Spencer v. Spencer

• Citation: 219 N.Y. 459,114 N.E. 849
• Parties: SPENCER et al. v. SPENCER et al.
• Decision Date: 28 December 1916
• Court: New York Court of Appeals

219 N.Y. 459

114 N.E. 849

SPENCER et al.

v.SPENCER et al.

Court of Appeals of New York.

Dec. 28, 1916.

Appeal from Supreme Court, Appellate Division, First Department.

Proceeding by Lorillard Spencer, 3d, and another, as trustees, etc., against Caroline S. Spencer, impleaded with Lorillard Spencer, 4th, a minor, by his guardian ad litem, and others. From a judgment of the Appellate Division (169 App. Div. 54,154 N. Y. Supp. 527) affirming a judgment judicially settling the accounts of the trustees, Caroline S. Spencer appeals. Modified and affirmed.

1. TRUSTS k274(1)-PRINCIPAL OR INCOME-TAXES AND EXPENSES.

Where testator recited his one-third interest in a farm, estimated to be worth $400,000, and provided that on a sale before his death or by his executors thereafter a son should receive one-fourth of the proceeds, and gave his residuary estate in trust for investment, and to pay over the net annual income to his widow for life, and on her death to pay the net annual income to his son, and gave the widow a legacy of $100,000, payable at once, and left him surviving his widow, a son, and grandson, and personal property valued at $156,802.50, certain city property and a residence in Newport, the taxes and carrying expenses and assessments on the farm, which was unproductive, leaving the widow practically no net income, were payable, not out of the income, but out of the principal.

[Ed. Note.-For other cases, see Trusts, Cent. Dig. s 389; Dec. Dig. k274(1).]

2. TRUSTS k274(1)-INCOME-TAXES.

The general rule is that taxes and carrying charges on real estate held by trustees for a life beneficiary are to be paid out of the income of the trust estate, and are not properly chargeable to capital account, unless the will contains unequivocal directions to the contrary.

[Ed. Note.-For other cases, see Trusts, Cent. Dig. s 389; Dec. Dig. k274(1).]

Herbert Barry, of New York City, for appellant.

Wolcott G. Lane, of New York City, for plaintiffs.

Charles H. Edwards, of New York City, for respondent Lorillard Spencer, 4th.

CUDDEBACK, J.

The question in this case is whether the taxes and other carrying charges on certain real estate left in trust by the testator shall be paid out of income or shall be charged to the principal of the trust estate.

Lorillard Spencer, 2d, died March 14, 1912, leaving a last will and testament dated April 27, 1911, which contained the following, among other, provisions:

‘Third. Whereas I now have a one-third (1/3) interest in a certain farm situated at Williams-bridge, borough of Bronx, city of New York, which interest I acquired under the last will and testament of my brother, Charles G. Spencer, deceased, and whereas I have agreed with my brother, William Augusta Spencer, and my sister, Eleanora L. S. Cenci, to divide the said farm, if the said farm is not sold by the executors of my said brother Charles' estate before July 28th, 1911, now therefore, I will and direct that the proceeds of my said interest in, or share of, said farm shall be divided as follows: If I should sell my entire interest in said farm previous to my death, I give and bequeath to my son, Lorillard Spencer, Jr., the sum of one hundred thousand($100,000) dollars; or, if I should sell previous to my death any portion or portions of my interest in or share of the said farm, I give and bequeath to my son, Lorillard Spencer, Jr., a sum equal to twenty-five (25) per cent. of the net proceeds of such sale. If, after my death, the whole of my interest in or share of said farm, or any portion or portions thereof is sold by the executors or trustees, their survivors or survivor, successors or successor, hereinafter named, then I give and bequeath to my said son, Lorillard Spencer, Jr., a sum or sums equal to twenty-five (25) per cent. of the net amount or amounts realized from such sale or sales, to be paid to him as soon as practicable after the net proceeds of such sale or respective sales are collected. If my son, Lorillard Spencer, Jr., should die before me, or if at the time of his death the whole or any portion of my interest in, or share of, the said farm shall remain unsold, then I give and bequeath to my daughter-in-law, Mary R. Spencer, the same share of the proceeds of said property which my said son, Lorillard Spencer, Jr., would have received if living, provided that, at the time of the sale of the said property, and of each portion thereof, the said Mary R. Spencer has not remarried.’

‘Sixth. All the rest, residue and remainder of my estate of every nature and kind, whether real, personal or mixed, and wheresoever situated, which I have or may have or of which I may die possessed, and whether in possession, reversion or remainder, so far as I have power to dispose of the same by will, I give, devise and bequeath to my said trustees hereinafter named, their survivors or survivor, successors or successor, in trust, however, for the following purposes: To invest and reinvest the funds of said trust estate and to change the investments thereof according to their or his best skill and judgment in the way and manner hereinafter provided; to collect and receive the rents, dividends, interest and income thereof, and to pay over to my said wife, Caroline S. Spencer, during her life, the net annual income in quarterly installments; and upon the death of my said wife, Caroline S. Spencer, to collect and receive the rents, dividends, interest and income thereof, and to pay over to my said son, Lorillard Spencer, Jr., during his life the net annual income in quarterly installments; and upon the death of my said son, Lorillard Spencer, Jr., I direct my said trustees, their survivors or survivor, successors or successor to convey and deliver in equal shares to the lawful issue of my said son, Lorillard Spencer, Jr., if any then surviving, per stirpes and not per capita, the principal of said trust property and any accrued income thereon.’

The will also gave to the widow a legacy of $100,000, payable at once, and made certain other bequests, and explained that no further provision was made for the testator's son, Lorillard Spencer, 3d, because the son on the testator's death would receive certain property of which the testator had enjoyed the use for life and which yielded an annual income of $20,000. The will vested in the plaintiffs as trustees a very broad and discretionary power to sell real estate.

The testator left him surviving his widow, the defendant Caroline S. Spencer, and his son, the plaintiff Lorillard Spencer, 3d, and his grandson, the defendant Lorillard Spencer, 4th, son of the plaintiff, who is an infant under the age of 14 years.

Lorillard Spencer, 2d, at the time of his death was possessed of personal property which amounted, after the payment of legacies and other charges thereon, to $156,802.50, and which passed into the hands of the plaintiffs as trustees, and also the following real estate: A lot of land on Green street in the borough of Manhattan; an undivided one-half interest in a lot of land on Broadway in the borough of Manhattan; an undivided one-third interest in the Williams-bridge farm, containing about 115 acres, in the borough of the Bronx; an undivided one-twelfth interest in land on the Bronx and Pelham Parkway, in the borough of the Bronx; his residence in Newport, R. I., known as Chastellux.

The Williamsbridge farm came to the testator by inheritance in or about the year 1906. It was practically unproductive, as was also the land on the Bronx and Pelham Parkway, though that is a small matter.

The testator's widow occupied the residence at Newport. The two lots in Manhattan seem to have produced satisfactory revenue. The income which the trustees...