Opinion ID: 2199033
Heading Depth: 1
Heading Rank: 3

Heading: Sales Legacy.

Text: Jan's claim of sales legacy is based upon the sale memorandum and will found in Thomas' safe after his death. The circumstances surrounding the finding of these papers have been related. We now set forth the documents in full: The Sale Memorandum, dated May 10, 1931: I, the undersigned Tomas Bata sell to you J. A. Bata and you purchase from me all shares of Bata akc. spol. Zlin as well as all shares of the construction company Zlin then all shares of the company Tisk then participations in the Libstat establishments. Of foreign companies I sell to you the following shares or participations: Company, Bata Schuh Aktiengesellschaft Zurich nominal value frc. 450,000.- Bata Matschapai Amsterdam 51,000 Hol. fl. Bave   20,000 Hol. fl. Bata Cipele i koze Zagreb 2100,000 Dinars Bata Krakov 100,000 Zl. Bata Bukarest 2000,000 Lei Bata Alexandria 2,250 £ Bata Copenhagen 400,000 D. Kr Bata Strasbourg 600,000 Frc From the sold property is further excluded the debt which we have against the city in the amount of approx. 4300,000 that is by such amount the purchase price is increased and J.A. Bata is under obligation to pay such amount to the city of Zlin. (signed) Tomas Bata [second page] Bata Stockholm 40,000. Kr Bata Deutsche Schuhe A. G. Berlin 110,000 Rm. Bata Vienna 20,000 S. Bata Shoe & Leather Lynn 15,000 $ Bata  New York 400,000 $ I sell to you shares Further also of domestic companies Bapoz spol. s. r. o. 400,000 Kc Paris akc. spol 500,000 Kc Atlas insur. 3,000,000 Kc Busi Trebic 10,000,000 Kc Budisovsky Trebic 10,800,000 Kc From these values I exclude is excluded the landed property Loucka a Lazy as well as my residential house in Zlin Besides these enumerated values included are in the sale I sell to you all ym my property even if it is not enumerated here for the amount of Kc 50,000,000 fifty million K.c. Czechoslovak currency. You are under obligation to pay this purchase price in cash within one year from taking over the companies and to pay 5% interest pro ano 7/13,32 note: I agree and purchase; (signed) J.A. Bata (signed) Tomas Bata that is to say, I agreed and purchased as per oral agreement. The will, dated May 19, 1931: [first page] S1 25/32 -------- 1 My last will: Made on the day 19/5 1931 My property as of today consists of Claim against J. A. Bata of for all shares sold xx domestic and foreign comp. Kc 50,000,000 My dwelling house in Zlin 100,000 Landed estates Loucka and Lazy and Schmergerle 3,000,000 Claim against the City of Zlin  About 4,300,000 ___________ 57,400,000 ----------- From this my property I bequeath To my wife Mrs. Marie Bata Landed estates Loucka Lazy Schmergerle  3,100,000 Further in cash  Kc 5,000,000 To my son Tom Bata his legal quota Kc 22,000,000 with the provision that this his property shall be administered by his mother until he reaches 22 years of age. The proceeds shall be used for his education and the remainder shall be deposited for his benefit. ___________ 30,100,000 [second page] Carried forward 30,100,000 To my sister Anna Schiebel I bequeath 1,500,000 To the City of Zlin the debt 4,300,000 with Bata a.s. J.A. Bata will pay The balance  Kc 21,500,000 ___________ 57,400,000 I give to my fellow workers is to be paid is payable within 5 years with 5% interest This amount is to be paid in cash to the Bata Workers Benevolent Fund and is to be administered in the spirit of the now effective by-laws. It is understood that I have drawn up this last will with full understanding being of sound mind and without duress and in my own handwriting. /s/ Tomas Bata My previous testament hereby naturally loses its validity. /s/ Tomas Bata Published at the District Court in Zlin on the 13th day of July 1932. [Seal of the District Court in Zlin] /s/ Loucka Bohumil Two questions at once arise: (1) What is the legal effect of these two documents under Czech law? (2) What did Thomas Bata intend to accomplish by them? First, as to legal effect. It is admitted (as was held in New York) that the sale memorandum is not a valid contract of sale under Czech law. It never left Thomas' possession. Jan had never seen it. Jan's claim in the New York litigation was that there had been an oral contract of sale in Thomas' lifetime, but that contention has been conclusively resolved against him. Jan's claim must therefore rest upon the will and sale memorandum, either or both. The two documents, it is said, evidence an intent to grant to Jan a testamentary right to purchase, i.e., a sales legacy to take effect after death. Conceding that the inter vivos sale was a fiction, adopted for the dual purpose of preventing disclosure of the real estate and of avoiding taxes, Jan argues that there is nothing inconsistent between the accomplishing of these purposes and the legacy to him. The insuperable difficulty with this argument is that there is nothing in the will to support the idea of any legacy to Jan. The will is clear enough; it simply disposes of a supposed estate of 50,000,000 crowns represented by a debt of Jan Bata to Thomas. The Czech law of will construction does not seem to differ greatly from our own. Code Section 582 provides: A disposition of the testator made by reference to a note or writing, is effective only if such writing complies with all the requirements necessary for a valid last-will declaration. Otherwise, such written remarks indicated by the testator may be used only for the interpretation of his intent. Clearly the