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Phillips Exeter Academy v. Gleason

Supreme Court of New Hampshire Rockingham
Jan 27, 1960
102 N.H. 369 (N.H. 1960)

Opinion

No. 4722.

Argued October 6, 1959. Reserved case amended December 16, 1959.

Decided January 27, 1960.

1. The decision handed down in Rockwell v. Dow, 85 N.H. 58 in 1931 establishing the exclusive jurisdiction of the probate court in the appointment of testamentary trustees and their accounting, and overruling earlier cases holding that the Superior Court had concurrent jurisdiction with that of the probate court in such cases, was not given retroactive effect as applied to the appointment and qualification of a corporate trustee by the Superior Court in 1917 and the allowance by it of thirty-six annual accounts of such trustee.

2. The decree of the Superior Court in the appointment and qualification of such trustee in 1917, having remained unquestioned until the institution of the present proceedings in 1955, became the law of the case and the thirty-six annual accounts filed and allowed in reliance thereon are valid and binding on the parties and are not now open to question.

3. However, all subsequent accounts which are pending and not already allowed and all future accountings are required to be made to the probate court.

4. Where a testamentary trust provides that income shall be payable at designated intervals to a life beneficiary and the beneficiary dies between such intervals, his personal representative is entitled to the income earned from the date of the last payment up to the time of death, in the absence of a provision to the contrary in the trust instrument. Such undistributed income is, however, subject to a charge in the apportionment of the expenses of administration.

5. Testator by the terms of his will bequeathed all of the income from a residuary trust estate to his sister, his niece, and the niece's two children, and the survivor for life in equal shares, and following the death of his sister and the birth of a third child to the niece executed a codicil which directed the trustee as residuary legatee to pay a stated annual sum to the niece's third child during her natural life but did not modify the gift of income made by his will. Held it was the testator's intent that such bequest to the third child of his niece should be paid from corpus during the lives of the surviving income beneficiaries.

6. The question whether a trustee in a petition for instructions and advice is entitled to costs and attorneys' fees rests in the cautiously exercised discretion of the court.

7. The probate court determines whether the payment of allowable costs and attorneys' fees shall be paid from corpus or income.

PETITION, for instructions and advice by the plaintiff claiming to be the duly constituted trustee under the will of Joseph C. Hilliard, late of Exeter. The defendants, Isabel M. Gleason, formerly Isabel M. Fish, and Ralph B. Fish, are life beneficiaries under the will, as was also Josephine Fish Pendergast, who died testate on August 2, 1955. Mrs. Gleason was duly appointed executrix of the will of Josephine Fish Pendergast, and by her answer and cross bill, prays for a declaratory judgment as to the rights of the life beneficiaries under the will, and for an accounting by the plaintiff of its administration of the trust estate. She also contends that the plaintiff was never legally qualified and appointed as trustee and alleges that the decree of the Superior Court entered in 1917, appointing the plaintiff trustee and the accounting by the Academy pursuant thereto is void and of no effect.

The defendant Ralph B. Fish seeks similar relief except as to certain income from the trust estate, which the plaintiff admits had accrued and was undistributed at the death of Mrs. Pendergast. Pursuant to an agreed statement of facts, the Court (Leahy, C.J.) reserved and transferred certain questions of law relating to the administration of the trust in a reserved case, pertinent portions of which are as follows:

"Joseph C. Hilliard died February 12, 1905 and his will, dated June 12, 1895, his first codicil, dated June 3, 1898 and his second codicil, dated October 6, 1900, were duly allowed by the Probate Court for Rockingham County as his last will and testament. The trust was created by the eighteenth and nineteenth clauses of his will as follows, —

"`Eighteenth: — I give, bequeath and devise to George A. Wentworth, Bradbury L. Cilley, and John Adams Blake, aforesaid, all the rest and residue of my estate, real, personal and mixed of which I may die seized and possessed, or to which I may be entitled at the time of my decease. To have and to hold the same, but in trust, nevertheless, for the following purposes, namely: —

"`First: — I direct my said trustees to hold and manage all my real estate situated in Kensington, aforesaid for and during the life of my sister, Sarah B. Brown, and to pay over to her, annually, during her life, the net income therefrom.

