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In re DENHAM'S ESTATE.

(Surrogate's Court, New York County. June 23, 1917.) 1. Executors and administrators Ow85 (1)-Purpose of discovery not to se

cure information about chose in action belonging to deceased.

A discovery proceeding is designed for the purpose of discovering specific property or specific money belonging to deceased, and where it is admitted that the object of the proceeding is to secure information about property which is incapable of delivery, such as a chose in action, the

proceeding should end. 2. Executors and administrators Om 85(1)-Discovery in probate court not

used to discover evidence to be used in another action.

A discovery proceeding in the probate court cannot be used for the purpose of ascertaining and discovering evidence to be used in another

action or proceeding. In the matter of the estate of one Denham. On motion to vacate order in discovery proceeding. Motion granted.

See, also, 174 N Y. Supp. 883; 107 Misc. Rep. 71, 175 N. Y. Supp. 726.

COHALAN, S. [1,2] The petitioners in the discovery proceeding admit in the brief filed in their behalf that

"The object of this inquiry is to obtain information concerning 'property [a chose in action] which should be

included in the inventory and appraisal.'"

It has been repeatedly held and is still the law that a discovery proceeding is designed"for the purpose of discovering specific property or specific money in coin and bank bills belonging to the deceased and withheld, on which discovery they may be ordered delivered summarily, but the provisions do not contemplate the collection of a debt by summary process.” Matter of White, 119 App. Div. 140, 103 N. Y. Supp. 868.

Where it is admitted that the object of the proceeding is to secure information about property which is incapable of delivery, an examination is unnecessary, and the proceeding should end. A discovery proceeding in this court cannot be used for the purpose of ascertaining and discovering evidence to be used in another action or proceeding.

Motion to vacate order granted. Settle order on notice.
For other cases see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes

(182 N.Y.S.)

In re BEREL'S ESTATE.
(Surrogate's Court, Bronx County. February, 1919

(Syllabus by the Court.) Partnership ww254—Evidence held to show that surviving partner and ex•

ecutor of deceased partner paid adequate price for decedent's interest; petitioner surcharged with interest on purchase price.

The objections in an accounting raised the issue as to the adequacy of the sale price paid by a surviving partner, the petitioner, who was also the executor of the testator's will, on the ground that the sale price paid for testator's interest in the firm was insufficient, and that the sale did not include the testator's share in the good will of the business. The testimony analyzed, and held, that the petitioner had sustained the burden upon him of showing that the sale price was a fair one; that the partnership business had no good will with which the petitioner was chargeable; but that the petitioner, under the circumstances, should be sur. charged with interest on the purchase price from the date of the sale

at the rate of 6 per cent. per annum, compounded annually. Contested proceeding on the judicial settlement of the account of the executor of Martin Berel, deceased. Executor surcharged with interest on proceeds of sale of decedent's interest in partnership business from date of sale at 6 per cent.

Lewis & Schaap, of New York City, for executor.
Henry W. Fried, of New York City, for legatees and objectors.

SCHULZ, S. This was a contested accounting, in which a hearing was had before the court. The answer of the contestants contained seven specific objections. Prior to the hearing a stipulation was entered into by which, among other things, it was agreed that,

"Should it be determined that the amount paid for the deceased's interest was a fair and reasonable value therefor, then the other objections, except objection VII, that the executors should be chargeable with interest, are withdrawn."

The objections which raise an issue as to the adequacy of the sale price, and which must therefore be first considered, are the second, to the effect that the sale price of the interest of the decedent in the firm in which the accounting executor and decedent were parties is insufficient, and the third, that the sale of the interest of the decedent did not include his share in the good will.

The evidence taken upon the hearing was voluminous, and an analysis of the same in this opinion would extend it unnecessarily and serve no useful purpose. It appears, however, that the accounting executor gave the contestants access to the books of the copartnership, and after an examination thereof nothing has been produced before me to impeach or contradict the testimony offered on behalf of the accounting executor in any way, except a statement made to a mercantile agency. This statement, which was made by the accounting executor during the lifetime of the decedent, is stated by him to have heen "false" and "padded," and appears incorrect from an examination Om For other cases see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes

of the books of the firm. None of the parties to this proceeding, however, have in any way changed their positions by reason thereof, so that nothing in the nature of an estoppel arises. An examination of a copy of the account of the firm also leads me to the conclusion that the partnership business had no good will with which the petitioner is chargeable. Matter of Silkman, 121 App. Div. 202, 105 N. Y. Supp. 872, affirmed without opinion 190 N. Y. 560, 83 N. E. 1131 ; Matter of Seaich, 170 App. Div. 686, 156 N. Y. Supp. 579.