sale memorandum cannot be construed as a will, if for no other reason than the fact that the other document was clearly intended to be the will. May the memorandum be used to interpret Thomas' will so as to read into the will a sales legacy? The Chancellor held not; and we agree with him. Many decisions of the Austrian and Czech courts were cited to him, as well as the writings of legal commentators. These authorities are all carefully considered and analyzed in the Chancellor's opinion. They all support, in one way or another, the rule that the interpretation of a testament must have some, however slight, support in the testament and must not be totally contradictory to the clearly expressed intent of the testator. (Austrian Supreme Court decision, July 18, 1952.) In the instant case there is not the slightest hint in Thomas' will of any intent to bequeath anything to Jan. The will is predicated upon a supposed claim against Jan, arising out of a fictitious sale. As the New York Court of Appeals said, the will disposed of a non-existing asset. It is unnecessary to analyze the applicable Austrian and Czech decisions. All of them have been read. Many of them concern the question whether a statement or a writing, somewhat ambiguous, was intended to have testamentary effect. Thus, in one case the deceased left a will in which he provided: The statutory right of succession of my wife, who is separated from me, is untouched. This statement, supported by extrinsic evidence, was construed as a bequest. Here we have nothing to construe. Jan's counsel argues that what Thomas did here was to leave a disguised legacy. The cases indicate that the Czech courts will give effect to such a legacy, but, again before that can be done some testamentary provision, or some utterance or document intended to have testamentary effect, must afford the hint or clue to the testator's intention. The supplementary interpretation may take place, only then, `when the declaration itself offers some basis for supplementing the declaration'. Klang-Handl, Commentary to the General Civil Code (A. B.G.B.). We can add nothing further to the Chancellor's discussion of the applicable Czech law. Mention should be made, however, of the holdings of the Dutch Court of Appeal and of the Swiss Superior Court on this question. The reasoning of the Dutch Court is not, we think, persuasive. Although the court cites ¶ 582 of the Code, it does not attempt to examine the Czech decisional law construing this section. Hence the requirement of Czech law that some hint of intention to create the legacy must be found in the will itself is ignored. We are inclined to think, as the Chancellor did, that the court's basic finding  that it was Thomas' intention to leave all of his shares of stock to Jan  colored the whole opinion. As we shall see, this finding of underlying intent rests on very dubious grounds. Moreover, the court stated flatly  ignoring the uncontradicted evidence in the New York case  that there was no reason to suppose that the value of Thomas' estate differed much from the value assessed by the tax authorities  $8,000,000. Also, the Court Appeal took the view that to attribute to Thomas Bata an intent to evade taxes was a grave misjudgment of his personality. This view we cannot help regarding as somewhat naive. The Swiss Superior Court reached the opposite conclusion. Jan (apparently as an afterthought) asserted the existence of a sales legacy. The court said that the sales memorandum could not constitute a valid testamentary disposition, and also held that the will setting out the claim against Jan could not cure this defect since the testator in no manner expressed the intent of, or even hinted that he was thinking of, a legacy   . Thus the Swiss court applied what we have found to be the Czech rule of interpretation of wills by reference to extraneous documents. We must, however, carefully analyze Jan's argument to the contrary. Accepting the rule that some hint of the claimed legacy, however slight, must be found in the May 1931 documents, he argues (1) that the hint may be found in either document, and (2) alternatively, that the two documents may be treated as one and, read together, evidence an intent to create a testamentary bequest to Jan of all of Thomas' shares upon Thomas' death. Under either approach to the problem, he says, the documents should be read in the light of Thomas' background and his philosophy of social responsibility, which tend to show that he intended Jan to succeed to absolute ownership and power in the Bata enterprise. We have had some difficulty in following the development of this argument, and we note that the Chancellor had the same difficulty. What counsel seem to be saying is that any one of three constructions of these documents supplies the necessary hint of Thomas' intent, and the extrinsic evidence of Thomas' philosophy supplies the reason for the intended bequest. The very multiplication of possible constructions of the papers emphasizes the difficulty of finding any hint of a sales legacy in either of them and the weakness of defendant's argument on the point. First, as to the sale memorandum. How can this meet the requirement of the hint rule? The Czech rule, as we have seen, is that the hint must be found in the will. We repeat that this is not a case in which it is possible to construe the memorandum as a will, because the other document is beyond doubt intended as the will. Moreover, counsel concedes, as we read the