Commercial Law Part 14

Signed, sealed, published and declared by John Jones, the above-named testator, as and for his Last Will and Testament, in the presence of us, and each of us, and at the same time declared by him to us, and each of us, to be his Last Will and Testament, and thereupon we, at his request, and in his presence and in the presence of each other, have hereunto subscribed our names as witnesses, this first day of July, 1921.

RALPH ROE, 3921 Broadway, New York, N. Y.

JOHN DOE, 65 Fifth Avenue, New York, N. Y.

JAMES SMITH, 130 Post Avenue, New York, N. Y.

REVOCATION.--A will may be revoked at any time at the pleasure of the testator. The ordinary ways of accomplishing a revocation of a will are: (1) The testator executes a later will, and in express terms says, "I hereby revoke all former wills by me made." Even if such an expression is not put in the second will, if its terms are wholly inconsistent with the former will, this in itself, will act as a revocation. Again, a will may be revoked by mutilation, as by being burned, torn, or otherwise mutilated by the testator himself, or in his presence and by his direction. The mutilation of the will, however, if not accompanied by an intent thereby to revoke it, is of no effect. I think I am tearing up an old insurance policy, but because of poor eye-sight, discover later that I have torn my will. This would not amount to a revocation of the will.

As has been said by a writer on the subject of wills, "No amount of cancellation or destruction without the intent to revoke, and no amount of intent without the actual destruction, will suffice to revoke a will.

Both the intent and the actual destruction or cancellation must coexist."

Sometimes changes in the circ.u.mstances and conditions of the testator's life will work a revocation. For example, at common law, the marriage of a woman worked an absolute revocation of her will. This has now been changed in most States by statute. In a great many States, however, to-day, if a testator, having no children, should make his will, and after the execution of the will, a child is born, the will is revoked in toto, when no provision for such child is made in the will. However, as above stated, this rule is not uniform in all States, and local statutes should therefore be consulted on this point. Where a testator already has children, the birth of additional children will not affect his will except, that such after-born children will inherit the same as though he had left no will. These rules in regard to after-born children apply only where the will does not make any mention of possible issue, and for this reason it is well to insert the clause, in many jurisdictions, providing that the will shall remain in full force and effect notwithstanding the fact that children may thereafter be born to the testator.

PROBATE OF WILLS.--Every State has a probate court for the settlement of decedents' estates. Such a court is variously named as the probate court, the surrogate's court, and the like, according to the nomenclature adopted in a particular State. Before an executor named in a will has any authority to act, he must produce the will, and after the proper proceeding has been had, the will is admitted to probate, and he may then qualify under it by giving the necessary bond. If the deceased died intestate, the proper person will apply to the probate court for the appointment of an administrator, and after a hearing, the court will appoint the person ent.i.tled to receive letters of administration. The administrator will then qualify, give the necessary bond, and then proceed with the settling of the estate.

A testator may name anyone in his will as an executor. In the large cities, in recent years, it is becoming quite common to name a trust company as executor, because its facilities for handling estates render it more efficient than the average individual. If, on the other hand, the testator is unwilling to place the sole care of his estate in the hands of a trust company, he may name two executors, a trust company and his wife, if he is a married man, or a very close friend in whose judgment he has great confidence, and, together, the two act as executors. The fees which the executors receive are generally fixed by statute. If the deceased dies intestate, the letters of administration are granted by the court in accordance with a definite statute. While the law in the various States is not uniform, generally, the priority of the right to administration is arranged by statute something like this:

(1) On the estate of a husband:

(a) To the widow, if there is any.

(b) If there is no widow, or if the widow renounces, then to the children.

(c) If there are no children, then to the issue of deceased children.

(d) If no issue of deceased children, then to the nearest of kin.

(2) On the estate of a wife:

(a) To the husband, who has an absolute right. If the husband for any reason does not desire to act as such administrator, he may select any fit person to administer the estate.

(b) If there is no husband, then to the children.

(c) If no children, then to the issue of deceased children.

(d) If no issue of deceased children, then to the nearest of kin.

