Focke v. Gay

26 Haw. 290, 1922 Haw. LEXIS 44

• Court: Hawaii Supreme Court
• Decided: February 28, 1922
• Docket: No. 1348
• Status: Published

Opinion

OPINION OF THE COURT BY

KEMP, J.

The complainants as trustees under the will and of the estate of James Gay, deceased, filed a bill in equity for instructions as to their duties under the will. From the decree entered by tbe circuit judge tbe minor respondents, remaindermen, through their guardian ad litem prosecuted an appeal to this court. Our opinion on that appeal (26 Haw. 1) is referred to for the history of the case. It is sufficient to say here that the cause was remanded with instructions to the circuit judge to modify the decree, appealed from so as to require the trustees to set aside as capital the value of the Ookala leasehold. When the matter again came before the circuit judge on the remand he heard evidence as to the rentals produced by the Ookala leasehold from the death of the testator to the expiration of the lease and from that evidence and calculations Avhich he had an actually make found its value to be $20,668.35. A decree was accordingly entered requiring the trustees to set aside that amount as capital or corpus of the estate. In order to arrive at that value each instalment of rent received by the trustees from said leasehold was considered to be part income and part capital. To determine what portion of each instalment of rent constituted capital calculations were made by the actuary to ascertain what sum put out at six per cent, interest with annual rests on the date of testator’s death would amount to each instalment actually received ¿t the time it was received. Each instalment was figured separately and the sum of the amounts thus ascertained equals the value found by the circuit judge. The remaindermen being dissatisfied with the decree in this respect have again appealed to this court.

Appellants complain because the circuit judge entered a new decree instead of modifying the former decree. This constitutes at most an immaterial departure from the instructions contained in the order remanding the cause and is not prejudicial to the rights of the appellants. The circuit judge was compelled to hear evidence in order to comply with the order of this court and having done so it was not improper for Mm to enter sucb decree as tbe evidence warranted.

On tbe question of tbe correctness of tbe decree it is argued that tbe following fonr courses were open to tbe trustees at tbe inception of tbe trust: (1) They could bave valued tbe Ookala leasehold at tbe inception of tbe trust and paid to tbe tenants for life six per cent, interest on sucb value; (2) they could bave sold tbe leasehold, invested tbe proceeds and given tbe income to tbe life tenants; (3) they could bave invested tbe rents as received and paid tbe income to tbe life tenants, and (4) they might (by analogy to a direct gift of money for life) bave paid tbe rents as received to tbe tenants for life upon receiving reasonable security to preserve tbe fund for the remaindermen. It is further argued that what tbe trustees did was to adopt tbe fourth course except that they did not exact security of tbe life tenants for tbe preseiwation of tbe fund.

We are not able to concede either that tbe trustees bad tbe four courses open to them or that they bave adopted tbe fourth course. Tbe only course which tbe trustees bad an absolute right to pursue was to promptly convert tbe wasting assets into an authorized permanent investment and pay tbe income derived therefrom, whatever it might be, to tbe life tenants and preserve tbe capital amount for tbe remaindermen. Not having pursued this course their error must now be corrected by requiring them to set aside as capital or corpus of tbe estate a sum equal to tbe one which they should bave bad for that purpose at tbe time. At tbe time of tbe testator’s death tbe value of tbe Ookala leasehold was uncertain because tbe amount it would produce was uncertain, but tbe information now makes its true value as of that date at least theoretically ascertainable, and tbe calculations which tbe circuit judge bad tbe actuary make based on tbe receipts from tbe leasehold showed that value.

In Kinmouth v. Brigham, 5 Allen 270, 279, where a portion of tbe trust estate consisted of an investment by a special partner in a trading partnership, tbe court after stating that such investment was one which tbe court could not sanction said: “It is obviously difficult in this case to determine what was tbe value of tbe investment at tbe testator’s decease by any other mode than a computation based upon tbe whole product ultimately realized from it. ⅞ ⅞ * We think therefore that upon a just construction of tbe will equity will require that tbe profits received by tbe executors from tbe special partnership should not be regarded or treated exclusively as income but that they be treated when received from time to time as property belonging to tbe estate, a part of which is to be invested as capital and a part distributed as income; which parts are to be ascertained by finding what sum if received at tbe death of tbe testator would amount, with interest at six per cent: and making annual rests, to tbe sum actually received, at tbe time it was received; and that tbe sum so found should be invested as principal and tbe remainder distributed as income.” Tbe circuit judge evidently bad this case before him and was largely influenced by it in adopting tbe method used to ascertain tbe capital value of tbe Ookala leasehold.

