Goldmann, Freund and Foley. The opinion of the court was delivered by Goldmann, S.j.a.d.
Ruth Armour Kamen, income beneficiary of a trust created under Article Seventh of the will of her father Bernard R. Armour, appeals from a summary judgment entered in favor of defendants-trustees on March 16, 1962, in her action seeking a refund of $18,935.72 which, she alleges, they improperly took as income commissions.
The Armour estate has been in our courts since 1949. We have carefully reviewed the voluminous files relating thereto, particularly the accountings in In re Armour, Docket P-30-49, as well as the files relating to the respective testamentary
trusts of plaintiff, her sister Rachel Armour Doyle and her sister Toby Armour Schneider, in both the trial and appellate courts. All of the material facts are either matters of record in the Superior Court or set forth in the undisputed affidavits filed on behalf of defendants.
Bernard R. Armour died December 1, 1949. By Article Seventh of his will, admitted to probate December 19, 1949, he gave, devised and bequeathed his residuary estate in equal shares in trust for his three daughters, respectively: plaintiff Ruth, who is now Mrs. Kamen; Rachel, now Mrs. Doyle; and Toby, now Mrs. Schneider. Testator appointed the Manhattan Company of New York City (now the Chase Manhattan Bank), his brother George L. Armour, and his friend and counsel, George F. Lewis, as his executors and trustees. The terms of the three trusts were identical. In each case the trustees were directed to apply so much of the net income as in their sole judgment was necessary and proper for the education, support and maintenance of the particular daughter until she attained the age of 21, when all excess income accumulated was to be paid to her. Thereafter, and until the termination of the trust, they were to pay her the total net income. Upon marriage, the trustees were to pay the named daughter one-third of the principal of the trust as then constituted, and upon the daughter's death the trust was to terminate and the principal paid over to those designated in the will. All of testator's daughters were minors at the time of his death; Ruth became 21 on October 17, 1953, Rachel on May 21, 1955, and Toby on September 21, 1957.
On January 23, 1953 George F. Lewis, Jr. succeeded his father, George F. Lewis (resigned), as co-executor and co-trustee, and when the father died on November 17, 1953 he became sole executor of his estate. George F. Lewis, Jr. served until the date of his death, September 27, 1960. Alfred Levy became co-trustee in his place on April 25, 1961.
Defendants and their predecessors set up the residuary trusts while the estate was still being administered by them as executors, and from time to time they transferred identical amounts of accumulated income from the estate to each of the trusts. The dates and amounts with respect to each trust were as follows:
December 29, 1950 $121,000.00
November 5, 1951 40,000.00
December 28, 1954 15,000.00
By Article Sixth of his will, testator left $100,000 in trust for charitable purposes. Having been advised that income accumulated in this trust should also be paid over to the residuary trusts, the executors in July 1954 transferred $1,714.35 from the Article Sixth trust to each of the residuary trusts.
Defendants or their predecessors, as executors of the Armour will, filed two intermediate accounts. The first was filed January 11, 1952 and covered the period through November 30, 1951. Under the Schedule of Income Allowances this account specifically showed the transfer to plaintiff Ruth's residuary trust of the first two sums above listed -- $121,000 and $40,000. The Schedule also set forth in detail the income commissions routinely taken by the executors without court allowance, as permitted by the statute, N.J.S. 3A:10-2 (formerly N.J.S.A. 3:11-2 and 3:11-2.2) amounting to $42,552.54 at the then statutory rate of 5% on all income received through November 5, 1951, which included all the income transferred to plaintiff's residuary trust. The complaint for the allowance of this account named plaintiff
as a party defendant. (She was a minor when the complaint was filed, but had become of age when the account was approved.) Notice of settlement of the account was duly mailed to Martha S. Armour, her mother and guardian, as provided by the court rules. Thereafter exceptions to the account were filed by Messrs. Milton, McNulty & Augelli, the predecessor firm of plaintiff's present counsel, as attorneys for Martha S. Armour, Ruth's general guardian. The exceptions were dismissed after a trial, and on June 5, 1954 the Chancery Division entered a judgment which recited that counsel were appearing for Ruth Armour, then of full age, and which included the following:
"The said accountants be allowed the sum of $42,552.54 which they have taken as statutory commissions on income collected by them during the period covered by the account."
