text:
    The Paterson General Hospital Association v. Jacob H. Blauvelt, executor, &c., et al.
    [Decided April 6th, 1907.]
    1. Where a testator follows bequests of pecuniary legacies with a general residuary clause, the legacies are charged upon the entire residuary estate, real and personal, and remain so charged until paid, the lien upon the realty being not contingent upon the insufficiency of the personalty at the testator’s death or at the final accounting, and it being immaterial that the legacies fail of payment out of the personalty because it has been wasted, embezzled, misappropriated or destroyed.
    2. A legatee was not barred by laches in 1906 from suing to enforce its lien upon the residuary realty, where testatrix 'died May 6th, 1892, and January 5th, 1899, the legatee obtained a decree requiring the executor to pay the legacy and he refused to pay it on the ground he had no assets in his possession.
    3. A presumption of the payment of a legacy does not arise until after twenty years from the accrual of the right' to it.
    Heard on demurrer to bill.
    Hannah Grundy died on the 6th day of May, 1892. By her will, -which was duly probated in the orphans court of Passaic county, she bequeathed general pecuniary legacies aggregating $12,400, and then gave, devised and bequeathed all the rest, residue and remainder of her estate, real and personal, wheresoever‘situate, or of whatsoever the same might consist, to her cousin, John Clough, and appointed Jacob H. Blauvelt sole executor.
    Among those to whom pecuniary legacies were bequeathed was the complainant, whose legacy was $4,000.
    The will was admitted to probate, and letters testamentary were issued to Blauvelt, the executor.
    The testatrix died possessed of personal property and real estate, the inventory of the personal property amounting to $15,414.35. On the 31st day of December, 1896, the executor, by his final account duly allowed by the orphans court of Passaic county, showed that he had paid all of the legacies bequeathed in the said will except the sum of $1,850 to the complainant, $360 to another legatee and $100 to another, and the said account also showed that the executor had a balance in his hands of the personal estate amounting to $2,638.51.
    After this time the executor made a payment to the complainant of $200, leaving a balance still due to it of $1,650.
    On the 19th of December, 1898, the complainant began proceedings in the orphans court aforesaid against the executor which resulted, on the 5th of January, 1899, in a decree that the executor pay to the complainant, upon its tendering a proper refunding bond, the sum above mentioned remaining due upon its legacy, whereupon it tendered a proper refunding bond, and the said executor refused to pay, stating that he had no assets of the estate in his possession.

      The bill charges that the executor, at the time of filing the final account on the 31st day of December, 1896, had wasted the estate of Elannah Grundy, and had misappropriated the same; that he was and is now insolvent and of no financial responsibility whatever, and that the complainant has exhausted all means at its command to obtain the balance due upon its legacy.
    The bill also Charges that at various dates from the 15th of June, 1895, to the 29th of June, 1906, the residuary legatee, John Clough, conveyed certain portions of the real estate, and agreed to convey certain other portions thereof to various persons.
    The bill charges that the legacy of the complainant is a charge upon the real estate of the decedent, and prays that the same may be so decreed, and that the defendants be decreed to pay the amount due thereon, or that so much of the real estate as may be necessary may be sold to raise and pay the same.
    The executor, the residuary devisee, and each of the parties to whom real estate was conveyed by the residuary devisee, and the other legatees who have not received payment in full, are made defendants.
    John Clough, the residuary devisee, files the demurrer. His grounds may be briefly summarized as follows:

      First. That the complainant is in laches in attempting, at this late date, to charge the real estate of the defendant acquired as residuary devisee.

      Second. That there was sufficient personal estate at the time of the death of the testatrix to pay all of the legacies, together with the costs of administration, hence there is no charge upon the real estate acquired by the defendant under the will.

      Third. That, under the will, there was no intention to charge the real estate acquired by the demurrant under the residuary clause thereof.

      Fourth. That if the complainant ever had a lien, its delay in enforcing the same has resulted in its losing it.

      Fifth. That the complainant has not, on the face of its bill, justified its laches.

      Mr. Robert Williams and Mr. Gustav A. Runziker, for the complainant.

      Mr. George P. Rust and Mr. Thomas P. Costello, for John Clough, demurrant.
   Garrison, Y. C.

(after stating facts).

There is no doubt that where a testator bequeaths pecuniary legacies and follows this with a general residuary clause, the legacies are charged upon the entire residuary estate, real as well as personal. This matter was set at rest in this state by the decision of the court of errors and appeals in the case of Corwine v. Corwine, 24 N. J. Eq. (9 C. E. Gr.) 579 (1874) The rule as there stated was adopted from Hawk. Wills, and is in the following language (at p. 294):

“It has been said that a testator generally intends the legacies given by his will to be a charge on his residuary real estate, as well as on his personal estate, but (in the absence of an express charge) they are held to be so only when the residuary real and personal ® * * estate are given together * ® * it being a rule of construction that if legacies are given generally, and the residue of the real and personal estate is afterwards given in one mass, the legacies are a charge on the residuary real, as well as the personal, estate.”

In the case of Johnson v. Poulson, 32 N. J. Eq. (5 Stew.) 390 (Court of Errors and Appeals, 1880), the rule in Corwine v. Corwine, supra, is explained, and is shown to apply only to those cases in which there is no evidence of contrary intention appearing in the will. That is to say, a will giving legacies generally, and following that with a residuary clause blending all of the property, real and personal, therein, will be construed as charging the legacies on the blended mass of real and personal property left by the testator. But if there is anything in the will which shows a contrary intent, then the charge does not necessarily result from a residuary clause of the character mentioned.

In the case at bar there is nothing in the will to take it out of the plain rule laid down in Corwine v. Corwine, supra, and so frequently applied since that time. Brown v. Brown, 31 N. J. Eq. (4 Stew.) 422 (Chancellor Runyon, 1879); Miller v. Sandford, 31 N. J. Eq. (4 Stew.) 427 (Chancellor Runyon, 1879); Adams v. Beideman, 33 N. J. Eq. (6 Stew.) 77 (Chancellor Runyon, 1880); Cook v. Lanning, 40 N. J. Eq. (13 Stew.) 369 (Chancellor Runyon, 1885); Langstroth v. Golding, 41 N. J. Eq. (14 Stew.) 49 (Chancellor Runyon, 1886); American Dramatic Fund Association v. Lett, 42 N. J. Eq. (15 Stew.) 43 (Chancellor Runyon, 1886); Turner v. Gibb, 43 N. J. Eq. (3 Dick.) 526 (Vice-Chancellor Green, 1891); Congregational Church v. Benedict, 59 N. J. Eq. (14 Dick.) 136 (Vice-Chancellor Stevens, 1899); affirmed, 62 N. J. Eq. (17 Dick.) 812; Horton v. Howell, 56 Atl. Rep. 702 (Vice-Chancellor Stevens, 1903).

Since it is the rule that the personal estate of a decedent is the primary fund for the payment of debts and legacies, the question arises, in applying the doctrine of Corwine v. Corwine, supra, whether there is any charge upon the residuary real estate if there is sufficient personal property to pay the debts and legacies. There is no doubt whatever that, as between the residuary devisee and a legatee, the legatee can be compelled by the devisee to proceed to obtain his legacy from the personal estate before resorting to the real estate. The question, however, still remains whether, if the legatee does proceed to obtain payment first from the personal estate and fails, although there was at the time of the death of the testator or of the final accounting ample personal estate to pay debts and legacies, the lien upon the real estate exists, or whether such lien only arises in the event that there was not sufficient personal property applicable to the payment of legacies.

Concisely stated, I think the question is whether, under the doctrine being considered, the proper holding is that there is a lien or charge upon the residuary real estate, or that there is such a lien or charge only if there is not sufficient personal estate at the time of the death of the testator or final accounting to pay the legacies.

It seems to me plain that if the first suggestion is adopted as a correct statement of the rule, then the lien or charge must remain until paid, and it is utterly immaterial whether there was sufficient personal property at the time of the death of the testator or of the final accounting, the only importance of that question being that such personal property must be resorted to by the legatee before enforcing his charge upon the real estate.

On the other hand, if the latter statement of the rule is the correct one, then if there was sufficient personal property at the death or at the final accounting, there is no charge. This proceeds upon the reasoning that the testator only intended to charge his real estate if he had not sufficient personal property to pay the legacies.

