In re Schroeder

This is an appeal by the administratrix from a decree of the Surrogate’s Court overruling in part the report of a referee, upon an accounting made by Lora C. Schroeder, as administratrix of Edwin A. Schroeder, deceased. Edwin A. Schroeder died October 14, 1902, leaving his widow, Lora C. Schroeder, who was appointed administratrix. Prior to his marriage to Lora C. Schroeder, he had been divorced from his former wife, Carrie B. Schroeder, and had one child by the former marriage, an infant, Phillis L. Schroeder. Pier mother, Carrie B. Schroeder, had been appointed guardian of this infant. In April, 1904, Carrie B. Schroeder, as such guardian, applied for a compulsory accounting, and an order for- an accounting was made. The administratrix then petitioned for a voluntary accounting, and after due service filed her account, which is the subject of this appeal. The account was referred by the surrogate under the provisions of section 2546, Code Civ. Proc., to a referee to examine said account and objections, and to hear and determine all questions arising upon the settlement of said account which the surrogate has power to determine. The referee afterwards filed his report, and exceptions thereto were taken and argued by both parties before the surrogate, who overruled the report of the referee in some particulars and sustained it in others.

Considering the points raised upon this appeal:

1. It seems that at the time of his death Edwin A. Schroeder was living with the appellant in a rented house at No. 10 Lexington avenue. After the decedent’s death his widow continued to live in this house for about seven months. Respondent objected to the account before the referee, upon the ground that the administratrix failed to charge herself with the rent of this house for this period. The referee found that the appellant did not assume the lease by continuing to remain in the house after her husband’s death; that therefore she could not be charged with rent thereof; that she could not be charged for use and occupation of the premises because the evidence was that the said use' and occupation was of no value. The learned surrogate reversed this determination of the referee and held that the appellant was chargeable with the reasonable value of the use and occupation of the premises; that said use and occupation was of considerable value, and fixed the same at the rental value specified in the lease, viz., $1,408.29. The appellant had already paid the rent for the time which she remained in the house after her husband’s death and had charged this against the estate in her account, and the same had been allowed by the referee. The evidence upon which the referee based his finding was the testimony of appellant and that of her attorney, Walter S. Logan. Appellant testified that she put the house in the hands of two or three real estate agents and tried to rent it, but was unable to do so, for the reason that the furnace which heated it was defective. That she tried to rent it furnished for $4,000 per annum, because that was the amount that her husband had thought it ought to bring. That she also tried to let it unfurnished, as did also the owner of the house, but to no avail. That she did not want to remain in the house and would have left at once if she could have obtained a tenant That she received an offer

2. The administratrix claims that the furniture and silverware which was left by her husband in the house at 10 Lexington avenue was given to her by him during his-lifetime. Both the referee and the surrogate held that there was not sufficient evidence to support this claim and charged the administratrix with, the value of said furniture and silverware. To establish the gift to the administratrix, Mr. Logan testified that shortly after the marriage Mr. Schroeder called upon him at his office and told him that he had given his wife all the furniture and “stuff” in the house .at 10 Lexington avenue. Mrs. Bailey, an aunt of the administratrix, testified that she heard the deceased tell the administratrix that he had given her everything in the house as a wedding present. She also testified that he allowed his wife to arrange everything in the house as she liked. Mrs. Okie, the mother of the first husband of the administratrix, which husband the administratrix had divorced, testified that in the course of a conversation with Edwin A. Schroeder, in which the furniture, tapestry, decorations, etc., were discussed by him, he remarked that “he was glad that Lora [the administratrix] could appreciate all these beautiful things which he had given her.” Mary E. Wilson, a nurse employed by the administratrix, testified that she heard Mr. Schroeder remark several times that he had given his wife everything in the house as a wedding present. Mrs. Knapp, a sister of the administratrix, testified that she had a conversation with Edwin A. Schroeder after his marriage to the administratrix, in which he “referred to his marriage as being very happy, and that my sister ought to be happy, as he had given her all these things contained in the house at 10 Lexington avenue, in the city of New York, including the furniture, bric-a-brac, silverware, and dishes, in fact, everything contained in the house, and had made her a wedding present of all these things.”

On behalf of the contestant, William A. Stafford, the brother-in-law of the deceased, testified that after the death of Edwin A. Schroeder

“I had several conversations with Mr. W. A. H. Stafford shortly after Mr., Schroeder’s death. I did not ask him what would become of the furniture' in the house. No such conversation took place in which he said that it would have to be sold, and I replied, ‘That seems terrible; some of these things I know Ned intended me to have.' May I be allowed to state the conversation? Nothing of that sort took place, nothing like that at all. It was something like that, but not that. I know it absolutely.”

