Summary
In Sayles v. Best (140 N.Y. 368), the court held that the fiduciary who had prior notice of an outstanding indebtedness of a legatee had no active duty to the judgment creditor except the proper administration of the estate and that there was no authority permitting payment of such indebtedness from estate funds.
Summary of this case from Matter of McClureOpinion
Argued November 28, 1893
Decided December 12, 1893
E.F. Bullard for appellant. Charles S. Lester for respondents.
Upon the death of Peter K. Best in 1878, his son Alfred became seized of an estate in remainder in the equal undivided twelfth part of the homestead farm, liable to be defeated by the exercise of the power of sale by the executors. (4 R.S. [8th ed.] p. 2439, § 59.) With respect to the other farm the situation was different. No precedent estate in it was given to any one and no valid trust estate created in the executors. The utmost that can be said is that a power in trust was given to the executors to rent the lands until the youngest child became twenty-one, and then to sell and divide the proceeds among the heirs. (Id. § 58.) It follows, therefore, that immediately upon the death of the testator the son became vested with a present estate in fee to the undivided one-twelfth part of this farm, subject to the execution of the power in trust. His estate could not be defeated until the youngest child became of age, when the executors were authorized to sell and distribute the proceeds. The estate which Alfred had in both farms was descendible, devisable and alienable in the same manner as if it had been an estate in possession. (Id. § 35.) It was consequently subject to the lien of any judgments that might be recovered against him while it continued, and to sale under execution thereon, and the purchaser would take the estate which he held and succeed to whatever rights he had in the property. (Code C.P. §§ 1251, 3343, sub. 6.) It must then be held that the plaintiff acquired a lien as a judgment creditor upon the estate which Alfred had in these farms by the judgments recovered against him in 1877 and 1878. The deed from Alfred to Williamson in 1884 conveyed this estate to the grantee, subject to the lien of the plaintiff's judgment. The power of sale became operative as to the homestead farm June 25th, 1887, and as to the other farm March 21st, 1887, and the subsequent execution of the power on April 2d 1888, became effective as of these dates respectively to extinguish the estate which Alfred had in the land, and resulted in an equitable conversion of the land into money as of the times when the power might have been exercised, and thereafter the rights of all parties interested in the estate which Alfred had in the land were transferred to the fund, including the lien of the plaintiff's judgment. The sheriff's sale on execution, September 29th, 1887, made no change in the relative rights of the parties to this action, inasmuch as the judgment creditor became the purchaser, and it was over-reached by the subsequent execution of the power of sale.
On May 29, 1888, when the executors had their final accounting, the legal situation may be thus summarized: The executors had in their hands a fund of $2,245, which represented the share to which Alfred was originally entitled in the testator's real property; the plaintiff had a lien upon the fund for the amount of his unpaid judgments, and Williamson and another had the legal title to the fund by transfer from Alfred subject to the lien of plaintiff's judgments. In a proceeding instituted by the executors in conformity to the statute, and to which all persons were presumably made parties whom the law required to be cited, the surrogate on that day directed the executors to pay over this fund to the grantees of Alfred, which decree the executors obeyed. The plaintiff was not a party to this proceeding, and the Code did not require his presence in order to confer jurisdiction upon the surrogate to make the decree, and his right to or interest in the fund was not affected by the decree. So far as he was concerned its sole effect was to discharge the executors from all further responsibility as custodians of the fund and transfer the fund into the possession of Williamson and the executor of Jane E. Best's estate. Whatever lien he had on it in the hands of the executors remained unimpaired by the change of possession, and whatever remedies the law authorized him to adopt for the purpose of enforcing his lien were available to him after the payment of the money to the judgment debtor's grantee to the same extent as before. The decree, therefore, did not operate to deprive him of any rights, and the guaranty of the constitution that his property shall not be taken from him without due process of law was not violated.
The plaintiff seeks to make the executors individually liable upon the ground that money in the hands of one person to which another is entitled may be recovered in a common-law action. ( Roberts v. Ely, 113 N.Y. 128; Hovey v. Elliot, 118 id. 124.) But this principle has no application to the case of an executor having funds for distribution belonging to the testator's estate. He owed no active duty to the plaintiff beyond that involved in the faithful administration of his trust. There is no law which authorized or required him to pay the plaintiff's judgments out of the moneys in his hands. His full duty was done when he brought the fund intact into the surrogate's court, and, after citing the legatees and next of kin and creditors of the testator, if any, distributed it in accordance with the surrogate's decree. If the plaintiff did not desire to be compelled to follow the fund into the hands of the distributees there were different ways in which he might have protected himself; either by the proper equitable action to establish his lien, or by applying to the surrogate to be made a party to the proceedings for an accounting; or if he was not aware of the decree until after it had been entered, by making a seasonable application to open it so far as it related to the distribution of this fund. He could have filed a caveat with the surrogate, disclosing his interest in the fund, and requesting to be notified of the proceedings for an accounting whenever they might be had, and it cannot be doubted that the surrogate would have complied with so reasonable a request. In any view of the situation the burden of activity was upon the plaintiff and not upon the executors, and he cannot complain if he is now required to assert whatever claim he may have to the fund against the party to whom, by the judgment of a competent tribunal, it has been transferred.
It has been urged by the respondents' counsel that by the execution of the power of sale the land was converted into personalty and the legal title of the heir was thereby divested and defeated, and that the legal title and estate of the heir failing the lien of the judgment must fall with it. That would necessarily be the result where the heir and the distributee of the proceeds under the will are different persons; but where they are the same person another rule, we think, must prevail. The conversion of the realty into personalty proceeds upon equitable principles. While the change in the quality of the property is made in accordance with the will of the testator, equity requires that the intervening rights of purchasers and lienors shall be protected.
A purchaser from the heir and distributee acquires a good title to the estate in the land before the sale, and to the proceeds after it has been converted. If the heir incumbers his estate in the land by mortgage, the conversion of the pledge into money, which still belongs to him, ought not to be permitted to involve the destruction of the security, and a judgment is a contract of as high a degree of solemnity by means of which he permits a lien to be created upon the land, and is entitled to equal protection. The ownership of the property in both of the forms, which it may assume, is continuous and uninterrupted, and so far as practicable, all the incidents of ownership should be preserved. The stability of property rights should not be unnecessarily disturbed in effecting the transformation. In fact, the conversion may never occur, for it has been repeatedly held that the legatees may elect to take the land instead of the money, in which case the power of sale is extinguished, and it has been held that where the heir and legatee conveyed his estate in the land before the power of sale became operative, it was an election on his part to treat the property as realty, which as between him and the grantee becomes final. ( Reed v. Underhill, 12 Barb. 113.)
The judgment must be affirmed, with costs.
All concur.
Judgment affirmed.