
    New York County.
    —Hon. RASTUS S. RANSOM, Surrogate.
    May, 1889.
    Matter of Keteltas. In the matter of the judicial settlement of the account of Alice Keteltas and Mary Keteltas, as trustees under the will of Eugene Keteltas, deceased.
    
    Trustees under a will can only loan on real estate or on state or United States bonds as permanent investments, even though the will, after giving them the power to sell, also gives them the right to “ invest and re-invest the same in such manner and upon such securities as to them shall seem advisable.”
    Accounting of testamentary trustees.
    John E. Parsons, for Alice Keteltas and Mary Keteltas, trustees.
    
    Benjamin T. Kissam, for Henry Keteltas, exceptant.
    
   The Surrogate.

This was an accounting by trustees of a specific trust created by the will of the decedent for the benefit of an insane son. The trustees received from the estate various securities, the face value of which is something over $27,000. About $4,000 in amount of these identical securities are still retained by the trustees, the interest being paid regularlv. The trustees, prior to 1884, invested in certain railroad bonds. Three thousand dollars of these, the Houston, Texas and Central, have defaulted in interest since 1884. The investments in railroad bonds are objected to, and the contestant claims that the trustees should be required to sell the securities, and make good any deficiency in the capital.

In addition to the investments heretofore stated, they have invested accumulations of interest and money received on redeemed bonds, and on other securities of a similar character. These investments have been made upon miscellaneous securities. Upon this question of the legality or the illegality of the investments made by the trustees a very close case is presented. Much, of course, will depend upon the peculiar language used by the testator in creating the trust and defining the power of the trustees with reference to sales and investments. The language of the will is as follows: “ To collect the income .... and apply the same to the use of my. said son during his natural life. And I do hereby authorize and empower the said trustees (naming them) and their survivors,.....at any time.....whenever in • their discretion they shall deem it proper to do so, to sell, lease, mortgage or convey all or any portion of the said property ....'. and execute any assignment, etc., .... and invest and re-invest the same in such manner and upon such securities as to them, shall seem, advisable.”

The referee held that this general authority conferred upon the trustees power to make the investments objected to. He also finds that such investments have benefited the estate, their present value, with the interest which has been received, being considerably greater than the sum. oí the invested amounts, with interest thereon at trust company rates, or upon bond and mortgage.

The leading case in this state upon the subject is King v. Talbot, 40 N. Y. 76, where the testator gave his estate to the executors, intrusting to their discretion its investment for the benefit of my heirs.” The Court of Appeals held that this did not in any wise enlarge the powers of the executor with reference to the investment of trust funds.

In making permanent investments as trustees, executors can only loan on real estate, or on state or United States bonds. King v. Talbot (supra).

The language used by a testator giving a discretionary power as to the kind of securities in which investments are to be made must be explicit and clear beyond a doubt as to the testator’s intention. Matter of Cant, 5 Dem. 270.

In this last case, the will directed the executor to invest the funds “ in such suitable manner as may be for the best interests of my estate, to be determined by said executor.” Surrogate Rollins held that this language did not give any broader discretionary authority than was conferred by the will under consideration in King v. Talbot. In his opinion he recited the provisions of several wills where clauses of this description have been the subject of criticism, and held that upon the facts there—a loan to an individual upon his promissory note—the investment was illegal and not justified by the language quoted.

The foregoing and many' other authorities upon this subject are collected in McClellan’s Surrogate’s Practice, at page 285 et seq.

The matter should be sent back to the referee for the reason that the parties interested can claim the benefit of any depreciation where such occurs, and throw the loss on the trustees where loss has occurred. Gillespie v. Brooks, 2 Redf. 349.  