Will of McDonald, Matter of
| Decision Date | 05 February 1988 |
| Citation | 525 N.Y.S.2d 503,138 Misc.2d 577 |
| Parties | In the Matter of the Petition of Morgan Guaranty Trust Company of New York and Henry C. McDonald for the Judicial Settlement of their Final Account as Trustees of the Trust f/b/o Anna C. McDonald under Article EIGHTH, and the Final Account of Morgan Guaranty Trust Company of New York and the First Intermediate Account of Henry C. McDonald as a Trustee of the Trusts f/b/o Eleanor A. McDonald under Article EIGHTH A and of Henry C. McDonald under Article EIGHTH B of the Last WILL and Testament OF W. Stewart McDONALD, Deceased, or for Alternate Relief. Surrogate's Court, Westchester County |
| Court | New York Surrogate Court |
Hill, Ullman & Erwin, New York City, for petitioner.
EVANS V. BREWSTER, Surrogate.
This is a proceeding for the judicial settlement of final accounts of Morgan Guaranty Trust Company of New York and First Intermediate Accounts of Henry C. McDonald as trustees of trusts created under Article Eighth, Eighth A and Eighth B under decedent's will for the benefit of Anna C. McDonald, Eleanor A. McDonald and Henry C. McDonald, respectively.
W. Stewart McDonald, the decedent, died on March 9, 1967 leaving a will and codicil which was admitted to probate on March 20, 1967. In Article Eighth, a residuary trust was created for the benefit of his wife Anna C. McDonald. Upon her death the trust corpus was to be divided into three equal shares. One share to be held in further trust for Eleanor A. McDonald, decedent's daughter, one share to be held in further trust for Henry C. McDonald and the third share was given outright to James S. McDonald, decedent's son.
The petitioners herein, Morgan Guaranty Trust Company of New York and Henry C. McDonald were named as trustees in Article Fourteenth of the will and letters of trusteeship were issued to them on August 22, 1969.
Upon the death of Anna C. McDonald on March 20, 1986 the trusts created in Article Eighth A and B were established.
Thereafter by petition filed November 5, 1986 the trustees sought a decree permitting the resignation of the corporate trustee and the appointment of successor trustees for the continuing trusts. The primary reason for the resignation of the corporate trustee was its corporate reasonable compensation fee schedule which includes a minimum annual fee of $10,000 and an additional $2,500 annually for serving with a co-trustee. The corporate trustee schedule was to be used to determine the "reasonable compensation" of the corporate trustee. As stated in the petition, "Petitioners both feel this is too heavy a burden for these trustees, and Morgan Guaranty Trust Company of New York has therefore itself proposed to resign."
By decree of January 8, 1987, the petition was granted. The corporate trustee was permitted to resign and was directed to file final accounts for its acts and proceedings as trustee of the trusts created in Article Eighth, Eighth A and Eighth B.
No objections have been filed to the settlement of the accounts. The only issue to be determined is the statutory commissions to which the corporate trustee is entitled from each trust. Commissions have been computed and set forth in the accountings in accordance with the corporate "reasonable compensation" fee schedule. The petition to settle the accounts of the trustees prays for the allowance of commissions to which the corporate trustee is entitled.
The law regulating commissions of corporate trustees was substantially altered by the legislative enactment of Chapter 936 of the Laws of 1984 which created SCPA 2312. The existing statutory commissions schedule for corporate trustees of trusts with principal value in excess of $400,000 was abandoned as a method of computing commissions. Thereafter, corporate trustees for such trusts shall receive "such commissions as may be reasonable". SCPA 2312(2). However, the statute does not contain a definition of reasonable compensation. The legislature also increased the annual fee of a corporate fiduciary, added SCPA 2114 to provide for the review of the reasonableness of the compensation and amended EPTL 11-2.2 to impose a higher standard of investment skill upon corporate fiduciaries. (SCPA 2312, 2311; EPTL 11-2.2, ch. 936 of Laws of 1984). The statute became effective on August 6, 1984 and it applies to trusts in existence on the effective date. The reasonable compensation is not applied retroactively and does not become effective until the end of the then current trust year after the effective date. Until the end of the trust year, commissions must be computed pursuant to SCPA 2308 and 2309.
In the absence of a statutory definition of "reasonable", reasonableness must be determined by the courts. While factors to be considered as guidelines in determining the reasonableness of attorneys fees have been established by the courts, Matter of Freeman, 34 N.Y.2d 1, 355 N.Y.S.2d 336, 311 N.E.2d 480, Matter of Potts, 123 Misc. 346, 205 N.Y.S. 797, aff'd 213 App.Div. 59, 209 N.Y.S. 655, no cases were found in New York which established guidelines or factors for determining commissions "as may be reasonable." The court decisions in other states which have "reasonable compensation" of trustees laws, are informative.
. McKinneys Practice Commentaries (Surr.Ct.Prac.Act) 2312 (Consolidated Supp.1985).
In adopting Chapter 36 of the laws of 1984, the legislature followed the path of California, Pennsylvania, Florida and many other states which enacted similar statutes providing compensation to trustees, reasonable for the services performed. Clearly, a trustee is entitled to and should receive fair and just compensation for the services performed. In re Ischy Trust, 490 Pa. 71, 415 A.2d 37; In re Dunlap's Estate, 38 Ariz. 525, 2 P.2d 1045.
Uniformly, in other jurisdictions, which have a reasonable compensation standard for determining trustees' compensation, courts have established factors to be considered when determining reasonable compensation of trustees. In general, it can be said that a trustee's compensation depends upon the extent and character of the labor and responsibility involved during the trustee's administration of the trust, ( In re Strickler's Estate, 354 Pa. 276, 47 A.2d 134) and must be reasonable in relation to the circumstances and the services actually rendered. Hayward v. Plant, 98 Conn. 374, 119 A. 341; In re Ischy Trust, supra; Rogers v. Belt, 317 Ill.App. 81, 45 N.E.2d 511. Before reasonable compensation for fiduciary services performed is determined, the trustee must establish to the satisfaction of the court a responsibility incurred and services actually performed in the execution of his fiduciary trust. In re Harrison's Estate, 217 Pa. 207, 66 A. 354. In New York as in Illinois, the law is construed to require that "the trustee, in some manner, make a showing of the performance of his acts with sufficient detailed proof in connection therewith, so that the court can determine what is a fair and proper amount of compensation to be granted." Rogers v. Belt, supra, 317 Ill.App., at 84, 45 N.E.2d p. 512.
Although courts in jurisdictions which have a reasonable compensation standard for determining the compensation of a trustee apply varying factors, there is a consistency in applying only those factors which exist in a particular case. The courts in general consider (1) the size of the trust, (2) the responsibility involved, (3) the character of the work involved, (In re Harrison's Estate, supra, In re Scott's Estate, 418 Pa. 332, 211 A.2d 429, (4) the results achieved, (5) the knowledge, skill and judgment required and used, (6) the time and services required, (7) the manner and promptness in performing its duties and responsibilities (Hayward v. Plant, supra ) (8) any unusual skill or experience of the trustee, (9) the fidelity or disloyalty of the trustee, (10)...
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