On appeals from Prerogative Court and Superior Court, Chancery Division, the opinion of the Chancery Division being reported in 11 N.J. Super. 102.
No. A-43: For reversal -- Chief Justice Vanderbilt, and Justices Wachenfeld, Burling and Ackerson. For affirmance -- Justice Case. No. A-44: For modification -- Chief Justice Vanderbilt, and Justices Wachenfeld, Burling and Ackerson. For affirmance -- Justice Case. The opinion of the court was delivered by Burling, J. Case, J. (dissenting in No. A-44).
[8 NJ Page 512] There are three appeals in connection with matters relative to the estate of Israel Koretzky, deceased, presently before this court for determination. The first of these is an appeal by Jacob (Jack M.) Koretzky, Lillian Horton and Jeanette Pollak from a decree allowing the account entered on July 13, 1948, in the former Prerogative Court in the matter of an accounting of the executors of Israel Koretzky, deceased, and it was directed to the former Court of Errors and Appeals. Prior to hearing there the appeal was transferred to this court by virtue of the New Jersey Constitution of 1947, Art. XI, Sec. IV, par. 8, clause (a). Consideration of the appeal was adjourned pending determination of the court below in the corollary matters. The reason for this will be apparent from the recitation of facts hereinafter set forth. The other two appeals were addressed to the Appellate Division of the Superior Court from a judgment of the Chancery Division of the Superior Court entered April 3, 1951, in a suit brought for removal of the executors of Israel Koretzky, deceased, and other relief incidental thereto (one of the corollary matters above mentioned); Jacob Koretzky (Jack M. Koretzky), plaintiff, and Lillian Horton, defendant, joining in the prayers of the complaint, appealed from portions of the judgment adverse to their interests, and the executors-defendants, Julius I. Kislak, Isaac Gross and Louis Kadison, appealed from other portions of the judgment. Certification of these two appeals was granted by us upon petition and cross-petition therefor, prior to hearing in the Appellate Division in order to permit at one and the same time our consideration of the interrelated questions involved in these several proceedings.
To enable one to dispel the mist of confusion blanketing the questions involved in these appeals resulting from the multiplicity of suits and to indicate the relative positions of the parties, we deem it necessary to chart the course of the litigation in detail.
Israel Koretzky, whose labors produced the material things subjected to this long series of litigations, departed this life on January 7, 1946. He died testate and his will dated April 30, 1941, was admitted to probate in the former Prerogative Court of this State on February 6, 1946; letters testamentary were granted to Julius I. Kislak, Isaac Gross and Louis Kadison, executors, who had been nominated in the will. The decedent had nurtured to success a substantial business which by virtue of ownership of a considerable majority of outstanding shares of stock, he had controlled through the media of two New Jersey corporations, the Bright Star Battery Company and the Bright Star Warehouse Company. His ownership in the Warehouse Company (10 shares of stock) was the entire issued capital stock, and in the Battery Company was 30,600 shares out of 39,000 shares. The testator provided in his will, inter alia:
"2. All the rest, residue and remainder of my estate, real, personal and mixed, and wherever the same may be situated, I do hereby devise, give and bequeath unto my friends, Isaac Gross, Julius I. Kislak and Louis Kadison to have and to hold the same, however, in trust upon the following trusts, terms and conditions:
(a) All cash on hand or in banks, as well as moneys owing to me by Bright Star Battery Company, Bright Star Warehouse Company and also moneys owing to me by any other person, firm or corporation, whether evidenced by promissory note or other writing, as well as any stock, bonds or securities issued by any other than Bright Star Battery Company or Bright Star Warehouse Company, as well as the proceeds of any policy or policies of life insurance on my life, which may at the time of my decease be payable to my estate, and all income interest, dividends and accumulations on any of the items in this subdivision mentioned, shall be held in trust for my beloved son, Jacob Koretzky, but nevertheless, subject to the provisions hereinabove set forth.
(b) Of my stockholdings in Bright Star Battery Company, a New Jersey corporation, my said trustees shall hold twenty thousand (20,000) shares, together with all dividends and income therefrom,
for the benefit of my said son Jacob Koretzky, but also subject to the provisions hereinafter set forth.
