Mills v. Smith — 57 N.Y. St. Rep. 388

Majority

p. 388

Wilfred F. Mills, App’lt, v. Edmund T. Smith, as Executor, etc., Resp’t.^[1]

(Court of Appeals,

Filed February 9, 1894.)

Headnote

Executor, etc.—Devastavit. '

Where the loss of a testamentary fund is caused by the waste or misconduct of the executor and trustee, no claim for contribution arises against the residuary legatees, in the absence of proof of any conversion or combination on their part whereby the trust fund was affected or divested.

Appeal from judgment of the general term of the supreme court in the first judicial department, entered upon an order made

p. 389

Jane 29, 1892, which affirmed, a judgment in favor of defendant entered upon a decision of the court on trial at special term.

The nature of the action and the facts, so far as material, are set forth in the opinion.

George H. Ilart, for app’lt; Fred. W. Iiinrichs, for resp’t.

Willian Wickham Mills, by his will, gave to his executors the sum $20,000, in trust “to loan the same on bond and mortgage upon real estate and to apply the net income thereof, at their discretion, to and for the use of his son, Theodore Mills, during his natural life, and, upon his decease, to divide, etc., etc., among the children of said Theodore, etc.” Testator died in January, 1865. The plaintiff, the sole surviving child of testator’s son, Theodore, was born in November, 1865. The will was admitted to probate in January, 1865, and letters testamentary were issued to the persons named as executors, to wit: To Eliza A. Mills, testator’s widow, and to Washington Mills and William W. Mills, two of testator’s sons. Theodore, the plaintiff’s father, died in January, 1886. Plaintiff, upon attaining his majority in November, 1886, demanded of William W. Mills, the then sole surviving executor of the testator, the fund given in trust for his father, Theodore Mills; but the executor was unable to respond to plaintiff’s demand and, as it appears, was insolvent. Plaintiff then brought this action; making the residuary legatees under the testator’s will, or their legal representatives, parties defendants. His complaint is based upon various charges of unlawful conduct and fraudulent acts by the defendants and others of testator’s children, since deceased, in matters connected with the administration of the testator’s estate. Those relating to the admission of the testator’s will to probate aud to the appraisement of the testator’s property are unnecessary to consider. He charged that the defendants unlawfully contrived to prevent the legacy bequeathed to the plaintiff from being discharged by the surrogate and from being invested upon bond and mortgage, as required by the will; that they unlawfully caused the surrogate to settle the accounts of the testator’s executors, with the effect of defrauding the plaintiff out of his legacy; that the executors failed to appropriate and to invest the sum of $20,000, as provided by the said will, and, finally, that they, with intent to defraud the plaintiff, unlawfully combining together, distributed all of the testator’s estate among themselves, in disregard of the plaintiff’s rights. Resting upon these charges, the plaintiff claims to be entitled to compel the residuary legatees to account as for moneys fraudulently appropriated- and distributed to them and to have them satisfy his claim to the trust fund of $20,000 thereout. Upon the trial, proof was given of certain proceedings, which took place after testator’s death, with reference to the probate of his will, to the appraisement of his estate and to settlements of his executor’s accounts. Beyond that documentary proof, the only other evidence was in the testimony of the defendant William W. Mills, the sole surviving executor. The trial judge found as facts, that at the time of accounting by the executors and of the surrogate’s

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decree thereupon, the trust fund of $20,000, invested in bonds, secured by mortgages, as required by the will, was in the hands of the executors and held in trust by them; that no part of the same was ever paid to the residuary legatees; that there was no evidence assailing the correctness of the accounts, or to show any conspiracy, combination, or consent to defraud the plaintiff, or to misapply the trust fund. Upon such and other findings the trial judge dismissed the complaint, and his conclusions have been sustained by the General Term. We think the learned judge could have come to no other conclusion upon the proofs. There is not a particle of evidence to sustain any of the allegations of fraudulent conduct in the residuary legatees, or to show any diversion of the trust funds into their hands. This action is simply an attempt to fasten upon the distributees of testator’s residuary estate the responsibility for the subsequent default of the executors, as trustees for plaintiff’s father. That cannot be done. Where the loss of a fund is due to the waste, or misconduct, of the executor and trustee, he and his estate alone can be looked to. No claim for contributions arises against residuary legatees in such a case. They are liable to refund in a case where, having •been paid from the estate, it is discovered that there is a deficiency of assets for distribution under the will, - caused by the diminution of the estate through the premature payment of legacies.

