Phraner v. Stone

• Decision Date: 05 November 1945
• Docket Number: 148/317.
• Citation: 44 A.2d 504
• Parties: PHRANER et al. v. STONE et al.
• Court: New Jersey Court of Chancery

44 A.2d 504

PHRANER et al.

v.STONE et al.

148/317.

Court of Chancery of New Jersey.

Nov. 5, 1945.

Bill by Wilson W. Phraner and Frances P. Wylie, as executors of the estate of Elizabeth B. Stone, deceased, against Mary S. Stone and others for construction of decedent's will and advice and direction.

Decree advised in accordance with opinion.

Syllabus by the Court.

1. Interest is not ordinarily payable upon a legacy until one year after the death of the testatrix (now changed to eighteen months. R.S. 3:26-1, P.L.1943, Chap. 82, N.J.S.A.). Where the will fixes time of payment, interest begins from the time fixed.

2. Where the testatrix in her will directs that the trust created therein shall be entitled to interest at the rate of 5% per annum from the date of her death until payment of the corpora of the trusts to the trustees, full effect will be given to her directions and the beneficiaries of the trust held entitled to interest at the rate provided in the will from the date of the death of the testatrix.

3. Testatrix gave her executors in their discretion three years in which to pay to themselves as trustees the corpora of the trusts and provided that her executors shall pay interest thereon to the beneficiaries at the rate of 5% per annum from the date of her death until the payment, such interest to be chargeable to her residuary estate and treated as income and paid as such to the beneficiaries. Held, testatrix intended that interest be paid the respective beneficiaries of the trusts mentioned in articles V and VII on the sum of $50,000 and not upon any diminished amount.

4. It is well established that appointees take not from the persons who appoint but from the original testator. Testatrix in exercising the power of appointment under the will of her mother merely acted as a conduit for the distribution of that portion of her mother's residuary estate from which she enjoyed the income during her life. When, therefore, in her will testatrix said in article III, ‘I give, devise and bequeath my portion of the residuary estate of my mother, Mary M. Stone, hereby executing the power given me by her will * * *,’ she was not disposing of her own estate, and did not intend by her direction in her will to pay taxes to cover that part of the federal estate tax as relates to the appointed property.

5. Testatrix directed that compensation be allowed to her trustees in accordance with the laws of the State of New York. Commissions in this State are allowed to testamentary trustees in accordance with the provisions of R.S. 3:11-2, N.J.S.A. Under R.S. 3:11-5, N.J.S.A., where provision is made in a will for compensation to a testamentary trustee, such provision is deemed full satisfaction for such services in lieu of the commissions set forth in our statute unless the trustee shall by writing renounce all claim to the compensation provided in the will, and the trustees are bound to accept such compensation unless they renounce in accordance with the statute.

Truman H. Luhrman, of Jersey City, for complainants.

Frederick C. Kentz, of Summit, for defendants.

J. Albert Homan, of Trenton, for I. Grant Scott, guardian ad litem.

STEIN, Vice Chancellor.

Complainants, Wilson W. Phraner and Frances P. Wylie, are the executors of the estate of Elizabeth B. Stone, and bring this bill for construction of the will and advice and direction.

Elizabeth B. Stone died testate a resident of Union County on November 17, 1942. Her last will and testament and codicil thereto were admitted to probate and letters testamentary issued to Wilson W. Phraner and Frances P. Wylie.

Under article V, the testatrix bequeathed the sum of $50,000 to her trustees, the complainants herein, in trust, to pay the net income therefrom to her sister, Mary S. Stone, for life, and upon her death the principal to become a part of the testatrix's residuary estate to be distributed in accordance with her will.

By article VII testatrix bequeathed the sum of $50,000 to her trustees, in trust, to pay the net income for the support, maintenance, and use of Margaret Kipp Todd, for life, and upon her death to pay the principal to Elizabeth P. Bowles, Frances Phraner, Mary Sumner Phraner, and Mary A. Phraner, or their heirs, share and share alike, per stirpes and not per capita.

In article IX of her will, the testatrix provided: ‘I direct that the trusts created in Paragraphs V and VII of this my Will shall be entitled to interest at the rate of five per centum per annum from the date of my death until the payment of the corpus of said trusts to the trustees; such interest shall be chargeable to my residuary estate and shall be treated as income and paid as such to the beneficiaries entitled thereto.’

