Mutual Life Insurance v. Bailey (19 A.D. 204, 1897)

Parker, J.:

The foreclosure of certain mortgages, covering real estate of which Benjamin Richardson died seized, resulted in a surplus, for the distribution of which this proceeding was instituted. Among other contests over the fund was one between the heirs at law and the executors of the will of Benjamin Richardson, the former successfully contending before the referee that there were no liens on the real estate, and, therefore, that they were entitled to the fund, and the latter insisting that, by the terms of the will, the testator’s real estate was converted into personalty as of the date of his death, and hence the surplus should go to the executors for administration. As the answer to this question must be found in the will, let us look at so much of it as is pertinent.

“ I give, devise and bequeath to my executor, William T. Wash-burn, and to Emma Richardson, wife of my brother Joseph, and their successors in said office, my executrix, all the balance of my real estate, wherever located, in trust for the purposes following:

“ Burst. I hereby direct my said executor and executrix to sell all said real estate from time to time, as the same can be sold to advantage, and out of the avails thereof to pay all my just debts, all the incumbrances upon said real estate, and all the legacies herein given, and after all said debts, incumbrances and legacies are paid, to pay the balance remaining to such of my children as may be living at the time of my decease, and the share of such of my children as now are; or as may at the time of my decease be dead, tó their children, in such proportion or shares as the law would give them if I died intestate.”

The learned referee apparently reached the conclusion that, when this will was before this court on another occasion, something was said, if not decided, in hostility to the present contention of the executors. But we- do not so read the opinion in Whitlock v. Wash-burn (62 Hun', 369). It was held that the will did not create an express trust, and that question having been passed on, nothing further can be profitably said on the subject. But whether, under the doctrine of equitable conversion, the testator’s real estate became personalty as of. the date of his death, was not considered, nor was there .occasion for it. The suit was one to' reform a Contract for the sale of a portion of ■ the testator’s ’ land, entered into between the plaintiff and "Washburn, one of the executors, both executors having qualified, and it was held that the executors had not the title, for an . express trust was.not created,: but were the donees of a power to sell, and that both executors were required to personally assent and act.

In this case, the question is for the first time presented whether ■ the real, estate of the testator was convertible into personalty. And the answer is not difficult. The ■ rule is that when executors have imposed upon them by will the duty of selling all of a testator’s real ■estate, and of making distribution Of the entire proceeds, the ■ real estate will be deemed converted into personalty. (Everitt v. Everitt, 29 N. Y. 39; Power v. Cassidy, 79 id. 602; Fraser v. The Trustees, etc., U. P. Church, 124 id. 479; Underwood v. Curtis, 127 id. 523.)

Whether the conversion takes place at the death of the-testator, ■or at some later, period, depends upon the intention, of the testator. If the will, in terms, provides for a sale at a specified future time, ■or creates a.trust with the discretion to sell only on the- happening ■ •of a designated event, which might or might' not happen, then the ■conversion takes place on its occurrence.- Otherwise the conversion will be deemed to take place as -of the date of testator’s death. (3 Pom. Eq. Juris. §1162; Fisher v. Banta, 66 N.Y. 468.)

Every element requisite to an equitable. conversion of the real ■estate from which this surplus arises is present in this will. No discretion whatever is vested in the executors, except as to the time of ..sale. They are commanded to sell the real estate and évery part of it, and distribute the proceeds in •the manner directed by the will. With commendable industry counsel have brought to our;attention many cases in which was lacking some element essential to the con- ' version of a testator’s real estate into personalty as of the date of death, but "they are not serviceable in this case, where' the will, in clear, unmistakable terms, Confers upon the executors the power to sell all real éstate^ commands the exercise of that power as to every , part of it, .and directs the executors tp. make distribution of every ■.dollar of the proceeds. The testator’s real estate, therefore, at' the '■date of his death, became impressed with the character of personalty, and the avails of it, whether resulting from the exercise of the power of sale conferred upon the executors, or from a sale under a mortgage foreclosure, are personalty, which it is the duty and the right of the executors to receive for the purposes of administration. The referee should, therefore, have directed the payment of the surplus to the executors, instead of to the heirs at law.

