Chapin v. Collard

• Decision Date: 13 February 1948
• Docket Number: 30257.
• Citation: 189 P.2d 642,29 Wn.2d 788
• Parties: CHAPIN et al. v. COLLARD.
• Court: Washington Supreme Court

189 P.2d 642

29 Wn.2d 788

CHAPIN et al. v. COLLARD.

No. 30257.

Supreme Court of Washington

February 13, 1948

Department 2

Action by C. N. Chapin and H. B. Jones, as trustees under the last will of W. G. Norris, deceased, against Nanzie Brown Collard for a declaratory judgment as to the duties of the plaintiffs under the will, wherein the defendant filed a cross-complaint. From an adverse judgment, the plaintiffs appeal.

Cause remanded with instructions to make deletions in judgment.

Appeal from Superior Court, King County; Hugh C. Todd, Judge.

Jones &amp Bronson and Wheeler Grey, all of Seattle, for appellants.

James M. Ballard, of Seattle, for respondent.

ROBINSON Justice.

W. G Norris died December 4, 1940. By the first four paragraphs of his will, he made certain specific bequests; and by the fifth paragraph he bequeathed and devised to his wife, Ina E. Norris, and to H. B. Jones and C. N. Chapin, and to the survivors or survivor of them, as trustees, all the residue of his estate, to be

'* * * held, managed, disposed of and applied in trust for the uses and purposes hereinafter set out:

'1. After the payment of the necessary expenses of administration of this trust, I hereby direct my trustees to pay to my wife, Ina E. Norris, provided she shall survive me, the entire net income from said trust during her life. * * *

'2. If my wife shall not survive me, or if she shall survive, then upon her death, I direct my said trustees to pay the entire net income from said trust to my niece, Nanzie Brown Collard, during her life. * * *'

This concluded the statement of the uses and purposes of the trust.

By the sixth paragraph, he provided that, on the death of both of the two named beneficiaries of the trust, his estate should be distributed to Ina C. Clemmens, the niece of his wife, or, in the event of her death, to her then living child or children.

The seventh paragraph directed that '* * * all inheritance, succession or estate taxes due upon account of my death, or upon my estate, or upon account of any bequests and devises herein made shall be paid out of the principal of my estate.'

The eight, ninth, and tenth paragraphs of the will had reference to the trust, the eighth dealing with the rights and interests of the beneficiaries, and the ninth and tenth with the powers of the trustees.

The eleventh and final paragraph appointed executors (who were identical with the trustees) and set forth their powers.

Included in the assets of the estate which came into the possession of the trustees were six pieces of improved real estate, consisting of two apartment houses, a theater-and-store building, a store building of the supermarket type, a row of wooden garages, and a building used as a machine shop.

The trustees adopted the practice of making deductions from the gross income of the rental properties for the purpose of setting up a depreciation reserve. Mrs. Norris, who was both trustee and beneficiary, died on April 14, 1943; and Nanzie Brown Collard, who then became entitled to the entire net income from the trust, thereafter challenged the right of the trustees to make such deductions. The surviving trustees, the appellants here, brought his action for a declaratory judgment under the provisions of Rem.Rev.Stat. (Sup.), § 784-4, which, so far as it is pertinent, reads as follows:

'A person interested as or through an executor, administrator, trustee, guardian or other fiduciary, creditor, devisee, legatee, heir, next of kin, or cestui que trust, in the administration of a trust, or of the estate of a decedent, an infant, lunatic, or insolvent, may have a declaration of rights or legal relations in respect thereto: * * *

'II. To direct the executors, administrators or trustees to do or abstain from doing any particular act in their fiduciary capacity; or

'III. To determine any question arising in the administration of the estate or trust, including questions of construction of wills and other writings.'

Their prayer was that they '* * * be authorized and directed to deduct from the gross income * * * an amount equivalent to the reasonable depreciation of the real properties included in said trust, Before making distribution of the net income thereof, * * *.'

