Cogswell v. Weston

• Decision Date: 20 September 1917
• Citation: 228 Mass. 219,117 N.E. 37
• Parties: COGSWELL v. WESTON et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

228 Mass. 219

117 N.E. 37

COGSWELL

v.WESTON et al.

Supreme Judicial Court of Massachusetts, Essex.

Sept. 20, 1917.

Case Reserved from Supreme Judicial Court, Essex County.

Petition for instructions by Walter C. Cogswell, trustee, against Henry E. Weston, the American Surety Company, Charles R. Darling, guardian ad litem, and others. From a decree of the probate court, the American Surety Company and the guardian ad litem appealed to the Supreme Judicial Court, a justice of which reserved the case for the full court. Questions answered, and decree ordered to be entered.

In this petition for instructions brought by the trustee under a will, the trustee put five questions for instructions. These questions with instructions thereon given by the judge of the probate court were:

[228 Mass. 220]1. Should the charges and expenses attending the investigation of the trust estate and of the acts and doings of the former trustee in relation thereto be charged in the account of the petitioner against the principal or the income of the trust?

The answer was: They should be charged to the principal.

2. Should the charges and expenses attending the recovery of the Chicago real estate be charged in the account of the petitioner against principal or income of the trust?

The answer was: It should be charged to principal.

3. Should charges and expenses attending the suit against Henry E. Weston as trustee and the American Surety Company of New York be borne by the principal or income of the trust to the exoneration of income, or charged against the income so as to preserve the principal intact?

The answer was: The amount recovered against the American Surety Company having included principal and interest from the day of judgment, the charges and expenses attending the suit in which said amount was recovered, less the costs taxed in said suit, should be paid from the amount so recovered. The balance of said amount should then be apportioned between principal and income in such manner that the principal shall be such amount as invested at 6 per cent. on May 1, 1905, would produce said balance on July 7, 1913, the date of said execution. The principal so found should be held by the trustee and the remainder of the fund paid to the persons entitled to receive the income of the trust fund.

4 (as amended). If the income is to be exonerated from the payment of charges and expenses, is the American Surety Company entitled to be subrogated to the rights of Henry E. Weston to the income accrued or that may accrue on one-half of the principal amounting to about $22,000, which was not misappropriated, and is the said surety company subrogated to the rights of Wm. H. Weston to receive any income accrued before May 1, 1905, or is the respondent Pratt entitled by reason of his assignments to the income that may accrue therein?

The answer was: The American Surety Company is entitled to be subrogated to the right of Henry E. Weston to the income of his share of the estate, except as to the income of one-half of $123,825.99 restored by it to the principal, and said company is subrogated to the rights of William H. Weston to receive the income of his share of the estate to May 21, 1905.

5. If the charges and expenses are to be borne by the income accruing since May 1, 1905, should the trustee restore to the principal from the income any portion of the principal heretofore expended for such purposes?

To this question the probate court stated that by reason of the answers to the preceding questions the fifth question became immaterial and need not be further considered.

Appeals were taken from the decree of the probate court (which decree was in accordance with above answers) to the Supreme Judicial Court, where Charles A. De Courcy, J., reserved the case for the full court.

Hutchins & Wheeler, of Boston, for American Surety Co. of New York.

Chas. R. Darling, of Boston, next friend for persons not ascertained or not in being.

Alfd. C. Vinton, of Boston, for Alfred C. Vinton, administrator with will annexed of estate of Wm. H. Weston.

John H. Stone, of Boston, for Marland L. Pratt.

RUGG, C. J.

This is a bill by the trustee under a will for instructions as to the apportionment between capital and income of certain expenses incurred in the administration of his trust. Henry E. Weston, who formerly administered this trust, was removed and judgment was recovered on May 1, 1905, against him and the American Surety Company of New York as his surety, for the penal sum of his bond as such trustee. Execution thereon issued for the amount found to be the deficit in the principal of the trust fund for which Henry E. Weston was liable by reason of his misappropriations, with interest thereon from the date of judgment, and costs. The pertinent facts and grounds of decision in that case are reported in Harmon v. Weston, 215 Mass. 242, 102 N. E. 470. The amount of the execution has been paid to the present trustee by the American Surety Company. That company has proved the amount so paid as a debt against the insolvent estate of William H. Weston, who died in May, 1905, and who also had been a cotrustee of the estate with Henry E. Weston. The facts and grounds for that proof are set forth in American Surety Co. v. Vinton, 224 Mass. 337, 112 N. E. 954.

The expenses which are the subject of the present bill may be grouped under three heads: (1) General expenses of investigation of the trust estate and of the doings of former trustees resulting in the disclosure of extensive misappropriations by Henry E. Weston; (2) expenses incident to the recovery of real estate in Chicago arising from an attempted sequestration respecting which it appears from the facts in the report that Henry E. Weston was actively fraudulent; (3) expenses in connection with litigation against Henry E. Weston and the American Surety Company on the probate bond.

[1] We consider the first two classes of expenses together. The regular annual or periodically recurring expenses arising in the administration of a productive trust commonly are paid out of the income, while extraordinary and unusual expenses are chargeable against the capital. The costs of litigation generally fall in the latter class. These rules apply in cases where the question concerns life tenants and remaindermen, both guiltless of any wrong against the trust and where the point of incidence of proper expenses must be...