Case ID: ny-st-rep_55/html/0314-01.html
Source: Caselaw Access Project
Author: {"author": "Andrews, Ch. J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

George H. Dyett, App’lt, v. The Central Trust Co., Trustee, et al., Resp’ts.
    
    
      (Court of Appeals,
    
    
      Filed November 28, 1893.)
    
    1. Trust—Alienation by beneficiary of interest.
    Section 63 of the statute of uses and trusts, which disables the alienation by a beneficiary of a trust for the receipt of the rents and profits of lands of his interest, has no application to a (rust created prior to the Revised Statutes, and the beneficiary of such a trust has power to dispose of or incumber his interest.
    -2. Same—Power of sale.
    A trust deed, made pursuant to a marriage settlement, provided that it was in trust to sell and convey with the consent of the husband and wife, and invest the proceeds in other real estate or security, and with power to change the investment irom time to time with the like consent, so as to produce the best income without lessening the principal; to permit the husband to receive the rents and profits for the use of himself and wife, and if he survive, to receive the same during life; if the wife survived, then to permit her to receive them to her own use for life, and if there should be children, or the issue of children, living at her death, then to their use forever. The trustees, with leave of court, mortgaged the property in question, and invested the proceeds in a factory as a change of investment. Thereafter the mortgage was foreclosed, but the purchaser refused to complete the purchase, claiming that the mortgage-was only a lien on the life estate, and the children were not bound by the decree. An arrangement was then made by which the life estate was sold under the foreclosure to said purchaser, and with the. wife’s consent the trustee sold and conveyed to him the fee subject to such life estate. Held, that the sale was a valid exercise of the power of sale upon an exigency which seemed to require, in the interests of all parties concerned, that such power should he exercised.
    Appeal from, judgment of the supreme court, general term, first department, affirming judgment in favor of defendants, dismissing the ■complaint.
    
      A. R. Dyett, for app’lt; William Allen Butler, for resp’ts.
    
      
      Affirming 46 St. Rep., 615.
    
   Andrews, Ch. J.

The records of the courts of the state disclose that litigations growing out of the marriage settlement of September, 1821, commenced a few years after its execution and continued until the- sale of the property to Wiley, in 1849. He purchased the Broadway lot in that year for $39,500, which concededly was the full value of the fee; and from that time until the commencement of this suit in 1888, a period of nearly forty years, Wiley and his grantees have remained in undisturbed possession of the property, claiming absolute title.

This action is brought by one of the children of Mrs. Dyett, who died in 1885 at an advanced age. The action proceeds on the ground that the alleged title of Wiley and his grantees under the foreclosure of the Globe Insurance Company mortgage, and the conveyance by the trustees, are invalid, because Mrs Dyett, in 1831, when the mortgage was given, had no power to charge her interest in the land, and on the further ground that, even if the mortgage bound her life estate, the sale and conveyance by the trustees of the remainder, separated from the life estate, although made with her consent, was not a good execution of the power of sale given by the marriage settlement.

The discussion at the bar has taken a wide range, and the character of the title in the trustees under the marriage settlement, and also as it was affected by the Revised Statutes subsequently enacted, has been considered by counsel with great learning and ability. It is supposed by the counsel for plaintiff that if he should succeed in establishing that Mrs. Dyett’s interest in 1831 was that of a beneficiary of an express trust, within the meaning of the Revised Statutes, it would follow that under § 63 of the article of the Revised Statutes on uses and trusts she was incapable of mortgaging or aliening that interest, or in any way creating .a charge enforcible against the land or binding her equitable interest, and that, therefore, the mortgage to the Globe Insurance 'Company, executed in 1831, and under which the life estate of Mrs. Dyett was sold ’to Wiley in 1849, was void. I entertain no doubt that under the marriage settlement the trustees took the legal title to the Broadway lot, and.that the persons who-became successively entitled to the rents and profits took an, equitable life interest therein, with remainder on the death of Mr. and Mrs. Dyett to .their children. The appointment of trustees in marriage settlements to take the title to the lands-embraced in the settlement, to protect the interests created; thereby, was the common practice. By the marriage settlement in question, not only was there a formal conveyance of the Broadway lot to the trustees, but they were invested with a power of sale and to reinvest the proceeds in other lands or' upon real or personal security, and they were directed to permit. Mr. Dyett to receive the rents and income, or in case Mrs. Dyett. became entitled thereto under the provisions of the settlement, to pay the same to her for her sole and separate use, and on the death of Mr. Dyett surviving his wife, to hold the property to the-use of the children of the marriage, with like direction on the death of Mrs. Dyett incase she survived her husband.