briefs, that the memorandum is drafted to avoid any suggestion in any of its words that the disposition to Jan was for the event of death. This is clearly the case; therefore the sales memorandum cannot meet the hint requirement of Czech law. Second, as to the will. It is clear to us, as it was to the Chancellor, that the will contains no suggestion of a legacy to Jan or any provision for his benefit. Again, counsel concede that the will is carefully drawn to avoid words suggesting any testamentary disposition to Jan. Naturally, it was so drawn, since to have left a legacy to Jan would have defeated Thomas' purposes  secrecy and tax evasion. Jan's alternative contention  that the two documents may be treated as one  has some surface appeal. It is buttressed by the further argument that the extrinsic evidencethe Moral Testament  shows that Thomas intended Jan to succeed to ownership and power. But it will not bear analysis. Reduced to its simplest terms, it is an argument that the memorandum must be read as a part of the will. In effect, this is the view taken by the Dutch Court of Appeal. We have already considered it. It runs afoul at once of the Czech Code (¶ 582, quoted above) and of the Czech decisions. No argument based on extrinsic evidence can avail to expand the language of the will to include a reference to the sales memorandum as a part of the will. Moreover, the extrinsic evidence of Thomas' intent that Jan should succeed to both absolute ownership and power falls considerably short of being convincing. It is based on certain writings of Thomas, one the so-called Moral Testament and another an article published in a newspaper in 1927, entitled My Attitude Towards Work. The Moral Testament is headed: To Accompany My Last Will. As above stated, it was found in the safe in May, 1932, after Thomas' death. It develops the idea that the Bata factory had not been built simply for the benefit of the founders and owners; that it had a higher purpose in furthering the general well-being of the community, both workers and customers. It concludes: So long as you will serve this great idea, so far you will live in accordance with the laws of nature and of man. So long will you be useful to all and so long will you be unconquerable. However, as soon as you will think only of yourselves, as soon as you cease to serve with your factory the commonwealth, you will become superfluous and you will fall inevitably. We are told that it was written in 1908. At that time Thomas had not been married and Jan was ten years old. However praiseworthy its philosophy may be, the Moral Testament certainly does not contain anything pointing specifically to any successor. The testament must have been addressed to any future owner or owners of the business. The 1927 article sets forth Thomas' attitude toward work. It concludes: My work has only one purpose: the service to life. I admire life. I love life. I wish to live through it ten times in sequence without a change, or under any conditions. I wanted to have 10 sons; not so that I will be able to divide my fortune among them, but to teach them how to live and work. Now I have thousands of sons, if only one who bears my name. I shall leave my fiddle to the best of them all; but so that he may play for others and not for himself. My son has not even the prospect like many a son of poor parents  to become gentlemen. He will not study in a college, the less in a university. After having finished the high school, he will become a free thinking craftsman like his father is. He will have just as much property as he will earn himself. He will anyhow have large advantage over the others, because he will have at his side more experienced advisers and certainly I shall not forget to draw his attention to the suitable opportunities. (Emphasis supplied.) The fiddle metaphor derived from a prior reference to his property as similar to the violin of a musician. Counsel argues that this utterance, read in the light of the Moral Testament, forecast the choice of Jan as the best of them all. There are several difficulties with this argument. First, in 1927 a will written by Thomas in 1918 was in effect. It made substantial provisions for his widow and for his son, then five years of age, as well as for Jan Bata. During Tom's minority control was to be separated from ownership, but after Tom should become of age working control would revert to him. It is hard to reconcile the existence of this will with counsel's construction of the 1927 article. Second, Jan in 1927 was not even employed in the Bata business, having left it temporarily for about a year because of his desire to build his own home rather than live on company-owned property. There are other considerations strongly rebutting the inference that Thomas intended by the May 1931 papers to vest absolute title and control in Jan. There is the inherent improbability in imputing to Thomas an intent to cut off his widow and son with a very small fraction  about one-thirtieth  of his estate; and the further improbability of cutting off his son, whom he was grooming for leadership, from any assurance of control of the enterprise. There is the admitted fact that the whole scheme of an inter vivos sale was a fiction designed to conceal the assets of the estate and to avoid crippling inheritance taxes. It was so found in New York. The Appellate Division said: The so-called agreement of sale dated May 10, 1931, and the will of Thomas Bata dated May 19, 1931, appear to have been designed chiefly, as Mr. Justice Schreiber has said, for tax purposes. 