author: Burke, J. Fold, J. (dissenting).

text:
    In the Matter of the Construction of the Will of Gullabi Gulbenkian, Deceased. Chouchane Baliozian et al., Appellants; Gullabi Gulbenkian Foundation et al., Respondents.
    Argued March 1, 1961;
    decided March 30, 1961.

      James N. Vaughan, Jeremiah P. Lyons and Stephen A. YeghiaÁan for Chouchane Baliozian, appellant.
    I. General rules were used below to take the place of testator’s intention and thereby the courts were led into error. (Matter of Wronkow, 127 Misc. 679; Matter of Dinkel, 133 Misc. 868; Matter of Bonner, 157 Misc. 810; Matter of Stroh, 171 Misc. 681; Matter of Skinner, 81 App. Div. 449, 180 N. Y. 515; Rezzemini v. Brooks, 236 N. Y. 184; Morris v. Sickly, 133 N. Y. 456; Matter of Crane, 164 N. Y. 71; Matter of Embree, 9 App. Div. 602, 154 N. Y. 778; Matter of Allison, 53 Misc. 222, 122 App. Div. 898, 194 N. Y. .540; Matter of Krooss, 302 N. Y. 424; Matter of Carlin, 6 A D 2d 281, 6 N Y 2d 914.) II. The intention of testator as collected from the whole will is to make substitutionary gifts to descendants of his brothers with respect to the trust created by paragraph Fifth. (Taggart v. Murray, 53 N. Y. 233; Scott v. Guernsey, 48 N. Y. 106; Matter of Wells, 113 N. Y. 396; Matter of Hinchman, 141 App. Div. 95; Matter of Gallien, 247 N. Y. 195; Matter of Durant, 231 N. Y. 41.) III. The words of gift to the several descendants of Badrig and Harutune should not be rejected as meaningless unless the court is compelled to that result. (Matter of Buechner, 226 N. Y. 440; Matter of Tamargo, 220 N. Y. 225; Matter of Denton, 137 N. Y. 428; Fowler v. Ingersoll, 127 N. Y. 472; Mullarky v. Sullivan, 136 N. Y. 227.) IV. The language of the residuary clause convincingly demonstrates, when compared with the language elsewhere used in the will and particularly paragraph Fifth thereof, that the language in paragraph Fifth makes the descendants of Badrig and Harutune substituted remaindermen of the trust under that paragraph. V. The Attorney-General in the court below relied on cases which do not successfully answer our argument. (Matter of Campbell, 307 N. Y. 29; Connelly v. O’Brien, 166 N. Y. 406; Matter of Krooss, 302 N. Y. 424; Riker v. Gwynne, 201 N. Y. 143; Matter of Montgomery, 282 N. Y. 713; Matter of Evans, 284 N. Y. 571; Matter of Tompkins, 154 N. Y. 634.)

      Arthur W. Siegrist, Albert B. Maginnes and Bud G. Dolman for Araxia Buckhantz and another, appellants.
    The intention of-testator, as evidenced by the express terms of his will, was that, on the termination of the trust, the remainder shares of his deceased brothers should go to “ their several descendants per stirpes ’ ’. (Matter of Evans, 234 N. Y. 42; Matter of Fabbri, 2 N Y 2d 236; Matter of Gautier, 3 N Y 2d 502; Matter of Buechner, 226 N. Y. 440; Matter of Barr, 233 App. Div. 290, 258 N. Y. 592; Matter of Krooss, 302 N. Y. 424; Matter of Simons, 16 Misc 2d 352; Matter of Burggraf, 12 Misc 2d 152; Matter of Kilborn, 15 Misc 2d 938; Matter of Fedders, 187 Misc. 207.)

      Joseph P. Flemming and Nicholas J. Dealy, III, for National Safe Deposit & Trustee Company, appellant.
    I. The descendants of Badrig and Harutune Gulbenkian were substitutional legatees under paragraph Fifth of the will of Grdlabi Gulbenkian. The will read as a whole entirely supports a construction that paragraph Fifth provides for substitutional remaindermen. An excision from paragraph Fifth of the words “ and their several descendants per stirpes ” is unjustified. (Matter of Evans, 234 N. Y. 42; Matter of Buechner, 226 N. Y. 440.) II. The words ‘‘ per stirpes ’ ’ in paragraph Fifth remove any doubt that the words “ and their several descendants” constitute a substitutional gift of the remainder. (Matter of Krooss, 302 N. Y. 424; Matter of Barrett, 141 Misc. 637; Steinway v. Steinway, 163 N. Y. 183; Matter of Thompson, 270 N. Y. 131; Matter of Title Guar. & Trust Co., 159 App. Div. 803, 212 N. Y. 551; Matter of Fedders, 187 Misc. 207; Matter of Kilborn, 15 Misc 2d 938; Staples v. Mead, 152 App. Div. 745, 214 N. Y. 625; Matter of Olds, 100 Misc. 388; Matter of Kelling, 206 Misc. 998.) III. Badrig and Harutune G-ulbenkian having predeceased the income beneficiary, the remainder under paragraph Fifth of the will of Gullabi Gulbenkian vested in their several descendants, as substitutional legatees, upon the death of the income beneficiary. (Matter of Fischer, 307 N. Y. 149; Schwartz v. Rehfuss, 129 App. Div. 630, 198 N. Y. 585; Clark v. Cammann, 160 N. Y. 315; Matter of Bierhoff, 271 App. Div. 743, 297 N. Y. 694; Matter of Meahl, 241 App. Div. 333; Matter of Burdsall, 128 Misc. 582, 221 App. Div. 756; Matter of Doerschuck, 8 Misc 2d 422; Matter of Swift, 204 Misc. 399; Matter of Watson, 262 N. Y. 284; Matter of Clark, 120 Misc. 191; Matter of Montgomery, 258 App. Div. 64, 282 N. Y. 713; Matter of Campbell, 307 N. Y. 29.)

      George Mutterperl for Hermáne Guerdan, appellant.
    I. The intention of testator must be ascertained from language used in his will. Testator’s will clearly expressed his intention to create substitutional gifts in paragraph Fifth. (Robinson v. Martin, 200 N. Y. 159; Mullarky v. Sullivan, 136 N. Y. 227; Matter of Durand, 250 N. Y. 45; Matter of Buechner, 226 N. Y. 440; Matter of Wolf, 171 Misc. 788; Matter of Rooker, 248 N. Y. 361; Matter of Bisconti, 306 N. Y. 442; Matter of Fabbri, 2 N Y 2d 236; United States Trust Co. of N. Y. v. Taylor, 193 App. Div. 153, 232 N. Y. 609; Staples v. Mead, 152 App. Div. 745; Matter of Tamargo, 220 N. Y. 225; Matter of Barr, 233 App. Div. 290, 258 N. Y. 592.) II. The remainder was contingently vested in the named remaindermen subject to being divested by their death prior to the termination of the trust. (Dougherty v. Thompson, 167 N. Y. 472; Matter of Schaefer, 160 Misc. 43.)

      William D. Tucker for Edward H. Gulbenkian, appellant.
    I. In order to take as remaindermen of such trusts, both Badrig and Harutune had to survive the life tenant, otherwise such remainder passed entirely to “ their several descendants per stirpes ”. (Keteltas v. Keteltas, 72 N. Y. 312; Matter of Watson, 262 N. Y. 284; Matter of Krooss., 302 N. Y. 424; Matter of Gautier, 3 NY 2d 502; Matter of Wronkon, 127 Misc. 679; Matter of Finaly, 20 Misc 2d 320; Matter of Tamargo, 220 N. Y. 225.) II. In construing said will, the verbiage of testator throughout the entire document must be analyzed and taken as a whole. Accordingly, the terminology used in paragraphs Third, Fourth, Sixth, Ninth and Eleventh of his will is cumulative and leads to the conclusion that, by the words ‘1 and their several descendants ” in paragraph Fifth, testator intended to create a class of substitute remaindermen. (Matter of Fabbri, 2 N Y 2d 236; Matter of Krooss, 302 N. Y. 424; Matter of Evans, 234 N. Y. 42; Matter of Buechner, 226 N. Y. 440; Goodwin v. Coddington, 154 N. Y. 283; Eidt v. Eidt, 203 N. Y. 325.) III. It was error to sustain the Surrogate’s decision in construing testator’s will to the effect that, in providing for distribution among “ the several descendants ” of testator’s brothers, there was nut a substitutionary gift over. (Matter of Fedders, 187 Misc. 207; Matter of Barr, 233 App. Div. 290, 258 N. Y. 592; Matter of Simons, 16 Misc 2d 352; Matter of Gardiner, 20 Misc 2d 722.)

