author: Bergen, V. C.

text:
    Mary E. Taylor v. Ellen Coriell, administratrix of Richard B. Coriell, deceased, at al.
    [Filed April 22d, 1904.]
    1: Where it clearly appears that a deposit made by a parent to the joint account of the parent and a child is made for the convenience of the parent in drawing money, and not with the intention of making a gift to the child in case she survived her parents, a subsequent change of intention must be proven by clear and satisfactory evidence. Merely permitting the account to remain in their joint names is insufficient.
    2. The contract between joint depositors and the bank relating to the right and method of withdrawing a deposit is not controlling evidence on the question as to whether one, in making the deposit jointly with the other, intended a gift to the other.
    3. In order to make a gift effective, the evidence should show an intention on .the part of the donor to divest himself of the possession and control of his property, and it should be inconsistent with any other intention.
    4. Evidence held insufficient to prove a gift inter vivos, but, on the contrary, to show that the gift was limited to take effect after the father’s death, and hence was void, being a testamentary disposition of the fund in a manner contrary to the statute of wills.
    5. In order to legalize a gift inter vivos, there must be an absolute parting, on the part of the settler, with the interest which had been his up to the time of the making of the gift.

      Mr. George S. Hobart, for the complainant.

      Mr. William A. Lewis, for the defendants.
   Bergen, V. C.

August 8th, 1888, Richard B. Coriell deposited in the Provident Institution for Savings, in Jersey City, the sum of $207.56 and caused tlie account to be opened on the books of that institution in the name of “Richard 'B. and Mary E. Coriell,” in which form it remained until his death, in 1902. The account was increased from time to time by deposits and decreased by drafts made against it, all such drafts being made by Richard. The balance standing to this account, with interest added to the 1st day of January, 1904, is $2,504.28, tire ownership of which is the disputed question in this cause.

The complainant, Mary E. Taylor (formerly Coriell), whose name appears in the joint account, claims it as a gift inter vivos from her father, Richard, and the defendant, as the widow of Richard, insists that it was his property at the time of his death and should be paid to her as the administratrix of his estate. When the bill of complaint was filed the widow was made a defendant individually, but being subsequently appointed administratrix, the pleadings were amended so that she now appears on the record as defendant in a representative capacity. The relief desired is to have the defendant permanently enjoined from drawing the fund, she holding the pass-book, and the prayer in the answer is that the bill be dismissed. The Provident Institution was also made defendant and has formally answered, admitting its liability to pay to either the daughter or widow when their rights have been established.

At the time the original deposit was made the savings institution issued and delivered to Richard, the father, a pass-book usual in such cases, in which the names of the depositors were entered in the same form as on the books of the bank; this book contained a printed copy of some of the regulations of the bank, subject to which deposits were received, one of which was: “But no person shall receive any part of his principal or interest without producing the original book that such payments may be entered therein.”

The following circumstances preceding the opening of this account are, in my judgment, sufficiently proven to justify their acceptance: That in lSTT a son of Mr. Coriell died, having a small sum of money standing to his credit in the Provident Institution, to secure the payment of which the father was required to administer; that at this time there was an account in the same institution standing to the credit alone of the former wife of .Mr. Coriell, in which she was described as the “wife of Richard B. Coriell;” that some time after 1876, and previous to the death of the wife, this account was changed on the books of tire bank by erasing the words “wife of,” thus leaving the account in the joint names of the wife and husband; that after the death of the wife, and when the complainant arrived at the age of twenty-one years, and on August 8th, 1888, the husband drew from this account the balance standing to his credit, $107.56, and on the same day opened the account in the name of himself and daughter, adding $100 to the sum drawn, thus making the lirst deposit in this account stand at $207.56; that two of the brothers of the complainant had accounts in this bank, and in both instances the name of the complainant appeared as a joint depositor, so that after the death of the son, in 1876, every savings account belonging to any member of this 'family stood in the names of two persons, and after the death of the mother one of the names in each case was that of this complainant, who does not, so far as appears, make any claim to the ownership of any of these funds other than the one now in question; that in rare case her name has been replaced by that of the wife of one of tire brothers, who had married after the account was opened; that Richard, the father, explained to the defendant that his reason for keeping the account in the joint names of himself and the daughter was because he had had trouble with his son Eddie’s account when he died, and he wished to avoid having any such trouble again, and that she need not worry as she should have a third of the money.

These circumstances satisfy my mind that it was the settled policy of Richard B. Coriell to have every savings account in which any member of his family was interested stand in the name of two persons, and that the only reasonable presumption to be deduced from these facts is that his purpose was to provide for the convenient management of the fund in the event of the death or incapacity of the owner and depositor of the money, and further evidence of his intention as to this particular fund is the fact that he retained until his death the possession and control of the pass-book, which carried with it the absolute control and management of the fund, and that at different times he drew large sums of money from it, at one time nearly depleting the account, withdrawing at a single draft $1,450, leaving a balance of only $34.41, showing “that the case in its inception was one of trust for himself and not of gift” to his daughter. Schick v. Grote, 15 Stew. Eq. 352. If it clearly appears that a deposit made to a joint account is merely for the convenience of the parent in drawing money and not with the intention to make a gift to the child in case of it surviving its parent, a subsequent change of intention must be proven by clear and satisfactory evidence. Permitting the account to remain in joint names is not sufficient. Skillman v. Wiegand, 9 Dick. Ch. Rep. 198.

As was said by Vice-Chancellor Pitney in Skillman v. Wiegand:

“In view of the well-known practice of savings banks to pay money on the presentation by the depositor in person of his or her pass-book, the motive of convenience in drawing money without personal attendance becomes at once prominent and a not uncommon purpose in the placing of moneys in bank to joint account. * * * And in case of savings banks, the proprietor of the fund by retaining the pass-book in his possession retains complete control of it.”

Mr. Coriell, the depositor, was employed during the usual banking hours in Hew York City, and it is not unreasonable to infer that he wished to have someone qualified to draw money if he should not be able at all times to be present. It is clear that he manifested no intention to part with -his right to the control, use or disposition of the fund. Smith v. Speer, 7 Stew. Eq. 336. The complainant, however, insists that she has overcome the fair deduction to be made from the foregoing facts, that the account was established for the convenience of the father and not as a gift, by testimony showing that the fund was intended by her father at its inception to be her property, and that the donation became operative at that time. The only witness oí what then occurred was the complainant. The testimony of the other witnesses, to which I shall hereafter refer, relate to periods long subsequent to this event, and, in my judgment, afford no corroboration of a donative purpose formed and executed in August, 1888. The complainant made some general statements, but when asked to recite what her father said at that time her reply was that he used the following words:

“I am going to take you clown and have your name put on the book, as you are my oldest daughter at home and are keeping house for me, and I want you tO' have whatever there is.”

Being further questioned, she said, at no other time did he give any reason for opening the account in the form in which it stands. With the exception of the last clause above quoted, all that he said was consistent with his apparent policy of having her name “on the book” for the convenience of the fund, and as to the latter clause, if construed as a donation, it would be limited to that particular deposit, which he afterward withdrew from the bank and applied to his own purposes. Whether the father made the admission in the language used by the witness with the purpose of actually transferring the ownership of the fund to her as a gift, viewed in the light of his subsequent acts, is debatable and is not as convincing as it should be to entitle the complainant to establish the ownership she sets up. Evidence of declarations in the nature of admissions is always received with great caution, and when ascribed to a deceased person, and testified to only by the party to be benefited, it should be closely scrutinized, and, before giving it controlling force, the subsequent acts of both parties,' together with their relation to each other, should be fully considered. When this gift was made, as claimed by the complainant, her father was a widower, with five children, three of them daughters, and all but one living at his home in Jersey City, and the effect of this gift was to deprive his other children (one of them a daughter only about twelve years of age) of any portion of, or interest in, his personal estate, whatever real estate he had having been conveyed to all of the children as tenants in common.

The complainant married two years after this alleged gift and left home in August, 1890, and her father married his present widow in December, 1890. At the time the complainant left her father’s home the total amount of this fund, including interest, was $535.83, no drafts having been made prior to this time and but three deposits of $100 each.

