Opinion
1891-01-31
CLUFF v. DAY.
Edward B. Whitney for appellant. Eugene B. Hawkins for respondents.
Appeal from a judgment.
Mary Cluff brought this action on her own behalf and that of others interested, against Henry S. Day and John Thompson, sureties on the bond of Edward E. Tower, executor, etc., of Burgess Cluff, deceased.
On the trial at special term before the court without a jury, it appeared that testator's will was in substance as follows:
“First I give, devise and bequeath all my property of every name or nature whatsoever unto Edward E. Tower, of the Town of Cohasset, in the State of Massachusets, to be held by him in trust, nevertheless, for the following purposes and no other,” to wit: “To convert all my said property into money, and to invest the same, together with what money I may have at the time of my death, in good and sufficient securities, and to pay the interest arising therefrom, and which may become due from time to time, to my wife,” and after her death he was directed to divide it among testator's children.
A subsequent clause in the will was: “I appoint my friend, Edward E. Tower, executor of this my last will and testament.”
In 1873, on an accounting by Tower, it was adjudged that there was “in the hands of said executor” a specified sum upwards of $12,000, and it was “ordered and adjudged that the said executor retain, invest, and keep invested the balance remaining in his hands,” (after making the payments which were ordered by the decree), “according to the trusts and provisions contained in said last will and testament.”
A subsequent decree modified the foregoing, by reducing the same to $10,906.02. By subsequent decree in 1886, the surrogate adjudged that Tower never made any proper investment of the fund in question, but had wasted it and neglected to obey the decree of 1873, and revoked his letters.
The widow brought this action against the sureties on his bond.
The trial court dismissed the complaint.
The superior court at general term, affirmed the judgment of dismissal given by the trial court, on the ground that the decree of 1873 adjudged that Tower had fulfilled his duties as executor, and the decree of 1886 charged him in effect as trustee; and on the further ground that the burden was on plaintiff to show that the default occurred while Tower was executor. Edward B. Whitney for appellant. Eugene B. Hawkins for respondents.
BRADLEY, J.
The action was brought under section 2609 of the Code of Civil Procedure, and the plaintiff, in the complaint, alleges the decrees of the surrogate made upon the accounting of Tower in 1873 and 1886, and that, at the time of the former, he did not set apart anything to represent the balance charged against him by the decree, and made no investment of the trust fund pursuant to it, and that he disobeyed each and both of such decrees of the surrogate.
The defense rests mainly on the alleged ground that the effect of the decree of 1873 was to terminate Tower's duties as executor, and that thereafter his functions were those of trustee only in respect to the estate; and therefore, the defendants, as sureties in his bond as executor, were no longer responsible for his adminis tration of it. If these premises are correct, such conclusion necessarily follows, because the decree of 1873 remains unimpeached, and as between the parties is conclusive as to the matters within the scope of its determination. That decree purports to and does represent a final accounting of the executor as such, and by it he was charged with a balance, as afterwards modified, of upwards of ten thousand dollars. The question presented here is whether the executor as such was discharged by the decree of 1873. If he was, the decree of 1886 must be treated as made upon an accounting by Tower as trustee, and if not so discharged it was within the jurisdiction of the surrogate to require and to take his accounting as executor, although it would not go back of the former decree as to the state of the account, but would have relation to the time and transactions subsequent to it ( In re Hood, 90 N. Y. 542;in re Souter, 105 Id. 514). And then liability upon the bond would arise from the failure of the executor to obey the decree of 1886.
The former decree did not, in express terms, discharge the executor. The investment and its continuance would seem to call into exercise the functions of a trustee rather than those of an executor, and it was in view of that purpose that he was directed to retain it, but his retention of it was not necessarily the act of a trustee as distinguished from that of an executor. The question became one of construction and effect of that provision of the decree, and upon that subject it may be well to consider the question in the light of the authorities having some relation to it.