"`Second: — My said trustees to hold and keep invested the remainder of the property devised to them, and its accumulations, for the period of twelve years from my decease, and to pay over, annually, from the income therefrom the following sums to the following persons, if living, namely: — To my sister, Sarah B. Brown, the sum of five hundred dollars ($500.) To Mary E. Fish, aforesaid, the sum of five hundred dollars ($500.) To Ralph B. Fish, aforesaid, the sum of five hundred dollars ($500.) To Josephine Fish, aforesaid, the sum of five hundred dollars. ($500.)

"`And I authorize and direct my said trustees to invest and reinvest the trust estate herein given to them, and its accumulations, in sound securities or productive real estate of undisputed title; and to this end I give them as such trustees, full power and authority to sell both real and personal estate, at public auction or at private sale, and to sign and deliver all instruments of transfer which may be legally necessary and proper. I direct that the purchasers, at any such sales, shall not be required to see to the application of the purchase money. At the expiration of twelve years from my decease I direct said trustees to transfer and convey to Phillips Exeter Academy, aforesaid, all of said trust estate, including my real estate in said Kensington, if my said sister, Sarah B. Brown, be not living at that time, to have and to hold, but in trust, nevertheless, for the following purposes, namely: —

"`First: — To manage, control, invest and reinvest and to this end to sell or dispose of any part thereof, either at public auction or private sale, and from the income therefrom to pay over to my sister, Sarah B. Brown the sum of five hundred dollars ($500.) annually, during her life and the balance of said income to pay over, semiannually, in equal shares to said Mary E. Fish, Ralph B. Fish and Josephine Fish, and the survivors or survivor of them.

"`Second: — After the decease of said Sarah B. Brown, Mary E. Fish, Ralph B. Fish and Josephine Fish To have and to hold all of said trust estate to it and its successors and assigns forever.

"`Nineteenth: — After the death of my said sister, Sarah B. Brown, I direct my said trustees to convey my said real estate in said Kensington to said Phillips Exeter Academy, to be held by it upon the same terms and conditions and in the same manner as the rest of said trust estate is held by it.'

"Sarah B. Brown, the testator's sister, died before the testator. Isabel M. Fish, now Isabel M. Gleason, was born after the will was made, but before the second codicil. The second codicil provided for filling of vacancies in the executors or trustees and made changes and additions to his will as follows, —

"`I revoke that part of my will which gives to my sister, Sarah B. Brown, deceased, my Library of Printed Books, and give the same to Mary Elizabeth Fish, of Kensington, New Hampshire, together with household and office furniture, and wearing apparel.

"`I give Isabell M. Fish, of Kensington, New Hampshire, Two Thousand Dollars. My Executors and Trustees are instructed to pay Isabell M. Fish Five Hundred Dollars annually during the time they have charge of the property, and the Phillips Exeter Academy, as Residuary Legatee, is to continue the payment of this sum annually during the time of her natural life.'

"Mary E. Fish died January 19, 1919. Josephine Fish Pendergast died testate August 2, 1955, and Isabel M. (Fish) Gleason was duly appointed executrix of her last will and testament.

