Summary
In Fisher v. Banta (66 NY 468), this Court held that, where a fiduciary seeks to account to itself in another capacity, an accounting decree will be conclusive only where persons ordinarily represented by the fiduciary in its alternate capacity "have been made parties to the accounting" (id. at 482).
Summary of this case from In the Matter of HunterOpinion
Argued March 29, 1876
Decided September 19, 1876
E.H. Morse for the appellant.
W.W. Rowley for the respondent.
The direction in the codicil to the will of Albert Banta, that his executor should sell all his real estate, operated as a conversion of the real estate into personalty, from the time of his death. The direction is unqualified and peremptory. It leaves no discretion to the executor, except as to the time and manner of sale. The exercise of the power of sale is subject to no condition, except that which it implied in every case of this character, that, at the death of the testator, the purposes for which a conversion was directed have not failed, but still require that the power should be exercised. In all cases where conversion takes place, it is because the purposes of the will require it. The conversion may be entire, embracing the whole estate, or partial, extending only so far as is necessary to satisfy special purposes indicated in the will. The matter to be considered is the intention of the testator. The conversion, whether absolute to all intents, or partial only, is the one or the other, because the purpose of the will, i.e., the intention of the testator was that the conversion should be general or partial, for all purposes or for limited purposes only. There is no purpose specified in the codicil for which the sale is directed to be made. But, taken in connection with the will, the fair inference is that it was for the purpose of a division of his estate between the testator's two sons. By the sixth clause the executor was directed to divide the real estate between them, when the youngest should arrive at the age of twenty-three years. In the absence of a power of sale, this direction would be incapable of execution, except through an actual partition, and a setting apart of portions of the real estate in severalty to the sons. The testator owned lands in different States, and it is a reasonable construction of the will that the power of sale was given to the executor for convenience of division. But it was not an authority merely, it was an imperative direction to sell all the testator's real estate.
The sons survived the testator, and the purpose for which the sale was directed had not failed. It became the duty of the executor to sell the land and divide the proceeds between them. From the moment of the testator's death, the conversion took place, and the land became money for all purposes of administration. The impression of money was fixed upon it; the sons took their interest in the converted property as legatees, and upon their death, before actual sale, it would pass to their personal representatives. ( Fletcher v. Ashburner, 1 Bro. Ch. Cas., 497; Leslie v. Craig, 3 Wheat., 587; Bogert v. Hertell, 4 Hill, 492, and cases cited; Stagg v. Jackson, 1 Comst., 206.)
The power of sale was not affected by the death of Charles Edward Banta before the lands of Albert Banta were sold by his executor. The necessity of a sale for the purpose of a division between the surviving brother and the personal representatives of Charles Edward, continued. Nor was conversion prevented from taking place, because the legal estate was not given in trust to the person in whom the power of sale was vested, or because then there was no devise of the lands, and that they passed by descent to the two sons of the testator. (1 Jar., 465; Post v. Hover, 33 N.Y., 593; Bogart v. Hertell, supra.)
Upon the death of Albert Banta, in 1864, the widow of the testator qualified as executor, and took upon herself the execution of the will. Charles Edward Banta died afterwards in the same year, leaving a will, by which he gave legacies to the plaintiffs, and the rest, residue and remainder of his property to his brother, one of the defendants in this action, with a direction that his executor should retain possession, and control and manage the residue until the legatee should arrive at the age of twenty-nine years, and appointed the defendant Hubbell his executor. The executor of Albert Banta proceeded and acted upon the assumption that there was, by his will, a conversion of his real estate into personalty, which, as we have seen, was the true construction of the instrument. She sold portions of the real estate of the testator from time to time, and on two several accountings before the surrogate, had on her application in 1867 and 1869, to which the defendants were made parties (the defendant Stanley A. Banta, as legatee under his father's will, and the defendant Hubbell, as executor of Charles Edward Banta), the proceeds were brought into court and distributed by the decree of the surrogate as personal estate, one moiety to the defendant Stanley A. Banta, and the other to the defendant Hubbell, as executor. There was no appeal from the decree of the surrogate; it was fully executed, and the executor of Charles Edward Banta paid over to the legatees under his will the moiety of the proceeds received by him on the distribution. All this was done in strict accordance with the legal rights of the parties. After the accounting in 1869, there remained in the hands of the executor of Albert Banta the sum of $8,000, proceeds of the personal estate of the testator, which had been invested to produce the annuity given to his widow by the will, and a part of his real estate remained unsold. The executor died in 1870, and the defendant Hubbell was appointed administrator, with the will annexed, of Albert Banta's estate, and as such received the fund of $8,000 referred to, and its accumulations. The legacies to the plaintiffs under the will of Charles Edward Banta have been paid only in part. Their testator left no property at his death, except what he was entitled to under the will of his father, and to pay the plaintiffs' legacies will require the application of his entire interest in that estate. It does not appear that there are any debts existing against either testator. Under these circumstances it was the plain right of the plaintiffs that the real estate of Albert Banta remaining unsold should be sold, and that a moiety of the proceeds, together with one-half of the fund in the hands of his administrator, should be paid to the executor of Charles Edward Banta, and applied in payment of their legacies. This, substantially, was the relief awarded to the plaintiffs by the judgment in this action, and the judgment should be affirmed, unless the plaintiffs were concluded by the decree of the surrogate, made in 1871, on the accounting by the defendant Hubbell as administrator with the will annexed of the estate of Albert Banta. This accounting was had on his application, before the successor of the surrogate, who made the decrees on the accounting by the executor in 1867 and 1869, and Stanley A. Banta and the defendant Hubbell, as executor of Charles Edward Banta, were made parties. The surrogate, by his decree, adjudged, in substance, that there was no conversion of the real estate of Albert Banta under his will, and that Stanley A. Banta, as residuary devisee and legatee under the will of Charles Edward, was entitled to the one-half of the real estate of Albert Banta remaining unsold, and to one-half of the proceeds of what had been sold by his executor, and that the decrees of the former surrogate were erroneous in awarding to the executor of Charles Edward any portion of the proceeds of such sales, and to correct this alleged error he directed that Charles Edward Banta's share of the personal estate of Albert Banta, then in the hands of Hubbell, as administrator, should be paid to and retained by him as trustee of Stanley A. Banta, under the will of Chales Edward Banta, in satisfaction, pro tanto, of the proceeds of real estate of Albert Banta, paid under the former decrees to the executor of Charles Edward. From this decree no appeal was taken. The defendant Hubbell refused to appeal therefrom, or to allow the plaintiffs to appeal in his name, although they offered to indemnify him against the costs of the appeal.
