Opinion
September Term, 1863
Charles H. Smith, for the appellants. Marshall S. Bidwell, for the respondent.
There is no allegation that the payments disallowed by the referee were not made in good faith by the executor and trustee, and I am at a loss to perceive any substantial reason why they should not be allowed. It is to be borne in mind that the complaint in this action is in the nature of a proceeding in equity, to call upon the executor and trustee for an account and transfer, and to deliver over to the administratrix, with the will annexed, all the estate of the deceased. It is not a proceeding before the surrogate to call him to account as executor solely; and therefore it is that all the just and equitable payments made by the executor and trustee, in the management of the estate while under his control, are proper matters to be now disposed of and adjudicated.
It is quite clear to my mind that the executor and trustee but performed a duty incumbent upon him, in seeking to establish the will in New Jersey. There was real estate which passed by the will, and which by its provisions was vested in the executor as a trustee. On the death of the cestui que vie it was to be sold by him, and the proceeds distributed according to the terms of the will. He could not properly protect the property, or make a good title to it on such sale, unless the will was duly proved and established in the state where the land was situated. It became a matter of necessity, therefore, that the will should be proved in New Jersey; and when the representatives of the executor and trustee were called upon in equity to account for the estate of the decedent received by their testator, all the payments made by him, and expenses legitimately incurred by him, in establishing his title to the estate, so confided to him, they were entitled to be credited with such payments. It is thought to be well settled that a trustee, while acting under a general trust, is entitled to be allowed for all disbursements for taxes, repairs, salaries, insurances, and for all other charges and expenses which he in good faith thinks proper to pay. (7 Ves. 480; 3 Russ. 448; 2 John. Ch. 14; Id. 619.)
There can be no doubt that costs incurred by the trustee in protecting the estate confided to his care, and paid by him, should be reimbursed to him out of the estate. In the present case, I think the decrees of the courts in New Jersey directing the costs of the proceedings there to be paid by the trustee out of the estate of the decedent, afforded him warrant and protection for making such payment; and it was error in the learned referee not to have allowed such payment to his representatives. They ought not to be called upon, after this great lapse of time, to furnish any other evidence of the necessity of such payment.
I think the items should have been allowed, and the referee having found that they were in fact paid at the dates, and for the purpose specified, the total amount thereof should be deducted from the amount of the judgment in this action. They are enumerated in the referee's report.
A new trial should be ordered.
Catherine C. Young, by her will, not only appointed David Brush her executor, but devised to him certain real estate, and all her personal property in trust, to receive the rents, issues, and profits of the real estate, and the interest of the personal property, and pay the same, excepting the taxes and necessary repairs of the real estate, to George Young, the son of the testatrix, during his natural life. The real and personal estate of the testatrix was thus made the subject of one and the same trust by the will, and the title of both kinds of property was devolved upon the trustee for the purpose of the trust. The will contains no directions as to the particular fund out of which the reasonable expenses of the trustee incurred in relation to any portion of the property, which is the subject of the trust, shall be paid; and it is difficult to understand upon what principle it can be claimed, that such expenses shall be charged to the particular kind of property, in the management of which the expenses were incurred. The general rule is, that trust property shall reimburse a trustee for all his charges and expenses properly incurred in the execution of the trust, ( Worrall v. Harford, 8 Ves. 8,) and such charges and expenses constitute a charge or lien on the trust-estate in favor of the trustee, and he is not to be compelled to part with the legal estate until his claim is discharged. (8 Ves. supra; Hill on Trustees, 567, 570.) In the case of The Attorney General v. The Mayor of Norwich, (2 M. C R., 406, 424,) Lord Cottenham stated it to be quite clear according to the rule which applied to all cases of trust, that if necessary expenses are incurred in the execution of a trust or in the performance of duties thrown on any parties, and arising out of the situation in which they were placed, such parties are entitled, without any express provision for that purpose, to make the payments required to meet those expenses out of the fund in their hands belonging to the trust; and he said such was the rule of courts of equity and at common law. This language implies that the trustee has the whole trust fund to which he may resort for the reimbursement of his reasonable expenses incurred in the execution of the trust. Where there is nothing in the instrument creating the trust, limiting the trustees to a particular fund, or kind of property, for reimbursement of such expenses, a rule which should thus limit him might operate unjustly upon him, and tend to embarrassment in the discharge of the duties of his trust.
The account rendered by the trustee does not disclose that he ever received any thing from the real estate in New Jersey, which was a part of the subject of the trust. Doubtless he allowed the cestui que trust to occupy this property, and appropriate the rents, issues, and profits to his own use; and yet, if not absolutely necessary, it must be conceded to have been prudent on the part of the trustee to have the will proved in New Jersey for the purpose of protecting his title to this property, and the interest of the cestui que trust, as well as the interests of those who were entitled in remainder. It might have become necessary to institute actions in relation to this property which could not have been maintained without the probate of the will. Real estate is governed by the laws of the state in which it is situated. Not only houses and lands, but charges on land, including trust estates, are declared in law to be immovables, and governed by the lex rei sitœ, and no interest can be acquired in such property except by the persons, and under such circumstances as the local law prescribes. The validity of every disposition of real estate must depend upon the law of the country in which it is situated. (Story's Conf. of Laws, § 424.)
The trustee is presumed to have acted in good faith, and in the absence of any evidence of bad faith on his part, it can not be affirmed that his submitting the will for probate in New Jersey, by which his title to real estate in that state was acquired, was not in accordance with the dictates of sound discretion. Indeed, it is questionable whether it would not have been an act of gross negligence on the part of the trustee to have omitted the probate of the will in the state of New Jersey. If it be conceded that the domicil of the testatrix at her death was in the state of New York, and that the distribution of her personal estate must be in accordance with the laws of this state, it by no means follows that the trustee is to be deprived of the personal estate in his hands as such trustee, until his reasonable expenses are fully paid, which he has incurred in relation to all the subjects of the trust. The ruling of the referee, and the decision of the Supreme Court did not regard the character of David Brush as trustee. He was called upon to account simply in the character of executor of the will, having control only of the personal estate of his testatrix, and his rights as trustee of both the real and personal estate were not considered.
The referee expressly finds that the expenses charged in the account for the litigation arising out of the probate of the will in New Jersey were actually incurred; that the decrees of the court in New Jersey were made, admitting the will to probate in that state, and directing that the taxable costs of the parties to the litigation, together with their reasonable counsel fees, be paid out of the estate of the testatrix; but he finds that those decrees were immaterial on the question of the allowance of the expenses of the litigation in those courts out of the personal estate of the testatrix The litigation having been shown, and the expenses to have been incurred upon an issue of devisavit vel non, the trustee was entitled to all his reasonable costs and expenses, to be paid out of the estate, independent of the decrees in the state of New Jersey. ( Bradford v. Boudinot, 3 Wn. C.C.R. 122.)
The plaintiff was only entitled to the balance of the trust fund after the trustee had been allowed his costs as between solicitor and client, and other necessary and reasonable charges.
These reasons are sufficient to require a reversal of the judgment. It is also a general rule that the trustees are entitled to costs of litigation in relation to the trust fund where there is no evidence of bad faith on their part, and we think the judgment in this case is erroneous in not allowing the defendants the costs of this litigation.
The judgment should be reversed and a new trial ordered.
All the other Judges concurring,
Judgment accordingly.