From the inception of the fund until the day of his death the father treated it as his own, having under his absolute control the pass-book, with power to draw whenever he saw fit. The fund was added to from time to time, so that on August 10th, 1894, four years after the complainant had left home, it amounted to $1,484.41, at which time the father drew from the account $.1,450, leaving a small balance of only $34.41. The money which he drew he disposed of to his own use, to the knowledge of the complainant, and without her protest, and subsequently, on three different occasions, exercised the same right of control by drawing and disposing of the money for his own purposes. Manifestly this conduct on the part of the father, and the acquiescence by the daughter thereto, is not consistent with her claim that the fund had been given to her inter vivos, but, on the contrary, indicates that her name was put in the account for the father’s convenience. The testimony shows that he was employed all day in Few York City and that all deposits were made from 1888 until August, 1890, by the complainant, and, after she left home, by the defendant, with the exception of a single deposit, in June, 1901, to be hereafter considered.

Under the regulations of the savings bank, above set out, the power to draw money depended upon the possession and presentation of the pass-book. That evidence of dominion was resolutely retained by the father until his death, was found among his effects and came in due course to the hands of his administratrix. In my judgment this evidence does not support the claim of the complainant that the fund was a gift to her inter vivos when the account was opened, and that the utmost we are authorized to infer is that the donor intended that his daughter might have whatever was left after he had exercised the absolute control during his life, making it a testamentary disposition of funds, without complying with the law of wills.

The p complainant further claims that when the account was opened there was a contract entered into between the savings institution, her father and herself, under which she obtained an' irrevocable interest in the fund, so that all question of testamentary disposition is removed. Undoubtedly there was a contract between the father and the daughter on the one side and the institution on the other, by the terms of which the bank became their debtor to the extent of the amount due on the account; and that either presenting the book might draw the fund, but I cannot approve the contention that such contract is, as between the father and the daughter, controlling evidence on the question of a gift inter vivos. Their rights to the fund depend upon the character of their respective relations thereto, and if it appears that the father furnished the money making up the deposit, that the account was opened in their joint names for the convenient holding and management of the fund by one party for the other, a court of equity would declare their rights according to good conscience, and to avoid the application of the law of wills it must appear that the donor had surrendered all control over the subject-matter. Upon this point my attention has been called to Dunn v. Houghton, 51 Atl. Rep. 71, but I do not understand that in that case Vice-Chancellor Stevenson held that the contract entered into by the bank established prima facie a gift inter vivos but that a distinct donative intention on the part of the donor must appear, and he sums it up in the following language: “The question whether there was a gift or not is determined in each case solely by the purpose of the alleged donor."

The facts in the case under consideration are materially different from those existing in Dunn v. Houghton. Among other things, it was shown in the latter case that the fund claimed to be the subject of the gift was never diminished but preserved in precisely the same condition it presented on the day of the alleged gift, while in the present case the original deposit, a gift of which is' claimed, was withdrawn and disposed of by the depositor and the donative intention not proven.

The complainant, however, further insists that the testimony of tire witnesses on her behalf establish the original donative intention of her father, and that from subsequent statements and admissions made by him it is proven that it was his intention to give her the money at the time of the deposit, in 1888. The complainant testified that in 1889 she went with her father to the bank, at which time he drew a portion of the money. The only- draft against the account about that time is under date of February 10th, 1899, when the father drew $65; that her father then said: “My daughter has married since this account was opened, and the money is hers; I don’t want her to have any trouble; I should like to have it changed to her married name.” If this witness has correctly stated what was said it would mean that the money then on deposit belonged to her, for there are no qualifying words, yet on that very occasion the father did draw and appropriate to his own use a part of the funds in which, if he is correctly quoted, he had no interest or right whatever. The subsequent conduct of both parties with regard to- the money does not justify the belief that he used the precise language stated, for on another occasion he drew and used of this money $300 and continued to use the fund as his own and did not relinquish his control over it.

The great interest of the complainant in the result of the case leads me to the conclusion that we cannot safely rely upon her statement that she has given the precise words of the deceased, especially when the subsequent acts of the parties do not accord with the statement.

The testimony does not refer to future ownership, but declares it was then tire property of the complainant. The deed cannot in words explain his intention'but his acts do, and they contradict the statement. I am led to the belief that the father’s anxiety was with regard' to the convenient handling of the fund in case of his death. It was to preserve the policy of having two persons, either of whom might be able to draw the funds, in case of necessity, that he wanted the change made to the married name of his daughter, fearing that some complication might arise over the change in her name, and his dominant intention frustrated. That lie did not intend that the' daughter then had title to the fund is demonstrated by the fact that, subsequent to that date, he drew and appropriated a part of the- very money which it is alleged he then said was his daughter’s.

The testimony of the other witnesses do not establish any donative intent but relate entirely to the intention of the father as to the disposition of the fund after his death, and nearly all relate to a period later than 1900. In speaking of the declarations of the father, one witness testified that he said: “That when he died there would be no question about anything, every-1 thing was the way he wanted it to go.” Another testified that he told the complainant: “Your name is on the book and the money is yours if anything happens to me.” To another: “If anything happens to me, Mamie is to have that money.” And to another, at the time of their uncle’s funeral: “The money in the bank belonged to Mary Emma if anything happened to him.” To still another: “That money is Mamie’s; as when I am through with it the money is hers; and I want her to have it.” To another he said that in case of his death the money should go to her.

To make a gift effective the evidence should show an intention on the part of the donor to divest himself of the possession of his property, and it should be inconsistent with any other intention. In re Bolin, 136 N. Y. 177. All of this evidence tends to disprove the claim of the complainant of any present gift of the fund, and shows that whatever intention the father had with reference to it related to its disposal after his death.

The deceased married his second wife, the defendant, in December, 1890, and until liis death she had charge of his home and was in every way, so far as the evidence discloses, a faithful, economical wife, aiding in the accumulation of the funds in dispute, acting as her husband’s agent, depositing moneys to his account, and when she called his attention to the form in which the account stood he assured her that it was opened in that manner because he had had trouble with his son Eddie’s account when he died, and he wished to avoid having any such trouble again; that she need not worry, as she should have a third. In this she is corroborated by her daughter, Mrs. Dowling. The evidence discloses that the house in which they lived had been transferred to the children and that substantially all his remaining property was embraced in this account. To accede to the claim of the complainant would leave this widow penniless so far as her husband’s estate is concerned, and to attribute to Mr. Coriell a deliberate intention to deceive his wife and leave his widow in this condition we should be supported by convincing proofs of that intention.

I am entirely satisfied that this evidence does not tend to prove a donative intention within the rule required for such purpose, and that the only justifiable inference is that the money was first put in the joint account merely as a convenience for the father; that he did not then intend to part with his property in it, and that he always claimed and exercised a right of absolute ownership over it, and that the gift of this fund to his daughter was limited to take effect after his death, and falls within the rule announced in Stevenson v. Earl, 55 Atl. Rep. 1091. In the case just cited, the chief-justice, speaking for the court of errors and appeals, in defining the requisites of a gift inter vivos, said: “But, in order to legalize such a gift, there must be not only a donative intention, but also in conjunction with it a complete stripping of the donor of all dominion or control over the tiling given.”

It is perfectly clear from the evidence in this cause that the father intended to and did retain his control over the thing given, and that the most liberal construction in favor of the complainant that can be given to this evidence is that it was his wish that she should have whatever remained after his death. Even if we assume a donative intention proven, the other element, the stripping of the donor of all dominion or control over the gift, is wanting. There is no pretence that the father lost all dominion at any time. The account stood in his name as well as of his daughter; he retained the effective means of control, the pass-book, in his possession until his death, and during his whole life exercised exclusively the right of ownership over the whole, drawing, using and depositing according to his own will and pleasure. There was no trust in favor of the complainant, for the indispensable element, the absolute parting with “that interest which had been his up to the time of the declaration," is not present. In order to create a trust there must be specific property held by the trustee. It was argued that there was a distinction to be drawn between the case of Stevenson v. Earl and the one under consideration, for the reason that in the former case the title to the fund never vested in the claimant; that she had no control, and could have none, over the principal fund during her husband’s life, while in the present case the claimant, if she could obtain possession of the bank-book, might draw the money; but I think this argument has little weight, for if the complainant was not to be entitled to the ownership of the fund until after her father’s death, tire fact that she might obtain possession of the book and draw the money would not, as between her father and herself, give her the right to hold the fund against his claim and demand; she would be bound to turn it over to him.

