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Behrman v. Egan

Decided: June 28, 1954.

HARRY BEHRMAN, ET AL., TRUSTEES UNDER A TRUST AGREEMENT DATED DECEMBER 26, 1934, BETWEEN THEM AND THE FRANKLIN TRUST COMPANY OF PATERSON, PLAINTIFFS-APPELLANTS,
v.
JOHN J. EGAN AND GEORGE LENDRIM, AS REPRESENTATIVES OF THE HOLDERS OF CLASS "A" CERTIFICATES; AND WILLIAM E. BROWNE AND MOSES I. FULD, AS REPRESENTATIVES OF THE HOLDERS OF CLASS "B" CERTIFICATES, DEFENDANTS-RESPONDENTS



On appeal from the Superior Court, Chancery Division, certified prior to oral argument in the Appellate Division of the Superior Court.

For modification -- Chief Justice Vanderbilt, and Justices Heher, Oliphant, Wachenfeld, Burling and Brennan. Opposed -- None. Heher, J. (for modification).

Per Curiam

[16 NJ Page 98] For the reasons expressed by Judge Grimshaw in three opinions reported in 17 N.J. Super. 598 (Ch. Div. 1951), 25 N.J. Super. 109 (Ch. Div. 1953), and 31 N.J. Super. 95 (Ch. Div. 1953) (the last being dated July 22, 1953), the judgment below is affirmed except in the following particulars:

(1) Paragraph 12 charges only a part of the accountants' bills to the trust estate. The retention of the accountants, however, was entirely proper, their services were clearly required by the trust estate and the amount of their bills is admittedly reasonable. They should not therefore be drawn into the controversy of the other parties in this litigation or forced to resort to a direct suit against the trustees for that portion of their bills for which the trustees should be surcharged. Accordingly, paragraph 12 is amended to provide that the accountants' total bill of $26,278.50 shall be a charge against the trust estate.

(2) In its opinion filed July 22, 1953 the trial court stated:

"The accountants presented a bill for $26,278.50. I do not question the fact that the charge is reasonable for the work done. However, $4,547 was for services in preparing an accounting which was totally inadequate and without justification under the rules. The fault did not lie with the accountants. They did what they were told to do. Their instructions came from the surviving trustees, who must bear the expense of the unnecessary and wholly inadequate work. However, since some of the information obtained was used in the preparation of the subsequent account, the entire amount will not be disallowed. The testimony also revealed that the delay in rendering an accounting occasioned an additional cost of from 10 to 30%. This expense the trustees must bear.

Accounting fees in the amount of $7,000 will be disallowed."

In the judgment entered on this opinion, however, the original trustees (Harry Behrman, Charles H. Roemer, Charles A. Bergen, Hugo Huettig, and Amos H. Radcliffe) are surcharged $4,547 "for accounting services in connection with the filing of the first account." This obviously is inconsistent with the opinion above quoted and paragraph 5 of the judgment should be amended by striking subsection (j), and this amount should be charged to the present trustees (Harry Behrman, Charles H. Roemer, John J. Hall, and Aloysius J. O'Brien). The balance of the accounting surcharge of $7,000 (i.e., $2,453) should be surcharged to all the trustees, past and present, since all are at fault in the matter.

(3) It has been argued that certain surcharges against the estates of Charles A. Bergen and Hugo Huettig are not justified, because they deal with matters arising after these trustees severed their relations with the trust. The record before us is insufficient for us to determine the matter in detail. Paragraph 7 and section (b) of paragraph 5 of the judgment should be reconsidered by the trial court to determine what, if any, surcharges arising out of the Herbert Katz transaction and the payment of fees to Charles H. Roemer by the trust resulted from breaches of trust committed after the termination of the duties of Charles A. Bergen and Hugo Huettig as trustees. Any such items erroneously charged against the estates of Charles A. Bergen and Hugo Huettig shall be properly surcharged to those trustees who are in fact liable.

The cause is remanded to the Chancery Division of the Superior Court for further proceedings in accordance with this opinion.

HEHER, J. (for modification).

I read the contract as rendering the trustees liable for the consequences of fraud, bad faith, and inexcusable negligence in the administration of the trust, but not for errors of judgment and discretion. The contract provides in terms that a trustee shall be liable only "for his individual malfeasance." Technically, "malfeasance" is the wrongful or unjust doing of an act which one ought not to do at all, or which he has stipulated by contract not to do. But read in context, it would seem that the contractual exoneration was not intended to include gross or inexcusable negligence by the trustee in the performance of his fiduciary duty. This was a complex and difficult undertaking; and it is readily conceivable that there would be reluctance to accept the trust for a stipend that is little more than nominal, unless the ...


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