THOMPSON'S EX'OR v. BROWN, &c.

(Filed June 17, 1903.)

Wills-Public charity-This action involves the construction of a clause of the testatrix's will directing that her executor sell her property, and after payment of certain bequests and funeral expenses shall distribute the balance to the poor in his discretion. Held-That the devise is sufficiently definite to establish a public charity.

Thompson & Spalding for appellant.

H. P. Cooper for appellees.

Appeal from Marion Circuit Court.

Opinion of the court by Chief Justice Burnam.

The eleventh clause of the will of Elizabeth Thompson, who died in September, 1897, reads as follow: "I will and direct that my house and lot in Raywick, Ky., be sold at such time and on such terms as my executor may deem best, and I will that the proceeds, together with whatever other estate I may have after the payment of the aforesaid bequest and funeral expenses, shall be collected by my executor, and by him distributed to the poor in his discretion."

The only question for decision upon this appeal is whether the gift in this clause is sufficiently definite to be enforcible under section 317 of the Kentucky Statutes, which require that such gifts shall point out with reasonable certainty the purpose of the charity and the beneficiaries thereof. Very different rules from those that are applied in establishing and administering private trusts will be applied in order to give effect to the intention of a donor to establish a public charity. In discussing this question Perry on Trusts, section 687, uses this language: "If in a gift for private benefit the cestui ques trust are so uncertain that they can not be identified, or can not come into court and claim the benefit conferred upon them, the gift will fail. But if the gift is made for a public charitable purpose, it is immaterial that the trustee is uncertain or incapable of taking, or that the objects of the charity are uncertain and indefinite. Indeed it is said that vagueness is in some respects essential to a good gift for a public charity, and that a public charity begins where uncertainty in the recipient begins."

The general doctrine upon the question of charitable bequests is that the beneficiaries should be designated as a class only, leaving the number and individuals to be determined by the trustees who administer it. Devises for the poor have always been favorite modes of dispensing charity by benevolent persons, and trusts created for this purpose have been generally upheld by the court. In Moore's Heirs v. Moore's Devisees, 34 Ky., 354, it was decided: "When an ascertainable object is designated by the donor in general and collectible terms as the poor of a given county or parish, or when a person is appointed by him to select a described portion or kind or number from a designated class, the chancellor, sitting as judge in equity, will interpose on the ground of trusts."

In the case of Curling v. Curling, 8 Dana, 38, James Curling left the residue of his estate for the use and benefit of a public seminary, not designating where it was to be located. The circuit judge held the devise void for uncertainty, but upon appeal to this court Judge Robertson, delivering the

opinion of the court, said: "The testatrix by designating a general object of charity (a public seminary), must be understood as intending either a seminary, or the seminary of his county, or any seminary, which his executor or a court of equity, in the exercise of a sound discretion, should select as best adapted to effect the object of charity. Upon either of these hypotheses the testator's purpose, as declared and circumscribed by himself, may be fulfilled by applying the fund to a specific object without any hazard of perverting his bounty in a manner not contemplated by him, and authorized by his will. Therefore, according to principles established as perfectly judicial, we are of the opinion that the devise created a charitable trust, which may be executed according to law, and without violating the will of the testator or making a will for him, and, therefore, we conclude that the circuit court ought to have decreed the appropriation of the profits of the devise to the use of the Trigg Seminary, and appointed a trustee to execute the trust."

In the very recent case of Spalding v. St. Joseph's Industrial School, 21 Ky. Law Rep., 116, Judge DuRelle uses this language: "All the Kentucky cases have sustained the charitable uses therein considered because the court held that a charitable object was indicated, or a class of charitable objects. designated, from which choice was authorized to be made. In some of them there is room for difference of opinion as to the certainty of the objects of the charitable uses sustained, but the courts have always held that they were certain, either by being designated by the donor or one of a class designated by him from which choice was authorized to be made.”

In Bedford v. Bedford, 18 Ky. Law Rep., 193, the devise was to the State of Kentucky in trust for the benefit of the State, the profits therefrom to be appropriated annually forever towards the education of the children of the State, particularly the poor and most unintelligent. The devise in this case was sustained as sufficiently definite. The court said: "Trusts must be for the benefit of an indefinite number of persons, for if the beneficiaries are personally designated the trust lacks the essential element of indefiniteness, which is one characteristic of a legal charity, and which distinguishes it from a mere private trust."

