Webster Realty Co. v. Delano — 135 A.D. 488

Majority

p. 488

Webster Realty Company, Respondent, v. Josephine Delano, Individually and as Trustee under the Last Will and Testament of Christopher Delano, Deceased, Appellant, Impleaded with Julia D. Bernard, Defendant.

First Department,

December 30, 1909.

Headnote

Trust — sale of lands'held intrust—jurisdiction of Supreme Court — when lands unproductive.

Under the authority of section 85 of tlie Eeal Property Law, as amended ■by chapter 136 of the Laws of 1897, the Supreme Court has jurisdiction to authorize a trustee to sell trust property wherever it appears to the satisfac- ' tion of the court that the property', or some, portion thereof, has become so

p. 489

unproductive that the sale is for the best interest of the estate. It is not essential that there be an actual necessity for the sale.

Where it is shown that property held in trust, income to a life beneficiary with remainders over, returns only a net income of $700 owing to the condition of the buildings thereon, and the estate is not in a position to improve the same, while the property can be sold for over $46,000, the court, on the consent of the remaindermen, is justified in authorizing a sale by the trustee on the ground that the lands have become unproductive and the sale will be for the benefit of the cestui que trust.

In determining whether an estate has become unproductive the ratio of the income to the value of the property may be considered. It may become unproductive either because the income has decreased' while the, value has remained constant, or because the value has increased while the income remains constant.

Where the Supreme Court has jurisdiction to authorize a sale of lands held in trust its action is not open to collateral attack. ■ ,

Appeal by the defendant, Josephine Delano, individually and as trustee, etc., from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of New York on the 8tli day of March, 1909, upon the decision of the court rendered after a trial at the New York Special Term.

Jioberi G. Beatty, for the appellant.

M. Edward Kelley, for the respondent.

This is an appeal by Josephine Delano, individually and as trustee under the will of Christopher Delano, deceased, from a final judgment imposing a lien and assessing damages upon the ground of defective title, in an action for the specific performance of a contract for the sale of real estate. The appellant is the owner in fee of premises known as No. 312 Seventh avenue in the city of New York, and holds, as trustee, No. 314 Seventh avenue. She made a contract with plaintiff’s assignor for the sale of both parcels. The only question in the case is as to her power to convey No. 314, which she claims the power to sell under an order of the Supreme Court made in proceedings taken under the provisions of sections 85 and 87 of the Real Property Law (Gen. Laws, chap. 46; Laws of 1896, chap. 547), as amended by chapter 136 of the Laws of 1897. The contention of the respondent is that the Supreme Court was

p. 490

without jurisdiction to entertain the proceedings, and consequently that the order purporting to authorize such sale was void and of no effect. The lot in question formerly belonged to Christopher Delano, now deceased, and was disposed of by the 8th paragraph of his will, as follows: “Eighth. To my daughter Josephine I give and bequeath in trust for my ■ grandson, William Henry Delano, the lot of ground with the building thereon situate Ho. 314 Seventh avenue, being 25 feet front and rear by 96-§- feet deep, she or any agent she may appoint to take sole care and charge of said property, to collect the rent and profits thereof and after paying the taxes and all other necessary expensés to pay the balance over to him as often as once in three months during the term of his natural life, and at his death I bequeath the same to my surviving daughters to be divided -equally, share' and share alike.”' The-surviving daughters of Christopher Delano at the time of his death were the appellant and Frances Knapp and Mary Ellen Bellows. The latter has since died leaving her surviving three sons, Arthur C., Clarence E. S. and Albert Edward. AH of -the foregoing, are of full age and have consented to the sale of the property. We assume that the ■“surviving daughters” mentioned in the 8th clause of the will to whom the -remainder is left after the death of the life tenant .are those surviving the testator, and who are named above. If, however, by any constructiqn such “ surviving daughters ” should be deemed to be those who survive the life tenant the result would, be the same for, if no daughter so survived, the remain-' der would fall into the residuary estate which, by another clause of the will is given to the appellant. So in any aspect of the case all persons possibly interested as. devisees of the remainder have consented to the sale, which leaves to be considered only the rights and interests of the cesfoti que trust.

Section 85 of the Real Property Law, as amended by chapter 136 of the Laws of 1897, under which the court entertained jurisdiction to permit a sale of the trust property, reads as ■ follows: “ § 85. When . trustee may convey trust property.— If the trust is expressed in the instrument creating the estate, every sale, conveyance or' other act of the trustee in contravention of the trust, except as provided in this section, shall be absolutely void. The ■ Supreme Court may by order, on such terms and conditions as seem

