Opinion ID: 2302870
Heading Depth: 1
Heading Rank: 6

Heading: legality of certain investments.

Text: The guardian ad litem contends that investments Nos. 2, 3, 7, 10 and 11 were not investments in bonds and mortgages within the purview of the New York statutory authority permitting investments by trustees in bonds and mortgages, since the enforcement of the mortgages was delegated to the companies guaranteeing payment of the mortgages. The form of guarantee which accompanied the sale of the mortgages to the trustee constituted the guarantor irrevocably the exclusive agent of the assured trustee to collect the interest on the bond and mortgage and to exercise every option or privilege given by said bond and mortgage to the mortgagee. The guarantor, however, was given no authority to extend the maturity of the mortgage. It is true that the trustee did not have the same control over the bonds and mortgages as it would have had without the existence of the guarantor in the picture, but it is also true that without the guarantor the trustee would not have had any guarantee of payment of the mortgage. No citation of authority is presented in which such investments have been held to be illegal investments for trust funds in New York. The advisory master found as a fact that investments of this type were quite widespread in the State of New York during the years under consideration. Forms of guarantee similar to those used here were referred to without criticism in Matter of Harnden, 64 N.Y.S. 2d 180 ( Sur. Ct. 1946); affirmed, 271 App. Div. 979, 68 N.Y.S. 2d 798 (1947); leave to appeal denied, 296 N.Y. 1058, 73 N.E. 2d 120 (1947), and Matter of Allen, 142 N.Y. Misc. 113, 254 N.Y.S. 176 ( Sup. Ct. 1931). We see no reason to disturb the judgment below on this point.