State ex rel. Beardsley v. London & Lancashire Indem. Co. of America

• Decision Date: 09 June 1938
• Citation: 200 A. 567,124 Conn. 416
• Parties: STATE ex rel. BEARDSLEY et al. v. LONDON & LANCASHIRE INDEMNITY CO. OF AMERICA.
• Court: Connecticut Supreme Court

200 A. 567

124 Conn. 416

STATE ex rel. BEARDSLEY et al. v. LONDON & LANCASHIRE INDEMNITY CO. OF AMERICA.

Supreme Court of Errors of Connecticut.

June 9, 1938

Rehearing Denied July 15, 1938.

Appeal from Superior Court, Litchfield County; John Richards Booth and Frank P. McEvoy, Judges.

Action on a probate bond by the State, on the relation of Mary Beardsley and others, against the London & Lancashire Indemnity Company of America, wherein a cross-complaint was filed, a demurrer to the complaint was overruled, a demurrer to the second defense in the answer was sustained, and the issues were tried to the court. From a judgment for plaintiffs, defendant appeals.

Error in amount of judgment only. Case remanded, with direction.

Charles Welles Gross, of Hartford, for appellant.

Lorin W. Wills, of Bridgeport, and Frederic E. Mygatt, of New York City, re for appellees.

Argued before MALTBIE, C.J., and HINMAN, AVERY, BROWN, and JENNINGS JJ.

HINMAN, Judge.

This action was brought at the relation of appointees under a power of appointment claiming to be entitled to shares in the residue of property after the life use of the donee of the power, and alleging loss to the trust by mismanagement through improper and illegal investment by the life tenant on whose bond as trustee the defendant is surety. The finding includes the following facts: By this will, George T. Sperry of New Milford, who died in July, 1926, gave to Sarah Tomlinson $10,000 in cash and his household goods, to Will S Sperry his note for $5,000 which the testator held, and he then gave to Sarah Tomlinson the use and income during her life of all the rest and residue of his estate. Subject to her life use, he made several personal bequests, aggregating $31,000, and gave the residue ‘ to such persons societies and corporations, and in such shares, interests and proportions, absolutely or in trust, as the said Sarah Tomlinson shall by her last will and testament * * * designate and appoint; and in default of such appointment either wholly or in part, then I give and devise the same or such part thereof as may not be so appointed by her, to the estate of said Sarah Tomlinson.’ George E. Ackley, the executor named in the will, qualified and settled the estate and filed his account, which the Court of Probate, on August 9th, 1927, allowed, found that there then remained for distribution $112,766.70 and ordered that the executor deliver to Sarah Tomlinson the $10,000 in cash and household furniture, to Sperry his note, that Sarah Tomlinson give a probate bond of $100,000 for the faithful performance as trustee of the trust created under the will, and that upon the acceptance of such bond the executor deliver to her all the rest and residue of the estate. Sarah Tomlinson as principal and the defendant as surety executed such a bond. It was accepted by the Court of Probate and on or about September 27th, 1927, Ackley filed a supplemental and final account showing a balance on hand of $104,435.39. This account was approved by the Court of Probate, which found that securities of the inventory value of the amount above mentioned remained on hand and ordered that the executor deliver the same to Sarah Tomlinson under the terms of the will. Subsequently Ackley made return that he had delivered these securities to Sarah Tomlinson and taken her receipt therefor. The pecuniary legacy of $10,000 made to Sarah Tomlinson and ordered paid to her was never paid.

Sarah Tomlinson died March 9th, 1932, leaving a will and codicil by the terms of which she, in pursuance of the power and authority given her by the Sperry will, designated and appointed disposition of so much of the residuary estate of Sperry as remained, after the payment of the legacies bequeathed by the Sperry will, to named individuals and corporations to the amount of $31,000, also certain real estate, and all the rest and residue remaining after payment of these appointments and dispositions to her nephew George N. Beardsley; Marcus G. Merwin, named in that will as executor, qualified and acted as such and was also appointed and qualified as administrator d. b. n., c. t. a. of the estate of Sperry. On June 17th, 1932, Merwin as executor under the Tomlinson will filed in the Court of Probate a statement of facts regarding the trust estate, the life use of which had been left to Sarah Tomlinson under the Sperry will, and presented therein an account of the property which he found remaining in the trust, and setting forth that he had no knowledge or information of any other property belonging thereto. Under date of July 9th, 1932, the Court of Probate accepted and allowed the same. Under date of September 16th, 1932, Merwin was ordered to reduce the estate to cash and on November 25th, 1932, as administrator c. t. a. of the estate of Sperry he filed in the Court of Probate a statement and account, further details as to which will be stated later in this opinion. On January 25th, 1933, this statement and account was accepted and instructions given to Merwin as to the disposition of the balance remaining on hand as hereinafter more fully stated. No appeal was ever taken from either of the orders dated July 9th, 1932, and January 25th, 1933. Further findings are recited later in appropriate connections.

