Dahlberg v. Brown
| Decision Date | 14 August 1941 |
| Docket Number | 15308. |
| Citation | 16 S.E.2d 284,198 S.C. 1 |
| Parties | DAHLBERG v. BROWN. |
| Court | South Carolina Supreme Court |
Samuel Want, James S. Verner, and Sam Rogol, all of Darlington, for appellant.
Buist & Buist, of Charleston, for respondent.
This is an action at law brought by the respondent as plaintiff for the recovery of $97,305.08 for services alleged to have been performed, and expenses incurred in connection with tax matters relating to the estate of the late John Scruggs Brown, and for incidental relief. The action is brought against the widow of said testator in her individual capacity and also in her capacity as administratrix c. t. a., of the estate of the testator.
The claim set forth in the complaint involves four separate items, to-wit: (1) Compensation for services performed in connection with deficiency estate and inheritance tax assessments levied against the testator's estate, as the result of which services it is alleged large savings were effected for the estate; (2) reimbursement of expenses incurred by the respondent in the performance of his services; (3) compensation for services performed in preparing "Various and sundry tax returns *** entirely separate and apart from the services of the plaintiff in contesting" the deficiency tax assessments; (4) an "accounting" by the appellant that will enable the respondent to ascertain whether he is entitled to compensation for any additional amounts saved to the estate by his services following his discharge by the appellant, and which may not have been taken into account by him in fixing the amount of his claim.
The questions before the Court arise under a demurrer to the complaint and under motions to strike certain portions of the complaint and to make the complaint more definite and certain in designated particulars. In the Circuit Court the demurrer was overruled and the motions refused.
The arguments of counsel have taken a wide range, and encompass a number of questions of substantive law that we do not deem it necessary to pass upon.
The pertinent facts disclosed by the record are as follows:
The late John Scruggs Brown died in July, 1934. At the time of his death he was a resident of Tennessee. During his lifetime he had created a trust by the delivery of assets of an estimated value of $1,500,000 to the Farmers Loan and Trust Company of the City of New York. The trust instrument provides that the income of the trust shall be paid to the donor and to his wife, during the lifetime of both, in equal shares. Upon the death of either, the whole of the income is to be paid to the survivor during the term of his or her natural life. Further provisions relating to the disposition of the income and of the capital of the trust, after the death of Mr. and Mrs. Brown, are not material in this controversy. The donor, however, reserved a power of appointment by Will over the corpus of the trust.
The trust instrument contains a drastic "spendthrift trust" provision to safeguard the income of the trust against the claims of creditors of Mr. and Mrs. Brown, and to prevent the assignment or anticipation of the income of either of the donees.
On the subject of the payment of estate and inheritance taxes, the trust instrument contains a provision to the effect that if by reason of the creation of the trust inter vivos "a transfer, estate or inheritance tax is assessed against the estate of the donor," the trustee shall pay such tax out of the principal of the trust fund.
The estate left by the testator at the time of his death in 1934 exclusive of the estate embraced in the trust instrument, was appraised at $142,181.82. The will devises the income of the estate to the appellant for life, subject to a "spendthrift trust" provision similar to that contained in the trust instrument. Exercising the power of appointment over the trust estate which he reserved in the trust instrument, the testator disposed of the trust fund by provisions in his will to become effective upon the death of the widow. The spendthrift trust provisions under which she obtained all of the income of the trust estate upon the death of her husband were not changed. The will disposed of the combined estates after the death of the appellant, and contains a provision for payment of all estate, inheritance and other death taxes out of the general estate as an expense of administration. We may say here parenthetically, that this provision of the will did not abrogate the aforementioned provision of the trust indenture providing for the payment of estate and inheritance taxes on the trust fund, should there be any, out of that particular fund.
The Farmers Loan and Trust Company of New York, the trustee named in the trust instrument, is named as executor and trustee of the estate left by the decedent. This concern accepted the trusteeship, but did not qualify as executor. Thereupon appellant applied to the proper court in Tennessee for letters of administration c. t. a., and was duly appointed.
Although, as hereinbefore stated, the action is brought against the appellant both individually and also in her representative capacity as administratrix c. t. a., the complaint throughout uses the word "defendant" rather than the plural.
The plaintiff describes himself as "a certified public accountant, practicing his profession in Knoxville, in the State of Tennessee ***." The defendant, it is alleged in the complaint, resides in the City of Charleston, South Carolina. There is no allegation in the complaint as to where the assets of the trust estate and of the decedent's estate are located, except that in referring to the creation of the trust inter vivos, the complaint states that assets to the value of more than a million and a half dollars were placed in the trust. There are no allegations in the complaint from which it can be inferred that any assets of the estate are situate in South Carolina, and it is not alleged that ancillary letters of administration in South Carolina have been sought.
Although the greater portion of the respondent's claim is founded upon allegations to the effect that the respondent is entitled to be paid (on a quantum meruit basis) a fee equal to twenty-five per cent. of the saving in inheritance and estate taxes effected for the benefit of the estate, it is not alleged that the respondent was employed by the Farmers Loan and Trust Company of New York, which as trustee under the above quoted provision of the trust instrument was under obligation to pay all estate and inheritance taxes assessed against the assets embraced within the trust; nor is it alleged that the appellant had or claimed to have authority to bind the trustee; or that any demand upon the trustee for payment has been made by the respondent and refused. The theory of the respondent's claim, though not so stated by him, appears to be that because the appellant is a beneficiary of the estate (only however to the extent of the income thereof) the respondent's services must be taken to have been rendered for the benefit of the beneficiaries of both the income and capital of the estate, and that the alleged employment of the respondent by the appellant entitles him to be paid the value of his services out of the capital funds of the estate.
Just how the assets of the estate can be reached by respondent through any judgment that might be obtained in this action to which the trustee is not a party is not apparent. Respondent's counsel touches this point in his argument with the suggestion that if the appellant, having transferred the assets of the estate of her testator to the trustee (which was in keeping with the directions of the Will), "has left herself without sufficient assets to pay such judgment as might be rendered against her individually in this case, it would not be inappropriate for the Court to assert some manner of extraordinary remedy against her in her representative capacity, sufficiently drastic to undo the things that she has done in this attempted fraud ****." Since, however, we are in accord with the view expressed in the order of the Circuit Court that this action must be construed as one against the appellant individually, and being of the further view that for this reason, among others a judgment is not obtainable in the present action against the appellant in her representative capacity, we need not enter into a discussion of the remedies that may be open to the respondent in the event that in a later case, properly brought against a representative of the testator's estate, a judgment binding upon such estate is obtained by the respondent.
The respondent's claim to twenty-five per cent. of the amount he alleges was saved to the estate in estate and inheritance taxes through the services performed by him is founded on an alleged custom in his profession to charge from twenty-five to fifty per cent. of the amount saved to an estate in this class of cases, and respondent alleges that he elects to charge the minimum of twenty-five per cent.
On this subject the appellant, by demurrer and motion, raises the point that the complaint does not set forth a cause of action on a contract to pay a...
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