text:
    In the Matter of the Will of Thomas H. Chittick, Deceased. Margaret C. Johnson, Appellant; G. Arthur Heermans, as Executor, et al., Respondents.
    Will — trust — suspension oí absolute ownership of property for more than two lives in being — trusts for payment of annual sums to cestuis que trust, accumulation of balance of income, and payment thereof with principal on death of each life tenant to, in one case her descendants and in the others their next of kin, when they shall each arrive at the age of twenty-five years, invalid.
    1. Where, by Ms will, testator created a trust for payment to Ms daughter of an annual amount and directed that the balance of the income accumulate and with the principal be paid at the death of his daughter to her lawful descendants “ at the time each shall arrive at the age of twenty-five years,” the trust for the daughter is good, but otherwise, void as violative of the statute prohibiting the suspension of the absolute ownership of property for more than two lives in being. The accumulations of income have properly been awarded to the person having the next eventual estate, and on the death of the daughter the principal will be payable to her descendants, or if none, to testator’s next of ldn as provided in his will.
    (Argued June 9, 1926;
    decided July 9, 1926.)
    2. Similar trusts for named nephews with provisions for accumulation of surplus income and payment thereof with the principal at the. death of each nephew, “ to the next of kin of the said nephew when they arrive at the age of twenty-five years ” are also void and the principal is payable on the death of each said nephew to his next of kin.

      Matter of Chittick, 216 App. Div. 179, modified.
    Appeal, by permission, from an order of the Appellate Division of the Supreme Court in the fourth judicial department, entered March 10, 1926, which modified and affirmed as modified a decree of the Steuben County Surrogate’s Court construing the will of Thomas H. Chittick, deceased.

      Simon Fleischmann, Martin Clark, Adrian Block and J. Walter Heffernan for appellant.
    The accumulations of income attempted by each of the four trusts are void under express statutory inhibitions. (Pers. Prop. Law, § 16; Beal Prop. Law, § 61; Hawley v. James, 5 Paige, 318; 16 Wend. 60; Lovett v. Gillander, 35 N. Y. 617; U. S. Trust Co. v. Sober, 178 N. Y. 442; Matter of Harteau, 204 N. Y. 292; Cruikshank v. Home for Friendless, 113 N. Y. 337; St. John v. Andrews Institute, 191 N. Y. 254.) The title to the corpus of the trust funds, attempted to be created by the 11th, 12th, 13th and 14th clauses of the will, will not vest in the ultimate beneficiaries of these trusts upon the death of testator’s daughters or nephews. (Cont. Trust Co. v. Egleston, 185 N. Y. 23; Matter of Silsby, 229 N. Y. 396; Boal v. Metropolitan, 298 Fed. Rep. 894;
      Matter of Bostwick, 236 N. Y. 242; N. Y. Life Co. v. Winthrop, 237 N. Y. 93; Bailey v. Buffalo L. T. & S. D. Co., 213 N. Y. 525; Hooper v. Wood, 125 S. E. Rep. 350; Perks v. Moseley, 5 App. Cas. 714.) The trusts created by the will are void, irrespective of whether or not the corpus thereof vests in the descendants of the daughter and the next of kin of the nephews upon their respective deaths. (Sawyer v. Cubby, 146 N. Y. . 193; Converse v. Kellogg, 7 Barb. 597; Underwood v. Curtis, 127 N. Y. 523; Bindrim v. Ullrich, 64 App. Div. 444.) There are no words of gift to the descendants of the daughter, or to the next of kin of the nephews, so that the trust funds could not vest until such descendants and next of kin should arrive at the specified ages. (Matter of Crane, 164 N. Y. 71; Matter of Leonard, 218 N. Y. 513; Rudd v. Cornell, 171 N. Y. 114; Herzog v. Title Guar. & Tr. Co., 177 N. Y. 86; Schlereth v. Schlereth, 173 N. Y. 444; May v. May, 209 App. Div. 19; Matter of Bostwick, 236 N. Y. 242; Matter of Evans, 234 N. Y. 42; N. Y. Life Ins. & Tr. Co. v. Winthrop, 237 N. Y. 93; Matter of Pulis, 220 N. Y. 196.) The trusts created by the 11th, 12th, 13th and 14th clauses of the will are invalid and void, in that they suspend the absolute ownership of personal property for more than two lives, as well as for lives nor in being- at the death of testator. (Matter of Horner, 237 N. Y. 491; Hone v. Van Schaik, 7 Paige, 221; 20 Wend. 564; Ward v. Ward, 105 N. Y. 68; Genet v. Hunt, 113 N. Y. 158; Matter of Howland, 75 App. Div. 207; Bindrim v. Ullrich, 64 App. Div. 444; Matter of Finck, 171 N. Y. Supp. 573; Matter of Raab, 79 Misc. Rep. 185; Cruikshank v. Home, 113 N. Y. 337; Smith v. Smith, 154 App. Div. 313; Haynes v. Sherman, 117 N. Y. 433; Garvey v. McDevitt, 72 N. Y. 556; Hagemeyer v. Saulpaugh, 97 App. Div. 535; Underwood v. Curtis, 127 N. Y. 523; Brown v. Quintard, 177 N. Y. 75.) The test of the validity or invalidity of the suspension of the absolute ownership or power of alienation is to be applied as of the time of the death of the testator and by what may result from the will thereafter, and not by actual conditions subsequently arising. (Herzog v. Title Co., 177 N. Y. 86; Matter of Silsby, 229 N. Y. 396; Matter of Horner, 237 N. Y. 489; Clark v. Cammann, 160 N. Y. 315; Matter of Wilcox, 194 N. Y. 288; Morton Co. v. Sands, 122 App. Div. 691.) The trust created for the descendants of testator’s daughter and the trusts for each of the groups of the next of kin of the nephews are inseparable as between the beneficiaries of said respective trusts. (Vanderpoel v. Loew, 112 N. Y. 167.) The void elements of the trusts cannot be excised from the portions which, if considered separately, might be regarded valid, and their exclusion would result in a chaotic disposition of the estate and thwart testator’s intent. (Central Co. v. Egleston, 185 N. Y. 33; Bailey v. Buffalo Co., 213 N. Y. 525; Boal v. Met. Ins. Co., 298 Fed. Rep. 894; Matter of Evans, 234 N. Y. 46.) The primary purpose of the trusts attempted to be created by the 11th, 12th, 13th and 14th clauses, of the will, being the unlawful accumulations of income, renders the trusts void. (Thorn v. De Bretuil, 179 N. Y. 64; Harris v. Clark, 7 N. Y. 242.) The trusts for the daughter and nephews are merely nominal and intended as a mere cover for attempted illegal accumulations and trusts, and are, therefore, void. (Cochrane v. Schell, 140 N. Y. 536.) The income of the trust funds illegally directed to be accumulated for the next of kin of deceased nephews cannot go to the persons presumptively entitled to the next eventual estate, there being no persons in existence at present who are even presumptively entitled to the next eventual estate, as it cannot be determined who will be the next of kin of the nephews until the death ©f the nephews. ( United States Trust Co. v. Soher, 178 N. Y. 442; McGillis v. McGillis, 154 N. Y. 541.)

      Guernsey B. Hubbard for executor, respondent.
    It was the testator’s intention that the corpus of the trust fund established in paragraph 11th of his will should vest at the death of his daughter and that the corpus of the trust funds established in paragraphs 12th, 13th and 14th should vest at the deaths of the respective nephews therein mentioned. (Cammann v. Bailey, 210 N. Y. 19; Fulton Trust Company v. Phillips, 218 N. Y. 573; Canfield v. Fallon, 26 Misc. Rep. 345; Matter of Hitchin, 120 Misc. Rep. 586; Hersee v. Simpson, 154 N. Y. 496; Connelly v. O’Brien, 166 N. Y. 406; Warner, v. Durant, 76 N. Y. 133; Smith v. Edwards, 88 N. Y. 103; Bushnell v. Carpenter, 92 N. Y. 270; Vanderpoel v. Loew, 112 N. Y. 167.) The trust created by the 11th, 12th, 13th and 14th paragraphs of the decedent’s will, except as to the provisions therein directing accumulations of income are valid and legal testamentary dispositions. (Everitt v. Everitt, 29 N. Y. 67; Goebel v. Wolf, 113 N. Y. 405; Warner v. Durant, 76 N. Y. 113; Smith v. Edwards, 88 N. Y. 103; Warner v. Durant, 76 N. Y. 136; Fulton Trust Company v. Phillips, 218 N. Y. 582; Quade v. Bertsch, 65 App. Div. 600.) No trusts have been created under this decedent’s will whereby absolute ownership of personal property has been suspended for more than two fives in being at the time of the testator’s death. (Bliven v. Seymour, 88 N. Y. 469; Gilman v. Reddington, 24 N. Y. 9; Everitt v. Everitt, 29 N. Y. 39; Steinway v. Steinway, 163 N. Y. 183; Clark v. Clark, 23 Misc. Rep. 272; Smith v. Edwards, 88 N. Y. 92.) If the court finds that the decedent intended to impose any duties with respect to the various trust funds such as investing, collecting the income and paying the same over after the deaths of the decedent’s daughter and the nephews with respect to the shares of such ultimate donees as might be under twenty-five years of age and until their arrival at such age, it should either authorize the same to be performed as a power in trust. (Matter of Kellogg, 187 N. Y. 355; Post v. Hover, 33 N. Y. 593; Downing v. Marshall, 23 N. Y. 366; Steinway v. Steinway,
      163 N. Y. 183; Everitt v. Everitt, 29 N. Y. 39; Bliven v., Seymour, 88 N. Y. 469; Quade v. Bertsch, 65 App. Div. 600.) If the decedent intended a trust extending beyond the deaths of his daughter and the nephews with respect to the shares of such ultimate donees as might be under twenty-five years of age and until their arrival at such age, such trusts may be eliminated from the will without destroying the whole will. (Everitt v. Everitt, 29 N. Y. 89; Post v. Hover, 33 N. Y. 593; Beekman v. Bonsor, 23 N. Y. 298; Schey v. Schey, 194 N. Y. 368; Oxley v. Lane, 35 N. Y. 340; Tiers v. Tiers, 98 N. Y. 568; Smith v. Chesebrough, 176 N. Y. 317; Savage v. Burnam, 17 N. Y. 561.) The directions for accumulation of income do not invalidate the gift or bequest of the principal from which it accrues. (Tobin v. Graf, 39 Misc. Rep. 412; Garland v. Garland, 35 Misc. Rep. 147; Williams v. Williams, 8 N. Y. 525; Kilpatrick v. Johnson, 15 N. Y. 322; Manice v. Manice, 43 N. Y. 303; Pray v. Hegeman, 92 N. Y. 508; Barbour v. DeForrest, 95 N. Y. 13; Cochrane v. Schell, 140 N. Y. 516; Hascall v. King, 162 N. Y. 134.) The income directed to be accumulated in paragraphs 11th, 12th, 13th and 14th should be paid to the persons presumptively entitled to the next eventual estate. (Matter of Harteau, 204 N. Y. 292; Mills v. Husson, 140 N. Y. 99; Delafield v. Shipment, 103 N. Y. 463; Cook v. Lowry, 95 N. Y. 103; Manice v. Manice, 43 N. Y. 303; U. S. Trust Co. v. Softer, 178 N. Y. 442; Cochrane v. Schell, 140 N. Y. 516; Williams v. Williams, 8 N. Y. 525; St. John v. Andrews Institute for Girls, 191 N. Y. 254; Kilpatrick v. Johnson, 15 N. Y. 322; Pray v. Hegeman, 92 N. Y. 13.)

