
    Rachel S. Lansing, appellant, vs. Douw F. Lansing, executor, &c. of Peter Leversee, deceased, respondent.
    
    A testator, by Ms will, directed his executors at the expiration of four years after his decease, to invest out of his estate, upon real estate securities, the sum of $3000, and to keep the same invested for the benefit of E. until she should attain the age of twenty-one years, or until her death, applying the interest, or so much as they should deem proper, towards her support and education; and they were directed to reinvest the interest they might receive, for the like benefit of R.; and upon her arriving at the age of twenty-one years, they were to pay her the legacy, and the accumulated interest, except so far as the use thereof was necessary and deemed proper for the education and support of R. . Several other legacies were given, and devises made; and the rest, residue and remainder of the estate was also disposed of, subject to the previous payment of the legacies, and investments by tho executors. R. having arrived at the age of twenty-one years, the acting . executor was cited to account, before the surrogate.
    
      Meld, 1. That there was no trust created in the hand's of the executors, distinct and separate from their duties as such; the testator not naming them as trustees, nor manifesting any intention that they should act otherwise than as executors; and that without proper words to establish a trust, it could not be inferred.
    
      2. That the fund in the hands of the executor, for the benefit of B. was held by him. in his character as an executor, and the trust created thereby was a part and portion of the duties imposed upon him as an executor, and not distinctly and separately as a trustee.
    3. That acting as executor, and not as trustee, in the investment and management of the legacy, the executor was entitled to a commission of one per cent only, upon the interest or increase of the fund; such increase not being a separate and distinct receipt, but merely an addition to the principal fund of the estate.
    4. That.the executor was not entitled to fall commissions, upon the principle ¡ of annual rests, that principle having no application to such a case.
    6. That the fund of $3000 set apart for the benefit of B., the income of which was given without any particular amount being specified, was chargeable with commissions and taxes.
    Where an executor works out a highway tax personally, instead of paying the money, or hiring another person to do the work, he should ba allowed therefor, in his account.
    An executor will not be charged with compound interest for neglecting to invest the interest accruing and received by him, annually, according to the directions of the will, where he states in his account that he has tried to keep the fund, together with the accrued and accumulated interest, invested and reinvested as required by the will, but has not been able to do any better than is stated in the account; and there is nothing to disprove that allegation, nor to show that he used the funds in his own business, or made any profit from their use; or that he was guilty of any gross delinquency or violation of duty.
    Where a will requires an executor to invest in real estate securities, he should, if possible, pursue the directions of the testator; but if no such securities are offered, he will be justified, in the exercise of a sound discretion, in depositing the fund in a savings bank.
    A trustee or executor is required, in making investments, to conduct himself faithfully, and to exercise a sound discretion; and when he observes that • prudence and intelligence which is demanded of aman in the management of his own affairs, not in reference to large gains, but to the safety of the principal and to its probable income, he should be sustained. Per Miller, J.
    APPEAL from a decree of the surrogate of Albany county. On June the 23d, 1849, Peter Leversee made his last will and testament, and died July 10, 1849. By said will ‘the testator directed his executors, at the expiration of four years after his decease, to invest out of his estate, upon safe and sufficient real estate securities, at the legal rate of interest, the sum of $3000, and to keep the same invented for the benefit of his grand daughter, Rachel S. Lansing, until she should attain the age of twenty-one years, or until her death, applying the interest that might be received from said investment, or so much thereof as might be necessary, toward the support and education of said Rachel; and when she should attain the age of twenty-one years, his executors were to pay the sum of $3000, with the accrued and accumulated interest, except so far as the use thereof had been necessary as aforesaid, and by said executors deemed proper for the education and support of said Rachel; and subject to the like necessity, his executors were directed to reinvest, safely and securely, the interest they might receive during such investment, for the like benefit of said Rachel. A similar provision was made for the benefit of Sarah Maria Witbeck. The testator bequeathed specific legacies to Peter L. Witbeck, Sarah Maria Witbeck, his grand daughter, Helena Lansing, and to his grandsons Isaac H. and Peter Leversee Lansing. The testator also directed the payment of the sum of $100 annually, for the period of four years, to his daughter Jane Ann. The testator then devised to his daughter Jane Ann his farm in Watervliet, consisting of about one hundred and twenty acres, and also devised to Peter L. Witbeck one hundred and twenty acres. He also made the following devise; “All the rest and residue of my estate, real and personal, whereof I may die seised or possessed, I hereby give, devise and bequeath (subject to the previous payment of the aforesaid legacies and investments by my executors) unto my said daughter Jane Ann, who is hot, however, entitled to the possession of said rest and residue of my estate, or the rents, issues and profits accruing therefrom until four years after my decease.”
    Rachel having arrived at the age of twenty-one years, an accounting was had before the surrogate of Albany county: All the parties interested were cited to appear, including the residuary legatee. The respondent, Douw F. Lansing, on his final accounting, claimed there was due to Rachel $5447.96, and the surrogate decided there was due to Eachel $5641.26, to wit, principal, $3000 ; increase $3093.26 ; taxes paid by the respondent, $297.44; and as the respondent’s commissions on the gross increase of the legacy $154.56.
    The executors’ account, filed with the surrogate, showed an investment of the sum of $3000, the amount of the legacy, upon bond'and mortgage, on the 10th day of July, 1853, at seven per cent per annum, and an allowance of interest, and the interest upon the annual interest received up to the time of the accounting, with a deduction of taxes, highway taxes, and commissions at five per cent upon the amounts received. It also showed that on the 29th day of October, 1862, the mortgage was paid up, and the executor not being able to reinvest upon real estate security, he deposited the same in a savings bank at five per cent interest, compounded every six months, which interest, with interest upon the same, was credited in his account. Objeotions were made, that the charges of taxes and commissions were not proper items of charge against the legacy or its increase; to the charge of commissions at five per cent; to the deposit of the moneys in the savings bank at an interest of five per cent; to the charges for highway taxes, upon the ground that they had been retained by the executor as a compensation for his own services, he having performed the work himself. It was also claimed that the interest should be compounded'from year to year.
    A decree was made, on the 15th of February, 1865, confirming the account, and bringing it down to December 23, 1864, and directing payment to the appellant of $5641.26, with interest at five per cent from that time. Objection was made to the allowance of five per cent instead of seven per cent upon this amount.
    Eachel S. Lansing,- from this decree of the surrogate, appealed to this court. ,
    
