86 P.2d 707 | Wyo. | 1939
This is an action for a declaratory judgment, arising under the will of John E. Higgins, who died on June 24, 1926, and whose will, evidently written by himself, a layman, is as follows:
"June 30, 1924
I hereby will and bequeath to the State of Wyoming all of my property both personal and real.
From the income I want the following relatives to be beneficiaries:
Frederick W. Higgins, Denver, Colorado, nephew, One thousand (1,000.00) dollars per year.
Ann Devine, Milwaukee, Wis., daughter of my deceased sister, Lizzie Higgins Devine, and her nephew, Harry Devine, Jr., Two thousand ($2,000.00) dollars per year. When Ann Devine dies, $1,000.00 of the above reverts to the estate, should Harry Devine die or lead a discreditable life the remaining thousand dollars shall revert to the estate.
To Vivian Higgins, Carol Higgins, and Lucille Higgins, children of my brother James, deceased, One thousand ($1,000.00) dollars per year each, and to Eloise Amoretti, daughter of Eugene and Ella Amoretti of Lander, Wyoming, One thousand ($1000.00) dollars per year.
The above and all other property real and personal to belong to the State.
It is my wish that the State create a trust whose life shall be not less than 50 years, for the administering of this property, at the end of the 50 years to distribute the property to the best interests of the State, or to hold it intact as the best judgment of the proper authorities of the State may dictate.
JOHN E. HIGGINS." *17
The probate of the will was contested. By Chapter 104, Session Laws of 1927, (amended in 1931), the Legislature created a Board of Wills and Trusts, composed of the Governor, the Attorney General, and the Superintendent of Public Instruction, authorizing the Board to compromise and settle contests in connection with grants or gifts to the State of Wyoming. Pursuant to this power, agreements were entered into in March and April, 1928, which resulted in the withdrawal of the contests above mentioned and the settlement by payment of lump sums in the satisfaction of all annuities mentioned in the foregoing will except that due Harry Devine, Jr. These agreements were approved by the court and the will was admitted to probate in May, 1928. The estate was thereafter duly administered and distributed. By the decree of distribution, made November 7, 1929, it was provided:
"That Harry Devine, Jr., one of the legatees named in the will of said testator, be and he is hereby awarded the sum of $1000 per year for the period of fifty years from the death of said testator, with the understanding, however, that said annuities shall cease upon the death of said legatee, and it is also hereby decreed that said annuity shall cease if the said legatee shall at any time during said period lead a discreditable life, which annuity shall be paid by the State of Wyoming to said legatee during said period of time, all in accordance with the testator's wishes as set forth in his last will."
The decree then provides that the whole of the testator's estate is "vested by full and absolute title in the State of Wyoming."
Thereafter, by Chapter 157, Session Laws of 1929, the legislature provided for the Higgins Memorial Foundation, giving to that foundation the property belonging to the estate of John E. Higgins, and to be administered by the Board of Trustees of the University of the State of Wyoming. Thereafter the State, on the relation of the Attorney General, W.O. Wilson, *18
brought an action against the Board of Trustees of the University to determine the status of the property acquired by the State under the foregoing will, and contesting the validity of the law providing for the Higgins Memorial Foundation. The law was declared unconstitutional by the trial court. The case was appealed to this court. Bond, et al ., v. State ex rel. Wilson,
"We cannot agree that the property belongs to the common school fund, but hold that, until the annuity as a charge upon the property is satisfied, the State should administer the property, or its proceeds, and income as a trust fund to be appropriated and applied to the payment of the annuity. We do not think we need decide what state officers or agents have the present right or duty to manage and control the property for the State. The defendants' asserted right in that regard is, of course, denied. No one else questions the right of those now in control. We may assume that the legislature in view of this decision, will provide for the proper administration and application of the property as a trust fund either by state officers whose duties may be defined by law, or by some one who shall act under authority and direction of the proper court. In the absence of legislative action on the subject, it may be necessary for the executive officers in possession of the property to invoke the action of the courts for the purpose of executing the trust."
Pursuant to the order of this court, the district court entered a modified judgment in the foregoing case, on December 30, 1932, providing therein in part as follows:
"It is further ordered, adjudged and decreed that said property, real and personal, as belonging to and *19 constituting a part of the Estate of John E. Higgins, deceased, and the income therefrom, be and the same is hereby declared to be a trust fund subject to the payment of the Harry Devine Jr., annuity, and to be administered as such by the State of Wyoming under and by authority and direction of this Court; that said trust fund to be established, administered and maintained, first, for the purpose of paying, according to the terms of the will of said John E. Higgins, deceased, the annuity in the sum of One Thousand Dollars ($1,000.00) per year for a period during the natural life of Harry Devine Jr., and should he live so long not to exceed a period of fifty (50) years from the date of the death of said John E. Higgins, and to terminate at any time during the life of Harry Devine, Jr., if he shall lead a discreditable life.
"It is further ordered, adjudged and decreed that the assets of said estate, consisting of both real and personal property, for the purpose of dedicating the property of said estate to the payment of said annuity, shall be in the custody of this Court and shall be administered, handled, used and managed by some one designated to act under authority of this Court for said purpose; and that said property shall remain under such supervision, jurisdiction and management until said Harry Devine, Jr., shall have reached his majority, or so long as may be necessary to fully discharge the obligation to the said Harry Devine, Jr., according to the terms of said Will, and until a proper final disposition of the remainder of said estate has been determined by authoritative legislation for that purpose."