I am of opinion that, under the reasoning and precedents, a will of the kind here under consideration charges the legacies upon the land, and that they remain a charge until paid. I do not think that the proper rule is that the so-called charge or lien is a contingent one which only arises in the event that there was insufficient personal property at the time of the testator’s death or at the final accounting. The leading case upon this subject is Greville v. Browne, 7 H. L. Cas. 690 (1859). In that case there was a pecuniary legacy, a general residuary clause, and another person than the residuary devisee was the executor. Lord-Chancellor Campbell (at p. 696) said: “For nearly a century and a half this rule has been laid down and acted upon, that if there is a general gift of legacies, and then the testator gives the rest and residue of his property, real and personal, the legacies are to come out of the realty. It is considered that the whole is one mass; that part of that mass is represented by legacies, and that what is afterwards given is given minus what has been before given, and therefore given subject to the prior gift.” He further quotes with approval the language of Vice-Chancellor Page-Wood, who said: “I feel that I should be only introducing a useless and mischievous distinction if I held the legacy not to be a charge, the principle of the decision being in truth the same in the case of legacies as in that of debts.”

Lord Cranworth (at p, 699) said: “The distinction that is suggested between real and personal property is an artificial part of the case,” and Lord Kingsdown (at p. 706), after holding that “the rest” must be construed to mean “that which remains after what has previously been given is withdrawn,” proceeds to say: “The distinction which is relied upon * * * is, I think, a distinction which is founded, not upon general principles, or upon the ordinary sense of mankind, but entirely upon the technical rules of the English law.”

It must be recalled that by reason of the feudal system and the inability to transfer lands by will there grew up an entirely arbitrary distinction with respect to property. As has just been pointed out by the judges above quoted, there is no real distinction in the mind of the layman between one kind of his property and another kind. He has property. He desires to dispose of it by will. To the lay mind it does not occur that any distinction will be applied, and hence, when he gives some of the property in the form of money bequests, and what is left of his property in a mass to another, he undoubtedly means that all of his property shall first be used (after payment of his debts) to pay the legacies he has given, and that only what is left shall go to the one who is to have the residuum.

It is an entirely artificial thing that the personal property is held to be the primary fund for the payment of debts and legacies, and while it is perfectly true that it is so held, I think it entirely improper to extend this doctrine so as to hold that if, for any reason, the personal property is diverted from and does not reach the legatee, he thereby loses his legacy in a case where the testator left ample property to pay the named pecuniary legacies.

It will be observed that in the leading case just cited there is no suggestion that the charge upon the realty arises in the event of a deficiency of personal property. The court, as has been demonstrated, wiped out any distinction in such cases between the two classes of property, and held squarely and without qualification that the legacies were a charge upon the realty. This case was cited in our leading ease of Corwine v. Corwine, supra, and (at p. 584 thereof) is shown to be the basis of the modern formulation of the doctrine.

The difficulty which now confronts us has arisen, in my view, because the courts, in stating the undoubted rule that the personal property is the primary fund for the payment of legacies, have failed to clearly show that this relates merely to priority or precedence in the marshaling of assets, and does not affect the existence or continuance of the lien. Because the residuary devisee has the undoubted right to have the personal property of the decedent, after the pajment of his debts and administration expenses applied to the satisfaction of pecuniary legacies, the courts have often unqualifiedly stated that, under the doctrine being dealt with, the legacies are a charge on the land if there be an insidficiency of personal estate. This is undoubtedly the rule, but it is not the whole rule, and as thus stated leads to the incorrect inference to which I have alluded. If from this statement of the principle it is inferred that there is only a charge upon the real estate in the event of there being an insufficiency of personal estate, then such inference is unwarranted and the principle is not properly applied.

In my view, as between the legatee and “the estate,” the latter is charged as a whole, irrespective of any distinction as to different kinds of property, and remains charged until the legacy is paid. In the matter of marshaling of assets, or of determining the rights as between the residuary devisee and the legatee, the latter undoubtedly can be compelled to exhaust his remedy against the personal property before enforcing the lien which he has upon the real estate. Many of the cases above cited as following Corwine v. Corwine, supra, refer in the way in which I have above indicated to the necessity of there being an insufficiency of personal assets before the doctrine contended for will be applied. But Greville v. Browne, supra, the leading authority above cited, does not, as heretofore shown, refer to the necessity of any such insufficiency to create the lien, and the following cases in our own courts have stated the doctrine without any such qualification: American Dramatic Fund Association v. Lett, supra (at p. 44); Stevens v. Flower, 46 N. J. Eq. (1 Dick.) 340 (Chancellor McGill, 1890); First Baptist Church v. Syms, 51 N. J. Eq. (6 Dick.) 363 (Chancellor McGill, 1893); Carter v. Gray, 58 N. J. Eq. (13 Dick.) 411 (Vice-Chancellor Grey, 1899); Vernon v. Mabbett, 58 Atl. Rep. 298 (Vice-Chancellor Grey, 1904) Haberman v. Kaufer, 61 Atl. Rep. 976 (Vice-Chancellor Grey, 1905); see, also, Wyckoff v. Wyckoff, 48 N. J. Eq. (3 Dick.) 113 (Vice-Chancellor Pitney, 1881). While the vice-chancellor in that case dealt only with the doctrine which concerned land devised to a person who is directed to pay a legacy, and held that in such case the deficiency of personal assets was not considered, he cites authorities which show that the same ruling is made in cases where the charge is upon a residuary estate, and is not confined to cases where the land is devised with a specific direction to pay. In Greville v. Browne, supra, one of the authorities cited by the vice-chancellor, and which I have heretofore alluded to, Lord Cranworth, in commenting upon an argument and an inference from the case of Awbrey v. Middleton, points out that the circumstance that the legacies were directed to be paid by the executor, and that the gift of the general residue was to the executor, did not control the decision, but that the decision proceeded upon the general principle that the residue was charged with the legacy, and therefore the legacy must be paid without regal'd to whether it came from personal property or real estate.

If, then, I am correct in my understanding of the principle, this will, as above stated, created a lien or charge upon the real estate, and the authorities all hold that under such circumstances nothing but payment to the legatee extinguishes the lien. Quick v. Quick, 1 N. J. Eq. (Sax.) 4 (Chancellor Vroom, 1830); Terhune v. Colton, 10 N. J. Eq. (2 Stock.) 21 (Chancellor Williamson, 1834); Grode v. Van Valen, 25 N. J. Eq. (10 C. E. Gr.) (at p. 97) (Chancellor Runyon, 1874). See, also, collection of cases in other jurisdictions. 49 Am. Dig. col. 3254 § 2122.

Even in cases where the charge was upon the real estate, “if the personal property should prove insufficient to pay,” the Irish courts have held that the lien existed in cases where the executor embezzled sufficient personal property to have paid the legacies. Although in the English court of chancery, under similar circumstances, there is a different holding. In re Massy, 14 Ir. Ch. 355 (1863); McCarthy v. McCartie, 1 Ir. Rep. 86 (1897); Richardson v. Morton, L. R. 13 Eq. 123 (1871).

In the case of Sims v. Sims, 10 N. J. Eq. (2 Stock.) 158 (at p. 161) (Chancellor Williamson, 1854), there is a dictum that if the executor embezzles the monej'' of the estate the legatee loses, and the land is released. It will be found in analyzing that case— first, that the chancellor held that under the will therein considered there was no charge upon the real estate, so that what he had to say concerning the effect of the embezzlement of the executor in a case where there was a charge was dictum, and secondly, that the authorities which he cites for that dictum are those in which land charged with the payment of legacies was once resorted to and the money raised upon it and paid to the executor for the legatee, and the misconduct or embezzlement of the executor was then attributable to the legatee, and not to the devisee, whose land had once suffered the burden. Undoubtedly the cases hold that if there is a charge, and the amount of the charge is obtained from the land, that land shall not again be subjected to the same charge. But I do not think that this in any way militates against the principle that if the land is subject to the charge and has not borne it, it is not exempt therefrom because the executor did have funds in his hands arising from the personal estate which should have been devoted to paying the legacy.

In the case at bar there was sufficient personal property left by the testatrix, if'properly and honestly administered upon, to have paid the legacies in question. This money was wasted, misappropriated or embezzled by the executor. The legatee (the complainant) has pursued the executor, and has, it pleads, exhausted all the remedies at its command to obtain payment of its legacjr, and has failed to secure such payment, and cannot secure it because the executor is insolvent and there is no personal property of the decedent now in existence to be applied to this legacy.

