* * *

to dispose of the real "The facts in Hall v. Hall

duty is imposed upon the executors estate preparatory to distribution." showed that the testator denominated his executors in different parts of the will trustees, and that circumstance was relied upon; but this court said that the words were used interchangeably and as synonymous, and that the bequest of the fund to the executors and their survivors and successors, indicated rather a trust attached to the office than imposed upon the individuals." And in Hall v. Hall (78 N. Y. 535), referred to by FINCH, J., the court quotes from Mann v. Lawrence (3 Bradf. 424): "The investments are made by the executors in their trust capacity, and though they cannot receive double commissions where they are both executors and trustees, yet they may receive full commissions as executors." Thus, it would seem that, so far as the fund itself is concerned, the court regarded it as in the nature of a trust, and it is immaterial whether it was attached to executors or to them as individuals when we consider it with reference to the rights of beneficiaries. In Hamlin v. Mansfield (88 Maine, 131) the court held that a similar provision in a will" would make the executor a trustee of that portion of his estate which was part of the capital of the firm." When this will became operative the statute (1 R. S. 728, § 55, subd. 3, as amd. by Laws of 1830, chap. 320, § 10) permitted an express trust to receive the rents and profits of lands, and to apply them during a life or for any shorter time, subject to the rules prescribed in the 1st arti cle of title 2 of chapter 1 of part 2 of the Revised Statutes, while trusts for any purpose were permitted as to personal property. The language used in Downing v. Marshall (supra, at p. 376) as already cited is applicable again. The mere omission to name the executors as trustees or to use formal words to clothe them with the power of trustees is not controlling. The scheme of the testator is the touchstone. (Tobias v. Ketchum, 32 N. Y. 319; Matter of Dewey, 153 id. 63; Morse v. Morse, 85 id. 53; Ward v. Ward, 105 id. 68.)

If, then, this fund, under the directions of the testator, is to be regarded as a trust, I do not understand the rule to be that these daughters defendant could elect to have the trust terminate; i. e., could prevent the executors from continuance of the business by

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[Vol. 86. interposing an objection thereto. (Cuthbert v. Chauvet, 136 N. Y. 326; Lent v. Howard, 89 id. 169; Wood v. Wood, 5 Paige, 596; Burrill v. Sheil, 2 Barb. 457, 468; Douglas v. Cruger, 80 N. Y. 15.) I cannot think that the mere fact that the direction for the continuance of a business may put the fund to the hazard incident to any trade venture, however sound, could avail the beneficiary in seeking to prevent the execution of the scheme of the testator. For Denike v. Harris (84 N. Y. 89) decides that "the creator of a trust requiring the investment of money may designate how the investment may be made and what security may be taken, and he may dispense with all security. * * * It matters not that the sum thus loaned is put in some jeopardy-subjected to such risks as ordinarily attend the carrying on of any business or the loaning of money upon merely personal security." (See, too, Clark v. St. Louis, Alton & Terre Haute R. R. Co., 58 How. Pr. 21, 23.) There is a further consideration: If this direction of the testator were regarded as but for an investment, it is well settled that there could be no change of an investment but with the consent of all parties interested. Can it be said that these adult defendants were, subsequent to the death of the testator, the only persons interested in the investment of the fund? The fund is not to be distributed until the death of the wife and of the daughter Florence, when it is to be divided among the children of the testator or their descendants, if any have died leaving children, per stirpes. In Burrill v. Sheil (supra) the court said: "As to the questions which were raised upon the argument in reference to the power of this court to divert the investment from England, there is one conclusive answer, and that is that such a change could only be made with the assent of all persons interested." (See, too, Prentice v. Janssen, 79 N. Y. 478, 485; Greenland v. Waddell, 116 id. 234, 246; Hetzel v. Barber, 69 id. 1, 11; Perry Trusts [4th ed.], § 920; Lewin Trusts [1st Am. ed.], chap. 25, p. 872.)

The learned referee draws an analogy between the testator's business and a corporation, after citing the opinion of CULLEN, J., in Matter of Rogers (22 App. Div. 437), and says: "This opinion practically admits that the Statute of Accumulations could be evaded by creating a corporation. But why can it be evaded? * * * Obviously, for the reason stated by the Court of Appeals

