In Re Roth's Estate.

• Decision Date: 16 April 1947
• Citation: 52 A.2d 811
• Parties: In re ROTH'S ESTATE.
• Court: New Jersey Prerogative Court

52 A.2d 811

In re ROTH'S ESTATE.

Prerogative Court of New Jersey.

April 16, 1947.

COPYRIGHT MATERIAL OMITTED.

Appeal from Orphans' Court.

Proceeding in the matter of the estate of Isaac Roth, deceased, wherein Mrs. Sameth filed a petition praying that decrees allowing accounts of trustees be opened on ground of mistake and that the accounts be resettled. From an adverse order of the orphans' court, Mrs. Sameth appeals.

Decrees set aside.

Syllabus by the Court.

1. Remaindermen are necessary parties to a petition by life tenant to open, on the ground of mistake, decree settling intermediate account of trustees, in order to transfer a certain sum from corpus to income.

2. On appeal to Prerogative Court from Orphans' Court, parties may be brought in, whose joinder is necessary to a decree on the merits, but who were not parties to the proceeding in the Orphans' Court.

3. Payments amortizing mortgage on property which is part of the trust estate should be charged against corpus.

4. Trustees used rents to amortize mortgage, because they lacked liquid corpus. Their account charged these payments against income. The life tenant who was also one of the trustees, did not realize that their account was so drawn that allowance thereof by the Orphans' Court would debar her from recapturing the rents so used, and would operate as a gift to the remaindermen. Held, the decree approving the account should be opened to the end that the amortization payments be charged against corpus.

5. Annual sums cannot be taken from income to create a reserve against depreciation and obsolescence of buildings.

6. The Orphans' Court and the Prerogative Court are both without jurisdiction to instruct trustees how they should execute their trust.

Herbert A. Kuvin, of Springfield, for appellant.

Richard J. Fritz Maurice, of Orange, for executors.

Milton M. and Adrian M. Unger, of Newark, for defendant Congregation Oheb Sholom.

Tepper, Tepper & Verney, of Newark, for respondent Daughters of Israel Home for Aged.

Hannoch & Lasser, of Newark, for respondent Hilda R. Goldby Frank, etc.

Emanuel Kohn, of Newark, for respondents Janice Krimke and others.

BIGELOW, Vice Ordinary.

Isaac Roth, the testator, died in 1927, leaving a will of which the executors were his brothers Jacob and Moses, and his sister Mrs. Sameth. To them he gave his residuary estate in trust to pay the net income to Mrs. Sameth during her lifetime. While he left a large estate, most of the assets that were readily convertible into cash, were used to pay debts, administration expenses, and legacies. The major part of the trust estate is a half interest in land which the testator had owned in common with his brother Jacob. The property was, and still is, heavily mortgaged. Ever since testator's death, the mortgagees have required amortization and since the trustees had no capital funds with which the estate's share of the payments could be made, the rents were used for this purpose. In 1944, Mrs. Sameth began pressing her brother Moses-Jacob had died some years earlier-to restore to income and pay her the amounts which had been diverted to amortization. But he did not deem it safe to do so, inasmuch as three successive accounts of the trustees in which the amortization payments were charged against income, had been approved by decree of the Orphans' Court. Mrs. Sameth thereupon filed in the Orphans' Court a petition praying that the decrees allowing the accounts be opened on the ground of mistake, and the accounts be resettled. When the matter came on to be heard, no testimony or other proofs were received and an order was made dismissing the petition, without the Court stating any reasons for the action. From the order, Mrs. Sameth appeals.

Mrs. Sameth's petition to the Orphans' Court and the order to show cause made thereon, name only her co-trustee as respondent, although the trustees have no real concern in the matter one way or another, as the petition does not seek to increase their liability. What the petitioner seeks to accomplish is the transfer of a certain sum from corpus to income. The only persons who have an opposing interest are the remaindermen, and they were not made parties to the petition and were given no opportunity to be heard.

While the remaindermen were not joined in the proceeding to open the decrees, they had been parties in the accountings in which the decrees were made. The doctrine is universally accepted that the judgment of a competent court, acting within its jurisdiction, is conclusive upon the parties as to all matters adjudged, upon which the parties were, of right, entitled to be heard. This doctrine is applied to decrees of the Orphans' Courts settling fiduciaries' accounts. Shearman v. Cameron, 78 N.J.Eq. 532, 80 A. 545; Brown v. Fidelity Union Trust Co., 126 N.J.Eq. 406, 433, 9 A.2d 311. Not only are the decrees conclusive in controversies between the accountant on the one side and the beneficiaries on the other, but also the decrees are conclusive in subsequent litigation between different classes of beneficiaries, for instance, between remaindermen and life tenant. City Bank Farmers' Trust Co. v. McCarter, 111 N.J.Eq. 315, 162 A. 274. The decrees ascertaining the amount of corpus held by the Roth trustees are conclusive in favor of the remaindermen, and so they have a definite vested property in the decrees. This interest would be destroyed by vacating the decrees and leaving open for further consideration the question of the amount of corpus.