In the case of Horton v. Howell, 56 Atl. Rep. 702 (1903), Vice-Chancellor Stevens holds that, as between the residuary devisee and the legatee, the net amount shown to be in the hands of the executor from his administration of the personal property is all that the devisee can require as applicable to the legacy. In the course of his reasoning it will be found that he holds that the intention of the testator must be held to be to prefer the legatee as against the residuary devisee, and he points out that extraordinary expenses of litigation carried on by the executor are not chargeable as against the legatee in relief of the land devised to the residuary devisee, because the testator could not contemplate that any such expenses should reduce the amount payable to the legatee upon his legacy. By parity of reasoning I think it may fairly be said in the case in hand that the testatrix could not contemplate that an embezzlement of her personal property by her executor should result in a loss to the legatee while there was property, whether real or personal, coming to the residuary devisee. In my view, the whole matter is settled by the holding (which I find to be the correct one) that, under the language of this will, the legacies were charged upon the property of the testatrix, and that until they are paid they remain a charge, and therefore it is immaterial whether they fail of payment out of the personal property because it was wasted, embezzled, misappropriated, or destroyed by an act of God. If we suppose a case in which ample personal property in the shape of money was left in a bank which failed, or was left in some form which was destructible, and that it was, without negligence or fault, and by an act of God, destroyed, we are then to consider whether the testator intended that the legatee should lose and the residuary devisee should be exempt from loss under such circumstances. I fail to see how it can be reasonable to hold that the testator had any such intention. He names his beneficiaries and the amounts he desires them to receive, and the rest of his property, without artificial distinction between the kinds, he leaves to another. I think the only reasonable conclusion is that those to whom he has given pecuniary legacies have a charge upon all the property, and that until they are paid such charge remains.

This decision disposes also of the contention of the defendant that there was laches. It would be equally ineffectual, in my view, if the objection came from those who acquired title from the residuary devisee. Grode v. Van Valen, supra. But undoubtedly, on behalf of the residuary devisee himself (who is the only demurrant here), there is no basis for a contention that the complainant is barred by laches from enforcing its lien upon the residuary realty. A presumption of payment of a legacy does not arise until after the expiration of twenty years from the time of accrual of the right to it. Coleman's Executors v. Howell, 16 Atl. Rep. 202 (Vice-Chancellor Bird, 1888); Congregational Church v. Benedict, supra (at p. 140).

I will advise a decree overruling the demurrer, with costs.


source: Caselaw Access Project

author: Garrison, Y. 0.

license: Public Domain

text:
    Albert Fogg v. Ocean City Sewer Company.
    [Decided April 11th, 1907.]
    1. The official record of the contents of an ordinance may not be varied by parol.
    2. A paper, entitled “Application for Sewer Attachment,” executed by a property owner and a sower company, providing that the company agrees to allow the owner to make attachment of his property to the main sewer pipe, sewer to be used at named rates per year, and that the owner makes application for sewer attachment as above, and agrees to comply with all the company’s present and future rules relative to the use of sewer, is a license to connect, and an arrangement from year to year only, so that the company, on giving due notice, can charge a higher rate for subsequent years, up to the limit allowed by ordinance.
    Heard on bill, answer, replication and proofs.

      Messrs. Bourgeois & Sooy, for the complainant.

      Messrs. Thompson & Cole, for the defendant.
   Garrison, Y. 0.

Ocean City,-in the year 1893, was a borough, having been incorporated under the Seaside Borough act. 1 Gen. Stat. p. 254. On the 28th day of April, 1893, the council of the said borough passed an ordinance over the veto of its mayor dealing with the Ocean City Sewer Company. The original ordinance as laid before the mayor, acted upon by him and returned to council, is lost. The complainant introduced into evidence the ordinance book of the said borough. The clerk is, by the statute in question, required to keep such a book, in which he is to record the ordinances as passed. From this exhibit it appears that the borough, by the ordinance in question, granted certain powers and privileges in the streets to the said sewer company, and in the eighth paragraph thereof provided as follows:

“That the said company charge and collect in advance, for the use of said sewer service, as follows: For hotels or boarding-houses, seventy-five (75) cents per annum, for each sleeping-room, not exceeding thirty, and fifty (50) cents per annum for each additional sleeping-room over said number; private dwellings or cottages, seventy-five (75) cents per annum for each room, not exceeding ten, and fifty (50) cents per annum for each additional room over said number.”

Under the Borough act aforesaid it was necessary, before the ordinance became effective, that it be published for two weeks, and such publication was duly made, and copy thereof was introduced into evidence, and is an exact copy of the ordinance as it appears in the ordinance book.

The complainant in 1893 was the owner of certain houses in the borough of Ocean City. In 1895 a writing was executed between the complainant, through the plumbers with whom he had contracted to do the plumbing in his houses as his agents, and the sewer company, which, in its material parts, is as follows :

“Application for Sewer Attachment.
“Ocean City Sewer Oo.
“Ocean City, N. J., June 15th, 1895.
“The Ocean City Sewer Company hereby agrees to allow Smith & Thorn to make attachment to the main sewer pipe * * * Owner of property, Albert Fogg. * * * Full number of sleeping-rooms, 4 rooms in each cottage, 5 cottages, 20 rooms in all. Sewer to be used at the following rates per annum:
All sleeping-rooms of 30 or under, in hotels or boarding-houses. .$.75 each
All sleeping-rooms over 30..................................$.50 “
All sleeping rooms of 10 or under, in private dwellings.........$.75 “
All sleeping-rooms over 10, in private dwellings................$.50 “
“I do hereby make application for a sewer attachment as above, and do grant permission to enter premises for all purposes relating to said sewerage, and do agree to conform to and comply with all laws, resolutions, rules and regulations which have been or may at any time hereafter be enacted relative to the use of sewerage.
“(Signed)
Albert Fogg,
‘H. C. Smith.’

By the ninth section of the ordinance it was provided that if the company did not change the outlet of its sewers before the expiration of ten years from the passage of the ordinance it must reduce the schedule of rates as provided in paragraph 8 twenty per cent. The ten years’ period expired'in 1903. The company did not change the outlet of its sewers. In 1903, therefore, the company was not empowered, under the ordinance, to charge more than the schedule in paragraph 8, less twenty per cent.

Beginning in 1903 the company rendered bills to the complainant for his sewer connections for the private houses or cottages owned by him upon the basis of the number of rooms contained in each cottage. Up to that time and during the ten years’ period from the passage of the ordinance its bills had always been based upon the number of sleeping-rooms in each of such private houses or cottages.

It is the contention of the complainant .that the company has no right in the premises to charge him for each house any more than seventy-five cents per sleeping-room, less twenty per cent. The complainant seeks to justify this position by the contention that the original ordinance considered by council, vetoed by the mayor and passed over the latter’s veto, contained the word “sleeping” before the word “room” or “rooms” in the paragraph relating to the rates to be charged for private dwellings or cottages. He argues that since the paper'upon which the original ordinance was ¡minted or written has been lost, he has the right to introduce evidence of a secondary nature as to the contents thereof, and he called two of the members of the borough council, who were members at the time that the ordinance was passed over the mayor’s veto on the 28th of April, 1893, to endeavor to prove that the word “sleeping” was in the original paper.

At that time the council consisted of five members.

Before the complainant can prevail it must be first settled in his favor as a matter of law that the official record of the contents of an enactment may be varied by parol evidence. It is conclusively settled in this state that it may not. Bloomfield v. Board of Chosen Freeholders of Middlesex County, 74 N. J. Law (45 Vr.) 261 (Supreme Court, 1907), and cases there cited.

Even were the law otherwise, I clo not think that the complainant in this ease has proven the fact for which he contends.

This leaves for consideration the question as to whether or not the written paper, dated June 15th, 1895, is a contract between the complainant and defendant of such a nature and kind, and of such duration that the defendant, under it, is bound to continue to furnish service at the rate of seventy-five cents per sleeping-room for each of the houses of the complainant in said paper mentioned.

I think the effect of that paper-writing and the conduct of the parties was to license the complainant to connect with the sewage system of the defendant at the prices therein mentioned. Fogg v. Ocean City, 74 N. J. L. (45 Vr.) 362 (Supreme Court, 1907). That there was not constituted thereby a continuing contract of perpetual duration; that in effect the arrangement between the parties was from year to year. Under the ordinance the rates were to be paid in advance. The complainant was not bound to connect, or to continue a connection once made. If he chose to act upon the license he could do so, and then became bound to pay the rates specified in the paper. He could discontinue the connection without subjecting himself to any claim for damages on the part of the defendant.

The defendant, on its part, was bound to furnish the service at the rates specified for any year it served the complainant until it gave due notice of a change of rates for an ensuing year. It had the right, up to the limit authorized by the ordinance, to change the rates. It was not bound by a definite binding contract perpetually to serve at the rates mentioned in the paper-writing.

