text:
    Alexander Lane et al., as Executors of and Trustees under the Will of Benjamin Lichtenstein, Deceased, Appellants, v. Chantilly Corporation et al., Defendants. John M. Moody, Respondent.
    (Argued May 28, 1929;
    decided July 11, 1929.)

      Dan Gordon Judge and Yorke Allen for appellants.
    The fact that the premises were sold expressly subject to any state of facts which an accurate survey would show, made it error for the court to sustain the objections based on the encroachments — especially so under the facts of this case. (McCarter v. Crawford, 245 N. Y. 43; March v. Marasco, 165 App. Div. 438.)

      William Pinkney Hamilton, Jr., for respondent.
    A purchaser will not be compelled to complete his purchase of premises sold on foreclosure, where there is an encroachment making title unmarketable, although the advertisement of sale provides that the property is to be sold “ subject to any state of facts shown by an accurate survey.” (Veeder v. Fonda, 3 Paige Ch. 94; Heim v. Schwoerer, 51 Misc. Rep. 97; Sohns v. Beavis, 200 N. Y. 268; Josephy v. Golden, 113 Misc. Rep. 284; People v. N. Y. Bldg.-Loan & Banking Co., 189 N. Y. 233; Batchelar v. Batchelar, 244 N. Y. 274; Haberman v. Baker, 128 N. Y. 253; Morrow v. Renniere Process, Inc., 222 App. Div. 100; Moser v. Ellis, 106 N. Y. Supp. 1075; Luker v. Fitzer, 107 Misc. Rep. 308.)
   Lehman, J.

John M. Moody purchased the premises known as 640 Broadway at a foreclosure sale. Under the terms of sale signed by the purchaser, the premises were sold subject to any state of facts which an accurate survey would show.” The survey made after the sale showed that certain stone piers projected one foot eight inches on Broadway and that the portico extended about two feet six inches on Broadway, These encroachments could be removed at the cost of about $1,500, but their removal would somewhat injure the appearance of the building. There were some other encroachments upon the street of minor consequence. The purchaser because of these facts has been relieved of his purchase and the referee has been ordered to repay to the purchaser the deposit or part payment of 10 per cent of the purchase price made by the depositor upon the sale. The order further provides that “ the Plaintiffs pay unto John M. Moody the following sum on account of the sale which is hereby set aside: Five hundred Dollars to John M. Moody, the purchaser hereby relieved, as and for the full expenses of the examination of title.”

The purchaser, who agreed to take title subject to- a state of facts which an accurate survey would show, now. asks to be relieved of his purchase because an accurate survey shows that the building encroaches on the street. The contract contemplated that a survey might show encroachments which would ordinarily constitute an objection to the title, and the purchaser agreed to waive such objections. (McCarter v. Crawford, 245 N. Y. 43.) Refusal to accept title tendered in accordance with the terms of sale constitutes a breach by the purchaser of Ms contract to purchase. The bargain made by the purchaser may result in hardsMp to Mm, but it is Ms own bargain, and only the other contracting party can reheve him of Ms bargain.

Here the sale was made by the referee as an officer of the court. The court may direct its officer to act in accordance with fairness and equity. In effect the contract is made with the court, and a purchaser upon a judicial sale will not be compelled to perform his contract where it would not be perfectly just and conscientious in an individual to rnsist upon the performance of the contract against the purchaser, if the sale had been made by such mdividual or Ms agent.” (Veeder v. Fonda, 3 Paige Ch. 94.) Perhaps, in tiffs case, an individual seller might conscientiously and fairly have insisted upon the performance of a contract, made under similar circumstances, for a purchaser deals at arm’s length with an individual seller and may not look to the seller for protection or relief against his own blunders. The rule that a buyer must protect himself against undisclosed defects does not apply in all strictness to a purchaser at a judicial sale. He may feel some sense of security against hidden pitfalls, and be lulled into signing a contract with an officer of the court which he would not make with an individual without further investigation.

Doubtless the referee in this case had no more information about encroachments than the purchaser. Nothing known was concealed, yet the fact remains that the buyer has entered into a contract which he would not have made if all the facts had been known. Conscience cannot always be guided by general rule. Each case must depend upon its own facts. Where there is room for difference of opinion there is room for the exercise of discretion. Though we might doubt whether good conscience demands that the purchaser be relieved of his contract, we cannot say that in the circumstances of this case the court might not in the exercise of its discretion grant such relief.

Discretionary power to reheve the purchaser of his obligation does not include authority to compel the plaintiff to pay the expenses of examination of title. The purchaser asks a favor of the court; he is not entitled to any relief as of right. There has been no breach of contract or other wrong by the referee, certainly none by the plaintiffs. Expenses incurred might be allowed as damages for breach of contract; such expenses cannot be imposed on the plaintiffs where there has been no wrong. (People v. N. Y. Building Loan Banking Co., 189 N. Y. 233.)

The orders of the Appellate Division and those of the Special Term should be modified by striking out the provision for payment of expenses, and as modified affirmed, with costs to the appellants in this court and in the Appellate Division.

Cardozo, Ch. J., Pound, Crane, Kellogg and O'Brien, JJ., concur; Hubbs, J., not sitting.

Ordered accordingly.


source: Caselaw Access Project

author: Lehman, J.

license: Public Domain

text:
    In the Matter of the Accounting of Emma S. Starbuck as Executrix of Charles A. Starbuck, Deceased. Empire Trust Company, Appellant; Zulo A. Von Ostroff, as Administratrix with the Will Annexed of Charles A. Starbuck, et al., Respondents.

      (Argued June 13, 1929;
    decided July 11, 1929.)