In Laytin v. Davison (95 N. Y. 263), the will referred to contained provisions requiring the exercise of functions executorial and those of a trustee. A final accounting of the executors was had before the surrogate, and by the decree the amount of the capital of the estate remaining in their hands was determined, and they were directed to retain and hold it “as trustees under the last will and testament” of the testator. The court, in the opinion delivered by Judge ANDREWS, said: “The decree did not, in terms, discharge the executors, but this was the reasonable intendment and legal effect of the direction that they should retain and hold the whole balance of the estate as trustees under the will. The fact that the trustees have not made an actual division of the trust fund into shares, as directed by the will, does not, we think, change the question. … The executors have upon a final accounting as executors been discharged as such. The fund has become exclusively a trust fund under the will, to be held by the trustees,” etc.
Our attention is also called to Matter of Estate of Hood (98 N. Y. 363), where there was a final accounting of the executors, and the decree of the surrogate directed “that the balance of said moneys, being the sum of $53,710.69, said executor shall hold and invest pursuant to the powers in said last will and testament,” and it was held in a proceeding to revoke the letters testamentary of one of the executors, that he, as such, was not discharged by that decree; and in the opinion of the court, delivered by Judge MILLER, it was said that in the absence of any direction in the will that the executors should become trustees, no reason exists why the executor whose account was settled should not continue to act in that capacity. “When the decree was made, he was clearly an executor, and held these funds in his hands, and was liable for the same as such,” and “even if, under the will, it was possible for the executor to have become a trustee, he could not have done so until there had been a final accounting and discharge, by decree of the surrogate, from his position as executor, or by direction in the decree that he take and hold the property as trustee as distinct and separate from his functions as executor.” And he added that “at the time of the decree the executors had not fully performed their functions, and their duties had not terminated. This fact is a complete answer to the position that the executors became trustees after the decree of the surrogate.” And he remarked that the Laytin case was not adverse to such views, as “trusts were there created under the will, and the decree of the surrogate directed the property to be held by the executors as trustees.”
The ground of distinction founded solely upon the decrees of the surrogate in the two cases cited seems to be in the use in the one and absence in the other of the word “trustee” as relating to the character in which they should retain and invest the fund. But back of those decrees and in reference to the wills, it is said that a period of time was contemplated by the testator in the Laytin case when the duties of the executors as such would end and they should assume the character of trustees only, which was not applicable to the will in the Hood case. The fact, however, remains, that in the latter case the direction to invest applied to all the property remaining in the hands of the executors, and allowance was made to the executor Hood of his commissions.
The Matter of Hood (104 N. Y. 103), again came up on appeal from an order directing him, as late executor, to render an account before the surrogate, and in referring to the former review, Judge FINCH, in speaking for the court, said: “We then held--passing by the inquiry whether, under the will, it was possible for him to exchange the character of executor for that of trustee-- that he had not effected such exchange, and remained executor only, and removable, as such, for his misconduct in that capacity. We pointed out that on the accounting in 1869, he was not discharged, but was directed to hold the remaining assets as trustee, was not credited with such transfer, and his account thereby balanced, but the decree entered directed, as to the assets remaining, that the said executor shall hold and invest, pursuant to the powers and directions contained in said last will and testament.” There had been no payment to the defendant as trustee, no new account opened, no separation or division of the fund allotting to the beneficiaries their exact and specific proportions.”
These views tend to illustrate the principle of the decision of the court on the former review, and they seem to indicate that to some extent at least the distinction between it and the Laytin case was in the direction given by the surrogate's decrees.
In Matter of Willets (112 N. Y. 298), it was held that it was not within the contemplation of the will that the two functions of executors and trustees were to co-exist, but that those of the former were first to be executed, and the latter to follow. The surrogate settled their accounts as executors, and ordered them, out of the “balance of principal in their hands, to pay to themselves as trustees” a sum mentioned. It was held that their functions as executors then terminated, and they assumed those of trustees. That case came fairly within the doctrine of the Laytin case.
In Johnson v. Lawrence (95 N. Y. 162), where the indication in the will was that the two functions might co-exist and that no separation of them was contemplated, the court said that “taking the adjudged cases together, they appear to establish that to entitle the same persons to commissions as executors and as trustees the will must provide, either by express terms or by fair intendment, for the separation of the two functions and duties, one duty to precede the other, and to be performed before the latter is begun, or substantially so performed … and that where the will does so provide for the separate and successive duties, that of the trustee must be actually entered upon and its performance begun either by real severance of the trust fund from the general assets or a judicial decree which wholly discharges the executor and leaves him liable only as trustee.” And on the subject Hall v. Hall (78 N. Y. 535);In re, etc., Mason (98 Id. 527);Phœnix v. Livingston (101 Id. 45).
