Case ID: nj-eq_101/html/0037-01.html
Source: Caselaw Access Project
Author: {"author": "Leaking, Y. C.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Emmor Zelley, complainant, v. Pearl Zelley et al., defendants.
    [Submitted February 18th, 1927.
    Determined March 18th, 1927.]
    1. A deed of trust containing- a power of sale and imposing- active duties upon the trustee — I-Iclcl, to remove the legal title of the trustee from the operations of the statute of uses-during- the lifetime of the trustor.
    2. The duration of a trust is dependent upon and determined by its purpose.
    3. When no further duties are to be performed under an active trust the trust is terminated by the statute of uses.
    4. The doctrine of courts of equity is that equitable estates are considered, to all intents and purposes, as legal estates.
    5. When a trustee under a deed of trust sells real estate under a power, but in the absence of any specific direction to convert real estate into personalty, the money derived from the sale will retain the character of real estate and be dealt with as if it were actually real estate, except as to such part of the proceeds of sale as may have been administered by the trustee pursuant to the trust.
    
      6. Surplus at foreclosure sale retains the character of real estate.
    7. At distribution to a life tenant appropriate measures may be adopted to preserve the interest of those taking over.
    8. If orphans court declines to make a decree of distribution in settlement of an estate for want of jurisdiction, the court of chancery may entertain bill for the decree without putting parties to the necessity of appeal.
    On final hearing on bill for distribution of assets of Mary Zelley, deceased.
    Testatrix executed a will and codicil containing several bequests of personal property and appointing executors with power of sale of her real estate. By her will her real estate was directed to be sold at such time as her executors should determine and the proceeds of sale distributed, one share to each of her two daughters absolutely, and the other share to her son “to be held and enjoyed by him for life, and upon his death to go to his children.” No provision was contained in the will touching any residuary estate of testatrix.
    Subsequently, testatrix executed a deed of conveyance for all her real estate to one of her daughters, and received from the daughter a declaration of trust in which it was declared that under the conveyance the daughter had no claim in her own right but that the conveyance was made to her for the purpose of enabling her to sell, mortgage or otherwise use the said land for the benefit and interest of testatrix and the husband of testatrix, who is now deceased.
    Subsequently, the trustee under this deed of trust desired to sell a portion of the real estate of testator to one Lester Collins for $25,000, but by reason of objections raised by a title company in behalf of Collins touching the trust title, a foreclosure of an existing mortgage on the land was arranged and at the foreclosure sale the property was purchased by Collins for $7,000 in cash, and the execution of a mortgage to the trustee on the property so purchased for the balance of $18,000.
    The $7,000 cash, received by the trustee, was used by the trustee for the benefit of testatrix in her lifetime. Testatrix has since died and the $18,000 mortgage has been turned over to the executors of testatrix and-listed in their inventory of assets; the trustee under the deed of trust being one of the executors.
    The balance of the real estate of testatrix has since been sold by the executors for $30,000.
    The orphans court has refused to make a decree of distribution because of the issues involved growing out of the trust.
    The son of testatrix now claims that one-third part of the mortgage of $18,000, and one-third part of the $30,000, proceeds of sale of land, should be distributed to him absolutely, and not limited to him for life.
    The two daughters of testatrix contend that the mortgage and the proceeds of sale of real estate made by the executor should be divided into thirds, and one-third distributed to each of them absolutely, and the remaining third to the son for life only and secured to his children at his death. The testimony is in conflict touching the mental capacity of testatrix at the time the sale was made to Collins.
    
      Messrs. Wells & Tomlinson, for the complainant.
    
      Mr. George B. Evans, for the defendants.
   Leaking, Y. C.

The power of sale and duties imposed upon the trustee, as disclosed by the declaration of trust, remove the legal title of the trustee from the operation of the statute of uses prior to the termination of the trust. Price v. Sisson, 13, N. J. Eq. 168. But the duration of the trust was dependent upon and determined by its purpose; when no further duties were to be performed the trust was terminated by the statute of uses. Doe v. Simpson, 5 East. 162. Accordingly, at the death of testatrix and her husband the legal estate of the trustee in the real property then undisposed of by her terminated. Except as to any real estate disposed of by the trustee in the lifetime of testatrix the trust deed was inoperative upon testatrix’s will, since testatrix retained the equitable estate and the legal estate was restored by the statute of uses. The doctrine of courts of equity is that equitable estates are considerd, to all intents and purposes, as legal estates. Trust estates are subject to the same incidents, properties and consequences as, under like circumstances, belong to similar estates at law. They are alienable, devisable and descendable in the same manner. Cushing v. Blake, 30 N. J. Eq. 689. Testatrix’s will requires her real estate to be sold by her executors and the proceeds distributed in the manner stated. Sale has been made by the executors; distribution of the proceeds of that sale must be made in the manner directed by the will. The same is true as to the $18,000 mortgage, representing a portion of the proceeds of sale of real estate made by the trustee. Only the portion of the proceeds of the trustee’s sale which has been used for the benefit of testatrix can be considered as converted; the $18,000 unadministered surplus retains its nature as real estate and passed by the will in the manner there directed. This is because only a power to sell, as distinguished from a requirement to sell, was embodied in the trust. “If a trustee sells real estate under a power, but, in the absence of any specific direction to convert real estate into personalty, the money derived from the sale will retain the character of real estate to descend and be dealt with as if it were actually so.” 28 Am. & Eng. Encycl. (2d. ed.) 916. Should the mortgage be treated as surplus at foreclosure sale the same would be true. Servis v. Dorn, 76 N. J. Eq. 241; Oberly v. Lerch, 18 N. J. Eq. 346. At distribution appropriate measures should be adopted to preserve the share of the son for his children at his decease.

I entertain the view that the,orphans court should have made the decree of distribution. But that court having refused, this court may appropriatefy entertain a bill of this nature-without putting the parties to an appeal. Gallagher v. Lembeck & Betz Eagle Brewing Co., 86 N. J. Eq. 188; Headly v. Leavitt, 65 N. J. Eq. 748.