New York Probate and Estate Administration Lawyer Blog
This is an appeal brought before the Court of Appeals of New York from a decision rendered by the Supreme Court, Appellate Division, Second Department, in the matter of the judicial settlement of the account of MNH and others, as trustees under HH’s will.
The trustees appealed from an order of the Appellate Division affirming a decree of the Surrogate’s Court settling their account. The instant court modified and affirmed.
The issue here is the validity and effect of certain portions of the will of HH, and the correctness of the directions contained in a decree of the surrogate of Kings county as to the disposition of certain moneys of his estate.
HH was a resident of Brooklyn. On 5 September 1895, HH died leaving a last will and testament. On 1 October, 1895, the will was admitted to probate. His executors were MNH, his widow, and FW, and EH. WF, and JDF, president of the KC Trust Company.
The will contained the following: the executors were directed to deposit in the KC Trust Company all the testator’s securities and moneys to constitute what he termed in his will as the ‘general fund’ of his estate; bequeathed to his wife, MNH, all the testator’s personal property in his Brooklyn residence and devised to her his summer residence in the town of Lee, in Berkshire County, Massachusetts, and all his real estate there for the period of her natural life; at the death of his wife, or sooner, if she consented, the executors were directed to sell said real property and deposit the proceeds to the credit of the general fund of the estate already mentioned; and, the executors were further empowered to sell any of the testator’s personal property not otherwise disposed of whenever, in their judgment, it shall be for the interest of the estate, and to deposit the avails thereof in the same general fund; out of this general fund,
Under the will, the executors were also directed to make payments as follows: (1) twelve hundred dollars a year to the testator’s wife and all taxes and expenses for the necessary repairs upon his Brooklyn residence; six hundred dollars a year to the testator’s sister, FW, during the lifetime of the testator’s wife, and upon her death, if the said sister survives her, a sum sufficient to insure an income of $600 per annum for the remainder of her life; to the testator’s niece, HAHB, $400 a year during the life of the testator’s wife; and, upon MNH’s death, if the niece survives, a sum sufficient to insure an income of $400 per annum for the remainder of her life.
A Westchester County Probate Lawyer said that upon the death of the wife, the executors were also directed under the will to appropriate from the general fund of the estate the sum of $35,000 to be expended in the erection of a statue to Lafayette, and, that, whatever sum may remain in the estate after the statue is erected is to be applied, first, to the payment of $200 to the town library of Lee, Massachusetts, and then in the proportion of one-fifth each to the Gates Avenue Homoeopathic Dispensary, the Brooklyn Children’s Aid Society, the Brooklyn Society for the Prevention of Cruelty to Children, the Brooklyn Home for Aged Men, and the American Society for the Prevention of Cruelty to Animals.
On 23 November 1902, the testator’s sister, FW, died.
On 11 April 1908, the testator’s niece, HAHB, died, leaving a last will and testament, of which JRK was the sole executor.
Under HH’s will, except his widow, are dead, and the obligation of his executors and trustees to pay their annuities has ceased.
Among the assets of the estate were 160 shares of the capital stock of the MPG Insurance Company, now known as the M Casualty & Insurance Company. At the time of the testator’s death, the authorized capital of this corporation was $100,000. Sometime in 1902, the directors determined to increase it to $200,000, and to this end they declared a cash dividend of 100 percent., payable out of the company’s surplus, on 15 February 1902. Stockholders were accorded the privilege of subscribing at par for the additional stock to the extent of 100 percent of their respective holdings, and HH’s. executors availed themselves of this privilege in behalf of his estate and applied the $16,000 which they received by way of dividend to the acquisition of 160 shares of the new stock. They have since sold these 160 additional shares at public auction at a price which yielded the estate the sum of $19,912.80.
On this appeal, the questions which require consideration are only two, viz.: (1) Is the bequest in the eleventh paragraph of the will for the erection of the Lafayette statue valid? (2) Is the sum received by the executors and trustees for the additional stock purchased with the surplus dividend of the MPG Insurance Company to be regarded as capital or income?
On a prior appeal, this case was reviewed by the Appellate Division in the Second Department, and its principal phases were then discussed in an opinion by Mr. Justice G, which upheld the validity of the provision for the statue to Lafayette.
