City of Rochester v. Smith — 12 N.Y. St. Rep. 711

Majority

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In the Matter of the Application of the City of Rochester to Acquire the Right to Draw Water from Hemlock and Canadice Lakes, etc., William Hamilton, App’lt, v. George R. Smith, as Ex’r, etc., Resp’t.

(Supreme Court, General Term, Fifth Department,

Filed December 30, 1887.)

Headnote

1. Wills—Provisions of—What do not produce equitable conversion of real property.

The will of the defendant’s testator provided, among other things, as follows: First. After all my just and lawful debts are paid and discharged, I give and bequeath unto my wife one equal one-third of all my personal property of which I may die seized, and the use or income from one-third of my real estate during the term of her natural life; second, the residue and remainder of all my real and personal property, of every name and nature, I give, devise and bequeath unto my son in manner following: One equal one-half of the same to him, his heirs or assigns absolutely, the other equal one-half to him in trust for the benefit of my daughter. Further provision was made in respect to the trust, and then power was given to the son as executor or trustee to sell, transfer and convey, mortgage or lease any of the property, and to invest the same, or the proceeds of the same, in such manner as to him might seem most judicious. Held, that the provisions of the will did not produce an equitable conversion of the real estate into personalty; that the exercise of the power of sale given was designed to be dependent upon the discretion of the executor.

'2. Same—Real property—Proceedings by creditor to apply decedent’s REAL PROPERTY TO PAYMENT OF DEBTS—CODE ClV. PRO.. § 2750 —Action against heirs—Code Civ Pro., § 1844.

Held, that where there was no specific lien upon the real property of a decedent for the payment of debts created by the terms of a will, the

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statutory right under Code Civil Procedure, section 2750, continues for' three years from the granting of letters, and that unless within that time the proceeding provided for is taken, the power of the surrogate to direct sale of real estate and application of the proceeds ceases, and a luna fide purchaser may take title, relieved from the charge for the payment of debts, but that after the expiration of that time, the creditor may bring his action against the heirs, devisees or legatees, to charge them as such for the property which came to them from the decedent.

3. Same—Action against heibs.

Held, that a judgment recovered against the heir or devisee will be preferred as a lien upon the land so descended or devised to the defendant, to a judgment against him for his individual debt. See Code Civ. Pro., § 1852. Although it will not affect the title of a purchaser in good faith and for value, acquired before notice of the pendency of the action isfiled’or final judgment entered. See Code Civ. Pro., § 1853.

4. Same—When assignee of devisee—When property not protected m ACTION BROUGHT BY CREDITOR.

Held, that an assignee of a devisee could be held to have an unqualified title to a sum awarded to the devisee as damages for the taking of his rights under the will only upon it appearing that he was a purchaser in, good faith and for value.

5. Wills—Interpretation of—Intent of testator—To what extent sought.

In interpreting wills, the search for the intention of the testator to charge the real estate with the payment of legacies, is quite liberally extended; and in respect to charging the real estate with the payment of debts, like rules may, in a degree, be applicable, although the same force may not be given to circumstances indicating an intent that they shall be paid, because the creditors, without the aid of any purpose on the part of the testator, have the statutory remedy to require the appropriation of the real estate, if necessary, to their payment.

6. Same—What taken as showing testator’s disposition to charge testator’s REAL PROPERTY.

Held, that the personal property of the testator at the time of his death being wholly inadequate to meet his debts, a provision in his will for certain devises and legacies after all his just debts were paid, must be taken as charging his real property with the payment of his debts.

Appeal from an order of Monroe special term denying motion to confirm referee’s report, and directing payment, to George B. Smith as executor, etc., of moneys arising from an award hereinafter mentioned. Hiram Smith, up to the time of his death, owned mill premises and property situate on Honeoye Creek. And in 1873 he, with other mill owners, commenced actions to restrain the city of Rochester from taking water from those lakes, of which such creek was the outlet, and his right to relief was finally established. Smith v. City of Rochester, 92 H. Y., 463.

He died May 14, 1883, leaving his will, which was made April 10, and admitted to probate and recorded May 19, 1883, by which he nominated his son, George B. Smith, executor, to whom letters were issued on the last mentioned day.

The will contained the following provisions: “First. After all my just and, lawful debts are paid and discharged*

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I give and bequeath unto my wife Emily C. Smith one equal one-third of all my personal property of which I may die seized, and the use or income from one-third of my real estate during the term of her natural life.