In all these cases except that of Hood, the controversies were in respect to commissions, and whether the executors and trustees were entitled to them in both capacities, and more especially in the latter. And to entitle them to commissions also as trustees, it must appear by the will that the separation of the two functions was clearly intended by the testator and has been effected, or that the office of executor has been terminated by the discharge of him as such by the decree of the surrogate made upon his accounting, whereby the matters of the testamentary trust solely are devolved upon him as trustee.
In the present case the trial court found that at the time of the accounting, in 1873, Tower had in his hands the money charged in the decree. This must be assumed, as the fact does not necessarily appear to the contrary, and therefore, no charge for any devastavit prior to that time arises for consideration, and as the executor was not by the express terms of the decree discharged, the determination of the question presented is dependent upon the nature of the functions which he was, after the decree, permitted to exercise in respect to the fund. It may be observed that all the property of the testator was devised to Tower “to be held by him in trust,” and he was directed to convert it into money, invest it, pay the income to the plaintiff, and, after her death, divide it among his children. Tower was appointed executor to execute the provisions of the will. The duty of investing the fund and disposing of the income, and finally of the principal, was that of a trustee. But Tower took the estate in his hands as executor, and the decree directed “that the said executor retain, invest and keep invested the balance remaining in his hands … according to the trusts and provisions contained” in the will. Those provisions were for investment, payment of income and final distribution. He could retain the fund as executor, as directed by the decree, although the investment and what followed would be within the functions of a trustee. He made no investment and did no act indicating that he treated the fund as held by him in any capacity other than that in which he had received it.
It is true, that, as a general rule, when the same hand is to pay and receive, what is required by law to be done to accomplish it will be deemed to be done, but it is entirely consistent with the decree that the fund be retained by him as executor until he should take an opportunity to invest it, and the transfer to him as trustee would be evidenced by the investment. The decree did not, as in the Willetts case, direct him, as executor, to pay the fund to himself as trustee, nor, as in the Laytin case, to hold it as trustee. The only practical effect of the decree was a settlement of the accounts of the executor; and it would have the same effect for all the purposes to which it was entitled as made if it had stopped with the adjudication of the balance against him as such, and directed the payment of the costs and expenses of the proceeding as it did. The duty in respect to the investment, etc., was given by the will. So the case may be treated as if no direction had been given by the decree in that respect.
Could it be effectually said that, from the time of a mere adjudication of a settlement of the accounts of the executor, he ceased to hold the funds as such? It seems quite clearly not until he had in some manner done something to change his relation to it. In such case, as said by Judge FINCH in Johnston v. Lawrence, the duties of the trustee must be actually entered upon and performance begun, or the executor be wholly discharged by decree of the surrogate. Neither was done in this instance, and assuming that the fund remained in his hands at the time of such accounting, nothing appears to divest him of the relation of executor to it. The decree does not import his discharge as such; nor is a forced or doubtful construction justified for the purpose of giving to it such effect. In the Phœnix case the trustees actually entered upon the performance of their duties as such, and as the executor in the case at bar was not discharged by the decree, nothing appears to warrant the conclusion that his functions as executor were terminated in respect to the fund.
If these views are correct, the surrogate had jurisdiction to take the accounting of the executor and make the decree of 1886, and it must be treated as made upon the accounting of Tower as such. This is consistent with the provisions of that decree, and it was in that view that the application was entertained by the surrogate for the revocation of his letters testamentary, and decree made accordingly. The exceptions, therefore, to the finding of the trial court, that the executor was discharged by the decree of 1873, and to the conclusions of law which followed, were well taken. These views render it unnecessary for the purposes of this review to consider any other question.
The judgment should be reversed and a new trial granted, costs to abide the event. All the judges concurred.
NOTE ON THE DISTINCTION BETWEEN THE FUNCTIONS OF AN EXECUTOR AS SUCH, AND AS TRUSTEE OF AN EXPRESS TRUST CREATED BY THE WILL.
