Foote v. Bruggerhof

O’BRIEN, J. 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 testan;entary guardianship of the persons and estates of the defendants Lucy F., Bessie M., and Ray 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. devisee, and.hequeath 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 codicil to 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 whjch 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 he 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 1883, 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 $196,305.68 in cash and securities, and decreeing the distribution thereof in the following language: “Said amount is hereby divided into fiveequal shares of $44,387.29 each.” Then follow provisions ordering, with respect to the share of each of the persons, that the said executors 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 affected a separation. Neither has there been a separation or di [512] vision of the income received from the estate after the accounting pro■ceedings 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 feold, in. its undivided ■state, portions, dfinat all, of :the shares .found .b,y the decree of ¡1883. -Although many questions >are .suggested, .four principal ".ones -only need be considered: (1) Gan.the action fee.maintained? (2) ¿Bidthe ■ testator, fey '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); asdnciderital .thereto / what effect'would the retention of the fund, without actual division,'have upon such right? 1 In Blake v. Barnes, (Sup.) 12 N. Y. Supp. 69, which -upon this •point .was affirmed .fey .the general term of .this .court, it'-was held that a court of-equity will not' assume jurisdiction of1 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 donein the surrogate’s court,—"and it is not enough ‘:to -allege,the special "facts, but.they.must be true, and must fee.established by' competent Testimony ,—and that,'if any such'special fact is estab-' •lished, 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 cáse'that suéh ."special "facts.are .made to .appear, dn -that, among .other things, the fund, which, has heén.feéld -intact fey the plaintiffs, is to fee -accounted'for fey them in different’.capacities,.and that upon -such accounting a..construction of the .provisions o"f the .codicil is .necessary. In .regard To Ihis-Jast question, the learned judge at special'term was ■of opinion thát'the provisions "of The codicil,were void,.for,the reason that therein1 the testator suspended the power of alienation duringithe •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, fin effect, provided.for ^distribution of his estateinto five equal ■shares, one share to go to each of bis 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 21 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, ■towhich suéh one .may fee .entitled ,under, my said -will, after.such one becomes twenty-one years-of age,”—such;share to be kept invested, and 1 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 made1 it dependent upon the life of one, namely, the beneficiary alone; because it is evident'that, whileThe executors were not obliged 'to pay -over the principal of any one of The "shares'upon the child to - Whom suéh [513] 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 exerpised their discretion by withholding the fund during the life and until the death of such 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 the 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 discretionary 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 assumed 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 notin bothj 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 [514] 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 are 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 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 prevent 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, arid for the mutual benefit of all interested in the estate, retain the entire 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. [515] 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. All concur.