      Louis J. Lefkowits, Attorney-General (Julius Greenfield and Paxton Blair of counsel), for Attorney-General of the State of New York, respondent.
    In this will, this testator intended to vest the remainder of this trust absolutely in his two brothers without any substitutionary gifts to their descendants. If substitutionary gifts were intended, they were to take effect only if the brothers predeceased testator. Since the brothers survived testator, the remainder of the trust passed pursuant to their respective wills to the charitable foundation. (Matter of Fabbri, 2 N Y 2d 236; Matter of Campbell, 307 N. Y. 29; Connelly v. O’Brien, 166 N. Y. 406; Matter of Watson, 262 N. Y. 284; Matter Krooss, 302 N. Y. 424; Riker v. Gwynne, 201 N. Y. 143;
      Matter of Montgomery, 258 App. Div. 64, 282 N. Y. 713; Matter of Evans, 165 Misc. 752, 258 App. Div. 1037, 284 N. Y. 571; Matter of Ablett, 3 N Y 2d 261; Nelson v. Russell, 135 N. Y. 137; Matter of Gautier, 3 N Y 2d 502.)

      Abraham Rosten for Gullabi Gulbenkian Foundation, respondent.
    I. Badrig Gulbenkian and Harutune Gulbenkian took vested remainders under the will of Gullabi Gulbenkian. (Matter of Thompson, 279 N. Y. 131; Matter of Tamargo, 220 N. Y. 225; Matter of Allen, 151 N. Y. 243.; Matter of McParlan, 169 Misc. 1027; Matter of Campbell, 307 N. Y. 29.) II. The courts below properly determined that testator did not intend to make a substitutionary gift to descendants of the named remainder-men in paragraph Fifth of his will. (Keteltas v. Keteltas, 72 N. Y. 312; Matter of Watson, 262 N. Y. 284; Dougherty v. Thompson, 167 N. Y. 472; Connelly v. O’Brien, 166 N. Y. 406; Matter of Krooss, 302 N. Y. 424; Matter of Wronkow, 127 Misc. 679; Morris v. Sickly, 133 N. Y. 456.)

      Burton C. Meighan for Raphael Esmerian and another, respondents.
   Burke, J.

In the Fifth paragraph of the will under construction, decedent left $300,000 in trust to his wife for life. The paragraph further provides: “ I give and bequeath the remainder of said trust fund, upon her death, to my brothers, Badrig Gulbenkian and Harutune Gulbenkian, in equal shares and their several descendants per stirpes ” (emphasis added).

The issue here presented is whether' the concluding phrase bequeathing to the “ several descendents per stirpes ” is to be considered as surplusage or as a substitutionary gift conditioned upon the death of the remaindermen. It is oiir opinion that decedent intended a substitutionary gift.

Testator died July 23, 1918, survived by his wife, the life beneficiary, and Ms brothers, the remaindermen, both of whom predeceased the wife who died in 1957. By their wills, the remaindermen bequeathed their entire interest in the trust to the Gullabi Gulbenkian Foundation, a charitable corporation created by the testator in the will presently under consideration. In this construction proceeding, appellants contend that the remainder interests were vested subject to being divested, in favor of the descendants per stirpes, if remaindermen were not living at the time of distribution. The Gulbenkian Foundation, represented by the trustees and the Attorney-General of the State of New York, contends, on the other hand (1) that the gift was indefeasibly vested, and (2) that if any substitution was intended it was to take effect only if the remaindermen failed to survive the testator rather than the life beneficiary. The latter alternative suggested by the respondents is not, according to well-settled authorities, acceptable.

“ [I] t is quite correct that ordinarily where there is a devise or bequest to one person and in case of his death to another, it is to be construed as referring to death in the lifetime of the testator. However * * * ‘ [t]here is * * * a qualification, or, more properly speaking, an addition to this rule which is equally well established, and this seems to have been overlooked by the learned [court below] ’ [cases and authority cited]. ‘As cases very like the present demonstrate, absent language pointing a contrary intention, words of survivor-ship refer to the time of the testator’s death “ only in the case of an absolute devise or bequest to one and in case of his death to another ’ ’; they carry no such implication where, as in the will under consideration, the first devisee or legatee takes a life estate. (Mullarky v. Sullivan, 136 N. Y. 227, 231; see, also, Matter of Parsons, 242 N. Y. 246, 250; Matter of Buechner, 226 N. Y. 440; Matter of Palis, 220 N. Y. 196, 204; Lyons v. Ostrander, 167 N. Y. 135, 140; Restatement, Property, § 251, p. 1266.) ’ (Matter of Gautier, 3 N Y 2d 502, 508, supra.) (Matter of Larkin, 9 N Y 2d 88, 92-93.)

The more difficult problem presented is whether the testator intended an indefeasible vesting rather than, as in Matter of Larkin (supra), a vested remainder in fee subject to being divested by the remaindermen’s failure to survive. In other words, did he intend by any event whatever to have the children take by substitution (Lyons v. Ostrander, 167 N. Y. 135; Matter of Bigelow, 285 App. Div. 1072), or was the final phrase in the Fifth paragraph merely one of limitation, describing the nature of the estate. Since the latter construction would require us to treat the final words as mere surplusage, it must pass rigorous tests.

These words obviously were not utilized to prevent a lapse of legacy. At the time of the execution of the will herein, section 29 of the Decedent Estate Law provided that there could be no lapse of legacy in situations of this kind.

We have said that “ Words are never to be rejected as meaningless or repugnant if by any reasonable construction they may be made consistent and significant.” (Matter of Buechner, 226 N. Y. 440, 443.) Therefore, even if this single phrase were somewhat equivocal, we may still glean the testator’s dominant purpose ‘ from a sympathetic reading of the will as an entirety and in view of all the facts and circumstances under which the provisions of the will were framed.” (Matter of Fabbri, 2 N Y 2d 236, 240, emphasis supplied; Matter of Gautier, 3 N Y 2d 502); and this purpose must prevail regardless of the fact that a literal interpretation might yield an inconsistent meaning because of the language or format employed. (Matter of Larkin, supra, p. 91; Matter of Fabbri, supra.) The phrase, however, in and of itself is indicative of testator’s ultimate purpose and does evidence an awareness of the fact that his brothers might not survive. If he had intended an indefeasible gift, he could have ended paragraph Fifth after the bequest of the remainder “in equal shares ”. His addition of the phrase “ and their several descendants, per stirpes,” certainly is a disclosure of his intention to have the descendants take the share of the parent who failed to survive distribution. (See Matter of Barr, 233 App. Div. 290, 293, affd. 258 N. Y. 592 on the concurring memorandum at the Appellate Division.)

The inarticulate use of the word ‘ ‘ and ’ ’ instead of “ or ” is of no consequence in this text. Although a use of the disjunctive (which we may substitute in place of the conjunctive used, Roome v. Phillips, 24 N. Y. 463, 469; Scott v. Guernsey, 48 N. Y. 106, 121; Matter of Wells, 113 N. Y. 396, 402-403) would have mandated a substitutional construction of the remainder interest, we are persuaded to draw the same conclusion by a comparison of paragraph Fifth with the other dispositive provisions. For example, in paragraph Eleventh testator made it abundantly clear that the residue of his estate was to be indefeasibly vested in his brothers under any and all circumstances by using-the time-honored and perfect words of limitation, i.e., 11 their several heirs and assigns, absolutely ’ ’. However, in paragraphs Third, Fourth and Sixth, the contingency of a demise prior to distribution is concededly provided for by the substitution of descendants and the method in which they should share, i.e., per stirpes. In this light, we should not distort by excision the almost precise language used in article Fifth merely because it was not as clearly spelled out as in the Third, Fourth and Sixth paragraphs. It is of much more significance that the testator failed to use established words which he knew would surely (as in par. Eleventh) create an indefeasible gift. (See Matter of Krooss, 302 N. Y. 424, 428-429.) His adoption, instead, of other technical language used in other provisions to provide a substitutionary gift makes it ‘ ‘ clear and decisive ’ ’ that the remainder, rather than absolute, was subject to qualification, i.e., survival.

Moreover, a belief that a substitutional gift was intended gains support from the presumption in favor of a testator’s relatives as against strangers to his blood (7 Warren’s Heaton, Surrogates’ Courts, Construction Favoring Heirs and Next of Kin, § 21, par. 3, p. 171; Matter of Robinson, 155 Misc. 412, 415; March v. March, 186 N. Y 99; Matter of Larkin, supra), regardless of the fact that the ‘ stranger ’ ’ in this instance was a charitable foundation originally created by the same testator with distinct funds in another provision of the will. A reading of the will as an entity indicates decisively that testator segregated his funds carefully, indicating his desire in certain instances, as here, that they be enjoyed by his closest blood relations and their descendants.

