53 N.Y.S. 172 | N.Y. App. Div. | 1898
Lead Opinion
Certain considerations concerning the trust created by the 4th clause of the codicil of Daniel Devlin are practically undisputed, and may be stated at the outset to simplify the discussion. The trust was legal in its duration. It was to last only during the lives of William and Jeremiah Devlin. The power of disposition of the income does not enlarge the trust term. This power of disposition existed only during the joint, lives of William and Jeremiah, and the testator’s widow, Bridget Devlin. Hence, as soon as either of the brothers died, this latter power ceased, and when the death of the other followed the trust terminated. The phrase “ during the joint lives of my said wife, brothers Jeremiah and William,” cpialifies each of the preceding clauses, limiting the power to pay the beneficiaries, as well as into the body of the estate. This is the natural construction. Otherwise, we should have two powers, one carefully limited as to time, and the other left wholly indefinite in this respect. There is apparently no reason for any such distinction. That it was not intended is shown by the wording of this part of the clause and of that which follows. The power to dispose of the income is given to the trustees jointly, to be exercised to such extent “ as may seem proper to them.” It was a discretionary power, and the testator evidently meant to secure the exercise of the judgment of both of his trustees. When he intended that one of them alone might act, he expressly so stated. The latter part of the clause contains two distinct powers with reference to the principal of the fund, one of which is conferred upon “ the survivor of the said trustees,” and the other upon “ said trustees and the survivor of them.”
The first serious question relates to the proper disposition of the income of the trust fund, namely, the $101,000 paid by the trustees to the executors prior to May, 1888. This disposition was evidently made in execution of the power to pay income “ into the body of my estate.” There is a dispute as to the meaning of these words
The proper disposition of the money by the executors also seems clear. They were to apply it in fulfillment of the purposes of their trust. The specific legacies had all been paid, and the money consequently went to the residuary legatees. But it did not form part of the residuary estate as that was at first constituted. If so, two-sixths of it would again find its way into the trust, from which it had just been sent. This would evidently have been contrary to the testator’s intention. In such a case it would be the duty of the trustees to again pay this portion of the income to the executors; part of it would again come to them, and this process of payment and repayment would continue indefinitely. What the testator meant was that the money should form a portion of that part of his residuary estate not, included within the trust. The residuary estate, as at first, constituted, was composed of two parts — the trust fund and the remainder; and this remainder the testator calls the “ body of my estate.” This construction not only, as we think, gives to the testator’s words their natural significance, but also prevents, either in whole or in part, an illegal accumulation of the income of the trust fund.
The rule that the residue of a residue does not pass to the residuary legatees, but devolves as undisposed of, has no application. That rule applies only where the provision has lapsed. In such a
It has been argued that there was no general “ body of the estate ” in the hands of the executors at the time when the trustees were directed to make this payment. This argument rests upon the theory that the executors had already divided the residue of the estate into six equal parts, as provided by the will; and that the testator meant the residuary beneficiaries to take these shares as thus constituted — no more and no less. It is true that he did direct the executors to make the division and distribute the shares; but no reason is apparent why he should not, by subsequent words, qualify these provisions by increasing the first four shares. It does not appear that the testator meant this initial division to be final and absolute. There is nothing so unusual about a subsequent increase of the shares as to justify putting a forced and unnatural construction upon the words “ body of my estate.” Furthermore, it is clear from the will that the testator contemplated, when this was made, at least, that the amount "of the first four shares of the residuary estate might be increased, for he directed that in certain contingencies one-half of the remaining two-sixths should “ fall back and become part and parcel of the residue of my estate.” Thus, as to Jeremiah Crolly, he provides in the 11th clause of his will as follows: “But in case my said nephew Jeremiah should die without having become entitled as aforesaid to the payment or transfer to him of said one undivided twelfth part, then, upon his death, I direct the same to be transferred to his children then living, and to the issue of such as may be dead, per stirpes and not per capita ; and in case he should leave no children or issue thereof, then the same shell fell back and become part and parcel of the residxce of my estate.” So, as to James Crolly, we find the following provision in the 12th clause: “But in case my said nephew James should die without having become entitled as aforesaid to the payment or transfer of said undivided twelfth part, then, upon his death, I direct the same to be transferred to his children then living
Thus the court below rightly decreed that Jeremiah Doherty was, and the plaintiff is, entitled to the unpaid balance of the $101,000 paid over by the trustees to the executors. Prior payment of this sum was properly decreed out of any funds in the hands of Daniel Devlin’s executrix, or which are payable to her under the terms of the judgment. No accounting wras necessary as a preliminary to this decree. There are no creditors of the Daniel Devlin estate; and the rights of creditors of Jeremiah Devlin’s estate are fully protected by the judgment, which directs an accounting, payment to a receiver of such part of the debt of that estate as it may be able to pay, and distribution by the receiver in accordance with the judgment.
The next question relates to that portion of the income which the trustees did not pay either to the executors or to the beneficiaries named in the 4th clause of the codicil.
