313 Mass. 19 | Mass. | 1943
These are appeals from decrees allowing the first and second accounts of William M. Mclnnes as executor of the will of Henry S. Milton. The second account is erroneously described as the second “& final” account, a balance still being shown in schedule B as in the hands of the accountant.
The accounts were referred to an auditor, and it was agreed that his findings of fact should be final. Material facts found by the auditor may be summarized as follows: The testator died on February 28, 1930, leaving an estate consisting solely of personal property, and represented for the most part by shares of stock. The property was appraised at the value of $94,114.24. The testator’s heirs at law were his widow, and his daughter Alice (hereinafter called Mrs. Smith). The latter had five children, Kilby and
The testator gave the residue of his estate to Mrs. Smith, but in trust, to pay to his widow so much of the net income and principal as might be needed for her comfortable support during her life, and upon her death to pay the income to herself (Mrs. Smith). He provided that upon her death the income should be paid to his grandchildren, in equal shares, until the youngest of them reached the age of twenty-one years, at which time the trust fund was to be distributed equally among those living. Provision was made for the issue of any of the grandchildren who might die before that time.
The accountant qualified as executor of the will on March 28, 1930. The “cash assets” of the estate totalled $6,590.77. They were insufficient to pay the debts of the deceased and other obligations arising out of the settlement of the estate. The legacies of shares of stock of the Slade company could not be paid without withdrawing certain of the shares of that company from those pledged as collateral to the trust company. At the request of Mrs. Smith, her son Kilby and her daughter Constance, those legacies were not paid for the time being, and the dividends thereon were applied from time to time in part satisfaction of the notes held by the trust company. Other payments
The auditor also found that certain stocks left by the testator were “improper” investments for trust funds, and annexed to his report a table showing the dealings with these securities. Among them were certain mining stocks. The report discloses that with one or two exceptions where sales were made a year or two after the qualification of the accountant, these improper investments were not disposed of until 1938, or had been lost by nonpayment of assessments. Some were turned over to a trustee later appointed. Others are still in the hands of the accountant. The auditor set forth the inventory value, and the market value of these stocks as of two dates, namely, June 1, 1930, and April 1, 1931. The auditor found, however, that until the death of Mrs. Smith, the accountant had acted throughout in the matter of retaining or selling these securities at the request of Mrs. Smith; that her son Kilby was “as fully informed as his mother with respect to the manner in which the estate was being settled and fully consented to all that . . . [she] and the executor did in respect to it”; that Constance, who lived in New York but who visited her mother frequently, knew the terms of the will, why the estate was being kept open, that her legacy and dividends were withheld for a time, and consented to all her mother did and “considered . . . [her] as her representative in respect to the affairs of the estate and in dealing with the executor.” The auditor found with relation to Anne, Priscilla and Sarah that “there is no evidence that their knowledge went any further than that there was an estate left by-
The accountant made payments of income to the widow of the deceased from April 25, 1930, down to the time of her death on June 30, 1936, in amounts fixed by Mrs. Smith. Thereafter he made payments of income to Mrs. Smith. Mrs. Smith died on March 16, 1938. The legacies of the Slade company stock had been satisfied, together with the dividends that had been declared thereon, except those to Priscilla and Sarah, which were later delivered and otherwise satisfied. The accountant still held unsold the greater part of the securities originally listed in the inventory, including some of those found to be improper investments. Some of these latter investments he sold, others he turned over to Teele, who was appointed trustee under the will on April 12, 1938. Teele immediately sold certain securities which the auditor has held to be improper investments for trust funds at a price which has been taken into account in determining the loss through those investments. Schedule B of the accountant’s second account shows certain property still in his hands and noted as “Held to be turned over to John W. Teele, trustee upon the allowance of this account subject to further expenses.” The items which follow this recital consist of certain shares of stock and a deposit in a trust company. They should have been set forth in schedule C as in the hands of the accountant. Until disposition of the securities listed, which appear to be carried at inventory value, it cannot be determined whether in connection therewith the accountant is to be charged with loss. Any question concerning those investments must await a further accounting.
The appellants contend that it was the duty of the accountant to satisfy the debts of the deceased within the
The appellants also contend that the conduct of the accountant in delaying to satisfy the legacies of the Slade .stock tó them was prejudicial. So far as appears, however, these legacies were ultimately satisfied. The adult persons to whom they were delivered together with the dividends which had been declared thereon are not shown to have demurred. Indeed, the legatee Kilby, after receiving his legacy, sold his shares of the Slade company stock to the accountant for the purposes of the trust estate. Until the appointment of a legal guardian of the minor legatees there was no one to whom the accountant could have made delivery and payment properly. He was under no duty, if indeed he would have had any standing in the lifetime of Mrs. Smith, to seek the appointment of a guardian of the minors. Delivery and payment were made to their legal guardian following his appointment. We see no reason for surcharging the accountant with respect to the legacies in question.
