Opinion
June, 1902.
John Hackett, for executors.
Allison Butts, G.C. Bolin, C. Morschauser, S.H. Brown, for legatees.
M.A. Fowler, guardian ad litem.
The will of William I. Foster, after a provision in favor of his wife in lieu of dower, directs the sale of his real estate and gives the proceeds to his executors in trust. The income of $2,000 is given to Thomas Foster for life. The remainder including the principal of the $2,000 fund, on the death of the life beneficiary, is directed to be divided into three equal parts. Two shares are bequeathed unconditionally to two daughters. "The yearly interest on the other share I bequeath unto my daughter Elma Whittaker during her life and after her decease I bequeath the principal of said share unto her children." The will was executed April 5, 1890. The principal of this share is about $2,671.56.
Upon the final accounting of the executors, the question is presented as to whether the income of the Whittaker fund should be applied toward the payment of certain notes and indebtedness given and contracted by the beneficiary Elma Whittaker to and with the testator between the time of execution of his will and his death, aggregating $1,056.70 without interest.
The annual income of the fund does not exceed $100, so there can be no question as to its being wholly exempt under the statute providing that only the surplus beyond the sum necessary for the education and support of the beneficiary shall be liable for the claims of creditors. Real Prop. Law (L. 1896, chap. 547), § 78, applied to personal in Tolles v. Wood, 99 N.Y. 619. But this does not reach the question involved. While the income may undoubtedly be wholly exempt from the attack of a creditor, is it likewise proof against the equitable lien of the executors upon the legacy and the right of retainer? I am unable to find a parallel case, but the principle upon which the right of retainer depends must be the same whether the legacy is general, or is the income of a fund placed in trust. The right of retainer is an equitable doctrine, founded on the principle that the legatee should not be entitled to his legacy while he retains in his possession a part of the fund out of which his and other legacies are to be paid. Smith v. Kearney, 2 Barb. Ch. 533; Rogers v. Murdock, 45 Hun, 32; Irvine v. Palmer, 91 Tenn. 463.
A debt due to the testator from one to whom he has given a legacy is an asset of the estate in the hands of the legatee and is a satisfaction of the legacy to the extent of such asset. Clarke v. Bogardus, 12 Wend. 69; Matter of Bogart, 28 Hun, 468; Rogers v. Murdock, supra; Smith v. Murray, 1 Dem. 34; In re Colwell, 15 N.Y. St. Repr. 742. It is upon the same equitable principle that the Statute of Limitations has been held to be ineffective against the right of retainer.
It was the unquestioned intention of the testator to divide his residuary estate equally among and for the benefit of three daughters. Such equality could not exist if one of them was wholly relieved from her debt to the testator by reason of the trust, while another is charged with a similar indebtedness.
Applying the principle that the debt is an asset in the hands of the legatee it is a fair deduction that Mrs. Whittaker has received the income of the fund to the extent of her debt to the testator, or in other words, her legacy, which is the income of one-third of the residuary estate, has been satisfied to the extent of such obligation.
I cannot agree that the right of retainer is on the same level with the rights of a creditor of a cestui que trust. It is founded upon different principles and when the equality of distribution is considered it works no hardship in this case.
On the question of the intention of the testator not to enforce the debt as against the income, the rule is well settled that such an intention must be signified in the will.
The legal implication from the taking of the notes and their present existence is that the testator intended that the debt should not be considered an advancement and if he desired that they should not be paid he would have made a testamentary provision to that effect.
The executors must therefore retain the income of the fund to pay the amount due from Mrs. Whittaker with interest.
Decreed accordingly.