Opinion
12775
December 6, 1929.
Before TOWNSEND, J., Anderson, October, 1928. Modified and remanded.
Proceedings instituted by the beneficiaries under the will of Joseph F. Norris objecting to discharge of the executor, Arthur Lynah. From a decree of the Circuit Court on appeal from the Probate Court which dismissed the proceedings, the beneficiaries and executor appeal.
The decree of Judge Townsend directed to be reported, and the relevant portions of the will of Joseph F. Norris, were as follows:
DECREE"This matter comes up before me on an appeal from the Probate Court taken on the question of the amount of commissions allowable to the executor under this will.
"The first question is as to the construction of the language of Item 17 of the will. This Item reads as follows:
"`Item 17. I direct that as compensation for his services as executor and trustee, under this my last will and testament, that the said executor and trustee shall receive two and one-half (2 1/2%) per cent. on all property of the estate received by him consisting of cash, bonds, stocks, notes, mortgages, real estate and other securities, and shall also receive two and one-half (2 1/2%) per cent. on all principal and income collected, and two and one-half (2 1/2%) per cent. on all moneys paid out.'
"In my opinion the testator intended by this language merely to make sure that every possible class of assets of the estate received and/or collected by him, including the proceeds of accounts and choses in action, should form the basis of calculation of the Trustee's commissions. It is not my opinion that the testator intended to allow double commissions consisting of 2 1/2% on property received and an additional 2 1/2% upon the conversion of the identical property into cash. I therefore conclude that the commission to which the executor is entitled is a straight 2 1/2% commission on everything received and/or collected, and a straight 2 1/2% on everything disbursed, figured on the same basis as that provided for under the statute relating to executor's commissions, and that the executor is not entitled to charge two commissions on receipts and collections.
"The second question is whether the executor is entitled to charge one set of commissions as executor and another set of commissions as trustee. My opinion is that under Sections 10, 11 and 12 of the will, the executor as such, discharged the duties laid down in those Sections. John Drayton, the beneficiary named in those Sections, is dead and the estate has therefore been finally distributed by the executor. I hold, therefore, that the executor is entitled to no additional commissions for his services as trustee and in this opinion I am confirmed by the language of Item 17 above referred to, which clearly fixes the commission of 2 1/2% as the compensation for the combined services of executor and trustee. It appears from an account exhibited to the Court by counsel for the executor that upon the sale of the Twenty Thousand ($20,000.00) Dollars worth of United States Steel Bonds, and the distribution of the proceeds of that sale among the legatees after the death of John Drayton, the executor retained Five Hundred and Fourteen ($514.00) Dollars constituting 2 1/2% commission on the amount so disbursed. Therefore, in the recalculation of the commissions to be made under this order, the executor must be charged with this amount.
"The third question is whether the executor shall forfeit commissions for the years for which he did not file returns. In my opinion under the language of Item 17 of the will, the compensation to be received by the executor was a gift from the testator which he takes independently of the statute and the provisions in the statute for forfeiture of commissions upon failure to file returns do not apply in this case.