On January 7, 1933, the court, again reciting the foregoing action, and the order of this court, and the annuities due Harry Devine, Jr., appointed J.C. Underwood as Trustee "with authority to possess, control and manage all of the property of said estate and on specific orders of this court to be entered from time to time to liquidate said properties and convert the same into cash funds under the orders of and subject to the approval of this court." The trustee was required to give a bond, and he soon thereafter qualified *20 in accordance with the order of the court and has managed the property ever since that time. Prior to that appointment it seems that the property had been managed by the land commissioner of this state.
The instant action is, as before stated, an action for a declaratory judgment. The State of Wyoming is plaintiff, and it is brought by the Attorney General of this state. J.C. Underwood, Trustee, Harry Devine, Jr., and the County of Converse, and the Town of Glenrock are defendants in the action. The petition recites many of the statements heretofore made, mentions the property of the trust, consisting mostly of real property and partially of personal property, sets forth the fact that the expenses of administering the trust are large, that large sums of taxes are due, as well as installments on certificates of purchase of some land, and that, in order to preserve the estate it is necessary that the property of the estate should be sold and converted into securities which bring a definite income per annum; that it also may be necessary to mortgage some of the property of the estate for the purpose of preserving it; that the title of the property is disputed, making it uncertain as to who should sell and convey it; that it is accordingly necessary that the rights, powers, status, duties and other legal relations of the parties to this suit be determined, and the petition asks that the court determine the following:
1. Has the defendant, J.C. Underwood, Trustee of the John E. Higgins Estate Trust, power and authority, under the supervision and direction of the Court having jurisdiction of said Trust, or otherwise, to borrow money and to pledge the property of said estate by mortgage or otherwise as security therefor to provide funds necessary for the payment of taxes, legacy or other obligations of said estate when necessary for the preservation thereof?
2. Has the defendant, J.C. Underwood, Trustee of the John E. Higgins Estate Trust, power and authority, *21 under the supervision and direction of the Court having jurisdiction of said Trust, or otherwise, to sell and convey, passing good title thereto to the purchaser, of any part of the property belonging to said estate, for the purpose of raising funds for said estate to pay taxes, legacy and other expenses of said estate when necessary for the preservation thereof?
3. Is it the legal duty of said Trustee, under the provisions of said Will, to pay Harry Devine, Jr., the legacy of $1,000.00 per annum for the time specified in the Will out of the corpus and earnings of said estate, when the earnings of said estate remaining after payment of taxes and current expenses are insufficient therefor, or is said Trustee legally required to pay said legacy only out of the earnings after taxes lawfully assessed and all legal current expenses have been paid?
4. In case the Court holds that said Trustee may lawfully mortgage or pledge the property of said estate to secure a loan as aforesaid, is said legacy of $1,000.00 per annum payable to said Harry Devine, Jr., under the provisions of said Will, a prior charge against the corpus of said estate, and is it superior to the lien of said mortgage, or is such mortgage a prior and superior charge to said legacy, to be satisfied in preference thereto?
5. In case the Court holds that said Trustee may lawfully sell and convey the property of said estate, passing good title thereto to the purchaser, for the purpose of raising funds to pay necessary expenses for the preservation of said estate, is said legacy of $1,000.00 per annum, payable to the said Harry Devine, Jr., under the provisions of said Will, a prior charge against the corpus of said estate, or may the Trustee transfer and convey the property so sold free and discharged from the charge of said legacy?
6. Is the property of said Estate in the hands of said Trustee subject to State, County and Municipal taxes, and are the taxes heretofore levied against the same a lien upon said property, or is said property belonging to the State of Wyoming free from State, County and municipal taxes?
7. Does the defendant, J.C. Underwood, Trustee, as aforesaid, have the power and authority, under the supervision of the Court having jurisdiction of said *22 estate, to sell and convey any part or all of the property of said estate, for the purpose of investing the proceeds thereof in other property or securities?
8. That the court determine the proper distribution of costs in this case, and for all other proper equitable relief.
The defendants appeared in the case, each asserting what were conceived to be their respective rights. It was shown that at the time of the probate of the Higgins will, the value of the estate was approximately $597,000. At the time of its distribution, evidently after the compromise and settlement heretofore mentioned were made, the value was approximately $347,000. By September 22, 1937, the value had been reduced to approximately $122,000, the real estate being of the value of approximately $80,000. It further appears that much of the property of the estate does not produce income sufficient to pay expenses, while a great portion produces no income at all. The trial judge who entered the modified judgments in the case of Bond et al. v. Wilson, Attorney General, supra, testified that they were entered pursuant to the direction of this court, and his testimony in part further is:
"Q. Before making the order appointing the trustee which has been testified to, did you have any negotiations or conferences with any of the executive officers of the State in which they requested that you make this order?
A. Mr. Greenwood, the Attorney General, was looking after the matter at the time, and my recollection is that the delay in the entry of the two orders was that he took that time to consult with the state officers before he asked for the appointment of the trustee.
Q. Mr. Greenwood, the Attorney General, supervised the legal end of this as attorney?
A. All the way through, yes, as long as he was in office."
The trial court in the instant action made certain declarations and orders hereinafter mentioned, and *23 which will be discussed in detail hereafter. A few additional facts will also be mentioned in connection therewith. The plaintiff and Underwood and Harry Devine, Jr., have appealed. Their respective contentions, wherever necessary or advisable, will be stated hereafter. All three appeals have been consolidated in this court, so that but one opinion is necessary herein.
