Lent v. . Howard

89 N.Y. 169, 1882 N.Y. LEXIS 205

Opinion

Andrews, Oh. J.

We are of opinion, that the executors were properly held to account for the rents and profits of the real estate received by them, and for the proceeds of sales of real estate made under the power conferred by the will.

It is undoubtedly true, that the executors did not take a legal estate in the lands of the testator. They were vested simply with a power of sale, and there being no specific devise of the lands, the title descended to the heirs of the testator, subject to the execution of the power (1 R. S. 722, § 56), and the right of possession followed the legal title. But while at law the rents and profits of land are incident to the possessory right and belong to the holder of the legal title, they may in equity belong to another. Where by a will a bare power of sale is given to executors, and the lands meanwhile descend to the heir, the latter is at law entitled to the intermediate rents and profits, but if the power of sale operates as an immediate conversion of the land into personalty, accompanied with a gift of the proceeds, then in equity the intermediate rents and profits, go with, and are deemed to be a part of the converted fund, and the heir may be compelled to account therefor to the executor. (Stagg v. Jackson, 1 N. Y. 206; Moncrief v. Ross, 50 id. 431; Lancaster v. Thornton, 2 Burr. 1028; Yates v. Compton, 2 P. Wms. 308; Bam on Assets, 83.) In Moncrief v. Ross the action was by the heir against the executor to compel the latter to account for intermediate rents of real estate descended to the heir, subject to an immediate and imperative power of sale in the executor, and the relief was denied on the ground that the rents were assets in the hands of the executor. It appeared in that case that the executor had received the rents of the real estate, but under what circumstances the case does not disclose. The remedy of an executor to recover the intermediate rents and profits of land descended to the heir subject to an immediate and imperative power of sale and a gift of the proceeds to other persons, would seem to be in equity only. The legal possession of the land is in the heir, and not in the executor, and the latter cannot at law, recover possession, or exclude the heir therefrom. The heir may be compelled to account, and other equitable remedies may doubtless be resorted to by the executor to prevent spoliation, in the nature of waste, to the injury of the legatees of the proceeds.

We think there was by the ninth section of the will in question, a conversion of the testator’s real estate (except the homestead farm,) into personalty as of the time of his death, and a gift of the converted fund, together with the intermediate income, to the testator’s wife and daughter, with cross remainders. It is true that the power of sale is not in terms imperative. The words are those conferring authority, and not words of command or absolute direction. But it is clear that a conversion was necessary to accomplish the purpose and intention of the testator in the disposition of the proceeds, and when the general scheme of the will requires a conversion, the power of sale operates as a conversion, although not in terms imperative.

(Dodge v. Pond, 23 N. Y. 69.) The conversion also will be deemed to be immediate, although the donee of the power is vested, for the benefit of the estate, with a discretion as to the time of sale. (Stagg v. Jackson, supra ; Robinson v. Robinson, 19 Beav. 494.) We are therefore of opinion, that the rents and profits of the real estate received by the executors, and the proceeds of sales, were properly brought into the accounting.

But a serious question arises, which is not free from difficulty, in respect to the claim of the defendant,- Bailey, to an allowance for services in taking charge of, and managing the farms and real estate of the testator, after his death. The testator left five farms (including his homestead farm), all but one of which, were in the county of Genesee, and, also several houses and lots in the village of Le Boy,, in that county. The defendant Bailey, was the brother of the testator’s wife, and the defendant Howard, her brother-in-law. Howard was a banker living at Batavia; and Bailey was a farmer and miller, living several miles from Le Boy. After the testator’s death, he changed his residence, removed to Le Boy, and took charge- of all the real estate belonging to the testator at the time of his death, including the homestead farm, which was devised to the testator’s wife. for life. He continued in charge of the real estate (except two farms, sold,) working upon, managing and improving it, and receiving the rents and income until March, 1878, a period of nearly fifteen years, and the services performed by him, as the referee found, exceeded in value his commissions as executor, and the legacy of one thousand dollars given him by the will. The defendant Bailey, took charge of the real estate at the request of the other executors, including Mrs. Lent, and the homestead farm was managed by him in the .same way as the other real estate. It is clear that the executors supposed that the management and control of the real estate devolved upon them as such. The gross rents and income were entered in the executor’s accounts, as were also the disbursements for taxes, repairs, labor, seed, etc. The general rule is well settled, that the commissions allowed by statute to executors measure the compensation to which they are entitled for their services in the execution of the trust. An executor, or trustee, empowered to manage an estate, may employ a clerk or agent, and charge ’ the estate with the expense, when from the peculiar nature and situation of the property, the services of a clerk or agent are necessary, and he will be allowed expenses of keeping up the estate, and for taxes, repairs, etc. But executors cannot employ one of their number as clerk and allow him a salary, nor will an executor be allowed compensation for his own service's as attorney in the affairs of the estate. (Vanderheyden v. Vanderheyden, 2 Paige, 287; Clinch v. Eckford, 8 id. 412 ; (Collier v. Munn, 41 N. Y. 143; Perry on Trusts, § 913.) The principle is, that for the personal services of an executor or trustee in the discharge of executorial duties, or those which pertain to his trust, the commissions allowed by law are deemed to be a full equivalent. We are not disposed to impair the force of this salutary rule, although in some cases the statutory compensation may be quite inadequate. But we think the rule does not fully or justly apply to the claim of the defendant Bailey, to be allowed out of the gross rents and profits of the real estate a suitable compensation for his services in the nature of a charge thereon, for his labor expended in producing them. It was no part of his executorial duty to spend his time and labor in conducting the business of carrying on the farms. Clearly, there can be no ground for claiming that he owed any duty whatever in respect to the homestead farm; but as has been said, this farm was managed in the same way as the rest. The executors were not entitled to the possession of the testator’s real estate. The control and management was apparently surrendered to Bailey by the consent of all the parties in interest. In accounting, the executors should be charged with the net income and profits, and we think a reasonable compensation to Bailey for his services and labor is a proper element to be considered in ascertaining them. This conclusion renders a reversal of the judgment necessary.

