Van Houten v. Stevenson

77 A. 612, 74 N.J. Eq. 1, 4 Buchanan 1, 1907 N.J. Ch. LEXIS 12

• Court: New Jersey Court of Chancery
• Decided: November 1, 1907
• Status: Published

Opinion

Embry, V. C.

(after statement).

The decrees made in the prerogative court on April 18th, 1899, passing the executors’ final account and the trustees’ first intermediate account, were not final adjudications, .that the bond and mortgage in question were, as against the complainants, worth the appraised value thereof, or that they were at the time of the-passing of the accounts properly held by the trustees in the due-performance of their duties. If the decrees are not such iilnal adjudications, then they do not, even if regularly obtained,, create, in favor of any of the defendants, as executors or trustees, a bar to an inquiry or adjudication in reference to the value of the securities, or the liability of any of the defendants, either as executors or trustees, or individually, for the amount thereof,, when such inquiry properly rises for adjudication. I take the-status of these decrees and their effect to be as follows: By the-joint inventory, signed by all executors, including Mrs. Stevenson ('the executrix who had joined in the bond to testatrix), the-executors described the security in question and appraised its-value as follows: "Bond and mortgage of Preston Stevenson and wife on premises in Franklin township, Bergen county, N. J., and in Easthampton, L. I., nominal value $10,000, actual value $10,000,” and this amount is part of the total appraisement,. $20,270.97. In the final account the executors, filing a joint account, charge themselves with the entire inventory, and pray no allowance or deduction on account of the debt secured by this-mortgage. The Executors’ and Administrators’ statute (Revision of 1874 § '8; Gen. Stat. p. 1426) provides that

“the appointment of a debtor as executor or executrix shall not, unless-otherwise expressed in the will, be construed to discharge such executor or executrix from the payment of the debt, but the said debt shall be considered assets in his or her hands, to be accounted for in the same-manner as any other part of the personal estate.”

The inventory charged all the executors prima, facie with the-appraised value of this debt as assets of the estate, and the continuance of this charge in the final account, without praying any allowance, made them all responsible (prima facie at least) for this amount as so much assets of the estate collected and in hand for distribution of the estate. In Weyman v. Thompson, 52 N. J. Eq. (7 Dick.) 263 (Court of Errors and Appeals, 1894), the-question of the effect of a decree on the joint final account of' executors was specially considered and decided, and the rule declarecl that the matters conclusively adjudicated by such decree are exclusively the receipt of assets and disbursements in behalf of the estate, and that the balance is in the hands of all or one of. them. It is not, however, an adjudication that each of the executors has the balance, or as to which one of them has it. Chief-Justice Beasley p. 269; Justice Dixon p. 273. The defendant Mrs. Stevenson, although a married woman, is bound to the complainants as executrix, by this charge of the debts as assets, and, as between herself and her co-executors, may be primarily liable, and the defendant trustees, by their own act, as evidenced by the decrees on the accounting, further accepted, or purported to accept, as trustees, and as part of the trust estate, and at the full value thereof, this security passed from themselves as executors.