It may be perfectly true when, in 1871 and 1872, proceedings were had for an accounting by the executors, which resulted in a decree of adjustment and distribution, that the plaintiff and his father should have been cited to appear and that, for the want of such citation, or of an appearance, the proceedings and decree as to them were irregular and of no binding force. But admitting to the fullest extent the plaintiff’s rights to complain of that defect, that fact, however otherwise available against the executors, does not furnish any support for the present action. If there was the omission to cite his father, or him, or to cause his appearance by guardian, it may have been a serious irregularity; but it, in no wise, furnishes any basis for imputing to the residuary legatees any fraudulent intention. They were not called upon to verify the regularity of the procedure and nothing connects them with a purpose to deceive plaintiff and his father, with respect to the accounting. In the accounts filed upon that accounting, it was shown that bonds and mortgages, representing in the aggregate the amount of $20,000, and particularly described, were held as a trust fund for Theodore Mills, plaintiff’s father. The accounts of the executors were verified and were made the subjects of objections. Testimony was taken before the surrogate at some length. In the decree of the surrogate, as rendered upon that accounting, the executors are credited with the amount of the trust fund, as set apart for Theodore Mills. Neither in that proceeding for an accounting, nor in anything previously done between the executors and the parties interested in the estate, does anything appear which, in the slightest degree, tended to prove any collusion or conspiracy to injure the plaintiff

p. 391

or his father. To the contrary of any theory of a combination between the executors and the legatees, there is evidence to show that the former were held strictly to the performance of their duties. When we come to consider the evidence given by the surviving executor, at the trial, upon his examination bv the plaintiff’s counsel, we find him testifying that he received the mortgages and securities that were set aside for the trust fund by him for Theodore Mills ; that he and his brother took them out of the safe and that his brother, Washington Mills, the deceased executor, then took charge of them. He does not explain what became of them; simply saying that he never did anything with them thereafter and never had any control over them. The inference of a devastavit is, of course, plainly deducible. All the evidence in the case goes fairly to prove that the trust fund, created for the plaintiff’s father, was invested, held and set apart by the executors and existed in that condition at the time of the rendition of the surrogate’s decree. That being the proof, the plaintiff cannot be heard, as against the residuary legatees, who received their portions of the estate, pursuant to this decree, to say that, for the irregularity in the accounting proceedings, the distribution of the estate to them was wholly invalid and null and that they should refund sufficient to make good to him the amount of the lost trust fund. That result does not follow upon any such proof. The question, in which the plaintiff was interested, concerned the trust fund and when that is found to have been set apart and held by the executors out of the estate, it is no concern of his how the distribution was made of the rest of the estate to the residuary legatees. He is remitted to his remedy against the executor or trustee, and for any breach of duty or of trust on his part he is without any claim against the distributees of this estate. It is unquestionably essential to the security of the executor that, upon a judicial settlement of his accounts, all parties interested in the estate and entitled to be heard, should be cited, and that all the proceedings shall be conducted, in material matters, as required by law. But with respect to payments made by an executor to legatee, regarded as advances, or without a decree authorizing them, they take without other risk than such as may arise by reason of insufficiency of assets to discharge prior claims, or to pay other legatees with equal rights, when such payments are duly and regularly ordered to be made upon a judicial accounting. In the absence of any proof of a fraudulent connivance or combination on the part of the residuary legatees, whereby the trust fund appointed to be held for his father’s life was affected or diverted; or of any proof to show that that fund was non-existent in the executor’s hands and never was set apart and held as a trust, the the plaintiff is without sufficient ground for an action against the residuary estate to compel them to refund, merely because there was a failure to cause his appearance upon the proceedings for a settlement, or some irregularity of procedure. His counsel’s brief is very full in its reasoning and bristles with propositions relating to the necessity for the observance of the rules established by statute, in order to confer jurisdiction upon the court, or to give

p. 392

force to its decrees. We do not dispute them, in the main ; but they do not touch this case. The difficulty in their application is that while they illustrate the effect of irregularities in proceedings before the surrogate and might be applicable as against the executors; or in a case where it is made to appear that the final distribution of the estate has been withoutn-egard to, and to the prejudice to prior claims upon the estate, they are not applicable in aid of an action like this; where the object is to compel the distributees to make good the amount of a trust fund, lost, presumably, through the misconduct of the trustee and, so far as the proof discloses, in no wise, through the acts of the residuary legatees.

We deem it unnecessary to continue the discussion. The opin-ion at general term is very full in its review of the questions and sufficiently answers many of them we have not referred to. Hor have we overlooked other questions, raised upon exceptions to the rulings of the trial judge. In our opinion there was no error in such respects. The plaintiff utterly failed to establish any of the charges against the defendants of a fraudulent contrivance or combination, resulting in injury to his rights, and his complaint was properly dismissed.

The judgment should be affirmed, with costs.

All concur; Andrews, Ch. J., in result.

Judgment affirmed.