author: Lansing, S.

text:
    In the Matter of the Judicial Settlement of the Accounts of the Trustees and Executors of Nicholas S. Vedder, Deceased.

      (Surrogate’s Court, Rensselaer County,

      Filed June 5, 1891.)

    1. Legacy—Interest—Infants.
    Where a legacy is given to an infant child or one to whom the testator stood in loco parentis, and no other provision is found in the will for its support, the legacy presumptively draws interest from the testator’s death; hut the absence of such provision creates a presumption only, which may be overcome by evidence in the will itself of a contrary intention, or by evidence, extrinsic to the will, that the infant had other means of support.
    3. Executors and administrators—Increase of securities.
    An increase from natural causes in the value of real or personal estate held as an investment does not constitute profits and go to the life tenant, but becomes principal and goes to the remaindermen.
    3. Same—Res ad judicata.
    In an action for the construction of a will, to which the grand-nephews and grand-nieces of deceased were parties, it was held that the win provided for the conversion of the real estate into personal property, and that the whole estate must be considered as personal property and distributed as such upon the death of the life tenant. Held, that this adjudication was binding upon all the parties to that action, although there has been a partial failure of the objects of the conversion, and that the grand-nephews and grand-nieces could not share in the distribution of the proceeds of the realty.
    Judicial settlement of accounts of executors.
    Nicholas S. Tedder died in 1879, leaving a will which was shortly thereafter duly admitted to probate by the surrogate of Bensselaer county. He left him surviving a widow, Nancy A. Tedder, but no children or descendants. Ida Angelí, a child of about nine years of age, was a member of his family at the time of his decease and had. been such for about six years. The testator and his wife had procured her from an institution in New York known as the American Female Guardian Society, in 1875. The child was indentured to them by the society by an indenture in writing, and they assumed therein certain duties and obligations, among others, “ to receive said apprentice as an adopted child, to reside in the family of the party of the second part and to be maintained, clothed, educated and treated as far as practicable by them with like care and kindness as if she was in fact the child of the party of the second part," The testator during his lifetime and his wife after his decease faithfully observed their agreement in their treatment of said Ida, and the said testator in his will terms her his “ adopted daughter.”
    The provisions of the Will, so far as they are necessary to be considered, are as follows: Item first: “ I give and bequeath unto my wife, Nancy A. Tedder, all my household furniture, useful and ornamental, pictures, plate and wearing apparel.
    “ Second. I. give and bequeath unto my said wife, Nancy A. Tedder, the income and profit of all my other estate, both real and personal, of which I shall die seized or possessed, for and during her natural life.”

      General legacies to the amount of $27,000 are provided for in the will, including thé two legacies for which the legacy to Ida A. Yedder of $8,000, provided for in the codicil, executed not long after assuming the care of said Ida, is a substitute.
    The codicil, dated July 25, 1875, provides as follows: “I revoke and cancel the bequest contained in the fourth item of said will of $5,000 to my wife’s sister, Fanny A. Mann; and (Martha Mann and Alvanda Homing mentioned in the ninth item of said will being dead), I revoke and cancel the bequest ($3,000) and benefit to and for Phoebe Mann therein provided, in case of the death of said Martha Mann, and in place thereof I give and bequeath the-sum of $8,000, being the sum of said former bequests, to my adopted daughter, Ida A. Yedder.”
    The eleventh and last item of the will provided as follows: “ Of the remainder of my estate, I give, devise and bequeath on'e-half unto the Troy Orphan Asylum of the city of Troy, N. Y., and the other one-half unto the trustees of the Tróy Annual Conference for the uses and purposes specified in the third section in their act, of incorporation passed March 30, 1864.”
    By the last item the testator appoints. Daniel D. Bucklin, of Lansingburgh, and Otis G. Clark, of Troy, executors and trustees of his will, with power of sale as follows: “ I authorize them and their successors in this trust, in their discretion, to sell my real estate and convert same into money.”
    About February, 1888, an action was brought by said executors and trustees in the supreme court for the construction of the will. In the complaint said executors allege that at the time of the making of said will the property of said testator .did not exceed the sum of $50,000, but that since that time the property had increased to such a degree that they believe that the real estate (all of which is situated in the state of New York) is of the value of $37,000; and that the personal property left to his wife for her use they believe to be of the value of $106,000; that the property given absolutely to his wife is of the value of about $1,000, and that said testator left no debts.
    The complaint also alleges that in consequence of said increase of said property, after the making of the will and before his death, the provision for the benefit of the Troy Orphan Asylum and the Troy Annual Conference has become void under the law forbidding the devise of more than one-half of a decedent’s estate after the payment of his debts to any charitable or religious institution, etc., where the testator at the time of making his will and at his death had a wife.
    The complaint further alleged that some of the legatees under said will claim that the legacies to all persons, save those to Nancy A. Yedder, Alida Yan Guysling, Troy.Orphan Asylum and Troy Annual Conference, are to be paid within a year after the death of testator, while Nancy A. Yedder contends that none of the legacies other than.hers are payable until after her death. . .
    It is. also alleged that some of the heirs-at-law‘and next of kin of testator are his grand-nephews and nieces and are not entitled to share in the distribution of his personal property; and plaintiffs asked the direction and judgment of the court, whether the whole of that portion of the estate as to which the said Nicholas S. Vedder shall be adjudged to have died intestate, if there be any such portion, shall be taken from the personal property and distributed according to the rules of law applicable to personal property ; or whether a part shall be distributed from the real property and an interest in the real property shall be held to be vested in the heirs-at-law; if any such interest in said real estate shall be held to be so vested in such heirs, then what that interest may be.
    Trial was had in said action; all parties interested had due notice and appeared, the infants by their special guardians. A decision of the court was made in said action and entered on the 11th day of June 1880, construing said will and adjudging that Nancy A. Vedder is entitled to the use and income of all property, real and personal, of which testator died the owner, during the period of her natural life; that none of the legacies in the will and codicil, nor the interest or income thereof, are payable until after the death of Nancy A. Vedder, and that no income or interest will accrue thereon for any period during her life; that the legacy of $8,000 given to said Ida in the codicil belongs to her subject to the life interest of the said Nancy A. Vedder.
    It was further decided “ that as the said will provides for the conversion by the executors of the real estate left by said testator into personal property, the whole estate must be considered and treated as personal property ; that the gift in said will to the Troy Orphan Asylum and to the trustees of the Troy Annual Conference is void under the statutes of this state in so far as the same exceeds one-half of the amount of the estate of said testator;” that as to such excess the said Nicholas S. Vedder died intestate, except in so far as the will has invested in said executors the power and duty to hold and take care of the same and to pay the income thereof to said Nancy A. Vedder during her natural life.” That such excess belongs to the widow, said Nancy A. Vedder, and the next of kin of testator, deceased, to be divided among them as provided for distribution of personal property in case of intestacy.
    And it is further provided “ that inasmuch as the said Nancy A. Vedder is entitled to the income of her share of the said last-mentioned personal property for her life and to the principal of that share under the statute of distribution, she will be entitled to demand and receive from the executors her share thereof before the proper court. That the remainder of such property as to which the said Nicholas S. Vedder died intestate, except as to the rights of said widow therein, shall remain in the hands of the executors until after the death of said Nancy A. Vedder.”
    Subsequently and on the 16th day of November, 1882, in the surrogate’s court of Rensselaer county, an accounting was had and a decree entered in accordance with said judgment. It was therein provided that property of which the testator died intestate (according to said judgment, exclusive of certain real property which had not been sold) was of the value of $30,044.67, of which the widow should receive $14,486.02, leaving the sum of $10,436.03 to be distributed according to said judgment, one-half among the next of kin of deceased and the remainder to Troy Orphan Asylum and Troy Annual Conference after the death of Nancy A. Yedder. A second accounting was had in the same court and a decree therein entered March 10, 1888. The occasion of such accounting was the sale by said executors of certain real estate left by deceased, known as the pattern-shop property, which was sold for the sum of $30,000.
    The decree provided that the same, after deducting certain expenses, should be divided as follows: One quarter, $7,494.88^, each to the Troy Orphan Asylum and the Troy Annual Conference, and the balance of $14,017.86^-, which after deducting the expenses and disbursements of the accounting and commissions, was divided as follows : One half, being the sum of $7,008.93, to be paid to Nancy A Y. Hartshorn, she having in the meantime married Mr. Hartshorn, and the remaining half to be held in trust, the income to be paid to Nancy A. Y. Hartshorn during her lifetime, and after her death to be divided among the next of kin of testator.
    Under these two decrees the distribution of the personal estate and the real estate, so far as the real had been sold, was settled " and determined and distribution made and provided for in accordance with the terms of said judgment. Nancy A. Y. Hartshorn received the income during her life upon the entire estate and also, in pursuance of said judgment, her share as widow of the portion as to which the testator died intestate, except certain real estate sold since her death.
    Upon the present accounting the executors show that they have sold the house and lot known as the homestead since the death of Nancy A. Y. Hartshorn, which occurred on the 9th of June, 1890, for $14,000; that they hold for the payment of taxes assessed on said estate and taxes paid in 1890, $350.64, leaving a balance on account of said real estate of $13,649.36; they have sold the cottage at Round Lake for $800; also the pew in the North Second street Methodist church for $100, and a safe for $35, aggregating $14,584.36; they have sold also certain securities which they had originally received as a portion of the trust estate or in which they invested the trust fund at or prior to the first decree of said surrogate’s court; and they show that the securities brought an advance above the amount they had stated on the first account of $10,220.86, which must be added to the amount above stated, $14,584.36, making the sum of $24,805.22, which with $117,619.09, the trust fund held by the executor during the life of Mrs. Yedder and still in his hands, makes altogether $142,436.07, which amount, less expenses and commissions, must be distributed under the decree upon the final accounting of said executors and trustees.