1. Annuities Payable Out of Corpus.
The trial court declared:"That the annuity of said Harry Devine Jr. constitutes a charge against the corpus of said trust property payable whether the net income therefrom is sufficient or not, and if such net income is insufficient therefor, the trustee should sell so much of the property of said trust as is necessary to satisfy the same."
The decision that the annuity is a charge against the corpus of the trust property is challenged by the State as well as Underwood. It would seem that it is best to discuss and determine this point first, for more or less light will then be thrown on a number of other questions involved herein, including the question of title, the question of interest and the question of taxation. The will states that the annuity is payable out of the income. Counsel for Devine seek to sustain the court's declaration on the theory that the decree is inconsistent with the will, that it declares the annuity to be a charge on the corpus, and that it, accordingly, not having been appealed from, is binding on the parties. The rule appears to be that where the will and the decree are inconsistent, the decree will govern. 11 R.C.L. 184; 24 C.J. 532. And reading the original decree and the modified decree together, there may be ground for the contention of Devine. See In Re Miller's Estate (Minn.)
The ultimate criterion as to whether or not an annuity may be charged against the corpus of the property is the intention of the testator. Smith v. Fellows Adm'r.,
The will expresses the wish that the state should create a trust. Just what the testator meant by the state creating such trust is not clear. Possibly he had a legislative act in mind. We think, however, that this is immaterial. A testamentary trust may be created, if a reasonable construction of the language of the will as a whole and the surrounding circumstances show that to have been the intention. 69 C.J. 712. We think that such intention appears. In Re Ingram's Estate,
It is stated in another subsidiary rule, held by some of the courts, that if the annuity is made "an unlimited and indefinite charge upon rents and profits, resort may be had to the corpus in case the income is insufficient." 3 C.J. 213; 3 C.J.S. 1382. We think that it would make no difference whether reference is made to "rents and profits" or to "income," and if so, the will before us would come within the rule — if adopted. By an "unlimited and indefinite" charge, courts apparently mean that the charge is not limited to the annual income or the income during the life of the annuitant. Illustrations may be given. In Gillespie v. Boisseau, 23 Ky. L. 1046, 64 S.W. 730, the testatrix provided for a trust and that "from the rents and profits," her surviving husband should have $20 per month to live on. It was held that the annuity was a charge upon the whole estate. In Phillips v. Gutteridge, 4 DeG. J. 531, 46 Eng. Rep. 664, 3 Eng. Ruling Cases 197, the facts will appear from the opinion of the court, which, so far as pertinent here, is as follows:
"An unlimited indefinite charge upon rents and profits is a charge upon the corpus, just as an unlimited indefinite gift of rents and profits is a gift of the corpus. The trust in this case is in effect out of the rents and profits to pay the testator's daughter 60 pounds a year during her life, not out of the rents and profits during the life of the daughter to pay her the annuity. The right of the trustee to receive the rents and profits is general and indefinite; there is no limitation of time. The charge, therefore, upon the rents and profits is unlimited and continues until the annuity is satisfied."
The test here mentioned would seem to have negative rather than affirmative force. The provision mentioned fails to show affirmatively that it was the testator's intention that the corpus should be held, and the rule *28
would have no force whatever, if it appears from other provisions in the will that only the income was intended to be given. Note L.R.A. 1917 E. 588; Stelfox v. Sugden, 1 Johns. 234, 70 Eng. Rep. 410; Delaney v. Van Aulen,
It is stated in note 6 A.L.R. 1361 that "the inclination against construing a legacy as specific is especially noted in those cases where a legatee is a natural object of the testator's bounty." Many cases are cited. Courts have frequently called attention to, and sometimes have laid stress on the fact that this or that beneficiary would be the natural object of such bounty. Cases 6 A.L.R. 1361-2; Corley v. Harper,
2. Power to Change Trustee.
The trial court in its first declaration held that the court had jurisdiction to appoint J.C. Underwood as trustee. Neither Underwood nor the State challenges this finding. In fact, the latter, in its reply herein, insisted upon the validity of the appointment. Devine, correctly discerning that Underwood's appointment amounts to a substitution of trustees, challenges the *31 correctness of the declaration, and insists that the State alone has the right to administer the property, and that ample constitutional and statutory provisions exist for that purpose. We shall consider that contention. There can, of course, be no doubt that the testator contemplated that the property should be managed by the State, through its proper agent or agents. In doing so, it would primarily, as already seen, and as stated in Bond v. State ex rel., supra, act as trustee for the purpose of paying annuities. It is suggested by counsel for Underwood that the State never accepted the grant under the will. But that point is doubtful. The officials of the state managed the property for awhile; the legislature attempted to regulate the holding of the property; the attorney general consented to the appointment of the present trustee, and it may be that the state may be said to have accepted the grant by implication, if not directly. It is further suggested by counsel for Underwood that the State has no power to act as trustee of a trust such as is involved here. It however has, or at least may have, a direct interest in the property remaining after the satisfaction of the annuities provided for in the will, and we are not prepared to hold that the state could not, through its legislature, provide for the administration of such a trust by officers of the state or other agents. In section 95 of the Restatement of the Law of Trusts it is stated: "The United States or a state has capacity to take and hold property in trust, but in the absence of a statute otherwise providing, the trust is unenforceable against the United States or a State." And in comment (d) to that section it is stated that "a state can administer a trust for any purpose unless restrained by the provisions of the Constitution or laws of the United States or of the State." In comment (a) it is said that "as against the United States or a state the only remedy of the beneficiary is by a special act of the legislature, unless a *32 proceeding in a court of claims or other tribunal is provided by statute." Of course, if this correctly represents the law in this case, on the theory that a proceeding to change trustees in such case is a suit against the State, there is grave doubt that a court has the power to deprive the State of the management of a trust which it has accepted, whether any legislative or other provision for the protection of an outside beneficiary under the trust has been made or not. We do not, however, think that the rule applies under the facts in this case. We should in that connection, perhaps, not