Hyperlawhypertext legal database In re Estate of Smith 66 A.D. 340

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In re Estate of Smith

66 A.D. 340 Court N.Y. App. Div. English

Delivered by Adams, P.. J.:

Contents

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In the Matter of the Estate of Reuben Smith. E. Lucintha Penfield and I. Stoddard Penfield, as Executors, etc., of Thomas D. Penfield, Deceased, Appellants; Elias E. Spencer, as Administrator with the Will Annexed of Abigail Smith, Deceased, Respondent and Appellant.

Headnote

Dividend stock, refused by a cestui que trust entitled to the income of an estate, and paid for by the executor out of his own money — tohen the Statute of Limitations runs in his famor—what decree does not change his relation from that of executor to that of trustee. >
A testator who died in 1864. directed that the use and income of his property should be paid to his widow during her life, with remainder to his daughters. ' The estate included thirty-five shares of the stock of a railroad company. In 1869 a stock dividend of twenty per cent was declared- upon such stock, upon
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terms requiring the payment of §50 for each share of dividend stock. The widow declined to take advantage of the offer of the railroad company, whereupon the executor of the will accepted the seven shares of dividend stock,, paying therefor the sum of §350 from his individual moneys. After the death of the widow in 1878 the executor rendered an account of his proceedings in the Surrogate’s Court, upon which the auditor who stated the account found that the title to the seven shares of dividend stock was disputed between the residuary legatees and the heirs of the widow, and that the executor still retained said stock and should retain it “for the present.” The report was confirmed by a decree which directed that the seven shares of divi- . dend stock should remain in the executor’s hands ‘ ‘ until the dispute is settled. ”
In 1897 an administrator with the will annexed of the widow instituted a proceeding to compel the executor to account for the seven shares of dividend stock, alleging in his petition that the executor had been frequently requested to deliver such stock both before and after the decease of the widow.
Held, that the right of,the widow to enforce her claim upon the stock accrued upon the refusal of the executor to deliver the same to her, and that as she died in 1875 the proceeding was barred by the ten years’ Statute of Limitations; That the decree rendered in 1878 did not operate to change the executor’s relation to the seven shares of dividend stock from that of executor to that of a trustee of an express trust.
Appeals by E. Lucintha Penfield and another, as executors, etc., of Thomas D. Penfield, deceased, and by the petitioner, Elias E.. Spencer, as administrator with the will annexed of Abigail Smith,, deceased, from so much of a decree of the Surrogate’s Court of the-county of Oneida, entered in said Surrogate’s Court on the 7th day of April, 1900, as directs the payment of the sum of $1,097.74 recovery in costs against the said estate in favor of the petitioner.
On the 26th day of October, 1864, one Reuben Smith, a resident of the town of Camden, Oneida county, FT. Y., departed this life leaving a last will and testament .which was duly admitted to probate upon the sixth day of December following. The will nominated and appointed Thomas D. Penfield and Abigail Smith, the widow of the testator, the executors thereof, but by an arrangement between them Penfield became the sole acting executor in the settlement of the estate.
Under the provisions of the will, the widow, Abigail Smith, was to receive the life use . and income of the testator’s property, and after the payment of certain specific legacies the remainder was to go to Polly Wetmore and Rebecca Morse, daughters of the testator.
Rebecca Morse died prior to the commencement of this proceed
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ing, leaving a last will and testament in and by which her son, Edward Morse, was duly appointed executor thereof.
In June, 1865, the other daughter, Polly Wet-more, duly transferred and assigned to Thomas D. Penfield all her interest in the estate tif her father, Reuben Smith.
The widow, Abigail Smith, died in 1875, leaving a last will and testament in and by which she gave all of her property to her daughter Patience Spencer, and the petitioner herein was in due bourse of time appointed administrator with the will annexed of Mrs. Smith’s estate.
