Court Opinion

ID: 5271922
Source: CourtListenerOpinion
Date Created: 2022-01-06 21:26:19.189425+00
Date Added: 2024-06-11T08:28:15.009595
License: Public Domain

Kelby, J.:
The method pursued by the executors in consummating the sale of the testator’s interest in the partnership of A. D. Juilliard & Co., and the sale of the mill stocks owned by the testator, followed the power of sale vested in the executors and trustees by section 39 of the will. The power of sale as to the partnership interest practically vested in the trustees the power to liquidate the partnership interest by contract with the surviving partners. It was provided, as to the sale of the partnership interest, that such sale could be made to the surviving partners “ for a sum which shall equal the value of my interest therein at the date of my death, the value of which interest shall be determined upon the inventory value of all the property of said firm.” Notes bearing interest at four and one-half per cent per annum from the date of the testator’s death could be taken. Plenary power for the adjustment and settlement of these values was also given in section 42 of the will.
The consummation of the sale on November 24, 1920, fully *487approved and ratified by the Juilliard Musical Foundation, was a sale as of April 25, 1919, as directed by the will. The executors, in making the sale as of this date, followed the express limitation on their power of sale. No other sale was authorized.
The testator commanded his executors and trustees to treat the sale of the partnership interest and the mill stocks as a sale as of the date of his death. Both of these large factors in the administration of his estate were really fundamental and essential. All acts necessarily .relating thereto must likewise relate back to the date of the testator’s death.
After the death of the testator the surviving partners formed a joint stock company, which carried on the business. Thereafter the profits were earned by the new association and not by the old firm. The old partnership did not continue under article 13 of the partnership agreement. The estate held property rights in the assets and profits that accrued up to April 25, 1919, subject to liquidation. It was this interest which was sold as of April 25, 1919, to the surviving partners. The increase over the value of the testator’s partnership holding was not due to any change in the capital value but was compensation for delay in payment. The delay was by agreement between the parties to the contract, and the delay was paid for by the purchasers by agreement also, and was ratified by the foundation.
It appears that the profits on the mill stocks since the testator’s death have gone to the purchasers under the contract of sale.
The question presented for decision is the distribution of the income accruing between the date of the testator’s death and the date of the organization of the corporation. Frederic A. Juilliard, Juilliard Musical Foundation, American Museum of Natural History, St. John’s Guild in the City of New York and the appealing next of kin all claim title to the income which has accrued since the testator’s death and down to the organization of the Juilliard Musical Foundation.
The learned surrogate held that Frederic A. Juilliard, the nephew, was entitled to all income that was “ due and payable ” up to the date of the organization of the Juilliard Musical Foundation, April 16, 1920, whether or not it had been actually reduced to possession by the executors and trustees; and that the attempted gift to the Juilliard Musical Foundation of the income which accrued prior to its organization was illegal, as it involved an accumulation for a term of years not dependent upon the minority of an infant. The learned surrogate further determined that as to income which had accrued but which on April 16, 1920, was not yet payable, the testator died intestate, and that such part of the income *488passed to the testator’s next of kin. (Matter of Juilliard, 117 Misc Rep. 642.)