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in the same case on appeal." In the first place, CULLEN, J., does not write that the statute could be "evaded." His words are: "The only way that this provision against accumulations can be avoided (I do not say evaded) is through the medium of a corporation, for there the legal ownership by the corporation is interposed between the shareholder and the property." Further, the Court of Appeals in its decision in the same case (161 N. Y. 108) does not state the reason. HAIGHT, J., simply holds that the plant, with necessary tools, fixtures and machinery of a manufacturing business is one of the things to which earnings may be devoted, and that such devotion may be deemed fairly within the contemplation of a testator in creating trusts in capital stock of a corporation, and concludes that the testator must have contemplated that "a reasonable amount would be retained by the directors for this purpose." Even in the case at bar, the testator may be said to have contemplated, as any sensible man, that his business would entail expenses. He has expressed the idea by the use of the words "income and profits," "gains," "surplus income," in contradistinction to "income," the meaning whereof I have heretofore attempted to show. I think that these expressions imply the payment of incidental expenses of the business. But there is no indication that the testator had any thought of avoiding the statute if he could have done so. For, as I have said, the ultimate purpose was to devote the surplus income to his wife's maintenance and his children's support. The postponement of payment of the whole surplus income to his children was not primarily for any purpose of his business. It was to be accumulated for a fixed period and invested in the business, not because the business needed it, but because the children were not to receive it until they arrived at a fixed mature age. Its disposition was an investment, meanwhile, not a devotion to a trade purpose. I think that CULLEN, J., gives the answer to the query of the learned referee in his opinion, as follows: "The only way that this provision against accumulations can be avoided (I do not say evaded) is through the medium of a corporation, for there the legal ownership by the corporation is interposed between the shareholder and the property. Technically, though also legally, the specific thing which is the subject of the trust is not an interest in the property of the corporation, but in the shares of the corporation. The identity of

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[Vol. 86. the subject-matter of the trust, therefore, remains the same, though its value may be vastly enhanced by accumulations from income or profits which would not be permitted in a case of the bequest or devise of specific property or specific funds." Certainly there is no analogy between the stock of a corporation and the firm business of Garner & Co. that makes this language of definition of the essential differences applicable to the mere copartnership of Garner & Co. The sole analogy is that both a business corporation and a business copartnership carry on business.

The learned referee, referring to the character of the accumulations, says: "The general rule in the absence of fraud is, as stated in Sproule v. Bouch (L. R. 29 Ch. Div. 635), quoted by Judge CULLEN in Matter of Rogers (22 App. Div. 432): 'What the company says is income shall be income, and what it says is capital shall be capital." But in Hascall v. King (162 N. Y. 144) PARKER, Ch. J., quotes with approval the words of CULLEN, J., in the Rogers case: "But if a testator's intent is to make that principal which is income in the case of a trust of the nature of the one before us, such intent is not in conformity with law, but in express contravention of it."

Matter of Sands' Will (3 N. Y. Supp. 67) is a case directly in point, and, as the learned counsel for the defendants De MoltkeHuitfeldt and Gordon-Cumming have pointed out, it is cited by Mr. Chaplin in his book on Express Trusts and Powers (at §§ 258, 407, 491) and by Judge Thomas in his book on the Law of Estates (at pp. 503, 506, 527). (See, also, Horndorf v. Horndorf, 13 Misc. Rep. 343, opinion by ADAMS, J.)

I agree with the learned referee that the plea of res adjudicata should not prevail. It is based upon several judgments in actions brought by the executors from time to time in this court to have their accounts passed and adjudicated. I fail to find in any complaint, answer or record that the question of the validity of these provisions now attacked was ever raised, mooted or discussed, or that any judgment ever directly determined that question. The learned referee is within bounds when he states: "It was never suggested and apparently was never thought of by anybody." Indeed, the learned counsel for the plaintiff and the guardian ad litem for the infant defendants, though insisting that

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"these judgments involved the conclusion or the determination of the court that the provision in the will now claimed to be void was valid," are frank enough to admit that "it is true that in none of these actions was the point made on behalf of the adult defendants that the provision of the will was void as contravening the statute against accumulations." They mainly rely upon the general rule stated in Pray v. Hegeman (98 N. Y. 351), approved in Reich v. Cochran (151 id. 122). Examination of Pray's case shows that the judg ment relied on as a bar was in Moore v. Hegeman (72 N. Y. 376). Moore v. Hegeman was brought to construe a will on the allegation that it was invalid, as "unlawfully suspending the power of alienation and otherwise," and the prayer was for voidance and for an award to the plaintiff of the one-third share of the residuary estate, and all of the accumulations thereof. The 4th clause of the will provided for accumulations during minorities. The defendant executor affirmatively took issue as to the validity of the will, and the court adjudged that the will was valid. In the opinion of the Court of Appeals, MILLER, J., said: "A question is also presented as to the effect of the sixth subdivision of the fourth clause of the will, which provides for a partial accumulation during the minority of the children," and then proceeds to discussion and decision. Moore v. Hegeman (supra) presented by pleading and by answer the same issue that was presented and adjudicated in Pray v. Hegeman. And, consequently, when the court came to that question in Pray v. Hegeman it applied the doctrine of res adjudicata. That this is so is evident from the opinion of ANDREWS, J., in the latter case. The learned judge says: "It is undoubtedly true that the object of the plaintiff in bringing the action was to procure a judgment annulling the entire trust as illegal and invalid, and that the reference in the complaint to the accumulations was not primarily with a view to procuring a judgment as to the validity of the provision for accumulation, independently of the validity of the trust as to the body of the share, but only as a part of the relief to which the plaintiff would be entitled, as incident to the main relief sought. But the plaintiff, by asking larger relief than that to which he was entitled, was not precluded from obtaining any measure of relief less than that which he demanded in his complaint, which was within the scope of the action. The first action was in gen