York, but urges as a defense that its corpo- | mune from suit. In the circumstances exrate life was ended by a decree of the Russian Soviet government nationalizing the business of insurance companies in Russia; that, by the same decree, the companies were released from the payment of debts and liabilities; that Great Britain has recognized the existence of the Russian Soviet government, and by a trade agreement set forth in the answer has confirmed the confiscation of the debts owing to its nationals; that all these things were done before the transfer to the plaintiff; and that the plaintiff, taking no greater rights than its assignor, is seeking to enforce a right of action which at the time of the assignment had already been extinguished. The defendant moved that the plaintiff be directed to reply to its defenses, and the Appellate Division, refusing that relief, has certified questions which require us to determine whether the defenses, variously pleaded, are sufficient on their face.

[1] We deal first with the so-called defense that the corporation which defends is dead and so incapable of defending. Martyne v. American Union Fire Ins. Co., 216 N. Y. 183, 190, 110 N. E. 502; Sturges v. Vanderbilt, 73 N. Y. 384. This is obviously not a "defense" at all, if the word defense is employed as one of art, with a proper legal meaning. A corporation with vitality sufficient to answer a complaint has, by the very terms of the hypothesis, vitality sufficient to permit it to be sued. The shades of dead defendants do not appear and plead. Expedients, of course, there are whereby a court may be informed that jurisdiction has been halted. If the corporation is defunct, those in charge of its assets may place upon the record a suggestion of its death, may stay the progress of the suit, and may even vacate the process that assumes to bring it into court. Nankivel v. Omsk All Russian Government, 237 N. Y. 150, 142 N. E. 596; Martyne v. Am. Union Fire Ins. Co., supra. Such are not the expedients that by the questions now certified to us we are asked to approve or to condemn. But if we put the questions to one side and view the statements of the answer, verified by the defendant's officers, as a suggestion of its death, to be heeded even in this court, lest a controversy with an unreal litigant be unwittingly determined, the result will not be changed.

[2] The decree of the Russian Soviet government nationalizing its insurance companies has no effect in the United States unless, it may be, to such extent as justice and public policy require that effect be given. We so held in Sokoloff v. National City Bank, 239 N. Y. 158, 145 N. E. 917. Justice and public policy do not require that the defendant now before us shall be pronounced im

hibited by this record, we find it profitless to consider whether the decree was intended to put the nationalized companies out of existence altogether, or, on the other hand, to preserve them as corporate entities though in the ownership of the government. Russian Commercial & Industrial Bank v. Comptoir D'Escompte de Mulhouse, House of Lords, 40 T. L. R. 837. Our concern is not so much with the consequences intended by the authors of the decree as with those that will be permitted in other jurisdictions where the intentions of its authors are without effect as law. The defendant has complied with the provisions of our statutes prescribing the conditions in which foreign insurance companies may do business within our borders. Insurance Law, §§ 27, 28; Consol. Laws, c. 28. It has put itself for many purposes in the same category as our own domestic corporations. Comey v. United Surety Co., 217 N. Y. 268, 274, 111 N. E. 832, Ann. Cas. 1917E, 424. Far from suspending its activities since the promulgation of the decree which is said to have ended its existence, it has since then written policies of insurance covering millions of dollars of risks, has collected premiums in large amounts and by the admissions of its answer, is doing business to-day. If the Russian government had been recognized by the United States as a government de jure, there might be need, even then, to consider whether a defendant so circumstanced, continuing to exercise its corporate powers under the license of our laws, would be heard to assert its extinction in avoidance of a suit. Cf. Thompson on Corporations, § 6569; 2 Morawetz, Private Corporations (2d Ed.) § 1003; 37 Harvard Law Review, 610.