      Townsend, Roche & Nason, for Otis G. Clark, sole surviving executor; McClellan & McClellan, for Simon F. Mann,temporary administrator of the estate of Nancy A. V. Hartshorn, deceased; also for Edward E. Stevens and another, assignee of William O’Neil, assignee of the legacies bequeathed to Mrs. Carpenter and Gertrude Shufelt; John H.Peck, for Troy Annual Conference ; King & King, for Troy Orphan Asylum; Horatio G. Glen, for executors of the estate of Myndert Schermerhorn and for Catharine M. Fellows; Matthew Hale, for Willard K. Brooks, Walter Brooks and Belle Smith; William Lord, for H. W. Gordinier, general guardian of Ida A. Vedder, an infant; Seymour Van Santvoord, for William Lord, as special guardian of Ida Vedder; Saunders & Myers, for John E. Cary, Peter Van Guysling, Nicholas V. Van Guysling, Eliza Luke, Mary Sagendorf, Alexander A. Gilchrist, Thomas A. Gilchrist, Gertrude Shufelt and Sarah G. Carpenter; and Nelson Davenport, for executors of Daniel D. Bucklin, deceased, executor and trustee.
   Lansing, S.

Several questions have arisen upon this accounting as to the proper disposition to be made of the fund yet remaining in the hands of the executors and trustees for distribution. The persons presenting adverse claims have been represented by numerous and able counsel, who have pressed their views upon the court with great force and ability and have submitted numerous briefs evincing great industry and research in the law pertaining to the questions in dispute.

The questions involved are substantially questions of law only. I shall consider them in the order of their statement.

The first question is as follows: Is Ida A. Yedder (a legatee under the will of said deceased to the amount of $8,000) entitled to interest upon her legacy from the death of the testator to the death of testator’s widow, Nancy A. (Vedder) Hartshorn, which ■occurred some ten years thereafter?

The facts pertaining to this question are briefly these: Ida Angelí, termed in the will Ida A. Yedder, was taken from an institution in the city of New York when about three and. one-half years of age, by Mr. and Mrs. Yedder, for the purpose, as appears, of receiving her into their family and rearing her as their own child, they having no children of their own. A few months after receiving her, the institution (reciting that it had the authority to do so) entered into a formal agreement in writing under seal with Mr. and Mrs. Yedder, by which she was indentured to them as an apprentice until she reached the age of eighteen years, on certain terms and conditions therein mentioned; and it was especially provided in said instrument by the parties thereto that -it was the intent and meaning thereof that Ida should be received into the family, maintained, clothed and educated and treated with like care and kindness as if .she was in fact the child of Mr. ■and -Mrs. Yedder. The evidence clearly shows that she was so received, educated, clothed and maintained during the lifetime of the testator, and at his death she continued a member of the family of Mrs. Yedder and received the same treatment down to the time of her death.

A legacy to Ida of $8,000 was given by the codicil to testator’s will, made shortly after she became a member of his family. By this codicil he revoked items 9 and 11 of his will, which contained two items aggregating $8,000, which were legacies to adult persons, the interest and income of which was to be paid to his wife Nancy during her lifetime, and gave the same to Ida. He terms Ida, in the codicil to his will, his adopted daughter, but makes no other provision for or mention of her in his will. The income of the entire estate, real and personal, including the portion given to Ida, was given to his wife during her lifetime, and there was no provision for the payment of any legacies to anybody, or for the payment of any money for any purpose prior to her decease; and the entire estate was disposed of by the terms of his will.

The question presented under this state of facts is: “ Did the testator intend the legacy of $8,000 to be a provision for the maintenance of his adopted daughter and that interest be paid her thereon during the lifetime of his wife ?” The question is one of intent. The rule is well settled in the construction of wills that the intention of the testator, if not contrary to law, will, when ascertained by the courts, be enforced. The right of the testator to dispose of his property by his will, when not contrary to the provisions or policy of the law, is as well settled as his right to dispose of the same during his lifetime. The legal obligation of a testator to support one as to whom he -is in loco parentis, or even his own child, continues only during his life. Brown v. Knapp 79 N. Y., 142.

It is a well settled rule of law that legacies -draw interest only ■from the time when either by law, which is one year from the date of issue of letters testamentary, or by the express terms of the will, they are payable. Lupton v. Lupton, 2 John. Ch., 614; Bradner v. Faulkner, 12 N. Y., 472; Matter of McGowan, 32 N. Y. State Rep., 226.

But there is a well settled exception to this rule, which is laid down as follows by the learned and accomplished author of Red-field on Wills: “ Where a legacy is given by a parent to his child or by one in loco parentis by way of maintenance, and the possession of the principal defined,- it is held that the legatee is entitled to interest from the death of the testator. ■ But this rule will not apply where the maintenance of the child is otherwise provided, for either by the will or in any other mode." 2 Redfield on Wills, 566.

In Williams on Executors, at page 1429 (marginal paging), the rule is in these words: “ If the legatee be not an adult, interest on the legacy shall be allowed as a maintenance and from time of death of testator if there be no other provision for that purpose;” and the rule in the language above quoted from Williams on Executors is stated with approval by Davies, Ch. J., in Cooke v. Meeker, 36 N. Y., 19.

