Corn Exchange Bank Trust Co. v. Bankers Trust Co.

Ceane, Ch. J.

On the 9th day of May, 1929, Margaret P. Daly, of Hamilton, Montana, by instrument, duly executed, made the Corn Exchange Bank, doing business in the city and State of New York, a trustee of certain personal property, consisting of stock and bonds, to pay the income thereof to her son, Marcus Daly, during his life, and upon his death to apply the same to the use, maintenance and support of his son, Marcus Daly, 3d, being the grandson of the settlor. Upon the death of the grandson, the principal is to go in equal shares to his *226 children, or in the absence of any such children, to the then living children of the settlor.

When Marcus Daly, the son, died, the trust company accounted in the Supreme Court, citing all parties interested, and showing the principal of the trust in its hands to be $445,190 and the accumulation to be over $60,000. The infant son, Marcus Daly, 3d, having received a large income under the will of his father, the income under this trust has not been fully paid to him since the death of his father, but it has accumulated in the hands of the trustee.

Upon this accounting the trustee employed, as attorneys, Laughlin, Gerard, Bowers & Halpin whose services have been found to. be reasonably worth $2,750. The trial judge also found in passing upon the account that the trustee “ has made or necessarily incurred taxable disbursements in the above-entitled action in the amount of $304.70 and that said sum is reasonable and proper in amount.” However, he disallowed these charges, holding that the trustee was obliged to pay them, if at all, out of its commissions because of a provision in the trust agreement reading as follows:

“ 8. It is further agreed that the compensation of the party of the second part for acting as Trustee hereunder shall be one-half (f) of one per cent (1%) of the value of the securities turned over to it to form the corpus of this trust or of any cash so turned over and shall be one per cent of the value of the securities and cash paid over, transferred and assigned to whomever may be entitled thereto at the death of the life beneficiary and that the compensation of the party of the second part for collecting and paying over the income of this trust fund shall be two per cent.”

do not find that this word “ compensation ” includes the necessary expenses of the trustee upon an accounting proceeding such as this. It was obliged to be represented in court by an attorney and the charges *227 have been found to be reasonable and necessary. The money which an executor or trustee pays out of his own funds and gets back as reimbursements is in no sense compensation, and such has been the application of the word by the cases. The law finds expression in these words; acting en autre droit, as executors, administrators, trustees, guardians, receivers, etc., are, upon a faithful execution of their trusts, to be indemnified out of the trust property, for all expenses necessarily incurred in the faithful performance of their duties ” (Matter of Maxwell, 218 N. Y. 88, 90 ), and expenses in a proper case may include allowance for counsel fee and legal services.

(Woodruff v. York, L. E. & W. R. Co., 129 N. Y. 27 ;

Downing v. Marshall, 37 N. Y. 380 ; Bogert on the Law of Trusts, § 106, p. 404.

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*228 We decide that the word “ compensation ” in that instrument does not include expenses and disbursements incurred upon this accounting.

Therefore, the judgments of the Appellate Division and of the Special Term in so far as they direct the payment of $2,750, lawyers’ fees, and $304.70, expenses, by the plaintiff individually, should be reversed and judgment directed for the plaintiff for these amounts payable out of the estate, without costs.

Lehman, O’Bkien, Crouch, Loughran and Finch, JJ., concur; Hubbs, J., not sitting.

Judgment accordingly.