Citizens' Nat. Bank of Albuquerque v. First Nat. Bank of Albuquerque

• Decision Date: 21 January 1924
• Docket Number: No. 2712.,2712.
• Parties: CITIZENS' NAT. BANK OF ALBUQUERQUEv.FIRST NAT. BANK OF ALBUQUERQUE ET AL.
• Court: New Mexico Supreme Court

29 N.M. 273

222 P. 935

CITIZENS' NAT. BANK OF ALBUQUERQUE

v.FIRST NAT. BANK OF ALBUQUERQUE ET AL.

No. 2712.

Supreme Court of New Mexico.

Jan. 21, 1924.

Syllabus by the Court.

It is well settled that the owner of property may, by way of will, and in many other ways, change the nature or character of his property, so that thenceforth it partakes of the character which the owner desires. The intention of the testator is immediately upon his death effectuated by the application of the equitable doctrine or maxim that “Equity regards as done that which ought to be done.”

In determining whether real estate has by the terms of a will been converted into personal property, the intention of the testator is of paramount and controlling importance. This intention, when correctly and certainly ascertained, governs in all cases.

The intention of the testator to convert the property may be implied even in the absence of express mandatory words in the will. This implied intention, when properly ascertained, becomes as mandatory on the executors and trustees, and as effectual to work conversion, as if so expressed in the will.

The doctrine of equitable conversion is a rule of necessity, not of convenience. It is a rule of necessity in the sense that, when a person has exercised a power over his property, as he has a right to do, by will or deed, the change in the character of the property which he has directed becomes binding upon all persons thereafter concerned with the same.

Where a will devises property to trustees with directions to convert the same into money, and distribute the proceeds thereof to beneficiaries named in the will, the trustees take the entire title, and the beneficiaries take only a gift of money.

Before merger can take place there must be both a legal and an equitable estate uniting in the same person.

Merger is not favored either at law or in equity, and is largely a question of intention on the part of the person in whom the two estates unite. This intention is not fixed or unchangeable until some one having the right to do so calls the same in question.

The mere giving to a trustee, having in charge moneys belonging to a beneficiary of notice of a levy of execution by the sheriff, without notifying said trustee to appear before the court out of which the execution issues to answer concerning the matter, is ineffectual, under the provisions of section 2192, Code 1915.

Error to District Court, Bernalillo County; Brice, Judge.

Action by the Citizens' National Bank of Albuquerque against the First National Bank of Albuquerque and others. Judgment for defendants, and plaintiff brings error. Affirmed.

Where a will devises property to trustees with directions to convert it into money and distribute the proceeds thereof to beneficiaries named in the will, the trustees take the entire title, and the beneficiaries take only a gift of money.

Simms & Botts, of Albuquerque, for plaintiff in error.

A. B. McMillen and Lawrence F. Lee, both of Albuquerque, for defendants in error.

PARKER, C. J.

On July 1, 1916, one Annie Zirhut made her last will and testament, which, following her demise, was, on April 17, 1917, duly admitted to probate by the probate court of Bernalillo county. The will provides, among other things, the following:

“1. I hereby nominate and appoint William John Zirhut, of Albuquerque, New Mexico, and the First Savings Bank & Trust Company, of Albuquerque, New Mexico, to [be] the executors of this, my last will and testament, and I hereby revoke all former wills by me made. * * *

5. I give, devise and bequeath unto my executors William John Zirhut and the First Savings Bank & Trust Company, of Albuquerque, New Mexico, all of my real estate in trust, however, for the purposes hereinafter mentioned.

6. I hereby direct that my said executors shall have full power to manage said real estate as they may think for the best interest of the beneficiaries of my estate, that is, they shall hold the said real estate, collect the rents therefrom, pay the taxes thereon and do all other acts in connection with the management of said real estate, the same as I myself could do, to sell or convey any of said real estate at such time, and for such price as they may think is for the best interests of the beneficiaries of this trust.

7. I further direct that any time my said executors shall receive any money as rents from the said real estate, that they shall, as soon as reasonably possible, distribute the said moneys as follows:

One-half (1/2) to William John Zirhut, one-eighth (1/8) to William G. Nehr, one-eighth (1/8) to Carry G. Nehr Bearup, one-eighth (1/8) to Lola Anna Nehr McKee, and one-eighth (1/8) to George M. Nehr.”

