text:
    In the Matter of Vallie G. Kinney et al., Appellants. G. R. Kinney Co., Inc., Respondent.
    Argued November 21, 1938;
    decided January 10, 1939.

      Saul Gordon and Alex M. Hamburg for appellants.
    The preference of the eight-dollar cumulative preferred stock of the petitioners, on distribution of assets at dissolution, has been materially altered and changed, and, therefore, their petition for appraisal should have been granted. (Kent v. Quicksilver Mining Co., 78 N. Y. 159; Matter of Silberkraus, 250 N. Y. 242.) The amending certificate materially altered and changed the preferential rights of the holders of the old preferred stock in the distribution of assets on dissolution and, therefore, the petition for appraisal should have been granted. (Matter of Silberkraus, 250 N. Y. 242; Matter of International Superpower Corp., 236 App. Div. 791; 261 N. Y. 538.) The superimposition of the new preferred stock, with new priorities, upon the old preferred stock was a material alteration of the preferential rights of the old preferred stock, for the certificate of incorporation, prior to the amendment, guaranteed the maintenance of an equal status between the old ^preferred stock and any other class of preferred stock. (Pronick v. Spirits Distributing Co., 58 N. J. Eq. 97; Breslav v. N. Y. & Queens Electric Light & Power Co., 249 App. Div. 181; 273 N. Y. 593 Matter of International Superpower Corp., 261 N. Y. 538; Matter of Silberkraus, 250 N. Y. 242.) The reduction of capital effected by the amended certificate of incorporation constitutes a material alteration of the preferential rights of the eight-dollar cumulative preferred stock, which entitles the petitioners to have their stock appraised. (Matter of International Superpower Corp., 236 App. Div. 791; 261 N. Y. 538; Matter of Silberkraus, 250 N. Y. 242.)

      Paul Armitage, Archibald Douglas and Edward Holloway for respondent.
    The creation of a new class of prior preferred stock given a superiority in assets on dissolution over an old preferred stock does not “ alter the preferential rights ” of the old preferred stockholder within the statute granting a right of appraisal. (Matter of Dresser, 247 N. Y. 553; Matter of Silberkraus, 250 N. Y. 242; Breslav v. N. Y. & Queens Electric Light & Power Co., 249 App. Div. 181; 273 N. Y. 593; Matter of International Superpower Corp., 236 App. Div. 791; 261 N. Y. 538; Kent v. Quicksilver Mining Co., 78 N. Y. 159; Campbell v. American Zylonite Co., 122 N. Y. 455; Stokes v. Continental Trust Co., 186 N. Y. 285; Hinckley v. Schwarzschild & S. Co., 107 App. Div. 470.)
   Finch, J.

Respondent G. R. Kinney Co., Inc., is a domestic corporation. Prior to the recapitalization on June 17, 1937, it had issued and had outstanding two classes of stock, 50,479 shares of eight-dollar cumulative preferred, and 160,000 shares of common, both without par value. There was also authorized but unissued a class of $100 par value preferred stock consisting of 15,453 shares.

The eight-dollar cumulative no par value preferred stock was entitled to the dividend of eight dollars per share annually before payment of any dividends on the common stock. Upon dissolution or liquidation each holder was entitled to receive $100 per share and all accrued dividends before any payment in distribution might be made on the common stock. Upon redemption this preferred stock was entitled to preference over the common stock' to the extent of $115 per share, plus all unpaid dividends.

Immediately prior to recapitalization, the stated capital of the Kinney Company, as shown by its books, was as follows:

50,479 shares of $8 cumulative preferred stock at a stated value of $50 per share.. $2,523,950

160,000 shares of common stock at a stated value of $10 per share................ 1,600,000

Total stated value................ $4,123 ,950

Up to the date of the plan for recapitalization, there were arrears of dividends on this cumulative preferred stock amounting to $47.66 2/3 per share, or a total of $2,406,165.67.

At a meeting of stockholders of the Kinney Company held May 12, 1937, a written plan of recapitalization was duly authorized over the objection of Alex M. Hamburg, one of the petitioners, by the holders of two-thirds of the preferred and common stock. Thereafter, on June 17, 1937, an amendatory certificate of incorporation in two parts, which together carried out the plan of recapitalization, was duly filed with the Secretary of State.

Through these amendments there was created a new class of preferred stock consisting of 67,306 shares of five-dollar cumulative prior preferred stock, which was given priority over the existing eight-dollar cumulative preferred stock, both as to the payment of dividends and as to prior claim upon distribution of assets. In the event of dissolution, the five-dollar cumulative new preferred was entitled to $105 per share, if voluntary, and to $100 per share if involuntary, before any distribution was made on the old eight-dollar preferred or on the common stock. The board of directors might prepay dividends or redeem at $105 or purchase at private sale, the whole or any part of this five-dollar prior preferred stock. If either the amount earned annually, or the assets upon distribution should prove insufficient to permit full payment to the new preferred, then the entire amount available was to be distributed ratably only among the holders of the new preferred, to the exclusion of the old preferred and the common stock.

The number of shares of common stock was increased from 160,000 to 210,000.

The amended certificate reduced the stated capital of the corporation to $2,687,350 and changed the common stock from a no par value stock with a stated value of ten dollars a share to a par value stock with a par value of one dollar a share.

The resulting reduction in the stated capital, totaling $1,440,000, was transferred to surplus.

The five-dollar cumulative prior preferred stock and the common stock were offered in exchange for the eight-dollar cumulative preferred stock at the rate of one and one-third shares of five-dollar cumulative prior preferred stock and one share of common stock for each share of eight-dollar cumulative preferred stock.

There was eliminated from the certificate of incorporation the following provision: “ The holders of preferred shares of One Hundred ($100) Dollars par value and preferred shares of no par value shall share ratably in all preferences and privileges and no issued stock of one class of preferred stock shall in any way be superior to the other.”

The petitioners, having duly filed their petition, requested an appraisal of, and payment for, their shares of old preferred stock. The application was denied at Special Term, and such denial affirmed at the Appellate Division, two justices dissenting.

The sole question is whether the holders of the old preferred stock have had their preferential rights altered by the amended certificate of incorporation and may claim appraisal and payment in accordance with the provisions of the Stock Corporation Law (Cons. Laws, ch. 59, § 38, subd. 12 [now subd. 9]). This provision of the Stock Corporation Law reads as follows: “ If the certificate alters the preferential rights of any outstanding shares, any holder of. such shares not voting in favor of such alteration may * * * object to such alteration and demand payment for his stock, and thereupon such stockholder or the corporation shall have the right, subject to the conditions and provisions of section twenty-one, to have such stock appraised and paid for as provided in said section.”

In Matter of Dresser (247 N. Y. 553) we held that such statute has no application where the preferential rights of one class of outstanding stock over another class are left unchanged by the 'aprended certificate, but both classes of such outstanding stock are made subject to the preferential rights of a new class of stock to be issued. The old preferred was not retired in Matter of Dresser, and while the value of the old stock may have been affected, the preferential rights remained the same, subject only to the preference of the new class. In other words, the authorization of a new class of preferred stock, which is to be superimposed upon an outstanding preferred stock, does not “ alter the preferential rights ” as between the classes of the shares of the corporation which were outstanding prior to the time that the new class of preferred stock was superimposed, and hence does not warrant an appraisal within the terms of the Stock Corporation Law (§ 38, subd. 12 [now subd. 9]).

On the other hand, in Matter of Silberkraus (250 N. Y. 242) a different state of facts was presented. There the preferential rights of the old stock were not preserved. The stock itself ceased to exist. It was not only involuntarily retired, but the new class of preferred stock created by the new certificate provided changed preferential rights and new restrictions upon rights which had previously inhered in the preferred stock now eliminated. In other words, there we had a case where the preferential rights of the outstanding preferred stock were altered as between it and the common stock. Whether these changes would prove beneficial or detrimental to those who had previously held the old preferred stock, we did not inquire. It was sufficient that the amended certificate changed these rights as between the outstanding preferred stock and the common stock. In other words, considering the development of this right of appraisal and the wording of the Stock Corporation Law, we interpreted the intention_of the Legislature as shown by the statute to permit an appraisal where an alteration changed the preferential rights within the corporation as between different classes of stock. If there is no change in this relationship, the fact that both preferred and common are subject to a bond issue, or to an issue of preferred stock, taking preference over all classes of old, outstanding stock theretofore existing in the corporate structure, the statute is not violated.

The history of the creation of this right of appraisal for dissenting stockholders and a consideration of the language employed in section 37, which immediately precedes this section 38, of the Stock Corporation Law, both confirm our conclusion.

