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[Vol. 38.


mate residuary estate to Messrs. Parsons, Fairchild and Bartow as tenants in common. Doubts having arisen as to the effect of various provisions of the will, an action was brought by the executors for a construction, which resulted in a judgment of the Special Term whereby, among other things, it was adjudged: "The following provision of the said will and second codicil thereto is valid: If for any reason any legacy or legacies left by this my will, either pecuniary or residuary, shall lapse or fail, I give and bequeath the amount thereof absolutely to the persons named as my executors. In the use of the same I am satisfied that they will follow what they believe to be my wishes. I impose upon them, however, no condition, leaving the same to them personally and absolutely, and without any limitation or restriction. The effect of this provision is to vest in the persons named as executors * absolutely, all portions of the estate of the testatrix which she has failed validly to dispose of by any of the other provisions of her will." This decision was affirmed on appeal to the General Term (Fairchild v. Edson, 77 Hun, 298); and thereafter the tax appraiser was appointed, who reported as taxable one-third of the ultimate residuary estate, valued at $118,396.98, which passed to Mr. Parsons. The valuation of this one third is not disputed. This report was confirmed by the surrogate, who by his order assessed a tax against Mr. Parsons and valued his interest, and also imposed a similar tax on the other executors. Thereafter an appeal to the surrogate was taken, not by the executors of Mary A. Edson, but by the executrix of Marmont B. Edson, her brother, which appeal was heard subsequent to the decision of the Court of Appeals in Fairchild v. Edson; Edson v. Bartow (154 N. Y. 199, 215), and the entry of the judgment thereon upon the remittitur in the case of Edson v. Bartow to this court ; and the surrogate modified his earlier order assessing the taxable interests in Miss Edson's estate by striking from the list of such interests the portion given by her will to Mr. Parsons as residuary legatee, practically upon the ground that Mr. Parsons had no title or beneficial interest in the bequest of the residuary estate, but that it belonged to the brother of the testatrix, and, therefore, was not liable for the tax.


Whether this view was right is necessarily to be determined by the judgment of the Court of Appeals in Edson v. Bartow (154

App. Div.]


N. Y. 215, 222), and is not affected by the form of the Supreme Court judgment entered upon filing the remittitur in that case from the Court of Appeals, the State not being a party to that action, and the judgment having been entered by consent without its having appeared or been heard. (Matter of Protestant Episcopal Public School, 86 N. Y. 396; McGregor v. Buell, 1 Keyes, 153; Freeman v. Barber, 1 Hun, 433.) The learned surrogate was, undoubtedly, influenced by the form of the judgment of the Supreme Court upon such remittitur from the Court of Appeals, which in effect adjudges that upon the death of Mary A. Edson, her brother, Marmont B. Edson, by her will became beneficially entitled to this one-third of her residuary estate, and that the only interest of Mr. Parsons, as trustee thereunder, was for the purpose of doing equity; and to that end it provides that the executors, "instead of transferring, delivering and paying over the said one-third part of the said residuary estate of the said Mary A. Edson, deceased, to the said John E. Parsons, to be by him individually transferred, delivered and paid over to the said * executrix," transfer


and deliver it to her directly.

The right of the State to collect the tax not being concluded by the form of the Supreme Court judgment in Edson v. Bartow, we are to look at the judgment of the Court of Appeals, as expressed in its opinion (such opinion being made by its remittitur a part of its judgment), to reach a determination as to what was therein decided. As therein said (154 N. Y. 222): "We have already pointed out that under the judgment in the first action (Fairchild v. Edson) the legacy to Mr. Parsons did pass under the will and second codicil, and that the court, in the exercise of its equitable jurisdiction, lays hold of this one-third of the estate in the hands of Mr. Parsons, individually, as residuary legatee, and impresses thereon a trust in favor of the next of kin. There was no intestacy as to this portion of the estate."


Neither by the express terms of the will nor of the codicil was it held that Mr. Parsons became a trustee for the brother. On the contrary, it was held that he took an absolute legacy; that he obtained under the will the legal title and was the beneficiary in one-third of the residuary estate, and that the equitable rights of the brother arose, not under the will, but from facts appearing extrinsic thereto.






[Vol. 38 The question is, therefore, whether Mr. Parsons or the brother of the testatrix took the one-third interest which it is here sought to tax under the will. If Mr. Parsons, then, under the Collateral Inheritance Tax Law (Chap. 713, Laws of 1887), such interest is subject to the tax. Disregarding the form of the final judgment in the Supreme Court as not binding upon the State, we find that, under the decision of the Court of Appeals, the one-third of the residuary estate passed under the will and vested in Mr. Parsons absolutely, and that no trust was imposed thereon by the will. And although it was held that, as the result of the extrinsic evidence introduced, he took it impressed with a trust in favor of the brother, this would not relieve him from the payment of the tax.

Our conclusion, therefore, is, that the order appealed from was wrong, and should be reversed, and the original order made by the surrogate assessing the tax should be affirmed, with costs.


Order appealed from reversed, and original order made by surrogate affirmed, with costs.

