Bridgeport-City Trust Co. v. First Nat. Bank & Trust Co. of Bridgeport

Decision Date30 June 1938
PartiesBRIDGEPORT-CITY TRUST CO. v. FIRST NAT. BANK & TRUST CO. OF BRIDGEPORT et al.
CourtConnecticut Supreme Court

Case Reserved from Superior Court, Fairfield County; Arthur F Ells, Judge.

Action by the Bridgeport-City Trust Company, as successor trustee of a trust created by Julia E. Stoddard, since deceased, against the First National Bank & Trust Company of Bridgeport, as trustee of a trust created by Sanford Stoddard, and others for advice as to whether plaintiff may charge part of its fee for services against the principal of the trust fund. Reserved by the Superior Court for the advice of the Supreme Court of Errors.

Question reserved answered in the negative.

Arthur M. Marsh and Norman K. Parsells, both of Bridgeport, for plaintiff.

Lawrence A. Howard and Charles S. House, both of Hartford, for defendants other than Henry B. Stoddard.

Louis H. Porter, Jr., of Stamford, amicus curiae.

Argued before MALTBIE, C.J., and HINMAN, AVERY, BROWN, and JENNINGS, JJ.

HINMAN, Judge.

The question as to which advice is sought by this action is whether the plaintiff, a corporate trustee acting under the circumstances alleged in the substituted complaint and admitted by all the defendants, may charge against the corpus of the trust a portion of its annual fee for services. The trust here involved was created by a deed of trust dated December 13th, 1914, by Julia E. Stoddard, now deceased, conveying certain securities in trust to the Bridgeport Trust Company of which the plaintiff is the successor trustee. The deed provides that the trustee is to ‘ hold, invest and reinvest’ the corpus and pay over to the settlor's son Henry B. Stoddard ‘ the net income thereof during his life’ ; upon his death the trustee is directed to pay the principal, share and share alike, to such of his children as survive him and, per stirpes, to the lineal descendants of any deceased child; failing children of Henry or lineal descendants of such children there is a substitutionary remainder to the settlor's son Sanford Stoddard, and if he be dead, to his children and the lineal descendants then living of any deceased child. If there be none of the foregoing remaindermen existing at Henry's death, there is a further substitutionary gift of the principal to The Bridgeport Hospital. On or about December 1st, 1937, Sanford Stoddard executed and delivered a trust deed to the defendant The First National Bank and Trust Company of Bridgeport conveying all of his right, title and interest under the Julia E. Stoddard trust to that bank as trustee. The plaintiff, as trustee of the Julia E. Stoddard trust, has rendered to Henry B. Stoddard and the trustee of the Sanford Stoddard trust an account covering the period from December 16th, 1936, to December 15th, 1937, in which it has made a charge of $341.40 for its services as trustee for that period, of which sum, although the income for the period amounted to $4,992.09, it has charged $104.30 against the principal of the trust and $237.10 against the income thereof.

The plaintiff has invested and reinvested the principal of the trust, and during the year covered by its account and theretofore has periodically considered and examined the assets composing the trust fund with respect to such investments and reinvestments, for the preservation and safety of the principal fund as well as for the protection of income therefrom in such measure and degree as was consistent with such preservation and safety. For this purpose the fund was placed under the personal supervision of a vice president and trust officer of the plaintiff, who has conferred with Henry B. Stoddard as to all purchases and sales of trust investments. The plaintiff maintains an investment department devoted exclusively to investigation of the advisability of changes of investments and as to what securities should from time to time be purchased or sold by its various trusts; it also has a trust committee composed of four trust officers, two assistant trust officers, three directors of the bank, and the head of the investment department, and each change made in this particular trust has been passed upon and approved by the investment department, the trust officer in charge of the trust, the trust committee and Henry B. Stoddard. The plaintiff maintains constantly a list of the various securities in all the trust funds which it holds as trustee and a list of the holdings of each separate trust in each particular security. Daily supervision of active securities is maintained, and inactive securities are frequently examined and analyzed. The plaintiff also maintains a separate department devoted to supervision and investigation of mortgage loans held in trust funds and the property securing such loans. During the period of the account the trust has had the benefit of all of these services of the plaintiff. None of the defendants question the reasonableness of the amount of the trustee's fee or of the stated proportions as between income and principal if allocation be approved, but the defendants other than Henry B. Stoddard, being or representing potential remaindermen, claim that the plaintiff is not entitled to charge any portion of it against the corpus of the trust.

While several states have statutes regulating the fees of fiduciaries, including trustees, and a few providing for allocation thereof as between principal and income, this State has no such statute and the matter of compensation is wholly within the discretion of the appropriate court. 1 Cleaveland, Hewitt & Clark, Probate Law and Practice, p. 189; 2 Perry, Trusts & Trustees, (7th Ed.) p. 1545. Where compensation is regulated by statute, provision is usually made for a commission of a stated or limited percentage upon the amount of yearly income received and paid out by the trustee; in some states a commission is allowed for receiving and investing the principal fund or a commission at the termination of the trust for the care of the fund and for distributing it to those entitled to it. See 4 Bogert, Trusts & Trustees, § 974, page 2851 et seq.; Restatement, Trusts, Vol. 1, p. 740. Permissive allocation of a portion of trustees' compensation to the corpus of the trust is provided by statute in Georgia, Kentucky and Maine, the Maine statute, Chapter 75, § 43, Revision of 1930, providing that executors, administrators and trustees, in addition to certain specified travel and per diem fees for attending court, may be allowed, at the discretion of the judge, ‘ having regard to the nature, liability and difficulty attending their trusts, a commission not exceeding five per cent on the amount of personal assets that come into their hands, * * * and trustees may receive yearly such additional sum for the care and management of the trust property as the court * * * shall allow not exceeding, however, in any one year one per cent of the principal, * * * said additional sum * * * to be charged against principal or income, or both and if charged against both, to be charged in such proportions as the said court shall determine.’

The Uniform Principal and Income Act, approved in 1931 by the National Conference of Commissioners on Uniform Laws, which has been adopted, so far, only in Oregon Florida, North Carolina and Virginia, includes, in § 12, the following provision: ‘ All ordinary expenses incurred in connection with the trust estate or with its administration and management, including regularly recurring taxes, * * * water rates, premiums on insurance taken upon the estates of both tenant and...

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