There is still another claim of the complainant to be disposed of, and that is that she claims to have deposited a portion of this money, the result of her 'own savings; but I find that there is no proof in the case to warrant the allowance of any such claim. She left home in August, 1890, and from that time until 1991 does not show by any satisfactory evidence that she furnished any money for this account. When she left but three deposits of $100 each had been added to the original fund. In her exanrination-in-chief she was shown the bank account containing the account and testified that she was not able to identify a single deposit as being made from her personal earnings. As but three had been made while she was at home, after which time the pass-book seems to have been in charge of the defendant, it is remarkable that her recollection was so deficient about so important a transaction, and when we consider that she further testifies, in a general way, that she had from her savings deposited in this account about twelve or fourteen hundred dollars, when the total amount of such deposits, in addition to the original sum, only amounted, at the time she left home, to $300, it is manifest that her statements are too loose and general to support her claim. As to the item of $150, which she says she deposited in 1901, she testified that, at that time, she ivas a tenant of her father, renting some rooms of the homestead, and one day, in the absence of the defendant, she went to the defendant’s bedroom, opened the bureau-drawer, took out the pass-book, carried it to the bank and deposited to this account, of her own money, $150, returning the book to the place from which she took it, and told no one of what she had done. I cannot credit this story; its improbability condemns it. She was then married and the money which she deposited, she testified, was the result of her husband’s earnings. It was a most extraordinary proceeding- to place her husband’s earnings in an account which was at all times subject to the disposal of her father, and put the evidence of her contribution to the fund beyond her reach. To sustain such a claim as this, the evidence of it ought to be convincing. On the other hand, the -defendant testifies that from the time of her marriage, in 1890, every deposit written in the book was made by her on her husband’s behalf from his earnings, and the circumstances tend to establish the truth of this statement, and I am unwilling to find, as a matter of fact, that the $150 were deposited by the complainant in the manner she describes. A party seeking to establish a claim of this character must justify it by evidence of such strength as to leave in the mind of the court no real doubt of its truth.

I will advise a decree dismissing the bill of complaint as prai-ed in the answer, with costs.


source: Caselaw Access Project

license: Public Domain

text:
    The Continental Securities Company v. The Northern Securities Company.
    [Filed April 26th, 1904.]
    1. Where a decree enjoined a corporation from voting the stock of competing railway companies which it held, or from exercising- any control over them or paying any dividends on account of the stock so held, ■but provided that it should not be construed as prohibiting the corporation from returning the stock in the railway companies to its stockholders in exchange for its own stock, such decree did not require that the specific stock in the railway companies which stockholders had transferred to the corporation should be returned 'to them, the proviso being permissive and not mandatory.
    2. Where a corporation was enjoined from voting stock which it held in competing railway companies as a part of its capital and assets or from declaring dividends on account thereof, necessitating a reduction of its capital and a division of the surplus thereby created, was proposed by distributing the stock of the railway companies hold as assets, every stockholder, some of whom had purchased for cash in the open market, was entitled to his proportionate share of each class of the stock, where there is a possible difference in market value.
    3. Where the holding by a corporation of stock in competing railway companies was adjudged illegal, a stockholder, or his successor in interest, cannot, in a court of equity, enforce the return to him of the specific stock in the railway companies which he transferred to the corporation on the ground that the original transfer was void for illegality, since he was himself a conspirator.
    4. A corporation, on reducing its capital stock, may distribute a portion of its assets, and retain the balance as its property.
    5. On reduction of the capital stock of a corporation, where the surplus thereby created is invested in the stock of railway companies, it is not necessary that it be reduced to cash before distribution to the stockholders, but the stock itself may be distributed.
    On order to show cause why an injunction should not issue.

      Mr. Charles D. Thompson, lor the complainant.

      Mr. John IF. Griggs, Mr. Robert II. McCarter, Mr. Charles L. Corbin and Mr. Thomas Thatcher, for the defendant.
   Bergen, V. C.

Stated as concisely as the matters under consideration will permit, it appears from the bill of complaint, affidavits and exhibits, offered and used by consent on the hearing, that the defendant was lawfully incorporated under the laws of this state; that the objects for which it was formed, as set forth in its certificate of incorporation, was the purchase, holding and selling of the bonds, evidences of indebtedness or capital stock of other corporations, whether incorporated in this state or elsewhere, and, as owner thereof, to exercise all the rights, powers and privileges of ownership, including the right to vote on any such stock; that shares of the capital stock of the defendant corporation of the par value of $100 each to the extent of three million nine hundred and fifty-four thousand shares were issued and disposed of; that of the stock so issued a large proportion was used in purchasing a majority of the capital stock of the Northern Pacific Railway Company, and also of the Great Northern Railway Company, by virtue of which the defendant company assumed the management and control of those railway companies; that the defendant company purchased one million five hundred and thirty-seven thousand five hundred and ninet3r-four shares of the common stock 'and four hundred and ten thousand eight hundred and fifty shares of the preferred stock* of the Northern Pacific company, paying therefor, in cash, $43,625,036.50, and one million seven hundred and sixty-eight thousand two hundred and twent3rnine shares of its own stock; that it purchased of the capital stock of the Great Northern Railway Company one million one hundred and eighty-one thousand two hundred and forty-two shares, paying therefor $1,707,200 in cash, and two million one hundred and ten thousand five hundred and seventy-six shares of its own stock; that the defendant issued and sold of its own stock sevent3'-five thousand two hundred and twenty shares to the public for cash; that, in January, 1902, the preferred stock of the Northern Pacific Railway Company held by the defendant was called for payment by that company and paid in cash, for which the defendant received $41,085,000, of which it invested $34,709,063.50 in the convertible bonds of the Northern Pacific company, afterward availing itself of the convertible rights vested in the owner of any such bonds; the defendant surrendered said bonds to the Northern Pacific company and received from it the equivalent in shares of the common stock of said company, issued to redeem the bonds. It is thus disclosed that the capital stock of the defendant company was issued in part for the common stock of the two railway companies, which, we may assume for the purposes of this motion, was an exchange of stocks with differences paid in cash; that stock of the defendant company, worth at pax $7,533,000, was sold in the public market for cash; that a •large amount of common stock of the Northern Pacific company, now owned by the defendant, was issued by the Northern Pacific company directly to it' for the surrender of convertible bonds belonging to the defendant company.

It further appeared that a suit, brought by the United States against the defendant company, based upon an alleged violation of the act of congress, commonly known as the “Anti-trust” act, had resulted' in a decree, afterward affirmed by the supreme court of the United States, adjudging that the defendant had entered into a combination in restraint of trade and commerce among the several states, which the act of congress denounced as illegal; that all of the stock of the Northern Pacific Railway Company and all the stock of the Great Northern Railway Company, claimed to be held and owned by the defendant, was acquired and held by virtue of such illegal combination, and upon such adjudication enjoining the Northern Securities Company, or its representatives, from acquiring, or attempting to acquire, any further stock in either of said railway companies, and prohibiting the defendant from voting, or attempting to vote, said stock at any meeting of the stockholders of either of said railway companies, and from exercising, or attempting to exercise, any control, direction, supervision or influence whatsoever over the acts and doings of said railway companies, or either of them, by virtue of its holding any stock therein, or from voting at any corporate election for directors or officers of either of said companies; and said decree further enjoined the said railway companies from paying any dividends to this defendant on account of any stock which it claimed to hold or own of either of said companies and prohibited the said railway companies from permitting the defendant to exercise any control over their corporate acts. The said decree adjudges that nothing in it contained should be construed as prohibiting this defendant from returning and transferring t'o the stockholders of either of said railway companies any and all shares of stock in either of said companies which the Northern Securities Company might have theretofore received from said stockholders in exchange for its stock, 'or as prohibiting the defendant from making transfer-of the stock to such persons as might then be the holder of its own stock, originally issued in exchange or payment for stock acquired by it in the aforesaid railway companies.

