83 N.Y.S. 849 | N.Y. App. Div. | 1903
This action, which was brought March 20,1899, for an accounting, involves the construction of the will of William T. Garner. He left an estate largely in cotton mills, print works and other assets of Garner. & Co., the commission house for the mills. Mr. Garner and his wife died together in 1876, leaving surviving them three daughters as sole heirs and next of kin: Marcellite, born in 1868, now La Marquise de Breteuil; Florence, born in 1869, now Lady Gordon-Cumming; and Edith, born in 1874, now Countess de Moltke-HuitfeldtEach daughter has infant children. The will is- as follows:.
“I, William T. Garner, of Hew York City, do hereby make, publish and declare this as and for my last will and testament, hereby revoking and annulling all other and former wills by me. at any .time heretofore made. ■.
“First. I direct the payment of .all my just debts as soon as practicable after my decease. '
“Second.-1 direct that my executors hereinafter named, or such of those named as shall qualify as such, their survivors or-successors, shall prosecute and carry on with my estate and property, my present business under the firm name of Garner & Co., for and during the lifetime of my wife, Mary Marcellite, and my daughter Florence, and the survivors of them, and that all profits and gains arising from said business shall, after the sum set apart for the support of my wife and children, as hereinafter provided, are- deducted, be added, to and form a part of the working capital of. my estate. -
“ Third. From out the income and profits of my said estate, my executors will pay my beloved wife, Mary Marcellite, during her life, the sum of seventy thousand dollars, net, per annum, to be paid to her in equal monthly payments, upon her individual receipt, free from any abatement or -reduction for any charge or tax whatever. I give to her, also,, and to her heirs forever, all my household furniture, beds, bedding, pictures, books, jewelry, horses, carriages, silverware and- plate owned by me at my decease.;. also the use and occupation, rent free, during her lifetime, of my residence in Hew York City and my country place at Staten Island, the same to be kept in repair by my estate. These provisions for my. wife shall be in lieu and bar. of all claims for dower she may have in my estate. .
“Fourth. From out of the surplus income of my estate my éxecu*409 tors will support, educate and maintain my child or children surviving me, and such as may be borne alive of my said wife within nine months after my decease, until they severally attain the age of twenty-five years. Up to such age such executors may advance any child or children such moderate sum or sums of money as, in their best judgment, will benefit or promote the happiness or comfort of such child or children, such advances to be charged against them. As each child attains the age of twenty-five years, said executors shall pay over "to such child or children the full proportionate sum per annum, to which she or he may be entitled, from out of the profits of said business, after my wife’s amount is paid her, with expenses thereof, and my executors will so apportion and divide such income and profits that my sons shall receive twice the sum per annum that my daughter’s receive.
“ In case of the death of any child or children of mine, leaving lawful issue surviving, then the parent’s share shall he paid to such issue, if of age, or used for their education, support and maintenance (or so much thereof as may be necessary) by my executors until such issue attains full age of twenty-one years, when such income shall be paid them in full.
“Upon the death .of my said wife and my daughter Florence, the said businéss .shall be closed and my entire estate settled and divided among my children or their descendants, if any have died leaving children, per stirpes.
“ In case of the death of all my children, leaving no lawful issue or descendants them surviving, upon the death of my said wife, and ' my business being closed, all of my estate of every kind, with all accumulations, profits and gains arising from business or otherwise, shall be divided equally among my sisters, Frances A. Lawrence, Anna J. Garner and my niece, Fannie M. Garner (daughter of my deceased brother Thomas), share and share alike, or the descendants of such as may have died, per stirpes, not per capita, or if either have died leaving no issue or descendants, then such share shall be given to the survivor of those above named.
“ Fifth. I appoint as the executors of this my will Samuel W. Johnson, John I. Lawrence, James F. Thorn and William E. Thorn, and authorize them, or the survivor, to sell and convey all or any part of my real estate left by me, as they may deem advisable, and*410 tb give good and valid' deeds therefor, with full power to change securities and investments, as they deem best.
“ My said executors and my said wife shall be the guardians of the persons, and my said executors shall be the-guardians of the estate tif my children during their minority.
“ In the prosecution of my said business as above directed, the said executors shall not be liable personally for any losses or debts,, except arising from bad faith or gross mismanagement.
“ In witness whereof, I have herewith set my hand and seal this 5th day of April, one thousand eight hundred and seventy-one.”
The executors have carried on the business. The children have been maintained, and, since their twenty-fifth year, respectively, have received one-third of the profits^ In every year since 1878 there was a large surplus of profits added to the capital until each daughter became twenty-five years old.