Second. The residue and remainder of all my real and personal property of every name and nature I give, devise and bequeath unto my son, George B. Smith, in manner following: One equal one-half of the same to him, his heirs: or assigns absolutely. The other equal one-half to him in trust for the benefit and maintenance of my daughter, Emma 0. Smith. The will contains further provisions in respect to this trust. And then he gave to George, as executor or trustee, “ full power and authority to sell, transfer and convey, mortgage or lease any of the property, and to invest the same or the proceeds of the same in such manner as to him may seem most judicious.” And bequeaths, to him “the right and privilege to continue the business, now engaged in by me, or in which I may be engaged, at the time of my death in my name or otherwise, and for such time after my death as he may desire.”

The testator was engaged in the operation of the mills upon the premises before referred to. In November, 1883, Emily 0. and Emma 0. Smith, by deed, conveyed to George all their -interest in such premises, water privileges, etc., appurtenant, and released him from all their claims against him as such executor and trustee. He accepted such conveyance subject to all encumbrances on the premises, and assumed and agreed to pay all the encumbrances on certain other premises by him conveyed to them, and undertook to pay all the indebtedness against the estate of the testator.

'Early in 1884 proceedings, pursuant to statute providing for it, were instituted by the city of Bochester to acquire-the right to take water from those lakes. Commissioners were appointed; and, in June, 1885, filed their report, which awarded to George B. Smith and Emily 0. Smith, as the owners of the mill premises, $21,000. The report, was confirmed.

In March, 1884, George assigned all his interest in the money to be awarded in the proceedings to William Hamilton to secure the payment of the amount then due, and which should, by further advances, become due to the latter from George. Further advances were made, and George became indebted to Hamilton to the amount of $12,000 and upwards. And in December, 1884, George B. Smith made to Hamilton a general assignment for the benefit of his creditors. At the time of the death of testator his debts over and above the encumbrances on his real estate amounted to upwards of $30,000, of which $23,000)

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"unsecured indebtedness remains unpaid. And there is no personal property of the decedent applicable to the payment ■of any of them. The award is the only fund or property from which they can be paid, except he left other real ■estate, but it is not chargeable with the debts until after this property is exhausted. • It seems the mill premises, at the time of the testator’s death, were and remain considerably encumbered. Hamilton appeals from the'order directing the payment to the executor of the fund produced by the award.

Theodore Bacon, for app’lt; J. A. Stull, for resp’t.

The contest is between Hamilton as such special and general assignee of George B. Smith, and the creditors of the estate represented by the executor of the wül of Hiram Smith, deceased. There was no equitable ■conversion of the real estate into personalty produced by the provisions of the will.

They do not indicate any intent on the part of the testator that the real estate should be sold and converted into money for the purposes of the execution of the trust, but the exercise of the power of sale given was designed to be dependent upon the discretion of the executor.

It is contended on the part of the appellant that the Tight to take the proceeding under the statute to produce and apply the proceeds of real estate in payment of the ■creditors of the estate of the testator was barred from and after the expiration of three years from the time letters testamentary were issued, and as such period terminated dn May, 1886, the creditors can assert no right to such payment from the proceeds of real estate. Code Civil Pro., § 2750; Slocum v. English, 2 Hun, 78 , affirmed 62 N. Y., 494 ; Parkinson v. Jacobson, 18 Hun, 353 . -When there is no specified hen for the payment of debts created by the terms of a will the statutory lien continues for the three years from the time of granting letters, and unless within that time the proceeding provided for is taken, the power of the surrogate to direct sale of real estate and application of the proceeds ceases and a bona fide purchaser may take title relieved from the charge for the payment of debts. Hyde v. Tanner, 1 Barb., 75 ; White v. Kane, 19 J. & S., 295. But after the expiration of that time the creditor may bring his action against the heirs, devisees or legatees to charge them as such, or the property which came to them from the decedent. Code Civil Pro., § 1844. And a judgment recovered against the heir or devisee will be preferred as a lien upon the land so descended or devised to the defendant, to a judgment against him for his individ

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ual debt (Id., § 1852), although it will not affect the title of a purchaser in good faith and for value acquired before notice of the pendency of the action is filed or final judgment entered. . Id., § 1853; Smith v. Soper, 32 Hun, 46 .