      John C. Wheeler for Anna J. Bailey et al., respondents.
    The court is in duty bound to reject a construction which would result in failure of the trusts, and in intestacy as to the bulk of the estate, if any fair and reasonable interpretation of testator’s language enables it to save Ms dispositions and give Ms will effect. (Vanderpoel v. Loew, 112 N. Y. 167; Schult v. Moll, 132 N. Y. 122; Fulton Trust Co. v. Phillips, 218 N. Y. 573.) The directions for the accumulation of income as contained m paragraphs “ eleventh,” “ twelfth,” “ thirteenth ” and “ fourteenth ” of the will are void, although the respective trusts created thereby are valid. (Tobin v. Graf, 39 Misc. Rep. 412; Garland v. Garland, 35 Misc. Rep. 147; Matter of Roos, 4 Misc. Rep. 232; Garvey v. Union Trust Co., 29 App. Div. 513; Matter of Alexander, 186 N. Y. Supp. 242; Kilpatrick v. Johnson, 15 N. Y. 322; Williams v. Williams, 8 N. Y. 538; Crawford v. Dexter, 178 App. Div. 764; Manice v. Manice, 43 N. Y. 303; Hascall v. King, 162 N. Y. 134; Cochrane v. Schell, 140 N. Y. 516: Dodge v. Pond, 23 N. Y. 69.) Those who presumptively will be entitled to receive the income when the period of accumulation ends, are entitled to anticipate the event wMch is to termmate the accumulation, and to take at once the income which is unlawfully directed to be accumulated. (Matter of Harteau, 204 N. Y. 292; Mills v. Husson, 140 N. Y. 99; Delafield v. Shipment, 103 N. Y. 463; Matter of Kohler, 231 N. Y. 353; Ossman v. Van Roemer, 221 N. Y. 381; Matter of Segura, 110 Misc. Rep. 624; Crawford v. Dexter, 178 App. Div. 764; Matter of Sayre, 178 App. Div. 269; St. Johns v. Andrews Institute for Girls, 191 N. Y. 254; Matter of Ryder, 43 Misc. Rep. 476.) The provisions of the trusts contained in paragraphs “ eleventh,” “ twelfth,” “ tMrteenth ” and “ fourteenth ” of the will do not unlawfully suspend the absolute ownersMp of personal property. Upon the death of testator’s daughter, her descendants take a vested interest in the corpus of her trust, and upon the death of each of the three nephews, Ms respective next of kin take a vested interest in the corpus of his trust, the time of payment being postponed until the descendants of the daughter and the next of kin of the nephews arrive at the age of twenty-five years. (Quade v. Bertsch, 65 App. Div. 600;
      Goebel v. Wolf, 113 N. Y. 405; Everitt v. Everitt, 29 N. Y. 39; Schell v. Carpenter, 50 Misc. Rep. 400; 116 App. Div. 914; 190 N. Y. 552; Vanderpoel v. Loew, 112 N. Y. 167; Fulton Trust Company v. Phillips, 218 N. Y. 573; Steinway v. Steinway, 163 N. Y. 200; Fargo v. Squires, 6 App. Div. 465; Embury v. Sheldon, 68 N. Y. 227; Van Camp v. Fowler, 59 Hun, 311.) The trusts created in the four paragraphs of the will were for the benefit of the daughter and the nephews respectively, and under the language used ceased and terminated at the respective deaths of the daughter and nephews, and that thereafter until the respective descendants and next of kin arrive at the age of twenty-five, the executor is not to be vested with the legal estate, but has a mere imperative power which does not suspend the absolute ownership of the property. (Tiers v. Tiers, 98 N. Y. 568; Bliven v. Seymour, 88 N. Y. 469; Smith v. Edwards, 88 N. Y. 92; Tucker v. Bishop, 16 N. Y. 402; Quade v. Bertsch, 65 App. Div. 600; 173 N. Y. 615; Matteson v. Armstrong, 11 Hun, 245; Dupre v. Thompson, 8 Barb. 537; Burrill v. Sheil, 2 Barb. 457; Bascom v. Weed, 53 Misc. Rep. 496; Franklin v. Minertzhagen, 39 App. Div. 555; Robert v. Corning, 89 N. Y. 225; Matter of Charliear, 22 App. Div. 71; Vanderpoel v. Loew, 112 N. Y. 167; Steinway v. Steinway, 163 N. Y. 183.) The intent of the testator disclosed in the will is that the remainder in each trust should vest in the descendants and next of kin immediately upon the respective deaths of the daughter and nephews, and the interests thus vested were tenancies in common and were descendible, devisable and alienable, in the same manner as estates in possession and hence the absolute ownership was not suspended for more than one life in being at the death of the testator. (Roosa v. Harrington, 171 N. Y. 341; Brooklyn Trust Co. v. Phillips, 134 App. Div. 697; 201 N. Y. 561; Hersee v. Simpson, 154 N. Y. 496; Goebel v. Wolf, 113 N. Y. 413; Fox v. Fox, 19 Eq. Cases, 298; Vanderpoel v. Loew, 112 N. Y. 167; Warner
      v. Durant, 76 N. Y. 133; Matter of Talbot, 212 N. Y. Supp. 506.) Even if the court should decide that testator intended to impose active trust duties which were to continue after the death of the first life tenants and until the ultimate donees arrive at the age of twenty-five, thereby unduly suspending the absolute ownership, nevertheless such void intermediate trusts are separable and may be expunged without destroying the general scheme and purpose of the will. (Van Vechten v. Van Vechten, 8 Paige, 105; Harrison v. Harrison, 36 N. Y. 543; Kalish v. Kalish, 166 N. Y. 368; Carrier v. Carrier, 226 N. Y. 114; Matter of Horner, 237 N. Y. 489; Everitt v. Everitt, 29 N. Y. 39; Smith v. Edwards, 88 N. Y. 92; Oxley v. Lane, 35 N. Y. 340; Matter of Berry, 154 App. Div. 509; 209 N. Y. 540; Matter of Hitchcock, 22 N. Y. 57; Matter of Central Union Trust Company, 193 App. Div. 292.)

      Charles L. Crane for Margaret E. Johnson, respondent.
    The directions for accumulations of income in paragraph 11th are void. (Pers. Prop. Law, § 16; Real Prop. Law, § 61; Phelps v. Pond, 23 N. Y. 89; Greerland v. Waddell, 116 N. Y. 234.) The illegal directions for accumulations of income do not of themselves invalidate the trust. (Kilpatrick v. Johnson, 15 N. Y. 322; Tobin v. Graf, 39 Misc. Rep. 412; Matter of Alexander, 186 N. Y. Supp. 242.) The interest of the infant daughter of testator’s daughter in the estate under the 11th clause of his will is vested. (Cammann v. Bailey, 210 N. Y. 19; Connelly v. O’Brien, 166 N. Y. 406; Matter of Morris, 9 App. Div. 602; Fulton Trust Co. v. Phillips, 218 N. Y. 573; Matter of Crossman, 113 N. Y. 503; Dimmick v. Patterson, 142 N. Y. 322; Clark v. Clark, 23 Misc. Rep. 272; Matter of Kessler v. Fride, 29 Misc. Rep. 187; Hayden v. Sugden, 48 Misc. Rep. 108; Bank of New York v. Handealey, 121 Misc. Rep. 730; Matter of Valentine, 119 Misc. Rep. 442.) The provisions of paragraph 11th in regard to accumulations might be construed as legal if we find they are to be made for the benefit of the granddaughter, an infant in being at the death of the testator, until said infant becomes twenty-one years of age. (Matter of Rogers, 22 App. Div. 428; Matter of Kilpatrick, 15 N. Y. 322; Matter of Wagner, 81 App. Div. 163; Matter of Lehman, 2 App. Div. 351.) The income illegally directed to be accumulated in paragraph 11th should be paid to the person presumptively entitled to the next eventual estate. (Mills v. Husson, 140 N. Y. 99; Manice v. Manice, 43 N. Y. 303; Matter of Harteau, 204 N. Y. 292; Cochrane v. Schell, 140 N. Y. 516; Kilpatrick v. Johnson, 15 N. Y. 322; U. S. Trust Co. v. Soher, 88 App. Div. 506.) If necessary to sustain the will, the alternative and secondary disposition at the death of the daughter, to the next of kin, should be deleted. (Matter of Wilcox, 194 N. Y. 288; Bailey v. Buffalo L. T. & S. D. Co., 213 N. Y. 525; Herzog v. Title Guaranty & Trust Co., 177 N. Y. 86; Central Trust Co. v. Egleston, 185 N. Y. 23; Schelereth v. Schelereth, 173 N. Y. 444.)

