Case ID: abbn-cas_11/html/0401-01.html
Source: Caselaw Access Project
Author: {"author": "Andrews, Ch. J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

RIGGS v. CRAGG.
    N. Y. Court of Appeals ;
    
    October, 1882.
    [Reversing 26 Hun 89.]
    Executor’s Accounting.—Jurisdiction oe Surrogate.—Will, When May be Construed by Surrogate.—Citation to Accounting.
    Where the construction of a will involves the question whether income or accretions—such as stock dividends on shares in a corporation belonging to the estate—go to the life tenant or the remainderman, the life tenants are necessary parties to a proceeding awarding payment thereof to the life tenant.
    
      The principle that persons not actually parties to a suit in equity may nevertheless be bound by the decree on the theory of representation, should not be applied to such a case.
    The rule that unless a warrant for the jurisdiction exercised by the surrogate can be found in the statute, either expressly or by implication, his proceedings are void,—applied.
    The distinction between an accounting required on the application of a particular creditor or legatee, and the resulting decree for payment of the particular debt or legacy,—and a final accounting upon which all persons interested should be cited,—reiterated.
    A proceeding of the former character which is not turned into a final accounting, either by the application of tile executors, etc., or by the direction of the surrogate, raises only such questions as are appropriate to the limited nature of the proceeding ; and a decree of payment is not authorized in such case unless the right to the debt or legacy is undisputed.
    
    When the surrogate upon such application can see that other persons claim or may claim the same thing as the petitioner, and that areal question is presented as to the right of one of several persons to the fund, he should not proceed to a determination without the presence of all sucli persons.
    If he does, his decree may be reversed on appeal. It is not a sufficient answer that the absent parties will not be bound by the decree.
    
      It seems, that where the right to a legacy depends upon a question of construction which must be determined before a decree for the distribution can be made, the surrogate has jurisdiction, upon a final accounting where all the parties interested are before the court, to determine the construction of the will as incident to the authority to make distribution.
    
    Appeal from an order of the general term of the supreme court in the first department, affirming a decree of the surrogate’s court.
    
      Austin G. Fox, for the appellants;
    
      
      Duncan Smith and William G. Choate, for the respondents.
    
      
      It will be observed that this proceeding was commenced before September 1, 1880, when the provisions of the Code of Civil Procedure affecting surrogates’ courts took effect. See Code Civ. Pro. §§ 2722, &c., where the statutes as to accounting are revised.
    
    
      
       The present statute, and other cases upon it, will be found at pp. SO, &c. of this volume. The justice and necessity of this rule is apparent from the fact that a court of equity will not entertain an action for a construction unless there is a trust.
    
   Andrews, Ch. J.

The objection that the surrogate . had no jurisdiction to render the decrees in question is we think, well taken.

The proceedings were instituted by the filing of a petition before the surrogate of the county of New York on June 7,1870, by Samuel W. Cragg, administrator of Mary Alice Cragg, deceased, setting forth that Mary Alice Cragg was the daughter of Elisha Riggs, deceased, late of the city of New York, and beneficially interested in the estate of said Elisha Riggs, and in a trust created by his will; that the testator died August 3, 1853, and that his will was duly admitted to probate, before the said surrogate, September 37, 1853; that on the same day letters testamentary were issued to George W. Riggs and Joseph K. Riggs, two of the executors named therein; that the testator left personal estate amounting to about nine hundred thousand dollars; that the executors were also by the will appointed trustees of the trust treated thereby; that they have never rendered any account of their proceedings as executors, nor as trustees under the will, of the share of the testator’s estate set apart for the benefit of his daughter, Mary Alice, for life. The petition concludes with a prayer that an order may be issued requiring the said George W. Riggs and Joseph K. Riggs to render an account of their proceedings as executors, and also as testamentary trustees and for general relief.

The surrogate, upon presentation of the petition, issued a citation or order, pursuant to the prayer of the petition, which was served on the executors. The executors appeared on the return of the citation and filed separate accounts as executors and trustees—viz., an executor’s account, extending from August 3,1853, to May, 1870, and two accounts as testamentary trustees, one extending from August 3, 1853, to June 29, 1860, and the other from the latter date to March 9, 1870. The proceedings finally resulted in two decrees made by the surrogate February 24, 1881, settling the accounts of the executors and trustees with the estate of Mary Alice Cragg, and adjudging the balance due. By the decree on the executor’s account it was adjudged" that there was due to the estate of Mary Alice Cragg the sum of §50,578.06, which the executors were directed to pay to her administrator.

