Spencer v. Weber

• Decision Date: 19 June 1900
• Citation: 57 N.E. 753,163 N.Y. 493
• Parties: SPENCER et al. v. WEBER et al.
• Court: New York Court of Appeals Court of Appeals

163 N.Y. 493

57 N.E. 753

SPENCER et al.

v.WEBER et al.

Court of Appeals of New York.

June 19, 1900.

Appeal from supreme court, appellate division, Second department.

Action by Frank Fessenden Spencer and Caro A. T. Spencer against Henry Weber and others to set aside an assignment of a mortgage made by John I. Alston to Wilber B. Maben, to cancel a certificate and record of the satisfaction of such mortgage, to declare said mortgage a lien on the mortgaged premises, to reinstate it on the record, and to foreclose it. From a judgment of the appellate division (49 N. Y. Supp. 687) affirming a judgment of the special term dismissing the complaint, plaintiffs appeal. Appirmed.

George H. Fletcher, for appellants.

Isaac M. Kapper, for respondents.

MARTIN, J.

The purpose of this action was to set aside an assignment of a mortgage made by the defendant John I. Alston, as trustee, to Wilber B. Maben; to cancel a certificate and the record of the satisfaction of such mortgage made by Maben as assignee, and recorded in the office of the register of Kings county; to declare the mortgage thus assigned, which was made by the defendant Weber to the defendant Alston, a lien upon the mortgaged premises; to reinstate it upon the record; and to foreclose it when thus reinstated. Thomas T. Spencer died October 28, 1877, leaving a last will and testament, which was admitted to probate in January, 1878. It, in effect, provided that his executors should, out of his estate, invest $6,000 in bonds and mortgages on unincumbered real estate of twice the value of the amount loaned, at interest at the rate of 7 per cent. per annum, payable semiannually, for the benefit of his two minor children,Caroline and Frank; the income, however, to be paid, a certain proportion to his mother, and the remainder to his sister, during their lives. Upon their death, or the death of either of them, the legacy given to her was to cease, and the interest upon the $6,000 was to be from time to time collected, controlled, managed, and held in trust by a trustee named, for the benefit of such children, until they should respectively reach their majority, and in such manner as to yield the greatest aggregate increase. He also bequeathed the principal sum of $6,000 so invested, and the income thereof, after the death of his mother and sister, to his two children, and directed that said investments should remain intact and invested until his eldest child should arrive at full age, when a moiety of the principal, with a moiety of the interest and increase thereon, should be paid to her, and that the remaining moiety of the principal and interest should remain intact and on interest until his youngest child should arrive at full age, when the principal and interest were to be paid to him. By the will it was further provided that, when the executors should have invested the $6,000 as directed, they should transfer the securities taken upon such investment to the trustee named, to be received by it in trust for the benefit of his children, and that the trustee should control and manage such securities, receive, collect, and pay over the interest and principal due or to grow due thereon, and in all things carry out the directions and provision of the testator's will as to said investment and any matter connected therewith. The executors subsequently collected that sum, and invested it in two bonds and mortgages,-one made by Monaghan, and the other by one Streker. The United States Loan & Trust Company, which was named as trustee in the will, having refused to accept the trust, the defendant Alston was duly appointed as a substituted trustee in its place. On September 22, 1882, Spencer's executors, in compliance with the provisions of the will, assigned and delivered to Alston, as such trustee, the two bonds and mortgages mentioned. Subsequently Alston foreclosed the Streker mortgage,and, in pursuance of a judgment of foreclosure, sold the premises to the defendant Henry Weber, to whom they were conveyed by the referee, for $4,125; $1,125 was paid in cash upon the sale, and the remaining $3,000 was secured by a bond and mortgage upon the premises sold. They were made payable to John I. Alston, as trustee of the estate of Thomas T. Spencer, deceased, his successors or assigns. October 23, 1883, Alston, as trustee, assigned this bond and mortgage to one Maben, who was a lawyer, and the legal adviser of Alston as trustee. After the assignment the interest, as it became due, was paid by the mortgagor to Maben. At the maturity of the mortgage, July 2, 1886, Weber paid Maben the whole amount of principal and interest secured by the mortgage, obtained a certificate of satisfaction from him, procured it to be recorded in the office of the register of Kings county, where the assignment from Alston to Maben was also recorded, and the record of the mortgage was marked, ‘Canceled of record.’ Caroline Spencer became of age July 22, 1890, and Frank reached his majority March 6, 1893.

The question presented in this case is whether Alston, as substituted trustee under the testator's will, possessed authority to assign or transfer the securities in which the trust fund was invested so as to protest the motgagor in paying the interest and principal of his bond and mortgage to such assignee as it became due, when acting in good faith, and without notice, actual or constructive, of any fact relating to the trust or the mortgage, except that Alston was a trustee, and held the mortgage as such. The contention of the appellants is that the trustee had no power to assign the mortgage in question. As sustaining this contention, much stress is laid upon the language of the will directing the investment of the fund in bonds and mortgages, and that such investment should remain intact and invested until his children should arrive at the age of 21 years. This leads to the inquiry whether the provision of the will that such investment should remain intact and invested as aforesaid until his children should arrive at the age of 21 years is to be construed as requiring the executors or trustee to invest the fund in a mortgage or mortgages to run during the minority of his children, and which could under no circumstances be discharged and the fund reinvested by the trustee, or whether that direction is to be construed as requiring the fund to be invested in bonds and mortgages, and that the fund should remain intact, in that it could not be properly diverted from the purpose to which it was dedicated by the testator. We think the latter is the proper construction of that provision, and that the testator's purpose was to create a fund of $6,000, to be kept invested in bonds and mortgages, and that no part of it was to be employed for any other purpose or invested in any other class of securities, but that the fund should be thus invested from time to time as necessity might require. In this connection it is to be observed that the testator, after directing the executors to invest this fund, in the manner specified, for the benefit of his children, expressly provides that the interest upon the investment should be collected, controlled, managed, and held in trust by the trustee, and that upon the transfer of such securities to him he should control and manage them, receive, collect, and pay over the interest and principal due or to grow due thereon, and in all things carry out the directions and provisions of the will as to the investment, or any matter connected therewith. When the whole will is read and considered, it becomes obvious, we think, that the testator intended to confer upon the trustee authority to change the securities which should come into his hands, to reinvest the fund in like securities when they should be paid, to collect and enforce the securities thus taken, and keep the fund invested in the class of securities mentioned. If the language of the will does not expressly confer upon the trustee authority to reinvest the fund when it should come into his hands, and vary the securities to the extent of taking other bonds and mortgages, it is clearly implied from its terms. As to the character of the investments to be made, either by the executors or trustee, it is clear that the testator intended the fund to be invested in bonds and mortgages upon unincumbered real estate. So long as the trustee kept this fund invested in that class of securities, he was acting within the power conferred upon him by the will. When the mortgage which was transferred to him by the executors became...