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Matter of Estate of Wehrhane

Decided: June 8, 1956.

IN THE MATTER OF THE ESTATE OF CORA TALMAGE WEHRHANE, DECEASED


Civil action. On accounting after final hearing.

Drewen, J.c.c. (temporarily assigned).

Drewen

[41 NJSuper Page 160] There should first be stated the background of litigation out of which the instant questions arise. The cause before us is the consolidation of two suits. Initially, suit was brought in the Essex County Probate Division by United States Trust Company of New York, as successor trustee under the will of Cora Talmage Wehrhane, deceased, for an accounting of the administration of the trust established under the will, and covering the period from March 13, 1950 to May 3, 1954. Some time thereafter suit was brought in this court (Docket No. C -389-54) by John Gardiner Lord and the infant plaintiffs Mally Graham Lord and Talmage Lord for construction of the will of the said Cora Talmage Wehrhane in the respect hereinafter stated. In the latter suit this

court ordered that all proceedings in the County Court, together with the pleadings and the record therein, be transferred to this court and that all issues raised in the cause thus transferred be consolidated for trial with the issues raised in the aforesaid suit for construction. A further order was entered that all pleadings and papers in the consolidated action be filed in the cause entitled and docket-numbered as shown at the head of this opinion.

We are also concerned, as will appear, with a third litigation, wherein suit was brought in this court by Calla Hale Wehrhane, executrix of the estate of Henry W. Wehrhane, deceased, for, among other things, an accounting of the administration of said trust by the decedent as its primary trustee, from the time of the trust's creation until decedent's death, a period of some 25 years. Divers complex issues and questions were raised in the litigation that followed. The suit was terminated by settlement, pursuant to which some $240,000 was paid by the estate to the successor trustee. The part had in that settlement by the present life tenant under the trust and its relation to one of the questions sub judice will be later dealt with.

The problem of construction in the John Gardiner Lord suit relates to the meaning and effect of the term "issue" in the "Eighth" article of the will, which reads as follows:

"EIGHTH: All the rest, residue and remainder of my property, whatsoever and wheresoever situate, I give, devise and bequeath to my Executor and Trustee, or his successor, hereinafter named, IN TRUST, nevertheless, to hold, invest and reinvest the same and pay over the net income thereof in equal quarterly installments to my husband, HENRY W. WEHRHANE, during his life; and upon the further trust, upon the death of my said husband, to continue to hold, invest and reinvest the same and pay over the net income thereof in quarterly installments to my said daughter, DOROTHY WEHRHANE LORD, during her life, and upon the further trust, upon the death of my said daughter, to pay over said fund with any accumulations thereon to the issue of my said daughter per stirpes absolutely. In the event that my said daughter shall die leaving no issue her surviving, then and in that event, I direct my Trustee to pay over the principal of said trust fund and any accumulations thereon, as follows:" (then follow various gifts over).

The underlying facts are that the primary life beneficiary, Henry W. Wehrhane, died February 15, 1950, and upon his death the trust continued for the benefit of his daughter, said Dorothy Wehrhane Lord, for the term of her life. Dorothy Wehrhane Lord is 60 years of age. As the result of a divorce decreed in 1946, she was at the time of the trial of this case still unmarried. She has had no children, save only as the result of adoption by herself and her former husband during their marriage of the plaintiff John Gardiner Lord, who since the adoption has been known by that name. The will sub judice bears date January 5, 1925. Testatrix died March 13, 1925, a resident of West Orange, Essex County. The proofs show that John Gardiner Lord was never known to her and that his adoptive parents did not know of him until June 1929. The date of the adoption is January 14, 1931, over six years after execution of the will and approximately the same length of time after its probate. The plaintiff John Gardiner Lord is of full age and sui juris , and the infant plaintiffs Mally Graham Lord and Talmage Lord are his children.

The claim of the plaintiff John Gardiner Lord is that his status as adopted son of the present life beneficiary is such as to constitute him her "issue" within the meaning of the following phrase of the above-quoted article of the will: "* * * and upon the further trust, upon the death of my said daughter, to pay over said fund with any accumulations thereon to the issue of my said daughter per stirpes absolutely."

The relevant adoption statute in effect at the time of the making of the will and of testatrix' death, provides as follows:

"The adopted child shall not be capable of taking property expressly limited to the heirs of the body of the adopting parent or parents, nor property coming from the collateral kindred of such adopting parent or parents by right of representation."

Needless to say, we are not concerned with the present statute on the subject, which was not enacted until 1953 (N.J.S.A. 9:3-30 B).

The claim of John Gardiner Lord and his children must be denied. Their status is not within the term "issue" as contended. Notwithstanding the learned and expansive briefing this question has had I find the governing law to be so clearly and categorically established that there is nothing for this court to do on the question before it but to recognize the authority of In re Fisler , 131 N.J. Eq. 310 (Prerog. 1942), as that decision is affirmed in 133 N.J. Eq. 421 (E. & A. 1942). Subordinate decisions in the line of precedent are Fidelity Union Trust Co. v. Potter , 8 N.J. Super. 533, 539 (Ch. Div. 1950); Fidelity Union Trust Co. v. Hall , 125 N.J. Eq. 419 (Ch. 1939); Dulfon v. Keasbey , 111 N.J. Eq. 223 (Ch. 1932).