There has been considerable diversity in the decisions of the courts of the various States of the Union as to the extent they will go in upholding an indefinite trust. In some States, particularly Marlyand, Virginia, Michigan, New York and Wisconsin, it has been held that courts of equity have no greater jurisdiction to enforce public than private trusts. On the other hand, in Kentucky, Maine, Massachusetts, Misssouri, Pennsylvania, and many other States, where the principles of 43 Elizabeth, chapter 4, are accepted, they have gone to the farthest limit in this regard. In this State sixteen decisions have been reported upon this question of charitable uses, beginning with the case of Glass & Bonta v. Thomas, 2 Dana, 170, in which charitable bequests have been uniformly upheld. But it is insisted that the amendment to section 317 of the Kentucky Statutes, passed by the general assembly in 1893, which is in these words: "If the grant, devise, gift, appointment or assignment shall have pointed out with reasonable certainty the purpose of the charity and the beneficiaries thereof, etc.," was intended by the law-making department of the government to change the rule which

has heretofore prevailed in this State. The words of the amendment are the same as those used in several opinions sustaining bequests to various charities, and it would be more consistent with reason and common sense to believe that the legislature simply intended to crystallize into the statute law the doctrine which has been so often announced by this court, and which has been accepted with approval by the profession, the general assembly, the public at large, and by most eminent text-writers.

The gift in this case is to the poor as a class, and the testatrix has appointed her executor to select from this class the persons who are to receive the benefit of the charity. In our opinion the judgment of the trial court is in conflict with what has become the settled legislative policy in this State with respect to public charities, and Spalding v. St. Joseph's Industrial School, 21 Ky. Law Rep., 116, relied on to support the judgment of the trial court, is not in conflict with the other case, and the devise in this case should be upheld.

For reasons indicated the judgment is reversed and cause remanded for proceedings consistent with this opinion.

MILLER v. FARMERS BANK OF KY., USE OF SAM JETT.

(Filed June 17, 1903-Not to be reported. )

1. Champerty-Adverse possession-P. recovered judgment against E., enforcing a lien for purchase money, and M. became the purchaser at the sale and took possession, but failed to pay the purchase money. Afterwards P. took out an execution which was levied on the land, and he became the purchaser. He afterwards obtained a writ of possession for the land, but did not have it issued or executed. P. sold the land to M., and it was afterwards included in a large boundary conveyed by order of court to the Farmers Bank, who sold and conveyed it to J., and he failed to pay for this tract of land held by M., who was the nephew of P., who had permitted him to hold possession. The bank instituted this action in equity to dispossess M. of the land. It is insisted for M. that M.'s possession was adverse, and, therefore, the deed to the bank was champertous, and the judgment of P. against M. was void, as he was not before the court. Held-That the possession of M. was not adverse to P., and the deed was not champertous, and appellant can not in this collateral proceeding question the correctness of the judgment in favor of P. against M.

2. Parties to actions-The bank has a lien on the land for the purchase money, and, therefore, has an equitable interest in it. It was necessary for it to get M. out of possession to protect its interest, and although it had conveyed the land to J., it might maintain an action in equity for the protection of its rights.

J. B. Marcum for appellant.

J. J. C. Bach, John Patrick, Kelly Kash and John W. Rodman for appellee.

Appeal from Breathitt Circuit Court.

Opinion of the court by Judge Hobson.

In the year 1876, M. W. Puckett recovered judgment in the Breathitt Circuit Court against Wesley Edwards, enforcing a lien for purchase money

on a tract of 100 acres of land. The land was sold on February 19, 1877, and M. W. Miller became the purchaser, executing bond with surety. He failed to pay the bond and Puckett took out an execution on it, which was levied on the land by the sheriff. After proper proceedings the land was sold and Puckett became the purchaser. On July 3, 1878, Puckett filed suit against Miller to recover the land. This action was consolidated with the former action then pending of Puckett v. Edwards, and on July 5, 1889, a judgment was entered in the consolidated actions in favor of Puckett, and awarding him a writ of possession for the land, the court holding that no conveyance was necessary as the legal title was already in him. Puckett allowed Miller, who was his nephew, to remain on the land, and while he was thus in possession, the writ of possession in favor of Puckett not having been sued out or executed, Puckett sold to John Meagher, and on March 19, 1896, in a suit of M. W. Puckett against John Meagher, the land was included in a large boundary conveyed by order of the court by commissioner's deed to the Farmers Bank, who sold and conveyed it to Sam Jett.

