” and not “ as money; ” yet the court there also ruled the executor could have commissions on the interest he had collected on those same bonds; and the court also concedes the rule to be that he could have had commissions on the value of the bonds themselves had the general legatees agreed to take them over as cash. (See, also, Matter of Brewis, 165 N. Y. Supp. 1066.) Apparently, the “ bonds,” for commission purposes, were but scraps of paper; and so it came to pass that any specific thing, other than “ money ” in the narrowest sense of this word, was not to be considered as a basis for computing commissions; and such was the rule down until the revisers in 1914, by repealing this limitation to “ money,” destroyed the foundation on which
“ On general principles, it would seem just and proper for all such (Orphans) courts to make some compensation to executors for such services as paying over legacies, no less than for paying debts. In the case of specific legacies, the trouble and risk are as great, if not greater, than in moneyed legacies; and it would be difficult- to find elementary principles to justify commissions in one case and withhold them in the other.”
Our highest State court, however, ten years later, felt constrained to cleave to the letter of the law when it ruled tersely in Schenck v. Dart (22 N. Y. 420) that although shares of stock, specifically bequeathed, had been actually transferred and delivered specifically to the legatees, by the executors, “ we think the statute does not justify a commission in such cases (2 R. S. 93, § 58).” Nothing further was said by the Court of Appeals on the specific subject then; nor since, so far as I know.
I The literalistic spirit overcarried so far as to deny commissions, in the case of a specific legacy, even where the specific legatee had requested the executor to sell the article and turn the proceeds . over to him, which the executor did. (Farquharson v. Nugent, 6 Dem. 296.) The books abound in like cases — but in none was a trustee’s right to commissions involved — and the ruling of the foregoing cases was repeated, without discussion, and as one might say, automatically. As late as 1918 it was held the surrogate has no power to allow an executor commissions on stock specifically bequeathed, even though he has rendered services on it which are reasonably worth the amount of commissions (Matter of Evans, 104 Misc. 641); and a like ruling was made later in Matter of Anable (139 Misc. 914). In Matter of Whipple ([1903] 81 App. Div. 589), in applying the rule that stocks and bonds are not “ money,” the court admits that stocks, bonds and other securities are usually regarded in the business world as practically the equivalent of money.
In striking contrast to those rulings are the contemporaneous decisions that the legatee, by making such requests on the executor,
As regards a trustee, the same can be said today. He may find in testator’s list, aside from some “ cats and dogs,” several blocks of stock specifically mentioned; and may have greater trouble in managing them during the lifetime of the beneficiary.
The inequity of asking an executor to do all such work for nothing finally began to break down the former rigid rule. First, where the will worked an equitable conversion of real estate, the executor was given commissions on value thereof, actually handled; and later cases allow a commission in such cases where legatees intervened and changed his course. (See Oberg Case, supra.) Other cases tend to limit the term “ specific legacy ” to its original connotation of a gift of a keepsake, entailing little or no duty on the
When a great burden was entailed by specific mention of property, the equity of rewarding the representative became a dominating factor in the decisions. In the Fisher Case (93 App. Div. 186) testatrix bequeathed “ the contents that shall be in my box in the Safe Deposit Co., of N. Y., now situate at 146 Broadway, N. Y., corner of Liberty St., in said city, at the time of my decease, to the following persons and in the following proportions.” Eleven persons were then named to take in unequal fractions, the stocks and bonds, appraised at $101,058.23, contained in the box. This bequest was held to require the conversion of the contents into money before a distribution could be made; and the court said that had the executor refused to make sale of this property and distribute the proceeds as requested, he could have been compelled to perform the same; and for the performance of an executorial act he was entitled to commissions. A case occurred in Monroe county where the will merely devised one particular house and lot to one named legatee and likewise another place to a second; but the draftsman, , as usual, forgot to look ahead to this matter of commissions.. To ' have title conveyed to a third person, these legatees finally agreed to pay the executor and trustee commissions thereon if he would qualify as such and pass the title.
In Matter of Grosvenor (105 Misc. 344) there was a bequest to two sisters equally of all the furniture, and other specified articles, “and all other personal effects in said house,” to be divided in kind, upon appraisal by the executors; and where each legatee desired the same article, the executors could permit them to draw therefor, and make such adjustment as might become necessary as the result of such drawing. Surrogate Fowler there said: “ the executors were directed to perform certain executorial func
In Matter of Brooks ([1922] 119 Misc. 738) there was a bequest of a similar miscellany, equally to such children as survived, and the court, citing Matter of Fisher (93 App. Div. 186), said: “ the bequest is specific as to the property bequeathed but it was not specific as to the particular property to be delivered to a particular legatee, * * * The division of the property, and its probable sale to effect an equal partition, required the performance of duties by the executors, and they should be allowed commissions on the value of the items so bequeathed.”