279 App.Div. 182, 108 N.Y. S.2d 659, 660. Counsel for Jan argue that this fiction is not inconsistent with an intent to leave the whole property to Jan, but we do not agree. The price fixed for the sale was at the most one-twentieth of the real value of the property. Again, as heretofore noted, payment of the debt of Thomas Bata to Bata a.s. of 35,000,000 crowns  over a million dollars  would have wiped out the bequests to the widow and son. This circumstance suggests that the provisions of the documents were not intended to be followed literally. The same inference can be drawn from Thomas' treatment of the real estate. He did not even explicitly devise his residence to his widow; and after making the will he transferred to Bata a.s. other real estate that he had devised to her. What, then, it may be asked, did Thomas Bata really intend or expect when he drew up the two documents in May, 1931? This is the second question that we posed at the outset of the discussion of the merits. Any answer is in the relm of speculation. It may be that Jan was intended to be a mere nominee or agent of all the property  on the theory that his relationship to the heirs would be flavored with a trust, as the Chancellor put it. Or it may be that Thomas intended Jan to have the full title to all the property, but, in the expectation that Jan would treat it as a mere simulacrum and do what was right as regards Tom and Marie. Per Van Voorhis, J., 279 App.Div. 182, 108 N.Y.S.2d 659. Again, it may be that the transaction was incomplete, i.e., that Thomas intended at some time to supplement the 1931 documents by a later will or by a private memorandum to his family, and that his unexpected death prevented him from so doing. Some slight support for this possibility is found in the following incident. In December, 1931, while traveling by airplane to India, Thomas wrote a note book or series of entries and comments. Among them is a reference to a recurrence of an old ailment  thrombosis  and the writing of another will en route. Later he records the fact that his leg stopped hurting and adds: I tore up the last will. Perhaps it is inferable that the 1931 documents were not complete. There is another possibility not mentioned by any of the courts that have reviewed this puzzling set of facts. It may be that Thomas intended  or hoped for  some sort of division of the enterprise  the Leader shares and ultimate control to his wife and son  Bata a.s. and the minority shares, registered in Thomas' name, to Jan with active control of the entire enterprise to be in Jan until, at least, such time as Tom was able to accept the responsibility. Such an intention on the part of Thomas would have been consistent with his business philosophy. This theory finds some support from the fact that, by his 1918 will, Thomas left Jan a substantial interest in the enterprise1,000,000 crowns  or roughly onetenth of the value of the enterprise as it then existed. Also, by his 1918 will, Thomas left ultimate control of the entire enterprise to his son, Tom, but provided that that control should be deferred until a future date. Further support for this theory is found in the fact that the Leader shares are not mentioned as such in the papers  it is only from the use of the word majetek (all my property) that Jan is able to build an argument that he acquired them. The papers list only stockholdings which, since they were registered in Thomas' name and had been reported to the Czech authorities, obviously could not be concealed for tax evasion purposes. Each of these listed stockholdings was assigned a value (possibly the par value). The exception was Bata a.s. which had never issued any stock in Thomas' lifetime but which, nevertheless, was known to the Czech authorities as the property of Thomas. Under this assumption, therefore, Thomas' intention was carried out, viz., concealment from the Czech tax authorities of the value represented by the Leader shares and sixty percent of the value of the foreign companies. His intention, also, of control of the enterprise, at least until Tom could take over, was assured. Finally, it may be that Thomas intended the documents as an outright bequest to Jan of the entire Bata enterprise, without any reservation or expectation whatever. We have suggested a number of possible answers to the question, What was Thomas' intent? There are obvious objections to each of these answers. We have suggested them solely to emphasize the uncertainty surrounding the matter, and the unsoundness of attempting to build up from extrinsic evidence a supposed intent and then to construe the documents in the light of that intent. This, we say with respect, is in our opinion the fundamental error into which the Dutch Court of Appeal fell. Any conclusion founded on such a basis is not to be trusted. It is impossible to be sure what was Thomas Bata's actual intention. We fall back, therefore, as the Chancellor did, on the principles of the Czech law of will construction. The Chancellor said: As I find the Czech law and without regard to the testator's actual intention, it must be concluded that Thomas Bata did not by his May 19, 1931 will create a sales legacy in favor of Jan. 139 A.2d 195. In other words, even if Thomas Bata actually intended to create a sales legacy in favor of Jan, he did not take the necessary legal steps to accomplish it. We are in accord with the Chancellor's conclusion.