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MATTER ESTATE ETHEL S. JADWIN (01/08/69)
SURROGATE'S COURT OF NEW YORK, SUFFOLK COUNTY
1969.NY.40018 <http://www.versuslaw.com>; 296 N.Y.S.2d 901; 58 Misc. 2d 809
January 8, 1969
IN THE MATTER OF THE ESTATE OF ETHEL S. JADWIN, DECEASED
Remsen, Millham, Bowdish & Spellman for Manufacturers Hanover Trust Company, as executor of Ethel S. Jadwin, deceased, petitioner.
Simpson, Thacher & Bartlett for Manufacturers Hanover Trust Company, as executor of Alvin G. Brush, deceased.
Shearman & Sterling for Irving A. Wills, as coexecutor of Ethel S. Jadwin, deceased.
Jackson, Nash, Brophy, Barringer & Brooks for Trustees of Princeton University.
Louis J. Lefkowitz, Attorney-General, for charitable beneficiaries.
Rensselaer G. Terry, Jr., guardian ad litem for Helen B. Jessup.
Pierson R. Hildreth, S.
This is an accounting proceeding. It was commenced by Manufacturers Hanover Trust Company (herein called Manufacturers) as one of the coexecutors of the will of Ethel S. Jadwin, deceased, to settle its own account for the three-year period from the date decedent died, October 4, 1964, to October 4, 1967. During that period the named individual coexecutor died and the named successor individual coexecutor succeeded him. The account as filed has been adopted by and in behalf of the individual executors except with respect to certain matters put in issue by answers and objections. Accordingly, this proceeding is now one to settle the account of each of the three executors for their respective periods of administration and to determine the objections.
The main issues relate to the compensation to be allowed to the deceased executor and to the commissions to be allowed the successor executor. These issues arise because two days after the individual executor died and before the successor qualified, the corporate coexecutor, Manufacturers, distributed Treasury notes of $210,000 and securities having a value of $7,473,537.01 to the residuary legatee. The account as filed includes the value of that distribution in the computation of commissions to which Manufacturers claims to be entitled, but the account does not include any computation of or request for compensation or commissions to either the estate of the deceased executor or to the successor executor. The residuary legatee contends that the value of that distribution cannot be considered or included in determining either compensation to the deceased executor or commissions to the successor.
Mrs. Jadwin died October 4, 1964. She left an estate valued at over 30 million dollars all of which, after bequests to others aggregating less than one million dollars, she gave to Princeton University. She appointed her friend, Alvin G. Brush (who had been a friend of her predeceased husband), and Manufacturers as executors of her will. Both served until Saturday, April 24, 1965 when Mr. Brush died. She also appointed Irving A. Wills (who was likewise a friend of her husband and of Mr. Brush), as an executor in place of Mr. Brush if the latter should die before his duties were fully performed. These appointments were made by paragraph Tenth of her will which provided: "Tenth: I hereby nominate, constitute and appoint my friend Alvin G. Brush, and Manufacturers Trust Company as executors of this, my Will, and trustees of the trusts herein created. In the event that Alvin G. Brush shall die, resign, fail to qualify or for any reason cease or fail to act as executor of and/or a trustee under this, my Will, before his duties as such shall have been fully performed and completed, then I nominate, constitute and appoint Irving A. Wills of Manhasset, New York, as an executor and trustee in his place and stead. No executor and trustee named herein shall be required to give any bond or security as such for any reason or in any jurisdiction. All the powers, duties, privileges and immunities herein conferred or imposed upon the executors and trustees herein specifically named shall devolve upon their survivor, legal successor or successors."
At all times Manufacturers was fully aware of the provisions of the Jadwin will appointing Mr. Wills as successor executor if Mr. Brush died. On Monday, April 26, 1965, the first business day after Mr. Brush died, the attorneys who had represented Mr. Brush and Manufacturers as coexecutors prepared the papers for issuance of letters testamentary to Mr. Wills. Mr. Wills signed them the following day, April 27, 1965, at the office of Manufacturers immediately after attending the funeral of Mr. Brush. The documents were then submitted to the Surrogate's Court, and letters testamentary were issued to Mr. Wills on May 6, 1965 as a successor executor of the Jadwin will.
The account does not separate the administration of the estate as between the periods before and after Mr. Brush died. Before Mr. Brush died he and Manufacturers distributed assets of the estate valued at approximately $22,000,000. On the date Mr. Brush died, assets valued at $10,887,409.03 remained on hand which included the securities which were distributed two days later.