On November 30, 1917, the said William J. Zirhut borrowed from the defendant the First National Bank of Albuquerque $4,400, and gave his promissory note therefor, and at the same time assigned to the bank all of his interest in the estate of said Annie Zirhut, deceased, as security for the payment of the note. The note not being paid at maturity, the bank brought suit in Bernalillo county against the said William J. Zirhut, personally and against him and the said First Savings Bank & Trust Company as executors and trustees under said will, resulting in a judgment on June 26, 1918, against the said William J. Zirhut personally and against both of said executors and trustees, establishing an equitable lien on said Zirhut's interest in said estate and the proceeds thereof, by reason of said assignment to the bank. The judgment further provided that, unless said Zirhut paid the judgment, his distributive share of the proceeds realized from the sale of the real estate under the will be paid over to the bank to be applied on the judgment, and, unless the judgment be satisfied in 60 days, the right, title, and interest of the said Zirhut in the proceeds to be realized from sales of the real estate might be sold to satisfy said judgment. On February 8, 1919, the First Savings Bank & Trust Company, out of the proceeds of sales of the real estate, acting as surviving executor and trustee, the said William J. Zirhut having died, paid off said judgment in full.

In the meantime, said William J. Zirhut being indebted to plaintiff, it brought action against him, and on May 1, 1918, recovered a personal judgment against him in said district court. On the same day execution was sued out and placed in the hands of the sheriff for service, and was served June 14, 1918. On June 1, 1918, plaintiff filed a transcript of said judgment in the office of the county clerk of Bernalillo county. After the death of said William J. Zirhut, the exact date does not appear, the First Savings Bank & Trust Company, as surviving executor and trustee, sold and conveyed the real estate involved to the defendant Alfred Thelin, who in turn mortgaged the same to another of the defendants.

Plaintiff brought a suit in equity upon the theory that it had acquired a lien upon the interest of William J. Zirhut in the real estate, by reason of its judgment, levy of execution, and filing of the transcript of its judgment, and in its amended and supplemental complaint filed January 5, 1920, set up most of the facts hereinbefore recited, and brought in new parties, made necessary by the death of some of the original parties, and sought by its action to establish its lien upon an undivided one-half interest in said real estate as the property of said William J. Zirhut, and seeking to remove the said deed to Thelin and the said mortgage by him to the other defendants as clouds upon the title, so that it might enforce its said judgment by execution.

The defendant the First National Bank of Albuquerque demurred to the complaint on the ground that it failed to state a cause of action upon the theory that William J. Zirhut never acquired under the terms of the will anything more than an equitable interest in the proceeds of the sale of the real estate, which was not subject to sale as real estate under execution. The defendant First Savings Bank & Trust Company answered fully, setting out that it had sold the real estate and paid out of the proceeds the claim of the First National Bank as it was directed by the judgment heretofore mentioned, and setting up many of the other facts heretofore recited. Defendant Mary E. Sturges answered, setting up her mortgage from Thelin. Defendant Thelin answered, setting up his title to the property free from any judgment or execution lien of plaintiff.

The court sustained the demurrer of the First National Bank to the complaint, and overruled the demurrers which plaintiff had interposed to the answers of the defendants above mentioned, and found that the complaint failed to state a cause of action, and, plaintiff electing to stand on its complaint, and declining to plead further, the court dismissed the complaint, which judgment is here for review.

It is apparent that the parties have proceeded upon two opposing theories of the law as applicable to the facts, about which there is no dispute. The plaintiff has proceeded upon the theory that its debtor, Zirhut, under the terms of the will, became the owner and holder of the legal title to an undivided one-half interest in the real estate, which became and was subject to the judgment lien, and subject to sale under execution. In order to arrive at this result, plaintiff must and does rely upon the doctrine of merger, and it is claimed by it that, upon the death of the testatrix, Zirhut took under the will equitable title in the land as devisee, and the legal title as executor and trustee, and that the former became absorbed and merged into the latter. Defendants, on the other hand, have proceeded upon the theory that, under the will, Zirhut took no interest, personally, either legal or equitable, in real estate as such; that he took an undivided one-half interest in the proceeds of rents and sales of the real estate, holding the legal...