Opinion
July 11, 1961
In a proceeding for the judicial settlement of the intermediate account of a testamentary trustee, the parties cross-appeal as follows from a decree of the Surrogate's Court, Dutchess County, entered February 10, 1960, upon the decision of the court ( 21 Misc.2d 154), after a nonjury trial, settling the account: The trustee appeals from so much of such decree as disallowed management fees to it, under subdivision 7 of section 285-a of the Surrogate's Court Act. The trust beneficiaries appeal from so much of said decree as: (1) overruled their objections that the trustee was improvident in selling the income producing real estate which was the major asset of the trust estate; (2) refused to surcharge the trustee for damages by reason of such sale; and (3) refused to remove the trustee and to deny it commissions by reason of its misconduct with respect to such real estate and the sale thereof. Decree modified, on the law and the facts, by striking out the second decretal paragraph. As so modified, the decree, insofar as appealed from, is affirmed, with costs to the trustee, payable out of the trust estate; and the proceeding is remitted to the Surrogate's Court for entry of a decree not inconsistent herewith. Findings of fact contained in the Surrogate's decision or opinion ( 21 Misc.2d 154), insofar as they may be inconsistent herewith, are reversed; and new findings are made as indicated herein. The evidence establishes that the trustee performed extensive services which must be held to be "management" services within the meaning of subdivision 7 of section 285-a of the Surrogate's Court Act. Some of such services included negotiations for and modification of the lease instrument upon terms which resulted in greatly increased revenue to the trust for a period of several years; negotiations and proceedings required upon expiration of the first term of the lease; proceedings in refinancing, extending, and reducing the interest rate on the mortgage covering the real property; insuring that the lessee at all times complied with the terms of the lease as to payment of taxes, and other lienable charges; obtaining adequate and proper types of insurance; making repairs; and complying with governmental orders as to violations, etc. The statute (Surrogate's Ct. Act, § 285-a, subd. 7) grants to the trustee an absolute right to the management fees, where the management services are actually performed. In Matter of Smathers ( 309 N.Y. 487), followed in Matter of Burrows ( 3 N.Y.2d 869), the trustee expressly declined to offer evidence of any specific acts of management performed; and the record there required a finding that the trustee did absolutely nothing but receive the rent check every three months. In the case at bar, however, the trustee did all that it was required and permitted to do by way of management of the real property. It was not, as in the Smathers case ( supra), a mere passive recipient of rent checks — conduct which did not involve any more action than the receiving of interest on bonds or the receiving of dividends on shares of stock (cf. Matter of Kahn, 13 Misc.2d 76). The proceeding is remitted to the Surrogate's Court for the entry of an appropriate decree allowing the management fees and adjusting and settling the account accordingly. Nolan, P.J., Beldock, Ughetta, Kleinfeld and Brennan, JJ., concur.