Court Opinion

ID: 6376224
Source: CourtListenerOpinion
Date Created: 2022-06-24 23:55:26.975337+00
Date Added: 2024-06-11T15:50:11.016130
License: Public Domain

Henderson, J.,
At the time of his death, Aug. 9, 1915, the testator was engaged in what is known as the instalment business, and he gave it to trustees to carry on after his death. He had several stores, one of them contained in three properties, Nos. 2330, ’32 and ’34 North Front Street. In his lifetime he had conveyed title to No. 2330 North Front Street to his daughter, Laura K. Bayo, and the fourth item of the will confirms this conveyance. He devised No. 2332 North Front Street to trustees for the maintenance of his son, Thomas Kelly. On June 9, 1915, he entered into a five-year lease for No. 2334 North Front Street, with a covenant of renewal for an additional term of five years; the lease granting him an option to purchase the property for $25,000.
This option was exercised early in 1925 and the property resold at a profit of $24,612.91. The Auditing Judge awarded this sum to the trustees of the residuary estate, and the trustees of the business have excepted to this ruling and contend that this fund belongs to the trustees of the business to pay the creditors thereof.
We must now examine the will to ascertain who has title to this fund.
The testator separated his business, which he authorized to be continued after his death, from the rest of his estate, creating two trusts; the former he gave to his “Business Trustees,” and the latter, subject to certain minor provisions, he gave to the “Trustees of my Residuary Estate.” He specially directed that no liability of the business trust should attach to the residuary estate.
By the second item of his will he directed as follows:
“It is my desire that after my decease, the instalment business conducted by me at No. 624 Market Street and 1940 North Front Street, Philadelphia, or wherever said business at the time of my decease may be conducted, either individually or as a copartner, shall be carried on, after my death, by the persons hereinafter named, their successors and assigns.
“It is my intention that the business carried on shall comprise the good-will of the business and all the contracts of the same and all assets of every kind which, at the time of my decease, may be connected with the business itself. This will, of course, include all merchandise which may be on hand and which may be contracted for, and all cash in said business, as well as all money due me in said business. The business thus to be conducted shall be taken in charge by the Trustees, subject to making of all contracts entered into by me in and about the business hnd also subject to the payment of all debts which may be owing or become owing on account of the business theretofore contracted for in and about the conduct of the same, as well as all other debts owing by me at the time of my death.
“I desire, however, that this business shall be so conducted as that there shall be no liability for its success or failure thereof incurred by my residuary *773estate. The latter I intend to give to Trustees for the specific purposes to which I will devote said residuary estate.
“In order that the business may be kept separate and apart, I desire and direct that it shall be conducted under the name of the Trustees as ‘Business Trustees.’
“With this explanation I give and bequeath said business and its assets, together with all my stock in Pine Beach Improvement Company, subject to the performance of the business contracts and the payment of the debts as heretofore specified, to Richard T. Kelly, Laura I. Kelly and Harry A. Ban-non, and the survivor or survivors of them, In Trust, to carry on said business for the uses and purposes following, with the express understanding, to be binding upon all persons doing business with said Trustees, that said instalment business and Pine Beach Improvement Company shall be conducted and managed by them distinct and separate from my residuary estate:
“In trust, under said name, said Trustees shall conduct said instalment business and shall also conduct the business of Pine Beach Improvement Company without charge to my residuary estate.
“In Trust, from time to time, semi-annually, if possible, the said Trustees shall pay over all dividends on stock of Pine Beach Improvement Company, and all sums which can be appropriated out of the net income of the business to the Trustees of my residuary estate, to be used and appropriated by them in the way and manner directed of and concerning the income of the principal of said residuary estate.
“As I have said, I desire that said instalment business, as well as all dividends on said stock of said Company, shall be managed and controlled by said Trustees without any liability therefor on the part of my residuary estate for the debts which shall be incurred and the contracts which shall be made in and about the carrying on of the business.
“I direct that the Trustees of my residuary estate shall, from time to time, make leases of the real estate now used in said instalment business or which may be used in and about the same at the time of my decease, at the same rent now being paid therefor. The rental thus paid shall be used by the Trustees of my residuary estate as part of the income of the latter.
“If my instalment Trustees or a majority of them shall agree in writing to extend the business because they may deem such extension desirable and profitable, they shall have the right to do so.
“I also confer upon said instalment Trustees or a majority of them the power, at any time, if they deem it advisable to .sell said business and assets and close out the same, to make such sale for such purchase price as may be agreed upon by a majority of them. This sale may be made for all cash or for all [part] cash and part payable in the future, the future payments being secured or not secured, as to the Trustees shall seem best. The net proceeds of such sale shall go to the Trustees of the residuary estate.”
By the third clause of his will he devised No. 2332 North Front Street and three other properties in trust to provide for the support of his son Thomas.
And by the sixth clause he gave “all the rest, residue and remainder of my estate, real and personal,” to the trustees of the residuary estate, for the purposes therein set forth.
He owned numerous properties in this city, in Atlantic City and in Ocean City, and with the exception of the four specifically devised, all fell into the residuary estate.
It should be noted that he authorized his residuary trustees to lease the properties used in his instalment business to his business trustees, at the *774rental with which the business was charged at the time of his death, and he provided that such rents were to be paid to the residuary trust and distributed as income.
To recapitulate: the testator had conveyed No. 2330 North Front Street to his daughter in his lifetime; he devised No. 2332 North Front Street in trust for his son Thomas; and he had a lease for No. 2334 North Front Street, which contained the option to purchase. In these three properties the business at that location was operated.
The Auditing Judge held that where an option to purchase is exercised, the title of the optionee relates back and his interest is to be regarded as .real estate from the date of the option; citing in .support thereof: Kerr v. Day, 14 Pa. 112; Peoples, &c., Co. v. Spencer, 156 Pa. 85, and McCutcheon’s Estate, 24 Dist. R. 94. In this conclusion we concur.
But it is contended by the business trustees and the principal creditor that the lease for No. 2334 North Front Street passed to them under the clause of the will directing that the business shall “comprise the good-will of the business and all contracts of the same and all assets of every kind which, at the time of my decease, may be connected with the business thereof.” It is argued that this language is broad enough to pass real estate, and as the business has had the burden of meeting the rental, it should have the benefit arising out of the option. It may be conceded that the language is broad enough to pass real estate and that the business trustees have had the burden of maintaining the lease, but the benefits of the option do not pass to the business trustees because the will devises all the realty to the residuary trustees and certain specific devisees.
The lease and option therein contained are disposed of by the will, which gave the lease to the business trustees, and the option, which, when exercised, became realty, was devised to the residuary trustees. The testator has dealt differently with his two rights — lease and option — the former for the benefit of his business trustees and the latter for his residuary trustees, as was his privilege so to do.
The exceptions are dismissed and the adjudication is confirmed absolutely.
Thompson, J., was absent.