      Herbert A. Heminway for Virginia J. Bailey et ah, respondents.
    The provisions for the accumulation of income in paragraphs 13th and 14th of the will are void. (Pers. Prop. Law, § 16; Tobin v. Graf, 39 Misc. Rep. 412; Garland v. Garland, 35 Misc. Rep. 147; Matter of Roos, 4 Misc. Rep. 232; Garvey v. Union Trust Company, 29 App. Div. 513; St. John v. Andrews Institute for Girls, 191 N. Y. 254; Koch v. Semken, 58 Misc. Rep. 90; Real Prop. Law, § 63; Matter of Alexander, 186 N. Y. Supp. 242.) The absolute ownership of property is not unlawfully suspended by paragraphs 13th and 14th of the will. (Quade v. Bertsch, 65 App. Div. 600; 173 N. Y. 615; Goebel v. Wolf, 113 N. Y. 405; Everitt v. Everitt, 29 N. Y. 39; Schell v. Carpenter, 50 Misc. Rep. 400; 116 App. Div. 914; 190 N. Y. 552; Vanderpoel v. Loew, 112 N. Y. 167; Fulton Trust Company v. Phillips, 218 N. Y. 573; Steinway v. Steinway, 163 N. Y. 183; Fargo v. Squiers, 154 N. Y. 250; Embury v. Sheldon, 68 N. Y. 227; Van Camp v. Fowler, 59 Hun, 311; Canfield v. Fallon, 43 App. Div. 561; 161 N. Y. 623.) Even if paragraphs 13th and 14th of the will did create trusts for twenty-five years those paragraphs would not be void but the illegal portions should be eliminated and the others sustained as valid. (Reeder v. Antrim, 110 N. E. Rep. 568; Guaranty Trust Company of New York v. Goetting, 185 N. Y. Supp. 663; Matter of Berry, 154 App. Div. 509; Kalish v. Kalish, 166 N. Y. 368; Brinkeroff v. Seabury, 137 App. Div. 916; 201 N. Y. 559; Smith v. Cheesbrough, 176 N. Y. 317; Tiers v. Tiers, 98 N. Y. 568; Haynes v. Sherman, 117 N. Y. 433; Davis v. MacMahon, 161 App. Div. 458; Matter of Hitchcock, 222 N. Y. 57; Matter of Trevor, 239 N. Y. 6.)
   Crane, J.

Thomas H. Chittick died on December 3, 1922, leaving a last will and testament which has become the subject of this litigation. His relatives, so far as named in this will, are an adopted daughter, Margaret Chittick Johnson; three nephews, Thomas H. Bailey, William E. Bailey and Eugene J. Bailey, children of his sister, Anna J. Bailey.

Paragraphs 11, 12, 13, 14 have been challenged as suspending the power of disposition or of alienation beyond the time allowed by the statute. Accumulations directed by the will are coheeded to be illegal. The provisions of the will referred to are as follows:

Eleventh
I give and bequeath to the executor one-half of my personal property, remaining after paying said expenses and legacies, including property not so converted into personal in trust for the following purposes: At the marriage of my daughter, Margaret E. Chittick to pay to her from the principal thereof One Thousand ($1000.00) Dollars. From the income from the said one-half of my estate pay to the said daughter, Margaret E. Chittick Six Hundred ($600.00) Dollars, annually during her 'life time; or at the discretion of the executor, he may pay to the said Margaret B. Chittick the sum of Three Hundred ($300.00) Dollars, semi-annually. Accumulate the residue of the income, hold and invest the same as part of the principal until the death of my daughter. At the death of my daughter pay over the principal with the accumulation, if any, to her lawful descendants, per stripe (sic) at the time each shall arrive .at the age of twenty-five years. And if she have no lawful descendants, to the person on persons then living who would be my next of kin in case I died at the time of her death, in the same proportions such person or persons would take as my next of kin under the laws of the State of New York. In case of the death of my said daughter before her children as such become of the age of twenty-five years, then such of her children as shall not have arrived at the age of twenty-five years shall receive Six Hundred ($600.00) Dollars, annually, to be divided between them. If any of my daughter’s children are infants at the time of her death, then that infant’s share shall be paid to a guardian for the said infant’s benefit.
Twelfth
I give and bequeath to the said executor one-sixth of my personal property, remaining after paying said expenses and specific legacies, including property not so converted into personal, in trust for the following purposes: From the income therefrom to pay my nephew, Thomas Bailey, One Hundred ($100.00) Dollars annually during his lifetime. Accumulate the residue of the income and hold and invest the same as part of the principal until the death of my said nephew. At the death of my said nephew, pay over the principal, and accumulations, if any, to the next of kin of the said nephew when they arrive at the age of twenty-five years, in the same proportion they would inherit property from him under the laws of the State of New York.”

The 13th and 14th paragraphs make similar provision for the other nephews. The surrogate, with slight modification by the Appellate Division, which is not vital or material, decided:

(1) That the trust in paragraph 11th of the will is valid.

(2) That the provision for accumulation is contrary to law and void.

(3) That the income above that given to the testator’s daughter Margaret should be paid to the one having the next eventual estate, in this case, Margaret’s daughter, Margaret Elizabeth Johnson, who was alive and in being at the death of the testator.

(4) That in the event that Margaret Elizabeth should die, and there should be no lineal descendants of the testator’s daughter, Margaret Chittick, then the income should be payable to the next of kin of Thomas H. Chittick, determined in accordance with the provisions of his will.

(5) That in case Margaret Chittick Johnson died before her children became twenty-five years of age, the income should be payable pro rata to the guardians of her infants until they became twenty-one, and to the children thereafter.

(6) As to the principal of the trust fund, it was the intent of the testator that the trust should cease at the death of his daughter, and that the principal should go to her children, payment only being deferred until they became twenty-five years of age. The surrogate said that the executor held the principal under an implied trust; the Appellate Division copying the words of Steinway v. Steinway (163 N. Y. 183) said that he had “ an administrative title.”

(7) That if Margaret Chittick Johnson died with no lawful descendant, then the trust terminated and the principal was payable to the next of kin. of the testator, determined according to the provisions of his will.

In similar fashion, the surrogate construed paragraphs 12, 13 and 14 relating to the gifts to the nephews.

Because of a direction in paragraph second of the will to turn all the real property into personalty, the estate left by the testator has been dealt with below and by the counsel as personal property.

The question of accumulation is out of the case, as all sides have agreed to the disposition below that the provisions for accumulation are void.

This will as fairly construed violates section 11 of the Personal Property Law (Cons. Laws, eh. 41), which says that the absolute ownership of personal property shall not be suspended by any limitation or condition for a longer period than during the continuance and until the termination of not more than two lives in being at the death of the testator. Chittick in making his will had in mind accumulation up to an age of twenty-five for the legatees» He was a layman, and apparently unfamiliar with the law regarding accumulations or the suspension of the power of alienation. He creates a trust in paragraph eleven to pay Margaret E. Chittick, his daughter, $600 annually, and to accumulate the balance of the income. The courts below have taken out this accumulation provision, as it is void, and have given the income over the $600 to the testator’s granddaughter, having the next eventual estate.

At the death of the daughter, the testator directs' his executor to pay over the principal to the daughter’s lawful descendants at the time each shall arrive at the age of twenty-five years. The daughter, at the time of the testator’s death, had one child living, Margaret Elizabeth Johnson. If she were the only child to be born to the daughter, and mentioned in the will, there would be no difficulty. If the daughter should die now, the income could be accumulated by the executor for the granddaughter until she was twenty-one (Personal Property Law, sect. 16), and thereafter paid to her until she was twenty-five, when she would receive the principal. If the trust should continue until the daughter was twenty-five years of age, paying her the income until that time, the principal with power of disposition would only be suspended for two lives in being at the death of the testator, bis daughter and the granddaughter living at his death.

The difficulty arises over the attempt of the testator to make provision for all the children of his daughter, including those who may subsequently be born, and not in being at the time of his death. If the daughter should die and the granddaughter should die, and then the disposition of the principal should be suspended for twenty-five years during the fife of a grandchild born after the death of the testator, here we would have the power of alienation, or the suspension of disposition fbr more- than the two fives in being — the two fives having gone out, the power of disposition would be suspended until the child or children born after the testator’s death arrive at twenty-five.

We, therefore, must hold that the trust for the daughter is good, but otherwise void. It seems to have been the intent of the testator to continue the trust through the twenty-five-year period.

The courts below, however, have said that when the daughter died, then the trust ended. If she had five children surviving her, they took a vested equal interest in the principal; that it was simply the payment to them that was suspended until they arrived at twenty-five years of age; that they could dispose of this principal by willing it away or assigning it to any one they pleased. If the power of disposition be suspended, then it is conceded that the statute is violated. It has been said that money like this may be given to a legatee so as to pass title, and also the power of disposition, although payment of the amount may be postponed, citing Bliven v. Seymour (88 N. Y. 469, 478); Quade v. Bertsch (65 App. Div. 600; affd., 173 N. Y. 615); Vanderpoel v. Loew (112 N. Y. 167, 180). Such cases, however, reach the limit of construetion. The intent in this case is not only to postpone payment but also to suspend the absolute ownership in the interval.

The courts have gone quite far to avoid the consequences of applying these provisions of the Personal Property and Real Property Laws (Cons. Laws, chaps. 41 and 50). What we have said in one case cannot be strictly applied to another where from the wording of the will and the family surroundings the intent is apparently different. Our statutes must be applied to the facts as they are. I think that taking into consideration the provisions for accumulation with no attempt to pay over the income until the principal was to be paid at twenty-five years of age, the testator intended to and did create a trust for this purpose; that the provisions of paragraph eleven of the will are all one trust; that when the daughter died, he intended to continue the trust for her children until they arrived at twenty-five years of age. Such continuation was void.