Since the complainant fails to prove that the charges were unauthorized, he fails to make out a case, and his bill must be dismissed, with costs.


author: Garrison, Y. C.

text:
    Peter J. Tuite et al. v. Mary J. Tuite.
    [Decided April 11th, 1907.]
    1. Evidence held insufficient to justify a finding that defendant purchased certain real estate in her own name under an agreement to hold the same in trust for herself and complainants, her minor children.
    2. Defendant, on the death of her husband, continued his junk business, with the assistance of three of her six minor children, the eldest of whom was a girl of sixteen and the youngest only a month old. She collected all the money, paid all the bills, and employed such help as was necessary, and from the profits purchased certain real estate in controversy.—Held, insufficient to establish a partnership between defendant and her children, under which they were entitled to an equal share in the profits, while defendant was alone responsible for losses.
    3. The mother being entitled to the earnings of the children during minority, there was no consideration for such an agreement of partnership, if one was made.
    4. Where, after the death of defendant’s husband, she assumed control of his estate without any administration being declared thereon, she was chargeable with the value of the property derived from her husband, less all payments made by her with which a lawful administrator might have been credited, under the express provisions of % Gen. Stat. p. Uftd § 3.
    Heard on bill, answer, replication and proofs.
    This is a bill filed by Delia, Peter, Ellen and Ann Tuite against Mary J. Tuite. Mary J. Tuite is the mother of the four complainants. The father was Michael J. Tuite. He died on the 9th of February, 1885, intestate, leaving at that time the widow aforesaid and six children, one of whom, Sarah, at the time of her father’s death was fourteen years of age, died on the 22d of January, 1888, and another of whom, Michael, was born in January of 1885 and died in December of the same year.
    The bill charges that at the time of the death of Michael J. Tuite he was engaged in the junk business in Jersey City, which at that time was worth about $3,000; that no letters of administration were taken out, but Delia, the eldest child, and Peter, the next eldest, took charge of the business, and, with the assistance of Sarah until her death, conducted the same; that the business was profitable, and the income therefrom was invested in real estate in Hudson county, with the understanding and agreement that such real estate should be the joint property of the complainants and the widow, Mary J. Thite, but that for the purpose of convenience the title to all of such property should be and was taken in the name of Mary J. Tuite, she to collect the rents and income, and, after paying the taxes and other expenses, to divide the balance among the complainants and herself in equal proportions.
    It is charged that Mary J. Tuite agreed to hold the property in trust for the complainants and herself in equal shares, and it is prajred that she be decreed to be trustee, and that each of the complainants is entitled to a one-fifth part of the real estate and to a one-fifth part of all the rents, issues and profits thereof, less the expenses and disbursements in connection therewith.
    The answer denies any agreement or arrangement concerning the said property, and denies that the defendant is a trustee for the complainants, and avers that all the property now standing in the name of Mary J. Tuite is her own, unqualifiedly, and thai the complainants have no interest or estate whatsoever therein.

      Mr. James P. Northrop and Messrs. Tumulty & Cutley, foi the complainants.

      Messrs. Blade & Drayton, for the defendant.
   Garrison, Y. C.

Michael J. Tuite married the defendant in the year 1868. He engaged in several businesses thereafter until 1877, in each of which he was unsuccessful, owing to his habits with respect to drinking. In 1877 he started in the junk business in a very modest way. He still continued to drink, and frequently became incapacitated therefrom, during which periods he transacted no business. His wife always was an active aid to him in his business. They managed to lay by a little money, and in October of 1883 two lots of land, costing less than $400, were purchased in the name of the wife. This property was undoubtedly hers, and the charges in the bill concerning it utterly failed of proof.

Michael J. Tuite was ill for a considerable time before his death, and at the time of his death on the 9th of February, 1885, did not leave much property. He had no real estate. Whatever he had was the accumulated junk in the lower part of the house in which they lived, and the horses and wagons used in the junk business. There is considerable dispute between the witnesses for the respective parties as to the amount and value of this property, but it is obvious that it was not great. I am inclined to the opinion that $1,000 is an ample, but not accurate, estimate of the value of all the property that he left.

No administration was taken out upon his estate. At the time of his death the children were respectively aged as follows: Delia, sixteen; Sarah, fourteen; Peter, twelve; Ellen, eight; Ann, three years, and Michael, one month.

The junk business was continued, the widow taking out the license required by law in her own name. Men were hired to go out on the wagons, and were given money with which to buy junk, which was then brought to the house where the parties lived, was there sorted, if it required sorting—as the rags and other material of that character did—and was then sold to dealers in the different classes of material.

Delia, both before and after her father’s death, engaged in sorting the rags. Sarah for a time sorted, but almost immediately after her father’s death ceased doing this and engaged in work about the house. Peter went out on one of the wagons with the men and helped the best he could. The others were too young to do anything.

The girls were sent to school, some of them for short periods and others for considerable periods, and two of them at least were fairly well educated—that is, Ellen and Ann. All of the children lived at home with the mother, and she paid all of their expenses of maintenance and education. The business was under the direct management and control of the mother, and what moneys she received therefrom she invested in the real estate described in the bill.

I do not find any evidence to support the charge of the bill that there was any agreement or understanding between the mother and the children that she was trustee for them with respect to the real estate purchased by her, in her own name, from the profits of the business. I think it would waste time to either analyze the evidence or cite authorities for what, to me, is so plain a situation.

I therefore conclude that the complainants are not entitled to relief on the case made by the bill.

The testimony- of the complainants, while it did not refer to or concern in any way any agreement with' the mother by which she was to act as trustee for them, did seek to show that there was a general partnership agreement between the mother and all six of the children, and that by the terms of the said partnership agreement the business was to be carried on and the profits were to be divided equally among all of the partners. They seek to show that this agreement was first entered into immediately after the father’s death in 1885, at which time the eldest child was sixteen years old and the youngest one month.

The law with respect to the proof of partnerships inter sese will be found in Hallenback v. Rogers, 57 N. J. Eq. (12 Dick.) 199 (Vice-Chancellor Grey, 1898); affirmed, 58 N. J. Eq. (18 Dick.) 580. But the facts in the case at bar do not, in my judgment, make it necessary to devote much time to the consideration of such principles. I utterly failed to find any credible evidence upon which any finding of a partnership could rest. It passes belief that a mother would enter into a partnership with her own children (the eldest of whom, a girl, was sixteen years and the youngest of whom was oiie month old), and would agree that each should have an equal share of the profits, while she, so far as they allege, was alone responsible for all the losses.

Furthermore, there was no possible consideration for such an agreement. The mother was entitled to the earnings of her children during their minority. Campbell v. Campbell, 11 N. J. Eq. (3 Stock.) 268 (Chancellor Williamson, 1856); Osborn v. Allen, 26 N. J. Law (2 Dutch.) 388 (Supreme Court, 1857); Furman v. Van Sise, 56 N. Y. 436 (1874). And if they worked for her, under her direction and control, they but did their duty to her, and there is therefore no possibility of importing any consideration into any such agreement as they allege was made. Upon the theory, therefore, that there was a partnership between the complainants and the defendant I find that complainants could not succeed, even if they amended their bill by appropriate allegations to charge such an agreement.

It is proven that there was no administration taken out upon the estate of Michael J. Tuite, and that whatever personal property he possessed at the time of his death was taken possession of by his widow, the defendant. The children, of course, were entitled to two-thirds of the value of such property after the debts and administration expenses of the decedent were paid. Undoubtedly the defendant is accountable for the children's share of the property which she thus possessed herself of at that time. It may be that if she used the money derived from this property for their support, such expenses will be allowed to her. Pyatt v. Pyatt, 46 N. J. Eq. (1 Dick.) 285 (Court of Errors and Appeals, 1889).

Under our statute (2 Gen. Stat. p. 1426 § 3, tit. “Executors and Administrators”) she is chargeable with the value of all such property, less all payments made by her which a lawful administrator might have been credited with under the laws of this state.

She was not proceeded against in this case as an executrix de son tort, and no personal representative of the decedent is a party hereto, and the frame of the bill is not such as to raise the proper issues and secure appropriate relief from her as such. Since the estate is very small, and considerable expense has been incurred by the proceedings in this present suit, and much testimony has been taken which will be available in such an accounting, if one is to be had, I have determined to permit the complainants, if they so desire, to move to amend their bill so as to seek an accounting from this defendant for the property of Michael J. Tuite which came into her hands at the time of his death, making a representative of his estate a party, if they shall be so advised. As to this, see 1 Dan. Ch. Pr. & Pl. 219; Flagler v. Blunt, 32 N. J. Eq. (5 Stew.) 521 (Chancellor Runyon, 1880); Jenkins v. Freyer, 4 Paige 47.

