Page, J.:
After a careful consideration of the will of Charles Kohler I find myself unable to accept the constructions placed upon it in the opinions of my brother Merrell, the surrogate or the distinguished referee. In each, in my opinion, a result is reached which is contrary to and in some respects, destructive of the purposes and intentions of the testator. In the opinion of Mr. Justice Merrell the trustees are given a reasonable time to close up the business and marshal the assets, establish the separate trust funds and distribute the remainder of the residuary estate to the daughters. This construction, in my opinion, ignores the provisions contained in the 12th, 13th and 14th clauses of the will and gives effect to the 8th clause alone. The referee gives effect to the 12th, 13th and 14th clauses of the will and postpones the setting up of the separate trust* until the sale of the business, but he treats the profits of the business as the income of the trust estate, out of which the annual payments are to be made, and finds that the accumulated surplus of such profits must be distributed to the persons presumptively entitled to the next eventual estate by virtue, of section 63 of the Real Property Law. Under this construction the daughter Olga would be paid at this time the sum of $200,000, and her infant child the sum of $200,000, and his daughters Vera and Rita $100,000 each, and if the business should continue to be prosperous, and a surplus of profits over and above the amount necessary to pay the annual charges, there would of necessity be a like [12]*12distribution. This contravenes the provision of the 14th clause of the will that “ The said yearly payments of Twenty-five thousand dollars ($25,000) to each of my daughters as aforesaid and Twenty-five thousand dollars ($25,000) to my wife are to be made in lieu of profits and interest and irrespective of what the profits of the business are, that is to say, in the event of the profits of the business in any year being in excess of the aggregate of said yearly payments to my wife and daughters, such payments shall not be increased.”
The learned surrogate held that it was the duty of the trustees now to set up the various trusts; that as there had been no definite separation of the trust funds it would not be correct to regard any accumulation of income in excess of the requirements of paragraph 8, accumulations on a particular trust fund; therefore, until such trusts are definitely constituted the excess income remains a portion of the residuary estate, which when the trusts are permanently constituted, is to be distributed to the daughters under the 18th clause of the will; but that after the trusts are constituted thereafter all surplus each year should be paid over to the holder of the next eventual estate. (See 96 Mise. Rep. 433.) ■ . v ■
In my opinion, both the surrogate and the referee have read into the provisions of the 8th clause of the will the words, out of the income and profits thereof,” thus making the clause read: “ To set aside out of my said residuary estate a share or portion thereof sufficient for the purpose, and to hold the same in trust for my daughter, * * * investing and reinvesting the same from time to time and out of the income and profits thereof paying over the sum of Twenty-five thousand dollars ($25,000) per annum.” There is a radical difference between a provision that a certain sum is to be paid annually or at a specified time out of the estate, and a provision that it is to be paid out of the income and profits of a capital sum that is to be set apart. In the latter case if there is a surplus, of income from the capital sum, over and above the annual payment, it cannot be accumulated to make up a deficiency in any subsequent year, but it must be paid over to the presumptive taker of the next eventual estate. (Spencer ,v. Spencer, 38 App. Div. 403, 410.) As payment is to be made out of income no portion of the principal of the fund nor [13]*13of the corpus of the estate could be applied to make up the deficiency. (Delaney v. Van Aulen, 84 N. Y. 16.) If through the shrinkage of income, loss of the capital sum, or for other reasons the income from the fund is diminished, or fails, the life beneficiary must suffer the loss.
On the other hand, if a specified sum is directed to be paid periodically and not out of income and profits, it must be paid in all events. Of course being a periodical payment, resort would first be had to income, but if that is insufficient, then to the capital or corpus of the estate, and to this end property would have to be sold to make good the deficiency. (Matter of Haviland, 49 Hun, 301; affd., 124 N. Y. 640; Rowe v. Lansing, 53 Hun, 210; Pierrepont v. Edwards, 25 N. Y. 128, 131.) In my .opinion, the draftsman of the will under consideration had clearly in mind this distinction. It seems to me the diversity of views and the different constructions put upon this will arise from the fact that it has been construed in the light of present facts, rather than from the viewpoint of the testator, and with an eye to the provisions of law for the purpose of making the facts fit the law, instead of first attempting to ascertain from the language used the intent of the testator, considering the condition of his property, the circumstances of his family and the objects he sought to accomplish, and then determining whether such provisions are valid or otherwise. (Herzog v. Title Guarantee & Trust Co., 177 N. Y. 86, 92.) In attempting to thus construe the will I have arrived at a conclusion that differs from those heretofore given.