The decree entered on passing the executors’ final account, so far as it purported to be a decree of distribution, was not a matter properly included in the decree on the account. The jurisdiction of the prerogative court over accounts (of executors at least) is purely statutory, and, except by statute, the prerogative court has no authority to order distribution by executors under a will. Such distribution was purely a matter of chancery jurisdiction. In re Eakin, 20 N. J. Eq. (5 C. E. Gr.) 481 (Williamson, Ordinary, 1858). The constitutional and statutory jurisdiction of the prerogative court over executors extended only to the probate of wills, and the settlement of their accounts, and (prior to 1872 at least) did not include any power to order a distribution. Lord Cornbuy’s Instruction, Leam. & Spi. (Reprint) 639; Prerogative Court act of 1846; Gen. Stat. p. 1030. By the Orphans Court act (Revision of 1874; Gen. Stat. p. 2357 § 5) the ordinary was vested with the powers of the surrogate and orphans court, in relation to the settlement of the accounts of executors and trustees, but this section would not, I think, include the power to order distribution by executors. Ordinary v. Barcalow, 36 N. J. Law (7 Vr.) 15, 20 (Supreme Court, 1872, Chief-Justice Beasley). The one hundred and forty-sixth section of the Orphans Court act (Gen. Stat. p. 2389) expressly gives to the orphans court power to order distribution of intestate’s estates only, and although section 151 (Gen. Stat. p. 2391) also authorizes the orphans court, where an account of executors has been allowed, to make a decree of distribution under a will, “upon the application of any party in interest,” the constitutionality of this provision has been questioned and decision thereon reserved by the court of errors and appeals in Adams v. Adams, 46 N. J. Eq. (1 Dick.) 298 (1889). And in this case it was held that, under this section 151, a decree for distribution could not be made merely upon a notice of settlement of accounts, but that actual notice of the application for such decree must be given to the parties interested. No such notice appears (by the record or otherwise) to have been given in this case, and even if it should be held that the powers in relation to the administration of estates of testators and the settlement of accounts of executors, given by the fifth section (which was merely an amendment of the law of 1869, P. L. ¶. 1Í02), included a grant of power to the ordinary to order distribution under a will by the one hundred and fifty-first section (which was an amendment of a subsequent law of 1872), there was, under the Adams Case, no authority to make a binding decree of distribution in the absence of actual notice of special application thereof. The directions in this decree passing their final accounts, that the executors as trustees under the will take over from themselves as executors, and by way of distribution of the estate, the security in question (or rather an undivided interest therein) as payment or discharge of the balance coming to them as such trustees on distribution, is therefore no decree or adjudication as against persons other than the trustees interested in the estate — fipsi, that the security was then of the value at which it was turned over or distributed to the trustees, or second, that the trustees were (as against other persons interested) authorized to accept it as assets realized and properly held in trust. The only effect of this recital in the decree is the effect derived from the fact that the trustees procured it, and that it operates as an admission on their part, that they received this security from themselves as executors, in the settlement of the estate, as assets of the estate realized to the full amount, without any claim for diminution or depreciation, by reason of the executrix not being bound, or otherwise; and that as trustees they received the same as representing, in their judgment, the value thereof, as stated in the accounting. Whether this action of the defendants as trustees, in accepting from themselves as executors this security as a full discharge of their duty in relation to the collection of the assets of the estate (so far as they included a claim against one of the executors, inventoried and accounted for as such), binds them, and each of them, for the full amount so charged against them as taken over, it is not necessary now to decide. In my judgment, the taking over of the security to themselves as trustees in this manner for the full value thereof, makes them all prima facie liable for the entire amount, and until a rebate or allowance from this charge of the full amount has been made on proceedings directly and properly involving that issue, all of the trustees must, so -far as •the complainants are concerned, be held chargeable with the value at which it was taken over. Such question cannot properly arise until such rebate or allowance is claimed on an accounting as trustees, and probably only after proceedings taken to realize upon the mortgage and bond. Any or either of the trustees, other than Mrs. Stevenson, may foreclose the mortgage and bring suit upon the bond against her in this court. Petty v. Young, 43 N. J. Eq. (16 Stew.) 654, 658 (Court of Errors and Appeals, 1887), and if, in the judgment of either of them, this course is advisable, in the interest of the estate, it is their duty to institute such proceedings at the peril of being held liable for the amount of any loss on the special ground that they have failed to exercise proper judgment as trustees. Proceedings to realize the security can, in my judgment, be brought only by some person entitled to recover thereon and receive the money, and the proceedings should, I think, be first for the foreclosure of the mortgage, for the reason that the language of the act of March 23d, 1881 (P. L. p. 184 § 1), relating to mortgages, seems to cover all proceedings of any character to collect the debt. Proceedings cannot, in my judgment, be maintained merely for the purpose of declaring Mrs. Stevenson’s liability on the bond in advance of, and independent of, any suit to recover against her on the bond or mortgages (one of which contains a covenant for payment on her part) by a person entitled to recover, such as the other executors would be, and no case is here made by the bill or proofs which entitles complainants to a decree that Mrs. Stevenson now pay the amount of the bond.