This conclusion is also not inconsistent with the familiar canon of construction required in doubtful cases in order to obtain an early vesting (Walsh, Law of Property, Rules of Construction, § 246 et seq.; however, see § 253). Nevertheless, it should once again be emphasized that ‘ ‘ [n] o such construction mandates that property be indefeasible/ or absolutely vested. * * * the courts have held that the ‘ language, such as that used by the testator here, or language substantially identical, creates a vested remainder in fee subject to be divested by the remainderman’s failing to survive the life beneficiary ’ if the remainderman leaves descendants surviving [cases cited]. In the latter event the children take by substitution [cases cited] ” (Matter of Larkin, supra, p. 93).

Accordingly, the order appealed from should be reversed, with costs to all parties filing briefs, payable out of the estate.

Fold, J. (dissenting).

Gullabi G-ulbenkian died in 1918, survived by his wife and two brothers. By paragraph Fifth of his will, he left the sum of $300,000 in trust for his wife for life and provided for the disposition of the remainder upon her death in this way:

"I give and bequeath the remainder of said trust fund, upon her death, to my brothers, Badbig Gulbenkiah and Haeutuhe Gtjlbehkian, in equal shares and their several descendants per stirpes.”

It seems quite clear to me, as it did to the Surrogate and all of the Appellate Division Justices, that the remainder interest vested indefeasibly in Badrig and Harutune, provided only that they outlived the testator.

However, the appellants contend, and the majority accepts the contention, that the phrase, “and their several descendants per stirpes ”, provided for a substitutionary gift to the heirs of Badrig and Harutune and somehow or other required them to survive the widow. I find no warrant for such a construction and, accordingly, conclude that, since each of the brothers was living when the testator died, each of them became entitled, absolutely and in fee, to the remainder gift, and it mattered not that they predeceased the life beneficiary.

The determinative factor is, of course, the intention of the testator as expressed in the will and, in ascertaining what it was, we should not ignore settled rules and principles of construction. In other words, when a .will contains language which has acquired, through judicial decision, a definite and established significance, the testator is taken to have employed the language in that sense and with that meaning in mind. (See Matter of Krooss, 302 N. Y. 424, 428.)

In the case before us, the testator made a gift to named persons—his brothers Badrig and Harutune — and used words of present gift — “ I give and bequeath These are pointed indications that the testator intended them to have indefeasibly vested remainders. (See Matter of Campbell, 307 N. Y. 29, 34; Matter of Montgomery, 282 N. Y. 713, affg. 258 App. Div. 64; Connelly v. O’Brien, 166 N. Y. 406, 409; see, also, 3 Restatement, Property, §§ 256, 257.) As this court stated in the Campbell case (307 N. Y., at p. 34), “The use of the phrase, ‘upon the death of,’ as an adverbial expression of time has on innumerable occasions been interpreted to annex futurity only to possession and not to the substance of the gift. * * * ‘ An explicit present gift of a future interest implies, in the absence of contrary indications, that the intervening estate * * * merely suspends the enjoyment of the interest and does not prevent the vesting thereof.’ (Powell, op. eit. [Real Property, 1950, Vol. 2], § 331, p. 735; see, also, [3] Restatement, Property, op. cit., § 257.) ”

It is indisputable, therefore, had the sentence ended with the provision for the gift of the remainder, upon the wife’s death, to his two brothers “ in equal shares ”, that the brothers would have taken vested remainders. And I do not believe that the words which followed—“and their several descendants per stirpes ” — changed the nature of the bequest or cut down the character of the estate. Additional language, we have written (Matter of Krooss, 302 N. Y., at p. 428), “ will not be read as qualifying or cutting down the estate unless that language is as clear and decisive as that which created the vested remainder. ’ ’

The claim that the phrase “ and their several descendants per stirpes ” bespeaks a substitutionary gift is actually negated by the language which the testator used in other portions of his will. He knew how to provide for such a gift, whenever he so intended, in clear and unmistakable terms, in the event of the prior death of a beneficiary. In each of paragraphs Third and Fourth, for instance, he gave $50,000 to a named sister and explicitly provided that, 11 in case of her prior death”, the bequest was to go ‘‘ to her descendants per stirpes ’ ’. And in paragraph Sixth, the testator set up á trust for a nephew for 10 years and, in providing for the disposition of the funds if the nephew died during the 10-year trust period, he used language reflecting meticulous attention to the matter of survivorship: ‘ ‘ In case of his death prior to the expiration of said ten years periodthe testator declared, “I give and bequeath the remainder of said trust fund to his descendants, if any, per stirpes

The careful wording of this provision as to the devolution of the remainder of the trust fund is in sharp contrast with that of paragraph Fifth and renders almost irresistible the conclusion that under such provision the remainder was to vest in Badrig and Harutune absolutely. As this court observed in Mullarky v. Sullivan (136 N. Y. 227, 231), involving a somewhat similar situation, “ The difference in meaning and language between the two provisions is so pronounced that it serves to emphasize the different intention which the testator had rather than to furnish an argument in support of the proposition that the intent in both cases was the same.”

Matter of Larkin (9 N Y 2d 88), upon which the appellants rely, is quite different from the case before us. In Larkin, too, the words of survivorship were explicitly set forth, just as in paragraph Sixth of the present will and in sharp contrast to the language of article Fifth. In Matter of Larkin, the will gave the testator’s wife a life estate, granted the remainder to his three sons and provided that, “ In the event that any of my sons should die leaving descendants, said descendants shall take the share of any such deceased son, per stirpes ”. This is far different language than that which is here under consideration.

It was not the words, “descendants per stirpes”, which imported into the clause in the Larkin will the requirement of survivorship; it was, rather, the reference to the death of the sons, coupled with the explicit provision that, if they “ should die leaving descendants ”, such descendants “ shall take ”. These are the “ words of survivorship ” to which the principle (quoted from Matter of Larkin, 9 N Y 2d, at p. 93) applies, namely, that ‘ ‘ ‘ words of survivorship refer to the time of the testator’s death “ only in the case of an absolute devise or bequest to one and in case of his death to another ”; they carry no such implication where, as in the will under consideration, the first devisee or legatee takes a life estate. [Cases cited.] ’ (Matter of Gautier, 3 N Y 2d 502, 508, supra.)

In short, it is only a reference to the remainderman’s death, or his failure to survive, which justifies the construction, contended for by the appellants, that the remainder vests upon the death of the life beneficiary rather than upon that of the testator. Here, I repeat, there is no reference to death or survival of the testator’s brothers, and none is to be found in the reference to ‘ ‘ descendants per stirpes ’ ’.

Indeed, at the very least, to render the phrase, “ their several descendants per stirpes ”, words of purchase, rather than of limitation, it would have to be preceded by the conjunction “or” instead of “ and ” (Restatement, Property, § 252)) and in the present context there is nothing to warrant this court’s rewriting the will in this fashion. (See, e.g., Matter of Campbell, 307 N. Y. 29, 34, supra; Matter of McParlan, 169 Misc. 1027, 1030.) In the Campbell case, we refused to read the word “and” as “or” where, as here, it would defeat the early indefeasibility of the remainder, aptly noting that the appellants’ “ argument borders on verbal legerdemain, confusing as it does the time of enjoyment of the remainder with the time of its vesting in interest ” (307 N. Y., at p. 34).

The testatrix in Campbell had created a trust for the lives of a sister and a cousin, the remainder, upon their deaths, to go to her nephew Carl and his heirs. If the nephew predeceased them, then, the will provided, the corpus was to go to certain charities. The remainder to Carl was held to be absolutely vested, except in the event that he predeceased both sister and cousin. Since he predeceased only the sister, we hold his remainder to be absolutely vested. Although the problem posed was slightly different from that presented here, what we there wrote is particularly pertinent (307 N. Y., at p. 35): “ If [the testatrix] had created a trust for the lives of her sister and cousin with a remainder to Carl, if he be living at their deaths, his interest would then have been conditioned upon his surviving the other two and would have become indefeasibly vested only if he were alive at the termination of the trust. ’ ’

So, in the present case, if the testator had bequeathed the remainder, upon his wife’s death, to his “ surviving ” brothers or to his brothers “ if they be living at her death ”, the necessary words of survivorship would be present and would evince the intent that their interest was to be conditioned upon their surviving the life beneficiary. Absent such words, or language of similar import, the will reflects the testator’s intention that his brothers were to have indefeasibly vested remainders if they were alive when he died.

I would affirm the order appealed from.