"John M. Thompson, Samuel H. Dana and Perley Gardner were duly appointed trustees by the Probate Court for Rockingham County to administer the trust created by the will of Joseph C. Hilliard, which was to continue unchanged for twelve years from his decease. At the expiration of this period, the trustees were directed by the will to `transfer and convey to Phillips Exeter Academy * * * all of said trust estate * * * to have and to hold, but in trust, nevertheless' for the purposes set forth in the will. The trustees, on December 19, 1916, filed in the Superior Court for Rockingham County a petition for advice or instruction as to whether they could legally transfer the trust estate to the trustees of Phillips Exeter Academy, a body corporate, commonly known as Phillips Exeter Academy, and on this petition, the Superior Court at the January term, 1917, entered a decree as follows, — `. . . it is found ordered and decreed that the Trustees of Phillips Exeter Academy being legally competent and being legally entitled thereto be and are appointed trustees under the will of Joseph C. Hilliard late of Exeter, N.H. and more especially under the 18th clause of said will for the purpose and duties therein set out; to receive and invest such funds separate and apart from all other funds in their hands and subject to the conditions set forth in the 18th paragraph of said will and to give receipt thereof; to return an inventory of said funds to the Superior Court on the first day of the May Term of said Superior Court to be holden at Exeter on the third Tuesday of May 1917 and annually thereafter to settle and account in said Superior Court. The said trustees shall qualify by filing a personal bond for 10,000 without sureties.' Phillips Exeter Academy qualified as trustee in accordance with this decree by filing in the Superior Court a bond in the amount of $10,000 which was approved March 9, 1917 and the trustees, John N. Thompson, Samuel H. Dana and Perley Gardner thereupon turned over to the said Phillips Exeter Academy the trust estate, which has since been administered by Phillips Exeter Academy pursuant to said decree.

"Thirty-six accounts have been filed in this proceeding by the Phillips Exeter Academy and allowed by decree or order of the Superior Court and as to each of said accounts there has been notice by publication and personal notice to beneficiaries by registered mail and an opportunity to be heard and no objection has been raised as to the payment of Five Hundred Dollars ($500) annually out of income to Isabel M. (Fish) Gleason by said Phillips Exeter Academy and a 37th and 38th account have been filed and are now pending.

"The Academy, by its petition, seeks advice as to disposition of income which it received between May 10, 1955 when the last quarterly distribution was made to the life beneficiaries, Ralph B. Fish and Josephine Fish Pendergast, and August 10, 1955 when Josephine died, her share of which, according to the allegations of the petition, had she lived, would have amounted to $891.80. Isabel M. (Fish) Gleason asserts that she, as executrix of the will of Josephine Fish Pendergast, is entitled to one-half of all the income which was received by the plaintiff or which accrued prior to the death of her testatrix. The defendant, Ralph B. Fish, asserts that, as sole life beneficiary, he is entitled to all the undistributed income, received or accrued during this period.

"The plaintiff, Phillips Exeter Academy, by an amendment to its petition, also seeks advice as to whether the $500 payable annually to Isabel M. (Fish) Gleason is `properly payable out of annual income or is properly payable out of principal.' The defendant, Isabel M. (Fish) Gleason, individually and as Executrix of the will of Josephine Fish Pendergast, alleges that the $500 payable to her annually is a charge upon principal and not upon income and, by her amended answer, seeks a declaratory judgment, decreeing that the sum of $500 payable to her annually is not a charge upon income but is payable out of the principal or corpus of the estate. In this contention, she is joined by the defendant, Ralph B. Fish.

"The defendants also questioned at the hearing whether the Superior Court had jurisdiction to appoint, and qualify Phillips Exeter Academy as trustee and to allow the accounts which the Academy, purporting to act as trustee, had filed in the Superior Court."

Additional facts appear in the opinion.

Perkins, Holland Donovan (Mr. Donovan orally), for the plaintiff.

Burnham B. Davis and Upton, Sanders Upton (Mr. Robert W. Upton orally), for the defendant Isabel M. (Fish) Gleason, individually and as executrix of the will of Josephine Fish Pendergast.

George R. Scammon for the defendant Ralph B. Fish, furnished no brief.

Ernest R. D'Amours, Director of Charitable Trusts, pro se.


