Miller v. Mich. Trust Co. (In re Peck's Estate)

• Decision Date: 12 November 1948
• Docket Number: No. 18.,18.
• Citation: 34 N.W.2d 533,323 Mich. 11
• Parties: In re PECK'S ESTATE. MILLER v. MICHIGAN TRUST CO.
• Court: Michigan Supreme Court

323 Mich. 11

34 N.W.2d 533

In re PECK'S ESTATE.MILLER

v.MICHIGAN TRUST CO.

No. 18.

Supreme Court of Michigan.

Nov. 12, 1948.

Appeal from Circuit Court, Kent County; Leonard D. Verdier, judge.

Proceeding by the Michigan Trust Company, trustee under the will of Thomas M. Peck, deceased, and individually, for a final accounting opposed by Lydia B. Miller, executrix of the estate of Emily A. Peck, deceased. From an order of allowance, contestant appealed to the circuit court. From an order of the circuit court allowing the trustee's account and disallowing the trustee's claim for an overpayment of income to the life tenant under the will, contestant appeals, and petitioner cross-appeals.

Order affirmed in part, and cause remanded with directions.

Before the Entire Bench.

Annis & Cooper, of Grand Rapids, for Lydia B. Miller, Executrix of Emily A. Peck.

Butterfield, Amberg, Law & Buchen, of Grand Rapids, for Michigan, Trust Co. Trustee.

BUTZEL, Justice.

Thomas M. Peck, a wealthy citizen of Grand Rapids, Michigan, died in 1913, leaving a will and numerous codicils. In the will he left two parcels of property, one on Monroe Street and the other on Wealthy Avenue, in Grand Rapids, to John E. Peck and Roger W. Butterfield, in trust,

‘To collect the rents, income and profits thereof, and from the moneys so collected to pay the taxes and assessments on premises and to pay to my beloved wife, Emily A. Peck, the sum of Two Thousand Five Hundred ($2,500) Dollars per annum in monthly payments during her natural life, and out of the balance of said income, if any, to pay the expenses of said Trust, including a reasonable compensation to my Trustees, and for the repairs of said premises, and if a balance of said income shall remain, then up to the settlement of my estate it shall be paid to my executors to be disposed of under the other provisions of this will. After the settlement of my estate any such surplus of income over and above the amount for the payment of taxes, said annuity, expenses and repairs, shall be held by my Trustees and invested and re-invested, and shall constitute a fund out of which may be paid extra ordinary repairs; or from which may be made up any deficiencies arising from any cause in the moneys to be paid for annuity or expenses of said trust. In case the building on said premises, or any part thereof, shall be destroyed during the continuance of this trust * * * or become so dilapidated that repairs * * * be necessary for which the provisions herein made should not be sufficient, then I authorize my said Trustees to borrow money and mortgage said premises to procure funds for the purpose of making such construction or repairs; and at the death of my said wife that the property herein mentioned as belonging to said trust, including all income, or its proceeds not paid over, in the hands of my Trustees go to and be divided between my brother, John E. Peck, and my sister, Catherine A. Peck, share and share alike.'

The will also gave his widow the homestead together with the household goods and personal belongings. It stated:

‘The devises and bequests made to or for the benefit of my wife, Emily A. Peck, including the provision for her in the second paragraph of this my will, are in lieu of dower and of all other claims against my estate, and I direct that in case for any purpose it shall become necessary to sell any of my property in the settlement of my estate, that all of my other property be exhausted before the property given to her, or for her benefit be diminished in any manner. It being my purpose that the provisions for her shall have priority over all the other legacies or devises of this my will.'