If the complainants do not move to amend their bill within ten dajrs after the date of the filing hereof, then I will advise a final decree dismissing this bill, with costs.


author: Garrison, V. C.

text:
    Anna D. Babbitt v. Fidelity Trust Company et al.
    [Decided May 16th, 1907.]
    1. A trust declaration and assignment, by which C. transferred all his property to a trustee, provided that the trustee should pay the interest on outstanding notes, bonds, mortgages, &c., given or endorsed by C., and from time to time reduce and cancel the same, and hold and retain without action, and without collecting interest thereon, all notes and securities given by G., or by his son, daughter and son-in-law, until the death of G., and then to cancel them.—Held, that a mortgage by the son-in-law, a bond of the daughter, and notes of the son, endorsed by C., were to be canceled at his death, and the trustee should be credited with the sum expended in the payment of the same.
    2. Under this trust declaration and assignment, where a note was not made before the making of the declaration of trust, and was not a renewal of any note or notes existing at the time of the execution of the trust, the trustee was not warranted in paying it from the estate.-
    3. Where real estate was transferred to ¡i trustee to hold or convey the same as he thought best, items paid real estate agents and others as commissions on sales of real estate, which were shown to be reasonable commissions for the services rendered, Were properly charged against the trust estate.
    4. Where a party transferred all his property to a trustee, it was proper for the trustee to pay for the services of the lawyers engaged in making the transfers and the declaration of trust and in giving advice concerning the proper wiay to accomplish the object of the settlor.
    5. A settlor, at the time of making a declaration -of trust, owned and transferred to a trustee shares of stock in an insurance company. The execution of a scheme whereby the trustee attempted to obtain a majority of the stock of the insurance company was- prevented by the court, and tlie stock of the insurance company depreciated in value so that the stock of the trust estate sold after the defeat of the scheme brought much less than that sold before.—Held, that it could not be said that the trustee should have known that the necessary result of the proposed scheme would be to depress the price of the stock of the insurance company, and he should not be surcharged with the difference between the selling price of the stock before the defeat of the scheme and the lower price at which it subsequently sold.
    0. Where a person transferred all his property to a trustee to hold as a trust fund, it was a general trust, and if the trustee held stock which came to him- from the settlor, and which were not securities he was authorized by law to hold, he should be surcharged with the difference between the market value of the stock at the time he should have sold it and the lower price at which it subsequently sold.
    7. Where a declaration of trust declared that the trustee hold the property transferred in trust for the following uses and purposes, “to hold or convey the same as in his judgment may be deemed advisable, and to collect the principal of securities and reinvest the same from time to time,” the trustee was to exercise his discretion only in doing authorized things, and could not hold securities transferred to him which he was not by law authorized to hold.
    8. Where a trustee’s conduct was not willfully wrong, and he has not confused accounts or unwarrantably used trust moneys, and has large resources, so that the making of unauthorized investments could not prejudice the interest of the cestui que trust, the fact that he was subject to surcharge in certain respects is insufficient to defeat his right to commissions.
    9. Where a trustee was held to a strict accountability, had charge of a large estate of a most varied character, was required to exercise due diligence in the calling in of all unauthorized investments, and had duties and responsibilities not incident to the care of an ordinary trust estate, four per cent, upon the' principal was a proper allowance for his compensation.
    Heard on bill, answers, cross-bill, replications and proofs.
    On tlie 19th. day of July, 1898, Charles G. Campbell, by appropriate instruments, transferred all of his property of every description to the Fidelity Trust Company, of Newark, as trustee.
    The latter on that date executed a declaration of trust with respect to the said property. In said instrument it
    “declares that it holds the property, real and personal, this day conveyed to it by Charles 6. Campbell in trust for the following uses and purposes: (1) To hold and possess or dispose of and convey the same, by proper instruments of conveyance, as in its judgment may be deemed advisable, and to collect the principal of securities and reinvest the same from time to time. (2) To collect the income from the personal property, and the rents, issues and profits, from the real property.”
    By other provisions it undertakes to attend to the taxes and repairs upon the real estate, to the payment of interest on outstanding notes and other obligations, and to their reduction and cancellation, and to pay the proper expenses arising in the execution of the trust.
    The net income is to be paid monthly, in certain stated amounts, to the settlor, his sisters, his son, Charles B. Campbell; his daughter, Anna D. Graham (since intermarried with Babbitt), and the father of a deceased daughter’s children.
    TJpon the death of Charles G. Campbell certain sums are to be paid to his sisters and the balance is to be divided among his heirs-at-law according to the intestate laws of this state, the personal property according to the statute of distributions, and the real property according to the statute of descent.
    There are other provisions which will be stated as occasion requires it.
    Charles G. Campbell died on the 29th day of May, 1905, and left him surviving his daughter, the complainant; Charles B. Campbell, a son, and Eobert C. Denny, Walter B. Denny and Julia Denny, children of Jennie B. Denny, deceased, who was the daughter of Charles G. Campbell and the wife of Edward B. Denny.
    The bill in this case is filed by Anna D. Babbitt. She obtained loans from certain non-residents and made certain assignments of her interest in the estate of her father to secure the same.’
    The bill in this case was framed not only to secure an accounting from the Fidelity Trust Company, the trustee, but also sought to litigate certain questions between the complainant and those to whom she had executed the assignments. These latter, being then represented by non-resident executors, filed a plea to the bill, and the issue raised was disposed of by this court adversely to the complainant. The report will be found in 70 N. J.Eq. (J Robb.) 651 (Vice-Chancellor Garrison, 1006).

      The suit thereupon proceeded as one of accounting between trustee and ceslui que trust.

    All of the other beneficiaries under the declaration of trust, or their assignees, are parties to this suit.
    The trustee, in addition to filing an answer and account, also filed a cross-bill praying, among other things, for a construction of certain portions of the declaration of trust, and for directions concerning its duty under certain provisions thereof.
    The complainant filed exceptions to numerous items of the trustee’s account. Issues were properly joined and are to be herein disposed of.

      Mr. Ilenry II. Fryling and Mr. Chandler JRiker, for the complainant.

      Mr. Samuel W. Beldon, for the Fidelity Trust Company, defendant.

      Mr. Fdward D. Duffield (with whom was Mr. J. J. Burke, of the Nebraska bar), for Charles B. Campbell, defendant.

      Mr. George B. Dutton, for Florence J oel, defendant.
   Garrison, V. C.

The property which Charles G. Campbell had, and which, on the 19th day of July, 1898, he turned over to the Fidelity Trust Company as trustee, was of varied character and of large value. It consisted of real estate, mortgages, bonds, stocks of companies, furniture, pictures, bric-a-brac, money in bank, and other characters of personal property such as an active business man of large means would possess. The face value exceeded the actual value by many thousands of dollars, because among the property turned over were interests in real estate which could not be realized upon, and in some instances the real estate could not be located, and also among the property were bonds and stocks of various companies, which latter were defunct, or, if in existence, the stock of which had no value.

The realized value exceeded $400,000, with some items still undisposed of in the trustee’s hands.

The account of the trustee is a very long one, and shows total receipts, principal and interest, of over $700,000, among the numerous items of disbursement being advancements made to the various parties to this suit on account of their distributive shares.

A number of the questions raised under the exceptions were disposed of at the hearing by consents or arrangements between the parties, and only need to be stated without discussion. Others of the exceptions may be grouped, and so much of the trust deed as requires construction for the purpose of determining the rights of the parties need not be discussed separately, but will be dealt with in connection with the subject-matter which it concerns.

I.

The first exception concerns a series of promissory notes, all, excepting two, of which were made by Charles B. Campbell, the son of Charles G. Campbell (or by firms of which Charles B. Campbell was a member), and endorsed by Charles G. Campbell, the money going to Charles B. Campbell.

After the making of the deed of trust these notes were renewed, and such renewed notes were paid by the trustee. The two notes not coming within the above statement are one made by Denny Brothers and endorsed by Charles G. Campbell, and one made by Campbell & Osborne and endorsed by Charles G. Campbell, and paid to the Merchants’ National Bank.

The point of the exception is that, under the declaration of trust, the trustee, if it paid such notes, must hold them and charge the amount thereof against the distributive share of the maker of the note. This, of course, depends upon the proper construction of the declaration of trust. This instrument has two clauses which concern this matter of obligations of Charles G. Campbell existing at its date, the fourth and the tenth clauses.

The fourth clause is as follows:

“(4) To pay the interest on outstanding notes, bonds, mortgages, &c., . given or endorsed by the said Charles G. Campbell, and to provide from time to time for the reduction and cancellation of the same as may be deemed advisable, provided it be done, so far as possible, without interfering with the execution and performance of the trusts hereinafter set forth.”

The tenth clause is as follows:

“(10) To hold and retain, without action and without collecting interest thereon, all notes and securities given to Charles G. Campbell by Charles B. Campbell, Anna D. Graham and Edward B. Denny, and now held by assignment by Fidelity Trust Company until the death of the said Charles G. Campbell, and then to cancel and deliver Lliem, without charge, to the said Charles B. Campbell, Anna D. Graham and Edward B. Denny, their respective heirs, executors and administrators.”

At the time of the making of the declaration of trust there was held by the settlor and delivered to the trustee a mortgage of E. B. Denny, the settlor’s son-in-law, for $2,100, and notes of his for $8,710. At the same time there was held by the settlor and delivered to the trustee company a bond of Anna D. Graham, the complainant, for $20,976.51. Under the provision of the tenth clause these two obligations were canceled at the time of the death of Charles G. Campbell, and the amounts thereof thus became gifts by the settlor to each of the persons named.