I. Three of the questions transferred without ruling may be summarized as follows: did the Superior Court have jurisdiction (a) to appoint and qualify the plaintiff, Phillips Exeter Academy as trustee; (b) to allow the annual accounts filed by the trustee; and (c) are the decrees of the Superior Court allowing the annual accounts of plaintiff binding on the parties? For the reasons hereafter stated the answer to each question is in the affirmative in the circumstances of this case.

The defendants contend that the Superior Court had no jurisdiction to appoint and qualify the plaintiff as trustee or to allow the annual accounts filed by it and that its action in so doing was void and without force or effect. Reliance is placed on Rockwell v. Dow, 85 N.H. 58, decided in 1931. There is no doubt that this case definitely established the exclusive jurisdiction of the probate court in the appointment and qualification of testamentary trustees and their accounting. Lisbon Savings Bank c. Co. v. Moulton's Estate, 91 N.H. 477. However it is to be noted that in considering the present case we do not write on a slate new and clean since the plaintiff was appointed a trustee in 1917. At that time the decisions were in conflict as the Rockwell case itself plainly indicates from the following quotation at page 68 of the opinion: "In so far as the earlier cases hold that equity has concurrent jurisdiction with the probate court in the settlement of the accounts of trustees, or in the appointment or removal of trustees, they have in effect been overruled and are not to be followed." (Emphasis supplied). See also, Barker v. Barker, 73 N.H. 353 (1905); Hoyt's Probate Practice, c. xx (1901).

After notice and hearing at which all interested parties appeared by counsel and the State was represented by the Attorney General, the plaintiff was appointed and qualified as a trustee in 1917 by a decree of the Superior Court and ordered to make annual accounts to the Superior Court. No objection to the decree was made then or to the thirty-six annual accounts thereafter filed by the trustee and allowed by the Superior Court. So far as appears neither court nor counsel prophesied in 1917 the coming of Rockwell v. Dow, 85 N.H. 58, which was decided March 3, 1931 and became effective June 25 following. The proceedings taken under the decree of 1917, and the accounts filed and allowed pursuant thereto before the effective date of the Rockwell decision or within a reasonable time thereafter are valid and binding on the parties, unless that decision is to be given retroactive effect.

When a decision overrules earlier precedents it may be given retroactive effect but there is no constitutional requirement that it must be. Great Northern Ry. Co. v. Sunburst Co., 287 U.S. 358; Opinion of the Justices, 95 N.H. 533, 536. Particularly in probate matters where previous decisions are overruled this jurisdiction has frequently stated that the overruling decision will not be applied retroactively to the detriment of those who had previously relied on the former decisions. Thus in Langdell v. Dodge, 100 N.H. 118, 123, which overruled Holbrook v. Holbrook, 74 N.H. 201, and established a new rule relating to stock dividends, it was stated that the "opinion will not be retroactive to affect prior reliance on the Holbrook rule." There is a strong public policy in probate matters to see that decisions cause "no disruption of the settlement of estates." Langdell v. Dodge, supra. We conclude that the Rockwell case is not to be given retroactive effect as applied to the appointment and qualification of the plaintiff as trustee and to the annual accounts which were allowed before the Rockwell decision.

The decree of the Superior Court of 1917 remained unquestioned until the present proceedings. The 1917 decree became the law of the case and the accounts filed and allowed in reliance thereon, including the thirty-sixth annual account, are not now open to question. Miller v. McCutcheon, 117 N.J. Eq. 123; Union Oil Co. v. Reconstruction Oil Co., 58 Cal.App. (2d) 30; anno. 95 A.L.R. 708. See Zielinski v. Cornwell, 100 N.H. 34, 39. The thirty-seventh and thirty-eighth annual accounts which are pending and have not been allowed as well as future accountings should be made to the probate court.

In view of the result reached on this issue it is unnecessary to decide whether the parties would be bound by the decrees because of laches (Knight v. Hollings, 73 N.H. 495) or on the ground of res judicata. Restatement, Judgments, s. 10; Bickford v. Bickford, 74 N.H. 448; McAllister v. Elliot, 83 N.H. 225, 227; Keene v. Martin, 96 N.H. 504, 506.