The counsel for the guardian ad litem of the infant challenges the correctness of the rule, as above stated, and insists that the will alone is to be looked to, and that interest upon a legacy, the payment of which- is deferred, must, where the legatee is the child of the testator, or one to whom the testator stood m loco parentis, be paid from the death of testator, where there is no other provision made in the will for the maintenance of such infant legatee. In his view it is immaterial how ample a provision has been made and enjoyed by the infant from any other source; in other words, that nothing will defeat the payment of interest on the legacy to the infant, under such circumstances, but a provision in the will for its support. I am unable to assent to this view of the law, and I think no well-considered case can be found to-sustain that position. The language of two or three cases in this state, when considered apart from their facts, lends some support to the doctrine. The case of Lupton v. Lupton, supra; Brown v. Knapp, 79 N. Y., 141, and Thorn v. Garner, 113 id., 202; 22 N. Y. State Rep., 692, are cited in support of the contention of the guardian ad litem. But each of these cases, when carefully examined, will be found to state only what is termed the general rule in the construction of wills respecting the payment of interest upon legacies to infants. In each of the cases it is stated in general terms that the rule is, that where there is no provision made in the will for the maintenance of such infant legatee, interest will be allowed from the death of testator by way of maintenance. This rule, as we understand, when taken in connection with the reason upon which it is based, is to be applied when looking at the will alone, interpreting it by its own terms. ¡Neither of the cases holds or professes to decide that where ample provision is found outside of the will for the maintenance of the infant, whether from the bounty of the testator or otherwise, that the legacy will draw interest from the death of the testator. There is nothing, therefore, actually decided in the cases cited by the counsel for guardian ad litem in conflict with the rule as laid down by Judge Redfield. Indeed, the court expressly say, in the case of Brown v. Knapp, supra, that the rule is based upon the presumption that the testator in such a case must have intended that the legatee in the meantime should be maintained at his expense. And in the case of Thorn v. Garner, supra, Judge Peckham says: “ The fact that the legacy was payable to an infant child * * * an¿ there is no other provision made in the will for the maintenance of such legatee, has been regarded as a fact sufficiently indicative of the intention of the testator to authorize the payment of interest from his death, although such direction was not found in the will.” The fact that in such a case no other provision is found in the will for the maintenance of the infant creates the presumption only that the testator intended that interest should be paid upon the legacy from his death. But this presumption may be overthrown not only by the import and terms of the will itself, but also by evidence extrinsic to the will. In the case of Brown v. Knapp, the court, after having stated that the absence of a provision for maintenance created the presumption that the testator intended the legacy to draw interest, adds: “ That this presumption is not overthrown by the language (of the will) used in the bequest to his daughter,” thus clearly implying that it was simply a question of intent, that the presumption raised upon, .the one hand in favor of interest is not conclusive, but might be overthrown if a contrary intent appeared in the will. In the case of Thorn v. Garner the court considers in detail a large amount of evidence extrinsic to the will for the purpose of ascertaining whether the testator intended the legacy (in that case of $1,000,000) should draw interest from the death of the testator or from the time fixed hy law (one year thereafter), and reaches the conclusion that from the evidence furnished by the terms of the will itself and the evidence extrinsic to the will that the testator did not intend the legacy to draw interest until it was payable, and reversed the decision of the court below, which had allowed interest under the rule cited by the learned counsel for the guardian ad litem.

In the case of Lyon v. Industrial School Association, 52 Hun, 359, 24 N. Y. State Rep., 443, the very point under consideration here, namely, as to whether the court could look outside of the will for the purpose of ascertaining whether the infant had a provision for its support, was carefully considered, and the court expressly held: “If the fact exists that the legatee is not dependent, then no presumption exists that the testator intended the postponed legacy to draw interest; and it is immaterial whether or not there is other provision in the will for the legatee.” And the court adds: “We are not unmindful of the fact that the expression has been used in many cases where interest has .been allowed ‘ that no other provision was allotted hy the will,' seeming to imply that the will alone can be looked to to determine the question; but as I have before remarked, if we go outside of the will to make a case for claiming interest, no reason exists for not going outside to defeat interest.” The result of the authorities appears to be to establish this rule, that where a parent gives a legacy to an infant and no other provision is found in the will for its support, the legacy presumptively draws interest from the death of the testator, but that the absence of such provision creates a presumption only, which may be overthrown by evidence in the will itself of a contrary intention, or the presumption may be repelled by evidence, extrinsic to the will, that the infant had other means of support

First. In the present case it seems clear from the very terms of the will that the testator did not intend said legacy should draw interest from his death, for (1) in express terms he gives to his wife the interest and income of his entire estate, real and personal, leaving no room for inference that he intended interest upon this legacy to be paid to" his daughter Ida, year after year, after his decease during the life of his widow, and (2) he provided in his will no means from which the same could legally be paid, for he specifically devoted his entire estate to other purposes; thus the presumption is overcome effectually by the terms of the will itself that he did intend such payment, and this is fatal to the claim.

Second. The extrinsic evidence is even still more clear, for from it we learn that Mrs. Yedder had become, with her husband, the guardian of Ida, and upon his death there devolved upon her the legal duty, as well as the moral obligation to furnish Ida maintenance and support And it further appears that, mindful of this obligation, Mrs. Yedder did care for her as for her own child, educating and clothing her and affording her all the advantages which her large income and her station in life enabled her to do during her life.

Third. And it can hardly be doubted but that the testator in making this ample provision for his wife of the entire income of his large estate, with no one to enjoy it except Mrs. Yedder and the child Ida, contemplated that he was making a most ample and generous provision for the child of their mutual affection; and the result shows that his expectation was not disappointed, for she received a support in comparison with which the income from the $8,000 would have been a pittance. It is quite common in wills to provide thus indirectly for the education, maintenance and support of children by simply providing the wife and mother with means for such purpose; such a provision is usually effectual, while at the same time placing the children under such restraint as experience has shown to be wholesome.

In conclusion upon this point, we think it will hardly be claimed that at any time during the lifetime of Haney A Vedder this infant would have been heard in court to compel the payment of this interest for her support. A sufficient answer would have been, first, that she was not dependent but was in receipt of ample maintenance; secondly, that there was no fund provided by the will for the payment of such interest and consequently none was intended; and, thirdly, that as the legacy was not intended for her maintenance, no interest was payable upon it until it became due.

The second question presented for decision is : “Are the personal representatives of Haney A. (Vedder) Hartshorn entitled to receive as profits, under the terms of the will, the increase in the value of the securities held by the executors and trustees of Hicholas S. Yedder, deceased, since 1882, the time of the entry of the decree upon the first judicial settlement of said estate by the surrogate, or should such increase be held to be a part of the principal sum and be divided among those entitled to receive the same ? ”

These securities were inventoried and constituted the greater portion of the estate of said testator. His widow received the income therefrom during her lifetime. After her death the executors converted them into money and realized by their sale an advance of $10,200.

The second item of the will provides as follows :

“ I give and bequeath to my said wife, Haney A Yedder, the income and profits of all my other estate (the first item of the will gave her goods valued at $1,000), both real and personal, of which I shall die seized or possessed, for and during her natural life.”

The testator died possessed of both real and personal property to a large amount The will authorized the executors, in their discretion, to sell the real estate and convert the same into money.

The personal representatives of Mrs. (Yedder) Hartshorn insist that, since under the terms of the will she is entitled to receive the “income and profits” of the estate during her lifetime, she should receive as income of the real and personal estate the rents and interest, and also something beyond that, namely, the profits, and that the accretion to said securities, which is assumed to have accrued during her lifetime, is such profits.

. Unquestionably, if the testator intended that his wife should receive whatever of increase in value accrued to his estate during her lifetime, and had so stated in his will, there is no legal principle that could be successfully interposed to prevent its receipt by her, if ascertained in her lifetime, or by her personal representatives after her decease

(1.) The first question then is, Did the testator so intend and provide in his will? The word “ profits,” when applied to trade, or business means “ the advance in price of goods sold beyond the cost of purchase.” Bouvier’s Law Dictionary. The word “ profits,” when applied to real estate, means “ the produce of lands,” and is, as used in the phrase “rents, issues and profits,” synonymous with “ rents.” 2 Burrill’s Law Dictionary, p. 344. “Rents and profits” of real estate means “the sum annually yielded ” by the same. Delaney v. Van Aulen, 84 N. Y., 23.

The testator died seized of a large amount of real estate, which for aught that appears produced or was capable of producing an income; and as the testator left it to the discretion of his executors when to sell the real estate, it may be fairly inferred that the word “ profits ” was used by the testator with reference to such rents as might be received by the executors from the real estate during the life of his wife.

Indeed, it seems to us that the meaning of these terms, in the connection used, is too clear to require construction; certainly the words used are apt to express an intent by the testator, if entertained by him, to give to her the use and income of his estate, real and personal, and that alone; and it may be worthy of note that the supreme court in construing the will used the phrase “ income and profits ” as synonymous with “ use and income.”

(2.) We find no evidence in the remaining provisions of the will, nor in the surrounding circumstances, from which it may be inferred that the testator intended to give his wife any sum greater than the annual income or interest and the rents of his estate.

(3.) Since there is nothing in the terms of the will itself nor the surrounding circumstances indicating any specific intent on the part of the testator that his widow should receive the increase in the value of his estate during her lifetime, the claim of her personal representatives, if any, must be based upon the legal proposition that the advance or increase in value of the estate or of the securities, under the circumstances here disclosed, belonged to her as life tenant, without reference to any specific intent on the part of the testator to give her the same. This proposition, we think, cannot be successfully maintained. This very question has been repeatedly before the courts, and it is now settled by numerous and authoritative adjudications.

