On appeal from a judgment of the Superior Court, Chancery Division, entered on order of Judge Stanton who filed the following opinion.
For affirmance -- Chief Justice Vanderbilt and Justices Oliphant, Wachenfeld and Ackerson. For reversal -- Justices Case and Burling.
[8 NJ Page 113] "Max Goebel, then 81 years old, made his last will on July 2, 1929. On the same day he entered into a written agreement
with North American Iron Works, Inc., which will be referred to as the company, and all the other stockholders therein, Nathan Michelman, Matthew J. Moroney and Carl Fiedler. At that time testator held 35 per centum of the common stock, 100 per centum of the first preferred stock and about 93 per centum of the second preferred stock of the company. It was also indebted to him in the approximate amount of $140,000, part of which was past due. The primary design of the contract was, in its own language, to bestow leniency upon the company in meeting its obligations after his death; and in return the company was to pay his estate by way of interest and dividends at least $6,000 per annum; and the contract was to continue as long as it was performed by the company and the stockholders and as long as Moroney and Fiedler or the survivor of them were actively engaged in the business of the company.
"Testator died on April 8, 1930, and plaintiff qualified as his executor and trustee. The business of the company, apparently not very prosperous at the time of the contract, suffered as a consequence of the great depression which began soon after his death; but at the time he made his will he evidently considered that his interest in the company was valuable and substantial.
"In the fall of 1931 testator's interest in the company was sold to Michelman for $40,000, of which $10,000 was paid in cash and the balance was to be paid in monthly installments of $500 each. Only $2,000 was paid on the balance and the company was adjudged bankrupt in September, 1933, and Michelman the following February; no dividend was paid by the estate of either. The gross inventory value of decedent's estate, in which the stock and credit interest in the company was set at $40,000, was approximately $100,000. After the deduction of debts and administration expenses the balance was slightly more than $65,000. Following the bankruptcies this latter amount was reduced by loss of $28,000 on the Michelman notes. Annually during the period between 1934 and 1950, the trustee placed an approximate valuation on
decedent's net estate, and it varied between the high figure of $39,602 and the low of $32,600.
"Caroline A. Petty and Carrie Hammann, the life tenants named in paragraph seventh (a) of the will, died on December 17, 1936 and April 7, 1947, respectively. Moroney and Fiedler severed their active connection with the business of the company between August 1 and August 7, 1933, and the trust described in paragraph seventh (b) of the will, if it had come into being, would have terminated at that time.
"Paragraph seventh of testator's will is as follows:
'Seventh: All the rest, residue and remainder of my estate, both real and personal, wheresoever the same may be situated, I give and bequeath to my executor and trustee, in trust nevertheless to hold the same and invest and keep the same invested and collect the income thereon and distribute the same as follows:
(a) As a first charge on said income, I give to my daughter-in-law, CARRIE HAMMANN and to her mother, CAROLINE A. PETTY, and the survivor, the sum of two hundred dollars ($200) per month, payable monthly on the first of each and every month from the date of my death, for the term of the natural lives of my said daughter-in-law and her said mother and the survivor. To insure these monthly payments, I further direct my executor and trustee to accumulate the balance of the income from my estate, and use said income together with such of the principal of my estate as may be available through liquidation of assets to set up a trust fund of forty-eight thousand dollars ($48,000), and thereupon to hold said fund as a separate fund in trust to invest and reinvest and to pay the income thereon to my said daughter-in-law, Carrie Hammann and to her mother, Caroline A. Petty, and the survivor, so long as they or the survivor shall live. Upon the establishment of said fund the income thereon is to be substituted for the said $200 monthly payments aforesaid and not be in addition thereto. Upon the death of the survivor of my said daughter-in-law and her mother, said principal sum of Forty-eight thousand dollars ($48,000) shall be added to the residue of my estate.
(b) After setting up said trust fund of forty-eight thousand ($48,000) as provided aforesaid, I direct my executor and trustee to collect the income on the balance of principal of my estate, and to pay over all of the net income to the following named persons, and the survivors or survivor of them, if any shall die before the termination of this trust, in the shares set opposite their respective names, the share of income of any deceased person to be divided among the survivors according to their proportionate interests. (Where joint tenants take, the joint tenants or survivor are to be
regarded as one person in taking the share set opposite their names): --
Mrs. Caroline A. Petty, now residing at No. 6 Whippany
Road, Morristown, New Jersey 3 shares
Mrs. Minnie E. Tapken, now residing at No. 141 Welton
Street, New Brunswick, New Jersey ...