BLOODGOOD vs. BRUEN.

BLOODGOOD vs. BRUEN.

In the matter of the Estate of THOMAS H. SMITH.

THE will of the testator stated that he was desirous of making "a general disposition" of all his estate, real and personal; directed in the first place "all his just debts to be paid;" devised all his real estate to his 'executors" on certain trusts, and among others in trust,-if his personal estate should be insufficient, "after payment of his debts," to pay legacies amounting to $400,000, to his children and their issue,-that his executors "should sell such part of the real estate, as would enable them to make up and provide the said several sums." He gave all the "rest, residue and remainder" of his estate to his executors, and also empowered them, "whenever they should think it expedient, to sell all or any part of his real estate," provided that the change of the character of the funds should not change the disposition thereof. The executors having sold the real estate, were cited to account for the proceeds, by a creditor, the personal estate being insufficient for the payment of the debts. Held, That the Surrogate had power to call the executors to account for the proceeds of the sales, and to compel distribution in the same manner as if the proceeds had been originally personal property.

The distinction as to legal and equitable assets, no longer prevails as to the

proceeds of the sale of realty, but such proceeds, when the real estate is sold by order of the Surrogate, are distributed in the same manner to creditors as the personal estate. The only effective remedy provided by statute for the specific application of the realty to the discharge of debts, is vested in the Surrogate's Court.

Where the will directs a conversion of the real into personal estate, the

money arising from the sale becomes legal assets in the hands of the executor, for which he is bound to account before the Surrogate. If a mere authority to sell is given to the executor, he may bring the proceeds into the Surrogate's office for distribution, as the proceeds of the sale of real estate.

If the intention of the testator to charge the debts upon the real estate can be gathered from the will, and the executors have a power of sale under which they have acted, they may be cited to account and distribute, the intention to charge the debts on the realty affecting the power so as to make it an imperative power in trust, tantamount to a peremptory order to sell in case of the personalty being insufficient to pay the debts.

If the real estate is ordered to be sold for the payment of legacies, the Sur

BLOODGOOD vs. BRUEN.

rogate has power to compel distribution at the instance of creditors or legatees. Several suits may proceed in the same court or in courts of concurrent jurisdiction, by plaintiffs seeking an account of executors and administrators, and payment of their respective claims; but when a decree for a general account and distribution is made in one suit, and the other creditors are authorized to come in under the decree and obtain satisfaction of their demands, the other suits will be stayed. But if provision is not made in the decree, for the payment of the claims of all creditors, or allowing them to apply for payment under the decree, such other creditors are not barred from proceeding in their own suits to a final decree.

TUCKER & CRAPO, for Petitioner.

WILLIAM M. EVARTS, for Executor.

THE SURROGATE. The testator commenced his will by stating that he was desirous of making "a general disposi tion" of all his estate, real and personal. He then, in the first place directed "all his just debts to be paid," and in the next place devised unto his "executors," all his real estate in trust, to collect and divide the rents among his four children during their respective lives, and on the death of the last survivor, to apportion and convey the estate to and among the issue of his children, per stirpes: And upon the further trust, that if his personal estate should not suffice, "after payment of his debts," to pay legacies amounting to $400,000, as subsequently provided in his will for the benefit of his children and their issue, then his executors "should sell such part of the said real estate as would enable them to make up and provide the said several sums.”

The testator also gave a power to his executors, "whenever they should think it expedient, to sell all or any part of his real estate," with the restriction that no alteration or change of the funds from real to personal, or from personal to real, should change the disposition thereof, made in his will. He directed all the debts and incumbrances on his real estate to be paid out of his personal estate; gave legacies of $30,000 to each of his four children, and required the

BLOODGOOD vs. BRUEN.

executors to invest $280,000, and pay the income to his children for life, and on their death, the principal to their issue.

The question now presented is, whether, the executors having sold the real estate, they can be called to account in the Surrogate's Court, on the application of a creditor, the personal estate being insufficient for the payment of the debts.

Whatever doubt may once have existed, whether the proceeds of real estate devised to executors in trust to sell for the payment of legacies, were legal or equitable assets, it is now settled in England, that they are equitable assets; and, in a case where a devise of this kind was made, the property sold, and the legatee brought suit for his legacy in the Consistorial Court, a prohibition was granted by the Court of King's Bench. (Barker vs. May, 9 B. & C. 489; Clay vs. Willis, 1 B. & C. 364.)