(c) Of my stockholdings in Bright Star Warehouse Company, a New Jersey corporation, my said trustees shall hold six (6) shares, together with all dividends and income therefrom, for the benefit of my said son Jacob Koretzky, but also subject to the provisions hereinafter set forth.
(d) My said trustees are hereby vested with absolute discretion in their sole and exclusive judgment to apply and pay over such part of the accumulations, income, interest or dividends or capital for the benefit of my said son Jacob Koretzky, as to them may seem necessary or proper, for his maintenance, support or education, or for the support, maintenance or education of his wife and child or children, should he have any, until my said son shall become of the age of forty (40) years; whereupon my said trustees may turn over to him, my said son, all of the trust fund hereby provided for him, with all accumulations thereon. Should my son die before attaining the age of forty (40) years, leaving him surviving a child or children, then I direct my trustees to hold all of the then remaining portion of my estate, so provided for the benefit of my son, for the like benefit of such child or children of my said son, who shall survive him, in equal shares, to be delivered with all accumulations thereon, when the youngest of my said son's children shall have attained the age of twenty one years; but until the time for such ultimate distribution shall arrive, to provide such reasonable support, maintenance and education of my son's child or children, out of the same as in the discretion of my trustees shall seem proper.
(e) That of the remaining of my stockholdings in the Bright Star Battery Company and Bright Star Warehouse Company, both New Jersey corporations, whether standing in my name or in the name of another, but in which I own the equitable interest, I do give and bequeath unto my daughters Anne Barash, Lillian Horton and Jeanette Pollak, in equal shares. My said trustees shall hold the shares bequeathed to my said daughters under this subdivision with all accumulations and dividends thereon, and from time to time apply the income or dividends therefrom toward the support and maintenance of my said daughters, each out of her respective share, and shall turn over to each of my daughters the share to which she is entitled, together with any accumulations accrued thereon, upon her attaining the age of forty (40) years. Should any of my daughters die before having attained the age of forty (40) years, leaving her surviving a child or children, then I direct my trustees to hold all of the then remaining portion of my estate, as provided for the benefit of my said daughters respectively for the like benefit of such child or children of said respective daughters, who shall survive her, in equal shares, to be delivered with all accumulations thereon, when the youngest child of such daughter shall have attained the age of twenty one (21) years; but until the time for such ultimate distribution shall
arrive, to provide such reasonable support, maintenance and education of the child or children of such daughter, out of the same as in the discretion of my trustees shall seem proper."
In his will, he designated and appointed Kislak, Isaac Gross and Kadison as executors and trustees, authorized and directed payment of his just debts and funeral expenses, authorized his executors and trustees to sell any part of his estate, except his stockholdings in the Bright Star Battery Company and the Bright Star Warehouse Company, and directed them to invest and reinvest the proceeds in bonds or obligations of the United States of America. He provided that if any of his executors and trustees should die pending the administration of the trusts, the survivors or survivor should "continue as sole trustees or trustee with like force and effect as if all three of said trustees had continued and acted accordingly."
The suit initiated first in point of time, was instituted by the executors on May 19, 1947, against Lillian Horton, Meyer B. Horton, Anne Barash, Abraham I. Barash, Jeanette Pollak, Jacob (Jack M.) Koretzky and the Bright Star Warehouse Company to determine the ownership of 24 shares of stock of said Warehouse Company, the executors charging the defendants with fraud in the issuance of four certificates for six shares each, to Lillian Horton, Anne Barash, Jeanette Pollak and Jacob (Jack M.) Koretzky respectively. This action was filed in the former Court of Chancery and was later transferred to the Chancery Division of the Superior Court.
