
    MATTER OF ORTHODOX CONGREGATIONAL CHURCH IN UNION VILLAGE.
    
      N. Y. Supreme Court, Third Department, Fourth District;
    
    
      Special Term, 1878.
    Religious Corporations.—Trustees.—Statute of Limitations.— Legacies.—Distribution of Surplus upon Dissolution of Religious Corporations.
    Trustees of a religious corporation should not be permitted to allow claims against the corporation which are barred by the statute of limitations.
    
    Where legacies to a religious corporation consisted of annual payments to be made to the trustees so long as the church should bear public testimony against slavery and intemperance,—Held, that when such public testimony ceased the right to the legacy ceased, and the principal of the legacies and unexpended interest received should be divided pro rata among the residuary legatees.
    Trustees of a church society who, without authority, change the securities of a trust fund from those authorized by law to those unauthorized, make themselves personally responsible for any loss sustained thereby, no matter how perfect the good faith with which they made the change.
    The church society, in such a case, is not liable for the loss to the residuary legatees upon forfeiture of the legacy, unless it in some way authorized or ratified the change.
    Upon the dissolution of a religious corporation, surplus funds derived from legacies should be paid over in such a manner as the court shall believe to be most in harmony with the will of the contributors to the fund, could they have foreseen the event.
    Application for dissolution of a religious corporation.
    Application having been made by the trustees, for the dissolution of the Congregational Church in Union Village, Greenwich, Washington county, in this State, and certain members opposing it, the court appointed a referee to ascertain and report a proper person for a receiver; what indebtedness existed; what property it possessed; what legacies were held by the corporation, and the purposes for which the trustees propose to apply the surplus of the property. The referee reported sundry small bills against the society, amounting to $84.37. In addition to this that two certain promissory notes, one for $700, dated April 2, 1839, on which there was due $820.59, principal and interest, and another for $1,025.03, on which there was due $3,368.96, principal and interest, were presented, and proved to be the property of Mrs. Ann 0. Holmes, of Greenwich, in her lifetime, and now held by the administrator of her estate, Mr. William M. Holmes, who claimed them as debts against the society, due said estate. That the trustees recognized and allowed these notes as a just and equitable indebtedness of the society, but that the remonstrants objected to them' as barred by the statute of limitations. That it appeared from the evidence based on information derived from Mrs. Holmes, in her lifetime, that the first mentioned note represented a part of moneys agreed to be paid as the purchase price of the lot on which the church edifice, parsonage and barn now stand; that said note when pressed for payment was taken up and paid by Mrs. A. 0. Holmes, by reason of the inability of said church and society to meet the same; that payments had been made thereon at various times down to and including the year 1840, and that since its transfer to Mrs. Holmes she had held it as a debt against the society, without pressure of payment on her part, on account of the poverty of said society.
    That the second mentioned note represented a loan to said society by Mrs. Holmes, and the amount represented thereby was used towards the erection of the church edifice and parsonage, and as purchase-money for the lot on which they stand. That the remonstrants objected that the trustees who signed this note were not trustees de jure of said society at the time said note was given, there having been no election of trustees between June 23, 1842, and February 28, 1848, and that therefore all the trustees must have been out of office June 23, 1845, about five months before said note was given. That it further appeared that this note was given in renewal of other notes for like amounts, from time to time, up to its last mentioned date. That copies of the two notes, with a memorandum wrapt about them, shown to be in the handwriting of Mrs. Holmes, were received in evidence by him under objection of the remonstrants, but without opposition on the part of the trustees. That it appeared that the trustees named in said note were the acting and recognized trustees, but not by actual election within the period required by law.
    The referee found also that the total estimated value of real and personal property amounted to $3,525.01, besides an unsettled account between the society and the estate of Dr. Hiram Corliss, the settlement of which, it was mutually agreed, should be effected between the receiver and the executors of said Corliss.
    That the legacies given to said society were bequeathed under four wills, made by Charles H. Holmes, Erastus Bigelow, Mary Bigelow and Angelina Gr. Mowry. That the wills of the three first mentioned persons gives the income of $1,000, while that of the last named gives $50 a year. That all of these are given in trust to the executors of said wills, to be paid to the persons who shall annually act as the trustees of said' church, for the use and benefit of said church and society, so long as the said church shall continue, openly and avowedly, to protest against slavery and intemperance, and withhold communion and fellowship from all persons who shall uphold slavery, and shall use, manufacture, and sell intoxicating liquors as a beverage. That the principal of the legacies given under the wills of the three last named persons was originally invested in United States 5-20 bonds, and' amounted to the sum of $2,800. That no particular investment was made of the principal of the legacy, given under the first mentioned will, but the interest was paid on the same by the executor of the said will, and after his death the same was invested in a security which has since become worthless. That the interest so bequeathed in said will was paid to the trustees of said society down to the year 1870 ; but no payments have been made since.