. Reuben Smith left, among other -personal assets,, thirty-five shares of the capital stock of the Rome, Watertown and Ogdensburg Railroad Company, of the par Value of $100. per, share. After his death, and on or about the 1st day of July, 1869, a stock' dividend was declared by the railroad company upon the basis that every, owner of stock should be entitled to receive one share of the par value of $100 for every five shares owned by him, upon payment to the company of $50 per share in cash; and as a consequence the estate of Reuben Smith became entitled under these terms to seven additional shares of the stock. The widow, Abigail Smith, declined to take advantage of the offer of the railroad company, whereupon* her co-executor, Penfield, accepted the seven shares, paying therefor in cash the sum of $350,- which money was furnished by him individually. Thereafter, and on the 5th day of February, 1873, * another stock' dividend was declared upon these seven shares at the rate of $5 per share, and thereafter, and on the 13th day of March, 1881, an additional stock dividend was declared of twenty per cent, or $140. Regular cash dividends were likewise declared, which were received by Penfield.
After the death of Abigail Smith, and in the year 1878, the surviving executor, Penfield, rendered an account of his proceed- ■ ings in the Surrogate’s Court of Oneida county. Upon such accounting a hearing was had before an auditor who took and stated the account of the executor, and in his report to the Surrogate’s Court stated in respect of the amount found due the estate, that “ the same includes all the property which has come into his hands, as executor of Reuben Smith, except seven shares of dividended railroad stock of Rome, Watertown R. R. Co. (and not included in any account
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heretofore mentioned), and which stock is of but little value and the title to the same is in dispute between the residuary legatees of Reuben Smith, and the heirs of his widow, and which seven shares said executor still retains and should retain for the present.”
This report was subsequently confirmed by a decree of the Surrogate’s Court, which decree followed the language of the auditor's report, save -that it directed that the seven shares of stock should remain in the hands of Penfield “ until said disputéis settled.” No further proceedings were taken in regard to this stock until February 10, 1882, when Penfield sold the same, together with some stock of his own, through the First National Bank of Camden, for nineteen and seven-eighths cents per share. It is conceded that in making this sale Penfield acted in good faith and obtained for the stock all that it was worth at that time.
In 1897 this proceeding was commenced by the petitioner Elias F. Spencer, as administrator with the will annexed of Abigail Smith, to compel a further accounting by Thomas D. Penfield, the surviving executor of Reuben Smith, of the assets of the estate remaining in his hands, and particularly of the seven shares of stock of the Rome, Watertown and Ogdensburg Railroad Company, alleged in the petition to have been income arising from the estate of Reuben Smith, and -that as such it belonged to the estate-of Abigail ¡Smith. Edward Morse, as executor of Rebecca Morse, was made a party to this proceeding, and appeared therein by attorney, claiming that such stock was principal, and that as such one-half thereof belonged to his testatrix, Rebecca -Morse, as. one of the residuary legatees of Reuben Smith, deceased. Thomas D. Penfield answered the petitión herein, and among other defenses thereto claimed that by an arrangement with Abigail Smith, his co-executor, he had paid for? the stock in question with his own money, and. that in consequence thereof the same belonged to him ; that in any event he should be allowed the sum of $350, paid by him for such stock, and that the claims of the petitioner and of Edward Morse to such stock, if they ever had any, were barred by the Statute of Limitations. The issues thus joined were tried before the surrogate of Oneida county, all the parties appearing and taking part in such trial. During the pendency of the trial Penfield died, leaving a last will and testament, of which the appellants, É. Lueintha Penfield and I. Stoddard Pen-
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field, were duly appointed executors, and in due course of timetliey were substituted as parties to this proceeding in the place of their testator. Subsequently the surrogate made certain findings of fact, among which was one to the effect fhat one-half of the seven shares of stock was principal and the other half income; that the» claim of Edward Morse, as executor of Rebecca Morse, to that, portion of the seven, shares so found to be principal was barred by the Statute of Limitations, and that the representatives of Penfield" should account for and pay over to the petitioner, as representative-of Abigail Smith, the value of the one-lialf found to be income,, together with the dividends received on the same since May 1-, 1876,, together with, interest thereón and the costs and expenses of the» proceeding.
The executors of Penfield in due course of time filed exceptions to certain of the findings of the surrogate,, as did also the petitioner in the. proceeding, who claimed that.no part of such stock should be treated as principal; and from the decree which was subsequently entered upon the findings of the surrogate these appeals are brought.
William Kernan, for the executors.
Charles R. Coville, for the administrator.