The trusts following those for his named nephews were also void and the principal — remainder — is payable on the death of each said nephew to his next-of kin. (Kalish v. Kalish, 166 N. Y. 368.)

The order appealed from should be modified by adjudging that the trust following that for the testator’s daughter, Margaret E. Chittick (Johnson) is invalid, and the remainder or principal at the death of the said daughter is payable to her descendants, or, if none, to the testator’s next of kin as provided in his will and as so modified affirmed, with costs to appellant payable out of the estate.

Hiscock, Ch. J., Cardozo, Pound, McLaughlin, Andrews and Lehman, JJ., concur.

Ordered accordingly.


source: Caselaw Access Project

author: Lehman, J. McLaughlin, J. (dissenting).

license: Public Domain

text:
    The People of the State of New York, Respondent, v. Fannie Soper, Appellant.
    (Argued May 10, 1926;
    decided July 9, 1926.)
    Crimes — murder in first degree — trial — evidence — motive — circumstantial evidence — importance of showing motive —■ erroneous admission of evidence that decedent had made new will a few months before murder where concededly defendant did not know it —• not competent to show testamentary intent — error prejudicial where jury was permitted to base upon evidence unjustified inference tending to' sustain charge.
    1. Where, on trial of an indictment for murder in the first degree, the proof relied upon is circumstantial, the presence or absence of apparent motives and the friendliness of the relations of the parties are circumstances which may greatly diminish or increase the force of other evidence tending to show guilt.
    2. As proof of motive, the prosecution was properly permitted to show that the decedent shortly after his marriage to defendant had made a will leaving her all of his property, which will was in defendant’s possession, but to permit the prosecution to go further and prove that a few months before the alleged murder, decedent had made a new will leaving defendant but a small sum and the remainder of his property to his sons,.is erroneous, where, concededly, the existence of that will was not known to the defendant.
    3. An argument that the evidence was competent to prove testamentary intent of the deceased, cannot be sustained, since testamentary intent unknown to the defendant could not influence her actions and, therefore, could be no relevant factor in the crime or tend to show its commission.
    4. Admission of evidence which has no probative force upon the question of whether the defendant committed the crime is erroneous and the error becomes prejudicial and may not be disregarded when the jury is permitted, as it was in this case, to base upon that evidence unjustified inference of the existence of a state of affairs which if true, would tend to give force to the charge against the defendant. Nor can it be justified on the ground that the jury was entitled to know that the earlier will was revoked, when the revocation of that will is irrelevant and yet is used as argument for a conclusion which it does not sustain.

      Appeal from a judgment of the Supreme Court, rendered November 20, 1925, at a Trial Term for the county of Essex upon a verdict convicting the defendant of the crime of murder in the first degree.

      Patrick J. Tierney and James C. McMahon for appellant.
    It was reversible error to admit in evidence the will of the deceased dated January 19, 1924. (People v. Buchanan, 145 N. Y. 1; People v. Wilson, 109 N. Y. 345; People v. Kinney, 202 N. Y. 389; People v. Messner, 45 N. Y. 1; People v. Wansker, 191 App. Div. 575; Montag v. People, 30 N. E. Rep. 337; People v. Van Aken, 217 N. Y. 533; People v. Osmond, 138 N. Y. 80; People v. Holloway, 151 Pac. Rep. 975; People v. Smith, 172 N. Y. 210.)

      O. Byron Brewster for respondent.
    The admission in evidence of the second and last will and testament of deceased was proper and non-prejudicial to defendant. (People v. Creasy, 236 N. Y. 205; People v. Harris, 136 N. Y. 452; People v. Greenfield, 136 N. Y. 423; People v. Hendrickson, 1 Park. 406; Richards v. U. S., 175 Fed. Rep. 911; People v. Harris, 136 N. Y. 423; People v. Straight, 148 N. Y. 566; People v. Willson, 109 N. Y. 345; People v. Berham, 160 N. Y. 402; People v. Decker, 157 N. Y. 186; People v. Jones, 99 N. Y. 667.)
   Lehman, J.

The defendant has been convicted of murder in the first degree. The victim of the crime, of which she has been found guilty, was her own husband, William Henry Soper. He was shot with a revolver and instantly killed, shortly before noon on May 28, 1925. At the time of his death the defendant’s husband was a farmer. He was also a deputy sheriff of Essex county. The defendant notified the sheriff’s office that her husband had been shot and she also telephoned for a physician. She told them and others that her husband was shot by a strange man who had called at the house and asked for Henry Soper, the deputy sheriff. The body of the murdered man rested upon a couch in the kitchen. Death was caused by two bullet wounds in the top of the head. The bullets were shot from a pistol held not over three inches away. From the position of the body it is quite evident that the murdered man had fallen asleep before he was shot. At the trial the defendant testified, in effect, that her husband had returned to the house, after finishing some planting in the fields. She was at the time preparing the midday meal. Her husband washed up and then reclined on the couch. He took up a book and adjusted his spectacles for reading, but fell asleep. A stranger came to the door and asked for Henry Soper, the deputy sheriff.” The defendant directed him to the kitchen where her husband was lying but thinking that his business with her husband concerned her husband’s official duties as deputy sheriff, she did not accompany him. A moment later she heard shots and the stranger hurried from the house and drove away in an automobile he had left when he came to the house. She had told substantially the same story from the time she notified the sheriff’s office, though one witness testified that, at the time she gave the notification, she said that her husband had come to the door when the stranger called and was shot down there. Concededly when the murder occurred no witness was present. No witness could testify directly that the defendant committed the murder. Conviction rests upon circumstantial evidence. The wounds could not have been self-inflicted. Death was instantaneous and the person who committed the murder must have carried away the revolver from which the bullets were shot, for no revolver was found near the body. There can be no doubt that this person was either the defendant or the alleged stranger upon whom the defend- . ant seeks to fasten the .crime. Jf .her .story about this stranger is false, all hypotheses except the defendant’s guilt are excluded.

The defendant at the time of the murder was a woman forty-nine years of age. She had lived all her life in the same neighborhood. The defendant married the deceased in January, 1923. Both had been married before, the defendant twice, and both had children by earlier marriages. The defendant had always borne a good reputation in the community. The testimony is uncontradicted that she and her husband were on good terms; that she accompanied him sometimes when he was driving .about on his official business as deputy sheriff and that together they visited their neighbors, attended church (entertainments and took part in the usual social life of the rural community in which they lived. Neighbors saw them together on the very day of the murder and /apparently noted nothing unusual in their demeanor and there is no reason to doubt that when her husband came home that day she was engaged in housewifely duties preparing a meal for him. Men and women of good reputation who have lived in manner that seemed exemplary to the world at large do sometimes commit heinous crimes. The force impelling to wrong which overcomes the inhibitions of a lifetime is not always capable of analysis or explanation or indeed discernible. Motives that are unsuspected or apparently trivial may have potent influence. It is possible that this defendant living apparently in friendly relations with her husband may yet have formed the deliberate plan of killing her husband while he lay helpless in sleep, in the fancied security of his own home, but the jury’s verdict must rest not merely upon the possibility that the defendant may haye committed the crime but upon proof which removes any reasonable doubt that she did commit it. Where the proof relied upon is, as in this case, circumstantial, the presence or absence of apparent motives and the friendliness of the relations of the parties are circumstances which may greatly diminish or increase the force of other evidence tending to show guilt. Extended analysis of the testimony of all the witnesses produced by both sides at the trial would serve no purpose. We shall summarize it only to the extent necessary for the statement of those considerations which in our opinion require that the defendant should have a new trial.

Promptly after the defendant gave notice that her husband had been shot, the district attorney and members of the State Police began an investigation at the defendant’s house. They discovered there a revolver. The revolver belonged to the deceased. It was in the pocket of a coat of deceased hanging in a bedroom. It contained three cartridges that had been discharged. One of these cartridges showed evidence of having been fired some time before, two showed evidence of recent discharge. The defendant was questioned at length in the presence of a large number of officers who expressed belief in her guilt. She volunteered an explanation for the presence of the exploded cartridges in the revolver. It may be conceded that this explanation is improbable, nevertheless it is not impossible. It is said that the defendant’s story of the presence of the stranger is on its face so improbable that its falsity is manifest; that persons in position to see a stranger coming and going from the decedent’s house testified that there was no such stranger; that at times the defendant’s story varied; that her demeanor showed consciousness of guilt and that she tried to conceal the existence of the revolver from the officers of the law. In great part the inferences which the prosecution asks us to draw from such circumstances rest upon conflicting testimony and disputed facts. In part the inferences are doubtful, even though conflict in the testimony be resolved against the defendant. Proof of attempt to conceal the weapon is vague if not illusory. If the defendant’s story at times varied and even that is doubtful, the variations might be explained by the stress under which the defendant must have labored when she told the stories. At most we may say that cumulatively the circumstances might permit the jury to draw some inference against the defendant. Such inference would certainly be far from conclusive as to the defendant’s guilt unless supplemented by proof that the fatal shots were actually fired from the revolver found in the coat of the deceased.

The trial judge charged the jury that they must determine whether or not the bullets in the body of the deceased came from his own revolver. That is the basis of the case of the People. If they did not then there is a failure in proof and defendant is entitled to an acquittal.” The bullets found in the body of the deceased were fired from a revolver of the same calibre as the revolver which was found. Of course, there are many revolvers made of the same calibre. When taken from the body of the ' deceased, the bullets were more or less distorted by con-tact with the bone. Nevertheless two experts produced by the prosecution testified, in effect, that they found 1 and measured certain marks on the bullets and that these ' marks corresponded exactly with so-called “grooves” and “ lands ” in the barrel of the revolver and that these bullets were fired from that particular revolver. If that testimony were uncontradicted and unimpeached, then inference of defendant’s guilt would be so clear that error in the admission or exclusion of other testimony might perhaps be disregarded. The defendant did not permit the testimony of the expert witnesses to go unchallenged. She produced other experts of standing and experience who testified that the method of examination of bullets and revolver barrel was inaccurate and could result in no reliable data for comparison. They claimed that only by comparison of the marks on the bullets which caused death with the marks on another bullet fired from the revolver could proof of identity be made. It is undisputed that opportunity to make this comparison was refused by the prosecution on the ground that the marks in the barrel of the revolver might be changed if a bullet were fired for ' basis of comparison through the barrel.