      Henry L. Wheeler, Jr., and Stuart McNamara for appellant.
    Section 66 of the Stock Corporation Law permits a corporation which has complied with its provisions to refuse to transfer shares, standing in the name of a stockholder who is indebted to the corporation, at the demand of a purchaser for value or upon an attempted sale upon execution. (Strahmann v. Yorkville Bank, 148 App. Div. 8; 210 N. Y. 536; Hathaway v. Howell, 54 N. Y. 97; Zartman v. First National Bank, 189 N. Y. 533; 216 U. S. 134; Matter of Marks, 218 Fed. Rep. 453.) The statutes permit a corporation which has complied with section 66 of the Stock Corporation Law to withhold dividends becoming due upon the stock registered in the name of a debtor-stockholder as against a purchaser for value or execution creditor. (Jordan v. National Shoe & Leather Bank, 74 N. Y. 467; Bagar v. Union National Bank, 63 Me. 509; Sargent v. Franklin Insurance Co., 8 Pick. 90; Gemmell & Sinclair v. Davis & Co., 75 Md. 546; Brent v. Bank of Washington, 2 Cranch C. C. 517.) The executor of an insolvent takes the property of his decedent subject to all the rights which could have been asserted against an execution creditor of, and a purchaser for value with notice from, the decedent. (Muller v. Kling, 209 N. Y. 243; Goodwin v. Wertheimer, 99 N. Y. 149; Chotean v. Jones, 11 Ill. 319; London, Paris & American Bank, Ltd., v. Aronstein, 117 Fed. Rep. 601; Kenton Insurance Co. v. Bowman, 84 Ky. 430; Farmers Bank of Maryland Case, 2 Bland, 394; Brent v. Bank of Washington, 35 U. S. 596.) A banking corporation which has complied with all of the provisions of section 66 of the Stock Corporation Law acquires a lien upon the shares of a stockholder indebted to it. (Strahmann v. Yorkville Bank, 148 App. Div. 8; Battey v. Eureka Bank, 62 Kan. 384; Reese & Fisher v. Bank of Commerce, 14 Md. 271; Union Bank of Georgetown v. Laird, 2 Wheat. 390; Citizens’ Bank v. Kalamazoo Co. Bank, 111 Mich. 313; Kenton Ins. Co. v. Bowman, 84 Ky. 430; Bates v. New York Ins. Co., 3 Johns. Cas. 238; Driscoll v. West Bradley Co., 59 N. Y. 96; Bullard v. Bank, 85 U. S. 589; Bank v. Lanier, 78 U. S. 369; National Bank v. Watsontown Bank, 105 U. S. 217.)

      Arthur W. Graff for Zulo A. Von Ostroff, as administratrix, respondent.
    Section 66 of the Stock Corporation Law does not give a creditor corporation a hen upon the stock of a debtor stockholder. (Cook on Corporations [8th ed.], 1815; Bank of Attica v. Manufacturers Bank, 20 N. Y. 501; Driscoll v. West Bradley, etc., 59 N. Y. 96; Union Bank v. U. S. Exchange Bank, 143 App. Div. 128; Newell v. People, 7 N. Y. 9; McCluski v. Cromwell, 11 N. Y. 593; Brown v. Woodruff, 32 N. Y. 355; Bertles
      v. Numan, 92 N. Y. 152; Jones v. Albany, 151 N. Y. 223; O’Brien v. East River Bridge Co., 161 N. Y. 539; Tompkins v. Hunter, 149 N. Y. 117; Furey v. Gravesend, 104 N. Y. 405; Strahmann v. Yorkville Bank, 148 App. Div. 8; 210 N. Y. 536.)

      Melber B. Chambers for Bank of Manhattan Company respondent.
    Section 66 of the Stock Corporation Law does not give appellant a lien or any other interest in the shares of stock. (Driscoll v. West Bradley Co., 59 N. Y. 96; Bank of Attica v. Manufacturers’ Bank, 20 N. Y. 501; Mohawk Nat. Bank v. Schenectady Bank, 78 Hun, 90; Bank v. Lanier, 11 Wall. 369; Anderson v. Cook County State Bank, 154 Minn. 231; Planters’ Bank v. Eskind & Sons, 134 Miss. 696; Bank of Pontotoc v. Robinson, 136 Miss. 409; Corydon Deposit Bank v. McClure, 141 Ky. 481; Bullard v. Bank, 18 Wall. 589; Bank of Millvale v. Ohio Valley Bank, 234 Penn. St. 1; Presbyterian Congregation v. Carlisle Bank, 5 Penn. St. 345; Boyd v. Redd, 120 N. C. 335; Matter of Polson Iron Works, 3 Ont. W. N. 1269.) The executrix, not appellant, is entitled to the dividends declared on the shares of stock. (London, Paris & American Bank, Ltd., v. Aronstein, 117 Fed. Rep. 601; Brent v. Bank of Washington, 2 Cranch C. C. 517; 2 Cook on Corporations [8th ed.], § 526.) The direction by the court below that the executrix deliver the shares of stock to appellant as part of its dividend was proper. (Pabst v. Goodrich, 133 Wis. 43; Crandall v. Lincoln, 52 Conn. 73; Cook on Corporations [7th ed.], 901, note 2; Green v. Bissell, 79 Conn. 547; Matter of Watson, 215 N. Y. 209; Matter of Aldrich, 194 App. Div. 815; Matter of Coombs, 185 App. Div. 312; Matter of Haigh, 125 Misc. Rep. 365; Matter of Baire, 122 Misc. Rep. 519; Matter of Walsh, 126 Misc. Rep. 479.)
   Lehman, J.