There were no notes or other securities of Charles B. Campbell held by the settlor and transferred, to the trustee, but there were between $16,000 and $17,000 worth of notes of Charles B. Campbell, endorsed by Charles G. Campbell, outstanding in the hands of those who had discounted them.

It is evident that it was with these notes in mind that the fourth clause was inserted.

The exceptant contends that the proper meaning to be ascribed to this fourth clause is that the trustee is to reduce the notes, if it deems advisable, and if, by reduction, they are finally paid off, the trustee is to hold the paid-off note and charge it, after the death of Charles G. Campbell, against the distributive share of the maker of the note.

I do not think that this is the correct construction of this clause, or that it was the meaning of the settlor. I think it clear that this settlor, who was disposing of all of his property, and had clearly in mind that which he wished to do with it, desired to treat his son Charles, his daughter Anna, and his deceased daughter’s husband and her children with similar bounty. At the time of the making of the instrument he had advanced money to his son-in-law and to his daughter, and had obligated himself upon the notes of his son. I think it entirely clear that by these two clauses he intended that where he had actually made advances and held an obligation therefor such obligation was to be retained by the trustee without action, and was, at the distribution of the estate, to be canceled and delivered to the obligor, and similarly he intended that the obligation which he had undertaken for his son by endorsing his notes should be met by the trustee from time to time, and when met the note should be canceled.

I cannot conceive of any meaning to be given to the word “canceled” in the fourth clause excepting the well-known one “to render null and void.”

This works out the scheme of equity which I think was in the mind of the settlor.

I hold, therefore, that when this estate is to be distributed the trustee is to be credited with the payments of the notes of Charles B. Campbell endorsed by Charles G. Campbell.

This holding also applies to the notes of Mrs. Babbitt, the complainant, which were endorsed by her father and paid by the trustee, and also to the note of Denny Brothers, which was the title under which Edward B. Denny traded.

These notes were in existence at the time of the making of the declaration of trust, and were renewed and subsequently paid by the trustee, and therefore come within the language of the fourth clause.

The only remaining note to be dealt with is that which was in the Merchants’ National Bank. This note was made by Campbell & Osborne and endorsed by Charles G. Campbell. There is no evidence that this note was a renewal of any note or notes existing at the time of the making of the declaration of trust. I cannot find any warranter authority for the trustee paying this note out of the estate. If it has paid the same, it must either be surcharged with.it, or must, as between the parties hereto, charge the same against the distributive share of Charles B. Campbell.

IT.

The next exception relates to items in the account of commissions on principal retained by the trustee.

Undoubtedly the trustee can only retain such commissions on principal as are fixed by this court, and the matter of this exception will be dealt with in adjusting the matter of commissions.

HI.

The next exception relates to the investment in the gold notes of the Public Service Corporation. The amount involved is $99,750, and the point of the exceptant was that the investment was not one authorized by law.

By consents made at the time of the final hearing this matter was satisfactorily adjusted, the trustee agreeing to charge itself with whatever the proper sum was in respect to this item.

IV.

The next exception relates to the payment on account of the distributive share of Charles B. Campbell in advance of payments of any of the other distributees, and merely requires adjustment of interest items.

V.

The next exception relates mainly to items paid to real estate agents and others as commissions on the sales of real estate. These were shown to be proper commissions for the services rendered, and I think it entirely proper to charge them as the trustee has. Any effect which the rendering of these services by others should have upon the amount to be allowed to the trustee will be taken into account in fixing its compensation.

The items in this exception which are not covered by the above statement are for lawyers’ services, and only one item is questioned, the other one being conceded to be correct at the hearing. The questioned item has to do with services at the time of the making of the declaration of trust. I think it clear, since Charles G-. Campbell was transferring everything he owned to the trustee, that it is a proper item for the trustee to pay for the services of the lawyers engaged in making the transfers and the declaration of trust, and in giving advice concerning the proper way to accomplish the object of the settlor.

I therefore allow this item.

VI.

The matter of interest on net bank balances was adjusted at the trial, and was set ofl: against the right of the trustee to charge interest on advances to the distributees.

VII.

The only remaining question under the exceptions relates to the conduct of the trustee concerning shares of stock of the Prudential Insurance Company.

The par value of this stock is $50, and much confusion resulted at the trial because the custom is to sell two shares at one time and call the same “a full share”—that is, the custom is to deal with this stock as if the par were one hundred, and deliver two shares to make what is termed “one full share.” To avoid confusion I have dealt with the stock as it actually was, namely, each share at a par of $50.

At the time of the making of the declaration of trust the settlor owned and transferred to' the trustee one hundred and sixty-seven and twenty-seven hundredths shares of such stock This was disposed of by the trustee at the following rate per share of $50 each: February 23d, 1899, sixty shares at $360; February 6th, 1900, thirteen shares at $350; August 20th, 1901, twenty shares at $375; December 7th, 1903, thirty shares at $200; December 23d, 1903, twenty-five shares at $195; January 25th, 1904, nineteen and twenty-seven hundredths shares at $200.

It will be observed that the first three sales averaged about $360 a share, and that these took place prior to the year 1903. The sales made after that date do not average quite $200 per share. The proofs show that down to about November, 1902, the stock of the Prudential Insurance Company was readily salable at about the average figure shown above, namely, $360 per share, and that since that date the latter average has been about the obtained price, namely7, $200 per share.

At about the date in 1902 just mentioned the Fidelity Trust Company and the Prudential Insurance Company endeavored to carry out a scheme by which each should own a majority of the stock of the other, and by this means the existing management in each company could perpetuate its control. In execution of this scheme the Fidelity company7 offered the stockholders of the Prudential Insurance Company $300 per share for one-half of their holdings. It succeeded in purchasing two shares over one-half of the capital stock of the Prudential Insurance Company. This court (Robotham v. Prudential Insurance Co., 64 N. J. Eq. (19 Dick.) 673 (Vice-Chancellor Stevenson, 1903) prevented the execution of this scheme, and the Fidelity Trust Company parted with sufficient of the-stock to reduce its holdings below a majority.

The exceptant charges that the trustee, the Fidelity Trust Company7, should have known that the scheme it embarked in with respect to the Prudential stock'would depress the price or • value of that stock, and therefore it should be surcharged on the stock held in this trust, with the difference between the selling price of the stock before it entered upon the execution of the scheme and the lower price at which the stock subsequently sold.

Applying to the trustee the rule of care to which it was subject, I cannot say that I find that it should have known that the necessary result of the proposed scheme would be to depress the price of the stock of the Prudential Insurance Company. The scheme was undoubtedly conceived with the purpose of perpetuating the management of those then in the control of each of these companies. But, as appears by the facts stated in the cited case, each was solvent and possessed of large assets and of a great and valuable business, and the business of each 'was growing and not diminishing, and I do not think it fair to infer that a reasonable man should have believed that perpetuating the then management would lessen the value of the stock of either of the companies. Whatever the result may have shown the fact to be, I do not believe that at the time the scheme was proposed and was attempted to be carried out there was any thought in the minds of the parties that it would decrease the value, in the market, of the stock of the companies concerned. The very fact that the parties engaged wished to retain control, and invested large sums of money for that purpose, shows that they thought that each institution was a valuable one and would so continue.

I do not therefore concur in the point made by the exceptant that, under the rule concerning the care with which'a trustee is chargeable under such circumstances, this trustee is to be surcharged in this respect.

I do find, however, that the trustee is to be surcharged with the difference between the fair market value of this stock down to 1903 and the price at which it was sold in 1903 and 1904, for the reason about to be given.

The trust in this case was of a unique character. It was a transfer by a living person of all of his property of every kind and description, including even his household goods and his money in bank. It was, in the broadest sense of the word, a general trust. Under such circumstances I think it the duty of the trustee, so soon as it could do so in the exercise of reasonable diligence and good judgment, to convert the securities which came to it from the settlor into cash and invest the same in securities authorized by law.

It is admitted by all of the counsel in the case that there is no statute law involved, excepting to the extent that the statute points out the investments in which trustees are authorized to place trust moneys, and it is conceded that the stock of the Prudential Insurance Company is not one of those so authorized.

The general principle deducible from the cases and text-books is well stated in 17 Am. & Eng. Encycl. L. 454, as follows:

“While a fiduciary may, as a rule, in the exercise of his discretion, retain such investments as are proper for the fiduciaries to hold, all others he must call in, and invest the proceeds in an authorized manner.” Perry Trusts, §§ 460, 461, 465; Ashhurst v. Potter, 29 N. J. Eq. (2 Stew.) 625 (Court of Errors and Appeals, 1878).

The trustee in the case at bar seeks to escape the responsibility involved in the application of this principle. In the brief of counsel for the trustee its position is thus stated:

“The rule contended for has undoubted existence, but is not of universal application. It is applicable to trusteeships where the subject of the trust has come to the trustee as a general estate or an aliquot portion of an estate, but is not applicable where it comes as certain and specific property, unless there be a direction to convert.”

