Court Opinion

ID: 6139401
Source: CourtListenerOpinion
Date Created: 2022-02-05 14:31:04.350839+00
Date Added: 2024-06-11T08:54:34.062325
License: Public Domain

The Surrogate.
The testator was appointed a trustee by the heirs and widow of Joseph Graham deceased, to take possession of his real estate; and mortgage, lease, or sell the same for the purpose of paying the debts and charges thereon, and *190to invest one-third of the residue for the payment of the widow’s dower, and to distribute the remainder, including the aforesaid third on the decease of the widow, among the parties entitled. The trustee sold the property and performed the trust, except as to the distribution of the third to be invested for the widow’s dower. The widow and the trustee both having died, two of the persons entitled to a share of the fund retained for the widow’s dower have cited the executor of the trustee to pay over. The fund does not exist in the shape of specific investments, but was mingled by the deceased trustee with his own moneys. Can distribution now be made by the executor of the trustee without the appointment of a new trustee; and if so, are the funds to be distributed as real or as personal estate ? By the terms of the trust, it is evident there is no positive and absolute direction to sell the lands, but it is discretionary whether the sale shall be made. The instrument, therefore, does not of its own force effect a conversion of the estate from realty to personalty. Till the discretion was exercised, the property must be considered to have remained in its original state and condition; but after the power was exercised and the estate sold, or in other words, the conversion effected, it must be treated as personalty, according to its actual condition at the time of the decease of the parties interested. The rule seems to be this—that where the direction is unqualified and absolute, either to convert money into land or land into money, the property will bear the character so directed, even in case of devolution before the character so directed has been in fact assumed. But on the other hand, where there is a mere power or discretion to change the quality of the property, the succession will take effect according to the nature of the property at the time the succession attaches. When the authority has not been exercised, there is no conversion. (Bourne v. Bourne, 2 Hare, 35; Banks v. Scott, 5 Madd. 493 ; 1 Jarman, 530.) Thus, in case of a mortgage with power of sale, if the sale takes place in the life-time of the mortgagor, the residue is to be treated according to its actual condition as personalty; but if not *191made until after the mortgagor’s death, as realty. (Wright v. Rose, 2 Sim. & Stu., 323; Brown v. Bigg, 7 Vesey, 279; Polley v. Seymour, 2 Young & Coll., 708; In re Evans, 2 Cromp., M., & R., 206; Biggs v. Andrews, 5 Sim., 424.) And where there is a conveyance in trust with a power of sale, if the trustees sell in the life-time of the party entitled, and have the money in hand at the time of his death, it would belong to his personal representatives. (Griffith v. Ricketts, 7 Hare, 299 ; Story's Eq. Jur., § 790.) The reason Is obvious in cases where the trustee has no discretion, why his failure to comply with the directions of the deed or will, should not be permitted to alter the character of the property, or change the rule of succession. But if a discretion be given, then the conversion having been left to the judgment of the trustee, the nature of the property depends upon the exercise of that discretion. The testator, or grantor, in case of a will or deed, has given a power to change the nature of the subject matter; and as that power has been exercised or has not been exercised, at the death of the party in interest, so is the succession to be determined according to the character of the subject in its then existing form. The power relates back to the instrument by which it was given, and by relation is the act of the grantor. The descent takes effect according to the nature of the subject when the succession devolves. If a testator devise lands, and give a power to his executors to sell, the devisees take subject to the execution of the power. If a devisee die before the power be executed, the estate devolves as land, but if after, it devolves as personalty. The same rule applies to a grant in trust, with a power of sale. The only exception existing, is in cases of the sale of lands of infants.
But in the present instance, I think the grantors in the trust deed under which these lands have been sold, have provided expressly as to the disposition of the proceeds of the lands, under that clause of the deed which directs the fund to be divided “ among the parties of the first part, their executors, administrators, or assigns.” This must be carried out as a special direction of the deed, and a substantial part *192of the trust. (Van vs. Barnett, 19 Vesey, 102.) It thus being ascertained that, the property in the hands of the deceased trustee was personal estate, he was in respect to that fund a creditor of the cestui que trusts, or their representatives, and was bound to divide it among them on the decease of the life-tenant. He mingled the funds with his own, so that on his decease, his- estate remains indebted to the trust. On the death of the life-tenant, the trustee, not having divided the fund among the parties entitled, and the substance of the trust having terminated except simply the payment to the parties interested, it seems to me to fall within the jurisdiction of the Surrogate to order his executor to make that payment. There is no occasion for the appointment of a new trustee. That is not necessary to make title to the trust fund, for that has not been kept separately. The active branch of the trust has ceased, and nothing remains but to pay the several parties entitled. It is true the obligation having grown out of a trust, the demand is in the nature of an equitable debt; but the Surrogate has jurisdiction to examine, settle, and order the payment of equitable as well as-legal claims. (Jumel vs. Jumel, 7 Paige, 591; Gardner vs. Gardner, ibid., 112.) The executor on the final accounting can have all the parties in interest before the Court, the amount of the entire fund ascertained, and a proper distribution among the cestui que trusts directed, and this will exonerate him from further liability.