(3) On the estate of an unmarried child:

(a) To the father, who has an absolute right. If for any reason the father does not wish to act, the court may select any fit person to administer the estate.

(b) If there is no father, then to the mother and brothers and sisters, whether of whole or half blood.

(c) If no mother or brothers or sisters, then to the nearest of kin in equal degree.

PER STIRPES AND PER CAPITA.--Where the subject of a testamentary disposition is directed to be "equally divided" or to be divided "share and share alike," or where similar words are used which indicate an equal division among a cla.s.s of persons, the persons among whom the division is to be made take per capita, unless a contrary intention is discoverable from the will. Where the individuals of a cla.s.s are specifically named, or are designated by their relation to some ancestor living at the date of the will, whether the testator or another, they take per capita, unless the context of the will shows an intention that they should take per stirpes. But where the gift is to an individual, or several named individuals, and to others as a cla.s.s, the latter take per stirpes; unless the testator uses language indicating an intention that the members of the cla.s.s shall share equally with the named individuals. A gift to a cla.s.s of persons or on their death to their heirs or children will be distributed among such heirs or children per stirpes; but a gift to one person and the children of other deceased persons will be divided per capita, unless it appears from the context or circ.u.mstances shown by extraneous evidence that the testator intended a distribution per stirpes.

ILl.u.s.tRATION.--A gift to children of testator, A. B. and C., or on their death to their heirs or children will be distributed, in the event of the death of C. before the testator, among heirs or children of C. per stirpes. (In other words, they will divide the share of their father between them.) But a gift to A. and to X. Y. and Z., the children of B.

deceased, will be divided per capita.

THE CONSTRUCTION OF WILLS.--It sometimes happens that wills are not carefully drawn, and even if they are, their meaning is not always perfectly clear. Ordinarily, any person who is interested in the meaning of a clause of a will may bring a suit in the proper court asking for a construction of the will. Of course, each case is governed more or less, by its own facts, but there are certain general rules which the courts follow in trying to arrive at the testator's intent. For example, a will is ordinarily presumed to speak as of the time of the testator's death.

Thus, reference in a will, to the arrival of the testator's youngest child at the age of twenty-five years, will apply to the youngest child at the time of the testator's death, although such child is born after the execution of the will. Ordinarily, a testator is presumed to have intended to dispose of all of his property, and if a will can be so construed, this will be done, rather than to adopt a construction which will make him testate as to part of his property and intestate as to another part. If there are two irreconcilable parts, the latter part is the one which prevails. Words are to be understood in their ordinary meaning, unless there is something to clearly show contrary intent. If, between two possible constructions, one of which would disclose a legal purpose, and the other an illegal purpose, the court will adopt the former.

DOWER.--Under the rules of the common law, a wife was ent.i.tled, on the death of her husband, to an estate for life in one-third of the lands of which her husband was seized of an estate of inheritance at any time during the marriage. This dower right still exists in most States, although it may differ in some particulars. For example, in Connecticut, a dower right exists only in the real property which the husband owns at the time of his death, and not, as at common law, in all the real property of which he was seized during the whole marriage. Therefore, reference to the statutes must be made in each State, to know the exact rule in a particular jurisdiction. Where the State adheres closely to the common law, this right, on the part of the wife, is a right of which her husband cannot deprive her; if the husband disposes of all his real property in his will to his friend, John Jones, such disposition is not valid and the wife would still be allowed her dower right by the probate court. It must also be borne in mind that dower refers only to real property. Generally, a husband may dispose of his personal property without any reference to his wife. Ordinarily, two things are necessary to establish the right of dower: (1) A legal marriage, and (2) seizin by the husband of an estate of inheritance in lands, or, in a layman's terms, the absolute ownership of a piece of real estate.

CURTESY.--Curtesy is the common law right which a husband has in the real property of his wife, and by it he is ent.i.tled to an estate for his life in all lands of which his wife was seized during marriage. Needless to say, women did not take part in law making when this law arose. To establish this right, three things are necessary: The two already mentioned in dower, and third, the birth alive of issue of the marriage.

