In re the Judicial Settlement of the Accounts of Curtiss

Silkman, S. — The court, upon the application of the petitioners, permitted their resignation, but upon condition that trustees’ commissions upon the principal of the trust estate be waived. The authority for imposing such a condition is found in the case of Matter of Allen, 96 N. Y. 327. The court intended that the petitioners should have commissions of executors, but none as trustees, upon the principal of the trust. It was directed that the decree to be entered should be upon notice, and now the settlement of the decree to be entered is before the court for consideration. It is urged by the special guardians, with much insistence: First, that the petitioners would not be entitled, in any event, to commissions in the two capacities, — as executors and as trustees — because, it is claimed, the functions and duties of executor and trustee co-exist and run together, that the will does not provide for separate and successive duties. Second, that the decree entered on the 17th day of June, 1891, i© not conclusive as to the allowance of commissions, because the life beneficiaries only were.made parties to' the proceeding, the infant cestui que trust not having been cited; and, Third, that the duties to be performed under the will are not duties which can be performed by a substituted trustee, but miist be performed by an administrator with the will annexed. The testator, by the seventh clause of his will, provided as follows: “All the rest, residue and remainder of my estate, — 532 — both, real and personal of whatsoever nature, and wheresoever situated, I give, devise and bequeath unto my executors hereinafter named, their survivors, successors and assigns, in trust, however, to take the same in their possession; to convert the same into money, without needless sacrifice, subject to the exceptions above set forth; to invest the same in such securities as they may from time to- time see fit, whether they are the securities recognized by law for investment by executors and trustees or not; to continue, in their discretion, any investment which I have made; and to dispose of the same as follows, viz.: The said residuary estate shall be divided into two equal parts, to be separately invested, to be known as ‘ Fund No. One and Two.’ “Fund No. one shall, for purposes both, of division of income and principal, be divided into, shares, one share for each of my surviving children, and one share for each child of mine that shall have died before me, leaving issue; and, for the purposes of such subdivision and apportionment, the amount of my balance appearing on my books at my death against any child of mine, or any sum which shall be owing to, me, except as above released, shall be considered, not as a debt, but as an advance^ ment, and shall be counted as cash in making up the apportionment aforesaid, and the share of each child shall be less by such amount than it otherwise would be. “I direct my exemitors to pay over or apply the net income of each child’s share, ascertained as above stated, to, his or her use during the term of his or her natural life, except that no more than fifteen hundred dollars a year shall he paid or applied to the use of my son Frederick during his minority. I ■also authorize and empower them, or the survivor of them, their successors in the trusts, in their discretion, to make to each child advancements out of the principal of each one’s shares so held in trust for them respectively, as may be deemed for their highest good, in the following sums.” Ttestator then names the times at which the part of the prin — 533 — cipal may be advanced to Ms cMldren; respectively. He then provide®: “ The net income of the respective sums s;o held in trust for my cMldren shall be paid to them, or applied to their use, during the term of their natural lives, for their maintenance and support; the principal, or so. much thereof as shall remain at their respective deaths, to be paid or transferred to their heirs or next-of-kin.” The testator then provides as to fund No. two as follows:: “ The incpme of fund No. two shall be paid over, as the same accrues, to my wife, Mary E. Curtiss, during her life, for her own use absolutely. After her death; or in case she reject this provision, and claim dower instead, the income and principal, both of said fund No. two and of the other property mentioned in this will, not specifically devised or bequeathed, shall be disposed of in the same manner as fund No. one; but the amount of advancement to my cMldren,' respectively, shall not be increased thereby.” The testator then, by the eighth clause of his will, provides: “ The legal title to all my real estate subject to the provisions of this will shall vest in my executors and trustees, and they are hereby authorized and empowered to sell and convey, lease, and, in general, deal with the same in their discretion.” He then provides that the property which his wife is given the use of for a period of years shall not be sold without her consent, and that property specifically devised to Ms son Frederick shall not be sold unless he refuse to accept thei same upon the terms provided, and further provides that the distributive shares of any of the distributees might bei valued and set off in lieu of sale .and distribution of the proceeds. Testator then, by the Mnth clause, nominates and appoints “ my brother, Frank Curtiss, and my friend Frederick DeOBillier, executors of this