She failed, however, to state what this conversation was. Her only other testimony on this point was:

“I had so many conversations with Mr. Stafford. He called on me a great many times. I know I had a conversation with him, and he wanted me to put my interests in the hands of Mr. Weiss, the lawyer, and they were all very much excited because I did not do that, and I have had conversations with him about my affairs, but never about the furniture of the house. He suggested those things many times to me; but I simply did not feel that there was any reason why I should discuss these things with him, and I never did. He is very antagonistic, and it is very likely he said these things. Yes, very likely he made that statement, or that he might make any statement at all. He is very antagonistic.”

The administratrix also testified that, before her husband died, she gave certain of the things away that she did not want; and that she sent some of the things away to be sold and received the proceeds therefrom and spent the same. But upon cross-examination she was unable to state what things she sent away to be sold, where she sent them or how much she received from the sale of them. It seems to me that this evidence is not sufficient to establish a valid gift inter vivos to the administratrix. All of the witnesses who testified in her behalf, with the possible exception of Mrs. Okie, the mother of her first husband, were interested witnesses. One was her attorney who represented her in this case, another her aunt, a third a maid who was in her employ at the time she testified, and a fourth her own sister. Appellant contends that Mrs. Okie cannot be considered an interested witness, since appellant had divorced her son. If it had not been for that fact Mrs. Okie would have fallen within that category, and the fact that Mrs. Okie had seen fit to visit the appellant" and her second husband in their home would tend to show that she had not lost that interest..

The law is well established in this state that one who attempts to establish title through a gift inter vivos must do so by clear and conclusive evidence. As was said in Matter of O’Connell, 33 App. Div. 483 , 53 N. Y. Supp. 748 :

“He who attempts to establish title through a gift inter vivos, as against the estate of a decedent, takes upon himself a heavy burden which he must support by evidence of great probative force, which clearly establishes every element of a valid gift, viz., that the decedent intended to divest himself of the title in favor of the donee and accompanied his intent by a delivery of the subject-matter of the gift.”

The language of Judge Vann, in the case of Rosseau v. Rouss, 180 N. Y. 116 , 72 N. E. 916 , is applicable here. He says:

“Thus the evidence relied upon to establish the contract is: First, the testimony of the mother who tried to swear $100,000 into the pocket of her own child; and, second, the testimony of the witnesses who swear to the admissions of the dead man. The former is dangerous; the latter is weak, and neither should be acted upon without great caution. We have repeatedly held that such a contract must not only be certain and definite and founded upon an adequate consideration, but also that it must be established by the clearest and most convincing evidence.”

The evidence offered to establish the gift intended was not of that clear and uncontradicted nature which the law requires. The referee, who had an opportunity to observe the demeanor of the witnesses, came to the same conclusion, and, aside from there being no reason why his determination should be set aside, there is every reason why it should be upheld. It is true, as contended by the appellant, that, in view of the fact that she and the decedent were living together as husband and wife, it would have been unusual that this property should have been removed into the exclusive possession of the appellant,- and for that reason an entire change of possession would not be a necessary part of the proof of delivery; but, aside from that question, I do not think that the intention to make the gift has been sufficiently established. The surrogate was right in charging the appellant with the furniture, silverware, and other effects in the house at No. 10 Lexington avenue, except as to such articles as are comprised within the exceptions set forth in section 2713 of the Code of Civil Procedure.

3. Appellant contends that the surrogate erred in holding that the charge of the attorney of $3,000 for legal services should be cut down to $2,000, and that the remaining $1,000 paid should be charged against the administratrix. It seems that, while the attorney retained the sum of $3,000 collected from the corporation of Schroeder & Arguimbau as payment for legal services rendered by him to the estate, it appears that he afterwards gave $1,000 of this amount to the administratrix. The attorney claims that this transaction was a personal loan by him to the administratrix. 1 do not think the discretion of the surrogate in fixing the proper amount of the attorney’s fees for the services rendered should be disturbed, and he is therefore sustained.

