Case ID: ad_150/html/0656-01.html
Source: Caselaw Access Project
Author: {"author": "McLaughlin, J. :", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Irving W. Childs, Respondent, v. Eversley Childs, Individually and as Sole Trustee under the Last Will and Testament of William H. H. Childs, Deceased, Appellant.
    First Department,
    May 31, 1912.
    Trust — suit to set aside sales made by trustees — discharge of trustees in Surrogate’s Court —pleading — frivolous reply — res adjudicata — conclusiveness of surrogate’s decree settling accounts of trustee — jurisdiction—powers of surrogate to construe will and determine distribution of property— estoppel.
    Where testamentary trustees sued for an accounting of trust property alleged to have been sold by them without power of sale and at an inadequate price, etc., set out as a defense that they have been judicially discharged after an accounting in the Surrogate’s Court to which the plaintiff was a party and wherein the matters in controversy were determined, a reply admitting the entry of said decrees and that they have not been reversed, modified or set aside, whieh merely denies on information and belief certain allegations of the answer respecting what the accounts which were settled contain, is frivolous and raises no issue.
    A denial “upon information and belief ” is not expressly authorized by the Code of Civil Procedure, but, it seems, may be treated as a “denial of knowledge or information thereof sufficient to form a belief.” '
    Such reply is insufficient because the plaintiff is charged with knowledge of the accountings in the Surrogate’s Court, to which he was a party, and they are matters of public record.
    Even if it be assumed that the denials of the reply Were made in good faith no issue is raised as the decrees of the Surrogate’s Court are an absolute bar to the suit in the absence of allegations that they were obtained by fraud, misrepresentation or that the plaintiff did not have knowledge of the transaction prior to the entry of the decrees.
    The Surrogate’s Court has power to construe a will so far as may be necessary to determine to whom and in what manner an estate shall be distributed. It may also determine what property ,an executor or trustee holds and for what he is liable to account.
    Objections to an account of an executor or trustee must be presented and passed upon prior to the entry of a decree settling itor a party thereto is thereafter precluded from raising any question with reference thereto collaterally.
    Moreover, such action for an accounting is barred where the plaintiff, with knowledge of the facts now complained of, accepted his share of the property distributed under the decree of the Surrogate’s Court, as by so doing he ratified the transactions of the trustees and is estopped. In any event, in order for the plaintiff to question the validity of sales made by the executors, he must offer to return what be has received thereunder.
    
      Appeal by the defendant, Eversley Childs, individually and as sole trustee, etc., from an order of the Supreme Court, made at the New York Special Term and entered in the office of the clerk of the county of New York on the 7th day of February, 1912, denying the defendant’s motion for . judgment on the pleadings.
    
      John M. Bowers, for the appellant.
    
      Frederick H. Clarke, for the respondent.
   McLaughlin, J. :

Action to construe a will, to compel a retransfer to a trust estate of certain property alleged to have been wrongfully disposed of, to compel the trustee to account and to have him removed and another person appointed in his place.

After the service of a reply to new matter set up in the answer a motion was made by the defendant for judgment on the pleadings. The motion was denied and the appeal is from that order.

The reply admits that since the commencement of the action the trust created by the will of the testator has terminated and that the trustees have settled and by surrogates’ decrees have been discharged. The only question, therefore, necessary to be considered is whether the plaintiff, notwithstanding such decrees, upon the facts alleged is entitled to any relief.

