In re the Judicial Settlement of the Accounts of Nesmith

Majority

p. 216

In the Matter of the Judicial Settlement of the Accounts of Henry E. Nesmith, Trustee under the Will of James Nesmith, Deceased.

(Supreme Court, General Term, Second Department,

Filed July 28, 1893.)

Headnote

1. Tbustee—Impbovement of tbust estate.

By the will oí testator the trustees were empowered to improve the property, if they saw fit, and to buy adjoining property on the block, if they saw fit, raising money on mortgage for either or both purposes, if in their judgment necessary, to recover the earning of said property. The trustees erected a shed at a cost of $12,450, which was necessary to hold and increase the business formerly carried on by testator, and the rental was thereby increased $6,000. Held, that the power to raise money by mortgage was not imperative and did not subject the trustees to loss if it was not exercised, and that a direction to pay said sum out of the increased income was proper.

2. Same—Allowance fob office bent.

Where it appears that an office was necessary to the business, and the trustee gives substantially all his time thereto at said office, an allowance for the rent thereof is proper.

3. Same—Intebest.

The trustees had been partners with deceased and continued the business, and deposited the trust moneys in the firm name with the consent of all the beneficiaries. Some part thereof was used in the firm business, but notice was given when the deposit did not equal the trust funds. Held, that under these circumstances the trustees were only chargeable with interest on the sums so used by them and not on the entire deposit.

Appeal from decree of the surrogate’s court of Kings county, settling the account of the trustee.

J. Treadwell Richards, for Sarah F. Nesmith et al., app’lts; L. H. Arnold. Jr., for resp’t.

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. and Henry E. Nesmith, the Empire street property, 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,

p. 217

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 recover 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 property. 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 has increased six thousand 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 increased 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 $12,450 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 canned 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 charged 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.

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The decree of the surrogate should, therefore, be affirmed, with costs.

Dykman and Pratt, JJ., concur.