(178 N.Y.S.)

Jay Gould; Coudert Bros., of New York City (Lorenzo Semple and Howard Thayer Kingsbury, both of New York City, of counsel), for defendant Duchesse de Talleyrand (formerly Anna Gould); Thomas S. Fuller, of New York City, guardian ad litem for infant defendant Helen Margaret Gould; Walter F. Carter, of New York City, guardian ad litem for infant defendant Dorothy Gould; and William Nelson Cromwell, of New York City, guardian ad litem for Marie, etc., de Castellane, Georges, etc., de Castellane, Charles, etc., de Sagan, Jason, etc., de Castellane, Helene, etc., de Talleyrand-for the motion. Chadbourne, Babbitt & Wallace, of New York City (William Wallace, Jr., of New York City, of counsel), for George J. Gould; Alton B. Parker, of New York City, for Edwin Gould, individually and as trustee; Frank Lawrence, of New York City, appearing specially for Kingdon Gould and Jay Gould; and Stanchfield & Levy, of New York City (John B. Stanchfield and Siegfried F. Hartman, both of New York City, of counsel), appearing specially for George J. Gould, Jr., and Marjorie Gould Drexel-opposed.

Frank M. Gould, infant remainderman, opposed (although his guardian ad litem, William A. W. Stewart, of New York City, is neutral).

Helen G. Shepard, by her attorneys, De Forest Bros., of New York City, is neutral.

WHITAKER, J. This is a motion to remove George J. Gould as a trustee under the will of his father, Jay Gould.

Jay Gould died leaving a will, which was probated in January, 1893. The provisions of this will, so far as pertinent to the questions involved, are as follows: First, there were specific legacies and bequests made which, it is conceded, have been paid and satisfied. The will then provides as follows:

"Fifth. I give, devise and bequeath all the rest, residue and remainder of my estate, real, personal and mixed, of every name and nature whatsoever and wheresoever situate of which I shall die seized or possessed, or to which I may be entitled at the time of my decease, unto my executrix and executors hereinafter named as trustees, the survivors and survivor of them, in trust for the uses and purposes following, that is to say:

"1. To hold or sell, convey or dispose of the same at public auction or private sale, at such time or times and on such terms as they or the survivors or survivor of them in their or his or her discretion shall deem advisable.

"2. To divide said real and personal estate or the proceeds thereof into seven equal parts or shares and to designate, hold and invest one such part or share for my said wife, and to collect and receive and pay or apply the rents, interest and income of the part or share so set apart for my said wife to her for her use during her natural life, and upon her death to pay, assign, transfer and convey the part or share so held in trust for her to such persons and in such proportions as she shall appoint and direct in and by her last will and testament; and in case of her failure to make such testamentary appointment, then to my children then surviving and to the issue of any deceased child share and share alike, per stirpes and not per capita.

"3. To designate, hold and invest one other such share for each of my children, George J. Gould, Edwin Gould, Howard Gould, Frank Gould, Helen M. Gould and Anna Gould, and to collect and receive and pay or apply the rents, interest and income from the part or share so set apart for each child to his or ner use during his or her life; and upon the death of any of said children to pay, assign, transfer or convey the part or share so held in trust for him or her to his or her issue in such proportions and at such times as he or she shall appoint in and by his or her last will and testament; and in case of failure to make such testamentary appointment, then to such issue absolutely in the proportions provided in and by the statutes of this state in cases of intestacy.

"4. In the event that any of my children shall die without issue, then to pay, assign, transfer and convey the part or share of the one so dying to my surviving children and to the issue of any deceased child share and share alike per stirpes and not per capita.

"Sixth. I direct that all securities in which said trust funds shall from time to time be invested be taken and held by said trustees in their name as trustees for the parties respectively for whose benefit the funds are severally set apart and held so that each of the trust funds herein provided for shall be kept separate and distinct from the others, and the accounts thereof shall be separately kept; and I authorize and direct my said executrix and executors and trustees to employ and pay out of the funds of my estate all the clerks and bookkeepers that may be necessary for this purpose.

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"Tenth. I hereby direct that all stocks, bonds and other securities belonging to me at my decease shall form part of the trusts created by this my will at such values as shall be placed upon them by my said executrix and executors and trustees, but I hereby authorize them, the survivors and survivor of them, to sell and dispose of the same or any of them whenever in their discretion they think proper. And I expressly direct that my executrix and executors and trustees, the survivors or survivor of them, are not to be held responsible or liable for or charged with any loss or depreciation that may arise by holding such securities or any securities forming part of the trust created hereby; and I hereby empower them, the survivors or survivor of them, to make such investments and reinvestments of the trust moneys in securities other than those in which trustees are authorized to invest by law, in the absence of testamentary direction, as they may think proper; and I further authorize and empower them, the survivors or survivor of them, to call in, change, invest and reinvest the said securities and investments and proceeds thereof whenever and as often as they may deem necessary.

