(202 N. Y.S.)

count of federal estate tax paid in respect of the trust fund. The decision of the Circuit Court of Appeals to the effect that the act was retroactive in respect to said trust fund was reversed by the Supreme Court of the United States. But neither of these cases gives any reasons for the dicta in respect to this point. There has been no authoritative ruling by any court on this question.

An instance of the working of an opposite rule shows the inequity of it. If, perchance, a testator had made a trust under which he retained a life estate, with remainder to children by his first wife, and after the making of the deed he remarried having children by the second marriage, and because of provision by the trust for the children by the first marriage he left by will all his estate to his children by his second marriage, his executor, if no reimbursement can be ordered, would be obliged to pay the estate tax on the trust fund, and the amount of the tax might be so large as to diminish substantially the property which would pass under the will, while the beneficiaries under the trust would be amenable to no impost whatever, although the sum of their trust is a part of the taxable sum.

[12] Since Mrs. Bostwick by her will provided that all inheritance taxes should be paid out of her general estate, and as we find that the true meaning of the clause so providing is that it must relate only to the estate under her will, she must have intended that the trustee of any trust deeds which she may have made during her life should pay their own proportions of the federal estate tax. She is presumed to have known the law, and to have known that the trust funds under these trusts would be added to the entire estate to make up the gross estate on which the federal estate tax would be assessed, and, knowing this, she must have had in mind that the federal estate tax would be levied, not only upon the property she left in her estate but on the funds under the trust deeds.

An express provision for the payment out of her own estate of the inheritance taxes in respect thereto evidences a design that no greater burden for the estate tax should be added to the property she left by will. The trust funds should in this view pay their shares of the federal estate tax. Since we hold that the provision of the will for the payment of inheritance taxes applies only to property passing by the will, the payment by way of reimbursement to the executor of the various inheritance taxes levied by the states was properly directed, as these obviously are based upon the right to succeed to the funds, and are in no sense a levy or excise on the whole fund, and the parties who take ought to pay as the law contemplates.

These conclusions lead to the determination that the judgment below should be reversed, in so far as it decrees that the fund amounting to $1,470,473.70, held by the Farmers' Loan & Trust Company, as executor of the will of Helen C. Bostwick, in a separate account, should be added to the trust fund herein, and in so far as it decrees that the federal estate tax against the trust fund in this action was properly payable by the executor of the will of Helen C. Bostwick, and not by the plaintiff as trustee from the trust fund, and affirmed in so far as it directs payments from the trust fund of the various state inheritance and transfer taxes.

Judgment reversed to the extent indicated in opinion, and in other respects affirmed.

Settle order on notice.

DOWLING and MARTIN, JJ., concur.
CLARKE, P. J., and FINCH, J., dissent.

FINCH, J. (dissenting). The deed of trust, powers of attorney, and letter referred to in the majority opinion should all be considered together, and, so considered, they clearly show a declaration on the part of Mrs. Bostwick to give to the trustee under said deed of trust, for the purposes thereof, all the property to which Mrs. Bostwick was entitled under a decree about to be entered in accounting proceedings by the United States Trust Company, as trustee of a trust created by Mrs. Bostwick's husband, which proceedings were then pending in the Surrogate's Court of New York County. Such decree was duly entered prior to the death of Mrs. Bostwick, and the property in question exactly ascertained; also prior to Mrs. Bostwick's death the plaintiff duly presented to the United States Trust Company, custodian of the securities, his authorization to receive the same, and demanded possession thereof. Said custodian recognized the right of the plaintiff to receive all the securities, and delivered a portion thereof to it. Concededly there was a valid declaration of trust as to the securities so delivered. As to the remainder of the securities, it is impossible. to find a valid ground of distinction, so as to prevent them from being a part of the same trust. The declaration of trust by Mrs. Bostwick was one and the same, the notice to the United States Trust Company was one and the same, and there was a partial delivery under such notice.

The mere fact that for some reason not disclosed in the record, but having nothing to do with the declaration made by Mrs. Bostwick or the right of the plaintiff to receive the securities, all of the securities. were not delivered, could not change the rights of the parties as to the undelivered securities. The powers of attorney delivered to the trustee in no way qualified the trust, but were merely delivered as a means for obtaining physical possession of the securities. Even assuming that the powers of attorney were revoked by the death of Mrs. Bostwick, they were only revoked as powers of attorney, leaving the declaration of trust unaffected. In other words, the powers of attorney are not necessary to the validity of the declaration of trust. Nor was a physical delivery of the property essential to the validity of the trust. Moreover, this court has even gone so far as to hold, in a case where a delivery was necessary, that a symbolical delivery was sufficient. Matter of Cohn, 187 App. Div. 392, 176 N. Y. Supp. 225. In that case one Leopold Cohn gave to his wife a paper reading as follows:

"I give this day to my wife, Sarah K. Cohn, as a present for her fortysixth birthday 500 shares of American Sumatra Tobacco Company common stock."