The eleventh paragraph of HH’s will read as follows: ’11. Upon the death of my said wife, MNH, and the other provisions of this my last will and testament having been complied with, I direct that my surviving executors shall devote and appropriate from the general fund of my estate the sum of thirty-five thousand dollars ($35,000) to be expended in the erection of a statue of General, the Marquis De La Fayette, to be placed in Prospect Park, Brooklyn, as an expression of my admiration for that noble and patriotic man and of my appreciation, in which my country shares, of his aid in establishing our republic, and I request, nominate and appoint the mayor of the city of Brooklyn and the commissioner of the department of parks of said city, or the officers who may be exercising corresponding functions at the time of my death, to act as a commission in conjunction with my said executors to carry out this provision of my will. I give this joint body full power and discretion in the matter, except that I request that said statue shall be sculptured as far as possible from the negative in the works of Irving (Life of Washington) and from the engraving therefrom, in possession of testator, and except that I further request that said joint body shall consult and confer with SCM and ACB, both of the city of Brooklyn, as to the preparation of suitable inscriptions upon the statue, which shall indicate that it was erected by HH and presented by him to the people of Brooklyn, in honor of the memory of the friend and close companion of the immortal Washington, and also to confer with said SCM and ACB in regard to the details of such presentation.’
The provisions of the abovementioned paragraph can be questioned only upon the ground that the will is indefinite and uncertain as to the persons designated as beneficiaries; but, as Judge G pointed out, the beneficiary was the city of Brooklyn, and, although it ceased to be a separate municipality in 1897, two years after the testator’s death, the existing city of New York has succeeded to all its corporate rights, capacities, and trusts. As discussed in the case entitled Matter of Crane, 12 App. Div. 271,42 N. Y. Supp. 904, affirmed 159 N. Y. 557, 54 N. E. 1089, among these was the capacity to receive a gift for the erection of a statue. In that case, what was cited was a gift for the erection of a drinking fountain in the city of New York to the memory of the testator. The same principle must apply to the gift of a statue which will add to the attractiveness of the city and promote the education, patriotism, and enjoyment of its inhabitants.
On the question of whether a surplus dividend is to be deemed capital or income depends upon the time of the acquisition of the surplus which was divided.
Here, the amount of the dividend was $100,000. Based upon the findings of the surrogate, it would show that on 31 December 1895, shortly after the testator’s death, the surplus of the MPG Insurance Company was $190,000, and that at the time of the adoption of the resolution for the dividend it was $279,000, an increase of $89,000 within that period. This increase, which, under the doctrine of Robertson v. De Brulatour, 188 N. Y. 301, 80 N. E. 938, Thayer v . Burr, 201 N. Y. 155, 94 N. E. 604, and other cases, is to be regarded as income, was 89 percent of the total dividend; and consequently 89 percent of that portion of the dividend which went to the executors must also be deemed income. This amounted to $17,722.39. Inasmuch as it exceeded the aggregate of the annual payments directed by the will, and an accumulation of it would be unlawful, the Appellate Division considered that it must go to the corporations mentioned in the residuary clause of the will as being the parties entitled to the next eventual estate; whereas, the executor of the deceased niece insists that it should go to her estate inasmuch as she stood in that position.
The statute as to the undisposed profits, Real Property Law, § 63; Cons. Laws, c. 50, provides as follows: ‘When, in consequence of a valid limitation of an expectant estate, there is a suspension of the power of alienation, or of the ownership, during the continuance of which the rents and profits are undisposed of, and no valid direction for their accumulation is given, such rents and profits shall belong to the persons presumptively entitled to the next eventual estate.’ This rule, Personal Property Law, § 11, is equally applicable to future interests in personal property. But are the corporations mentioned in the residuary clause the ‘persons presumptively entitled to the next eventual estate’ under this will? The Court thinks not.
The next eventual estate is the bequest of $35,000 for the erection of the statue to Lafayette. The intention of the testator was perfectly clear, that is, after the provisions for his wife, sister, and niece have been carried into effect, and his wife has died, his estate, to the extent of $35,000, shall be expended for the benefit of the city of Brooklyn, now the city of New York, in the manner indicated. Here, we have an estate in expectancy to which the city of New York is next entitled. Therefore, it is clear that the city comes within the very letter and spirit of the statute. If this view is correct, the 89 percent for the surplus dividend received by the executors and trustees as proceeds of the surplus dividend belongs to the city, and must be paid by the executors to the city and credited on account of the legacy for the statue.
Henceforth, the order of the Appellate Division and the decree of the surrogate should be modified, so as to charge the executors and trustees with $17,722.39, instead of $19,912.80, as income arising out of the proceeds of the sale of 160 shares of the M Casualty & Insurance Company, and with the balance thereof as capital of the estate, and, further, so as to direct that they pay said income to the city of New York under the eleventh paragraph of the will.
As modified, the order and decree was affirmed, with costs to those parties who appeared and filed briefs.
If you have a probate matter, speak to Stephen Bilkis and Associates to ensure that your rights are protected.