The right of curtesy does not exist in this common law form in as many States as does the right of dower. Where these two rights do exist, in their more or less modified form, you have the explanation of the fact that when a married man sells real property, his wife joins in the deed, or when a married woman sells real property, her husband joins in the deed. The act of either in joining, releases the dower or curtesy right and allows the purchaser to get a clear t.i.tle.

CONFLICT OF LAWS.--We have already referred to this topic. It frequently happens that a person dies owning real property located in a number of States. It is almost certain that the laws covering real property will vary in these different States. If he was a resident of Philadelphia, his will will probably have been executed in accordance with the laws of Pennsylvania. The question arises whether such a will is valid to convey real property which he owns in New York, California, and Ma.s.sachusetts.

Insofar as the will affects real property, the mode of execution and its validity will be controlled by the law of the jurisdiction in which the real property is situated. If, then, the will had two witnesses only, as required by the Pennsylvania law, but three witnesses are required in one of the other States named, he would die intestate as far as the real property in the other State is concerned. Difficult questions sometimes arise in regard to gifts to charities. Some States limit the amount which a charitable corporation may receive as a gift under a will, and other States require that the gifts must be executed within a certain time before the decedent's death. Where there is a question of this character involved only a careful examination of the decisions and statutes in the States concerned can furnish the basis for any satisfactory answer. If there is personal property, the requisites of validity and construction of a will are controlled by the law of the testator's domicile. The question as to his domicile is sometimes quite difficult to determine and may require a court action. We have had a number of ill.u.s.trations of that in connection with the inheritance tax laws, where the officers of one State have sought to establish the domicile of a particularly wealthy person, who has just died, within that State in order that they may secure the inheritance tax for the State, which would of course, be much larger if the person were adjudged a resident of that State than it would be if he were held to be a non-resident.

CONTRACTS TO MAKE A WILL.--It sometimes happens that one person may make a contract whereby he agrees to make a will in favor of another person.

A, 75 years old, and of the proper mental capacity to make a will, makes a contract with Mary Jones, that, if she will live in his house and act as housekeeper as long as he lives, he will make a will and in it give her his house and $5000. He fails to make his will and dies suddenly at the end of the year after the making of this contract. It is generally recognized that contracts of this nature are valid. The general rules applicable to contracts apply here. There must be consideration, the contract must be certain in its terms, and as such contracts are not favored by the courts, because they are open to many forms of fraud, they must be proved by clear and convincing evidence, and the contract would have to be in writing under the provisions of the Statute of Frauds. In the ill.u.s.tration suggested, the further question arises, what is the remedy on the part of the housekeeper for a breach of contract.

Ordinarily there are two proceedings open in such a case. The personal representative of the deceased might be sued at law to recover damages for a breach of contract, or one might proceed in equity to compel the parties who take the legal t.i.tle to the house, in consequence of the failure of the decedent to make his will as he contracted to do, to convey the property which would have been conveyed by the will, had the will been made in compliance with the contract.

TRUSTS DEFINED.--In Bouvier's Law Dictionary, trusts are defined as obligations imposed, either expressly or by implication of law, whereby the obligor is bound to deal with property, over which he has control, for the benefit of certain persons of whom he may himself be one, and any one of whom may enforce the obligation. A trust arises when property has been conveyed to one person and accepted by him for the benefit of another. The person who holds the property and the legal t.i.tle is called the trustee, and the person for whom it is held is termed the beneficiary or "cestui que trust." Trusts are created for a great variety of purposes. It is very common to create them by a will, the testator appointing a trustee to manage a trust fund which he sets aside for the maintenance and support of a certain person or a certain inst.i.tution. A new device for creating a trust for the carrying on of a business, seems to be growing in popularity. The practice apparently began in Ma.s.sachusetts with the creation of a trust for the operation of an office building and similar undertakings. Under this arrangement, a trust estate may have transferable shares, exemption of shareholder's liability, and frequently enjoys peculiar advantages in taxation matters. These organizations are sometimes spoken of as common law corporations. They are so comparatively new that the closest care should be exercised in operating a business under this form of organization. We shall now consider the powers and duties of trustees and include with them executors and administrators.