The donor died six days after the delivery of the instrument. At the time of the gift he was the owner of 7,213 shares of the common stock of the American Sumatra Tobacco Company, but the stock was in the name and possession of his firm, and deposited in a safe-deposit

(202 N. Y.S.)

box which was in the name of and belonged to the firm. The court held there was a symbolical delivery, saying:

"The intention to make the birthday gift being conclusively established, the gift being evidenced by an instrument of gift executed and delivered to the donee, * and the circumstances surrounding the making of the gift affording a reasonable and satisfactory excuse for not making actual delivery of the certificates at the time the gift was made, there was in my opinion a valid and effectual gift of the certificates mentioned in the instrument of gift."

When the plaintiff made due demand for the securities, pursuant to which there was a delivery of some of the securities, it is not too much to say that there was more of a symbolical delivery of all the securities than in the case last cited.

For the foregoing reasons, the judgment should, in my opinion, in so far as it sustains the finding of the referee that the fund in question belongs to the trust estate, be affirmed.

CLARKE, P. J. (dissenting). I concur in the dissent. The obvious intent of the settlor to include in the trust all of the securities decreed by the Surrogate's Court to belong to her is not to be defeated by the accident that, when demand was made on the United States Trust Company, the custodian thereof, only half of said securities were ready for immediate physical delivery. If there be such a thing as a symbolical delivery, it existed in this case.

(207 App. Div. 373)

FARMERS' LOAN & TRUST COMPANY, as Trustee under a Deed of Trust Dated June 10, 1918, Made by Helen C. Bostwick for the Benefit of Helen C. Bostwick and Remaindermen, Respondent, v. Egerton L. WINTHROP, Jr., as Executor of the Last Will and Testament of Evelyn Bostwick Voronoff, deceased, Marie S. Gilbert and New Rochelle Trust Company, as General Guardians of the Estates of the Bostwick Infant Defendants, Francis Francis, Jr., and Evelyn Francis, by Hall Park McCullough, as Guardian ad Litem, Dorothy S. Bostwick and Albert C. Bostwick and Guardian ad Litem for Lillian S. Bostwick, Dunbar W. Bostwick, and George H. Bostwick, and Marion Carstairs de Pret, Appellants.

(Supreme Court, Appellate Division, First Department. December 14, 1923.) Appeals by various defendants from parts of a judgment of the Supreme Court, New York County, entered on the report of a referee.

Argued before CLARKE, P. J., and DOWLING, FINCH, MCAVOY, and MARTIN, JJ.

Winthrop & Stimson, of New York City (Frederick W. Stelle, of New York City, of counsel, and Henry L. Steitz and Arthur E. Pettit, both of New York City, on the brief), for appellant Egerton L. Winthrop, Jr.

Charles S. McVeigh, of New York City, for appellant Marion Carstairs de Pret.

Hall Park McCullough, of New York City (John W. Davis, of New York City, of counsel, and Edward R. Greene, of New York City, on the brief), for appellant Hall Park McCullough, guardian ad litem for Francis Francis, Jr., and Evelyn Francis.

Seacord, Ritchie & Young, of New Rochelle (Albert Ritchie, of New Rochelle, of counsel), for appellants New Rochelle Trust Co. and Marie S. Gilbert, general guardians of Bostwick infants.

Lawrence Atterbury, of New York City (Charles Green Smith, of New York City, of counsel), for appellants Dorothy S. Bostwick and Albert C. Bostwick and guardian ad litem for Lillian S. Bostwick, Dunbar W. Bostwick, and George H. Bostwick.

Geller, Rolston & Blanc, of New York City (Charles Angulo, of New York City, of counsel), for respondent.

MCAVOY, J. The controversy here is common to that in Farmers' Loan & Trust Co. v. Winthrop, 207 App. Div. 356, 202 N. 7. Supp. 456. decided herewith, in so far as it relates to the claim for reimbursement for federal and state taxes paid by the Farmers' Loan & Trust Co., as executor, for the transfer and 'estate taxes levied upon the properties which passed by the trust, and the rule formulated there applies, and accordingly the judgment appealed from, in so far as it adjudges that the payment of the federal estate tax on the transfer of the trust property herein by the Farmers' Loan & Trust Company, as executor of the estate of Helen C. Bostwick, deceased, was proper, should be reversed. It should be adjudged that such executor is entitled to be reimbursed out of the trust fund for the federal estate tax, and said judgment should in all other respects be affirmed. Settle order on notice. All concur.

ARMLEDER MOTOR TRUCK CO. OF NEW YORK, Inc., v. BARNES. (Supreme Court, Appellate Division, Second Department. December 14, 1923.) 1. Judgment 185-In action on stock subscription, answer and affidavit held to withstand motion for summary judgment.