“ Value,” as a basis of commissions, found its way into the statute after Judge Gray had suggested it as a better term than the word “ principal,” which was the first statutory step away from the phrase “ sums of money ” in this matter. When the Legislature amended section 3320 of . the Code of Civil Procedure, the judge said that “ a trustee became * * * entitled to commissions for receiving and paying out all sums of principal, * * *
“ They were to be no longer fixed by analogy to the rule in the case of an executor, and based upon all sums of money received and paid out. The change in phraseology was too deliberate to be disregarded and something different from the existing- rule must have been intended. * * *
“ Evidently, the Legislature, recognizing the ambiguity in the Code provisions with reference to trustees, intended to establish by the amendment, somewhat inartifically expressed, a rule, which, as I construe it, gives to trustees the right to commissions, in such a case, upon the value of the securities, both for receiving them and paying them over.” (Robertson v. de Brulatour, [1907] 188 N. Y. 301, 318.)
Accordingly, in the proposed draft for the 1914 revision, the “ value of any real or personal property ” was added to “ sums of money ” as a basis for all representatives, including trustees; but the value was therein limited to such as was “ distributed without sale, at the election of a devisee, legatee or distributee, or pursuant to a consent duly filed.” A note was added that this was to “ give commissions on property turned over in kind, to avoid a sacrifice, etc., when consent is filed. See new §§ 2684, 2736.” This new matter ended with the statement: “ But this shall not apply in case of a specific legacy or devise.” See Report of Commission to Revise the Practice and Procedure in Surrogate’s Courts, Senate Document No. 23 [1914; § 2753] p. 283).
Two years later the Legislature amended (Laws of 1916, chap.
However, there is no doubt in my mind that the term “ specific legacy ” cannot properly be applied to the legacy in trust made by the fourth paragraph of the will now in question. This specifies only the initial existing form of the investment, which it then consistently and repeatedly calls “ principal; ” and it omits any indication that the testatrix meant that this fund was to retain forever its initial specific form,-for delivery in kind to the variously i classified remaindermen; but rather this paragraph indicates, not only by the word “ principal ” but also by the word “ trust,” with all its necessary implications, that the legacy was liable to be converted, for its own preservation, into some other than its initial form; and this paragraph embodies a' far greater responsibility than does the ordinary keepsake gift, so that the testatrix could not have intended such valuable effort should go without its reward. Her intention, at the date of the will, in all the possibilities it outlines, is the factor that governs such matters. (73 A. L. R. 1228,1252.) I repeat, no case has been found in which commissions were denied a trustee on such a trust as is this; but on the contrary, while the “ specific ” feature of the legacy in Robertson v. de Brulatour (188 N. Y. 301) was not therein emphasized, the legacy there given in trust was as “ specific ” as is the one now in question — that is, in part only. There, a list of specifically described securities is given, in trust, to pay income to widow for life, with remainder over. The will also mentioned, not only the number of shares and the companies, but it included the provision they were to carry into the trust also all the interest accrued thereon “ at the
In Matter of Anable (139 Misc. 914) the gift was specifically to the trustee as such; and as the executor had nothing whatever to do with the subject-matter of it, he could not have executorial commissions on the value of it. This case says nothing as to the trustee’s right to trustee commissions.
In the Terwilliger Case (142 Misc. 249) also only executorial commissions were passed on. Testatrix there had only a power of appointment under her husband’s will; and the property subject thereto, with her own added, was given by her will to her executors in trust to pay over forthwith to three persons named. In so far as the appointed property was concerned, the trust was dry or passive, and vested no trust title in the executors; and did not entitle them to commissions, any more than they would be on a gift of a specific portion of a specific whole.
As to the third objection, therefore, I cannot find any ground, in case law or in statute, for denying this trustee commissions on the “ principal ” of this trust under the fourth paragraph of this will, notwithstanding the outcome happens to be that the “ principal ” still remains in the identical form of investment it had at the death of testatrix. The matter must be judged from her point of view then, rather than from our own today.
Enter the decree in accord with this decision, after settlement of its form on two days’ notice, or on stipulation.