Case ID: ad_128/html/0621-01.html
Source: Caselaw Access Project
Author: {"author": "Clarke, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

The Farmers’ Loan and Trust Company, as Trustee Appointed by the Supreme Court of the State of New York to Execute under the Direction of the Court the Trust Created by the Last Will and Testament, etc., of Amanda E. McCarthy, Deceased, Respondent, v. James R. McCarthy and Others, Defendants, Impleaded with Harriet Neifert (Formerly Hattie A. McCarthy), Individually and as Administratrix with the Will Annexed, etc., of Amanda E. McCarthy, Deceased, and Others, Respondents, and David A. Crites and Others, Appellants.
    First Department,
    November 20, 1908.
    Will — provision that specific legacies be paid in full — devastavit by executor — loss falls on general and residuary legatees.
    Where a will make.s specific legacies and provides, that they “shall be paid in full and all taxes or other charges on said bequests shall be paid * * * out o£ my residuary estate,” the specific legatees do not share ratably with the general and residuary legatees in a loss occasioned by a misappropriation oí the funds by an executor, but are entitled to be paid although nothing be left for the payment of general and residuary legatees.
    Where an estate has been so depleted by the devastavit of an executor or trustee that there are not funds enough to pay specific legacies in full, whatever is left must be devoted to the payment of such legacies to the exclusion of residuary legatees.
    Scott, J., dissented.
    ■ Appeal by the defendants, David A. Crites and others, from an interlocutory judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of New York on the 5th day of February, 1908, upon the decision of the court, rendered after a trial at the New York Special Term, in an action brought for the judicial settlement of plaintiff’s account as trustee.
    
      1Newton Williams, for the appellants.
    
      Mervyn Mackenzie of counsel [Hastings & Gleason, attorneys], for the respondents N eifert and others.
    
      
      James F. Horan of counsel [Turner, Rolston & Horan, attorneys], for the plaintiff, respondent. ' .
   Clarke, J.:

Amanda E. McCarthy died leaving a last will and testament under which she bequeathed: To Amanda E. Crites, $1,000; Amanda E. Hauck, $1,000; James R. McCarthy, $1,000; Alfred C. McCarthy, $1,000 ; David A. Crites, $1,000 ; Caroline Bailer, $1,000; Noah Crites, $3,000; Mrs. James Jones, $2,000, and to others some legacies of specific personal property. The will provided that “ All the bequests hereinbefore mentioned shall be paid ■in full and all taxes or other charges on said bequests shall be paid by my executors hereinafter mentioned out of my residuary estate, * * * All the rest, residue and remainder of my estate, both real and personal of whatsoever nature, kind or description, I give, devise and bequeath to'my executors hereinafter named to divide the same into three equal parts, to hold one equal part thereof, invest the same and to pay the income of the rents, issues and profits therefrom semi-annually to James H. Walters during the term of his natural life and upon his death the said part I give, devise and bequeath to Hattie A. McCarthy and my sister Emiline Bittenbender equally, share and share alike, or to the survivor of either of them. To hold one equal part, invest the same and out of the rents, issues and profits thereof to pay Hattie A. McCarthy, daughter of Jennie Jones, the sum of fifteen dollars per week until she arrives at the age o'f thirty years, at which time she shall be paid by my said executors out of the said part one-third of the principal of the trust created for her benefit. Upon her arrival at the age of thirty-five years, I direct that my executors pay to her the second third of the trust created herein for her benefit. At the time she arrives at the age of forty years the balance of said trust fund and the accumulations thereon shall be - paid forthwith. ■*. * * I hereby give, devise and bequeath the third part of the rest, residue and remainder of my estate not hereinbefore' disposed of to my beloved sister, Emiline Bittenbender, should she survive me, and in the event of her decease prior to my death, I give the same, to her heirs at law. * * * I authorize my executors- for the execution of this my last will to sell and dispose of all my property, whether real or personal, or any part thereof, at public or private sale * * * for the benefit of my said estate.”

She appointed Albert J. Wise her executor. He sold three pieces of real property and received therefor about $67,000. He paid two legacies of $1,000 each in full, and $500 on account of the legacy of $3,000. He misappropriated to his own use the rest of the money and died insolvent. Thereafter the Farmers’ Loan and Trust Company was appointed trustee under the will and Harriet Neifert was appointed administratrix with the will annexed. The plaintiff as trustee received $5,306.98, being the proceeds of the sale of the remaining piece of real estate sold by direction of the court; $715.59, refund payment from the Comptroller over-payment of transfer tax; $18.34, balance of the account standing in the name of the estate of A. E. McCarthy in the Knickerbocker Trust Company; $1 found in a safe deposit box ; received for rents and as interest $318.14; and the further sum of $187.50 interest on a bond of oiie Otto J. Schultz for $2,500 payable to decedent secured by a mortgage.