The rule as settled maybe stated broadly to be that an increase from natural causes in the value of real or personal estate held as an investment does not constitute profits and go to the life tenant, but such increase becomes principal and goes to the remainder-men.

In the Matter of the Final Accounting of Gerry, 103 N. Y., 450. 3 N. Y. State Rep., 688, a case much in point, the court say: “ The theory of the will did not contemplate any traffic in securities by the trustees, but a permanent investment in interest-bearing obligations, subject to be sold or exchanged when the exigencies of the trust required it to be done.” And the court adds: “If the will had required the trustees to invest in real estate, the rents, incomes and profits of which were made payable to the life tenant, with a remainder over, it cannot be questioned but that any increase in the value of the lands from natural causes would have been an accretion and inured to the benefit of the remaindermen, Perry on Trusts, § 545, p. 486; Cogswell v. Cogswell, 2 Edwards’ Ch., 231, 240, and we cannot see any difference in principle between this (an increase in value of securities) and the one supposed (an increase in value of real estate).”

The court further say: “ The question here presented was up in the case of Townsend v. U. S. Trust Co., 8 Redf., 222; Whitney v. Phænix, 4 id., 180, before the surrogate of New York, and it was there held that an enhancement of the value of United States bonds, held in trust, went to the remaindermen and not the legatee for life. These decisions accord with our views.” See also Clarkson v. Clarkson, 18 Barb., 646; Scovel v. Roosevelt, 5 Redf., 121; Matter of Pollock, 3 id., 114; Matter of Kernochan, 104 N. Y, 618; 6 N. Y State Rep., 439.

Finally, if the term “profits” could, in view of the law, be held to include the difference between the inventoried value of these .securities in 1882 and the price for which they were sold after the death of Mrs. Hartshorn, in 1890, still she would not be entitled to the profits as such, since there was no sale or realization during her lifetime. It is well settled that until the securities are actually sold and the transaction complete there are no profits. Increase in value becomes profit only when realized by sale, and in this case, there having been no actual realization or receipt of profit during the life of Mrs. Hartshorn, neither she nor her personal representatives are entitled to it Jennery v. Olmstead, 36 Hun, 586; S. C., affirmed, 105 N. Y., 654; 8 N. Y. State Rep., 907.

It follows that the increase in the value of these securities must be held to belong to the principal and be distributed as a portion of the same.

The third and remaining question is: Are the grandchildren of testator’s deceased sister, namely, Willard Breóles, Walter Brooks and Belle Smith, entitled to share as heirs-at-law in that portion of testator’s real estate as to which, according to the decision of the supreme court, the testator died intestate, or must the entire estate, real and personal, be distributed as personalty to the widow and next of kin of said deceased ?

After the death of his widow the testator, by his will, gives certain legacies to the different persons therein named, and finally of the entire remainder of his estate he gives, devises and bequeaths one-half to the Troy Orphan Asylum and the other half to the trustees of the Troy Conference.

Shortly after the death of the testator the executors brought suit against the widow, legatees named in the will, the heirs-at-law and next of kin of said deceased, for the construction of said will, and all parties appeared and answered. The executors alleged in their complaint that they were advised that certain provisions of said will for the benefit of the Troy Orphan Asylum and Troy Conference were under the facts stated by them invalid under the laws of this state and asked the judgment of the court thereon. The court held and decided that the gifts to the Troy Orphan Asylum and the Troy Conference, so far as they exceeded one-half of the testator’s estate, were prohibited by law and were void, and that as to the remainder of the estate the testator died intestate, and the same must be distributed according to the laws, of distribution applicable to cases of intestacy.

The court further held and decided (the question having been directly raised by the pleadings) that said will provided for the conversion by the executors of the real estate left by the testator into personal property, and that the whole estate must be considered to be and be treated as personal property.” And the judgment in the case provided in terms: That such excess belongs to the widow, said Nancy A. Yedder, and the next of kin of said Nicholas S. Yedder, to be divided among them in the manner provided in the statute regulating the distribution of personal property among the widow and next of kin, as in case of intestacy.”

The testator left no children but nephews and nieces and the grandnephews and grandniece above named. The right of these grandnephews and the grandniece to a portion of the testator’s estate is now only in question. As to the personal property of the deceased, these grandnephews and the grandniece have no claim, 2 R. S., 97, § 75, subd. 11, but of the real estate they would- ordinarily take their portions with the nephews and nieces as heirs-at-law in case of intestacy. 1 R. S., 752, §§ 8 and 9.

It is conceded that the testator left sufficient personal property ' to pay all his debts and legacies, including the portion of the estate to which the Troy Orphan Asylum and the Troy Conference are by law entitled. It is insisted by the counsel for the said heirs-at-law that as the testator died intestate as to the remainder of his property, after payment of debts and legacies, a considerable portion of which is real estate, and as a large portion of that remaining to be distributed upon this accounting is the proceeds of the sale of real estate, that the heirs-at-law are entitled to share in the distribution of the proceeds of said real estate.

And it was further insisted by said counsel that nothwithstanding the court held by its judgment that by reason of the-power of sale to the executors the whole estate left by the testator became converted into personalty, yet such conversion into' personalty was only for the purposes of the will. And that if any estate or interest in the fund arising from the sale is not legally and effectually disposed of by the will, there is a resulting trust or interest in favor of the heirs-at-law.

In other words, the claim is that it is settled, as a matter of law, that where there is a partial failure of the objects of the conversion, that the undisposed portion of the surplus, where it is real estate, will result to the heirs, and that this is always so where there is no “ out and out conversion,” such as follow a peremptory direction to the executor to sell; and a number of authorities are cited in support of such position.

We are inclined to think, although the earlier authorities are not altogether uniform, that the later authorities support this contention of the counsel for the grandnephews and grandniece of the testator.

In the case of Chamberlain v. Taylor, 105 N. Y., 185; 7 N. Y. State Rep., 517, Judge Ruger, speaking for the court, says : “The legal right of an heir to the real property of a deceased person cannot be defeated except by a valid devise of the property to another; and, although a testator may have intended a conversion of his real estate, this does not affect the transfer of ■ title unless the intention is manifested in the mode and language required by the statute.” And the learned judge adds: “ The authority given the executor to sell the real estate did not work an equitable conversion, as there was no necessity for such conversion to satisfy the valid provisions of the will”

But the heirs at law (grandnephews and grandniece) have not overcome the chief obstacle to their recovery. Let it be conceded that the equitable conversion of the estate was only for the purposes of the will, and that its purposes having all been met without recourse to the .real estate, said heirs at law are entitled to share therein under the laws of descent, there still remains the judgment of the supreme court construing said will, to which the heirs at law and next of kin were parties, where the issues were specifically and definitely framed to obtain a decision from the court upon the very question raised here. It is not contended by the counsel for the heirs that the court did not have jurisdiction of the subject-matter and of the parties; in other words, that the executor was not authorized to seek the direction of the court as to the construction of the will or of the several provisions of the will as to which question was raised by the pleadings.

But it is insisted by the learned counsel for the heirs that “ so far as the suit or action asked the court to decide as to whether that portion of the estate as to which the will was ineffectual went to the heirs at law or next of kin, it went beyond “ the proper object and scope of such suitand any adjudication upon the question was, therefore, not binding upon the parties in a proceeding like this, to determine who is entitled to the real estate now in the hands of the executors and remaining for distribution.” Numerous authorities are cited holding in effect that the rights and interest.of parties to actions which were not the proper subject matter of such action or within its scope and object are not conclusively disposed of by the judgments therein. Rathbone v. Hooney, 58 N. Y., 463 ; Outram v, Morewood, 3 East, 346, 357.

We do not think that doctrine applies here.

It was within the “ proper object, purpose and scope ” of the action for the construction of the will that the executors should have determined, first, if there was any portion of the estate as to which the testator died intestate; secondly (as it was the right at least, if not the duty of the executors under the power of sale to . convert the real estate into money for the purposes of their trust), to obtain the direction of the court as to what ultimate disposition should be made of the proceeds after the death of the widow. This was a question proper to be raised and decided by the court to enable the executors to perform their duty. It was answered by the court, whether right or wrong (presumptively it was right, since no appeal was taken by the heirs), that the whole property, real and personal, was under the terms of the will converted into personalty. And that the whole of that portion as to which the testator died intestate must be distributed among the widow and next of kin as personal property under the statute of distribution.