The jury must pass upon the weight that should be given to the testimony of the experts. Apparently they have given such weight to the testimony of the experts who appeared as witnesses for the prosecution, that upon that testimony, in connection with the other circumstances in the case, they have found the defendant guilty of deliberately murdering her husband in his sleep. That testimony has outweighed the denials of the defendant. It has outweighed the presumption of innocence. It has outweighed previous good reputation. It has outweighed the fact that previously the defendant and her husband were apparently living in friendly relations.

The prosecution has attempted to show that the defendant had motive for killing her husband. It is undisputed that shortly before the murder the defendant and her husband had decided to move from the farm to a neighboring town. The defendant with her husband’s consent, had agreed to purchase a house there. She had deposited in a savings bank the sum of $4,000 received from the estate of her second husband who had died in December, 1921. She had arranged to draw from this account the purchase money for the newly-acquired house. The transaction was about to be completed at the time of the murder. Argument is made that when the defendant arranged to draw her money from the bank she realized that she and her husband had scant means for their joint support after they left the farm. Her husband had little property. He owned the farm but that was of small value. He had made a will in 1923 leaving to the defendant all of his property. That will was in defendant’s possession. Expectation that after the death of her husband she would receive his small property and be able to five alone upon its proceeds, though these proceeds would be insufficient for the support of both, or perhaps fear that her husband might change his will, is urged as sufficient motive for the crime. There was no error in the admission of such evidence and the jury had the right to pass upon its effect. The prosecution, however, went further and proved over defendant’s objection and exception that in January, 1925, the deceased had made a new will leaving to the defendant $100 and giving the remainder of the property to his two sons. Concededly, the existence of that will was not known to the defendant. If it had been known to her then it would itself have negatived the motive which the prosecution argues impelled the crime.

We are unable to see how the evidence of the later will, the existence of which was unknown to the defendant, could be relevant to any issue that might properly be raised in this case. The trial judge held that it was competent to prove testamentary intent of the deceased. An executed testamentary instrument obviously shows testamentary intent but testamentary intent of the decedent unknown to the defendant could not influence the defendant’s actions and, therefore, could be no relevant factor in the crime or tend to show its commission. It is said that from the change by the deceased in the testamentary disposition of his property, the jury might infer that the matrimonial relations of the parties were no longer as cordial as before. Undoubtedly the jury was permitted to draw such inference from this testimony, for over the objection and exception of the defendant the district attorney was permitted in his summing up to say: Whether the sea was calm or whether the tempest and hurricanes of temper continually lashed the angry waves and their frail bark we don’t know. We don’t know much about it, but there is one little rift in the midst where we are permitted to look and that is this: Five months after Henry Soper embarked upon that voyage he made a will and he gave every single particle of his wordly goods to his third wife of five months standing.” Inference that the relations of the parties were no longer harmonious would be prejudicial to the defendant’s rights. It would tend to negative the testimony of friendly relations. It would give apparent force to a motive which might otherwise be insufficient.

It may be doubted whether the change by the husband ' of testamentary intent towards his wife shows a change in his affection towards her. It may as well, in this case, have been caused by increased needs of his sons or by change in his affections towards them. We pass that doubt for even a cooling of the affection of the husband for bis wife would not show correlative change in her affections towards him. The very fact that the existence of the second will was concealed from the wife would rather tend to show that the deceased wished the defendant to regard their relations as unchanged. Only change of feelings shown to the wife could influence her feelings towards him. Only the state of her affections for him could influence her acts. Admission of evidence which has no probative force upon the question of whether the defendant committed the crime is erroneous. The error becomes prejudicial and may not be disregarded when the jury is permitted to base upon that evidence unjustified inference of the existence of a state of affairs which if true, would tend to give force to the charge against the defendant. It cannot be justified on the ground that the jury was entitled to know that the earlier will was revoked, when the revocation of that will is irrelevant and yet is used as argument for conclusion which it does not sustain.

It follows that the judgment of conviction should be reversed and a new trial ordered.

McLaughlin, J. (dissenting).

I am unable to concur in the prevailing opinion that the judgment of conviction should be reversed, and it is, therefore, proper that I should state the reasons for my conclusion.

Shortly before noon on the 28th of May, 1925, William H. Soper, the husband of the defendant, was killed by two shots fired at close range from a .32 calibre revolver. The defendant was indicted, tried and convicted as the person who fired such shots. A careful consideration of the record on appeal convinced me that the defendant not only had a fair trial but that the jury could not honestly have rendered any verdict other than guilty, and that no errors were committed which would justify a reversal of the judgment of conviction.

Two grounds, and two grounds only, are urged by defendant’s counsel as calling for a reversal. The first is that the verdict is against the weight of evidence. In my opinion, the verdict is not against the weight of evidence but, on the contrary, is overwhelmingly sustained by it. The testimony of the defendant as to what took place immediately preceding and at the time of the shooting is so incredible and improbable that it is difficult to even imagine how twelve honest jurors could have reached any other conclusion than they did. In any view, at the close of the evidence, a case was made for the jury which had to be submitted to it. It was for the jury to weigh the evidence and to pass upon the credibility of the different witnesses. The jurors saw the witnesses, they heard them testify, and observed their demeanor upon the witness stand, and, therefore, were better able than an appellate judge to determine what testimony was true or false. (People v. Sliney, 137 N. Y. 570; People v. Ferraro, 161 N. Y. 365; People v. Ford, 200 N. Y. 209.) I do not understand that there is any disagreement among the-judges of this court that at the conclusion of the evidence there was a question of fact as to whether the defendant was guilty of the crime charged, which fact had to be submitted to and determined by the jury. The jury found the defendant guilty and the evidence sustains that finding.

But it is said, and this is the second point urged by appellant’s counsel for reversal, that an error was committed at the trial in the admission of evidence, which calls for such reversal. In order to intelligently consider and pass upon the alleged error it is necessary to briefly state a few facts connected therewith.

The defendant and the deceased were married on the 12th of January, 1923, each having been married twice before. At the time the defendant was married to Mr. Soper she was about fifty years of age and he was some ten years her senior. There was no issue of this marriage but the' deceased had two sons by his second marriage, both of whom survived him. On the 5th of May, 1923, a little less than five months after the marriage of the deceased and the defendant, he made a will by which he gave her all of his property. The will was executed in her presence, and the subscribing witnesses were her daughter and her daughter’s husband. The defendant knew the contents of the will and had possession of it at the time of the homicide, and between that time and the time she was arrested she delivered the same to the son in-law for safekeeping. On January 19, 1924, a little over seven months after the first will was made, the deceased made a second will by which he bequeathed all Ms property to the two sons above referred to, except $100 which he gave to the defendant. The district attorney, for' the purpose of establisMng a motive on the part of the defendant for takmg the life of her husband, introduced in evidence the first will. From tMs he could legitimately argue to the jury that she, knowing the contents of that will and possibly apprehensive that the deceased might make a different disposition of Ms property, decided to take Ms life before he could make such change. The district attorney, however, could not resort to such an argument knowing that another will had subsequently been made by which the defendant was deprived of the substantial part of her husband’s property. The etMcs of the legal profession required that he should disclose the fact to the court and the jury. The fairness of the trial and the proper administration of justice necessitated such disclosure. He, therefore, offered the second will in evidence. This was objected to, the objection was overruled, and the will was received. It is true that, so far as appears, the contents of the second will or the fact that it had been made were unknown to the defendant at the time of the homicide. It, however, was received, according to the charge to the jury, for the sole purpose of proving the testamentary intent on the part of the deceased at the time the second will was executed.

I am of the opinion that the second will was properly received in evidence for the following reasons:

(a) It was the duty of the district attorney to disclose to the trial court and to the jury the fact that such will had been made. This he could not do without offering it in evidence. Not to introduce the second will in evidence would have constituted error on the part of the People. (People v. Creasy, 236 N. Y. 205.)

(b) It was admissible in evidence as showing a change of feeling on the part of the deceased as to the testamentary disposition of his property. By the first will he had given the defendant all of his property; by the second will she was deprived, except in a small amount, of all interest in his estate. The second will indicated a change of feeling on the part of the deceased and from all the facts the jury was justified in drawing the inference that, prior to the homicide, the defendant had discovered such change. As I understand it, the rule in this State, established by many decisions, is that any evidence is admissible if illustrating the mutual relations and relative feelings of husband and wife where one is on trial for the murder of the other. (People v. Harris, 136 N. Y. 423, 452; Greenfield v. People, 85 N. Y. 75.) The extent of the inquiry into such relation and feeling rests quite largely in the discretion of the trial court. (Common wealth v. Howard, 205 Mass. 128, 148.) The fact that acquaintances who casually saw them together at different times testified that their feeling toward each other was apparently friendly does not and cannot outweigh the fact that the deceased did have a change of feeling with reference to the testamentary disposition of his property. Differences between husband and wife are not usually aired in public, except in courts. Such differences are generally discussed in private.

(c) I think the second will was admissible for another reason. While it is true that the record does not disclose that the defendant knew anything about the second will, nevertheless, for the reasons already given, the jury had a right to find that the execution of the second will was the result of a change of feeling on the part of the husband toward his wife. From that change of feeling, the jury could legitimately infer that the wife had discovered that fact and, having ascertained that it existed and apprehensive that he might by reason thereof change the first will and thereby deprive her of any interest in his estate, she sought to prevent his making such change by taking his life.