It therefore insists—

First. That this was a trust of a specific thing, and that it was entitled to hold that thing, chargeable only with the exercise of reasonable discretion.

Second. That by the declaration of trust it was given discretion with respect to investments, and therefore is not chargeable for anything excepting negligence.

As I have before said, I do not concur at all in the view that this is a trust of a specific thing, or that this is a case to which the authorities relating to duties of trustees under trusts of specific things can be applied. It is true, of course, that a specific thing, or rather a great number of specific things, were by-this settlor turned over to this trustee, but the real transaction was a turning over by the settlor of everything that he possessed to the trustee for it to handle and manage under its obligation as trustee, subject to the responsibilities thereof.

I shall not stop to cite or analyze the various cases in which the subject-matter of the trust was held to be specific, but will content myself with sajdng that in each case, as I have read them, it was clear that the settlor intended that the identical thing transferred should be held by the trustee. There is not the slightest evidence in Jthis case of the settlor’s intention that this trustee should hold any specific thing, and it is quite clear, I think, from the circumstances, that there could have been no such intention. Among other property transferred to the trustee were household furniture, pictures, bric-a-brac, and money in banks. Certainly it was not intended thft these several species of property were to be held in specie by the trustee. Similarly there is nothing to show that any of the transferred property was to be so held. The intention clearly shown was to hand over all of the property owned by the settlor to the trustee for the latter to deal with as.trustee, and under such circumstances the law is clear that the trustee can only escape responsibility by converting the unauthorized securities thus transferred to it into authorized securities so soon as it conveniently and reasonably may do so.

In the case in hand it is clearly shown that it could have sold the Prudential stock during the years 1898, 1899, 1900, 1901 and 1902 for at least $360 per share. The income from this stock was very small, being ten per cent, upon $50 par, and therefore about one and one-half per cent, on the market value of the stock. There was therefore no reason, properly viewed by the trustee, to induce it to hold an unauthorized security, paying so little, at a time when the market for its sale was open and a large price could have been obtained for it, and that price could have been invested in authorized securities to yield a rate of interest at least three times greater than that received from the then investment.

With respect to the argument that by the terms of the declaration of trust the trustee was so vested with discretion that it Is not chargeable for maintaining unauthorized investments it is necessary to refer to the language of the instrument.

The material part thereof is that in which the trustee declares that it holds the property, real'and personal, in trust for the following uses and purposes:

“To hold and possess or dispose of and convey the same, by proper instruments of conveyance, as in its judgment may be deemed advisable, and to collect the principal of securities and reinvest the same from time to time.”

From this clause the respective parties draw diametrically opposing meanings. The complainant insists that the meaning of this clause is that the trustee has enjoined upon it the absolute duty of collecting the principal of securities. In other words, it draws from this clause the inference that the settlor intended to direct the trustee to collect the principal of securities, and therefore it has not oiqly_ihe„_djiiy cast upon it by law, but also the positive injunction of the settlor with respect thereto.

The trustee, on the other hand, lays great stress upon the presence of the words “as in its judgment may be deemed advisable,” and argues that they relate not only to the first part of the sentence concerning conveyances, but also to the last part of the sentence. It therefore repudiates the idea that it was directed to collect the principal of securities, and contends that the whole matter was left to its discretion, and it can only be chargeable if negligent.

The trustee further argues that stocks are not “securities,” and therefore, even if it is required to collect the principal of. securities, this would not relate to stocks generally.

I do not find it necessary to determine whether this clause should be construed so as to positively require the trustee, by force of its terms, to convert the securities) including the stocks, into money, and reinvest the same in authorized securities, because I think the result of a fair reading of this clause in any legitimate way is not to vest in the trustee any greater or other discretion than is vested in trustees generally.

Differently stated, I think that this clause confides the property to the trustee to be dealt with as its judgment deems advisable, subject to those rules which govern trustees; that its discretion, in other words, was not to do unauthorized. things, • but to exercise its judgment concerning what authorized things it would do.

I do not find from the authorities that it is the rule to exempt trustees without a clear and unequivocal statement of intention to that effect made by the maker of the trust in the instrument creating or evidencing it. Ward v. Kitchen, 30 N. J. Eq. (3 Stew.) 31 (Chancellor Runyon, 1878); McCullough v. McCullough, 44 N. J. Eq. (17 Stew.) 313 (Chancellor McGill, 1888); Halsted v. Meeker’s Executors, 18 N. J. Eq. (3 C. E. Gr.) 136 (Chancellor Zabriskie, 1866); King v. Talbot, 40 N. Y. 90; Adair v. Brimmer, 74 N. Y. 539; Clark v. Beers, 23 Atl. Rep. (Conn.) 717; Spralt v. Wilson, 19 Ont. 28; Kimball v. Reding, 31 N. H. 352.

In tlie case of Tuttle v. Gilmore, 36 N. J. Eq. (9 Stew.) 617 (Court of Errors and Appeals, 1883), the clause limiting the liability of the trustee provided that he should not be liable or responsible for any other cause, matter or thing except his own willful and intentional breaches of the trusts therein expressed and contained. The present chancellor, in writing the opinion of the court, said: “It is a breach of trust for the trustee to speculate with trust funds for his own gain, but it is no less a breach of trust to make unauthorized investments. * * * To do so knowingly is a willful _ and intentional breach of trust. In my judgment it is a willful and intentional breach of trust, within the meaning of this clause, to knowingly do any act hazarding trust funds in violation of a duty imposed on a trustee. That this construction may leave but little force to the clause is no reason why it should not be adopted.”

It will thus be seen that it is settled in this state that a clause restricting the responsibility of the trustee, in terms much broader and more comprehensive than in the case at bar, was held not to exonerate the trustee.

In the same case the court holds that “a strict rule of construction should be applied as against the claim of restriction.”

I therefore conclude that this trustee is chargeable with the difference between the ¡Drice at which the seventy-four and twenty-seven hundredths shares were sold in 1903 and 1904, namely, about $200 per share, and $360 per share, which I find to be the price at which it could have been sold at any time within five years after the date of the execution of the declaration of trust.

VIII.

The remaining question relates to the matter of compensation to the trustee.

While it was urged by the complainant in her brief that there should not be any allowance of commissions to this trustee, I can perceive no legitimate ground for withholding the same.

It is true that in certain respects this trustee is found by the court to be subject to surcharge, but its conduct has not been willfully wrong, nor has it confused accounts, unwarrantably used trust moneys, or done any of the things which have been held to disentitle trustees to compensation.

It is, of course, true that a general rule of law applies alike to those possessed of small means as well as those possessed of large, but it is equally true that where a trustee is possessed of very large resources, as this trustee is, and therefore nothing that it has done could possibly jeopardize the interests of the cestui que trust, and the latter would, in every event, receive all that the court found due to them, a different situation exists than if a trustee of meagre resources should make unauthorized investments and thereby jeopardize the interests of the cestui que trust, and make it possible that they would lose what ought to come to them.

I see no reason for treating this trustee in any other than the normal way in fixing its compensation.

The discretion of this court in this class of cases as to the amount to be allowed is unfettered by statute, and the compensation should be based on the nature and amount of the services rendered and the risk incurred by the trustee. Van Houten v. Van Houten, 45 N. J. Eq. (18 Stew.) 796 (Court of Errors and Appeals, 1889).

Holding this trustee, as I do, to a strict accountability, I think that its allowance should be commensurate with such responsibility. If the contention of the trustee was found to be sound, and it was only chargeable for negligence, and would be held to have done its duty if it merely retained the securities and colleeted the income, then I think a small allowance would compensate it fully for its responsibility. (I am only speaking of an allowance upon principal, because, under the terms of the declaration of trust it was to receive five per cent, upon the income, and it has already, under such clause, taken its commissions on income.) But I think that where a trustee has a very large estate, such as this one was, of a most varied character, handed over to it, and is required by the rule, applied to it by the court, to exercise due diligence in the calling in of all unauthorized investments and the duty of investing in authorized securities, it should be paid a proper sum to compensate it for this labor and the responsibility and risk involved.

In view of the rule which I apply to this trustee, I do not think that four per cent, upon the amount of principle is too large a sum for the time, labor, responsibility and risk involved. It had the estate in its charge from 1898 to date, and, in addition to the ordinary duties in an ordinary trust, there were unique duties imposed upon this trustee, because, as has been before stated, many of the apparent securities turned over were worthless, and that fact could only be ascertained after patient investigation and much trouble, and in each instance it had to take the risk of its conduct. And, with respect to the valuable property, it performed its duties well, the surcharge resulting from a misconception of duty and not from a willful disregard thereof.