Prior to 1901 under the law of this State, a corporation had no power to issue new preferred stock without unanimous consent. (Kent v. Quicksilver Mining Co., 78 N. Y. 159, 179, 180; Stock Corporation Law, § 47; Laws of 1892, ch. 688.) In 1901 the Legislature enacted a statute (L. 1901, ch. 354, § 1, amdg. § 47 of Stock Corporation Law) which authorized every corporation to issue ,a new preferred stock with the consent of two-thirds of the stockholders. This was sustained as a valid exercise of the power reserved to the Legislature. (Hinckley v. Schwarszchild & Sulzberger Co., 107 App. Div. 470; appeal dismissed, 193 N. Y. 599.) Up to 1921 no protection appears to have been afforded to non-consenting minority stockholders. In 1921 (Laws of 1921, ch. 694, § 6, amdg. § 24 of Stock Corporation Law) the Legislature granted to the holders of a majority of outstanding shares the right to change such shares from par value into no par value. Along with this, a right_of appraisal was given to non-consenting stockholders on account of this change in the capital structure of the corporation. In 1923 (L. 1923, ch. 787) the Legislature granted to stockholders of every corporation the right to classify or reclassify any shares, and permitted the issuance of new shares having precedence and priority over any classes theretofore authorized, if such stockholders approved the change by a two-thirds vote. Thus this section 37 of the Stock Corporation Law (subd. 3-c) gave to two-thirds of the stockholders of each class both the right to “ alter preferences ” as between the different classes of old stock, or “ authorize ” new shares with “ prior preferences.” Section 38 gave a right of appraisal only in cases of alterations,” and did not give such right of appraisal in case of “ authorization ” of new shares. Therefore, both a tracing of the history of this branch of the law and a reading of these sections 37 and 38 of the Stock Corporation Law confirm our conclusion that section 38 permits an appraisal only when an amended certificate alters the preferential rights of the outstanding stock of a corporation as between the different classes of stock and that it does not apply to a case where such rights are left unchanged as between themselves, but are both made subject to a new issue of stock. Judged by these principles, that portion of the certificate providing that the eight-dollar cumulative preferred stock should be subject to the new preferential rights of the five-dollar cumulative prior preferred, is valid and confers on the appellant no right to an appraisal.

We are thus brought to a consideration of the provision of the amended certificate which reduced the stated capital of the corporation to $2,678,350 and changed the common stock from a no par value stock with a stated value of ten dollars a share to a par value stock with a par value of one dollar a share; the resulting reduction in the stated capital, totaling $1,440,000, being thereby transferred to surplus. Prior to such transfer, the eight-dollar cumulative preferred stock was in a position to benefit from the earning power of such capital, and in the event of liquidation or dissolution such capital would be available for distribution to such stockholders, subject only to diminution by losses in business operations. It could not have been used for dividends or for the purchase of any shares of stock. When this sum of $1,440,000, amounting to about one-third of the capital of the corporation, was transferred from capital to surplus, the eight-dollar cumulative preferred stock lost its right to rely upon this portion of capital. The capital structure was so altered that it was placed within the power of the corporation to deprive forever the preferred stockholders of their preferential rights in regard to this portion of the capital structure. In brief this $1,440,000 was in itself a security of approximately twenty-eight dollars for each share of the old preferred stock and has now by this amendment of the certificate of incorporation become a surplus that may no longer support such stock.

The reduction in capital constitutes a material alteration of the preferential rights of the old preferred for it has reduced materially and finally the amount of stated capital which theretofore had safeguarded the preferential rights of the old preferred stock. Respondent urges that because two-thirds of the common and preferred stockholders passed a resolution authorizing the board of directors, or the appropriate officers of the company, to reduce the good will of the company as shown on the balance sheet from $2,480,050 to a nominal amount of one dollar by applying the difference against the capital surplus, the transfer from capital to surplus may be disregarded. The appellant, on the other hand, contends that this transmutation from capital to surplus leaves the directors free to use that surplus in the purchase of outstanding shares of common and new preferred stock, or in the payments of dividends on the new preferred stock, thus reducing the stated capital which before recapitalization supported the old preferred stock and its preferential rights. But with these various contentions we are not concerned. Our concern is with the alteration provided by the certificate _of incorporation, and with what the basic charter of the corporation makes lawful when carried out by appropriate by-law and resolution, and not by what may happen after the amendment of the certificate of incorporation. This also is the command of the statute. If the certificate alters the preferential rights of any outstanding shares ” (italics interpolated), the objecting stockholder may demand appraisal and payment.

The appellants’ objection that the amendatory certificate omits that portion of the former certificate which provides that the holders of the eight-dollar cumulative preferred shares and the holders of the unissued 15,453 shares of stock of $100 par value shall share ratably in all preferences and privileges, “ and no issued stock of one class of preferred stock shall in any way be superior to the other,” is without merit. Since the quoted portion is in the same sentence which provides that the holders of these two classes of stock shall share ratably in all preferences and privileges, it is clear that the language so stricken out related solely to those two classes of stock. As the amended certificate abolished the authorized but unissued 15,453 shares of $100 par value preferred stock, the provision in the old certificate relating to this unissued stock was properly eliminated as unnecessary.

It follows that the orders should be reversed, with costs in all courts, and the application granted. The motion to dismiss the appeals should be denied.

Crane, Ch. J., Lehman, O’Brien, Hubbs, Loughran and Rippey, JJ., concur.

Ordered accordingly.


source: Caselaw Access Project

author: Finch, J.

license: Public Domain

text:
    The People of the State of New York, Appellant, v. John Fury, Respondent, and Frank Miller and Anthony Ollis, Defendants.
    Argued December 2, 1938;
    decided January 10, 1939.

      Daniel J. O’Mara, District Attorney (Clarence J. Henry of counsel), for appellant.
    The defendant-respondent was properly adjudged a second offender within the meaning of section 1941 of the Penal Law. (People v. Rhoner, 4 Park. Cr. Rep. 166; People v. Peabody, 25 Wend. 472; Fox v. Ohio, 5 How. 410; Matter of Geisler, 50 Fed. Rep. 411; Matter of Truman, 44 Mo. 181; People v. Welch, 141 N. Y. 266; People v. Carlesi, 154 App. Div. 481; 208 N. Y. 547; Matter of Loney, 134 U. S. 372; United States v. Arjona, 120 U. S. 479; Commonwealth v. Fuller, 8 Metc. [Mass.] 313; Harlan v. Michigan, 1 Dougl. [Mich.] 207; People v. White, 34 Cal. 183.)
   No appearance for respondent.

Finch, J.

The defendant-respondent, John Fury, was convicted of the crimes of burglary in the third degree and grand larceny in the first degree. Subsequently he was charged with being a second felony offender within the meaning of section 1941 of the Penal Law, in that he had previously been convicted in a United States District Court for the Western District of New York of the crime of uttering a counterfeit Federal reserve bank note in violation of section 265 of title 18 of the United States Code, and he was sentenced to serve, as a second felony offender, a term of from ten to twenty years on each charge of which he was convicted, the sentences to be served consecutively.

The Appellate Division affirmed the judgment of conviction except in so far as the adjudication and sentence as a second felony offender was concerned, and entered an order that the defendant be brought before that court for the correction of the judgment and his sentence as a second offender, by resentence as a first felony offender. The Appellate Division sentenced him to serve a term of from five to ten years on each charge, the sentences to be served consecutively.

The provision concerning second felony offenders is to be found in section 1941 of the Penal Law. That section provides that “ A person, who, after having been once or twice convicted within this state, of a felony, of an attempt to commit a felony, or, under the laws of any other state, government, or country, of a crime which, if committed within this state, would he a felony, commits any felony, within this state, is punishable upon conviction of such second or third offense, as follows: * * (Italics interpolated.)

If the crime for which the defendant was convicted in the Federal courts is one for which he might have been convicted of a felony under the laws of this State, this section is applicable. As noted above, defendant was convicted in the Federal courts of the crime of uttering a counterfeit Federal reserve bank note.

Does this constitute a crime under our Penal Law? Section 881 of the Penal Law makes it a crime for any person to dispose of or put off as true, or to have in his possession with intent so to utter:

“ 3. A forged will, deed, certificate, indorsement, record, instrument or writing, or other thing, the false making, forging, or altering of which is punishable as forgery. Is guilty of forgery in the same degree as if he had forged the same.’’ (Italics interpolated.)

We must turn then to the provisions concerning forgery to determine whether a Federal reserve bank note is included as a “ certificate * * * instrument or writing, or other thing, the false making, forging, or altering of which is punishable as forgery * * In section 884 we find, included as instruments, the forging of which constitutes forgery in the first degree,

“ 3. A certificate, bond, paper writing, or other public security issued or purporting to have been issued by or under the authority of this state, or of the United States, or of any other state or territory of the United States, or of any foreign government, country or state, or by any officer thereof in his official capacity, by which the payment of money is promised absolutely or upon any contingency, or the receipt of any money or property is acknowledged, or being or purporting to be evidence of any debt or liability, either absolute or contingent, issued or purporting to have been issued by lawful authority.”

