Doherty's Estate

Van Dusen, P. J., The trustee foreclosed certain mortgages and bought in the prop [454] erties and thereafter managed them for a number of years until they were finally sold. Calculations are submitted for each property separately in accordance with the rule of Nirdlinger’s Estate (No. 2), 327 Pa. 171, distributing the proceeds of sale and the net rents between life tenants and remaindermen. Pending the sale the net rents were paid to the life tenants, as was the universal practice before the decision in that case. This practice was sanctioned in the decision in Nirdlinger’s Estate, 331 Pa. 135, out of consideration for the life tenant, who ought not to be required to wait for income until the mortgage salvage operation is completed. The latter decision also held that when the operation was completed, and it appeared that the life tenant had received as current rents more than he was entitled to as a result of the whole operation, the excess might be recouped from any other income from the trust fund which might otherwise be due to the life tenant. This is the situation in the present case, and the auditing judge directed that in the preparation of the schedule of distribution excess payments should be so charged. No exceptions have been filed to this conclusion. The salvage operations lasted a long while, and before they were completed, more than five years ago, an account was filed and adjudicated and the net income then in hand from the foreclosed properties was awarded to the life tenants. It was the opinion of the auditing judge that the income so awarded must be excluded from the Nirdlinger calculations. Exceptions to this conclusion were filed by the guardian and trustee ad litem who represented remaindermen. The awards of the prior adjudication were correct. The life tenants were entitled to the income. But they necessarily received the money upon a condition attached by the law that they must repay what they received if in the end it appeared that they were overpaid; or at least that they must so repay out of income [455] from this fund. The allocations of these items in the accounts were therefore not res judicata. This conclusion is confirmed by our decision in In re Scott’s Trust, 40 D. & C. 227. In that case an account had been filed and adjudicated which did not allocate items relating to foreclosed properties as required by the Nirdlinger rule. A petition for review was filed averring that items had been charged against income which should have been charged against principal and that each foreclosed property was not treated by itself. We dismissed the petition, saying that no review was necessary; that an advance to a salvage operation “is impliedly, if not expressly made so, subject to future proper adjustment and return to the fund from which it is taken when the salvage operation has been completed, and the fund brought before the court for distribution”. Reference was made to the opinion in Romberger’s Estate, 39 D. & C. 604. In that case objection was made by the life tenant to the allocation to income of certain expenses on foreclosed property whereby his income was materially reduced. Judge Stearne said (p. 612) : “Until the real estate is actually sold, and a fund is before the court for distribution, there exists no completed salvage operation. Under such circumstances, decisions relating to questions of allocation as between income and principal are mostly premature. This accounting is therefore solely to verify actual receipts and disbursements of such items. When the salvage operation is finally completed, and upon an accounting when there is a fund before the court for distribution, the parties may then appear and make application for equitable allocation of the funds as between income and principal: Nirdlinger’s Estate (No. 2), 327 Pa. 171. Confirmation of the present accounts, as respects such items, merely approves the actual receipts and expenditures, and is not intended to preclude the parties [456] from subsequently having the fund allocated as above indicated. This right is expressly reserved to them. See Bullitt’s Estate, 308 Pa. 413, Neafie’s Estate, 325 Pa. 561, and Mark’s Estate, 2598 of 1932, opinion of Klein, J. (not reported).” The recent decision in Crozer’s Estate, 346 Pa. 446, is urged upon us in the argument against the exceptions. The opinion is by Mr. Justice Stearne who, when a member of this court, wrote the opinion in Romberger’s Estate from which quotation has just been made. In Crozer’s Estate there was a prior account within five years in which there appeared the result of completed sales of real estate, both that which had been acquired by foreclosure and that which had been owned by decedent. The proceeds of these sales were debited to principal. The court held that this adjudication of completed transactions could not be altered without at least a petition for review. It is apparent that the prior account afforded an opportunity to raise the question. In the present case the prior account did not afford such an opportunity. The exceptions are sustained.