The account of the executors, as testamentary trustees, was settled and allowed at $120,104.44, which sum was adjudged to be the balance in the hands of the trustees to the credit of the estate of Mary Alice Cragg, and which sum, less costs and expenses, was also decreed to be paid by the trustees to her administrator, and in addition the trustees were directed to transfer and to deliver to him sixty-six shares of the capital stock of the New York Gas Light Company, and the amount of certain dividends thereon. The decree of the surrogate was affirmed on appeal by the general term.

For a proper understanding of the jurisdictional question, it is necessary to refer to certain facts disclosed by the record. The testator, Elisha Riggs, died August 3, 1853, leaving a widow and six children, five sons and one daughter, surviving. Two of his children, William H. Riggs and Mary Alice Riggs, were then minors, the latter having been born June 29,1839. His will was dated May 17, 1844, to which a codicil was added June 7, 1851. The testator at the time of his death was possessed of a large personal estate, and also owned real property, the amount of which does not appear. The will was duly proved, and letters testamentary were issued thereon to George W. Riggs and Joseph K. Riggs, who qualified as executors, and who also accepted the trust for the benefit of Mary Alice Cragg created by the will, and have since managed the estate.

The testator, by his will, after directing the payment of his debts and providing for the widow and making certain bequests, provides in the ninth clause as follows:

“Ninth. All the rest, residue and remainder of my ( property and estate, both real and personal, &c., I hereby give, devise and bequeath to my six beloved children (naming them), and to their respective heirs, executors, administrators or assigns, in equal portions, or share and share alike, except the portion or share of my said daughter Mary Alice Riggs, which I dispose of for her sole and separate use and benefit, whether married or unmarried, as follows, that is to say: I give, devise and bequeath the same to my executors, hereinafter named, in trust for her separate use and benefit during her natural life, to invest and improve the same at their best discretion, and to pay to her from and after her arrival at the age of twenty-one years, or marriage with the consent of her mother, if living, whichever event may first happen, into her own hands, whether married or unmarried, and upon her own separate receipt, to be given from time to time, and not by way of anticipation, the net interest, dividends or other periodical income thereof, and at her decease I hereby give, devise and bequeath the capital of her said share or portion, to her issue or other descendants in equal portions, or share and share alike, &c. ; and should my said daughter not marry, or marry and have no issue that shall survive her, and should she survive her husband, then upon her decease I hereby give, devise and bequeath her share and portion in my residuary estate, both real and personal, to her surviving brothers and their issue, share and share alike, except that the issue of any deceased brother are to take by representation.”

The ninth clause further provides that in case his daughter should marry, and should die leaving no issue, but leaving her husband surviving, he should receive an annuity of $1,000, &c.

By the tenth item the executors are authorized to make advances from time to time for the support, . maintenance and education of his minor children during their minorities, not exceeding $800 a year, and they are directed to keep a separate account with each child,, charging him or her with such advances.

Mary Alice Cragg became of age June 39,1860. She was married to the petitioner, Samuel W. Cragg, in 1869, and died March 9, 1870, intestate and without issue, and the petitioner was duly appointed administrator of her estate. It seems, from what can be gathered from the record, although there is ño distinct proof upon the subject, that the executors, from time to time after the death of the testator, set off portions of the estate to the credit of the trust, but retained a portion of the share of the testator’s daughter as an undivided interest. The surrogate, in stating the executors’ account, ascertained, in the first place, the whole income received by the executors, as such, from the death of the testator, in 1853, to the death of Mrs. Cragg, in 1870, and awarded to her one-sixth of the net income for that period, deducting such payments as were properly chargeable to her. In stating the trustees’ account he charged the executors with the whole income of the trust estate during the same period, and ascertained the balance by deducting therefrom the sums properly chargeable to her, as in the other case. Both accounts are largely made up of income on the one-sixth share of the estate given to Mary Alice for life, which accrued between August 3, 1853, the date of the testator’s death, and June 39, 1860, the day on which she reached her majority, and interest thereon.