“5. A * * * bank note * * * or other obligation or evidence of debt, issued or purporting to be issued by any bank, banking association or body corporate existing under the laws of this state, or of the United States, * * * promising or purporting to promise or agree to the payment of money, or the performance of any act, duty, or obligation.”

The act of uttering a counterfeit Federal reserve bank note thus clearly constitutes a violation of the Penal Law of this State, and such an act is a felony. (Cf. People v. Rhoner, 4 Park. Crim. Rep. 166.)

The case of People v. Gutterson (244 N. Y. 243, 250) involved an offense which was cognizable only by the laws of the United States,” and was not one which was a crime under the laws of this State. In the case at bar the crime itself under the Federal law is the same as that under the State law. In both jurisdictions the crime is the uttering of counterfeit bank notes.

The fact that the Federal government has made the uttering of counterfeit bank notes a crime does not bar the State from including a similar crime in its Penal Law. The jurisdiction of Federal courts over such crime is not exclusive unless Congress enacts legislation taking away the jurisdiction of the courts of the State. (See People v. Welch, 141 N. Y. 266, 277; United States v. Lanza, 260 U. S. 377.) It has long been decided that both governments may have concurrent jurisdiction over the emission of' counterfeit moneys. (See Sexton v. California, 189 U. S. 319, 322, 323; Fox v. Ohio, 46 U. S. [5 How.] 410; People v. Carlesi, 154 App. Div. 481; affd., 208 N. Y. 547; United States v. Arjona, 120 U. S. 479; United States v. Marigold, 50 U. S. 560, 569.) Congress has expressly provided, concerning the statute making this act a crime, that it should not “ be held to take away or impair the jurisdiction of the courts of the several States under the laws thereof.” (U. S. Code, tit. 18, § 547.)

The judgment of the Appellate Division, in so far as it amends the judgment of the County Court, should be reversed, the sentence of the defendant by the Appellate Division vacated, and the judgment of the County Court affirmed.

Crane, Ch. J., Lehman, O’Brien, Hubbs, Loughran and Rippey, JJ., concur.

Judgment accordingly.


author: Crane, Ch. J.

text:
    Margaret C. Coggeshall, Appellant, v. Edward F. Hennessey, as Supervisor of the Town of Mount Pleasant, et al., Respondents.

      Argued December 7, 1938;
    decided January 10, 1939.

      Joseph Day Lee and Winfield L. Morse for appellant.
    The inclusion of the item, “ Hardscrabble Water District — legal services, $6,905.60,” in the 1937 budget was illegal. (Laws of 1916, ch. 105; Cons. Laws, ch. 62, §§ 111, 112, 118.) The inclusion of the item “ highway department — highway certificate of indebtedness $10,400,” was illegal. (City of Johnstown v. Wells, 242 App. Div. 103; People ex rel. Moody Co. v. Hamilton, 108 Misc. Rep. 585; Rondout Sav. Bank v. City of Kingston, 144 Misc. Rep. 880.)

      William F. Bleakley, John J. Byan, James D. Hopkins and Max Edelman for respondents.
    The i+ems designoted as “ miscellaneous ” and “ reserve for contingencies ” were validly included within the annual estimate of the town. (Mackay v. Belvidere, 101 N. J. 250; People v. Tremaine, 252 N. Y. 27; East v. Brooklyn Heights R. R. Co., 195 N. Y. 409; People v. Ahearn, 196 N. Y. 221; People v. Title Guarantee & Trust Co., 227 N. Y. 326; Town of Mount Pleasant v. Eversole, 96 S. W. Rep. 478; People ex rel. Holmquist v. Illinois Central R. R. Co., 237 Ill. 324; People v. Bowman, 253 Ill. 234; People ex rel. Mooneyhan v. Cairo, V. & C. R. R. Co., 247 Ill. 260; Protest of St. Louis-San Francisco Ry. Co., 5 Pac. Rep. [2d] 763; People v. Home Ins. Co., 92 N. Y. 328; Matter of McPherson, 104 N. Y. 306; People ex rel. Burrows v. Supervisors of Orange County, 17 N. Y. 235.) The appropriation in the annual estimate for the payment of the temporary certificate. of indebtedness issued pursuant to chapter 34 of the Laws of 1936 was not invalid. (People v. Karr, 240 N. Y. 348; People ex rel. Bloy v. Walker, 113 Misc. Rep. 592; People ex rel. R., W. & O. R. R. Co. v. Haupt, 104 N. Y. 377; People v. Ahearn, 196 N. Y. 221; People v. Title Guarantee & Trust Co., 227 N. Y. 366.) The items making appropriations to pay claims for professional services rendered in connection with the defense of actions brought against the town were not unlawfully included within the budget or unlawfully levied solely against the water district. (Matter of Clark v. Smith, 250 App. Div. 233; Lowe v. City of New York, 240 App. Div. 484; 265 N. Y. 583; Griffith v. City of New York, 73 App. Div. 549; 173 N. Y. 612; People ex rel. Kiehm v. Board of Education, 198 App. Div. 476; Echo Lake Corp. v. Town of Mount Pleasant, 249 App. Div. 736; 275 N. Y. 500.)
   Crane, Ch. J.

Certain provisions of the Town Law (Cons. Laws, ch. 62) must be considered in determining the questions raised upon this appeal. Section 110 to section 120, inclusive, of the Town Law are known as the budget system.

Not less than sixty-five nor more than seventy days prior to the meeting of the board of supervisors at which taxes are levied in the county in which the town is situated, every administrative officer, board, department and commission of the town and of every district thereof, except fire districts and except as otherwise provided in section two hundred two-a, shall annually prepare and file with the town clerk detailed estimates in writing of the amount of expenditures for the next fiscal year in, for and by their respective offices, boards, departments and commissions." (§ 111.)

At least fifty and not more than sixty days prior to the date of the meeting of the board of supervisors at which taxes are levied in the county in which the town is situated, the town board shall prepare an itemized statement in writing of the estimated revenues and expenditures of the town for the next ensuing fiscal year, which statement shall be known as its annual estimate." (§ 112.)

Immediately after the annual estimate has been completed, the town board shall file the original estimate in the office of the town clerk where it shall be available for inspection by any interested person at all reasonable hours, and shall give notice of a public hearing thereon. * * * The notice shall also specify the proposed salaries of each member of the town board, the town clerk and town superintendent of highways, and, if there be a town attorney or town engineer, the proposed salaries thereof. * * * At such hearing, any person may be heard, in favor of or against the estimate as compiled or for or against any item therein contained." (§ 113.)

The tax levy is provided in section 116, which in part reads: The town clerk shall prepare and certify in duplicate a copy of the annual estimates as adopted by the town board, including the estimates adopted pursuant to section two hundred two-a, and deliver one copy thereof to the supervisor of the town. The amount of the estimate of expenditures less the estimate of revenues as specified in section one hundred twelve shall constitute the amount of tax to be levied upon the town for town purposes * *

Certain contracts and expenditures are prohibited by section 118, which reads: Except as authorized by law, no officer, board, or department shall during a¿ny fiscal year expend or contract to be expended any money or incur any liability or enter into any contract which by its terms involves the expenditure of money for any purpose, unless provision therefor shall have been made in the annual estimate, and in no case in excess of the amount appropriated for such year. * * • * Any contract, verbal or written, made in violation of this section, shall be null and void as to the town * * *.”

Pursuant to section 51 of the General Municipal Law (Cons. Laws, ch. 24), and the general equity power of the court, this action has been brought to declare certain items illegal in the proposed budget of the town of Mount Pleasant, Westchester county, for the year 1937, and to enjoin their collection and payment. The challenged items may.be divided into three classes: miscellaneous, $1,000, and reserve for contingencies, $2,500, being one class; legal services, $6,905.60, a second class; and highway certificates of indebtedness, $10,400, the third class. We shall take these up in their order. .

The appellant claims that the words “ detailed estimates in writing of the amount of expenditures for the next fiscal year ” must include every little item and cannot be embodied in a lump sum appropriation. This is not the purpose of the budget. The items required to be detailed are those which give to the taxpayers notice of the proposed expenditures in such general outline that they may have a very good idea of what the government is going to cost. Thus in section 112 of the Town Law it will be noted that the town board, after receiving the detailed estimates from the various departments, shall prepare an itemized statement in writing of the estimated expendíturcs of the town for the next ensuing fiscal year. The estimate shall include the several amounts deemed necessary in each office, board and department, separately stated. The position of the appellant is that unless every item appears in these proposed estimates, nothing can be paid out for the town from taxes, and that any item of necessary indebtedness unexpectedly arising, and which could not be foreseen, can never be paid; it would be illegal to include it, for instance, in a subsequent budget; in other words, make up for a deficiency. This we consider to be entirely too strict an application of the budget system. No person or institution or municipality could possibly act under such rigid rules. Besides, such are not necessary for the safeguarding of the public funds. The amount of $1,000 for miscellaneous items and $2,500 reserved^ for contingencies is not at all unreasonable.

