In Re the Estate of Bishop , 1945 Haw. LEXIS 20 ( 1945 )

I concur in that part of the opinion of Mr. Justice Peters disposing of the questioned right of the trustees to commissions on the rents received for the use of the buildings of the Kamehameha School for Girls, but I am unable to concur in his conclusion as to the effect of Acts 88 and 149 on the rates of commissions to be applied to the income reported in the 58th account.

The 58th account as filed is for the period commencing with July 1, 1942, and ending with June 30, 1943.

During the period of the 58th account the trustees received income of $1,453,517.92. Of this amount $1,220,763.70 was received during the period from July 1, 1942, to May 10, 1943, both days inclusive, and $232,754.22 was received during the remainder of the accounting period. On the total year's income of $1,453,517.92 the trustees took commissions of $70,103.27, computed as follows:

For the period ending May 10, 1943:

10% on $ 1,000.00 $ 100.00 7% on $ 4,000.00 $ 280.00 5% on $1,215,763.70 $60,788.18 $61,168.18 ___________

For the remainder of the period:

10% on $ 1,000.00 $ 100.00 7% on $ 4,000.00 $ 280.00 5% on $ 100,000.00 $ 5,000.00 3% on $ 100,000.00 $ 3,000.00 2% on $ 27,754.22 $ 555.09 $ 8,935.09 ___________ ___________ $70,103.27

By his answer the attorney general took the position that the trustees having received income in excess of $505,000 prior to May 11, 1943, the date upon which Act 149 became effective, they were entitled to only 1% on the $232,754.22 received after May 10, 1943.

The circuit judge overruled the contention of the attorney general and approved the accounts as filed. In his appeal the attorney general has specified this ruling as error.

In disposing of the question of the correctness of the computation of commissions by the trustees, after reciting the facts and the contention of the attorney general, the court said: "The Court is of the opinion that the commissions taken by the Trustees are proper under section 3973 [sic] of the Revised Laws of Hawaii 1935, as amended by Act 149 of the Laws of 1943, and that the computation of the amount of commissions taken by the Trustees is a literal compliance with the statute."

In his brief and at the oral argument the appellant admitted that commissions were correctly calculated on all income received prior to the effective date of Act 149. No issue as to these commissions was raised below. In a memorandum filed after the oral argument he states that he had overlooked the decision inEstate of da Silva, 31 Haw. 78, which he discusses as follows:

"The only difference between the situation in the da Silva case and the present case is that there the commissions were increased but here they were decreased, plus the fact that a part, though not all, of the commissions allowable here have been affected by the enactment of Act 88, S.L. 1943. The da Silva case establishes the proposition that all commissions are to be allowed at the lawful rate in existence at the time of the accounting. In this case the rate would be that of Act 149. Act 88 affects this situation to the extent of giving a vested right in commissions at the rate provided in Section 3793, R.L. 1935, during the time after the effective date of Act 88 (April 30, 1943) and before the effective date of Act 149 (May 11, 1943). Whether a vested right came into being in commissions on income received before April 30, 1943, depends on whether Act 88 is given a retrospective operation. Section 4, R.L. 1945, provides that no law shall have a retrospective operation."

At the beginning of the accounting period the statute, section 3793, Revised Laws of Hawaii 1935, provided that "Upon all moneys received in the nature of revenue * * * trustees * * * shall be allowed as commissions * * * ten per centum for the first thousand dollars, seven per centum for the next four thousand dollars, and five per centum for all over five thousand dollars, such commissions to be allowed upon each accounting when made but not oftener than once a year."

Section 3793 was amended by Act 88 (C-107), Session Laws 1943, effective April 30, 1943. This Act amended the paragraph of said section just quoted to read as follows: "Upon all moneys * * * received in the nature of revenue * * * trustees * * * shall be allowed as commissions payable out of the income received during each year, ten per centum for the first thousand dollars, seven per centum for the next four thousand dollars and five per centum for all over five thousand dollars, such commissions to be payable as and when such income is received, but said rates of ten per centum and seven per centum to be applied not oftener than once a year."

The significant change in section 3793 effected by Act 88 was the elimination of the phrase "such commissions to be allowed upon each accounting when made but not oftener than once a year" and substituting therefor the phrase "such commissions to be payable as and when such income is received, but said rates of ten per centum and seven per centum to be applied not oftener than once a year."