"In the event of any differences of opinion among my executrix and executors and trustees as to the holding and retaining of securities or investments, or as to the calling in or making investments and reinvestments and management of the estate and of the trusts herein created, I direct that so long as they shall be five in number the decision of four of them shall be conclusive, and when and so long as their number shall be reduced to four that then the decision of three of them shall in like manner be conclusive.

"Eleventh. I nominate, constitute and appoint my wife, Helen D. Gould; my brother-in-law Daniel S. Miller, my son George J. Gould, my friend Thomas T. Eckert, and my second son Edwin Gould when he shall have reached the age of twenty-one years executrix and executors of and trustees under this my list will and testament: Provided, however, and the appointment of trustees in this my will is subject to this exception, that neither of the persons herein named as trustees shall be trustee of the fund, share or portion hereinbefore directed to be set apart and to be held for him or her or for his or her benefit, but as to such fund in the case of each of the beneficiaries who is also made a trustee herein the trust shall vest in and be executed by the others of the trustees herein named and the survivors and survivor of them.

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"Thirteenth. I desire and direct that in lieu of the commissions provided by statute to be paid to executors and trustees there shall be paid to my said executrix and executors and trustees for their services the sum of ten thousand dollars per annum each so long as they shall respectively act in the capacities aforesaid: Provided, however, and said appointments of said executrix, executors and trustees are subject to the further condition, that no commission or compensation shall be charged by or allowed to any of them for their services as executrix, executors and trustees other than as above provided, and if either shall decline to serve on said condition his or her appointment as such executrix or executor and trustee shall cease and terminate."

(178 N.Y.S.)

The first codicil provided for the division of the estate into six, instead of seven, separate trusts, the wife having died, and specifically confirms the direction that the residuary estate be divided into six separate trusts, and directs that

"Said shares and the accounts and transactions pertaining thereto shall at all times be kept entirely separate and distinct and shall never be mixed or mingled."

The present trustees are George J. Gould, Helen G. Shepard, Edwin Gould, and Howard Gould.

The interested parties who have appeared in favor of the motion are as follows: Frank Jay Gould, life tenant; Duchesse de Talleyrand (formerly Anna Gould), life tenant; Helen Margaret Gould, infant remainderman; Dorothy Gould, infant remainderman; Marie, etc., de Castellane, infant remainderman; Georges, etc., de Castellane, infant remainderman; Jason, etc., de Castellane, infant remainderman; Charles, etc., de Sagan, infant remainderman; Helene, etc., de Talleyrand, infant remainderman.

Those who opposed the motion are as follows: George J. Gould, trustee and life tenant; Edwin Gould, trustee and life tenant; Kingdon Gould, remainderman; Jay Gould, remainderman; Marjorie G. Drexel, remainderman; George J. Gould, Jr., remainderman; Frank M. Gould, infant remainderman (although his guardian ad litem is neutral).

The only other appearance was Helen G. Shepard, who is neutral. The executorial duties of the trustees have all been performed and

completed.

The present action, in which George J. Gould, Edwin Gould, Helen G. Shepard (formerly Helen M. Gould) and Howard Gould, as executors and trustees under the last will and testament and codicils thereto of Jay Gould, deceased, are plaintiffs, and all the parties interested in the estate are defendants (in which action this motion is made), was begun in 1916, and asks for an accounting and the approval of the court of all the acts of the executors and trustees and a construction of certain portions of the will. The executors and trustees have administered the estate, which amounted to over $80,000,000, for 23 years, and during that entire period have neither accounted nor attempted to account. It is manifest from all the facts before the court that the respondent George J. Gould was in practical control of the management of the entire estate. This, of course, was a natural consequence of the provisions of the testator's (Jay Gould's) will, which indicated that the testator had great confidence in the judgment, ability, integrity, and experience of the respondent, George J. Gould, and as matter of fact the will made him the sole arbiter under certain conditions.

The charges made against the respondent George J. Gould by the moving parties are substantially as follows:

(1) That George J. Gould has exercised a dominating influence in the management and administration of the property and investments of the estate of Jay Gould, of which he is executor and trustee, and has dictated its policy in all, or nearly all, important matters.

(2) That in the management of the estate he has habitually subordinated the interests of the estate, and his fiduciary obligations in respect thereto, to his individual and personal interests.