"Applying this construction to his returns, the amount of commissions to which he is entitled is as follows:
Return June 2, 1924: Receipts — $127,920.61 — 2 1/2% commissions .......$ 3,198.02 Disbursements — $127,920.61 — less above commissions, $3,198.02 and $3,029.46 on hand — $121,693.13 — 2 1/2% commissions ...................... 3,042.33 Return April 27th, 1927: Receipts — $30,619.82 — less $3,029.46 on hand — $27,590.36 — 2 1/2% commissions ...................... 689.76 Disbursements — $30,619.82 — less above commissions $689.76 — $29,930.06 — 2 1/2% commissions ...... 748.25 Return July 23rd, 1927: Receipts — $85.25 — 2 1/2% commissions ............ 2.13 Disbursements — $83.12 — 2 1/2% commissions ....... 2.08 __________ $ 7,682.57 "The executor has retained commissions as executor and trustee as shown on his accounts as follows: Return of June 2, 1924: 2 1/2% commissions on assets $114,433.75 ......................$ 2,860.84 2 1/2% commissions on receipts $127,920.61 .................... 3,198.02 2 1/2% commissions on disbursements $115,933.95-95 ............ 2,898.34 Return of July 23, 1927: 2 1/2% commissions on receipts $85.25 ......................... 2.13 2 1/2% commission on disbursements $83.12 ..................... 2.08 Acting as Trustee: 2 1/2% commissions on disbursements $20,566.21 ................ 514.00 _________ Total commissions withheld .................................$ 9,475.41 From the above it will be seen that as executor and Trustee he has retained the sum of .....................$ 9,475.41 He is entitled to ............................................. 7,682.57 __________ Overpayment ................................................$ 1,792.84 "It is therefore ordered, adjudged and decreed, that Arthur Lynah as trustee under the will of Joseph F. Norris do pay over to the parties entitled to the proceeds of the trust fund the sum of Five Hundred and Fourteen ($514.00) Dollars retained by him as commissions on disbursing said fund; and as executor under the will of Joseph F. Norris do pay over to the parties entitled thereto the sum of One Thousand Two Hundred Seventy-eight and 84/100 ($1,278.84) Dollars excess commissions retained by him."It is further ordered, that upon proof to Probate Judge of Charleston County of such payments, letters dismissory be issued to him by said Probate Judge."
WILL OF JOSEPH F. NORRIS"Item 10. I give and bequeath to my executor the sum of Twenty Thousand Dollars ($20,000.00) to be invested in United States Steel 5% Bonds, which bonds are to be held by him in trust, and he is hereby instructed to pay the interest collected from same to my faithful employee, John Drayton (colored), commonly known as Ramsey, during his natural life.
"Item 11. I direct my executor to pay the sum of One Hundred Dollars ($100.00) monthly, to John Drayton, until the income derived from the U.S. Steel Bonds commences to come in.
"Item 12. On the death of John Drayton, I give and bequeath the sum invested in the United States Steel 5% Bonds to be equally divided between the living children of my brother George Manly Norris, of Vance, So. Ca., share and share alike."
"Item 17. I direct that as compensation for his services as executor and trustee, under this my last will and testament, that the said executor and trustee shall receive two and one-half (2 1/2%) per cent. on all property of the estate received by him consisting of cash, bonds, stocks, notes, mortgages, real estate and other securities, and shall also receive two and one-half (2 1/2%) per cent. on all principal and income collected, and two and one-half (2 1/2%) per cent. on all moneys paid out."
Mr. L.D. Jennings, for appellants, cites: As to demurrer: Sec. 405, Code Proc. Pleadings: 89 S.E., 821; 6 S.C. 118; 31 S.C. 605; Secs. 420, 439, Code Proc. Cases distinguished: Bail. Eq., 489; 2 Rich. Eq., 131; 7 Rich. Eq., 481; 14 S.C. 623; 137 S.C. 28; 4 Strob. Eq., 79; Rich. Eq. Cas., 3; 61 S.C. 522. In point: 150 S.C. 15.
Messrs. Allen Doyle, and Watkins Prince, for respondents, cite: Failure of complaint to state sufficient facts to constitute cause of action; defect cannot be waived: Sec. 405, Code Proc. Insufficiency of complaint: 89 S.E., 821; 31 S.C. 605. Trustee: Sec. 5458, Code; Rich. Eq. Cas., 3; 61 S.C. 522.
Mr. Rufus Fant, also for respondents, cites: Insufficiency of complaint: 6 S.C. 118; 31 S.C. 605. Trustee: Secs. 3994, 3981, 3985, 4281, Code. As to demurrer: 5 S.C. 10; 11 S.C. 409; 29 S.C. 64.
December 6, 1929. The opinion of the Court was delivered by
The Court is entirely satisfied with the decree of his Honor, Judge Townsend, except in the matter hereinafter discussed:
We do not think that the executor is entitled to commissions during the period for which no accounts were filed.