overlook Section 2 of Article 18 of the Constitution, which provides that property donated, granted or received from any source shall be inviolably appropriated and applied to the specific purposes specified in the original grant or gifts. Furthermore, the State has acquiesced in the appointment of Underwood, through its officials, including its attorney general. It is in this very proceeding insisting upon the validity of that appointment. The appointment was made in the early part of January, 1933. Three sessions of the legislature have been held since that time; one in 1933, one in 1935, one in 1937, so that our statement in Bond v. State ex rel. Wilson, supra, to the effect that "it may be necessary for the executive officers in possession of the property to invoke the action of the courts for the purpose of executing the trust" has been acquiesced in as not an improper course to pursue. Hence we do not feel that we are called upon at this late date, particularly upon our own initiative, to hold the appointment void on account of the rule stated by the Law Institute and the comments thereto, especially in view of the fact, since no public purpose is expressed in the last will and testament in question, the state, in accepting the trust, seems to act more in the nature of a private than in a public capacity. In fact, none of the parties have asked us to hold the appointment void for *33 the foregoing reason. It is merely insisted by counsel for Devine that the appointment is void, because ample constitutional and statutory provisions exist for the management of the trust both for the benefit of the State as well as for the benefit of Devine. And we shall proceed to consider that point.Our attention has been called to sections 103-501 to 504, Rev. St. 1931, which amended Chapter 104 of the Session Laws of 1927. Provision is made for a board of Will Trustees. The board is empowered to investigate and settle contests made in connection with any grant or gift made to the State by will or otherwise. Section 103-503 then proceeds to provide:
"It is made the duty of said board to receive, take charge of and administer all personal chattels heretofore or hereafter received by the state of Wyoming as a devisee, legatee, beneficiary, grantee or by escheat and to convert the same by sale or otherwise, including every evidence of debt or of value so received, into money; also to convert all mortgages, so received, into money according to the terms thereof, by foreclosure or other legal process; and to turn said funds over to the treasurer of the State of Wyoming to be by said treasurer credited to the fund or funds for which the same were directed and intended in such grant, gift or devise; and when not otherwise directed by the terms of such grant, gift or devise, the funds so received by said treasurer shall be credited to the common school permanent land fund."
It may be noted that this section relates to personal property only, and counsel for Devine assert that it makes ample provision for the administration of such property belonging to the Higgins estate. It provides for the payment of the money realized from the disposition of the property into the state treasury. It makes no appropriation of the money for the payment of the annuities; it gives no direction that the annuities must be paid. The difficulties of enforcement of the annuities, accordingly, mentioned in Bond v. State, supra, *34
are present. The trust fund arising from the personal property cannot be efficiently administered, so far as the annuitant is concerned. Counsel for Devine claim that so far as the real property is concerned, sufficient provision is made in section 3 of article 18 of the Constitution, which provides that the board of land commissioners "subject to the limitations of this constitution and under such regulations as may be provided by law shall have the direction, control and disposition and care of all lands that have been heretofore or may hereafter be granted to the state." And it is claimed that when the lands are administered as so provided, the proceeds must first be applied to the payment of the annuities in accordance with section 2 of article 18 of the constitution, already quoted, as interpreted in Bond v. State, supra. In this connection counsel for Devine have overlooked some constitutional and statutory provisions. Section 7 of Article 16 of the constitution provides that "no money shall be paid out of the State Treasury except upon appropriation by law on warrant by the proper officer." Section 35 of Article 3 provides that "moneys shall be paid out of the treasury only on appropriations made by the legislature and in no case otherwise than upon warrant drawn by the proper officer in pursuance of law." See in this connection MacDougall v. Land Commissioners,
3. Proceedings for Appointment of New Trustee.
Counsel for Devine also contend that the trial court in appointing Underwood as trustee misinterpreted the direction of this court in Bond v. State ex rel. Wilson, supra, acted sua sponte and without a written application for the appointment before it; that such appointment is without jurisdiction and void for that reason, and we are cited to Janin v. Logan,It is true, as contended, that courts do not ordinarily act sua sponte, but only upon the filing of a written application or petition showing at least that the court has jurisdiction of the subject matter. State v. District Court,
The attack in this case on the appointment of Underwood as trustee is a collateral one. That is conceded, and hence it is not a question whether the appointment was irregular, but whether or not in this particular case, the court had, under the circumstances disclosed herein, no power whatever to appoint a trustee. 65 C.J. 603. The district court is a court of superior and general jurisdiction, which includes jurisdiction to appoint trustees to administer a trust. 65 C.J. 584, 589. The attack herein being collateral, as already stated, the court's jurisdiction in this case will be presumed, unless the contrary appears from the record itself, or, perhaps, is shown aliunde. 15 C.J. 838. The fact that no written application for the appointment of Underwood was filed should not, we think, of itself defeat the power of the court to appoint him. In Haggin v. Strauss,
The evidence in the case seems to indicate that the State and its officers did in fact, through the attorney of the State, make an oral application to the court for the appointment of Mr. Underwood as trustee. He conferred with the court, it seems a number of times in that connection. So that for this reason alone, the appointment should not, in accordance with Haggins v. Strauss, supra, be held to be without jurisdiction. This court, in Bond v. State ex rel. Wilson, supra, had directed the trial court to modify its judgment in accordance with the opinions expressed by this court. The trial court, then, had the power to modify its judgment in that case. In doing so it had jurisdiction over the parties in the case, which included the state, one of the beneficiaries of the trust, and the officers of the state who then administered the property. The direct order appointing Underwood appears to be a continuation of the modifying judgment. While that is not clear, it is not questioned, and we shall assume that to be the fact. Was the appointment of a trustee reasonably involved in the modifying judgment? If so, the order was not without jurisdiction, as held in the case of In Re Ingram's Estate,