Nanzie Brown Collard was the only person made a party to the action, and by her amended answer and cross-complaint, she took the position that the reserve for depreciation was not a proper charge against the income from the rental properties and asked that the amounts theretofore deducted from the gross income for that purpose be paid to her. She also charged that the trustees were awarding themselves excessive fees and asked that the court fix reasonable fees for the trustees for the years 1943 and 1944 and that they make an accounting.

It was conceded that the amount of depreciation reserve which had been deducted between April 14, 1943, and December 31, 1946, the period during which Mrs. Collard was entitled to receive the entire net income from the estate, was $14,856.93.

The trial court found that a full accounting had been made, and approved the fees of the trustees, but did three things of which appellants complain: (1) decreed that the withholding by the trustees of $14,856.93 from April 14, 1943, through the year 1946, as a depreciation reserve, was contrary to the terms of the last will and testament of W. G. Norris and without authority of law, and directed them to pay that amount over to Nanzie Brown Collard and not to make such deductions in the future; (2) gave to Nanzie Brown Collard a judgment in the sum of $750, to apply on expenses incurred for a certified public accountant, and a judgment in the sum of $1,000 to apply on her attorney's fees, which sums were to be paid by the trustees 'out of the corpus of the W. G. Norris Estate'; and (3) directed the trustees to 'charge their costs, Trustees' fees and attorneys' fees in this action to the corpus of the estate.'

(The parties and the trial court used the term 'corpus' to distinguish the capital assets which would pass to the remainderman from the income therefrom, to which the beneficiary or life tenant was entitled. We will use the same terms, but where we refer to the 'W. G. Norris trust' or the 'trust estate,' we will be referring to the entire trust, both corpus and income.)

In Laflin v. Commissioner of Internal Revenue, 7 Cir., 69 F.2d 460, 461, the law is tersely stated: 'It is a rule of general application that the beneficiary of a trust entitled thereunder to receive the income from such property may not be required to suffer a deduction from such income for the creation of a sinking fund to provide for depreciation and obsolescence, unless, indeed, the trust instrument or the law of the state makes provision therefor. * * *'

Appellants concede this to be the general rule, but urge that the language of the whole will, and particularly the portion of the ninth paragraph reading: '* * * and generally in all respects to manage, handle and dispose of each and every part of the trust estate in such securities, properties or investments, either of the character permitted by law for the investment of trust funds or otherwise, and in such manner and upon such terms and conditions as to them may seem best, it being my desire, however, that in making any investments my trustees shall have regard for the safety of the principal of the trust estate, rather than the obtaining of a high rate of interest * * *' and the tenth paragraph, which is: 'My trustees, or the survivors or survivor, shall have power to pay all taxes, assessments, governmental charges, expenses of this trust and all other proper charges against the property held under this trust or arising out of the administration hereof, including reasonable compensation to themselves for the performance of their duties hereunder, for all of which they shall be entitled to be reimbursed out of the income and principal of the trust estate prior to the making of any distribution hereunder,' together with the use of the words 'the entire net income from said trust,' manifests an intention on the part of the testator that a reserve for depreciation be established.

This is no more than wishful thinking. The trustees were directed, 'after payment of the necessary expenses of this trust,' to pay to the named beneficiaries 'the entire net income from said trust.' There is nothing in the will to evidence any intention that a reserve for depreciation be deducted from that income, and no ambiguity that warrants the admission of extrinsic evidence of such an intention. In the Laflin case, supra, the court said:

' * * * We find nothing in the trust instrument itself which would authorize the life tenant to set up such a reserve. There is the general authority to pay 'all taxes and special assessments and all water rates and all other public charges of every king and description whatsoever on all of the property belonging to the trust estate, and also all cost of insurance and all necessary and proper costs, charges and expenses of any and every kind and description whatsoever connected with or growing out of the management of the trust estate or the exercise of any of the powers conferred by this my Will on my said Trustee.' 'But in our judgment this does not even suggest any duty or right to set apart a sinking fund to provide for depreciation.'

Under the Declaratory Judgments Act, we may construe the provisions of a will, but we may not supplement it with provisions it does not contain.

Appellants then invite us to say that the rule referred to is outmoded and to declare that modern business conditions and practice justify the establishment of a rule of law in this state that trustees of a trust...