The amended complaint alleges that the plaintiff’s father died on the 25th of April, 1898, leaving a will by which the plaintiff was bequeathed $35,000, a one-fourth interest in the business of the Mica Booting Company — a firm composed of the testator and the defendant — and a one-half interest in the residuary estate after the death of the plaintiff’s mother; that the $35,000, the one-fourth interest in the Mica Booting Company, and the entire residuary estate under the terms of the will were directed to be held by the trustees therein named in trust until the plaintiff became twenty-five yéars of age, subject, however, to a power of sale by the executors and trustees and in their discretion to pay him a portion of the proceeds before that time; that provision was made for the payment of certain income to the plaintiff before his mother’s death and to the payment to him of the principal, including his portion of the residuum, when he reached twenty-five years of age, if his mother was then dead; that his mother, one William H. Childs, and the defendant, Bversley Childs, who was a brother of the plaintiff, were appointed executors and trustees and the defendant was also appointed testamentary guardian of the plaintiff; that the will was admitted to probate in May, 1908, and letters testamentary were issued to the plaintiff’s mother and the defendant, both of whom qualified; that they acted as such until- March 21, 1904, when the mother died; that the third executor and trustee named in the will was thereupon substituted in her place and he served with the defendant as executor until July 15, 1907, when an accounting was had and a decree entered directing the executors to turn over the assets of the estate to themselves as trustees; that William H. Childs served as such trustee until August 6, 1908, when he, upon his own application, accounted and was discharged, and that thereafter the defendant continued to act as sole trustee until June 13, 1911, when, as appears by the answer and admitted by the reply, he accounted and was discharged. The complaint further alleges that in December, 1898, the executors unlawfully sold all of the testator’s interest in the Mica Roofing Company in violation of an express provision contained in the, will, which directed that the plaintiff’s interest therein should be held and managed by the executors and trustees until the plaintiff arrived at the age of twenty-five years, when the same was to be turned over to him. There -is no allegation in the complaint that the price at which this interest was sold, $157,764.26 in cash, and $311,000 par value of the capital stock of a corporation which purchased it, was inadequate or that the sale was fraudulent. It is, however, alleged that the power of sale contained in the will did not authorize the sale and that the purchaser took title to the property with notice of that fact and for that reason the sale should be set aside and, if necessary for that purpose, that the party who made the purchase be made -a party defendant. It is further alleged that a part of the residuary estate of the testator-consisted of 475 shares of the capital stock of the Boh Ami Company, of which the executory gqlct 50 shares in 1899 and the balance at some time prior to 1903; that the price at which this stock was sold was grossly inadequate and that the purchase money was furnished by the defendant, he being the real purchaser; that he still owns such stock, though the same was transferred to and stands in the name of another representing him, and for that reason that the sale should be set aside and defendant be compelled to account therefor and for the dividends received thereon.

It is further alleged that in April, 1907, the executors held, as part of the residuary estate, 2,770 shares of the capital stock of the American Coal Products Company, which then or at some time thereafter they sold for $208,365, notwithstanding the fact that it was worth $277,000, and, by such sale through their fraud or negligence, a loss of $68,335 was sustained by the estate and for which the defendant should account.

After certain denials, the answer sets up certain affirmative defenses, from which it appears that the plaintiff was a party to various proceedings in the Surrogate’s Court in which the accounts of the executors and trustees were judicially settled, and it is alleged that the decrees entered in those proceedings are binding and conclusive upon the plaintiff in this action and that, therefore, he cannot litigate the questions here sought to be raised. It is specifically alleged that on February 21, 1900, a decree was entered in the Surrogate’s Court settling the accounts of the executors up to that time, and in that proceeding there was set forth at length all of the facts connected with the sale óf the Mica Roofing Company and of the fifty shares of the Bon Ami Company; that on February 25, 1904, a similar decree for the intervening period was entered in a proceeding in which appeared all of the facts connected with the sale of the balance of shares of the Bon Ami Company; that on July 15, 1907, a decree was entered finally settling the executors’ accounts and directing them to turn over to themselves as trustees all of the assets of the trust estate, and in that proceeding all of the facts in regard to the sale of the stock of the American Coal Products Company were set forth; that on August 6, 1908, when defendant’s cotrustee, William H. Childs, was discharged, a decree was entered settling his accounts and overruling the plaintiff’s objections, which objections included the very issues here sought to be raised; that on June 13,1911, which was subsequent to the commencement of this action, there was entered a final decree settling the accounts of the defendant, overruling the plaintiff’s objections thereto, and directing distribution of the trust estate, and, upon such distribution, discharging him; that the plaintiff was a party to all of those proceedings, and that the decrees entered therein have never been reversed, modified or set aside, but that the same still remain in full force and effect. The answer further alleges that the defendant has paid out and distributed the trust estate, as he was directed to do by the decree of the Surrogate’s Court of June 13, 1911; that prior to the entry of that decree the plaintiff had assigned to a trust company his interest in the trust estate in excess of $300,000, and that the defendant, pursuant to that assignment and with the acquiescence and ratification of the plaintiff, paid to such trust company the plaintiff’s interest in the trust estate less $300,000, which latter amount was also paid to the trust company pursuant to orders of the Supreme Court.

