Opinion
No. E3899
Decided March 27, 1970.
Wills — Construction — Declaratory judgment proceeding — Previously settled account of executor not affected — Corpus to be distributed to trustee — Income earned while corpus in hands of executor — Charges which may be made against such income disputed — Residuary estate is to be determined as of testator's death — Testator's directions for the distribution of his estate inapplicable — Ohio Intangible Property Tax — Based on income yield of productive investments — Does not make it a tax on income — Payment of such tax by executor a cost of administration — To be charged to corpus — Interest payable on estate tax deficiencies — Also chargeable to corpus — Where executor has expenses of investing funds, they are to be charged to corpus — Bequest of a specified number of shares of stock in a company — No particular shares indicated — Bequest general, not specific — Dividends on such stock while in hands of executor — Due to residuary beneficiary — Expenses of litigation to determine rights between life beneficiary and remaindermen — Where equally for benefit of both, should be borne equally — Discretion in granting declaratory judgment.
1. An account previously settled is not opened by a declaratory judgment proceeding which calls into question certain decisions made by the executor in allocating expenses between principal and income.
2. The residuary estate from which the executor was directed to pay debts and costs of administration is determined at the time of the testator's death, so that the income received from investments in the estate cannot be applied to such payments.
3. None of testator's directions for the distribution of his estate are applicable to whatever income he receives while the assets are in his possession.
4. The Ohio Intangible Property Tax, levied by R. C. 5707.03 et seq., although at a rate based on the income yield of productive investments, is not a tax on income.
5. The payment by an executor of the Ohio Intangible Property Tax on assets in the decedent's estate is a cost of the administration of the estate and should be paid from the corpus of such estate.
6. The payment of interest which becomes due on estate tax deficiencies is a cost of administration of a decedent's estate and should be charged to principal.
7. Where it is necessary for an executor to become involved in investing funds, the expense is one of the costs of administration, payable out of principal.
8. A bequest of a specified number of shares of the stock of a company, out of a much larger number owned by the testator and without designation of any certain shares, is not a specific bequest, but a general one, so that the beneficiary is not entitled to dividends received on such shares before they are transferred to him.
9. Where litigation to determine rights as to a decedent's estate between the life beneficiary and remaindermen is for the substantially equal benefit of both groups, the expenses thereof should be assessed equally between principal and interest.
Mr. Louis R. Mahrt, for plaintiff.
Mr. G. Chester Gay and Mr. Henry H. Chatfield, for defendant Gardner.
Mr. C. Richard Greathouse, Jr., for defendant Doty House of Middletown, Inc.
Mr. Lewis T. Barr, for defendant Children's Hospital.
Mr. Harvey L. Ingraham, for defendant University of Cincinnati.
Mr. William E. Rathman, for defendant Middletown Post No. 218, The American Legion, and defendant Middletown-Butler County United of American Cancer Society.
Mr. Robert V. Spayd and Mr. Amos Gardner, Jr., for defendant Turner.
The Third National Bank and Trust Company of Dayton, Ohio, brings this action as the Trustee of a Trust created pursuant to Item VIII of the Last Will and Testament of Robert B. Gardner, deceased, for a declaratory judgment regarding said Will and for the court's directions thereunder. Joined as parties defendant are Mazie R. Gardner, the income beneficiary of said Trust, Wellmore B. Turner, the executor of said Will, the Attorney General of Ohio, Robert B. Gardner, Jr., one of the legatees whose interests may be involved, and seventeen other parties who might have some interest as charitable distributees after the intervening life estates on which the trust is based terminate. The executor, Mazie R. Gardner, and one of the charitable ultimate beneficiaries, Children's Hospital of Cincinnati, Ohio, have filed detailed answers, with specific inquiries of their own. Nine of the other defendants have filed answers or entries of appearance in which they joined in the prayer of the petition. The other defendants are in default for answer.