We are of opinion that the decree does not conclude the plaintiffs. The fund before the surrogate for distribution, when the decree was made, was derived from the personal estate of Albert Banta, and not from the sale of real estate. The testator, Albert Banta, by his will, gave his personal estate, in equal shares, to his two sons. The decrees of the former surrogate were final. They adjudged that the proceeds from the sales of real estate were personal property, and directed a distribution upon that theory. They stood unreversed, and were not opened or set aside by the surrogate on the accounting in 1871. The surrogate should not have disregarded them, and his decree charging the share of Charles Edward Banta in the personal estate of Albert Banta then remaining to be distributed, with the sums paid to his personal representatives from the proceeds of his real estate under the former decrees, was erroneous, and reversible on appeal.
It is unnecessary to determine, assuming that the necessary parties were before the court, whether the surrogate exceeded his jurisdiction in making the decree, as we are of the opinion that Charles Edward Banta's estate was not represented on the accounting in such a sense as to bind the plaintiffs, and conclude them by the adjudications made. The decree was made in a proceeding instituted under section 70, article 3, title 3, chapter 6, part 2 of the Revised Statues, by Hubbell, as administrator of Albert Banta, for the final settlement of his accounts. That section is as follows: "An executor or administrator, after the expiration of eighteen months from the granting of letters testamentary or of administration, may render a final account of all his proceedings to the surrogate who appointed him, although not cited to do so, and may obtain a citation to all persons interested in the estate, to attend a final statement of his accounts; which citation shall be served and published in the manner prescribed in the preceding sections of this title, and thereupon the same proceeding shall be had for a final settlement, and with the same effect, in all respects, as in the case of a settlement at the instance of a creditor." The seventy-first section provides that whenever an account shall be rendered, and finally settled under any of the preceding sections, except the sixty-eighth and sixty-ninth, if it shall appear to the surrogate that any part of the estate remains to be distributed, he shall decree payment and distribution of what shall so remain, among the creditors, legatees, etc., "and in such decree shall settle and determine all questions concerning any debt, claim, legacy, bequest, or distributive share; to whom the same shall be payable; and the sum to be paid to each person."
It will be observed that the citation authorized by the seventieth section is to be directed to, and served upon, "all persons interested in the estate," and that the decree of distribution authorized by the seventy-first section is one to be made upon an accounting had in pursuance of the previous sections of the statute. The persons immediately interested in the accounting of an administrator or executor, or in the distribution of the estate of a decedent by the surrogate, are creditors and next of kin, and in case of a will, legatees. These are the persons, mentioned in the sixtieth section, to whom the citation is to be directed, when the administrator or executor, who has been required to account by the order of the surrogate, applies to have his accounts finally settled.
No specific provision is made in the statute for the service of the citation in the case where a legatee has died before the accounting. But notice of the proceeding is, according to the general rule of law, necessary to bind the interest of the deceased legatee by the decree, and as the legal title to the legacy vests in his personal representatives, service of the citation upon his executor or administrator would ordinarily be sufficient to bind the estate he represents. The plaintiffs were not legatees of Albert Banta. They were legatees under the will of Charles Edward Banta, and Hubbell, as his executor, was made a party to the accounting. The plaintiffs, however, had an interest in the proceeding before the surrogate. The share of their testator in the estate of Albert Banta, was the only source from which their legacies could be paid. It is doubtless true that a decree made on the settlement of Albert Banta's estate, to which the executor of Charles Edward Banta was a party, would, under ordinary circumstances, in the absence of fraud or collusion, conclude them. But the defendant Hubbell was the representative of both estates. So far as the plaintiffs were concerned, the accounting was a proceeding instituted by Hubbell as representative of one estate against himself as the representative of the other estate. It is a familiar principle that a court of equity will require parties having remote interests to be brought in, when necessary to a complete disposition of the matter in litigation (Story's Eq., § 1526), and this, we think, is a case to which this rule applies, and the language of the seventieth section is broad enough to authorize the legatees of Charles Edward Banta to have been made parties to the accounting.
To give conclusive effect to the decree of the surrogate, against the plaintiffs, is not consistent with general principles. In equity Hubbell was the trustee of the estate of Charles Edward Banta, and the plaintiffs were cestuis que trust, and had the beneficial interest. They ought not to be concluded by a proceeding instituted by himself, against himself, in which they were interested. We are of opinion that the decree of the surrogate is not conclusive upon them, and is no obstacle to their maintaining this action.
The judgment should be affirmed, with costs.
All concur.
Judgment affirmed.