The decisions are ample that such an adjudication, made in the construction of a will, is binding upon all parties in any litigation which may thereafter arise between any of them concerning any of the provisions of the will directly passed upon in construing the same.

The general rule is well settled that a final judgment or decree of a court of competent jurisdiction is conclusive in every other suit between the same parties as to all matters and questions therein properly determined, or which might or ought to have been determined therein. Doty v. Brown, 4 N. Y., 71; Demarest v. Darg, 32 id., 281; Brown v. Mayor, 66 id., 391; Chamberlain v. Taylor, 105 id., 185; 7 N. Y. State Rep., 517; Leavitt v. Wolcott, 95 N. Y., 222; Chamberlain v. Chamberlain, 43 id., 424.

Also that infants represented by a guardian ad litem are bound to the same extent as adults. Walsh v. Walsh, 116 Mass., 377 ; United States Life Ins. Co. v. Schermerhorn, 36 How., 373.

That this rule applies to this case we think there can be no doubt. If so, the grandnephews and grandniece of testator are, much as we must regret the result, excluded from all participation in the fund by reason of the judgment in the suit for the construction of the will. Let it be conceded that they as heirs-at-law of testator, immediately upon his death, took, under the law, title as tenants in common with the nephews and nieces to that portion of the real estate as to which the testator died intestate, the fact still remains that a suit was properly brought, in which they were parties and in which the question was squarely presented as to whether any portion of the estate as to which the testator died intestate should, upon a proper application of the rules of law applicable to the construction of the terms of the will, go to the heirs-at-law, and the court decided that the whole estate was by the terms of the will, under the circumstances, equitably converted into personalty and must go to the widow and next of kin and not the heirs at law.

The application of the doctrine of res adjudicata to cases involving the construction of wills is not a matter of reasoning alone. In the case of Chamberlain v. Taylor, 105 N. Y., supra, which was an action of ejectment from certain real estate which had passed under a will, the construction of which had been determined by the court between the same parties in a former action brought especially for that purpose, Chamberlain v. Chamberlain, 43 N.Y., 424, the court say in substance that as all the parties to this suit (ejectment) were before the court when the will under which the real estate passed was construed, neither party can now be heard, whether the judgment was right or wrong, to call in question the construction then given to the provisions of the will. See also case of Leavitts v. Wolcott, supra; Bowers v. Smith, 10 Paige, 193.

The case of Bowers v. Smith holds that although the decision of legal questions, such as title to real estate in construction of wills, belongs exclusively to courts of law, yet such questions may, when 'they incidentally arise or where the court has obtained jurisdiction for some other purpose, be conclusively determined upon the construction of wills in a court of equity.

The case of Demarest v. Darg, supra, holds that the rule of res adjudicata applies, although the adverse parties were nominally defendants in suit in equity, since they have in such suit ample opportunity to assert their rights not only as against the plaintiffs (executors) but against each other.

These considerations lead to a denial of the right of the grandnephews and grandniece, as heirs at law of said deceased, to participate in the distribution of the fund.

Let a decree be prepared and submitted in accordance with the views herein expressed.


source: Caselaw Access Project

author: Williams, J. Hardin, P. J.

license: Public Domain

text:
    Daniel Crouse et al., Resp’ts, v. Walter Whittlesey, App’lt.

      (Supreme Court, General Term, Fourth Department,

      Filed October 3, 1891.)

    Bankruptcy—Discharge of judgment—Code Civ. Pro., § 1268.
    Where the validity of a discharge in bankruptcy is questioned in a proceeding under § 1268 of the Code to discharge a judgment, such question may be settled and determined by the court in such proceeding. The proper practice in such case is to" order a reference to take and report the evidence of the parties with the opinion of the referee.
    Appeal from an order made at Onongaga special term, denying a motion made pursuant to § 1268, Code Civil Procedure, to procure a judgment to be discharged of record, on the ground that the debtor had been discharged in bankruptcy from the payment of the judgment
    A discharge in bankruptcy had been granted, which, if valid, was sufficient to discharge the judgment, and entitle the judgment debtor to the relief asked for in the court below. The judgment creditors, however, claimed the discharge was invalid; that there was want of jurisdiction in the court, and other things connected with the proceedings practically amounting to fraud in procuring the discharge.
    The court below, upon the affidavits and papers presented, decided the discharge was invalid, and denied the motion.

      C. D. Adams, for app’lt; G. W. Adams, for resp’ts.
   Williams, J.

It is provided by § 5119, U. S. R. S., that “the certificate (of discharge) shall be conclusive evidence in favor of such bankrupt of the fad and regularity of such discharge.”

And then provision is made by | 5120 for contesting the validity of the discharge for fraud, within two years, by reason.of any of the acts specified in § 5110 as grounds for refusing or invalidating the discharge.

It has been held in this state that the remedy given by § 5120 is exclusive in the district court only where the invalidity of the discharge is based on one or more of the grounds of fraud specified in § 5110, and a discharge may be attacked in a state court for fraud based upon any other ground, and also for want of jurisdiction in the court granting it Poillon v. Lawrence et al., 77 N. Y., 207.

The attack was, in that case, made in an action, but I can perceive no reason why it may not be done as well on a motion under this section of the Code of Procedure. Such attack was made and resulted in the defeat of such a motion, in superior court, New York city, special term. Seaman v. McReynolds, 65 How. Pr., 521.

The question of power to settle the question of the validity of the discharge on motion, however, does not seem to have been considered. There are some cases holding the validity of discharges should not be tried upon motions. Bangs v. Strong, 1 Denio, 619; Robens v. Sweet, 48 Hun, 436; 16 N. Y. State Rep., 334, and the cases therein cited and referred to. Hone of these cases were motions under this section of the Code of Civil Procedure. They were motions to set aside executions or supplemental proceedings based upon judgments alleged to have been discharged; and it was held the motions should be practically held to await the determination of the validity of the discharge in actions to be brought upon the judgments.

While the principle involved in those cases is very similar to the one here involved, yet this motion, unlike those referred to, is expressly provided for by the legislature, and the intention would seem to be obvious to provide by this section for a full and complete determination of all matters' involved in the relief sought for. The power to attack these discharges exists in the state courts, and when, therefore, the validity of a discharge is questioned in a proceeding under this statute, I see no reason why the cou'rt may not in the same proceeding settle the question as to the validity of the discharge which stands in the way of granting the relief sought. It would be a great hardship to the parties to be driven to an action, with its attendant expense and delays, to procure a determination of this question. There is really no necessity for it, and no reason why the question cannot as well be settled in the proceeding under the section of the Code itself.

The court should • be careful to provide for a full, fair opportunity to litigate the question, and the better practice is to order a reference to take and report the evidence of the parties, with the opinion of the referee. In this case new papers are presented in this court, which at least create a doubt as to whether a correct conclusion was reached by the court below as to the facts.

I think a proper disposition -of this appeal is to reverse the order appealed from, and direct the entry of an order of reference to take proofs of both parties as to the validity of the discharge, and report the same, with the opinion of the referee, the motion to be further heard at special term, upon the coming in of such a report. And no costs or disbursements of the appeal should be allowed.

Merwin, J., concurs.

Hardin, P. J.

I think the order should be reversed. Inasmuch as all the record evidence was not before the special term which the debtor has in regard to the discharge, and he did not have an opportunity to meet and explain or contradict the affidavits read by the plaintiffs, it is reasonable that upon a reference the facts should be ascertained before final action is had upon the motion. I agree with Justice Williams in ordering a reference to take proofs, and when they are taken by the referee and he has expressed his opinion thereon, the motion should be further heard by the special term, when it can be determined whether the motion should prevail.

I suggest a reversal of the order, without costs to either party of the appeal, and a reference to take proofs and report with his opinion to a special term, when the motion should be heard upon eight days notice.


author: Williams, J.

text:
    Charles P. Leonard, App’lt, v. James P. Bowman and Edward J. Boshart, Def’ts.

      (Supreme Court, General Term, Fourth Department,

      Filed October 3, 1891.)