Judges Dye, Froessel, Van Voorhis and Foster concur with Judge Burke ; Judge Fuld dissents in an opinion in which Chief Judge Desmond concurs.

Order reversed, with costs to all parties appearing separately and filing separate briefs, payable out of the estate, and matter remitted to the Surrogate’s Court for further proceedings in accordance with the opinion herein.

       “ Third : I * * * bequeath to my sister * * *, and in ease of her prior death, to her descendants per stirpes, the sum of Fifty Thousand Dollars ($50,000).
      Fourth: [Same to another sister] # * *
      Sixth : [Trust to pay income to nephew for 10 years and then to pay principal] In ease of his death prior to the expiration of said ten years period, I give and bequeath the remainder of said trust fund to his descendants, if any, per stirpes, and in ease he shall die within said ten years period without issue, then * * * to the trustees of the Armenian Hospital of Saint Savior at Constantinople,”


source: Caselaw Access Project

author: Foster, J. Burke, J. (dissenting). Fboessel, J. (dissenting).

license: Public Domain

text:
    In the Matter of Association for the Preservation of Freedom of Choice, Inc., Appellant, v. J. Irwin Shapiro, as Acting Justice of the Supreme Court, Queens County, Respondent. In the Matter of Association for the Preservation of Freedom of Choice, Inc., v. Caroline K. Simon, as Secretary of State, Respondent.
    Argued February 20, 1961;
    decided March 30, 1961.

      Alfred Avins, Edwin M. Bourlce and William J. Neilan for appellant.
    I. So much of section 10 of the Membership Corporations Law and subdivision 2 of section 211 of the General Corporation Law as provide that ‘ ‘ Every certificate of incorporation filed under this chapter shall have * * * the approval of a justice of the supreme court ’ ’ is unconstitutional on its face and as construed and applied. (N. A. A. C. P. v. Alabama, 357 U. S. 449; Bates v. Little Rock, 361 U. S. 516;
      Joseph Burstyn, Inc., v. Wilson, 343 U. S. 495; Niemotko v. Maryland, 340 U. S. 268; Cox v. New Hampshire, 312 U. S. 569; Hague v. C.I.O., 307 U. S. 496; Kunz v. New York, 340 U. S. 290; Cantwell v. Connecticut, 310 U. S. 296.) II. Justice Shapiro’s findings made without evidence violate the constitutional rights of the Association for the Preservation of Freedom of Choice, Inc. (Thompson v. Louisville, 362 U. S. 199; Beauharnais v. Illinois, 343 U. S. 250; Matter of Lithuanian Workers’ Literature Soc., 196 App. Div. 262; Niemotko v. Maryland, 340 U. S. 268; Conley v. Daughters of the Republic, 106 Tex. 80; Matter of New York Soul Clinic, 208 Misc. 612; Cantwell v. Connecticut, 310 U. S. 296; N. A. A. C. P. v. Alabama, 357 U. S. 449; Matter of American Jewish Congress v. Carter, 19 Misc 2d 205.) III. The patent bias of Justice Shapiro against the association violated its constitutional rights. (Jordan v. Massachusetts, 225 U. S. 167; National Labor Relations Bd. v. Ford Motor Co., 114 F. 2d 905; United States v. Peebles, 220 F. 2d 114; People v. McLaughlin, 150 N. Y. 365; Hirabayashi v. United States, 320 U. S. 81.) IV. The failures to give the Association for the Preservation of Freedom of Choice, Inc., a hearing violate its constitutional rights. (Greene v. McElroy, 360 U. S. 474; Wong Yang Sung v. McGrath, 339 U. S. 33; Morgan v. United States, 304 U. S. 1; Matter of Philadelphia Labor’s Non-Partisan League Club, 328 Pa. 465; Goldsmith v. Board of Tax Appeals, 270 U. S. 117.)

      Louis J. Lefkoivits, Attorney-General (Dunton F. Tynan and Paxton Blair of counsel), for respondents.
    I. Insofar as the proceeding relates to section 10 of the Membership Corporations Law, petitioner is not the real party in interest within the meaning of section 210 of the Civil Practice Act and has not the legal capacity to sue for the benefit of others within the meaning of section 195 of the Civil Practice Act. II. The provisions of section 10 of the Membership Corporations Law and subdivision 2 of section 211 of the General Corporation Law, vesting power in a Justice of the Supreme Court to determine in the exercise of sound discretion whether the purposes of a membership corporation violate the public policy of this State, are constitutional. (People ex rel. Blossom v. Nelson, 46 N. Y. 477; Matter of Council of Orthodox Rabbis, 10 Misc 2d 62: Matter

      of United Cadet Assn., 13 Misc 2d 957; Matter of Stillwell Political Club, 26 Misc 2d 931; Matter of Patriotic Citizenship Assn., 26 Misc 2d 995; Matter of American Jewish Evangelization Soc., 183 Misc. 634; Matter of Columbia Assn. of N. Y. City Tr. System, 175 Misc. 876; Matter of General Von Steuben Bund, Inc., 159 Misc. 231; Matter of Catalonian Nationalist Club, 112 Misc. 207; Matter of Daughters of Israel Orphan Aid Soc., 125 Misc. 217; Bryant v. Zimmerman, 278 U. S. 63; N. A. A. C. P. v. Alabama, 357 U. S. 449.) III. The courts below correctly and properly refused to grant orders in the nature of mandamus in each proceeding since the remedy does not lie either to review decisions of inferior courts in matters within their jurisdiction and discretion, or to compel a State officer to perform an act which would be in violation of statute and contrary to the determinations of courts of competent jurisdiction. (Matter of Black v. O’Brien, 264 N. Y. 272; Matter of National Sur. Co. v. Wallace, 221 App. Div. 506; Matter of Colonial Beacon Oil Co. v. Finn, 245 App. Div. 459, 270 N. Y. 591; Matter of Burr v. Voorhis, 229 N. Y. 382; Judges of Oneida Common Pleas v. People ex rel. Savage, 18 Wend. 79; Ex parte Ostrander, 1 Denio 679; People ex rel. Auwell v. Calder, 85 App. Div. 31.) IV. The Supreme Court, Queens County, and the Appellate Division, Second Department, properly and wisely exercised their discretion in denying the applications. It is the established public policy of this State that discrimination on basis of race, creed, or color ‘ ‘ menaces the institutions and foundation of a free democratic state ” (Executive Law, § 290). The stated purposes of petitioner and the very words of its members condemn the association as an organization advocating discrimination on the basis of race, creed, color and national origin.
   Foster, J.

These consolidated appeals, brought on constitutional grounds, involve two applications: (a) one made by petitioner-appellant and its New York subscribers to incorporate as a domestic membership corporation under section 10 of the Membership Corporations Law; (b) an application made to the Secretary of State to accept and file a certificate of incorporation which does not have the approval of a Justice of the Supreme Court as required by statute (Membership Corporations Law, § 10; General Corporation Law, § 211, subd. 2). For the purposes of this opinion we are concerned chiefly with the first-named application.

The proposed certificate of incorporation, as presented for the approval of a Justice of the Supreme Court, listed the following charter purposes:

“ (a) to promote the right to individual freedom of choice and association, constituting the right of the individual to associate with only those persons with whom he desires to associate;

“ (b) to conduct itself, and to encourage, promote, and aid in scientific research into problems engendered by a multicultural society, into problems of intergroup relations, in areas of ethnic characteristics and patterns, and into the implications and effects of such problems on freedom of choice and association, and to publish and to encourage, promote, aid and assist in publication of the results of such research in suitable scholarly periodicals and other publications;

“(c) to assist in the elimination of barriers to individual freedom of choice and its exercise in specific instances, as well as preventing and guarding against deprivation of this right at large; and

“ (d) to find and promote the means through freedom of choice and association by which the numerous groups in our multicultural society can find their fullest development.”

Approval was denied (Matter of Association for Freedom of Choice, 17 Misc 2d 1012, 1013). In his opinion the Justice said: ‘ ‘ In passing upon an application for the approval of a membership corporation, the duty of the court is not merely to see to it that the requirements of the statute have been met, but also to judicially determine whether the objects and purposes of the proposed corporation are lawful, in accord with public policy and not injurious to the community. ’ ’ Subsequently the same ' Justice, when requested to reconsider his decision, said in another opinion: “ Certainly the sponsors of the proposed membership corporation are completely free to associate for the purposes they spelled out in the proposed certificate. * * * But they may not compel the State to grant them, for these purposes, the benefits and privileges of a membership corporation.” (18 Misc 2d 534, 535.)

