Dufford v. Smith

• Decision Date: 06 February 1890
• Citation: 18 A. 1052,46 N.J.E. 216
• Parties: DUFFORD v. SMITH.
• Court: New Jersey Supreme Court

18 A. 1052

46 N.J.E. 216

DUFFORD

v. SMITH.

Prerogative Court of New Jersey.

Feb. 6, 1890.

(Syllabus by the Court.)

Appeal from orphans' court, Morris county; CHILD, QUIMBY, and HARDEN, Judges.

On exceptions to an account of trustees under a will.

Edmund D. Halsey and Henry C. Pitney, for appellant. George T Werts, for respondent.

MCGILL, Ordinary. George Dufford died in June, 1864, leaving a will, which was proved by the executors named in it on the 5th day of August in the same year. By this will the testator made various devises and bequests, and among them the following: "Second. I give and bequeath unto my beloved wife, Elizabeth Dufford, the interest of six thousand dollars, to be paid to her yearly by my executors hereinafter named, during her life-time. * * * Third. I give to my son, George Dufford, after the decease of my wife, the interest on six thousand dollars, bequeathed to her, during his life-time, and after his death to be equally divided among his lawful children during their life-time, and after their death then the six thousand dollars to be equally divided among their lawful children: provided, and it is hereby ordered, that in case said George Dufford die without lawful issue, then the above-named six thousand dollars is to be equally divided among my children. Fourth. I give and bequeath to my son William Dufford the sum of four thousand dollars, to be paid to him by my executors as soon as conveniently can be after my decease." "Tenth. I give and bequeath to my daughter, Catherine Sophia Smith, the interest on six thousand dollars, to be paid to her annually by my executors during her life-time, and after her death the said interest to be divided equally among her lawful children during their life-time, and after their death the said six thousand dollars to be divided equally among their lawful children: provided, that if the said Catherine Sophia Smith die without lawful issue, or if she have lawful children, and they die without lawful issue, then said six thousand dollars to be divided equally among my children. Eleventh. I give and bequeath to my grandson, Gilbert Dufford, son of my son Leonard Dufford, one thousand dollars, to be paid to him by my executors when he arrives at the age of twenty-one years." The will then directed that the executors should sell the testator's undisposed-of real and personal estate, and divide the proceeds of sale equally among his children; and he then appointed the testator's sons Elijah, Henry, and Andrew its executors. In November, 1865, the executors' first account, exhibiting a cash balance in their hands of $22,646.47, was allowed by the orphans' court. In June, 1888, in obedience to a citation which was issued at the instance of the respondent, Catherine Sophia Smith, a second account was presented, to which the respondent filed the exceptions which inaugurated this litigation. By this second account the executors charge themselves with the balance found against them on their first accounting, and pray allowance for the payment of the legacies of $4,000 to William Dufford and $1,000 to Gilbert Dufford, and for the distribution of $5,646.47 among the nine children of the testator,—that is, $705.81 to each of them; and thus show a balance of $12,000 remaining in their hands. They then state that $6,000 of this balance is held by Andrew Dufford, the appellant, as trustee for Elizabeth Dufford, and charge themselves with interest on it at the rate of 7 per cent. from November 13, 1865, to April 1, 1878, and at 6 per cent. from April 1, 1878, to August 12, 1886, the date of Elizabeth Dufford's death, and pray allowance for payment of the interest thus charged. They also state that the, other $6,000 of the $12,000 balance is retained by the accountant, Henry P. Dufford, in trust for Catherine Sophia Smith, and that of that $6,000, $1,516.69 was money due upon notes made by Henry P. Dufford to the testator in his life-time, and $2,604.67 was represented by notes of Dufford & "Wert, a firm composed of said Henry P. Dufford and John C. Wert, a son-in-law of testator, neither of these sums having been collected by the executors. They then charge themselves with interest at 7 per cent. on the $6,000 from November 13, 1865, to April 1, 1878, and with interest on it at 6 per cent. from April 1, 1878, to April 1, 1885, and pray allowance for the payment of the interest to Catherine Sophia Smith, their cestui que trust.

The exceptions to this account raise the following questions for consideration: Whether the investments of the trust fund were proper; whether, if they were not proper, all the executors are liable for losses they occasion the trust fund; whether taxes upon the principal of the trust fund should have been paid from the interest which the will gave to the cestuis que trustent; whether the interest upon the trust fund at 7 per cent. should have continued to July 4, 1878, the time when the legal rate of interest was changed from 7 to 6 per cent.; and whether th executors should be allowed commissions.

By their first account the executors made it appear that they had a balance of $22,646.47 in cash. When their account was settled, they were charged with that sum as cash, and thereupon, treating it as such, they proceeded to pay two legacies, of $4,000 and $1,000, respectively; to distribute $5,646.47; and to retain $12,000 to answer the trusts created by the will. It was clearly their duty, under the will, to invest two funds of $6,000 each so that they would yield interest. Those sums were to be set apart before it could be known what the residue to be distributed would be. Unless they were completely had, there would be no residue. Under such circumstances, the distribution of the residue proclaimed the trust funds to be secured. Now it appears that more than $4,000 of the balance, which was represented to be cash, consisted of the indebtedness of one of the executors to the estate, evidenced in part by his own promissory notes. The evidences of that indebtedness were handed over to him, together with sufficient money to increase his indebtedness to $6,000; he agreeing with his co-trustees to pay his sister the yearly interest provided for her by the will. He was not required to pay his notes, and it was known to his co-trustees that he intended to invest the money which they paid him in his private business. It is impossible, in view of these circumstances, to escape the conclusion that this transaction was tantamount to, and must be regarded as, a deliberate investment of the $6,000 in which the respondent is immediately interested, upon the mere personal security of one of the trustees. Such an investment is not recognized by the courts of this state as safe, prudent or proper, or one that trustees will be justified or protected in making. "It is a well settled rule," said Chancellor GREEN,...