The second action in point of time was a suit by Jacob (Jack M.) Koretzky, instituted by amended bill of complaint filed in the former Court of Chancery on January 13, 1948, against Julius Kislak, Isaac Gross, Louis Kadison, Lillian Horton, Jeanette Pollak and Anne Barash, for construction of the will of Israel Koretzky, deceased, for cancellation of a consent signed by the complainant to a payment of $25,000 made by the Bright Star Battery Company to Abraham I. Barash, for a decree enjoining and restraining the defendants
Kislak, Gross and Kadison and each of them from acting as executors of the estate of Israel Koretzky, deceased, for a decree enjoining and restraining the defendants Kislak, Gross and Kadison and each of them from qualifying as trustees under the will of Israel Koretzky, deceased, and for such other and further relief as to the court might seem equitable and just in the premises. Defendants Jeanette Pollak and Lillian Horton by their answers admitted the allegations of the said amended bill of complaint and joined in the prayers for relief therein contained; the other defendants answered contesting the suit. This action also was later transferred to the Chancery Division of the Superior Court.
The third proceeding stems from an intermediate account filed by the executors of Israel Koretzky, deceased, in April, 1948, in the former Prerogative Court. Exceptions having been filed by Jacob (Jack M.) Koretzky, Jeanette Pollak and Lillian Horton, an order of reference was made on May 18, 1948, to a master of that court to hear the matter of the exceptions to the account and report to the court. Four exceptions had been taken, but two of these were waived at the hearing before the master. One of the remaining exceptions related to inclusion in the account as an asset of the estate ten shares of capital stock of the Bright Star Warehouse Company which the exceptants claimed was not properly included among the assets of the estate until ownership thereof was determined in the warehouse stock suit in Chancery, ante. The remaining exception was to the effect that approval of the account should be withheld pending the outcome of the injunction or removal suit (against the executors) in Chancery, ante. The master filed his report, dated June 18, 1948, advising dismissal of both of these exceptions. On July 13, 1948, the former Prerogative Court ordered, adjudged and decreed that the master's report be confirmed and that the account be allowed, except as to the matters alleged in the exception with reference to the ten shares of the Bright Star Warehouse Company stock which the court decreed should be reserved until disposition of the Chancery suit
concerning such stock (to be accounted for by the executors in any further accounting), and allowing the executors five per cent commission on the corpus of the estate (less the value of the ten shares of stock of the Warehouse Company), allowing the executors five per cent commission on income, and allowing a $40,000 counsel fee to Gross & Gross, proctors for the executors-accountants. The exceptants Jacob (Jack M.) Koretzky, Lillian Horton and Jeanette Pollak appealed from such parts of the aforesaid decree as confirmed the master's report, as allowed corpus and income commissions and as allowed the proctors' fee. The appeal was addressed to the former Court of Errors and Appeals and, as hereinbefore stated, prior to hearing there was transferred to this court and has been held pending the outcome of the other two suits (ante) which at the time of the entry of the decree appealed from were pending in the former Court of Chancery.
This was not all. The executors also filed in the former Court of Chancery a bill of complaint for instructions, seeking authority to sell all the estate's stockholdings in the Bright Star Warehouse Company and in the Bright Star Battery Company, and later filed in the Chancery Division of the Superior Court a petition for instructions as to whether they should be required to retain an attorney other than the proctors of the estate to handle pending federal estate tax matters (as requested by Anne Barash, one of the beneficiaries of the estate) and for instructions as to their proper course of conduct with reference to a street improvement proposed to be effected by the City of Clifton which would affect the property of the aforesaid Warehouse Company. Pretrial conference, by order of the Chancery Division of the Superior Court, dated April 19, 1949, on these matters, was adjourned and continued until the disposition and determination of the warehouse stock and injunction or removal suits, ante. These proceedings are therefore not before us for determination but reference thereto is made for the purpose of indicating the entire situation existing between the various parties to these appeals.
This case is an example of the effect of lack of teamwork among all concerned for their mutual interests and welfare, when the gamut of jealousies and selfishness are running riot and forecast destruction of the fruits and hopes of an industrious ancestor, a man of initiative who developed and fostered a successful business, as may be done through the opportunities afforded in the American way of private enterprise.