The matter most seriously contested before the referee related to a bond and mortgage executed by the executors and the heirs at law of Richardson, in' which was described the property from which this 'surplus results. It seems that the executors and all others interested in the estate deemed it advisable to borrow the sum of $35,000, and a mortgage therefor was executed to Mary R. Washburn, the wife of one of the executors. It is the claim of the heirs that Mary R. Washburn was not at any time the owner of the mortgage; that the money which it was given to secure was the money of Emma J. Richardson, executrix,' and that the mortgage was given to Mrs. ■ Washburn for Mrs. Richardson, to whom it at all times belonged. The contestants introduced evidence tending to show withdrawals of moneys from the estate by the executors, which were not specially applied on any account at the time, amounting in the aggregate to a greater sum than the principal and interest secured by the bond and mortgage. It was also made to appear that Emma J. Richardson, the executrix, took an active interest in the affairs of the estate from the day of her qualification as executrix, and that she knew of W ashburn’s drawing large sums of money from the funds of the estate; indeed, that she consented and approved of his doing, so. By reason of these facts it was insisted that she was properly surchargeable as executrix with the amount of such withdrawals, and as they exceeded the sum secured by the bond and mortgage with interest, that such application of payments as the law made operated to discharge the mortgage-debt. On these facts the referee found in favor of the contestants, resulting in a decision that the mortgage was paid.

The evidence before the referee, upon that subject, justified the findings of fact made by him; but it is contended on the part of the appellant Mary R. Washburn, and we think rightly, that the referee refused to receive evidence, which she had a right to have considered by him in passing, on the question, of the ownership of ■ the mortgage as .to whether the mortgage belonged to her, as she testified, or to Emma J. Richardson, the executrix. The contestants, as a part of their case, put in. evidence a' declaration of trust executed' by Mary. R. Washburn, bearing the same date as that of the bond and ' mortgage, by which she agreed,' among other things, to make assignment of the bond and mortgage to Emma' J. Richardson upon demand, Mrs. Washburn offered in evidence an indorsement upon the. paper, containing -the declaration of. trust signed by Emma. J. Ricliardsoh, and it is said in the. briefs of conn-' sel, and in the . opinion of the referee that this indorsement purported to be a cancellation- of the declaration of trust.. The record of the trial, however, contains no suggestion,' either in. the questions or comments of counsel made at the time the indorsement was offered-in evidence', or subsequently, indicating its character.- .There is no basis, therefore,.on this review for holding that its exclusion ■ was error, for we are .not advised by. the récord that the indorsement was either material or relevant; • ■

■ Mrs.- Washburn'and. her husband both testified that the $35,000-was a gift from Emma J. Richardson to Mrs. Washburn. Against this- testimony, the contestants put in evidence an affidavit made' by Emma J. Richardson in a proceeding in Surrogate’s Court, in which ■she stated ip substance that, on the date of. the bond and- mortgage, .she loaned the estate $35,000 ;; that she paid the sum in two'checks, copies of which were given, and that, as security for the loan, she took a mortgage executed by the executors and all the heirs at law and next of lcin of Benjamin Richardson. Afterwards Emma J. Richardson was called as a witness in -behalf of. Mrs. Washburn, and the following questions were asked, and the-ánswérs excluded against Mrs. Washburn’s exception : “ Q. Mrs. Richardson, do yon at present own, or have you any interest, legal, or equitable, in the $35,000' bond and mortgage which has been offered in evidence in this proceeding ?. ” “ Q. If you have no interest in that bond and mortgage at -present, to whom.have yon parted with whatever interest you ever had in -it?” ' Mrs.'Washburn testified that Emma J. Richardson had given to her.this $35,000 mortgage, and she was entitled to Mrs. Richardson’s testimony on that subject.. '

The order should be.reversed,- the report, of the referee set aside and another referee appointed, with costs to the appellant’s executors payable out of the fund.

Van Brunt, P. J., Rumsey, Williams and Patterson, JJ., concurred.

Order reversed and report of referee set aside, and another referee appointed in the order to be entered hereon, with costs to the appellant’s executors payable out of the fund. \