Gerlach Estate
| Decision Date | 20 March 1950 |
| Citation | 364 Pa. 207,72 A.2d 271 |
| Parties | In re GERLACH'S ESTATE. Appeal of GERLACH. |
| Court | Pennsylvania Supreme Court |
Argued January 16, 1950
Appeal, No. 28, Jan. T., 1950, from decree of Orphans' Court of Lehigh County, File No 38,277, in Estate of Charles L. Gerlach, Deceased. Decree affirmed.
Audit of account of executor. Before GEARHART, P.J.
Adjudication filed and final decree entered. Widow appealed.
Final decree affirmed, costs to be paid out of the estate.
Charles M. Bolich , for appellant.
Maurice Bower Saul , with him Morris L. Shafer, Donald L LaBarre and Snyder, Wert & Wilcox , for appellee.
Before MAXEY, C.J., DREW, LINN, STERN, STEARNE and JONES, JJ.
A paragraph in the will of the testator, Charles L. Gerlach provides as follows: "I give, devise and bequeath all my right, title and interest in my business, known as the Allentown Supply Company, to the following in equal shares absolutely;" There were named thirteen persons as the beneficiaries of this gift, most of whom were old employes of the business, one was decedent's financial advisor, another his attorney; two of these legatees predeceased the testator. His residuary estate was left in trust to pay one-third of the net income to his mother for life and two-thirds to his wife for life; upon the death of both of them the principal was to go in equal shares to those of his brothers and sisters who survived him.
On the adjudication of the executor's first account controversy raged around two principal questions: -- (1) Was the bequest of the testator's interest in his business adeemed by circumstances hereinafter referred to? (2) Was certain real estate, the title to which was held in the name of the testator, an asset of the business and therefore included in the bequest?
The Allentown Supply Company, which conducted a coal, fuel and electrical appliance business, was originally a corporation under the name of the Allentown Supply Company, Incorporated, the stockholders being Gerlach, John W. Pratt and Morris A. Bitting. In 1937 it was converted into a partnership of the same three persons; this partnership was reorganized in 1939, and in 1943 Bitting's interest was purchased by Gerlach who continued the partnership thereafter with Pratt. Gerlach executed his will on August 1, 1945. On November 16, 1946 the business was again changed to a corporation under the name of Allentown Supply Corporation, 15,000 shares of which, valued at $120,000, were held by Gerlach, and 33 shares at $264, by Pratt; the stock certificates, however, were never actually issued. Gerlach died on May 1, 1947. His widow filed an election to take against the will.
The present appeal is by the testator's mother who claims that because the bequest to the appellees was of the testator's interest in the "business, known as the Allentown Supply Company", and because that business was subsequently and before his death incorporated under the name of "Allentown Supply Corporation", the bequest was adeemed and nothing passed thereunder to the named legatees. As the court below properly held, however, the change from partnership to corporation was one of form rather than of substance, as had likewise been the change from corporation to partnership in 1937. Whether as a partnership or as a corporation it was always Gerlach's business; the interest originally of Bitting and Pratt, and subsequently of Pratt alone, was practically negligible; there was never any change in the identity of the enterprise, which, to Gerlach, was always "my business." The mere fact that his capital investment increased considerably between the time he executed his will and the time of the formation of the corporation is of no legal significance in the determination of the question of ademption, and the same is true of the fact that a few days before his death he offered to sell stock in the corporation to his employes; this might have meant merely that he wanted them to have an interest in the business thenceforth and not only after his death, there being nothing in the record to indicate that he had any presentiment at that time of his approaching end.
The bequest of testator's interest in his business was, of course, a specific one and therefore subject to ademption if the business was extinguished before his death. There seems to be some difference of opinion in the authorities as to whether weight should be given to the assumed intention of the testator in determining whether, if the subject of the specific gift has been sold or destroyed and the testator acquires another thing which possesses the same qualities as the original, such subsequently acquired property passes under his will, but all the authorities agree that "If property which is specifically devised or bequeathed remains in existence, and belongs to testator at his death, slight and immaterial changes in its form do not operate as an ademption" Page on Wills (3rd ed.), vol, 4, p. 375, sec. 1523. In Horn's Estate , 317 Pa. 49, 52, 175 A. 414, 415, the question was whether a legacy of stock in a certain named corporation was adeemed by the consolidation of that corporation with another company into a single and distinct corporation whereby the testator received a different number of shares in the new company and of different classes and subsequently also a voting trust certificate in a fourth corporation which had taken over some of the property of the consolidated company. It was held that an ademption had resulted, but the test to be applied was stated by Mr. Justice LINN (p. 52) as follows: "The question now is: Does the thing given exist? -- are the shares in the third and fourth corporations substantially the same thing as the Fuel Corporation stock, though in different forms and with different names? -- or is the property claimed a different thing ?" From the opinion of COZENS-HARDY, M.R. in Slater v. Slater [1907] 1 Ch. 665, 672, there was quoted the following: The change in the subject of the bequest in the present case was obviously not like the one where real estate devised in a will was sold by the testator and what he owned at his death was a purchase money mortgage on the property (Gibson's Estate , 22 Dist. Rep. 482); or where shares of stock were sold and a bond taken by the testator in payment (Blackstone v. Blackstone , 3 Watts 335); or where a particularly described ground rent was paid off to the testatrix and the proceeds were subsequently invested by her in a different ground rent ( Harshaw v. Harshaw , 184 Pa. 401, 39 A. 89); or where certain life insurance policies bequeathed by the testator matured and were paid to him and he invested the proceeds in bonds (Pruner's Estate , 222 Pa. 179, 70 A. 1000); or where a farm devised in a will was sold by the testator who subsequently reacquired the underlying coal on which he had held a purchase money mortgage ( Miller's Estate , 251 Pa. 201, 96 A. 473). It is obvious that in all those cases the property bequeathed or devised was either wholly extinguished or changed into property of a distinctly different nature. On the other hand, where a testator bequeathed a certain number of shares which he then held in a trust company, and the company doubled the par value of its stock whereby he received in exchange one-half the number of shares previously held by him but of the new par value, no ademption was thereby effected (Appeal of The Fidelity Insurance Trust & Safe Deposit Company , 108 Pa. 492, 1...
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