4. Appellant contends that the surrogate erred in holding that the sum of $1,172.40, which was expended for legal services and disbursements in defending and appealing a suit brought against the administratrix for rent under a lease of an apartment formerly occupied by her which had not expired when she moved out and went to live with Mr. Schroeder, was chargeable against her, and not a proper expenditure on behalf of the estate. Appellant bases this contention on her further contention that, at the time he married her,

5. Appellant contends that the surrogate erred in disallowing her certain small items of expenditure. The items disallowed are set forth in vouchers 21, 63, 66, 72, 73, and 15, 16, 24, 32, 34, 37, 41, 46, 47, 52, 53, 58.

Voucher 21 was a bill rendered by Hass Bros., with whom the executrix had an account in her husband’s lifetime which her husband permitted her to carry in his name, and which he was in the habit of paying, for clothing. Most of this was ordered in the husband’s lifetime, and what was not consisted of mourning garments for the widow. This item ($222) should have been allowed.

Voucher 63 was for flowers purchased mostly before the husband’s death, and those purchased afterwards were those which the widow placed upon the grave immediately after the interment. This latter item ($22) was properly disallowed; the balance should have been allowed.

Voucher 66 (48) was a bill for electric lighting in the house at 10 Lexington avenue after the death of Mr. Schroeder. This item was properly disallowed ($16.85).

Voucher 72 was a bill for coal purchased for the house 10 Lexington avenue after the husband’s death. So much of this as was for fuel for 60 days was improperly disallowed; and appellant should be credited with it upon the award made her as widow, under section 2713, Code Civ. Proc.

Voucher 73 was a bill for an ornament ordered at Tiffany’s on July 16, 1901, in the name of Mrs. C. L. Okie, No. 2 West Ninety-Fourth street, and which remained in their delivery department awaiting the call of this appellant until January 3, 1903, nearly three months after the intestate’s death, when she directed them to send the bill to her attorney. This ornament was ordered by the appellant before her marriage, and there is no evidence to show that the deceased ever knew of the fact, or that he intended to pay for it. The item was properly disallowed ($100).

Vouchers 15, 16, 24, 32, 37, 41, 46, 47, 52, 53, and 58 were bills for groceries and other household necessities, nearly all of which were ordered before the death of the husband. These should all have been allowed.

6. The estate held a majority of the common stock of the corporation of Schroeder & Arguimbau, and this common stock controlled the election of a majority of the directors of the corporation. The appellant contends that the surrogate should not have required a dis

7. Appellant contends that the surrogate erred in sending the case bade to the referee to permit further explanation by the administratrix with respect to the furniture in the house at 10 Lexington avenue, and the other articles therein with regard to the value thereof, and to determine the value of said property; also for the purpose of reporting as to the proper allowance to be made the widow under section 2713 of the Code, and as to the amounts which the administratrix had received from Arguimbau by way of weekly allowances. It seems to me that this proceeding on the part of the surrogate was right and proper and entirely within his authority. He had authority to send the account to the referee in the first place, and he certainly has authority to request of him a further and fuller report. The point is not well taken.

8. The remaining question upon this appeal arises upon the contention of the administratrix that the surrogate erred in charging her with certain moneys which she received from one Frank M. Arguimbau. At the time of his death Edwin A. Schroeder held a majority of the common stock which represented a controlling interest in the corporation of Schroeder & Arguimbau Company, of which he was president. At that time the corporation was very much involved. Its paper then outstanding amounted to $295,000. More than $200,000 of the company’s assets were invested in Florida lands upon which it was impossible to realize. It owed E. A. Schroeder’s estate more than $27,000. Before Schroeder’s death he made an agreement with Arguimbau, who owned the next largest interest in the company, and who was the treasurer thereof, that upon the death of either of them axi inventory should be immediately taken, and upon the completion thereof the survivor should have the option to buy out the interest of the decedent’s estate in the corporation at the inventory value, and that, if such survivor failed to do so within 20 days, the corporation should be dissolved. It seems that Schroeder held 60 per cent, of the common stock in this corporation, and Arguimbau 40, and that by the company’s by-laws a majority of the common stock could elect three out of four directors. Schroeder’s stock, of course, went to the ad

Shortly after Schroeder died Arguimbau began making payments of $100 a week to the administratrix out of- his own pocket. These payments he testified he first made to her as loans, because he “thought it would be to the best advantage of the corporation to do so.” After a few weeks, and after consultation with the corporation’s attorney ana another officer of the corporation, Arguimbau determined to treat these former and all subsequent weekly payments as gifts. He testified :

“The reason why I came to that conclusion to change them from loans to gifts was, well, Mrs. ‘Schroeder had nothing to live on at the time, and I did not want to put Mrs. Schroeder in a position of being obliged to take steps to create any internal trouble in the corporation.”