The testator, Charles A. Starbuck, at the time of his death, owed the Empire Trust Company a large sum of money. Until the indebtedness is paid, the trust company refuses to consent to a transfer of twenty-six shares of capital stock of the trust company which the decedent owned at the time of his death, and it has retained and applied upon the indebtedness dividends declared upon the stock. The estate is insolvent. From the assets of the estate the unsecured creditors are entitled to a pro rata payment or dividend upon the sums due to them. The courts below have held that the executrix may deliver to the Empire Trust Company the twenty-six shares of its capital stock, now held by the estate, and that the market value of the said stock, at the date of delivery, and the dividends upon the stock, retained by the trust company, shall constitute " a partial payment on account ” of the pro rata payment or dividend due from the executrix to the trust company.

Section 66 of the Stock Corporation Law (Cons. Laws, ch. 59), provides: “Transfer of stock by stockholder indebted to corporation. If a stockholder shall be indebted to the corporation, the directors may refuse to consent to a transfer of his stock until such indebtedness is paid, provided a copy of this section or the substance thereof is written or printed upon the certificate of stock.” A copy of this section was printed upon the certificate in question. The statute applies to corporations organized under the Banking Law (Cons. Laws, ch. 2) as well as to other corporations. (Strahmann v. Yorkville Bank, 148 App. Div. 8.)

Upon Starbuck’s death, title to his stock was transferred by operation of law to his personal representative. A construction of the statute would be unreasonable which would authorize the directors of a corporation to refuse to consent ” to a transfer which has been effected by operation of law regardless of the will of the debtor stockholder. The directors may not assert the continuance of an ownership which death has made impossible. Upon request, the corporation is bound to register upon its books the transfer of the certificate of stock to the executrix in her representative capacity. (See London, Paris & American Bank, Ltd., v. Aronstein, 117 Fed. Rep. 601.)

The question remains whether the corporation may refuse to consent to a transfer by the executrix. The statute gives the corporation the right to withhold registry of the transfer of the stock until the indebtedness is paid. It is unimportant whether we classify that right as a lien or give it another name. It bears at least some analogy to a lien, though the stockholder maintains possession of the stock and continues to enjoy all the rights of an owner, save only the right to make a complete transfer. We find in the statute no express or implied provision that by appropriate proceedings the corporation may divest the stockholder of his title or right to possession, but there are many holding liens which do not carry with them any right of foreclosure and sale. (See Tete v. Farmer’s Bank, 4 Brewster [Pa.], 308.) The statute gives to the creditor corporation, at least, some hold upon the stock. As in the case of the holding lien of an attorney or of an artisan, the advantage that may accrue to the debtor from a release of the hold may result in payment of the debt. The right of the corporation to maintain its hold was created by the Legislature for that purpose. The order of the Surrogate that the corporation must accept its own stock as a payment on account of the dividend or pro rata payment due on the decedent’s indebtedness to it is based upon the view that in some way the corporation is acting inequitably in refusing to loosen its hold, and may be compelled to do so. The corporation is undoubtedly entitled to share with other creditors similarly situated in the distribution of the assets of the decedent. If the statute gives it, in addition, the right to maintain its hold upon the stock, after the title has become vested in his executrix, the courts -may not destroy that right.

The executrix has title only in her representative capacity. In a sense she continues the testator’s personality. The indebtedness of the testator survives at his death. At the moment when by operation of law the executrix obtains title to the assets of the decedent she becomes, as executrix, hable for his debts. Title to the stock is, at all times, in the person who is indebted to the corporation. True, the executrix is bound only to apply the assets received from the decedent to the payment of the debts of the decedent. Beyond that she has no obligation; but, even though the debt may be in part uncollectible, it has not been paid or discharged where the assets are sufficient to pay only a dividend or fractional part of the debt. In such case, the statute permits the creditor corporation to refuse to consent to a transfer of the stock even though such refusal makes a sale of the stock difficult or impossible. The statute, indeed, was intended for the purpose of impeding a sale of stock, as long as the stockholder remained indebted to the corporation.

The corporation has maintained its hold not only upon the stock but upon the dividends payable upon the stock. The right to the dividends is an incident of the ownership of the stock. The executrix is the owner of the stock, and the statute, as we have pointed out, does not alter or diminish any rights of ownership except the right to make a complete transfer of the stock. The provision of the order that the amount of dividends retained by the corporation shall constitute a partial payment of the distribution or dividend payable to the corporation is correct.

The order of the Appellate Division and that of the Surrogate’s Court should be reversed, with costs to the appellant payable out of the estate, and the proceeding remitted to the Surrogate’s Court for further order in accordance with this opinion.

Cardozo, Ch. J., Pound, Crane, Kellogg, O’Brien and Hubbs, JJ., concur.

Orders reversed, etc.


author: Kellogg, J.

text:
    Mary Campbell, as Administratrix of the Estate of John Murphy, Deceased, Respondent, v. Elsie S. Holding Co., Inc., Appellant, Impleaded with Another.
    (Argued June 12, 1929;
    decided July 11, 1929.)

      Clarence S. Zipp and E. C. Sherwood for appellant.
    Defendant was the lessor of this loft building in its entirety; the lease contained no warranty by defendant as to the condition of the demised premises, and defendant, therefore, cannot be held liable to its lessee, or to any one upon the premises by the lessee’s authority, for an open and obvious condition existing at the time of the letting. (Elefante v. Pizitz, 182 App. Div. 819; 230 N. Y. 567; Baitzel v. Rhinelander, 179 App. Div. 735;
      Jaffe v. Harteau, 56 N. Y. 398; Widmar v. Healey, 247 N. Y. 94; Hirsch v. Radt, 228 N. Y. 100; Vousden v. United Cities Realty Corp., 194 App. Div. 26; Franklin v. Brown, 118 N. Y. 110; Lusk v. Peck, 132 App. Div. 426; 199 N. Y. 546; Steefel v. Rothschild, 179 N. Y. 273; Edwards v. N. Y. & H. R. R. Co., 98 N. Y. 245; Stamm v. Purroy, 170 App. Div. 584; Ackerly v. White, 58 Hun, 362.)