my last will and testament.” It is claimed that the duties, under the provisions above quoted are so mingled with’ the duties of executorship that there — 534 — is an intention evident on the part of the testator not to- separate the offices of executor and trustee, and that the legal conclusion from such provisions is that the duties, and functions run together and are inseparable, and that the executors aud trustees named are entitled to commissions in the capacity of executors only. In this claim I tbink the special guardians are in error. While it isi tine that the testator uses the term “ executors ” when, perhaps, it would have been more appropriate to have used the term “ trustees,” the use of the term “ executor ” or “ trustees ” does not necessarily define the character of tire office. Whether they are to act in the capacity of executors, or that of trustees, is to he determined by the functions which they are to perform. The duties of an executor are usually simple, — the burial of the deceased, thei collection of his assets, the payment of his- debts and legacies-, and the distribution of the residue to those entitled thereto, as residuary legatees, heirs-at-law or next-of-kin. The distribution of the residue may he immediate, or it may he postponed, and be paid in installments or by way of annuity, or paid to trustees for the use aud benefit of beneficiaries named. The' retention by executors of any portion, of the estate upon a trust provided for is a distribution of tbat part, — as. much so as if the same bad been paid te other persons, as trustees. If paid to' a trustee, or retained by the executor as trustee, the distribution, to ha valid, must ha under one of the trusts- authorized by the Revised Statutes'. Bearing in mind the simple duties of an executor, and the fact that the duties- of a trustee must be thosei in the execution of a trust authorized by statute, we will have no difficulty in determining where the executorial duties leave off, aud the trustee’s duties begin. In this case the testator has given his residuary estate to- his executors, in trust, to pay to, or apply to the use of, his wife and children the income thereof during their natural lives. This is a trust duty, pure and simple, and depends upon the Revised Statutes for its validity. While it may he true that for a cer — 535 — tain period the duties of the executors and of the trustees coexist and run together, by reason of the fact that, the trust being for the support and maintenance of the testator’s wife and children, they are therefore entitled to the income from testator’si death, the running together of such duties lasted only until the ordinary executorial duties had been fulfilled, and the amount of the residue of the estate established. The Code provides for the compensation of executors (section 2-130), and also for the compensation of testamentary trustees!, separate from that of executors. Code, section 2802. It is clear from the authorities that, where it is contemplated that the executors’ duties are to end and the trustees’ duties are to begin, double commissions, may be allowed, — onei commission to. the executors, and another commission to. the trustees. Laytin v. Davidson, 95 N. Y. 263. In fact, under the provisions of the Code as. they exist, there is no power to deny such commissions, except for misconduct on thei part of the executor or trustee. The facts in the case of Laytin v. Davidson, where double commissions were allowed, are similar to those in the case before us. It was said in that case that the duty of distribution into shares, and to receive and apply the income of the several shares, to the use of the beneficiaries, respectively, could not be performed until the residue given to thei executors, in trust to divide into shares, and pay over and apply the income of the several shares to the testator’s wife, and children, had been ascertained. In the case before us, the residue, was ascertained by the decree of the surrogate upon the accounting of the executors in 1891. I have carefully examined the case of McAlpine v. Potter, 126 N. Y. 285, relied upon by the special guardians, but do not think the facts in that case admit of itsi being cited or of its being an authority in this. There the testator gave, to his trustees all his real and personal estate, in trust, for the pur — 536 — poses named, and to retain his estate entire and undivided, except as provided for, and then provides for' the payment by his trustees of his funeral expenses, debts, taxes, etc. There were no- duties to he performed by the executors as such, and there was no residuary estate to be ascertained. The duties were to be performed by the trustees from the beginning. Judge Finci-i says: “ At its very outset it makes the executors wholly and continuously such, or wholly and continuously trustees; for in its first sentence® it gives the entire estate in trust, and directs the executors and trustees hereinafter named to retain it undivided till the period of distribution, and meanwhile to. pay funeral expenses, debts accruing, taxes, repairs, reasonable insurance, one fixed and definite annuity, and aliquot parts of the net accruing income until the final distribution.” It is a proper criticism of the will under consideration in McAlpine v. Potter, to say that it appointed trustees only, and that there were no duties to be performed by executors. Here the duties of executors, and trustee® are separate and dis*tinct, and in