But even if it be assumed that a technical error was committed in the admission of the second will in evidence, I cannot believe that the jury in any way predicated its verdict upon that, especially in view of all the evidence and the limited consideration by the jury of the second will under the charge of the court. The jury was instructed that the defendant had no knowledge of the second will; that it was admitted in evidence for one purpose, and one purpose only — to show the testamentary intention of the deceased. If it was error, it was an immaterial one. It is not every error committed in the trial of a criminal case that will warrant an appellate court on review in reversing a judgment of conviction. The statute prohibits such result. It provides: “After hearing the appeal, the court must given judgment, without regard to technical errors or defects or to exceptions which do not affect the substantial rights of the parties.” (Code Crim. Pro. sec. 542.) The reception of the second will in evidence did not, in my opinion, affect the substantial rights of the defendant.

I, therefore, vote to affirm the judgment of conviction.

Hiscock, Ch. J., Cardozo and Crane, JJ., concur with Lehman, J.; McLaughlin, J., dissents in opinion in which Pound, J., concurs; Andrews, J., absent.

Judgment reversed, etc.


author: Lehman, J.

text:
    Bottlers Seal Company, Suing on Behalf of Itself and Other Creditors of Tear Off Bottle Seal Company, Respondent, v. Roy A. Rainey et al., Appellants.
    Corporation — stockholders — creditor’s suit against holders of stock not fully paid for — no distinction may be drawn between debts incurred in ordinary course of business and indebtedness incurred for royalties under license agreement — stock issued in part payment, of license agreement transferred to corporation at a valuation largely in excess of amount paid plaintiff therefor — plaintiff not estopped from denying that value of license was in excess of amount he received for it —■ immaterial that contract, under which liability to plaintiff arises, was instrument used by directors to evade statutory prohibition — plaintiff excused, by bankruptcy proceedings against corporation, from bringing action for royalties when due — liability of stockholders joint, not several, and where some have not been served or appeared, proceedings should be taken to bring them in aa parties or complaint dismissed,
    1. Under section 70 of the Stock Corporation Law (Cons. Laws, ch. 59) the common stockholders of a corporation are liable to one who sues as a creditor, not for a debt incurred in the ordinary course of business after incorporation, but for unpaid installments of annual guaranteed royalties, part of the consideration of a license agreement for the use of a patent executed by such creditor to a third party which license agreement was, with the creditor’s consent, assigned to the corporation which assumed the obligations thereof and covenanted to perform and carry them out. No ground for distinction, between debts incurred in the ordinary course of business and indebtedness incurred, for royalties under a license agreement is pointed out, and under the broad terms of the statute none may be drawn.
    2. Where from the findings it appears that the consideration for the license agreement paid by the third party, who in entering into the agreement with the plaintiff acted merely as a promoter in behalf and in the interest of the persons who were the directors and incorporators of the corporation in suit, was but $25,000, while the purchase price which the directors of the corporation agreed to pay for the license agreement was $927,500, of which sum $27,500 was paid in cash and' $900,000 by the issuance of stocks to the said third party or to his nominees, in addition to which the corporation bound itself to pay the royalties heretofore referred to, it cannot be said as matter of law that the directors in good faith and in the exercise of an honest discretion placed upon the contract a fair valuation and, where the plaintiff took no part in the fixing of the valuation, he is not estopped from denying that the value of the license was in excess of $25,000. • -.¡i . . :l
    3. The statute under those circumstances imposes upon every holder of the shares of stock so issued personal liability to the creditors of the corporation, and it is immaterial that the contract, under which the liability to the plaintiff arises, was the instrument which the directors used in attempt to evade the statutory prohibition against the issue of stock except for full value. Since the plaintiff did not participate in, or consent to, the overvaluation it may enforce the remedy given to all creditors.
    4. A petition in bankruptcy having been filed against the corporation before the last installment of the royalties sued for became due and an injunction issued restraining all creditors of the bankrupt from instituting any action against it, plaintiff was ■ excused from bringing an action against the corporation for the royalties when due in compliance with section 73 of the Stock Corporation Law, limiting, personal liability of stockholders for debts of the corporation to. eases where judgment therefor has been recovered against the corporation and an execution returned unsatisfied.
    5. All the common stockholders having been named defendants, but thirty-five of them never having been served nor appeared in the action, and there being an express finding in the decision that no proof had been offered “ that said defendants or any of them at any time were beyond the jurisdiction of this court or insolvent,” it was error to permit the proceeding to proceed against the defendants served and to' adjudicate that their liability is several. The established policy of our law is that the liability of a stockholder for corporate indebtedness may be'enforced only by action in equity, in which all stockholders subject to the Same liability must be'joined, unless the statute otherwise provides and the statute under consideration creates no several liability. (Worth v. Moore Blind Stitcher & Ooerseamer Co., 146 App. Div. 28; affd., 207 N. Y. 673, followed.)
    (Argued May 27, 1926;
    decided July 9, 1926.)
    6. The complaint, however, should not be dismissed, but the case remitted to the Supreme Court for appropriate proceedings to bring in the necessary parties.

      Bottlers Seal Co. v. Rainey, 216 App. Div. 702, reversed.
    Appeal, by permission, from a judgment of the Appellate Division of the Supreme Court in the first judicial department, entered February 16, 1926, unanimously affirming an interlocutory judgment in favor of plaintiff entered upon a decision of the court on trial at Special Term.
    The following questions were certified:
    “ 1. Are the common stockholders of a corporation liable under section 70 of the Stock Corporation Law to one who sues as a creditor, not for a debt incurred in the ordinary course of business after incorporation, but for unpaid installments of annual guaranteed royalties, part of the consideration in a license agreement for the use of a patent executed by such creditor to a third party, which license agreement was with the creditor’s consent, assigned to the corporation at the time of its incorporation?

      “2. In an action in equity brought by a creditor of a corporation against all the common stockholders to enforce the liability provided in section 70 of the Stock Corporation Law, should the complaint be dismissed when it is found as a fact that thirty-five out of the fifty-seven stockholders named as defendants in the summons and complaint have not been served nor have they or any of them appeared in the action and no proof has been offered that any of them were beyond the jurisdiction of the court, or insolvent?
    “ 3. In such an action based on the allegation that the common stock of the bankrupt corporation was issued for an assignment to it of a license agreement made by the plaintiff for the use of a patent owned by plaintiff, expressing a consideration of $25,000 cash on execution which was paid and a further consideration of fixed annual guaranteed payments by way of royalties during the term of the license, amounting to $320,000 more, is the plaintiff estopped to deny that the value of the license was in excess of $25,000?

      “ 4. In an action to enforce the liability of stockholders for unpaid stock to creditors of the corporation under section 70 of the Stock Corporation Law, in which the liability is established by an interlocutory judgment, should the amount of each stockholder’s liability bear interest from the date when he acquired his stock?
    "5. When, in an action by a creditor to enforce the liability of stockholders under section 70 of the Stock Corporation Law, it is found that a bankruptcy proceeding was instituted against the corporation, and an injunction was issued therein restraining all creditors of the bankrupt from instituting any action against it, or from issuing any execution or other writ against its property; and it is found that a portion of plaintiff’s claim, to wit, $20,000, did not become due and absolutely owing by the corporation to the plaintiff until after the petition in bankruptcy had been filed; and that the plaintiff had never taken any of the steps required by section 73 of the Stock Corporation Law, and had never asked permission of the Bankruptcy Court to take such steps as to such $20,000; did such bankruptcy proceeding and injunction operate as a bar to a compliance by plaintiff with the provisions of section 73, and as an excuse for non-compliance therewith, as to the $20,000 of its claim that was not due and absolutely owing when the petition in bankruptcy was filed?”
    _ John Godfrey Saxe, Edwin D. Worcester and Rogers H. Bacon for appellants.
    The first certified question should be answered in the negative and the third in the affirmative. (Mann v. Pentz, 3 N. Y. 415; Kinney v. Kinney, 221 N. Y. 133; Bonnell v. Griswold, 89 N. Y. 122; Wahl v. Barnum, 116 N. Y. 87.) The second question certified should be answered in the affirmative. (Roebling Sons Co. v. Federal Storage Battery Co., 185 App. Div. 430; Pollard v. Bailey, 20 Wall. 520; Southworth v. Morgan, 205 N. Y. 293; Christensen v. Eno, 106 N. Y. 97; Christensen v. Colby, 110 N. Y. 660; Chase v. Lord, 77 N. Y. 1; Carrol v. Green, 92 U. S. 509; Terry v. Little, 101 U. S. 216; Mann v. Pentz, 3 N. Y. 415; Weeks v. Love, 50 N. Y. 568; Mathez v. Neidig, 72 N. Y. 100; Griffith v. Mangam, 73 N. Y. 611; Pfohl v. Simpson, 74 N. Y. 137; Marshall v. Sherman, 148 N. Y. 9; Lang v. Lutz, 180 N. Y. 254; Ford v. Chase, 118 App. Div. 605; 189 N. Y. 504.) The fifth question certified should be answered in the negative. (Firestone Tire & Rubber Co. v. Agnew, 194 N. Y. 165; Matter of Roth v. Appel, 181 Fed. Rep. 667; Assets Realization Co. v. Howard, 211 N. Y. 430.)

      Alexander Pfeiffer and Leonard Klein for respondent.
    Section 70 of the Stock Corporation Law inures to the benefit of any creditor of a corporation, irrespective of how his debt arose. (Parmenter v. Fitzpatrick, 135 N. Y. 190; People ex rel. Westchester Street R. R. Co. v. Pub. Serv. Comm., 210 N. Y. 456; Hawyer v. Bell, 141 N. Y. 140; Matter of Johnston, 144 N. Y. 563; Hoffman v. Connor, 76 N. Y. 121; Isham v. Erie Railroad Co., 112 App. Div. 612; National Tube Works Co. v. Gilfillan, 124 N. Y. 302; Douglas v. Ireland, 73 N. Y. 100; Flour City Nat. Bank of Rochester v. Shire, 88 App. Div. 401; 179 N. Y. 587; Boynton v. Andrews, 63 N. Y. 93; Huntington v. Attrill, 118 N. Y. 365.) The statute imposes a several liability on the defendants; they cannot, therefore, complain that all of the stockholders were not served with process. (Warth v. Moore Blind Stitcher & Overseamer Co., 146 App. Div. 28; Roebling’s Sons Co. v. Federal Storage Battery Car Co., 185 App. Div. 430.) The injunction issued from the Federal court effectively prohibited plaintiff from commencing an action to recover the $20,000 royalty due July 1, 1913, and this item was, therefore, properly allowed as part of plaintiff’s claim. (Shellington v. Howland, 53 N. Y. 371; Firestone Tire & Rubber Co. v. Agnew, 194 N. Y. 165; Matter of Mustin, 21 Am. Bank Rep. 147.)
   Lehman, J.

