45 Misc. 529 | N.Y. Sur. Ct. | 1904
The grounds upon which the revocation of letters is sought are that at the time such letters were issued the trust company was disqualified from accepting the appointment as executor under the will of the deceased, or from acting as such executor, and that the court was without authority to issue such letters to it, and that the objection was not taken upon the hearing of the application for the issuing of such letters by the petitioners, or any of them, or any one representing them, and that said trust company is now disqualified by law from exercising the powers of executor over the estate of the deceased; and, second, that it has invested the funds of the estate in securities unauthorized by law.
The right of an individual to make a will disposing of his property is not a vested property right, but rests upon statutory enactment, and is subject to such limitations a,nd restrictions, as respects the substance, form, and beneficiaries, as the law imposes. It is equally true that administration and transmission of estates of deceased persons are regulated and controlled by statute. The right to appoint an executor or trustee by will to carry its provisions into effect is in no sense a vested right, but is restricted and regulated by statute, as is the action of the court in issuing letters conferring authority upon the person so appointed to act.
It is said that an executor derives his appointment and powers, and his title to the estate, from the will. People ex rel. Gould v. Barker, 150 N. Y. 52, 57, 44 N. E. 785; Hartnett v. Wandell, 60 N. Y. 346, 19 Am. Rep. 194. That these expressions are general, and are not intended as defining the legal effect of the instrument itself, is manifest upon a moment’s reflection, for, if the concurrence of the fact of the execution of the will and the death of the testator effectuates the appointment of an executor, vests him with the title to the estate, and clothes him with power to execute its provisions, no further act would be required on the part of the court to enable him to proceed with the administration and disposition of the estate according to its terms. He derives no such authority, however, from the will itself. He can exercise none of the functions of his office, or the powers conferred by the will, prior to its probate and the issuing of letters, except to preserve the estate and pay the burial expenses of his testator. He has no such title as enables him to dispose of the property, except to pay the burial expenses. Here the law steps in and subjects the estate and the executor to the jurisdiction, supervision, and control of the court. When the court has acted upon the probate of the will—admitted it to probate—and when the executor has qualified as required by law, and letters have been issued to him out of, and under the seal of, the court, then, and not till then, can he be said to be the executor of the will, with power to execute its provisions; but even then his power to carry out its provisions is subject to the limitation that such provisions must not be contrary to the laws of the state, or against its public policy.
Whether the action of the court in issuing letters to an executor is to be deemed an appointment, or be described by the use of some
Allusion has already been made to the fact that a testator, in his appointment of an executor, is circumscribed in his selection by such limitations as are imposed by statute. To this we should add that he is also limited in his selection to persons and corporations whose appointment does not contravene the public policy of the state, for whatever is against public policy is against the law, and must be treated as though prohibited.
This brings us to the first important question in this proceeding —whether there was authority in law for the appointment of this trust company, a foreign corporation doing business in the District of Columbia, to the office of executor within this state. If there was not, then the action of the court in granting letters was without jurisdiction, and it is our duty to revoke the same. This question naturally subdivides itself under two heads: (1) Was the trust company, by its charter and the laws of its own domicile, authorized to accept and execute such trust in this state? And (2) do the laws of this state permit it to come here and execute such a trust, and authorize this court to issue letters unto it? In the view which we take of the question, it is unimportant whether by its charter and the laws of its domicile the trust company has authority
Section 2685 of the Code of Civil Procedure provides for the revocation of letters issued to an executor or administrator:
“Where the executor or administrator was, when the letters were issued to him, or has since become, incompetent, or disqualified by law to act as such; and the grounds of the objection did not exist, or the objection was not taken by the petitioner, or a person who he represents, upon the hearing for the application for letters.”
The Legislature undoubtedly has a right to determine who may and who may not be appointed or accept and execute the office of executor in this state. In doing this the state does not interfere with the testator’s right to dispose of his property. It simply limits the agency through which it is to be distributed under the supervision and direction of the court.
