Summary
In Randall v. Gray, 80 N.J. Eq. 13 (Ch. 1912), an administrator agreed to serve without compensation upon the understanding that two persons in interest were to assist him; they failed to do so. Difficulties developed between the trustee and the beneficiaries who filed an action for an accounting.
Summary of this case from In re LoreeOpinion
11-09-1911
Mr. Sackett, of Newark, for complainant. Mr. MacMahon, of Newark, for defendant Hopping.
Additional Opinion May 15, 1912.
Bill by one Randall against one Gray. On application for an allowance of commission to an administrator and on a hearing on the bill and a cross-bill. Application denied. Decree directed.
Mr. Sackett, of Newark, for complainant.
Mr. MacMahon, of Newark, for defendant Hopping.
EMERY, V. C. (orally). This is a case that has been before me some time, from the time of the filing of the original bill in the latter part, I think, of December, 1909, asking an account against Mr. Gray as trustee. The claim of the complainant is based on the view that the discharge of Mr. Gray as executor under the will of Randall, by the order or decree of the orphans' court, did not discharge him as trustee under the will, and that, notwithstanding the order and what has been done since the order, Mr. Gray is still responsible as trustee under the will of George G. Randall, and should be called to account as such trustee. The situation is this: Mr. Randall died some time I think in 1889 or 1890, about that time, and by his will he appointed George R. Gray and George Duryea executors and trustees. He did not by his will give expressly to them any interest in his real estate, and whatever estate or interest they have, or either of them have or ever have had under the will, is by what is called "implication"; that is, by reason of such duties being imposed on them as executors or trustees that the legal estate must necessarily follow in order to carry out those duties. He directed by the second section of his will that a house, 134 Clinton avenue, should be sold or reserved for the use of two of his three children, Lillian and Edith. In that the executors have no estate whatever. Then he gave by the third section the income of the remaining portion of his estate, that would be all of it, he gave an income of a third to his daughter Lillian, a third to his son Frederick, and the remaining third to a daughter Edith until she arrived at 24. He then disposes of those interests after the death of those life tenants, giving Edith an absolute estate, and limiting over the other two-thirds. The eighth clause appointed Gray and Duryea executors and trustees in a single clause of the will, and authorized and empowered them "to sell any of my real estate,or rent, whenever in their judgment it shall be most advantageous to do so, and to invest the proceeds, and from the income to pay the legacies provided for." Under that clause of the will directing them to rent the real estate, they were authorized by implication to assume the legal title to the whole property until the daughter Edith became 24, and after that time they had by implication the legal title to the balance of the estate for the lives of the life tenants—the power to rent it during the life of the children Frederick and Lillian. While they did not have the estate fee, they had, however, the express power to sell, and therefore it is a case that very often occurs, where the legal title so far as not given expressly or by implication to the executors, goes to the heirs or devisees, subject to the power of sale. This power of sale was given to the executors and trustees, and on the sale they were directed to invest the money, so that they had trust duties to perform in reference to it. Mr. Gray and Mr. Duryea were executors for some years together, and then Mr. Duryea died in 1896. That left Mr. Gray the sole surviving executor and trustee, and also the person solely responsible.
In 1901 he made an application to the orphans' court of Essex county to terminate his trusts under this will. I think it is clear, on reading the petition, that he intended to be discharged from the performance of any trusts that were imposed on the executor. This petition recites that "under the terms of the will the duties imposed on your petitioner as executor have become in the nature of a trust, which promises to endure for many years. Among the duties of the trust are the care and management of many parcels of real estate, necessitating personal supervision, repairs, and renting." And then it sets out the reasons he could not undertake further the discharge of those duties. But all those duties he set out were trust duties, not a single one of them was the duty of an executor, and in the duties that he sought to be relieved of, and in the reasons that he gave for being relieved of them he undoubtedly meant to be relieved of his duties as trustee. And on this petition, although the petition itself only asks that he may be discharged from his said office, whatever it was, whether it is executor with trust or executor without trust, he asks that he may be discharged from his office.