(3) That he has on numerous occasions taken advantage of his powers and opportunities offered to him by his official capacity as executor and trustee of the estate to make individual and personal profits for himself, for which he has not accounted to the estate, and to cause the estate to assume the burden of losses arising out of transactions which he had initiated for his personal account.

(4) That he has conducted speculations in securities in which the estate was interested in such a manner that when there was a profit he could and frequently did take it for himself, and when there was a loss he could and frequently did cause such loss to be assumed by the

estate.

(5) That he has failed to exercise common prudence and diligence in making and keeping investments for the estate; that he has invested large portions of the estate in securities of a highly unsafe, speculative, and nonproductive character, and has kept such investments when he might and should have disposed of them, often for the purpose of serving some personal interest of his own, and frequently resulting in great loss to the estate, both of principal and income.

(6) That he has willfully and intentionally disregarded the interests of the life beneficiaries by investing large amounts of the funds of the estate in nonincome-producing securities and by keeping such investments for long periods of time.

(7) That through his dominating influence in the management of the estate he is principally responsible for the failure of the executors and trustees to divide the estate into separate shares as directed by the will.

(8) That he has habitually abused the discretion and powers intrusted to him by the testator for his own individual and personal benefit. (9) That he has failed to keep proper, sufficient, intelligible, and correct accounts of the trust estate.

(10) That he has mingled the estate funds and transactions with his own, and has destroyed a large number of his own records and accounts, whereby the facts in regard thereto might appear.

(11) That he has shown by his conduct, his accounts, and his testimony that he has no adequate realization of the duties and obligations of a fiduciary.

It is also claimed that he made false quarterly statements to the parties interested in the estate, for the purpose of deceiving them, and that he is unfit to administer the estate intrusted to his care by reason of his dishonest actions, ignorance of his duties as trustee, and abuse of discretion, through which the estate has lost some millions of dollars. There are a large number of specific instances of wrongdoing set forth in the moving papers, tending to prove the above allegations, and which set forth the most intricate, complicated, and involved stock and bond transactions, amounting to vast sums of money, some of which, it is alleged in the moving papers, resulted in large secret profits to George J. Gould personally, which were never turned into the

(178 N.Y.S.)

estate, and in which the property of the estate was used, and some of which resulted in losses, which losses were charged to the estate.

It is practically impossible to unravel and see completely through this apparent legerdemain of finance by the aid only of affidavits. Suffice it to say that, while most of the transactions themselves are admitted, the wrongfulness of them is either denied or attempted to be explained in such a way as to excuse George J. Gould of any violation of his duties as trustee, and although the evidence preponderates against George J. Gould's denials and attempted explanations, concerning some of these charges, inasmuch as these matters are controverted, the court will not pass upon them, nor base its determination on them in this motion.

[1] There are, however, three specific charges of dereliction of duty and abuse of trust that are admitted and indisputably proven. The first of these charges is the failure of the trustees to divide the estate into six separate trusts. The will contained specific and mandatory provisions that this should be done. The whole scheme of the will shows that the testator was especially insistent upon this direction. This is accentuated by the fact that subsequent to making the will his first codicil again reiterates the direction in most positive terms that

"The said shares, accounts and transactions pertaining thereto shall at all times be kept entirely separate and distinct and shall never be mixed or mingled."

The trustees have entirely ignored this positive provision of the will. By thus doing, it is claimed, the respondent George J. Gould, was able to enter into the financial transactions above referred to. All the papers submitted show that he has had the entire estate practically under his control. The failure to create the six separate trusts was in direct defiance of the most positive directions of the testator; it tended to violate the statute against perpetuities and defeated the entire plan of the testator in the distribution of his estate. It deprived and continues to deprive each beneficiary of the protection and security which would have followed the separation of his or her fund. The creation of the separate trusts would have avoided the loss of one of the trusts being borne by the others. It would have avoided the anomalous position of a trustee being also the beneficiary. It would have prevented the use of the entire estate in individual business enterprises, and would have enabled each beneficiary to know approximately the extent of his or her interest.

It would seem unnecessary to cite judicial authorities to sustain the determination that the absolute and continued refusal of a testamentary trustee to obey the proper expressed directions of the testator is legal ground for his removal. The trustee is appointed expressly for that purpose, and when he persistently and intentionally refuses to perform the very purpose for which he is appointed, and acts directly contrary to that purpose, he should not be allowed to remain as

trustee.

There is, however, judicial authority holding that the refusal or neglect of a testamentary trustee to follow the legal instructions of the testator is ground for removal. Matter of Hoysradt, 20 Misc. Rep.