In a general sense assets of the estate in the hands of an executor are held by him in trust, that is to say, in a fiduciary relation in which he is subject to the stringent remedies which belong to that relation as distinguished from a position of a debtor; but for the purposes, or so far as concerns the principles of law peculiarly applicable to express trusts, and the powers, rights and responsibilities of trustees thereunder, an executor is not as such a trustee. If he is also a trustee it is by reason of efficient provisions contained in the will and creating an express trust as distinguished from executorial duties. Few questions in the modern law of administration occasion more frequent controversy than the question in which of these two capacities the personal representative acts.
The question whether an executor or administrator with the will annexed, acts as such or as trustee, affects his rights and liabilities besides those of his sureties, and the line of demarcation between executorial and trusteeship functions is often obscure. Whether it be left in doubt by the will or not, it ought to be made clear by the decree on accounting.
There are several fundamental reasons for the distinction. The law of trust imposes some restrictions on trusts in real property which may not be involved in the ordinary fiduciary possession and title of an executor as such. Again the powers of a trustee involve incidents not always belonging to the character of an executor. Moreover if there are two or more joined in the office, the power of one executor to act for the estate is much larger than that of one trustee to act for the trust; and the mutual responsibility of each for the defaults of the other is different in the two capacities.
The testator has a right to frame his will in such a manner as to confer or withhold the functions of trustee; and a well drawn will leaves no doubt on this point.
It is for the interest of an executor charged with functions of trusteeship, that the distinction be made sufficiently clear, for if there be both he may accept one only while renouncing the other; and if he accepts unqualifiedly he may be charged with both functions and yet receive but one commission.
The principal litigation has been in cases where the language of the will has left the question in doubt, and there has been no decree on accounting so framed as to remove the doubt.
The principles chiefly useful in determining such questions are the following:
1. The use of the word “trust” or “trustee” in the will is not conclusive of the testamentary intention to constitute a trust. It is necessary that there be an intention manifested to establish a trust. And in the absence of any such manifest intention, the designating the representative as executor and trustee, or a donee as guardian and trustee is wholly insufficient.
2. The use of the word “trust” or “trustee” is not essential. If the provisions of the will in legal effect, create a trust such as a mere appointment as executor cannot involve, the law gives it the name of a “trust” although the testator has not done so, and the law affixes thereto the distinctive functions of a trustee although the testator may have been quite unmindful of them.
3. In determining whether a trust is created by language not explicit in the point it must appear that the necessary effect is to give the absolute title and possession to the trustee, subject of course to the right of the beneficiary to enforce it, or are the provisions of the will capable of being fully satisfied by the right of possession and mere legal title which the law casts on the executor in case of personalty not the subject of a specific legacy.
4. In applying this test it is hardly necessary to say that the trust may relate to only a particular part of the assets, but if so, that part must be or become capable of severance from the assets held as executor, and of being held as a definite fund and by a different kind of title from the residue. Thus in the common case of a gift of the residuary estate to an executor in trust, the trust in the sense now considered does not commence before it is ascertained that there will be a residue, and when so ascertained it commences no faster than specific parts of the assets are distinguishable as legally belonging to that residue.
5. Further there is usually if not always a distinct element of time introduced by the trust or the purpose which the trust is to serve. A gift in trust merely to pay over to a specified beneficiary however formally expressed in language appropriate to the law of trusts, would confer nothing more than executional functions. And the usual element of time or continuity relates to the lives of the beneficiaries or their attaining a specified age or other contingencies.
6. It is not necessary that the executorial duties shall all be completed in respect to the estate before the duties of a trusteeship begin, unless the trusteeship embraces the whole estate after payment of debts; but the executorial duties as to the moneys claimed to be held in trust must have been completed before the duties of trusteeship in respect to those moneys can be deemed to have commenced.
7. A testator may confer on the same person several trusts as to distinct funds, or separable parts of one original fund; and the question whether the trustee has actually separated the moneys and invested each portion in his name as trustee for a different purpose, or has acted under or within the proper limits of the recognized discretionary power to commingle funds of separate trusts for the purpose of more continuous and productive investment, is not necessarily decisive of the question whether he acts as a separate trustee in respect to each share.