
    In the Matter of the Petition of Matilda Myers for an allowance out of the estate of Alfred G. Myers, Dec’d. In the Matter of the Petition of Louisa Myers for an allowance out of the estate of Alfred G. Myers, Dec’d.
    
      (Supreme Court, General Term, First Department,
    
    
      Filed October 24, 1890.)
    
    Executors and administrators—Interest.
    The day following- testator’s death a new firm was formed by his surviving partner, to which all the assets of the firm were transferred, and the securities belonging to the estate remained in the business of such firm, except a portion thereof which was deposited by it with a trust company which paid a low rate of interest. The surviving partner was one of the executors and trustees under the will. Held, that such deposit was subsidiary to the business of the firm, and that the executors wc re chargeable with full interest on the capital so far as it was employed in the business of the firm.
    Appeals by B. Baring Gould, John A. Butherford, Bichard King and J. Champlin Morris, from the decrees of the surrogate of the county of New York, confirming the report of a referee, and directing them to pay to the attorney of the petitioner in the first entitled proceeding the sum of $6,176.31 on account of her share of the income of the estate of Alfred G. Myers, deceased, and the sum of $183 out of the principal of the estate for one-half the referee’s and stenographer’s fees in the reference ordered on the petition and answer made to the same. And from a like order directing the executors to pay to John W. Thompson, as committee of the person and estate of Louisa Myers, or to his attorneys, the sum of $6,176.31 on account of the income arising out of the same estate, and the sum of $183 out of the principal of the estate for one-half the referee’s and stenographer’s fees in the reference ordered on the issues framed by the answer of the executors to her petition.
    
      Henry Thompson, for app’lts; Geo. II. Thomson and Foster & Thomson, for resp’ts.
   Daniels, J.

These proceedings were commenced at different times, but they were finally heard and decided together. The referee to whom, the issues in them were referred made one report equally applicable to and disposing of the issues framed by the answers of the executors to each of the petitions. The report was confirmed by two different orders or decrees, directing the moneys to be paid for and on account of each of the petitioners. The proceedings have not been strictly regular, neither have the directions contained in § 2545 of the Code of Civ. Pro. been complied with. But as no objection has been taken to them in either respect and the evidence as well as the facts proved by it are fully and clearly before the court, the case may still be considered and decided and these appeals determined.

The petitioners are sisters of the deceased testator, who departed this life on the 4th day of March, 1887, unmarried, leaving them and an only brother surviving him. And the orders or decrees from which the appeals have been brought have disposed of the income of the estate from the decease of the testator to the 28th day of September, 1888. This was found to be the sum of $19,-050 from which the executors had made previous payments to and on behalf of the petitioners, and for the payment of taxes, amounting to the sum of $6,757.19, leaving a present balance of $12,292.31 which was directed to be divided equally between the petitioners.

Pi’oceedings were pending to revoke the probate of the will, but the brother, by whom they were commenced, consented in writing that the income of the personal estate should be paid to his sisters, but without prejudice to those proceedings. Their pendency, therefore, in no way interfered with the success of the petitioners’ applications. They claim the income of the personal estate as the beneficiaries in a trust directed to be created for them by the testator. His directions as to this trust, as well as the final disposition of the property, were as follows:

After payment of the specific legacies hereinafter bequeathed, I give and bequeath all my personal property of whatever kind, and also the proceeds of my seat in the stock exchange, except as hereinafter disposed of, to Bichard King, B. Baring Gould, J. Champlin Morris and John A. Butherford, in trust, to collect, invest and re-invest the same and pay the income thereof in equal shares to my sisters, Matilda Myers and Louisa Myers, and I direct that executors should receive the compensation allowed by law, and that no bond or other security be required of them, or either of them, for the proper performance of their duty.

At the death of the last surviving of my sisters I direct that one-half of the principal of my estate be given to my friend and partner, John A. Butherford, forever, and that the other or remaining half shall be given to William Walton Butherford forever.

And no question has been made as to their right to the payment of this income. But the executors claimed that they had already paid over all that the beneficiaries were entitled to receive from them. This was contested and denied by the petitioners, and they were sustained by both the referee and the surrogate in the proceedings following the issues in this manner produced. The executors, however, contend that injustice has- been suffered by them through the decisions which have been made. In arriving at the result they have been charged with interest, or income, at the rate of six per cent., while they have conceded less than half that rate as the income realized from the personal estate by themselves.

The testator was a memb.er of the firm of Myers, Butherford & Co., which was composed of himself and the executor, John A. Butherford, who were engaged in business as brokers and dealers in securities and stocks. And the personal estate of himself (yas in that firm. Upon the occurrence of his decease a new firm was formed under the name of Myers, Butherford & Co., in liquidation, in which the executor, John A. Butherford, and his brother are members.