4. Title of Old and New Trustee.
The appointment of Underwood as trustee being valid, at least as against a collateral attack, where is the title to the property? The trial court in its second and third declarations held that it is in Underwood, for the purpose of paying the annuities to Devine and thereafter to convey whatever property is remaining to the State, and that he has all the ordinary powers of a trustee. All three of the appellants insist that under the will the title to the property is clearly vested in the State, and that it, and it alone, accordingly, can convey it to another. Of course, that contention would be correct, if the State had not been given the title to the property, primarily at least, as trustee. Holding it as such changes the situation, and it seems that the State and Underwood take exceptions to the foregoing findings upon a misapprehension of the legal effect of Underwood's appointment. Counsel for Devine further call our attention to Section 109 of the Restatement of the Law of Trusts, and were it not for that section, we should not have had any great difficulty in the solution *43 of the point now before us. The section reads as follows:"If the court appoints a new trustee, the title to the trust property will not vest in the new trustee until a transfer is made to him by the old trustee or other holder of the title to the trust property, unless it is otherwise provided by the terms of the trust or by statute."
In the comment thereto, it is stated:
"By statute in almost all of the states provision is made for the vesting of title to the trust property in the new trustee; in many states the mere appointment of a new trustee by the court vests the title in him; in other states the court can by its decree vest the title in the new trustee; in other states the court may appoint a person to make a conveyance which shall vest the title in the new trustee."
According to the comment, then, the rule stated in the main text prevails in few, if any, jurisdictions, and we should, therefore, have welcomed a statement by the learned Reporter of the reasons of its adoption by the Law Institute, for we have no statute regulating the matter, although under section 88-1401, 1403, Rev. St. 1931, the court, apparently acting in probate matters, seems to have been given the power to substitute a new trustee for one who has defaulted in his actions or who has removed from the state. Section 109, supra, is supported by Washburn on Real Property (6th Ed.) Section 1479, where the author states:
"But in the absence of a special statutory provision, the interest and estate of a trustee can only be divested by a conveyance thereof, even though he be removed from his trust and another appointed by the court in his place. To complete the appointment of such new trustee, the court directs and requires the one in whose place he is appointed to execute a proper conveyance of the legal estate to the new trustee. And the abandonment of a trust by one of two trustees does not vest his title in the remaining trustee." *44
A similar statement is found in Perry on Trusts (7th Ed.) Sec. 284, and cases stating that to have been the rule at common law are found in 65 C.J. 636, note 27. And see Culross v. Gibbons,
The first case on the subject seems to have been O'Keefe v. Calthorpe, 1 Atk. 17, 26 Eng. Rep. 12. In that case (in addition to making an order of conveyance) the chancellor stated to "let the appointee take such interest as the law will give him; for I shall not lend him the assistance of this court to make such appointment more effectual than it will be at law." In Peabody v. Eastern Methodist Society, 5 Allen (Mass.) 540, the court held that the new trustees took no title without conveyance to them because there was "no privity of estate between them and the trustees who took the land by deed and could have no effect in law to divest or change the title." In Corbett v. McNutt, 18 Gratt. (Va.) 666, 690, and West v. Fitz,
Some of the cases go further and hold that the new trustee becomes vested with the title by implication of law. 65 C.J. 65, note 25. In Freeman v. Prendergast,
"Under the English practice, when there was a change of trustees there was a formal conveyance from the old to the new trustee. It was therefore properly said in Hill, Trustees, p. 196, that `the appointment of the new trustee by the court would not be complete without a conveyance or transfer of the trust property *46 to him.' The decree therefor usually goes on to direct a proper conveyance of the legal estate.' Under our system, however, there is no formal conveyance from the old to the new trustee, but the title passes to the latter by virtue of his appointment."
Apparently the same rule prevails in Iowa. Parkhill v. Goggett,
"The decree accepting the resignation of Walker and discharging him of the trust, and appointing White in his stead, is silent as to the title of the trust property; it does not in terms, either divest the legal title out of Walker or vest it in White, and the act of 1831, under which this proceeding took place, contains no provision for a change or transfer of the title to the trust estate, from the trustee who is permitted to resign to the successor appointed by the court. What then becomes of the legal title to the trust property, upon the resignation of the trustee? This is a question by no means free *47 from difficulty. To hold that the title still remains in the trustee, after he is formally discharged of the trust, would seem to be absurd. Upon this construction of the act, the resignation of the trustee and the appointment of another in his stead, would be alike inoperative; because, while it would fail to discharge the first trustee effectually, from all future liability, it would leave his successor destitute of the power of exercising legal control over the trust property, for the want of title. To give the act any sensible construction or effect, it must be held, therefore, that upon the discharge of the first trustee, by implication of law the title is transferred to and becomes vested in the successor appointed by the court; and for the same reason, a like construction and effect must be given to the decree of the chancellor in the present case."
