
    In the Matter of the Judicial Settlement of the Account of Nora C. Hawley and George N. Hawley, as Executors, etc., of William S. Hawley, Deceased. Nora C. Hawley and George N. Hawley, as Executors, etc., of William S. Hawley, Deceased, Appellants; Jay R. Hawley and Others, Respondents.
    
      Accounting by executors—postponement of the payment of debts of the decedent for the advantage of the life beneficiaries — neglect to sell real property for the same reason.
    
    Where executors who, at all times after entering upon their duties, had in their hands personal property of their testator sufficient for the payment of two interest-bearing promissory notes executed by the testator, postpone the payment of one of such notes for more than two years after the testator’s death, and postpone the payment of the other note for more than six years after the testator’s death, such executors are properly disallowed credit for the interest which accrued upon the notes after one year from the time the letters testamentary were issued to them.
    A will directed the executors thereof, who were the testator’s widow and one of his sons, to set apart a fund of $4,000 and to pay the income thereof to the widow for life. The personalty was inadequate for the creation of the fund, but the executors were empowered to use the realty for that purpose. The executors, however, in order to subserve their own private interests at the expense of the other beneficiaries, did not sell the real estate until more than six years after the testator’s death, and then paid the widow a sum of money out of the proceeds of the sale on the ground that the widow had not received the full income to which she was entitled.
    
      Sold, that the payment of such sum to the widow was not justified.
    Appeal by Hora O. Hawley and another, as executors, etc., of William S. Hawley, deceased, from a decree of the Surrogate’s Court of the county of Monroe, entered in said Surrogate’s Court on the 25th day of February, 1905, in so far as said decree disallows to said executors as credits in their account an item of $379.25 interest paid by them on debts of the decedent, and an item of $285.89 paid by them to the widow of the decedent.
    
      Clarence W. McKay, for the appellants.
    
      J. W. Barrett, for the respondents.
    
      Walter I. Scott, special guardian, for the infant respondents.
   Spring, J. :

"William S. Hawley died August 22, 1898,, leaving a last -will and testament and a codicil thereto, which were duly admitted to probate. By the. provisions of the w.ilj, ' as altered by the codicil, the executors were first directed to. pay the debts and funeral expenses of the testator, then to set apart ” from his estate $4,000 and. pay the income thereof to his wife during her natural life, or . until her remarriage.. "

He also bequeathed to-"liis. son, George N. Hawley,. $200, to be paid without-interest six. years after the decease-of the testator, and also gave the- use for. six years to his said son of all his property, including said $200, remaining after the setting apart of the $4-,000 to the widow, and subject to"the payment of. certain .siims annually' to his three other children. The will further provided that when the property Was Converted into money certain general legacies were to be paid and fhe balance divided equally among his children or their descendants. The widow and the son, George N.,, were named' executors, and were given the usual power of sale, and at the election of George the executors were permitted to convert the property . into money before the expiration of the six-year period.

An intermediate accounting "was had by the executors in December, 1899, by which it appeared that a -note of - $1,000 and interest thereon since November 1, 1896, held by one Pinkney, remained s unpaid, and also a note of $100 and interest owned by Nora O. . Hawley, the- executrix. It also ajopeared that there was a note of $3,000 against the executor, George Hawley, which comprised the personal estate then remaining; The decree directed that this note-be collected within thirty days and the avails invested in good real estate • securities,' or if that could not reasonably be made within' - thirty days, -that said money be deposited in some savings bank in the city of Rochester, and these directions were complied with.

■ On that accounting, there was of the personal estate'- on hand, after the payment of the expenses of the accounting, the sum of -’$2,729.40, and the two notes against the testator were still unpaid. The decree directed the investment of this personal estate pursuant to the will in order that á fund might be provided to furnish an income for the widow. ' ■

The executor, Hawley, paid the Pinkney note with the accumulated interest December 29, 1900, from his personal funds, and the note of Mrs. Hawley was not paid until October 1,1904, and on the sale of the real estate, more than six years after the death of the testator. The executors credited in their account in the present proceeding the interest on the sum paid xm the Pinkney note from the date of its payment to October 1, 1904, which item was disallowed by the surrogate. It will be observed that the executors postponed the payment of the Pinkney note for more than two years after the death of the testator, although during all the time from the commencement of their trust duties they had ample personal property in their possession to pay this note, and the surrogate disallowed the interest which had accrued after one year from the time letters were issued to them, and also the interest paid on the Hora Hawley note after such time.