      Francis Dean and Edward J. Elliott for respondent.
    The appellant as lessor of the warehouse was properly-held' liable for the death of the decedent caused by a dangerous defect which existed at the time the lease was made. (Swords v. Edgar, 59 N. Y. 28; Warner v. Lucey, 207 App. Div. 241; 238 N. Y. 638; Edwards v. N. Y. & H. R. R. Co., 98 N. Y. 245; Barrett v. Lake Ontario Beach Imp. Co., 174 N. Y. 310; Gray v. Siegel-Cooper, 187 N. Y. 376; Junkerman v. Tilyou Realty Co., 213 N. Y. 404.)
   Kellogg, J.

The Elsie S. Holding Co., Inc., was the owner and lessor of a building; the Alamo Warehouses, Inc., was the lessee and occupant. It had been stipulated that the building was “to be used and occupied as a warehouse ” and that all repairs thereto were to be made by the tenant. The building was equipped with a freight elevator which was operated in an open shaft immediately adjoining the front wall of the building. This wall, which was wide at the base, narrowed as it rose, so that the inner face of the wall inclined outward. So much out of plumb was the wall that the elevator platform, which almost touched the wall when at the first floor, raised to the eighth floor, was eighteen inches distant therefrom. The elevator had side walls but was entirely open front and back. Consequently, when the elevator was at the eighth floor, between the wall of the building and the edge of the platform there was an uncovered opening eighteen inches wide, access to which from the platform was unobstructed by any rail or other guarding obstacle. John Murphy, an employee of the lessee Alamo Warehouses, Inc., was at work on the eighth floor unloading a truck which he had wheeled upon the elevator platform. In some unexplained manner he fell through the opening and was killed. This action was thereupon brought by the administratrix of his estate against the lessor, Elsie S. Holding Co., Inc., to recover damages for his death.

It is a familiar rule that the lessor of a building is not hable for injuries to the lessee, or others upon the premises in the right of the lessee, resulting from a structural defect existing when the lessee took possession. (Jaffe v. Harteau, 56 N. Y. 398; Barrett v. Lake Ontario Beach Imp. Co., 174 N. Y. 310; Junkermann v. Tilyou Realty Co., 213 N. Y. 404; Widmar v. Healey, 247 N. Y. 94; Restatement of the Law of Torts, Tentative Draft, No. 4, § 226.) The rule does not apply if the lessor rents the premises for a public use to which he knows they are unsuited. (Swords v. Edgar, 59 N. Y. 28; Edwards y. N. Y. & H. R. R. Co., 98 N. Y. 245; Timlin v. Standard Oil Co., 126 N. Y. 514; Lusk v. Peck, 132 App. Div. 426; 199 N. Y. 546; Junkermann v. Tilyou Realty Co., supra.) Thus, the lessor is hable for accidents and injuries resulting, if, knowing its unsuitabihty therefor, he leases for use in serving the pubhc a defective dock (Swords v. Edgar, supra); a defective grand stand in an athletic park (Lusk v. Peck, supra); a defective toboggan shde (Barrett v. Lake Ontario Beach Imp. Co., supra); a garage with a defective elevator (Warner v. Lacey, 207 App. Div. 241; 238 N. Y. 638); an amusement park with a defective board walk (Junkermann v. Tilyou Realty Co., supra). This court has stated the exception to the rule of non-habihty as follows: If the premises are rented for a pubhc use for which he [the lessor] knows that they are unfit and dangerous, he is guilty of neghgence and may become responsible to persons suffering injury, while rightfully using them.” (Barrett v. Lake Ontario Beach Imp. Co., supra.) The American Law Institute, avoiding a possible ambiguity resting in the word public,” has stated the exception as follows: “A lessor who leases land for a purpose which involves the admission of a large number of persons as patrons of his lessee, is subject to liability for bodily harm caused to them by an artificial condition existing when the lessee took possession, if the lessor (a) knew or should have known of the condition and realized or should have realized the unreasonable risk to them involved therein, and (b) had reason to expect that the lessee would admit his patrons before the land was put in reasonably safe condition for their reception.” (Restatement, § 229.)

In this instance there was no evidence that the premises were rented to be used in serving the public or a large number of persons; none, that the public or a large number of persons have been admitted to the premises. True it is that the premises were to be used and occupied as a warehouse.” Whether the warehouse was to be used to store goods for the public for a hiring charge, or merely to store the merchandise of the lessee, was not stated and has not been proven. We are aware that in Edwards v. N. Y. & H. R. R. Co., and Barrett v. Lake Ontario Beach Imp. Co. (supra) it was said that a lessor who “ lets a building for a warehouse ” or “ lets a warehouse,” knowing that its floors will break down from the weight to be placed upon them, is liable for injuries resulting to a person lawfully therein from a collapse of its floors. We think that the plaintiff can justly draw no comfort from the statements made. In the first place they were obiter dicta. In the second, the context shows that the court spoke concerning warehouses which served a public use. Thus, in the first of the two cases, the court was at pains to explain the holding in Swords v. Edgar (supra), where a lessor of a defective dock was held hable, by saying that “ a dock is regarded as a species of public highway.” In the second, the instance of the warehouse was cited to illustrate the general rule of liability where premises are rented for a public use,” the statement of which by the court in the cited case we have already quoted in full. As the building in question here may have been leased for private storage by the lessee, may have been used exclusively therefor, and may never have been intended for use, or been used, by a large number of persons, we think that liability for the death of John Murphy never attached to make the lessor, the defendant Elsie 8. Holding Co., Inc., responsible in damages therefor.