It further appeared that the continued ownership of said railway stocks by the defendant company would not only be useless but a great disadvantage to the stockholders of the company, and that the directors of the company had decided to reduce its capital stock and divide the surplus that would arise upon such reduction between the stockholders, and in order to carry out said determination, on the 22A. day of March, 1904, adopted certain resolutions for that purpose, those pertinent to this issue being as follows:

“Resolved, In consideration of the premises, it is declared necessary and desirable for this company so to reduce its present capital stock as will enable it, without delay, in connection with such reduction, to distribute among its shareholders the shares of capital stock of said railroad companies held by it.
“Resolved, That the board of directors of this company hereby declare it advisable that article fourth (4th) of this company’s certificate of incorporation be amended so as to read as follows:
“Fourth. The capital stock of this company is hereby reduced to three million riine hundred and fifty-four thousand dollars ($3,954,000), divided into thirty-nine thousand five hundred and forty (39,540) shares of one hundred dollars each ($100). Such reduction of capital stock shall be accomplished by each holder of outstanding shares of this company’s stock surrendering to the company, for retirement, ninety-nine per centum (99) of the shares held by him.
“Upon the surrender to this company by any shareholder of the entire number of shares, and parts of shares, of this company’s stock which he is hereby required to surrender, this company will assign to him, for each share so surrendered, thirty-nine dollars and twenty-seven cents ($39.27) of the stock of the Northern Pacific Railway Company, and thirty dollars and seventeen cents ($30.17) of the preferred stock of the Great Northern Railway Company, and proportional amounts thereof for fractional shares of the stock of this company.”

And on the same day the said directors called a special meeting of the shareholders of the defendant company to vote upon said resolutions and upon such other business as might be brought before said meeting. That the requirements of the statute regarding the holding of the special meeting have been complied with is not disputed, but the lawful right of the stockholders to approve, and of the directors to carry out, the distribution of surplus as proposed, is questioned, and the court is asked to enjoin the stockholders from meeting and passing upon the resolutions proposed by the directors as aforesaid, and the directors from carrying it out if approved.

The Corporation act of this state very clearly and distinctly defines the method to be pursued bjr a corporation desiring to reduce its capital stock; it is not disputed but that the proceedings taken in the present instance have followed the statutory directions, so that the asking of the court to enjoin the meeting of the stockholders is a mere incident to- the real question, which is the prohibiting of the directors of this company from dividing the surplus in the manner proposed, for if the action of the. stockholders at the special meeting should be the approval of the proposed reduction of capital stock the result would be, if carried out, the creation of a large surplus of assets. Before the court will allow an injunction order to restrain a corporation from distributing surplus assets on the prayer of a complaining stockholder it should be satisfied that the complainant is entitled to the relief he asks on the case presented.

The able and ingenious argument of the .complainant’s counsel rested largely upon the contention that the decree of the supreme court of the United States, above recited, not only prevents the distribution of the surplus assets in the manner proposed, but goes further and requires that the defendant company shall transfer to the original stockholder, or his transferee, the same stock which was delivered in exchange for the defendant’s stock. To me it is very clear that the decree of the supreme court will not bear any such construction; it controls the action -of these defendants only so far as the holding of the stock and the exercise of such powers as the ownership of. stock in a corporation usually confers may be in violation of the act of congress with regard to interstate commerce, and that the statement or proviso in the decree that nothing in it contained should interfere with the transfer of the stock to the stockholders of either of the railway companies, any stock which the defendant might have received from stockholders in exchange for its stock, is not a direction that it shall transfer it in any particular method or form, but is added to the decree to avoid the possible construction that the stock could not be returned to the original holders if it was wise, or possible to do so. There is no doubt about the character of the original transaction; it was intended to be, and was, a sale of stock to the defendant company with every indicia of ownership and title; the purchaser was not bound to retain one share of the stock; it had the right to sell any or all of it and invest the proceeds in other securities, and did do so in the ease of the preferred stock of the Northern Pacific company; upon such sale and delivery the stock of the two railway companies became the assets of the defendant company, upon which the value of its stock depended. Large quantities of the capital stock of the defendant have been sold in the open market to purchasers who had a right to rely upon the well-known character of the assets of this company as a protection to their investment, and it would not make the slightest difference whether the stock in one instance was originally issued for cash and in another in exchange for the stock of the two railway companies; the cash and the stock are the common assets of the company and each stockholder is entitled to the benefit of all of the assets of the corporation whose stock they hold, and if a division of the surplus is to be made from securities held as assets every stockholder is entitled to have his proportionate share of each class where there is a possible or probable difference in market value.

The complainant also contends that as the purpose for which the stock was acquired lias been adjudged to be unlawful, the transfer and sale of the stock was void db initio, that no title passed and upon surrender of the stock of the defendant company, the original holder, or his transferee, is entitled to demand and have the identical stock he sold or transferred to the company returned to him. If this insistment of the complainant is sound, he does not show what property he is entitled to have returned. Eor all that appears to the court at present his stock may belong to the class that was sold for cash, in which case he would have no ground to complain, for he is getting his equitable portion of the assets of the company, be they worth more or less; but in my judgment he would not be entitled to the relief he seeks if he had been able to show that his stock was originally issued to one who had turned over to the defendant company stock in either of the two railway companies, for if the original stock was issued for an unlawful purpose the person who paid the consideration and who accepted the stock was one of the conspirators and can hardly ask the aid of a court of equity to restore to him property which he contributed to an illegal enterprise; he must abide the consequences of his own act. To permit the originators of an unlawful scheme, or their successors in title, to withdraw from tire property of the company a special class of assets and leave as security for the unoffending stockholder such assets as might remain as a security for his investment, is inequitable. This corporation is not to be dissolved; it holds many valuable securities other than the stocks of these two railway companies, and ■ expects to continue business, and might, so far as I can sec, sell all .of these stocks, the holding of which had become unprofitable, and divide the cash among the stockholders or invest it in other proper securities. It seems to me that the only question on this branch of the case is what is the character of the title by which the defendant corporation holds these stocks. I am satisfied, from the evidence before me, that the stocks were sold and conveyed without reservation to the defendant, and that its directors might sell all of one class of stock and hold the other, and that each stockholder would then have a joint interest in the stock retained as well as in the cash. If one class of assets had depreciated in value and the other had increased in worth during such ownership, would it be seriously contended that a favored class of stockholders could take the valuable assets and leave the depreciated to satisfy the other stockholders? I think not. Stockholders are, in a sense, partners, and the property of the firm belongs jointly to all. Uo trust-was created when the stocks were transferred, at least none was announced to the public when the stock was offered for sale, or shown on this hearing, and a secret trust, if now disclosed, would not be sustained, at least against such stockholders as are not subject to its protection.

The complainant further argues that the law under which the defendant was organized, while permitting a reduction of stock, does not provide for a distribution of a portion and the retention of the balance of the assets as the property of the corporation. The suggestion that a corporation cannot retain a portion of its assets to represent the capital stock after reduction is without merit, otherwise every reduction of capital would require a distribution of all the property of the Compaq and thereby in effect work a dissolution of the corporation-.

By the reduction of the capital stock of a corporation, not impaired by losses, there must necessarily occur a surplus of assets to the extent of the reduction, and unless the rights of creditors will be affected thereby, or the capital impaired, it becomes the duty of the directors to make an equitable distribution of such surplus, or of so much thereof as the carrying on of the business for the best interest of the stockholders may not require. Strong v. Brooklyn Railroad Co., 93 N. Y. 426; Williams v. Western Union Telegraph Co., 93 N. Y. 163; Morawetz Corp. 453. The proposed distribution is not a dividend in the sense intended by the statute, but a division of surplus capital rendered useless for the purpose' usually attributed to capital, because the issue of stock which it represented has been canceled.

