Agudas Chasidei Chabad of U.S. v. Gourary

• Decision Date: 17 November 1987
• Docket Number: No. 1302,D,1302
• Citation: 833 F.2d 431
• Parties: AGUDAS CHASIDEI CHABAD OF UNITED STATES, Plaintiff-Appellee, v. Barry GOURARY, Defendant-Appellant, Hanna Gourary, Intervenor-Defendant-Appellant. ocket 87-7224.
• Court: U.S. Court of Appeals — Second Circuit

Page 431

833 F.2d 431

AGUDAS CHASIDEI CHABAD OF UNITED STATES, Plaintiff-Appellee, v. Barry GOURARY, Defendant-Appellant Hanna Gourary, Intervenor-Defendant-Appellant.

No. 1302, Docket 87-7224.

United States Court of Appeals Second Circuit.

Argued June 25, 1987.

Decided Nov. 17, 1987.

Richard A. Jaffe, New York City (Matthew G. Dineen, Catherine A. Helwig, Abady & Jaffe, New York City, of counsel), for defendant-appellant.

Nathan Lewin, Washington, D.C., Jerome J. Shestack, Philadelphia, Pa. (Martin D. Minsker, Miller, Cassidy, Larroca & Lewin, Washington, D.C., Gayle C. Sproul, Schnader, Harrison, Sedal & Lewis, Philadelphia, Pa., of counsel), for plaintiff-appellee.

Before VAN GRAAFEILAND, CARDAMONE, and PIERCE, Circuit Judges.

CARDAMONE, Circuit Judge:

In this appeal from a partial final judgment and order of the United States District Court for the Eastern District of New York (Sifton, J.), we review the district court's rulings that granted appellee replevin in an action to recover books taken from its library and that dismissed appellants' counterclaim seeking a declaration that the library was theirs by right of inheritance. The district court's opinion is reported at 650 F.Supp. 1463 (E.D.N.Y.1987).

The precise question before us is whether the evidence before the district court was sufficient to demonstrate a settlor's unequivocal intent to convey the library in question to appellee as trustee for charitable purposes. We acknowledge that some of the evidence is, standing alone, equivocal. But, as is often the case, a person's actions sometimes speak even more plainly than his words. Such is the case here. When the settlor's actions and words are viewed as a whole, the district court's finding of an unequivocal intent to create a charitable trust--far from being clearly erroneous--is in our view rightly decided. Hence, we affirm.

I Background

At issue is the ownership of a 40-50,000 volume library consisting of sacred manuscripts and a variety of religious books. Plaintiff-appellee, Agudas Chasidei Chabad of the United States (Agudas Chabad), is a New York religious corporation with offices at 770 Eastern Parkway, Brooklyn, New York. Defendants-appellants, Hanna Gourary and Barry S. Gourary, are mother and son. Mrs. Gourary is the daughter of Rabbi Joseph Isaac Schneersohn and Barry S. Gourary is the Rabbi's grandson. Until his death in 1950, Rabbi Schneersohn was the sixth in a line of leaders of the Chasidim movement known as Chabad Chasidism, founded in 1775 in Eastern Europe and later called Lubavitch Chasidism. The library is housed on the premises of plaintiff's synagogue and headquarters at 770 Eastern Parkway, which also served during his lifetime as Rabbi Schneersohn's home.

For purposes of discussion the library may be divided into two parts, the ksovim ("writings") and seforim ("books"). The ksovim are statements of the Lubavitcher Rebbes, generally handwritten by the Rebbes themselves and passed down from one Rebbe to the next. Found in these writings are the basic tenets of the Chasidic beliefs, and the ksovim serve as a source for a Rebbe's discourses to the community. These sacred writings have always been preserved by the Rebbes, whatever the cost. The bulk of the library consists of the seforim, presently around 40,000 texts. Commencing in the 1920's, Rabbi Schneersohn, as the Sixth Lubavitcher Rebbe, acquired the bulk of the seforim during his lifetime, with the remainder being collected by others after his death. Some books were obtained by purchases, employing funds collected as contributions from the community known as ma'amad, used to support the Rebbe and his immediate family and to support community activities--including the library--that the Rebbe oversees. Other parts of the seforim were acquired as gifts from authors and publishers in response to advertisements soliciting books for the Lubavitcher library.

At least from the time of the Third Rebbe, it was the practice of each Lubavitcher Rebbe to maintain and add to a large library of books and manuscripts. Although the district court stated that each of the Rebbes treated the library as personal property, it also found that there can be "no question that the library came to be conceived as one to be used for the benefit of the religious community of Chasidim by the leader of the community, the Rebbe." 650 F.Supp. at 1466.