In this case, as in the Kinmouth case, it is obviously difficult to determine what was tbe value of tbe investment at testator’s death by any other mode than a computation based upon tbe whole product ultimately realized from it. We therefore bold that tbe circuit judge committed no error in thus determining tbe value of said leasehold. But we are not to be understood as bolding that in every such case six per cent, should be taken as the correct rate of interest. Whenever interest is to be allowed for the failure to pay money when it is due the law knows no other rate than the one established by law, but here we are to ascertain between the tenants for life and the remaindermen what part of the gross sum now in hand shall he treated as capital and what part as income, and when we are called upon to find out what sum at a particular, date if invested by the trustees would have been sufficient to produce with its income the gross sum now in hand Ave must look to the actual income that can be obtained from authorized investments and not to the rate of interest established by law. (Edwards v. Edwards, 183 Mass. 581, 67 N. E. 658; Lawrence v. Littlefield, 215 N. Y. 561, 109 N. E. 611; Furniss v. Cruickshank, 130 N. E. (N. Y.) 625.) No point is made of the rate of interest used in the computations in this case, the objection being to the method used rather than to the details of applying the method.

Shortly after the case was remanded to the circuit court Mr. Edmondson, guardian ad litem for the minor respondents, filed a motion for the allowance to him of $2000 for his services in the supreme court on the former appeal and for the further sum of $1000 for the services of counsel employed by him to assist him on that appeal. At the conclusion of the hearing as to the value of the leasehold in question evidence was heard as to the nature, extent and value of the services of the guardian ad litem after which the circuit judge simultaneously with the entry of the decree entered a separate order allowing him a fee of $1000 “for his services rendered in this case in the supreme court and to date, and a further sum of $1000 for services of counsel employed by the said” guardian ad litem “ * * * which total sum is directed to be apportioned between and paid forthwith out of capital and income respectively in the proportions that $20,668.35 and $13,060.89, respectively, bear to the sum of $34,-329.34.” Also upon tbe oral application of counsel for tbe trusteees made at tbe time of tbe entry of tbe order it was further ordered that tbe sum of $750 be paid to bim for bis services as counsel for tbe trustees on tbe appeal and to date, wbicb sum was similarly apportioned between and to be paid out of capital and income. From this order Mr. Edmondson bas appealed and urges that tbe $1000 fee allowed bim is inadequate.

Tbe evidence as to tbe value of tbe services of tbe guardian ad litem is conflicting. Tbe circuit judge in order to determine wbat was a reasonable fee for tbe guardian ad litem necessarily • acquainted bimself with-tbe nature and extent of tbe services rendered. If be desired more definite information than was acquired during tbe progress of tbe trial be was then at liberty to bear evidence as to tbe nature and extent of tbe services rendered for wbicb tbe fee was sought. He was also at liberty to take tbe judgment of professional men as to the value of such services but such evidence is not necessarily controlling even when it is not conflicting. When tbe circuit judge bad familiarized bimself by either method with tbe nature and extent of tbe services and tbe other circumstances generally it became bis duty in tbe exercise of a sound discretion to fix tbe amount of tbe fee to be allowed (Guardianship of Humeku, 15 Haw. 394; Magoon v. Fitch, 16 Haw. 13), and unless it appears that be bas abused that discretion bis action in fixing tbe amount of tbe fee will not be disturbed on appeal. In this case tbe guardian ad litem bad already been allowed a fee of $1000 for bis services in tbe first trial in tbe circuit court. For-prosecuting tbe appeal from tbe decision of tbe circuit judge in that trial be bas now been allowed $1000 for counsel wbicb be employed to assist bim and $1000' for-bis own services on appeal and tbe second bearing in the-circuit court. Considering tbe benefits resulting from tbe guardian ad ¡item’s services and all the surrounding circumstances we regard the amount allowed by .the circuit judge as very liberal. It cannot be said therefore that the circuit judge abused the discretion reposed in him.