TRUSTEES, EXECUTORS, AND ADMINISTRATORS.--Trustees, executors and administrators may be cla.s.sed together because they are alike in that they hold legal t.i.tle to property which is held by them for the benefit of other persons. They hold the legal t.i.tle. A trustee is the owner of the property, and any one who seeks a transfer of the legal t.i.tle of the property must get it from the trustee. Executors have exactly the same powers as administrators, aside from powers that may be expressly given in the will. The difference in name is simply because an executor is appointed by the will of the testator, whereas an administrator is appointed by the court to take charge of an estate for which no executor has been named in a testator's will, or where the executor may have died or refused to act, or, the most frequent case, where the deceased died intestate.

THEIR APPOINTMENT.--Were it not for statutes, a trustee or an executor would become such simply because somebody had made him a trustee or an executor without any appointment or a.s.sistance from the court. But in the appointment of executors or trustees, under wills, the court is by statute generally required to make an appointment to give validity to a nomination or appointment in the testator's will. Administrators, of course, from their very nature, have to be appointed by the court. A trust, however, may be created between living persons without any appointment by the court, and frequently is. A real estate trust may be created by simply conveying property to trustees on the trust that they manage it and pay the income to the beneficiaries, and a great variety of trusts are constantly created without an appointment from the court.

Wherever any question on a trust arises, or wherever the appointment of a new trustee is necessary, however, the court has jurisdiction, and any person interested in the trust can bring the matter before the court.

When a testator dies the person named as executor in the will pet.i.tions for appointment, and unless there is some reason why he should not be appointed he doubtless will be appointed. If there is no executor, then the persons, or beneficiaries, interested in the estate, usually agree on someone to administer the estate, and a pet.i.tion is filed for his appointment. The person who is next of kin, and competent to act, is generally appointed in the absence of agreement. These officers remain in office and retain their powers until their work is completed, unless they are sooner removed, which they may be at any time for cause.

THEIR POWERS.--What powers do these persons have? Do they have power to sell? We must first always look at the terms of the trust. If we are dealing with a trustee under a will we look at the will to see what powers the testator gave him. If we are looking at a question of a trust under a deed, we look at the deed, and the right of an executor to sell real estate similarly depends on whether any such power has been given him in the will. Aside from express power given in the instrument, a trustee has no power to sell either real or personal property unless the power is expressly given or unless the nature of the trust is such as necessarily implies the power, and courts are very slow in construing the existence of such power by implication. An executor, on the other hand, since his duty is to reduce the personal property of an estate to cash, and distribute it, has, in most States, implied power to sell personal property. He has, however, no power to sell real estate unless the will expressly gives such power. The court may authorize him to sell real estate, and will authorize him, if it is necessary to pay debts or legacies, but only in such cases unless a power is expressly given.

Trustees, executors and administrators have no power to pledge property unless expressly given in the instrument under which they act. They have power to make such contracts as are necessary to carry out their trust, but only these, and even when they make such contracts they are personally liable upon them, having, however, a right of reimburs.e.m.e.nt from the estate which they represent. If they entered into an unauthorized contract they would be liable upon it personally and have no right of reimburs.e.m.e.nt.

THEIR DUTIES.--Their first duty is the care and custody of the property in their charge. A trustee, whose duty is to hold property, is bound to keep it invested so as to bring in an income, whereas an executor has no right to invest funds of the estate, except under the direction of the court; if he does so he will take the chance of loss, and the beneficiary can not only hold him liable for loss but can also take the profit should the investment prove profitable. The executor's duty is to reduce the property to cash and distribute it to the proper parties. All these officers owe the same duty of fidelity to their beneficiary that an agent owes to his princ.i.p.al. There is the same duty to execute the trust personally and not delegate authority, except in regard to ministerial or mechanical acts. There is the same duty to account, and furthermore, the accounts of these officers, if they are appointed by the court, must be filed in court. The trustee to carry out his trust will ordinarily distribute the income to the persons ent.i.tled, but, of course, trusts are of great variety, and not infrequently the object of a trust is to acc.u.mulate the income. Whatever the terms of the trust are they must be carried out. The duties of the executor and administrator are to distribute the estate by paying creditors first and the surplus to legatees or the next of kin legally ent.i.tled. They are allowed a fixed period, in many States two years, to settle an estate.

