Canfield v. Canfield.

laid upon a foundation six feet in depth, properly inscribed and protected. This object, it is conceded, has been attained, and the work has been done under the direction of the widow to whom he gave, with a trifling exception, the enjoyment of all his property for her life, and in whom he had, presumably, the fullest confidence.

If this is not the proper construction of this codicil the residuary legatees would not be benefited, as some of them appear to have supposed they would. No intestacy would result. It would still be possible to carry out the direction of the will in this regard, and the executors would be bound to do it if the testator had, in fact, required it; but I do not think he has.

The other question is whether the share of one of the residuary legatees, the widow of testator's brother William, she having predeceased the testator, goes to the other residuary legatees. It is well settled that it does not. The testator died intestate as to that share. Garthwaite's Executor v. Lewis, 10 C. E. Gr. 351; Wms. Ex. 1315.

The only arguable question, on this branch of the case, is whether the share which thus lapsed is to be treated as real estate or personalty. By the so-called eighth item of his will the testator directs his land to be sold after the death of his wife and the money divided among his residuary legatees. The direction to convert is imperative, and the executors have actually converted it. It is admitted that the balance now in their hands is the proceeds of the sale of land. Although this is so, I think there can be no doubt that the money is, for the purposes of distribution, to be treated as real estate and not as personalty. It was so decided in the leading case of Ackroyd v. Smithso.. Lead. Cas. Eq. *690, where two out of a larger number of residnary legatees had died in testator's lifetime, and this case has been relied upon and followed in this court, in Roy v. Monroe, 2 Dick. Ch. Rep. 356, and in the court of appeals, in Lerch v. Oberly, 3 C. E. Gr. 575. The principle is thus stated in Roy v. Monroe, in a passage quoted by Vice-Chancellor Van Fleet from the note of the American editors to the above-cited case of Ackroyd v. Smithson:

Canfield v. Canfield,

"The conversion of property from one species to another by the will of the testator, takes place only for the purposes of the will, and so far as those purposes do not extend or in so far as any of them do not take effect in fact or in law, the property is considered as remaining in its former condition, as it was in the bands of the testator, and passes accordingly."

On the same general principle it is said by Chief-Justice Beasley, in Lerch v. Oberly: "The principle is established by a multitude of cases that where real estate is directed, either by the owner or by the order of the law, to be converted into money for a particular object, and a surplus remains after the accomplishment of such object, such surplus, as between the heir and personal representative of such owner, will be regarded by a court of equity as land, and will descend as such."

"Where," says Lord Eldon, in Hill v. Cock, 1 Ves. & B. 175, "a testator means, with regard to a particular purpose, to convert his real estate into personal, if that purpose cannot be served, the court will not infer an intention to convert the estate for any other purpose not expressed."

In view of these authoritative declarations, I should not have thought the question open to discussion had it not been for the case of Hand v. Marcy, 1 Stew. Eq. 59. There a testator, after directing a conversion of his lands, gave and bequeathed "the residue of his estate to S. M. L. E. and M. S., their heirs and assigns, to be equally divided between the said S. M. L. E. and M. S." M. S. died in the lifetime of testator. After holding that the legacy had lapsed, and that the surviving residuary legatees were not entitled by survivorship, Chancellor Runyon further held that the lapsed share, composed in part of the proceeds of the sale of land, went wholly to the next of kin, on the ground that the direction to convert was absolute. The only case cited by him in support of that proposition was Miller v. Miller, 10 C. E. Gr. 354. But the point there decided was only that a contract for the sale of real estate works an equitable conversion of the land into personalty from the time it is made, and that the purchase-money becomes a part of the vendor's personal estate, and, as such, distributable, upon his death, to his widow and next of kin. This decision is unquestionably sound, resting, as it does, upon the well-known rule declared in Fletcher v.

Canfield v. Canfield.

Ashburner, 1 Lead. Cas. Eq. *659, but it had no application to the case then in hand. The distinction involved evidently escaped the notice of court or counsel, and the opinion indicates that the case was thought to turn chiefly upon another matter, viz., the effect of the words "heirs and assigns" on the question of lapse.

So strong is the rule that the undisposed of beneficial interest will result to the heir where the produce of the sale is to be applied for a purpose which, either wholly or partially, fails, that in the case of Fitch v. Weber, 6 Hare 145, it was held by Vice-Chancellor Sir James Wigram, on grounds that seem unanswerable, that the heir was entitled, notwithstanding testatrix's declaration that the trustees should stand possessed of the proceeds of the sale,

"as a fund of a personal and not of real estate for which purpose I declare that such proceeds or any part thereof shall not in any event lapse or result for the benefit of my heir-at-law."