• The plaintiff seeks an adjudication of "his accounts, discharge, acceptance of his resignation, and the appointment of a certain cor-, poration as his successor. The adult defendants ask for a construction of the will, so that they may be declared severally entitled to receive amounts in addition to their other dues equal to the difference between' one-third of all the income up to the time each attained the age- of twenty-five years and the amount actually, received by them. The record shows this stipulation: “ That in. case the accounts must be restated in the manner claimed by adult defendants, that the sum of $3,830,978.16 is the balance of the net-income of the estate of William T. Garner since his death after deductions of $1,019,732.93 claimed by the trustee and guardian ad litem and the amounts paid to the three adult defendants other than for their support, education and maintenance.”
The Thellusson Act (39 & 40 Geo. III, chap. 98), which is the basis of our legislation upon accumulations, reads in part: “Whereas it is expedient that all dispositions of real or personal estates, whereby the profits and produce thereof are directed to -be accumulated, and the beneficial, enjoyment thereof is postponed, should be ' made subject to -the restrictions hereinafter contained; * * * be it enacted * * * that no person or persons shall, * , * * by any deed or deeds, surrender or surrenders, will, codicil, or otherwise howsoever, settle or dispose of any real or personal property,
By the 4th clause of the will the testator provides for the support, education and maintenance of his children, but he does not direct the payment of each one’s share of the profits per annum of the business until she has attained the age of twenty-five years. Whatever annual sum represents the excess of profits over charges of the $70,000 payable to his wife, the sums expended for the maintenance of thé children, and any advancements, are to be added to the fund — the working capital of the estate. As to some sums, then, there is an accumulation thereof directed, not during the minority of the children, but until they respectively arrive at the age off twenty-five years, and, .thérefore, by so ranch beyond their
I now proceed to examine the grounds for the conclusion of the learned and able referee that the provisions of this will are not repugnant to the statutes. He writes that the question in this case is “ whether a direction by a testator to an executor to carry on (the testator’s) business and to add a portion of the profits to the capital for the purpose of maintaining and developing the business is the creation of an estate out of which profits are to arise within the meaning of the statute, and whether the profits of such a business are rents and profits of real estate and income of personal property within the meaning of the statute.” I do not concede that this is an exact statement of the question. The scheme of the testator is not primarily to add a portion of the profits to the capital for the purpose of maintaining and developing the business. He directs the business to be carried on for the lifetime of his wife and of his daughter Florence, and of the survivor of them, and that all profits and gains after the sum set apart for the support of his wife and children is deducted, be added to and form a part of the working capital. He then gives his wife $70,000 a year, and out of the surplus provides for the maintenance of his children until they are twenty-five years old respectively. The terms used are “ profits and gains,” and “ surplus income.” The terms involve the idea of the deduction in the first instance of the expenses of the business. In People v. Supervisors of Niagara (4 Hill, 20), Bronson, J., while stating that “ income ” and “ profits ” are sometimes synonymous, says further that “ ‘ profits ’ generally mean the gain which is made upon any business or investment when both receipts and payments are taken into the account.” (See, too, Matter of Jones, 103 N. Y. 621, 624.) But as soon as the children reached the fixed periods, of
Returning to the question as stated by the learned referee, I note that the statute (1 R. S. 726, § 38) does not merely forbid the creation of an estate. Its specific words were: “ And all directions for the accumulation of the rents and profits of real estate except such as are herein allowed, shall be void,” and the present Real Property Law (Laws of 1896, chap. 547, § 51) reads: “All directions for the accumulation of the rents and profits of real property, except such' as are allowed by statute, shall be void.” As to personalty, the statute (1 R. S. 774, § 4) reads : “ All directions for the accumulation of the interest, income or profit of personal property, other than such as are herein allowed, shall be void,” and the present Personal Property Law (Laws of 1897, chap. 417, § 4) reads: “ All other directions for the accumulation of the income of personal property, not authorized by statute, are void.” The learned counsel for the plaintiff, also arguing that there must be a creation of an estate,
I think that the direction that profits and gains arising from . the said business be added to and form a part of the working capital of the estate is equivalent to a direction for the accumulation of the rents and profits, and of the interest, income and profits of the real and personal estate of the testator. In the first place, the testator directs that the business shall be continued and carried on with his estate and property, so the profits and gains thereof are the continuous earnings of that business, or the continuous returns therefrom as a going concern. He used the terms interchangeably with income and profits, inasmuch as he provided that the profits and gains shall, after the sum set apart for his wife and children is deducted, be added to and form part of his estate. I think that “ profits and gains ” is equipollent with “rents and profits.” “Rent is a certain yearly profit in money, provisions, chattels or labor, issuing out of lands and tenements in retribution for the irse.” (3 Kent Comm. [14th ed.] 728, citing authorities.) “Rent is defined to be a certain profit issuing