The plaintiff, suing in behalf of itself and all other creditors of the Tear Off Bottle Seal Company, has brought an equitable action to compel stockholders of the debtor corporation to pay the amount remaining unpaid on the stock held by them so far as such liability is necessary to be resorted to in order to pay the claims of the plaintiff herein and the other creditors of the said Tear Off Bottle Seal Company.” An interlocutory judgment in favor of the plaintiff has been rendered at Special Term and unanimously affirmed by the Appellate" Division. It adjudges that the plaintiff herein is a creditor of Tear Off Bottle Seal Company in the sum of forty-five thousand dollars less dividends received by the plaintiff in the bankruptcy proceedings of Tear Off Bottle Seal Company, and that “ each of the defendants herein who has been personally served with the summons herein is personally and severally liable to the plaintiff herein and to the other creditors of Tear Off Bottle Seal Company whose debts shall have been duly proved herein, and who shall establish their right to enforce personal liability for each and every share of the common stock of Tear Off Bottle Seal Company held by such defendant when each such debt was contracted.” A reference was ordered to ascertain, among other things, the creditors “ entitled to enforce the personal liability of the defendant stockholders, " if any ” and the amount each of the holders of the coliimon stock “ should be required to pay toward the payment of said debts of Tear Off Bottle Seal Co.”

Leave to appeal from the interlocutory judgment herein has been granted by the Appellate Division, which has certified five questions of law for review. The parties agree that answer to the fourth question could not affect the soundness of the interlocutory judgment, and that question, therefore, need not be answered or considered further. The parties are also agreed that the remaining questions should receive a somewhat broad construction in order to bring up for review substantial questions of law upon which determination must rest as to whether the defendant stockholders are liable for the corporate debt to the plaintiff and also as to whether such liability, if it exists, is a several liability, as determined by the courts below. We pass upon the question in regard to the existence of any liability before we consider its nature or whether the present judgment correctly defines and enforces such liability.

The stockholders’ liability for corporate debts which the plaintiff seeks to enforce in this action is created by section 70 of the Stock Corporation Law (Cons. Laws, ch. 59), which provides that: “ Every holder of shares of stock not fully paid shall be personally liable to the creditors of the corporation, to an amount equal to the amount unpaid on the shares held by him, for debts of the corporation contracted while such shares were held by him.” Limitation on the stockholders’ liability is imposed by section 73 of the Stock Corporation Law, which provides:

“No action shall be brought against a stockholder for any debt of the corporation until judgment therefor has been recovered against the corporation, and an execution thereon has been returned unsatisfied in whole or in part, and the amount due on such execution shall be the amount recoverable, with costs - against the stockholder. No stpekhqldpr fshall.be. personally liable fqr any. debt .of the corporation not payable within two years from the time it ,is contracted, nor unless an action for its collection shall be brought against the corporation within two years after the debt becomes due; and no action shall be brought against a stockholder after he shall have ceased to be a stockholder, for any debt of the corporation, unless brought within two years from the time he shall have ceased to be a stockholder.”

Findings of fact, in large part based upon uncontradicted evidence, establish that on or about December 23, 1909, the plaintiff entered into an agreement in writing with one Edward Augustus Horner whereby the plaintiff granted to the said Horner the sole right and license to manufacture, use and sell certain patented “ bottle caps, seals or closures ” for a term of years; and in consideration of this grant Edward Augustus Horner agreed to pay a license fee or royalty of one cent per gross on each gross of bottle caps, seals or closures sold or delivered by the said' Edward Augustus Horner or his assigns. The agreement further provided that the amount of the royalty to be paid to the plaintiff for the period ending July 1, 1911, should be not less than $10,000; for the succeeding year not less than $15,000, and for the year ending July 1, 1913, not less than $20,000 and the same amount for each succeeding year thereafter during the term of the license. After the execution and delivery of the said agreement and on or about the 28th day of December, 1909, Horner, with the consent of the plaintiff, assigned the license agreement to Tear Off Bottle Seal Company which assumed the obligations of said agreement and covenanted to perform and carry them out. The Tear Off Bottle Seal Company has not paid any of the royalties provided for in the agreement. On the ninth day of June, 1913, a petition for the adjudication of the corporation as a bankrupt was filed by certain creditors. It was adjudicated a bankrupt on July 3, 1913. The present action is to compel the payment to the plaintiff of the royalties amounting to forty-five thousand dollars which were due and owing on July 1, 1913.

This court has already passed upon the sufficiency of the complaint herein (225 N. Y. 369). We there overruled the contention of the defendant that the obligation or debt of the corporation to pay the royalties for the whole term of the license agreement was contracted when the license agreement was transferred to, and its obligations assumed by, the corporation. We held that this indebtedness or obligation was “ contracted ” within the meaning of the statute (Stock Corporation Law, section 73) only when the time stipulated for payment arrived and that section 70 of the Stock Corporation Law creates a personal liability for such debt as described in this complaint, against one who at that time held shares of stock in the corporation, to an amount equal to the amount unpaid on such shares held by him. No ground for distinction between debts incurred in the ordinary course of business and indebtedness incurred as in this case for royalties under a license agreement is pointed out, and under the broad terms of the statute none may be drawn. It follows that the first certified question must be answered in the affirmative.

Proof of corporate debt is only the first step in establishing statutory liability against the individual stockholder. It must be supplemented with proof that the stockholder to be charged with that liability held, at the time when the debt was contracted, shares of stock which were not fully paid. There are findings of fact which establish that all the defendants held such shares at that time. We may not upon this appeal review the evidence upon which these findings are based. It is said that they are contradicted by other findings. The justice at Special Term has properly included in his findings of fact some which are entirely subsidiary to the ultimate findings, which form the basis for the conclusions of law embodied in the judgment. Without the subsidiary findings, we might be unable to review some of the questions which the defendants seek to raise as to the soundness of the ultimate findings, but upon examination the subsidiary findings appear in no wise contradictory of the ultimate findings.

It appears from the findings that the Tear Off Bottle Seal Company was incorporated with a capital of $10,000 on December 21, 1909, immediately before the plaintiff made the formal license agreement of December 23d with Horner. That agreement acknowledges the receipt of the sum of twenty-five thousand dollars from Horner as part consideration. The only other consideration for the grant of the license was the covenants contained in the agreement, and especially the covenant for the payment of royalties in the future. Horner in entering into this agreement with the plaintiff acted merely as a promoter, in behalf, and in the interest of, the persons who were the directors and incorporators of the Bottle Seal Company. Horner did not pay, and these persons whom he represented did not intend that he should pay, to the plaintiff from his own funds, the consideration mentioned in the agreement.

Within a week after the Tear Off Bottle Seal Company was incorporated its authorized capital was increased to the sum of $1,000,000, consisting of nine thousand shares of common stock of the par value of $100 each, aggregating $900,000, and one thousand shares of preferred stock of the par value of $100 each. On the day after the certificate of increase of the capital stock was filed in the office of the Secretary of State, the corporation entered into an agreement with Horner for the purchase of the license agreement. The purchase price which the directors of the corporation agreed to pay for the license agreement was the sum of $927,500, though they knew that Horner had paid only $25,000, furnished him by others, and that he made the license agreement under circumstances which gave them as individuals and corporate promoters an interest therein, if not its actual ownership. This sum of $927,500 was to be paid $27,500 in cash and $900,000 by the issuance to said Horner or his nominees of 9,000 shares of common stock constituting the entire authorized issue of common stock of Tear Off Bottle Seal Company. Part of this common stock so issued was returned by Horner and his nominee to the treasury of the corporation to be delivered as a bonus to purchasers of the preferred stock of the corporation at the rate of three shares of common stock as a bonus with each share of preferred stock purchased. The corporation has received no other consideration for any of its common stock.

Certainly none of these circumstances indicate that the fair and reasonable value of the license agreement was in excess of the $25,000 which Horner had paid for it or that the corporate directors in good faith placed upon it a value of $927,500 or any sum above $25,000. True, the corporation in assuming the obligations of the license agreement bound itself to pay in the future by way of royalties the additional sum of $320,000 during the term of the agreement. Doubtless the directors hoped to get back this sum with large profits by exploitation of the license, yet the stipulated benefit to be received by the corporation was not the patents, or even the license, free from any burden, but only a license subject to the burden of the obligation to pay the stipulated royalties. Certainly we cannot say as a matter of law that under these circumstances the directors in good faith and in the exercise of an honest discretion placed upon the contract with its large burden of future payments a valuation of $927,500 when they knew that it was acquired by the promoter for the sum of $25,000.

The plaintiff took no part in the fixing of this valuation and no basis exists for an estoppel against it. It consented to the transfer of the license agreement upon the promise of the corporation to carry out the obligations of the contract. It had, the right to obtain payment of the indebtedness of the corporation through the enforcement of corporate liability in any manner permitted by law. If the corporation had issued its stock for full value the capital so raised by the corporation would have constituted a trust fund for the benefit of the general creditors and the plaintiff would have been in the same position as any other corporate creditor. The findings establish that the directors instead chose to issue the common stock without receiving any real consideration for it, placing for that purpose a valuation upon the contract which they knew to be fictitious. The statute under those circumstances imposes upon every holder of the shares of stock so issued personal liability to the creditors of the corporation. It is immaterial that the contract, under which the liability to the plaintiff arises, was the instrument which the directors used in attempt to evade the statutory prohibition against the issue of stock except for full value. Since the plaintiff did not participate in, or consent to, the overvaluation it may enforce the remedy given to all creditors. It follows that the third question must be answered in the negative.

