
    In the Matter of the Estate of Mills P. Baker, Deceased. John C. Baker and James E. Baker, as Executors, etc., of Mills P Baker, Deceased, Appellants; Mary A. Pelcher, Respondent.
    
      Trust fund — assignment of a second mortgage to, by executors—purchase by them of the equity of redemption.
    
    A will directed the executors to “set apart and keep invested upon bond and mortgage” the sum of $20,000 for each of the testator’s five daughters, and to pay the income therefrom to each daughter during her natural life, and gave -the residue of his estate to his two sons, the executors of his will. The'testator left sufficient personalty earning interest to provide for the trust funds ■ created by the will.
    
      Held, that each daughter was entitled to interest on $20,000 from the death of the testator, and not merely to interest on one-fifth of the amount of the testator’s estate, which was invested in bonds and mortgages.
    The executors, out of the mortgages belonging to the estate, allotted a first mortgage to one of the trust funds and a second mortgage on the same property to another at a time when the mortgagor was in default in the payment of interest and two years’ taxes on the mortgaged premises were unpaid, and there- . after, instead of foreclosing the first mortgage, purchased the morgagor’s equity of redemption in the mortgaged premises, and charged the amount so paid and the interest and taxes due .upon the premises to the respective1 cestuis que trustent in proportion to the amount.of their first and second mortgages.
    
      Held, that the executors were hot justified in assigning-a second mortgage to one of the trust funds to the enhancement of the residuary estate, nor were they justified in thus purchasing the equity of redemption in the mortgaged premises.
    Appeal by John O. Baker and ■ another, as' executors, etc., of Mills P. Baker, deceased, from a decree of the Surrogate’s Court of the county of Queens, entered in the office of said Surrogate’s Court on the ljtk day of May, 1900, settling1 their accounts as such executors, in so far as it relates to the trust fund provided for the respondent under the last will and testament of their testator.
    
      Henry A. Monfort, for the appellants.
    
      William Allaire Shortt, for the respondent.
   "Woodward, J.:

Upon the death of Mills P. Baber, father óf the respondent, Mary A. Pelcher, which occurred on the 31st day of March, 1894, be left a last will and testament, with a number of codicils, in which his executors were directed to set apart and keep invested upon bond and mortgage the sum of ten thousand dollars (afterward increased to $20,000), and the income arising therefrom ¡Day my •daughter Mary A. (the respondent), during her natural, life,” and at her death to go to her issue, or, if none, to his other children, excepting Charlotte A., for whom a similar provision was made in the will. The executors were also directed to set apart and to keep invested a like sum for three other daughters by a second wife, and the residue of the estate, real and personal, was. given to his two sons, the •executors, “ after the specific and general legacies have been paid or invested as hereinbefore provided in my will and the several ■codicils.” The executors accepted the trust and found that decedent had $87,225 invested in bonds and mortgages, exclusive of bonds and mortgages made by the executors, and which were dis•charged by the terms of the will, and certain stocks and a sum of money, amounting in the aggregate to $10,332. These shares of stock, with their income, together with the cash on hand, the learned surrogate finds were appropriated and divided 'between the •executors. For the first six months after qualifying the executors paid to the respondent, not the income on $20,000, but one-fifth of the income of the $87,225 which the testator had invested in bonds -and mortgages. For a period of two years the executors held the :$87,225 in bonds and mortgages as a separate fund, and made two mortgages on their own lands for sums sufficient, with the mortgages mentioned, to constitute a single fund of $100,000, and gave one-fifth of the income of this fund to each of the daughters from October 1, 1894, to October 1, 1896. In the meantime, however, and •on April 1, 1896, the executors divided up the mortgages found in the estate, assigning to themselves, as trustees of Mrs. Pelcher (the .respondent), certain of .such mortgages, aggregating $14^225;, ■ and executed to themselves as trustees their own several bonds and mortgages for $2,887.50 each to make up the $20,000. Among the mortgages so assigned for Mrs. Pelcher was a first mortgage, bearing interest at five per cent, on property at the corner of Stone avenue and Hull street, Brooklyn, belonging to one Militscher, for $5,000. A second mortgage on the same property, bearing interest at six per cent, and for the sum of $1,000, was at the same time assigned to the fund for Mrs. Clark, one of the daughters of the decedent. At the time of this assignment there was due half a year’s interest and two- years’ taxes on the mortgaged premises, and subsequently the executors, instead of foreclosing respondent’s first mortgage on default of interest, took the premises. in behalf of the owners of the first and second mortgages, paying the mortgagor $200 for his equity in the premises. This amount, together with the interest and taxes due upon the premises, was charged to the respondent and Mrs. Clark in the proportion of five to one. By this process the income of the respondent was practically wiped out for a considerable period, and the executors are still holding this property, at present unproductive, and affording no return to the 'respondent.