From all of the evidence that has been produced, it is my opinion that the executor has sustained the burden, which, under the circumstances, is upon him, of showing that the sale price was a fair one. Bauchle v. Smylie, 104 App. Div. 513, 93 N. Y. Supp. 709. It follows, therefore, that objection II and objection III must be dismissed. Under the stipulation, this disposes of all the objections, except objection VII.

The decedent in his will provided that, should the executor not be able to pay over to the persons mentioned in his will the shares which the will prescribes within 18 months, he was to have "an additional extension of twelve (12) months.” It appears, however, that the executor sold the business to the corporation in the year 1914.

There is nothing in the account showing that any interest was earned upon the amount of the purchase price of the decedent's share in the partnership business between the time of the sale and the time when the account was filed. The testimony discloses that the executor left the purchase price for which he sold the partnership assets in the business of the corporation which was formed on February 16, 1914. The corporation in question was, for all practical purposes, the business of the executor; he was the president, and his wife was the secretary. Under such circumstances, I believe that he should be surcharged with interest on the same from the date when the sale was made, at the rate of 6 per cent. per annum, compounded annually. Hannahs v. Hannahs, 68 N. Y. 610; Farrell v. Farrell, 142 App. Div. 605, 127 N. Y. Supp. 764, reversed on other grounds 205 N. Y. 450, 98 N. E. 857; Matter of United States Mortgage & Trust Co., 114 App. Div. 532, 100 N. Y. Supp. 12.

The fact that the will provides that, if the executor is not able to pay over the shares referred to in the will "within the prescribed eighteen months allowed him by law," he shall have an additional 12 months within which to do so, in my opinion, does not change the situation, because it appears that the business was sold long before the expiration of the thirty months.

The executor will therefore be surcharged with interest on the net amount stated in the account to have been realized upon the sale of the decedent's interest in the copartnership business from the date of sale at 6 per cent. per annum, compounded annually. Settle decision and decree accordingly, on notice.

(182 N.Y.S.)

In re COLLIER'S ESTATE. (Surrogate's Court, New York County. May 11, 1920.) 1. Taxation en 895(5)-Debt owed by decedent to corporation is asset of

corporation in determining value of its bonds owned by decedent.

The transfer tax appraisers, who deducted from decedent's estate a debt owed by him to the corporation whose bonds he owned, properly included that debt as an asset of the corporation in determining the value of the

bonds. 2. Taxation Cw895(5)—Securities payable only from corporate assets after

other indebtedness are not "bonds."

The distinguishing feature of a bond is that it is an obligation to pay a fixed sum, with stated interest, so that securities issued by a corporation, which were payable only out of the assets of the corporation after its other obligations were paid, though designated as "bonds,” were more like preferred stock, and were not taxable as bonds, under Tax Law, 88 221b, 330.

[Ed. Note.-For other definitions, see Words and Phrases, First and

Second Series, Bond.) 3. Corporations m178Stockholder has no lien on assets.

A stockholder in a corporation, whether his stock is common or preferred, cannot have a lien on the property of the corporation, though the stock by its terms is accorded a lien.

In the matter of the estate of Robert J. Collier, deceased. From the report of the transfer tax appraiser, and the order thereon, Sarah Steward Collier and another appeal. Order assessing the tax modified.

Hornblower, Miller, Garrison & Potter, of New York City (William R. Begg and Lloyd Church, both of New York City, of counsel), for appellants.

iafayette B. Gleason, of New York City (Schuyler C. Carlton, of New York City, of counsel), for state comptroller.

