Scholle v. . Scholle

Finch, J. Very convincing proof is furnished in this case that Baynor, at his death, owned an undivided three-tenths of the land in controversy notwithstanding his deed to Phillips, which, on its face, purported to convey his entire interest. That deed is liable to be reformed as against all the parties before us, and in judging the title proffered to the purchaser we must assume, in the interest of his safety, that such reformation may occur; and proceed to the inquiry whether that undivided three-tenths passed under his will to the grandchildren in remainder, or was taken from them and *270 their interest extinguished by the sale on foreclosure, or the deed given by the executrix. The grandchildren were not made parties to the foreclosure •of the mortgage given to Scholle; but the executrix, who alone qualified and entered upon the execution of the will, was made a party defendant. It is now claimed in behalf ■of the title tendered, that by the terms of Raynor’s will there was an equitable conversion of the real estate into personal, and that the grandchildren took no interest in the land, but ■only legacies in money coming to them through the exe■cutrix, and so her presence as a party was alone needed to make the judgment of foreclosure pass a clear title to the land when executed by a sale. There is in the will no imperative direction for the sale of the real estate. Indeed, there is no direction to sell at all. A power or authority to sell is given, but unless the exercise -of that power is rendered necessary and essential by the scope of the will and its declared purposes, the authority is to be deemed discretionary, to be exercised or not, as the judgment of the executrix may dictate, and so an equitable ■ conversion will not be decreed. ( White v. Howard, 46 N. Y. 162.) To justify such a conversion there must be a positive •direction to convert, which, though not expressed, may be Implied; but, in the latter case, only when the design and ■purpose of the testator is unequivocal and the implication so . strong as to leave no substantial doubt. (Hobson v. Hale, 95 N. Y. 598.) Where, however, only a power of sale is given without explicit and imperative direction for its exercise, and the intention of the testator in the disposition of his , ■estate can be carried out, although no conversion is adjudged, the land will pass as such and not be changed into personalty. (Chamberlain v. Taylor, 105 N. Y. 194.) We are, therefore, required to consider the terms of the will .and the purposes which they indicate. The testator, after a formal direction for the payment of debts and funeral expenses, gives certain specific articles to his wife and to his children; •and then, in the fifth clause of his will, gives, devises and *271 bequeaths to his executors all the rest, residue and remainder of his estate in trust, with power, first, to receive the rents and profits; second, to sell and convey the property; third, to invest both rents and profits and proceeds of sales; and, fourth, “to divide and apply the same and the income thereof” as directed. By the words “ the same,” as used in the last clause, the testator obviously means the entire residue given in trust, for the same words were used in a preceding clause where they ■could have no other interpretation, and the division referred to, as shown by its carefully expressed terms, was of the whole ■estate, and not merely of some portion invested. The testator then directs his executors to apply the income of two-sixths of the residue and remainder to the use of his wife for life, and, -upon her death, bequeaths and devises such two-sixths to his ■children then living, and the issue of those deceased. Then follow four clauses identical in construction and language, by which, as to each of his four children, he gives and bequeaths .and directs his executors to apply one-sixth of the residue to ■such child for life, with remainder over to the issue of such ■child then living, or the children of such issue," if deceased. A final provision respects the death of a child without issue and ■carries that over to the survivors and the issue of those deceased. There is thus contemplated beyond the life estate of the widow an equal division of the whole residue among the children for life, with a remainder over to the grandchildren. The final ■and ultimate division in no sense or respect requires or compels a conversion of the land into money, and each devise and bequest is of an aliquot part of the residue, and not of the proceeds of such residue when turned into money. A conversion would,, perhaps, be convenient as an aid to the ultimate distribution, but is not rendered necessary or essential to the final division. ISTor, as it respects the intermediate income, is any ■such conversion requisite. The executors are to receive the rents and profits, and are authorized to invest the same, together with any proceeds of sales which, in the exercise of their discretion, they may have made, but the income of the whole residue is given, and not merely of the invested funds; and *272 while the executors are apparently empowered to turn rents' and profits into capital by investing the same, they are not required to do so by any implied direction, and if they were, it would only indicate the testator’s expectation that land, as the origin of rents and profits, would remain in the hands of the executors until, by possibility, the date of final division. It is observable that the language of the testator is very carefully employed to rebut the theory of a conversion. In each of five articles, when giving income merely, he uses the phrase “ I give and bequeath,” appropriate to a mete gift of personal property, but when he creates the remainders, the language changes uniformly and in every instance and becomes “ I give, devise and bequeath.” The change of phraseology seems not to be accidental, but intentional, and to indicate the testator’s expectation that land, as such, would pass in the remainders, and their gift require "the added word “ devise.” Our