Thus, the issue at the Supreme Court ex parte level was clearly drawn to the effect that although the purposes expressed in the proposed certificate were not unlawful, nevertheless its sponsors were not entitled to incorporate. The conclusion, therefore, must be drawn that denial of approval was based upon public policy, or injury to the community, or both, as envisaged by the Justice before whom the matter was placed.

Subsequently, appellant made an application to the Appellate Division, Second Department, for an order directing the Justice who had denied approval for the proposed certificate to annul and revoke both of his opinions, and approve the certificate. The AppeEate Division denied this application and granted the Justice’s cross motion to dismiss the petition on the ground of insufficiency as a matter of law (10 A D 2d 873). Appellant thereafter appealed to this court from the order entered upon the decision of the AppeEate Division, alleging that constitutional questions are presented, and it is this appeal with which we are chiefly concerned. The other appeal from an order of the AppeEate Division, First Department, which denied rehef by way of mandamus against the Secretary of State, presents somewhat different issues and is really superfluous so far as the main issue is concerned, i.e., whether the courts have constitutionaEy applied the provisions of section 10 of the Membership Corporations Law.

This statute has been in effect for many years without change of language significant here, and was originally derived from section 1 of chapter 319 of the Laws of 1848. Stripped of technical requirements and exceptions not pertinent here, its language is simple: ‘ ‘ Five or more persons may become a membership corporation for any lawful purpose * * *. Every certificate of incorporation filed under this chapter shall have endorsed thereon or annexed thereto the approval of a justice of the supreme court of the judicial district in which the office of the corporation is to be located. ’ ’

' With some exceptions not relevant here, no standards are set up to guide the exercise of judicial power. It would seem logical, therefore, to assume that the function of judicial scrutiny as intended by the Legislature was to ascertain whether the proposed incorporation was for a lawful purpose. This was a function which could not be handily carried out by the Legislature, or readily left to a ministerial officer such as the Secretary of State, hence it was committed to the judiciary, but only that and nothing more so far as the language of the statute is concerned.

From time to time, however, the courts below have enlarged this comparatively simple and narrow judicial function and have engrafted thereon the requirement of “ a finding that the objects and purposes of the proposed corporation are in accord with public policy * * * and not injurious to the community ” (Matter of Daughters of Israel Orphan Aid Soc., 125 Misc. 217, 219). Since the case cited was decided in 1925, many decisions have followed its reasoning, in effect that a Justice is at liberty to grant or deny applications based on his personal notion of what is contrary to public policy or injurious to the community.

We feel impelled to hold these views erroneous. In the first place the public policy of the State is not violated by purposes which are not unlawful. To hold otherwise would be a contradiction in terms. In the second place the test as to what may be injurious to the community is too vague, indefinite and elusive to serve as an objective judicial standard. Within such a scope the individual Justice would he at liberty to indulge in his own personal predilections as to the purposes of a proposed corporation, and impose his own personal views as to the social, political and economic matters involved. This is the direct antithesis of judicial objectivity, especially in an ex parte proceeding where no evidence is taken.

The Attorney-General, in his very comprehensive brief, says that the constitutionality of section 10 of the Membership Corporations Law has not been attacked since its original enactment in 1848. This is true, so far as we can discover, insofar as any court test is concerned, but the statute or rather the manner of its construction and application by the courts of this State has been heavily criticized by legal students and scholars (55 Col. L. Rev. 380 [1955]; 66 Yale L. J. 545, 550 [1957]; 6 Howard L. J. 169 [1960]; 46 Cornell L. Q. 290 [1961]; Dwight, Objections to Judicial Approval of Non-Profit Corporations, 12 Business Lawyer 454 [1957]).

Many fundamental concepts are involved that are akin to freedom of association, for instance freedom of expression, and the latter, of course, cannot be limited to ideas that are palatable only to the majority withont impinging on the constitutional rights of a minority. But we think an enlarged discussion of such concepts is unnecessary, and we limit our expression to the foregoing observations directly applicable to the statute involved. We agree with the courts below that the purposes expressed in the proffered certificate of incorporation are not unlawful, and hence we can find no legal basis for its rejection. The reasons assigned by the courts below are, in our opinion, untenable. It is perfectly lawful for an individual or group of individuals to agitate for the repeal or modification of any law on the statute books of the State; or even for a change in the form of the State government itself, provided such agitation is not coupled with the advocacy of force and violence. Such activity is not against public policy whether indulged in by an individual or a membership corporation, but of course approval of a corporate charter devoted to such a purpose does not imply approval of the views of its sponsors. It simply means that their expression is lawful, and their sponsors entitled to a vehicle for such expression under a statute which cannot constitutionally be made available only to those who are in harmony with the majority viewpoint. Dissenting organizations have equal rights, so far as freedom of expression is concerned, as any other groups, and are entitled to an equal and objective application of the statute.

The order of the Appellate Division, Second Department, in the proceeding against J. Irwin Shapiro, Acting Justice of the Supreme Court, Queens County, should be reversed, withont costs, and the matter remitted to the Appellate Division for proceedings consistent with this opinion.

The order of the Appellate Division, First Department, denying relief by way of mandamus against the Secretary of State should he affirmed, withont costs.

Burke, J. (dissenting).

I dissent and vote to affirm. The only issue presented is whether the standard applied by Special Term in this case satisfies the constitutional requirement of definiteness. We are not now concerned with what criteria may have been relied on in other situations.

That which is sought here is not solely permission to accomplish a simple act of business, to organize for political purposes and exercise freedom of speech, but rather to obtain ‘ ‘ the imprimatur of incorporation”, bearing the blessing of the Supreme Court, the benediction of the Secretary of State, and the right to affix the characterization 1 ‘ Incorporated under the Laws of the State of New York ” to public matter so as to enable the organizers to assure themselves the prestige which accompanies the privilege (see Matter of Stillwell Political Club, 26 Misc 2d 931; Matter of Patriotic Citizenship Assn., 26 Misc 2d 995).

A State should not be forced to lend its prestige to efforts of a group whose objectives are a contradiction of State law. No decision of the United States Supreme Court is so clearly to the contrary that we should subordinate our policy to that of the Federal Government..

The use of the word “lawful”, as describing the purposes for which a membership corporation may be formed (Membership Corporations Law, § 10), does not restrict the Justice of the Supreme Court merely to the performance of a ministerial act, but rather requires the exercise of a judicial function. “ That is lawful which is in conformity with * * # the principle or spirit of the law, whether moral or juridical; that is legal which is in conformity with the letter or rules of law as it is administered in the courts ” (Webster’s New International Dictionary [2d ed., Unabridged], p. 1401; Matter of Lewis v. Harlem Dental Co., 189 App. Div. 359). A “ lawful purpose ” hence must be in conformity not only with the letter but also the spirit of the law. To be “ lawful ” then, the purposes of a proposed incorporation, although legal, must also be in harmony with an explicitly defined public policy of a State.

The purposes of the applicant are in conflict with a well-known and recognized public policy of the State of New York, which finds expression in numerous statutes. Consequently the denial of this application by the courts below does not rest on an unconstitutionally vague notion of 6 ‘ what is wholesome public policy ” or on any other vague personal philosophy, but on a definite standard of conduct mandated by the Legislature in various statutes. (Section 290 of the Executive Law states: “ [T]he legislature hereby finds and declares that practices of discrimination against any of its inhabitants because of race, creed, color or national origin are a matter of state concern, that such discrimination threatens not only the rights and proper privileges of its inhabitants but menaces the institutions and foundation of a free democratic state.”)

Incorporation, moreover, is a privilege which may be withheld (see Mayor of City of New York v. Twenty-Third St. Ry. Co., 113 N. Y. 311, 317). It is as much a privilege whether New York individuals or corporate entities of other States seek it (Ashley v. Ryan, 153 U. S. 436).

When such a franchise is sought and where the Appellate Division has unanimously approved an exercise of discretion, we do not interfere if there is any basis in the evidence or the inferences to sustain the action taken below. The record here supports the unanimous conclusion of the Justices of the Supreme Court, which is the agent of the Legislature.

The policies of the petitioners are, beyond argument, in sharp conflict with those of the People of this State, as announced by the Legislature (e.g., N. Y. Const., art !,§!!;“ Equal protection of laws; discrimination in civil rights prohibited”; see, also, specific provisions in Alcoholic Beverage Control Law, Civil Rights Law, Civil Service Law, Education Law, Executive Law, General Business Law, Military Law, Penal Law and Public Housing Law). Therefore, we could not hold that it was as a matter of law an abuse of discretion for the Justice of the Supreme Court to require, as a basic minimum, that the public policy of the granting body not be abridged (see Matter of General Von Steuben Bund, Inc., 159 Misc. 231). The discretion delegated by the Legislature may not be found to be improperly exercised or in violation of rights guaranteed by the United States Constitution when it is based on an oft-reaffirmed State polity, and is consistent with the rationale of decisions of the United States Supreme Court.