The first ground of exception of the beneficiaries to the ruling of his Honor, Judge Townsend, on this question is that the language in the will did not create a gift to the executor, but was a mere repetition of the provisions of the statute and gave the executor no higher right than that which he enjoyed under the statute. This ground of exception involves Section 5430, Vol. 3, Code of Laws 1922. The language of Item 17 of the will is in effect the same as the language in the above section. The statute provides as follows: "Every executor or administrator shall, for his, or her, or their care, trouble and attendance, in the execution of their several duties, take, receive or retain in his, her, or their hands, a sum not exceeding the sum of Two Dollars and Fifty cents for every Hundred Dollars which he, she, or they shall receive, and the sum of Two Dollars and Fifty cents for every Hundred Dollars which he, she, or they shall pay away, in credits, debts, legacies, or otherwise, during the course and continuance of their or either of their managements or administrations, and so in proportion for any sum or sums less than one hundred dollars."
A statute could not allow an executor a gift from an estate. That would constitute a taking of property without due process of law. The above language of the statute must therefore have been so chosen as to denote compensation, and it has been so applied by the numerous cases that have dealt with it. Since the language of Item 17 of the will is substantially the same as the above language of the statute, this item must also denote compensation.
The second ground of exception of the beneficiaries is that even if the language of the will created a gift, it was a gift based upon services as executor, and therefore is essentially a commission and comes within the provisions of the statute.
There is certainly strong reason for holding that the bequest to the executor under Item 17 of the will was a consideration for services to be rendered and was conditioned upon services to be rendered as executor. This bequest was based upon property received by him and collections made and moneys paid out (the collections and disbursements, of course, to be made by him, the executor). A consideration of the definitions of "compensation" and "gift" would lead to the conclusion that the bequest to the executor in Item 17 of the will was compensation and not a gift. The words "compensation for his services as executor" are used by the testator.
In connection with the above two grounds of exception, it is true that authorities agree that at the death of the testator there exists no consideration for the basis of a claim by the executor against the estate, because the executor is under no obligation to act. Reason and authority, however, are to the effect that after the executor enters upon and performs his duties as executor a different situation exists, and he then has a claim against the estate based upon legal consideration.
Harpers Appeal, 111 Pa., 243, 2 A., 861, 862, holds that: "The legacy to J. Morrow Arnold was given for a valuable consideration. The consideration was his services as trustee for the appellant, under the will of testator, James H. Brown, of certain stocks and bonds, which he had bequeathed to the appellant."
See also Matter of Runk, 181 App. Div., 461, 168 N Y S., 970, affirmed 224 N.Y., 570, 120 N.E., 875, Mem., cited in 24 Corpus Juris, page 990.
In the case of Clements v. Fletcher, 161 Ga. 21, 129 S.E., 846, the Court speaks of the commissions allowed the executor under the will as compensation.
Section 5430, Vol. 3, Code of Laws 1922, gives an executor commissions for his care, trouble, and attendance in the execution of his several duties. This statute implies that the services rendered by an executor constitute good consideration for which he is entitled to compensation. Whatever may have been the case before the enactment of this statute, the doctrine expressed above obtains under our statutory system today, and it might be added that this doctrine has become a part of our present public policy. The allowance of commissions to executors today gives them an incentive to good work and diligence which they would not otherwise have.
The commissions allowed in Item 17 of the will are not given in lieu of compensation as executor. Therefore, if the language of this Item denotes a gift which the executor takes independently of the statute, in addition to receiving the commissions provided by that Item he would also be entitled to compensation as executor under the Code — a result manifestly unjust and a claim that the respondent-appellant has not made.
