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In re Keller

127 N.Y.S. 16 Court N.Y. App. Div. Decision date 1911-01-20 English

Delivered by MILLER, J.

Contents

Majority

p. 16
(142 App. Div. 454.)
In re KELLER et al.
(Supreme Court, Appellate Division, First Department.
January 20, 1911.)

Headnote

1. Trusts (§ 167[2] )—Matters Subject to Reference—Proceedings fob Removal of Testamentary Trustee.
A testator by bis will ratified articles of copartnership, providing for the valuation and settlement of his partnership interest, and appointed his partner, together with his widow and a brother-in-law, trustees under the will. After testator’s death, a controversy arose between the surviving partner and the other trustees as to the valuation and inventory of the partnership interest, and an action for an accounting was begun in which the merits of the controversy were adjudicated. Held, that an order of reference in the proceeding for the removal of the surviving partner as testamentary trustee in which same questions were raised, would involve a useless expense to the parties, and should be reversed.
[Ed. Note.—For other cases, see Trusts, Cent. Dig. §§ 219, 220; Dec. Dig. § 167.[2] ]
p. 17
2. Trusts (§ 166*)—Executor as Trustee—Removal—Grounds—“Unsuitable Person to Execute the Trust.”
Under Real Property Law (Consol. Laws, c. 50) § 112, empowering the Supreme Court to remove a trustee who, for any cause, shall be deemed to be an “unsuitable person to execute the trust,” a trustee who asserts interests in. hostility to his trust becomes an unsuitable person, and where a testator’s surviving partner is named as testamentary trustee and a substantial controversy as to an accounting, and the inventory of partnership interests furnished by the surviving partner arises between him and the other testamentary trustees, in which the surviving partner’s interests conflict with his duties as trustee, the court is justified in removing him as trustee.
[Ed. Note.—For other cases, see Trusts, Cent. Dig. §§ 217, 218; Dec. Dig. § 166.[2] ]
Appeal from Special Term, New York County.
Special proceedings by Clotilde R.' Keller and another for the removal of Hugo P. Keller as testamentary trustee under the will of Adolph Keller, deceased. From an order of Special Term referring the proceedings to a referee to take proof and report with his opinion, the petitioners appeal.
Order reversed.
Argued before INGRAHAM, P. J„ and FAUGH FIN, CFARKE, SCOTT, and MIFFER, JJ.
Alfred B. Cruikshank, for appellants.
Fewis H. Freedman, for respondent.

Adolph Keller died on the 18th of May, 1904, leaving a last will and testament in and by which he appointed the respondent and his widow and brother-in-law, the petitioners and appellants, executors and trustees of his will. His estate consisted of his interest in the firm of F. H. Keller & Co., composed of himself and the respondent. The copartnership was formed March 14, 1895. On the 14th day of April, 1904, new articles were executed. They provided that, upon the death of either member, an inventory should be taken by the survivor within three months; that the property, save cash, book accounts, bills payable, promissory notes, stock in certain corporations and jewels and supplies, carried under a stated account, should be valued at 60 per cent, of the cost price; that the said jewels .and supplies should be valued at 85 per cent, of the cost price; that the stock of the Keller Jewelry Manufacturing Company, which was owned by the copartnership, save cash in hand and in bank, should be valued at 75 per cent, of the cost; that the capital stock of certain corporations, owned by the firm, should be valued at 75 per cent, of the par value, and that the good will of the firm should be valued at $4,000, but that no value whatever should be allowed for the good will of the Keller Jewelry Manufacturing Company; that the interest of the deceased partner, thus ascertained, should be paid to his representatives in the following manner, viz.: 2y2 per cent, thereof annually for the period of four years, and thereafter semiannually at the same rate, until the entire amount should be paid, interest to be allowed at the rate of 4 per cent. The testator’s will, made on the same day, ratified and confirmed said

p. 18
articles of copartnership. The capital account of the testator was .carried on the copartnership books at the time of his death at $78,-' 267.48.- The inventory furnished the executors by the respondent within three months after the testator’s death showed the value of that interest to be $38,554.85. The petitioners and appellants have brought a suit against the respondent as surviving partner for an accounting. They attack the inventory, and assert that the respondent procured the testator to execute the said copartnership articles when the latter was feeble in body and mind. It does not distinctly appear whether fraud and undue influence are specifically averred. It is quite significant that the main purpose of the new articles of copartnership apparently was to provide for dissolution upon the death of one of the partners. The plaintiffs in that action sought an inspection of the Books and papers of the copartnership, and an order granting an inspection was recently affirmed by us against the opposition of this respondent. 133 App. Div. 910 , 123 N. Y. Supp. 1123 .

The learned justice at Special Term thought that, in view of the gravity of the charges made against the respondent, the matter ought ■ to bé referred to a referee. While undoubtedly the Special Term had the power to order a reference, we think that power was improvidently exercised. The questions referred to the referee are involved, and will be adjudicated in the action for an accounting. A reference in this proceeding will have little effect but to subject the parties to useless expense.

It plainly appears that there is a substantial controversy between the parties, and that as a result thereof the respondent occupies two inconsistent positions, one as trustee and the other as surviving partner, and that his private interests as surviving partner conflict with, his duties as trustee. He ought to be the first to apply for relief from the embarrassment of such a situation. The Supreme Court has power in an action brought, or on a petition presented, to remove a trustee “who for any * * * cause shall be deemed to be an unsuitable person to execute the trust.” Real Property Law (Consol. Laws, c. 50) § 112. When a trustee acquires or asserts interests in. hostility to his trust, he becomes an unsuitable person to execute the trust. Pyle v. Pyle, 137 App. Div. 568 , 122 N. Y. Supp. 256 . No such situation as here exists was involved in Matter of Thieriot, 117 App. Div. 686 , 102 N. Y. Supp. 952 . Of course, the respondent as surviving partner is entitled to liquidate the copartnership. The petitioners merely ask that he be relieved of the embarrassment' of continuing as trustee of his deceased partner in. view of the fact that a substantial controversy has arisen in which his private interests conflict with his trust duties.

We do not undertake in any way to pass upon the merits of the controversy, but only decide that it is of such a nature as justifies the court in relieving the respondent of the burden of continuing as trustee.

The order should be reversed, with $10 costs and disbursements, and the petition granted. All concur.

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