There is another important question in respect to the interest charged against the executors on uninvested balances in their hands from time to time. The referee charged them with interest on such balances, at the rate of six per cent, per annum, amounting in the aggregate to about $20,000. The account rendered seems to show that the estate earned an average of more than five and one-half per cent, per year, from the death of the testator, up to the time of the accounting. There is no affirmative evidence that the executors negligently kept the fund uninvested, and there is some evidence that they made efforts to keep it at interest. They were directed by the will to invest the funds of the estate, on bond and mortgage, or in State' stocks, of the State of Hew York. It is the duty of trustees, guardians, etc., holding funds for investment, to use due diligence to keep them invested. (DePeyster v. Clarkson, 2 Wend. 77.) Some time usually elapses before investments can be made, and in charging a trustee with interest, six months from the time the money was received, is usually allowed as a reasonable time. (Dunscomb v. Dunscomb, 1 Johns. Ch. 508.) After a reasonable time, trustees are prima facie liable for interest, and if they have retained money uninvested beyond such reasonable time, the burden is on them, on an accounting, to explain or justify it. If the executors in this case negligently omitted to make investments, or kept the fund idle for personal reasons, or if on the accounting, they render no explanation of the delay, interest may properly be charged against them, computed upon the principle adopted by the referee. (King v. Talbot, 40 N. Y. 76.) The facts bearing upon the liability of the defendants, either jointly or severally, for interest on uninvested funds, may upon a new trial be more fully developed, and the further consideration of the question at this time is unnecessary.

There does not seem to be any ground for charging the defendant Howard with the sum of $786.60, received by the defendant Bailey on the exchange of the house and lot for the Kellogg farm. We find no evidence that the defendant Howard, had any knowledge of the transaction, or that the money ever came to his hands or under his control. There are some other items charged in the account to which objection is taken. The errors in respect to them, if they exist, are obvious, and can be corrected on a rehearing.

The executors excepted to that part of the judgment, which adjudges the determination and extinguishment of the unexecuted trusts, directed by the fifth and sixth articles of the will. By the fifth article, the executors aré directed to set apart and invest §10,000, on bond and mortgage, for the maintenance of the testator’s daughter during her minority, and to pay the income to her thereafter, during her life, and in case of her death before the death of his wife, to pay the principal sum to her. By the sixth article, the testator gives to his wife an annuity of §700, and directs his executors to invest on bond and mortgage, a sum sufficient to produce the annuity, and in case his daughter survives his wife, to pay over the same to her. The executors have never made any investment on the trusts directed by these sections of the will, and prior to the trial of this action, they transferred to the plaintiffs, all the real and personal estate of the testator in them hands. The testator’s daughter, became of age in 1878, and the plaintiffs, who are the only persons interested, unite in asking that the trusts be extinguished. There are authorities which hold that it is in the power of a court of equity to decree the determination of unexecuted trusts of this nature, where the parties beneficially interested, unite in the application (Smith v. Harrington, 4 Allen, 566; Perry on Trusts, § 920, and cases cited.) Whatever view may be taken of the general jurisdiction of courts of equity, in the absence of any statutory or legislative policy, to abrogate continuing trusts, created for the purpose of providing a sure support for the widow or children of a testator, or other beneficiary, the indestructibility of such trusts here, by judicial decree, results, we think, from the inalienable character impressed upon them by statute. The beneficiaries, of trusts for the receipt of the rents and profits of land, are prohibited from assigning or disposing of them interest (1 R. S. 729, § 63), and this provision is held to apply, by force of other sections of the statute, to the interest of beneficiaries in similar trusts of personalty. (Graff v. Bonnett, 31 N. Y. 9.) This legislative policy, cannot we think be defeated by the action of the court permitting such alienation, or abrogating the trust. (See Douglas v. Cruger, 80 N. Y. 15.) The provision in the judgment in this case, abrogating the trust in question, was therefore unauthorized. Whether any practical difficulty now exists in the way of giving effect to the will of the testator, need not now be considered. It is sufficient to say that the principle that the courts may destroy trusts for support and maintenance, is sanctioned by the judgment in this case, and the judgment is also for this reason erroneous.

The judgment should be reversed and a new trial granted, costs to abide the event.

All concur, except Tbaoy, J., absent.

Judgment reversed.