
    In the Matter of the Judicial Settlement of the Accounts of George W. Peck, as Executor, etc., of George W. Banker, Deceased; In the Matter of the Judicial Settlement of the Accounts of George W. Peck, as Executor, etc., of Henrietta M. Banker, Deceased. Bert A. Banker and Others, Appellants, Respondents; George W. Peck, as Executor, etc., of George W. Banker, Deceased, and as Executor of Henrietta M. Banker, Deceased, Respondent and Appellant; The Town of Keene and The National Woman’s Suffrage Association, Respondents.
    
      Executor—not compensated for continuing Ms testator’s business—he is liable for the profits realized, not for those which might have been—disbursements in the business not inquired into — burden of impeaching vouchers for debts of the testator, and those for debts created by the exebutor—a-debt treated as part of a fund applicable to the payment of legacies.
    
    An executor of an estate, who, of his own motion, and not because he is required to do so by the will, continues the testator’s business for about a year before selling the same and succeeds in making a profit therein, must account, to the beneficiaries of the estate for all the profits which he makes and cannot retain any portion of such profits as compensation for his own services.
    His liability is limited to the profits which he actually makes and not to the profits which he might have made had he managed the business more economically or with greater discretion.
    The amount which the executor paid to a person who assisted him in carrying on the testator’s business is, therefore, not a proper subject of inquiry before the surrogate and the executor’s account cannot be surcharged with any portion of the salary actually paid to such person on the theory that such salary was exorbitant.
    On a final accounting by the executor, an unassailed voucher for the payment of a debt of the deceased throws upon the contestant the burden of impeaching the justice as well as the fact of the payment of the claim, but the burden of proving the justicé and necessity of & payment made upon a claim created by the executor rests upon him.
    George W. Banker, by his will, gave all his property to his wife; by a codicil to his will, in the event that he survived his wife, he gave to certain persons named therein certain legacies amounting in all to the sum of $8,500 “ out of the, capital employed in my business and the proceeds of sale of machinery, moulds, patents and good will of the business." A codicil to his wife’s will, executed at the same time and place as thé codicil to the husband’s will, con-tamed a similar bequest in the event of her surviving her husband. The fund from which the bequests were to be paid were described in this codicil as follows: “the capital employed in my husband’s business and proceeds of the sale of machinery, moulds, patents and good will of the business.”
    The wife died about two weeks after her husband. Some years prior to the execution of such codicils, the wife had loaned the husband for investment in his business a sum which amounted at his death to §9,369.67. The value of the husband’s business at the time of his death, including the §9,369.67 belonging to his wife, was §14,702.85.
    
      Held, that the §9,369.67 owing by the husband to the wife should be treated as a part of the fund applicable to the payment of the legacies given by the codicil to the wife’s will.
    Cross-appeals in the first above-entitled proceeding by Bert A. Banker and others, legatees under the will of George W. Banker, deceased, and by George W. Peck, as executor, etc., of George W. Banker, déceased, from portions of a decree of the Surrogate’s Court of the county of Essex, entered in said Surrogate’s Court on the 10th day of February, 1902, judicially settling the accounts of the said George W. Peck, as executor, etc., of George W. Banker, deceased.
    Also, cross-appeals in the second above-entitled proceeding by Bert A. Banker and others, legatees under the will of Henrietta M. Banker, deceased, and by George W. Peck, as executor, etc., of Henrietta M. Banker, deceased, from portions of a decree of the Surrogate’s Court of the county of Essex, entered in said Surrogate’s Court on the 10th day of March, 1902, judicially settling the accounts of the said George W. Peck, as executor, etc., of Henrietta M. Banker, deceased.
    
      James C. Foley, for Bert A. Banker and others, appellants, respondents.
    
      Gustave Hurlimann, guardian ad litem of William F. Banker and Adelaide Banker, appellants, respondents.
    - A. K. Dudley and Diehard Lockhart Hand, for George W. Peck, as executor, respondent, appellant.
    
      Philip Carpenter, for the National Woman’s Suffrage Association, respondent.
    
      Milo C. Perry, for the Town of Keene, respondent.
   Parker, P. J.:

This record presents two appeals, one from the decree of the surrogate of Essex county, finally settling the accounts of George "W. Peck, as executor of the will of George W. Banker, deceased; the other an appeal from a decree made by the same surrogate upon tlie judicial settlement of said Peck’s accounts, as executor of the will of Henrietta Banker, deceased. The said Henrietta was the widow of the said George W. Banker, and she died on the 5th day of December, 1899 ; he died on November 23, 1899.