    Supplementary proceedings—Affidavit fob third party order.
    An affidavit for a third party order, under § 3441 of the Code, which states that the execution was issued to a county where the judgment debtor then resided, and yet resides or has * * * an office for the regular transaction of business, and on information and belief that the third person has property of the judgment debtor exceeding ten dollars in value, or is indebted to him in such sum, is defective in making the statements in the alternative and in failing to state the sources of information and grounds of belief and is insufficient to support the proceeding.
    Appeal from an order made at Oswego special term, vacating an order for the examination of a third party, in supplemental proceedings, under § 2441, Code of Civil Procedure.
    The affidavit, among other things, stated that execution was issued to the sheriff of Lewis county, “where the judgment debtor then resided and yet resides, or has at the time of the commencement of these proceedings an office for the regular transaction of business in person.” And upon information and belief that the third person “has personal property of the judgment debtor exceeding ten dollars in value, or is indebted to him in such sum of ten dollars.”
    It is claimed the affidavit was defective in making the foregoing statements in the alternative, and in failing to state the sources of affiant’s information and the grounds of his belief as to property or indebtedness.

      Merrell, Ryel & Merrell, for app’lt; E. J. Boshart, for resp’ts.
   Williams, J.

In Arnot v. Wright, 55 Hun, 561; 29 N. Y. State Rep., 425, this court held that such a statement as to the county to which the execution was issued was defective and rendered the affidavit insufficient to support the proceeding.

In Lee v. Heirberger, 1 Code R, 38, it was held, under a statute substantially like the present, that such a statement as to property or indebtedness was defective, and rendered the affidavit insufficient to support the proceeding. The same thing was held by the general term, first department, in Collins v. Beebee, 7 N. Y. Sup., 442; 27 N. Y. State Rep., 4, a case under the provision of the Code now in force. The latter two cases were cited and approved by this court in Arnot v. Wright, above cited.

In Miller v. Adams, 52 N. Y, 409, cited by appellant’s counsel,, the question as to the alternative form of statement was not considered. The question raised was as to the sufficiency of the-statement of facts on information and belief. That was an attachment case. In People v. Recorder of Albany, 6 Hill, 429, also cited, an application was made for a warrant under the non-imprisonment act, and the statement as to property was in the alternative. This statement was held defective because in the alternative, and no reason was shown why the affiant could not be more definite. In Van Alystne v. Erwine, 11 N. Y, 331, also cited, an application was made for an attachment. The statements were in the alternative as to departure from the state or keeping concealed therein, and as to intent, and it was held in an action brought by trustees claiming under the attachment proceeding, that the affidavit was sufficient to confer jurisdiction to grant the attachment and appoint the trustees. That case is clearly distinguishable-from the present one, as appears from the following brief extract from the opinion of the court: “The remedy is precisely the same-whether the debtor had absconded or was concealed. A case may be so circumstanced that although it may be conclusively shown that the debtor has left his place of business-in order to defraud his creditors by depriving them of their remedies, yet it may be impossible even to conjecture whether he has continued his flight beyond the boundaries of the state, or has resorted to some place of concealment in it. The same considerations apply to the alternative as to the debtor’s intent. This affidavit discloses such a case in the present instance. If such an objection is well founded, there could be no proceeding under this statute in a case thus-circumstanced. The debtor would only have so to conduct his evasion as to make it uncertain which course he had adopted, and he would avoid this remedy. I do not think the statute requires such a construction. The case cited by defendant’s counsel, 6 Hill, above, implies that where the circumstances are such that it is doubtful in what particular the defendant’s conduct' has brought him within the statute, the creditor has only to state all the facts without electing which aspect he inll adopt” Precisely that course was adopted here.

In that case it appears, in addition to the formal affidavit in which these alternative statements were made, there were other affidavits in which circumstances were disclosed, as a basis upon. which the formal affidavit was founded. In the case we are considering it does not appear there was uncertainty as to the residence of the judgment debtor, and it could not well be doubtful whether he had in the county an office for the regular transaction of business in person. It does not appear there was uncertainty whether the third person had property or owed a debt to the judgment debtor. These latter statements were made on information and belief. It does not appear what the nature of the information was, or whether it left any doubt or uncertainty upon the mind of the affiant as to which alternative was the true one.

We think the affidavit in this case was clearly insufficient to support the supplemental proceeding, and that the order made by the court below was correct and should be affirmed, with costs and disbursements of appeal.

Hardin, P. J., and Merwin, J., concur.


author: Clement, Ch. J.

text:
    John Grafton, Pl’ff, v. The Union Ferry Co., Def’t.

      (City Court of Brooklyn, Special Term,

      Filed, April 8, 1891.)

    Abatement and revivor—Corporations.
    A person who has an action for injuries to his person pending against a corporation at the time of its dissolution by expiration of its charter cannot he considered a creditor within the meaning of the provision of the Revised Statutes making the directors trustees of the creditors, and the action cannot he continued against them.
    Motion to continue action.

      Backus & Manne, for pl’ff; Benj. D. Silliman, for def’t.
   Clement, Ch. J.

This action was brought to recover damages for a personal injury to the plaintiff by reason of the negligence of the employes of the defendant, and was commenced on March 27, 1890. The charter of the defendant expired on November 9, 1890, and plaintiff moves- to continue the action against the directors who were in office at that time. The notice of motion was served upon two of the directors only, but I hold that the attorneys, by their consent to adjourn, appeared for all the purposes of the motion.

At common law, on the dissolution of a corporation, its real property reverted to the original owners, its personal property went to the government, and all debts due to and from the corporation were canceled. Owen v. Smith, 31 Barb., 641, and authorities there cited. This rule of the common law was never adopted in this country, and while, without any statute, an action at. law would not lie by a creditor against a defunct corporation, yet a court of chancery would enable a creditor to follow the assets and collect the claim. Bacons v. Robertson, 18 How. (U. S.), 480.

By the revised laws of this state it was provided that, upon the dissolution of a corporation, the directors should be the trustees of the creditors and stockholders, with full power to settle the affairs of the corporation, collect and pay the debts, and divide among the stockholders the remainder, after the payment of debts and necessary expenses. This law was re-enacted in the Revised Statutes, ana the directors of the defendant have, since the expiration of the charter, been acting as trustees.

By § 4 of chapter 295 of the Laws of 1832, it was provided that the court in which any suit was pending against a corporation which should have been dissolved by the expiration of its charter, should have power to continue the action until final judgment. Judge Rapallo held in McCulloch, v. Norwood, 58 N. Y., 562, 568, that under this statute the new representatives should be substituted by name, and also said that “ unless such an order be made, there is nothing in our statutes interfering with the common law rule that the dissolution of the corporation puts an end to the action, and that all subsequent proceedings are void.” The law of 1832 was in force until 1880, when it was repealed, Chapter 245, Laws of 1880, and § 4 has not been re-enacted. See table page xxxv, Vol. 4, 7th ed., Revised Statutes, Banks.

There is, therefore, no statute in force in this state for the continuance of this action, unless the directors are to be treated as trastees for the plaintiff. * An action abates when no statute exists for its continuance. Greeley v. Smith, 3 Story, U. S., 657; National Bank v. Colby, 21 Wall., 609. Therefore, the only question on this motion is whether or not the plaintiff is a creditor of the defendant within the meaning of the statute before referred to, as to the powers of the directors in office at the date of the expiration of the charter. I have examined the definitions of the word creditor and can find no definition and no authority that a party who has an action pending for injuries to the person can be considered as such. The contrary was held in 1795 in Stanly v. Ogden, 2 Root, 259, 262, 265. The meaning of the word is defined in N. J. Insurance Co. v. Meeker, 37 N. J., 282, 300, and in Frazer v. Tunis, 1 Binney, 254, and in the various law dictionaries.

While it is a hardship to the plaintiff to hold that the action cannot be continued, it is also a similar hardship to the plaintiff who sues an individual for personal injuries when such individual dies pending the action. It was probably an oversight on the part of the legislature that § 4 of the law of 1832 was not reenacted in the Code. Even if such was the fact, the courts have no power to administer the law except as it is. The law of 1832 was in force forty-eight years, and according to the theory of the plaintiff, was entirely unnecessary; for I am asked to construe a prior law of the duty of the directors toward creditors and stockholders in such a way that all parties having claims on contracts or suits in tort had their remedy against the directors of a corporation whose charter had expired, without reference to such law of 1832.

