On certified appeal to the Appellate Division from the Chancery Division of the Superior Court.
For affirmance -- Chief Justice Vanderbilt, and Justices Heher, Oliphant, Burling, Jacobs and Brennan. For reversal -- Justice Wachenfeld. The opinion of the court was delivered by Heher, J.
The appeal here concerns an order made by the Chancery Division of the Superior Court dismissing the application of Jack M. Koretzky for the appointment of Julius I. Kislak as co-trustee of a trust created for his benefit by the will of his deceased father, Israel Koretzky, to serve with Walter T. Margetts, Jr., the substituted administrator cum testamento annexo and substituted trustee appointed after the removal of the three executors and testamentary trustees, Kislak among them, in the proceedings reported in 8 N.J. 506 (1951).
Following the judgment of removal, the executors accounted for their administration and were discharged; and thereupon the substituted administrator and trustee proceeded to administer the estate and the trust. The estate's liquid assets were in major part used to satisfy estate and inheritance taxes. The remaining assets consisted of 10 shares of the capital stock of Bright Star Warehouse Company, its entire issue, and 30,600 shares of the outstanding 39,000 shares of capital stock of Bright Star Battery Company. The latter company, later known as Bright Star Industries, was a manufacturer of flashlights, batteries and kindred appliances. Its operations were had in buildings of the Warehouse Company. The will bequeathed 60% of the Warehouse Company stock and 20,000 shares of the Battery Company stock to the three designated executors in trust for the testator's son, Jack; and the remaining 40% of the Warehouse Company stock and 10,600 shares of the Battery Company stock were bequeathed to them in separate and equal trusts for the testator's three daughters. There were provisions for the payment of the corpus of each trust to the cestui at the age of 40, and for a trust in favor of surviving children in the event of the cestui's earlier death, and payment at the age of 21. The trustees of Jack were given discretion to use the corpus, if need be, for his support and education. The testator's daughters have all reached the age of 40; Jack is now 30 and unmarried.
It is said that during the incumbency of the executors there was an increase of $300,000 in the Battery Company's surplus, but the "change in administration * * * saw a quick decline in the position of the estate and its beneficiaries," and for the years 1952, 1953 and 1954, "the business of the companies showed a rapid collapse," with heavy losses, $600,000 in the three-year period, and all liquid assets "consumed in the payment of taxes, fees and administration expenses," leaving large sums still unpaid; and the result was an order by the Chancery Division of the Superior Court empowering the administrator to enter into negotiations for a sale of the assets and directing that he report thereon to the court, to the end that the outstanding obligations be paid, the administration concluded, and the testamentary trusts established.
Maladministration is not laid to the administrator. The decline in the fortunes of the Battery Company is not attributed to his mismanagement or default. Indeed, it would seem that the decline had set in when the administrator was appointed. In this court's opinion in the earlier proceedings, 8 N.J. 506, 522 (1951), Mr. Justice Burling said that the stockholdings in the Battery Company had been "threatened by the weakening of the stability or productive capacity of that corporation, indicated by a rapid decrease of gross profits ($580,000 in 1946; $414,000 in 1947; and $110,000 in 1948) and a similar decline in net profits ($278,854 in 1946; $256,551 in 1947; $67,784 in 1948)."
Jack Koretzky was a director and officer of the Battery and Warehouse companies during the incumbency of the administrator; and the administrator's accountings for the period have been approved, on notice to Jack. There is no occasion now to consider the economic factors which adversely affected the operations of these enterprises. It suffices to say that the administrator was not at fault; there is no suggestion that he be removed from his fiduciary office for incompetence.
Subsequent developments are to be found in the opinion of the Appellate Division reported in 33 N.J. Super. 530 (App. Div. 1954). The administrator submitted to the court
an offer of $325,000 made by Progressive Industrial Expeditors, Inc., for the assets of the estate. He did not recommend acceptance of the proposal, but his counsel did; and the offer was approved. The cestuis ' application for an adjournment of ten days because other bids were in prospect was denied. They appealed; and the Appellate Division vacated the order approving the proposed sale and remanded the cause with direction to reopen the bidding.
Meanwhile, notwithstanding his removal as executor and trustee, Kislak interposed on the side of the cestuis and through his efforts the assets of the estate were sold, after competitive bidding, to Charles Frost for $440,000. The offer was submitted by Kislak for Frost, supported by a deposit of $250,000. Debts, taxes and estimated allowances chargeable to the estate were roughly $250,000; and a sale of the assets for $325,000 would have yielded but $75,000 for the beneficiaries; at $440,000, the price paid, the amount for distribution will be $215,000, less such allowances as may be made on the administrator's final accounting. Thus, the gain to the cestuis through the good offices of Kislak was $115,000.
In their complaint in the present proceeding, filed January 5, 1955, Jack Koretzky and his sister Anne Barash speak of Kislak's "continued concern for and his interest" in them and their sisters, despite what had occurred, and they affirm that "during the years since 1952" Jack had frequently conferred with Kislak and sought his advice "on personal matters as well as those affecting the estate and its administration"; that "if the companies can be continued under family control, the establishment of the trusts under the will" of the deceased "is of primary concern" to Jack since two of his sisters had then reached the age of 40, and the third would arrive at that age in February 1955, and if, on the other hand, it became necessary to sell the capital stock of the Bright Star Companies, "then the ...