
    James B. Jermain, Plaintiff, v. George N. Sharpe et al., Defendants.
    (Supreme Court, Rensselaer Special Term,
    October, 1899.)
    1. Surplus money proceeding — Right of mortgagee of life interest to take a gross sum from a court fund in lieu of income.
    Assignees of a mortgagee, given by life tenants and which is a lien upon a fund in court, are, within rule 70 of the General Rules of Practice of the Supreme Court, parties who may, against the objection of the life tenants, consent to accept a gross sum in lieu of such annual interest or income for life, as the right so to consent passes to the assignees by operation of law as an incident of the mortgage lien, and the court should permit its exercise in a proper ease.
    3. Same — Hot impaired by a contingent remainder.
    The fact that the remainder, after the life estates, is contingent and may pass to unborn children, who cannot therefore be presently determined, is not a valid objection to the exercise of such right, as it belongs exclusively to the life tenants and is in no way dependent upon the wishes of the remaindermen.
    3. Same — Withdrawal not prejudicial to remaindermen.
    Such a withdrawal of a gross sum from a court fund does not impair the estates in remainder, as the residue of the fund, with interest thereon, will, in contemplation of law, equal, at the death of the life tenant, the corpus of the fund to which the remaindermen are entitled.
    
      Pkooeeding to reach surplus moneys paid into court, arising upon the sale, in foreclosure, of a piece of land known as the Jacob Sharpe farm, instituted in the action by persons claiming to have a lien upon the fund under the following circumstances:
    Bernard TJ. Sharpe, of the town of ¡North Greenbush, Rensselaer county, ¡N. Y., died in the year 1882, seized of four farms known as, first, the Home or Harris farm; second, the Jacob Sharpe farm; third, the Conrad Sharpe farm, and fourth, the Andrew Barringer farm. At the time of his death there was, upon the Home or Harris farm and upon the Jacob Sharpe farm, a mortgage of $10,000, and upon the Conrad Sharpe farm one of $4,000. The Andrew Barringer farm was then unincumbered.
    Bernard H. Sharpe left him surviving the following issue: George ¡N. Sharpe, a son, and Elizabeth S. Graver, a daughter. George ¡N. Sharpe had two sons, Melvin B. Sharpe and William A. Sharpe, who was a minor at the death of his grandfather. Elizabeth S. Craver had a daughter, Eveline Huyck, and a son, Chester B. Craver, who was an infant when his grandfather died. Eve-line Huyck had living, when Bernard H. Sharpe died, two infant children named Annie Campbell and Flora Lape.
    By his will, Bernard TJ. Sharpe devised the Home or Harris farm to George ¡N. Sharpe, Melvin B. Sharpe and William A. Sharpe; the Jacob Sharpe farm to Elizabeth S. Craver and Chester B. Craver, then and still unmarried, during their joint lives, remainder to the survivor for life, remainder in fee to the issue of Chester B. Craver, should he leave any; and, in default of such issue, then over to George N. Sharpe, Melvin B. Sharpe and William A. Sharpe, in fee. The Andrew Barringer farm was devised to the children of Eveline Huyck, under provisions not here material. The Conrad Sharpe farm was bequeathed to George ¡N. Sharpe and his sons.
    The testator had, in addition, charged all his real property, and its devisees, with an annuity of $400, in favor of Mary F. Sharpe, his widow. This he distributed ratably over each of his four farms, charging $100 a year upon each. Certain other charges were made by the will, which are not material here.
    After the death of Bernard H. Sharpe, the devisees of these farms wished to discharge them of the widow’s annuity, and a mortgage was given to James B. Jermain, the assignor of the claimants in this proceeding. A bond for $3,000 was executed by George ¡N". Sharpe, ¡M¡elvin B. Sharpe and Elizabeth S. Graver, who were, at the time, the only adult devisees; and a mortgage was executed by the three obligors and by the infants, William A. Sharpe, Chester B. Graver, Annie Oampbell and Elora Lape, by special guardians, duly appointed, conveying all the estates of all the mortgagors, in all the four farms, as security for the bond. It had, however, been provided in the proceedings, under which permission to execute the mortgage was granted, that the estate of William A. Sharpe should be charged only to the extent of $750; that of Chester B. Graver to the extent of $750, and that of Annie Oampbpll and Elora Lape to the extent of $750. The widow received the money raised upon the bond and mortgage and thereupon. discharged the farms of any lien or charge in her favor.
    Subsequently the mortgage of $10,000, which was held by James B. Jermain, was foreclosed. Upon the sale, the Home or Harris farm was sold first and the Jacob Sharpe farm next. A surplus resulted from the sale of the Jacob Sharpe farm and this surplus was the subject of the present controversy.
    The Conrad Sharpe farm was also sold, under a foreclosure of the $4,000 mortgage upon it, held by James B. Jermain, and no surplus resulted.
    Upon the hearing of the present proceeding before a referee, it was contended, on the part of the claimants, that they, as assignees of the $3,000 mortgage, were entitled to the present value of the joint life estates of Elizabeth S. Graver and Chester B. Graver, and also to the present value of the estate in survivorship of each. It was admitted that the share of Chester B. Graver was subject only to the sum of $750, with interest.
    It was contended, on the part of the Gravers, that the claimants must first exhaust their remedy against the Andrew Barringer farm; also that the right of a life tenant to elect to take a present sum, equal to the value of his annuity, calculated under the ¡Northampton tables, was a purely personal right which did not pass to a mortgagee; and, further, that, owing to the fact that a remainder to unborn children had been limited upon the life estates of the Jacob Sharpe farm, there could be no action which would in any way deplete the principal of the fund in court, to the possible prejudice of such unborn children.
    The Gravers also insisted that Elizabeth and Chester could not each have separate life estates in survivorship, as one must die first and each could not survive the other.
    The referee reported that the mortgageés were entitled to an order directing the county treasurer to pay over to them the yearly increment of the fund in court, during the lives of Elizabeth and Chester, and of the longest liver of them, to be applied on this mortgage. He also decided that they were entitled to the past increase of the fund, but that they could not deplete the principal of the fund by an election to take a gross sum under court rule 10.
    Each party excepted to the referee’s report and the exceptions were heard before Mr. Justice Edwards, who rendered the following opinion:
    Learned Hand, for claimants.
    J. A. Oipperly, for life tenants.
   Edwabds, J.

