Foote v. Bruggerhof — 50 N.Y. St. Rep. 311

Majority

p. 311

Jirah I. Foote et al., Ex'rs, Pl'ffs, v. Lucy F. Bruggerhof et al., Def'ts.

(Supreme Court, General Term, First Department,

Filed December 16, 1892.)

Headnote

1. Executors and administrators—Accounting.

Testator, by his will, directed that his estate be divided equally among his children living at his death, such shares to be paid to each child on attaining majority. By a codicil, the executors were given discretion to postpone, for any period not illegal, the payment of the principal of any such share to which such one may be entitled after he becomes twenty-one years of age, and pay only the income therefrom. Testator left five children; the executors accounted and distribution was decreed, the estate being divided into five equal shares, and the executors ordered to file vouchers “for all payments to be made by them under this decree, especially the voucher from themselves as testamentary guardians, when they shall be, and hereby are dischargéd, as such executors until the further order of this court.” Held, that as the estate was never actually divided, it must be accounted for by the executors in different capacities, and as, upon such an accounting, a construction of the codicil would be necessary, the case presented such special facts as would enable the executors to maintain an equitable action for an accounting.

2. Will—Suspension op power op alienation.

The provision of such codicil, giving the executors discretionary power to postpone,for any period not illegal, the payment to any child of the principal of his share after he becomes of age, was valid, as it simply might suspend the power of alienation during the lifetime of such child.

3. Executors and administrators—Commissions.

Plaintiffs, in such case, are not entitled to commissions upon the same fund held by them, over the same period, in the double capacity of guardians and trustees.

4. Same.

Plaintiffs should not be deprived of their commissions because they neglected to make an actual division of the estate into separate funds in accordance with their directions.

5. Same.

Each beneficiary is entitled to his proportionate share in the income realized from the investment of the entire fund, less such amounts as can be shown, by the executors, to have been paid to them or for their account, and for which such executors are justly entitled to a credit.

p. 312

Appeals from interlocutory judgment in action by executors for an accounting.

Maclay & Forrest, for pl’ffs ;

John Henry Mann, for def’ts,

Lucy F, Bruggerhof, individually and as administratrix, Margaret B. Scrugham and Bessie M. Govell; Robert P. Getty, Jr., for deft Bay F. Otis.

This action was brought by the plaintiffs for an accounting in respect to the estate of Horatio N. Otis, deceased. The defendants are the four children of the deceased and the administratrix of a deceased child. Horatio N. Otis died May 7, 1881, leaving a will, which was thereafter proved before the surrogate. In addition to their letters testamentary, the plaintiffs also received letters of testamentary guardianship of the persons and estates of the defendants, Lucy F., Bessie M. and Bay F. Otis, who were under age when the testator died. By his will the testator disposed of his estate as follows :

“ Third. I direct that all my estate that shall remain at the time of my decease shall be divided into as many equal shares as I may leave children surviving me ; provided, that the issue living, at the time of my decease, of any deceased child of mine shall take a share such as the parent of such issue would have taken if living, and I give, devise and bequeath to each of my children that shall survive me, one of such shares, and one share to such issue of each deceased child. * * * Fourth. The portions above provided shall be paid over by my executor and executrix to the several legatees upon their attaining the age of twenty-one years, and not before; provided, that my executor and executrix shall have the time allowed by law for the settlement of my estate, and except as hereinafter provided.”

Subsequently, by a codiciLto said will, it was provided :

“ Second. I direct my executor and executrix named in my said will, and I hereby declare my said executor and executrix shall have a discretionary power to postpone, for any period not illegal under the laws of this state, the payment to any legatee or devisee of the principal of the share, or any portion thereof, to which such one may be entitled under my said will after such one becomes twenty-one years of age, if, in the judgment of either said executor or executrix, such postponement shall be deemed best for such legatee or devisee, but said executor and executrix shall keep such share, or part thereof, remaining in their hands invested, and such legatee or devisee shall be entitled to receive the income annually from the same.”

