In Re the Accounting of Satterwhite

The question is whether taxes and carrying charges on unproductive real estate should be paid by the life tenant or apportioned to capital. This not unusual dispute between those entitled to the principal and those entitled to the income of a trust estate has been before us recently in Matter of Jackson (258 N.Y. 281). We there held on the authority of Lawrence v.Littlefield (215 N.Y. 561) and other cases cited that if *Page 343 the language of the will indicates an intention of the testator to constitute an imperative power of sale and an equitable conversion of the real estate into personalty at the time of the testator's death, it must be presumed that while the trustees were converting the real estate into personalty the right of the life tenant to income was the same as if the fund had come into existence immediately after testator's death and that an exception to the general rule of loading on the life tenant charges of carrying unproductive real property pending a sale thus came into existence.

On the other hand, it was said that where there is no imperative power of sale or equitable conversion; where the testator authorizes the trustees to sell in their discretion, the only inference is that testator intended to benefit the principal of his estate and not the life tenants.

A simple and workable rule has been suggested. It provides that in all cases, except where the will otherwise provides, the proceeds of the sale of unproductive real property as between life tenant and remainderman shall be apportioned between principal and income. (Apportionment between Principal and Income of Proceeds Derived from the Sale of Unproductive Realty Held in Trust, 40 Yale Law Journal, 275, 278, note 18.)

Appellant contends in substance that Matter of Jackson (supra) tends to adopt the rule suggested above as an expression of the policy of this State. He concedes, however, that we have not gone so far as to adopt it. We still seek the intention of the testator as expressed in the language of the will, interpreted in the light of surrounding circumstances. Let us so consider the will before us.

Testatrix died May 1, 1927. She was possessed of personal property of the appraised value of approximately $5,000,000 and unproductive real estate used as family homes and not bought for speculation, as in the Jackson *Page 344 Case (supra), worth about $1,000,000 more. The unproductive real estate consisted of two parcels, the home at Great Neck, Nassau county, New York, known as "Martin Hall," having an appraised value of $970,000, and a winter residence at Palm Beach, Florida, having an appraised value of $590,000. "Martin Hall" was sold September 27, 1930, for $585,000 (sale confirmed December 31, 1930), and the Palm Beach property was sold December 23, 1929, for $425,000, including contents appraised at $62,176.50, aggregating a sum in excess of $900,000 for the unproductive real estate.

As to the Martin Hall property she had provided in her will:

"Twenty-ninth. * * * It is my will and I direct that my said husband have possession of `Martin Hall,' its land and all the buildings thereon, for use and occupancy from the time of my decease down to the time when the sale of said property shall be carried out and effected as herein provided and said property is duly conveyed to the purchaser.

"I hereby direct my executors and trustees to sell at private sale or public auction within three years after my decease, for the best price and upon the best terms obtainable, my lands with the dwelling house and other buildings and improvements thereon erected, situated at or near Great Neck, Nassau County, New York, now known and designated as `Martin Hall,' being one of the residences occupied by my husband, Preston P. Satterwhite, and myself since our marriage, and to place the proceeds thereof, whether cash or bond and mortgage, in the residuary fund of my estate."

The appellant, who has a life interest in a residuary trust under the will, objects to the carrying charges of the unproductive real estate, Martin Hall and Casa Florencia, amounting to $144,596.58 to the time of sale, being charged against income and contends that such sum should have been charged against principal. *Page 345

As to Martin Hall, we have an imperative direction to the executors and trustees to sell within three years after testator's decease and place the proceeds in the residuary fund of the estate. This is to be offset by the direction that testator's husband shall have the use of the property until it is sold, within three years after her decease. Meantime the life tenant would pay the carrying charges quite independently of when that property became a part of the trust estate. From the end of three years after her death, May 1, 1930, until September 27, 1930, when Martin Hall was sold, there was an equitable conversion of the real estate into personalty. The learned Surrogate has held that from May 1, 1930, until the actual conveyance of Martin Hall the carrying charges should be charged to principal. This we think is the correct rule. The appellant says the apportionment should date from the day of death.

As to the Palm Beach property, known as Casa Florencia, the power of sale in the will applicable to this property is the general power of sale contained in the forty-fifth clause which reads as follows: "I authorize and empower my said executors and trustees and the survivor of the survivors of them, or the ones who shall qualify, for any purpose whatever which they, he or it may deem necessary, to sell and convey the whole or any part of my real property, not herein specifically devised, at such time or times, in such manner, and on such terms as to them, him or it shall seem proper; * * *."

This is the widest and most discretionary language possible. It contains no words of direction which can be construed as evidencing an intent or desire that the property shall be sold before the trustees may deem it necessary. The property was sold December 23, 1929, two years and eight months after the death of the testator. It cannot be said that the trustees were unnecessarily dilatory in making the sale of costly Florida real estate. Contrasted with the imperative direction to sell Martin *Page 346 Hall, the choice of language by testator seems judicious and well chosen to give the widest discretion without intimating any direction as to when they should act.

Furthermore, there is no reason why we should torture language to find an intent to do the right thing. The appellant was a brother of testator. He was not the chosen object of her bounty. He took but twenty per cent of the residuary trusts for his benefit during his lifetime. The special objects of Mrs. Satterwhite's solicitude were her sister, Lilla Dugmore, and her children. Lilla takes thirty-five per cent of the income of the residuary trusts. Testator was at pains to say in her will: "I have made the liberal provisions herein contained for my sister, Lilla Dugmore, and her children, for the reason that she has sustained great financial losses and her fortune has been greatly depleted, and I wish to give to her children that financial protection and support which she is now unable to give them." Mrs. Dugmore's children take the entire residuary estate.

As to her husband, he also is dealt with liberally. He takes forty-five per cent of the income of the residuary trusts.

In the cases cited supra special reasons, which were assumed to have influenced the intention of the testators, were found for apportioning the carrying charges. William Gould Brokaw, the brother, represents in amount twenty per cent of the life beneficiaries. He does not appear to be the special object of testatrix's bounty. Eighty per cent are content. He alone protests. As said in Matter of Jackson (supra, p. 291), it is the obvious intent of the testator alone which justifies the inference that "the first object of his solicitude" should have the advantage therein bestowed on him.

The order appealed from should be affirmed, with costs to all parties, payable out of the estate.