The testator, at the time of his death, owned stock in various railroad and other corporations, upon which, after his death, stock dividends were declared from time to time, which were received by the executors and trustees, and credited to capital, and not to income, amounting in the aggregate to a large sum. The surrogate, in making up the accounts, held that the stock dividends were, as between the life tenant and the remainderman, income and not capital, and were to be credited as income in the accountings. The citation, as has been said, by which the proceeding was initiated, was a citation to the executors only. The residuary legatees, other than the executors, have not been brought in, and were in no way made parties to the proceeding or to the decrees of the surrogate. So far as appears, they were neither served with process nor did they appear or take any part in the litigation.

Several interesting and important questions involved in the determination of the surrogate have been presented upon the appeal, and argued with great ability by the respective counsel. One of these questions respects the right as between life tenant and remainder-man to the income and the share of Mary Alice Biggs, under the will of her farther, which accrued during her minority. "It is claimect oh'the part of the respondent that, by the true construction of the will, the income of her share beyond the sum directed to be paid for her support and maintenance during minority was to be accumulated and to be paid to her on arriving at the age of twenty-one years, and that this construction is necessary to effectuate the intention of the testator to give to his daughter the “ use and benefit” of the equal one-sixth part of the estate during her life; and other provisions of the will not herein referred to are relied upon as confirming this construction.

On the other hand, it is claimed by the executors that the share of the daughter having been vested in the trustees upon the trust to “invest and improve” the same and to pay to her “from and after” her arrival at majority the “net interest, dividends or other periodical income thereof,” it was the intention of the testator that the share should be augmented by adding the surplus income accruing during the daughter’s minority to the capital of the share, and to give to her the income only after that time accruing from the original capital of the share and the additions, and that it is only by this construction that effect can be given to the directions of the testator to the trustees to improve the share given in trust.

When the construction of the will is settled, a further question may arise as to the validity of the trust as a trust for accumulation, and if void, whether the surplus income goes to the daughter or to the remainderman, as persons entitled to the next eventual estate in the fund.

, Another important question involved in the decision of the surrogate relates to the distribution, as between capital and income, of stock dividends declared and received by the executors and trustees during the existence of the life tenancy. Are stock dividends, representing earnings and profits of a corporation expended in construction or improvements of the corporate property, declared during the life tenancy, to be regarded, as between the life tenant and remainderman, as accretions to the capital or as income ? If declared out of accumulated profits earned before the inception of the. life tenancy, are they capital or income as between these two interests % If they represent earnings made partly before and partly during the life tenancy, are they apportionable ?

The right to stock dividends, as between tenant for life and remainderman, has not been considered by the court of last resort in this state. The decisions upon the subjects in other states, and in England, are conflicting, and it will be the duty of this court, when occasion arises, to seek to settle the principle and establish a practical rule for the guidance of trustees and others, which at the same time shall be just and equitable as between the beneficiaries of the two estates.

The surrogate decided that surplus income of the share of testator’s estate given to his daughter for life, which occurred during her minority, was not by the true construction of the will, to be regarded as an accretion to the capital, but was income, payable to the tenant for life, on her reaching her majority ; and he also decided that the stock dividends declared during the life-tenancy belong to the life tenant, and not to the remainderman. It is obvious that the five sons of the testator, who, in the event which has happened, are entitled, as remaindermen, to the share given to his daughter for life, are interested in the determination of these questions. They were adjudicated by the surrogate in favor of the daughter's personal representative in a proceeding between him, and the executors exclusively, without bringing in three of the sons of the testator, or giving them an opportunity to be heard.

The decrees require the executors and trustees to pay over the fund to the petitioner, and when executed it will pass beyond the control of the court into his possession. It is plain, we think, that if, instead of resorting to the surrogate’s court, the petitioner had filed a bill in equity for the same relief, the court would not have proceeded to a decree in the case until all the parties interested in the questions had, by amendment or other appropriate proceeding, been brought in and made parties to the action. For it is a general rule of courts of equity, that all persons materially interested in the object of the suit must be joined, so that there may be a complete and final determination of the controversy (1 Dan. Ch. Pl. 190 ; Story Eq. Pl. § 99).

