127 Misc. 399 | N.Y. Sup. Ct. | 1926
By the 14th paragraph of the will of Charles F. Hoffman, his executors Were instructed to divide his real estate into as many parts as he left surviving children and “ the use, interest and income of one of said shares or parts of my real estate and the use of the proceeds thereof, if the same or portions thereof be sold by my Executors and Executrices under the power hereinafter conferred ” is devised to each of his chrilden with remainder over to the children of his children respectively, or to the surviving brothers and sisters, or their issue, if any child died leaving no surviving children. By the 16th paragraph of the will a power of sale, permissive in terms, was given to the executors. The testator left him surviving four children. One of them (Mrs. Rodewald) died within three months of the testator, leaving infant children surviving her. The testator owned a large amount of productive real estate and some negligible amount of unproductive real estate. The property was held undivided until, in 1905, a corporation was formed pursuant to the provisions of section 116 of the Real Property Law
The life tenant became a trustee for the remaindermen. The general rule is that she was entitled only to the income of the fund and that the'capital increment thereof belongs to the rertiaindermen. (Thayer v. Burr, 201 N. Y. 155, 158.)
Where the corpus takes the form of corporate stock, even undeclared earnings accrue to the benefit of the remainderman. ( U. S. Trust Co. v. Heye, 224 N. Y. 242, 254, 255; Baker v. Thompson, Id. 592.)
The plaintiff, while apparently not questioning these general rules, urges that there are circumstances which make this case exceptional. He argues in the first place that under the rule of Lawrence v. Littlefield (215 N. Y. 561) there was an equitable conversion of the real estate into personalty. I think that Lawrence v. Littlefield has no application. There, substantially the entire estate was vacant, unproductive real estate, and unless the power of sale were exercised the life tenants would have received nothing whatever. A power of sale, permissive in terms, is to be construed as effecting an equitable conversion only when sale is necessary to a division, or where it is necessary “ to accomplish the purpose intended by the general scheme of the will.” (Thompson v. Hart, 58 App. Div. 448; affd., on opinion below, 169 N. Y. 571; Matter of Coolidge, 85 App. Div. 295, 303; affd., 177 N. Y. 541; Chamberlain v. Taylor, 105 id. 185, 191.)
“ No conversion is effected where the purposes of the decedent may be carried out by a retention of the real- estate by the executors or trustees and a transfer thereof by them to the persons entitled.” (1 Davids N. Y. Law of Wills, 858.)
This testator certainly never contemplated that a division would be necessary to carry out the scheme of his will because paragraph “ fourteenth ” provided: “ All the rest * * * of my real estate I direct my Executors * * * to divide into ” four equal parts; “ the division into ouch parts shall be made as nearly equal as in the judgment of my executors is practicable.” There is no evidence that such a division was impracticable.
But even if the will Were deemed to effect equitable conversion and the bequest considered technically one of personalty rather than of realty, no substantial difference Would result. The trust
Plaintiff argues further, however, that When the executors, eight years after the testator’s death, exercised the power of sale, they, in effect, reduced Mrs. Olcott’s share to cash and that consequently her only obligation is to return the exact amount she received. The only cases tending to support this contention are based upon wills where the bequest itself was of cash. The intent of the testator must govern. Where he bequeaths cash to the life tenant, obviously he could have intended only that this cash was to be returned. By this will, however, real estate is devised ¿nd no such implication of intention to bestow upon the life tenant any possible capital increment is inferable. (Matter of Cutler, 23 Misc. 508; Matter of Moeller, 117 id. 803; Matter of Clark, 62 Hun, 275, 282; Matter of Gerry, 103 N. Y. 445, 450; Townsend v. U. S. Trust Co., 3 Redf. 220, 223.)
Moreover, plaintiff’s argument that there was a conversion into cash is inconsistent with actuality. The real estate was in fact never sold for cash. The parties in interest co-operated to form this corporation under section 116 of the Real Property Law.
There is some evidence that the corporation from time to time invested in other real estate and sold some of the properties derived from the testator and distributed to its stockholders portions of the capital gains thereby realized. I do not pass upon the propriety of these distributions. The plaintiff’s intestate shared in them and no doubt the parties in interest believed that they were acting correctly in making these distributions. But their intention is of no consequence. It could not affect adversely the interests of the remaindermen. Their rights were fixed by the testator’s will and the action taken thereunder pursuant to section 116.
I direct judgment for the defendants.
Since amended by Laws of 1924, chap. 414.— [Rep.
Since amended by Laws of 1924, chap. 414.— [Rep.