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Isham v. Union County Trust Co.

Decided: February 20, 1950.

RALPH HEYWARD ISHAM, PLAINTIFF,
v.
UNION COUNTY TRUST COMPANY, EXECUTOR AND TRUSTEE OF THE ESTATE OF HENRY HEYWARD ISHAM, DECEASED, ET AL., DEFENDANTS



Stein, J.s.c.

Stein

Union County Trust Company filed its second account as trustee under the last will and testament of Henry Heyward Isham, deceased. Exceptions to the account were filed by Ralph Heyward Isham, the life beneficiary, and by Heyward Isham and Donald F. Hyde, guardian ad litem , remaindermen. The matter was referred to a master by consent on July 7, 1948. After several hearings were had before the master, the Union County Trust Company moved to strike certain of the exceptions on the primary ground that the issues raised by those exceptions had been resolved and adjudicated at an earlier accounting. The master ruled upon the motion and filed an ad interim report, denying the motion with respect to some of the exceptions and sustaining the motion with respect to others. Both the accountant and the exceptants claim grievance by reason of the master's rulings and the matter is now before me for resolution.

The testator, Henry Heyward Isham, died in 1922, and by his will he set up a trust, comprising substantially his entire estate, for the benefit of his only son, Ralph Heyward Isham, one of the exceptants. The condition of the trust was that his son should receive $3,500 each year until he attained the age of 30, at which time one-half of the corpus was to be turned over to him absolutely, and the income from the balance was to be paid over to him for life, with the remainder to his issue. The Union County Trust Company and Foster M. Voorhees were named as executors and trustees. The will was probated forthwith and both executors qualified. Voorhees died in 1927, and Union County Trust Company has continued to act since that time as sole executor and trustee.

On December 5, 1931, the trust company filed with the Court of Chancery its "First Account of Executors," the purpose of which was to account for its stewardship down to

November, 1930. Thereafter an addendum to this account was filed, bringing the account down to September 30, 1931. Exceptions to these accounts were filed by the beneficiaries and on July 12, 1932, the matter was referred to Samuel Powis, Jr., as master to take testimony and audit. While the hearings before that master were in progress, a second addendum to the account was filed by the trust company bringing that account down to the terminal date of August 1, 1933.

The then master considered all exceptions and on September 4, 1939, filed his report. Exceptions were taken and a decree confirming his report was entered on May 27, 1940. It is on this adjudication that the accountant now bases its claim of res judicata and estoppel in pressing its present motion.

A number of exceptions presently before the court involve transactions which occurred prior to May 27, 1940, the date of the decree confirming the previous master's report. Whether or not that decree conclusively precludes investigation into those transactions is the question now before me. The exceptions under attack, although many in number, may be grouped in general categories and will so be dealt with in this opinion.

RISING SUN BREWERY TRANSACTIONS.

The decedent, at the time of his death, was the owner of 3,549 shares of the Rising Sun Brewing Company, representing only about one-third of the total stock outstanding. In 1928, after dissolution of that company, Union County Trust Company took over certain of the assets of the company for the purpose of liquidating them for the benefit of all the stockholders. Its administration of the affairs of the Rising Sun Brewing Company was separate from its administration of the Isham estate. The interest of the estate in the Rising Sun trust was a minority one and there were other beneficiaries whose combined interests were twice as great. However, there was a direct relationship between the two trusts by reason of the estate's stock ownership, and the accountant, in its former account as executor and trustee of the estate,

showed what it had received for the benefit of the estate out of the assets of the Rising Sun trust. It is important to observe, however, that no formal accounting of the Rising Sun trust was filed at that time, nor was any such account ever filed until the present proceedings, when it was made the subject matter of the fifth section of the instant account.

The exceptants charge the accountant with failure to set forth sufficient information; negligent and improper conduct in permitting assets to become dissipated; failure to account for monies; improper dealings with one Seeber, a stockholder in the Rising Sun Brewing Company; and bad faith generally in connection with the administration of the affairs of the Rising Sun trust.

The accountant now seeks to invoke the rule of res judicata and estoppel by judgment as to all matters prior to May 27, 1940, the date of the decree on the prior account. In effect the accountant contends that the information disclosed collaterally in the earlier estate accounting should now be considered as an account of its administration of the Rising Sun trust. With this I cannot agree. The two trusts are separate and distinct. A different corpus and different beneficiaries are involved. Even the commencement and terminal dates of the several accounts differ materially. The decree confirming the master's report in the earlier estate account does not constitute an adjudication with respect to the Rising Sun account.

Furthermore, the trustee here seeks approval of transactions embracing the entire period of its administration of the Rising Sun trust. The beneficiaries should not be restricted or precluded from making inquiry into all transactions for which confirmation is sought.

In limine it might be said that had the accountant followed the same procedure in its prior accounting which it adopted here and had accounted for its administration of the Rising Sun trust as a companion to its estate account, all matters included in that account might now be res judicata. In view of the trustee's failure to do so, the ...


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