The general provisions of the statute governing the qualifications of executors, or, perhaps, more strictly speaking, the incompetency of persons to serve as such, are found in section 2612 of the Code of Civil Procedure, which provides that:
“No person is competent to serve as an executor who, at the time the will is proved, is (1) incapable in law of making a contract; (2) under the age of twenty-one years; (3) an alien not an 'inhabitant of this state; or (4) who shall have been convicted of an infamous crime,” etc.
It will be noted that the language of this statute does not expressly prohibit the appointment of such persons as executors, or the court from granting letters unto them, but it cannot be doubted that it was so intended by the Legislature; and it is a well-settled rule of construction that a thing which is within the intention of the makers of a statute is as much within the statute as if it was within the letter. Riggs v. Palmer, 115 N. Y. 506, 509, 22 N. E. 188, 5 L. R. A. 340, 12 Am. St. Rep. 819. There is no essential difference respecting the competency of persons to serve as executors from that of administrators, under section 2661 of the Code of Civil Procedure. These provisions relating to the competency of executors and administrators should be considered as in pari materia. They both deal with the question of the competency of persons authorized to administer and settle the estates of deceased persons, and it is a well-established rule of construction that the intention of the Legislature is to be collected from the act itself and other acts in pari materia. Section 2661 of the Code expressly provides that letters of administration shall not be granted to the class of persons enumerated therein, which is the same class declared incompetent to act as executors by section 2612 of the Code. It cannot, therefore, be doubted that, when the Legislature established a standard of incompetency respecting persons to serve as executors, it prohibited their appointment as effectually as though express language had been employed for that purpose, and that if incompetency existed, which would prohibit the appointment of a person as administrator, it would apply with equal force and effect to prohibit the appointment of such person as executor. This discussion
I have no hesitancy, therefore, in reaching the conclusion that, so far as these general Code provisions are concerned, they are confined, and were intended to be confined, to natural persons; and, by necessary implication, this trust company derived no right thereunder to have letters issued to it, and the court thereby obtained no authority to issue them. If, however, at this late day in the process of devolution, it should be held that these provisions of the Code are to be given a different meaning than was originally intended by the lawmaking power—that the term “person” should be held to be broad enough to include “corporation” (Statutory Construction Law, § 5; Laws 1892, p. 1487, c. 677), this would not aid the trust company in this case, because one of the class of persons rendered incompetent to serve as executors by section 2612 of the Code is “an alien not an inhabitant of this state.” The word “alien,” in this connection, is undoubtedly used in the sense of a person who is not a citizen of the United States. This trust company being a foreign corporation (General Corporation Law, § 3, subd. 5; Laws 1892, p. 1802, c. 687), located in and resident of the District of Columbia, and a corporation of a foreign state—the District of Columbia being a state, within this meaning (Statutory Construction Law, § 23, p. 1489)—is deemed, for the purposes of jurisdiction, in the United States courts, a citizen of the state of its creation; but it is equally well settled that a corporation is not a citizen, within the meaning of the constitutional provision that “the citizens of each state shall be entitled to all privileges and immunities of the citizens in the several states.” Blake v. McCIung, 172 U. S. 239, 259, 19 Sup. Ct. 165, 43 L. Ed. 432, and cases cited. And not being a citizen of the United States, it is, within the meaning of section 2612 of the Code of Civil Procedure, “an alien not an inhabitant of this state,” and hence incompetent to serve as executor in this state, under the provisions of that section.