The testatrix had provided that her trustees should apply the residue of her estate as she should, by codicil, direct, and she made no codicil. The controversy was between the next of kin and the heir-at-law. The vice-chancellor said: "Admitting the intention to exclude the heir, is not the intention equally clear to exclude the next of kin? Where, then, is there room for a necessary or any implication in favor of the next of kin? In these circumstances I feel myself called upon to follow the course of decisions, in holding that the testatrix has expressed an intention to exclude the heir only for the purposes of her will, and that if her words express more, and she has failed to say who shall take the surplus, the law must dispose of it. *** 1 cannot imply an intention in favor of those whom the will excludes. The heir takes, not by intention, but in the absence of intention."

I

Without doing violence to the principle upon which Roy v. Monroe and Lerch v. Oberly were decided, I cannot, in this case, give the proceeds of the sale of the land to the next of kin in preference to the heir-at-law.

Nugent . McNeil Shoe Co.

I think it is perfectly plain that the widow of William Canfield does not answer the description of any of the persons mentioned in section 34 of the Wills act.

FRANCIS P. NUGENT

v.

THE JOHN MCNEIL SHOE COMPANY.

[Filed December 2d, 1901.]

1. Where the mortgagor of a stock of shoes sold it to a company which took subject to the encumbrances, but did not assume the mortgage debt, it never became the personal obligation of the company so as to entitle the mortgagee to recover it from the company's receiver.

2. Where a partner continuing a shoe business gave a chattel mortgage to his late partner on the book accounts due to the dissolved firm, it imposed a lien on them, but not on the money collected on such accounts by a company which purchased the business from the mortgagor, the money being mixed with other money and used in the regular course of the company's business.

3. Where a continuing partner of a firm gave a chattel mortgage to the other partner, on the book accounts and afterwards sold the business to a company, the mortgagee is entitled to claim from its assets whatever the company collected on such accounts, as an unpreferred creditor, as for money received to his use.

4. Where a chattel mortgagee sold, under his mortgage, machines put on the premises by a purchaser of the business from the mortgagor, which were distinct from the property mortgaged, and capable of identification, he is answerable for their value.

Mr. Malcolm McLear, for the appellant.

Mr. Charles M. Myers, receiver, pro se.

STEVENS, V. C.

This is an appeal from the determination of the receiver of the shoe company. The case is submitted on an agreed state of

Nugent v. McNeil Shoe Co.

facts. It appears that the appellant, Bainbridge, and one John McNeil were partners in the shoe business. Bainbridge sold his interest therein to McNeil for $4,000. The payment of the money was secured by eight notes, made by McNeil, all bearing date on the day of sale, August 12th, 1898, and further secured by a chattel mortgage, in the usual printed form, in which MeNeil bargained and sold, upon condition,

"all the goods and chattels mentioned in the schedule hereunto annexed and now in that part of the premises known as 236 Bank St., Newark, N. J., and occupied by me and also all goods and chattels that may in the future be brought into said premises to take the place of said goods and chattels now therein and all stock, shoes, &c., that in the future may be manufactured to take the place of the stock now therein and all book accounts."

The schedule refers, more particularly, to some of the goods on the premises, and concludes as follows: "And all book accounts now due the said firm of McNeil & Bainbridge now dissolved, and all book accounts in the future that grow due."

McNeil carried on the business on his own account from August 12th to August 24th, 1898. Then he transferred it to the John McNeil Shoe Company. Only one of the above-mentioned notes having been paid, a constable, on August 8th, 1899, at the instance of the mortgagee, seized the property of the shoe company, then on the premises 236 Bank street, and, on August 14th, sold it for the price of $556. This sum was credited on the mortgage debt.

On August 15th, 1899, the company was adjudged insolvent by this court and Mr. Myers was appointed receiver. Bainbridge presented his claim for the balance due on his mortgage ($2,942), and it was disallowed. From this disallowance the present appeal has been taken.

The debt was due, not from the company, but from McNeil. The company did not assume it, and so it never became its personal obligation. The case states only that "the business mentioned in the said conveyance was conveyed to the said corporation subject to the encumbrances thereon." Whatever claim, therefore, Bainbridge may have springs out of the lien created by his mortgage. He has no other claim, so far as the company