      A. Lansing, for the appellant.
    
      Ira Shafer, for the respondent,
   Miller, J.

Several objections are made to the decree of the surrogate, which I will proceed to consider. It is said that the surrogate erred in charging the appellant with commissions, taxes" and expenses. By the will of the testator, the executors were to make the investment of the -legacy-bequeathed to Rachel S. Lansing, and to keep the same invested until -she arrived at the age of twenty-one years, or until her death. The executors were to apply the interest, or so much as they deemed proper, towards her support and education, and upon her arriving at the age of twenty-one years, they were to pay her the legacy and the accumulated interest, except so far ás the use thereof was necessary and deemed, proper by said executors for the education and support of said Rachel. The rest, residue, and remainder of the estate is also disposed of subject to the previous payment of the legacies and investments by the executors.

It is very evident from the will that there was no trust created in the hands of the executors, distinct and separate from their duties as such. The testator does not name them as trustees, and manifests no intention that they shall act otherwise than as executors, with instructions to perform certain duties by virtue of their powers as- executors. Without proper words to establish a trust it can not be inferred. The fund in the hands of the executor for the benefit of Rachel S. Lansing was held by him in his character as an executor, and the trust created thereby was a part and portion of the duties imposed upon him as an executor, and not distinctly and separately as a trustee. (See Drake v. Price, 1 Seld. 430; Valentine v. Valentine, 2 Barb. Ch. 430, 438, 439; Westerfield v. Westerfield, 1 Bradf. 198.)

Acting then, as executor and not as trustee, in the investment and management of the legacy, the executor was entitled to a commission of one per cent upon the interest or increase of the fund instead of five per cent which was erroneously allowed him. This increase was not a separate and distinct receipt of money independent of what had been previously' received, but merely an addition to the principal fund of the estate. This is expressly held in 1 Seld. 430, and 2 Barb. Ch. 430, before cited, and is well settled law. By statute the executor is only entitled to one per cent for receiving and paying out sums over $10,000. (Laws of 1863, p. 608, § 8,) and the estate here showed assets to the amount of fifteen thousand dollars.

The suggestion that the executor was entitled to full commissions upon the principle of annual rests, has no application to a case like this. Drake v. Price, (1 Seld. 430,) was similar in most of its leading features to the present case, and that disposes of the question the other way.

Whether this commission should be taken out of the fund itself, or, with the taxes and expenses, be deducted from and chargeable on the general estate, is another and a different question which must be determined by looking at the provisions of the will and ascertaining so far as possible what the testator really intended. It appears that the legatee was to receive the legacy upon attaining her majority, and such interest as remained after paying for her support and education. The amount was specific, and it was subject to this deduction alone, without any reference to commissions and taxes; and hence it is claimed that it can not be complied with by the payment of any thing less. It is true this is the only exception made, but it must be taken into consideration that this amount was specially set apart by itself as a fund for the benefit of the legatee, and as such it had a distinctive character. It was taken out of the estate for a specific purpose, and the legatee was to'enjoy the interest so far as it might be necessary, until she became of age. It is quite possible that the residue of the estate may have been distributed before the time arrived when the legacy was due. Had such been the case, would, the executor have been authorized to retain an uncertain amount in his hands to meet the taxes and expenses ?