In an action on a stock subscription an answer alleging a waiver and a release, and an affidavit setting up a letter sent defendant, stating that, unless the subscription was paid within 10 days, a certificate of stock for the amount already paid would be issued, and right to further stock would be waived, and that stock for the amount paid was issued, and nothing further done for nearly two years, held sufficient to withstand a motion for a summary judgment, notwithstanding Stock Corporation Law, § 54.

2. Corporations 90(7)-Whether corporation waived right to assert liability under stock subscription held for jury.

Whether a corporation, informing stock subscriber that unless he paid for the stock in 10 days his right to the stock would be waived, was estopped by a delay of 2 years from asserting liability under the stock subscription, held for jury.

Appeal from Special Term, Kings County.

Action by the Armleder Motor Truck Company of New York, Inc., against Daniel V. Barnes. From an order granting plaintiff's motion for a summary judgment under Rules of Civil Practice, rule 113, and from the judgment for $5,627.28, entered pursuant to that order, defendant appeals. Reversed on the law, and motion denied.

Argued before KELLY, P. J., and RICH, KELBY, YOUNG, and KAPPER, JJ.

William Wills, of Brooklyn, for appellant.

Henry Pearlman, of New York City, for respondent.

YOUNG, J. [1] The complaint alleges in substance that the defendant, in agreement with other persons, agreed to from the plaintiff corporation and to subscribe for 100 shares of its stock, of a par value of $100 per share; that the plaintiff was thereafter incorporated; that the defendant paid to the corporation $5,000, and received a certificate for 50 shares of stock; that demand was duly made upon him for an additional 50 shares of stock subscribed for by him, and that the defendant has refused to pay the additional $5,000 so demanded. Upon these alleged facts judgment is demanded.

For other cases see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes

(202 N.Y.S.)

The defendant set up three separate and complete defenses in his answer. The third defense, which is alleged in paragraph eighth of the answer, is the only one material to this appeal. It is as follows:

"Eighth. And for a further and separate defense to said complaint the defendant alleges that on or about the 5th day of August, 1921, the said company, the plaintiff herein, did waive any right to enforce any subscription for more than fifty (50) shares of stock, and to enforce payment from defendant for more than five thousand ($5,000) dollars, and did release the said defendant from any and all liability upon, under, or by reason of the subscription agreement mentioned in said complaint, or any obligation thereunder to take, the balance of said shares of stock set forth in paragraph numbered 'fifth' of said complaint."

The facts upon which the defense is based are set forth in the answering affidavit of Daniel V. Barnes, sworn to the 2d day of August, 1923, and submitted in opposition to the motion for summary judgment, as follows:

"The third separate and complete defense to the alleged cause of action is set forth in paragraph 8 of the answer, and is in substance that the plaintiff released the defendant from any and all liability, if any, in excess of the sum of $5,000 so paid under or by reason of the conditional subscription agreement. The release so pleaded is based upon the following facts: Much to deponent's surprise, and in direct contradiction of the oral understanding herein before set forth, deponent received, shortly after August 5, 1921, a letter dated that date, directed to him, and signed 'Armleder Motor Truck Company, John S. Hyatt, Treasurer,' demanding that this defendant pay an additional $5,000 to the plaintiff above named. A true copy of this letter is annexed hereto as Exhibit A and made a part hereof.

"The second paragraph of said letter reads as follows: 'If not paid in to John S. Hyatt, treasurer, by Friday, August 15, 1921, a certificate of stock will be issued covering the amount paid by you and your right to further stock in the company will be waived.' That the amount so requested to be paid by said letter was never paid into the company, but in accordance with the terms of said letter a certificate of stock for the fifty (50) shares subscribed and paid for by the defendant was issued to him by the company which thereby elected to and did release this defendant from any additional or further liability to it, and his right, if any, to additional stock in the company was forfeited.

"No action was ever taken by the plaintiff above named, or by any one on its behalf, to impose any liability upon this defendant by reason of his signature to the so-called conditional subscription agreement, until this action was started on or about the 9th day of May, 1923, almost two years after the defendant's alleged default."

The learned court at Special Term was of the opinion that the acts relied on by defendant were futile to effect a forfeiture. It is, of course, apparent that the notice sent defendant on August 5, 1921, was not in conformity with section 54 of the Stock Corporation Law of 1909 (now section 68). That statute required a 60-day notice and the notice sent defendant was only a 10-day notice.

It will be observed, also, that the answer alleges a waiver on the part of plaintiff of its right to enforce defendant's subscription, while the affidavit of defendant in opposition to the motion states that plaintiff released the defendant from all liability in connection with his. subscription. It is apparent that plaintiff made no move against the defendant for nearly 2 years. The notice is dated August 5, 1921, and the present action was begun on May 4, 1923.