The change effected by Act 88 was in the method of procedure for the payment of trustees' commissions on income received and authorized the trustees to take their commissions on all income received when income was received. Act 149, Session Laws 1943, which set up a new schedule of commissions for trustees of charitable trusts, became effective on May 11, 1943, before the trustees filed their 58th account, and the application of the rates prescribed by that Act will be considered later.

If Act 88 authorized a trustee to immediately take his commissions on unreported income received prior to the effective date of said Act, then the title of the trustee in the commissions at the then prevailing rate became vested. To have this effect Act 88 must be given a retrospective operation.

Section 4, Revised Laws of Hawaii 1945, which provides that "No law shall have a retrospective operation" does not prevent Act 88 from applying to income received prior to the effective date of that Act. Article 71 of the constitution of the Republic of Hawaii provided that, "Except as herein provided, no Retrospective Law shall ever be enacted," and that section of the constitution was construed in Peacock v. Haw. Rep., 11 Haw. 404, from which I quote: "To hold that every law that ``looks backward' is unconstitutional, would be absurd; it would tie the hands of the Legislature so as to prevent all sorts of salutary laws harmful to no one. ``Retrospective laws' have, therefore, come to have much the same meaning as ``ex post facto laws,' ``laws impairing the obligation of contracts,' c. While these phrases apply in whole or in part to different subject-matters, they in general mean laws that impair vested rights; and in general so long as laws do not impair vested rights they are not unconstitutional because retrospective." Oleson v. Borthwick,33 Haw. 766, and Palea v. Rice, 34 Haw. 150, are to the same effect. Section 3577, Revised Laws of Hawaii 1935 (§ 9578, R.L.H. 1945), provides that "The several courts, in their decisions, shall have due regard to vested rights."

In the case of In re Potter, 175 N.Y.S. 598, the court, in discussing the general rule of statutory construction to the effect that "it takes a clear expression of legislative purpose to justify a retroactive application," said: "This general canon of construction is subject to an exception as broad and distinct as the rule itself. This exception is that the legislature has the right to pass laws changing the form and method of procedure, and that such changes affect cases and conditions arising before the change in the absence of words of exclusion.

"The rule, then, is that it takes a clear expression of the legislative purpose to justify a retroactive reading of a law only when the enactment tends to destroy or impair a vested right, or to give a right when none existed, or to impose a liability not previously known; but legislation which affects only the remedy or procedure applies to a pending action or condition which came into being before the passage of such legislation, unless words of exclusion are found in the statute."

In re Potter involved an amendatory Act which allowed a commission on "the value of real or personal property received, distributed or delivered," whereas prior to the amendment no commissions were allowed on the value of property received but only on the value of property distributed or delivered.

After the effective date of the amendatory Act the trustees filed their accounts which showed that they received real estate prior to the date of the amendment allowing commissions for receiving real estate. They claimed and the court allowed commissions for receiving the real estate under the amendatory Act and held that the allowance of commissions is a mere matter of procedure.

By analogy the foregoing cases support the thesis that the trustees were authorized by Act 88 to immediately take commissions on income received prior to the effective date of said Act at the then prevailing rate, and if perchance a trustee took more commissions than the statute authorized, the remedy would be a decree requiring him to refund the excess.

When Act 88 took effect it applied to trustees of charitable trusts as well as to trustees of private trusts. It neither contains words of exclusion nor tends to destroy or impair a vested right. The rule of In re Potter, supra, therefore applies and justifies the application of Act 88 to commissions on income received prior to the effective date of said Act. The then statutory commissions on income received prior to the effective date of said Act became immediately payable. Ballentine defines "vested right" as follows: "A right is vested when there is an ascertained person with a present right to present or future enjoyment." Ballentine, Law Dictionary. Act 88 gave trustees a present right to present enjoyment of commissions on income immediately upon receipt of income. The right of trustees to the statutory commissions on income immediately upon receipt of income is therefore a vested right.

Obviously, the trustees were entitled to their commissions on income received after April 30, 1943, and prior to May 11, 1943, at the rates prescribed in Act 88, payable as and when such income was received.

I think I am further supported in my view of the effect of Act 88 by the report of the judiciary committee on senate bill number 3, which became Act 88. The committee said:

"The present language of the statute is that commissions on income shall be ``allowed upon each accounting when made but not oftener than once a year.'

"It has been customary in the past to collect the commissions as they were earned, but to have the account allowed annually.

"A question of construction has now arisen, however, and it has been ruled in some courts that the fiduciary must await the allowance of his annual account before he is entitled to his commissions.