Motion to continue denied, without costs.


author: Fursman, J.

text:
    In the Matter of the Application of The New York & Suburban Investment Company of New York for a Peremptory Writ of Mandamus Directed to the Secretary of State.

      (Supreme Court, Special Term, Rensselaer County,

      Filed October, 1891.)

    Corporations—Organization tax—Laws 1890, chap. 567.
    When a corporation organized under the Manufacturing Act of 1848 reincorpórales under chap. 567, Laws 1890, it thereby becomes a new corporation and subject to the franchise tax imposed by the law of 1886.
    Application for writ of mandamus.

      F. H. Van Vechten, for petitioner; I. H. Maynard, deputy attorney-general, for the secretary.
   Fursman, J.

The petitioner is a domestic corporation originally organized under the Manufacturing Act of 1848 and the acts amendatory thereof. Chap. 267 of 1884. At the time of its organization, in April, 1890, it paid its franchise tax on its then capital of $100,000, pursuant to the requirements of chap. 143 of the Laws of 1886. In April, 1891, its capital was increased to $500,000, and the tax duly paid on the increase.

Afterwards, and in June, 1891, the company was reorganized under and in pursuance of chap. 567 of the Laws of 1890.

The certificate of such reorganization was thereupon presented to the secretary of state, who declined to receive it until a franchise tax as on the formation of a new corporation should be paid. The petitioner now asks for a peremptory mandamus to compel the secretary of state to receive and file the same without the payment of such tax. Previous to the act of 1890 there were a large number of laws relating to the organization of corporations, most of which, including §§ 1 and 2 of chap. 40 of the Laws of 1848, are by that act repealed, the design being that corporations coming into existence subsequent to May 1,1891, should be formed under it The act of 1890 makes material changes in the law as theretofore existing, requiring new methods of formation, granting new powers and privileges and removing certain restrictions and limitations. By the act of 1848, any three persons could organize themselves into a corporation; by that of 1890, five is the smallest number that can do so. By the former act the certificate of incorporation was required to state the objects for .which the company shall be formedby the latter this statement is required to include the “ locality of its business as well as its natureby the former act it was sufficient to state the “ amount of the capital stock ” of the company; by the latter, a “ description ” of the capital stock is also required; the former act contained no limitation upon the par value of the shares of capital stock; the latter fixes the minimum limit at five and the maximum at one hundred dollars; under the former any stockholder might be a trustee or director; under the latter only such stockholders as have, at least, five shares of the capital stock can hold the office; by the act of 1890 the post office address of each of the directors for the first year must be stated, as well as the names of the directors as required by that of 1848; and finally, in addition to the requirements of the act of 1848, the certificate is required by that of 1890 to state the names and post office address of the subscribers to the stock, with a statement of the number of shares agreed to bé taken by each, and the corporation cannot commence business until certain specified by-laws are adopted by the holders of at least one-half of the capital stock of the corporation, and a copy thereof filed in the offices where the original certificate of incorporation is filed. The requirements of the certificate prescribed in the act of 1848 are retained in all the amendments thereof. It will be observed that the process of forming a corporation is materially different under the act of 1890 from that, under the act of 1848.

Section 5 of the act of 1890 authorizes existing corporations to “ reincorporate ” under the act by complying with the conditions therein specified. There must be a meeting of stockholders called by the directors by means of a published notice signed by a majority of such stockholders, which must also be served on each stockholder; there must be a meeting of the stockholders pursuant to such notice organized by choosing one of the directors as chairman and a suitable secretary; there must be a concurrence of votes representing a majority of all the stock in favor of “ the proposition to reincorporate under this chapter,” and thereupon “the officers of the meeting” must execute, acknowledge and file a certificate of the proceedings, which must also contain the statements required to be set forth in the certificate to be made and filed by a corporation originally formed under the act

This 'is not a -corporate act A corporation acts only by its duly constituted officers and agents. This is the act of the stockholders individually. It rests with them and not with the corporation as such to determine whether they will reincorporate under the act of 1890. This section twice employs the word “reincorporate.” It provides that “any corporation heretofore organized, except,” etc., may “reincorporate under this chapter,” etc., and that there shall be a vote of the stockholders taken “ upon the proposition to reincorporate under this chapter," etc. That is, to incorporate again, or anew, to make a new corporation out of the old one, retaining, by a further clause, all the rights and franchises of the old and invested with such additional powers and privileges as are conferred by this statute. By the same section it is declared that from the time of the filing of the new certificate- ■“ such corporation shall be deemed to be a corporation organized under this chapter.” The word “ reorganization ” in the concluding sentence of the section is evidently employed synonymously with reincorporation. The employment of this language, taken together with the requirement of a certificate so essentially different than that required by the act of 1848, the change in the number of persons necessary to the formation of a new corporation or reincorporation of an existing one, the various things required to be done, in addition to those required by that act, before the company is to be deemed to be a coiporation under the act of 1890 and authorized to engage in business, and the additional powers and privileges acquired by an incorporation under it, indicate a legislative design that all organizations created under it should be regarded as new corporations and subject to the provisions of existing laws applicable thereto. In the present case the petitioner has complied with all of the requirements of the act of 1890. The original certificate states the objects for which the company is formed to be: “Purchasing, taking, holding, possessing, selling, improving and leasing real estate and buildings; manufacture, purchase, lease, sale, use of building stone, lumber and other building materials.” The new certificate states that the objects for which the company is reincorporated are “ Purchasing, taking, holding, and possessing real estate and buildings, and selling, mortgaging, leasing and improving the same, and the doing of all lawful act or acts, thing or things, in any wise appurtenant, incidental or belonging thereto.”

Judged by the certificates the objects of the original incorporation and of the reincorporation are in some respects essentially different. The original corporation had no power to mortgage its real estate except that given by chapter 517 of the Laws of 1864, as amended by chapter 481 of the Laws of 1871, by which the prior procurement and filing of the written consent of stockholders owning at least two-thirds of the capital stock to the execution of the mortgage were made necessary. Under the present certificate such consent is not necessary. Mortgaging its real estate is now one of the objects for which the corporation is formed. The written consent of stockholders owning two-thirds of its stock can not be necessary to enable a corporation specifically organized to mortgage as well as purchase and hold real estate to execute a valid mortgage upon it. In the new certificate “ manufacture, purchase, lease, sale, use of building stone, lumber and other building materials,” stated in the original certificate to be among the objects of the organization are omitted. It is true that among the objects stated in the new certificate is the “ doing of all lawful act or acts, thing or things, in any wise appurtenant, incidental or belonging ” to the business of “ purchasing, taking, holding and possessing real estate and buildings, and selling, mortgaging, leasing and improving the same,” but it is difficult to see how the manufacture and especially the sale of building stone, lumber and other building materials are in any wise incidental to the objects thus specifically named.

Again, by the new incorporation the corporate existence of the company is extended without complying with the requirements of existing law in that respect. The original certificate gave the company fifty years of life from the date of its incorporation on April 3, 1890. To extend this period the written consent of stockholders owning two-thirds of its capital stock must be obtained and filed. Laws 1890, chap. 563, § 22. By the reincorporation this necessity is obviated, and by the mere force of the new certificate the period of existence is extended to fifty yearn from June 18, 1891.

The requirement as to the number of directors or trustees is different in the law of 1890 from that of 1848, and the company has been reincorporated with five directors as now required instead of three as formerly. A company incorporated or reincorporated under the act of 1890 cannot legally exist with less than five directors, while a company incorporatod under the act of 1848 may continue with only three. It is true that a company thus continuing may increase at any annual meeting the number of trustees from three to five, or any number up to thirteen, but it cannot exist under the new law with less than five, as it might have continued to do if it had not reincorporated under it.

The field of its operations is greatly enlarged by the new incorporation. Under the old organization its operations were confined to the counties of New York, Suffolk, Queens and Kings, while under the new there is practically no limitation. In this connection it may be added that a corporation organized under the act of 1848, and its amendments, for the purpose of “taking, purchasing, building or possessing real estate and buildings, and selling, leasing, and improving the same ” is not permitted to purchase and hold real estate in excess of one million of dollars in value, Laws of 1888, chapter 313, while the right to purchase and hold real estate by a corporation organized under the act of 1890 seems to be without limitation, inasmuch as the act containing the limitation is repealed by the law of 1890, in which no restriction upon this power is expressed.