    That on February 3, 1870, under a written order, signed by William M. Holmes, Hiram Corliss, and A. P. White, three of, the then six acting trustees of said society, addressed to D. W. Mandell, treasurer thereof, the said treasurer was directed to sell the United States 5-20 bonds before mentioned, and invest $1,000 of the money in G. & J. R. R. bonds, and the balance of the fund in town bonds of the town of Greenwich, which order was immediately acted upon by said treasurer, in accordance with its direction, and the amount realized from the sale of said bonds was invested as follows: $1,000 in G. & J. R. R. bonds, par value $1,400, balance in town bonds, par value $2,000. . That the town bonds a secure investment, but the security of the railroad bonds somewhat doubtful, no particular value being placed upon them at present, but their estimated value being 40 cents.
    That the legacy given under the will first above mentioned will revert to the estate of Mrs. A. C. Holmes, of which estate Mr. William M. Holmes, her son, is administrator ; those given under the wills of Mary Bigelow and Angelina G. Mowry to the heirs of said persons respectively, viz.: Henry L. Mowry, William G. Mowry, Mrs. Jeannie E. Haskell and Mrs. Sarah M. Lavake, all residents of the town of Greenwich aforesaid ; that given under the will of Erastus Bigelow, on forfeiture óf the condition on which it is bequeathed, is directed by said will to be paid to the person who shall on such forfeiture act as the treasurer of the American Missionary Association, New York. That the reversions above mentioned also, depend upon forfeiture of the conditions under which the legacies are given. That it was claimed on the part of those to whom these legacies revert that such reversion should date from March, 1869, at which time the last pastor left, and since which time the regular and ordinary church services have not been kept up. That he found, from the evidence produced before him, that the society grew financially weaker up to March, 1869, when they became unable to support a pastor, and that since that time there has been no regular preaching of the gospel, and no administration of the sacraments of the church. That a formal organization was maintained, and moneys used for. church expenses at various times within the last nine years, but energetic action on the part of said society within this period has been an impossibility.
    That the trustees designated the “minister, elders, and deacons of the Reformed Batch Church in Union Village,” to receive said surplus. That he found this object to be a proper one under the statute, and such as said statute contemplates ; but it was contended, on the part of the remonstrants, that the purpose aforesaid is not a proper one under the circumstances of the formation of their church and society. That it appears that this society was originally formed by certain members of said Reformed Dutch Church, who, in the year 1837, withdrew from said church because of vital differences of opinion between them and said church on the subjects of slavery and intemperance. That it further appeared that said Reformed Dutch Church has no rule binding itself to withhold communion and fellowship from those who use, manufacture, or sell intoxicating liquors, although it is at presefit in full sympathy with the cause of temperance work, and gives active aid and encouragement to such work. That it is also claimed on the part of the remonstrants, and it appeared from the evidence, that a new Congregational society has been organized in said village; that any surplus arising from the sale of the property of the old Congregational church should be given to this new society, or to the American Congregational Union ; that it appeared from the evidence that the new society, so formed, as above stated, is financially weak, and there is no certainty of its continued existence. That a majority of the members of the old Congregational church and society have united with and become members of the church and congregation of the Reformed Dutch church aforesaid; and it is their wish that any surplus shall be given to said Reformed Dutch church.
    That as regards the interest account on the legacies between the church and the legatees he found that the church had received the interest on the legacies given under the wills of Erastus Bigelow and Mary Bigelow, each being $70 a year, from December, 1869, to May, 1878, ■ amounting, without interest or annual rests, to the sum of $1,190. That under the will of Angelina Gr. Mowry, the legacy of $50 had also been received by the church for the same time, amounting to the sum of $425, making a total of $1,615, which, if the legacies are to revert from 1869, the heirs and legatees claim shall be repaid them, the church taking the coupons on the railroad bonds, which have not been paid since November, 1873. That legacies of the three wills of Erastus and Mary Bigelow and Angelina Gr. Mowry represented a principal of $2,800, as before mentioned, invested in United States 5-20 bonds, but by the exchanges made as hereinbefore stated the total investment suffered a loss of $273.35, which, being on the principal of said legacies, the legatees claim should be made up to them by the church.
    