Has, then, the Legislature, by any express or implied grant or permission, authorized foreign trust companies or this trust company to come into this state and accept the office of executor, and execute the will and administer the estate of a resident testator? It is not contended by counsel for the trust company that any statute exists which expressly gives any such consent or permission. The only general statute of our state dealing with the subject of trust companies, in connection with their acceptance of the office of executor or administrator and the administration of estates, is found in article 4 of the banking laws, relating to the organization, powers, obligations, and duties of trust companies (Laws 1892, p. 1906, c. 689). Under this act trust companies are authorized and permitted to accept appointments as executors, administrators, etc., and to execute the duties of those offices, and the court is expressly authorized to make the appointment; but the authority and permission in this respect are by the terms of the act itself expressly limited to domestic trust companies organized under or embraced within the terms of that act, and can in no- manner be said to apply to, or grant any authority to, foreign trust companies, in respect to executorships. Even had the language of this statute been less explicit in limiting its application to domestic trust companies, it could not be held to embrace foreign trust companies, in the absence of language clearly indicating that they were intended to be embraced, under the now settled rule of law in this state, that “a statute of a state granting powers and privileges to corporations must, in the absence of plain indications to the contrary, be held to apply only to corporations created by the state, and over which it has the power of visitation and control.” Matter of Prime, 136 N. Y.
But counsel for the trust company contends that the state has impliedly granted this permission, as evidenced by its public policy toward foreign corporations under the doctrine of comity. To quote from the statement of their position as presented by their brief:
“Our [the trust company’s] right to this appointment does not depend upon any statutory consent or permission of New York state, but solely upon whether we can, under our charter and our home laws, accept and' execute similar trusts, and upon the absence of a legal prohibition here.”
The rule of law relied upon in support of this contention, and as applicable thereto is, that, “unless prohibited by law, a foreign corporation duly organized can come into this state and exercise the legitimate powers conferred upon it, and carry on any business n< prohibited by law.” Dunbarton Flax Spinning Co. v. V. & J. R. Co., 87 App. Div. 21, 83 N. Y. Supp. 1054; Hollis v. Drew Theological Seminary, 95 N. Y. 166; Demarest v. Flack, 128 N. Y. 205, 28 N. E. 645, 13 L. R. A. 854; United States V. Co. v. Schlegel, 143 N. Y. 542, 38 N. E. 729.
Applied in the sense in which the language used in expressing this rule of law was intended, there is probably no substantial con - flict of authority as to the rule itself. The rules of law are too well settled to need the citation of authorities, that the domicile of a corporation is in the state creating it, and that it has no migratory powers; that the laws of the state creating and conferring powers and privileges upon it have no extraterritorial effect in granting it permission to execute its chartered privileges in any other state; and that it has no powers or privileges other than those conferred by the laws of its own creation. The rule of law as intended by these authorities is, and should be, as I apprehend, that, if permitted by its charter and the laws of the state creating it, a corporation may exercise its chartered privileges in any other state which grants it permission to do so, and such permission may rest upon express statutory enactment, or be implied from the public policy of the state in allowing foreign corporations to do business within its borders in deference to the principles of comity.
The broad and liberal policy of this state in permitting foreign corporations to exercise their chartered privileges in this state has been of such universal application as to give rise to the negative expression that, unless prohibited, the right exists. It is, however, nothing more than a convenience of expression, for the right must rest upon permission instead of prohibition. Keeping in mind this basic principle, the use of the term “prohibition” is not objectionable. Not having granted such permission by statute, it only remains to be considered whether, by this general policy of permitting foreign corporations to come into and do business in this state, which is indicated by the cases cited, the state has by implication granted such permission respecting the class of trusts under consideration, or, to use the negative expression, are foreign corporations prohibited from executing this class of trusts in this state?
