
    In the Matter of the Judicial Accounting of Lafayette E. Pruyne, as Testamentary Guardian of Tirzah G. Bigelow, an Infant. Lafayette E. Pruyne, Appellant; Tirzah G. Bigelow and Charles H. Walts, Respondents.
    
      Executin' and guardian—failure to create a trust fund by selling a farm on which the trust fund is charged and of which the executor holds a lease — in calculating his liability for income upon the trust fund he should be-charged with the net pro-, ceeds during the term of the lease, and thereafter with interest at five per cent — expenses of unsuccessful habeas corpus proceedings to obtain his ward — not entitled to be reimbursed foi' the payment of taxes illegally assessed.
    
    The will of a testator, xvho died in 1884, provided: “I-give and bequeath * *■ *■ to my daughter Tirzah G. Bigelow the sum of five thousand dollars. * * And I direct my said executor to keep the said five thousand dollars herein given to my said daughter safely invested and to apply the income therefrom to the support, maintenance and education of my said daughter until the principal shall he paid over to her as hereinafter provided, or until her death, .if it occur before the time for the payment of such principal sum to her, as hereinafter provided. And I direct my executor to pay to my said daughter on her arriving at the age of twenty-one years, one-half of said principal sum of five thousand dollars, and on her arriving at the age of twenty-six years, the remaining one-half thereof, and I make these two legacies to my wife and. daughter liens and charges upon my real estate.” The testator also appointed Lafayette E. Pruyne the executor and testamentary guardian of the person and estate of his said daughter and gave to him her “custody and tuition ” and made him his residuary legatee.
    The testator did not leave sufficient personal property to create the trust fund and also to discharge his other obligations and bequests, but he left a farm, which, subject to the bequests to the testator’s wife and daughter, passed to the executor as residuary legatee.
    The executor never converted any of the testator’s real estate into personalty for the purpose of creating the trust fund, nor did he ever transfer to himself, as guardian, any separate fund or property for that purpose.
    At the time of the testator’s death the daughter was in the custody of her mother who was living apart from the testator. Until 1886, shortly before the death of the testator’s widow, the guardian paid to her, for the benefit of the infant, income as upon the trust fund at the rate of six per cent per annum. Since that date he did not pay any income upon the trust fund to or for the benefit of the infant, and the latter was supported and provided for by persons to whom her mother had intrusted her.
    Upon an accounting by the guardian after the infant had arrived at the age of twenty-one years, the guardian contended that the trust fund was invested in the farm and that the net proceeds thereof should be the measure of his liability for income. It appeared that at the time of the testator’s death the farm had been leased to the guardian until March 1, 1889; that the guardian mingled the affairs and receipts of the farm with his other business, and kept no separate account of the infant’s alleged share of the profits.
    
      Held, that the guardian was not blamable because he did not sell the farm during the continuance of the lease to him and that, from the time of the testator’s death to the termination of the lease, he should be charged with interest at the rate of four and one-half per cent per annum, which represented the net income of the farm;
    That at the expiration of the lease it was his duty, either by a sale of the farm, or in some other manner, to create the trust fund, and that as he had failed to do this he was properly chargeable with interest which was not regulated or limited by the net proceeds of the farm;
    That as it did not appear that he had been guilty of bad faith or willful misconduct in not creating the trust fund, such interest should be calculated at the rate of five per cent;
    That in calculating the interest, annual rests should be allowed and the interest be compounded;
    That the guardian was entitled to credit for expenditures made in a habeas corpus proceeding by which he unsuccessfully endeavored to obtain the possession and custody of the infant from the persons to whose care her mother had committed her, in so far as such expenditures were made on the original hearing, but that he was not entitled to expenses incurred by him in prosecuting unsuccessful appeals from an adverse decision rendered on the original application;
    
      That the guardian was not entitled to credit for' taxes assessed against him, as guardian and paid by him, as he never had any trust fund under his control as guardian and for this reason the tax was not properly assessed against him as such.
    Appeal by Lafayette E. Pruyne, the testamentary guardian of Tirzah G. Bigelow, an infant, from a decree of the Surrogate’s Court of the county of Jefferson, entered in said Surrogate’s Court on the 18th day of July, 1901, settling his accounts as such testamentary guardian.
    While the appeal is from the whole of said decree, said appellant really complains of the same because it
    
      First. Charges him with compound interest at the rate of six per cent per annum upon the funds which he was directed to invest and administer for the benefit of said infant;
    
      Second. Denies him credit for the sum of $880.35, taxes assessed against and paid by him as such guardian;
    
      Third. Denies him credit for the sum of $708.93, expended for legal services and disbursements in habeas corpus proceedings instituted by him to obtain possession of said infant from the respondent, Charles H. Walts.
    
      John Jmsing, for the appellant.
    