It is urged that payment by the trustees to the executors was, at least, discretionary, and cannot be enforced. We think not. The clause provides that the trustees shall “ apply so much if any of the income and dividends to the use of * * * therefrom — from time to time, and in such sums as may seem' proper to them (the beneficiaries) — or to pay such income or dividends or such part as they may see fit into the body of my estate,” etc. There was clearly a discretion vested in the trustees as to the amount to
We thus agree with the learned court below as to the disposition of the income accruing up to July 27, 1892, the date of William Devlin’s death. We have readied a different conclusion, however, with reference to that accruing between this date and August 11, 1893, when Jeremiah Devlin died. On July 27, 1892, the power to dispose of the income of the trust fund ceased. After that date neither the beneficiaries nor the executors were entitled to any of it, and it remained undisposed of. It consequently belonged, under the statute (1 R. S. 726, § 40; Id. 773, § 2) “ to the persons presumptively entitled to the next eventual estate.” We cannot agree with the learned counsel for the plaintiff that these persons
It follows that those relatives of Daniel Devlin, comprised within the class of his next of kin, obtained a vested interest in the principal of the trust fund under the power in the 4th clause of his codicil, subject only to be diminished or defeated by a different appointment by Jeremiah .Devlin; consequently these relatives were entitled to the next eventual estate and the undisposed of income belongs to them. They take per capita not per stirpes (Dominick v. Sayre, supra, 571), and those who comprise the class at the time the income accrues are entitled to it. (Kilpatrick v. Johnson, supra, 326, 327.) In this case the income which was illegally accumulated was given to the children of certain of the testator’s daughters upon the death of the latter. Denio, J., said : “ I am of opinion that they take the whole of the interest upon their mother’s shares during the time they continue to be thus presumptively entitled. As to the children born subsequent to the testator’s death and those yet to be born they are to come in and share in the income which may accrue after they become presumptively entitled to a share of the next eventual estate in the principal of the fund.”
We think the court below rightly disposed of the proceeds of the sale of the water lots. These were two lots upon which the trustees originally held two of the Phillips mortgages, aggregating about $25,000. In 1885 the mortgages were foreclosed and the trustees bought in the property. In 1893 Jeremiah Devlin, as surviving trustee, sold it to the defendant Felix for a sum less than the principal and interest of the original mortgages. The judgment directs that the proceeds of sale be apportioned between the principal and income of the trust fund in the ratio which the aggregate principal" of the mortgages bears to the whole unpaid interest. This was correct. The land represented the original investment in the mortgages, and its proceeds should be distributed in the same manner as though the mortgages were being foreclosed for the first time for the amount of the purchase price. It is well settled that where the interest upon mortgages is unpaid, and the premises are eventually sold, the sum received should be ratably apportioned between
The next questions relate to the rights of the William Devlin estate with regard to certain mortgages assigned to Jeremiah Devlin as its executor. The O’Connor mortgage, for $7,560, may be first considered. This was executed by Thomas II. O’Connor in 1872, and became part of the trust fund in 1886. In 1893 Jeremiah Devlin, as surviving trustee of Daniel Devlin, assigned it to McAndrew. lie reassigned it to Jeremiah, as executor of William Devlin, who thereupon abstracted from the assets of William Devlin's estate a sum equal to the principal of the mortgage. At the time of such assignment interest was due from March, 1887. Subsequently to 1872, Angela M. Devlin, wife of Jeremiah, who had become the owner of the property, executed, with her husband, two other mortgages thereupon, which were acquired by the trustees, and were, in 1893, assigned by Jeremiah Devlin as surviving trustee, to McAndrew and by him satisfied. At the time McAndrew executed such assignment and satisfactions the interest on the mortgages was largely in arrears. The court has held that McAndrew did not acquire, by the assignments to him, any title to the unpaid interest on these mortgages; and that such interest remains a lien upon the premises superior to the lien of the O’Connor mortgage held by the William Devlin estate. That estate, on the other hand, claims to be a bona fide purchaser of the O’Connor mortgage for value, and to have a first lien upon the premises.
Jeremiah Devlin, as surviving trustee, could not convey the interest to McAndrew in execution of the power contained in the 4th clause of the codicil. But he had the same power to sell this mortgage as to deal with any of the other assets of the estate, and any one purchasing for value from McAndrew, without knowledge of the facts, would get good title. The William Devlin estate claims to be such a purchaser, and we are inclined .to think that the contention is well founded. It undoubtedly paid value, for Jeremiah Devlin, as its executor, withdrew the amount of the purchase price from the funds of the estate. It is difficult to see how any knowledge is imputable to the estate which will impeach its title. Jere
The same considerations apply to the Eidgeway mortgage for $4,000. The pi^erty which it covered was originally owned by Phillips, who mortgaged it to the Daniel Devlin executors. The trustees acquired this mortgage, foreclosed it and bought in the property. Jeremiah Devlin, as surviving trustee, conveyed it to Eidgeway, taking back a purchase-money mortgage, the one in question. This he assigned to McAndrew in 1893, who reassigned it to him as executor of William Devlin. For the reasons stated the William Devlin estate should be held to have good title to this mortgage to its full extent.