In the case of Ormiston v. Olcott, 84 N. Y. 339, 343, it is declared to be the law of this state that the investment of funds of an estate by an executor or trustee in foreign securities is unauthorized, notwithstanding the absence of statutory prohibition, and the rule established is that “such an investment, which takes the trust fund beyond our own jurisdiction, subjects it to other laws, and the risk and inconvenience of distance and of foreign tribunals, will not be upheld by us, as a general rule, and never unless in the presence of a clear and strong necessity, or a very pressing emergency.” And this rule is again recognized in Matter of Denton v. Sanford, 103 N. Y. 607, 612, 9 N. E. 490. Leading factors in establishing the principle upon which the rule rests is that it is against the public policy of our state to place the funds of an estate beyond the jurisdiction of our courts charged with the duty of directing and controlling their proper administration and distribution, and subjecting them to foreign laws and the jurisdiction of foreign tribunals. The principles which apply to and forbid the investment of'the funds of estates by executors, administrators, or other trust officers in foreign securities, apply, it seems to me, with equal if not stronger prohibitory force, to the appointment of foreign corporations as executors or administrators, to administer the estates of resident decedents. All of the objectionable features applicable to foreign investments, with many others, to some of which allusion will be made, are present in, and applicable to, the case under consideration. The trust company, which, upon the issuing of letters to it, became an officer of this court, and whose conduct in the execution of the trust committed to it is subject to the direction and control of the court, is beyond its jurisdiction and control, and beyond the reach of its process. Upon its appointment and the granting of letters it became vested with the legal title to the assets of the estate, and, acting under a claim of right—presumably correct in the absence of prohibition—has removed them beyond the jurisdiction and control of the court. The removal of the assets from the state deprives the state of revenue from taxation; the court is rendered powerless to enforce its mandates and decrees, and compliance therewith is made dependent upon the willingness of the executor to obey; and such conditions tend to bring the court and
The fact that the court may require a trust company to give a bond as executor in certain cases does not go to the question of jurisdiction; hence the giving of a bond, or the willingness to give it, cannot be held to confer authority upon the court to issue letters. Neither does the fact that the statute authorizes the appointment of a citizen of the United States who is a nonresident of the state establish a public policy broad enough to warrant the inference that a foreign corporation is likewise permitted to serve in such capacity. The right of a nonresident citizen to act as executor or administrator within this state was doubtless granted in deference to that public sentiment which has prevailed in this country since the organization of our government—that the citizens of one state should be entitled to the privileges and immunities of the citizens in the several states, which was subsequently embodied in the fourteenth amendment of the Constitution of the United States; but there is no principle or public policy involved which calls for an extension of this right, by analogy, to the case of foreign corporations.
Now, let us consider the implied prohibitory effect of our own statute on the rights of foreign corporations to execute the trust of executor in this state. The statute (Banking Law, art. 4) conferring authority upon trust companies to accept and execute the office and trust of executor, and other kindred trusts, as already stated, applies solely, by its express terms, to domestic trust companies organized under that act, and by section 163 of the same adt (page 1913) broadened so as to include another particular class of trust companies, viz., not foreign, but those organized under special statutes of this state. The authority of the court to grant letters in such cases does not, however, rest upon inference to be drawn from the authority to accept, but rests upon the provisions contained in section 157 of the same act (page 1910). This section expressly authorizes, and in proper cases requires, the court to issue letters testamentary to trust companies. This authority, however, by the use of the term “such,” as employed in the statute, is confined to
We are clearly of the opinion that when the Legislature thus com ferred authority upon trust companies organized thereunder, as a class, to accept the office of executor, administrator, etc., and conferred authority upon the court to issue' letters to such companies,
' and then by the terms of the same act broadened the class so as to include all other trust companies organized under special statutes of the state, it limited the appointment to the particular classes enumerated, viz., domestic trust Companies, and, by necessary implication, prohibited the appointment of, or the issuing of letters to, foreign trust companies of a similar class.
