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SECOND DEPARTMENT, DECEMBER TERM, 1892.

form required by the contract, by paying the balance of the purchasemoney directed to be paid, and assuming the mortgage of $2,800 ?

Second. Is the defendant entitled to a judgment against the plaintiff for the return to him of the fifty dollars paid on the contract with the further sum of $100 for expenses incurred in the examination of the title?

Third. Are either of the parties to this submission entitled to any further or different relief against the other?

In the third paragraph of his will Thomas Connell made a recitation that his personal property was insufficient for the payment of the legacies bequeathed, and gave to his executors, or such of them as should qualify, all his property, real and personal, in trust to sell and dispose of the same and apply the proceeds, with the avails of his personal property, to the payment of debts and legacies, and in the meantime to collect the rents and prcfits of the real property.

The will bestowed no power of reconversion or to execute mortgages, and no such power will be inferred, because it cannot become necessary to carry into execution the scheme of the will.

The money paid to Collins by Quinn, upon the purchase of the property, belonged to the estate of Connell, and was in the hands of Quinn, as trustee, and such use of the funds was in contravention of his trust, yet the conveyance of Collins transferred the title to Quinn, either individually or as trustee, and, for the purposes of this case, the capacity in which he held the title is quite immaterial. But the fact that Quinn did not take title to the property under the will of his testator is quite material, for if he had so acquired the title no mortgage upon the property would have been valid, because no power to mortgage is contained in the will.

In relation to property purchased by Quinn, even though the purchase was made with trust funds, the same disability does not arise. The conveyance to him invested him with the full legal title, although, as between him and his beneficiaries, it was impressed with a trust which they could enforce, yet, as the title did not come to him under the will of his testator, his want of power to mortgage under that instrument did not apply, and, therefore, the mortgage executed by him was a valid instrument.

The fact that the property did not belong to the testator at the time of his death is material in another respect. If it had so belonged

SECOND DEPARTMENT, DECEMBER TERM, 1892.

to him, then Quinn would have no title, except such as he acquired under the will as trustee, but now, so far as the title is concerned, the conveyance to him had the same effect as if it had been taken to him as an individual, and the will had no direct operation upon it.

The beneficiaries never acquired any direct estate or interest in the property. It never was subject to any of the trusts in the will, and, therefore, no one can dispute the conveyance to Quinn or his mortgage thereunder.

These conclusions receive support from the adjudicated cases which have arisen under purchases of real property by executors upon sales under judgments of foreclosure of mortgages belonging to their testator.

Such was the case of Lockman v. Reilly (95 N. Y., 64), where the executors, on foreclosure of their mortgage, became the purchasers and received the conveyance in their name as executors, and it was held that, whether the deed was taken in the name of the executors as such, or in their individual names, the legal title was in them, and they might sell the same although no power of sale was contained in the will.

The same question again received the attention o the Court of Appeals in the case of Haberman v. Baker (128 N. Y., 253), and it was there held that when, "upon foreclosure of a mortgage belonging to the estate of a decedent, the mortgaged premises are bought in by the personal representatives, they take on the character of the mortgage indebtedness, and so are as personalty in his hands, which he may dispose of, and for which he is liable to account as such, and this is so, although the decedent left a will which conferred no power upon his executors to sell real estate." And, further, that neither the heirs of the decedent nor his residuary devisees take any direct interest in the property.

The case of Valentine v. Belden (20 Hun, 537) was an action like this to compel a purchaser to take title. The plaintiff foreclosed a mortgage belonging to his intestate and became the purchaser at the sale under the judgment and took a deed in his own name individually. He then entered into a contract to sell and convey the premises to the defendant, who subsequently refused to consummate the agreement on the ground that the plaintiff, being the adminis

SECOND DEPARTMENT, DECEMBER TERM, 1892.

trator of the estate could not purchase the premises under the judgment, and was, therefore, unable to convey a good title thereto.

The court held that the land thus purchased became a substitute for the bond and mortgage, and that the plaintiff acquired as perfect title to the land as he possessed to the bond and mortgage previous to the foreclosure, and the conveyance which he tendered to the defendant would vest in the latter a perfect title to the premises.

In the case of Cook v. Ryan (29 Hun, 249), the plaintiffs, as executors, brought an action to foreclose a mortgage owned by their testator. Pending the action the property was conveyed to the plaintiffs as executors, and the action was discontinued. Subsequently a moneyed judgment was recovered against the plaintiffs as executors, and it was held that they had power to sell the property although no power of sale was conferred by the will, and that a purchaser from them would acquire a good title.

The court there said in the course of the opinion: "They not only have power, but it is their duty to sell and dispose of the property, and to convert it into cash for the payment and discharge of the liabilities of the estate of their testator, and their conveyance will constitute a perfect title."

