Court Opinion

ID: 4011188
Source: CourtListenerOpinion
Date Created: 2016-07-06 11:14:00.995427+00
Date Added: 2024-06-11T07:44:44.805507
License: Public Domain

Marshall  Ilsley Bank, administrator de bonis non with will annexed, and testamentary trustee, of the will of Emily L. C. Trowbridge, deceased, objects to the final account filed on behalf of the estate of Charles B. Perry as the surviving executor and trustee of the Emily L. C. Trowbridge will.  The administrator de bonis non and testamentary trustee opposes the application of Elsie H. Gray, sole heir of William R. Childs, deceased, demanding payment to the residuary estate of Emily L. C. Trowbridge, deceased, of real-estate taxes and inheritance taxes claimed to have been advanced.  From an order allowing the final account and ordering repayment of taxes, Marshall  Ilsley Bank, administrator de bonis non
with will annexed and testamentary trustee, appeals.
The will of Emily L. C. Trowbridge, deceased, was admitted to probate in the county court of Milwaukee county on April 3, 1929.  Charles B. Perry and William R. Childs were appointed and qualified as coexecutors of the will and *Page 521 
cotrustees of the testamentary trust created under the will. Paragraphs forty-seven and forty-eight of the will present the only issues involved in this appeal and provide as follows:
"Forty-seventh.  All the rest, residue, and remainder of the real estate belonging to my estate at the time of my decease, of every description and wheresoever located, I give, devise, and bequeath to Charles B. Perry and William R. Childs, trustees, and to their successors as trustees, but only to them in trust for the following purposes:
"(A) To sell, dispose of and convey the said real estate, whenever and as soon as they are able to obtain for the same a fair and satisfactory consideration therefor, but with the express provision, that they may take such reasonable time to effect such sale as shall by said trustees be deemed to be for the best interests of the said trust estate.
"(B) From the consideration derived from the sale of said real estate, to set aside and invest in good sound trust investment securities the sum of fifty thousand ($50,000) dollars.
"(C) In the event my niece, Ethel Childs Mitchell of Los Angeles, California, shall be living at my decease, to pay to her, the said Ethel Childs Mitchell, in semiannual instalments, the entire net income of said trust fund, so long as she shall live.
"(D) My niece, Ethel Childs Mitchell, has two children who are Esther C. Mitchell and Stanley N. Mitchell, and in the event my said niece shall have predeceased me, leaving either or both of her said children surviving at my decease, or upon her death, if after my decease, leaving either or both of her said children her then surviving, the entire net income of said trust fund shall be paid to the said child, or in equal shares to both children, if both are living, until said child or children respectively shall have become thirty years of age.
"(E) If my said niece, Ethel Childs Mitchell, shall have predeceased me, leaving either or both of her said children surviving at my decease, or upon her death after my decease, leaving either or both of her said children her then surviving, when either of said children shall have attained to the age of thirty years, said trust shall cease and determine, and if both of said children are then living, the principal of said trust *Page 522 
shall be paid and delivered in equal shares to said children; if but one of said children is then living, with issue of the deceased one of said children, said principal shall be paid and delivered in equal shares to the then living child and to the issue of such deceased child, such issue taking by right of representation, the portion its parent would have taken if then living; if but one of said children is then living and the other of said children deceased without issue, the entire principal of said trust fund shall be paid to the living one of said children; if both of said children have deceased prior to the termination of said trust fund, both of said children leaving issue them surviving, the principal of said trust fund shall be paid to the issue of said children, deceased, of my said niece Ethel Childs Mitchell, in equal shares, share and share alike, among all such issue of said deceased children.
"Forty-eighth.  All the rest, residue, and remainder of my estate, of every name, nature, and description, I give, devise, and bequeath to my nephew, William R. Childs of Milwaukee, Wisconsin, the same to him, his heirs and assigns forever."