attention is drawn to an adverse conclusion of the Supreme Court in another case not reported involving, by way of specific performance, the same title here in question. (Mut. Life Ins. Co. v. Wood, 51 Hun, 640.) We have given the opinion in that case a careful consideration. Its argument for a conversion is founded upon the idea that rents and profits are never to be divided as such, but to pass as capital into a fund the income of which is to be divided, and then the fund itself. If we concede that the power given to invest rents and profits makes such investment in all cases obligatory, which is a point open to question, it does not follow that the land was not given, subject to an appropriation during lives of the rents and profits, to a fund the income of which was otherwise appropriated. I am inclined to think, however, that the investment of rents and profits referred to by the testator had relation only to such parcels or portions of the land as the executors, in the exercise of their discretion, might see fit to sell, for in the ultimate division the testator gives, not aliquot parts of the invested funds or proceeds of sales, but of the very rest, residue and remainder which he gave to his executors in trust, and by a form of language alone appropriate to the transfer of land as *273 land. We are unable to discover in the scope or plan of the testamentary disposition any such necessity for an equitable conversion as would justify an implication of a positive direction. In the situation of the estate of Raynor, as it stood wheti his will was executed, there was much to occasion and explain a discretionary power of sale in his execntors but nothing to justify an imperative command. The bulk of his property consisted of real estate which he and his associates had purchased in the upper part of Hew York, and extending from One Hundred and Thirty-eighth to One Hundred and Forty-second streets, in numerous lots. The purchase was doubtless made by the testator and his associates with an expectation of large increase of values as the growth of the city extended. Raynor’s property was heavily mortgaged and he must have looked to great profits in his enterprise and contemplated a growth of value in the future which would not only pay off the incumbrances, but furnish a basis for the large advances which he authorized his executors to make to his children. But the future was uncertain. The expected increase might come swiftly or be very slow in its approach. And so he made the advances rest in the absolute discretion of his executors. They were not to be compelled to sell for the purpose of making them, and were to be governed in their action by what appeared to be for the best interest of the estate and its beneficiaries. To command a sale might be to compel a sacrifice, but a discretionary power met the exigencies of the situation, and such was explicitly given. We ought not to broaden and strengthen it by a needless implication into an imperative command. But the appellants claim that Raynor’s three-tenths, if not cut off by the foreclosure, passed from the remamdermen by force of the deed of the executrix to Scholle as a due execution of the power of sale. The facts disclosed were as follows: When the mortgage for $58,500 was assigned to Scholle, Raynor guaranteed its payment to the extent of *274 fifty per cent. After Raynor’s death, Scholle presented a claim to his executrix for one-half of the. mortgage and interest, which the executrix disputed. Thereafter Scholle began his action of foreclosure in which the executrix appeared and answered. The result was an arrangement by which the executrix withdrew her answer and. executed a deed to Scholle of the entire Raynor interests, and he in return withdrew his claim against the estate or. for any deficiency, and on the sale bid in the property for the full amount of the mortgage and interest. The substance of the transaction was a release of the guaranty in consideration of the conveyance to Scholle of Raynor’s whole interest. In her settlement before the surrogate Scholia’s claim appears first as not admitted, and afterward as settled by the deed of the executrix. The power of sale given by the will was- to sell at times or •in a manner which the executors should deem for the best interests of the estate. The authority contemplated' first a .sale, and second the exercise of a judgment as to the best •interest of the estate. Here there was, in truth, no sale such as ■the will contemplated. That was one for the purpose of realizing proceeds to be invested as the source of income and ■interest, and at a time when such values could be realized as ■would justify a sale instead of further delay for an appreciation of value. Nothing of that kind took place. No proceeds were realized. The land was appropriated to pay a debt chargeable primarily upon the personal property without an order of the surrogate or proof that the personal assets were -insufficient to pay the debts. The authority to sell was given for one distinct and definite purpose, and not at all to enable a •disputed debt to be compromised. The deed, therefore, -passed no interest of the remaindermen, and the surrogate was ■powerless to take it away and appropriate it to the payment •of debts except in the statutory method. (Allen v. De Witt, 3 N. Y. 276; Briggs v. Davis, 20 id. 15; Roome v. Philips, 27 id. 357; Russell v. Russell, 36 id. 581.) Whatever may have been the effect of the deed as against the interest;of Mrs. *275 Raynor, it was not a good execution of the power of sale as against the grandchildren, and did not divest them of their estate. It follows that the-title proffered was defective, and the purchaser was properly discharged. The questions involved were pure questions of law; unaffected by any possible change of the facts out of which they sprang, so far as the will and the deed of the executrix are concerned, and are not so doubtful or so evenly poised as to justify an omission to decide them. The order appealed from should be affirmed, with costs. All concur. Order affirmed.