It is urged by the Juilliard Musical Foundation that title to the entire residuary estate, under the 45th paragraph of the will, was conveyed to trustees of a charitable trust immediately upon the testator’s death, and that there was no intervening non-charitable estate between the death of the testator and the incorporation of the Juilliard Musical Foundation, and that the incorporation was merely a change in instrumentality in carrying out an existing charitable trust. If this point be granted as a premise, the solution of the difficulties presented by the will would be very simple, because then there would be no illegal accumulation, for title immediately vested on the death of the testator. This contention cannot be maintained, according to my reading of the 45th paragraph. The particular charitable use for the aiding of students of music, the giving of musical entertainments and the instruction of the general public in musical arts, was entirely dependent upon the formation of the Juilliard Musical Foundation by incorporation, as directed under the will, during the fives of the testator’s nephew, Frederic, and his surviving partner, Robert Westaway. The 45th paragraph specifically states, under subdivision (d), that “ If for any reason the said corporation shall not be organized within the time specified, to wit, within the fives of said Frederic A. Juilliard and Robert Westaway, and the survivor of them, or if for any other reason the provisions of this clause shall be ineffectual, then I give, devise and bequeath the entire fund and estate referred to in this section of my will marked ‘ Forty-fifth ’ unto the American Museum of Natural History and St. John’s Guild in the City of New York in equal amounts.” It would have been legal for the Juilliard Musical Foundation to be incorporated and organized at any time during the fives of Frederic A. Juilliard and Robert Westaway. This might have involved a considerable number of years. Besides, subdivision (d) further provides: “ Until the organization of the corporation Juilliard Musical Foundation as hereinabove provided (which I trust may be accomplished without any appreciable delay after my death) and within the lifetime of said Frederic A Juilliard and Robert Westaway, and the survivor of them, I direct my said Executors and Trustees under this Will to pay over unto said Frederic A. Juilliard all income that may be actually received from the fund provided tp be transferred to said corporation upon its organization, but that upon the organization of said corporation all distribution of income from said fund unto said Frederic A. Juilliard shall cease, and there shall be no apportionment to him of income partially or wholly earned, but not yet due and payable *489at the time above stated.” It seems clear, therefore, that there was a creation of an intermediate estate until the organization of the corporation, and that said organization could have been deferred legally during the lives of Frederic A. Juilliard and Robert Westaway. If the corporation of the Juilliard Musical Foundation was not formed, then certainly the charitable use, in so far as it affected the charity for the benefit of music, was defeated, because in that event it went to an entirely different charitable use, namely, to the American Museum of Natural History and St. John’s Guild in the City of New York.
Under the 45th paragraph of the will the residuum of the estate is devised and bequeathed to the executors and trustees in trust, “ giving and granting to my said Executors and Trustees the same rights and powers in connection with the management and investment of said trust fund as are conferred upon them by the section of this my Will, marked ‘ Forty-second.’ ”
The executors and trustees, under subdivision (b) of the 45th paragraph, are then directed: “ as soon after my death as may be practicable, and within the lifetime of * * * Frederic A. Juilliard and * * * Robert Westaway, * * * to * * * cause to be incorporated * * * a corporation to be known as the ' Juilliard Musical Foundation.’ ” By subdivision (c) of the same paragraph the executors and trustees are directed, within the period of the two lives mentioned and upon the organization of the corporation, “ to transfer and pay over unto the said corporation, the entire capital of the said trust fund created by this section of my Will, marked ‘ Forty-fifth.’ ” By the power given the trustees under the will as to investment of the trust fund and by the testator’s gift of the capital of the trust fund, he clearly contemplated that there would necessarily be an interval between his death and the organization of the corporation, and that during such interval the principal should be made productive. The testator also differentiated between capital of the trust fund and income therefrom, because it is only the former that is expressly given to the corporation. The income is then disposed of by subdivision (d) of the same section, which reads as follows:
“ Until the organization of the corporation Juilliard Musical Foundation as hereinabove provided (which I trust may be accomplished without any appreciable delay after my death) and within the lifetime of said Frederic A. Juilliard and Robert West-away, and the survivor of them, I direct my said Executors and Trustees under this Will to pay over unto said Frederic A. Juilliard all income that may be actually received from the fund provided to be transferred to said corporation upon its organization, but *490that upon the organization of said corporation all distribution of income from said fund unto said Frederic A. Juilliard shall cease, and there shall be no apportionment to him of income partially or wholly earned, but not yet due and payable at the time above stated.
“ If for any reason the said corporation shall not be organized within the time specified, to wit, within the lives of said Frederic A. Juilliard and Robert Westaway, and the survivor of them, or if for any other reason the provisions of this clause shall be ineffectual, then I give, devise and bequeath the entire fund and estate referred to in this section of my will marked ‘ Forty-fifth ’ unto the American Museum of Natural History and St. John’s Guild in the City of New York in equal amounts.”