Under article I of the codicil to her will she provided: ‘In order that my estate may not be needlessly sacrificed, I direct that my executors or their successors shall have, in their discretion, three years in which to settle my estate and to pay out the general legacies set forth in Paragraph IV of my Will, and that said legacies therein mentioned shall not be entitled to interest if these amounts are paid to said general legatees within three years from my death. I further direct that my executors, in their discretion, shall have three years in which to pay over to the trustees named in my Will the amounts set forth in Paragraphs V and VII of this my Will, but shall pay interest thereon to the legatees, as provided in Paragraph IX of my Will.’

The complainants have substantially completed the administration of the estate and have paid all inheritance taxes due to the State of New Jersey and all federal estate taxes which they concede to be properly due; that after having paid said taxes and all other appropriate charges, and after making proper reservations for the payment of commissions and counsel fees, there will be insufficient funds to pay all of the general legacies at this time, and that it can be reasonably anticipated that the residuary legatee will at no time receive any part of her said legacy or, at best, a very small percentage thereof.

Complainants have paid to the general legatees, including themselves as trustees under the aforesaid trusts, 55% of said legacies-40% thereof during February, 1944, and the remaining 15% during October, 1944. They anticipate at the time of their first accounting they will be able to pay an additional 2% on account of the general legacies, and that when distribution is finally made they will be able to pay approximately 65% of each of the general legacies.

On May 27, 1925, the testatrix transferred by instrument in writing to Wilson W. Phraner, as trustee, certain securities and therein provided for the payment of the net income from said securities to certain designated life beneficiaries, and upon their respective deaths to pay the corpus thereof to Jean Yecker, Frances Short, and Elizabeth Steuart, if they be then living at the death of the last surviving life tenant, share and share alike, or to the survivors or survivor of them, in equal portions. The trust indenture further provided that if none of the named remaindermen be living, then the principal of said trust shall be paid over to the executor or executors designated in the last will and testament of the testatrix.

The Commissioner of Internal Revenue of the United States because of the language in the indenture proposes to treat said remainder interests of said trust as a part of the estate of Elizabeth B. Stone, deceased, and has computed the value thereof at $10,356.39. The complainants allege that they are resisting the claim of the Collector of Internal Revenue.

Under article X of her will, the testatrix provided as follows: ‘I direct that all inheritance or transfer taxes levied against my estate or any portion thereof shall be paid out of my residuary estate and also the trustees' commissions for receiving the trusts expressed in Paragraphs V and VII of this my Will shall be paid out of my residuary estate and also the trustees' commissions for receiving the trusts expressed in Paragraphs V and VII of this my Will shall be paid from my residuary estate at the time of the setting up of the trust.’

Under article III of her will, the testatrix exercised the power of appointment vested in her under the terms of the will of her mother, Mary M. Stone, deceased, as follows: ‘I give, devise and bequeath my portion of the residuary estate of my mother, Mary M. Stone, hereby executing the power given me by her will, to the children and children of deceased children of my sister, Caroline M. Phraner, me surviving, share and share alike, per stirpes and not per capita.’ This portion of the appointed estate under the federal estate tax laws was included in the decedent's estate for federal state tax purposes and was computed to have a value of $47,686.40.

In addition to the provisions set forth in article X of her will relating to the payment of commissions to the trustees, the testatrix under article XIV of her will provided as follows: ‘I give to my executors and trustees, and I direct that they be allowed as compensation for their services as such, the same commissions as executors and testamentary trustees may at the time of my death be allowed by the laws of the State of New York, and I further direct that the trustees shall be allowed to deduct all commissions on income paid beneficiaries at the time of payment. This provision being made in lieu of any allowance or commission made by the laws or practice of any jurisdiction in which my estate may be situated.’

Nine specific questions are presented for determination. Questions which involve the same principle of law will be answered under point I. The questions presented are:

A. Under article IX of the testatrix's will are the beneficiaries of the trusts created under articles V and VII entitled to interest at the rate of 5% per annum from the date of decedent's death on $50,000, the principal...