The right to distribute the surplus having been determined, the question arises, can the directors distribute securities in which such surplus is invested, or must it be reduced to cash? In this case the character of the assets make an equitable division easy to accomplish; each share of the stock to be assigned to a stockholder in the manner proposed has an equal market value; if there is a difference in value between the two classes, or the value of one is subject to greater fluctuations than the other, each shareholder gets an equal proportion of the fat and the lean, and in view of the possibility that a peremptory sale -of this stock, amounting to over three hundred millions of dollars, would be attended with disastrous results to the stockholders of this company, it would seem that the best interests of the shareholders require that a division of the stock of the two railway companies be made between them unless prevented by some imperative legal rule; no such rule exists. On the contrary, the power of directors of a corporation to divide property other than money among the shareholders is sustained by abundant authority. 9 Am. & Eng. Encycl. L. (2d ed.) 695; Ehle v. Chittenango Bank, 24 N. Y. 548; Leland v. Hayden, 102 Mass. 542.

Having determined that the stock of the two railway companies constitutes a part of the assets of the defendant company, in which, or in its proceeds, each shareholder has a vested interest to the extent of his holdings of the defendant company’s stock; that when the capital stock of a corporation is reduced and a surplus of assets results, it becomes the duty of the directors to divide such surplus as is not required for the use of the company among the stockholders; that a division of property, as distinguished from cash, is lawful; that each shareholder is entitled to his proportionate share of each class of property so held for distribution, and that the proposed method of division is equitable,Ut is clear that the complainant has shown no equity upon which to base its claim for the restraining order of a court of equity. Whether this complainant would be entitled to equitable relief in any phase of the case is extremely doubtful. I must take the bill of complaint as stating complainant’s position correctly, and it is there alleged that notice of the action of the directors on this subject, together with the call for a special meeting for its approval, was issued on the 22d day of March, 1904, and that after that, and on the 28th day of March following, the complainant went into the market and bought five hundred shares of defendant’s capital stock; manifestly he bought such stock with knowledge of the proposed action of.the directors and stockholders, and thereupon immediately filed his bill of complaint in this cause. But one inference can be properly deduced from his conduct, and that is, that it' bought this stock with the fixed purpose of harassing the directors of the company and its stockholders and to hinder and delay them, in carrying out a proposition for the adjustment of the affairs of the company made necessary by the restrictive order and decree of the United States court, and to delay the stockholders of the defendant company (many, of whom had nothing to do with the origin of the scheme afterwards declared unlawful) in the receipt of dividends or income from their investment.

The order to show cause will be discharged.


text:
    Robert A. Willis et al. v. George E. Clymer.
    [Filed April 1st, 1904.]
    1. A trustee should not be allowed credit for money alleged to have been paid for a judgment against the trust estate merely on his own testimony as to such payment, without any voucher or evidence of judgment or execution.
    2. Where an attorney-at-law prepared a trust deed for clients for whom he had acted before, in which deed he was warned as trustee to hold the property, sell the same, and apply the proceeds to pay off all liens and encumbrances, and any and all costs, charges and counsel fees connected with the sale or redemption of the property, the trustee was not entitled to retain any part of the fund arising-from the sale of property as remuneration for professional services rendered before the trust deed was made.
    3. He was entitled, however, to reasonable counsel fees for services rendered after the execution of the deed.
    On bill for accounting.

      Messrs. E. A. & W. T. Day, for the complainants.

      Mr. George E. Clymer, pro se, for the defendant.
   Bergen, V. C.

The object of this suit is to require the defendant to account as trustee and to pay over to the complainants whatever may be found due to them on such accounting, and also to procure the removal of the defendant from his position as trustee.

The latter result has already been accomplished since the commencement of this suit by the voluntary withdrawal of the defendant and the transfer by him of his title in the trust estate, to the co-trustee.

The trust was created by a deed bearing date May lltli, 1897, made by the complainants, in and by which they convoyed to the defendant and to Eobert A. Willis, jointly, all their interests in certain lands, devised to them by the last will and testament of one Jacob Willis upon certain trusts set out in said deed, viz.: First, the sale of lands at such times and prices as might, in their discretion, be for the best interests of the grantors; second, that the trustees would take, receive and apply the proceeds of any such sale or sales “first to pay off all liens and encumbrances against any and all of said property, and secondly, to pay any and all costs, charges and counsel fees connected with the sale or redemption of any or all of said property;” third, to make and render unto each of the said parties, at the end of each and every six months from the date thereof, a true and perfect statement of all sales, moneys received, paid,' laid out and expended, and the balance in hand, and in case there were more moneys in hand than was needed to taire care of said properties, to pay the balance thereof to the grantors, share and share alike.

It is admitted that the trust was created in order to provide a convenient method to make title in case any of the lands were sold. The defendant admits that, after the execution and delivery of his deed, lie made two sales of portions of the land, one to a Mr. Wade, for $1,867, and another to an agricultural company for $500, a total of $2,367. All of these proceeds, the defendant admits, he received, or directed the disbursement of, and should account for, his co-trustee not having had possession of any of the funds. The proceeds of the Wade sale reached the defendant’s hands March 27th, 1899, and of the second sale December 10th, 1900. After March 27th, 1899, the defendant was repeatedly called upon to furnish a statement of, and account for, the net proceeds of the first sale. To these demands he apparently paid no attention until November 3d, 1899, when he sent each of the parties in interest a statement, charging himself with the proceeds of sale and taking a credit, amounting in the whole to $1,262, for disbursements, none of which are disputed, excepting an item of $250, claimed to have been paid as costs, fees and expenses of a sheriff’s sale under a common law judgment, the amount of the judgment being less than $300, and held by the trustees by virtue of air assignment thereof to them, for which the defendant had paid $60, and for which payment he had taken a credit. By the statement thus rendered the defendant admitted that he had in hand, March 27th, 1899, money belonging to the complainants amounting to $605. It further appeared that, after the second sale, repeated demands were made by the complainants on the defendant to account for and pay over the money in his hands belonging to the complainants, all of such demands being without avail until, under threats of legal proceedings to enforce it, the defendant furnished 'a statement, charging himself with the previous balance of $605 and, with the amount of the second sale, making a total of $1,105, which he attempted to discharge by an allowance of $200, paid by him to the firm of attorneys of which he was a member, as counsel fees for services rendered in and about the Wade sale, and also by a general charge of $1,000 for counsel fees from 1891 to date, less the sum of $15 paid him by some of the parties in 1891, the net result being that the complainants, according to his statement, were indebted to him in the sum of $80.

The items disputed by the complainants is the charge of $1,000 for counsel fees, and also of $200, part of the allowance claimed of $250, for expenses of the sheriff’s sale above mentioned. The defendant’s explanation of the $250 item is that $50 of it was paid by him to the sheriff for his fees and costs; this the complainants do not dispute; that the residue of this item, namely, $200, was paid by him in cash to Mr. Maimers, now deceased, formerly a counsclor-at-law, practicing in this state; that the trustees had purchased a judgment against one of the parties having some interest in the land, under which an execution was issued and a levy made on the interest of such owner in these lands; that there were other judgments against the same defendant previous to the one so purchased, although no levies had been made thereunder. That, on the day of the sale, Mr. Manners, representing one of the judgment creditors, was present and bid on the property; that the defendant stopped the sale for a short time and induced Mr. Manners to cease bidding upon paj'ment to him of $200; that the paj'ment was made in cash and no receipt or voucher taken for the same.

I do not think the trustee should be allowed to discharge himself for so large a sum of money without a voucher, or some proof of the payment, other than his own testimony, and certainly not without some proof of the circumstances connected with the payment. Mr. Manners is dead, and it is fair to presume that he accounted to his client for the money. The judgment is a matter of record, and it would have been, it seems-to me, very easy for the defendant to have produced the plaintiff in execution, and shown -by him that some such payment had been made. I shall therefore not allow this credit.

With reference to the charge of $1,090 for counsel fees, the defendant undertakes to justify himself in making this charge by the following circumstances: that, in the year 1891, some of the complainants — -'one of them at least — consulted Mm! with reference to the interests of the complainants in the lands devised by Jacob Willis; by the terms of that will a life estate was given in the lands with remainder to the complainants; that the life tenants had procured an opinion from a ñrm of lawyers in Uew York City that under the terms of the will their estate was a fee-simple, and the defendant was employed to give his opinion on the matter. That he agreed to make the searches necessary and furnish the opinion for $50; that of this sum only $15 was ever paid; that he furnished the opinion, establishing the rights of the complainants as remaindermen. That from 1891 to 1897 he was rendering services to these people, but furnished no evidence from which the amount or character of such service can be ascertained beyond the fact that, on two occasions, he negotiated for the sale of part of the lands, which was not accomplished, because the persons to make the deed could not agree upon the price.

