On appeal from the former Court of Chancery.
For affirmance: Chief Justice Vanderbilt and Justices Case, Heher, Wachenfeld, Burling and Ackerson. For reversal: None. The opinion of the court was delivered by Case, J.
The cause has to do with the implied power of a substituted trustee under a testamentary trust to sell and convey real estate which had come into the trust after the testator's death in part payment of an adjudicated surcharge against the executors. The appeal is from a part of the Chancery decree.
Austen H. McGregor left a last will and testament with codicils wherein he set up a spendthrift trust for his son Donald, the appellant herein, the income to be paid to Donald during
life with remainder to Donald's children -- in effect to the respondent, John McGregor, Donald's only child. Upon the filing of the account of the executors, among whom were the testator's widow and his son Donald, in the Monmouth County Orphans' Court exceptions were filed by the guardian ad litem for John McGregor, then a minor, with the result that the executors were surcharged in the amount of $18,892.44. That surcharge arose from the fact that the executors had placed in the trust as an asset thereof an indebtedness in the amount of $14,370.50 owing by the insolvent Donald McGregor to his decedent father. It was held that the indebtedness was an uncollectible asset and that the executors should be surcharged therewith. In re McGregor, 130 N.J. Eq. 5 (E. & A. 1941). Interest and incidental charges made up the total of $18,892.44. The testator's widow, Emily R. McGregor, owned the residence property at 203 Seventh Avenue, Belmar, and she and Donald resided therein. These two, as executors, asked that the property be taken over by the trust in partial satisfaction of the surcharge standing against them. Mr. McCarter, on April 14, 1943, in the capacity of one who was looking after John's interests, wrote to the latter explaining the situation, informing him that there was then a remaining deficiency of $8,472.44 in the surcharge item, stated that while he did not have exact knowledge he believed the real estate was worth at least the amount of the deficiency, and that if it was not worth that amount it certainly was close enough to it so that out of Mrs. Emily R. McGregor's remaining securities of $2800.00 enough could be had to make up the balance, and that if John was satisfied to have the property taken and would so inform Mr. McCarter the latter would, as John's attorney, attend to the matter. John, who was then in the army, replied that he was not anxious to have the real estate placed in the trust but, to aid in the adjustment, was willing that it should be taken at a value not to exceed $4,000.00. The trustee accepted the property and gave credit therefor in the amount of $4,000.00 on the surcharge.
On February 23, 1945, the former trustee having been discharged, Mr. McCarter qualified as substituted trustee. Less than two weeks thereafter, namely, on March 7, 1945, Donald
McGregor addressed the following communication to Mr. McCarter:
As you know my mother is old and not well, but it is her very definite wish to spend the remainder of her life in her home -- 203-7th Ave. Belmar, N.J. I want her to have her wish -- and after her death -- within one year or sooner -- I want to buy the premises for my own use. The price of $4,000.00 was agreed upon several years ago -- and my son 'Jock' has said he would prefer $4,000.00 to the house. I have paid the taxes and made all the repairs for the last ten or twelve years -- and want you to know my desire and intention.