Jacobs, Eastwood and Bigelow. The opinion of the court was delivered by Bigelow, J.A.D.
The complainant-appellant is the residuary legatee and devisee under the will of his foster mother, Mrs. Caroline B. D. Colgate, who died October 5, 1940. The principal defendant-respondent is S. Bayard Colgate, the son of Mrs. Colgate, and the executor of her will and also the trustee under the fifth paragraph of the will of his father, Sidney M. Colgate. The senior Mr. Colgate died November 10, 1930.
By the fifth article of his will, Sidney Colgate bequeathed to Bayard, upon certain trusts "all my shares of stock of Seven Oaks Company, a Delaware corporation, together with any of the furnishings," etc., in the homestead in Orange, known as Seven Oaks. The trusts declared were: To hold during the life of testator's widow, Caroline B. D. Colgate, to collect and pay over the income to her, to provide for the use by her, free from rent of the homestead, and the furnishings thereof. Upon the death of Mrs. Colgate, the trustee was directed to divide the property then constituting the trust fund, including any accumulations thereon, in three equal parts. One part to be paid to Bayard, the other two parts to be added to trusts created for testator's daughters, Mrs. Eagan and Mrs. Taylor, and their issue. Bayard and his two sisters, who are also defendants-respondents, and the issue of the latter, are the residuary legatees under their father's will.
After Bayard Colgate filed in the Orphans' Court his account as executor of his mother's will, which showed her estate was insolvent, the complainant instituted this suit to remove the settlement of the account into Chancery and to establish a liability on the part of Bayard to his mother's estate growing from his administration of the trust under the fifth paragraph. The accounting and all the issues raised on the bill of complaint were heard in the first place by a Master. To his report the plaintiff excepted, but his exceptions were overruled and the judgment was entered from which he appeals. He argues his appeal under nine headings to which we will now turn.
The one source of support for Mrs. Colgate provided by the will of her husband, was income from the capital stock of the
Seven Oaks Company. From the date of testator's death until the death of his widow, the Company declared only one dividend, $20,000, February 10, 1931; but it made advances to Mrs. Colgate from time to time for her living expenses, in all a net sum of $73,249. This sum Bayard, as her executor, repaid to the Company out of her estate after her death. Plaintiff argues: "Advances made by a son-trustee to his mother for her living expenses should be repaid out of future trust income and not by him as executor of her estate."
Although the advances were made by the Company, they may be treated as advances out of the trust corpus by the trustee, since he held all the capital stock and controlled the actions of the Company. If the advances were to be repaid to the trust corpus out of future trust income, such repayment would necessarily come out of income that belonged in equal thirds to Mrs. Eagan, Mrs. Taylor and Bayard. Whatever may be the responsibility of Bayard, there could be no justification for such a charge against his sisters' income. As between Bayard, trustee, and his sisters as beneficiaries, he is unquestionably responsible for making good the moneys which were advanced to Mrs. Colgate. As between Bayard and his mother, can the advances be considered as gifts by him, or must they be regarded as loans? If the advances had been made out of Bayard's own moneys, his mother might plausibly have thought them to be gifts; but she cannot have thought this, since the fund was not his to give. The payments to Mrs. Colgate were loans to her of trust funds, unauthorized it is true, and her estate is liable to repay the money in the absence of special circumstances, making a demand for the money inequitable. Rest. -- Trusts , §§ 254 and 255. No reason appears in the present case for relieving Mrs. Colgate's estate of this liability.
Appellant's Points II and III attack a promissory note signed by Mrs. Colgate for $53,776, part of the sum of $73,249, discussed above. It is immaterial what weight be accorded to the note, since we find that, even had Mrs. Colgate not made the note, Bayard still acted with propriety when he repaid to the Seven Oaks Company, out of her estate, the entire debt of $73,249.
Point IV raises a question of fact: Was the dividend of Seven Oaks Company, which was declared February 10, 1931, actually in the sum of $20,000, or was it a dividend of $200,000? Admittedly only $20,000 was paid, and admittedly the minute of the action of the directors stated the sum to be $200,000. While the minute book is prima facie evidence of the resolution of the directors, it is not conclusive, and parole evidence is admissible to correct or contradict the minutes. Graham v. Fleissner , 107 N.J.L. 278 (E. & A. 1931). The Chancery Division's holding that the dividend declared was $20,000 finds ample support in the proofs.
Point V brings up another corporation, the Beechwood Security Company, which was wholly owned by Mr. Colgate at the time of his death, and the stock of which formed part of his residuary estate. Within six months or so after his decease, it became apparent that the Seven Oaks Company would be unable to yield the very substantial income that the Colgate family considered Mrs. Colgate should enjoy. So under the guidance of Mr. Albert C. Wall, the family solicitor and a very distinguished member of the bar, the Beechwood Trust, so-called, was created. The Beechwood Security Company, which theretofore had outstanding only one class of stock, now issued new stock with a preferred dividend of $75,000 a year. The three Colgate children agreed with their mother that this stock should be transferred to a trustee for her benefit for life, and this was done. During the depression years, 1931 to 1940, in which the Beechwood Trust operated, the stock did not earn or pay the full yearly dividends of $75,000, but it did pay to Mrs. Colgate an average dividend of $42,666. Appellant argues that Bayard and his sisters, by the trust agreement, promised that the dividends would be $75,000 a year and appellant contends that Bayard should be held liable for so much as ...