We next come to the item of $6,905.60 for Mr. Henry J. Logan, the duly appointed attorney for the town from a time prior to January 1, 1932, until December 31, 1933. The town of Mount Pleasant had a litigation about this time over a contract for the purchase of certain land and water rights from the Echo Lake Corporation, and it arose out of these facts: The Hardscrabble Water District was formed in 1931, but on petition of certain taxpayers in 1932 it was dissolved, pursuant to chapter 113 of the Laws of 1925, being section 305-a of the act relating to towns. This act provided that the dissolution shall be made to take effect only on the termination of any existing contract, and this contract of purchase was set for a time subsequent to the passage of the resolution to dissolve the district. Litigation over the contract has found its way into the reports. (Lowe v. Town of Mount Pleasant, 240 App. Div. 997; Echo Lake Corp. v. Town of Mount Pleasant, 249 App. Div. 736; affd., 275 N. Y. 500.)

The actions were continued through a portion of Mr. Logan’s term as town attorney and after his successor was appointed. Apparently he acted either as attorney or as retained counsel during all of the proceedings. This item of $6,905.60, it is admitted, covered a bill of $6,750 for services rendered by Mr. Logan for the period beginning August 12, 1932, and ending April 20, 1936, a period of approximately four years. The appellant insists that under section 118 of the Town Law no indebtedness could be incurred for counsel unless it was included in the estimate for each year; in other words, each and every year of a continuous litigation must include the fees and allowances for counsel, and these must be estimated in advance. We do not construe this law as requiring any such strict construction. The value of the services performed in one year could be included in the budget for the next, provided they are reasonable. The appellant further claims that this item should be assessed upon the town as a whole, and not upon the Hardscrabble Water District.

Referring to the records in the cases above cited, we find that the water' district was created pursuant to the Town Law as it existed in 1931. A water system was to be constructed at the expense of $340,000 maximum, and Edward G. Rehfield, Charles E. Williamson and Charles H. Chapman were appointed water commissioners, constituting the board of water commissioners of the Hardscrabble Water District in the town of Mount Pleasant, New York. On November 19, 1931, the water board purported to enter into a contract with Echo, Lake Corporation wherein the board agreed to purchase certain lots at the price of $7,500, and certain water rights. The proposals of the water commission were strenuously opposed, and in January of 1932 the water district was dissolved, pursuant to section 305-a of the old Town Law (Laws of 1925, ch. 113).

The plaintiffs Echo Lake Corporation and Nicola Cristofalo brought an action which as amended was for damages for breach of contract. The action was against the town of Mount Pleasant and the water commissioners of Hardscrabble Water District in the town of Mount Pleasant, New York. A judgment of $14,000 was recovered against the defendants which on appeal was affirmed by this court. (See Echo Lake Corp. v. Town of Mount Pleasant, 247 App. Div. 743; 249 App. Div. 736; affd., 275 N. Y. 500.)

What was the effect of the dissolution of the water district? Section 305-a of the old Town Law provides: “ * * *. All existing indebtedness of any such district shall, notwithstanding the dissolution thereof as herein provided, be a charge upon the taxable property of the district dissolved and the town board of the town shall annually levy and collect in such district by tax a sum sufficient to pay the principal and interest of any such indebtedness as the same shall become due and payable. * * * Upon the dissolution of any such district the term of office of the water commissioner, if any, shall terminate and all property of_the district shall become the property of the town.”

This item for Logan’s services was an existing indebtedness or obligation of the water district. It grew out of a contract created by the water commissioners for the benefit of the district. The damages for the breach took the place of the price.

We now come to a more serious question, which has to deal with the highway certificates of indebtedness, $10,400. The 1936 budget of the town of Mount Pleasant contained an appropriation for the general repair and maintenance of highways. Although the appropriation had given out, additional improvements were undertaken at a cost of $10,400, financed by the issuance of a certificate of indebtedness. This is the item now included in the 1937 budget, the money being raised in that year by taxation to pay the certificate of indebtedness. Justification for this procedure is said to be found in chapter 34 of the Laws of 1936, which has reference to any town in this county of Westchester. It provides that the town board may make an order directing the widening, straightening, extending, draining, paving and otherwise improving of a highway, or a portion thereof, situate wholly within such town pursuant to the provisions of this act. The application, if any, and the order shall describe the part of the highway proposed to be widened, straightened, extended, drained, paved and/or otherwise improved and shall state that such improvement is necessary for the public convenience and welfare. Before the adoption of such an order the town board shall cause to be made, a map showing the property proposed to be acquired for such improvement, arid for such purpose may employ an engineer and thereafter make an estimate of the cost of the improvement, including the cost of the land required therefor and all expenses in connection with said improvement and acquisition. The order of the town board shall also designate what part or portion of such town shall pay for any such improvement unless the entire town is to pay for the same.”

Section 3 of this act provides that the town board shall acquire the property or such property as it may deem necessary for the purpose of such improvement or it may be taken by gift or devise or purchase. Proceedings in condemnation may be resorted to.

Then come sections 4 and 5, which the appellant says require the board to issue bonds to pay for certificates of indebtedness issued for such work, and that the town may not include the cost in the budget for a subsequent year no matter how small or limited the improvement.

§ 4. Bonds. * * * Such town board is hereby authorized and directed to issue from time to time bonds of such town to pay the estimated cost of such improvement, and to take up the certificates of indebtedness that may be issued as provided in the following section^ provided, however, that such town board may provide for the payment of any such bonds within twenty years from their respective dates of issue. * * * It shall be the duty of such town to cause to be raised annually by tax upon the taxable property of such town, in the same manner as other taxes are levied and collected a sufficient sum to pay the interest upon said bonds and the interest on any certificates of indebtedness issued as provided by the following section when and as the same shall become due and payable and also to cause to be raised by tax upon the taxable property of such town the moneys necessary to pay the principal of said bonds as the same shall become due * * *.

“ § 5. Temporary certificates of indebtedness. The improvement of such highway, including the cost of land, acquired, may be financed by the issuance of temporary certificates of indebtedness * * * and the proceeds of bonds issued and sold under the provisions of this act, shall be devoted to the payment of the cost of the improvement, including the cost of land acquired and for paying and redeeming any temporary certificates of indebtedness issued therefor."

“ Such town board is hereby authorized and directed to issue from time to time bonds of such town to pay the estimated cost of such improvement, and to take up the certificates of indebtedness that may be issued as provided in the.following section." (§4)

When we.consider that this law of 1936 covers extensive improvements such as new highways requiring condemnation of property or else of purchase, and the expenditure of large sums of money as well as trivial repairs or changes in highways, we must give to the word directed " a sensible application. After the appropriation in the yearly budget has given out, it may be that through some disaster a highway requires immediate repairs costing a few thousand dollars. Does this statute require that the certificate of indebtedness that may be issued to raise money to pay for such repairs can only be paid out of a bond issue, and that a public hearing must be had, pursuant to section 113 of the Town Law, before the repairs can be made or the indebtedness incurred? This, too, would be carrying the purposes of the budget system entirely too far. At all times we must never lose sight of the object which the legislation has in mind. This budget system is to place a limit on expenditures so far as those expenditures can reasonably be foreseen. The public are entitled to a hearing on all these matters for which officials are to spend money during the coming year. If they are deemed to be unnecessary or unreasonable in amount, the facts will come out and be well aired before the public or in the press, but it is against all human experience or the ability of man to provide for everything that may happen within 365 days of the year. Accidents, unforeseen occurrences, litigation may occur, and to say that indebtedness for these things could not be incurred because not included in the yearly budget, would be requiring the impossible. When, therefore, a road needs to be repaired for some emergency or otherwise, and there is no money to meet the expense, there is no reason that we can see why the amount may not be included in the budget of the subsequent year or years, within the discretion of the town board, or if a certificate of indebtedness has been issued to raise the money, why the funds to pay this should not be provided for in such a budget. Of course officials are expected to act reasonably and in good faith. This amount of $10,400 does not strike us as being so large as to contravene the purpose of this act of 1936 which does not require that small expenditures for highway improvements shall be met by a bond issue. Therefore, we consider that the word directed has no application to the facts of this case, and that there was nothing illegal in including this item in the budget of 1937.

What I have said here must also be read in the light of the appellant’s claim. Nowhere does she attack the good faith of the officials or the reasonableness of the charges.

The judgment should be affirmed, with costs.

Lehman, Hubbs, Loughran, Finch and Rippey, JJ., concur; O’Brien, J., taking no part.

Judgment affirmed.


author: Per Curiam.

text:
    In the Matter of the Accounting of Judson R. Hooper, as Administrator of the Estate of Frank H. Barker, Deceased, Respondent. Keuka College et al., Appellants.
    Argued November 22, 1938;
    decided January 10, 1939.

