Opinion
Decided April 30th, 1937.
1. The rule of law in this state is that a legatee indebted to a testator under whose will he is entitled to a legacy, shall accept his debt in payment of his legacy, or his legacy may be applied in discharge of his debt. This principle is founded in sound reason and justice.
2. Testatrix by codicil to her will directed her executors and trustees to extend the time for payment of the principal of the debt due from the legatee for a period of five years from her death. Held, testatrix intended the legatee to have the benefit of his legacy immediately upon the settlement of her estate and at the same time that other legatees received their respective legacies.
3. Legatee was entitled to receive his legacy upon the passing of executors' intermediate account. Payment of such legacy directed, together with interest from the date of the passing of the intermediate account, less deduction of accrued interest on debt due from legatee.
On appeal from a decree of the court of chancery advised by Vice-Chancellor Berry, who filed the following opinion:
"The bill is for the construction of the will and codicils thereto of Sarah Evans Selover, who died at South River, New Jersey, on April 5th, 1932, and instructions touching the payment of certain legacies to the defendant R. Edgar Hurley are also sought.
"The decedent's estate was of the approximate value of $400,000, more than one-half of which was disposed of by numerous money bequests to close relatives. After an intermediate accounting in the orphans court of Middlesex county in August, 1933, the executors paid all legacies except those to the defendant R. Edgar Hurley, touching which the court's instructions are now sought. The estate is in funds for the payment of the R. Edgar Hurley legacies also, and the residuary estate which, of course, still remains in the hands of the executors undistributed, is valued at $131,402.08. By the seventh paragraph of her will the testatrix, among other bequests, bequeathed to her nephew, R. Edgar Hurley, the sum of $7,000 and also to the three children of her deceased sister, Margaret, of whom R. Edgar Hurley was one, the sum of $10,000. R. Edgar Hurley is also one of the residuary legatees, he being entitled to a one-eighteenth interest in the residue. The only portions of the will which need be here recited are as follows:
"`I give and bequeath to the children of my deceased sister Margaret Hurley, the sum of Ten Thousand Dollars, to be equally divided among them, share and share alike. They being William E. Hurley, Miriam I. Heulitt and R. Edgar Hurley.'
"`I give and bequeath to my nephew R. Edgar Hurley, the sum of Seven Thousand Dollars ($7,000).'
"`All the rest, residue and remainder of my estate of whatsoever the same may consist, and wheresoever the same may be found, I bequeath, share and share alike to One Share to Minnie B. Blaisdell, daughter of Eleanor Van Note [deceased], One share to be divided equally among Wm. E. Hurley, Miriam I. Heulitt and R. Edgar Hurley, children of Margaret Hurley [deceased], One share to John P. Evans, One share to Geo. W. Evans, One share to Edwin I. Evans, One share to Joseph B. Evans.'
"The will is dated July 25th, 1929. Two codicils thereto are dated respectively August 15th, 1931, and December 12th, 1931. The first codicil merely appointed the First National Bank of South River, New Jersey, as co-executor with R. Edgar Hurley; the second codicil revoked the appointment of R. Edgar Hurley as one of the executors and substituted E. Thurston Blaisdell in his stead. The only apparent reason for making this change in executors, as suggested in the brief of counsel, is the removal of R. Edgar Hurley from Monmouth county to Boonton, N.J. The particular portion of the second codicil pertinent to this controversy reads as follows:
"`Whereas, previously I have loaned a large sum of money to my nephew, R. Edgar Hurley, the amount of which will appear from papers executed by him, and whereas, it is my desire that in the event of my death, the said R. Edgar Hurley shall not be called upon or required to make immediate or prompt settlement or repayment thereof; NOW therefore, I do hereby direct my said executors and trustees above named to extend the time of payment of the principal sum of said obligation for a period of five years from the date of my death, provided such arrangements as are necessary are made for the payment of interest and in order that said obligation shall not become outlawed or void through lapse of time.'
"The sum thus loaned, and for which R. Edgar Hurley had given testatrix his note, was $11,000, and that note remained unpaid at the time of testatrix' death, which occurred about four months after the execution of the second codicil.
