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In re Trust Estate Created and Established

Decided: August 1, 1967.

IN THE MATTER OF THE TRUST ESTATE CREATED AND ESTABLISHED BY DEED OF TRUST OF HENRY D. MOORE, DATED MAY 10, 1918


For affirmance -- Chief Justice Weintraub and Justices Jacobs, Francis, Proctor and Hall. For reversal -- None. The opinion of the court was delivered by Hall, J.

Hall

[50 NJ Page 137] This litigation challenges the amount of corpus commissions allowed by the Camden County Court, Probate Division, on the settlement of the fourth intermediate account of the trustees of an inter vivos trust. The corpus has always exceeded $100,000 and the administration of the trust has already extended beyond 25 years. The Appellate

Division, on the appeal of certain of the beneficiaries, decided that the allowance had been improperly computed, vacated it and remanded the matter to the trial court to make a new award in conformity with guidelines laid down in the opinion. The court also set out guidelines for the computation of final commissions upon the eventual termination of the trust. 91 N.J. Super. 321 (1966). We granted the trustees' petition for certification. 48 N.J. 144 (1966).

We are in complete accord that the basis and method of computation were legally wrong and thus that the amount of the allowance was grossly excessive, dictating the disposition the Appellate Division made. While in most respects we agree with the guidelines set forth, we think we should restate them. We are moved to this course by reason of the paucity of prior expression by this court and of fairly recent statutory changes. Earlier judicial opinions at various levels, not entirely consistent and principally involving prior versions of statutory provisions, are not currently of great help to trial judges or the bar in a field where the statutes are quite imprecise in many particulars, most applications for commissions are not questioned for various reasons, and practices may well have grown up which are neither uniform nor fully conforming to the views we hold. Since this is a non-testamentary trust and the instrument does not provide for the compensation of the trustees, the sections of Chapter 10 of Title 3A supplementing Revised Statutes (1937) which deal with the commissions of other fiduciaries specified therein, are applicable. N.J.S. 3A:10-4. Therefore what we have to say is pertinent to such other fiduciaries as well.

The current form of the pertinent chapter provisions dealing with the allowance of corpus commissions reads as follows:

" N.J.S. 3A:10-1. Allowance in general

Allowance of commissions on corpus in excess of $100,000 to executors, administrators, administrators with the will annexed, guardians, trustees under a will and fiduciaries appointed under chapter 40 of this Title for the property of an absentee, shall be made with reference to their actual pains, trouble and risk in settling the estate, rather than in respect to the quantum of the estate."

" N.J.S. 3A:10-2. Computation of commissions; rates

On the settlement of accounts of fiduciaries acting in any capacity referred to in section 3A:10-1 of this Title, their commissions over and above their actual expenses shall be computed upon the following rates:

If there is but one fiduciary, 5% on all corpus that comes into the fiduciary's hands in cases where corpus receipts do not exceed $100,000.00, and in cases where corpus receipts exceed $100,000.00, 5% on the first $100,000.00 of corpus, and, on the excess over $100,000.00 of corpus, such percentage, not in excess of 5%, as the court may determine on the intermediate or final settlement of the fiduciary's accounts, according to actual services rendered. If there are 2 or more fiduciaries, their commissions on corpus shall be the same as herein provided in the case of one fiduciary, and, in addition thereto, the court may allow corpus commissions in excess of the commissions to which one fiduciary would be entitled under this section, at a rate not exceeding 1% of all corpus for each additional fiduciary. In any case in which the administration of the fiduciary or fiduciaries has extended or extends beyond a period of 25 years, corpus commissions for such additional years shall be allowed at a rate not exceeding 1/5 of 1% per annum, irrespective of the number of fiduciaries.