It is the general rule that all parties to a decree or judgment, whose interest will be affected by opening or vacating it, should be made parties to a proceeding in which this relief is sought. 34 C.J. 344. See also 49 C.J.S., Judgments, § 293. Surety Building & Loan Ass'n of Newark v. Risack 118 N.J.Eq. 425, 179 A. 680. This principle extends to decrees of probate courts, including decrees on accounts, although I find no case in New Jersey in which this phase has been involved. 21 C.J.S., Courts, § 309, p. 561; 34 C.J.S., Executors and Administrators, § 917, p. 1125. A proceeding to open a decree is, in its effect, much like an appeal. Here again it is the rule that all parties to the record who may be affected by the reversal of a decree, should be made parties to the appeal. Powell v. Yearance, 73 N.J.Eq. 117, 124, 67 A. 892. Including appeals from decrees of the Orphans' Court. In re McCabe's Estate, 125 N.J.Eq. 278, 4 A.2d 2.

Appellant relies on In re Slater's Estate, 88 N.J.Eq. 296, 102 A. 384, in which Vice Ordinary Leaming said that on a petition to the Orphans' Court to open the decree for fraud or mistake, the ordinary procedure is a rule requiring the executor to show cause why the decree should not be opened. In the case before him, the Orphans' Court, without any application to open the decree settling a certain intermediate account, had on the executor's final accounting received and allowed exceptions to the intermediate account and had thereby increased the liability of the executor. The question whether other parties than the executor should be given notice of the application, did not enter this case or any of the cases referred to by Vice Chancellor Leaming.

The appellant also cites Orphans' Court Rule 28, N.J.S.A. Tit. 2: ‘In proceedings for the re-settlement of the account of an executor, administrator, guardian or trustee, at least five days' notice of the intended application shall be given to all parties in interest, unless the Court shall otherwise order.’ This rule does not give the Orphans' Court unlimited discretion to determine what parties shall receive notice. The rule would not, for instance, justify a failure to notify the executor in a case where the object of the proceeding is to increase his liability. The authority given by the rule must be exercised in accordance with the fundamental doctrine that a party who will be directly affected by the action of the court, must be brought in.

The Roth remaindermen were necessary parties to the proceeding to open the decrees settling the trustees' accounts. Since they were not joined, the Orphans' Court property dismissed the petition. When I announced this view of the matter to counsel, the suggestion was made that instead of remitting the record to the Orphans' Court, the remaindermen be brought into the Prerogative Court on the appeal, so that there might be made here a decree on the merits. After considering with some care the nature of this Court's jurisdiction, I concluded that this course might properly be pursued.

The Prerogative Court has always been regarded as an ecclesiastical court. In re Coursen's Will, 4 N.J.Eq. 408; Harris v. Vanderveer, 21 N.J.Eq. 424, 434; In re Merrill, 88 N.J.Eq. 261, 102 A. 400. The origin of the court may be found in the Seventy-fifth Article of the Instructions given to Cornbury, our first Colonial governor, conferring on him the ecclesiastical jurisdiction over the probate of wills. 2 N. J. Arch. 529; Smith's His. of N.J. 253. By virtue of this grant, Cornbury and his successors or their delegates admitted wills to probate, granted letters of administration, and settled accounts of decedents' representatives. The first Constitution of New Jersey, adopted in 1776, N.J.S.A. provided that ‘the governor [shall] be ordinary or surrogate-general.’ Par. 8. Then, in 1784, the legislature passed the important statute which settled our probate courts much as they remain to this day-‘An Act to ascertain the power and authority of the ordinary and his surrogates, [and] to regulate the jurisdiction of the prerogative court, and to establish an orphans' court in the several counties of this State.’ Pat. p. 59. The titles ‘ordinary’ and ‘Prerogative Court’ do not appear, so far as I am aware, in the commissions issued to any of our colonial governors, or in their Instructions, or in any colonial statute or ordinance. The terms, however, came into common usage in the colony...