The will of George W. Banker left all his property to his wife Henrietta. No party had any interest in the settlement of his estate save his said wife and his creditors. By her will she gave all her property to her husband, but in the event that she survived him, her estate passed to certain legatees therein named. Some of these legatees filed objections to the accounts of said Peck, as rendered by him, in both, estates. The surrogate sustained some of those objections and denied others, and, from the decision so made in each proceeding, both the contestants and said Peck have appealed to this court.

We can consider upon this appeal those questions only which were raised by the surrogate’s rulings upon the objections taken.

The most serious one arises under the following conditions:

At the time he died Banker was engaged in the business of dealing in certain merchandise under patents owned by' himself. Peck and his son, Oscar, had for some years been in his employ and were skilled in carrying on such business. During the two weeks’ interval between Banker’s death and that of her'own, his wife, Henrietta, who was the executor named in his will, and who alone took his whole estate as the absolute owner thereof, entered into a copartnership agreement with Peck, under which they were to continue the business that Banker had left. Upon her sudden death, and after he was appointed executor of both estates, the scheme of a partnership seems to have been abandoned, and he concluded to continue the business himself until a purchaser could be found for it upon what he considered would be favorable terms. He was then informed by his counsel that, if he did so, he would be liable to account for and make good to the estate any loss that might occur to the assets thereof, and that, as to any profits that he might make, they must be deemed the property of such estate and be accounted for as assets thereof. He continued the business something over a year in the store for which the estate then held an unexpired lease, and, upon his accounting to the surrogate as executor of George W. Banker’s estate, he charged himself with the sum of $2,764.31 as the net profits made by him in so conducting the business. The contestants objected to this item as insufficient, and, upon the hearing before the surrogate, it appeared that among the items of expenses which Peck credited to himself in ascertaining the net profits he included the sum of $2,371.53 paid to his son for services as an assistant therein, and also the sum of $3,071.95 taken by himself as compensation for his services in so conducting the business. As to the payment to the son, the surrogate reduced the sum so claimed to $1,769.58. As to the credit for his own services, the contestants claim that Peck was not entitled to any. The surrogate allowed him his whole claim, and here is presented the question for consideration.

It is clear that Peck was not acting as executor in continuing this business. He was not required by the will so to do, but, individually, and of his own motion, he continued it for something more than a year before he sold the same as assets of the Banker estate. He was, therefore, under no obligations to account to the • surrogate for the details of such business. His receipts and expenditures in such business were no part of his executor’s account. He was obligated to report and account to' the surrogate for the actual net profits made in such business, because, under the well-settled and familiar rule of equity, such profits became an asset of the estate; but he was in no way responsible to the surrogate, nor to the estate, for not having made more. His primary liability was for all the assets of the estate, and for such profits as he actually made from them, not for what he might have made had he managed the business more economically and with greater discretion. And the burden is upon the beneficiaries to show that the net profits were more than the executor reports. If they fail to show that he made any profits, and he reports none, but yet show that he used the trust fund in his own business, they may have interest thereon because of his wrongful use . of the same. These principles are well stated by Ransom, S., in Estate of William Munzor (4 Misc. Rep. 374).

■It seems clear, therefore, that the amount which Peck paid to his son for assisting him in carrying on this business was not a proper subject of inquiry before the surrogate. True, he might have made more profits if he had not paid so high salaries to his help; but, as stated above, he cannot be surcharged by the surrogate for not making larger' profits. ' He was under no. obligation to ..the estate to make any, and hence the only inquiry before the surrogate was whether he accounted as executor for all that he did make. There is no pretense that he had not actually, paid, to his son the full amount of $2,371.53—no claim that he had it. still in his hands and was seeking to appropriate it to his own use in this indirect way. Hence it was not within the scope of the inquiry before the. surrogate, and the surrogate was in error to surcharge the executor’s account with any part thereof.

As to that part of the earnings of the business retained by the executor on account of his own services, a different question is presented. Confessedly, he has not paid out any part of it. It can hardly be said to have been disbursed. It is still in his hands as a part of such earnings.

