This is a proceeding brought before the Surrogate’s Court, Kings County for judicial settlement of the first and final account of proceedings of the CM Bank, National Association, as trustee under Article “Second” of the will OF AGK, deceased, for the benefit of BMK.
This proceeding for settlement of a final trust accounting presents a question of construction occasioned by the bankruptcy of a charitable remainderman designated by the donee of a power of appointment.
On 3 March 1931, the donor of the power, AK, died. He left a 1927 will which was probated in the instant court. Under the will, the net estate shall be divided into three portions and placed in trust, each part to furnish income to one of his three children; and, upon the death of each child, the remainder interest in his or her trust shall be distributed “by valid and absolute disposition by will of such child” and in default of such exercise of the power, “as a part of the estate of such child in accordance with the statutes of descent and distribution of the State of New York.”
One of the children benefited in the aforementioned will was Dr. AFK. On 2 March 1940, Dr. AFK died. He a left a will which was duly admitted to probate in New York County. Under the will, he directed that the trust fund established for him under his father’s will be placed in further trust to pay income to his wife, BMK, and that upon her death, the corpus be equally divided between his niece, CCV, “to her own sole use, benefit or behoof, forever” and K Hospital, or its successor or successors, “to its sole use, benefit and behoof, absolutely and forever.”
On 10 April 1976, BMK died. At that time, the charitable remainderman, then known by the name ACL Memorial Hospital, was an operating hospital. Shortly thereafter, sometime in October of the same year, ACL Memorial Hospital filed a voluntary petition under Chapter XI of the Bankruptcy Law. On 15 February 1979, the corporation was adjudicated as bankrupt and, consequently, ceased its usual operations.
A Westchester County Probate Lawyer said that according to UM, executrix of the estate of BMK, the remainder gift to the hospital lapsed under these circumstances and is properly payable to her testate as sole distributee in intestacy in accordance with the asserted testamentary intent both of AK and of Dr. AFK. The Attorney General of the State of New York, appearing in his capacity as statutory representative of charitable interests, agreed that the gift failed but argued for an application of the cy pres power to preserve the gift for a similar eleemosynary purpose. According to LS, who served as trustee in bankruptcy for the hospital, since ACL Memorial Hospital was a functioning voluntary hospital upon the termination of the preceding life income interest, the gift vested absolutely in it and is not subject to divestiture merely because the trustee failed to make immediate payment.
The intended remainderman, K Hospital, renamed ACL Memorial Hospital, though adjudicated a bankrupt, remained extant. However, the bare legal existence of a charitable corporation to which a testamentary disposition is made does not ensure entitlement to receipt of the gift in its favor; on the contrary, the cessation of its benevolent functions, whether or not accompanied by bankruptcy, has invariably been held to defeat its claim to the disposition notwithstanding continued corporate existence whether the winding down occurred before the death of the testator, in the case of an immediate outright gift as discussed in the cases entitled Matter of Walter, 150 Misc. 512, 269 N.Y.S. 400, 402 [Surr.Ct.N.Y.Co.1933, 1934] and Matter of Mills, 121 Misc. 147, 200 N.Y.S. 701 [Surr.Ct. Westchester Co.1923], during an antecedent life income interest, in the case of a gift of the remainder as dscussed in the cases entitled Matter of Scott, 1 Misc.2d 206, 145 N.Y.S.2d 346 [Surr.Ct.N.Y.Co.1955], In re Shelton’s Estate, 87 N.Y.S.2d 853 [Surr.Ct.N.Y.Co.1942], In re Brundrett’s Estate, 87 N.Y.S.2d 851 [Surr.Ct.N.Y.Co.1940], Estate of McNeile, N.Y.L.J. Jan. 5, 1981 p. 11, col. 5 [Surr.Ct.N.Y.Co.], Estate of Lauterbach, N.Y.L.J. July 11, 1980, p. 7, col. 3 [Surr.Ct.N.Y.Co.] ), or during the actual enjoyment of a gift of income in perpetuity as discussed in the case entitled Matter of Bowne, 11 Misc.2d 597, 173 N.Y.S.2d 723 [Surr.Ct.N.Y.Co.1958] ).
The trustee in bankruptcy sought to distinguish this body of law on the ground that the institution herein was still performing its customary patient services at the time the gift became payable upon the death of the life income beneficiary. Had the testamentary trustee made prompt distribution, no question would have arisen as to the hospital’s qualification to receive the funds. According to the trustee, the dilatoriness of the fiduciary should not be permitted to have the effect of causing the hospital’s indefeasibly vested gift to be diverted to another recipient.
According to the court, the line of reasoning of the trustee is wide of the mark. As a non-contingent gift the enjoyment of which was merely postponed to let in an intervening life income interest. The gift to K Hospital actually vested before it became payable, upon the death of Dr. AFK, the donee of the power, as discussed in the cases entitled Matter of Ablett, 3 N.Y.2d 261, 165 N.Y.S.2d 63, 144 N.E.2d 46 , Matter of Leventhal, 27 Misc.2d 594, 212 N.Y.S.2d 475 [Surr.Ct.N.Y.Co.1961], Matter of Bowne, supra, and In re Tapper’s Will, 139 N.Y.S.2d 110 [Surr.Ct. Queens Co.1954]. But that fact has no relevance to whether payment should now be directed to be made to the trustee in bankruptcy, as evident from the line of authority mentioned, termination of its benevolent services causes the loss of a charity’s right to receive an absolute disposition or continued income, as the case may be, despite the prior vesting of the bequest or devise. In the cases entitled Sherman v. Richmond Hose Co., 230 N.Y. 462, 130 N.E. 613  and Matter of Scott, supra, charitable gifts by will, being for public purposes, are impressed with a public trust imposed by the charter of each particular entity even if no express trust was created by the donor. Thus it is, as held in the cases entitled Sherman v. Richmond Hose Co., supra, and Matter of Wagner, 112 Misc.2d 302, 305, 447 N.Y.S.2d 111 [Surr.Ct. Schenectady Co.1982], upon the dissolution of a charitable membership corporation which holds a testamentary fund to furnish income to itself in perpetuity, the fund may be ordered paid under the cy pres power to another entity furthering similar benevolent purposes rather than distributed among the membership.