      D. At Boies (.Lowrie & Gibson, attorneys), for petitioners.
    A. A. Moor, for remonstrants.
    Trustees of religious societies possess no powers but those designated by the statute under which they act. They could only give a note in the name of the corporation and under seal (L. 1813, c. 60, § 4 ; Brockway v. Allen, 17 Wend. 40). They can only bind the church and society when assembled as a body (L. 1813, c. 60, § 5 ; Constant v. St. Alban’s Church, 4 Daly, 305 ; U. S. Dig. § 137; Packard v. Universalist Soc. in Quincy, 10 Metc. [Mass.] 427; Dennison v. Austin, 15 Wisc. 334, cited in 11 U. S. Dig. 691, § 137; Moore v. Rector, &c. of St. Thomas, 4 Abb. New Cas. 51). The note for §1,025.03 is the individual note of the trustees and not of the corporation (Baker v. Mechanics’ Fire Ins. Co., 3 Wend. 94 ; Taft v. Brewster, 9 Johns. 334; White v. Skinner, 13 Id. 307; Stone v. Wood, 7 Cow. 453; Moss v. Livingston, 4 N. Y. 208 ; De Witt v. Walton, 9 Id. 571; Powers v. Briggs, 79 Ill. 493 ; 22 Am. R. 175). The society having lost its existence by nonuser in 1843, and not having been reorganized until 1850, could not be the corporation sought to be bound now (L. 1844, c. 158, § 3 ; L. 1813, c. 60, § 16). The notes are barred by the statute of limitations, and the trustees should not allow them (Attorney-General v. Life Ins. Co., 4 Paige, 225, 226 ; Robinson v. Smith, 3 Id. 221, 231, 232, 233 ; Vestry, &c. of St. Bartholomew’s v. Cantey, 3 McCord [S. C.] 317; 11 U. S. Dig. 702, § 311). Equity regards the property of a corporation as held in trust for stockholders or members and creditors (Jackson v. Snelling, 21 Wall. 616 ; Chicago, &c. R. R. Co. v. Howard, 7 Id. 392, 409, 410 ; Cumberland Coal Co. v. Sherman, 30 Barb. 570). The act of the trustees, even where they can act in favor of one of their own number against the corporation, as in auditing his bill against it, must be at a meeting where there is a quorum without him (Butts v. Wood, 37 N. Y. 317 ; Gardner v. Ogden, 22 Id. 332). The trustees acting beyond the scope of their authority did not bind the corporation (Nat. Bank v. Norton, 1 Hill, 572 ; Bentley v. Columbia Ins. Co., 19 Barb. 595 ; N. Y. Central Ins. Co. v. Nat. Protection Ins. Co., 20 Id. 
      468). The trustees making the exchange should make good the loss (3 Paige, 331, 333). The surplus should not be given to the Reformed Dutch church, because that would be to divert the fund from its proper objects (Wheaton v. Gates, 18 N. Y. 395, 403). It cannot be given to any church or society but one in connection with the Congregational faith and order (L. 1875, c. 79, § 4; L. 1876, c. 176, § 1).
    
      
       See Chapin v. Thompson, 4 Hun, 779 ; Lowndes v. Garnett, &c. Mining Co., 33 L. J. Ch. N. S. 418; Koehler v. Black River Falls Co., 2 Blackf. 715.
    