      Flon R. Brown, for the respondents.
   Hiscock, J. :

Lyman E. Bigelow, of Jefferson county, died on or about August 28, 1884, leaving him surviving a wife from whom he was separated at the time of his death, and also the respondent Tirzah G. Bigelow, then a young child. He also left a last will and testament which contained the following material provisions: I give and bequeath * * * to my daughter Tirzah G. Bigelow the- sum of five thousand dollars. ' * * * . And I direct my said executor to keep the said five thousand dollars herein given to my said daughter safely invested and to apply the income therefrom to the support, maintenance and education of my said daughter until the principal shall be paid over to her as hereinafter provided, or until her death, if it occur before the time for the payment of such principal sum to her, as hereinafter provided. And I direct my executor to pay to my said daughter on her arriving at the age of twenty-one years one-half of said principal sum of five thousand dollars, and on her arriving at the age of twenty-six years, the remaining one-half thereof, and I make these two legacies to my wife and daughter liens and charges upon my real estate.” Said will also provided that appellant Pruyne should be residuary legatee as to said $5,000 in case of the death of the daughter. It also appointed him guardian during her minority of the person and estate of said daughter, and disposed of the custody and tuition of said daughter during her minority to said Pruyne.” Said testator also made said Pruyne his general residuary legatee and sole executor of his will.

The mother died soon after the death of her husband, having arranged before her death that the infant, who up to that time remained with her, should live with and be under the care and custody of the respondent Charles H. Walts and his wife. The latter, after such death, did take the child to live with them and ever since have exercised such care and custody in a most careful, judicious and devoted manner. The infant having arrived at the age of twenty-one years, instituted this proceeding for the purpose of calling her guardian to an account of his proceedings.

The testator did not leave sufficient personal property with which to discharge his other obligations and bequests, and also make the trust fund in favor of his daughter. A considerable portion of his estate at the time of his death consisted of a farm in the county of Jefferson, which, subject to the bequests in favor of the wife and daughter, passed to said Pruyne. as residuary legatee. The latter never converted any of the testator’s real estate into personalty for the purpose of establishing the trust fund in favor of the daughter. He never in any form created and transferred to himself as guardian any separate fund or property with which to meet the requirements of said trust. Down to and including November 10, 1886, which was shortly before the infant’s mother died, he paid over to the mother for the benefit of the infant income as upon the trust fund at the rate of six per cent per annum, but. since said date has not paid any income upon such trust to or for the benefit of the infant, the latter, so far as appears, being entirely supported and provided for by the respondent Walts and his wife.

Upon this accounting appellant has attempted to settle with the infant, upon the theory that the trust fund for her was invested in the Jefferson county farm above referred to, and that the net proceeds thereof should be the measure of his liability for income. In operating this farm down to the time of the accounting as appellant did, he kept no separate account with the infant of her alleged.share of its income and profits, and set apart no moneys for her benefit, but mingled the affairs and receipts of the farm with his other business. The evidence amply warrants the finding by the surrogate “ That the said Lafayette E. Pruyne, as executor of Lyman E. Bigelow, or personally, has never paid over to himself as guardian of Tirzah G. Bigelow any part of the said five thousand dollars given. to her by the will as aforesaid. That the said Lafayette E. Pruyne has converted a number of parcels of real property into money? and has received the income of the real property unsold since the death of the said Lyman E. Bigelow, and has not kept any separate account of the income of the said five thousand dollars, or made any investment on account thereof.”

We will take up first the item of $880.35, for which the appellant sought credit in his account for taxes assessed against him as guardian and paid, and which item was disallowed by the surrogate. We think that the finding and conclusion of the surrogate, upon this point are justified and entirely proper, Pruyne was assessed-from and including the year 1887 in the town and village of Adams, Jefferson county,' where he lived, and paid the above amount on such assessment for village, school, State and county taxes. He was assessed as guardian. As we have seen, he never had in his hands as guardian any funds or property whatever. His claim, as formulated upon this accounting, has been that the trust fund which should have been created and placed in his hands as such guardian, had been allowed to lie invested in the farm which' was in his hands and possession as executor or residuary legatee. The statute (1 R. S. 389, § 5, as amd. by Laws of 1851, chap. 176, and re-enacted in Laws of 1896, chap. 908, § 8) covering the subject of assessments provided that Every person shall he taxed in the tax district where he resides, when the assessment for taxation is made for all personal property owned by him or under his control' as agent, trustee, guardian, executor or administrator.” This fund of $5,000 was never under his control as guardian. (Willcox v. Smith, 26 Barb. 316; Wells v. Knight, 5 Hun, 50.)

We see no legal theory under which he could be properly assessed as guardian upon the fund, or under which, having paid the taxes upon an illegal assessment, he can take credit therefor upon this accounting.

We next take up the item of interest at the rate of six per cent per annum, with annual rests, with which the surrogate charged appellant from the year 1886, when he stopped paying the income to the infant’s mother for her benefit.

Appellant produced a detailed account of the receipts from the disbursements on account of the farm in which he claims the'infant’s legacy should be regarded as invested. While not kept in its present form at the time, he testifies that it is made up from various memoranda and accounts and is correct. This claim of correctness is not seriously challenged by respondents. It shows a net income of less than four and one-half per cent per annum. Said guardian, however, in his account, says that he is “willing to account for the said income (of said trust) at the amount which I have actually received from the same, which does not exceed more than four and one-half per cent per annum on the amount of said legacy.”

