In re the Intermediate Accounting of First National City Trust Co.

New York Supreme Court

In re the Intermediate Accounting of First National City Trust Co.

32 Misc. 2d 7, 222 N.Y.S.2d 86, 1961 N.Y. Misc. LEXIS 2084

DecidedNovember 13, 1961

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This text of 32 Misc. 2d 7 (In re the Intermediate Accounting of First National City Trust Co.) is published on Counsel Stack Legal Research, covering New York Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

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In re the Intermediate Accounting of First National City Trust Co., 32 Misc. 2d 7, 222 N.Y.S.2d 86, 1961 N.Y. Misc. LEXIS 2084 (N.Y. Super. Ct. 1961).

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Opinion

Samuel M. Gold, J.

The shares allocated to income, in the accounting, were distributable, in Idnd, to the income beneficiary within a reasonable time after their receipt by the trustee. That appears to be the rationale of the opinion in Matter of Wren (21 Misc 2d 494). The trustees’ power of sale should not extend to property which is, at the time of sale, distributable to a beneficiary. The latter is entitled to decide whether or not he desires to sell his property. The income beneficiary was not apprised until the present accounting of the allocation of the sold shares to income rather than principal. The trustees’ election, in its accounting, to apply the proceeds of the sale of stock which belonged to income and to treat the unsold stock of the same company as principal appears to be unjustifiable. To quote from Matter of Wren (supra, p. 498), “ it will be presumed that it did not sell stock belonging to the beneficiaries, but that it sold only stock belonging to the trusts. It still has on hand * * * stock of each issue sufficient to satisfy petitioners’ claims to the extent allowed herein.”

This court holds that the stock sales complained of should be treated as sales of principal, and that the income beneficiary is entitled to the stock allocable to income, in kind, together with all accretions. The account must be revised accordingly.

The court also holds that the distribution of Continental Insurance Company stock was a stock dividend as it was [8]*8described in the company’s proxy statement, notwithstanding the fact that the distribution was not to be made until the merger became effective. As the shares distributed represent payments into the capital account from earned surplus, and as they may be allocated to the income without impairyig the intact value of the stock of the company in the principal account, the shares in question should be allocated to income (Matter of Fosdick, 4 N Y 2d 646; Matter of Payne [Bingham], 7 N Y 2d 1; Matter of Osborne, 209 N. Y. 450).

The motion is granted to the extent of settling the account, with the amendments necessary to make it conform to the court’s decision.

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Samuel M. Gold, J.

The shares allocated to income, in the accounting, were distributable, in Idnd, to the income beneficiary within a reasonable time after their receipt by the trustee. That appears to be the rationale of the opinion in Matter of Wren (21 Misc 2d 494). The trustees’ power of sale should not extend to property which is, at the time of sale, distributable to a beneficiary. The latter is entitled to decide whether or not he desires to sell his property. The income beneficiary was not apprised until the present accounting of the allocation of the sold shares to income rather than principal. The trustees’ election, in its accounting, to apply the proceeds of the sale of stock which belonged to income and to treat the unsold stock of the same company as principal appears to be unjustifiable. To quote from Matter of Wren (supra, p. 498), “ it will be presumed that it did not sell stock belonging to the beneficiaries, but that it sold only stock belonging to the trusts. It still has on hand * * * stock of each issue sufficient to satisfy petitioners’ claims to the extent allowed herein.”

This court holds that the stock sales complained of should be treated as sales of principal, and that the income beneficiary is entitled to the stock allocable to income, in kind, together with all accretions. The account must be revised accordingly.

The court also holds that the distribution of Continental Insurance Company stock was a stock dividend as it was [8]*8described in the company’s proxy statement, notwithstanding the fact that the distribution was not to be made until the merger became effective. As the shares distributed represent payments into the capital account from earned surplus, and as they may be allocated to the income without impairyig the intact value of the stock of the company in the principal account, the shares in question should be allocated to income (Matter of Fosdick, 4 N Y 2d 646; Matter of Payne [Bingham], 7 N Y 2d 1; Matter of Osborne, 209 N. Y. 450).

The motion is granted to the extent of settling the account, with the amendments necessary to make it conform to the court’s decision.

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32 Misc. 2d 7, 222 N.Y.S.2d 86, 1961 N.Y. Misc. LEXIS 2084, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-the-intermediate-accounting-of-first-national-city-trust-co-nysupct-1961.

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