Each of the individual members of this proposed corporation has all of those rights of freedom of speech and association as may be guaranteed by either the State or Federal Constitution. Special Term did not prohibit or limit them in any such protected activity. They may continue, as they have undoubtedly done, to gather together and exercise their rights in all permissible forms. But the “ constitutionally protected right of association” is not tantamount to a right of incorporation (compare N. A. A. C. P. v. Alabama, 357 U. S. 449, 463 with Bryant v. Zimmerman, 278 U. S. 63). Petitioner has no absolute prerogative to have a corporation created or to operate one within this State (National Council U. A. M. v. State Council, 203 U. S. 151, 161, 163).

Although we respect the right of petitioners to share a belief that the exercise of freedom of choice is one of the constitutionally protected, inalienable rights referred to in the Declaration of Independence, we may give effect not only to our State public policy but also to the decisions of the United States Supreme Court, all of which are to the contrary.

Accordingly, the orders of the Appellate Division should be affirmed.

Fboessel, J. (dissenting).

I concur entirely with Judge Burke, and vote to affirm for the following additional reasons:

The power of creating corporations unquestionably rests with the Legislature. Formerly, the right to corporate existence was always granted by special charter or act of incorporation. By the Constitution of 1846, to obviate the necessity for much special legislation, corporations were authorized to be formed under general laws (N. Y. Const., art. X, § 1; Johnson v. Hudson Riv. R. R. Co., 49 N. Y. 455, 458). Whether organized directly by special act or indirectly under general laws, a corporation is given its life by the Legislature.

While a corporation may be formed for a lawful purpose, the purpose may not further an illegal object “ or one necessarily inconsistent with public policy, as declared by the public law ’ ’ (Vinegar Co. v. Foehrenbach, 148 N. Y. 58, 64). It is inconceivable that the Legislature would charter by special act, or intend to be chartered under general law, a corporation whose avowed purposes are inconsistent with public policy as declared by the People of the State in our Constitution (art. I, § 11) and in the Law Against Discrimination ” (Executive Law, art. 15).

The Legislature, in requiring the approval, under section 10 of article 2 of the Membership Corporations Law, of a certificate of incorporation by a Justice of the Supreme Court, could not have intended that he should affix his signature as a mere matter of form, but authorized and empowered him to carry out the legislative intention.

Chief Judge Desmond and Judges Dye, Fuld and Van Voorhis concur with Judge Foster; Judge Burke dissents in an opinion, as to proceeding No. 1, in which Judge Froessel concurs in a separate opinion in which Judge Burke also concurs.

In proceeding No. 1: Order reversed, without costs, and the matter remitted to the Appellate Division for further proceedings in accordance with the opinion herein.

In proceeding No. 2: Order affirmed, without costs.


author: Dye, J.

text:
    In the Matter of the Arbitration between Samuel Reif, as President of Local 169, Amalgamated Clothing Workers of America, Appellant, and Williams Sportswear, Inc., Respondent.
    Argued February 21, 1961;
    decided March 30, 1961.

      Clifford D. Reznicek and .Jacob Sheinkman for appellant.
    I. The corporation by its actions has participated in the arbitration proceedings and cannot now attack the existence of a contract to arbitrate. (Abrams v. Macy Park Constr. Co., 282 App. Div. 922; Matter of Roscoe, 12 Misc 2d 370; Matter of A. R. La Mura, Inc. [Rochelle Arms Apts.], 281 App. Div. 683; Milton L. Ehrlich, Inc., v. Swiss Constr. Corp., 21 Misc 2d 506; Matter of Simplex Mach. Tool Corp. [Swind Mach. Co.], 16 Misc 2d 85; Matter of Harris [East India Trading Co.], 16 Misc 2d 87; Matter of Franks [Penn-Uranium Corp.], 4 A D 2d 39; Fudickar v. Guardian Mut. Life Ins. Co., 62 N. Y. 392; Matter of Iino Shipbuilding & Eng. Co. [Hellenic Lines], 6 A D 2d 159.) II. Respondent, by its acts of adoption and acceptance of a written contract between the promoters of said corporation and the Amalgamated, is bound by the terms of said contract, including the requirement of arbitration even though the contract is not signed. (Newburger v. American Sur. Co., 242 N. Y. 134; Margady v. Weissman, 272 App. Div. 922; Matter of Helen Whiting, Inc. [Trojan Textile Corp.], 307 N. Y. 360; Matter of Acadia Co. [Edlitz], 7 N Y 2d 348; Matter of Teschner [Livingston], 285 App. Div. 435, 309 N. Y. 972; Matter of Wachusett Spinning Mills [Blue Bird Silk Mfg. Co.], 12 Misc 2d 822, 7 A D 2d 382, 6 N Y 2d 948; Matter of Perfect Fit Prods. Mfg. Co. [Pantasote Co.], 5 Misc 2d 348.)

      Max Schoengold and Irwm M. Katz for respondent.
    I. Respondent did not participate in the selection of the arbitrator or in any arbitration proceeding. (Schafran & Finkel v. Loiuenstein & Sons, 280 N. Y. 164; Matter of Hesslein & Co. v. Greenfield, 281 N. Y. 26; Matter of Harris [East India Trading Co.], 16 Misc 2d 87.) II. When the partnership went out of business and settled its affairs with appellant and appellant delivered its general release to that firm, the contract between the partnership and appellant came to an end and there was no contract thereafter in existence which the new corporation, respondent herein, could have adopted and accepted. (Matter of Kosoff [“ Jones ”], 276 App. Div. 621, 303 N. Y. 663; Matter of Shapiro [Rosenblatt], 282 App. Div. 245; Matter of Binger [Thatcher], 279 App. Div. 650, 304 N. Y. 627; Matter of Teschner [Livingston], 285 App. Div. 435, 309 N. Y. 972.) III. If there be a question of the existence of the arbitration contract, then whether or not respondent is a successor to the contracting party named in the said agreement raises a substantial issue within the meaning of section 1450 of the Civil Practice Act. (Matter of Milton L. Ehrlich, Inc. [Unit Frame Corp.], 5 A D 2d 272; Lobby Display Frame Corp. v. Steinberg, 281 App. Div. 678.)
   Dye, J.

The sole question is whether respondent corporation should be bound, as was its predecessor, by the arbitration clause contained in a collective bargaining agreement.

On this motion for a stay of arbitration, both the supporting and the opposing affidavits are in basic agreement on all the facts we consider relevant. From about 1946 on, the petitioner-appellant, Local 169 of the Amalgamated Clothing Workers of America, had engaged in consecutive collective bargaining agreements with the Infant and Juvenile Manufacturers Association, Inc., which had acted in behalf of its member employers. The contract now being controverted, dated June 1,1956, covered the period ending June 1,1960. In connection with this contract William Badwelsky and Moe Schwartz, then partners in the manufacture of children’s sportswear apparel and doing business under the name ‘‘ Williams Sportswear Co.”, ratified the bargaining agreement executed by the association, of which their firm was a member. They did this by executing a ‘ ‘ Certificate of Authorization and Ratification ”, by which they covenanted that during the life of the association’s agreement with the union they would not “ establish, open or engage or in any manner become interested, directly or indirectly, either as Employer, Owner, Partner, agent, stockholder, director or officer in any business whatsoever, involving the rhanufacture of garments unless in such business all the terms and conditions set forth in the above mentioned contract are duly performed and fully complied with ’ ’. Subsequently, on or about September 1, 1957, a date during the life of the collective agreement, Badwelsky and Schwartz dissolved their partnership. Thereafter Badwelsky continued the same business in the same location imder the same name. Schwartz endeavored to find another business connection but, failing in this, he rejoined Radwelslty and on or about December 10,1957 they formed the respondent corporation with themselves as the officers thereof and as sole stockholders owning equal shares. The corporation continued the same business in the same location, and the record contains nothing to indicate that the employees were not also the same. The firm name was continued, with the addition of 1 ‘ Inc. ’ ’.

Early in 1959 the union learned that respondent was in default in its payments to the union’s insurance, pension, holiday and vacation fund, required by the bargaining agreement. Accordingly, the union proceeded to an audit of the corporation’s books and records for the year 1958-1959, as a consequence of which respondent was advised by letter that $5,719.72 was due and payment was demanded. The union states that the audit was performed pursuant to paragraph 24 of the bargaining agreement, with the full acquiescence of the corporation. The corporation admits that the audit took place but says that it was forced under threat of picketing.