The ruling with reference to the two Shaw mortgages is also assailed. The premises which they cover were originally owned by O’Connor, who mortgaged them in 1872 to Daniel Devlin’s executors for $6,720. This mortgage became part of 'the trust fund in 1886. After its execution Angela M. Devlin became the owner of the property, and she and her husband Jeremiah executed two mort
We think, however, that the provisions of the judgment in this regard should be modified. The purchase price of the premises represented both the interest and principal of the original mortgages— the one as much as the other. It was consequently erroneous to order prior payment of the interest. There should have been an apportionment between principal and interest, as in the casé of the water lots. And it was the whole purchase price received by Mrs. Devlin, and not merely the mortgages, which thus stood for principal and interest. The amount thus received should be ratably apportioned between the principal and unpaid interest of the old mortgages. The amount due to interest should be thus determined and deducted out of the proceeds of the purchase-money mortgages.
The principal remaining question relates to the correctness of the ruling that William Devlin’s estate is not liable for the mismanagement of the trust fund. We are unable to agree with the learned court below upon this point. The rule regarding the liability of executors and administrators, which is also applicable to trustees (Ormiston v. Olcott, 84 N. Y. 339) was thus stated in Nanz v. Oakley (120 id. 84, 89): “ One joint executor or administrator is not liable for the assets which come into the hands of the other, nor for the laches, waste, devastavit or mismanagement of his co-executor or co-administrator, unless he consents to or joins in an act resulting in loss to the estate, in which event he will become liable. In other words, co-executors and co-administrators may act either separately or in conjunction. They are jointly responsible for joint acts, and each is separately answerable for his separate acts and defaults.” Plainly, William Devlin and his estate cannot be absolved under such a rule. One fact alone would preclude such a result. It appears, and the court has found, that the original loan to Devlin & Co. was made with his knowledge. If he had this knowledge, he could certainly have prevented the loan, and is just as much liable for consenting to it as though he had been active in procuring it. And this loan was the principal breach of trust, which caused most, if not all, of the subsequent questionable transactions. It also appears that William Devlin participated, to a very considerable extent, in
The cases cited in opposition to this conclusion (Ormiston v. Olcott and Nanz v. Oakley, supra) differ very materially in their facts, as the trustee in those cases did not receive any of the trust estate, and held quite aloof from its affairs.
We think the judgment should be modified by striking out the provision requiring the executors of Jeremiah Devlin to pay into court the amount of the preliminary deposit made by Felix on the purchase of the water lots. No reason appears why this claim stands on a different footing from any other debt due by the estate, or should, in case of insolvency, receive a preference. The judgment contains proper general provisions for the liquidation of the debt of the estate of Jeremiah Devlin, and no exception should be made with regard to this item.
We also think the judgment should not have decreed the liability of Jeremiah Devlin’s estate for his failure to collect interest on the Phillips mortgages. Whether this interest, or all of it, was collectible, or whether it was prudent and justifiable for the trustees to withhold foreclosure as long as they did, were proper questions for the accounting.
We have examined all the other points raised, but do not think the judgment requires correction in any of the particulars specified.
The judgment should be modified as indicated in this opinion,
Ingraham and McLaughlin, JJ., concurred ; Van Brunt, P. J., and Bumsey, J., dissented in part.
Concurrence Opinion
I concur with Mr. Justice Barrett that by the terms of the 4tli clause of the second codicil it was the duty of the trustees to pay over all the income which they had not appropriated to the beneficiaries under the trust created by that codicil to the body of the estate, and I agree with him that the direction thus to pay it over required that it should be paid to the executors under the will.
But I do not agree with the conclusion which he reached that this fund thus paid to the executors became again a portion of the residuary estate from which it had been originally taken, and should be divided among the residuary legatees other than the trustees to whom two-sixths of the estate was given by the 4th clause of the second codicil. The testator gave several very large legacies by his will. After those were paid there was left a considerable residue of his estate. This he undertook to dispose of by the 7th clause of his will which commences, “ All the rest, residue and remainder of my estate, both real and personal, I direct to be divided into six equal parts.” There is no provision anywhere in the will for a division of the residuary estate or any portion of it into less than six parts. Whatever the executors had as residuum was to be divided into six parts by the express terms of the will and they had no more right to divide it into four parts and give it to four persons among the residuary legatees, than they had to refuse to divide it at all. It made no difference, clearly, for the purposes of the will as to funds to which they were originally entitled, whether they were divided all at one time or from time to time as they came into the possession of the executors. In either case, if they constituted a portion of the residuary estate, -the testator positively directed what should be done with them and that was to divide them into six parts and to dispose of the parts as he directed in his will. It is very true that the presumption is that he did not intend to die intestate as to any portion of his estate, and such is the presumption in every case where a testator disposes by a residuary clause of all property
In all other respects than this I concur with the judgment of Mr. Justice Barrett.
Van Brunt, P. J., concurred.
Judgment modified as indicated in opinion of Barrett, J., and as so modified affirmed, without costs.