We have already stated that the plaintiff’s claim of indebtedness by the corporation is based upon the corporate agreement to pay minimum royalties of $10,000 for the year ending July 1, 1911; $15,000 for the year ending July 1, 1912, and $20,000 for the year ending July 1, 1913, and that a petition in bankruptcy was filed against the corporation in June, 1913, a few days before the last named payment became due. Claim for this amount was proven and allowed in the bankruptcy proceedings and dividends thereon paid. No contention has been made that as to the plaintiff’s claim for royalties payable when the petition in bankruptcy was filed, the proceedings taken in the bankruptcy court do not constitute excuse for non-compliance with the provisions of section 73 of the Stock Corporation Law, which constitute limitations upon the personal liability of stockholders. All question as to the effect of such proceedings has been concluded by the decision of this court in Firestone Tire & Rubber Company v. Agnew (194 N. Y. 165). We think that the bankruptcy proceedings are similar excuse for noncompliance with the statutory provisions in regard to plaintiff’s claim for $20,000 not due and payable when the petition in bankruptcy was filed. So long as the injunction issued by the bankruptcy court stood without modification, the plaintiff could not bring an action against the corporation. If the injunction had been modified, the bringing of the action would have been merely an empty gesture for all the assets of the corporation were subject to distribution in the bankruptcy proceedings. Even if we were to assume that the bankruptcy court erred in allowing claim for the part of the debt not then due and payable, it yet remains true that the court did take proof and allow it. (Bankruptcy Act, section 63.) If error was made by the bankruptcy court, and we do not attempt now to pass upon such question, such error has caused no injury but only benefit to the defendants, for the claim against them is reduced by the amount of the dividend. In considering the effect of the statute now invoked, this court has heretofore pointed out: “ Ordinarily statutory remedies must be strictly pursued. We are not disposed, however, in this case to adhere to the strict letter of the statute, but we must observe the spirit and intent of the Legislature in adopting it.” (Card v. Groesbeck, 204 N. Y. 301.) Obedience to the injunction of the Federal court, especially when coupled with reliance upon its order purporting to adjudicate plaintiff’s entire claim, constitutes excuse for failure of the plaintiff to bring any action for the royalties due on July 1, 1913. (See, also, Shellington v. Howland, 53 N. Y. 371; Hunting v. Blun, 143 N. Y. 511; Hirshfeld v. Bopp, 145 N. Y. 84.) The fifth question should, therefore, be answered in the affirmative.

The answer to the only remaining question we must consider depends upon whether the liability of the defendant stockholders is several. The action, as stated above, was brought in equity. All the common stockholders arc named as defendants, and the relief asked is a judgment that said defendant stockholders be required to contribute to and pay pro rata towards the payment of all such debts of, and claims against, said Tear Off Bottle Seal Co. contracted while such stock was held by them respectively.” The complaint further asks for an accounting to ascertain the amount of the liability. Thirty-five of the defendants named have not been served nor have they or any of them appeared in the action, and there is express finding in the decision that no proof has been offered “ that said defendants or any of them at any time were beyond the jurisdiction of this court or insolvent.” The action has proceeded against the defendant stockholders who were served and the judgment adjudicates that the liability of these stockholders is a several liability. The Appellate Division has certified the question whether in such case the complaint should be dismissed.

In the absence of statutory provision a stockholder of a corporation who has fully compbed with all contractual obligations to the corporation and has committed no wrong towards it is not hable for any of the corporate debts. He may be compelled even in the absence of statute to return assets of the corporation which constitute a trust fund for the payment of its debts, if by unlawful distribution of such assets among the stockholders, the corporation is stripped of funds with which to pay its creditors. So, too, unpaid subscriptions are, at least in American jurisdictions, regarded as a trust fund for the benefit of general creditors and payment may be enforced by bill in equity. The equitable principle has long since been embodied in the Revised Statute s of this State, but the principle antedates the statute an I is of general application. (See Mann v. Pentz, 3 N. Y. 415, at page 422.) In such cases, liability depends upon contractual obligation to the corporation which may be enforced in equity, and in some jurisdictions, even at law, for the protection of unpaid creditors. (Griffith v Mangam, 73 N. Y. 611; Christensen v. Eno, 106 N. Y. 97.) Where, however, there is no contractual obligation to the corporation and where no trust fund which should be held for the benefit of general creditors has been either withheld from the corporation by stockholders or unlawfully distributed to the stockholders by the corporation, liability, if any, on the part of a stockholder is wholly the creature of statute. Here the corporation did not receive the full nominal value for the stock, but it issued the stock without expectation of further payment for the stock and without express or implied promise of further payment. Indeed, there is no finding that the defendants who were not directors ever knew that the stock they received was not originally issued for full value. The Legislature may under such circumstances provide a remedy for an unpaid creditor, but the difference between the nominal value of the stock and the amount received does not, under the decisions of this court, constitute a trust fund. (Southworth v. Morgan, 205 N. Y. 293; Milliken v. Caruso, 205 N. Y. 559.) The Legislature here has provided such remedy and created a statutory liability to creditors even where no contractual liability to the corporation exists. The question which we must now decide is whether that liability is a joint liability which may be enforced only by suit in equity against all the solvent stockholders within the jurisdiction, or is a several liability which may be enforced against such stockholders whom the plaintiff may select.

Action by a creditor against one stockholder can be sustained only where the statute by its terms creates a several liability. (See Patterson v. Lynde, 106 U. S. 519; Cook on Corporations [8th edition], section 222.) Slight differences in the terms of statutes may at times lead to varying interpretations of legislative intent, and decisions as to the effect of other statutes may furnish but uncertain guidance in the construction of the statute now under consideration. Prior to the enactment in 1901 of the provisions of law which now fix liability of corporate stockholders for corporate debts, general statutes or special charters had long imposed upon corporate stockholders liability of much wider extent, and by the express terms of the statutes that liability was declared to be joint and several, or even several. The Legislature under these statutes left little room for judicial definition. The function of the courts was generally confined, in actions either at law or in equity, to the enforcement of the liability clearly defined by the Legislature. Nevertheless in the case of Marshall v. Sherman (148 N. Y. 9, 21) this court in an opinion by O’Bbien, J., expressed the view that as a general rule “it is quite well established that in a case like this an action at law by a single creditor against a single stockholder for the recovery of a specific sum of money cannot be maintained in our courts under our statutes declaring the liability of stockholders. In such cases the liability must be enforced in equity in a suit brought by or in behalf of all the creditors against all the stockholders, wherein the amount of the liability and all the equities can be ascertained and adjusted.” (See, also, Griffith v. Mangam, 73 N. Y. 611.)

The language of the new statute might be open to the construction that the Legislature intended that the stockholders should be severally liable, yet we may not disregard as entirely without significance, that it omitted the express provision for several liability contained in the statute it superseded or amended. That omission did not escape notice of this court in Lang v. Lutz (180 N. Y. 254). Though not necessary to the decision the opinion per O’Bbien, J., states: “As to all cases, which might arise thereafter, I assume that it [the amendatory act of 1901] prescribes, a new rule of liability under which the remedy available to a creditor is intended to be by way of an equitable action, or proceeding; wherein all the stockholders of the corporation should be made equally and ratably responsible for the payment of corporate debts.’'

The only case in which the question of whether liability under the statute is joint or several has been squarely presented to this court is Warth v. Moore Blind Stitcher & Overseamer Co., (146 App. Div. 28; affd., 207 N. Y. 673.) In that case an action in equity was brought by a creditor who, as in this case, failed to serve all the stockholders. All the justices in the Appellate Division agreed that the action should be dismissed, but there was some difference of opinion as to the ground for dismissal. The opinion of Laitghlin, J., treats as a dictum of doubtful force the statement quoted above from the opinion in Lang v. Lutz, but holds that in any event several liability may not be adjudicated in an equitable action. (See, also, Roebling Sons Co. v. Federal Storage B. C. Co., 185 App. Div. 43.) Though the decision of the Appellate Division in the Warth case was affirmed in this court without opinion, the subsequent case of Mosler Safe Co. v. Guardian Trust Co. (208 N. Y. 524) made clear that this court had affirmed not on the ground that several liability may not be enforced by action in equity but on the ground that the statute creates no several liability. The later case was brought under a statute which expressly created a joint and several liability, and this court stated: Since the right of action is given by statute, and the liability of the defendants is joint and several, the remedy is the same in equity as at law. There is no conflict between this conclusion and what was held in Warth v. Moore Blind Stitcher & Overseamer Co. (146 App. Div. 28; affd. in this court without opinion 207 N. Y. 673).”

No valid distinction can be drawn between the case now under consideration and the case of Warth v. Moore Blind Stitcher & Overseamer Co. (supra). The statute creates a liability against stockholders which in the absence of statute would not exist. The established policy of our law is that the liability of a stockholder for corporate indebtedness may be enforced only by action in equity, in which all stockholders subject to the same liability must be joined, unless the statute otherwise provides. The case of Worth v. Moore Blind Stitcher & Overseamer Co. (supra) is clear authority that the statute under consideration creates no several liability. It follows that the judgments of the courts below should be reversed and that the complaint should be dismissed unless the other solvent stockholders within the jurisdiction are served in the action.

We construe the second certified question as meaning nothing more. So construed, it should be answered in the affirmative. The trial court was not, however, compelled to dismiss unless the plaintiff failed to bring in the necessary parties when need of their presence was made clear. Under the liberal practice now prevailing in this jurisdiction, the court would probably have granted application for reasonable adjournment if the court had held that it could not render judgment unless all the stockholders of the corporation were join'ed. This court should not under the circumstances order the complaint dismissed but should remit the case to the Supreme Court for appropriate proceeding. If application is not promptly made by the plaintiff in that court, that court may still dismiss the complaint on motion of the defendants or any of them.

The judgments should be reversed, with costs to appellant Webb in all courts. Certified questions answered as indicated in this opinion, and the case remitted to the Supreme Court for further proceedings as indicated in opinion.

His cock, Ch. J., Cardozo, Pound, McLaughlin, Crane and Andrews, JJ., concur.

Judgment accordingly.