If the commissions given by Item 17 are to be considered as compensation, then under Section 5425, Vol. 3, of the Code of 1922, those Commissions have been forfeited during the years the executor failed to render annual accounts. Blackmon v. Blackmon, 113 S.C. 478, 101 S.E., 827; Sherwood v. McLaurin, 103 S.C. 370, 88 S.E., 363; Epperson v. Jackson, 83 S.C. 157, 65 S.E., 217; Brooks v. Brooks, 12 S.C. 422; Koon v. Munroe, 11 S.C. 139; Frazier v. Vaux, 1 Hill, Eq., 203; Wright v. Wright, 2 McCord, Eq., 185; Black v. Blakely, 2 McCord Eq. 1; Gee v. Hicks, Rich. Eq. Cas., 5; Corbin v. Jones, Rich. Eq. Cas., 52; Corbin v. Howell, Bailey Eq., 183; Jenkins v. Fickling, 4 Desaus., 369; Benson v. Bruce, 4 Desaus., 463; Davidson v. Moore, 14 S.C. 251; Lay v. Lay, 10 S.C. 208; Ramsay's Assignees v. Ellis, 3 Desaus., 78; Brown v. McCall, 3 Hill, 335; Roberts v. Johns, 24 S.C. 580.
The law on this point is well expressed in Gee v. Hicks, Rich. Eq. Cas., 22: "The defendant was entitled to commissions, unless it was shown that she had failed to make regular annual returns to the ordinary. In such years as she failed to make returns, she was entitled to no commissions. On returns regularly made she was entitled to commissions. So, if she had not made a single return, she was entitled to commissions for paying over the balance found in her hands and decreed to be paid to the complainants."
The fact that the compensation in this case was given under the will and not under the statute should not affect the question whether or not it had been forfeited during the years accounts were not made. The statute does not state that he has forfeited commissions given under the statute, but it states that, "He shall not be entitled to any commissions," thereby meaning all commissions, whether given under the statute or under the will.
In the case of Clements v. Fletcher, 161 Ga. 21, 129 S.E., 846, 860, in which the compensation was provided by the will, the Court said: "It is true that where an executor fails to make his annual returns as required by Section 3992 of the Code * * * he forfeits all commissions for transactions during the year within which no return is made. * * * By a special order, entered on the minutes, an ordinary may relieve the executor from such forfeiture. * * * Civil Code, § 4069. In this case the executor procured such order."
The Court in this case did not hold that an executor had forfeited commissions for his failure to file annual returns, but specifically placed its holding on the ground that the executor had been relieved from such forfeiture by a special order of the ordinary, which procedure is permitted by the Georgia Code. The inference is clear that had this special order not been entered, the executor would have forfeited his commissions, although they were provided by the will.
The third ground of exception of the beneficiaries is that under the language of the will the amount provided to be paid to the executor was to be paid for his services as executor, and that he did not render proper services as executor, in that he did not file accounts annually, and therefore was not entitled to commissions for the years during which no accounts were filed. The question that under the language of the will the amount to be paid to the executor was to be paid for his services as executor has already been considered. The case of Edmonds v. Crenshaw, which will presently be considered, also treats of this third ground of exception.
The only South Carolina case which we have been able to find in which a similar question arose as to commissions given under the terms of the will is the old case of Edmonds v. Crenshaw, Harp. Eq., 224. The following is the language of the will involved: "I will and direct that my executors * * * receive as a compensation for their services 10% on the whole amount of the moneys to be collected from the sale of my estate and of outstanding debts which may be due at my decease, or which may become due thereafter." The decree of the lower Court held that: "The 10% in question was undoubtedly a legacy, but it was a legacy given for the performance of important services which are explicitly stated in the very sentence bequeathing the legacy and coupling the duties and the reward together. They were not performed in many important particulars and much loss has been sustained by their neglect in not collecting and investing the moneys of the estate in stocks. Under these circumstances, I am of the opinion with the commissioner that the executors are not entitled to the 10% bequeathed them for services to be performed, but which were not performed. * * * I also concur with the commissioner that the executors are not entitled to the statute allowance of 2 1/2% receiving and 2 1/2% on paying away moneys of the estate for the years in which they neglected to make returns to the ordinary of their transactions. For those years in which they made returns it is proper they should be paid."
This decree is authority for the position that in the case at bar, although the commissions under Item 17 of the will constitute a legacy, it is a legacy given for the performance of duties as executor, and since the executor failed to file annual returns during part of his term, as required as a service of him as executor under Section 5425, Vol. 3, of the Code of 1922, he failed to perform his duty in an important particular and therefore is not entitled to commissions given by the will, but can take, if at all, only under the statute, and under the statute he has forfeited commissions during the years he failed to make returns.