p. 491

just and proper, authorize any such trustee to mortgage or sell such real property, or any part thereof, whenever it appears to the satisfaction of the court that said real property, or some portion thereof, has become so unproductive that it is for the best interest of such estate or that it is necessary or for the benefit of the estate to raise funds for the purpose of preserving it by paying i € incumbrances or of improving it by erecting buildings or making other improvements, or that for other peculiar reasons, or on account of other peculiar circumstances, it is for the'best interest of said estate, and whenever the interest of the trust estate in any real property is an undivided part or share thereof, the same may be sold, if it sliall appear' to the court to be for the best interest of such estate.” It will tend to simplify the question here presented if the pertinent provision of the section as it read prior to the act .of 1897 be compared with the present law. Chapter 257 of the Laws of 1886 permitted a sale of a trust estate “ Whenever it shall appear .* * * that it is for the best interest of said estate so to do, and that it is necessary, and for the benefit.of the estate, to raise by mortgage thereon, or by a sale thereof, funds for the purpose of preserving or improving such estate.” Under, this act it was held that the necessity for a sale or mortgage was of predominant importance, and that to justify an order authorizing a sale it must be made to appear that “ some necessity [exists] for the use of money ,in the preservation or improvement of the property.” (Matter of Roe, 119 N. Y. 509 , affg. 53 Hun, 433 .) The amendments to the act of 1886, prior to the enactment of the act of 1897, are not important to consider here. Throughout the section as it now stands the disjunctive is used in place of the conjunctive. The actual necessity for a sale no longer controls, but a sale of the trust property may be had under authority of the court because it has become unproductive, or because it is necessary or for the benefit of the estate. The amendment of 1897|was clearly an enabling act intended to permit the sale or mortgage of the estate of the remaindermen which could not be done under the former actj(Losey v. Stanley, 147 N. Y. 560 ), and extend the cases in which the court might authorize the sale or mortgage of trust property. ( Weir v. Barker, 104 App. Div. 112 .) It is manifest that the amendment of 1897 was intended to widen, and has greatly widened the scope of the section, and

p. 492

has'authorized the court to act under circumstances which theretofore would not have justified action. Among the grounds .upon-which a sale may be authorized-under the present act, and not found in the section before amendment, is that upon which the court proceeded in the present case, to wit: “ That said real prop^ ■erty, or. some portion thereof, has become so unproductive that it is for the best interest of such estate ” that said real property -be sold. . This, under the wording of the statute, is sufficient irrespective of any question. of necessity. The petitioner in the proceeding to obtain leave to sell the trust property attempted to set forth the unproductiveness of the estate as follows: “ Third: That the condition of said trust estate and the particular facts which make it necessary and proper that this application should be granted are as follows : That the ‘buildings erected upon said land consist of an old two,story brick building constructed about forty years' ago covering the front twenty-two feet of said lot and of a wooden shed covering . the rear of said lot. Said buildings are in poor condition and are used for a second hand store, lumber yard and carpenter shop, and are. in no respect adequate or suitable to produce a fair and reasonable income from the said trust estate. That said trust estate is not possessed of any funds or means of replacing said old buildings on said land with new buildings or of adequately improving the same so as to produce a reasonable and adequate income from said trust estate, ' and that the income from said trust estate is much smaller than it would be if such trust estate were converted into -money- and invested in securities in which trust funds are by law allowéd to be invested.

“ That the taxes upon said land have largely increased within the past thrée"years and repairs upon the buildings are becoming more necessary each year without any proportionate increase of the rent obtainable from -said land, thus rendering a large portion of the value of said trust estate unproductive.

“ That the gross income from said real propérty amounts to not more than twelve hundred and forty dollars per annum. That the taxes imposed upon said land for the year. 1904 were $499.42, and for the year 1905, $491.86. Besides said taxes, the necessary expenses on account of said real property for insurance, repairs and water tax amount to about the sum of sixty-three dollars per year.

p. 493

That the net annual income from said trust property applicable to the Use of the life beneficiary, William Henry Delano, remaining after paying all taxes and expenses, amounts on the average to less than seven hundred dollars.” It appears from the proposed. contract of sale annexed to the petition that the price at which it is proposed to sell the property is $46,750.

The respondent insists that the petitioner did not make out a case ■ of unprpductiveness under the statute ; that in order to “ become * * * unproductive ” the income from the property must .be shown to have decreased, without regard to the ratio between the value of the land and the income derived therefrom. This view seems to me to be too narrow. The ratio of income to value must always be an important consideration in determining whether or not an estate is, in a legal sense, productive, and an estate may become unproductive either because the income has decreased while the value has remained constant, or because the value has increased and the income remained constant. In the case under consideration the petitioner shows that the property produces an income grossly disproportionate to its value, with no probable prospect of an increase of income. This, in our opinion, states a case of unproductiveness. Clearly it was for the advantage of the cestui que trust that the property should be sold, and the remaindermen, as has been said, all consented to the sale. We are; therefore, of the opinion that the Supreme Court had jurisdiction to entertain the proceeding and to make the order permitting a sale of the property. Having such jurisdiction its action is not open to collateral attack.

The judgment appealed from is reversed and a new trial granted, with costs to appellant to abide the event.

Patterson, P. J., Ingraham, Laughlin and Clarke, JJ., . concurred.

Judgment reversed, new trial ordered, costs to appellant to abide event.

Cases cited

In re Roe 119 N. Y. 509 N.Y. 1890-03-11 p. 491
Losey v. Stanley 147 N. Y. 560 N.Y. 1895-11-26 p. 491