At about the time that this decision was made, the attorney of the administratrix wrote a letter to Arguimbau’s attorney in answer to one from him in which he had requested that the administratrix delay taking steps to wind up the corporation, in which, on behalf of the administratrix, he complained of certain increases in salaries which had been voted to Arguimbau and another officer of the corporation since the death of Schroeder, and wound up by saying:

“If she cannot, as administratrix, obtain enough of the money due from the company to Mr. Schroeder to pay the estate’s pressing bills—many of which are embarrassing to her personally—and enough money besides on her personal account to enable her to start upon a scale of living within her means, she would naturally feel bound, both for her own protection and the protection of the estate, to settle up the estate’s affairs at the earliest possible moment so that she could come into possession of the part that belongs to her in time to serve in some measure her present needs.”

After this letter, Arguimbau continued to pay $100 weekly to the administratrix out of his own account, but the treasurer, Stafford, turned over his entire salary received from the corporation to Arguimbau to be used in making part of these payments. This money the latter placed in his private account. Later the salary of Arguimbau as president of the corporation was reduced from $15,000 to $8,600, and thereupon he reduced the amount of the weekly remittances to the administratrix to $50. There can be no doubt but that these payments made by Arguimbau to the administratrix were for the purpose of inducing her to refrain from exercising her right to demand a dissolution of the corporation, and a payment of the corporation’s indebtedness to the estate. It is also conceded that to refrain from press-' ing these matters was greatly to the advantage of the corporation, and it is claimed, consequently, of the estate which owned 60 per cent, of the stock. The question presented, then, is simply whether or not an administratrix shall be charged with moneys which she has received from a source independent of the decedent’s estate for refraining from doing an act in her capacity as administratrix which it would have been detrimental to the estate to have done.

The learned referee found that these moneys were voluntary gifts or loans made,,by Mr. Arguimbau to Mrs. Schroeder, and that they were personal transactions, and were not induced by threats, compulsion, intimidation, or improper solicitation of the administratrix

The administratrix occupied a fiduciary relation to the persons interested in the trust estate. The rule in regard to trustees seems clear:

“They cannot use the trust property, nor their relation to it, for their own personal advantage. All the power and influence which the possession of the trust fund gives must be used for the advantage and profit of thé beneficial owners, and not for the personal gain and emolument of the trustees.” Perry on Trusts, 427.

In McClure v. Law, 161 N. Y. 78 , 55 N. E. 388 , 76 Am. St. Rep. 262 , .in an action to recover from a former president and director of the Life Union a sum claimed as profits made by the defendant out of his trust relationship with the company, an agreement had been made by which the management and control of the corporation had been agreed to be turned over for a stated consideration, accompanied by the resignation from time to time of one or more directors and the election of others in their places. The agreement was carried out, and the defendant received $3,000. The Appellate Division treated the transaction as a bribe, and reached the conclusion that the money did not belong to the corporation. The Court of Appeals said, however:

“As an officer, he had the right to resign, but the money was not paid to him for his resignation. It was paid over upon condition that he procure Levy and his friends to be elected directors and given the control and management together with the property and effects of the corporation. The election of directors and the transfer of the management and property of the corporation were official acts, and whatever money he received from such official acts were monies derived by virtue of his office, for which we think he should account. In Sugden v. Crossland, 3 Sm. & Gif. 192, Horsefield was a trustee under a will. Crossland paid him £75 to withdraw from the trust and have Crossland appointed in his place. It was held that the £75 belonged to the estate.”

The court cited the passage from Perry on Trusts, supra, with approval.

I can see no difference in principle between the receipt of money by a director to influence his resignation and the election of another in his place, and the receipt of money by an administratrix to influence and control her actions as administratrix in certain particulars in relation to the estate. It is immaterial whether the action or nonaction was for the benefit of the estate. The money was received because of the relation of the recipient to the estate. It was personal profit made

The rule is clearly stated by Judge Rapallo, in Fulton v. Whitney, 66 N. Y. 555 :

“No actual fraud on the part of the defendants is alleged or found, nor is it necessary that it should be. The object of the rule which precludes trustees from dealing for their own benefit in matters to which their trust relates is to prevent secret frauds by removing all inducements to attempt them.”