■ In my opinion, the defendant is not entitled to any credit on account of the trust funds for any services rendered by him previous to the execution of the trust deed. The defendant was a counselor-at-law and prepared the trust deed, which stated in clear terms what application he should make of the proceeds of any sales, and he was limited in the payment of costs, charges and counsel fees to such as were connected with the sale or redemption of any or all of said property. Nothing, is said in the trust deed that any of this money was to be taken to pay any previous claim. The defendant knew, that by the terms of the trust, which he had accepted, that he was to account for the proceeds of the sale of that property in the manner prescribed in the deed, and that he had no right to take any of the trust funds to pay any previous claim, unless it was provided for in the deed, and if ho had such a claim, -which he expected to be paid out of the proceeds of the sales, naturally, he would' have provided for it. The parties whom he claimed he had served were to execute the deed; if it was their understanding that the trust moneys were to be used to pay him for previous services, they would have been perfectly willing to have it provided for in the deed; if they demurred, the defendant could have declined to accept the trust on the terms stated.

The next question that arises is, is he entitled to have any compensation by way of counsel fees, for services rendered by ■him in the execution of his trust?

Ordinarily, an executor, or a trustee, is only entitled to the compensation which the law provides; he is not entitled t-o counsel fees, but courts of equity have at times awarded them where the circumstances of the case seem to justify it. In this case the trust did provide for the allowance of counsel fees connected with the sale or redemption of the property, and I think I am justified in allowing to the defendant reasonable counsel fees for services rendered after the execution of that deed. The first service rendered was connected with the sale of land to Mr. Wade, and the character of the service, as it appears from the evidence, justifies a liberal allowance; he himself has fixed that in the last statement which he produced at $203, which he claims to have paid Clymer and Johnson for services in the Wade sale. I think the amount reasonable and ought to be allowed.

The only other service which he rendered was connected with the sale to the agricultural company, for which he received $500.

It further appears that the defendant went to Denver in October, 1901, and on his return stopped for a day in Cincinnati to look after what he supposed to be some interest which the complainants claimed in certain lands in the city of Cincinnati. I am not disposed to consider this service of any great value; it was perfectly manifest to the defendant, before he went there, that the complainants had no interest in the land that could be maintained. He himself admits that the very first interview with a friend from Washington Territory satisfied him that the claim was a stale one, and it must have been manifest to him, as it would have been to anyone, that the claim for a large part of the city of Cincinnati, based on a land warrant one hundred years old, could not be maintained, and I am of opinion that $150 will be a liberal allowance for the services rendered by him as counsel in addition to the $200 claimed by him in connection with the Wade sale.

I am satisfied that the allowances are liberal when we consider the manner in which the deféndant has executed this trust. He did not render to each of the parties a statement at the end of every six months; what he did furnish was only done after repeated demands and were in their character very unsatisfactory.

I find that the defendant should be charged with $805 as the net proceeds of the Wade sale, received by him on March 27th, 1899, from which should be deducted $200 counsel fees allowed for services in that matter, leaving a balance of $605, to which interest should be added from that date; and that there is due from the defendant the further sum of $500 on account of the sale to the agricultural companj', received December 10th, 1900, less $150, allowed for services, so that he is to be charged with $350, with interest from that date. ■


author: Magie, Ordinary.

text:
    In re collateral inheritance tax against the Vineland Historical and Antiquarian Society.
    [Filed February 16th, 1904.]
    1. The act of a surrogate in assessing on a legatee under a will a tax on the legacy, under the provisions of section 13 of the Collateral Inheritance Tax law, is not a judgment which will conclude the legatee from contesting his liability to the tax, when called upon to show’cause before the orphans court why the tax should not be decreed to be paid, under the provisions of section 16 of the law, although the legatee has failed to appeal from the assessment of the surrogate within the time limited by section 13. The New York act, as construed in Matter of Wolfe, 137 N. y. 205, distinguished.

      2. An incorporated society claiming to be exempted from taxation under the Collateral Inheritance Tax law as being within the exemptions enumerated in section 1, must make out its claim by proof.
    3. When such a society claims exemption as a “charitable institution,” it must appear that the purposes and objects to which it is bound to devote its property, are charitable within the doctrine of charitable uses.
    4. Property devoted to educational purposes is within that doctrine.. It will not be sufficient to show that the society is incorporated under the-laws permitting the incorporation of societies for the promotion of learning ; it must be shown that th'e property is in fact devoted to such purposes and has an educational character.
    o. The objects of this societj' are “to collect and preserve historical and current accounts of events, persons and inventions, scientific investigations and photographs, drawings, models and specimens, and all other materials of a similar character connected with the interests of Vineland.”
    0. It appears that the collection of the society is now open to the public, but there is nothing in the terms of the legacy which was assessed, or in the organization or rules of the society, imposing on it any such duty in the future. — Sold, (1) that the objects thus shown do not possess an educational character, and (2) that the collections of the society are not necessarily to be devoted to a public use.
    On appeal from a decree of the orphans court of Cumberland county.

      Mr. J. Ilamptori'Fithian,' for the appellant.

      Mr. Charles K. Landis; for the respondent.
   Magie, Ordinary.

The decree appealed from was made by .the orphans court, under the following circumstances: By the will of Charles Iv. Landis, who died in the county of Cumberland, June 12th, 1900, a legacy was given to a corporation entitled the “Vineland Historical and Antiquarian Society.” On March 18th, 1901, the surrogate of that county had appointed an appraiser, under the provisions of section 13 of the act entitled “An act to tax intestates’ estates, gifts, legacies, devises and collateral inheritances in certain cases,” approved April 15th, 1894 (Gen. Stat. p. 3339), and upon the report of his appraisement had fixed the value of the estate and the tax to which the same was liable, and had given notice thereof in the manner prescribed by that section. No appeal therefrom was made either to the ordinary or to the orphans court within sixtjr days after the surrogate’s .assessment was made and filed.

The tax'thus fixed was not paid, and the state comptroller notified the prosecutor of the pleas of the county of the failure to pay, and the prosecutor thereupon proceeded,-under the provisions of section 17 of that act, to' procure a decree from the orphans court, under the power conferred upon it by the provisions of section 16. Upon the prosecutor’s request the surrogate ■of the county issued citations, and cited the persons interested ¡before the orphans court, to show cause why the tax should not be paid. Upon the return of the citations the parties interested appeared by counsel, and the orphans court proceeded to the ■consideration of the matter thus presented. The learned judge, upon the facts before him, reached the conclusion that the legatee, the Vineland Historical and Antiquarian Society, was not liable to a tax upon its legacy, because he found it to be a “charitable” institution or organization, and so excepted from the provisions of the act by the express terms of its first section. Thereupon a decree was made discharging the rule to show cause and setting aside the assessment of the tax. From that ■decree this appeal is taken by the prosecutor of the pleas.

There 'are two contentions made by appellant in support of this appeal. The first is that the orphans court had no jurisdiction in this case to entertain the question of liability to the tax assessed upon the legacy, because the parties interested were debarred from raising that question by their failure to appeal from the surrogate’s assessment within the time limited by the terms of section 13.

This contention involves the construction of section 13. The respondent argues that the appeal therein provided for relates ■only to the valuation and the amount of tax fixed, and not to the liability of the legatee thereto.

I feel unable to jneld to this contention. The act of the surrogate, prima facie, fixes the liability to the tax as well as the amount thereof. The appeal given is from the appraisement and the assessment, and I have no doubt that upon such an appeal the parties interested might well complain either of the amount assessed or of the liability to assessment, or both, and that the orphans court might, upon such an appeal, adjudicate accordingly.

But in the absence of an appeal under section 13, and an adjudication thereupon, I do not think the surrogate’s assessment debars the parties from raising the question of liability when they are called upon, by citation, under section 16, to show cause why the tax should not be paid. The language of that section is, perhaps, wanting in clearness, but I think it must be construed as empowering the orphans court to determine whether the tax should be paid; to decree its payment, and to enforce such decree as other decrees of that court maj'- be. enforced, with the additional provision that a transcript of the decree may be given the effect of a lien by judgment. A party interested, thus cited, must be deemed to be permitted to interpose any objection to such a decree.

