116 Misc. 260 | N.Y. Sur. Ct. | 1921
This claim grows out of a proceeding instituted in this court by John W. Wentworth, the beneficiary of an express trust created by the will of Mary Emma Armstrong, deceased. Henry L. Armstrong was the trustee named in the will. The trust was of a one-fourth interest, subject to the life estate of the testatrix’s mother, in a house and lot in the city of New York. In that proceeding the trustee resisted the application of said Wentworth for an accounting, claiming that there was no trust, for the reason that it had been terminated by the consent of Wentworth. A hearing was held and the trustee established the fact that he had sold the entire property to a Mrs. Wright for $60,000. Mrs. Wright was a sister of Wentworth and of the testatrix. She immediately mortgaged the property for $40,000. Thirty thousand dollars of this was turned over to the trustee out of which he paid a $10,000 mortgage and a $5,000 mortgage. The will charged the trustee with the payment of the $10,000 mortgage that had apparently been placed upon the property for his benefit. The remaining $10,000 of the avails of the mortgage was kept by Mrs. Wright and_ the interest of the beneficiary of the trust was left in the property subject to the $40,000 mortgage, and the trustee contended before the surrogate, the Appellate Division and the Court of Appeals that Mrs. Wright was the person chargeable with the trust fund and that he was not.
In the accounting proceeding it was held that the transfer of the trust estate by the trustee was illegal. It was found that the trust estate amounted to $13,185.75 and the trustee was charged with the income on that sum at the rate of four per cent per annum for three years, six months and twenty days, the length of time that the beneficiary lived after the death of his mother, the life tenant of the whole property.
Since the commencement of the proceeding to compel the accounting, the beneficiary of the trust has died and the proceeding has been continued by his executrix. The trustee has also died and the proceeding was continued in the Court of Appeals by his executor.
The claimants here take the position that what was done by the trustee, and by his attorneys for him, was in the interest of the trust estate. The representative of the beneficiary contends that the action of the trustee was not for the benefit of the trust estate. In other words, the contention of the representative of the beneficiary is that if the trustee had been successful in his contention then there would have been no trust estate. I think this contention is true and it is, therefore, difficult to understand on what theory or ground the claimants here can found their claim for payment out of the income of the trust fund.
The claimants rely on the following authorities for their contention: Matter of Hutchison, 84 Hun, 563; Matter of Hoffman, 136 App. Div. 516; Matter of Title Guarantee & Trust Co., 114 id. 778.
In Matter of Hutchison the claim was founded upon payments made for legal services and disbursements by the executor in an action brought for the construction of the will and codicil of the deceased. In Matter of Hoffman the executor had brought an action against a banking institution to recover a deposit and the claim was'made for disbursements to attorneys, etc., in the prosecution of such action. In Matter of Title Guarantee & Trust Company the claim was for disbursements for counsel fees and expense** in defend
The accounting proceeding is against the trustee personally, and, while his acts have been héld to have been illegal, nevertheless, the contention is made for him in this proceeding that he acted under a misapprehension as to the law, but, nevertheless, in good
Counsel for the claimants also makes a point of the fact that an appeal was taken first by the beneficiary and afterwards by the trustee. The fact remains that both parties appealed. There was nothing to prevent the trustee from obeying the order of the surrogate and accounting to the beneficiary for the sum required.
The trustee’s representative makes the further claim at this time that he was successful before the surrogate in resisting a part of the claim made against the trustee in the compulsory accounting proceeding. It is true that the beneficiary also demanded that his circumstances were, and had since the death of his mother been, such to the knowledge of the trustee that the trustee should have advanced him certain sums out of the principal from time to time as he was authorized to do by the will. In this respect the trustee was defending himself personally for the reason that he took the trust fund on the death of the beneficiary and it was to his personal interest to keep it all, if possible.
If the claim of the claimants were to be allowed at all, the contest being over the illegal transfer of the principal of the trust, the expenses thereof should be charged against the principal and not against the income. The claimants should, therefore, prosecute their claim against Mrs. Wright, who received the trust estate and who they claim agreed to execute the trust and be responsible therefor. A decree may be prepared disallowing claimants ’ claim and settling the account rendered by the executor of the trustee charging him with $1,875.30 and interest thereon from the 30th day of June, 1919, as directed by the order of the surrogate, heretofore entered herein, subject, however, to the payment of the trustee’s commissions, but without costs to either party.
Decreed accordingly.