      Clarence M. Gifford for appellants.
    The claimants made a prima facie case by proving the notes which recited the phrase “ for value received.” (Owens v. Blackburn, 161 App. Div. 827; Rice v. Rice, 43 App. Div. 458; Prindle v. Carruthers, 15 N. Y. 425; Hegeman v. Moon, 131 N. Y. 462; Hamilton v. Hamilton, 127 App. Div. 871; Matter of Ball, 221 App. Div. 228; Howell v. Wright, 41 Hun, 167.) No different rule should be applied to the proof of a subscription note given to a charitable corporation. (Allegheny College v. National Chautauqua County Bank, 246 N. Y. 369; Barnes v. Perine, 12 N. Y. 18; Matter of Ball, 221 App. Div. 228; Shimel v. Williams, 136 Misc. Rep. 464; Hegeman v. Moon, 131 N. Y. 462; Matter of Taylor, 251 N. Y. 257.)

      George H. Bowers for respondent.
    An. executory promise, without consideration and intended to operate as a gift after death, cannot be enforced. (Harris v. Clark, 3 N. Y. 93; Twenty-third Street Baptist Church v. Cornell, 117 N. Y. 601; Holmes v. Roper, 141 N. Y. 64; Matter of Tummond, 290 N. Y. Supp. 40; Matter of Taylor, 251 N. Y. 257.) The instruments are non-negotiable and the claimants must both plead and prove a consideration for them. (Cons. Laws, ch. 38, § 50; Deyo v. Thompson, 65 N. Y. Supp. 459; Wray v. Miller, 120 N. Y. Supp. 787; St. Lawrence County Nat. Bank v. Watkins, 153 App. Div. 551.) The recital “ for value received ” raises only a very slight presumption of consideration. (Dougherty v. Salt, 227 N. Y. 200; Matter of Taylor, 251 N. Y. 257.)
   Per Curiam.

We are of opinion that the inference of consideration from the phrase “ For value received ” on the face of each of the notes was not necessarily repelled by the remainder of the text of the instruments themselves. (Matter of Taylor, 251 N. Y. 257; Strickland v. Henry, 175 N. Y. 372.)

The order of the Appellate Division and the decree of the Surrogate’s Court should be reversed and the matter remitted to the Surrogate’s Court for further proceedings in accordance with this opinion, with costs in all courts to abide the event, payable out of the estate.

Crane, Ch. J., Htjbbs, Loughran and Finch, JJ., concur; Lehman, O’Brien and Rippey, JJ., dissent.

Ordered accordingly.


text:
    German Masonic Temple Association of the City of New York, Appellant, v. City of New York et al., Respondents.

      Argued December 5, 1938;
    decided January 10, 1939.

      Eugene Cohn for appellant.
    Exemption of charities from the municipal sales tax and the right of any person aggrieved by the unauthorized imposition of that tax to a declaratory judgment are well established. The complaint, read in the light of the rule that its allegations are to be taken as true, makes out plaintiff’s charitable status. (Y. M. C. A. v. City of New York, 159 Misc. Rep. 539; 251 App. Div. 821; 276 N. Y. 619; Matter of N. Y. U. v. Taylor, 251 App. Div. 444; 276 N. Y. 620; Socony-Vacuum Oil Co. v. City of New York, 247 App. Div. 163; 272 N. Y. 668; Dun & Bradstreet, Inc., v. City of New York, 276 N. Y. 198; National City Bank v. Waggoner, 243 App. Div. 305; 270 N. Y. 592.) Plaintiff is a charity and, as such, exempt from the sales tax. (Corbett v. St. Vincent’s Industrial School, 79 App. Div. 334; 177 N. Y. 16; Matter of Huntington, 168 N. Y. 399; People ex rel. German Masonic Temple Assn. v. Goldfogle, 136 Misc. Rep. 100; 229 App. Div. 863; 255 N. Y. 586; Matter of Allen, 76 Misc. Rep. 88.) That plaintiff maintains and operates an institution such as the Temple for the purpose of providing revenue used for the maintenance of its asylum does not affect its charitable status. (County of Noblirig v. Hamlin University, 46 Minn. 316; People ex rel. Trustees of Masonic Hall v. Farrell, 130 Misc. Rep. 142; Matter of Allen, 76 Misc. Rep. 88; National Navy Club v. City, 122 Misc. Rep. 89; Butterworth v. Keeler, 219 N. Y. 446.) Immunity from payment of the sales tax comes to plaintiff by force of a public policy consistently pursued by the State and expressed in actions of its legislative and executive branches and not by grace of the exemption which the local laws extend to what it calls semi-public institutions. (Socony-Vacuum Oil Co. v. City of New York, 247 App. Div. 163; 272 N. Y. 668; Matter of Huntington, 168 N. Y. 399; Matter of Moses, 138 App. Div. 525; People ex rel. Trustees of Masonic Hall Assn. v. Miller, 279 N. Y. 137; Matter of W. S. A. & P. R. R. Co., 115 N. Y. 442; City of New York v. New York City Ry. Co., 193 N. Y. 543; Grimmer v. Tenement House Dept., 205 N. Y. 549; Behan v. People, 17 N. Y. 516; Jewell v. City of Ithaca, 36 Misc. Rep. 499; 72 App. Div. 220.) The complaint sufficiently alleges the existence of a judiciable controversy. (Commonwealth of Australia v. Queensland, 29 Commonwealth Law Rep. 1; Spooner, O., Ltd., v. T. V. C. Bd., [1932] 4 Dominion Law Rep. 750; N. C. & St. L. Ry. Co. v. Wallace, 288 U. S. 249.)

      William C. Chanler, Corporation Counsel (Sol Charles Levine, Arthur A. Segall and Charles H. Birdsall of counsel), for respondents.
    The courts below properly dismissed the complaint which failed to allege such special facts or circumstances as would warrant a departure from the administrative procedure prescribed" by the local laws for testing out liability to tax. (Lewis v. City of Lockport, 276 N. Y. 336; Matter of New York University v. Taylor, 276 N. Y. 620; United States v. West Virginia, 295 U. S. 463; Y. M. C. A. v. City of New York, 251 App. Div. 821; 276 N. Y. 619; Kalman v. Shubert, 270 N. Y. 375; Socony-Vacuum Oil Co. v. City of New York, 247 App. Div. 163; 272 N. Y. 668; New York R. T. Corp. v. City of New York, 275 N. Y. 258; 303 U. S. 573; Dun & Bradstreet, Inc., v. City of New York, 276 N. Y. 198; 1024 Third Avenue Corp. v. City of New York, 254 App. Div. 853; Ramsey v. City of New York, 254 App. Div. 658; Myers v. Bethlehem Shipbuilding Corp., 303 U. S. 41; Matter of Western Electric Co. v. Taylor, 276 N. Y. 309; Matter of Syracuse Masonic Temple, 270 N. Y. 8; Newburger v. Lubell, 257 N. Y. 383.) Plaintiff is not a semi-public institution within the meaning of the local laws. (Matter of Kennedy, 240 App. Div. 20; 264 N. Y. 691; People ex rel. Mizpah Lodge v. Burke, 228 N. Y. 245; People ex rel. New York Lodge B. P. O. E. v. Purdy, 179 App. Div. 805; 224 N. Y. 710; B’nai Brith Club, Inc., v. City of New York, 270 N. Y. 12; Matter of Syracuse Masonic Temple, 270 N. Y. 8; People ex rel. German Masonic Temple Assn. v. Goldfogle, 255 N. Y. 586; Brewster v. Gage, 280 U. S. 327; Matter of Armitage v. Board of Education, 122 Misc. Rep. 586; 210 App. Div. 812; 240 N. Y. 548.) Plaintiff is organized and operated for profit. (People ex rel. German Masonic Temple Assn. v. Goldfogle, 136 Misc. Rep. 100; 229 App. Div. 863; 255 N. Y. 586.) Plaintiff is not supported by public subscription or endowment within the meaning of the local laws. (Matter of Kennedy, 240 App. Div. 20; 264 N. Y. 691.)
   Per Curiam.

Since the material allegations of the complaint are constructively admitted, there is no issue of fact and a declaratory judgment may appropriately be directed. (Dun & Bradstreet, Inc., v. City of New York, 276 N. Y. 198.)

We think that on the facts alleged by the pleading the plaintiff is not within the exemption for those charitable and religious institutions which are supported wholly or in part by public subscriptions or endowment and are not organized or operated for profit.” (Local Law No. 29, 1935 [§ 1, If [h], § 2] and Local Law No. 31, 1936 [§ 1, If [h], § 2] of City of New York.) Concededly the plaintiff association is operated for profit. It is not enough that all its profits are devoted to the maintenance of an asylum which is purely charitable in character. The exemption does not extend to such a situation.

The judgments dismissing the complaint should be reversed and judgment directed for the defendants in accordance with this opinion, with costs in all courts.

Crane, Ch. J., Lehman, Loughran, Finch and Rippey, JJ., concur; O’Brien and Htjbbs, JJ., taking no part.