It may be true, as claimed by the counsel for the plaintiff, that-the presence in the trustees of the legal title to the property embraced in the settlement was not indispensable to enable them to perform the acts and execute the authority contemplated. But there can be no doubt, I think, that the legal effect of the instrument was to vest the legal title in the trustees. The trust created; was not one which came within the purview of the statute of uses.. That statute applied to strictly formal trusts, and where any agency or authority was vested in the trustee, the statute did not execute the use and vest the legal estate in the beneficiary. Com-stock, J., Downing v. Marshall, 23 N. Y., 379 ; Lewin on Trusts, 246. The learned counsel for the plaintiff insists that the trustee originally took no title, and this insistance was made apparently for the purpose of establishing the invalidity of the mortgages executed by the trustees in 1823, for the payment of which the mortgage of 1831 was executed. He further claims that on the enactment of the Eevised Statutes the interest of Mrs. Djmtt became, by some metamorphosis not explained, changed from a legal life-estate into an interest as a beneficiary of a trust to receive the rents, and profits of land, and that the trustees then, for the first time, by operation of law, became vested with the legal title. This contention cannot be supported. The interest of Mrs. Dyett at all times was equitable and not legal, and she having, by the insolvency of her husband in 1827, become entitled under the terms of the settlement to the whole rents, and profits, she had thereafter, at any time, whether before or after the Eevised Statutes, the power to charge her equitable interest by lien or mortgage.

Under the common law a wife had complete capacity to dispose of, pledge or incumber her separate estate, or an interest settled to-her separate use, whether her interest was-legal or equitable, unless restrained by the instrument of settlement. Hulme v. Tenant, 1 Br. Ch. Cas., 16; Jaques v. Methodist Church, 17 Johns., 548; Vanderheyden v. Mallory, 1 N. Y., 452; Yale v. Dederer, 18 id., 265 ; 2 Story Eq., § 1388 et seq. This right, which was vested in Mrs. Dyett when the Ee vised Statutes were enacted, was not taken away or abridged by § 63 of the article on uses and trusts. That section which disables the alienation by a beneficiary of a ■trust for the receipt of the rents and profit of lands, of his interest, has no application to a trust created prior to the Ee vised Statutes. The concluding- section of the chapter containing the article on uses and trusts declares that: “ Hone of the provisions of this ■chapter, except those converting formal trusts into legal estates, shall be construed as altering or impairing any vested estate, interest or right, or as altering or affecting the construction of any ■deed, will or other instrument, which shall have taken effect at any time before .this chapter shall be in force as a law.” The power of a beneficiary in a trust created before the Devised Statutes to alien was plainly a right reserved from their operation. That Mrs. Dyett had the right to charge her separate estate or interest in the land, was expressly adjudged in the case of North American Coal Co. v. Dyett, 7 Paige, 9, one of the litigations connected with this trust, as also in the case of Warner v. Hoffman, 4 Edw. Ch., 381. In the casein Paige the validity of the Globe Insurance Company’s mortgage was recognized by making the ■charge established in that case subordinate to the lien of the mortgage. The validity of the mortgage was also adjudged in the foreclosure action. Even if these adjudications are not binding on the children of Mrs. Dyett as res adjudicaba, they not having been parties to those actions, yet they should be deemed controlling, and should be followed unless clearly erroneous. I think those ■cases were correctly decided, and that there is no ground for questioning the capacity of Mrs. Dyett to charge her life estate by mortgage, and that a valid charge was created thereon by the mortgage in question. So far, therefore, as the plaintiff’s alleged title rests upon the claim that the mortgage was an invalid instrument and did not bind Mrs. Dyett’s life interest in the Broadway lot, and that, therefore, a title derived under foreclosure did not pass that interest to Wiley, the purchaser, it cannot be supported.