That case was approved by the same court in Hughes v. Brown,
"Upon appointment, the successor trustee succeeds to the title of the trust property without the necessity of a conveyance, and, unless some of the powers were personal to his predecessor or the court limits the powers conferred on him, he has the same powers that his predecessor had. The Massachusetts court has stated that at common law a conveyance was necessary, and occasionally courts have required it. Particularly, where some of the trust property consisted of foreign realty, has the automatic transfer of title been questioned. But the prevailing theory seems to be that, when an appointment is made, title is transferred, not by the authority of the court, but by operation of the trust instrument. Upon that theory the appointment can operate as a transfer of all property without regard to its nature or location."
It is apparent from the foregoing that the law on the point here considered is in a state of confusion. It is one of first impression here. And while we should ordinarily prefer to accept the rule adopted by the Law Institute, we hesitate to do so in a case in which this rule is applicable in but few, if any, jurisdictions, as *48
seems to be true in this instance. We do not wish to make the confusion greater than it is. The rule follows the early English practice, as shown in O'Keefe v. Calthorpe, Perry on Trusts and Washburn on Real Property, supra. It would seem that the origin of the rule, the reason therefor, to express it more clearly than in the authorities already cited, was based on the further rule that ordinarily a court of equity operates in personam and does not create or transfer a title. 21 C.J. 691; 58 C.J. 1276. And if it is a question of power, we should adhere to the rule of the Law Institute. If it is merely a question of practice or procedure, then we should be able to establish in this state, in the absence of legislation on the subject to the contrary, a rule which accords with the thoughts and idea of the present day. It must be borne in mind that if a substitute is appointed for a trustee, the latter retains at most but a mere naked legal title. National Webster Bank v. Eldridge,
"There may be some plausibility in this argument on its surface, but when it is examined with care, and under the light of history, all its force disappears. The early chancellors, from prudential motives alone, and to avoid a direct conflict with the common-law courts, adopted this method of acting, as they said, upon the consciences of defendants; and the practice which they invented has, with the English national devotion to established forms, continued to modern times. But it is certainly a complete confounding of the essential fact with the external form, to say that such a mere method of procedure, adopted solely from considerations of policy, determines the nature of the equitable jurisdiction, and demonstrates the non-existence of any equitable primary rights, estates, and interests. If there had been anynecessary connection between the proceedings and remedies of chancery and this mode of enforcing its decrees in personam, if it had been intrinsically impossible to render these decrees operative in rem, then the argument would have had some weight; but in fact there is no such connection, no such impossibility; the decrees of a court of equity may be *50 made to operate in rem to the same extent and in the same manner as judgments at law."
These considerations render it unnecessary, we think, or inadvisable, for us to adopt the rule of Section 109 of the Law Institute above mentioned, and we believe that in any event no more is necessary than a decree divesting the title of the old trustee and investing the new trustee therewith. That is particularly true in this case, where, if the rule of the Law Institute were adopted, it would require a special legislative act in order that the title might be transferred to the new trustee. And there are further points to be considered. The question of title, if it matters at all, which is doubtful, is not of the same importance in this case as in cases in which the trustee sells property without an order from court. It is stated in 65 C.J. that a trustee can pass no greater title than he possesses. That is doubtless true in cases where he makes a conveyance upon his own initiative. The cases cited seem all to relate to a situation of that kind. Here we have a different situation. The will does not direct or authorize the trustee to sell the corpus of the property, and the rule seems to be that it cannot be sold in such cases without an order from court. 65 C.J. 730-31. "A decree of a court of competent jurisdiction on an application to sell trust property from which no appeal is taken is a conclusive adjudication and cannot be collaterally attacked. The order and decree is binding on all the parties and persons whose interests were represented." 65 C.J. 751. It is said in 65 C.J. 778 that "where sale and conveyance was made under decree of court, the interest of all the beneficiaries who were parties to or were represented in, the proceedings, pass." The same rule obtains in cases of judicial sale, for it is said in 35 C.J. 73 that "with respect to property sold at a judicial sale, the decree and deed convey all the title and right of those who are parties to the *51
suit and are bound by the decree." And it would seem that a sale by a trustee under the circumstances mentioned is in some respects at least analagous to a judicial sale (35 C.J. 10; Mitchell v. Title Ins. Co.,
It happens in the case at bar that the State was not only the old trustee, but is also a beneficiary under the will. Hence, in order that it may be bound by any decree of sale, it must be notified of the proceedings, or it must appear therein. If the court, in such proceeding, under the proper circumstances and facts, makes an order of sale, it would be bound by the decree (unless an appeal is taken) at least as such beneficiary. It is the duty of the court in such proceeding to protect the purchaser and perfect his title, if it may be done. Copeland's Executors v. Copeland,
5. Power to Sell and Convert.
The court declared in paragraph four of the decree as follows:"That in order to preserve and safeguard said trust and the property thereof from loss and depletion, said trustee should proceed as rapidly as may be, under the *52 direction and supervision of the district court of the seventh judicial district of the State of Wyoming in and for the county of Converse, to convert all of the property of said trust into cash for the purpose of satisfying all valid claims now outstanding against the trust and to invest the balance of the proceeds therefrom in the purchase of such securities as are designated under the constitution and statutes of the State of Wyoming as being proper and authorized investments by trustees, but in no event to be invested in annuities in any private corporation."