The evidence amply indicates that Mr. Brush directly participated in the administration of the estate from the time Mrs. Jadwin died until his own death. In order to carry out the disposition of the entire residuary estate to Princeton, the formulation of a plan for use of the bequest as directed by the Jadwin will was required. Under paragraph Sixth of the will the residuary estate was given first to the executors who were directed to pay it over to Princeton upon such terms and conditions as they in their sole discretion should determine as a memorial to the late husband and son of Mrs. Jadwin. It is undisputed that Mr. Brush conducted the negotiations for the estate in formulating a plan for the appropriate use of the bequest as Mrs. Jadwin desired. The plan as formulated was ultimately accepted and embodied in an agreement in December, 1964.
The plans for the complete distribution of the residuary estate were worked out before Mr. Brush died. While Mr. Brush lived all assets exceeding 30 million dollars were collected, all general legacies except one were paid, assets were appraised, most debts paid, reserves for taxes and expenses were established, $80,000 was paid on account of New York estate tax ultimately fixed at $78,323.36, attorneys' fees had been agreed upon, and a distribution of securities valued at $20,875,623.50 had been made to Princeton on January 11, 1965. In connection with that distribution, Mr. Brush and Manufacturers as the coexecutors and Princeton as residuary legatee executed an agreement whereby Princeton expressly agreed to save the executors harmless from any claims and also agreed that the executors would retain the balance of the assets for distribution upon completion of the administration of the estate and upon a final accounting.
Notwithstanding the literal language of that agreement, the court is of the opinion that both Princeton and the executors understood that the estate would be distributed as readily as the executors deemed feasible even though it might be within what was then the prohibited statutory seven-month period under section 218 of the Surrogate's Court Act. For that and other reasons the executors required Princeton to incorporate an express indemnity provision in the agreement to save them harmless from any liability arising by reason of the distribution.
In March of 1965 a representative of Princeton inquired of Manufacturers as to when a further distribution might be made, and was told that although no precise answer was possible they might like to do it when the Federal estate tax return was filed. Whether Mr. Brush was advised of this does not appear. But on Friday, April 23, 1965 Manufacturers unilaterally determined that a further distribution could be made. It wrote a letter to Mr. Brush who was then ill in a hospital asking him to sign and return a copy of the letter if he approved, and they would then proceed with the distribution, or if he had a different view that they would be glad to hear from him. Mr. Brush never received the letter. He died the next day, Saturday, April 24, 1965.
On Monday, April 26, 1965 Manufacturers considered whether or not to proceed with the distribution. It consulted counsel and received advice that there was no "legal" impediment to its going ahead with the proposed distribution. It then instructed other counsel to prepare appropriate receipts for Princeton to sign acknowledging receipt of securities of the value of $7,473,537.01. The receipt was signed Monday afternoon, April 26, 1965 although physical delivery of the securities took place Tuesday morning, April 27, 1965.
Mr. McGorry, a vice-president of Manufacturers, testified that the idea of making a further distribution to Princeton as outlined in the letter to Mr. Brush on April 23 originated with him. He did not discuss it with Mr. Brush although he considered it customary and necessary to secure approval of cofiduciary Brush before making a distribution. It would appear that the approval of both fiduciaries had been obtained before proceeding with previous distributions.
It is clear from the testimony that in making the distribution Manufacturers was fully aware that legal problems would arise (as has been the case) with regard to the effect the distribution would have upon the compensation which Mr. Brush might be awarded and the commissions to which Mr. Wills would be entitled. There is no evidence that there was any urgency or that Princeton was even aware of the proposed distribution until Monday afternoon, April 26, 1965, although the receipt recites that Princeton "has now requested a further distribution." The receipt also reiterated and incorporated the undertakings of the January 11, 1965 agreement including the provision to indemnify Manufacturers.
The contention of the individual executors is that the distribution was made deliberately in an attempt to deprive one or both of them of any compensation or commissions based upon the value of the distribution. Manufacturers suggests that it made the distribution to "preserve" the issue because it had a responsibility to act in such manner as might possibly benefit the residuary legatee as opposed to a benefit to its cofiduciaries. Manufacturers itself claims full commissions inclusive of the value of the distribution. Such commissions are computed at $666,285.90 of which $460,000 has been paid, leaving a balance due of $206,285.90. The account shows that Mr. Wills has received $28,000 on account of ...