II. Another transferred question is whether "the defendant, Isabel M. (Fish) Gleason, in her capacity as executrix, is entitled to one-half the income which accrued prior to the death of her testatrix, Josephine Fish Pendergast, and was undistributed at her decease." Josephine Fish Pendergast died testate August 2, 1955. This accrued and undistributed fund of one-half of the income is claimed by the executrix of Josephine Fish Pendergast on the one hand and by Ralph B. Fish on the other hand. The fund represents undistributed income received or accrued for the three months' period since the last quarterly distribution was made on May 10, 1955.

"Unless it is otherwise provided by the terms of the trust, income which accrued prior to the death of the life beneficiary is payable to his personal representatives." Restatement (Second) Trusts, s. 235A, comment a. It is the general rule that where a trust provides that income shall be payable at designated intervals to a life beneficiary, and the beneficiary dies between such intervals, his personal representative is entitled to the net income earned from the date of the last payment up to the time of his death. 3 Scott, Trusts (2d ed. 1956) s. 238; 4 Bogert, Trusts and Trustees (Part I) s. 816, p. 236; 1 Nossaman, Trust Administration and Taxation (2d ed. 1957) s. 16.03. In the absence of any contrary provision in the will, we follow the general rule in this case. See Martin v. Eaton, 57 N.H. 154, 156.

By way of example from the specific facts of this case we consider the item of interest on certain Commonwealth Edison bonds which were due and payable August 1, 1955 (which was prior to the death of the beneficiary, Josephine Fish Pendergast on August 2, 1955) but was not received by the trustee until August 9, 1955. This is income to which the Pendergast estate is entitled. See also, Restatement (Second) Trusts, s. 238(1), comment b, illustration 1: "A bequeaths certain bonds to B in trust to pay the income to C for life in quarterly payments on the first of January, April, July and October. C dies on February 1st. His personal representatives are entitled to net income earned between January 1st and February 1st."

The transferred question is answered in the affirmative and the trustee is advised to pay to the executrix one-half the income which had accumulated but was undistributed at the decease of Josephine Fish Pendergast. A subsidiary matter relates to apportionment of the expenses of administration. If apportionment is proper the parties have agreed that the sum of $263.37 shall be charged against the undistributed income. The trustee is advised that such apportionment of expenses is proper. Taylor v. Bentinck-Smith, 304 Mass. 430; 3 Page, Wills, s. 1158, pp. 437, 438. See Page v. D'Amours, 99 N.H. 441, 443.

III. A further question transferred without ruling is stated as follows: "Is the $500 payable annually to Isabel M. (Fish) Gleason properly a charge on and payable from the principal or corpus of the trust estate and not from the income?" The parties have agreed on certain material facts relating to the beneficiaries named in the residuary clause and in the second codicil in the testator's will. These facts may be conveniently summarized at this point in connection with the construction of the will and particularly the dispositive sections of the second codicil. They are as follows: "Sarah B. Brown, the testator's sister, died subsequent to the execution of the will but prior to the execution of the second codicil, as appears from the recitals therein. Mary E. Fish was the daughter of Sarah B. Brown and a niece of the testator. She was born April 25, 1858, and died January 19, 1919. Ralph B. Fish, Josephine Fish Pendergast, and Isabel Fish Gleason were her children. Ralph was born December 3, 1884, Josephine was born March 3, 1888, and Isabel was born August 10, 1899. Josephine Fish Pendergast died August 2, 1955. Ralph and Isabel survive and are parties defendants."

The material part of the second codicil reads as follows: "My Executors and Trustees are instructed to pay Isabel M. Fish five hundred dollars annually during the time they have charge of the property, and Phillips Exeter Academy, as Residuary Legatee, is to continue the payment of this sum annually during the time of her natural life." The plaintiff claims that this annuity to Isabel M. Fish Gleason is to be paid from income and the defendants claim that it should have been and should be paid from principal.