In 1888, plaintiffs accounted as executors before the surrogate, and thereafter a decree was made judicially settling their accounts, by which it was found that there was an actual balance in the executors’ hands of the sum of $196,805.68 in cash and securities, and decreeing the distribution thereof in the following language: “ Said amount is hereby divided into five equal shares of $44,887.29 each." Then follow provisions ordering, with respect to the share of each of the persons, that the said execu

p. 313

tors pay over, retain, and invest the said shares, and concluding with the following paragraph:

“It is finally ordered, adjudged and decreed that said executors file in this court vouchers for all payments to be made by them under this decree ; especially the vouchers from themselves as such aforesaid testamentary guardians, when they, the said executors, shall be, and hereby are, discharged, as such executors, until the further order of this court.”

Since the decree the plaintiffs have never actually separated or divided the fund into the shares to which the five children were entitled, excepting so far as payments of portions of said shares to such persons have effected a separation. Neither has there been a separation or division of the income received from the estate after the accounting proceedings of 1883. But it would appear that the same were used in the expenses of running the household, the members of which household were all the testator’s children, for parts of the time, and also the expenses of educating the children, and for traveling and other similar expenses. It is conceded that the plaintiffs still hold, in its undivided state, portions, if not all, of the shares found by the decree of 1883.

Although many questions are suggested, four principal ones only need be considered: (1) Can the action be maintained? (2) Did the testator, by the codicil, suspend the power of alienation for a period longer than two lives in being? (3) What compensation should the plaintiffs receive? And (4), as incidental thereto, what effect would the retention of the fund, without actual division, have upon such right?

In Blake v. Barnes, 12 N. Y. Supp., 69 , which, upon this point, was affirmed by the general term of this court, 45 St. Rep., 130 , it was held that a court of equity will not assume jurisdiction of an action for an accounting by executors, disconnected from the enforcement of a trust, unless special reasons are assigned and facts stated to show that complete justice cannot be done in the surrogate’s court, and it is not enough to allege the special facts, but they must be true, and must be established by competent testimony, and that, if any such special fact is established, then the court will assume jurisdiction of the estate, and, in the general accounting, “ will not limit the relief to the single fact which appropriately brought the case within its jurisdiction.” We think in this case that such special facts are made to appear, in that, among other things, the fund, which has been held intact by the plaintiffs, is to be accounted for by them in different capacities, and that upon such accounting a construction of the provisions of the codicil is necessary.

In regard to this last question, the learned judge at special term was of opinion that the provisions of the codicil were void, for the reason that therein the testator suspended the power of alienation during the lifetime of the survivor of three persons. This, we think, was error, as a brief consideration of the provisions of the codicil, taken in connection with the provisions relating to the division of the fund, will show. The testator, in effect,

p. 314

provided for a distribution of his estate into five equal shares, one share to go to each of his children living at his death, and to the issue of any deceased child, the same to be paid over upon such child attaining the age of twenty-one years. By the codicil a discretionary power was conferred upon his executor and executrix “to postpone, for any period not illegal under the laws of this state, the payment to any legatee or devisee of the principal of the share, or any portion thereof, to which such one may be entitled under my said will, after such one becomes twenty-one years of age;” such share to be kept invested, and the legatee or devisee to receive the income annually upon the same. This did not suspend the power of alienation, as assumed by the learned trial judge, during the lifetime' of the survivor of three persons, but made it dependent upon the life of one, namely, the beneficiary alone; because it is evident thaf, while the executors were not obliged to pay over the principal of any one of the shares upon the child to whom such share belonged arriving at age, still there was no possibility of its being' suspended beyond such life. ' It is true that, during the life of the beneficiary, the executor or the survivor could exercise such discretion by withholding, after the child attained its majority, the principal, and keeping it invested, paying over the income annually. But it was not intended to hold, and the idea is expressly excluded of holding, the fund beyond the life of such beneficiary. As, therefore, there was but one life in being during which the power of alienation was suspended, even assuming the executors to have exercised their discretion by withholding the fund during the life and until the death of each beneficiary, the provision was valid and lawful, and, in accordance with the intention of the testator, should be made operative.