/This would scarcely have been considered as within the meaning and intention of the testator. The testator evidently meant to set apart this amount as a specific sum, the increase of which should be appropriated for the support and maintenance of his grandchild, and whatever remained to be reinvested, and the principal and interest paid over at the proper time, and did not contemplate a resort to the estate generally to keep down the taxes and commissions. When a fund is thus situated, and the party only entitled to the income, the authorities would appear to hold that it is subject to taxes and commissions. In 1 Seld. 430, before cited, where the facts bear a striking similarity to the present case, it was conceded that a commission of only one per cent was chargeable against the fund set apart. In Pinckney v. Pinckney, (1 Bradf. 269,) a testator gave to his wife the use and income of his real estate and the interest of a specified sum, and it was held that the taxes and expenses were chargeable upon the fund and not upon the estate generally. The court say: “ The bequest should bear its own burden; if the testator had intended these charges to be paid out of the general fund, he would have said so; and there is no presumption of law in favor of the doctrine contended for. The widow is not to be paid a certain fixed sum annually; nor are the executors to invest such an amount as will .produce a clear net income, but she is to receive the income of a particular specified property, and the interest of an investment of some thousand dollars, and the rest of the estate can not be taxed so that she can obtain the gross instead of the net income.” Much of the reasoning here employed is applicable to the present case. The .interest was to be paid as provided, for certain purposes, and at a specified period the principal. Mo provision is made that any charges upon the fund should be paid out of the general estate, and why should not the legacy be chargeable with these expenses ?

In Lawrence v. Holden, (3 Bradf. 142,) where a testator gave to his wife, by his will, the use of a dwelling house for life free and clear of all incumbrances and in case she requested it, directed the property to be sold and the proceeds invested, and the interest, income and dividends applied to her use, it was held that the executors were not bound to pay the current taxes and assessments out of the testator’s general estate.

In Booth v. Ammerman, (4 Bradf. 129,) the testator gave to his sister the interest upon fifteen hundred dollars, in case she should become a widow, during her widowhood, payable annually, and it was held that taxes and commissions were chargeable upon the trust fund. The court say: The taxes which the executors may be compelled to pay, and also the commissions on the interest payable annually to the legatee must come out of the interest, and.are not chargeable upon the general estate.”

The effect of the authorities cited clearly is, that a fund thus set apart, when the income is given without any particular amount being specified, is chargeable with commissions and taxes.

The objection made to the allowance for highway taxes is founded upon the ground that the executor personally worked out the taxes. The commissions for moneys received and paid out are in lieu of all personal services of the executor or administrator, and he will not be allowed any further compensation for his trouble or loss. (Dayton’s Sur. 2d ed. 496.)

Is the charge made in violation of this rule ? We must assume that the road taxes were imposed upon the fund, and that the executor was liable and bound to pay them. Instead of paying the money or hiring a person to do the work, he performed the service personally. He paid it in that way. The amount was fixed and settled and the estate legally obliged to pay it. It could make no difference whether paid in that way or by money. It is the same thing as if he had paid the money. He paid it by work instead of money, and it presents a case entirely different "from one where services, for which no compensation is fixed, are rendered for the benefit of an estate, and a charge made for such services. There an opportunity is furnished to make out charges and audit ■ them, while here the estate must pay a certain sum. I think that a rendition of the-service must he considered as a liquidation and payment of the tax, for which the executor should be allowed.

It is said that the surrogate erred in excusing the executor from an investment of the interest upon the interest annually. The will required that the interest should be invested, and if it had been made to appear in any way that the executor had neglected to perform the duty enjoined upon him in this respect, and that the fund has suffered by reason of it; or that more could have been realized than was. done, then he should be held liable for compound interest. In his account filed with the surrogate he states, that he has tried to keep the fund, together with the accrued and accumulated interest, invested, and reinvested as required by the will, and that he has not been able to do any better than is stated in the account. This account is rendered under oath, and prima facie must be considered as mainly correct until assailed or impugned. It presents the fact, however, from which some adequate judgment may be formed as to the propriety of his conduct in the disposition of the fund. " How it is somewhat manifest that it would not be a very easy matter at the expiration of each year, to reinvest the precise amount of compound interest received, so as to keep the fund in the process of constant accumulation; and hence, to charge him with a strict accountability, might inflict severe and unusual hardship.