The eighteenth and residuary clause of the will expressly provided that the equal bequests of $500 to the testator's sister Sarah Brown, and the three named members of the Fish family were to be paid by the individual trustees "annually, from the income therefrom" for a period of twelve years. At the end of the twelve-year period the eighteenth clause of the will further provided that the residuary estate was to be transferred to the plaintiff, Phillips Exeter Academy, in trust to pay to the testator's sister $500 annually for life "from the income therefrom" and to pay "the balance of said income" to the named members of the Fish family and the survivor. It is quite evident that the original will contemplated that all of the income should be paid to these beneficiaries during their lives.

The death of the testator's sister and the birth of Isabel M. (Fish) Gleason undoubtedly prompted the execution of the second codicil. The codicil instructed the individual trustees to pay Isabel $500 annually for life "during the time they have charge of the property" which is for the period of twelve years. The codicil then provided that "Phillips Exeter Academy, as Residuary Legatee, is to continue the payment of this sum annually . . ." during the beneficiary's lifetime.

The testator must have known that by his will all of the income of the trust estate after it was transferred to the Academy had been appropriated to the payment of his bequests to Mary, Josephine and Ralph Fish for their respective lives. The fact that he did not alter these provisions by the codicil but on the contrary directed that the Academy "as Residuary Legatee" should pay Isabel an annuity for her life indicates that he neither expected nor intended that her annuity should be paid by the Academy from income so long as the other life beneficiaries survived. Since during that time the only available source for payment of Isabel's annuity would be the corpus of the trust he must be deemed to have intended payment of her legacy therefrom. The question transferred is answered in the affirmative. The trustee is advised that the annuity bequeathed to Isabel should be paid from the corpus effective in the future and beginning with the period since the allowance of the thirty-sixth annual account.

IV. Whether the plaintiff is entitled to costs and attorneys' fees cannot be answered on the record before us. However, in this connection the following quotation from Concord National Bank v. Haverhill, 101 N.H. 416, 419 may be pertinent: "Accordingly, it should be emphasized that the allowance of attorneys' fees is not a matter of right but rests in the cautiously exercised discretion of the court. Attorneys' fees should be allowed only in those cases where the litigation' is conducted in good faith for the primary benefit of the trust as a whole in relation to substantial and material issues essential to the proper administration of the trust. Anno. 9 A.L.R. (2d) 1132. It is recognized that in such cases the court has a duty to protect the charitable estate from vicarious generosity which might result if attorneys' fees were allowed as a matter of right. Re Atwood's Trust, 227 Minn. 495." The source of payment for such costs and attorneys' fees as may be allowed should be determined by the probate court. Page v. D'Amours, 99 N.H. 441, 442; RSA 564:21.

V. The remaining questions transferred have in effect been disposed of by the answers already given. As previously indicated the plaintiff had authority to maintain its petition for instructions and advice, and even if it had not the defendants would have been entitled to have the same issues determined on their petition for declaratory judgment.

The defendants are not entitled to a full and complete accounting by the plaintiff of the income of the trust estate since it assumed the management thereof. The defendants, however, are entitled to a complete and full accounting in the probate court since the last annual account was allowed by the Superior Court.

Remanded.

All concurred.


Summaries of

Phillips Exeter Academy v. Gleason

Supreme Court of New Hampshire Rockingham
Jan 27, 1960
102 N.H. 369 (N.H. 1960)
Case details for

Phillips Exeter Academy v. Gleason

Case Details

Full title:PHILLIPS EXETER ACADEMY v. ISABEL M. GLEASON a

Court:Supreme Court of New Hampshire Rockingham

Date published: Jan 27, 1960

Citations

102 N.H. 369 (N.H. 1960)
157 A.2d 769

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