Two tracts of land, consisting of approximately thirty-four acres in an industrial area of the city of Milwaukee, comprised the real estate involved in paragraph forty-seven of the will, and were chiefly valuable only for manufacturing-site locations. William R. Childs and Ethel Childs Mitchell were brother and sister, and nephew and niece of Emily L. C. Trowbridge, testatrix.  William R. Childs died August 12, 1937, and his estate was duly probated.  Charles B. Perry died December 17, 1940, and Charles Stanley Perry, as personal representative of Charles B. Perry, deceased, surviving executor of the Trowbridge will, filed the final account in question.  Testatrix sold adjoining lands for manufacturing-site purposes shortly prior to her death, but due to the depression which started immediately after her death there was no demand for this type of property and no offer could be obtained by the trustees.  On April 6, 1933, William R. Childs, residuary legatee, petitioned the court to close the estate and for the entry of a final decree.  Charles B. Perry, coexecutor, *Page 523 
informed the court that the real estate was producing no income and that no offer had been received for it, and that if the estate was closed there would be no income with which to pay real-estate taxes, and asked for instructions as to whether the taxes should be paid from the residue of the personal estate.  On the 14th of October, 1933, the court found that the real estate under paragraph forty-seven of the will was nonincome-bearing property and that the residue of the estate to be disposed of by paragraph forty-eight of the will could not be determined until the trust real estate was disposed of and that said undetermined residue should be made subject to the carrying charges of said trust real estate until the sale thereof.  The executors were ordered to pay the carrying charges of the real estate, including taxes, from the residue of the personal estate, and the time for closing the estate was extended for a period of one year.  On November 21, 1933, an account was filed, showing the advancement and payment of all inheritance taxes due and the payment of all claims against the estate.  It also showed cash advanced to William R. Childs, residuary legatee, in the sum of $9,775, and securities on hand of the appraised value of $29,629, together with the trust real estate.  The account as filed also showed real-estate taxes advanced for the trust real estate in the sum of $4,301.41, which together with taxes thereafter advanced made a total of $8,006.53 up to and including the year 1937. The taxes thereafter were permitted to accumulate.
After the death of Charles B. Perry, surviving executor and trustee, Marshall  Ilsley Bank, trustee, sold the real estate for the sum of $31,665.  Unpaid taxes at the time of sale amounted to $8,498.28, and the expense of sale was $1,995.45.  Additional advances had been made to William R. Childs after December 20, 1934, in the sum of $11,785, and the balance of the personal estate on hand at the time of filing the account of Charles Stanley Perry as personal representative of Charles B. Perry, deceased, surviving executor, *Page 524 
was $3,269.22.  The inheritance taxes advanced by the estate on behalf of Ethel Childs Mitchell and her two children, Esther C. Mitchell and Stanley N. Mitchell, was the sum of $2,575.92, for which credit is claimed in the account filed.
The question is whether the carrying charges of the unproductive trust property are payable out of the principal thereof or whether they should be assumed and paid from the residue of the personal estate.  Appellant contends that the order and judgment of the court under date of October 14, 1933, construes the will and determines that the carrying charges of the trust property are to be assumed and paid from the residuary personal estate, and no appeal having been taken, it is res judicata.
We consider the court did not intend to, nor did it, construe the will in the above order and judgment.  The will was executed on August 28, 1928, and admitted to probate on April 3, 1929.  Shortly prior to her death, testatrix sold some of the land which was a part of this tract at a very substantial price, and there was demand for the balance of the property. It was not unnatural for her to assume that these conditions would continue to exist, at the time she executed the will. However, the depression followed shortly after her death and the court in its order and judgment of October 14, 1933, recognized this fact in the following language:
"That the said testator, Trowbridge, died on the 19th day of February, 1929, and that the present depression in business, *Page 525 
and particularly in manufacturing industry, has combined to create such conditions as have destroyed any demand for the said trust property during the time intervening since the death of said testator, and that the carrying charges in taxes on said real estate have at all times continued and will continue until the sale of the same can be made with all other expense connected with carrying the same, which taxes and expense amount to a considerable sum annually."
Title to the trust real estate passed under the will to the trustees without any order of the court assigning the property to them, notwithstanding that the appointment of the trustees was deferred until the executors had settled their final account.Will of Greene (1942), 240 Wis. 452, 3 N.W.2d 704.