This firm commenced business the next day after the testator’s decease and all the accounts of the old were changed to the new firm, which thereupon went on with the same business. In this manner it acquired the stocks, bonds and other securities of the preceding firm, and continued dealings in stocks and securities for responsible customers, for whom it carried these securities, and charged them a uniform rate of six per cent, for doing that. On the 2d of May, 1887, the personal estate of the testator was appraised at the sum of $180,852.02, and so far as it consisted of stocks and securities this passed into the new firm in the manner already mentioned, and was afterwards mainly employed in carrying on that business. A large amount of money was deposited in a trust company which paid a very low rate of interest on the deposits. But it is quite plain from the evidence that the executors cannot be relieved from the liability to pay a greater rate of interest than that which they received from that source, for the deposits were in fact subsidiary only to the business of the new firm. The certificates themselves are proof that they were not taken on account of the executors, but were in fact the property of the firm up to the time of their assignment, which was not earlier than the commencement of these proceedings and then was evidently intended to be no more than colorable. These deposits were no more than incidents of the business and supplied in part the means of carrying it on. And so far as capital was employed, the firm received for that employment this return of six per cent. For that object it had the use and benefit of this personal estate And that entitled these beneficiaries to that rate of income. It was earned by the estate devoted to the trust, and where that is the fact the rule generally followed is to charge the trustees so employing it at least with simple interest Perry on Trusts, 2d ed., § 471 (4.)

And while the capital was in this way employed under the direct authority of but one of the executors, they all, are subject to the obligation of making payment of this rate of interest, for all seem to have been aware of the fact of this use of the trust estate, or if they were not they were chargeable with the duty of ascertaining what use was being made of it, and neglected the observance of that duty. This liability was considered in Wilmerding v. McKesson, 28 Hun, 184, and 103 N. Y., 329; 3 N. Y. State Rep., 108; and an obligation as strict as that was held to be incurred by each of the trustees under such directions as were given to them by the will of this testator.

Nor was it in any degree improper to extend the liability back to the time of the decease of the testator. For it was from that time that his estate had in this manner been employed, and this rate of interest had been realized That was the rate obtained by the firm which was dissolved by his decease, and by carrying the same business immediately into the firm formed the next day the same rate continued to be chargeable and collectible by it. And as the customers were responsible persons, no reason presents itself for doubting that it was, in fact, collected.

This rate of interest was allowed upon the round sum of $180,000, being within $852.08 of the appraised amount of the testator’s personal estate. In the appraisement made the sum of $14,000 was the value of his undivided half of a seat in the New York stock exchange, which had not yielded any income. The sum of $10,503, the appraised value of suspended securities, also went to make up the amount of the appraisement. And so did specific articles of jewelry, silver plate, horses, vehicles and other articles, producing no income. These articles were appraised at the value of $1,891.

The referee has stated in his report that the seat in the stock exchange, and the suspended securities, and other items from what has been called the J. E. account, had not been included by him in his valuation of the personal estate. And to reach his valuation, after rejecting them, he must have considered that the remaining part of the estate so far exceeded the appraisement in value as still to be worth the amount of the appraisement. But while the evidence of the surviving partner indicated that the personal estate would finally exceed the appraisement, it was not satisfactorily proven that such was its condition when the hearing was had. Certainly not to the extent of equalling these deductions. The presumption is that the appraisement was approximately accurate, and it was the safer course to act upon that as long as the evidence left it indefinite to what extent the valuation would finally be found to go beyond that amount. The evidence before the referee was in that condition. The personal estate may considerably exceed the appraisement in value, or it may still remain nearly at that amount. And for the present purposes that should be adopted as the valuation of the personal estate. And that will reduce the amount in which the six per cent should be paid to no more than $154,458.08, instead of $180,000, assumed by the referee, and finally sanctioned by the surrogate.

The surrogate has directed the fees of the referee and stenographer to be paid out of the principal of the estate of the decedent This direction should be so modified as to exclude what has been devoted to the creation of the trust For that has been made inalienable during the continuance of the two lives for which the trust has been provided. 3 E. S., 5th ed., 22, § 84. And this section has been made applicable to a trust created in personal property. Id., 75, § 2. And a like rule previously prevailed.

The surviving partner, who was one of the executors, was asked whether he had been carrying securities for any of the other executors since the death of Mr. Myers. This was objected to as an inquiry into the private business of the executors. The objection was not sustained, and the counsel for this executor excepted. And he answered that the account which was called Harney was the account of Mr. Baring Grould, who is an executor of this estate. This was an irrelevant inquiry. But at the same time the exception is unimportant. For the right of the petitioners to the percentage allowed to the extent, or nearly to the extent, which has been mentioned was proved beyond all ground of reasonable controversy by the evidence obtained from the executors themselves. And they were in no respect injured by this answer, which did not and could not enter into the final decision of the applications.

No other objections appear to merit attention in the determination of the appeals. But the orders or decrees should be modified by reducing the amount on which the six per cent, is calculated to the sum of $154,458.08. And the referee’s and stenographer’s fees should be directed to be paid out of that part of the estate not included in the trust for its income directed to be maintained ■ for the benefit of the petitioners. And neither party should have costs on these appeals.

Van Brunt, P. J., and Brady, J., concur.  