Jermain v. Sharpe

Edwabds, J. I am of opinion that the report of the referee should be confirmed, except as to the fourth and sixth conclusions of law, wherein he finds that the demand of the claimants to withdraw from the fund the gross value of the life estates should be denied, and that only the annual income should be paid to them. But for the mortgage lien of the claimants there could be no doubt of the right of the life tenants, Elizabeth S. Graver and Chester B. Graver, to elect to take a gross sum representing their estates, and I see no reason why the court, in the exercise of its discretion, should not, in that case, direct the payment to them of such sum. The learned referee is of opinion that the claimants have not the legal right to elect to take such sum against the objections of the life tenants. I think that this right of election passed to the mortgagee as an incident of his mortgage lien, and the life tenants are not in a situation to object to the exercise of such right by the claimants, who are the assignees of the mortgage. It is a right which may be transferred either by the voluntary act of the life tenant or by operation of law. He may convey his estate and his successor in interest takes it with the same rights which the grantor might have exercised, or he may be divested of his estate against his will and his successor takes his rights with his interests in the property. A receiver, in proceedings supplementary to execution, is vested with the right, against the objection of the life [262] tenant, to consent to accept a gross sum in lieu of the life estate of the judgment debtor in the proceeds of the sale in an action of partition. Wood v. Powell, 3 App. Div. 318. So, also, the life tenant may mortgage his estate, and I think that this right to elect or consent passes to the mortgagee to enable him to realize the value of his security out of the land or its proceeds whenever -it becomes necessary to enforce his lien. The rights which the life tenant otherwise might have exercised then become available to the mortgagee. I think that the claimants are, within the meaning of Supreme Court rule 70, parties who may consent to accept a gross sum in lieu of annual interest or income for life. The referee, in his opinion, cites, as authorities for his conclusion, Matter of Camp, 126 N. Y. 377, and Matter of Zahrt, 94 id. 605. In the former case the court held that one having a life estate in a fund, the proceeds of land, and who was guardian of the remainderman, could not be compelled, on an accounting, at the instance of the remainderman, to accept a gross sum in lieu of his annual income. That was not a case where the life tenant was electing to take a gross sum, but where the remainderman was attempting to compel him to accept such sum against his objections. In Matter of Zahrt, supra, the court simply held that a person is not absolutely entitled to a gross sum in lieu of the annual income, but whether or not he shall have it rests in the discretion of the court, and under the particular circumstances of that case it was proper that it should be denied. I do not think that either of those cases is authority for the contention that the mortgagee of a life tenant, having a lien upon the surplus fund, has no right to elect to take a gross sum against the life tenant’s objection. It is contended by the counsel for the life tenants that the court has no power to permit the withdrawal of a gross sum in lieu of the income, for the reason that the persons entitled to the remainder are uncertain, may be the unborn children of Chester B. Graver, and are not represented in this action. I think a sufficient answer to this objection is, that the right to elect or consent to accept a gross sum is exclusively the right of the life tenant. It does not depend upon, nor is any way affected, by the wishes of the remainderman. It may be exercised by the life tenant without the consent and against the objection of the remainderman. The counsel for the life tenants further contends that the court cannot permit an impairment of the estate of the remaindermen by the with [263] drawal of a gross sum from the fund. The answer to this is that the withdrawal of such a sum is not, in equity, deemed to be an impairment of the estate of the remaindermen. The theory upon which a court of equity permits a life tenant to take a gross sum, in lieu of his estate, is that such sum is the equitable value of his estate, and that what is left is the equitable value of the estate of the remainderman. The fund remaining, after the withdrawal of the value of the life estate, with the accumulation of interest, will be equal, at the time of the death of the life tenant, to the corpus of the fund to which the remainderman is entitled. The court ascertains as accurately as possible the present value of the estate of both the life tenant and of the remainderman, and neither is deemed to be impaired by the separation. The remainderman takes his estate; subject to this right of election in the life tenant. Although the right is not an absolute one, it is one which the court, in its discretion, always permits the life tenant to exercise when no equitable reasons to the contrary exist. I can see no reason in this case why the life tenants, if their estates were unincumbered by the mortgage, should not be permitted to accept a gross sum from the fund; and as the estates of the remaindermen could not be differently affected by granting such permission to the claimants, I think that it should be granted. As the court has before it, on this motion, all the data from which the value.of the life estates of Elizabeth S. Graver and Chester B. Graver can be ascertained, and also the amount for which each is liable on the mortgage, the calculations will be made by the court on the settlement of the order, on notice, and the question of costs will then be determined. Ordered accordingly.