Court Opinion

ID: 3609302
Source: CourtListenerOpinion
Date Created: 2016-07-05 23:53:56.181367+00
Date Added: 2024-06-11T12:21:52.875904
License: Public Domain

To me it seems very clear that the Legislature did not grant permission to trustees to invest in certificates of participation in a group of mortgages *Page 214 
where the group is not fixed but is subject to change and substitution at the will of the mortgage company. The language of the statute does not authorize such investments. It permits fiduciaries to invest "in bonds and mortgages on unincumbered real property in this state worth fifty per centum more than the amount loaned thereon, and in shares or parts of such bonds and mortgages, * * *." The statute does not authorize the trustee, even by implication, to delegate to the mortgage company his discretion to determine in what bonds or mortgages or shares or parts thereof the funds should be invested. To permit the investment in the certificates involved in the case at bar constitutes an irrevocable delegation of this discretionary power.
It is urged that it has been generally accepted that the statute permitted such investments and, therefore, we should read into the statute this practical construction. Some support for this argument is found in an opinion of the Attorney-General rendered in 1928 in which he stated that he believed that the statute should be construed to authorize such investments. Such a statement by the Attorney-General is not binding upon the courts. Nor is it clear that the practical construction which the appellant asserts was placed on the statute was universally accepted. That some at least doubted that the statute permitted of such construction is evidenced by the fact that in 1930 a bill to legalize such investments was introduced in the Legislature, and that the bill was condemned by a publication circulating among corporate fiduciaries and by members of the bar. (50 Trust Companies Magazine, p. 182 [1930]; Simpson, Participation Certificates Permitting Substitutions of Securities as Legal Investments for Trust Funds, 7 N.Y.U. Law Quart. Rev. p. 950; Report of Committee on State Legislation of the Association of the Bar of the City of New York [No. 69]; Bulletins of Committee on State Legislation [1930], p. 122.) The bill died in committee. *Page 215 
We cannot draw any definite conclusions from the failure of the legislative committees to report the bill or from the criticisms of the bill, but that it was introduced and appraised shows that there was not unanimous acceptance of this so-called practical construction.
The mere fact that a number of trustees have invested in such certificates is not sufficient reason for reading into the statute a grant of authority to trustees to delegate to mortgage companies the discretion to determine in what property the trust fund should be invested. Such discretion has always been held to be non-delegable and the way of the court lies plain unless a statute by clear and express language alters the wise and established rule. (See 3 Bogert on The Law of Trusts and Trustees, p. 2028; Matter of Allen, 142 Misc. Rep. 113.)
The decree of the Surrogate, unanimously affirmed by the Appellate Division, was right and should be affirmed.
CRANE, Ch. J., O'BRIEN, HUBBS and LOUGHRAN, JJ., concur with LEHMAN, J.; FINCH, J., dissents in opinion in which RIPPEY, J., concurs.
Ordered accordingly.