It should not be presumed, from the absence of prohibition alone, that the Legislature intended to allow foreign trust companies to execute this class of trusts in this state, by reason of its general policy toward foreign corporations, when we consider the attendant consequences to which we have alluded, and which are particularly manifest in the case under consideration. This statute, in conferring upon courts the authority to issue letters and appoint trustees, is dealing with the most sacred class of trusts—trusts respecting the estates of deceased persons, and living persons who, by reason of infancy or infirmities, are unable to properly safeguard and protect their own interests; trusts respecting property and estates over which our courts exercise guardianship authority by directing and controlling the conduct of the trustees (the officers of the court) appointed to execute them. How, then, can it be successfully argued that the court to whom is committed such guardianship must appoint as such trustees, and its officers, foreign trust companies—artificial beings—beyond its jurisdiction and control, and beyond the reach of'its process. By far more reasonable it is to suppose that the Legislature intended, in the enactment of this statute, to linfiit the right of such appointments to trust companies of its own creation, and exclude all others therefrom. Moreover, the Legislature in the enactment of this statute authorizing the formation of trust companies, and conferring upon them power to accept and execute this class of trusts, has imposed upon them, as a condition of the exercise of such privileges, unusual and peculiar liabilities and responsibilities, and it has made claims against them for trust funds entitled to priority of payment out of their property in case of dissolution.
It seems almost like impugning the intelligence of the Legislature to presume that it intended, by the absence of prohibition alone, to allow all foreign trust companies, with the measure of their liabilities and responsibilities fixed by the laws of their own creation, to come in here and demand, as a matter of right, authority to execute such trusts, because, to do so, if the position of counsel is correct (that they have such right without complying with our statutes to enable them to do business in this state as foreign corporations), it enables them to come here and execute such trusts without obtaining permission from our state authorities, without designating any person upon whom process .may be served, without main
The conclusions which we have reached in no manner conflict with the rule of law contended for by counsel for the trust company concerning the right of foreign corporations to exercise their chartered privileges in this state, as indicated by the authorities, because all the authorities recognize and assert the doctrine that such right is withheld if its exercise here be contrary to our laws or public policy; and hence the legitimate scope of the authority and right of foreign corporations to come into this state and exercise their chartered privileges in the execution of trusts, prior to the passage of chapter 492, p. 1253, Laws 1904, was, in my opinion, limited and confined to the execution of trusts founded upon contractual relations, and only domestic trust companies were authorized to execute trusts of the class under consideration, whose execution is under the direction and control of our courts and the trustees, officers thereof.
If our views are correct in this respect, it makes harmonious the action of the Legislature by the passage of chapter 492 of the Laws of 1904, prohibiting the execution of this class of trusts by foreign trust companies, with its previously understood policy toward the right of foreign corporations to do business in this state, as indicated by the authorities. It simply declares the existing law respecting the execution of this class of trusts, made advisable or expedient by encroachments, and avoids any charge of vacillation
The fact that the petitioners consented to the issuing of letters to the trust company as executor does not, in my opinion, estop them from maintaining this proceeding. The right of the trust company to act as executor, as well the authority of the court to issue letters to it, is jurisdictional, and it is a well-settled principle of law that consent cannot confer jurisdiction in such matters. Consent may confer jurisdiction of the person, but is ineffectual to confer jurisdiction of the subject-matter, and hence the consent of the petitioners in this case cannot be held to confer authority upon the court to make the appointment where no authority existed at law.
In view of the conclusions reached, I do not deem it necessary to discuss the various other questions raised by counsel for petitioners respecting the authority of this trust company to act as executor in this state, or the effect of chapter 492 of the Laws of 1904 to prevent the further exercise of its charter privileges in the execution of such trust, if such right previously existed, and I do not pass upon these questions.
The only remaining question to be considered is whether this trust company, by reason of its having invested moneys of the estate in securities unauthorized by the laws of this state, is unfit for the due execution of its office. This question involves the conduct of the trust company in the management of the estate. The moneys, stocks, and securities constituting nearly the entire bulk of the estate were removed by the trust cómpany from this state to its own domicile, in the city of Washington, D. C., prior to December 1, 1902; and on December 2d thereafter it loaned to Henry Hurt, one of its own directors, $60,000 of the estate moneys, taking his individual note therefor, secured by a pledge of bank stock as collateral. The excuse offered by Mr. McKenna, its trust officer, for making this investment, is (to quote his language) :
“The reason for making the investment was the fact that shortly after we came into the possession of the estate we collected from the banking firm in New York, James D. Smith & Co., some $77,000 in cash money, and it was too much money to lie idle.”
