James v. Echols

• Decision Date: 18 May 1931
• Docket Number: 287
• Citation: 39 S.W.2d 290,183 Ark. 826
• Parties: JAMES v. ECHOLS
• Court: Arkansas Supreme Court

39 S.W.2d 290

183 Ark. 826

JAMES v. ECHOLS

No. 287

Supreme Court of Arkansas

May 18, 1931

Appeal from Woodruff Chancery Court, Southern District; A. L Hutchins, Chancellor; reversed.

Decree reversed, and cause remanded.

Win. J Clark, W. T. Price, Brundidge & Neelly and Carmichael & Hendricks, for appellants.

Bogle & Sharp, for appellee.

OPINION

HART, C. J.

This appeal involves the compensation which should be allowed D H. Echols, as executor and trustee under the will of R. R James, deceased, and the carrying charges and expenses which should be allowed him, and the interest on legacies which should be charged to him. The will of Dr. R. R. James was duly admitted to probate, and the Bank of Cotton Plant & Trust Company, the executor and trustee named in the will, was duly appointed and entered into the execution of the trust. Subsequently, the Bank of Cotton Plant & Trust Company became insolvent and was taken over by the State Bank Commissioner. D. H. Echols was appointed trustee in succession and proceeded to carry out the terms of the trust under the will.

The legatees named in the will questioned the power of the chancery court to appoint a new trustee upon the insolvency of the trustee named in the will. This court upheld the power of the chancery court, when properly exercised, to appoint a trustee in succession; and D. H. Echols, as such trustee, duly proceeded with the execution of the trust according to the terms of the will as he construed them. Bieatt v. Echols, 181 Ark. 235, 25 S.W.2d 431.

The principal issue raised by the appeal in this case is the proper construction of the 6th clause of the will which reads as follows:

"Sixth. After the death of my wife, Carrie L. James, I give, devise and bequeath unto the Bank of Cotton Plant & Trust Company, of Cotton Plant, Arkansas, as trustee, all the remainder of my estate of whatever kind, to be held in trust by the said Bank of Cotton Plant & Trust Company for the uses and purposes hereinafter set forth.

"I hereby direct that the said trustee shall hold and manage said property for a period of twenty years, and that said trustee shall annually distribute all income derived from said property, as follows:

"It shall pay to the said Bank of Cotton Plant & Trust Company twenty per cent. of said income as payment for its services in administering this trust. Second, to pay to the trustees of Galloway College fifteen per cent. of the said income; third, to pay to the trustee of Hendrix College fifteen per cent. of said income; fourth, to pay to the trustees of the Methodist Episcopal Church, South, of Cotton Plant, Arkansas, ten per cent. of said income, and ten per cent. of said income shall be held by said trustee for the benefit of the poor people of the town of Cotton Plant, Arkansas, to be paid out and distributed by said trustees as it may deem best and at such times as it may deem proper.

"I direct that twenty per cent. of said income shall be paid to John M. James during his lifetime, or until the termination of said trust, but if the said John M. James should die before the termination of this trust, then in that event this payment shall cease and the said twenty per cent. shall be distributed pro rata to the other beneficiaries named above in this paragraph."

Echols filed his account in the chancery court in which he asked for 20 per cent. of the gross income of the estate as his compensation under the terms of the will. He was also allowed the sum of $ 297, which he paid out under the orders of the court for guarding property belonging to the estate at Eagle Pass, Texas. The estate consisted of a large amount of real and personal property. Appellants herein, who were legatees under the will, filed exceptions to the account of said trustee, and also asked that he be charged with interest on the amount of legacies due them because he had unduly postponed the payment of the same.

We are of the opinion that the court erred in allowing the trustee for his compensation twenty per cent. of the gross income annually derived from the estate. A gift of the income generally means a gift of the net income after deducting taxes and other expenses necessary to the preservation of the property from which the income is derived. This rule applies to gifts of income of either realty or personalty. 2 Page on Wills, (2d ed.) § 1026 pp. 1687-1688; Rothschild v. Weinthel, 191 Ind. 85, 17 A. L. R. 1377, 131 N.E. 917, 132 N.E. 687; Johnson v. Johnson, 164 Ky. 724, 176 S.W. 199; Heard v. Read, 169 Mass. 216, 47 N.E. 778; Dickinson v. Henderson, 122 Mich. 583, 81 N.W. 583; Dewey's Estate, 153 N.Y. 63, 46 N.E. 1039; Spencer v. Spencer, 219 N.Y. 459, 114 N.E. 849, Ann. Cas. 1918E, 943, 114 N.E. 849; Martin v. Kimball, 86 N.J.Eq. 10, 96 A. 565; and Stone v. Littlefield, 151 Mass. 485, 24 N.E. 592. In these cases, the established rule is that, where the income from real estate is devised to the trustee to pay over to certain legatees, they are entitled only to the net income after the payment of taxes, repairs, and other expenses of administering the trust unless the will contains a provision to the contrary. Otherwise the principal of the estate would be exhausted ultimately in its self-support. So, it is said that a direction to trustees to pay certain named beneficiaries the income of the estate means what is left after paying taxes and other necessary and proper expenses incident to the care, preservation, and handling of the estate. ...