So much of testator's will pertinent to this inquiry reads as follows:
"ITEM I. I direct my Executor to pay out of my residuary estate, as soon as practicable after my decease:
"(a) all of my just debts, expenses of last sickness, funeral expenses, and costs of administration; and
"(b) all estate, inheritance, transfer, or succession taxes payable by reason of my death, whether imposed with respect to property passing under or outside of my Last Will and whether such property consists of life insurance benefits or other property, without apportionment to or reimbursement from the recipients of my property; provided that my residuary estate is sufficient to pay the aforesaid items. It is my intention that my residuary estate referred to hereinabove in this Item shall be construed to mean all of my property remaining as a part of my estate after Items II, III, IV, V, VI, and VII hereunder have been either fully satisfied or provided for.
"* * *
"ITEM V. I give and bequeath unto Robert B. Gardner, Jr. (the natural child of myself and my first wife, but who was legally adopted by another by and with my consent), Four Thousand (4,000) shares of the Common Capital Stock of DIAMOND INTERNATIONAL CORPORATION . . . .
"* * *
"ITEM VIII. I give, devise, and bequeath, in trust, to the Trustee, and unto its successor or successors, hereinafter named, all the rest, residue, and remainder of the property (after the satisfaction of Items I, II, III, IV, V, VI, and VII hereof), real, personal, and mixed, of whatever character and wheresoever situate, of which I may die seized or possessed, or which I may own or have an interest in at the time of my death. The Trustee shall hold, manage, administer and distribute the Trust Estate created by this Item VIII (for convenience designated herein as "Trust A"), and this Trust A shall terminate, upon the following terms and conditions:
"A. The Trustee shall pay the entire net income from this Trust A to my said wife, MAZIE R. GARDNER, for and during her natural life. Should the said Robert B. Gardner, Jr., described in Item V of this my last Will and Testament, survive my wife, MAZIE R. GARDNER, then upon the decease of my said wife, the Trustee shall pay the entire new income from this Trust A to said ROBERT B. GARDNER, JR., for and during his natural life.
"B. Income payments provided for in this Trust A shall commence as soon as practicable after my decease, and shall be made in quarterly installments as nearly as practicable, but shall only be made when and as such income, after it shall have accrued, shall be in the possession of my Trustee for payment.
"C. Except as hereinafter set forth, this Trust A shall terminate upon the decease of the survivor of my wife, MAZIE R. GARDNER, and said ROBERT B. GARDNER, JR. Thereupon my Trustee shall distribute all of the accumulated and undistributed income and all of the undistributed corpus in said Trust Estate (Trust A) to charitable organizations, as hereinafter set forth, to wit:" etc.
Thereafter, ITEM XIII nominates, constitutes, and appoints plaintiff as trustee.
This is a multi-million dollar estate, and the trust emanating therefrom is a multi-million dollars trust. The controversy in these proceedings arises out of the fact that productive assets of such large dollar volume produce considerable income. The defendant Mazie R. Gardner contends that all of the income earned by these assets while they are in the hands of the executor, without any charges whatsoever being made against them, should be paid over to the Trustee to be received by it as income, which under ITEM VIII she is entitled to the net thereof. The Children's Hospital of Cincinnati, Ohio, which seems to be carrying the ball for the various charitable institution defendants who are the ultimate beneficiaries of this Trust A, contends that the executor should be permitted to make certain charges against income he received, such as state intangible property taxes.
In his answer, the executor admits that he has made certain charges against income, but takes no position as to whether these charges were correct or not, and merely asks the court's direction as to what if anything he should do if the court rules that his charges against gross income were erroneous. He changes his tune somewhat in his brief, however, where he attempts to justify his use of income. Plaintiff Trustee makes no contentions one way or the other, but simply asks the court's directions. Plaintiff has not favored the court with any brief.
Before proceeding into the primary issue, a side matter should first be adjudicated. As indicated above, the executor has admitted that in the past he has charged certain expenditures to income. These appeared in his Second Account, which has heretofore been considered by this court, and approved and settled on December 2, 1968. The Third Account which also discloses certain additional charges against income was filed on November 3, 1969. At the hearing on this matter a motion was made in open court asking the court to continue the scheduled hearing date on the Third Account from December 15, 1969, to a time after this declaratory judgment is determined, which the court sustained, and hearing on this Third Account is now continued until the call of the court. In the meantime exceptions have been filed to it by the defendant, Mazie R. Gardner.