In the existing situation, the refinements of learning that envelop and to some extent obscure the definition of de facto corporations are foreign to our inquiry. So long, at least, as the decree of the Russian government is denied recognition as an utterance of sovereignty, the problem before us is governed, not by any technical rules, but by the largest considerations of public policy and justice. MacLeod v. U. S., 229 U. S. 416, 428, 429, 33 S. Ct. 955, 57 L. Ed. 1260. When regard is had to these, the answer is not doubtful. The defendant asks us to declare its death as a means to the nullification of its debts and the confiscation of its assets by the government of its dom icile. Neither the public policy of the nation, as established by President and Congress, nor any consideration of equity or justice, exacts an exception in such conditions to the need of recognition. We do not say that a government unrecognized by ours will

(146 N.E.)

de jure, it is still more clearly so where the decree is that of a government to which recognition has been denied. Neither comity nor public policy requires us to enforce a mandate of confiscation at the behest of such a government to the prejudice either of our own citizens or of those of any friendly power seeking justice in our courts.

always be viewed as nonexistent by our for decree is that of a recognized government courts, though the sole question at issue has to do with a transaction between the unrecognized government and a citizen or subject of a government by which recognition has been given. To say this might seem to imply, for illustration, that a voluntary conveyance by a British citizen to the Soviet government would be viewed as a nullity in the United States on some theory that the grantee, though recognized in Great Britain, was without capacity to take. No such sweeping declaration is essential to the decision of the case before us. We deal now with the single question whether the defendant has an existence sufficient to subject it to suit in the domestic forum. That is a question which the law of the forum will determine for itself. Liability to be sued is quite distinct from liability to be held in judgment upon the facts developed in the suit. We keep our ruling within these limits, and hold that the defendant is amenable to the process of our courts.

[5] The defendant insists, however, that though the Soviet decree standing by itself may have been inoperative in England to terminate the right of recourse to assets beyond the territory of Russia, yet the effect of the trade agreement of 1921 between Great Britain and Soviet Russia was to extinguish by force of eminent domain the rights of action of British nationals against Russian corporations, and to put their own government in place of the defendant, and of others similarly situated as a substituted debtor (citing Ware v. Hylton, 3 Dall, 199, 245, 1 L. Ed. 568; Gray v. U. S., 21 Ct. Cl. 340, 390; 2 Wharton, Digest Int. Law, p. 709, § 248; cf. [3] If existence be assumed, the question Hijo v. U. S., 194 U. S. 315, 323, 24 S. Ct. remains whether liability has been extin- 727, 48 L. Ed. 994; The Blonde, 1922, 1 App. guished. Was it extinguished by the Soviet Cas. 335). We pass the question whether decree canceling or releasing the debts of the such an agreement, if made, would be disrenationalized companies? If not, was it ex-garded by our courts because of our refusal tinguished by the action of Great Britain in to recognize the existence as a government negotiating the trade agreement of 1921? As of one of the parties to the compact. to the Soviet decree, we think its attempted assume, though we are not required to deextinguishment of liabilities is brutum ful- cide, that if the compact existed we would men, in England as well as here, and this not treat it as a nullity. A sufficient answer whether the government attempting it has is that no such substitution of liabilities was been recognized or not. Russia might terestablished by the trade agreement or minate the liability of Russian corporations thought of in its making. All that the trade in Russian courts or under Russian law. Its agreement does is to declare the principles fiat to that effect could not constrain the upon which a general peace treaty, if made, courts of other sovereignties, if assets of the will be concluded. The Russian government debtor were available for seizure in the ju- declares that it recognizes in principle that risdiction of the forum. Barth v. Backus, it is liable to pay compensation to private per140 N. Y. 230, 35 N. E. 425, 23 L. R. A. 47, sons who have supplied goods or services to 37 Am. St. Rep. 545; Matter of People (City Russia for which they have not been paid. Equitable Fire Ins. Co.), 238 N. Y. 147, 152, The British government makes a correspond144 N. E. 484; cf. Matter of Barnetts' ing declaration. Plaintiff's claim is neither Trusts, 1902, 1 Ch. 847. The decree invoked for goods nor for services, even if a recogniby the defendant is not in any true sense a tion in principle of a duty of reparation were decree of bankruptcy, though even if it were thought to be important. Beyond this, both there would be limits to its extraterritorial parties declare that: validity.

[4] A decree of bankruptcy presupposes a distribution of the assets for the benefit of creditors, and this decree is one of confiscation, appropriating the assets for the benefit of the Soviet republic. One government does not execute the tax laws of another (State of Colorado v. Harbeck, 232 N. Y. 71, 82, 133 N. E. 357), nor help another in enforcing a penalty or forfeiture (Loucks v. Standard Oil Co. of New York, 224 N. Y. 99, 102, 120 N. E. 198). If this is so where the foreign statute

We

"All claims of either party or of its nationals against the other party in respect of property, or rights, or in respect of obligations incurred by the existing or former governments of either country shall be equitably dealt with in the formal general peace treaty referred to in the preamble."