. It is a well-settled rule of equity that a trustee is not permitted to deal with the trust property so as to gain any advantage, directly or indirectly, for himself, beyond his lawful compensation. He may not use it in his own private business. He may not make any incidental profits for himself in its management, and he may not acquire any pecuniary gains from his fiduciary position. The beneficiary is entitled to claim all advantages actually gained, and to hold the trustee chargeable for all losses; if any, happening from a violation of his duty. (Pom. Eq. Juris. § 1075.) Within this rule I am unable to see upon what theory Peck may withhold from the estate of which he is executor any portion of such earnings to his own use or benefit. If the amount of his receipts from the business just equaled-the amount of his disbursements, clearly Peck could not ask that he be paid from the estate a reasonable sum as compensation for his services. If the amount of his receipts exceeded his disbursements by the sum of $3,071.95, why should he be allowed to retain that as such a compensation ? The estate owes him nothing for his services,, but may, under the rules'of equity, demand, from him everything that he — that is, his labor and skill — has succeeded in clearing up out of the business. And such demand is imposed against him for his wrongful act in using the funds of the estate in a manner forbidden by law.

Neither the case of Lent v. Howard (89 N. Y. 169) nor any of those to which we are cited by the counsel for the executor, are in conflict with this conclusion; nor have I been able to find any-decision that is. The question here presented is not whether an executor acting for the estate under circumstances which require unusual and greatly increased labors may have a greater compensation than the statute (Code Civ. Proc. § 2730) allows him, but whether the above-stated rule of equity will permit a trustee to retain to himself a salary from earnings which he has made through an unlawful use of the trust property. I am of the opinion that he may not do so, and that the net receipts which Peck should have accounted to the surrogate for should have included the earnings which he claimed to retain as salary for himself. It is manifest that Peck’s continuing the business has worked a decided advantage to the estate, and that lie entered upon such work in order that the estate might be so. advantaged, and it seems to be an ungracious objection on the part of the beneficiaries that will deprive him of all compensation for services that have so resulted; but it is presented to us as a question of law merely, and we may not swerve from well-established, and, in their general application, just and equitable principles, because in this case it seems to impose a hardship upon the trustee for a well-intended act.

A further objection to the account assails the amount of attorney’s fees and counsel fees which the executor asks to be allowed.

From the beginning an attorney seems to have been employed by the executor, and also another firm as counsel, the two acting in each estate.

On a final accounting, an unassailed voucher for the payment of the debt of a deceased throws upon the contestant the burden of impeaching the justice as well as the fact of the payment of the claim. But the burden of proving the justice and necessity of .a payment made upon a claim created by the executor rests upon him, and hence it devolved upon Peck to establish the justice of the payments in this regard for which he asks to be allowed. (Matter of Hosford, 27 App. Div. 427.)

In the estate of George W. Banker I am not disposed to inter-' fere with the conclusions reached by the surrogate respecting such claims, except as to three items hereinafter referred to. The claim for attorney’s fees was largely cut down,, and I think correctly.

In the other estate I am of the opinion that the allowance for attorney’s fees should be further reduced by the sum of $500. The burden was upon Peck to show what services were rendered in consideration for that sum so allowed him. It should be made to appear that they were necessarily incurred in the business of the; estate. There is a total absence of proof that services, as an attorney were rendered therefor, except - the general statement that they were for advice, etc. But there is allowed to the executor in this estate the sum of $650 as counsel fees paid to another-firm. This sum I see no reason to reject. The surrogate may well, from the facts appearing before him, have concluded that it was a necessary and reasonable sum to pay; but there are certainly no facts which show that.m addition thereto services as counsel were needed from the attorney to the extent of $500. The sum of $641.27 allowed as. attorney’s fees, in addition to the $500,. is possibly sustained by proof of its necessity, but the $500 is not sustained by any proof and should not have been allowed.

There are three several items, viz., Geo. B. Glover, $50.; F. B. (Handler, $37.50, and W. E. Stiger, $25, for which the executor claims to be allowed in the George W. Banker estate, and the following : W. E. Stiger, $37.50; E. L. Winthrope, $50, and E. B. Candler, $37.50, in the other estate. -Neither of them is warranted .as counsel or -attorney’s fees. There is no evidence to show that they rendered any such services 'to the estate. Within the above-stated rule they should have been disallowed.

As to the other disbursements for which the executor asks to be allowed in each of the estates and to which objection is made, there is no serious claim that they were not actually paid. But many of them seem very large, and as to some there is very slight, if any, proof that they were necessarily incurred. All such items, however, are to some extent supported by some proof, and whether reasonable or not depend very largely upon matters of fact which the surrogate was better situated to pass upon than we are upon the record before us. I consider them purely as questions of fact. The conditions surrounding this case are peculiar to it. The executor very clearly had to meet many perplexing questions, not only legal ones, but as to what was the most judicious way in which to care for and sell the property which came to his hands. And the surrogate’s disposition of these questions I am not disposed to interfere with.