The judgment of the Appellate Division and that of the Trial Term should be reversed and a new trial granted, with costs to abide the event.

Cardozo, Ch. J., Pound, Crane, Lehman, O’Brien and Hubbs, JJ., concur.

Judgment reversed, etc.


text:
    Josephine Dreyer, Respondent, v. George H. Hyde et al., as Executors of Henry H. Dreyer, Deceased, et al., Appellants.

      (Argued June 3, 1929,
    decided July 11, 1929.)

      Elmer E. Wigg and Brent W. Blythe for George H. Hyde et al., as executors, appellants.
    The plaintiff failed to establish any contractual relationship as between herself and Anna Dreyer, based upon the agreement of September 29, 1904, by merely proving that she made and delivered quitclaim deeds to Frederick Joseph and Regina Dreyer upon attaining her majority. She should also have proved that she did so with knowledge of and in reliance upon the existence and contents of said agreement. (Fitch v. Snedaker, 38 N. Y. 248; Howland v. Lounds, 51 N. Y. 604; Lally v. Cronen, 247 N. Y. 58; Cudahy v. C. & N. W. Railway Co., 196 Mo. App. 528.) The contract of September 29, 1904, did not constitute either an offer which could be accepted by the plaintiff, or a contract which could be adopted by the plaintiff, in the event that Anna Dreyer did not die before plaintiff attained her majority. (Strong v. American Fence Construction Co., 245 N. Y. 48; Simsonv. Brown, 68 N. Y. 355; Wheat v. Rice, 97 N. Y. 296; Seaver v. Ransom, 224 N. Y. 233.)

      George E. Miner for Emma M. Eggers, as executrix, appellant.
    Plaintiff did not establish a contractual relationship between herself and Anna Dreyer, based upon the agreement of September 29, 1904, by proving only that when she became of age she made and delivered quitclaim deeds to Frederick Joseph and Regina Dreyer. She should have proved that she then had knowledge of and then relied upon the existence and contents of said agreement. (Cudahy v. C. & N. W. R. Co., 196 Mo. 528; Fitch v. Snedaker, 38 N. Y. 248; Howland v. Lounds, 51 N. Y. 604; Ball v. Newton, 61 Mass. 599; Beetson v.
      Stoops, 386 N. Y. 456.) The agreement of September 29, 3904, did not constitute an offer or promise which could be accepted or adopted by plaintiff in the event Anna Dreyer died before plaintiff became twenty-one years of age. (Wescott v. Higgins, 42 App. Div. 69; 169 N. Y. 582.)

      William Gerald Phlippeau and Thomas F. Casey for respondent.
    Knowledge, acceptance and adoption of the contract by the plaintiff were abundantly established, not only by the evidence and the legitimate inferences which the trial justice was at liberty to draw therefrom, but also by allegations contained in the answers of the defendants. (Bank of U. S. v. Dandridge, 25 U. S. 64; Jackson v. Tallmadge, 246 N. Y. 133; Townson v. Tickell, 3 B. & Ald. 31; Saltzsieder v. Saltzsieder, 219 N. Y. 523: Everett v. Everett, 48 N. Y. 238; Spencer v. Carr, 45 N. Y. 406; Munoz v. Wilson, 111 N. Y. 295; Schell v. Schell, 192 App. Div. 419; Talbot v. Laubheim, 188 N. Y. 421; Kraus v. Birnbaun, 200 N. Y. 130; Bender v. Paulus, 197 N. Y. 369; Seaver v. Ransom, 224 N. Y. 233; Croker v. N. Y. Trust Co., 245 N. Y. 17.) The appellants’ contention, that the agreement and will of September 29, 1904, permitted Anna Dreyer to revoke the will after the plaintiff had delivered the quitclaim, is repugnant to an enlightened sense of justice. (Robertson v. O. E. Co., 146 N. Y. 20; Atwater v. Panama R. R. Co., 246 N. Y. 519; White v. Hoyt, 73 N. Y. 505; Gillet v. Bank of America, 160 N. Y. 549; Halpin v. Insurance Co., 120 N. Y. 73.)
   Lehman, J.

Anna Dreyer died in February, 1921, leaving a last will and testament dated March 19th, 1914. At various times prior to her death she transferred to her surviving children the proceeds of property sold by her. The plaintiff, Josephine Dreyer, is the daughter and only heir at law of a deceased son of the testatrix. She did not share in such transfers or distributions. The estate of the testatrix at her death was less than $40,000. Under the terms of the will the plaintiff received a legacy of $10,000. She accepted the legacy but thereafter she claimed that the testatrix had agreed not to change a prior will made on September 29th, 1904, whereby the plaintiff was to receive one-fifth of the property of the testatrix. The courts below have adjudged that the testatrix agreed that she would not change the will she made in 1904 or reduce the benefit which plaintiff was to receive under its terms, and that the recipients of the bounty of the testatrix, their mother, must account to the plaintiff for a share of all moneys or property received by them as a gift after the making of the will.

In 1904, when the testatrix made her prior will, she was a tenant in common with one Frederick Joseph of a parcel of land in Queens county. She occupied and, with a son, cultivated the easterly portion of the parcel. Joseph occupied the westerly portion. They desired to- divide the property by an exchange of deeds whereby each should obtain full title to the portion he or she occupied.