A further reason which appears to have warranted the conclusion of the referee is that the profits of a business, added to the capital and thereby increasing the income of the life tenants, does not present an instance of what Lord Justice Lopes, in Vine v. Raleigh (L. R. [1891] 2 Ch. Div. 13, 24), calls a “dry, unproductive cumulus” In Vine v. Raleigh (supra) a trust was created and authority given to expend the surplus income in the improvement of the estate, and in maintaining in good habitable repair houses" and tenements on the property, and the court allowed charges of sums expended from the surplus income for putting up buildings, setting out fruit trees, buying the fixtures óf a public house, saying that the will did not offend the Thellusson Act. But the “ dry, unproductive cumulus ” theory, as applied to this case, presents this proposition: If annual profits of a fund be added annually to 'that fund, then there is no accumulation of such profits, provided a part of the profits of that fund, as thus constituted, be annually paid out to the beneficiary. But the answer is that the beneficiary is deprived of the annual
Vine v. Raleigh (supra) is akin to Matter of Nesmith (140 N. Y. 609). The discrimination between this case and Matter of Nesmith (supra) is found in the fact that there is a radical difference between an absolute direction after the payment of $70,000 annually to the widow and the sum necessary to the maintenance of the children, and advancements, to add' all of the profits to the'fund, and (in the words of Gray, J., in the Nesmith case) “ a discretionary power to make a disbursement of income, in the course of the management of the trust property, * * * restricted to such matters as tend to preserve it, or to make it efficient for earning purposes.”
I think that the mere fact that the money to be accumulated is the result -of a continuance of a business is not material. As I have said, the statute is not aimed at the manner of the gain, but at the accumulation thereof. I can see no reason for that policy which should exclude accumulations of the gains of trade. Certainly the statute itself does not require or even warrant any such limitation of construction or interpretation.
But after a long and. exhaustive discussion of authorities, the learned referee states that the American cases which he cites seem to hold that a beneficiary can prevent a business from being carried on by an executor, and that, on principle, it would seem that a testator who creates a trust for a long term and directs his executors to continue to employ his assets in his business during the trust simply directs that the trust funds be subjected to extreme hazard, and that any beneficiary should have the right to "object. And thereupon he concludes in effect that the business as to the beneficiaries was carried on as if by their consent, and so the property was not held .in dead hand. In the first place, I do not read the American decisions to the effect that when the testator directs the continuance of his business, the beneficiaries can arrest the directions of the
The learned referee cites from Stewart v. Robinson (48 Hun, 327, 329 ; 21 Abb. N. C. 63, 69) the expression of the court that “ a direction by the testator to apply his estate to a partnership for five years, would have been clearly illegal, as against liis creditors, and even his next of kin and d'evisees.” But the court was plainly referring to the period of five years, as one of the points made by the counsel for the respondent was that such provision was a suspension of absolute ownership not limited on life. I find in this statement no authority for-the proposition that a beneficiary could arrest a direction for a continuance of the business otherwise valid. The learned referee also cites the expression in Bell v. Hepworth (134 N. Y. 442) that a statement m Stewart v. Robinson (supra) was “based upon the assumption that the continuance of the business was lawful as to those interested in it, either as lienors or actors so long as they assented to it.” I assume that he draws the inference that the continuance of the business was not lawful if they objected to it; i. <?., they could .arrest it. But the “ lienors or actors ” referred • to' were clearly ' either the executors or the creditors, as reference to the context will show. I can have no quarrel with the proposition that the executors or the creditors might have arrested the execution of the contract in view of the, doctrine of Willis v. Sharp (supra). But I
The learned referee says that the general rule, of course, is that a person who receives a bounty from a testator is bound by the conditions which he imposes, and he cites Dowse v. Gorton (1 App. Cas. [1891] 190, 204) and Brooke v. Brooke (L. R. 2 Ch. Div. [1894] 606) to sustain this view. And he notes in the former case Lord MacNaghten said : “ It was a just observation on behalf of
But the learned referee seems to think that the rule is different' with us, or at least that it is not definitely settled. His citation from Parsons on Partnership (4th ed. § 346) refers to eases wherein the trustees chose to continue, and has, I think, no reference to cases where the testator directs that there, shall be a continuance. Hone of the American decisions cited by the learned author in his note to the section presents the case of a direction for the continuance of a business.