There was a statute in force at that time —the Orphans' Court Act of 1898, Revision, § 146—which gave power to an executor or trustee to apply for his discharge by a petition to the orphans' court. Previous to the passage of that statute or statutes from which that was taken, the only way in which a trustee could be discharged was by filing a bill in chancery, and anybody who was appointed trustee on showing good reasons had the right to be discharged upon settling his account. This statute allowed the application to be made to the orphans' court, and they had the right to discharge him as trustee. And I think that as the petition applied for his discharge from his office, which was a trust, the court intended to act upon the petition and discharge him from his office as executor and from the duties of his office as executor, whether those were trust duties or not. It appears that at the time of that hearing three of the parties were not of age, but two of the children of Frederick Randall were adults and the other daughter, Lillian, was then about 20. The court made an order after hearing on the matter, and granted the application, and discharged him "from the further duties of his office as executor," except that of paying over and accounting for the moneys. The statute requires that, when a discharge is made, they must not discharge the executor or trustee from the duty of accounting, but that he must account, and the amount found due must be paid over to the person whom the court appoints to succeed and receive it. The court did then on the application of the children, of those who were able to act for themselves, appoint Mr. Hopping, who was a son-in-law, as substituted administrator with the will annexed, and directed that he give a bond of $25,000. Mr. Gray was under no bond, having been appointed by the testator. Neither he nor Mr. Duryea was required to give bond. I cannot conceive that the court intended to discharge Mr. Gray solely from the duties which he had as naked executor independent of the trusts which were imposed on the executor under the will, or that there was any intention on the part of the court that, in discharging him as executor, they were not to discharge him from the duties as trustee which were imposed on the executor, because this took place: The court directed by a subsequent order that the money which Mr. Gray had in his hands as executor and which he held in trust should be paid over to some one else, the substituted trustee, on his giving security, and Mr. Gray paid them over. Now, the court did not intend, and could not have intended, to direct that he pay those moneys over to a substituted administrator and still be responsible for them as trustee, because such payment took the trust funds out of his hands. If Gray is responsible as trustee, and he alone must have the right to hold the money, and the court did not intend, when it directed that he must pay over to the substituted administrator this money in his hands as executor, which was held upon a trust, they did not intend that he should still be bound to carry out the trusts. So that, in acting on that order of discharge as executor, the court further directed the payment to the substituted administrator, and on the request of all the members of the family who were able togive their assent (and I think by the guardians of those who were under age) Mr. Hopping, the son-in-law, was appointed. It was thought that the estate could be managed with less expense if he was appointed administrator in Mr. Gray's place, and it was intended by all those parties that he should then undertake the same duties with reference to the trusts and the management of the estate that Mr. Gray had, and they all requested the court to make this order of appointment, and that the bond be fixed at a certain amount which they thought would be satisfactory. That was done, and after that Mr. Hopping took absolute charge. Mr. Gray turned over this money held by him in trust, and from that time considered himself as absolutely relieved from responsibility. He did not take any further charge at all in relation to the management of the Randall estate.
The executors under his will had the power to sell, but the power to sell which under the original will could have been exercised by Mr. Gray so long as he remained the surviving executor, without any approval by the court, became a power which in Mr. Hopping's hand as the substituted administrator he had no right to exercise without the approval of the court, because Mr. Randall had first selected the man on whose judgment he would rely for the sale of his property. Now, when another executor is substituted, the law provides that they shall not have the same absolute power or discretion to sell as the original executors. They cannot make a sale unless they first bring it to the court for its approval, and the court must be satisfied that it is right.
