Court Opinion

ID: 3407636
Source: CourtListenerOpinion
Date Created: 2016-07-05 19:24:01.878137+00
Date Added: 2024-06-11T12:34:10.597153
License: Public Domain

R.L. 1925, s. 2544, in clear and explicit terms prescribes that the compensation of fiduciaries be computed upon "moneys received." As between landlord and tenant the assumption and payment by the lessee of the taxes assessed against the lessor upon the demised premises may properly be considered in the nature of rent and hence revenue or income. But this is equally true of covenants of lessees to repair, insure or make improvements. The question reserved, however, does not involve the relation of landlord and tenant but that of trustee andcestui que trust. That the result of a covenant of the lessee may be in the nature of rent is not enough to entitle a trustee to compensation thereon under a statute confining the compensation of trustees to a fixed rate upon "moneys received" by them. It is not sufficient that the result of the covenant be in the nature of rent or in the nature of revenue or income but it must be "money" and it must be "received" by the trustee before he is entitled to compensation in respect thereof. The statute says: "Upon all moneys received in the nature of revenue or income," etc. These two essential elements, to wit, money and its receipt by the trustee, must be coexistent otherwise the trustee is not entitled to compensation. A covenant by a lessee to pay the taxes assessed against the demised premises is comparable with and differs in no wise from the ordinary undertaking to pay certain debts of another as they may accrue. The debtor may be enriched to the extent of the undertaking; such enrichment may be in the nature of revenue or income; but no money passes between the covenantor and the debtor; the debtor does not receive money; the amount of the debt is paid to the creditor. And unless the revenue or income be "money" and "received" by the trustee compensation *Page 511 
does not attach. A covenant by a lessee to pay taxes assessed against the demised premises is not a covenant to pay the amount of the taxes to the lessor but to pay the taxes to the tax assessor having authority to receive the same. Such a covenant imposes upon the lessee the duty to ascertain the amount of the taxes and to pay them to the tax assessor when due. (Bacon v.Park, 57 Pac. (Utah) 28, 30; Ellis v. Bradbury, 17 Pac. (Cal.) 3, 4, 5.) The reason for the rule is that the covenant is not one of indemnity against the tax but a promise to pay it. (Richardson v. Gordon, 74 N.E. (Mass.) 344, 346; Fountain
v. Schulenberg  Boeckler Lumber Co., 18 S.W. (Mo.) 1147, 1148;Richards v. Ontai, 20 Haw. 335, 338, 339, and cases cited.)
In the instant case reimbursement was made by the lessee to the trustee for the 1923 taxes theretofore paid by the trustee to the tax assessor entitled to receive the same. It is upon this payment by way of reimbursement that the trustee credited itself with commissions as "moneys received in the nature of revenue or income." These taxes were due and payable on January 1, 1923. At that time it was the duty of the lessee to ascertain the amount of the taxes assessed against the trustee in respect to the demised premises and pay them to the tax assessor entitled to receive the same. It is not claimed that the Waialua Agricultural Company on January 1, 1923, was insolvent or unable to perform its covenant. Upon failure of the Waialua Agricultural Company to pay the taxes due on January 1, 1923, a cause of action accrued immediately to the trustee against the company upon its breach of its covenant to pay the taxes. To sustain such action it was not necessary that the trustee first pay the taxes assessed to the tax assessor entitled to receive the same. (Richardson v.Gordon, supra; Fountain v. Schulenberg  *Page 512 Boeckler Lumber Co., supra; Rector, etc., v. Higgins, 48 N.Y. 532. ) Had the lessee performed its legal duty the amount of taxes unquestionably would not have come into the hands of the trustee. The gratuitous advance by the trustee of the amount of these taxes cannot convert the amount of its reimbursement into "moneys received in the nature of revenue or income." The statute clearly contemplates actual in contradistinction to constructive receipt. The majority loses sight of the legal duty of the lessee and bases its conclusion upon the mere fact that the trustee paid the taxes and was actually reimbursed by the lessee in the amount thereof. The legal duty of the lessee, however, and not the facts, controls. Otherwise a trustee actuated by selfish interests might anticipate and perform his lessee's covenants, including those to effect insurance of the demised premises, to repair or to make improvements thereon, and upon reimbursement by the lessee of advances made with propriety claim commissions thereon. I do not desire to be taken as impugning any improper motives of the present trustee. Quite to the contrary. I understand that the circuit courts have allowed trustees commissions upon advances for taxes and no doubt the approved practice was followed in the instant case. I understand also that the circuit courts have allowed commissions on insurance premiums advanced by trustees. Be that as it may. A trustee should perform the duties of his trust with an eye single to the interests of his cestui que trust. Trustees' commissions are by way of compensation for services performed by the trustee in connection with "moneys received" as income or revenue and if the result of covenants imposed by a trustee upon his lessee is to require the latter to make payments of moneys in the nature of income to persons other than the trustee, the trustee should not be permitted *Page 513 
to anticipate the covenants and make advances necessary therefor simply for the purpose of earning commissions. He should see to it that his lessee personally performs his covenants and that the estate is thereby saved commissions on the amount involved in their performance.
Stress was laid on the legal results of our local property assessments, that is, that the assessment of the fee of demised premises is made directly against the lessor. I see no difference between our local statutes in that regard and those of Massachusetts, Utah, Missouri or California, where, according to the foregoing cited authorities, taxes payable by the lessee under his covenant are payable by him directly to the tax assessor. Nor can it be said that the tax assessor does not know the lessee in the matter and hence may refuse to accept taxes tendered by the latter. Upon exhibit by the lessee of his lease the assessor would certainly be bound to accept the taxes. It could not be seriously contended that a tender by the lessee of the taxes would not be a complete defense in an action by the tax assessor against the lessor therefor. Although the trustee in the instant case was itself indebted to the Territory for the amount of the taxes it was its duty nevertheless to insist upon the lessee's observing its covenant and paying them when due. The payment of the taxes by the trustee was clearly an advance and the subsequent repayment to it by the lessee of the amount thereof was a reimbursement for such advance. Reimbursement for an advance by a trustee is not "moneys received in the nature of revenue or income." The majority relies upon In re McCallum'sEstate, 60 Atl. (Pa.) 903. In Pennsylvania there is no fixed basis of computation of trustees' commissions. The statute confers jurisdiction upon the court to allow such compensation *Page 514 
to trustees as it may deem "reasonable and just." There are no limitations such as are contained in the local statute confining compensation to a fixed rate computed upon "moneys received."
The question reserved should in my opinion be answered in the negative.