There is authority to the effect that such a direction to continue the business created a trust. (Perry Trusts [4th ed.] § 121; Ferry v. Laible, 31 N. J. Eq. 566.) In this case the court say: “ A testator by a direction to continue his trade or business creates a trust estate whiéh the court will keep separate and apply exclusively to the purposes of the trust. (Owen v. Delamere, 15 Eq. Cas. 139.) This is the foundation doctrine of all the’cases. (Ex parte Richardson, 3 Madd. 138 ; Thompson v. Andrews, 1 Myl. & K. 116 ; Cutbush v. Cutbush, 1 Beav. 185 ; M'Neillie v. Acton, 4 DeG., M. & G. 744.) ” Johnson v. Lawrence (95 N. Y. 154) arose upon this will. Finch, J., evidently regards the duties imposed upon the executors as arising from a trust. Thus he writes: “ On the contrary, the ordinary duty of an executor to turn the estate into money was suspended at the outset, and in its room was put the duty of carrying on the business with all the assets on hand. That duty began at once. As a trust duty it sprang into life at the same instant with the executorship and inextricably blended with it. * * * To make a division at the death of Florence was a clear duty put upon the executors. To enable them to effect that purpose they were empowered as executors to sell the real estate and close up the business. Until then the duties blended at the beginning were to remain united, and the trust was not separate and distinct, but characterized and modified the duty of
If, then, this fund, under the directions of the testator, is to be regarded as a trust, I do not understand the rule to be that these daughters defendant could elect to have the trust terminate; i. e., could prevent the executors from continuance of the business by
The learned referee draws an analogy between, the testator’s business and a corporation, after citing the opinion of. Cullen, J., in Matter of Rogers (22 App. Div. 437), and says : “ This opinion practically .admits that the Statute of Accumulations could be evaded by creating a' corporation. But why can it be evaded? * * ■ * ' Obviously, for the reason stated by the Court of Appeals
The learned referee, referring to the character of the accumula- ■ tions, says : “ The general rule in the absence of fraud is, as stated in Sproule v. Bouch (L. R. 29 Ch. Div. 635), quoted by Judge Cullen in Matter of Rogers (22 App. Div. 432) : ‘ What the company says is income shall, be income, and what it says is capital.shall be capital.’ ” But in Hascall v. King (162 N. Y. 144) Parker, Ch. J., quotes with approval the words of Cullen, J., in'the Rogers case : “ But if a testator’s intent is to make that principal which is income in the ease of a trust of the nature of the one before us, such intent is not in conformity with law, but in express contravention of it.”
Matter of Sands’ Will (3 N. Y. Supp. 67) is a case directly in point, and, as the learned counsel for the defendants De Moltke-Huitfeldt and Gordon-Cumming have pointed out, it is cited by Mr. Chaplin in his book on Express Trusts and Powers (at §§ 258, 407, 491) and by Judge Thomas in his book on the Law of Estates (at pp. 503, 506, 527). (See, also, Horndorf v. Horndorf , 13 Misc. Rep. 343, opinion by Adams, J.)
I agree with the learned referee .that the plea of res adjudicata should not prevail. It is based upon several judgments in actions brought by the executors from time to time in this court to have their accounts passed and adjudicated. I fail to find in any complaint, answer or record that the question of the validity of these provisions now attacked was ever raised, mooted or dismissed, or that any judgment ever directly determined that question. The learned referee is within bounds when he states: “It was never suggested and apparently was never thought of by • anybody.” Indeed, the learned counsel for the plaintiff and ■ the guardian • ad litem for the infant defendants, though insisting that
The discrimination between Pray's case and the case at bar is that in the prior actions the question now up was not pleaded or put in issue or raised in any form on the trials or adjudicated in the judgment. The Court of Appeals has cogently stated the principle of the doctrine in res adjudícata in Rudd v. Cornell (171 N. Y, 114), per Martin, J.: “A judgment does not operate as an estoppel in a subsequent action between the parties as to immaterial or unessential facts, even though put in issue by the pleadings and directly decided. It is final only as to such facts as are litigated and decided, which have such a relation to the issue that their determination was necessary to the determination of that issue. (House v. Lockwood, 137 N. Y. 259, 268 ; Stannard v. Hubbell, 123 N. Y. 520.) ‘ In order that a judgment should have the effect claimed, it is not enough that the party produce a record showing a judicial determination of the same question litigated in his favor, but it must also appear that it was rendered ujion the merits, upon a material point and substantially upon the same facts- presented in the subsequent case;’ (Shaw v. Broadbent, 129 N. Y. 114, 123 ; Converse v. Sickles, 146 N. Y. 200, 208 ; Genet v. Del. & Hud. Canal Co., 163 N. Y.. 173 ; Same v. Same,