"The only issue here is whether or not the executors are justified in paying to R. Edgar Hurley the sum of the two money legacies of $7,000 and one-third of $10,000 hereinbefore mentioned without first deducting therefrom the amount owed the estate from this defendant on account of his note. Twice, prior to the passing of the intermediate account of the executors, this defendant, either personally or through his attorney, wrote to the executors authorizing them to deduct from the amount of the bequests to him an amount sufficient to pay the interest on his $11,000 note held by the estate. The executors, although paying all other legacies upon the passing of the intermediate account, have refused and still refuse to pay to the defendant R. Edgar Hurley the bequests mentioned, claiming that he is not entitled to receive the same until after he has paid the amount of his indebtedness to the estate; while on the other hand this defendant contends that by reason of the quoted clause of the second codicil and the direction therein contained he was entitled to receive his legacies at the same time that other legatees were paid theirs, and particularly so as he had agreed to the deduction therefrom of the amount due the estate for interest on his note. Of course, the disposition of the issue now before the court depends upon the intention of the testatrix as that intention must control. To my mind, there can be little question as to the intention of the testatrix. In Denise's Executors v. Denise, 37 N.J. Eq. 163, it was held that a legatee takes subject to the payment of his debts to the estate. The court there said:
"`It is a principle founded in sound reason and justice, that a legatee indebted to the testator under whose will he is entitled to a legacy, shall accept his debt in payment of his legacy, or his legacy may be applied in discharge of his debt.'
"In Webb v. Fuller, 85 Me. 443; 27 Atl. Rep. 346, the right of the executor to deduct the debt of the legatee from the legacy is termed `the right of retainer.' The court there said:
"`It is an equitable right of its own nature, and not at all dependent upon statute. It is the plain moral, as well as legal, duty of the debtor to pay his debt to the estate. He has had the value from the estate. He ought in morals and law to restore it. It needs no statute to affirm this duty. It is self-evident.'
"That is undoubtedly the rule of law in this state; but obviously, I think, the very purpose of the quoted clause in the second codicil was to avoid the application of this rule to the debt due the testatrix from the defendant R. Edgar Hurley. After reciting the debt she says: "I do hereby direct my said executors and trustees * * * to extend the time of payment of the principal sum of said obligation for a period of five years from the date of my death," and she then provides for necessary arrangements for the payment of interest and the prevention of the running of the statute of limitations. Had the law not been as laid down in Denise v. Denise, supra, there would have been no necessity for this direction to the executors. It is clear, I think, that testatrix intended that her nephew should have the benefit of this legacy immediately upon the settlement of her estate and at the same time that other legatees receive their respective legacies. The arrangements necessary for the payment of interest and to prevent the running of the statute of limitations were as much the obligation of the executors as of the legatee. And if it was incumbent upon the legatee to make any arrangements at all for the payment of interest, he did so before the passing of the intermediate account by authorizing the executors to retain from the amount of his legacy the interest accrued upon his debt. This was all that he was required to do. The testatrix contemplated payment of these legacies to her nephew at the same time that other legacies were paid, evidently with the idea that such payment might better enable her nephew to pay his debt to the estate at the expiration of the five-year grace period which she provided. It will be noted that more than four years of that period have already passed. This legatee was entitled to receive his legacy upon the passing of the executors' intermediate account in August, 1933. I will advise a decree directing payment of such legacy to him now. The executors may deduct from the amount due on those legacies the accrued interest on his $11,000 note, but he is entitled to interest on the legacies from the date of the passing of the intermediate account in August, 1933. Whether this defendant's interest in the residuary estate should be paid to him before he pays his debt to the estate is not now before the court, as the time for such payment has not yet arrived."
Mr. George L. Burton, for the complainants-appellants, the First National Bank of South River, New Jersey, and E. Thurston Blaisdell.
Mr. Henry D. Brinley, for the defendant-respondent R. Edgar Hurley.
Messrs. Smith Dickerson, for the defendants-respondents Minnie B. Blaisdell and William E. Hurley. Messrs. Snyder, Roberts Pillsbury, for the defendant-respondents Sadie Aumack, Garret Evans, Ella B. Glidewell, Mabel Clark, Percival H. Evans, George W. Evans, Jr., and Emma H. Cooper, executrix, c.; Edna L. Coleman, individually and as administratrix, c.
The decree appealed from will be affirmed, for the reasons stated in the opinion filed in the court of chancery by Vice-Chancellor Berry.
For affirmance — THE CHIEF-JUSTICE, TRENCHARD, PARKER, LLOYD, CASE, BODINE, DONGES, HEHER, PERSKIE, HETFIELD, DEAR, WELLS, WOLFSKEIL, RAFFERTY, COLE, JJ. 15.
For reversal — None.