The side issue is whether an approved and settled accounting may be opened in a declaratory judgment proceedings, which query must be answered in the negative. R. C. 2109.35 provides that the order of the Probate Court upon the settlement of a fiduciary's account shall have the effect of a judgment, and may be vacated only as provided therein. A declaratory judgment proceedings is not one of the methods provided. In making its declaration in these proceedings, this court, therefore, will not consider any previous account that may have been filed and settled.
To declare the rights and duties of persons arising under a decedent's will requires a construction of that will. The problem is the same regardless of the length of the will or the size of the estate. The intention of the testator controls, and this must be ascertained from the language used in the will, as a whole and within its four corners. 56 Ohio Jurisprudence 2d 52 et seq. As has been indicated, the problem here concerns income earned while the corpus is still in the hands of the executor. The life income beneficiaries want to receive the greatest possible amount of income. The charitable interests want as much of the corpus maintained as is possible. If income may not be used, the corpus will correspondingly be reduced. As to income received by the executor, the will offers little help, since neither in that part herein quoted nor in ITEM XIV which sets forth in more detail the powers, duties and discretions of the executor is there any mention of the word "income" or any instructions as to the executor's responsibilities in connection with it. The only instructions as to income are contained in those given to the Trustee to whom the executor is directed to make distribution.
The nature of income, under these circumstances, must therefore be determined. ITEM I of said will directs the executor to pay "out of my residuary estate" debts, costs of administration, certain taxes, and other items generally defined. As quoted above, this "residuary estate" is construed to "mean all of my property remaining as a part of my estate after" Items II to VII inclusive have been satisfied. The first question to be determined is whether income received by the executor is to be included in this "residuary estate," so that it may be used to pay for those items indicated.
The rule of construction that, in the absence of some specific language therein to the contrary, a will speaks as of the date of decedent's death is well settled. Ohio National Bank v. Boone, 139 Ohio St. 361. Under this rule the devisees and legatees under a decedent's will become entitled to the property bequeathed or devised to them immediately upon testator's death. Admittedly, the exigencies of administration may postpone their enjoyment of these gifts until the fiduciary has determined what might be needed to pay debts, costs of administration, etc., but their rights to possession are vested as of testator's death. Thus, the residuary estate, if any, is determined as of testator's death. In the instant case, therefore, the fund referred to by the decedent in ITEM I of his will as "my residuary estate" out of which his "just debts, expenses of last sickness, funeral expenses," costs of administration, and certain enumerated taxes are to be paid was determined as of the moment of his death.
Income earned by any of the assets held by decedent's executor during the period preliminary to payment of debts, etc. and distribution to the various legatees could not possibly be a part of this designated fund, since as of the time of testator's death there would have been no income earned as yet. As a matter of law, as of that time there was no guarantee even that any income would be earned. Cf. Rudolph v. Schmalstig, 9 O. O. 452.
The same reasoning applies to the designation of the fund the executor is directed to turn over to the trustee, as is set forth in ITEM VIII, with even more particularity. It will be noted that ITEM VIII specifically defines the property which is to be turned over to his trustee as "all the rest, residue, and remainder of the property (after the satisfaction of Items I, * * *), real, personal, and mixed, of whatever character and wheresoever situate, of which I may die seized or possessed, or which I may own or have an interest in at the time of my death." (Emphasis added.) Unmistakeably, testator intended that this "rest, residue, and remainder" referred to in ITEM VIII should be determined as of the time of his death. As of that time there would have been no income earned by any of these assets. None of testator's directions for the distribution of his estate to those entitled thereto can therefore be considered applicable to whatever income his executor might receive while these assets are still in his possession.
Where, then, does this income fit into the scheme of things? The receipt of income by the executor, under this testator's will, is purely accidental, a necessary ingredient of the fact that there is administrative delay before the persons entitled to income producing assets actually receive them. If distribution could be made as soon as the donees become entitled thereto, which is as of the time of decedent's death, the income-producing assets would have been in the hands of those persons entitled to them before they ever produced any income. Thus, if because of necessary delay in distribution, the executor does hold income producing assets from which he actually receives income, there being no other instructions in the will, such income must be held by him in toto in a trust capacity for the person or persons entitled thereto.