The auditor, at the request of the respondents, appended to his report the evidence upon which he based his findings to the effect that the accountant dealt with the investments left by the testator in accordance with the request of Mrs. Smith, and with the consent of Kilby and Constance, and that the minor children looked upon their mother as their representative with respect to the affairs of the estate. (See Rules 21, 32 of the Probate Court [1934], which are practically identical with Rules 89, 90 of the Superior Court [1932], and note that Spilios v. Papps, 288 Mass. 23, 27, was decided before the adoption by the Probate
The respondents further contend that there was no valid excuse for the delay by the accountant in settling the estate of the deceased, that it was his duty to convert the improper investments into cash within a reasonable time, and that he is chargeable with the loss sustained as a result of his failure to do so. With respect to the respondents Kilby and Constance, in view of what has already been said we think that they cannot be heard to complain. The findings of the auditor demonstrate that each of them being sui juris consented to the conduct of the accountant in retaining the securities in question, with full knowledge of the facts and of his rights. In this respect the case is governed by Preble v. Greenleaf, 180 Mass. 79, and is distinguishable from Bennett v. Pierce, 188 Mass. 186, 189, where the right insisted upon by the petitioner was not in existence when she consented to the account of the trustee. See 2 Scott, Trusts, § 216.3.
We have already pointed out that Anne, Priscilla and Sarah Smith are not barred from asserting their rights by the purported representation of their interests in the trust
It is settled that, when an investment is not such as the court would sustain a trustee in making, it should not be allowed to continue, but should be converted. The rule is the same with respect to property that comes to the trustee from the testator, Lannin v. Buckley, 256 Mass. 78, 84, and where the trustee seeks to be allowed for a loss on an investment, he has the burden of proving that he has exercised reasonable prudence and judgment in making or retaining the investment. Ashley v. Winkley, 209 Mass. 509. Creed v. McAleer, 275 Mass. 353, 362. It is true that in the instant case the accountant was not named as trustee by the testator, that he never was appointed as trustee, and that ordinarily the only duty of an executor is to reduce the personal property of the testator to possession, to pay his debts and costs of administration, to pay legacies, and to close the estate as soon as is reasonably necessary. But it is settled where a trust is created by will, and no trustee is named, that at least the executor may rightly act as trustee until one is appointed by the court. White v. Sawyer, 13 Met. 546, 547. Whiting v. Whiting, 4 Gray, 236, 240. White v. Massachusetts Institute of Technology, 171 Mass. 84, 96. Conant v. St. John, 233 Mass. 547, 551. We think that this also applies where, as here, Mrs. Smith was named by the testator as trustee, but was unwilling to serve and never qualified, and must therefore be taken to have declined the trust, G. L. (Ter. Ed.) c. 205, § 8, and at her request and with the consent of other beneficiaries the accountant administered the trust almost until its termination. In those circumstances the accountant, for the purposes of the case, must be treated as being subject to the same duties to which he would have been subject had he been appointed trustee by the court. This being so he was under a duty to dispose of the improper investments within a reasonable time.
The question of what is a reasonable time is not free from difficulty, that is, in defining precisely in a given case the time beyond which the trustee can no longer retain the
In thus fixing the loss for which the accountant is to be charged we are not setting up any fixed, arbitrary rule to
The respondents have argued that items of the second account showing payment of $1,200 to the accountant for his services and $350 to his counsel for legal services should not have been allowed. While that account covers only the period from November 1, 1938, to April 30, 1939, it appears from an examination of both accounts that the total charges of the accountant for his services covering the period from March 28, 1930, to April 30, 1939, approximated $2,500 or an average of about $300 annually, and that those contained in the first account were stated to be on “account.” The allowance of the items in question rested largely in the discretion of the judge. There is nothing in the record to show that the accountant did not act in good faith throughout, and the auditor has found that the accuracy of his accounts was unquestioned. We think it cannot
It will be simpler to provide for the adjustments made necessary by what we have said by making appropriate directions for modification of the decree entered by the judge allowing the second account. Accordingly, the decree entered upon the second account is to be modified by charging the accountant in schedule A with the loss on securities and interest as hereinbefore set forth, and by providing that the sums so charged shall be denoted as held for the benefit of Anne, Priscilla and Sarah Smith; by striking from schedule B the items recited to be held for transfer to the trustee Teele, subject to future expenses; by charging the accountant in schedule C with those items, together with the amount of loss and interest, just before referred to; and by making appropriate changes in the totals of the schedules of the account. As thus modified the decrees allowing the accounts are affirmed.
Ordered accordingly.