The whole parcel had been conveyed to the husband of the testatrix, Garret Dreyer, and Frederick Joseph by deed recorded in 1889. Garret Dreyer conveyed to his wife his interest in the easterly portion of the parcel by deed recorded in 1894. She occupied this portion of the parcel, and a deed from Joseph to her would vest full title in her. Garret Dreyer died intestate in 1895, and his interest in the westerly portion of the parcel occupied by Joseph descended to his five children as his heirs at law. One of them, John Dreyer, died intestate in 1902, leaving a widow and the plaintiff, his daughter, as his only heir at law. In this portion of the parcel the testatrix had only dower rights, but in August, 1904, her four surviving children and the plaintiff, her granddaughter, joined in a conveyance of their interest in the parcel to the testatrix. Then the testatrix and Joseph exchanged deeds.

The plaintiff at that time was an infant nineteen years .old. She might still claim her interest in the property when she came of age. To that extent, the deed by the testatrix to Joseph of her interest in the westerly portion of the parcel failed to convey full title to the premises occupied by him. He desired assurance that the defect would be cured by a confirmatory deed from the plaintiff when she came of age. Accordingly the testatrix entered into the following agreement with Joseph bearing date September 29th, 1904, and recorded on January 3d, 1905:

“ Whereas, Anna Dreyer has this day made her last Will and Testament, whereby she has given to Josephine Dreyer the interest that her son John Dreyer would have been entitled to had he been living at her death and which clause is as follows:
“ ‘ Seventh. It is also my express wish and I will and direct that any interest that my grand-daughter Josephine Dreyer may or can have under any of the clauses of this my Will, as the child of my deceased son John Dreyer or otherwise, shall be contingent and shall not be paid to her nor shall she be entitled to the same or to any interest of any kind whatsoever under this will or to any part in my estate, unless or until she shall after she becomes twenty-one years of age, execute, acknowledge and deliver to my executors or their appointees a quit-claim deed releasing to them or their assigns all the right, title and interest and claim whatsoever which she may now at the date of this my Will have in and to all or any portion of certain premises described in a deed thereof, made to Frederick Joseph and Garret Dreyer by Elizabeth J. Bogart dated August 28, 1899, and recorded in the office of the Clerk of the County of Queens in Liber 790 of deeds at page 355.’
“ The reason for this provision being made in her will is to secure the execution of the deed therein mentioned, so that the title of Frederick Joseph and Annie Dreyer shall be released from any claim that the said Josephine Dreyer may have and I do hereby agree with the said Frederick Joseph that I will not change my Will whereby the said. Josephine Dreyer shall receive or be entitled to in my estate freed from said clause, -until she shall have executed said deed and I will not reduce the interest of said child in her father’s estate.”

The plaintiff now claims the benefit of that agreement. On July 21st, 1906, when she was twenty-one years of age, she executed and delivered to Frederick Joseph a quitclaim deed releasing all her right, title and interest to the westerly half of the parcel. Though the plaintiff never had any interest in the easterly half of the parcel, she executed and delivered, at the same time, a quitclaim deed releasing her right, title and interest in that half to Engine Dreyer, who at that time held title to it. The trial court has found that by the execution and delivery of these deeds the plaintiff adopted the agreement of September 29th, 1904, entered into between the testatrix and Frederick Joseph.

To that agreement the plaintiff was not a party. It was not made for her benefit, and Frederick Joseph was, so far as appears, a complete stranger to the plaintiff, under no legal or moral duty towards her. The rule which, at times, permits one who is not a party to an agreement to enforce its obligations has not yet been extended to include such a situation. (Lawrence v. Fox, 20 N. Y. 268; Seaver v. Ransom, 224 N. Y. 233.) Even if that rule were so extended, it would not avail the plaintiff. The agreement was made only to provide assurance that plaintiff would execute a confirmatory deed. When that was secured, Joseph had no further interest in any disposition which the testatrix, thereafter, might choose to make of her property, and by its express terms the obligation of the testatrix continued only until Josephine Dreyer “ shall have executed said deed.” Thereafter there was no express obligation which Joseph or any other person could enforce.

The real question in this case is whether the will and agreement made on September 29th, 1904, read together, constitute an implied promise or offer made to the plaintiff that if she would execute a confirmatory deed, the testatrix would neither change the will she had made in plaintiff’s favor nor, by other disposition of her property, reduce the benefit which plaintiff might receive under the will. It is difficult to find such an offer or promise to the plaintiff implied in will or contract, or in both read together. The legatees under the will had joined in a conveyance to the testatrix. The plaintiff might still disavow the binding effect of her conveyance. By the contract and will the testatrix fashioned an instrument by which a confirmatory deed might be extorted from the plaintiff at the. death of the testatrix if the plaintiff had not voluntarily executed such a deed before. Provision that the plaintiff should be deprived of the benefit that she would otherwise receive under the will if she refused confirmation of her conveyance does not itself imply an agreement that benefit under the will should constitute payment or reward for a voluntary confirmation.

The record is entirely bare of any evidence that the testatrix ever made such an agreement, if indeed the evidence does not establish affirmatively that no such agreement was ever made. Even if upon this record an inference is possible that at the time when plaintiff executed and delivered the quitclaim deeds in Í9Q6 she knew of the existence of the contract and will of 1904, there is no evidence that such knowledge acted, or was intended to act, as an inducement to the plaintiff to make the deed.

On the contrary, the plaintiff herself testified: “ I merely signed. I felt that I was signing two years before, only that it was necessary to give my consent after I became twenty-one.” It appears further that at that time the plaintiff received a check for $968.50. It is said that it was intended as a gift by the testatrix and not a payment for the quitclaim deed made by the plaintiff. It was, in fact, the plaintiff’s equitable share in a distribution of the proceeds of the part of the parcel which the testatrix had received upon its division. If that distribution was a gift, it was a gift distributed equitably among those who had previously conveyed their interest in the parcel to the testatrix. Though the distribution was made out of the proceeds of the portion of the property in which plaintiff never had an interest, the testatrix had received that portion upon the division of the parcel, which was made possible by the previous conveyance to her by her children and the plaintiff of their interest in the other half of the parcel.