The most difficult question relates to the compensation to be awarded the plaintiffs. It appears that, as to the portion of the estate to which the minors were entitled, the decree of the surrogate in 1883 provided that the plaintiffs should hold it as testamentary guardians; and, with reference to tfie shares belonging to the adults, the question is presented whether the plaintiffs took the same and continued to hold it as executors or testamentary trustees. With respect to the fund not embraced in the decree of the surrogate of March, 1883, we think the trial judge was right in holding that the plaintiffs are entitled to commissions, as executor and executrix, upon such funds. He also held that they were entitled “ to commissions, as trustees, on the share of each child, until the child reached the age of twenty-one, and to commissions, as guardians, on the money expended for the benefit of each child during its minority.” If, in awarding commissions upon the share of each child, the learned judge intended to include all the commissions to which they were entitled, not alone for holding and investing, but also for paying over to each of the minors, then we think the conclusion reached by him was correct; because, as trustees, they would be entitled to one-half commissions for holding, and one-half upon paying over the trust funds.

Inasmuch, however, as the executors are vested with discretion

p. 315

ary power, and they have not determined upon its exercise in favor of the former minors, who have now all reached majority, we do not think that they should receive, until they have exercised their discretion, more than half commissions ; the payment of the other half being reserved until such time as the share is actually delivered to the beneficiary. To allow them, however, in addition, commissions as guardians on the moneys expended for the benefit of each child during its minority, we do not think warranted; for the reason that, if we assume that since the decree of the surrogate in 1883 the plaintiffs have held the fund which belonged to each minor as testamentary guardians, and not as trustees, they could only claim commissions in one capacity and not in both, for the performance of exactly the same service by the same persons. While, therefore, there might be a question in what capacity commissions should be allowed, we think it reasonably free from doubt that they should not be allowed in both capacities, upon the same fund, held by the same persons, over the same period. In this view as to the right of compensation to be paid the plaintiffs, we are discussing their right to commissions upon the fund, as distinguished from the income. With respect to the income, they are entitled, of course, to commissions, upon paying over the same, at the statutory rate.

As to the failure of the plaintiffs to make an actual division or separation into different funds, and their failure to so hold the same separate and distinct, we do not think, in view of the authorities, that this is a controlling consideration upon the question of compensation. As was said in Blake v. Blake, 30 Hun, 471 :

“ The actual division of the estate into five parts is not necessary to initiate the trust. It is for the mutual benefit of all that the estate was kept together, and no one objected at the settlement that there was no actual division. Legally, it is divided. The shares ate separate, and each gets his proper income therefrom." See, also, Laytin v. Davidson, 95 N. Y., 263 .

These views as to the compensation to be awarded plaintiffs upon the shares of the minors should also control as to their right to half commissions, as testamentary trustees, upon the shares of Bradford and Margaret, who were adults, and whose shares, under the discretion vested in the plaintiffs, were retained and invested, and to their right to the other half upon their paying over, at any time, the principal of the fund. It will thus be seen that we think the learned trial judge erred in not allowing commissions to the extent of one half upon the shares held by plaintiffs for Bradford and Margaret, and in disallowing commissions upon the annual income of each share held by them in trust, at the statutory rate. Should it, upon the accounting, be shown that the plaintiffs, as executors or trustees, were guilty of any waste or of any wrongdoing, this would affect the question of their right to commissions; and we think that the question as to what commissions should be paid might well have been left until the termination of the account, when, with all the facts before it, the court could fix their compensation. The trial court, however, having gone into the question, we have deemed it proper to state what we regard as

p. 316

the general rules relating to compensation of executors and trustees.

Another conclusion reached by the learned trial judge, we think, should also be modified, namely, that requiring that the plaintiffs should account for each share as a separate and distinct fund, without reference to any other fund ; because upon the trial it appeared, and he so found, that there never was an actual division into shares by the plaintiffs, but that they held the entire fund together. Thus it would be a physical impossibility for them to present accounts having reference to each share, as though there had been a separation, and each share had been separately administered upon by them. This fact, however, that there was not an actual separation into separate and distinct funds, should not prei vent each of the beneficiaries receiving, in the accounting to be had, a statement of the disposition made of the property belonging to each of them. In other words, where executors, without objection, and for the mutual benefit of all interested in the estate, retain the entile fund, and invest the same generally, without reference to each separate beneficiary, each would be entitled to his proportionate share, as his interest might appear, in the income realized from the investment of the entire fund. This, upon an accounting, they would be entitled to receive, less such amounts as it can be shown by the executors have been paid to them, or for their account, and for which such executors are justly entitled to a credit. In accordance with these views, we think the interlocutory judgment should be modified, with costs to the executors, to be paid out of the estate.

Yan Brunt, P. J., and Barrett, J., concur.