According to the trustee, the hospital is capable of using the bequest in accordance with the wishes of AFK since its obligations to its creditors were incurred in conjunction with its active operation as a voluntary hospital, particularly since patient care continued to be provided for nearly three years following the death of AFK’s widow, and payment of the hospital’s debts is a proper charitable object since the gift was not limited to any specific purpose, but rather given in absolute terms.
Indeed, in virtually every other instance in which a particular charity was in bankruptcy at the time the gift would otherwise have been paid, the same argument was, or could have been, advanced. Regardless, the courts have uniformly held that the intention of a testator in making a general gift to a charitable corporation was the furtherance of the charitable purpose for which the entity was formed as set forth in its charter. In the case of hospital corporations, such purpose is deemed to be the actual and continued provision of acute patient care services rather than the satisfaction of creditors’ claims. This was the ruling in the following case laws: Matter of Lauterbach, supra, Matter of McNeile, supra; Matter of Walter, supra; Matter of Ruttenau, 149 Misc. 626, 269 N.Y.S. 225 [Surr.Ct. Queens Co.1933]; and Matter of Cohen, 58 N.Y.S.2d 924 [Surr.Ct.N.Y.Co.1945].
The wording of the gift to K Hospital–“to its sole use, benefit and behoof, absolutely and forever” does not compel a conclusion at variance with that presumed intent. Given the use of almost those precise words of elaboration following the gift of the remaining half of the remainder to the donee’s niece, it would seem that they constitute a mere draftsman’s mannerism rather than a broad grant of authority to K Hospital to sue the fund for a purpose other than the continued operation of its facilities for the care of ill and injured persons. Thus, the court concluded that the gift was for the objects of the corporation and not to the corporation itself, as held in Matter of Scott, supra, 1 Misc.2d at 210, 145 N.Y.S.2d 346 and Matter of Mills, supra, 121 Misc. at 150, 200 N.Y.S. 701. While the delay in payment over of the hospital’s intended half share of the trust corpus was unfortunate, the court could not ignore the greatly changed circumstances. It remained to be determined whether the gift in question is subject to the cy pres power or passes to the estate of the donee’s widow by intestacy.
As held in the casesof Matter of Dunn, N.Y.L.J. March 15, 1983, p. 14, col. 2 [Surr.Ct. Kings Kings Co.], the cy pres power as it existed in 1940, when the donee died, though more narrowly circumscribed than it is today, was applicable to permit designation of an alternate recipient if the gift to the intended beneficiary had theretofore vested as had the instant one. Then, as now, cy pres may be invoked when it is determined that the testator’s primary purpose was a general charitable one rather than an intent to benefit the particular organization named and none other. Once a gift has vested, courts are loathe to fail to find the broader intent; in fact, absent an express divesting condition, cy pres is almost invariably applied. This is evident in the court’s ruling in Matter of Goehringer, 69 Misc.2d 145, 329 N.Y.S.2d 516 [Surr.Ct. Kings Co.1972]. In the cases of Sherman v. Richmond Hose Co., supra, and Matter of Goehringer, supra, testamentary provisions which could be interpreted as providing for forfeitures after vesting are disfavored and the intention to create them must appear clearly. While a specific gift over in the event of failure of the gift (in contradistinction to a general gift over) prevents use of the cy pres power when there had been an original failure, that is, a failure before vesting, it will not be deemed a bar to cy pres where the charitable entity subsequently becomes ineligible to receive the gift unless unequivocally applicable to that event. In other words and as held in Matter of Nurse, 35 N.Y.2d 381, 388, 362 N.Y.S.2d 441, 321 N.E.2d 537  and Matter of Potter, 307 N.Y. 504, 517, 121 N.E.2d 522 , “where a testator has apparently sought to leave money for a charitable purpose, a liberal construction is to be given to the terms of the will in order to uphold it and validate the bequest.”
In the instant case, there is no express divesting condition and no gift over of any description. There was no language in the will indicative that testator’s charitable intent was so strictly limited to it that he would have preferred a partial intestacy to the exercise of cy pres on behalf of a similar institution, even though K Hospital was the only intended recipient of a charitable disposition.
According to the executrix of the estate of AFK’s widow, the cy pres doctrine has no proper application here because the will of AK, the donor of the power, provided that the trust remainder was to be distributed as part of his son’s estate as if he had died intestate in the event of his default to make a “valid and absolute” disposition of the funds.
According to the court, however, the exercise of the power by the donee was both valid and absolute and that the gift over to the donee’s intestate distributees in default of its exercise has not been activated. Based on the case laws entitled Matter of Bowne, supra, 11 Misc.2d at 599, 173 N.Y.S.2d 723 and Matter of Clark, 1 Misc.2d 869, 150 N.Y.S.2d 65 [Surr.Ct. Columbia Co.1956], once a legacy vests upon the death of the testator, there is no lapse on the basis of what follows later.
Accordingly, the court held that the remainder gift intended for K Hospital under article Fourth of the will of AFK, deceased, pursuant to a power of appointment granted him under the will of AK, deceased, is a valid bequest which did not lapse but which should be applied under the cy pres power to a similar charitable use by reason of the cessation of the intended beneficiary’s charitable operations.