This provision of the decree is an order rather than a declaration of power, or rights or duties, and seems to go beyond the prayers of the petition. None of the parties, however, have taken any exception thereto, and have acquiesced therein, except as to matters already discussed, namely, that the State, rather than Underwood, should sell the property, and we shall not, accordingly, mention this provision further. It is connected with that part of the petition which alleges the necessity of the sale of the property of the trust and the conversion thereof, and with that part of the third declaration of the court which states that the trustee should proceed and sell and convert the property, and we shall briefly discuss the power to do so, in view of the fact that, though all parties agree that this should be done, the point has been argued at length, and they seem to want the view of this court thereon.
The will in question in this case does not contain an express power to sell. But that is not controlling. The general rule is stated in 26 R.C.L. 139, that "a court of chancery has to some extent, a general supervision over trust estates and may direct such a disposition as in its discretion seems beneficial to all parties interested, even going so far as to order the sale of the trust estate and a reinvestment of the proceeds without authority being given by the trust instrument, if the conditions are such that it is manifestly in the interest of the trust estate." And in 65 C.J. 744, it is stated *53
that without permissive statutes, a court of equity has inherent power "not only in cases where the trust instrument confers a power of sale on the trustee, but in cases where it does not, to order or prohibit a sale of trust property where such action is necessary to the execution of the purpose of the trust and for the protection of the estate and the rights of the beneficiaries." The rule goes even further, and a court of chancery may at times order a sale of property even though such sale is expressly forbidden by the trust instrument. 65 C.J. 746; note 77 A.L.R. 971; Restatement of the Law of Trusts, Sections 167 and 190. As stated in Curtis v. Brown,
"In regard to the jurisdiction of courts of chancery to direct the conversion of real estate into personal property, and vice versa, and to decree other modifications of trust agreements when it becomes necessary to preserve the trust estate, it may be stated as a general proposition that, while the power is exercised with great caution, it has become a well-established rule that, when the courts can see that unforeseen conditions have arisen which make it necessary, to preserve the rights of beneficiaries under trust instruments, to change the terms of the trust, courts of equity have not hesitated to direct such necessary modifications as will preserve the trust estate for the use of the beneficiaries."
(See also article by Austin Wakeman Scott in 44 Harvard Law Review 1025.)
There was evidence in the case that the property of the trust should be sold and converted, and, as already *54 stated, all parties concede that this should be done. We might add, that we do not express any opinion on that portion of the decree directing the character of future investments. That point has not been argued herein.
6. Power to Mortgage.
The court in its declaration No. 5 found:"That said trustee is without power and authority in the present financial condition of the trust and the present condition of the various properties making up the trust to borrow money and pledge the property of the trust by way of mortgage or otherwise."
Just what the court had in mind in making this declaration is not altogether clear. Seemingly it did not mean to declare that the property might not be mortgaged under any conditions whatever, for the declaration states that the power does not exist "in the present financial condition of the trust and the present conditions of the various properties." It may be that the court meant to find that the situation of the trust-property at the present time is such that to mortgage it now would be unjustified. If that is its meaning, we are not, of course, in position to say that such finding is wrong. In fact, if we were to express an opinion on the point at all, we should say that the trial court was probably right, since the power to mortgage should not, we think, considering the situation of the property as we find it in the record, be resorted to except in the extremest need, since there seems to be considerable danger that there is a lack of funds with which to redeem any mortgage.
Counsel in the case seem to construe the finding of the court broader than above mentioned. So we shall discuss the law in that connection. There is no power to mortgage given in the will of the deceased, or in the decree admitting the will. If, then, the power exists, it is implied under certain circumstances. Ordinarily *55 no such power exists. 65 C.J. 785. In 26 R.C.L. 1303, it is said that "a trustee cannot mortgage the trust property unless power to do so is expressly given him by the trust deed, or an intent to confer the power can be implied from its terms and the circumstances surrounding the trust." But the rule is not absolute. Under certain circumstances, the trustee, when acting under order of court, may mortgage the trust property. 65 C.J. 788; Restatement of the Law of Trusts, Sections 167 and 191. In Bogart on Trusts and Trustees, Section 762, the author states the rule to be as follows:
"The power is inherent in the court of chancery, independent of statute and in the exercise of its general jurisdiction over the administration of trusts, to authorize a trustee to borrow money and to secure the loan by a mortgage of the trust estate in certain cases. * * * Unless the trust instrument grants the necessary authority to the trustee, the exercise of the power of the court to authorize a mortgage generally has been confined to cases of exigencies in which a mortgage was essential to the continuation or carrying out of the trust. * * * An outstanding example of the exercise of the power is the granting of authority to mortgage for the purpose of paying off liens and incumbrances in order to save trust property for the cestui que trust. The courts have commonly given the trustee permission to incumber the trust property where it was necessary to raise money to pay taxes and thereby avoid a tax sale, or to redeem property which has been sold for taxes."
Many authorities bear out the foregoing statement. Scott v. Mussafer,
In Burrows v. Gaither, supra, the court stated:
"When the court, therefor, upon assuming control of the trust, found that all this large real estate had been sold for taxes for a sum merely nominal in comparison with its value, and that the title to it was about to pass to strangers, the effect of which would be to break up the trust, it became its duty to act at once for the benefit of the cestuis que trust, most of whom were then minors, and take advantage of the privilege of redemption secured by the tax laws. Under such circumstances, and where there was no other means of raising the necessary funds, we are of opinion the court had the power to sell or mortgage a part, in order to rescue the whole, or as much of it as possible, from this impending vis major. It was a power derived from the necessity of the case, and one which every prudent owner would use if he found his property in such a dangerous position. Thesecestuis que trust were the equitable owners of the property, and a court of equity was managing it in their interest, and for their benefit; and in such an emergency, and for such a purpose, we think the court was clothed with all the powers of absolute ownership."