On appeal of the case of Edmonds v. Crenshaw, the Supreme Court held: "We are satisfied with the decree, except on the points hereafter stated. The executors of Aaron Cates were directed to sell the whole of the estate, real and personal, and to invest the proceeds in bank stock, or in shares of some incorporated company, according to their judgments. These investments have not been made in the smallest degree; but the Circuit Court has made the executors liable for the amount to which the property would have accumulated if they had done their duty under the will. It appears therefore to us, that it is proper to allow them the compensation of ten per cent. on the amount of moneys of the estate received by them which is given, by the will of the testator, to the executors, for the performance of the duties assigned to them."
Other question not relating to executor's commissions were also discussed. It will be seen that the Supreme Court upheld the ruling of the decree below that the 10 per cent. commissions were conditioned upon services to be performed as executor. And the inference is clear that had the executors not been made liable for the amount to which the property would have accumulated if they had done their duty, the 10 per cent. commissions would not have been allowed. The commissions were allowed, but only because the executors were made liable for the deficiency brought about by their laxity.
The position was evidently taken that since the purpose of the statute requiring annual returns of executors was to place a check upon inefficiency and dishonesty, on the part of executors, and since executors had to account as if they had been efficient and honest, the purpose of the statute had been met and it would be inequitable not to allow commissions, especially since the executors had to account out of their personal funds. The Supreme Court evidently intended to create the situation that would have existed had the executors performed their duties properly — in which case they would have been entitled to commissions.
If in the case at bar commissions are allowed for the period during which no accounts were filed, the purpose of the statute and public policy would be defeated. A deterrent to laxity and dishonesty on the part of executors would be removed.
The accounts should be adjusted in the following manner: Commissions to which executor entitled:
Return June 2, 1924: Receipts — $127,920.61 — 2 1/2% commissions .......$ 3,198.02 Disbursements — $115,933.95 — 2 1/2% commissions .. 2,898.35 Return April 27, 1927: Receipts during year for which July 23, 1927, account was filed $19,908.79, 2 1/2% commission .................... 497.72 Disbursements during same period — $21,866.84 — 2 1/2% commissions ................................. 546.67 Return July 23, 1927: Receipts — $85.25 — 2 1/2% commissions ............ 2.13 Disbursements — $83.12 — 2 1/2% commissions ....... 2.08 Return Jan. 25, 1927: Receipts, Profit on sale of United States Steel Bonds — $566.21 — 2 1/2% commissions ........... 14.16 Disbursements — $566.21 — 2 1/2% commissions ...... 14.16 __________ Total ......................................................$ 7,173.29 Total commissions withheld ....................................$ 9,475.41 Commissions earned ............................................ 7,173.29 __________ Overpayment ................................................$ 2,302.12 The $514 commission improperly retained for acting as trustee should not be distributed under Item 12 of the will. This amount of $514 represents excess over the $20,000 amount to which the living children of George Manly Norris were entitled and which they have already been paid.The amount of $2,302.12 should be paid by the executor to the parties entitled thereto under the will.
His Honor, Judge Townsend, in computing commissions on disbursements for the period for which return was made June 2, 1924, allowed commissions on the amount of $121,693.13, which amount was excessive for the reason that it included commissions on assets of $114,433.75 at 2 1/2 per cent., $2,860.84, and commissions on disbursements of $115,933.95 at 2 1/2 per cent., $2,898.34. The account on which commissions should have been computed was $115,933.95 as shown by the statement in the transcript of record on page 3, lines 6, 7 and 8.
His Honor, Judge Townsend, in computing commissions on disbursements during the period for which the return of April 27, 1927, was made, erred in deducting the amount of $689.76, commissions on receipts during the same period, for the reason that no commissions were included in disbursements for the above period. This deduction has not been made in the above calculations.
The judgment of this Court is that the decree be modified as herein indicated, and that the case be remanded to the Circuit Court for further proceedings consistent herewith.
MR. CHIEF JUSTICE WATTS and MESSRS. JUSTICES BLEASE, STABLER and CARTER concur.