In re Bernice P. Bishop Estate

• Decision Date: 08 July 1943
• Docket Number: No. 2507.,2507.
• Parties: IN THE MATTER OF THE BERNICE P. BISHOP ESTATE.
• Court: Hawaii Supreme Court

36 Haw. 403

IN THE MATTER OF THE BERNICE P. BISHOP ESTATE.

No. 2507.

Supreme Court of the Territory of Hawai‘i.

Argued July 16-30, 1942, inclusive.

Submitted August 29, 1942.

Decided July 8, 1943.

APPEAL FROM CIRCUIT JUDGE FIRST CIRCUIT, HON. J. A. MATTHEWMAN, JUDGE.

Syllabus by the Court

The statute (R. L. H. 1935, § 3793) fixing the compensation of trustees on a percentage basis and such further allowance as the court shall deem just and reasonable for special services has no application to the right of trustees to incur expense to be borne by the trust estate in employing others to assist them in the discharge of their duties. Independent of statute and subject to review by a court of equity for abuse, trustees are entitled to incur reasonable expenses, chargeable to the trust estate, for administrative assistants to perform delegable duties which are, under the circumstances of the particular estate, reasonably necessary to its efficient administration.

A trustee's powers are defined in the trust instrument and are of two classes: (1) those expressly granted and (2) those impliedly granted, as reasonably incident and necessary to the carrying out of the powers expressly granted. Thus, where trustees are expressly empowered to employ others and the terms upon which they are to be employed are not prescribed in the trust instrument, the implied powers permit the establishing of a pension or annuity system for the benefit of superannuated employees.

Trustees may properly incur expense which they, in the exercise of a sound discretion, find to be necessary to preserve the estate or make it more productive. Thus, they may expend trust funds to repair roads belonging to the estate on estate land and contribute to the expense of conducting an experiment designed, if successful, to restore lands owned by the estate to their former productive value.

The trustees incurred expense to facilitate the sale and delivery of securities by employing a banking institution in San Francisco to care for and make delivery of the securities being offered for sale in that city, where a market existed. There being no market therefor in Honolulu, the expense was proper, having been incurred in the usual course of business. Likewise, the small sum expended in renting palms and plants to decorate the estate office followed the usual course of business.

The trustees kept bonds belonging to the estate in lock boxes built in a vault which is part of a building owned by the estate and occupied by the trustees and their employees as an office. The refusal of the chancellor to require the trustees to pay rent for the use of said lock boxes did not constitute error.

E. K. Kai, Attorney General, and J. V. Hodgson, former Attorney General ( W. Z. Fairbanks with them on supplemental brief), for appellant.

A. G. M. Robertson ( Robertson, Castle & Anthony on the briefs) for trustees of Bishop Estate and executors of A. F. Judd Estate, appellees.

G. D. Crozier for Theo. F. Trent and Cooke Trust Co., Ltd., co-executors under the will of R. H. Trent, deceased, appellees, filed a brief but did not argue.

KEMP, C. J., PETERS AND LE BARON, JJ.

OPINION OF KEMP, C. J.

This is an appeal by the attorney general from an order or decree approving accounts of the trustees under the will and of the estate of Bernice Pauahi Bishop, deceased.

The principal issue involves the challenged right of the trustees to employ others to perform services in the management of the properties of the trust at the expense of the trust other than services which are beyond the skill and experience of the ordinary trustee, and services which are menial.

The substance of the argument of the appellant is that since there is no provision in the will authorizing the trustees to employ others at the expense of the estate to assist them, the compensation provided by our statute (R. L. H. 1935, § 3793) is in full for the performance of all services necessary for the proper administration of the trust estate, except such as are beyond the skill of the ordinary trustee or are menial, and that to require the estate to pay for such services would require it to pay twice for the same service. The appellant, therefore, argues that the trustees must either personally perform all such services or procure them to be performed without expense to the estate.