I am of opinion that the report of the referee should be confirmed, except as to the fourth and sixth conclusions of law, wherein he finds that the demand of the claimants to withdraw from the fund the gross value of the life estates should be denied, and that only the annual income should be paid to them.

But for the mortgage lien of the claimants there could be no doubt of the right of the life tenants, Elizabeth S. Graver and Chester B. Graver, to elect to take a gross sum representing their estates, and I see no reason why the court, in the exercise of its discretion, should not, in that case, direct the payment to them of such sum. The learned referee is of opinion that the claimants have not the legal right to elect to take such sum against the objections of the life tenants. I think that this right of election passed to the mortgagee as an incident of his mortgage lien, and the life tenants are not in a situation to object to the exercise of such right by the claimants, who are the assignees of the mortgage. It is a right which may be transferred either by the voluntary act of the life tenant or by operation of law. He may convey his estate and his successor in interest takes it with the same rights which the grantor might have exercised, or he may be divested of his estate against his will and his successor takes his rights with his interests in the property. A receiver, in proceedings supplementary to execution, is vested with the right, against the objection of the life tenant, to consent to accept a gross sum in lieu of the life estate of the judgment debtor in the proceeds of the sale in an action of partition. Wood v. Powell, 3 App. Div. 318. So, also, the life tenant may mortgage his estate, and I think that this right to elect or consent passes to the mortgagee to enable him to realize the value of his security out of the land or its proceeds whenever -it becomes necessary to enforce his lien. The rights which the life tenant otherwise might have exercised then become available to the mortgagee. I think that the claimants are, within the meaning of Supreme Court rule 70, parties who may consent to accept a gross sum in lieu of annual interest or income for life. The referee, in his opinion, cites, as authorities for his conclusion, Matter of Camp, 126 N. Y. 377, and Matter of Zahrt, 94 id. 605. In the former case the court held that one having a life estate in a fund, the proceeds of land, and who was guardian of the remainderman, could not be compelled, on an accounting, at the instance of the remainderman, to accept a gross sum in lieu of his annual income. That was not a case where the life tenant was electing to take a gross sum, but where the remainderman was attempting to compel him to accept such sum against his objections. In Matter of Zahrt, supra, the court simply held that a person is not absolutely entitled to a gross sum in lieu of the annual income, but whether or not he shall have it rests in the discretion of the court, and under the particular circumstances of that case it was proper that it should be denied. I do not think that either of those cases is authority for the contention that the mortgagee of a life tenant, having a lien upon the surplus fund, has no right to elect to take a gross sum against the life tenant’s objection.

It is contended by the counsel for the life tenants that the court has no power to permit the withdrawal of a gross sum in lieu of the income, for the reason that the persons entitled to the remainder are uncertain, may be the unborn children of Chester B. Graver, and are not represented in this action. I think a sufficient answer to this objection is, that the right to elect or consent to accept a gross sum is exclusively the right of the life tenant. It does not depend upon, nor is any way affected, by the wishes of the remainderman. It may be exercised by the life tenant without the consent and against the objection of the remainderman. The counsel for the life tenants further contends that the court cannot permit an impairment of the estate of the remaindermen by the withdrawal of a gross sum from the fund. The answer to this is that the withdrawal of such a sum is not, in equity, deemed to be an impairment of the estate of the remaindermen. The theory upon which a court of equity permits a life tenant to take a gross sum, in lieu of his estate, is that such sum is the equitable value of his estate, and that what is left is the equitable value of the estate of the remainderman. The fund remaining, after the withdrawal of the value of the life estate, with the accumulation of interest, will be equal, at the time of the death of the life tenant, to the corpus of the fund to which the remainderman is entitled. The court ascertains as accurately as possible the present value of the estate of both the life tenant and of the remainderman, and neither is deemed to be impaired by the separation. The remainderman takes his estate; subject to this right of election in the life tenant. Although the right is not an absolute one, it is one which the court, in its discretion, always permits the life tenant to exercise when no equitable reasons to the contrary exist. I can see no reason in this case why the life tenants, if their estates were unincumbered by the mortgage, should not be permitted to accept a gross sum from the fund; and as the estates of the remaindermen could not be differently affected by granting such permission to the claimants, I think that it should be granted.

As the court has before it, on this motion, all the data from which the value.of the life estates of Elizabeth S. Graver and Chester B. Graver can be ascertained, and also the amount for which each is liable on the mortgage, the calculations will be made by the court on the settlement of the order, on notice, and the question of costs will then be determined.

Ordered accordingly.  