That case received an approving quotation from the Court of Appeals in Lockman v. Reilly (supra). In the action to foreclose the mortgage executed by Quinn to the building association, it was unnecessary to make any parties defendant except the mortgagor, because, as we have seen, the beneficiaries under the will took no interest in the property and the title was vested in him alone. Moreover the former decision of this General Term is conclusive on that question.

It is, perhaps, unnecessary to say that our decision does not justify the action of Quinn in making the purchase of this property with trust funds; on the contrary, such action was improper, and the persons entitled to the money used in making the purchase had the right, by appropriate proceedings, to have the property adjudged to belong to them, or they might require the trustee to account to them for the money so employed. But they could not have both. (Baker v. Disbrow, 18 Hun, 29; affirmed in the Court of Appeals, 79 N. Y., 631.) In that case, it was said: "The improper investment is considered, as against the trustee himself, as equivalent to no

SECOND DEPARTMENT, DECEMBER TERM, 1892.

investment, but, in favor of the cestui que trust, it gives an option to claim either the investment made or the replacement of the original fund, with interest according, as the one or the other may be most for his benefit."

It was the right of the beneficiaries, under the trusts in the Connell will, to have the entire estate converted into money, and until they did some affirmative act looking toward an election to accept an interest in land, their interest was in the fund as personal property, and the control of the trustee over the land, and his duty to convert it into money, and his power to make such conversion was full and complete.

In the case of Rogers v. Paterson (4 Paige, 409), a trustee of a legacy for an infant, feme coverte, which was invested on bond and mortgage in the name of the trustee, took a release of the equity of redemption, thus acquiring the legal title. The cestui que trust died during her infancy, and whether the rights of the infant were those of an owner of land or of a beneficiary of a legacy, and, also, whether the property descended to her heirs-at-law or passed to her husband, were the questions presented, and it was held that it continued personalty, and passed to her husband.

Our examination leads us to the conclusion that the plaintiff is entitled to judgment against the defendant for a specific performance of the contract.

BARNARD, P. J., and PRATT, J., concurred.

Judgment for plaintiff on submitted case, with costs.

66 349 73 517

BENJAMIN B. STRONG, RESPONDENT, v. LOUISA A. SHEF-
FIELD, APPELLANT, IMPLEADED WITH ANOTHER, DEFENDANT.

Bills and notes-action by a payee against a subsequent indorser — when it may be maintained-consideration · -old debt.

Benjamin B. Strong began an action against Gerardus R. Sheffield, as maker, and
Louisa A. Sheffield, as indorser, of the following promissory note:

"$400.

NEW YORK, July 1st, 1889.

"On demand I promise to pay to the order of Benjamin B. Strong four hundred dollars, with interest, at New Rochelle, value received.

"G. R. SHEFFIELD."

66 349 144a 392

66 349

83 194

SECOND DEPARTMENT, DECEMBER TERM, 1892.

The note was given for a pre-existing debt of Gerardus R. Sheffield to Strong, evidenced by a due bill, and was indorsed by Louisa A. Sheffield before it was delivered to Strong.

When Louisa A. Sheffield indorsed the note she received no consideration therefor, nor was there any agreement by Strong to extend the time of payment of the original debt, and it did not appear that the due bill was surrendered

Upon the trial the plaintiff recovered judgment, on an appeal from which it was, Held, that the judgment was improper.

Semble, that the note was non-negotiable, and that no person could be held liable as indorser of such a note.

That, if negotiable, Louisa R. Sheffield was, as to Strong, a subsequent indorser, and, therefore, he could not recover against her.

That, in the cases where a payee has been allowed to recover against an indorser, upon the ground that the indorsement was made to give the maker credit with the payee, the complaint must set out the facts; and that, upon the facts of this case, no recovery on that ground could be sustained.

That there was no consideration for the note, and none for the indorsement of Louisa Sheffield; and that, regarding the note as non-negotiable, there was no consideration for her promise as a guarantor. (BARNARD, P. J., dissenting.)

APPEAL by the defendant Louisa A. Sheffield from a judgment of the Westchester County Court, entered in the office of the clerk of the county of Westchester on the 23d day of December, 1891, upon a verdict for the plaintiff for $432.80, after a trial in the Westchester County Court before the court and a jury; and also from an order of said court, entered in said clerk's office on the 12th day of December, 1891, denying the defendant's motion for a new trial.

The action was brought by the plaintiff, as payee and holder, upon a promissory note made by Gerardus R. Sheffield, and indorsed by his wife, Louisa A. Sheffield, the appellant, whose indorsement the evidence tended to show was made before the note was delivered. The complaint was drawn in the ordinary form and with the allegations usually employed in an action against the maker and indorser of a note.

Martin J. Keogh, for the appellant.

Cornelius E. Kene, for the respondent.

DYKMAN, J.:

This action was commenced against the maker and indorser of a promissory note in these words and figures:

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