The two-fidiciary situation in testator's will must be borne in mind. First there is the executor, whose primary duty is to execute testator's will in such a manner that the persons entitled ultimately to his assets receive them at the earliest possible moment. Accordingly, generally no authority is conferred upon an executor in connection with the investment and re-investment of assets, since his duty is to distribute, not to invest. Secondly there is a trustee, who, like the executor, obtains his authority from the probate court, R. C. 2109.02, and who exercises it in accordance with testator's will and the statutes provided. Here, the trustee is simply one of the donees or distributees who should receive the property bequeathed to it from the executor at the earliest possible moment, being entitled to the same from the time of testator's death, with of course, specific instructions as to what it should do with what it receives.
From their briefs, the executor and the remaindermen, as represented by the briefs of the Children's Hospital of Cincinnati, Ohio, apparently agree that the income earned from assets being held by the executor and received by him does not form any part of the "residuary estate" referred to in ITEM I of testator's will, and thus such income may not be used to pay debts, etc. as provided in said item. The executor and the remaindermen, however, do contend that the executor should be permitted to net the income received by him by deducting therefrom expenses directly applicable to the receipt of such income before distributing it to the trustee. Particular reference is made to the burden of the Ohio Intangible Property Tax, where the amount of income has something to do with the amount of tax due. The life beneficiary objects to the executor, as distinguished from the trustee, netting anything against income, it being her contention that all income, without any deductions, should be paid by the executor to the trustee and by the trustee distributed to her.
As has been pointed out several times, Robert B. Gardner gave his executor no instructions whatsoever as to the disposition he should make of any income received. Only ITEM VIII (A), which sets forth the basic instructions for the trustee, uses the words "net income." Certainly, had this decedent intended that his executor should have access to income he received he could have so provided. "The intention of a testator must be ascertained from the language used in the will as applied to the subject matter and read in the light of circumstances surrounding its execution * * *. That intention is not that which existed in the mind of the testator, but that which is expressed by the language of the will. The question always in the mind of the court must be not what the testator should have done, but what did he do, and what he meant by the words which he actually employed. If the language of a will is plain, and the meaning obvious, the court cannot qualify or control the language by conjecture or doubt arising from extraneous facts * * *." 56 Ohio Jurisprudence 2d, 52ff, Section 521, and numerous cases cited thereunder. To put it another way, the court takes the will of the decedent as it is: it does not attempt to make a new will for him.
Thus, if the executor is to "net" income, his authority to do so must be implied from some circumstance rather than from any language in the will. The remaindermen and the executor contend that since the Ohio Intangible Property Tax is applied to "income yield," it is therefore an income type tax, and the income received should bear the burden of its payment. On the other hand, the income life beneficiary argues that this tax is on the ownership of the property itself and not on income, and that only the amount of tax is based on income, so that the actual receipt of income has nothing to do with the payment of the tax.
The Intangible Property Tax in question is levied by R. C. 5707.03 and 5707.04. Each of these sections begins: "Annual taxes are hereby levied on the kinds of intangible property, enumerated in this section * * * at the following rates:
"(A) On investments, five percent of income yield or of income * * *.
"(B) On unproductive investments, two mills on the dollar * * *"
From this language it is apparent that the tax is not levied on the income, but on the investment. The investment is taxable whether or not it yields income. Accordingly, the Supreme Court observed in Smilack v. Bowers, 167 Ohio St. 216, that the taxes levied under these sections are not taxes levied on income or income yield but are taxes levied directly on the kinds of property designated at the rate based on income yield; that this tax is plainly one on the property itself and not on income as such. In other words, as applicable here, the tax is on the corpus, not on its income. Thus the tax is not derived from income.