The union asserts that negotiations were had, that respondent never denied its obligations under the collective bargaining agreement, and that payment was resisted only because the amount demanded was in dispute. Respondent’s version is different. It contends that the union had knowledge of the company’s changed status and that, indeed, it had taken “ a lump sum of many thousands of dollars ” in settlement of the partnership’s obligations, and had executed “ general releases ” in return.

In any event, on or about June 1, 1959, the union served a notice of arbitration pursuant to paragraph 21 (c) of the bargaining agreement.

The first meeting was scheduled for June 2, 1959. The corporation requested and was granted postponement to June 23, 1959 and, again, to October 8, 1959. Shortly before that date Radwelsky telephoned the union that respondent would not attend the scheduled arbitration, as it had been advised by its attorney that it had no valid agreement with the union. The union then served a 10-day notice of arbitration, pursuant to section 1458 of the Civil Practice Act, and scheduled a hearing to be held November 5, 1959. The corporation countered this move by obtaining an order to show cause why the arbitration should not be stayed. This motion was denied on the ground that the respondent, by its acts of “ adoption and ratification ”, became bound by the bargaining agreement; in effect this was to say that arbitration was enforcible. The respondent apparently accepted this ruling as it then appeared at the adjourned arbitration on March 2, 1960 and obtained a further adjournment to March 21, 1960. On that date it again appeared and obtained a further adjournment to March 28, 1960. Instead of going forward on that date the corporation obtained an order to show cause why the Special Term should not reconsider his prior ruling. He granted the motion only for the purpose of indicating that in his original decision he did not intend to go beyond what was tendered and that the order so made should not be taken as dispositive in advance of any issue that might be submitted to the arbitrator.

The reversal in the court below was on the general ground that the corporation was not a party to the collective agreement, and thus was not obliged to proceed to arbitration.

The question of participation ” has been argued vigorously. Section 1458 of the Civil Practice Act provides in part that one “ who has participated in the selection of arbitrators or in any of the proceedings had before them ” thereby loses his right to object to the confirmation of an award upon the ground, allowed by section 1462, that ‘ ‘ there was no valid submission or contract ’ ’. The union contends that a party who has lost his right to object to confirmation has equally lost his right, if any, to a stay of arbitration (Matter of A. R. La Mura, Inc. [Rochelle Arms Apts.], 281 App. Div. 683 [2d Dept., 1952]; Milton L. Ehrlich, Inc., v. Swiss Constr. Corp., 11 A D 2d 644 [1st Dept., 1960]). It then points to the requests for adjournment as a sufficient basis for finding such participation, analogizing through such authorities as Braman v. Braman (236 App. Div. 164) and Kelly v. Kelly (26 Misc 2d 1058, affd. without opinion 266 App. Div. 674). But we need not, and do not, decide that question here.

The issue of whether the union had knowledge of the company’s changed status could not have been resolved on these affidavits. The matter is in dispute, and, if this were the ordinary case, a jury trial would have been necessary for a decision.

It is a familiar principle that a corporation will be liable on a contract of its promoters only if adopted, either expressly or by acceptance of benefits referable to that contract (Morgan v. Bon Bon Co., 222 N. Y. 22). Thus a positive, authorized act is normally essential to corporate responsibility for preincorporation contracts.

If what the union says is true, and it had no knowledge of the company’s change of form, then the corporation—an employer — was enjoying a forbearance from collective bargaining. Obviously, the employees were working under the impression that their employer was bound by a collective bargaining agreement drawn in their behalf. Through ignorance which was no fault of their own, these employees and the representing union were naturally unconcerned with any need to negotiate a new contract. But, by law, they had a right to negotiate, and the employer was under a duty to engage in such negotiations (see 6 Corbin, Contracts, § 1420). By withholding information of the change from the union, the corporation was able to get union labor and other substantial benefits it might not have enjoyed except for the collective bargaining agreement which it now seeks to ignore.

All that has been said is for the usual situation; but, with respect to the matter now before us, it is not necessary that an adoption he found, and, therefore, the question of knowledge is unimportant. This is because there has been no change in the company, as a result of the incorporation, except the form itself.

A different concept of corporate liability may be invoked where the assets of a predecessor have been taken over completely in consideration of shares of stock, and no change has occurred in the underlying business. Several authorities support the position that, where the same men are doing’ business in the new guise of the corporation, and there are no stockholders who did not participate in the earlier enterprise, the corporation will be held liable for its predecessor’s debts and contract obligations (see, e.g., Zander v. Larsen, 41 Wn. 2d. 503; Fena v. Peppers Fruit Co., 185 Minn. 137; Kulka v. Nemirovsky, 321 Pa. 234).

This corporation was, as the Special Term put it, “ an alter ego of the promoters ”. The Appellate Division reversed, on the law and the facts, because it felt that the creation of the new entity insulated the corporation from obligations arising out of its promoters ’ contracts. But, under the most favorable reading of its own affidavits, respondent is liable as the alter ego ” of persons bound by the collective bargaining agreement. This being so, no trial was, or will be, necessary.

Whether a release of the partnership’s future obligations under the collective bargaining agreement was in fact executed by the union is a question for the arbitrator.

Accordingly, the order of the Appellate Division should be reversed, and that of Special Term reinstated, with costs in this court and in the Appellate Division.

Chief Judge Desmond and Judges Fuld, Froessel, Van Voorhis, Burke and Foster concur.

Order reversed, etc.

       This danse is as follows: “ Should any complaint, grievance, demand or dispute arise hereunder out of or in connection with or in relation 'to this agreement or the interpretation, performance or breach thereof * * * then the matter shall be submitted for decision and final construction to the arbitrator under this agreement".


author: Dye, J. Burke, J. (dissenting).

text:
    Merril P. Arden, Appellant, v. Richard Freydberg et al., Respondents, et al., Defendants.
    Argued February 21, 1961;
    decided March 30, 1961.

      Irvin Waldman, for appellant.
    I. The Appellate Division erred in substituting its judgment for the verdict of the jury and in depriving plaintiff of his constitutional right to a trial by jury. (Korn v. Reich, 131 Misc. 742, 225 App. Div. 671; Pease & Elliman v. Gladwin Realty Co., 216 App. Div. 421; Bernstein v. Greenfield, 281 N. Y. 77; Regan v. Eight Twenty Fifth Corp., 287 N. Y. 179; Sadowski v. Long Is. R. R. Co., 292 N. Y. 448; Tennant v. Peoria & P. U. Ry. Co., 321 U. S. 29; Swensson v. New York, Albany Desp. Co., 309 N. Y. 497; Flamer v. City of Yonkers, 309 N. Y. 114; Stubbs v. City of Rochester, 226 N. Y. 516; Thedford v. Herbert, 195 N. Y. 63; Wood v. Duff-Gordon, 222 N. Y. 88.) II. If there were no contract, the law would have imposed one on the parties in the interests of justice. (Miller v. Schloss, 218 N. Y. 400; Pratt v. Hudson Riv. R. R. Co., 21 N. Y. 305; Livingston v. Livingston, 246 N. Y. 234; Thorne Neale & Co. v. New York So. Coal Term. Corp., 270 App. Div. 816, 295 N. Y. 977; Delehanty v. Hurley, 269 App. Div. 672, 294 N. Y. 870.)

      Solomon A. Klein and Julius Helfand for respondents.
    I. The Appellate Division did not err in unanimously reversing the judgment and dismissing the complaint on both the facts and the law. (Chiapparelli v. Baker, Kellogg & Co., 252 N. Y. 192;
      Matter of Triboro Coach Corf. v. State Labor Relations Bd., 261 App. Div. 636; Grossman v. Herman, 266 N. Y. 249; Friedman v. Markman, 11 A D 2d 57.) II. Appellant’s contention that ‘1 even if no contract had been made ’ ’ this court can amend the complaint and reinstate the verdict upon the theory of a constructive contract created by law is patently without merit. {Miller v. Schloss, 218 N. Y. 400.)
   Dye, J.

In this action for money damages the plaintiff, a licensed insurance agent, seeks to hold the defendants Freydberg to an alleged implied promise to place ‘ ‘ through and by ’ ’ him policies of life insurance on their lives and the lives of other officers and stockholders of a complex of close corporations owned and controlled by them in furtherance of a comprehensive plan designed to insure continued control of the corporations by the surviving stockholders and to provide adequate funds to meet tax liabilities and claims of the estate of a party in interest in the event of death.