It will be noted also that the fund set apart to meet the annual payments to the widow did not amount to the sum of $4,000, and after the sale of the real estate the executor paid to her $285.89 out of the principal of the avails of the sale.

This payment is sought to be justified on the ground that she had not received the full income to which she was entitled. This item was also disallowed. We concur with the conclusions reached by the learned surrogate as to these three items.

The widow and the son are the principal beneficiaries of the will. The estate was tied up for six years principally for the benefit of the son George. His mother lived with him and apparently they were managing the .estate together and for their mutual advantage. It was their duty as executors first to pay the debts of the testator, - and he especially commanded them do so. If these debts had been paid the income-bearing estate would havé been depleted to that extent which would have carried also a diminution of the income to George H. It was a shrewd device of his to invest all the personal estate for the benefit of the widow; pay the Pinkney note himself, receive all the income from the balance of the estate, and after the land was sold credit himself with the interest on the note which he had paid.

The scheme designed by the will, as suggested, was in the first instance to pay the debts of the testator, then to have invested and set apart the sum of $4,000 the interest of which was to be paid to the widow. If the personal estate was inadequate to provide this fund, the real estate could then he resorted to for that purpose. The real and personal éstate remaining after this sum was segregated for the benefit of the widow was to pass to George N. for six years. The primary' intention was to. provide for the widow. George could not. receive the income from the real estate and use it for his own benefit, and then clear himself because there Was not sufficient personal property to pay the widow the annuity. The authority that at his election he might -have the real estate sold within six years was to insure the income on affixed sum to the widow.

Evidently Mrs. Hawley and her son were willing, to allow the land to remain intact during the six-year period and then have George pay to his mother sufficient to make up the deficiency caused by the inadequacy of the personal estate.. In the accounting filed in 1899 the executors stated that by an arrangement satisfactory to Mrs.. Hawley,,the $3,000 of the personal estate,was to remain in George’s note,, and he was to p‘ay her annually “ the income on one thousand dollars worth of real estate which is to remain invested therein.” The note investment was contrary to the direction of the testator, and the decree of the Surrogate’s Court required that the note be paid and the avails invested conformably to the- testator’s intention. There was no further .personal estate, and these executors possibly in pursuance of their “ arrangement ” preferred that George should pay to the widow ‘‘ the income on one, thousand dollars worth of real estate,” rather than dispose of that property. •

The fact that -the decree of January, 1900, directed that' the avails of the note after • paying the expenses of administration be invested in real estate securities is no estoppel on the respondents, and did not operate to alter the provisions of the will or interfere with the orderly administration of the estate. These executors had reported their “ arrangement ” to the court and the decree simply directed that instead of keeping this personal estate in the nóte they must invest it as the will required. The surrogate did not intend to decide that Norá and George Hawley might receive all the. income of the entire property for their own use, pay the estate obligations out of their own'funds, and on the judicial settlement .of the estate receive the interest on the debts so paid out Of the corpus of the estate. The income to them was not expected to commence until after the debts of the testator had been paid. Their duty to pay these debts out of the personal estate was plain and unmistakable. Their duty clashed with their personal desires, and as often happens, duty was submerged in the collision.

So the executors having failed to secure to Mrs. Hawley the income on the $4,000, they could not upon the sale of the land charge up the claimed deficiency to the principal. It was only from the income she was to be paid. Whether the sum to be set apart was intended to be confined to the personal estate or included in its scope whatever property the testator left is unimportant, for in any event the corpus was not to be diminished to pay her annual stipend.

The key to the conduct of these executors is found in the fact that they were living together and managing the estate apparently, not for the benefit of all concerned, but to further their own interests. The widow did not attempt to secure the fixed sum intended for her benefit. She acquiesced in the arrangement” which made George her paymaster, and kept the real estate under his control. By her remissness or active participation in his course she may have failed to receive her full income, but George, not the estate, is liable to her.

The surrogate was very liberal to George Hawley in allowing him the interest on the debts against, the estate for the year after the issuance of the letters. During that year he received all the income for the benefit of himself and his mother, although it was not expected that the earnings of the estate would accrue to them until after the debts had been paid.

The decree of the Surrogate’s Oourt, so far as appealed from, should be affirmed, with costs and disbursements of this appeal against the executors personally.

All concurred.

Decree of Surrogate’s Oourt, in so far as appealed from, affirmed, with costs and disbursements of this appeal against the appellants personally.

' DETERMINED IN THE ‘ ‘ ' ' . t FIRST DEPARTMENT IN THE APPELLATE DIVISION, • 1905. , -  