The reply admits the entry of the decrees in the Surrogate’s Court; that they have not been reversed, modified or set aside, but denies on information and belief certain allegations of the answer as to what the accounts which were settled by the decrees contained. These denials are clearly frivolous and raise no issue. A denial “upon information and belief” is not expressly authorized by the Code of Civil Procedure (§ 500), hut treating the same asa “ denial of knowledge or information thereof sufficient to form a belief ” it is insufficient, because what the accounts contained and the facts therein set forth are all matters of public record, and they were all judicially considered in a proceeding in which the plaintiff was a party and of which he. necessarily must have knowledge. These denials are manifestly a mere evasion and should he disregarded. (Kirschbaum v. Eschmann, 205 N. Y. 127; Dahlstrom v. Gemunder, 198 id. 449; City of New York v. Matthews, 180 id. 41.) But, even if it he assumed that such denials were made in good faith and are true, this does not raise an issue, inasmuch as the plaintiff admits that the surrogates’ decrees referred to were duly entered and. the same still remain in force. Those decrees, and especially the final one entered on June 13, 1911, under which the trust estate was distributed^ are an absolute bar to the maintenance of this action. There is not a single allegation in the complaint or a fact stated from which an allegation fairly can be inferred that any of the decrees were obtained through fraud or misrepresentation or that the plaintiff did not have knowledge of all the transactions' complained of prior certainly to the entry of the last decree. All that is claimed is that the Surrogate’s Court did not have jurisdiction to decide the questions sought to be litigated. This claim has no foundation for its basis, because a Surrogate’s Court has power to construe a will' in so far as it may be 'necessary to determine to whom and in what manner an estate shall be distributed, and also power to determine what property an executor or trustee holds and for what he is liable to account. It is true, as suggested by the plaintiff’s counsel, that a Surrogate’s Court is one of limited jurisdiction, and for that reason an independent proceeding could not have been maintained for the sole purpose of construing the will of the testator or to have the sale of the business of the Mica Roofing Company or the shares of the Bon Ami Company set aside. (Matter of Schnabel, 136 App. Div. 522; affd., 202 N. Y. 134; Matter of Randall, 152 id. 508; Matter of Wagner, 119 id. 28.) But a Surrogate’s Court has power expressly given to it by statute to settle the accounts of executors and trustees (Code Civ. Proc. §§ 2742, 2807, 2810), and in settling such accounts it necessarily had the power in the present case to determine whether the executors or trustees should be charged with property which belonged to the trust estate or with the proceeds derived from the sale of the same. The transactions complained of were included in the accounts which have been judicially settled, and the Surrogate’s Court necessarily determined that the sales were properly made and that the proceeds thereof were to be accounted for by the executors and trustees. It is settled by a long line of decisions that a surrogate’s decree is binding as to all matters considered so long as it remains in force upon all of the parties who were properly before the court at the time the decree was entered. Objections to an account of an executor or trustee must be presented and passed upon prior to the entry of a decree setting them, or else a party is thereafter precluded from raising any question..with reference thereto. So long as the decree remains in force it is final and conclusive; with reference to matters embraced within the accounting. (Burkard v. Crouch, 169 N. Y. 399; Weintraub v. Siegel, 133 App. Div. 677; Rhodes v. Caswell, 41 id. 229; Mutual Life Ins. Co. of N. Y. v. Schwaner, 36 Hun, 373; affd., 101 N. Y. 681.) The decrees here under consideration cannot be attacked collaterally, and until they are set aside in a direct proceeding for that purpose, they are conclusive upon the plaintiff, not only as to what the defendant was chargeable with, but also as to the legality of sales made by him. (Joseph v. Herzig, 198 N. Y. 456; Jordan v. Van Epps, 85 id. 427; Matter of Douglas, 60 App. Div. 64.) Nor does the case of Fulton v. Whitney (66 N. Y. 548), upon which the appellant mainly relies, hold anything to the contrary. There, as pointed out in Mutual Life Ins. Co. of N. Y. v. Schwaner (supra), the transaction sought to be set aside was not involved in but was extraneous to the accounting.

But, aside from the conclusiveness of the various decrees of the Surrogate’s Court, I am of the opinion that the acceptance by the plaintiff, or his assignee, of his share of the proceeds of the transaction's now complained of constituted a ratification of such transactions and estops him from now maintaining this action. At the time when the defendant, pursuant to the final decree, paid to the plaintiff or his representative the amount directed to be paid to him, the plaintiff had full knowledge of all the facts of which he now complains. With such knowledge he did not appeal from the decree or ask that it be modified or set aside; on the contrary, he acquiesced in it and accepted the payments directed to be made. He is not now in a position to question the validity of the decree. He certainly cannot take and retain the proceeds of the sales and at the same time regain his interest in the property. In any view, before he could question the validity of the sales, he would have to return what he had received from the proceeds of the sales..

My conclusion, therefore, is that the defendant’s motion for judgment on the pleadings should have been granted.

The order appealed from, therefore, is reversed, with ten dollars costs and disbursements, and defendant’s motion for judgment granted, with ten dollars costs.

Ingraham, P. J., Laughlin, Miller and Dowling, JJ., •concurred.

Order reversed, with ten dollars costs and disbursements, and motion granted, with ten dollars costs.