The determination of the question of issue leaves open for decision the status of the remaindermen named to take upon the termination of the present life tenancy. The language of the will (Eighth article) in its provision for the gift over after such termination is as follows:

"One-third thereof to the husband of my said daughter, Dorothy Wehrhane Lord, if living;

One-sixth thereof to said Doris M. McGovern;

And I direct my said Trustee to divide the remaining one-half of said fund in equal portions among the following charitable corporations, to wit: Memorial Hospital of Orange, New Jersey; The Orthopaedic Hospital of Orange, New Jersey; Charity Organization Society of New York; New York Society for Prevention of Cruelty to Children; St. John's Guild, New York, and New York Association for the Improvement of the Condition of the Poor.

In the event that my daughter shall leave no husband, or issue her surviving, then it is my will and I direct that the one-third of said fund, which in case said husband were living would go to him, be divided between and I give and bequeath the same, in equal portions to said Doris M. McGovern and said Maud Pilkington Blacker."

I find and adjudge that Doris M. McGovern; Memorial Hospital of Orange, N.J.; The Orthopaedic Hospital of Orange, N.J.; Charity Organization Society of New York; New York Society for Prevention of Cruelty to Children; St. John's Guild, New York and New York Association for the Improvement of the Condition of the Poor, have each a vested remainder interest in the share of decedent's estate respectively

bequeathed them, such vested remainder being in each instance subject to the life interest of the present life tenant, and subject also to being divested by the birth and survival of natural issue of the present life tenant. One-sixth interest is vested in Maud Pilkington Blacker, subject to being divested should the present life tenant die leaving a husband her surviving; and an additional one-sixth interest is vested in the said Doris M. McGovern, subject to being divested upon the same contingency as that last stated. Cody v. Fitzgerald , 2 N.J. 93 (1949). For cases based upon facts essentially similar to those before us, see Trenton Trust & Safe Deposit Co. v. Robinson , 83 N.J. Eq. 226 (Ch. 1914); Miers v. Persons , 92 N.J. Eq. 17 (Ch. 1921); VanDyke v. Vanderpool , 14 N.J. Eq. 198 (Ch. 1862); Herbert v. Post , 26 N.J. Eq. 278 (Ch. 1875), affirmed 27 N.J. Eq. 540 (E. & A. 1876); Potter v. Nixon , 81 N.J. Eq. 338 (Ch. 1913), affirmed 82 N.J. Eq. 661 (E. & A. 1914); Fidelity Union Trust Co. v. Bond , 102 N.J. Eq. 494 (Ch. 1928).

We come now to the questions raised on the accounting. The first of these relates to certain tax payments made by the successor trustee to the Collector of Internal Revenue for capital gains for the trust years 1950 and 1951 respectively, payments made from corpus and without deduction by reason of the vesting of one-half of the remainder in charities. Payment by the successor-trustee of $14,575.57 was made on April 16, 1951, and payment of $7,072.63 was made on April 15, 1952, for the stated years respectively. Objection to these payments is now made by certain of the vested remaindermen, whose status as such at the time the tax payments were made was in no way, so far as appears, the subject of controversy or contention beyond being a taxpayer's problem. The provisions of the Internal Revenue Code relied on as allowing the charitable deductions reads (section 162(a) of the Internal Revenue Code in effect in 1950 and 1951):

"The net income of the estate or trust shall be computed in the same manner and on the same basis as in the case of an individual,

except that -- (a) Subject to the provisions of subsection (g), there shall be allowed as a deduction (in lieu of the deduction for charitable, etc., contributions authorized by section 23 (o)) any part of the gross income, without limitation, which pursuant to the terms of the will or deed creating the trust, is during the taxable year paid or permanently set aside for the purposes and in the manner specified in section 23 (o), or is to be used exclusively for religious, charitable, scientific, literary, or educational purposes , * * *." (Italics supplied)

Not until the making of the instant decision has there been an authoritative pronouncement that these remainders are vested. When the tax payments were made it was an open question whether "any part of the gross income" was "permanently set aside for charitable purposes," or "to be used exclusively" therefor. The problem of "issue" as an impediment to succession by the charitable remaindermen confronted the successor-trustee, not to mention the further contingency, that which is still potentially operative in effectuating a divesting of the remainders as already indicated.

The decisions relied on by the objectors do not apply to the central question under this head, viz.: that of negligence on the part of the successor-trustee in making the disputed payments; they all deal with the major, substantive questions being presently decided, those of "issue" and vested succession. It should be observed, moreover, that the precedents urged by the objectors as determining the ultimate merits of the problems that confronted the successor-trustee as taxpayer, are urged precisely as if it had been incumbent upon the successor-trustee at its peril in that juncture correctly to resolve the ultimate merits of the questions before it. My attention is called to no authority for such an exaction and I am aware of none. This court, needless to say, is without jurisdiction for the making of a tax decision in the premises; and the point of the successor-trustee is well taken, that for all that appears there was no ground for concluding that, out of the situation confronting it at the time the tax payments were made, some portion of the subject capital gains would not turn out to be taxable. The testimony shows

clearly the full care and attention given the matter by the trustee.

I find that the successor-trustee acted with the required degree of care, caution and prudence; that its conduct was characterized throughout by fidelity and good faith. Honest mistakes and mere errors of judgment are not in themselves grounds for answerability. In re Griggs' Estate , 125 N.J. Eq. 73 (Ch. 1939) and cases cited.

"Whether the trustee has acted prudently depends upon the circumstances as they reasonably appeared to it at the time it acted and not as they may appear at some subsequent time." ...


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