Judgment accordingly.


author: Lehman, J.

text:
    In the Matter of the Will of Isaac Liberman, Deceased. Herman N. Liberman et al., Individually and as Trustees under the Will of Isaac Liberman, Deceased, et al., Appellants; Harry Liberman, Respondent.

      Argued November 28, 1938;
    decided January 10, 1939.

      Henry Hofheimer, Louis J. Paley, Milton Mansbach and David B. Baum for appellants.
    The provisions of the trusts under subdivisions “ d ” and “ e ” of paragraph “ Eleventh ” of the will referring to a marriage of respondent with the consent of the trustees are valid. (Alexander, Commentaries on Wills, p. 1537; Schouler on Law of Wills [6th ed.], § 1352; Thompson on Law of Wills [2d ed.], p. 468; Jarman on Wills [7th ed.], p. 1496; Hogan v. Curtin, 88 N. Y. 162; Whiting v. DeRutzen, L. R. [1905] 1 Ch. Div. 96; Pacholder v. Rosenheim, 129 Md. 455; Matter of Smith v. Smith, 44 Ch. Div. 654; Matter of Cowen, 148 Misc. Rep. 35; Matter of Kempf, 252 App. Div. 28; Magee v. O’ Neill, 19 S. C. 170; Barnum v. Baltimore, 62 Md. 275; Hodgson v. Halford, 11 Ch. Div. 959.) Respondent’s brother and sister are entitled to the income of the trust under subdivision “ e ” of paragraph “ Eleventh ” regardless of the validity of the provision referring to the consent of the trustees to respondent’s marriage. (Williams v. Jones, 166 N. Y. 522; Manice v. Manice, 43 N. Y. 303; Leonard v. Burr, 18 N. Y. 96.)

      Ambrose V. McCall and John R. O’Hanlon for respondent.
    The decree of the Surrogate construing the testator’s intent is amply supported by the evidence and is in all respects in accordance with law. (Matter of Haight, 51 App. Div. 310; Matter of Hughes, 225 App. Div. 29; Matter of Carries, 140 Misc. Rep. 459; Matter of Forte, 149 Misc. Rep. 327; Merriam v. Wolcott, 61 How. Pr. 377; Saul v. Swartz, 112 App. Div. 511; Van Vechten v. Van Vechten, 8 Paige, 103; Matter of Schwarz, 160 Misc. Rep. 151.)
   Lehman, J.

-The testator, Isaac Liberman, provided in his will that after the death of his wife his residuary estate should be divided into six parts or shares. He had two sons and a daughter. To each he bequeathed beneficial interests in two shares. To his son Herman N. Liberman he gave the two shares absolutely. To his daughter Etta L. Baum he gave one share absolutely and a life interest in a second share with remainder to her issue. The testator named his son Herman and his daughter as his executors and trustees. They were both married and had children. The testator’s son Harry Liberman had no children. He had married twice. The testator was an orthodox Jew. Harry Liberman had married women of a different faith and the testator had strongly disapproved. Though he bequeathed to Harry Liberman and his issue beneficial interests in the remaining two shares of his residuary estate, he provided that the enjoyment of such beneficial interest — with the' exception of a life interest in one share — should be contingent upon the marriage of Harry Liberman with the consent and approval of the executors and trustees named in the will.

The will provides that:

“ (d) I give, devise and bequeath one of such shares to my Trustees hereinafter named, in trust nevertheless, to collect the rents, issues and profits thereof and to pay the same to my beloved son Harry Liberman, during his lifetime. Upon his death, should he have during his lifetime married with the consent and approval of my beloved wife and the executors and trustees herein named and/or the survivors or successors of them, and should he be survived by any issue of such marriage, then I give, devise and bequeath the principal of such trust fund to the issue of such marriage; in the event that there shall be no such issue, or should he have married without such consent then I give, devise and bequeath the principal of such trust fund to his brother and sister, him surviving and the issue of any deceased brother and sister, the issue of a deceased brother or sister to take collectively the share their parent would have taken.

“ (e) I give, devise and bequeath one of such shares to my trustees hereinafter named, in trust nevertheless, to collect the rents, issues and profits thereof, and to pay the same to my beloved daughter Etta L. Baum and Herman N. Liberman, in equal shares during the lifetime of my son Harry Liberman and /or until the marriage of my said son Harry Liberman as hereafter provided.

“ Upon the marriage of my son Harry Liberman if such marriage is with the consent and approval of my beloved wife and the trustees hereinafter named and/or survivors and successors of them, upon such event such income is to be paid to my beloved son Harry Liberman during the term of his natural life, otherwise such income shall continue to be paid to Etta L. Baum and Herman N. Liberman. Should Harry Liberman be survived by an issue of such marriage, contracted as aforestated, then and in that event, I give, devise and bequeath the principal of such trust fund to the issue of such marriage; in the event there shall be no such issue or should he have married without such consent then I give, devise and bequeath the principal of such trust fund to his brother and sister him surviving, and the issue of any deceased brother and sister, the issue of a deceased brother and sister to take collectively the share their parent would have taken.

In the event of the death of my beloved daughter Etta L. Baum or my son Herman N. Liberman, during the continuance of this trust then and in that event, I give, devise and bequeath the income of this trust fund to which they may be entitled to receive if living to their issue collectively them surviving.”

Harry Liberman has asked his brother and sister to consent to his marriage to Margaret Jones. They have refused. Then Harry Liberman brought this proceeding to compel them, or other persons to be appointed in their place as executors and trustees, to give such consent. The courts below have held that the provisions of the will of Isaac Liberman which we have set forth, insofar as they require the petitioner, Harry Liberman^ to obtain the consent of the testator’s wife and the trustees therein-after named, and /or the survivors or successors of them, to a marriage of Harry Liberman, be and the same hereby are declared to be ineffectual and inoperative and in all other respects in full force and effect.”

A testator of sound mind may, subject to statutory restrictions, not material here, choose the objects of his bounty. He may exclude a child or other descendant from any participation in his estate for sound reason, or because of whim or prejudice which might seem unreasonable to others. He may prefer a prodigal son or even an unrepentant sinner to a son who has been an exemplar and pattern of virtue. No considerations of public policy affect the validity even of a bequest which others might deem a reward for evil conduct in the past. The courts do, nevertheless, at times deny validity to a condition annexed to a testamentary gift where the condition is calculated to influence the future conduct of the beneficiary in manner contrary to the established policy of the State. In this case the courts below have found that the condition attached to full enjoyment of the bequest to Harry Liberman, that he shall marry only with the consent of his brother and sister, is against such public policy.

A condition calculated to induce a beneficiary to marry, even to marry in a manner desired by the testator, is not against public policy. A condition calculated to induce a beneficiary to live in celibacy or adultery is against public policy. “ Conditions in general restraint of marriage were regarded at common law as contrary to public policy, and, therefore, void.” The rule still prevails in New York. (Matter of Seaman, 218 N. Y. 77, 81.) Conditions in partial restraint of marriage, which merely impose reasonable restrictions upon marriage, are not against public policy. Thus a condition annexed to a bequest designed to prevent the marriage of the testator’s daughter with a particular individual is valid and enforcible. “ Such prohibitions have not only received the sanction of judicial authority but we think may be justified by sound reasoning.’ ’ (Matter of Seaman, supra.) The court there cited with approval Jarman on Wills: Conditions not to marry a Papist, or a Scotchman; not to marry any but a Jew * * * have also been held good.” Indeed, such conditions seem to have been sustained whenever challenged. (Pacholder v. Rosenheim, 129 Md. 455; Hodgson v. Halford, [1879] L. R. 11 Ch. Div. 959; Jarman on Law of Wills [7th ed.], p. 1497.) In this case the evidence leaves no room for doubt that the conditions annexed to the gift to Harry Liberman and his issue were intended by the testator to restrain his son Harry from marrying any but a Jewess. On that ground the appellants urge that the condition is valid.

Even though extrinsic evidence establishes that the purpose of the condition, imposed by the testator, was to restrain his son from marrying any but a Jewess, yet the condition as written in the will goes further. Only marriage with the consent of executors and trustees, who under the will of the testator would profit by refusal of consent, constitutes compliance with the terms of the will and there is nothing in the language of the will which could be construed as a limitation upon their power to give or withhold their consent in the exercise of an unfettered discretion. The question we must decide is whether such a condition is valid. The question would, of course, be different, if the condition of the will had been' different.

In the case of Hogan v. Curtin (88 N. Y. 162, 170) this court approved a condition imposed by the testator that the beneficiary, his daughter, should not marry during her minority, without the consent of her mother and the executors named in the will. In an opinion by Andrews, Ch. J., the court there said: “A condition prohibiting marriage before twenty-one without consent, is by the common law valid and lawful. It is otherwise of conditions in general restraint of marriage, they being regarded as contrary to public policy, and the ‘ common weal and good order of society.’ But reasonable conditions designed to prevent hasty or imprudent marriages, and to subject a child, or other object of the testator’s bounty, to the just restraint of parents or friends during infancy, or other reasonable period, are upheld by the common law, not only because they are proper in themselves, but because by upholding them the law protects the owner of property in disposing of it under such lawful limitations and conditions as he may prescribe.” In the will of Mr. Liberman the restraint' was not during infancy or other reasonable period,” it was to continue as long as Harry Liberman should live. Moreover, as we have said, the executors and trustees whose consent is required for compliance with the condition imposed by the testator are also legatees who under the terms of the will would suffer a detriment by giving their consent.