"With the burden upon him, the plaintiff, to my mind, fails to show that any one of the judgments in any of the prior proceedings comes up to the-standards of the rule. The learned counsel for the plaintiff and guardian ad litem for the infant defendants, after the admission I have quoted, say: “ But in the action of 1879, the executors' come into court, set forth the whole will, and ask for a construction of their duties arising under this very paragraph third of the will. * - * And the court, by its judgment, tells them what their duties in that regard are, and that they are to carry on the business as directed in the will, that is, that they are to add the surplus to the capital.” The phrase relied upon to indicate an adjudication that is res adjudícala is found in the second specific judgment. This is an answer to the allegation of the complaint “ First upon the-death of William T. Garner, what was the condition of the firm of Garner & Co., and who succeeded to the business with power to carry it oil, and with what liabilities an'd responsibilities?” The entire paragraph of the judgment is: Second: And it is adjudged and determined that upon the death of William T. Garner,
I think that the Statutes of Limitation do not apply. The learned ■counsel for the plaintiff and the guardian ad litem show that the -answers of the adult defendants Marcellite and Edith, wherein they ■aslc affirmative relief, were first served on the plaintiff on June 10, 1899; on Florence, Fovember 2, 1899, and on the guardian ad litem on January 22, 25, 1900, and cite as authority Gilmore v. Ham (142 N. Y. 1). They contend that the plaintiff is not the trustee of an express trust, and hence the case is not without the ■operation of the statute ; but that even if there was an express trust the statute would bar the adult defendants under the authority of Lammer v. Stoddard (103 N. Y. 672, 673), and Wood on Limitations (3d ed. 462, 464). And they insist, too, that inasmuch as the plaintiff acts in his capacity as an executor executing a power, and not as a trustee, he is entitled to the shield of the statute by the authority of Matter of Longbotham (38 App. Div. 607) and Matter of Rogers (153 N. Y. 316). The principle applicable is well stated by Van Vorst, J., in Giraud v. Giraud (58 How. Pr. 175, at pp. 179, 180), as follows: “ But it is urged by the counsel -for some of the defendants that this suit is barred by the Statute of Limitations. In this connection it is stated that the statute began to Tun immediately the will was proved, and that the cause of action
I think the learned referee is correct in his decision that the daughters of the testator áre entitled to the proceeds of the sale of the houses in New York and Staten Island, and of the household stuff referred to in the 3d paragraph of the will. I do not think that the proceeds of such property were intended to be added to the working capital of the testator’s estate. There is no warrant, therefore, save the broadness of the general expression, but the
Finally, I think that the intention of the testator was to provide ■'specifically for his wife and for his children’s support, education •and.maintenance until they arrived at the age of twenty-five years, respectively, and also meanwhile, in the discretion of his executor, to authorize the advancement of such further moneys as would conduce to the comfort and happiness of. any child. Any advancements are to be charged against each child. At the age of twenty-five a child is to receive her full share of the profits of the business. I do not think the executors are required to charge separately, as against each child, the particular sum devoted to its support, education and maintenance, but rather that the total sum is to be charged against profits. The testator does not so direct, and the omission is significant in view of the fact that he immediately •directs that the advancements are to be charged against them, respectively. It is argued that the failure to segregate the expenses of support, education and maintenance , produces inequality. Not necessarily. Practically it may do so. But the mere differences in the keep and education of these children, presumably to be maintained in the same status of life, which may appear in charges for raiment, tuition bills and living expenseSj are not so great, in view of the very large estate, as to require a construction based upon their possible inequality. But advancements for comfort and happiness . 'up to a period of twenty-five years present a different question. Schooling, living. expenses, clothing, pocket money and the like, between one child and another, would not be likely to present material variances. Advancements measured by the happiness and comfort of young men and young women up to the age of twenty-five might well vary. Higher study, embarkation in business, marriage to a poor man, might require, in the judgment of the-executors, material advancements for one not needed by another. ' Each child has attained twenty-five years and the practical determination must be based upon this circumstance* Thereafter, éacK.-was entitled to receive one-tliird of'the profits of the business; So. far as the testator' directs accumulation during minority the' scheme is valid. It
Goodrich, P. J., Bartlett and Woodward, JJ., concurred.
Judgment modified in accordance with the opinion of Jerks, J., and as modified affirmed, with costs to all the parties payable out of the estate.
1 R. S. 726, §§ 37, 38.—[Rep.
144.—[Rep.
2 How. (U. S.) 560.—[Rep.
Genet v. Del. & Hud. Canal Co.— [Rep.