This action was brought to take the account of the' trustee, construe the will, and to direct the plaintiff as. to what it should do with the funds in its hands. The learned Special Term 'decided that by the will the real property was converted into personalty for all purposes of administering the estate. Second, that the loss occasioned by the devastavit should be apportioned ratably between all the legatees, specific, general or residuary, whose claims remained unpaid, and that the specific legatees who had received their legacies should not be required to contribute to the fund.

I am inclined to think that this solution of the problem presented is not correct. I think every line of the will and the general propositions of law require that the specific legacies be paid before the residuary legatees receive anything, and that the devastavit does not affect the situation.

In Mills v. Smith (141 N. Y. 262) a trust fund was created by the will of $20,000 for certain purposes. The trust fund was in the hands of the executors as required by the will; the rest of the estate was distributed among. the residuary legatees. The trust fund was dissipated. The court said: “ This action is simply an attempt to fasten upon the distributees of testator’s residuary estate the responsibility for the' subsequent default of the executors as trustees for plaintiff’s father. That cannot be done. Where the loss of a fund is due to the waste or misconduct of the executor and trustee, he and his estate alone can be looked to. FTo claim for contribution arises against residuary legatees in such a case. They ‘ are liable to refund in a case where, having been paid from, the estate, it is discovered that there is a deficiency of assets for distribution under the will, caused by the diminution of the estate through the premature payment of legacies. * * * In the. absence * * * of any proof to show that that fund was non-existent in the executor’s hand's and never was set apart and held as a trust, the plaintiff is without sufficient ground for an action against the distributees of the residuary estate to compel them to refund.”

In Buffalo Trust Co. v. Leonard (154 N. Y. 141)-the action was to recover moneys prematurely paid to a residuary'legatee by a former executor. By decedent’s will she gave certain pecuniary legacies to two children, the remainder of the estate to the defendant, The executor received into his possession moneys to an amount more than sufficient to pay the specific legacies and to leave a surplus greater tiian was in fact received by Leonard, the defendant. But when, by proceedings in the Surrogate’s Court, the executor was required to pay to the guardian of the infants $3,606 in full for their legacies, he was discovered to be insolvent and he had absconded. Prior to this time, however, he had paid to Leonard, as residuary legatee, the sum of over $5,000, without authority or decree of the court. Said the court: “It is not disputed that, as between such a legatee and the residuary legatee, the former is entitled to receive his legacy in full before the latter is entitled to anything. * * * W here the question arises between general or specific legatees, and the endeavor is to compel- a refunding on the part of one who has been paid his legacy, its solution depends upon considerations which are -not applicable to a case where the funds are pursued into the hands of a residuary legatee. If a legatee has been successful in getting his legacj paid to him, and the estate in the executor’s hands was sufficient to pay all legacies at the time, -a subsequent devastavit'by the executor, through which there occurs a deficiency of assets wherewith to pay the other .legatees, will not justify an action to compel a refunding by the legatee who has received his legacy. That would be because the payment itself to the legatee was not a devastavit and because the law would throw its protection around the more diligent legatee. * * * Such a right to compel a refunding would only exist in a case where the assets were not sufficient to pay all the legacies at the time of the payment to the particular legatee. Where the case is between a general legatee and the residuary legatee, I can imagine of no defense to the latter’s liability to refund in case of a premature payment of moneys, where the former is without fault in the matter. * * * The residuary legatee is entitled to nothing until all the debts and other legacies are paid.” Talcing these two cases together, it would seem to be the law of the State that where a trust fund had been set aside and after that setting aside the residuary legatees receive what they were entitled to, and then there is a devastavit, there is no right to recover from the residuary legatees. But if the fund had not been set aside and appropriated to the trust estate and a residuary legatee had been paid and subsequently there was a devastavit, then said residuary legatee would be compelled to refund to pay the specific legacies upon the ground that the specific legatees must first be paid. Reasoning by analogy, I come to the conclusion when an estate has been so depleted by the devastavit of an executor or trustee, that there are not funds enough to pay the specific legatees in full, whatever there is must be devoted to the payment of such legatees to the exclusion of the residuary legatees. There is no residuary estate to be distributed. I see no reason why the wrongful acts of the executor should destroy the plain and evident intent of the testator. The Testator’s intent was that the specific legacies should be first paid, and that only the residuary should be distributed to those named as residuary legatees. So careful was she that the sums specified should be' paid in full to the first objects of her bounty that she provided that “ all the bequests hereinbefore mentioned shall be paid in full and all taxes or other charges on said bequests shall be paid * * * out of my residuary estate.” If the estate was only large enough in the first instance to pay the specific legacies, of course there would be no residue to distribute. Such is now the case, and that order of payment provided by the testator seems to me to be the only one to be administered by the courts. • •

If I am right it follows that the judgment appealed from should be reversed and a new trial ordered, with costs .to the appellants to abide .the event.

Patterson, P. J., McLaughlin and Houghton, JJ., concurred; Scott, J., dissented.

judgment reversed and new trial ordered, with costs to appellants •to abide event.