The other contention on the.,part of the plaintiff is that the deed •of February 28, 1849, from the trustees to Wiley, in which Mrs. Dyett joined, purporting to convey the remainder in the Broadway lot, subject to the life estate of Mrs. Dyett therein, “ recently sold under a foreclosure in the supreme court of a mortgage by her, executed on the premises,” was not a good execution of the power of sale conferred on the trustees by the marriage settlement. The particular ground upon which- the plaintiff relies in support of this claim is that by a true construction of the power of sale conferred on the trustees by the marriage settlement, it could be exercised only by a sale of an absolute fee in possession, and that the trustees could not sell the remainder separated from the life estate of Mrs. Dyett. The trustees were given power to sell and convey to a purchaser, “in such manner as to convey-a fee,” and they were authorized to invest the proceeds to the end “ that the best annual interest be made thereon, without lessening the principal.” It is said that, assuming the validity of the mortgage as a ■qharge on Mrs. Dyett’s life estate, nevertheless the purchaser on the foreclosure was substituted simply to her right to receive the rents and profits of the land during her life, and that the foreclosure did not affect the power of the trustees to sell the entire fee, and that on such sale being made the right of the purchaser would attach to the proceeds of the sale made by the trustees, of which the purchaser could claim the income only during the life of Mrs. Dyett, leaving the whole principal to go to the children on her death. It will be observed that the alleged restriction of the power of sale is not found in any express words. The trustees were authorized to sell “ in such manner as to vest the fee in the purchaser.” These words were insefted apparently to render it clear that the power extended to a sale of the fee of the land and not for the purpose of defining how that purpose should be accomplished. Acconyjanying the authority for reinvestment is a statement of the purpose for which the power was to be exercised, viz.: “ To the end that the best annual interest be made, without lessening the principal.”

This clause seems to have been inserted out of abundant caution, so that the principal should not be sacrificed or hazarded by attempts to enlarge the income. In determining whether the trustees were acting within the power in selling and conveying the remainder to Wiley by their deed of February 28, 1849, it. is important that the situation should be considered. Wiley, having purchased on the foreclosure. of the Globe Insurance-Company mortgage, refused to complete his purchase on the ground that his purchase was of the whole title, and that the mortgage only bound the life interest of Mrs. Dyett. The plaintiff in the foreclosure action thereupon caused the premises to be re-advertised for sale under the decree. At this point the children of Mrs. Dyett, through their guardian, filed'a bill to enjoin are-sale, insisting substantially that the interests of all parties required that the sale should be consummated, and that the sum of $39,500, which had been bid by the purchaser, should be apportioned as between the life interest and the interest in remainder, and a temporary injunction was obtained. Thereafter, by arrangement between all interests, the infants being represented by eminent counsel, the sheriff resold the premises, and they were again purchased by Wiley for the sum of $23,700, the (J value of the life estate of Mrs. Dyett, according to the Northampton tables, and simultaneously therewith the trustees convoyed to Wiley, for the consideration of $15,800, the remainder. It is not disputed that these two sums, amounting to $39,500, represented the full value of the lot. These transactions, if valid, vested in Wiley an absolute title in fee, the life estate under the foreclosure and the remainder by deed from the trustees.

By the foreclosure of the mortgage Wiley, as purchaser, became entitled to all the rights of Mrs. Dyett,the mortgagor,in the lot. She would no longer be entitled to the rents and profits. They would belong to the purchaser on the foreclosure. One of the main purposes of the marriage settlement had thereby been defeated, viz., to enable Mrs. Dyett through the rents and profits of the land to provide for the support of herself and her children, which purpose is declared in the marriage settlement. This purpose of the trust was no longer attainable. The children were deprived of all means of support out of the property, except what might be derived from the sale of the remainder. The present value of the remainder, if realized, would, with interest thereon, in theory of law, represent the value of the whole fee at the termination of the life estate. There were contingencies. The property might increase or decrease in value. The trustees, acting in good faith, at the request of Mi’s. Dyett, made the conveyance. The case is anomalous and stands upon peculiar facts. It is not necessary to declare any general rule as to the power of a trustee under a limitation for life with remainder over, having a general power of sale,, to sell the several estates in the land separately, or having sold the entire fee, to adjust the life interest by the payment of a-gross sum out of the purchase money. Courts have undoubted power in a proper case to apportion, as between a life interest and remainderman, the proceeds of a sale covering both interests. Clark v. Seymour, 7 Sim., 67 ; In re Cooper, L. R., 4 Ch. Div., 802. The sale made by the trustees in this case was not in violation of the terms, nor, as we think, of the spirit of the power conferred, but was a valid exercise of the power upon an exigency which seemed to require in the interests of all parties concerned that the power should be exercised. What disposition was made by the trustees of the sum for which the remainder was sold, does not appear. Neither Wiley nor his grantees were bound to inquire as to its application, there being no suggestion of bad faith on their part. 2 Bev. St., 730, § 66, and cases in notes.

Bor the reasons stated the judgment should be affirmed.

Judgment affirmed, with costs.

All concur.