We are to observe that the claims here mentioned are those, not against a Russian citizen or corporation, but against the Russian government; and that even as to these the obligations of the declaration are wholly

future and executory. What is equitable is will to charitable corporation on death of life to be agreed upon at some indefinite time tenants, were earned before testatrix' death, thereafter, if an agreement can be reached. they must be treated as ordinary increases, We should be straining words to the break-constituting part of residuum, rather than of share of trust estate, to which such corporaing point if we held that Great Britain, by tion is entitled under Decedent Estate Law, exacting from Russia a promise of just treat§ 17. ment in the future, presently extinguished the rights of action of its nationals which till then had been enforceable.

The order should be affirmed, with costs, and the questions certified answered in the negative.

HISCOCK, C. J., and POUND, MCLAUGHLIN, ANDREWS, and LEHMAN, JJ., con

cur.

CRANE, J., absent.

Order affirmed.

(239 N. Y. 259)

In re SEYMOUR'S WILL.

In re BROOKLYN TRUST CO.

(Court of Appeals of New York. Jan. 21, 1925.) 1. Wills 15-Charitable corporation held not entitled to share in increase in value of estate during life tenant's lifetime.

5. Conversion 19(2)-Conversion held not effected until life beneficiary's death.

Under provision of will that testatrix's house and furniture should be sold and proceeds become part of residuary estate when surviving husband's occupation of house ceased, there was no conversion into personalty until husband's death.

McLaughlin, J., dissenting in part.

Appeal from Supreme Court, Appellate Division, Second Department.

Petition by the Brooklyn Trust Company to render and settle its accounts as trustee, etc., under the will of Mrs. William H. Seymour, for the benefit of William H. Seymour. From an order of the Appellate Division (209 App. Div. 655, 205 N. Y. S. 327), modifying, and, as modified, affirming, surrogate's decree

(122 Misc. Rep. 343, 203 N. Y. S. 914), settling accounts, the executor of the estate of William H. Seymour appeals. Order and decree modified, and, as so modified, affirmed.

Henry A. Ingraham and Samuel C. Worthen, both of New York City, for appellant. R. W. Crolley, of Brooklyn, for Brooklyn Trust Co., trustee.

Charitable corporation, to which will gave principal of trust estate on death of life beneficiaries, but which, under Decedent Estate Law, 17, could take only one-half of estate held not entitled to share in increase in value of estate during life of beneficiaries, but entitled to no more than half of estate's value at time of testatrix' death, after payment of her O. F. Hibbard, of New York City, for redebts, allowance being made for fact that pay-spondent Church Charity Foundation of ment is postponed.

2. Wills 15-Administration expenses, etc., paid from, and profits and losses charged against, part of trust estate not passing to charitable corporation.

James S. Regan, of New York City, for respondent special guardian.

Long Island.

ANDREWS, J. Mrs. Seymour died in 1920. By her will she devised and bequeathed substantially all her property to trustees, with Under Decedent Estate Law, § 17, all ad- instructions to pay the income therefrom to ministration expenses, legacies, and commis- certain beneficiaries named therein for life. sions must be paid from, and all profits and The chief of these were her husband, a man losses charged against half of trust estate not passing to charitable corporation, statute then 85 years old. On the death of the bentransforming residuary gift to corporation, un-eficiaries the trustees were instructed to pay certain in amount, into general legacy for fixed

the principal to the Church Charity Foundation of Long Island, a charitable corporation. The statute provides that:

"No person having a husband, wife, child, or parent, shall, by his or or her last will and testament, devise or bequeath to any benevolent, charitable, literary, scientific, religious, or missionary society, association, corporation, or purpose, in trust or otherwise, more than onehalf part of his or her estate, after the payment of his or her debts, and such devise or bequest shall be valid to the extent of onehalf, and no more." Decedent Estate Law (Consol. Laws, c. 13) § 17.

N. Y.)

IN RE SEYMOUR'S WILL
(146 N.E.)

