Champlin v. Haight

The Chancellor.

It is perfectly evident, from the terms of the will of the testatrix, that the executors and trustees had no right to sell her residuary real estate for the purpose of dividing the proceeds thereof among the children of her two daughters, during the lifetime of Mrs. Champlin ; or for the purpose of raising a fund to pay a gross sum to Mrs. Champlin in lieu of her life estate in the residuary property, or in the proceeds thereof. As the testatrix died before the adoption of the revised statutes, the devise to the executors and trustees, with power to sell and invest the proceeds for the purposes of the will, is valid. But the equitable interests of the devisees, in the proceeds of the property, are the same as they would have been in the real estate itself if there had been a mere naked trust, without the power of sale. The power in trust to the executors and trustees, to sell the property, or any part of it, when they should think it adviseable to do so, was given for the purpose of enabling them to convert real estate into personalty, whenever they should deem it beneficial to the estate to make such a conversion for the purposes of the will; and not for the purpose of distribution. For when the time for distributing the capital of this residuary estate arrives, it will be the duty of the executors and trustees to divide the estate as it then exists; as the power to sell for the purpose of investment or otherwise will then have terminar ted. Whether this residuary property, therefore, continues to be real estate, or is converted into personalty, it is held in trust to pay the net rents and profits or income thereof to Mrs. Champlin for life, and then to divide the same among those who at that time shall be found to be entitled thereto by the terms of the will. The testatrix contemplated the possibility of the death of Mrs. Champlin while she had children under the age of twenty-one ; in which event she intended to suspend the distribution of the property until after the youngest child should have arrived at that age. But she did not intend to have the division made as soon as the youngest child was of age, although the mother should then be living. None of the present children of either of the daughters of the testatrix may ever be entitled to the remainder in fee in this property, as they may all be dead before the time for distribution arrives. If those now in existence, therefore, should receive the proceeds of these sales, and should die before Mrs. Champlin, their issue who are in existence at her death, will have the right to.call upon the executors and trustees to refund the amount thus distributed. And a purchaser of the premises who had purchased from the executors and trustees, with notice that they had agreed to sell for the purpose of making a distribution of the fund during the life of Mrs. Champlin, in violation of their trust, would not be protected against the equitable claims of such issue, although he had obtained the mere legal title to the premises, under the conveyance from the executors and trustees. Where there is a devise in fee in remainder, after the termination of a particular estate, with an executory limitation over to the issue of the devisee, in case of his death, such dying is to be construed to apply to the time when the remainder is limited to take effect in possession, and not to the time of the death of the testator. And the term issue, in such a case, is a term of purchase and not of limitation. The issue in such cases therefore do not take as heirs of the devisee, so as to be bound by his acts, but as substituted devisees under he executory limitation over to them.

The revised statutes provide, that no person who shall actually and in good faith pay a sum of money to a trustee, which the trustee as such is authorized to receive, shall be responsible for the proper application of such money according to the trust; nor shall any right or title derived by him from such trustee, in consideration of such payment, be impeached or called in question in consequence of any misapplication by the trustee of the monies paid. (1 R. S. 730, § 66.) And if the purchaser in this case had paid the money and taken his title, from all the executors and trustees who are now living, without any notice that the sale was made for the purpose of distributing the proceeds among the children, during the life of Mrs. Champlin, in violation of the trust, his title could not have been impeached. But as the next preceding section declares, in express terms, that where the trust appears in the instrument creating the estate, every sale, conveyance, or other act of the trustees in contravention of the trust shall be absolutely void, a purchaser could not be considered as having paid his money to these executors and trustees in good faith, when he had express notice, at the time of the sale, that such sale was not made for the purpose of investing the proceeds in conformity to the trust created in the will, but for the mere purpose of distributing the same during the life of Mrs. Champlin and in violation of the trust. For this reason I think the sale itself was illegal, because it was not made by the trustees for the purpose of carrying,into effect the directions of the will; and if the property should rise in value, that J. D. P. Champlin would have the right, as against this purchaser with notice, to insist that the sale was made in violation of the trust, and that the purchaser was a party to the illegal act of the trustees.

If all those who now are, or hereafter may be, interested in the proceeds of the trust property, were parties to this suit, so as to be bound by the decree of the assistant vice chancellor, the disposition which he has made of the fund might perhaps protect the purchaser, even if the fund should by any accident be lost. But I am not aware of any principle which will authorize this court to substitute its officer for the trustee of the fund, so as to protect the purchaser from the future and contingent claims of the cestui que trusts who may not now be in existence, and over whom the court has no jurisdiction. I cannot therefore compel this purchaser to take a title, under this illegal and improper sale, which is liable to be impeached, not only by J. D. P. Champlin who protested against its validity, but also by the issue of such of the children as may happen to die before Mrs. Champlin.

The proper course for the executors and trustees, if they believe it is for the interest of the estate to sell these lots for the legitimate purpose of investing the proceeds for the purposes of the will, is to abandon the illegal agreement which one of them has made to sell the property and to take a gross sum out of the proceeds thereof for her life estate and to distribute the residue, and again to offer the property for sale under circumstances in which no such questions as are now presented will arise to prevent a fair competition among bidders at the sale. I presume no actual fraud was intended by any of the parties to the agreement of 1841, but they clearly mistook their rights under the will. That, however, will not authorize the court to compel the defendant Haight to invest his money upon a doubtful title, which must almost necessarily subject him to future litigation and expense in case any of the ten children, now living, should happen to die before the time appointed for a division of the trust property.

The decree appealed from must therefore be reversed, with costs to the defendant Haight, and the complainant’s bill must be absolutely dismissed with costs, (a)

(a) This decree was reversed, upon appeal to the court for the correction of errors, in December, 1843.