The seven shares of stock or the avails thereof remained in the hands of Thomas D. Penfield from December 31, 1878, at which time the decree of the Surrogate’s Court was entered confirming the report of the auditor upbn the executor’s accounting, until the commencement of .this proceeding; and during that entire period of time no .reason existed why a proceeding to determine the ownership. of such stock could not have been instituted; but for.some-' undisclosed reason the petitioner did not see fit to move in the matter until nearly twenty years had elapsed; and it is not unreason-, able -to assume that the present proceeding would never have been heard of had not the stock suddenly become greatly enhanced in value. In these circumstances we fail to see why the ten years’ Statute of Limitations is not a complete defense to the petitioner’s-claim.. (Code Civ. Proc. §§ 388, 414; Matter of Rogers, 153 N. Y.. 316 ..; Matter of Longbotham, . 38 App. Div. 607 .)

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Certainly the present proceeding furnishes a most apt illustration of the necessity and propriety of a statute of repose; for, had it been, instituted within a reasonable time after the right to commence the same accrued, all the parties interested would have been living, and as a consequence the mouth of Thomas D. Penfield would not. have been closed respecting the transactions between him and his co-executor, Abigail Smith, which, could they have been disclosed,, would doubtless have thrown much light upon the question at issue. When, however, the case was brought to a hearing every person primarily interested in the estate of Reuben Smith was dead, except, the executor Penfield, and he died before the proceeding terminated..

It is insisted by way of avoidance of the Statute of Limitations that as one of the results of the decree entered upon the accounting of 1878, Penfield did not thereafter hold the stock as executor, but as trustee of an express trust, in consequence of which the Statute of Limitations did not begin to run until it had been determined, who was the owner of the stock.

It is doubtless true that in the absence of an adverse claim on the part of the trustee, as between him and his cestui que trust, no length of time is a bar, because of the privity existing between the parties (Perry Trusts, §§ 863, 864); but we are unable to see how the present case falls within this rule.

Thomas D. Penfield’s official character was m no wise changed by his partial accounting or by the decree of the Surrogate’s Court, entered thereon. He still remained the executor of Reuben . Smith and continued to hold the, seven shares of stock as such. Indeed, the surrogate’s decree required him as executor to retain the stock “ for the present ” or until the dispute as to the ownership was- settled ; it was only as executor that he could thereafter have been called upon to account for such stock; and it- is only as executor that the present proceeding can be maintained against him or his personal representatives.

Merely calling an executor a trustee does not make him such (Matter of Hamley, 104 N. Y. 250 ); and in the absence of any evidence tending to establish the creation of an express trust, save the provision in the decree of 1878, requiring Penfield to retain the stock in his hands for the present, which is equivalent to saying- " until the further order of the court,” we do not quite see how the

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respondent’s contention in this regard can be sustained. But even assuming that Penfield’s official character was changed from that of executor to trustee of an express trust by the decree in question, we still think he was entitled to avail himself of the ten years’ statute.

If the seven shares of stock were to be regarded as belonging to the principal of the estate he was clearly the owner of one-half thereof as the assignee of Polly Wetmore, one of the residuary legatees ; and whether principal or income he claimed to own the entire seven shares by reason of an understanding between him and his co-executor, Abigail Smith, in .pursuance of which he" personally furnished the money with which the stock was obtained. So that in either event lie was a claimant to the 'Stock,-whose interest was adverse to that of the petitioner and of his testatrix; and this fact must have been known to both- Mrs. Smith and her administrator, the petitioner herein. Indeed, the latter virtually admits this fact in his petition when he alleges that Penfield refused' to account for or deliver such stock, although frequently and personally requested so to do, both before and after the decease of Abigail Smith. Uposuch refusal Abigail Smith’s right to enforce her claim, either by proceeding in Surrogate’s Court or by a suit in equity, accrued; and as she died in 1875 such right must have expired some ten or twelve years prior to the commencement of this proceeding. (Roberts v. Ely, 113 N. Y. 128 ; Matter of Neilley, 95 id. 382.)

If we are correct in the views to which we have given expression, it follows that the decree of the Surrogate’s Court must be reversed, without reference to the other questions involved in the appeal, and consequently it becomes unnecessary to consider them.

Decree of Surrogate’s Court reversed, with costs payable out of the estate of Abigail "Smith, deceased, and case remitted to that court for such further proceedings as may be proper.

All concurred except Spring, J., dissenting, and Rumsey,J., not sitting.

Decree of Surrogaté’s Court reversed, with costs. ,

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