As to the objection that the sale of the business and property employed therein, of George W. Banker at private sale was for a much less sum than it was fairly worth, it does not appear that any facts were furnished the surrogate upon which he could charge the executor’s account with any other sum. The suggestion that the purchase was in the interest of Peck himself is utterly unproven, and I see no error in the surrogate’s decree in this respect.

The claim of the executor that the surrogate erroneously disallowed him an item of $150, payment on account of rent due on a lease outstanding at the time of George W. Banker’s death, is correct. He was obliged to pay, as a debt of Banker’s due on that lease, the full sum of $375 up to April 30, 1901. He was able to sublet the premises for the sum.of $225 only. There is no evidence that he could have obtained any more. The balance of $150 was evidently a payment which he was obliged to make and for which he should have been allowed.

There is another question presented by the contestants, which we are called upon to determine.

By the codicil to his last will George W. Banker, in the event that he survived his wife, gave to several persons named therein certain money legacies, amounting in all to the sum of $8,500, “ out of the capital employed in my business and the proceeds of sale of machinery, moulds, patents and good will of the business,” and the balance, if any, he gave one-half to the Rational Woman’s Suffrage Association, and the other half to the town of Keene in Essex county. A similar bequest to the same persons was contained in a codicil to the will of his wife, in the event she survived him, executed at the same time and place. The fund from which such legacies are to be paid, as described in her codicil, is “ out of the capital employed in my husband’s business and proceeds of the sale of machinery, moulds, patents and good will of the business.” Some years prior to the execution of such codicils, the wife had, from time to time, loaned to her husband money for the purpose of being invested in such business, and at the time of his death it was so employed and amounted to $9,369.67. The surrogate finds that the cash and such machinery, moulds and patents constituted the capital employed in the husband’s business, and that it amounted to ■ $21,119.84; that there were outstanding debts on account of the business to the amount of $6,416.99, leaving a balance of $14,702.85, from which balance the legacies given by such codicil were properly paid by the executor.

The contestants claim that said sum of $9,369.67, which had been loaned by the wife to the husband, was a debt due from him to her, and should have been deducted from the $21,119.84, as was the $6,416.99, and that the balance of $5,333.18, only, constituted the capital employed in the husband’s business within the meaning of the codicil to the wife’s will.. If such construction is correct, then the $9,369.67 was no part of the fund from which the legacies given by that codicil could be paid, but it should have been distributed to the legatees named in the will.

I am of the opinion that the construction adopted by the surrogate was the correct one. Both husband and wife evidently used the word “ capital in the sense of money or property, and their joint scheme was to dispose of the property which they jointly had put into the business. It is inconsistent with their evident purpose to conclude that the capital referred to in the wife’s codicil was $9,369.67 less than that referred to in the husband’s codicil. If he survived his wife and then died, both knew that the $9,369.67 would have become his, and so, beyond all controversy, become a part of the capital invested. Is it credible that she intended, in the event that she survived him and then died, that the $9,369.07 must ' be withdrawn from the fund which was to pay the legacies provided for in the codicil of each ? Clearly not. The intention is plain, and effect, must be given to that intention. In this respect the decree of the surrogate must be affirmed. It is complained that the surrogate erred in holding that upon the husband’s death, all this business and property passed at once to the wife, and must be administered by JPeck as her property. In my judgment it matters little whether that view is or is not correct. If erroneous, the interests of the contestants are in no way affected thereby. Whether treated as the property of the husband or of the wife, the fund in question, under the above views, would be applicable to the payment of the legacies named in the codicils, and so the same result would follow.

The decree of the surrogate should be modified in each case, in accordance with the suggestions herein contained, and the executor’s commissions should be adjusted accordingly, and as so modified, affirmed, with costs of appeal to the executor, to the contestants and to the guardián ad Utem, payable out of the estate. But one bill of costs to each of such parties should be allowed for the two appeals.

All concurred.

Decree of the surrogate modified as per opinion, and the executor’s commissions adjusted accordingly, and as so modified unanimously affirmed, with costs of appeal to the executor, to the contestants and to the guardian ad litem payable out of the estate, and one bill of costs to. each of said parties allowed for the two appeals. Order to be settled by Paekee, P. J.

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