R. C. 5711.05 provides that each person shall return all taxable property of which he is the owner, and specifically does not authorize any person to omit from his return of taxable property his interest in investments yielding income or held for his benefit by a fiduciary and not taxed at the source. The second paragraph then orders that all taxable property belonging to persons named shall be returned by the fiduciaries named, and in subsection (C) provides:
"(C) That of an estate of a deceased person, by his executor, etc. * * *"
The net result of this section is that a trustee holding corpus does not make any intangible property return, but the beneficiary of said trust makes the return. See Raymond v. Evatt, 145 Ohio St. 234. On the other hand the executor makes the return for the estate of a deceased person.
R. C. 5719.14 provides that "A person against whom taxes, except these levied upon real estate, are assessed as fiduciary for another person or an estate shall, upon payment of such taxes, have a claim against such * * * estate for reimbursement of the taxes paid * * * and a lien upon all funds and property of such * * * estate in his possession or which come into his possession * * *." As has been pointed out above, the funds and assets of the estate of Robert B. Gardner, deceased, were determined as of the time of his death, and these funds and assets did not include income thereafter earned by them.
The court has been referred to the Illinois case of In re Ginsberg's Estate, 4 Ill. App.2d 138, 123 N.E.2d 739, which case is cited favorably in In re Gamble, 36 O.O.2d 388. In Ginsberg, half of the residue went to a charity and the other half to an individual. Income was received by the executor during the course of the administration on which he was required to pay income tax. The charity contended that since income received by it was not taxable, the income tax should be paid entirely from the share of the individual donee. Analogous to the case at bar, decedent's will contained no reference to the payment of federal income tax. Under the Internal Revenue Code, the estate is a separate taxable entity, and the executor had a statutory duty to pay the income tax. The Illinois appellate court held that "where an estate's personal representative is required to perform a statutory duty, expense of performing such duty is one of administration and a charge against the estate corpus * * * to be deducted from corpus of estate prior to distribution to either tax-exempt or non-tax-exempt beneficiary." That court also regarded it as immaterial that one legatee may have incurred some advantage or disadvantage by its decision.
This court views the rationale of the Ginsberg case with favor, and holds that the Ohio Intangible Property Tax which is required to be paid by the executor here is a cost of administration, payable as provided in ITEM I of testator's will "out of my residuary estate," which, as has been concluded above, does not include estate income. Accordingly, the executor may not net income by deducting therefrom his obligation to pay intangible property tax.
While neither the prayer of plaintiff's petition nor requests for instructions in the answers of any of the parties defendant made any reference to the problem of interest on estate tax deficiencies, it did appear from testimony that there is a good possibility that there will be some such deficiency. At his death Mr. Gardner owned a large number of shares of Diamond International Corporation — so large that under I. R. S. Regulations the executor was permitted to take a "blockage" reduction. I. R. S. has raised the issue that too large a reduction was taken. If the "blockage" reduction itself is reduced, the valuation of these shares of stock will increase, as will the total estate, as will the Federal Estate Tax due thereon. This increased tax would also carry interest. The charitable remaindermen, as represented by the Children's Hospital, contend that such interest should be charged against income of the estate.
Again, attention is invited to the fact that testator made no direct mention of the payment of interest, let alone from what fund it should be paid. He did in unmistakable terms say (ITEM I(b)) that all transfer or succession taxes payable by reason of his death should be paid out of his residuary estate as soon as practicable after his decease. The potential deficiency, being a tax on assets actually in decedent's estate at the time of his death, certainly comes within these terms. The interest that might be assessed against this deficiency would be the result of a late payment arising from the fact that the executor, in the exercise of his duty as he sees it, is in disagreement with the Internal Revenue Service on valuation. Reasonable expenses incurred by the executor in the proper execution of his trust are certainly costs of administration, payable, as indicated in ITEM I(a) out of the residuary estate, which, as has been noted, is corpus, not income. Interest payable on a possible estate tax deficiency would be such an expense here.
Further, since the payment of interest under such circumstances is one of the statutory duties of the executor, the rule and reason of the Ginsberg case, supra, apply. Any interest payment that the executor might have to make will therefore be charged to principal.