   Landon, J.

I cannot allow the notes of Anna C. Holmes. On their face they have been barred by the statute of limitation for more than a quarter of a century. There is no evidence that the notes have not been paid. The declarations of Mrs. Holmes, in her own favor, are not such evidence as a court ought to receive or act upon; that the trustees consent to the reception of such evidence, and the allowance of the. notes, is of no value in this proceeding—whose rights and property are they thus giving away ? The consent of the officers of a company against the interests of a company may generally be set down as in favor of their own interests. It is the duty of the court to ascertain the debts, and the court refuses to consent to the allowance of a claim that has had no recognition for more than twenty-five years.

The receiver will report to the court the facts, when he ascertains them, in regard to the account between the estate of Hiram Corliss and the society.

The legacies given by the several wills consist of annual payments,, to be made to the trustees, so long as the church should bear public' testimony against slavery and intemperance ; upon further consideration I concur in the view that when such public testimony ceased the right to the legacies ceases.

The referee has fixed that cessation as in March, 1869. I do not find any reason to disapprove his finding.

From the referee’s report it appears that the church received the principal of the legacy funds under three of the wills, but not under the will of Charles Holmes. Under the latter will the church has nothing to restore. Under the other wills the principal of the fund has been invested in town bonds and railroad bonds, and nominally amounts to $3,400. The bonds should be divided pro rata among the residuary legatees ; seven-nineteenths under the will of Erastus Bigelow to the treasurer of the American Missionary Association; seven-nineteenths under the will of Mary Bigelow, to the residuary legatees named in the will, or their representatives; five-nineteenths under the will of Angeline Mowry, to the residuary legatees named in her will, or their representatives. I presume they are correctly named in the referee’s report, but I use the above terms for the reason that the referee uses the term “heirs,” and the two terms may not be identical.

So far as the church has, since March, 1869, spent the interests or dividends upon these investments, it must be held that the same was spent with the concurrence of the legatees ; so far as such interest remains unimpaired it should be paid pro rata- with the principal to the several residuary legatees. The deposit of $388.26, I presume, arose from these investments, and may be divided and paid as aforesaid. The costs of these proceedings as reported by the referee are allowed.

The receiver will pay such costs and his own fees and expenses out of the proceeds of the sale of real and personal property. He will pay the debt as reported by the referee, except the notes of Anna C. Holmes. He will distribute the securities as aforesaid, and the said remaining accumulation of interest thereon.

Upon what principle the church should pay to the residuary legatees the loss upon the securities held for its benefit, by the bank or by its trustees, I do not understand, unless it be that because there is a fund to be distributed, it should be distributed generously.

The individuals who changed the securities from ■those authorized by law to those unauthorized, made themselves personally Hable,—responsible for whatever loss the unauthorized investments sustained, no matter how perfect the good faith with which the investments were made. But that act, though made for the benefit of the church, was not the act of the church, and if it could recover of these individuals for the wrong done by them, it would be because the wrong was done to it. It would be a strange rule that would make the church liable because it has been wronged, unless it in some way authorized or ratified the wrong. The three individuals who changed the investments were not the church. I do not think in a proceeding of this kind the funds should be in any sense given to individuals if so, other churches may follow the bad example of this.

The founders of the church were Congregationalists. The Reformed Church, from which its founders went forth, was not stringent in a particular which they held to be vital, and hence this church was established.' I can hardly believe that in their zeal they would have complacently listened to the suggestion, that when the usefulness of this church was over, the Reformed Church should be heir of its estate. I think the American Congregational Union, of New York, is the best Congregational body to which this surplus can be paid, regard being had to what the court must believe to be most in harmony with the will, the contributors to the fund now under dissolution would have expected, could those contributors have foreseen this event. The Congregational society, recently organized at Greenwich, for the purpose, among other things, of sharing in this distribution, is for that reason excluded from it.

If the trustees will amend their petition so as to conform to the above suggestion, the order may be made accordingly; if not, the receiver will retain the surplus until the further order of the court.  