such .a case the law not only permits, but directs, the allowance of double commissions. We are then brought to the point that the allowance of commissions by the Surrogate in the decree of June, 1891, is not conclusive upon the infants .represented by the special guardians, because such infants cesiuis que trustent were not made parties thereto. The mere statement, of the position of the special guardians carries with it the answer that, as to such parties, the court must now review the allowance of commissions upon principal. All the parties interested in the income were made parties to the proceeding, and are consequently hound by the decree. It is urged that the executors were not entitled to commissions allowed upon securities possessed by the testator at the time of his death, and retained by the executors and trustees, but which might have been converted into cash in order to determine the cash value of the residuary estate. I disagree with the position of the special guardians as to the — 537 — right of the executors to- commissions upon the value of these securities received by them and retained by them as trustees under the trusts contained in the will. The trustees were legatees and devisees of the entire residuary estate, and as such had a right to- elect to take it in the form in which it was- left by the testator, provided it wa® unnecessary to convert it for the purposes -of paying debts and legacies; and such election does not deprive executors of commissions thereon, nor does- the fact that the same persons -are executors and trustees impair such right to commissions-. Matter of Moffat, 24 Hun, 325; Matter of Mason, 98 N. Y. 536; Phoenix v. Livingston, 101 id. 451; In re Willets, 112 id. 289. It would be impolitic for the law to- deny to- executors commissions under such circumstances, because to- do so might invite the disposal of investments; judiciously made by the testator, for the purpose only of entitling such executors- to commissions upon the proceeds-. It is the policy of the law to remove th-isi te-mpta.tion. It must, therefore, be held that the executors have the right to have the securities considered as cash, for the purpose o-f computing their* commissions-. Th-erei -has been no judicial determination, however, as to the value of these securities-, in a proceeding in which- all- the parties- interested could have been heard as to such value. Their value-, therefore, can only be considered as it has been- fixed by the appraisers upon the inventory and appraisement made; under the order of the surrogate. I do not understand that the case- of McAlpine v. Potter holds contrary to the; view® expressed. As has been stated, the will in that case provided for the functions o-f trustees only, and directed the estate to- be held entire and undivided until disposed of as provided. The court held that the period of distribution had not arrived, and, until that time arrived, no commission® could be allowed upon the securities which came into- the hands of the trustees. The; language- of Judge Einch clearly distinguishes the ease — 538 — from the present one. He says: “ The bulk of the estate came to the executors in the form of securities which have not been turned into money. No law justifies: the allowance of half commissions upon their estimated value in advance of their conversion into money or its. equivalent. * * * A time may come when thei allowance may be entirely just and proper. That will be when the securities, have been turned into' money for the purpose of payment, or have been accepted by the legatees as cash without being converted.” In the case before us the. trustees, as residuary legatees, accepted the securities; and it must be assumed that they were of the value determined by the official appraisers:, and were taken at that value. I am, however, of the opinion that the executors are not entitled, as such executors, under the provisions of testator’s will, to- any commissions upon the real estate sold. The title to- this real estate passed to the trustees under the devise of the rest and residue of testator’s: properly. There was no necessity for, nor purpose to be served by, a sale of the realty by the executors. The executors had no- right to deal with it, unless: it should become necessary for them to convert it for the: purpose of paying debts and the legacies provided for in the will. While- it is true that the testator provides, in the eighth clause, that “ the legal title to all my estate, -subject to- the provisions: of this my will, shall vest in my executors: and trustees',” the language used must not be construed in its literal sense-, but according to- testator’s evident intention to give the title to- his- executors, as trustees, for the purposes of the trust. The eighth clause must be read in connection with the seventh, in which he gives all the rest, residue-and remainder, both real and personal, to- his executors, their survivor -and successors in trust, to. take the same into possession, and to- convert the same: into money. Thei -sale of the real estate was a duty to- be performed by the trustees, and not by the executors, and commissions can be allowed only upon the proceeds of the real estate to- the executors: as trustee©; and, as — 539 — I have decided that the trustees shall be allowed to resign only upon waiving their commissions as trustees: upon the principal, whatever executor’s commissions may have been allowed in the former decree upon such proceeds