MARIN L. B. COOPER, as Sole Surviving Trustee under the Last Will and Testament of MARY T. WOOD, Deceased, Respondent, V. THE ILLINOIS CENTRAL RAILROAD COMPANY, Appellant, Impleaded with CHARLES C. MACY and WILLIAM F. PENDLETON. Will-bequest of specific legacies with remainder to executors in trust - at expiration of what time the estate will be presumed to have been settled by the executors — liability of a company for the discharge from registry of bonds held in trust; upon the application of only one of two trustees when brokers selling them are not negligent.

Where the will, dated in 1868, of a testatrix, who died in 1882, after directing the payment of the testatrix's debts, and the payment of two legacies to grandchildren, in case they should attain majority, gives the balance of her estate in trust for certain purposes, to her executors, only one of whom survived her death in 1882, it will be presumed that at the time of such surviving executor's death in 1887, he had performed all the duties devolving upon him as executor, and that whatever property he then had in his possession was held by him only as trustee for the purposes of the trust created by the will, and


App. Div.]

passed to two substituted trustees, including bonds which the original executor and trustee had procured to be registered in his name as executor. Semble, that such bonds, although containing a provision that, after such registry had been noted thereon, no transfers of them should "be valid unless made on the said books by the registered holder in person, or by his attorney duly authorized, and noted on the bond," may be transferred by the substituted trustees.

The discharge of such bonds from registry, so as to make them payable to bearer, is not a ministerial act and can be properly effected only upon the joint application of both of the two substituted trustees, and if the company issuing the bonds discharges them from registry, upon the application of one of the substituted trustees, made without the knowledge or consent of the other, and the trustee procuring such discharge sells them and converts the proceeds to his own use, the company is liable to the other substituted trustee for their value. Semble, that when bonds stand upon the books of a corporation, registered in the name of a trustee, it is the duty of the corporation, before permitting a transfer, to inquire concerning the trust and the trustee's authority. If it fails in this duty, and injury comes to the beneficiary through a wrongful transfer by the trustee, to which the corporation is a party, the corporation is liable. The fact that the bonds when first presented to the brokers, through whom the delinquent trustee finally sold them, were registered in the name of the original executor, does not charge the brokers with negligence, as, in the absence of evidence that they had knowledge of the condition of the trust estate, or of the death of the original executor, they were entitled to assume that the change in registration had been properly made.

APPEAL by the defendant, The Illinois Central Railroad Company, from a judgment of the Supreme Court in favor of the plaintiff as against the said defendant, entered in the office of the clerk of the county of New York on the 3d day of October, 1898, upon the report of a referee.

Fisher A. Baker, for the appellant.

John J. Crawford, for the respondent.

Judgment affirmed, with costs, on opinion of referee.


The following is the opinion of the referee:


By her will Mary T. Wood gave the rest and residue of her estate to trustees, in trust, to hold and manage the same for the benefit of her daughter during the latter's life, and upon her death to pay over


[Vol. 38. such rest and residue to the daughter's children. The will directed the executors and trustees to "convert all real estate into personalty, by a sale and conveyance of the same," and to "invest said rest, residue and remainder of my estate safely at interest in such way and manner" as they might deem best. The testatrix died in 1882. Only one of the trustees, John W. Sedgwick, survived her. He died in April, 1887. By an order of the Supreme Court, made in January, 1888, Marin L. B. Cooper (the plaintiff) and Clarence W. Sedgwick were "appointed and substituted in the place and stead of Ebenezer W. Arms and John W. Sedgwick, deceased, as trustees under the said will of Mary T. Wood, deceased, to carry out said unexecuted trust created under said will for the benefit of said Mary A. Sedgwick, and vested with the same title in and to said property so held in trust, and with the same rights, powers, duties and privileges as were vested in and possessed by the original trustees in said will named." At the time the said order was made the trust property consisted in part of the twelve mortgage bonds of the defendant The Illinois Central Railroad Company, which are the subject of this controversy. These bonds, when issued, were ordinary coupon bonds, payable to "holder" on January 1, 1951, but contained this provision: "The holder hereof may have the ownership of this bond registered on the books of the said railroad company, such registry being noted on the bond, after which no transfers shall be valid unless made on the said books by the registered holder in person, or by his attorney duly authorized and noted on the bond; but the same may be discharged from registry by being in like manner transferred to bearer, after which it shall be transferable by delivery." Availing himself of this permission, John W. Sedgwick, on January 23, 1886, caused the bonds to be registered in his name, "Executor of the estate of Mary T. Wood." Clarence W. Sedgwick and the plaintiff were the executors of his will. They took possession of the bonds, which were then, and which they allowed to remain, in a tin box in a small vault or safe in a safe deposit company. The plaintiff had possession of the key of the box, and his co-trustee, Clarence W. Sedgwick, had possession of the key of the safe. In May, 1895, Clarence W. Sedgwick obtained possession of the bonds without the plaintiff's consent or knowledge, and presented them to the defendant railroad company and procured them to be transferred to bearer

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