"The purpose of this bill is to clarify the meaning of the statute and to make it apparent that the commissions are payable as and when the income is received. The provision that the upper bracket of the statutory allowance of commissions is to be applied only once a year is retained." Sen. Jo. (1943) p. 449.

This leaves the question of the effect of Act 149 on our problem.

This Act amended section 3793, as amended, by inserting therein the following: "``Notwithstanding any other provisions of this section or of any other law, in the case of an estate of a charitable trust, the commissions of the trustees shall be limited to the following schedule of percentages on all moneys received in the nature of revenue or income of the estate, such as rents, interests, and general profits:

10% on the first _________________________ $ 1,000.00 7% on the next __________________________ $ 4,000.00 5% on the next __________________________ $100,000.00 3% on the next __________________________ $100,000.00 2% on the next __________________________ $300,000.00 1% on all over __________________________ $505,000.00;

but said schedule of percentages shall be applied not oftener than once a year.

"``Such trustees shall also be entitled to just and reasonable allowances for bookkeeping, clerical, and special services and expenses incidental thereto.'

"Section 2. This Act shall apply as well to future accounting in existing estates as to new estates.

"Section 3. This Act shall take effect upon its approval."

It may be conceded that but for Act 88 a trustee reporting after the effective date of Act 149 would be limited to the schedule of percentages prescribed by Act 149 in calculating his commissions on all income not theretofore reported. This would seem to follow from the decision in Estate of da Silva, 31 Haw. 78, but in that case the procedure created by Act 88 was not present.

Act 149, like Act 88, contains no words of exclusion but unlike Act 88 it would, if given a retrospective operation, destroy or impair a vested right. If so applied it would impair the vested right of the trustees to retain the commissions which they had taken as they were authorized to do by Act 88. Act 149 cannot therefore be given a retrospective operation.

Consequently, the calculation of commissions by the trustees on income received prior to May 11, 1943, and approved by the circuit judge, was in strict compliance with the applicable statute.

The question of the application of Act 149 to the reported income received after May 10, 1943, is more difficult of solution.

If the trustees had elected to ask permission of the chancellor to change their accounting period to begin on the effective date of Act 149, such permission would no doubt have been granted and their 58th account would have terminated on May 10, 1943, leaving the income received after that date to be reported in their first report thereafter with commissions calculated in accordance with the graduated scale of percentages prescribed by that Act.

They did not elect, however, to change their accounting period and have combined in their 58th account the income received both before and after the effective date of Act 149 and it therefore becomes necessary to determine whether the applicable provisions of both Act 88 and Act 149 have been applied to the income received after Act 149 became effective.

Acts 88 and 149 are in pari materia and must be construed together.

Act 88 prohibits the application of the 10% and 7% rates oftener than once a year. The commissions taken by the trustees and approved by the decree run counter to this provision.

It does not follow, however, that the 1% rate must be applied to all income over $505,000 received after Act 149 became effective, as contended for by the attorney general.

The trustees included $232,754.22 of income received after Act 149 became effective and $1,220,763.70 received prior thereto in their 58th account.

In calculating their commissions on the income received prior to the effective date of Act 149, they applied the 10% rate to the first $1000 and the 7% rate to the next $4000. They also applied the 10% rate to the first $1000 and the 7% rate to the next $4000 received after Act 149 became effective, all in the period of one year. This is forbidden by Act 88.

However, it is my opinion that the double application of the 10% and 7% rates within the year is the only objection to the 58th account as filed and approved by the decree. The rates of commissions prescribed by Act 149, after the first $5000, are 5% on the next $100,000, 3% on the next $100,000, and 2% on the next $300,000. Having applied the 10% and 7% rates once, the applicable rates to the income received after Act 149 became effective begins with the 5% rate. If I am correct in my conclusion that the 10% and 7% rates having been applied to the income received prior to May 11, 1943, should not have been again applied to the income thereafter received within the year, then the application of the schedule of Act 149 to the $232,754.22 received after said Act became effective would be as follows:

5% on $100,000.00 _______________ $5,000.00 3% on $100,000.00 _______________ $3,000.00 2% on $ 32,754.22 _______________ $ 655.08 _________ Total, $8,655.08

My conclusion is that the decree approving commissions on income, including the questioned rents received prior to May 11, 1943, should be affirmed; and as to commissions on income received thereafter, the decree should be reversed and the cause remanded, with instructions to modify the decree in accordance with the views herein expressed.