The most which could be done under such circumstances would be to fix a certain amount which had accumulated, and charge interest upon that sum. This also would be a difficult matter to carry out practically, and in the absence of any evidence to contradict or dispute -the statement of the executor to the effect that he has done the best he could, it would be unjust to charge him with compound interest annually. If there was any evidence to prove that the excuse • offered was not a valid one, or any aspect of the case which indicated neglect, misconduct, or a want of good faith, there would be the strongest reason for holding him to the most rigid accountability. Those intrusted with the charge of trust funds, under no circumstances should be permitted to use them for their own profit and pecuniary advantage, and whenever they thus violate their obligations, the courts should see that they account strictly for their misconduct. They should require at their hands the greatest diligence and fidelity. An executor, administrator or trustee is not allowed to make any gain, profit or advantage from the use of the trust funds. If he negligently suffer the trust moneys to lie idle, he is chargeable with simple interest. If he converts the trust moneys to his own use and employs them in his business or trade, he is chargeable with compound interest. (Schieffelin v. Stewart, 1 John. Ch. 620.)

In Ackerman v. Emott, (4 Barb. 626,) Strong, J. lays down the rule that compound interest is only allowed in cases of gross delinquency, or of intentional violation of duty. (See also Utica Insurance Company v. Lynch, 11 Paige, 520; Garniss v. Gardiner, 1 Edw. Ch. 128; Willard’s Eq. Jur. 614; 2 Kent’s Com. 230, 231; Bul. & Tif. Law of Trusts, &c. 594, 595.)

If we apply these principles to the case at' bar, I think a case is not made out within the rule laid down. It is not claimed that the executor used the funds in his own business, in trade, or that he made any particular profit from their use-; nor is there any thing to establish that he was guilty of any gross delinquency or violation of duty. In fact he presents a statement, which, if it can be relied upon, will exonerate him from any charge of willful omission of duty or misfeasance.

While trustees are held to great strictness in the management of trust funds, the court will deal leniently with them when it appears they have acted in good faith. And if no improper motive can be attributed to the trustee, the court will excuse the apparent breach of trust unless the negligence is very gross. (See Bul. & Tif. Law of Trusts and Trustees, 599, and authorities there cited.) As this case does not present features which indicate a departure from any settled rule of law, or bad faith on the part of the executor, I think that the objection is not available.

It is further urged that the surrogate erred in excusing the executor’s deposit of funds in the savings bank at an interest of five per cent, payable semi-annually. By the will the executor was required to invest in real estate securities. It is not denied that it was difficult at the time when the money was paid into his hands to find securities of this character. Where special directions are given, they should be pursued, if possible. If they can not be followed, then the executor should look out for such other securities as the court is known to have adopted, and where it has authorized and sanctioned any particular fund as a safe investment, he would be justified in making the investment there. In Ackerman v. Emott, (4 Barb. 626,) it was held that under, the general power to make investments, the court would sanction any investment by executors and trustees in loans on real security, or in public stocks of the state or of the United States, or in the loans of 'thd Hew York Life and Trust Company. It was said, in that case, that the law regarded the certainty of an income more than its magnitude. Parker, V. C. who originally heard ihe case, and from whose decision an appeal was taken, remarks: “ The court approves of a deposit in the Hew "York Life and Trust Company until a safe investment can be made on bond and mortgage.” The executor here being unable to invest upon real estate security, was bound to dispose of the fund in the best manner which was practicable, under the circumstances existing. He would have been justified in depositing it with, the New York Life and Trust Company, and in placing it elsewhere than in such securities as were sanctioned by the court he incurred the hazard of being made responsible in case of any loss. He put it in an institution where the rate of interest was quite as large as it would have been if deposited in the New York Life and Trust Company. It would have brought a larger income if invested in government securities, but as it turned out, it would have been no safer than where it was.

It appears that the executor exercised a sound discretion in thus disposing of it, and as he has acted honestly, and as it does not appear that he could in any other way have disposed of the money so as to have it in his power to invest it in real estate securities, and as no such securities were offered, I think he was justified in the course which he pursued. He might, it is trae, have made an application to the court for instructions, but he was under no obligations to incur such an expense, and was not bound to do so.

A trustee or executor is required, in making investments, to conduct himself faithfully, and to exercise a sound discretion ; and when he observes that prudence and intelligence which is demanded of a man in the management of his own affairs, not in reference to large gains, but the safety of the principal and its probable income, he should be sustained.

I think the surrogate erred in directing the payment of the sum due to the appellant with interest at five per cent. There is no good reason why the amount should not draw interest at the usual legal rate from the time of the decree, and in this respect his decree should be corrected.

With the views I have expressed, it is not important to examine some other questions raised upon the argument.

The proceedings must be remitted to the surrogate, with directions to correct the decree in the particulars named, with costs of appeal against the estate of the testator.

[Albany General Term,

September 18, 1865.

Hogeboom, J.

I am inclined to concur. I think the costs should he charged, not upon the executors personally, but upon the estate—-both the appellant’s and the respondent’s costs.

Decree accordingly.

Hogeboom, Miller and Ingalls, Justices.]  