Therefore, upon the probate of Mrs. Seymour's will it was adjudicated that the disposition of her property to the Church Charity Foundation was invalid, in so far as it was to receive more than one-half of her estate after the payment of all debts. The total after such deductions were made was then fixed and it was paid to the trustees. Mr. Seymour died in 1923 and the amount to which the corporation now becomes entiIt appears that tled must be determined. during his lifetime there was an increase of $76,314.21 in the value of the estate held by the trustees. This increase was the result of favorable sales and also of certain stock dividends received.

[1] The first question we must decide is whether or not, under these circumstances, the Church Charity Foundation is entitled to share in this increase as was held by the courts below. We see no reason why it should do so. The statute speaks as of the time of the death of the deceased. St. John v. Andrews Institute for Girls, 191 N. Y. 254, As of that 83 N. E. 981, 14 Ann. Cas. 708. time the value of the estate is to be fixed upon the same basis as if it had been then turned into cash and the amount which a charitable corporation may receive then determined. To that amount it is entitled, no more and no less. If the payment of the legacy is postponed, allowance must be made for that fact. One hundred thousand dollars presently due is of more value than one hundred thousand dollars payable ten years hence. Hollis v. Drew Theological Seminary, 95 N. Y. 166; Matter of Durand, 194 N. Y. 477, 87 N. E. 677.

[2, 3] But whether, under the circumstances of this case, the present value of a legacy payable in the future is calculated, or whether, when the distribution is made upon the death of the life tenant, interest is allowed out of the estate upon the half as it stood at the testator's death, as the Appellate Division has here done without objection, the result is practically identical. Out of the remaining half of the estate must be paid all expenses of administration, all legacies, and all commissions. To it also must be attributed all profits, and all losses must be charged against it alone. By virtue of the statute a residuary gift to the corporation uncertain in amount is transformed into a Matter of general legacy for a fixed sum. Brooklyn Trust Co., 179 App. Div. 262, 264, 166 N. Y. S. 513. The same rule is applied as in the case of all general legacies and all For this reason any inresiduary estates. terest that may be earned by the estate during the year after the testator's death goes to swell the residuum. Matter of Brooklyn Trust Co., supra. Any gain comes in no sense

from the use of capital to which the corporation was at the time entitled.

We have not before us a case where the amount which the corporation is to receive is fixed and is presently payable, but where for one reason or another it has not been paid within the year after the testator's death, and where the executors so used the estate in their hands, including the part to which the corporation is entitled, so as to increase its value. We do not decide that under such circumstances the corporation might not share in the increase caused in part by the use of its funds.

[4] As to that portion of the increase caused by the stock dividends there is no evidence as to when they were earned. Had it appeared that the whole or any part of them had been earned before Mrs. Seymour's death it might be that the corporation would be entitled to share therein, as they would represent the capital of the estate of the decedent as it existed at that time. In the absence of such evidence, however, we can only treat them as ordinary increases in the value of the estate held by the trustees, and the general rule which we have stated applies to them also.

[5] A matter of lesser importance remains. The will of Mrs. Seymour provided that she gave to her husband the use of her house in Brooklyn and of all the furniture therein so long as he personally occupied the same. When such occupation ceased the house and furniture was to be sold and the proceeds were to become part of the residuary estate. After Mr. Seymour's death the house was sold for between seven and eight thousand dollars. The question is whether one-half of these proceeds belonged to the heirs at law of Mrs. Seymour or to the estate of her husband. If, by the terms of the will, an equitable conversion occurred as of the time of her death the latter rule applies. If, on the contrary, there was no conversion into personalty until Mr. Seymour's death then her heirs are entitled to this sum. isfied with the conclusion reached by the Appellate Division that the latter construction is the correct one.

We are sat

The order of the Appellate Division and the decree of the surrogate should be modified in accordance with this opinion, and, as so modified, affirmed, with separate bills of costs to all parties filing briefs in this court payable out of the estate.

HISCOCK, C. J., and CARDOZO, POUND, and LEHMAN, JJ., concur. MCLAUGHLIN, J., dissents from modifi

cation.

CRANE, J., absent.

Ordered accordingly.

Contract under seal may not be specifically enforced against persons not parties to or interested in it on its face, on proof de hors the instrument that they are undisclosed principals, in whose behalf contract was executed by nom-understood and so often enforced. If such a inal party.

Frederick Behr and E. Chase Crowley, both of New York City, for appellant. C. P. Lattin, of New York City, for re- for nothing else because of the rules conspondents.