In the Van Houten Case (cited above) the court of errors and appeals set the figure as three and one-half per cent.; I think the additional one-half per cent, allowed by me in this case fairly represents the additional services and risk involved.

Application is made by the various counsel for costs, including counsel fees, to be paid out of the estate. This seems to be of the class of cases in which, under the practice and as a matter of authority, allowances should be made. Trustees v. Greenough, 106 U. S. 527; 26 L. Ed. 1157.

The matter of the amounts may be settled upon the settling of the decree, which will be done upon notice.


author: Beaming, Y. C.

text:
    Amelia R. Sparks et al. v. Charles S. Ross et al.
    [Submitted January 22d, 1907.
    Decided February 1st, 1907.]
    1. When a feigned issue is framed in equity and sent to a law court for trial before a jury, it is proper for the trial court to direct a verdict if the evidence justifies the peremptory instruction given.
    2. A ceremonial marriage was followed by fifteen years’ cohabitation, and terminated only by the death of the husband. During that time a family of children was raised by the parties to the marriage. These facts created a powerful presumption of the legality of the marriage. To have overcome this presumption sufficiently to have justified an instructed verdict against its legality, the evidence of a prior marriage should have been conclusive in its nature.
    3. The presumption of legality arising from a ceremonial marriage, followed by cohabitation of the parties as husband and wife, is founded upon the motives which govern human conduct and upon the policy of our social system. The conclusion of illegality involves the assumption that the parties have exposed themselves to the penal consequences of illegal acts, and operates to bastardize their offspring. The strength of the presumption increases with the lapse of time through which the parties have cohabited as husband and wife.
    4. Certain proofs offered of a prior marriage held to be insufficient to justify an instruction against the presumption of legality of a subsequent marriage, followed by long cohabitation.
    On bill to quiet title. Motion for new trial on return of postea of feigned issue.
    Complainants filed a statutory bill to quiet title. At the preliminary hearing in this court complainants were found to be in peaceable possession of the land in question. Defendants demanded an issue at law for the trial of the controverted facts upon which title depended under the issues as framed, and a feigned issue was accordingly awarded by this court. At the trial before the law court a verdict was rendered in favor of complainants (defendants in the feigned issue) by direction of the trial court, and a motion for a new trial is now made in this court on the return of the postea to the feigned issue.
    The sole question for determination by the issue at law, as framed, was whether the marriage which was celebrated between Edmund B. Ross and Mary Cavnaugh, October 24th, 1873, was a lawful marriage, or whether on that date, and until his death, Edmund B. Ross was the lawful husband of Maria Moose, and therefore incapable of marriage with Mary Cavnaugh. The purpose of that issue was to ascertain whether the children of Edmund B. Ross, born to him by Máry Cavnaugh, were born in lawful wedlock. -The verdict instructed by the trial court was as follows: ■ '
    “You will find for the defendants that Edmund B. Ross was, on the 24th day of October, 1873, the husband of Maria Moose, and continued to be her husband until his death, and that the said Maria Moose is still living.”
    The evidence offered by the plaintiff in the feigned issue, consisted of the testimony of Mary Ross, formerly Cavnaugh, and two of her sons, Clarence and Charles, áhd of one Emma Scull. Mary testified to her marriage to Edmund Ross October 24th, 1873, at Bridgeboro, New Jersey, and produced her marriage certificate, which was received in evidence without objection; that she and her husband resided together as husband and wife from the date of her marriage until his death, July 19th, 1888; that, except the first year or so, they resided, during all of that time, in South Jersey; that nine children' were born to them, three of whom are now living; that she never heard of Maria Moose, or of any prior marriage of her husband, until about the time of this litigation. Her two sons testified that they never heard of Maria Moose until this litigation. Emma Scull testified to her knowledge of Mary and Edmund living together as husband and wife and having children.
    The evidence offered by defendant in the feigned issued consisted of—first, depositions of Maria Prehl. Maria testified that her maiden name was Maria Moose, and that she was married to Edmund B. Ross December 4th, 1862, at the home of her parents near Bridgeport, New Jersey; that Edmund resided with her, at her parents’ home, until the following spring, when he went away, at the invitation of his father-in-law, and they never resided together afterwards; that she saw Edmund but once thereafter, namely, in the following summer, when he, with a gentleman friend of his, drove to the house of her parents, but did not get out of the wagon; that she, at the time, was in the garden; that a child was born to her October 23d, 1863, named Joseph, who died at ten years of age; that she married Augustus Prehl July 21st, 1870, and then knew that Edmund Ross was alive; that she destroyed her first marriage certificate when she remarried. Arthur J. Hendrickson testified that he had known Maria from her childhood and that she and Edmund Ross resided together at one time at the home of Maria’s parents; that he understood them to be married; as to how long they lived there together he was uncertain; that Maria had a son named Charley. Mary Adamson testified that she knew Maria and Edmund and that some forty-two or forty-three years ago Edmund stopped at her home and said that he was married to Maria and that he was on his way there; that she knew, in a general way, that Edmund resided with the Moose family for a time, but that she never actually saw him there. A record book of marriages from the county clerk’s office of Gloucester county was offered and received in evidence. It contained the record of a certificate signed “Jacob Loudenslager, Elder of the M. E. Church,” certifying that he had married Edmund B. Ross arid Maria Moose December 4th, 1862. The certificate bore no date but was recorded July 29th, 1864. A diary, shown to have-been a diary of Jacob Loudenslager,. now deceased, was offered and received in evidence. This diary contains an entry indicating that Jacob Loudenslager married these parties on the date named. George L. Dobbins, a Methodist minister, testified that in the Methodist church the word “Elder” imports an ordained minister of the gospel.

      Mr. Thomas E. French, for the complainants.

      Mr. Thomas J. Middleton and Mr. John J. Crandall, for the defendants.
   Beaming, Y. C.

I have reached the conclusion that the learned trial judge erred in instructing a verdict at the trial of the feigned issue in this cause. There can be no doubt of the right and propriety of a binding instruction in the trial of a feigned issue where the evidence justifies the instruction given, but the evidence must be such that a verdict contrary to the instruction could not stand. The evidence against which the peremptory instruction was given disclosed a ceremonial marriage followed by a cohabitation of the parties as man and wife for over fifteen years, and then terminated only by the death of the husband. During that period they raised a family of children, and, except for the first year or so, resided in the same general section of this state where the alleged first wife resided. This raised a powerful presumption of the legality of the marriage against which a binding instruction could only be properly given when that presumption was clearly overcome. The power of the presumption of legality of such a marriage is found in the motives which govern human conduct and in the policy lying at the base of our social system. The conclusion of illegality involves the assumption that the parties have exposed themselves to the penal consequences of illegal acts and operates to bastardize their offspring. Their conduct during the fifteen years was a living declaration of its legality. It is manifest that the evidence of a prior marriage should be conclusive before such presumption of legality can be said to be clearly and wholly overthrown. Touching this presumption of legality the text of 1 Bish. Mar., D. & S. § 956, is as follows:

“Every intendment of the law leans to matrimony. When a marriage has been shown in evidence, whether regular or irregular, and whatever the form of the proofs, the law raises a strong presumption of its legality, not only casting the burden of proof on the party objecting, but requiring him throughout, in every particular, to make plain, against the constant pressure of this presumption, the truth of law and fact that it is illegal and void. So that this issue cannot be tried like the ordinary ones, which are independent of this special presumption. And the strength of the presumption increases with the lapse of time through which the parties are cohabiting as husband and wife, it being for the highest good of the parties, of the children and of the community, that all intercourse between the sexes in form matrimonial should be such in fact, the law, when administered by enlightened judges, seizes upon all probabilities and presses into its service all things else which can help it, in each particular case, to sustain the marriage and repel the conclusion of unlawful commerce.”

In United States v. Green, 98 Fed. Rep. 63, Judge Shiras held that such a presumption was not overcome by proof of a prior ceremonial marriage, unless it should be also proven affirmatively that at the time of the prior marriage the parties were free from disabilities against a lawful marriage.

The evidence offered to establish a prior marriage is not, to my mind, of sufficient power to so clearly overthrow this presumption of legality as to warrant the peremptory instruction given. In the absence of positive evidence that “Jacob Loudenslager, Elder of the M. E. Church,” was, in fact, at the time claimed, a stated and ordained minister of the gospel, the record of marriages and the diary offered in evidence carry but faint probative force.

Indeed, it is doubtful whether the marriage record is admissible in evidence as a statutory record in view of the requirement of the statute that the certificate be lodged with the recording officer within six months of the date of the marriage, whereas the record offered in evidence was made two years after the alleged marriage. See People v. Etter, 81 Mich. 570, 573. The testimony of the witnesses who were sworn in support of the prior marriage cannot properly be said to be of that character which commands absolute acceptance or affords a conclusive demonstration of the fact sought to be established.

A new trial will be advised.