It is also argued that that portion of the order apportioning these counsel fees between capital and income is erroneous. The first question which presents itself is one which we have raised and called upon counsel to discuss, viz., whether or not the issue is raised by either of the appeals. The appeal of Mr. Edmondson, although a general appeal from the order in question, does not raise the issue for he has not such an interest in the subject-matter as entitles him to raise it. In fact o it is not contended that the issue is raised by his appeal. It is contended, however, in behalf of the remaindermen that their appeal from the decree does raise the issue of the correctness of the apportionment although contained in an order entirely separate from the decree from which they have appealed. It is well settled that an appeal from a final decree in equity brings up for revieAV all interlocutory orders, not appealable directly as of right, which deal with issues in the case. (Lee Chu v. Noar, 14 Haw. 648; Scott v. Stuart, 22 Haw. 641.) Whether such an appeal would bring up for review an intermediate order directly appealable, because final in its nature, which settles some issue in the case was not decided by either of the cases cited, nor is it necessary for us to decide it here. But the case of Scott v. Stuart does decide that an appealable order made in a proceeding growing out of the suit hut foreign to the subject-matter of the suit would not he up for revieAV upon an appeal from the decree and that an order or decree directing the payment of money other than the payment into court for further disposition is final in its nature and appealable. There the court was discussing an order entered in a partition proceeding but made in response to a motion of an attorney, wbo bad theretofore been appointed master in chancery in said partition proceeding, for the allowance to him of a fee for services which, he had rendered in obedience to an order of the circuit judge in resisting an application of one of the parties to said partition proceeding for a writ of prohibition against himself and the circuit judge by which said party sought to prevent further action under said order appointing him master. In response to said motion the circuit judge fixed his fee and ordered it paid by the clerk out of funds on deposit in court in said partition proceeding. In discussing that order this court said: “It should be pointed out, however, that that order was an appealable one, and as it was made in a proceeding independent of the suit for partition and foreign to the subject-matter of that suit, though growing out of it, the order would not, upon final decree, be up for reconsideration or review.” Here the order in question was made in the case on trial but in response to the motions of counsel for the trustees and the remaindermen to have their fees for services in a former appeal allowed and would seem to be ruled by the holding in Scott v. Stuart unless there are other facts which distinguish it. The only fact which has a tendency to distinguish this order from that is a recital in the decree following the portion ordering the trustees to set aside as capital the value of the Ookala leasehold to the effect that the remaindermen will be entitled to this sum on the termination of the trust “less the amount which the trustees are required to pay therefrom on account of counsel fees and disbursements under the separate order in that behalf this day filed.”

After careful consideration of this phase of the matter we are of the opinion that the recital in the decree could have no bearing on the question unless it had the effect of making the order allowing counsel fees a part of the decree. That it does not have tbis effect seems clear. The decree orders the full value of the Ookala leasehold as found by the circuit judge set aside by the trustees as capital and the further recital that the remaindermen will be entitled to that sum on the termination of the trust less the amount of fees ordered paid out of it is of no effect for the reason that such recital could not have the effect of irrevocably fixing the amount to which the remainder-men will be entitled at the termination of the trust. It is not impossible that further sums may be ordered paid out of capital before the termination of the trust, in which event the remaindermen would not be entitled to that amount. It seems clear to us that the most that can be said of the order in question is that it was made in a proceeding which was collateral to the case on trial. It did not settle any issue in that case and is foreign to the subject-matter thereof although growing out of it. It necessarily follows that the general appeal of the remainder-men from the decree does not bring up for review the order allowing and apportioning the payment of counsel fees.

W. L. Stanley for the trustees. II. Edmondson in proper person and for the minor respondents. L. J. Warren (W. 0. Smith with him on the brief) for the life tenants.

Both the decree and the order should be affirmed and it is so ordered.