the court shall specially direct. Before a mortgage, sale or lease can be made pursuant to the final order, the trustee must enter into an agreement therefor, subject to the ap proval of the court and must report the agreement to the court under oath. Upon the confirmation thereof, by order of the court he must execute as directed by the court a mortgage, deed or lease. A mortgage, conveyance or lease made pursuant to a final order granted as provided in this and the last two preceding sections shall be valid and effectual against all minors, lunatics, persons of unsound mind, habitual drunkards and persons not in being interested in the trust or having estates vested or contingent in reversion or remainder in said real property, and against all other persons so interested or having such estates who shall consent to such order, or who have been made parties to such proceeding as herein provided. Formerly section 87, Real Property Law of 1896, chapter XLVI, General Laws, as amended by chapter 242, Laws of 1907: CHAP. 242. AN ACT to amend the real property law in relation to parties to a proceeding where real property affected by a trust is conveyed, mortgaged or leased. Became a law, April 30, 1907, with the approval of the Governor. Passed, three-fifths being present. The People of the State of New York, represented in Senate and As sembly, do enact as follows: Section 1. Section eighty-seven of chapter five hundred and forty-seven of the laws of eighteen hundred and ninety-six, entitled "An act relating to real property, constituting chapter forty-six of the general laws," as amended by chapter one hundred and thirty-six of the laws of eighteen hundred and ninety-seven, is hereby amended to read as follows: § 87. Notice to beneficiary and other persons interested where real property affected by a trust is conveyed, mortgaged or leased and procedure thereupon.— The supreme court shall not grant an order under either of the last two preceding sections unless it appears to the satisfaction of such court that a written notice stating the time and place of the application therefor has been served upon the beneficiary of such trust, and every other person in being having an estate vested or contingent in reversion or remainder in said real property at least eight days before the making thereof, of such beneficiary or other person is an adult within the state or if a minor, lunatic, person of unsound mind, habitual drunkard or absentee until proof of the service on such beneficiary or other person of such notice as the court or a justice thereof prescribes. The court shall appoint a guardian ad litem for any minor and for any lunatic, person of unsound mind or habitual drunkard who shall not be represented by a committee duly appointed. The application must be by petition duly verified which shall set forth the condition of the trust estate and the particular facts which make it necessary or proper that the application should be granted. After taking proof of the facts, either before the court or a referee and hearing the parties and fully examining into the matter, the court must make a final order upon the application. In case the application is granted, the final order must authorize the real property affected by the trust or some portion thereof, to be mortgaged, sold or leased, upon such terms and conditions as the court may prescribe. In case a mortgage or sale of any portion of such real property is authorized, the final order must direct the disposition of the proceeds of such mortgage or sale and must require the trustee to give bond in such amount and with such sureties as the court directs, conditioned for the faithful discharge of his trust and for the due accounting for all moneys received by him pursuant to said order. If the trustee elects not to give such bond, the final order must require the proceeds of such mortgage or sale to be paid into court to be disposed of or invested as the court shall specially direct. Before a mortgage, sale or lease can be made pursuant to the final order, the trustee must enter into an agreement therefor, subject to the approval of the court and must report the agreement to the court under oath. Upon the confirmation thereof, by order of the court he must execute as directed by the court a mortgage, deed or lease. A mortgage, conveyance or lease made pursuant to a final order granted as provided in this and the last two preceding sections shall be valid and effectual against all minors, lunatics, persons of unsound mind, habitual drunkards nd persons not in being interested in the trust or having estates vested r contingent in reversion or remainder in said real property, and against all other persons so interested or having such estates who shall consent to such order, or who have been made parties to such proceeding as herein provided. § 2. This act shall take effect immediately.88 Comment. This section was first amended by an act of 1897, entitled "An act to amend The Real Property Law relative to uses and trusts.' "89 Prior to any such amendment this section, as originally enacted in The Real Property Law of 1896, read as follows: $ 87. Notice to beneficiary where trust property is conveyed, mortgaged or leased. The supreme court shall not grant an order under either of the last two preceding sections, unless it appears to the satisfaction of such court that a written notice, stating the time and place of the application therefor, has been served upon the beneficiary of such trust property, at least eight 88 Repealed by Real Prop. Law of 1909, 460, art. 14, chap. 50, Consolidated Laws. See below, § 460. 