Ooncededly, the plaintiff submitted a plan. However, the Freydbergs, in implementing the plan, did not buy the policies through and by him, but placed the business with a person connected with their organization (who had been licensed for that very purpose) in the same life insurance company as was represented by this plaintiff. He seeks damages in an amount equal to the commissions and renewal commissions he would have received on the insurance policies, had they been placed with him. He claims that the plan he devised and submitted, and which the defendants acted upon, affords the necessary consideration to support their promise.

To hold that circumstances such as here described give rise to an enforcible contract for payment of commissions on policies of insurance to be written would open the door to an entirely new field of liability. Even though we accord the plaintiff’s proof the benefit of the best inference rule, it remains insufficient as matter of law to establish the existence of either a bilateral or a unilateral contract. At the time the request for the submission of a plan was made, there was no accompanying promise to place the required insurance in the company represented by the plaintiff. Although a promise need not be express, we find no basis on which this alleged conduct creates an obligation, by implication, to pay.

The most that appears is that the plaintiff acted with high hopes and great expectations that his past personal friendship with the principals, coupled with his co-operation and suggestions, would induce them to buy the required policies through him. Such a belief on his part may have been warranted; nonetheless, it was purely subjective and fell short of establishing a cause of action. It was not until after the plan had been devised and submitted that any assurances were given that the policies would be bought through him. Such assurances, although in the nature of promises, came too late to benefit the plaintiff. He had already performed what he had undertaken to do. His past performance, although rendered upon request, afforded no consideration for the belated oral promises (Blanshan v. Russell, 32 App. Div. 103, affd. 161 N. Y. 629; cf. Personal Property Law, § 33, subd. 3).

The judgment appealed from should be affirmed, with costs.

Burke, J. (dissenting).

We dissent and vote to reverse. Upon this dismissal of the complaint we are bound to view the evidence in the light most favorable to the plaintiff and give him the benefit of every reasonable inference (see Flamer v. City of Yonkers, 309 N. Y. 114) in order to determine whether under any view of the facts the plaintiff’s proof established his right to recover damages for breach of contract.

Thus viewed, the record clearly discloses at least the creation of a unilateral contract, i.e., a promise for an act, which became absolutely binding upon the final acceptance by the defendants. In any event the evidence falls clearly within the rule that ‘ ‘ Apart from the statutes validating past consideration for a written promise expressed in the writing * * * where an act is done by one person upon the express or implied request, of another, under such circumstances that the law implies a promise to pay therefor, and a promise is made after the rendition of such a service, the promise is generally held to be valid,, being supported by what is often called ‘ a past or executed consideration. ’ ” (9 N. Y. Jur., Contracts, § 105, p. 634; Pershall v. Elliott, 249 N. Y. 183.)

‘1 The law has outgrown its primitive stage of formalism when the precise word was the sovereign talisman, and every slip was fatal.” (Wood v. Buff-Gordon, 222 N. Y. 88, 91.) A contract may be implied from the facts and circumstances of the trans-action; and the intention of the parties ascertained from their conduct as well as their expression. (Wells v. Mann, 45 N. Y. 327.) The implication of their deportment and declarations may be just as vital as the written or oral word itself (Grossman v. Schenker, 206 N. Y. 466, 469) and obviously just as binding (Ahern v. South Buffalo Ry. Co., 303 N. Y. 545, affd. 344 U. S. 367).

Plaintiff’s complaint alleges in substance a contract whereby defendants promised to buy insurance policies through plaintiff if he would devise a corporate life insurance plan for them and other stockholders of a certain closely held corporation; that said plan was devised and accepted, but the insurance was written through an employee of the corporation who was made an insurance agent for that sole purpose.

The evidence discloses that in November of 1955 Bichard Freydberg requested that plaintiff work up a plan to solve their corporate insurance problem. Plaintiff, in the months following, prepared various plans with supporting work sheets and computations and had a number of conferences with Schwartz, the corporate comptroller. In April of 1956 he was informed by Bichard Freydberg that it had been suggested that a consultant be called in to make recommendations. However, plaintiff was assured that his plan was almost certain to be approved; that the consultant did not sell insurance and would, therefore, be paid a fee only; and that “ whatever he recommends, you will write the business ”.

Subsequent to this consultation a new plan was temporarily adopted, later rejected, and, upon the reacceptance of plaintiff’s plan, physical examinations were arranged. However, before this progressed very far, defendants decided to consult another expert. Bichard Freydberg told plaintiff at this time: “We are going to retain a man who is not an insurance man, who will not sell life insurance. I think your plan is good but if he doesn’t think your plan is good and convinces us that your plan is no good, we are buying the insurance from you; so don’t worry about it.” (Emphasis supplied.)

Subsequent to this latter consultation plaintiff’s plan was adopted without change or modification. However, following that meeting plaintiff was informed that, although his plan was accepted, he would not write the business. He was offered instead a comparatively small fee. The consultant apparently advised, and the defendants adopted the recommendation, that Schwarts, the corporate comptroller, be made an insurance agent and the policies obtained through him.

Under these circumstances not only do we find no difficulty, but we find it quite equitable, to at least imply a promise (see Allegheny Coll. v. National Chautauqua County Bank, 246 N. Y. 369) that the insurance be obtained through plaintiff. The implication of a promise is not only evident from the initial request to act, but also from the later assurances, and again by the final acceptance of the plan devised.

Defendants place undue emphasis upon the fact that defendants were under no obligation to accept plaintiff’s first proposal early in 1956. Although the general rule mandates mutuality of obligation for a contract to be enforcible (Schlegel Mfg. Co. v. Cooper’s Glue Factory, 231 N. Y. 459), it is certainly not an absolute requirement. Mutuality is merely one of the forms of consideration, the indispensable element without which a contract cannot ordinarily exist. (Justice v. Lang, 42 N. Y. 493.) “ For there are many valid contracts not mutually binding at the time when; as where A says to B, if you will furnish goods to C I will pay for them, B is not bound to furnish them, but if he does he may recover on the promise ”. (L’Amoreux v. Gould, 7 N. Y. 349, 351.) This latter type is characterized as a unilateral contract, and defined as one in which there is a promise, the consideration exacted .therefor being an act rather than a promise (De Cicco v. Schweiser, 221 N. Y. 431). The promise, though in a sense void when made for want of mutuality, becomes binding on a performance of that in consideration of which it was made, (Willetts v. Sun Mut. Ins. Co., 45 N. Y. 45.) For example, in the case at bar, the act is an insurance plan which would solve the corporate and defendants’ problem. Although this may have been a somewhat vague goal in its inception, it became quite definite and enforcible by defendants’ conceded acceptance of the plan proposed (1 Williston, Contracts [3d ed.], §§ 49, 106).

Therefore, the performance by plaintiff (i.e., a plan which was acceptable) is the consideration which relates back to the promise (at least implied, if not express) which becomes a binding obligation upon defendants. (Hedeman v. Fairbanks, Morse & Co., 286 N. Y. 240; Rubin v. Dairymen’s League Co-op. Assn., 284 N. Y. 32; Willetts v. Sun Mut. Ins. Co., supra.)

Respondents’ additional reliance upon subdivision 1 of- section 129 of the Insurance Law is also without merit. That section provides that: "1. No insurance broker shall have any right to compensation, other than commissions deductible from premiums on insurance policies or contracts, from any insured or prospective insured for or on account of the negotiation or procurement of, or other services in connection with, any contract of insurance made or negotiated in this state * * * unless such right to compensation is based upon a written memorandum, signed by the party to be charged, and specifying or clearly defining the amount or extent of such compensation.” (Emphasis added.)

We find this section applicable solely to insurance brokers, as distinguished from insurance agents. Article 6 of the Insurance Law clearly defines and distinguishes these categories (see § 111, subd. 2; §§ 121,129 as to brokers; and § 110, subds. 1, 3; §§ 113, 114, subd. 2, par. [a]; § 115 as to agents), and explains exactly what the terms do, as well as what they do not, include. For example, the broker is considered an agent of the insured, and cannot sell life insurance, whereas an agent is the representative of the insurer and, of course, can sell life insurance. A perusal of this article will indicate that the Legislature was quite careful in its inclusion and exclusion of the distinct terms in the titles as well as the text of the numbered sections.

In any event, even if this section did include agents, it would not be applicable here since the consideration of the oral contract was merely a promise to buy insurance. It in no way included additional compensation, other than commissions * * * from any insured".

It is our opinion that the proof justified a submission of the facts to the jury (Stubbs v. City of Rochester, 226 N. Y. 516, 527).

Accordingly, the judgment should be reversed and a new trial granted.

Chief Judge Desmond and Judges Fuld and Van Voorhts concur with Judge Dye; Judge Burke dissents in an opinion in which Judges Froessel and Foster concur.

Judgment affirmed.