Jett refused to pay the bank for the 100 acres held by Miller, and thereupon it filed this petition in equity, praying that Miller be dispossessed of the land, and for writ of possession therefor. The court on final hearing adjudged the bank the relief sought, and Miller appeals. It is insisted for appellant that Miller's possession was adverse, and, therefore, the deed to the bank was champertous; also that the judgment against Miller in favor of Puckett is void, as he was not before the court, and that the bank having sold to Jett, is not the real party in interest and can not maintain an action.. In Swager v. Crutchfield, 72 Ky., 411, it was held that the champerty act did not embrace a case where the vendor had already litigated the title with the occupant and had obtained a judgment in his favor, which was irreversible. Besides, the proof heard on the trial is not sufficient to establish an adverse holding by Miller after the judgment in favor of Puckett against him for the land. As that judgment is not directly attacked and is only assailed now collaterally, it is presumed that the court had jurisdiction, although no service of process is shown. (Freeman on Judgments, section 124; Jones v. Edwards, 78 Ky., 6.) The bank has a lien on the land for its purchase money, and, therefore, has an equitable interest in it. It was necessary for it to get Miller out of possession to protect its interest, and although it had conveyed the land to Jett, it might maintain an action inequity for the protection of its rights. On the whole case the judgment in favor of appellee seems clearly in accordance with justice and right. It is, therefore, affirmed.

TAYLOR v. COMMONWEALTH.

(Filed June 18, 1903.)

Criminal law-Embezzlement by president and director of an investment company-Indictment-Appellant and four others organized an investment company of which appellant became president and director. He was indicted and convicted under section 1202, Kentucky Statutes, for embezzlement of the funds of the corporation, from which he prosecutes an appeal, and insists that the indictment is insufficient, and that a demurrer thereto should have

been sustained on the ground that it charged two offenses: One, in that appellant embezzled the money of the corporation; and the other that he embezzled the money of various persons other than the corporation. Held-That said indictment charges but one offense, the taking of a certain $500, in one fund and at one time. Its ownership was not material further than that it must be charged and shown to have belonged either to the corporation of which appellant was an officer or agent, or to some person who had entrusted its possession to that corporation. Under said section of the statute the distinguishing features of the crime of embezzlement are that the official should have come into possession of the property converted by reason of the confidence and trust reposed in him by virtue of his position, and that he should have converted such property fraudulently; in other words, it is to punish fraudulent breaches of trust when committed by such persons. The indict-ment is sufficient.

2. Evidence-The proof shows that the object and purpose of the corporation was to issue certificates of membership, to be sold to the public, who should make weelky payments of coupons, and the corporation agreed to redeem same in a certain method. The incorporators insist that the certificate holders were in no sense members of the corporation, and were not en-titled in any event to share in its profits. It is also insisted that they were not regarded as creditors either. Held-That their relation was that of creditors. It is apparent that the scheme attempted was impossible of execution, honestly, so as to perform all the contracts. The most charitable view to take of it is that it was a species of lottery. So far as the manifest purposes of the corporation are concerned they do not appear to have been illegal. The liability of the corporation is first to pay to its creditors their demands in full, or to provide therefor, before the stockholders are entitled to distribute anything among themselves as dividends, or otherwise, than in legitimate expenses actually incurred in the business. If the corporation is solvent when it pays dividends to stockholders, and their payment does not impair its capital and resources set apart to pay its debts, then the discretion of its directors in declaring and paying the dividends will not be questioned. The corporation in this case had not the right, if it was in fact insolvent, to distribute about 20 per cent. of its assets among its stockholders as dividends, when all of its assets would not pay its liabilities. The board of directors met on May 14, 1901, and declared a dividend of $2,500 ($500 to each stockholder), payable to themselves. Two other similar dividends were subsequently declared, and thereafter the affairs of the company were placed in the hands of a receiver as insolvent. Appellant was indicted for fraudulently converting and embezzling $500, which was a part of the dividend declared on May 14, 1901. The inquiry in this case, therefore, should have been, first, to learn whether the corporation had assets on May 14, 1901, which might be lawfully used in paying dividends, that is, a surplus in fact, whether or not in name. If it had not, the question of motive of the directors becomes important and controlling. If the directors believed they had the right to pay the dividend, or if they paid it in utter ignorance of their legal right, but without any fraudulent motive against others interested in the assets of the corporation, they can not be guilty of the crime charged. On the other hand, if they at the time knew that there were not funds belonging to the corporation which could legally be used in paying the dividend, and passed the resolution declaring it, and paid it with the fraudulent purpose of converting to their own use the money of the corporation, using the form of declaring the dividend as a blind to cover their peculations, then they are guilty under the statute. To determine whether the company was solvent on May 14, 1901, proof of its resources and assets, their solvency and security, should have been allowed