During the course of the administration of the estate, the executor has invested and reinvested funds, thereby incurring service charges, which he urges should be paid out of the income in his hands. In support he cites Sedgwick v. Sedgwick, 74 Ohio App. 435, which seems to verify executor's contention. Like other cases and authorities cited in briefs which this court has apparently ignored, however, this case is not in point since it concerns the activities of a trustee, not an executor. The powers of a trustee and the powers of an executor are not the same. Ordinarily, an executor's primary duties revolve around collecting the testator's assets and distributing them to the persons entitled thereto. Investing and re-investing is generally outside the scope of his authority. Only if there is some reasonable and necessary delay in affecting distribution may he become involved in investing funds, and then solely for the purpose of better preserving the assets pending distribution. Cf. R. C. 2109.37, the third paragraph from the end. Where it is necessary for the executor to become involved in investing funds, the expense is one of the costs of administration, payable out of principal.
The distinction made between an executor and a trustee is emphasized in Robert B. Gardner's will. ITEM XII sets forth the powers, duties, and discretions of the trustee, giving him, inter alia, unlimited investment powers. ITEM XIV, concerning the powers, duties, and discretions of his executor, is quite different from ITEM XII and is silent on general investment powers.
This court's conclusions with regard to inquiries concerning the activities of the executor, as distinguished from the trustee, end here. Some recapitulation is in order. All parties to this litigation apparently concur in the general rule as announced in Davidson v. Miners, etc. Trust Co., 129 Ohio St. 418, that "where one is bequeathed the income from certain property for life, he is entitled to such income from the death of the testator, in the absence of anything in the will to the contrary." See also Holmes v. Hrobon, 158 Ohio St. 508, annotation in 2 A.L.R. 3d 1056 et seq. Controversy has revolved around whether the executor who initially collected this income might use some of it to defray certain specific expenses. All of the inquiries have been answered in the negative. It will accordingly be ordered that the executor turn over intact to the trustee all of the income received by him.
As indicated, this court is not now ruling on any problems that may be apparent in any accounting that has already been approved. In his brief, however, the executor did admit that in his second accounting he charged against income cash the amount of $3,600 which he paid to Robert B. Gardner, Jr., as dividends received on the 4,000 shares of common capital stock of Diamond International Corporation stock bequeathed under ITEM V of testator's will. Just in case the executor has not as yet distributed these shares to Mr. Gardner, Jr., or has on hand dividend income which he believes eminated from them, some extension of the conclusions concerning income received by the executor is in order.
It is well settled that "where a testator bequeaths specific property to a legatee, the legatee is entitled to any income accruing thereon from the death of the testator, even though the legacy, like other legacies, is not payable until the expiration of the period of administration." III Scott on Trusts (2d Ed.) 1936, par. 234.1. The executor must have proceeded on the assumption that the 4,000 share bequest was specific, which this court considers to be a questionable conclusion.
At his death, according to his inventory, decedent owned 252,825 shares of common capital stock, Diamond International Corporation. ITEM V does not bequeath "my" 4,000 shares, or 4,000 shares represented by "Certificate No." so-and-so. It merely says 4,000 shares. There is no difference in this situation if decedent had died owning $252,825.00, and had made a bequest of $4,000: each legacy is general, not specific. In Hood v. Garrett, 53 Ohio App. 464, it is held that "a bequest of a portion of a number of shares of stock owned by a testator is a general and not a specific bequest where no particular shares of such stock are designated in the will, and the dividends accruing thereon after a testator's death but before delivery of the stock to the legatees go into the residuary estate, and not to such legatees." As in all cases where questions arise under a will, the intent of the testator controls; and, as indicated in In re Estate of Kirkwood, 6 Ohio App.2d 146, while there could be other factors present which would dilute this general rule, none of them are found in the will at bar.
Mr. Robert B. Gardner, Jr., is not, therefore, entitled to any dividends received on any shares of common capital stock of the Diamond International Corporation while such stock is in the executor's hands. Such dividends belong in toto to the trustee of Trust A.
Differently situated from the executor is the trustee, whose primary duty is set forth in ITEM VIII, subparagraph A. (quoted supra) which specifically uses the words "net income." The balance of the propositions for which a declaration is sought concerns a refinement of these words.