There are exceptions to the rale; as where its enforcement would cause great practical inconvenience, or where the interests of persons not parties are deemed to be protected by representation. Of the latter class, is the case of a bill filed by a single creditor or legatee, against an executor or administrator, for the satisfacsion of his single debt or legacy, without joining the other creditors or legatees or the next of kin, although the allowance of the particular debt or legacy may diminish the fund in which they are interested. But if special facts exist which render the actual joinder of all the persons interested proper, as where there is a deficiency of assets, the bill must make all the persons so interested parties, either as plaintiffs or defendants ; or, where their rights are identical, or not inconsistent, it must be filed in behalf of the plaintiff and all others in the same relative situation (Story Eq. Pl. § 140; Brown v. Ricketts, 3 Johns. Ch. 553; Hallett v. Hallett, 2 Paige, 432; Egbert v. Wood, 3 Id. 517): and in actions against trustees, in respect to the trust property, or for an accounting and the administration of the trust estate, all the cestui que trusts or beneficiaries are necessary parties (Story Eq. Pl. § 207 ; Holland v. Baker, 3 Hare, 69; Wakeman v. Grover, 4 Paige, 23).

The principle that persons not actually parties to a suit in equity may nevertheless be bound by the decree, on the theory of representation, has, however, no proper application to a case like this. The personal representatives of the daughter and the sons of the testator have a common interest in the accounting by the executors and trustees, and conflicting interests in the distribution. Their interest in the taking of the account is hostile to the executors and trustees, and it would be a violation of equitable principles to permit persons having an adverse interest to represent parties not before the court. The interest, moreover, of the absent parties is not indirect and consequential, but immediate and direct.

The proceeding in question was not an action in equity, but a proceeding before a surrogate’s court, a tribunal of peculiar and limited jurisdiction, which can exercise only the powers prescribed by the statute and such incidental powers as are requisite to the execution of the powers expressly given, or to the attainment of justice in the particular cases to which its jurisdiction extends (Sipperly v. Baucus, 26 N. Y. 46; Stilwell v. Carpenter, 59 Id. 414; Bevan v. Cooper, 72 Id. 315). Unless a warrant for the jurisdiction exercised by the surrogate in the case can be found in the statute, either expressly or by implication, the whole proceedings are void. By the general statute defining the powers of surrogates’ courts, power is conferred upon surrogates, among other things, to direct and control the conduct and settle the accounts of executors and to enforce the payment of debts and legacies (2 R. S. 220, §1), and the powers so conferred are to be exercised in the cases and in the manner prescribed by the statutes of the state (Ib.).

By chapter 782, Laws of 1867, a new power was conferred, to compel testamentary trustees to render accounts of their proceedings in the same manner as executors and administrators are required to account. On referring to the particular provisions of the statute regulating the subject of accounting by executors before the surrogate, it will be seen that two modes of accounting are provided for. One is had at the instance of a particular creditor or legatee upon a citation served on the executor, which may be followed by a decree for the payment of the particular debt or legacy of the party instituting the proceeding (2 R. S. 92, § 52; Id. 116, § 18 ; Guild v. Peck, 11 Paige, 475).

The other is what is known as the rendering of a final account, which may be had at the instance of the executor upon a citation requiring the creditors, legatees and (in case of intestacy) the next of kin of the decedent, to appear and to attend the settlement of the account which must be served on all persons to whom it is directed, or the accounting may be had upon the order of the surrogate upon his own motion and without the application of an interested party (2 R. S. 92, §§ 52, 60, 61; Smith v. Lawrence, 11 Paige, 206).

When the account shall be rendered and finally settled the surrogate is authorized to make a decree for the payment and distribution of the estate remaining in the hands of the executors to and among the creditors, legatees, widow and next of kin of the deceased, according to their respective rights, and in such decree he shall (the statute declares) “settle and determine all questions concerning any debt, claim, legacy, bequest or distributive share, to whom the same shall be payable, and the sum to be paid to each person (2 R. S. 95, § 71).