At the time of testator’s death this fa,rm was under lease by him to a tenant until March 1, 1889. There is no complaint that there was any improper application by appellant of his testator’s personal property which left respondent’s legacy and trust dependent upon this farm for realization. Appellant claims that he made some efforts to sell it. We do not think he is chargeable with legal fault for not having procured a sale or disposition of it during the continuance of the lease which the testator had made. He, perhaps, had a right to regard such lease as a disposition or investment by his testator of that portion of his property to which the trust in favor of his daughter was subject. We think, therefore, that during this period from November 10, 1886, to March 1,.1889, the appellant should not be charged with a greater rate of interest than four and one-half per cent per annum. At the expiration of said lease it was undoubtedly his duty, either by sale of the farm or in some other manner, to comply with the terms of the will, and have transferred into his possession as guardian a.separate fund of $5,000. It also became his duty to keep such fund properly and safely invested for the benefit of the infant. This.he failed tó do, and he was properly chargeable with interest which was not regulated or limited by the net proceeds of the farm. The question, however, arises whether it was proper to fix the rate at six per cent during this second'period after the expiration of the lease'. The surrogate has not found that Pruyne was guilty of bad faith or will fui misconduct in not making this transfer and investment of funds. We think the evidence indicates that he was subject to extremely bad judgment and misconceived notions of ■ duty rather than guilty of intentional wrongdoing. With that view we regard it more: just to charge him with interest at the rate of five than of six per cent. There is nothing to indicate that he has realized a greater rate of interest than this. Upon the other hand, we feel quite confident that such rate involves a very liberal estimate of what could have been realized for the infant if the guardian had properly discharged his duty by creating and investing a separate and distinct fund. In reaching that conclusion we have in mind not only the rates of interest prevailing during the period in question upon securities in which this fund might legally have been invested, but also another fact. If the guardian had taken said fund into his hands as such it is undisputed that it would have been subject to the taxes Which have now been disallowed to the guardian. These taxes would have. aggregated more than one per cent per annum to be deducted from the income.

The annual compounding of the interest was proper.

The last item disallowed by the surrogate in appellant’s accounts and of .which disallowance he complains, are respectively $245.94^ costs in a habeas corpus proceeding paid by him to the respondent Walts, and $462.99, disbursements and counsel fees incurred by him i-n said proceedings.

As heretofore stated, soon-after the death of the infant’s mother the appellant instituted habeas corpus proceedings to obtain the possession and custody of the infant from Judge and Mrs. Walts, with whom she had gone to live. These proceedings were had before Mr. Justice Kennedy, who d ecided against appellant; Appeals were taken by the latter from such decision to the General Term and to the Court of Appeals, in both of which courts the determination of the original court was affirmed. While perhaps it does not appear clearly that these proceedings were instituted by the appellant as guardian, still it is manifest that they must have been so instituted and were founded and predicated upon those provisions in the will which awarded to him the custody of the infant during her minority. The decision against him did not, in any manner,, contravene his claim in this respect, but held that under all of the circumstances it was not advisable that the infant should be taken from the home where she was then living. This determination v-as expressly without prejudice to his right to renew the proceedings if lie saw fit. Under all of the circumstances we do not think that he was guilty of any such unreasonable conduct as prohibits him from having credit for the costs and expenses incurred by him upon the original hearing. It might perhaps be said that it was his duty, in accordance with the will of his testator, to go to this extent, and that he should have credit for any expenses necessarily incurred in so doing. When, however, the original proceedings were decided against him, we think that if he saw fit to contest the matter farther by appeals, it was at his own peril in the matter of costs. As we are able to gather from the account in evidence, the total expenses incurred by the appellant upon this original hearing were seventy-seven dollars and seventy cents, and we think that the decree of the surrogate upon this branch of the account should be so modified as to give him credit for that amount, with interest from May 7,1887.

It is suggested in behalf of the appellant that a certain proceeding instituted against him by the respondent Walts to compel the payment to the latter for the benefit of the infant of the income upon the trust fund, is still pending and is a bar to this proceeding. Such application was made several years ago. Hone of the papers upon it are printed, and it does not appear very clearly what has become of the proceeding. There is nothing in the evidence before us which warrants us in holding that there is any such proceeding pending as would be a bar to this accounting.

In conclusion, we are of the opinion that the surrogate’s decree should be modified as follows:

(1) The appellant should be charged with interest with annual rests at the rate of four and one-half per cent per annum upon $5,000 from November 10, 1886, to March 1, 1889, and at the. rate of five per cent per annum from March 1, 1889, to the tim.e of the accounting, instead of at the rate of six per cent pér annum.

(2) He should be credited with the sum of seventy-seven dollars and seventy cents, with interest thereon at the same rate charged against him from May 7, 1887, to the date of the accounting on account of expenses and disbursements incurred by him in the habeas corpus proceedings to recover possession and custody of the infant.

As thus modified,, the decree should be affirmed, without costs to either party.

Adams, P. J., McLennan and Spring-, JJ., concurred; Williams, J., not voting.

Decree of Surrogate’s Court modified-,' and as modified affirmed, without costs of this appeal to either party.  