On these applications to confirm sales, several of them were subsequently made to the different orphans' courts by Mr. Hopping, as if he had charge and power to sell, the power to sell being one which was connected with the power of receiving the money on trust, and the sale was only for the purpose of receiving it on trust. On all these applications to sell the parties who were interested have a right to be heard, either before the application is made to the court, or afterwards, when the court fixes a time to hear them. But in all these cases of sale by Mr. Hopping the members of the family who were of age, and the guardians of those under age, were consulted in reference to the sale before the confirmation by the court, and they joined in requests to approve the sales by Hopping. These requests were, in effect, requests from all these heirs that the money which was to come from the sales be given to Mr. Hopping. That course of proceeding has continued all the time until 1909, and all the heirs who were of age have joined in every application and request that Hopping be authorized to sell, and to receive the money, not as if Gray still had any authority to exercise over the sales or as if he was responsible for it at all, or as if he had anything to do with the money. The consequence is that up to some time in 1909 all the parties of age who had any interest and who were entitled to any notice applied to the court together to have Hopping authorized to sell the property and receive the money. Then in 1909 application was made, I think, by the present complainant, to Hopping to account. Divisions and disputes arose in reference to Hopping's management of the property, and Hopping was cited to account. He prepared an account in the orphans' court of all that he had done with the estate since 1901, since he received it from Gray, and then the bill is filed, in which for the first time the claim is made that Mr. Gray is still trustee, and should account now to this estate for everything that was delivered over to Hopping by the order of the court in 1901. It is claimed that they are entitled to that account from Mr. Gray, because the language of the order discharging him is such as to discharge him only as executor, and not discharge him as trustee. That is a pretty strict construction of that order. The order is that he be discharged from the further duties of his office as executor. Now, it is a fair question whether under that will the further duties of his office as executor did not include all his duties as trustee, because the executor was made a trustee. Suppose the testator had not said "trustee" in his will at all, but had directed that his executors should do so and so with his money. That would have created a trust, and the duties of the office as executor would have been a trust. So that there is a fair question as to whether under the terms of the order Mr. Gray is not discharged as trustee, but, be that as it may, the question now before the court is whether at this late day, six years after every one of the devisees or legatees interested has become of age, and ten years after all the persons interested in the estate, either personally or through their guardians, have acquiesced in the payment over of the entire funds of the estate to Mr. Hopping, and have got his security for their management, Mr. Gray should be held accountable for the trust property in equity as trustee from the time of his discharge as executor in 1901, and solely on the ground that by the order he was not expressly discharged as trustee. I do not think it would be equitable to do so, and, on the contrary, I think that the equitable thing to do on the whole proofs is to do just exactly what the court would have done had the matter been called to their attention when the order was made—that is, to advise a decree discharging him from his liability as trustee from the date of that order—except so far as relating to paying over the funds in his hands to the substituted executor. Of course, his accounts will have to be taken so far as necessary to show that, if it does not already appear. Iwill advise such decree in reference to this branch of the case, and upon the cross-bill of Gray's administrator.
Additional Opinion.
On further consideration of the evidence bearing upon the matter of the allowance of commissions to Mr. Hopping as substituted administrator of Mr. Gray, I reach the conclusion that commissions should not be allowed. The evidence establishes that Mr. Hopping was appointed in Mr. Gray's place as the result of a conference of the members of the testator's family interested, at which it was understood that by this appointment the estate would be relieved from the expense of commissions. The appointment of Mr. Hopping was consented to and accepted on this understanding, and the accountant is bound by it until revoked upon notice. Such notice was not given nor such revocation attempted until after the commencement of proceedings for accounting, and the right to charge commissions is now placed by Mr. Hopping himself mainly upon the ground that the complainants have instituted the litigation and have made unfair and unjust charges against him. Such action might justify refusal to act longer without compensation, but would not give the right to ignore the understanding which had been acted on for years in the management of the estate.
At the time of the appointment, it seems to have been expected and perhaps agreed that Mr. Yearance, a son-in-law, and Frederick Randall, a son of the testator, would aid the administrator in the management of the estate.
The present claim of the administrator, that the aid and assistance to be given by these persons were in the nature of conditions made on the appointment, and that, by reason of their failure to assist him, he has the right to charge commissions, is not satisfactorily shown on the evidence. And, if this were proved, such conditions could not be made effective to give the right to the commissions unless the administrator makes further proof, first, that the administrator, who had as against them the legal right to the management, asked for their assistance and was refused; and, second, that the parties interested and who had acquiesced in the appointment, relying on the understanding that no commissions were to be charged, were notified that the conditions were not complied with and that the administrator would thereafter ask for commissions. Mr. Yearance lived for six years after the appointment and gave some aid in the management, as did also Frederick Randall. In the absence of any intimation that the original understanding as to commissions was no longer considered binding, the parties interested in the estate were entitled to hold the administrator to its observance.
Commissions, therefore, cannot be allowed, but the administrator cannot be obliged against his will to continue to act without compensation, and may apply for his discharge on settlement of his account.