And its counsel urges in extenuation that the loan was only intended as a temporary investment, and has since been paid.
Between October 27, 1902, and July 14, 1903, the trust company invested $60,672.50 of the moneys of the estate in railroad bonds, $12,106.88 in railroad stocks, and $400 in its own corporate stock —altogether, $73,179.38. On November 23, 1903, the president of the trust company verified an account of its proceedings as executor, and on December 18, 1903, the same was filed in the surrogate’s office. Down to that time these investments, aggregating $133,179.38, were the only investments which it had made, and every dollar thereof was unauthorized by the laws of this state. The evidence fails to disclose what part, if any, of these investments in bonds and stocks, have been realized upon. Suffice it to say that it
These investments in mortgage securities are not referred to in the petition, and probably were unknown to the petitioners at the time of making it, and they cannot, therefore, be considered as a proper basis for revocation of letters in this proceeding. They are alluded to here not for such purpose, but merely as characterizing the conduct of the executor respecting the investments complained
The fact that no apparent loss has thus far resulted from these unauthorized investments, and that the interested parties have' not, upon the accounting, sought to have the trust company charged with them, as in the case of devastavit, does not alter the case. And the argument presented by the brief of counsel for the. trust company, made with more particular reference to the investments in mortgage securities, that it will be time enough for the petitioners to complain respecting these investments when the estate has suffered a loss therefrom, and the executor has sought to avoid responsibility therefor, is not sound in principle. It illustrates, however, the attitude of the trust company toward the parties interested in this estate, as indicated by the course pursued by it in the administration respecting investments. These parties have a right to insist and demand, as a matter of right, that this estate be invested and administered in accordance with the law of this state. This is the precise obligation' which the trust company took upon itself when it undertook the execution of this trust. And when it made the series of investments complained of, it violated this obligation, and was guilty of infidelity to its trust. The argument that it is wealthy, and able and willing to make good any loss, is at once a confession and avoidance. The interested parties are entitled to insist upon the protection and security afforded them by our laws in safeguarding investments of trust funds, and are not required to be content with the security alone which the financial responsibility of the executor affords them. This responsibility is at all times subject to fluctuation, and dependent upon the skill and ability of its managers, and the present measure of its responsibility may not
. The conclusions which I have reached upon this branch of the case are not to be understood as warranting the inference that every technical breach of trust by an executor will call for a revocation of his letters. The protection of the estate and of the substantial rights of interested parties should be the controlling principle in determining whether or not letters should be revoked. It was upon this principle that the case (Matter of O’Hara, 62 Hun, 531, 17 N. Y. Supp. 91) relied upon by counsel was decided. A careful examination of that case leads me to the conclusion that, while laying down the proper principles of law applicable to this class of cases, the' circumstances of that case and the questions involved therein are so different from the questions involved in and the facts surrounding this case as to make it inapplicable as a controlling authority in this case.
It appears that at some time after making the investments in question, and prior to the institution of this proceeding, the trust officer of the executor met and conferred with certain of the petitioners respecting these investments; and his testimony is given as tending to show á ratification, or at least acquiescence, in what had been done. From the whole examination of this trust officer, I am satisfied that these parties never gave their assent to these investments, or ratified them in such manner as to estop them from instituting this proceeding. It does not appear, however, that Sarah D. Avery or McDougal Avery ever gave their assent thereto, or in an)' manner ratified any of them. Furthermore, the infants contingently interested in this estate were unable to consent thereto or approve the same, and their interests are entitled to the protection of the court.
It follows from the conclusions reached that the letters testamentary issued to the American Security & Trust Company should be revoked, and a decree will accordingly enter. The question of costs will be adjusted upon application. The attorney for petitioners may prepare proposed findings and a decree in accordance herewith.
Decreed accordingly.