All parties agree that ordinary expenses are chargeable to income, and that extraordinary expenses are payable out of principal. See 54 Ohio Jurisprudence 2d 163, Section 207, and 3 Scott on Trusts (3d Ed.) 1902, par. 233.2, for illustrative situations. Issue is drawn between the income life beneficiary and the remaindermen (Children's Hospital) as to what fund the expenses of this litigation should be credited.
The life beneficiary contends that where litigation is necessary, as here, to insure the correct administration of the trust the expense is an extraordinary charge and should be paid out of principal on the ground that, unless otherwise provided for by the settlor, it should be borne by all parties. "If the expenses of litigation incident to the trust is paid from principal, the life tenant, as well as the remaindermen, shares the burden, for in that event the life tenant is deprived of the income on the sum taken from principal." 54 Ohio Jurisprudence 2d 168, Section 207; 3 Scott on Trusts (3d Ed.) 1909, par. 233.3. In support thereof, Ohio Jurisprudence 2d cites Holmes v. Hrobon, 93 Ohio App. 1. This case, however, while quoting the general proposition as set forth above, does not reach the same conclusion. Instead, it holds that under the facts there, the litigation was equally for the benefit of the life tenant and the remaindermen, and therefore the expenses of litigation should be borne equally by each of them, with one-half of such expenses payable out of income, and the other half payable out of principal. This conclusion was affirmed in Supreme Court review, Holmes v. Hrobon, 158 Ohio St. 508, supra.
The general factual situation in the case at bar is sufficiently analogous with Holmes v. Hrobon, so that this court will order the expenses of this litigation to be borne in the same manner, one half charged to income and one half charged to principal.
At the hearing the defendant Middletown-Butler County Unit of the American Cancer Society set up a side issue as to the defendant The American Cancer Society, Ohio Division, Inc., by moving to strike it as a party defendant for the reason that testator's will named as a legatee the Middletown-Butler County Unit, not the American Cancer Society, Ohio Division, Inc. Each of these parties is concerned with a portion of the remainder of the trust estate after the termination of the intervening life estates. It does not appear that these intervening life estates will terminate at any time in the near future. No real choice needs to be made between these two parties until the trustee makes final distribution. The presence of both of them in this litigation is not burdensome. The granting of a declaratory judgment is within the sound discretion of the court, 16 Ohio Jurisprudence 2d 639, Section 9. This court therefore does not rule upon this motion.
Specifically responding to the various declarations sought, the following is submitted: Plaintiff's question No. 1, whether income received from the estate is to be administered as income, affirmative. Therefore, questions 2, 3, and 4 need not be answered. Question No. 5, whether the income received from the estate is the estate's gross income, the answer is yes. Therefore, questions 6, 7 and 8, need not be answered. Question No. 9, whether such income may be "netted" by the plaintiff as trustee for legal fees and expenses in connection with this litigation, the answer is that one-half of such fees and expenses may be netted from income, with the other half being paid from principal. The second part of question 9, whether plaintiff-trustee may "net" income to charge and pay trustee fees thereon in the administration of the trust, the answer is yes.
The executor-defendant has asked three questions, the answers to which are: Question A, may the executor charge any of the disbursements in the estate against the gross income of the estate, other than disbursement of such income to plaintiff, the answer is no. Question B, should the executor prepare his accounts to show receipts and disbursements separately identified as to principal and income, under R. C. 2109.30, the last sentence of the second paragraph thereof, it is doubtful whether the court can require this to be done. It is suggested, however, that such accounting system would simplify the executor's compliance with this decision.
The executor's last question seeks directions as to what he should do if in the past he has acted contrary to the answers given to his first two questions. Whether or not the executor has acted contrary is an accounting question. As was indicated earlier in this opinion, a declaratory judgment proceedings is not appropriate for questioning an accounting. The court will, therefore, decline to answer this question.
Counsel for the life tenant, Mazie R. Gardner, may prepare an entry in accordance with this opinion, making certain that counsel of record endorse the same before it is submitted for journalization. Costs will be paid by the trustee, with the accounting, as heretofore indicated, being one-half from principal and one-half from income.
Judgment accordingly.