But our statutes have largely changed the mode of enforcing the payment of the debts of deceased persons; and many of the rules which have prevailed at Common Law, and in the Spiritual Courts, are not applicable to our system of administering estates. The Surrogate is not only clothed with power to order the payment of debts out of the personalty; but, on the motion of the executor or administrator within three years after the grant of letters, or on the application of a creditor at any time after an account filed, he may proceed to order the sale of the real estate for the payment of debts. And the distinction as to legal and equitable assets, no longer prevails as to the proceeds of the sale of the realty; but they are distributed in the Surrogate's office in the same manner and course of administration, so far as respects debts, as the personal estate. (2 R. S. 3d ed., p. 169, § 42, p. 548, § 37; 3 R. S. 2d ed., p. 752, note to § 36.) The whole scope of the various statutory provisions on this subject, is obviously to place under the jurisdiction of the Surrogate the application of the entire estate of the decedent, real and personal, to the payment of debts, according to the same order and rule of dis

BLOODGOOD vs. BRUEN.

tribution. Indeed, it would appear that the only effective remedy provided by the statute for the specific application of the realty to the discharge of debts, is now to be found. in the Surrogate's Court. For though the heirs or devisees may be sued at law or in equity for the debts of the deceased, there is no longer a specific judgment or a decree for a sale of the real estate and distribution of the proceeds among all the creditors who may come in under the decree, according to the amount of their demands and their legal priorities, but each creditor must sue for himself, for the recovery of what the heirs or devisees are liable to pay him, after satisfying all legal priorities and the proportionate claims of other creditors. (Butts vs. Gennung 5 Paige, 254; Morris vs. Mowatt, 2 Paige, 586; Wambaugh vs. Gates, 11 Paige, 515.)

It is obvious, therefore, that when the executor has sold the real estate under a testamentary power, one of two results must take place: either that his sale and conveyance, give a good title and oust the Surrogate of his authority to compel a sale for the payment of debts; or, notwithstanding the execution of the power by the executor, the Surrogate may proceed at the instance of creditors to direct a sale, which will oust the title derived under the execution of the power. The latter result would be the proper legal conclusion; for a testamentary power is in the nature of a devise, and a devise cannot bar the authority of the Surrogate to order a sale of the realty. A title under an order of sale by the Surrogate, would prevail over a title by the devisee of a power. This affords a strong a priori argument why, when the executor has executed a power of sale under the will, he should be liable to account for the proceeds before the Surrogate.

In view, also, of the statutory provisions authorizing the Surrogate to decree the payment of debts and legacies, it has been held in the Court of Appeals that where the will directs an "out and out conversion" of the realty, the real estate upon the principle of equitable conversion is con

BLOODGOOD vs. BRUEN.

verted, from the death of the testator, into personalty, and the money arising from the sale becomes legal assets, in the hands of the executor, for which he is bound to account as personal estate. (Stagg vs. Jackson, 2 Bar. Ch. R. 86, 1 Comstock, 206; Kellett vs. Rathbun, 4 Paige, 102; Clark vs. Clark, 8 Paige, 152.)

There are two statutory provisions applicable to the sale of real estate under a power, and the distribution of the proceeds. By the 3d section of the act of April 17, 1822 (Session Laws 1822, p. 283), the Surrogate was authorized to call the executors to account for the proceeds of the sale of real estate, made by virtue of a power contained in a will, for the payment of debts or legacies. The language of this provision embraced all sales "authorized to be made;" and, as the phrase was altered at the re-enactment of the section in the Revised Statutes, from "authorized" to "ordered to be made " (2 R. S. 3d ed., p. 172, § 61), there can be no doubt it was intended to confine the power of the Surrogate to compel an account, to the cases where a sale was directed or ordered, and to exclude the case of a sale under a mere naked discretionary power. This construction is further strengthened by the enactment of section 75 of chapter 460 of the laws of 1837, which provides that the proceeds of a sale of real estate, made in pursuance of an authority given by any last will, may be brought into the office of the Surrogate for distribution, in the same manner as the proceeds of the sale of real estate, sold by the Surrogate's order for the payment of debts, are distributed.

The single point to determine, then, is, whether the Surrogate has power to compel an account and distribution under the sixty-first section of the statute, which runs in the following words,-" Where, by any last will, a sale of real estate shall be ordered to be made, either for the payment of debts or legacies, the Surrogate in whose office such will was proved, shall have power to cite the executors in such will named, to account for the proceeds of the sales,