In re Nesmith's Estate — 24 N.Y.S. 527

Majority

p. 527

(71 Hun, 139.)

In re NESMITH’S ESTATE.

(Supreme Court, General Term, Second Department.

July 28, 1893.)

Headnote

1. Testamentary Trustees—Powers—Payment for Improvements.

Where trustees under a will are given power to improve property it" they see fit, raising money on mortgage tor such purpose, it in their judgment necessary, they may pay for improvements so made out oí the-increase of income resulting therefrom, when this can be done within two years.

2. Same—Liabilities—Interest on Trust Funds.

A trustee under a will deposited the trust funds in the name of a firm of which testator and he had been the members. There was no intention, to use the trust moneys thus deposited for his own benefit, or to strengthen.

p. 528

his individual credit, and the income was regularly divided among those entitled thereto. The beneficiaries under the trust generally understood that the funds were so deposited, and for a long time made no objection. Held, that the trustee was not chargeable with full legal interest on moneys so deposited.

Appeal from surrogate’s court, Kings county.

.Proceeding for the judicial settlement of the account of Henry E. Nesmith, as sole surviving trustee under the will of James Nesmith, deceased. From the decree, Sarah F. Nesmith and others, beneficiaries under the will, appeal.

Affirmed.

Argued before BARNARD, P. J., and DYKMAN and PRATT, JJ.

Richards & Brown, for appellants.

Arnold, Greene & Patterson, (L. H. Arnold, Jr., of counsel,) for respondent.

The deceased was a warehouseman, doing business near the Fulton ferry, in Brooklyn, in connection with his two sons James I. Nesmith and Henry E. Nesmith. He died in 1872, leaving a last will and testament, with two codicils thereto. The second codicil is as follows, so far as needed to present the question raised:

“I give to my sons James I. anfi Henry E. Nesmith the Empire Stores prop"erty in trust for the benefit of themselves, one-quarter each; of my son Benjamin I give one quarter, and of the children of my daughter Caroline one-quarter, subject to an annuity of my wife, Caroline, of five thousand per year during her life; said James I. and Henry E. Nesmith to have sole direction and management of said property, to improve the property if they see fit, and to buy the adjoining property on the same block (any such purposes to be included in this trust) if they see fit, raising money on mortgage for either or both purposes, if in their judgment necessary; .to receive the earning of said property; and after deducting therefrom all charges, expenses, and disbursements, including the aforesaid annuity, to account to the heirs for their respective portions except as to the children of my daughter Caroline, who may not be of age, to them paying sufficient to support and educate them till they become of age, if necessary; and it is my will that, when either of said trustees shall die, the survivor shall hold the trust, and on his death the property shall be sold, and the proceeds divided in the manner directed in my will concerning my personal properly.”

Under this power to improve, the trustees erected a shed at a cost of $12,450, which was necessary to hold and increase the business, and the year’s rental thereby was increased $6,000 a year. The surrogate" decided that they were to be paid out of this increased income. This was a favorable construction to the appellants. The clause, taken together, means to give very full power to the trustees. The power to raise the needed money by mortgage was not imperative, and did not subject the trustees to loss if it was not exercised. That was one way" of getting the money, and, in view of the heavy mortgage on the property, an uncertain way. If there had been a mortgage the interest would be chargeable on the income. When payable out of the increásed income, there is no reason why the appellants should object.. There is no illegal accumulation of rents. The trustees had power to charge the $12,450 on the income wholly where a shed costing $12,-

p. 529

450 would increase the rental so much as to pay it back in two years. The decree only postpones the payment until the increased rents will pay it. The referee has found that the office in New York is necessary to the business, both as carried on by the trustees and the present occupant and tenant, whose occupancy will terminate so soon, when the office will be liable to become again a necessity. The charge for rent was therefore proper.

The trustee gave substantially his entire time to the management of the business at this office. The moneys of Nesmith were deposited in the firm name. The account was not changed in form after his death. There was notice when the deposit did not equal the trust funds; in other words, when the trustee had used the money for his private use. The decree appealed from charges him with the interest on such sums as were used by him. The appellants claim that he should be charged with interest on the whole deposit. The referee has found that it was used to carry on the business under the old name; that there was no intent to use the trust moneys for the trustee’s personal benefit, or to strengthen his individual credit. The beneficiaries generally understood" the way the business was managed. No harm was intended. None was done. The business was successfully carried on, and the income divided yearly among those entitled thereto. The decree of the surrogate should therefore be affirmed, with costs. All concur.