The apparent intention of the testator, in subdivision (d) just quoted, was to dispose of all income accruing between the date of his death and the organization of the corporation. Clearly his intent was to divide it in some manner between his nephew and the foundation. The gift of some part of the income to the foundation is not in express terms, but there is a clear gift by implication. Upon the organization of the corporation “ all distribution of income from said fund unto said Frederic A. Juilliard shall cease, and there shall be no apportionment to him of income partially or wholly earned, but not yet due and payable.” By clear implication, then, the corporation was given the income partially or wholly earned but not yet due and payable. But the corporation was not in existence at the time of the testator’s death, and was not in- fact organized until April 16, 1920, nearly a year after the testator’s death on April 25, 1919.
These facts as to the gift of income to the foundation are quite like the facts in the case of St. John v. Andrews Institute (191 N. Y. 254). In that case the testator, Andrews, devised and bequeathed to his executors in trust the residue of his estate to pay over the rents and profits to his wife during her life. Upon her death he bequeathed the residue in part to a corporation which he directed to be formed as soon as practicable after his decease. This corporation was to be organized for the purpose of establishing and maintaining a school for the free education of girls. The will further provided that if the wife should die before the testator, the gift to the corporation should take effect upon the testator’s death. The testator and his wife perished in a fire, so that it could not be determined which of them was the survivor. Subsequent to the death of the testator, and more than three years thereafter, “ The Andrews Institute for Girls ” was incorporated as directed by the will. The court held that there was an implied *491direction for the accumulation of income from the date of the death of the testator to the incorporation of the Andrews Institute for Girls, for the benefit of that corporation; that the direction for accumulation was void because of the provisions of section 51 of the Real Property Law of 1896 (now Real Prop. Law of 1909, § 61, as amd. by Laws of 1915, chap. 670) and section 4 of the Personal Property Law of 1897 (now Pers. Prop. Law of 1909, § 16, as amd. by Laws of 1915, chap. 670); and that the directed accumulation was not for the benefit of infants in being at the creation of the estate out of which the rents'and profits were to arise. (Cochrane v. Schell, 140 N. Y. 516; Manice v. Manice, 43 id. 303, 376; Pray v. Hegeman, 92 id. 508; Thorn v. De Breteuil, 179 id. 64; Hascall v. King, 162 id. 134.) ,
The attempted gift of part of the income to the foundation, “ partially or wholly earned, but not yet due and payable ” at the time of the organization of the foundation, was, therefore, void.;
The provisions making a gift to the nephew, Frederic, next1 require construction.
The executors and trustees are directed to pay to the nephew, until the organization of the foundation “ all income that may. be actually received from the fund provided to be transferred ¡ to said corporation upon its organization, but that upon the, organization of said corporation all distribution of income from ’ said fund unto said Frederic A. Juilliard shall cease, and there ' shall be no apportionment to him of income partially or wholly 1 earned, but not yet due and payable at the time above stated ” (April 16, 1920).
What is meant by income “ actually received? ” A literal construction would mean income actually reduced to possession by the executors and trustees. If this was what the testator intended, there would have been no necessity for directing that there should be no apportionment to the nephew of income partially or wholly earned, but not yet due and payable. If the contract for the liquidation of the partnership had been executed immediately after the testator’s death, and if interest on the partners’ notes had been actually paid to the trustees prior to the organization of the corporation, it is clear that such income would belong to the nephew. If, immediately after the death of the testator, the contract for liquidation had been executed and the notes delivered to the trustees, and the partners delayed paying the interest until after the organization of the corporation, was it the testator’s intent that the interest should go to the corporation? Or would the subsequent collection of interest, either by voluntary payment or by aclion reduced to judgment, relate back to the time it was due and payable?
*492In the case of Cook v. McDowell (52 N. J. Eq. 351) a testator gave the residue of his estate to six children, to be divided equally among them share ana share alike, with the proviso that “ in case any of my said children die before receiving their share leaving issue then I give, devise and bequeath to such issue the share the parent would have taken if living.” All of the children survived the testator, and one died without issue before coming into actual possession of any part of the testator’s estate! It was there held that the words “ before receiving ” were used in the sense of vesting in right rathdr than in the sense of being in actual possession, and that, therefore, the property passed under the will of the deceased child.