Authority of weight may be found to support the validity of a condition requiring consent of a specified person or persons without limitation of age. (Thompson on Law of Wills [2d ed.], § 381, p. 469; Schouler on Law of Wills [6th ed.], § 1351; Whiting v. De Rutzen, L. R. [1905] 1 Ch. Div. 96; Pacholder v. Rosenheim, supra.) The question has never been decided in this court. Again, there is authority to support the validity of a condition requiring consent of a trustee or other person who might benefit by refusal to give consent (2 Alexander, “ Commentaries on Law of Wills,” § 1070); and again this court has never directly passed upon the question.

Whether a condition in restraint of marriage is reasonable depends, not upon the form of the condition, but upon its purpose and effect under the circumstances of the particular case. What has been said and decided in other cases may often guide decision in analogous cases; but no rigid rule based upon ancient precedents dictates a decision where the circumstances are different and reason points to another conclusion. In spite of what was said in Hogan v. Curtin (supra) the fact that the legatee is a man of mature age and that the condition that he must obtain consent to any marriage is without limitation of time might not alone and under all circumstances render the condition unreasonable. The fact that if the executors and trustees refuse consent, they or their issue would enjoy the benefits which would otherwise go to Harry Liberman and his issue, might not alone and under all circumstances render the condition unreasonable. We decide in this case only whether the condition in the present case is reasonable and does not contravene our public policy, and we may not ignore any of those factors which determine either the purpose or the extent of the restraint. The fact that the restraint is imposed upon an adult and is to continue during life and is not limited to “ reasonable time ” is such a factor, and so is also the fact that the executors and trustees would have power to keep the property for themselves or their descendants by withholding their consent. Indeed, so distinguished an equity judge as Chancellor Walworth has indicated that in his opinion, because of that factor alone, the condition “ would probably be invalid and inconsistent with the principles of public policy; as it might operate as an inducement to her [them] to withhold her [their] consent to a proper marriage.” (Bayeaux v. Bayeaux, 8 Paige Ch. 333, 336.) When the condition is considered in its complete setting it becomes evident that the intention of the testator, as expressed in his will, is not merely to prevent the beneficiary from marrying any person other than a Jewess or even from entering into an ill-advised marriage, but to prevent any marriage not approved by the very persons who by approval would lose the benefit of a legacy which they might otherwise keep. Both reason and authority dictate the conclusion that such a condition is invalid. Its natural tendency might be to induce the beneficiary to live in either celibacy or adultery.

We reach that conclusion, though in this case it appears that the executors and, trustees have given most convincing proof that they withhold consent to their brother’s marriage only out of respect for their father’s wishes and do not wish to profit at their brother’s expense. They have even entered into an agreement to pay to their brother, while he remains unmarried, the income which under the terms of the will they might retain until he marries with their consent. None the less, the natural tendency of the condition contained in the will is to restrain all marriage and for that reason it is void.

The question remains, what is the effect of the invalidity of the condition. The testator has annexed the invalid condition to the gift. It is a condition precedent to the vesting of any estate in the beneficiary. Indeed, in paragraph “ e ” the testator has provided that the estate shall vest in his other children, subject to be divested only upon compliance with the condition. At common law, invalidity or impossibility of performance of the condition would not result in divesting the preceding vested estate. (2 Jarman on The Law of Wills [7th ed.], p. 1339; Manice v. Manice, 43 N. Y. 303, 383; Leonard v. Burr, 18 N. Y. 96, 104.) Courts of equity have, however, given a different effect to conditions in restraint of marriage or other conditions in wills which are void because they have a tendency to induce the beneficiary to adopt a course of conduct contrary to the “ common weal and good order of society.” The Appellate Division (Second Department) in an earlier case has said; “ ‘ With respect to legacies out of personal estate, the civil law, which in this respect has been adopted by courts of equity, differs in some respects from the common law in its treatment of conditions precedent; the rule of the civil law being that where a condition precedent is originally impossible * * * or is illegal as involving malum prohibitum, the bequest is absolute, just as if the condition had been subsequent.’ (2 Jar. Wills [6th Am. ed.], 15. See, also, 2 Williams Exrs. [7th Am. ed.] 1264.) When, however, the illegality of the condition does not concern anything malum in se, but is merely against a rule or the policy of law, the condition only is void. * * * (1 Roper, Leg. 757.) ’ ” (Matter of Haight, 51 App. Div. 310, 316; Potter v. McAlpine, 3 Dem. 108, 124.) Though the rule there stated has not been authoritatively approved by this State, it is in accord with the weight of authority. (O’Brien v. Barkley, 78 Hun, 609; Matter of Hutchins, 147 Misc. Rep. 462; Brace v. Klinedinst, 275 Penn. St. 266; Brizendine v. American Trust & Sav. Bank, 211 Ala. 694.) The tendency of the courts has been to ignore distinctions between “ legacies out of personal estate ” and legacies or devises of interests in real property, and to apply the rule of the civil law to conditions precedent and even to conditions creating a limitation upon a precedent estate with respect to all legacies or devises. The beneficiary takes under the will as if no conditions had been annexed to the gift to him or as if he had complied with the void condition. (Cf. 2 Jarman on The Law of Wills [7th ed.], p. 1496.)

The rule in that broad form may not be in accord with common-law principles! We recognize that it is rooted in considerations of practical expediency or necessity rather than logic. To give the rule less force; to declare the condition void without at the same time giving effect to the gift made upon the void condition, would be a mockery of the beneficiary and by indirection would permit a testator to accomplish a result which we hold contrary to the “ common weal.” Since the condition is void we need not decide whether if valid it would apply to a marriage contracted before the death of the testator.

The order should be affirmed, without costs.

Crane, Ch. J., O’Brien, Loughran, Finch and Rippey, JJ., concur; Hubbs, J., taking no part.

Order affirmed.


text:
    In the Matter of the Will of Eugenia Gifford, Deceased George H. Gifford et al., Appellants; Constantino Gavazzi, Respondent.

      Submitted November 22, 1938;
    decided January 10, 1939.

      William L. Schrauth and Earl J. Helmick for appellants.
    The issues raised by the answer of the appellants necessitated a trial before the Surrogate. (Taylor v. Syme, 162 N. Y. 513; Matter of Connell, 221 N. Y. 190; Matter of Renard, 157 Misc. Rep. 174; Matter of Harwood, 104 Misc. Rep. 653; 227 N. Y. 607; Holzer v. Deutsche Reichsbahn-Gessellschaft, 277 N. Y. 474; Gould v. Gould, 235 N. Y. 14; Pepin v. Lachenmeyer, 45 N. Y. 27; Bosworth v. Vandewalker, 53 N. Y. 597; Dunstan v. Higgins, 138 N. Y. 70; Lazier v. Westcott, 26 N. Y. 146; Petrogradsky M. K. Bank v. National City Bank, 253 N. Y. 23.) The so-called will offered for ancillary probate does not make the respondent the sole devisee and legatee of the decedent. (Matter of Bump, 234 N. Y. 60; Matter of James, 146 N. Y. 78; Miller v. Gilbert, 144 N. Y. 68; Matter of Brown, 154 N. Y. 313; Goebel v. Wolf, 113 N. Y. 405.)

      Henry Vollmer, Jr., George C. Wildermuth and Robert J. Dixon for respondent.
    The respondent, as universal legatee under the French law, on the proof submitted, was entitled to ancillary letters as a matter of law pursuant to the provisions of section 45 of the Decedent Estate Law (Cons. Laws, eh. 13) and section 159 of the Surrogate’s Court Act. (Matter of Harwood, 104 Misc. Rep. 653; 188 App. Div. 918; 227 N. Y. 607; Matter of Renard, 157 Misc. Rep. 174; Baldwin v. Rice, 183 N. Y. 55; Matter of McCaffrey, 188 App. Div. 772; Matter of Connell, 221 N. Y. 190.) The French will and its foreign probate, upon which ancillary letters were granted, adjudicates the respondent as the universal legatee. (Matter of Connell, 221 N. Y. 190; Matter of Harwood, 104 Misc. Rep. 653; Johnson v. Brasington, 156 N. Y. 181; Matter of Knapp, 206 App. Div. 260.)
   Lehman, J.

Eugenia Gifford died in Nice, France, on June 13, 1935. She left a letter in her own handwriting:

“ To the U. S. A. Consul in Nice, A.M. (Alpes Mari-times)

Dear Sir: In case I should die, my personal effects must be left in the custody of Mr. Constantino Gavazzi, Barclays Bank, Ltd., Monte Carlo. Mr Gavazzi is my heir and my personal belongings are located in Monte Carlo.