It would seem in that view to follow that before it can be held that Hamilton had the unqualified title to the fund in question, it must be determined that he has the situation ■of a purchaser in good faith and for value, which is not found by the referee; and we are not able to determine upon the papers before us that he is such. Nor are we prepared to adopt, as establishing the construction of the .statute, the dictum in Mead v. Jenkins ( 95 N.Y., 31 ), to the effect that limitation of the time within which proceedings under the statute may be taken before the surrogate to sell, etc., the real estate of the decedent for the payment of debts, extends beyond three years after letters are issued and embraces that period of time after accounting is' had. But the view taken renders it unnecessary to further consider that question. We think the testator intended by his will to make his debts a charge upon his real estate. The reasons for this conclusion are found in the terms of the instrument, aided by the other circumstances, which are deemed to have furnished occasion for the purpose on his part to-do so. The amount of his debts evidently was large at the time he made his will, and at the time of his ■death, which was shortly after, his personal estate was greatly inadequate for the purpose. It may be assumed that he appreciated the situation, and had in view the purpose to give and devise only what remained after deducting the amount requisite to pay them, as in the outset he by the will provided that after the payment of his debts his wife should take one-third of the personal and the use of ■one-third of the real property, and that the residue and remainder of his estate, real and personal, should then go as there directed. He in this manner blended the disposition of his real and personal estate, and seemingly made the entire devises and bequests subject to the payment of his debts and embracing only what remained after they were paid. This is something more than a mere direction to pay them. While the subject of charging legacies by wills upon the real estate of testators has produced much reported adjudication in this state, that in like manner of charging debts upon it has not, for the obvious reason that the latter is usually not essential for the protection of the rights of creditors. In the case of legacies, the search for the intention of the testator is quite liberally extended. Hoyt v. Hoyt, 85 N. Y., 142 ; Scott v. Stebbins, 91 id., 605.

In respect to debts, like rules of construction may, in a

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degree, be applicable, although the same force may not be given to circumstances indicating an intent that they shall be paid, because the creditors without the aid of any purpose on the part of the testator have the statutory remedy to require the appropriation of the real estate, if necessary, to their payment.

In Shallcross v. Finden (3 Ves. 738), it was held that the use of the phrase “ after payment of my debts,” etc., in a will, means that until the testator’s debts are paid, he gives nothing, that every thing he has shall be subject to his debts, and to give those words effect they must charge the real estate. And such seems to be the construction given to them by the English cases. In Lupton v. Lupton (2 Johns. Chy., 614, 623), such rule is stated and that case cited with apparent approval, although the question was not necessarily there for consideration. And while in Myers v. Eddy ( 47 Barb., 270 ), the case of Tracy v. Tracy ( 15 Barb., 503 ), was declared unsound, the conclusion in Harris v. Fly (7 Paige, 421), that the real estate was charged with a legacy was approved because the residuary clause contained the words after payment of all my debts, legacies, etc. In Reynolds v. Reynolds ( 16 N. Y., 257 ), a like rule of construction and effect of those words is stated, and Shallcross v. Finden, cited by Bowen, J. See Stoddard v. Johnson ( 13 Hun, 606 ), to the same effect. And in Kinnier v. Rogers ( 42 N. Y., 534 ), reference is made to the absence of any declaration in the will to the effect that the real estate is given after or subject to the payment of legacies, in support of the conclusion that they were not charged upon it. We think that these words in the will in question are entitled to no less significance by "way of construction than they would have if they were in the residuary clause, but it is not intended to be understood that general words of like character in the opening paragraph of a will may in all cases necessarily have the effect to make debts of a testator a charge by it upon real estate. The great excess of debts over the personal estate of the testator is a circumstance entitled to some consideration in giving effect to the provision referred to. And while this power of sale is not in terms significant in that direction, it is consistent with the purpose that the debts should, so far as necessary, be a charge upon the realty, and to enable the executor to pay them from the proceeds of sale. Taylor v. Dodd, 58 N. Y., 335 ; LeFevre v. Toole, 84 id., 95.

Inasmuch as there has been no accounting by the executor we should be inclined to direct that it be had preliminarily to the final direction that the fund in question go to-him, if it did not appear that there is no personal property applicable to the payment of the unpaid debts, but since

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that fact distinctly appears there is no occasion for any such provision.

The order should be affirmed.

Barker and Haight, JJ., concur.