To aid a full understanding of this statutory scheme, some brief reference should be made to history. Originally the sole provision was the precursor of N.J.S. 3A:10-1. In existence at least since 1820, Rev. 1820, p. 786, § 31, that enactment said only that "* * * the allowance of commissions to executors, administrators, guardians or trustees, shall be made with reference to their actual pains, trouble and risk, in settling such estate, rather than in respect to the quantum of estate, * * *"

Any further provision apparently did not come until L. 1855, c. 128, p. 345, § 9 and L. 1862, c. 29, p. 41 (Rev. 1877, p. 776, § 110), when the method which has developed into the quoted portion of N.J.S. 3A:10-2 was adopted. Since the provisions of the 1862 statute were continued, save for minor changes, in the Orphans Court Act of 1898 (L. 1898, c. 234, p. 762, § 129; 3 C.S. p. 3860) and Revised Statutes of 1937, we summarize them by reference to section 3:11-2 of the latter. It provided that commissions of specified fiduciaries where the estate receipts did not go beyond $50,000 should

not exceed a designated scale of percentages "[o]n all sums that come into their hands." 5% was the maximum allowed on the first $10,000 of receipts, 4% on the excess between $10,000 and $20,000 and 3% on the excess between $20,000 and $50,000. Where the receipts exceeded $50,000, a single maximum percentage of 5% of "all sums which come into their hands" was specified, the exact figure to be determined by the court "on the final settlement of their accounts according to the actual services rendered."

The first essential of the scheme thus laid out was that the dollar amount of corpus commissions awarded by a court as compensation for the administration of any estate, whether an executorship, trusteeship or whatever, was to be arrived at by the application of a percentage to a prescribed base. This basic format has never been changed. The base continues to be "all sums which come into their hands" or "receipts," terms which are synonymous and refer to the gross estate received by the fiduciary at commencement plus gross increases during the course of administration. See 7 N.J. Practice (Clapp, Wills and Administration (3 d ed.)) § 1527; In re Linn, 124 N.J. Eq. 65, 69 (E. & A. 1938); Appleby v. Appleby, 140 N.J. Eq. 8, 12 (Ch. 1947); Blauvelt v. The Citizens Trust Co., 3 N.J. 545, 558-559 (1950). The rate to be applied was originally entirely permissive with the court, limited only by maxima and by the standards of "according to the actual services rendered" and "with reference to their actual pains, trouble and risk * * * rather than in respect to the quantum of estate."*fn1

A succession of amendments since 1937 to what is now N.J.S. 3A:10-2 has resulted in a single mandatory rate of 5% of gross corpus receipts where such receipts do not exceed $100,000, without regard to pains, trouble, risk or actual services rendered, the length of time the administration required (short of 25 years) or the length of the period thereof during which the fiduciary held all the gross receipts comprising the base. In cases where such receipts exceed $100,000, the 5% rate applies mandatorily to the first $100,000, with that on the excess to be determined by the court at a percentage of not more than five under the original standards. See L. 1939, c. 134; L. 1949, c. 225; L. 1951, c. 345 (enacting Title 3A); L. 1957, c. 80. See 7 N.J. Practice, supra, § 1525, p. 221, n. 4.; In re Flynn, 132 N.J. Eq. 85 (Prerog. 1942); The National State Bank of Newark v. Nadeau, 57 N.J. Super. 53, 69-70 (App. Div. 1959).

Recognition of the length of time an estate administration requires first came into the statute by L. 1940, c. 172. The 1940 amendment simply said that commissions in excess of the rates set forth in the statute "may be allowed * * * in any case where the administration of the fiduciary has extended or extends beyond a period of twenty-five years". In 1949 a further amendment placed a limitation on such excess rate at not more than 1/5 of 1% per annum for the additional years beyond 25. L. 1949, c. 225. By L. 1957, c. 80, the phrase "may be allowed" was changed to "shall be allowed," but the mentioned rate remained as an outside limit and was not made mandatory. It is evident that this additional authority is without regard to the nature of the estate or the amount of gross receipts involved, that it authorizes an over-all rate larger than 5% of total gross

receipts where the administration extends beyond 25 years, and that it was intended to be retroactive.

One other special statutory provision should be noted, which is also slightly involved in this case. Until 1949 no recognition was given to the number of fiduciaries serving, i.e., as far as the statute stated, it made no difference in the rate of commissions whether the estate had one fiduciary or more than one. By L. 1949, c. 225, it was provided that if there were more than two fiduciaries, the court might allow commissions in excess of 5% at a rate not exceeding 1% for each fiduciary beyond two. By L. 1957, c. 80, this permissive authority was extended to situations where there are two or more fiduciaries, authorizing the additional maximum of 1% for each fiduciary beyond one. The statute so ...


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