In the case of Carpenter v. Taylor, 164 N. Y. 171 , 58 N. E. 53 , the plaintiff was a general assignee for the benefit of creditors of the defendant, and made an agreement with the defendant that, in addition to his legal fees and commissions, he should have 15 per cent, on all sums of surplus after payment of the debts of the assignor up to $5,000, and 10 per cent, on anything remaining as surplus. There was a surplus, and he demanded payment in accordance with his agreement. In reversing the Appellate Division, the Court of Appeals said:

“A trustee who holds the title to property for the benefit of others cannot use his position for his personal advantage. He cannot make a profit for himself in the execution of the trust. He cannot ordinarily deal with the beneficiaries or parties interested in the estate so as to acquire the ownership of the trust property.”

This administratrix held the title to these shares of stock, and by virtue of such title she received this benefit to herself in the execution of the trust. The general rule is of the greatest importance. Full effect should be given to it by the courts. It is most salutary. Persons holding , fiduciary positions, in the many trust relations which modern society has produced, should be held to the strictest accountability. The community should be given to understand that the courts of this state will hold trustees to the highest standard of straight conduct, and will not permit them to make by virtue of their trusts a private and personal profit beyond the compensation allowed by law. In the case at bar, a year and a half went by after decedent’s death, and it was not until the contestant began proceedings for a compulsory accounting that the voluntary proceeding was commenced by the administratrix. All this time the two-thirds of the stock of this corporation, which belonged to the infant, was held undistributed in the hands of the administratrix, and she still opposes distribution thereof. Without deciding whether this course has been of advantage to the estate or not, is it not too clear for argument that the fact that she was, through the possession of this stock, receiving these large weekly payments, a temptation to take the course she did? Does it not come squarely within the principle governing the conduct of trustees?

There is no analogy between the case at bar and Matter of Schaefer, 65 App. Div. 378 , 73 N. Y. Supp. 57 . In that case the executors who were asked to account for salary, and extra compensation received by them from the corporation, were officers of that corporation, and had been so long'prior to testator’s death, and, as such officers, both before and after said death, had received the payments for their services to the corporation. It was under those circumstances that this court held that the moneys were paid to them as officers of the corporation in

The decree of the surrogate should therefore be modified as indicated in this opinion, and, as modified, affirmed, with costs to all parties pay - able out of the estate.

O’BRIEN, P. J., and McLAUGHLIN, J., concur.

I concur with Mr. Justice CLARKE in the disposition that he has made of the questions arising upon this appeal, except in relation to the payments made by the administratrix of Frank M. Arguimbau. As to those payments, I think the estate had nothing to do with them, and that the administratrix should not have been charged with the amount. Both Mr. Justice CLARKE in.his opinion and the surrogate assumed, as I view it, without proof, against the finding made by the referee, that these were payments made to influence the administratrix, acting in her official capacity, by which she obtained a personal benefit, and this case is thus brought within those cited and upon which the conclusion is based. It is conceded that the course adopted by the administratrix was largely for the benefit of the estate and was the proper course to pursue under the circumstances; and that from the delay in enforcing the claim against the corporation no injury resulted to the estate, but, on the contrary, a distinct advantage. There can be no question but that the administratrix, by adopting the course pursued, assumed a liability for any injury that would result to the estate therefrom. If the corporation had become insolvent, I assume that the administratrix would have been liable if it had been made to appear that the claim against the corporation could have been collected if proceedings therefor had been promptly instituted. In considering this particular question, we must remember that this administratrix occupied towards the estate two independent positions. She was the administratrix, charged with the duty of settling the estate and dividing the personal property among the next of kin. She was also the widow of the deceased, and, as such, entitled to a distributive share of the estate. She was totally without means, and was entitled to receive from the estate a portion of her distributive share thereof for her support. By section 2723 of the Code of Civil Procedure, the surrogate is authorized to entertain a petition at any time after letters are granted for a p'ayment to be made to a person entitled to a distributive share in the estate out of the money or other property in the hands of the administrator applicable to the payment of the distributive share of the petitioner. The administratrix would not have been justified, if she had collected the personal property of the decedent, in applying the money in her hands on account of her .distributive share in the estate; but, having the property in her hands, she would have been entitled to apply to the surrogate, under this section of the Code, for permission to pay'to herself the amount of money necessary for her support. She was thus in a position, not as administratrix, but as entitled- to a distributive share of the estate, to apply for the payment

For these reasons, I think the decree of the surrogate should be further modified by overruling the objection to the referee’s report in this particular, and the referee’s report in that respect confirmed.

HOUGHTON, J., concurs.