The learned surrogate, upon a hearing of the matter, decreed that the respondent was entitled to an income, in .addition to what she had already received, of $1,216.79, and that “ said executors and trustees having unlawfully and without authority invested the sum of five thousand dollars, part of the principal of the trust fund directed by the said will to be set apart and invested for the benefit of said Mary A. Pelcher and remaindermen, in the purchase of certain real property, and having also unlawfully invested on bonds and mortgages made by themselves a sum of five thousand seven hundred and seventy-five dollars,.being a part of said trust fund, it is further ordered, adjudged and decreed that said executors and trustees do forthwith invest' upon bond and mortgage other than bonds and mortgages made by themselves, or upon property owned by them, the sum of ten thousand- seven hundred -and seventy-five dollars.” . The executors appeal from this decree.

It is urged that the court erred in charging the executors with interest for the first six months after testator’s death, on one-fifth of the difference between the amount left by the testator invested on bond and mortgage ($87,225), and the aggregate amount of the trust fund ($100,000). We are of opinion, however, that under the rule long established in this State, and reasserted in Matter of Stamfield (135 N. Y. 292, 297), the respondent was entitled to interest on the full amount of the trust fund from the death of the testator. There is no doubt that the personal estate of the decedent was sufficient to provide the trust funds which, by the terms of the will, were to be provided out of the personal estate, and that this was all, or nearly all, earning interest 'at all times subsequent to the death of the testator.

We are equally clear that the action of the executors in taking the Militscher property, and placing the respondent’s first mortgage on the same footing with that of a second mortgage, was not a compliance with their duties as trustees, and that the loss resulting to the respondent from such conduct should be reimbursed. There was an apparent effort to make the allotment of securities to Mrs. Clark good at the expense of the respondent, while the will contemplated that the executors should afford to each of the five daughters an income from the investment of $20,000 on first bonds and mortgages. It hardly seems necessary to cite authorities in support of the proposition that trustees have no right to benefit themselves at the expense of the beneficiaries of the trust, and there is no other motive apparent in the transaction with the Militscher property. The trustees had no right to assign a second mortgage as a part of the trust fund for Mrs. Clark, to the end that the residuary estate should be as little impaired as possible. Having done so, they had no right to attempt to make the second mortgagé good at the expense of the respondent’s security for her income, and the whole transaction is lacking in that good faith and fairness which is demanded of trustees. If the trust funds had been provided, as directed by the will, the executors would be charged only with the exercise of reasonable care and diligence to keep the investments in a condition to earn an income; but until these funds had been set aside in entire good faith, according to the letter and the spirit of the trust, the residuary legatees, acting as trustees for the respondent, would have no cause for complaint if they were compelled to pay the legal rate ■of interest to the respondent, instead of the income with which they are charged by the learned surrogate.

The matter appears to have-been properly disposed of by the court below, which has done no more than to'direct that the terms of the will shall be complied with in the manner pointed out by the law in respect to trusts of this character. ■

The decree appealed from should be affirmed, with costs to be paid by the appellants personally.

All concurred, except Sewell, J., taking no part.

Decree of the Surrogate’s Court of Queens'county affirmed, with .costs to be paid by the appellants personally.  