The court of appeals of blew York, I am aware, has given a different construction to the section of the Collateral Inheritance Tax law of that state, which is in substantially identical terms with section 13 of our act. In the matter of the estate of Wolfe, 137 N. Y. 205.

The opinion of Judge Grey, in that case, is ingenious and forcible, but is based upon the provisions of section 15 of the blew York act, which expressly confers on the surrogate’s court jurisdiction “to hear and determine all questions in relation to the tax arising under the provisions” of the act. It was therefore held that the surrogate’s act — adjudging liability within the jurisdiction conferred — had an element of finality, and would conclude the parties in subsequent proceedings for the collection of the tax assessed. This view was also expressed by Judge O’Brien, in the same court, in Matter of the estate of Ullmann, 137 N. Y. 403. See, also, Amherst College v. Ritch, 151 N. Y. 343.

But our act confers no such jurisdiction on the surrogate. On the contrary, the corresponding section of our act (lo) expressly confers that jurisdiction upon the ordinary or the orphans court. The action of a surrogate, under our system, therefore, possesses none of the qualities of a judgment which would conclude ’the parties interested from contesting their liability when cited to show cause why a decree for the payment of the tax should not be made and enforced.

The other contention of the prosecutor of the pleas is that the orphans court erred in determining that the legacy in question was exempt from the tax imposed by the act under consideration, because given to a person or corporation excepted from its provisions.

The claim for exemption is put, and can only be put, upon the ground that the legatee, the Yineland Historical and Antiquarian Society, is a charitable institution within the meaning of the language used in section 1 of the act.

To determine whether an institution is “charitable,” -within the meaning of the Collateral Inheritance Tax act, resort must be had, in my judgment, to the accepted doctrine respecting charitable uses. That institution is charitable with the act, the property and funds of which are devoted to purposes which are charitable within that doctrine, i. e., for such purposes as would support as valid a creation of a trust or gift. Our courts of law, when called on to determine what property is exempted by similar designation from the imposition of annual taxes, resort to those doctrines. Paterson, Receiver, v. High, 35 Vr. 116; Litz v. Johnston, 36 Vr. 169.

The society, it appears, was incorporated under the provisions of the “Act to incorporate’societies for the promotion of learning,” approved April 9th, 1875. Gen. Stab. p. 1925. It is not open to question that gifts for educational purposes are gifts to valid charitable uses in this state. Hyde’s Executors v. Hyde, 19 Dick. Ch. Rep. 6. In my judgment, any institution, the real purpose of which is to promote learning in the popular meaning of the word, and which is tona 'fide carrying out that purpose by means reasonably appropriate, is an institution of an educational character, and therefore charitable. But a right to exemption from the collateral inheritance tax will not be made out by mere proof that the institution was incorporated under the act for the promotion of learning, or avows itself to be organized for the purpose of promoting learning. An institution claiming exemption on the ground of its educational character must disclose the objects to which it is bound' to devote its property. It must appear that the objects disclosed have some educational value, and that the benefits and advantages of the institution in respect to .such objects are open to the general public, or at least to such persons as may seek them. An association which collects and preserves a library, of books, open to general use, would be a charitable institution under this act, for it furnishes the means of acquiring knowledge. It will not be excluded because many, or even all, of the books it collects attract the attention of scholars rather than of the general public.

It is made to appear in this case that the objects of the society now under consideration are the following, viz.: “To collect and preserve historical and current accounts of events, persons and inventions, scientific investigations and photographs, drawings, models and specimens, and all other materials of a similar character connected with the interests of Vineland.”

Are the objects thus disclosed charitable in character?

The only contention on the part of the respondent is that such a collection which it is bound to preserve has, or will have, an educational value.

I find it extremely difficult to discover in the “materials” particularly mentioned any such adaptation to education or the promotion of learning as would support a gift for a charitable use. But the society is not confined to the collection of materials thus particularized, but iras power to collect other “materials” of similar character. All the materials collected, however, must be connected with the interests of Vineland. Such a collection would not resemble a library, but rather a museum. Citizens of Vineland might resort to it out of curiosity, but I cannot perceive that it would perform any educational function.

There is another contention by the prosecutor which has great force. It appears that the legacy given to the society was given without any limitation or condition. The gift, therefore, did not impose on the society any duty with respect to its use of the fund, except that which may be inferred from the terms contained in the organization of the society as a corporation. The agreed-on facts show that the society now opens its collection (and what that now consists of is jiot disclosed) to the public, under proper regulations. But it does not appear that, in the certificate of its incorporation, or by any rule or by-law, the society is bound to maintain the collection open to the public.

As a society which claims exemption from the burden of taxation must show its right to be exempted, a failure of proof will be fatal to the claim. If the objects to which the society’s property is devoted are not clearly charitable in the sense of being educational, or if it is not shown to be bound to permit a perpetual public use, I think the exemption ought not to be allowed. As, in my judgment, the society has failed to establish its right in these respects, I conclude that decree of the orphans court is erroneous. It should be reversed, and a decree made directing the payment of the tax assessed by the surrogate.


text:
    In re estate of Jacob J. Vreeland, deceased.
    [Argued February Term, 1904.
    Filed May 10th, 1904.]
    1. A will giving to A. a sum of money in trust, the interest to be paid to A. annually, and after her death the principal sum to be divided among her children, vested a life interest in the legacy in A., and a right to the legacy itself in her children, on her death, the children’s interest being vested, subject only to be opened to let in after-born children.
    2. While a cestui que trust may be invested with the powers of and permitted or required to act as a trustee, yet his interest as cestui que trust, especially when it is for life only, being at variance with his duty as trustee, courts will not adopt a construction of a will involving such conflict of interest unless the testator’s intent to accomplish such result is clear.

      3. A will giving to A. a sum of money in trust, the interest to be paid to A. annually, and after her death the principal sum to be divided among her children, created a trust in A., though she was also cestui que trust, and entitled her to receive the fund from testator’s executors and hold it on the trusts specified.
    On appeal from the orphans court of Somerset county.

      Mr. Horace Goddington, for the appellant.

      Messrs. Bartine & Beelcman, for the respondents.
   Magie, Ordinary.

Jacob M. Yreeland ■ and Jacob Yreeland, Jr., executors of Jacob J. Yreeland, deceased, exhibited to the orphans court of Somerset county their final account, and thereby disclosed a balance in their hands of $11,761.64. They appended thereto a list of securities in which they had invested funds, which they claimed to hold in trust under the will of the deceased.

Catharine Jane Schultz and Jennie W. Kenyon, legatees under said will, excepted to said account on two grounds: (1) That the executors had not accounted for interest accumulated on their legacies, and (2) that the executors had invested their legacies, which the executors claimed to hold in trust, when the will created no trust of such legacies in the executors.

Jennie W. Kenyon appealed from the decree of the orphans court, and now insists that, by the terms of the will of Jacob J. Yreeland, she became entitled to a specific legacjr, payable to her in trust, and that the executors should have accounted for all interest accrued thereon, at least after one year from the death of the testator.

The clause of the will of Jacob J. Yreeland brought into question by this appellant is in these words:

“Fourteenth. I give to Jennie W. Kenyon, wife of George AY. Kenyon, of New York City, in the State of New York, the sum of two thousand dollars, in trust, the interest to be paid to Jennie AV. Kenyon annually, and after her death the principal sum of two thousand dollars to be divided among her children share and share alike.”

The plain intent of testator is thus disclosed to vest in Mrs. Kenyon a right to the interest of the legacy during her life, and to vest in her children a right to the legacy itself upon her death. The children’s right is now vested, subject only to be opened to let in the right of after-born children. Both Mrs. Kenyon and her children are cestuis que trustent of the fund.