For these reasons I conclude that when a corporation organized under the act of '1848 réincorporates under that of 1890, it becomes thereby a new corporation and subject to the franchise tax imposed by the law of 1886. It can make no difference that the individuals forming the new corporation are already organized as a body corporate under another act. , It is as individuals and not as a corporation that they act in making and filing the new certificate, thereby forming themselves into a new corporation. By their reorganization under the new law they become a new corporation, formed by a new process, having all the rights and powers of the old corporation, but having also new rights and powers the result of the new incorporation. Upon filing the new certificate, the old corporation is at an end. A new one has taken its place. “ From the time of such filing such corporation shall be deemed to be a corporation organized under the act of 1890,” and although the existing liabilities of the old corporation' are not in any way affected by the reorganization, it has no longer any corporate existence.

The motion for a peremptory mandamus is denied.


author: McAdam, J.

text:
    Edward Corrigan, Pl’ff, v. The Coney Island Jockey Club, Def't.

      New York Superior Court, Special Term,

      Filed August 29, 1891.)

    Injunction—Entry of horse for racing.
    Plaintiff purchased at auction, in 1890, a yearling colt which was described in the catalogue as “Eligible to Coney Island Futurity, 1891.” Held, that plaintiff purchased the horse with its engagements, including its right to take part in the race named; that the former owner could, not thereafter render it ineligible by cancelling its entry, and that plaintiff was entitled to á mandatory injunction to compel defendant to permit said colt to run in- said race ¿n payment of the entrance fee.

      The plaintiff is in the business of breeding and running race horses for purses and stakes at the different race tracks, having stables on all of them.
    The defendant is engaged in conducting a race-track at Sheepshead Bay, Kings Co., N. Y. One of its objects is to improve the breed of horses, and for that purpose stakes and purses are made up and horses are run to test their power, speed and endurance. Entrance fees are paid by those entering horses, and these together with a purse contributed by the defendant forms the stake,” which is either given to the owner of the horse winning the race, or divided in certain proportions among the owners of the first, second and third horses. These stakes are open for entries many months, and sometimes two or three years before the day fixed for the running of the race. In stake races, each owner is compelled to enter his horse before a certain date and to pay a certain amount, which is forfeited in case the owner shall within a certain time declare that his horse shall not enter the contest. Among the stake races so arranged by the defendant is one called “ The Futurity.” This is a stake race in which the owner of a mare in foal enters the get of such mare to run at the age of two years. Thus, the entry to “ The Futurity ” must be made more than two years before the day fixed for the race, and actually before the horse which is to take part in it is born.
    In the year 1888, the defendant opened entries for a race known as “ The Futurity,” to be run on Saturday, August 29, 1891, and in providing for it offered great pecuniary inducements to breeders and owners falling within said conditions, provided their animals developed superior endurance and speed, and came in at the termination of the race, first, second or third. In accordance with these terms, General Jackson, the owner of the Belle-Meade stud farm of ¡Nashville, entered for the race the get of a certain thoroughbred mare known as “ Brunette,” then in foal, which had been covered during the year 1888 by a certain thoroughbred race horse known as “ Iroquois.” In the spring of 1889 the mare foaled a certain bay colt, which was named Huron.
    On April 25, 1890, the colt, then known as a yearling, was purchased at auction by the plaintiff; the catalogue described the pedigree of the colt, and contained these words “Eligible to Coney Island Futurity, 1891.” The plaintiff claims that the purchase included the entry or what is technically known as “ the engagement ” of the colt, and that he became entitled to run said colt in the race. The horse is ready for the contest, but the defendant refuses to permit it to take part, although it is conceded the colt was properly entered, and the plaintiff had offered to pay the §250 fee required and comply with all the conditions precedent The stake is about $70,000, and unless the colt is allowed to take part in the race the damages will be irreparable, because incapable of oral or written proof. If the colt wins the stake, its value will be increased, while no injury can result to the defendant by allowing it to run. Upon these facts, the plaintiff by bill in equity applies for a mandatory injunction in the nature of a specific performance, to the end that the defendant be enjoined from preventing the colt from running according to the agreement aforesaid.

      Howe & Hummel, for motion; Platt & Bowers and J. Sergeant Oram, opposed.
   McAdam, J.

The novelty of the application is no argument against it, if it finds solid support in jurisprudence. At common law, bets or wagers upon a horse race were legal and it required a statute to make them unlawful. This statute prohibited bets and stakes, but was aimed at a race in which the competitors put up the money, and where one had the chance of winning from the other, as in Gibbons v. Gouverneur, 1 Den., 170, and did not apply where the stake was put up by an outsider. The payment of entrance fees by the competitors to the racing association, or their incorporation into the stake furnished by it, did not offend the statute. Jordan v. Kent, 44 How. Pr., 206 ; Costello v. Curtis, 13 W. Dig., 20; Harris v. White, 81 N. Y., 532. The statute provisions were substantially re-enacted in the Penal Code, §§ 351, 352, but are by the act commonly known as the Ives bill made inapplicable to racing associations during stated periods, May 15th and October 15th in each year. See Laws 1887, chap. 479. This legislative expression indicates a tendency on the part of the state to relax previous laws against the racing of animals, and interpreted in the light of the authorities cited relieves the contract sought to be enforced of all taint of illegality. Illegal gaming implies loss or gain by the parties determined by lot or chance, that is, what the one party to the wager loses the other wins. A purse, prize or premium contributed by a stranger for the doing of something by others is quite a different thing. The person offering the stake has not a chance of gaining the thing offered, and has no pecuniary interest in the strife made by the contestants. Such a contest, where the contestant has all to gain and nothing to lose, is not illegal, and since the Ives bill of 1887 (supra) has in effect legislative sanction. The defendant does not seek to withdraw its offer, or repudiate its promises. It stands upon the offer as a contract, and it will be treated accordingly. It declines to permit the colt to run on two grounds only, first, because, as it says, the colt was not sold with “ its engagements,” and next, because the former owner, on May 4, 1890, cancelled the entry. The plaintiff bought the colt April 25,1890, as “eligible to the futurity race,” which means “legally qualified to enter into it” This being the plain import and intent of the sale, the former owner could not, after disposing of the colt as eligible, do any act after the sale that could make him ineligible. The colt was sold with “this engagement,” if no other. It is not contended that the entry is a personal privilege, for the rules of the defendant permit a sale with “ the engagement,” nor is the transfer required to be evidenced by a writing except where the nominator dies before the race.

The defendant also claims that the plaintiff consented to cancel the entry, but this is disputed, and as the affirmative of proving such consent is on the defendant, the fact has not been established by evidence of that preponderating character that can be called conclusiva

As racing associations have by legislative enactment been brought within the pale of the law, they must not complain if the law acts upon them and enforces their agreements as it does the promises of other associations and corporations. The rights and obligations of the parties may be more satisfactorily established and determined at the trial than they can be within the short time .allowed for the decision of this motion. The plaintiff has equities, and is entitled to relief. He bought the colt with the entry into the futurity race of 1891, and may have paid more for it on that account. It will be more valuable if it wins. To exclude the colt from the race would deprive the plaintiff of all possibility of righting his grievance, for he could not prove that his horse would have won the race; a trial on the track in company with the other competitors will alone determine that The plaintiff should not be deprived of large possible gains without a judicial determination after a formal trial of his action and a hearing on the merits. Permitting the plaintiff’s colt to run can do the defendant no possible injury. The colt has a splendid record, and ought to be welcomed to the struggle. Under the circumstances the interests of all parties will be best conserved by permitting the horse to run in the race in order that the status of the owner may be ascertained. If it loses the race, the absence of all claim is at once determined. If it succeeds, the plaintiff is furnished with a basis upon which to assert his legal rights. This will not prevent the defendant from determining in its own way which horse rightfully entered the race or won the stake, or from paying it over according to its decision. It simply preserves whatever liability, legitimately flowing from the contract, it may have incurred to the plaintiff, and this .may be determined in an action to enforce' the same. To this extent the plaintiff’s right to equitable relief is clearly established.

An injunction will be granted to carry into effect these views. It will be conditional upon the payment or tender of the $250 fee to the defendant and the filing of the usual' undertaking in the sum of $1,000.