The pertinent provisions of section 3793, supra, follow: “Upon all moneys received in the nature of revenue or income of the estate, such as rents, interest and general profits, executors, administrators, trustees and guardians shall be allowed as commissions payable out of the income, ten per centum for the first thousand dollars, seven per centum for the next four thousand dollars, and five per centum for all over five thousand dollars, such commissions to be allowed upon each accounting when made but not oftener than once a year. * * * Such further allowances may be made as the court shall deem just and reasonable for special services. * * *

“Any * * * trustee * * * required by law or the order of any court or judge to give a bond or other obligation as such, may include as a part of the lawful and chargeable expense of executing his trust such reasonable sum, paid a company authorized under the laws of the Territory to become surety on such bond or obligation, for becoming his surety thereon, as may be allowed by the court in which, or a judge before whom, he is required to account, not exceeding one per centum per annum on the amount of such bond.”

Ever since 1859 our statute has provided a mandatory graduated schedule of fees or compensation for executors, administrators and guardians. The decisions of this court allowing or disallowing such fiduciaries reimbursement of expenses incurred in administering their trusts therefore apply with equal force to trustees under the present statute.

The first statute on the subject is found in the Civil Code of 1859, section 1281, which by its terms applied only to executors, administrators and guardians. The pertinent part of said section follows: “Fees of Executors, Administrators and Guardians:--For receiving and paying out moneys, ten cents for every dollar up to and not exceeding one thousand dollars; seven cents for every dollar over one thousand, up to and not exceeding five thousand dollars; five cents for every dollar over five thousand dollars; and such additional allowance for their actual expenses as the judge or court shall deem just and reasonable.”

While the foregoing statute was in force and unamended, this court in Hart v. Kapu, 5 Haw. 196, on September 15, 1884, affirmed the decision of the chancellor rendered May 12, 1884, which announced the law to be that a trustee is entitled to reasonable compensation for his time and trouble and all proper expenses to keep up the estate. This in effect rejected the English common-law rule denying trustees compensation but followed the English common law which allowed trustees indemnity for all proper and necessary expenses incurred in the management of the trust property.

The authority cited for the foregoing holding was Perry on Trusts, sections 913 and 917. The statute fixing the compensation and expenses of executors, administrators and guardians was not referred to.

In Estate of McBryde, 8 Haw. 472, 477, 478, decided April 26, 1892, after the effective date of Act 98, hereinafter quoted, but involving transactions prior to said statute, this court, in denying compensation to the executors based on the income from a ranch and plantation, gave as its reasons the following: “For if the widow was entitled to the possession, there would be no commissions on account of the income, and if the executors were authorized to take possession and manage the property they have not done so, but have allowed a business firm to attend to the financial management and have themselves handled no part of these receipts as executors. T. H. Davies & Co. have done the work and have doubtless charged and collected their compensation therefor. The executors, therefore, are not entitled to commissions, even if they had the right to receive the moneys.” The court, limiting the application of the above, further said: “We do not go so far as to hold that trustees of this character may not hire clerks or business agents to assist in carrying on the business of the trust. This may be done in some circumstances, and often is inevitable, but where trustees abandon the whole management of the trust to others they may not claim commissions.”

In 1892 the legislature, by Act 98, approved January 11, 1892, amended section 1281 of the Civil Code to read in part as follows: “FEES OF EXECUTORS, ADMINISTRATORS AND GUARDIANS.

“Executors, administrators and guardians shall be allowed the following commissions upon all moneys received and accounted for by them, that is to say: * * *

“Upon all moneys received in the nature of revenue or income of the estate, such as rents, interest and general profits, ten per centum for the first thousand dollars, seven per centum for the next four thousand dollars, and five per centum for all amounts over and above the first five thousand dollars.”

It will be noted that this Act by its terms was confined to compensation of executors, administrators and guardians. All reference to expenses was omitted.

On March 9, 1901, while this statute was in force and unamended, In re Estate of Lunalilo, 13 Haw. 317, 318, was decided. This was apparently the first case involving the compensation of trustees to reach this court after the enactment of Act 98 in 1892. That case did not involve the question of expenses but as to the compensation of trustees the court said: “We have no statute that prescribes the compensation of trustees, but we believe it has been the practice here, and as a rule, elsewhere, under similar circumstances, to follow in such cases the statutes which prescribe the fees of executors, administrators and guardians.”

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