American Jewish Joint Distribution Committee v. Eisenberg

Delaplaine, J., delivered the opinion of the Court. Martha W. Stern, of- Frostburg, who died on October 4, 1946, left a will making specific pecuniary bequests totaling $98,500 and leaving the residue of her estate to American Jewish Joint Distribution Committee, appellant. The estate was appraised in the Orphans’ Court of Allegany County at $250,404.59. Loraine Eisenberg, executor, stated his first administration account on November 4, 1947, but did not pay the legatees at that time.

On October 29,1948, he instituted this suit against the legatees for the purpose of obtaining the direction of the Circuit Court for Allegany County in the administration of the estate. On March 3, 1949, the chancellor passed a decree which, among other things, directed that no interest should be allowed on any of the bequests. On March 18 two of the legatees prayed for reargument of the case and modification of the decree. At the hearing on their petition, the executor testified that he had made earnest efforts to ascertain the amount of the Federal estate tax, and the Internal Revenue Bureau had expressed doubt as to whether the residuary legatee should be exempt from the Federal estate tax.

Influenced by the executor’s narrative, the chancellor on April 19 passed a second decree striking out the challenged portion of the decree of March 3, and ordering that, interest at the ²⁰⁷ rate of 3 per cent be allowed on the pecuniary bequests from October 4, 1947. The chancellor said in his opinion that it was agreed at the hearing that if interest should be allowed, it should be at the rate of 3 per cent. He accepted this agreement with the comment that it would not work any hardship upon the residuary legatee, inasmuch as the total interest will not be out of line with the income of the estate during the administration. The appeal is from the second decree.

The Maryland Testamentary Act provides that every administrator shall render to the Orphans’ Court the first account of his administration within the period of twelve months from the date of his letters. If the first account shall not show the estate to be fully administered, another account shall be rendered within six months thereafter, and, within every term of six months thereafter, an account shall be returned until the estate shall appear to be fully administered. Code 1939, art. 93, secs. 1, 2. It is a basic principle that an executor acts as a trustee for all persons interested in the estate, and he should be diligent and faithful in the discharge of his trust.

Gordon v. Small, 53 Md. 550, 556 ; Sullivan v. Doyle, 193 Md. 421, 430 , 67 A. 2d 246, 250 . Moreover, it is evident that prompt payment of the funds of an estate to the beneficiaries is a duty which is just as imperative as prompt collection of the funds. Accordingly, where an executor has retained the assets of the estate unproductive without any apparent reason or necessity, he is guilty of negligence and breach of trust and the Orphans’ Court should charge him with interest. Mickle v. Cross, 10 Md. 352, 363 ; Ing v. Baltimore Ass’n. for Improving the Condition of the Poor, 21 Md. 426, 432 ; Cook v. Aronheim, 186 Md. 138, 146 , 46 A. 2d 108 .

The personal liability of an executor to the legatees for interest because of delay in paying the legacies depends upon whether the delay was reasonable or unreasonable. Where the delay is reasonable, the executor is free from personal liability for interest; where the delay is unreasonable, ²⁰⁸ he is chargeable with interest. What constitutes unreasonable delay in making settlement rendering the executor personally liable for interest depends upon the facts and circumstances of each particular case. The inquiry is whether, under all the facts and circumstances of the case, a man of ordinary prudence dealing with his own funds in his own interest would have retained the money instead of delivering it at the time ordinarily required.

The policy of the Testamentary Act has been to promote the prompt administration and settlement of estates. Collins v. Carman, 5 Md. 503, 534 ; Barrett v. Clark, 189 Md. 116 , 54 A. 2d 128, 132 , 173 A. L. R. 188. Section 106 directs that an administrator shall discharge all just claims known to him, or pay each claimant his just proportion of the money then in his hands, within thirteen months from the date of his letters, or within such further time, not exceeding four months longer, on his making oath that he has reason to apprehend that the personal estate and assets will be insufficient to discharge the debts of and claims against the deceased; and it shall likewise bé his duty, once in every term of