One of the most essential duties of any fiduciary is to keep the property he holds as a fiduciary separate and distinct from his own.

This means that a trustee or executor receiving current income must keep a separate bank account as trustee or executor, and of course he should not draw checks on that fund for personal debts.

CHAPTER XI

Carriers and Warehous.e.m.e.n

CARRIERS WHO ARE PUBLIC SERVICE COMPANIES.--Common Carriers--that is, railroads, express companies, and other persons or corporations who carry goods for hire and hold themselves out to the public as engaged in the business of carrying goods for anybody for hire--are engaged in a public service. A man who owns a tramp steamer and gets cargoes as he can, is not engaged in a public service--he is not a common carrier or public carrier; but a person who has a line of steamers, or even one steamer, regularly engaged in plying between different places and taking goods as offered for hire, is engaged in public service.

DUTIES OF ONE ENGAGED IN PUBLIC SERVICE.--Now, being engaged in public service subjects a person or corporation who is so engaged to some special duties. Such a person cannot make any bargain he pleases with anybody he pleases, and refuse to make bargains with others, as an ordinary person can. It is the duty of any one engaged in a public service to give reasonable service to all who apply, without discrimination, and for reasonable compensation. Of course, carriers are not the only public-service corporations; electric light companies or gas companies or water companies are other ill.u.s.trations; but common carriers, and especially railroads, are the most prominent public-service corporations.

RAILROAD COMMISSIONS.--Not only is there this common-law duty to serve all without discrimination and at reasonable prices, but both the States and the United States have established commissions to look after railroads and other carriers to see that they properly perform their duties. The Railroad or Public Service Commission in most States has a great variety of powers for compelling railroads to give proper service.

The chief function of the Federal Interstate Commerce Commission originally, was in regard to rates, but its powers have since been enlarged by legislation. The Interstate Commerce Commission has the power concerning interstate commerce to say whether rates and practices are reasonable. A carrier is obliged to file with the Interstate Commerce Commission a schedule of its rates, and regulations concerning rates, and is also required to post these rates publicly in its stations. If anybody objects to the rates they must make complaint before the Interstate Commerce Commission. That is the only form of redress, and sometimes not an easy one for a person who is merely interested in a single shipment, because the expense and delay of proceedings before the Interstate Commerce Commission are such as to be prohibitive, unless the complainant's financial interest in the matter is considerable. It is common, therefore, for shippers' a.s.sociations to take that sort of question up rather than to leave it for individual shippers. Any contract made by a carrier for either more or less than the scheduled rate is illegal and void.

CARRIER'S COMMON-LAW LIABILITY FOR GOODS.--A carrier, at common law, when he receives goods for transportation, is subject to a degree of liability beyond that imposed on any other person. An ordinary person who receives goods--a bailee, as he is called in law--is merely liable for the consequences of his negligence. A carrier, however, while goods are in course of transportation is liable, at common law, as an insurer against all kinds of accidents except those caused by act of G.o.d or public enemies. For instance, if goods were struck by lightning in transit that would be an act of G.o.d, and the carrier would not be liable; but if goods caught fire from any other cause, as from neglect of an outsider or the act of an incendiary, the carrier would be liable.

Carriers, of course, dislike that and try to contract away their liability. They are allowed by law to do so, except that they are not allowed to contract for exemption from the consequences of their own negligence. It is largely this desire of carriers to free themselves from the extreme liability which the common law imposes on them, that induces them to give bills of lading. Bills of lading are often required by law, but carriers are pleased to issue them, as they can in that way contract to exempt themselves from this extreme liability, which lasts while the goods are in transit and until the consignee has had a reasonable time to remove them from the carrier's possession. If the consignee fails to remove them with reasonable promptness the carrier then becomes liable, merely as a warehouseman may, for its own neglect.

The extreme liability of the carrier does not extend to damage caused by delay. The carrier is liable for delays in so far as they are caused by its own neglect, but otherwise is not liable. A carrier need not deliver the goods unless freight is paid, as it has a lien for freight charges.