For these reasons the judgment of the Appellate Division and that of the Special Term should be reversed and the complaint dismissed, with costs in all courts.

Cardozo, Ch. J., Pound, Crane, Kellogg, O’Brien and Hubbs, JJ., concur.

Judgments reversed, etc.


text:
    In the Matter of the Accounting of John Sloane et al., as Executors of and Trustees under the Will of Nelson S. Clark, Deceased, Appellants. Lillian W. Clark, Appellant; William G. Clark et al., Respondents.

      (Argued June 11, 1929;
    decided July 11, 1929.)

      Irving Smith, Jr., for executors and trustees, appellants.
    The provisions for capitalizing the specified net incomes are mandatory and refer specifically and exclusively to the size of the funds. (Matter of Durand, 250 N. Y. 45; Matter of Buechner, 226 N. Y. 440; Matter of Sproule, 42 Misc. Rep. 448; New York Life Ins. & Trust Co. v. Sands, 24 Misc. Rep. 102; Matter of Clark, 120 Misc. Rep. 530.) All the net income from these trust funds is payable to the life beneficiaries. (Matter of Parker, 118 Misc. Rep. 121; 204 App. Div. 876; 236 N. Y. 583; Bussell v. Loring, 85 Mass. 121; Matter of Hartley, 90 Misc. Rep. 534; 171 App. Div. 912; Matter of Von Keller, 28 Misc. Rep. 600; Matter of Scott, 204 N. Y. Supp. 478; Matter of White, 125 N. Y. 544; Carr v. Smith, 25 App. Div. 214; 161 N. Y. 636.)

      Philip S. Hill for Lillian W. Clark, appellant.
    The courts below violated the rule that the plain language of the will must be given effect. (New York Life Ins. & Trust Co. v. Sands, 24 Misc. Rep. 102.)

      William F. Unger and Edward Gluck for William G. Clark et al, respondents.
    The language of the will is clear that the life beneficiaries should receive net annual incomes of no more than the amounts specified therein. Any income in excess of those amounts should be paid to the residuary legatees. (Matter of Kohler, 231 N. Y. 353.)

      George Frankenthaler for John M. Clark et al., respondents.
    The provisions of the will, taken as a whole, show that the testator’s intention was to provide a net annual income of $25,000 for his widow, $2,000 for his sister and $2,000 for his son Nelson. It was not his intention to give the entire net income to these three beneficiaries. (Matter of Gallien, 247 N. Y. 195; Matter of White, 125 N. Y. 544; Carr v. Smith, 25 App. Div. 214; 161 N. Y. 636; Phillips v. Davies, 92 N. Y. 199; Matter of Farmers Loan & Trust Co., 189 N. Y. 202; Eidt v. Eidt, 203 N. Y. 325; Van Nostrand v. Moore, 52 N. Y. 12; Tilden v. Green, 130 N. Y. 29.)
   Lehman, J.

Nelson S. Clark died on April 28, 1925. In his last will and testament he provided, after a number of specific bequests: “I give, devise and bequeath all the rest, residue and remainder of my property, real personal and mixed, and wheresoever situated, to my Executors hereinafter named and to their successor or successors, in trust, nevertheless for the uses and purposes as follows: that is to say: * * * 3. To set aside sufficient of the principal thereof to produce at the rate of five per cent (5%) a net annual income of Twenty-five Thousand Dollars and to hold, manage, invest and reinvest the same and to keep the same well and securely invested, and to receive the rents, issues, income and profits therefrom, and to pay the net income thereof in equal installments to my said wife, Lillian Walker Clark, so long as she lives, and at her death to divide the principal and accumulations thereof into four equal parts, and to pay over — One of said parts to my said daughter Gladys Clark Mertz, etc. * * *.” He also provided for the creation of two similar trusts sufficient to produce at the rate of five per cent a net annual income of Two Thousand Dollars.” The net income of one of these funds was to be paid to a sister of the testator; the net income of the other fund to a son. Evidently anticipating that, after three funds sufficient to produce at the rate of five per cent net incomes totalling $29,000 were set aside, a part of his estate might still remain undisposed of, the testator provided that all the rest, residue and remainder of my estate I give, devise and bequeath in equal parts, share and share alike, to my said children Gladys Clark Mertz, Dorothy Gertrude Price and William Calloway Clark * * * and to the lawful issue me surviving of my said son Nelson Sherwood Clark, Jr.”

The executors proceeded to administer the estate, paid legacies, debts, administration expenses, and necessary charges, and on October 26, 1926, set up three trust funds which were intended to comply with the provisions of the will. The assets of the estate consisted in large part of stock in closely held corporations in which the testator was interested. The will expressly permitted the executors and trustees in the exercise of their discretion to allow the whole or part of the estate to remain invested as the same might be invested at the time of the decease of the testator. Accordingly, the executors allocated to the various trust funds corporate securities which had been acquired by the testator.

To produce at the rate of five per cent net incomes totalling $29,000 would require capital funds of more than $580,000. The value of the entire estate at the death of the testator, as fixed in the transfer tax proceedings, after payment of specific legacies, debts, arid other charges, was much less than this sum. The executors at the -time they set aside the three funds made no independent estimate of the value of the securities. They accepted the values fixed previously in the transfer tax proceedings. Even though according to these values the three funds set aside by the executors amounted to much less than $580,000, the net income derived from dividends on corporate stock is much more than $29,000.

Upon the accounting of the executors and trustees two serious questions have been raised by objections interposed by the residuary legatees: First; are the life beneficiaries of the three funds entitled to any excess of income over $29,000? Second, did the trustees have the right in setting aside the funds to adopt the values fixed, as of the date of the death of the testator, in the transfer tax proceedings, or were they under the duty to fix such value independently, at the time they set aside the funds?