Under paragraph forty-eight of the will, the residue of the personal property passed to William R. Childs.  It is the general rule of the law of trusts that any charges incurred with respect to unproductive property are payable out of the principal thereof unless the settlor manifested a different intention in the instrument creating the trust.  Restatement, 1 Trusts, pp. 733, 734, sec. 241 (1), (2), (3); 103 A.L.R. 1271, note; 2 Scott, Trusts, pp. 1270, 1271, sec. 233.4;Spencer v. Spencer, 219 N.Y. 459, 114 N.E. 849; Stone v.Littlefield, 151 Mass. 485, 24 N.E. 592; In re TrusteeshipUnder Will of Moore, 185 Minn. 342, 241 N.W. 63.  It is evident this property had value under normal conditions and that it was advisable to save it if possible.  As the property was unproductive, money to pay the carrying charges had to be obtained from somewhere, either by loans from strangers or the advancement of funds of the estate bequeathed to others.  The safer and virtually the only place to obtain the money was to use, temporarily, funds in the residue of the personal estate which was to pass to Childs.  If this was not done, the property would be sold for taxes, and the interest of the Mitchell beneficiaries in the trust would be entirely destroyed. At that time there was no equity from which *Page 526 
William R. Childs was going to benefit, because to do so the property had to produce $50,000, plus carrying charges from 1929.  Five years' taxes had already accumulated and were unpaid amounting to $4,301.01 at the time of filing the order and judgment.  The order and judgment provided —
". . . that until sale of the real estate charged with the trust provisions expressed in the forty-seventh (47th) paragraph of her said will, that all proper carrying charges, including taxes, of the real estate which is the subject of said trust provisions, and which real estate is vacant and devoid of income,should and shall be carried out of the residue of said estate. . . ."
This must be construed to mean that the carrying charges were to be carried by the residue of the estate only "until saleof the real estate charged with the trust provisions."  The use of the language "until sale of the real estate" is highly significant when full consideration is given to the fact that it was a depression period, which the court clearly recognized, and everyone naturally assumed that it was not a permanent condition.  Within a month the executors filed an account with the court and set forth the payment of the taxes on the trust property and designated it as an "advancement."  In preparing and filing this account the executors were complying with the order and judgment of the court, and if the carrying charges of the trust property were to be a permanent charge against the personal estate there' would have been no occasion to separate it from other allowable expenses and treat it under a separate subdivision as an advancement.  All that the court did was to provide a method for the payment of the taxes on the unproductive trust property by using, for the present, funds in the residue in order to preserve the trust estate until the property could be sold, extend the time for closing the estate, and direct the filing of a supplemental account, holding the determination of all other questions in abeyance until the sale of the real estate had been made.  Under *Page 527 
the doctrine of res judicata, a judgment is conclusive only as to matters which it decides.  Willey v. Lewis (1902),113 Wis. 618, 88 N.W. 1021.  The court did not decide the residue of the personal estate, which was bequeathed to Childs, was to be considered ultimately liable for the carrying charges of the trust estate.  That would have been beyond the power of the court under the provisions of the will, and its order and judgment of October 14, 1933, are not to that effect or res judicata in that respect.
With the sale of the trust real estate completed this estate is ready to be closed, and the court in this proceeding was required to determine the funds available for trust purposes under paragraph forty-seven of the will and the residuary personal estate under paragraph forty-eight of the will.  In the earlier paragraphs of the will specific parcels of real estate and items of personal property were given to Ethel Childs Mitchell, and likewise certain real estate and personal property was given to William R. Childs.  Under paragraph forty-seven of the will the remainder of the real estate was to be sold by the trustees as soon as they were able to obtain a fair and satisfactory consideration therefor, and $50,000 of the proceeds was to be invested in securities as a trust fund for the purposes therein set forth.  This left the residuary personal estate to be disposed of, and under paragraph forty-eight of the will the testatrix gave the remainder of the personal estate to her nephew, William R. Childs.  Testatrix had two purposes in view.  One was to create a trust from the proceeds of the sale of the real estate for the benefit of the Mitchells, and the other was to dispose of the residuary personal estate, which she gave to William R. Childs.  Each purpose was separate and distinct.  We find nothing in the terms of the will to indicate that she desired to enrich the Mitchells at the expense of Childs.  It cannot be contended that, because the real estate failed to produce $50,000, this was to be supplemented from the personal estate, in order to *Page 528 
provide this amount.  If we were to hold that the taxes which were advanced from the personal estate, or the unpaid taxes at the time of the sale, are to be paid from the personal estate, we would be indirectly doing what we consider was not intended by the testatrix.  The trust fund was to consist of the proceeds of the sale of the real estate less the carrying charges, and not to exceed $50,000.
The administrator de bonis non concedes that the inheritance taxes advanced for the Mitchell interests should be repaid, but contends that no interest should be allowed.  They had the benefit of all the moneys advanced for them, and Childs, as residuary legatee of the personal estate, was therefore unable to have the use of these funds.  It is proper that interest should be allowed on all advancements.
By the Court. — Order affirmed.