So in the case of Allemannia Ins. Co. v. Firemen’s Ins. Co. (209 U. S. 326) the court construed the words “ actually paid ” in a contract of reinsurance to mean actually payable. This construction was perforce the nature of the contract, from which in turn the court inferred the intention of the parties. So the words “ shall have received his or her share ” were held to be the legal equivalent of “ shall have become entitled to receive his or her share.” (Johnes v. Beers, 57 Conn. 295.) And where there was a bequest in trust for a granddaughter of a testator, with direction to apply so much of the income or of the principal for the benefit of the granddaughter until she should attain the age of twenty-one years, and then to pay her the principal together with all accrued income if the trustees deemed it best, “ but should she die before receiving the same, then this trust is to continue for the benefit of her lawful issue, if any, until they each shall reach twenty-five years of age,” it was held that the estate was “ received ” at the moment when in contemplation of law she became entitled to receive it. (Thompson v. Marshall, 73 Conn. 89, 94.)
By the method of administration contemplated by the testator, the income was “ actually received ” when the trustees were legally “ entitled to receive it.”
The contract between the surviving partners and the executors and trustees, under the broad power given the latter by the will, made interest on the notes payable semi-annually for the first two years. This had the effect of making due before the organization of the foundation the sum of $321,823.87. There is no suggestion that this act of administration was done with any fraudulent intent to increase the nephew’s share of income. It was in pursuance of the power granted the executors under paragraphs 41 and 42 of the will. It follows, therefore, that the court below was correct in ruling that Frederic A. Juilliard wag entitled to the *493income “ due and payable ” at the date of organization of the foundation.
As the will directed the payment of income to the nephew Frederic until the organization of the corporation, and upon the organization of the corporation the payment of income to him should cease,- the court below was also correct in its ruling that decedent died intestate as to income partially or wholly earned, but not yet due and payable at the time of the organization of the corporation. (St. John v. Andrews Institute, supra.)
It is also urged that the foundation was “ organized ” when it was “ incorporated ” by special act of the Legislature on March 30, 1920, and that this date should prevail rather than the date of the organization meeting provided for in the special act. While the terms “ organized ” and “ incorporated ” are often used synonymously concerning the creation of a corporation, there is a difference between corporations created by a general act and those created by special act. The incorporators under a general act give their assent to incorporation in advance of actual incorporation, while incorporation under a special act is not deemed complete until formal organization, or assent inferred by the exercise of corporate acts under the special' charter. (Glymont Co. v. Toler, 80 Md. 278; Matter of Metropolitan Transit Co., 111 N. Y. 588, 603.)
The appellants American Museum of Natural History and St. John’s Guild in the City of New York claim that the court below erred in not decreeing payment to them of all interest from the date of testator’s death to the organization of the foundation. Their claims rest upon that part of paragraph 45, subdivision (d), of the will which reads as follows:
“ If for any reason the said corporation shall not be organized within the time specified, to wit, within the lives of said Frederic A. Juilliard and Robert Westaway, and the survivor of them, or if for any other reason the provisions of this clause shall be ineffectual, then I give, devise and bequeath the entire fund and estate referred to in this section of my will marked ‘ Forty-fifth ’ unto the American Museum of Natural History and St. John’s Guild in the City of New York in equal amounts.”
By the express terms of this clause the only gift to the museum and to the guild is the entire residuary estate. Concededly neither can take as “ persons presumptively entitled to the next eventual estate.” (See Real Prop. Law of 1909, § 63, as amd. by Laws of 1916, chap. 364. See, also, Pers. Prop. Law of 1909, § 11.) The gift of the entire residuary estate was dependent upon the illegality of the entire disposition in paragraph 45 of the will.
*494I, therefore, recommend: Decree of the Surrogate’s Court of Orange county affirmed, with costs to all parties appearing and filing briefs in this court, payable out of the estate.
Kelly, P. J., Young and Kapper, JJ., concur; Manning, J., dissents upon the ground that in his opinion the intent of the testator, as evidenced by the will, was that the whole of the income should go to the nephew until the actual organization of the foundation; and is also of opinion that the evidence in the case does not warrant the application of the doctrine of intestacy.
Decree of the Surrogate’s Court of Orange county affirmed, with costs to all parties appearing and filing briefs in this court, payable out of the estate.