in. the present aspect of the case, the decision of the question, ' whether due regard to the interests of the estate, and the parties interested therein, other than the executors, requires the taking of proceedings to realize the security by proceedings to foreclose, and subsequent suit on the bond by the other executors in this court, is a matter for the sound judgment and discretion of the other executors, and each of them, and of them alone. The court will not undertake to control or advise the action in this respect by a direction in this suit that they must now foreclose. Nor is such decree necessary for the protection of the complainants. As the accounts now stand, all of the defendants’ trustees are, in my judgment, prima facie chargeable to the complainants for the full value of the bond and mortgages, as assets of the estate admitted to be of that value in their hands. When the trustees, or either of them, by their accounts, pray allowance for any portion of the assets represented by this debt, as not realized, or as assets for which they are not jointly responsible, the question may arise as to their right to any allowance. This question, when so presented, would, I think, directly involve the effect of the inventory and decree on account, as concluding Mrs. Stevenson and the other executors as to the collection of this security by them as assets, and if it be not so conclusive, then it would further involve the responsibility of the trustees, or either of them, for any loss resulting from the failure to collect the debt by judicial proceedings, including a suit against Mrs. Stevenson upon the bond.

So far, therefore, as the complainant seeks a decree to compel the executors to foreclose, relief must be denied, because the court will not undertake to control' or direct the judgment of the executors in the foreclosure of the mortgage. Especially must this direction be denied, in view of the fact that the bill ■alleges that Aaron Yan Houten, one of the executors, desires to foreclose, and this executor, called as complainant’s witness, says that the reason no attempt had been made to foreclose or collect the mortgage was that his co-trustees refused to do anything in the matter. He does not seem to have been advised, or to have supposed that he could himself foreclose the mortgage without their concurrence, and his failure to bring such suit heretofore is not a sufficient reason for the court to relieve him of his duty and responsibility as trustee in reference to the security by directing and deciding for him what he shall do as to foreclosing. Nor has there been any such demand on the executors to foreclose, or to pursue the remedy on the bond, as would authorize the court to take the administration of the estate out of the hands of all of the executors by reason of failure to perform their duties in this respect. The letter of March 14th, 1898, written by the solicitors of the complainants on their behalf, was a complaint of delay in settling the estate, including the collection of claims against Preston Stevenson, and did not specially mention the security now in question. This letter, written before any inventory was filed, was followed by the filing of the inventory on April 6th, 1898, and the appraising of the debt as a bond and mortgage of Stevenson and wife at the full value. No other application to the executors appears to have been made by complainants to realize this security, before filing the bill (March 18th, 1899), or before the hearing (October, 1903).

And so far, also, as the bill seeks a present decree against Mrs. Stevenson, in relation to her individual liability on the bond, by reason of the circumstances of the original loan, relief must be denied. Until the trustees properly pray allowance for the amount for which they have charged themselves for this security, or by some other proceeding to obtain a judgment or decree upon the bond, directly raising the question of the validity of the bond, brought by some person who is entitled, either in law-or equity, to recover the amount of the bond, the question of Mrs. Stevenson’s liability on the bond, by reason of the circumstances under which the original loan was made, is prematurely raised. The denial of this relief at this time is, therefore, without prejudice.

So far as the bill seeks equitable relief, by charging the- devises or bequests received by Mrs. Stevenson under the will with the amount of the bond, because of assurances to the testatrix that her share would be so liable, and that the testatrix, relying on these assurances, refrained from changing her will, the prayer must be denied, because of failure to prove any such representations or assurances by Mrs. Stevenson. Relief of this kind is based on the personal fraud of the devisee, or of the person through whom he receives the estate, and, in the absence of such fraud, the statute of wills protects the devisee. I have lately considered this question, with an examination of the authorities, in Powell v. Yearance, 73 N. J. Eq. (3 Buch.) 117 (1907). The complainant, however, as a beneficiary entitled to a portion of the income on the fund held in trust, would seeiu to be entitled to receive interest on this security from the trustees, unless they discharge themselves from such liability by the proof of facts relieving them. As the evidence now stands, at the time the cause was brought to hearing, no interest had been paid since December, 1897. The bill was filed March 18th, 1899, and charges that interest was due and payable from July 27th, 1897, and, under the prayer for general relief, the complainants may be entitled to a decree for interest. As, however, such liability of the defendants, or either of them, for interest alone, as distinct from principal, was a matter not argued by counsel, I will hear counsel on this point, and also-on the question of the order of liability for interest, as between the defendant executors.