Opinion
Argued December 2, 1915
Decided January 4, 1916
Vernon Cole for appellant. Michael M. Cohn for respondent.
The plaintiff, as the vendor of real estate, seeks a judgment directing the defendant, as the vendee, to specifically perform the contract of purchase and sale made in November, 1914. The defendant denied the marketability of the proffered title, which came to the plaintiff through a deed, dated February 14, 1910, of the executors and trustees under the will of Jacob F. Schoellkopf. The testator at the time of his death owned the real estate in fee simple, and in case the executors and trustees had power and authority to convey the title devised by him, the defendant errs.
The will devised the residuary estate, which included the contracted parcel and many others, to the executors and trustees, in trust, to take possession and sell, convey and dispose of it at such time or times, and on such terms, as to them seemed advisable, and, after making provision for a designated annuity, and the payment of debts and legacies, "to divide and distribute said residue of my estate as follows: to pay to" each of six children or the descendants of a child one-seventh thereof, and to retain one-seventh thereof in trust. In January, 1910, a number of the parcels of land, including that in question, and a substantial part of the residuary personal property were still held by the executors and trustees; and all of the persons who as legatees or devisees were interested in the residuary estate (except three infants hereinafter mentioned) organized from themselves, pursuant to two agreements between themselves, the plaintiff corporation with an authorized capital stock of $560,000, for the expressed purposes of taking over and acquiring title to such land and personality, subject to and with the assumption of the debts and incumbrances, of issuing its capital stock in payment or exchange therefor and distributing it in proper amounts to the residuary legatees, of distributing the proceeds of the property as sold by the plaintiff to the holders of its capital stock and of dealing in real estate generally. In February, 1910, the executors and trustees conveyed and transferred to the plaintiff the lands and personal property (excepting certain specified securities and funds), and received as the consideration the 5,600 shares or the entire of the capital stock. Thereupon the Surrogate's Court, in a judicial settlement of the accounts of the executors and trustees, which set forth, among other things, the above-stated transactions and the two agreements mentioned underlying them, the second of which provided that the surrogate upon the final accounting might make and enter a decree "confirming the transfer of the property to the corporation on receipt of the capital stock and directing the distribution thereof as directed by the will," made the decree thus consented to. The shares of stock were in accordance therewith distributed in lieu of cash, and those who had consented to the decree released the executors and trustees from all claims on account of the residuary estate. The two agreements mentioned were elaborate and extended. It is sufficient here to state that the formation of the plaintiff, the conveyance and transfers to it, the issuance and transfer of the shares of capital stock to the executors and trustees in lieu of cash, the distribution of them, the final decree and the discharge and release of the executors were in strict accord with the provisions of the second of them.
Each of the adult persons interested personally in the residuary estate, who executed the agreements or the second of them, is obligated by them and the consequent transactions. Each was capable of acting for himself or herself and had full knowledge of the facts and circumstances and knowledge as to his or her legal rights. The agreements themselves directly disclose those facts. They, under such conditions, authorized the trustees to make the conveyance and transfers and receive the shares of stock as the consideration for the transfers, which, therefore, were effectual and valid as to them. Although the agreements were not executed by all the residuary legatees, the agreements and the consequent transfers would be operative and valid against the adult contracting legatees to the extent of their respective interests. ( Matter of Hall, 164 N.Y. 196; Ward v. Ward, 15 Pick. 511; Woodward v. Woodward, 16 N.J. Eq. 83; Ford's Estate, 185 Pa. St. 420; Newhall v. Jones, 117 Mass. 252; White v. Sherman, 168 Ill. 589.) The executors and trustees, however, had not lawful power and authority by virtue of the will itself to make the sale and transfers for the consideration received, to wit, the shares of stock. The power of sale granted by the will must be strictly pursued, and must be executed according to the intent of the testator. The testator here intended, manifestly, that the sale or sales should be for cash or the equivalent of cash. The consent of parties concerned gave the transfers validity as to them. A flaw in the appellant's position is that certain persons interested in the residuary estate did not enter into or become obligated by the agreements.
The signatories of the first agreement, that of September, 1901, included all of the residuary legatees, except two infants upon whose consent to it, "upon their severally coming of full age so that they may bind themselves to the terms hereof," it was conditional. Before the two infants became of age, or the corporation contemplated by the agreement was formed, a party to it — a residuary legatee — Alfred Schoellkopf, died. He left a widow and three infant children, and a will, duly probated, creating interests in them in his residuary legacy. The signatories of the second agreement, that of July, 1909, included all of those interested in the residuary estate (the infants of 1901 having become of age) except the three infant children of Alfred, and included also the executors of Alfred's will.
The appellant asserts that Alfred Schoellkopf, and consequently the executors of his will, were obligated by the agreement of 1901. Therein it errs for the reason (and there may be another) that such agreement did not become binding upon Alfred because it was conditional upon the entering into it of the two infants and the condition was never fulfilled. The differences in the first and second agreements were so substantial that the latter cannot be deemed the adoption or ratification of or a consent to the former. The action of the executors of the will of Alfred, in agreeing to receive or in receiving the residuary distributive share bequeathed to Alfred in shares of stock instead of money, was not authorized by the will or the agreement or binding upon the infant children. The children were not cited or represented by special or other guardian in the proceeding in the Surrogate's Court and, obviously, the decree therein in no way affected their rights or interests. As to them the sale and transfers were unlawful and invalid and ineffectual to divest the property transferred to the plaintiff of their interests therein.
The respondent asserts that the transfers were void and ineffectual also as to certain cestuis que trusts and their interests in the residuary estate. The executors and trustees were directed "to retain one-seventh thereof for said Myra Lee Schoellkopf and the children of my son Louis Schoellkopf," in trust, to invest the proceeds and pay the income to Myra during her life; thereafter equally to the children until they respectively arrived at the age of thirty years; then to pay them in equal shares the said one-seventh part. Myra and the children when of full age entered into the second agreement. Under the judicial decisions above cited they and their interests in the property transferred were bound by and subjected to the transfers. The transfers did not in any sense terminate the trust or assign the rights of the beneficiaries to receive the income from the trust estate. They merely changed the substance of the trust estate.
The judgment should be affirmed, with costs.
WILLARD BARTLETT, Ch. J., HISCOCK, CUDDEBACK, CARDOZO, SEABURY and POUND, JJ., concur.
Judgment affirmed.