We now move to the course of the litigation of the warehouse stock and injunction or removal suits, ante. Although these actions were tried consecutively they were not technically consolidated. Pretrial conferences held on the same day resulted in pretrial orders entered in the Chancery Division of the Superior Court on November 1, 1948, in both suits. In the injunction or removal suit the pretrial order raised merely a factual issue, namely, whether the proofs to be adduced at the trial would warrant the relief prayed. In the warehouse stock suit trial was limited by the pretrial order to four issues: whether Israel Koretzky at the time of his death was the owner of all the issued stock of the Bright Star Warehouse Company; whether prior to his death he transferred ownership of said shares to defendants Jacob (Jack M.) Koretzky, Anne Barash, Lillian Horton and Jeanette Pollak; whether cancellation of the certificate of stock (for ten shares) owned by Israel Koretzky was fraudulent; and whether the four certificates of stock for six shares each in the names of the defendants Jacob (Jack M.) Koretzky, Anne Barash, Lillian Horton and Jeanette Pollak were validly or fraudulently issued. The trial of the warehouse stock case resulted in a judgment of the Chancery Division entered April 3, 1951, determining that the said four certificates for six shares each were fraudulently issued and should be surrendered for cancellation, directing the above named defendants to surrender said certificates for cancellation, and directing the defendant Bright Star Warehouse Company to issue a certificate for ten shares in the name of Israel Koretzky. There was no appeal from this judgment. However, it was
stipulated in the injunction-removal suit that the relevant portions of the testimony in this warehouse stock suit should be considered by the court as if the witnesses had been interrogated and cross-examined in the injunction or removal suit.
At the trial of the injunction or removal suit, counsel for the plaintiff Jacob (Jack M.) Koretzky advised the court that the original bill of complaint had sought removal of the executors but had been amended to merely ask for restraint (see recital of prayers of the amended complaint, ante) due to alleged lack of jurisdiction in the former Court of Chancery to grant the relief of removal. See Leddel's Executor v. Starr, 19 N.J. Eq. 159, 163 (Ch. 1868). The trial court was advised that plaintiff would move at the conclusion of his case to restore that prayer for relief in view of the merger in the Chancery Division of the Superior Court of the jurisdiction of the former Court of Chancery and the former Prerogative Court effected by the Constitution of 1947. The testimony was closed without further motion by the plaintiff in this respect, but the trial court appears to have treated the foregoing remarks of counsel as a motion to amend the complaint and to have granted the same for paragraph 2 of the judgment rendered in the cause denies the application for removal of the executors. No objection to this informal treatment of the pleadings was or is raised by the executors-defendants or any other party. The trial of this action resulted in judgment entered on April 3, 1951, as follows:
"1. That the consent signed by Jacob M. Koretzky authorizing the payment by Bright Star Battery Company of $25,000 to Abraham I. Barash be and the same is hereby cancelled and declared void as to Jacob M. Koretzky;
2. That the application to remove Julius I. Kislak, Isaac Gross and Louis Kadison as executors of the estate be and the same hereby is denied;
3. That Isaac Gross, Louis Kadison and Julius I. Kislak be and they hereby are enjoined from qualifying as trustees under the last will and testament of Israel Koretzky, deceased;
4. That Walter T. Margetts be and he is hereby appointed as trustee under the last will and testament of Israel Koretzky, deceased,
in the place and stead of Isaac Gross, Julius I. Kislak and Louis Kadison, upon the filing of a surety company bond in the sum of $10,000 to be approved by the court, for the faithful performance of his duties as trustee;
5. That Isaac Gross, Julius I. Kislak and Louis Kadison assign and deliver to the trustee all of the shares of stock owned by the decedent in Bright Star Battery Company and Bright Star Warehouse Company;
6. That the full power to vote said stock at all meetings of the respective corporations be and the same is hereby vested exclusively in said trustee;
7. That the executors be and they are hereby enjoined from interfering in any manner with the operations and management of the aforesaid corporations;
8. That Isaac Gross, Julius Kislak and Louis Kadison, executors, be and they are hereby directed forthwith to resign as officers or directors of the said Bright Star Battery Company and the Bright Star Warehouse Company as the case may be;
9. That the management and operations of said corporations are hereby vested exclusively in the trustee;
10. That any of the parties to this action may apply to the court at the foot of this judgment for such other and further relief as may be just and proper in the premises; and
11. That no counsel fees be allowed in this proceeding to counsel for any of the parties plaintiff or defendant, on the ground that the court is without power to ...