I thank you for your courtesy.

Sincerely,

“ EUGENIA GIFFORD.”

Upon the application of Constantino Gavazzi to the appropriate court in Nice, the letter was admitted to probate as a holographic will in February, 1936, and the following order was made:

We, the presiding Justice of this Court for Civil Matters of Original Jurisdiction of Nice, Knight of the Legion of Honor:

“ Having seen the foregoing request and the reasons therein mentioned and the documents attached thereto, especially the legal opinion, vest the petitioner with the possession of the property of Mrs. Eugenia Sutherland, wife of Mr. George Gifford, so that he may enjoy same and dispose of the same, as belonging to him, as of the date of the death.”

The husband of the decedent and her sister reside in this State. Upon notice to them, Constantino Gavazzi applied to the Surrogate’s Court of Queens county for ancillary letters testamentary. In their answer to the petition of Gavazzi, they allege that they are advised by counsel that the “ provisions of the letter dated July 27th, 1931, which the French Court considered a Will, relate only to the personal effects of the decedent mentioned therein and have no relevancy to the American estate of said decedent.” They allege further “ that your respondents have reason to believe that the decedent has made a Will of her property, which Will is subsequent in date to the Will being offered for ancillary probate herein.” Letters from apparently responsible persons are annexed to show the grounds of such belief. The decedent’s husband and sister asked that the court adjudge “ that the said letter is illegal and invalid as a Will of property other than property in France, and of no effect beyond property in France, or, if the Surrogate construes said letter to be a valid disposition of property in this Country, then, that the Surrogate withhold the issuance of ancillary letters to Constantino Gavazzi for a reasonable time so that these respondents may have an opportunity to complete an investigation to determine if there is in existence a Will of the decedent subsequent in date to the letter which is the basis of this proceeding for ancillary letters.”

The Surrogate construed the proceedings in France as a conclusive adjudication that the letter of the decedent is a will valid in France and “ that the petitioner was entitled under the will to all of the property of the testatrix.” He added that “ even if I were inclined to disregard the adjudication of the foreign tribunal, I would, nevertheless, hold that the instrument leaves to the petitioner, all the personal property of the testatrix, wherever situated. Under the circumstances, I have no alternative except to grant the application.”

The application for ancillary letters was made pursuant to the provisions of section 159 of the Surrogate’s Court Act, which provides: “ Ancillary letters upon foreign probate. Where a will of personal property made by a person who resided without the state at the time of the execution thereof, or at the time of his death, has been admitted to probate or established within the foreign country, or admitted to probate within the state or the territory of the United States, where it was executed, or where the testator resided at the time of his death; the surrogate’s court having jurisdiction of the estate, must, upon an application made as prescribed in this article, accompanied by a copy of the will, and of the foreign letters, if any have been issued, authenticated as prescribed in section forty-five of the decedent estate law, record the will and the foreign letters, and issue thereupon ancillary letters testamentary, or ancillary letters of administration with the will annexed, as the case requires.”

The statute applies by its terms only to a will of personal property made by a “ person who resided without the state at the time of the execution thereof, or at the time of his death.” The validity and effect of a testamentary disposition of personal property situated within this State are regulated by the laws of the state or country, of which the decedent was a resident, at the time of his death.” (Dec. Est. Law [Cons. Laws, ch. 13], § 47.) Even before the statute was enacted it was the common law rule that the validity and effect of a testamentary disposition of personal property are regulated by the law of the testator’s domicile at the time of his death. (N. Y. Life Ins. & Trust Co. v. Viele, 161 N. Y. 11, 19.) It is plain that in both these statutes the Legislature used “ residence ” as synonymous with “ domicile.” The disposition of property within this State by a person domiciled here is certainly regulated by the laws of this State. Even where, by the laws of a foreign country, probate may be granted and letters testamentary issued upon the will of a person who dies there, though residing or domiciled elsewhere, a decree of probate can certainly not be a conclusive adjudication here of the validity or effect of an alleged will made by a person domiciled here, at least unless all interested persons have been made parties to the foreign probate proceeding.

In the instant case the application for probate in France was made ex parte. The decedent’s husband resided in the State of New York. Whether the decedent and her husband were permanently living apart does not appear from any papers submitted to the French probate court. Affidavits presented to the French court do, it is true, refer to the decedent as residing in Nice,” but the same affidavits state that the deceased was the wife of Mr. George Gifford residing in New York City.” It does not appear that the court in France attempted to adjudicate that the decedent resided or was domiciled there. On the contrary, it appears from the affidavit of an attorney admitted to practice both in New York and in France that “ under the laws of the Republic of France * * * the court located in the jurisdiction where a decedent dies has jurisdiction over the probate of such decedent’s last will and testament,” and that the court there assumed jurisdiction on that ground. The decree of probate does not even presumptively determine that the decedent was domiciled in France. Certainly no decision in that regard was made which would be binding upon any persons who might be interested in the estate. (Cf. Matter of Cornell, 267 N. Y. 456.)

Even assuming that the decedent at the time of her death was domiciled ” in France, the question whether the letter constituted a testamentary disposition of personal property here would still remain. Though the statute is mandatory in form, it is plain that no ancillary letters testamentary should issue if the will probated at a decedent’s last domicile was intended to cover only property there, for otherwise an executor would under a will obtain control of property which the testator did not intend should pass under the will.

It is said that the order of the court which purports to vest ” Mr. Gavazzi with the possession of the property ” of the decedent “ so that he may enjoy same and dispose of same as belonging to him ” constitutes a conclusive adjudication that all the property of the decedent here and abroad passed to him under the will. There may perhaps be some doubt whether the court intended to make any such adjudication, conclusive or otherwise. The affidavit of the French attorney to which we have already referred states that the order of the French court “ is termed in French an ‘ envoi en possession ’ ” and that Constantino Gavazzi, being the residuary legatee of the decedent, termed in French Legataire Universel,’ is entitled to the possession of the entire estate of the decedent.” That statement is, however, only the conclusion or opinion of the attorney. The parties interested are, of course, free to contest the accuracy of this statement of the French law.

That question cannot be determined satisfactorily upon the affidavits submitted. True, it finds some support in what was said or decided in Caulfield v. Sullivan (85 N. Y. 153); Matter of Gay (227 N. Y. 607), and Matter of Renard (157 Misc. Rep. 174). In those cases, however, the language of the will was specific and it was evident that the person to whom the envoi en possession ” was granted was intended by the testator to be the legatee of all his goods. In this case the letter which has been probated as a will does not in terms state that Mr. Gavazzi shall receive all the decedent’s property. Nor does the order of the court so state specifically. It is in different form from the court order construed by the court in Matter of Gay (supra). It contains no phrases like “ legataire universel ” or “ entire estate ” of the decedent. Those phrases in the affidavit of the attorney represent only the attorney’s construction of the court order. We do not wish to indicate that we' believe that the construction is incorrect; we say only that before it can carry any legal consequences here the appellants should have opportunity to contest its accuracy.

If upon a trial it should appear that the decedent’s domicile or residence at the time of her death was in France and that the French court did determine that Gavazzi was entitled to her entire estate ” including her property here, then we reach the question whether that determination is binding upon the courts here. We know that at times American citizens and others having personal property both here and abroad, make separate testamentary disposition of their property abroad. In such case the courts in each country probate the will or wills referring to property there. Even the courts of the country where the testator was domiciled do not grant probate or issue letters testamentary upon a will which refers only to personal property in another jurisdiction. That was decided centuries ago in Jauncy v. Sealey ([1686] 1 Vern. 397). Before granting ancillary letters testamentary upon a will probated elsewhere, the courts of this jurisdiction must determine whether the will disposes of personal property here.

No ex parte determination of that question, even by a court of the testator’s domicile, can conclusively bind the courts of this State upon such a point. This case illustrates aptly how unreasonable any other rule might be. The letter written by the decedent is written in English. Its language is not that of present testamentary disposition; it makes specific reference only to personal property and personal effects of the decedent abroad. Anytestamentary intention to dispose of all the decedent’s personal property elsewhere, if there be such intention, rests upon doubtful implication; yet it is said that a decree of the French court, construing a translation of the English letter, made without notice to interested parties here and without evidence which would throw light upon the meaning of the document, is a conclusive and binding adjudication that the letter was intended as a will of property here. Neither the statute nor common law principles dictate such a conclusion. (See Matter of Mayer, 84 Misc. Rep. 9, where Surrogate Fowler has considered that question.)

The order of the Appellate Division and the decree of the Surrogate’s Court should be reversed and the matter remitted to the Surrogate’s Court for a hearing in accordance with this opinion, with costs to abide the event.

Crane, Ch. J., O’Brien, Hubbs, Loughran, Finch and Rippey, JJ., concur.

Ordered accordingly.