89 Chap. 136, Laws of 1897, re pealed by Real Prop. Law of 1909, $460, art. 14, chap. 5c, Consolidated Laws. See below, § 460. days before the making thereof, if such beneficiary is an adult within the state; or if a minor, lunatic, person of unsound mind, habitual drunkard or absentee, until proof of the service on such person of such notice as the court, or a justice thereof prescribes.90 Section, How to be Read. This section is ancillary and must be read in connection with the two preceding sections.91 It is not retroactive. 92 Amendment. Some amendment is necessary to make this section complete in operation.93 90 Cf. chap. 275, Laws of 1882; chap. 26, Laws of 1884; chap. 257, Laws of 1886; chap. 209, Laws of 1891, and chap. 886, Laws of 1895, pp. 506, 509, supra. 91 Van Wyck v. Richman, 33 Misc. Rep. 404, 407; cf. §§ 2345-2364, Code 92 Matter of Asch, 75 App. Div. 485. 93 See notes 7 and 14, Appendix I, infra. § 108. Person paying money to trustee protected. A 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 not be responsible for the proper application of the money, according to the trust; and any right or title derived by him from the trustee in consideration of the payments shall not be impeached or called in question in consequence of a misapplication by the trustee of the money paid. Formerly section 88, Real Property Law of 1896, chapter XLVI, General Laws: § 88. Person paying money to trustee protected. A 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 not be responsible for the proper application of the money, according to the trust; and any right or title derived by him from the trustee in consideration of the payment shall not be impeached or called in question in consequence of a misapplication by the trustee of the money paid.94 Section 88 was formerly 1 Revised Statutes, 730, section 66: $ 66. 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.95 The Old Law. The old rule that a purchaser from a trustee was bound to see to the application of the purchase money and that it was applied in the furtherance of the trusts,96 was always subject to many exceptions.97 The rule itself was so inconvenient and prejudicial oftentimes that it led to the usual insertion in powers of sale of a clause relieving purchasers from the necessity of seeing to the application of the purchase money. Mr. Humphreys, a leading reformer in England, just prior to the Revised Statutes of this State, forcibly criticised the old rule, which the Revised Statutes consequently abolished.98 Yet the old rule was oftentimes 94 Repealed by Real Prop. Law of 1909, § 460, art. 14, chap. 50, Consolidated Laws. 95 Repealed, chap. 547, Laws of 1896. 96 Cruise, Dig. tit. 12, chap. 14, 88 13, 17, 19. Story, Eq. Juris., § 1125 seq.; Field v. Schieffelin, 7 Johns. Ch. 150; 981 R. S. 730, § 66; Humph. Real Prop. (1st ed.) 305; Revisers' note to 1 R. S. 730, § 66. very beneficial to beneficiaries of trusts, such as infants and persons non compotes. The principle that all persons having notice take subject to a trust is not inequitable. But where the trust was to sell and pay debts generally, it was never deemed equitable to apply the rule to purchasers.99 A series of acts following the Revised Statutes has in England also relieved purchasers from the rigid application of the common-law rule.1 The Present Law. Now, where the trust authorizes a sale, a purchaser from a trustee and other persons under legal obligations to trustees, who shall actually and in good faith pay money to the trustees, are by this section relieved from seeing to the application of such money. It may be purloined by the trustee and never reach the beneficiaries, but the purchaser or payer is nevertheless discharged, so far as the trust estate is concerned.2 While a bona fide purchaser is now relieved by this section from the necessity of seeing to the application of the trust purchase money where a trustee is empowered to sell, yet the statutory relief to purchasers extends only to persons clearly within the purview of this section. Where the purchaser has notice of some breach of trust on the part of the trustee, he may rapidly lose the protection of this section of the statute, and even be held to have participated in the breach of trust.3 In such cases it is obvious that the exception stated in this section has no application, and that the old rule applies with full force. Trustees under Powers in Trust. The original of this section (1 R. S. 730, § 66) was formerly expressly applicable to trustees of powers in trust. But section 182 of this act omits a like crossreference to this section of The Real Property Law. 99 2 Lewin, Trusts (last ed.), 598. 1 Lord St. Leonards' Act, 22 § 2c Vict., chap. 35, § 23; Lord Cranworth's Act, 23 & 24 id., chap. 145, $ 29; 44 & 45 id., chap. 41, §§ 36, 71. 2 Belmont v. O'Brien, 12 N. Y. 394, 402; Thomas v. Evens, 105 id. 601, 615; Spencer v. Weber, 163 N. Y. 493; Forbes v. Reynard, 49 Misc. Rep. 154. 3 Champlin v. Haight, 10 Paige, 274, 282, 7 Hill, 245; but revd. on another point, Moore v. American Loan & Trust Co., 115 N. Y. 65, 79; Benedict v. Arnoux, 7 App. Div. 1; revd., 154 N. Y. 715; Warren v. Union Bank of Rochester, 157 id. 259. 41 R. S. 734, § 102. |
