Mercer v. Merchants Nat. Bank

• Decision Date: 29 December 1972
• Docket Number: No. 6188,6188
• Citation: 112 N.H. 441,298 A.2d 736
• Parties: Lucille H. MERCER et al. v. MERCHANTS NATIONAL BANK, Trustee Under the Will of Bushrod W. Hill.
• Court: New Hampshire Supreme Court

Page 736

298 A.2d 736

112 N.H. 441

Lucille H. MERCER et al. v. MERCHANTS NATIONAL BANK, Trustee Under the Will of Bushrod W. Hill.

No. 6188.

Supreme Court of New Hampshire.

Dec. 29, 1972.

Grinnell & Bureau, Derry (George H. Grinnell, Derry, orally), for plaintiffs.

Wadleigh, Starr, Peters, Dunn & Kohls, Manchester (Theodore Wadleigh, Manchester, orally), for defendant.

KENISON, Chief Justice.

The question for decision in this case is whether a trustee may charge the portion of its fee attributable to principal at the termination of the trust instead of periodically during the life of the trust. The Probate Court (Treat, J.), allowed the defendant's termination fee, and an appeal was taken to the superior court which also ruled in favor of the defendant-trustee. Plaintiffs' exception to the court's denial of their motion to set aside the verdict was reserved and transferred to this court by Loughlin, J.

The defendant was appointed successor trustee in 1926 of the trust under the will of Bushrod W. Hill and administered the trust for thirty-eight years until its termination upon the death of the remaining life tenant in 1964. The probate court allowed a termination fee of $5,257 representing two and one-half per cent of the market value of the trust at termination as a charge against principal. Plaintiffs, two remaindermen of the trust who were also income beneficiaries, urge that a principal commission should not be allowed at the termination of a trust. They contend that the trustee's fees included in the annual accounts prepared by the trustee and approved by the court appeared on their face to be the sole compensation to which the trustee would be entitled and that no mention was ever made in those accounts or elsewhere of an eventual termination fee. They further contend that to allow an additional fee at the termination of the trust would in effect be an impermissible reopening of the prior accounts.

In this State and many others the probate court has the duty and authority to approve the amount and time of payment of trustee's fees as in its reasonable discretion it determines appropriate under the circumstances. Page v. D'Amours, 99 N.H. 441, 113 A.2d 544 (1955); RSA 564:21 (supp.). '(T)he amount of the compensation and the time of times at which the trustee is entitled to receive it are subject to allowance or approval by the court. The court exercises its discretion in fixing the amount and time of payment of compensation, but such discretion is ordinarily exercised in accordance with rules and practices which have become established in the State, not as absolute rules but as rules to be applied in most cases.' Restatement (Second) of Trusts, supra s. 242, Comment b at 605; Bogert, Trusts and Trustees s. 975, at 285 (2d ed. 1962); 3 Scott, Trusts s. 242, at 2109 (3d ed. 1967).

In this case it was stipulated that the custom and practice in New Hampshire at the time in question was for trustees to make annual charges against income, as compensation for its collection and distribution, and a final termination fee charge against principal. Plaintiffs contend, however, that this custom and practice is improper and unlawful. This method of trustee compensation has been, at least until quite recently, the approved method in most other states as well as New Hampshire: 'The ordinary practice with reference to the compensation of trustees is to give the trustee annual or periodic commissions based on a percentage of the income received and paid out. This is paid from income. In addition they are entitled ordinarily to a percentage of the principal, payable on the distribution of the principal. . . .' 3 Scott, supra s. 233.3, at 1921; Restatement (Second) of Trusts, supra s. 233, Comment h at 560. E.g., Mercantile Trust Co. Nat'l Assoc. v. Jaeger, 457 S.W.2d 727, 733 (Mo.1970). We do not think that this traditional method of compensation was improper in this case.

In recent years many trustees including those in Hillsborough County have changed over to a partial 'pay-as-you-go' method of calculating principal fees, whereby annual charges are made against principal and a smaller percentage termination fee is made on termination of the trust. This may well indicate the merit in plaintiffs' contention that annual principal charges more accurately conform to the value of the actual services rendered. Restatement (Second) of Trusts, supra s. 233, Comment h at 560. See...