For 35 years, from the time of Rabbi Schneersohn's death in 1950 until 1985, the library remained intact in the plaintiff's possession without anyone disputing plaintiff's ownership of it. In the summer of 1985 the defendant, Barry S. Gourary, surreptitiously removed over 400 rare books from the library and sold some of them to book dealers in various parts of the world. He realized approximately $186,000 from the sale. Defendant's actions in secreting these books from the library were discovered by video surveillance and caused the present action to be instituted.

Alleging ownership of the books Gourary had removed, Agudas Chabad commenced this diversity action against Barry Gourary, a New Jersey resident, in the Eastern District of New York, asserting claims for replevin, conversion, and trespass in order to recover the value of the books defendant had sold and the return of the others in his possession. A motion to intervene as a party defendant made by Hanna Gourary was granted, and the two Gourarys then instituted a counterclaim for a judgment declaring that the library housed at 770 Eastern Parkway belonged to them by reason of inheritance.

A bench trial on Agudas Chabad's replevin claim and the Gourarys' counterclaim was held in December 1985. Judge Sifton wrote a published opinion dated January 6, 1987 and a subsequent unpublished memorandum and order entered March 9, 1987. The district court judge granted partial final judgment dismissing the Gourarys' counterclaim and granting plaintiff relief in its replevin action. The district judge determined that the library was not part of the estate of Rabbi Schneersohn at the time of his death because during his lifetime he had made it the subject of a charitable trust. It therefore ordered Barry Gourary to deliver the books in his possession to Agudas Chabad, but stayed execution of the judgment pending appeal. ¹

On appeal, appellants argue that the district court erroneously found that the Rebbe intended to create a charitable trust and, further, that they were entitled to a jury trial. We discuss these issues in turn.

II Law of Charitable Trusts

This diversity action is governed by New York law. To create a valid trust under the law of that State four essential elements must be proved: (1) a designated beneficiary, (2) a designated trustee, who is not the same person as the beneficiary, (3) a clearly identifiable res, and (4) the delivery of the res by the settlor to the trustee with the intent of vesting legal title in the trustee. Brown v. Spohr, 180 N.Y. 201, 209, 73 N.E. 14 (1904).

A trust may be created orally or in writing, and no particular form of words is necessary. Martin v. Funk, 75 N.Y. 134, 141 (1878). Further, a trust may emerge by implication "from the acts or words of the person creating it," Wadd v. Hazelton, 137 N.Y. 215, 219, 33 N.E. 143 (1893), so long as the intent to create such an implied trust arises as a necessary inference from unequivocal evidence. Id. Stated another way, to constitute a trust there must be either an "explicit declaration of trust, or circumstances which show beyond reasonable doubt that a trust was intended to be created." Beaver v. Beaver, 117 N.Y. 421, 428, 22 N.E. 940 (1889); see also Martin v. Funk, 75 N.Y. at 141 (words or acts demonstrating that person holds property in trust must be unequivocal); In re Estate of Fontanella, 33 A.D.2d 29, 30, 304 N.Y.S.2d 829 (3rd Dep't 1969) (same).

These long-standing rules apply equally to charitable trusts. See Lefkowitz v. Cornell Univ., 35 A.D.2d 166, 172-73, 316 N.Y.S.2d 264 (4th Dep't 1970), aff'd, 28 N.Y.2d 876, 322 N.Y.S.2d 717, 271 N.E.2d 552 (1971). Although appellants challenge the district court's view of New York law, we believe it relied upon the proper standards. See 650 F.Supp. at 1474.

III Analysis of the Evidence

The more difficult proposition--and the principal focus of appellants' argument--is whether the evidence supports a finding that a charitable trust was created under New York law. Appellants maintain that any representations to the effect that the library did not belong to the Rebbe were made not to effect a change in ownership, but rather to gain the assistance of the United States during World War II in transporting the library from Poland to the United States, since the government would not intervene to help save a foreigner's personal property. We first examine the evidence and then apply to it the recited New York standard.

We begin analysis of the evidence of the Rebbe's intent to create a charitable trust by reviewing (1) the circumstances under which the library was collected, (2) Rabbi Schneersohn's written declarations concerning the library, (3) appellants' claims regarding the library during the probate of Rabbi Schneersohn's estate, and (4) actions taken regarding the collection in the years following the Rebbe's death. Plainly, not all the evidence found in the above four subparts is direct proof of intent. But since the circumstantial and indirect evidence of the Rebbe's intent was properly considered by the district court--and bears heavily on that issue--we discuss it as well.

(1) Library Collection

The bulk of the present library, as already noted, was begun years ago in Europe. Many of the volumes were acquired by solicitation on behalf of the "Lubavitch Library", not on behalf of Rabbi Schneersohn personally. Experts testified at trial that under Jewish law this kind of solicitation made the library property of the community. The trial testimony further established that the activities of the...