To some extent the two questions must be considered together. The learned Surrogate has found in the language of the will evidence of a dominant purpose of the testator to provide a net income in the amounts mentioned for the benefit of the three persons specifically named by him. In effect, the testator, according to that construction, intended to give to each beneficiary an annuity for life, and the three funds which the executors and trustees were directed to set aside were intended merely to secure payment of the annuities. The duty of the trustees, the Surrogate decided, was confined to setting aside and holding sums sufficient for that purpose. If they set aside more than was necessary, the excess income of the funds must pass to the residuary legatees, and they might at any time apply to the court for a reduction of the funds held and a distribution of the excess.

Under that construction the value of the securities at the time the funds were set up becomes of minor importance. The trust funds must be at all times large enough to make certain that they will produce an income sufficient to pay the annuities. As circumstances change, the funds may be reduced or increased. (Griffen v. Keese, 187 N. Y. 454; Matter of Kohler, 231 N. Y. 353.) Accordingly the objecting parties in the court below withdrew their application for a revaluation of the securities or for a present capital distribution subject to the determination of the Surrogate that they were entitled to all income in excess of the annuities.”

The construction placed upon the will by the courts below does violence to its plain language. In Matter of Kohler (supra), upon which the Surrogate relied largely for authority, the language of the will was entirely different. There the will directed that the trustees set aside a sum sufficient for the purpose, and to hold the same in trust for my daughter, Olga V. * * *, paying over the sum of twenty-five thousand dollars per annum, payable semi-annually during her natural life,” etc. There was no direction in the will for the payment to the daughter of any sum beyond $25,000. Under no possible construction of the will could the daughter be entitled to more than that sum, and an examination of the record on appeal shows that the daughter made no such claim. The contest, there, over the surplus income was between the residuary legatees and those who would be presumptively entitled to the next eventual estate in the funds set aside to produce the life annuities. A majority of the court held that the trustees’ authority was confined strictly to set aside a trust fund sufficient to produce * * * twenty-five thousand dollars,” and that, therefore, the remaindermen had no interest in any fund in excess of the necessary capital, or in the income derived from such excess. In the case now under consideration, the language is entirely different.

Here, the will does not place upon the executors and trustees in express language the duty strictly to set aside a trust fund sufficient to produce twenty-five thousand dollars.” They were required “ to set aside ” a fund “sufficient * * * to produce at the rate of five per cent * * * Twenty-five Thousand Dollars.” In the event, the income of the fund might of course exceed' or fall below the rate of five per cent. The testator made no express gift of an annuity or income of $25,000, and gave no express direction for the annual payment by the trustees of that amount, but directed that the “ net income ” of the fund set aside should be paid over to the life beneficiary.

We cannot find from the circumstances of the testator or from any other part of the will any intention on the part of the testator that his directions should not be carried out according to their letter. Doubtless he intended that the beneficiaries should receive approximately the income that he indicated and he directed how that intention should be carried out. He may have regarded a return of five per cent as reasonably safe. He might have provided that the funds should, if possible, be invested in securities which would bring approximately such return. He chose, instead, to permit the trustees to hold his own investments intact. These investments might produce more or "less than five per cent. The safety of the return would normally be reflected in the value of the securities. If the trustees decided to sell the assets of the estate and to invest the proceeds at five per cent, they might do so; if they chose to hold the testator’s investments intact, the return might in some years be less and in other years more than five per cent. Choice was left to the trustees, but they were required in any event to set aside a part of the residuary estate sufficient to produce at the rate of five per cent an income of $25,000, and then to pay over the net income of the fund, however invested, to the life beneficiary. Whatever choice might be exercised by the trustees, the life beneficiary was to obtain the income derived from a fund sufficient to produce at the rate of five per cent an income of $25,000. The risk of lesser income in lean years would then balance the possible gain from greater income in fat years, and at the death of the fife beneficiary the remaindermen would receive a fund measured in accordance with the directions of the testator, which would not fluctuate with the fluctuations of income. (See Russell v. Loring, 85 Mass. 121.)

It became the duty of the executors to set aside the three funds, when legacies, charges and expenses were met. They attempted to comply with this duty in October, 1926, adopting then the values placed upon the assets of the estate in the transfer tax proceedings. The value of the assets of the residuary estate at the time the funds were set aside, or should have been set aside, may have been larger than their value at the death of the testator. The executors were bound to fix the value at the time when they established the funds. ■ Otherwise, they could not comply with the direction of the testator to set aside funds sufficient to produce at the rate of five per cent net annual incomes of $29,000. This duty they did not properly perform. They must do so now, allocating to the three funds, if the residuary estate is sufficient, assets of a capital value, as of October, 1926, sufficient at the rate of five per cent to produce net annual incomes totalling $29,000.

If the residuary estate is insufficient for that purpose, then the entire residuary estate must be ratably divided between the three funds, and the life beneficiaries would be entitled to the entire income. If the residuary estate is more than sufficient, then the trustees must divide the assets of the estate, in fair and equitable manner, between the trust funds and the residuary legatees. The accrued income must then be apportioned in accordance with the amount of said trusts, and the amounts payable to the residuary legatees. (Matter of Kohler, supra, p. 373.)

The order of the Appellate Division and the decree of the Surrogate’s Court should be reversed, with costs to the appellant payable out of the estate, and the proceeding remitted to the Surrogate’s Court for entry of a decree in accordance with this opinion.

Cardozo, Ch. J., Pound, Crane, Kellogg, O’Brien and Hubbs, JJ., concur.

Ordered accordingly.