The proceeding in this case was a proceeding for a special accounting in the first mode referred to. The executors had never rendered an account, and it was not turned into a final accounting, either upon their application or by the order of the surrogate. Such questions, therefore, only could be determined by the surrogate as were appropriate to the limited and special nature of the proceeding. The provision authorizing the surrogate to compel an accounting and the payment of a debt or legacy upon the application of a particular creditor or legatee cannot, we think, be construed as authorizing a decree of payment, except where the right to the debt or legacy is undisputed. Other legatees or creditors may incidentally be affected by a decree for the payment of a particular debt or legacy, as such payment would reduce the funds in the hands of the executors or administrators, but this interest is indirect and consequential, and they are bound upon the theory of representation.

But when the proceeding is by a creditor to compel the payment of a debt, and the debt is not admitted and is disputed, the surrogate has no power to adjudicate it. He must await the ascertainment of the debt by judgment or upon a reference in the manner pointed out by the statute. This was decided in Tucker v. Tucker (4 Abb. Ct. App. Dec. 136). This decision was based in part upon the special provisions of the statute relating to disputed claims, and applies as well to a provisional as to a final accounting. The statute does not in terms preclude the surrogate from decreeing the payment of a disputed legacy upon the application of one party upon a provisional accounting when the other parties interested are not before him, but the inhibition is, we think, necessarily implied. When the surrogate upon such an application can see that other persons claim, or may claim, the same thing as the petitioner, and that a real question is presented as to the right of one of several persons to the legacy or fund, natural justice, as well as the principles of law, require that he should not proceed to a determination without the presence of all the parties who may be affected by the adjudication. The statute provides for bringing in all the parties in interest on the final accounting, and in that proceeding jurisdiction is conferred to settle and adjust conflicting rights and interests, while no snch authority is conferred in the special proceeding in favor of a single creditor or legatee, and such authority was not, we think, intended to be given. It is no sufficient answer that the absent parties will not be bound by the decree.

The fund in the hands of the executors is a trust fund, and in this case the fund in controversy was held under a formal trust. A court of equity would not permit it to be paid over without giving all the parties interested in the determination of the question^ an opportunity to be heard. The surrogate cannot award it to one and leave the others, who have not been summoned, to a doubtful remedy against the trustees, or to follow the fund into the hands of the personal representative of Mrs. Gragg.

The question of the jurisdiction of the surrogate to pass upon the construction of a will has been much argued in this case. In support of the objection to this jurisdiction the case of Bevan v. Cooper (72 N. Y. 315) is relied upon, in which the point decided was that a surrogate had no jurisdiction to determine the question whether certain legacies given by the will in that case were charged upon real estate. The question was not, so far as appears, involved in the accounting, and was not necessary to be determined by the surrogate as incident to the accounting or distribution. The surrogate could not enforce the payment of the legacies out of the land, and as was said in the opinion, his decree adjudging the lien claimed would be brutum fulmen.

It is doubtless true that a surrogate has no general jurisdiction in the construction of wills. But where the right to a legacy depends upon a question of construction, which must be determined before a decree for distribution can be made, the surrogate has, we think, jurisdiction under the broad grant of power conferred by section seventy-one, upon a final accounting, where all parties interested are before the court, to determine such construction, as incident to the authority to make distribution.

There are many cases in this court on appeals from the decisions of surrogates on final accountings, which i involved the interpretation and construction of wills, and no question was made by counsel or suggested by the court that the surrogate had no power to construe a will when necessary to the accounting and distribution (Stagg v. Jackson, 1 N. Y. 206; N. Y. Institution, &c. v. How’s Ex’rs, 10 Id. 84; Parsons v. Lyman, 20 Id. 103; McNaughton v. McNaughton, 34 Id. 201; Bascom v. Albertson, 34 Id. 584; Whitson v. Whitson, 53 Id. 479; Cushman v. Horton, 59 Id. 149 ; Hoppock v. Tucker, 59 Id. 202 ; Teed v. Morton, 60 Id. 502; Lawrence v. Lindsay, 68 Id. 108 ;. Luce v. Dunham, 69 Id. 36 ; Wheeler v. Ruthven, 74 Id. 428 ; Ferrer v. Pyne, 81 Id. 281).

But for the reason that the jurisdiction of the surrogate is limited and special, and that he could not in the proceeding under review determine the question as to the right to the fund in controversy, the judgment below should be reversed. We regret that this conclusion prevents a final disposition of this already protracted litigation.

Judgment of the general term and decree of the surrogate reversed.