On March 4, 1955 the Armour executors filed their second intermediate account covering the period from December 1, 1951 through November 30, 1954. This account, under its Schedule of Income Allowances, specifically showed the transfers to Ruth's residuary trust of the next five items set out in the list of distributions above: $92,000, $20,000, $2,000, $42,000 and $30,000, respectively. The Schedule also detailed the income commissions routinely taken by the executors, amounting to $23,158.85 at the then statutory rate of 5%, on income received during the period of the accounting, which included all of the income transferred to plaintiff's residuary trust. The complaint for the allowance of the account named plaintiff as a party defendant. She was then of full age. Notice of settlement of the account was duly mailed to her in accordance with the court rules. Her attorneys, Messrs. Milton, McNulty & Augelli, then filed exceptions to the account, addressed primarily to the corpus commissions requested by the executors and the fees requested by their attorneys. There was no exception taken to the income commissions. On November 10, 1955 the Chancery Division entered judgment allowing the account, reciting
the appearance of counsel for Ruth Armour Kamen, formerly known as Ruth Armour, and which included the following:
"The said accountants be allowed the sum of $23,158.85 which they have taken as statutory commissions on income collected by them during the period covered by the account."
This judgment was appealed with respect to the executors' corpus commissions and the fees allowed their attorneys. Thereafter, on October 2, 1956, the Chancery Division entered judgment on the mandate on appeal, which judgment repeated the above-quoted adjudication with respect to the allowance of statutory income commissions.
On February 10, 1954, the trustees of the trust established under Article Sixth of the Armour will filed their account as such trustees for the period December 1, 1950 through November 15, 1954. Under the Schedule of Income Allowances this account specifically showed that the trustees had taken commissions of $171.58, at the rate of 5%, on all income received by them during the period covered by the account, totalling $3,431.70. The sum of $1,714.35 of accumulated income which, as we have already stated, was transferred into plaintiff's residuary account in July 1954, represented the balance of income remaining after the deduction of such commissions and other proper charges against the Article Sixth trust income. The complaint for the allowance of the trustees' account named plaintiff, then of full age, as a party defendant. Notice of settlement of the account was duly mailed to her in accordance with our rules of court. The Chancery Division judgment allowing the account was entered April 28, 1954. It recited the appearance of Messrs. Milton, McNulty & Augelli, as attorneys for Ruth Armour, and included the following:
"The said trustees be allowed the sum of $171.58 which they have taken as statutory commissions on income of said trust collected by them."
On June 13, 1958 the trustees of plaintiff's trust filed their account covering the period from December 29, 1950 through November 30, 1957. Examination of the account shows that it was divided into two parts. The first was a final account with regard to the one-third part of the trust which, under Article Seventh of the will, had vested in plaintiff on her marriage. The other was the first intermediate account with regard to the remaining two-thirds of the trust which was to continue during plaintiff's lifetime. The Schedule of Income Charges showed that accumulated income had from time to time been transferred from the estate to the trust in the period December 29, 1950 to April 20, 1956, in the amounts heretofore stated and aggregating $377,000. The Schedule of Income Allowances showed that the trustees had not taken income commissions prior to filing the account.
The trustees' complaint seeking allowance of the account stated, in paragraph 2 of the First Account:
"* * * In addition to the said payment of principal there was paid to the said trustees by the said executors on or about December 29, 1950, the sum of $121,000.00 in cash which had been accumulated by the said testator. Thereafter from time to time, there was paid over to the said trustees by the said executors additional amounts of such accumulated income which, together with such original payment of accumulated income aggregated $377,000 in amount. The said trustees, in addition to the aforesaid payments of accumulated income, received on or about July 2, 1955 income in the amount of $1,714.35, which had accumulated in their hands as trustees of the trust established under Article Sixth of the Last Will and Testament of the said testator. All such accumulated income as well as all such principal was invested when received from time to time and was thereafter kept invested for the use and benefit of the testator's said daughter, Ruth."
Paragraph 10 of the account, summarizing that part dealing with the share of the trust not vested in plaintiff, gave the following information with respect to income:
"THE ACCOUNTANTS CHARGE THEMSELVES AS FOLLOWS:
Amounts received from time to time from the Executors
of the Last Will and Testament of Bernard R.