In re Brann

• Decision Date: 21 November 1916
• Citation: 219 N.Y. 263,114 N.E. 404
• Parties: In re BRANN. Appeal of JOHNSTON.
• Court: New York Court of Appeals Court of Appeals

219 N.Y. 263

114 N.E. 404

In re BRANN.

Appeal of JOHNSTON.

Court of Appeals of New York.

Nov. 21, 1916.

Appeal from Supreme Court, Appellate Division, First Department.

Proceedings for the judicial settlement of the account of John A. Brann, as sole surviving executor of the last will and testament of Alice Victorine Leavitt, deceased. An order of the surrogate construing the will and directing a distribution was affirmed by the Appellate Division (171 App. Div. 800,157 N. Y. Supp. 756), and Bessie R. Johnston appeals. Reversed and remitted.

George H. Richards, of New York City, for appellant.

Joseph Fennelly, Joseph H. Fargis, and William C. Orr, all of New York City, for respondents.

CARDOZO, J.

The determination of this appeal requires us to construe the will and codicil of Alice V. Leavitt. The will was made in 1908. It gave to a friend, Mrs. Roy Johnston, a legacy of jewelry. It then created a trust for the annual payment of $600 to a brother for life, with remainder to charities. The subject of this trust is described by the testatrix as ‘the 30 shares of stock of the Standard Oil Company owned by me.’ These shares then constituted the bulk of her estate. All the rest, residue, and remainder of the estate, ‘including any legacy which may lapse or be void,’ she gave to her friend, Mrs. Johnston.

The brother died in April, 1911. In December of the same year, the Standard Oil Company of New Jersey distributed among its stockholders the shares which it held in a large number of subsidiary oil companies. It did this under the compulsion of a decree of the United States Supreme Court by which it was required to dispose of its holdings in corporations under its control. The decree did not compel it to distribute the holdings among its own stockholders. It might have sold the shares and distributed the money, or even kept the money in its treasury. It elected, however, to distribute the shares in kind. At that time, the testatrix still owned her 30 shares. She continued to own them till her death. But by force of the distribution under the decree, there came to her, in addition, shares in 39 subsidiary companies, which to-day are worth more than the shares in the parent company. There came to her also at the same time some warrants for subscription rights.

Nine months after this distribution, in September, 1912, the testatrix made a codicil. Her brother was then dead, the shares of the subsidiary companies were already in her hands, and what she did and omitted to do must be viewed in the light of those conditions. By the codicil she gave money legacies aggregating $1,700 to friends and charities. She also disposed of a picture. ‘In all other respects,’ she said, ‘I do hereby ratify and confirm my said will.’ Three months later she died.

[1][2] The question is whether the shares in the 39 subsidiary companies pass as part of the original shares, or stand separate and by themselves, and pass to the residuary legatee. We think, in accord with the justices who dissented at the Appellate Division, that the residuarylegatee must be held to have the better right. It is true that the gift of the 30 shares is a specific legacy, and that a specific legacy will be construed in the light of the situation existing when it was made. Matter of Delaney, 133 App. Div. 409,117 N. Y. Supp. 838; 196 N. Y. 530, 89 N. E. 1098. But it is also true that unless the subject of a specific legacy exists, unchanged in substance, at the date of the will, there results an ademption, complete or partial according to the facts. In strictness, there has been in this case no ademption at all, for the 30 shares, which were the subject of the legacy, exist; but since the subsidiary shares, while held by the parent company, helped to give the primary shares their value, the analogy of ademption becomes useful. Slater v. Slater, [1907] 1 Ch. 665, states the controlling principle, and applies it to a situation similar to the one at hand. The principle is that a change in the nature of the property works an ademption unless it is a change ‘in name or form only.’ Slater v. Slater, supra, at pages 671, 672, quoting Oakes v. Oakes, 9 Hare, 666, 672. See, also, Norris v. Harrison, 2 Maddocks, 268. It may be that where the change is merely formal, as where a company is reorganized and there is a reissue of the shares, the identity of the gift will be held to be substantially preserved (Mallan v. McFie, [1912] 1 Ch. 29; Turner v. Leeming, [1912] 1 Ch. 828), but that is not this case. Here the original shares remain intact, and there is no contest about them. The new shares are, in effect, an extraordinary dividend declared during the life of the testatrix. Brundage v. Brundage, 60 N. Y. 544;Equitable Life Assurance Society v. Union Pacific R. R. Co., 212 N. Y. 360, 106 N. E. 92, L. R. A. 1915D, 1052. The case stands the same as if the Standard Oil Company had sold the shares, and distributed the proceeds. It is hardly denied that a voluntary dividend, whether paid in money or in stock, would be separate from the primary shares.

[3] The argument is that a different rule is applicable here because the dividend was compulsory. But the suggested distinction is inadequate. It was once thought that ademption was dependent on intention, and ‘it was, therefore, held in old days that when a change was effected by public authority, or without the will of the testator, ademption did not follow. But for many years, that has ceased to be law.’ Slater v. Slater, supra, at page 671. It has ceased to be law in England. Jarman, p. 163; Slater v. Slater, supra. It has ceased to be law in New York. Ametrano v. Downs, 170 N. Y. 388, 63 N. E. 340,58 L. R. A. 719, 88 Am. St. Rep. 671. What courts look to now is the fact of change....