of the real estate sold must be disallowed. As to the point taken that there should be an administrator with the will annexed appointed, I cannot agree with the special guardians. The duties of the executors, have been performed, and the residuary estate ascertained for the purpose of the trust, although it may not all have been sold and converted into cash, and reinvested. There remain only trust duties to be performed. I have, examined the case of Greenland v. Waddell, 116. N. Y. 234, relied upon by the special guardians. The facts: in, that case were very different from those under consideration. In that case the will under consideration contained a power in trust given to the executors to sell and dispose of the testator’s real and personal property, and to distribute the proceeds, one-third of which only they were to hold under a valid trust — a clear case of power in trust only, except as to the one-third, as to- which they had the legal title. Powers in trust are to' be exercised by executors, and not by trustees. Mr. Curtiss, however, gave his entire residuary estate to his executors, as trustees under a valid trust; and they were possessed not only with a power of sale, but the legal title as well. I think the cases are clearly distinguishable. This proceeding, as appears by the petition, is an application-on the part of the testamentary trustees, for leave to resign, under the authority of section 2814 of the Code. The petitioners cannot resign as executors. From such duties they can only be relieved by an application to have their letters testamentary revoked under the authority contained in section 2689 of the Code. My conclusions are, therefore, upon the objections! by the special guardians to the decree proposed by the petitioners: — 540 — (1) That the duties' of executors and of trustees under the will of testator are clearly separate and distinct, and the petitioners were entitled to full commissions as executors when the residuary estate was ascertained, and would have been entitled to another full commission as trustees, had they continued to fulfill their duties as such. (2) That the petitioners were entitled to commissions as executors upon the securities which came into their hands from the testator, and were retained by them and held by them, as trustees, as investments. (3) That no commissions, should have been allowed upon the proceeds of the real estate sold. The commissions to which the executors were entitled upon their previous accounting must be based upon the following statement of account: The executors are chargeable with the amount of the inventory, $282,323.85^ less the assets uncollected and undisposed of, $5,670.75, leaving a balance of $276,653.10, upon which balance each executor was entitled to a commission of $2,941.53. The amount of commissions upon income allowed upon the former accounting does not appear to be separated from the gross amount of commission® allowed. If the amounts' had been separately stated, that decree would have been conclusive, as to income', because all the beneficiaries interested in the income were parties to the proceeding. It is therefore necessary to, determine now what commissions the executor® were entitled to upon such income, either as such executors or trustees. The income of the personal property seems; to have been $29,,228’.16, and the income of the real estate $11,564.91. The account covered the period from October 24, 1888, to April- 30', 189-1. I find commissions on such income to, be the sum of $582.93, to be divided between the exeoutors. The total of amount of commissions, therefore, to which the executors were together entitled on the former accounting, as exeoutors and trustees, is the sum of $6,465.99, of which — 541 — $5,883-.06 is chargeable to principal and $582.93' to- income. Upon the present account I compute the commissions to- which the trustees are entitled upon income to- be $1,453.72. As the estate seems to have been managed almost entirely by the trustee Curtiss', two-thirds of the latter sum is awarded to- him. No final decree, however, can be entered at the present time. An interlocutory order may be entered declaring that certain reasons exist for accepting the resignation of the petitioners as trustees, upon the condition imposed, directing the payment of -all money and securities belonging to the trust, and the delivery of all books', papers', and other property of the trust, to the county treasurer, and directing that the petitioners- bring into court an account of their proceedings under such order, a-s well as since the date of the account filed herein, to- the end that a decree may be made finally settling their accounts, and forever discharging them and appointing a new trustee. This would seem to- be the correct practice under the Code o-f Civil Procedure (sections 2814, 28,18-). The final decree may provide for the payment of the costs and expenses of this- proceeding out of the moneys so to be deposited. Ordered accordingly. Note. — Where the income is to be received by the trustees directly, and not held by them as executors, they are not entitled to commissions- on such income -as executors-. (Matter of Tucker, 29 Misc. Rep. 728.) Where the residue o-f the estate is given to them as trustees, with a discretionary power of sale- and remainder over on the death of the life beneficiary, they are not entitled to- commissions on real estate which has- not been sold. (Matter of Tucker, 29 Misc. Rep. 728.)