In the first codicil, he increased the annuity to his wife to $4,000 a year and directed the trustees to pay it to her out of the net income of the property. He also added another piece of property on Library Street to the trust. In a subsequent codicil he also made an additional bequest of $50,000 to her. Regular payments of $4,000 per year were made to the widow for approximately twenty years. During that entire period the income from the property was more than sufficient to pay the taxes, expenses of the trust, repairs, et cetera, and the $4,000. During the year ending June 16, 1933, however, the income from the trust property was insufficient for operating the trust so that the Michigan Trust Company which had become the successor trustee advanced $1,058.74 out of its own funds to recover the overdraft. However, during many if not all the previous years the annual income was far in excess of the amounts necessary to pay the annuity, taxes and other expenses. For the year ending June 16, 1925, and for each year thereafter up to and including June 16, 1932, the Michigan Trust Company made large payments of the surplus aggregating $38,700 to Percy S. Peck and Clara Peck Caulfield, each receiving one-half of such sums. They at that time had become entitled to the remainder interest in the property in trust. The original remaindermen under the trust were testator's brother and sister, John E. Peck and Catherine A. Peck, now both deceased. Catherine A. Peck had transferred her interest to John E. Peck, who in his will devised his interest in the trust property, one-half to his son Percy, one-half in trust to his daughter Clara Peck (Caulfield) subject to the rights of Emily A. Peck. It is not necessary to detail other facts in regard to the estate. There is no criticism of the management of the trust with the exception of the payments of large sums of the surplus income, aggregating the sum of $38,700, to the remaindermen, and also the sale of the Wealthy Street property. Appellant does not attack the sale of the Wealthy Street property in their brief.

Appellant contends these payments were wrongfully made and in violation of the express provisions of the will as hereinbefore quoted; that this was such a breach of trust as to entitle Lydia B. Miller, as executrix of the Emily A. Peck estate, appellant, to recover the sum of $17,644.11 from the Michigan Trust Company, appellee, in both its individual and trust capacity. This amount is the sum of the difference each year between the $4,000 annuity provided for in the will and codicils and the $2,400 per year paid to Mrs. Peck from February, 1934, to her death in November, 1944. The record shows that if the payments of $38,700 had not been made to the remaindermen but had been invested and held as a reserve to be used in the subsequent years when the income decreased, there would have been more than sufficient to pay Mrs. Peck $4,000 per year. In 1933 the income from the trust properties had dwindled so that the trust company was no longer able to pay Mrs. Peck $4,000 per year and the taxes and other expenses of the trust from the annual income. In 1934 the trust company discontinued such payments at the rate of $4,000 per year. Mrs. Peck retained a law firm in Grand Rapids, and particularly Mr. Mark Norris of that firm. He wrote a letter, dated February 6, 1934, addressed to the Michigan Trust Company, in which he stated that the trust estate had been depleted by the improper payment of over $38,000 to the remaindermen, and also by the sale of the Wealthy Street property and wrongful use of the proceeds therefrom. He demanded that the trust company pay Mrs. Peck at once the difference between what they had paid to her the last year and the sum of $4,000, and also continue the payment of $4,000 per year until the termination of the trust. The Michigan Trust Company was represented by a law firm who acted through Mr. Willard F. Keeney of said firm. The attorneys for both parties entered into negotiations to settle their differences if possible. As a result of these negotiations Mr. Keeney sent a letter to Mr. Norris on September 28, 1934. It stated that after further conference with the Michigan Trust Company relative to the proposed adjustment of the claims of Mrs. Peck to the annuity under her husband's will, it had agreed in case the net rentals of the Monroe Avenue and Library Street building (one parcel of property having been disposed of) after payment of taxes, expenses and trustee's fees, were insufficient to pay the $4,000, the trust company would contribute from its own funds any deficit thus arising so as to permit the payment to Mrs. Peck of the sum of $200 per month, in accordance with the recent discussion. These advances would begin the first of February, 1934, and continue in any event through January, 1935, and for such period thereafter as both parties remained content with this arrangement. Either party had a right to discontinue the arrangement after January 30, 1935. The arrangement was carried out up to the time of the death of Mrs. Peck, neither party having given notice of discontinuance. The letter stated that Mrs. Peck should not claim against the trust company payment for any period prior to the date of such discontinuance. The letter also referred to Mrs. Peck's claim for an accounting to pay her the full annuity of $4,000 a year whether realized out of current rentals or not, and to the trust company's denial of her claim in that regard and to its insistence there was no liability upon its part. The letter also stated that the arrangement made should not be construed as a waiver of either party of his or her rights in the controversy except that no further claims should be asserted against the trust company for the period that the $200 per month was paid by it to Mrs. Peck and received by her pursuant to the provisions of this letter. The letter further asked that the writer be advised whether the various points specified in the letter were approved by Mrs. Peck. On October 11, 1934, she signed an endorsement on the letter to the effect that arrangement evidenced by the foregoing letter was agreed to. The settlement arrangement was never approved by the probate court, and, as we shall show, it was not...