FOLEY, S. This appeal is taken by Sarah Steward Collier, the widow of decedent, individually, and by her and the United States Trust Company as administrators c. t. a., from the report of the trans'fer tax appraiser and the order thereon, on the ground (1) that the assets of the estate have been appraised at a sum in excess of their true market value, and (2) that certain bonds of P. F. Collier & Son, Incorporated, have been reported as taxable pursuant to the provisions of section 221b of the Tax Law (Consol. Laws, c. 60).

1. The appraiser has found the net estate for distribution to be $202,194.99. The facts are undisputed, and the appraisals of assets are substantially those of the estate's experts. The appellants claim that the estate is insolvent. The question of the solvency of the estate depends upon the value at the time of death. The decedent was the owner of $2,500,000 par value "7 per cent. cumulative income bonds" of that company.

The appraiser finds that these securities, the entire issue of which was owned by the decedent, were worth the sum of $1,509,296.74 (the value of all the assets of the company). The appellants contend that their value was $1,251,330.14. The difference between the two figures is the sum of. $257,966.60. This latter sum For other cases see same topic & KEY-NUMBER in all Key-Numbered Digests & Indexes

The re

represents the indebtedness of the decedent, with interest, under a contract entered into between him and the company, by which he agreed, among other things to pay to it the sum of $200,000 within two years from the date of the agreement, January 13, 1912.

The appraiser has allowed the debt as a deduction, and has also included it among the assets of the company. The appellants admit that it is a valid debt, and it is scheduled as such by the administrators. They contend, however, that while it is properly deductible from the gross value of his estate, it is not an asset of the company, and therefore does not enhance the value of the bonds.

[1] If it was an admitted debt, it was also a proper asset of the company, and it would be neither moral nor legal, by any process of bookkeeping jugglery, to allow it for a purpose favorable to the estate and at the same time to disallow it against the state. sult is the same, whether the amount is included on both sides of the account between the estate and the company or excluded therefrom. The appraiser therefore properly included this indebtedness as an asset of the company.

[2] 2. An examination of the terms and conditions of the so-called “7 per cent. cumulative income bonds” and of the trust agreement, under which they were issued, convinces me that they are not investments as defined by section 221b and section 330 of the Tax Law. The principal and interest “are payable only out of the assets of the company remaining after the payment of all other indebtedness." The bonds, instead of being a debt due from the corporation, are really preferred stock. The certificates are similar in form to the "bonds" discussed in the opinion of the Appellate Division in the case of Cass v. Realty Securities Co., 148 App. Div. 96, 132 N. Y. Supp. 1074, affirmed 206 N. Y. 649, 99 N. E. 1105, which were held to be, in legal effect, certificates of stock.

[3] The substance of the securities, not the form or name, must be considered. Sohmer v. Hebden, 216 N. Y. 728, 111 N. E. 1100; U. S. Radiator Co. v. State of N. Y., 208 N. Y. 144, 149, 101 N. E. 783, 46 L. R. A. (N. S.) 585. The opinion of the Appellate Division, First Department, in the Cass Case, supra, reads as follows:

“The distinguishing feature of a bond is that it is an obligation to pay a fixed sum, with stated interest. It may or may not be secured; but, if it is, and the security proves to be insufficient, the indebtedness is not thereby wiped out. The distinguishing feature of stock is that it confers upon the holder a part ownership of the assets and right to participate according to the amount of his stock in the surplus profits of the corporation, and ultimately, on its distolution, in the assets remaining after the payment of its debts. Burrall v. Bushwick R. R., 75 N. Y. 211; Plimpton v. Bigelow, 93 N. Y. 592. It is fundamental that a stockholder, whether common or preferred, cannot have a lien on the property of the corporation, even though the stock, by its terms, is accorded a lien. Cook, Corp. (6th Ed.) § 271; Warren v. King, 108 U. S. 359. The securities upon which plaintiffs claim partake in a marked degree of the distinguishing characteristics of stock. It is true that they contain a promise to pay a stated sum of money at a fixed time and to pay meanwhile a stated rate of interest; but these obligations are qualified by what follows. It is provided that, after the payment of certain fixed dividends on the common and preferred stock, the holders of the bonds in suit are 'entitled to a proportionate share in the surplus income, if any.' So upon the liquidation

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