That a cestui que trust may be invested with the powers of, and may be permitted, and even required, to act as a trustee, seems settled. Story v. Palmer, 1 Dick. Ch. Rep. 1; Cruikshank v. Parker, 7 Dick. Ch. Rep. 310; 1 Perry Trusts § 59. As the situation of a trustee, who is also cestui que trust, especially when his interest is for life only, may raise a conflict between the trustee’s .duty and his interest, courts will not adopt a construction of a will which will involve this difficulty unless the testator’s intent is clear. In Parker’s Executors v. Moore, 10 C. E. Gr. 228, a will was under consideration whereby there was a bequest to a-daughter of the testator of a sum of money, the interest of which was to be paid to her during her life and the principal to her children at her decease. This was deemed capable of being construed, and was construed, as a bequest to the daughter for life only, and it was held that the principal sum was not to be paid to her, but to be held by the executors in trust. The executors, desiring to be relieved of the trust, were discharged therefrom, and the fund was administered by the court, and since my advent to office as chancellor, and upon the daughter’s death, has been distributed under the provisions of the will.

But the clause now before us manifestly differs from that contained in the Parker will. Here is an express gift to Mrs. Kenyon, and it is expressed to be a gift in trust. If she were not a cestui que trust, there could be no possible question a's to testator’s intent. A bequest to her in trust for a stranger or 'for her children must have been construed as creating a trust in her, and entitling her to take the fund from the executors and hold it on the trusts specified.

. I am unable to construe this clause otherwise than as creating a trust in Mrs. Kenyon.

It is not intended to indicate that she may not be compelled to give security for the fund for the protection of the cestui que Irusient, who will have the right to the corpus thereof at her death. It is sufficient to dispose of this appeal to say that the theory that the executors, by implication, took this legacy in trust, on which the account was made up and its allowance decreed, is erroneous. It ignores the express provision made by the testator.

It results that the exceptions should have been allowed, and the decree confirming the account must be reversed.


text:
    In re Davenport's appeal.
    [Filed November 30th, 1903.]
    1. Where a decree expressing the necessity for and appointing an administrator pendente lite of a decedent’s estate is not appealed from in the time required by law, an appeal from a subsequent decree appointing another, and fixing the amount of security to be given, and also reciting the former decree and declination of the first appointee to serve, does not call in question the necessity for the appointment of such administrator.
    2. An appeal which calls in question only the selection of the person appointed as administrator pendente lite of a decedent’s estate, and the amount of the security to be given, they being matters within the discretion of the court, is ineffective.
    On motion to dismiss appeal.

      Mr. Frank T. Lloyd, for the motion.

      Mr. Henry F. Stoclcwell, contra.

   Magie, Ordinary.

The motion to dismiss this appeal is supported in the argument upon the ground (among others) that, if such an order is appealable, the appeal in the present case, so far as the same is effective, was not taken within the time limited by law.

The decree appealed from was dated September 18th, 1903. It appointed an administrator pendente lite of the estate of Thomas C. Davenport, deceased, and fixed the amount of the security to be given by him. The appeal was demanded October 12th, 1903.

The transcript shows that on June 6th, 1903, the same orphans court made a decree, appointing an administrator pendente lite of the same estate and determining the amount of security which he should give. No appeal has ever been taken from that decree. The decree appealed from recited the decree of June 6th, 1903, and further recited that the administrator appointed by that decree had declined to act. The present administrator pendente lite was then appointed.

A decree appointing an administrator pendente lite is obviously founded on an adjudication by that court on each of three matters: (1) That a temporary administrator of the estate is essential to its care and preservation; (2) that a certain person is a proper person to be appointed; and (3) that he should be required to give security to a fixed amount.

The decree of June 6th expressed the adjudication of the court as to the necessity for such an administrator. If it was desired to review that adjudication, an appeal should have been taken from that decree. No such appeal having been taken within the time limited by law, the present appeal from the decree of September 18th calls in question only the selection of the person and the security to be required. If the administrator pendente lite first appointed had died, the selection and appointment of an administrator in his place would be a mere continuance of the former decree, and an appeal would not involve a review of the original decree.

In Dietz v. Dietz, 11 Stew. Eq. 483, Runyon, ordinary, held that the selection of the person to be appointed and the amount of security to be required of an administrator pendente lite were matters within the discretion of the orphans court, and that a party who had applied to that court for the appointment of an administrator pendente lite, was not aggrieved by a decree for such, an appointment of a particular person and fixing the security to be given by him. His appeal from the decree appointing was dismissed. Under the authority of that case, the decree appealed from here, so far as it can be effective, is not appealable. Therefore, without considering any other ground for dismissal presented in the argument, the appeal must be dismissed.


author: Reed, Vice-Ordinary.

text:
    In the matter of the assignment for the benefit of creditors of Maurice Browning and George Browning, trading, &c., as Browning Brothers.
    [Filed April 27th, 1904.]
    1. An assignment for the benefit of creditors, executed in Pennsylvania, with nothing in the instrument to indicate that it'is to be performed elsewhere, is a Pennsylvania contract, without reference to the domicile of the assignor.
    2. A New Jersey orphans court has no jurisdiction of an assignment for the benefit of creditors made in Pennsylvania, protecting creditors substantially as provided by the New Jersey statute, though assets exist in New Jersey and the assignment is recorded there.
    On appeal from a decree of the orphans court of Camden county.

      Mr. Joseph GasTcill, Mr. Herbert A. Drake and Mr. Norman Grey, for the appellants.

      Mr. Martin V. Bergen and Mr. David J. Pancoast, for the appellee.
   Reed, Vice-Ordinary.

These appeals are from a decree of the orphans court of Camden county, by which that court denied the petition of certain creditors that the assignee should make distribution of the assets in his hands in this state. The denial of the petitions was put upon the ground that the assignment was a Pennsylvania transaction, and that the New Jersey court should not take further jurisdiction over the matter.

I agree in the conclusion of the learned judge in the court below that the firm (the assignor) must be regarded as domiciled in the city of Philadelphia when the assignment was executed. Whether, however, it was or was not so domiciled, the assignment, having been executed in Philadelphia, and there delivered to the assignee, with nothing in the instrument to indicate that it was to be performed elsewhere, it is to be regarded as a Pennsylvania contract. The point to be resolved is whether an orphans court of this state, by force of the terms of our act to secure creditors an equal and just division of the assets of debtors who convey to assignees for the benefit of creditors, can taire control of a foreign assignment.

That jurisdiction cannot attach' to a domestic court in this class of proceedings, by force of that act, is entirely clear.

The course of procedure in administering an assigned estate, according to the terms of our statute, is referable solely to an assignment made in or to be performed in this state.

There is not the least doubt respecting the power of the courts of Pennsylvania to take cognizance of the administration of this assignment. The assignee, the moment he accepted the trust and placed the assignment in the office of the recorder of deeds, became vested with a complete title to all the property of the assigning firm. Bank v. Holmes, 85 Pa. St. 231. Either an acceptance by the assignee or a deposit for record by the assignor without the assignee’s .acceptance, irrevocably vested the beneficial interest in the property in the creditors.

When the assignee accepted the trust he became bound to administer it under the supervision of the courts of the State of Pennsylvania. He became responsible to account in that court for all the assigned property which passed to him under the instrument creating the trust. Inasmuch as it appeared that there existed no substantial difference between the rights of creditors under this instrument and under an assignment executed in accordance with the terms of our statute, it follows that upon the delivery of the present assignment all the property of the firm, whether it had its situs in Pennsylvania or New Jersey, at once passed to the assignee. The power of the assignee to administer 'the property became immediately complete, and an obligation at once rested upon him to render his account for administration in the court in which jurisdiction over the proceedings had attached. It is perceived, therefore, that if another assignment had been made in New Jersey, immediately after the execution and acceptance of this in Pennsylvania, the latter instrument would have passed nothing, for the title to all was already in the assignee. This being the position of the assignment when the original instrument was recorded in this state, neither his title in the property, as trustee, nor his duty to administer it as such, was in the least degree changed by the second record; he still remained liable to render his account in the Pennsylvania tribune.

In this situation, it appears clear that when the jurisdiction of the New Jersey court was challenged by an interested party it was the duty of that court to arrest all further proceedings in the way of administration, and to discharge the assignee from an order to distribute the fund under direction of our court, which order, if obeyed, would, in my judgment, have left him liable to again account in Pennsylvania.

My conclusion is that the decree below must be affirmed.