In Scott v. Mussafer, supra, in which the court permitted a mortgage to be made in order to erect improvements, the court stated:
"Generally an executor of an estate cannot mortgage the property of his testator unless given the power to do so by the terms of the will or by a statute. Jones on Mortgages (8th Ed.) § 132; Kirkbride v. Kelly,
It is apparent from what we have said that if the court's declaration was meant that no mortgage can ever be given on the trust estate, it is too broad, and must be modified as herein indicated.
7. Taxation.
The court declared "that the property forming a part of and belonging to said trust is now and at all times since the death of John E. Higgins, deceased, has been subject to state, county and municipal taxes." The correctness of this declaration is challenged. Exemption from taxation is claimed on the ground that under the will the property was devised and bequeathed to the state, and that the final decree entered in the estate matter is in conformity therewith. Section 115-102, Rev. St. 1931, exempts property belonging to the state from taxation. We think that our answer to the question as to whether or not the property in question here is state property within the meaning of this statute has already been foreshadowed by what we have already stated. It is stated in 61 C.J. 366 that "the public property which is thus immune from taxation includes all property, real and personal, held for public purposes, which legally or equitably belongs wholly to the state, no matter on what basis its title rests. But the immunity extends only to such property as may properly be said to belong to the state, and it is not sufficient that the state may have some indirect or *58 expectant interest therein." In 61 C.J. 418 it is stated that "property held by the state as trustee for the benefit of others is not exempt." To the same effect is Cooley on Taxation (4th Ed.) Sec. 629; Comstock v. Boyle,8. Interest on Annuity.
The court in one of its declarations stated that "Harry Devine Jr. is entitled to interest, at the legal rate, on all past due annuities from the time that annuities accrued and became due and payable." The authorities are not in accord as to whether interest is payable on unpaid annuities, and it seems that in England and Canada, interest is not ordinarily allowed. The author in 3 Amer. Jur. 829 states that "in this country the weight of authority supports the conclusion that interest upon arrearages of annuities is recoverable from the time the installments of the annuity become due and payable." We think that we should follow this rule, particularly in view of our statute (section 58-104, Rev. St. 1931) which provides that on money "due and withheld by unreasonable delay of payment, interest shall be allowed at the rate of seven per cent per annum." The statute does not seem to contemplate that financial difficulties of the debtor should be a sufficient excuse for non-payment. *59 The court did not decide as to the due date of the yearly payments. Counsel for Devine claims that the first payment was due on the date of the death of the testator under the provision of the decree closing the estate to the effect that "Harry Devine Jr., * * * is hereby awarded the sum of $1000 per year for a period of 50 years from the death of said testator." That, however, merely means that the annuity should be paid at some time during the first year after the testator's death. It is stated in 2 Amer. Jurisprudence, that "if the instrument contains no other provision for the time of making payments than that they are to be paid annually, it is lawfully performed by the payment of a single installment at the end of each year, and cannot be construed as a promise to pay such sum in advance, or at the commencement of each year, unless the language of the instrument creating the annuity may properly be construed as providing for such a time of payment. Likewise where an annuity is given by will, it begins to run from the death of the testator, and ordinarily, the first yearly payment is not due until the end of a year from the death, unless there are circumstances or expressions in the will evidencing a different intention." There is nothing in the will in question here, or in the decree, which would vary this rule, and we see no reason why we should differ with it. No compound interest, of course, should be allowed, and none is claimed.9. Counsel Fees.
Harry Devine Jr. asked the court to allow him counsel fees for participating in this proceeding. The court refused to do so, and he complains of this ruling. A number of cases sustain the right, or at least the discretionary power of the court, to make such allowance to necessary parties in cases for the construction of a will or a trust, aside from allowance of such fees to *60 fiduciaries. 69 C.J. 905-908; Perry on Trusts (7th Ed.) Sections 476a and 747a; note 37 Ann. Cas. 716. Some of the cases so holding are based upon a statute and would not be authority herein, since we have no statute authorizing such fees. The rule seems to have arisen under a statute enacted in the time of Richard II, permitting the chancellor to "allow damages according to his discretion to him which is troubled unduly." It is held in Re Donges' Estate,"No good reason is apparent why the expenses of a litigant as to his ownership of property should receive the attention of the court or be paid by another when the litigation takes the form of construing a will, any more than if the same issue were tried in ejectment or replevin; but no one would contend that in the latter case any power to make such order existed in the court. Where parties are sui juris, and each litigating for the promotion of his own interests, each should bear the expense, as he will enjoy the fruits of his own contention; and the existence of a fund over which the court has control in no degree varies the principle involved or justifies infraction thereof."
See also Downing v. Marshall,
10. The court directed Underwood to make an accounting of his trusteeship. This was done at the request of Devine. It appears herein that he made various detailed written reports of his doings up to June 30, 1937. It would seem accordingly that to require him to do so again will merely entail further expense for the trust fund, and we think that this is unnecessary. If any of the interested parties herein *62 should deem the reports already made insufficient or inaccurate, they may, of course, make their objections, which would point out specifically what, if any, further report they desire, and the court may then, if the objection appears to be well taken, make such order as is proper.
Except as herein indicated, the judgment of the trial court is, accordingly, affirmed.
Affirmed.
RINER, Ch. J., and KIMBALL, J., concur.