From the facts found the trial court concluded that Sarah Tomlinson was a life tenant of the estate bequeathed to her under the Sperry will; that the defendant surety is liable to the relators, all of whom are appointees by Sarah Tomlinson under the power of appointment; that the acceptance and approval of the statement and account filed by Merwin as executor of the Tomlinson will is no defense to this action, nor is the sale of securities found in the trust estate, the application of the proceeds, or the acceptance and approval of the account filed by Merwin as administrator c. t. a. of the Sperry estate; that no credit is to be given for the pecuniary legacy to Sarah Tomlinson for $10,000 which was not paid; that Sarah Tomlinson as life tenant and trustee was liable for the improper investment of the trust estate; and that for whatever portion of the trust estate was wasted or dissipated or improperly invested by her and for which she became liable, the defendant as her surety is also liable. It also concluded that the loss of the trust estate should be based upon the difference between the cost of the improper investments plus securities wholly lost or misappropriated, less the salvage obtained by the sale of improper investments, such loss amounting to $61,610.40. To this interest from March 9, 1932 was added and judgment rendered for the total amounting to $81,325.72.

The defendant advanced, first by a second defense, a demurrer to which was sustained, and in various ways on the trial, a claim that the probate proceedings relating to the ‘ accounts' filed by Merwin, as executor of the will of Sarah Tomlinson, and as administrator c. t. a. of the estate of Sperry, being unappealed from, released and discharged the defendant from all liability as surety for Sarah Tomlinson. Decision as to the validity of this contention is decisive of many of the assignments of error. The gist of the claim is that the action of the Court of Probate, upon notice to all interested parties including the relators therein, was not only binding upon them but the effect thereof was to bar them from recovery from the defendant on account of improper investments made by its principal, or otherwise.

It is true that if the executor or administrator of a deceased testamentary trustee files a full and final account of the decedent, the allowance of it, if not appealed from, would be determinative of rights as between the trustee and his estate and the beneficiaries and other parties interested. General Statutes, §§ 4972, 4976. The decree of a Court of Probate if unreversed is conclusive as to all relevant matters embraced therein. Delehanty v. Pitkin, 76 Conn. 412, 421, 56 A. 881. The issues involved in the acceptance of such an account might, and perhaps ordinarily would, include those pertaining to the legality and propriety of investments made by the trustee, and if illegality or impropriety be found by the Court of Probate it should refuse to allow the account until it has been corrected ‘ so as to show that the trustee is holding for the beneficiary all that the latter is entitled to receive, under the usual rules as to relief where the trustee has been guilty of misconduct; and for that purpose the court would have the power to apply the appropriate principles of law or equity necessary for the accomplishment of such a result. * * * The jurisdiction of courts of probate to pass upon the accounts of a testamentary trustee is not, however, exclusive, and courts of general jurisdiction may entertain actions against trustees for breaches of their duty, the jurisdiction of the two courts being concurrent.’ Dettenborn v. Hartford-National Bank & Trust Co., 121 Conn. 388, 391, 185 A. 82, 84.

The situation in the present case is not, however, the ordinary one involving only the respective responsibilities and rights as between a deceased trustee and a successor trustee or the beneficiaries. The rights to which the relators are entitled as appointees and beneficiaries were derived from the will of Sperry and they receive the property thereunder, and from his estate; the legal title to the appointed property never vested in Sarah Tomlinson, the life tenant and donee of the power. McMurtry v. State, 111 Conn. 594, 598, 151 A 252; United States v. Field, 255 U.S. 257, 262, 41 S.Ct. 256, 65 L.Ed. 617, 18 A.L.R. 1461. ‘ The appointee really takes from the original testator; the donee of the power acting as a mere conduit of the former's bounty.’...