Welch v. Welch , 235 Wis. 282 ( 1939 )

William O. Welch, James B. Welch, Annette L. Welch, wife of William O. Welch, Nancy Atwater Welch, and Margaret Ann Welch, adult daughters of William O. Welch, Annette Welch, wife of James B. Welch, and Hubert O. Wolfe, guardianad litem for the minor heirs, Mary Lucy Welch, Ann, Whitney Welch, Fredericka Welch, and James Welch, Jr., move for a rehearing on several grounds. It is first contended that the court, in disposing of their twentieth assignment of error overlooked or misunderstood their principal contention. In their original brief they asserted:

"The court erred in finding that the net income of the trust from October 28, 1914, to June 21, 1923, was $234,831.17."

The trial court found:

"The net income of the trust from October 28, 1914, to June 21, 1923, as determined in Exhibit 7, page 16, is $217,376.84, to which should be added dividends received from the Welch Investment Company and paid out of earnings, in the amount of $7,188.61, interest accrued on notes receivable as of October 28, 1914, $3,581.79, and interest accrued on bonds as of October 28, 1914, $6,683.93, so that the total net income of the trust for the period from October 28, 1914, to June 21, 1923, was $234,831.17. The distribution of income . . . was $218,502.38. So that there was no overdistribution of net income of the trust for the period from October 28, 1914, to June 21, 1923."

In considering that finding we assumed that the figure $217,376.84 represented the true net income for that period as found by the auditors. That amount, plus the adjustments which the trial court added to it, exceeded the income distributed during that period. It is contended that the court overlooked plaintiffs' contention that there was included in the $217,376.84, the sum of $46,023.98, accrued interest on advances and loans made to the beneficiaries, Charles, James, and William, which had not been collected. The interest actually accrued at that time and due from Charles, William, and James on loans or advancements was $37,995.28. The loans and advancements were made by the trustees under the broad powers conferred upon them by the trust deed, or under the assignments made by Charles, William, and James on December 30, 1916. It is contended that since the interest due the trustees had not been actually received by them, it should not have been treated as income and should not have been distributed as such. Since Charles, James, and William in all probability would be entitled to payments of corpus, the trustees doubtless figured that the interest owed by the beneficiaries would be adjusted at the time of the distribution to them of the first one fourth of corpus. Assuming, for the purposes of argument, that there was a technical overdistribution of income during the period mentioned because the interest had not been collected, and that there was an overdistribution of income which temporarily came out of corpus, that appears to have been corrected in the process of distributing to Charles, James, and William the first one fourth of the corpus and in charging the remainder due against their interests in the remaining corpus, by which their debts to the trustees were either wholly or partially liquidated. Any improper distribution of income out of corpus was in that manner restored to corpus. The remaindermen therefore have no cause for complaint because of any temporary overdistribution of income during that period. William and James may not complain since they had assigned the whole of their respective interests in the trust to the trustees as collateral security for the payment of their then existing indebtedness or any other indebtedness or liability to the said trustees that might thereafter be contracted by them. (Assignments dated December 30, 1916.) The court specifically found that there was no overdistribution of income or of corpus during the administration of the trust. Looking at the whole administration of the trust from 1914 to the date of the trial, we cannot say that the court's finding, that there was no overdistribution of income or corpus (other than the Welch Investment Company dividends, as found by this court), was against the great weight and clear preponderance of the evidence.

It is next contended that this court should have determined the exact amount of the dividends declared by the Welch Investment Company, which was paid to the trustees and improperly distributed by them as income. We considered that it was quite impossible for us, without the assistance of accountants, to determine the correct amount of the overdistribution of income based upon dividends declared by the Welch Investment Company out of surplus created by appreciating the value of its real estate. We have reconsidered this matter for the purpose of determining whether we might possibly reach a correct result without the assistance of accountants. When it is considered that the appellants contend that the dividends improperly distributed as income amount to $109,765.44, and that the respondents contend that the dividends improperly distributed amount at the very most to $23,000, the difficulties which confront us are apparent. We therefore adhere to our former ruling that the cause should be remanded with directions to the trial court to determine the amount of dividends declared by the Welch Investment Company out of surplus created by appreciating the value of its real estate, which dividends were received by the trustees and improperly distributed as income.

It is next contended that the court should have ordered the trustees to restore to the trust the full amount of the dividends received by them, which were declared by the Welch Investment Company by appreciating the value of its real estate. This court deemed it just and proper that the amounts of any overpayments received by Charles, James, and William should be charged against their respective interests in the corpus of the estate, and that the amount of the overpayments to Mrs. Hengels should be adjusted by withholding from her all income until the trustees were repaid the amount of the overpayments, but in the event of her death prior to such repayment and upon failure of her estate to repay the balance due, that the trustees should make good any loss. We adhere to the ruling with respect to any overpayments to Charles, James, and William, but upon careful reconsideration, we are of the view that the trustees should be required presently to restore to the trust estate the six twenty-fourths part of the dividends which was improperly distributed to Mrs. Hengels, and that the trustees so paying shall have a lien or liens upon her future income, payable out of the trust, until they have been reimbursed. We reach this conclusion because Mr. Estberg, one of the trustees, is presently of the advanced age of seventy-eight years, and because the burden of such reimbursement should be placed upon the trustees, and not left to the uncertainties of collection which may exist in the future. In 1 Restatement, Trusts, p. 783, § 254, it is stated:

"If the trustee has made a payment out of trust property to one of several beneficiaries to which the beneficiary was not entitled, such beneficiary is personally liable for the amount of such overpayment, and his beneficial interest is subject to a charge for the repayment thereof, unless he had so changed his position that it is inequitable to compel him to make repayment."

Mrs. Hengels did not appear in the action although originally made a party. So far as she is concerned, there is nothing to show that it will be inequitable to compel her to make repayment of so much of the corpus as she improperly received as income. If she repays to the trustees the amount improperly received by her, as counsel for the respondents suggests she probably will, that will end the matter so far as she is concerned. Charging Charles, James, and William with the overpayment against their interests in the corpus is, in our opinion, not unjust or inequitable since each of them had assigned his interest in the trust to the trustees to secure his indebtedness.

It is suggested that in the event this court should decide to determine the amount of overdistribution of income based on the dividends received by the trustees from the Welch Investment Company, that we determine the reasonable amount of additional attorneys' fees which should be allowed the plaintiffs' attorneys. It is asserted that the small amount of attorneys' fees allowed them by the trial court out of the trust was based upon the comparatively small amount which the court required the trustees to make good to the trust estate, and that since further restorations to the trust estate will doubtless follow the determination of the amount of the overdistribution of income based on the dividends mentioned, their fees should be increased. Since the matter of the overdistribution must be determined by the trial court, we think the matter of additional attorneys' fees should also be determined by it. In our opinion, the trial court, in its discretion, may properly allow additional fees to the plaintiffs' attorneys and to the guardian ad litem based upon the additional recovery, and may order the payment of a reasonable amount to the accountants for additional services to be rendered in assisting the trial court in determining the correct amount of the dividends improperly distributed as income.

By the Court. — The motion for rehearing is denied. The mandate is modified to read: Judgment affirmed in part, reversed in part. Cause remanded with directions to determine the amount of dividends declared by the Welch Investment Company out of surplus created by appreciating the value of its real estate, and to modify the judgment in accordance with the opinion and this memorandum on motion for rehearing. Taxable costs in this court, including $25 motion costs, to be allowed the appellants. Order affirmed.