By the will of Charles Kohler his entire residuary estate was devised and bequeathed to his executors as trustees. The entire residuary estate turned over to them by themselves as executors, pursuant to the decree of the surrogate, became the corpus of the trust. This amounted to $4,300,312.72 in personalty and also as a part of the residuary estate an unproductive piece of real estate estimated to be worth $110,000. The beneficiaries of the trust were his wife and children, three daughters; the natural objects of his bounty. The main purpose of the trust was to secure to each an income of $25,000 a year, during their lives, with a further provision for the daughters that payments of $100,000 should be made [14]*14to each of them on arriving at the age of twenty-five, thirty-five and forty-five years, respectively. His first thought was the establishment of four separate trust funds, sufficient for the purpose. He, therefore, made provision for such trusts in the 8th clause of his will, setting forth in separate subdivisions a provision for each daughter in identical language, to the following effect: He directed his trustees to set aside out of his residuary estate a share or portion thereof sufficient for the purpose, and to hold the same in trust for his daughters, investing and reinvesting the same from time to time and paying over the sum of $25,000 per annum, payable semiannually during her natural life, and in addition thereto when she arrives at the age of twenty-five, to pay over to her the sum of $100,000; when she arrives, at the age of thirty-five a further sum of $100,000; and when she arrives at the age of forty-five, a further sum of $100,000; and upon her death to pay over the balance remaining unpaid of the share or " portion of the said residuary estate so set aside for her benefit, as aforesaid, to such of her issue as shall be living at her death, share and share alike. Should any of her issue die before her, leaving issue at her death, then such issue shall take in equal shares the share the parent would have received had" he -or she survived her death. Should his daughter leave no issue surviving her, then, in that event, the said share or portion provided for her shall pass into and become a part of the residuary estate. By the 4th subdivision of the 8th clause of the will the trustees were to set aside out of his residuary estate a share or portion thereof sufficient for the purpose, and hold the same for his wife, investing and reinvesting the same from time to time and paying over the sum of $25,000 per annum payable semi-annually during her natural fife. In the 9th clause he directed that the bequest of the above fife interest in the remainder.of the residue of his estate given to his wife shall be in lieu of dower. In the 10th clause he appointed his wife guardian of his daughters. In the 11th clause he gave to his trustees, their survivors and successors in trust, as full power and authority over his personal and réal estate as he hiinself then possessed, to sell the same for cash or on mortgage, at public or private sale. He then •makes provision for the holding of his real estate until in' their [15]*15discretion a sale should be made, and further a provision in regard to the real estate which was entirely inapplicable to the real estate that he then owned, i. e., meanwhile to receive and collect the rents, repair and insure the buildings and in case of destruction by fire, or otherwise, to rebuild, remodel or repair any buildings on said real estate, and to receive and collect, invest and reinvest the said personal property, and to receive and collect the interests and profits as fully and freely as he might do in his lifetime, and to pay the same over as thereinbefore directed. The testator up to this point in his will has outlined his plan and expressed his purpose for his estate as it might be at the time of his death and in a manner consonant with the usual practice, and without special reference to the then form of his investments. He contemplated' the possibility that at the time of his death he might haVe productive holdings of real estate; therefore, elaborate provision is made for its care and maintenance and the receipt and collection of the rents, issues and profits. He did not in this scheme contemplate the continuance of his business by his trustees, and the plan so far outlined by him is not only inappropriate to, but as has been demonstrated by those who have sought to so apply it, inapplicable to that contingency. The testator, in my opinion, then undertook to provide an alternative plan. In the 12th clause he authorized his trustees at their discretion to retain the investments of his property in the form in which they might be at the time of his death, and he also authorized and empowered his trustees to continue the business then owned and carried on by him in the city of New York or elsewhere during such period of time as in their discretion they considered it to be of benefit to his estate. Should the continuing of the investments or of the business prove to be unprofitable to his estate he directed that upon no account should they be held hable for any loss or , damage his estate might sustain by reason of such continuance. In the 13th clause he provided that in continuing the business as therein directed if the shares or portions set aside for his daughters as hereinbefore directed are already invested in such business, then it was his desire that they so remain until the business was sold by the trustees, and he so directed. This clause evidently contemplated the possibility that at the [16]*16time of his death there might be a sufficient residuary estate invested otherwise than in his business, out of which the trusts specified in the 8th clause might be constituted. But if that should not be the case then he did not wish the investment in his business to be disturbed to constitute such trust, but to remain in the business. In that event he provided in the 14th and 15th clauses of the will a plan for accomplishing his purpose which was an alternative or substitution for that provided in the 8th clause. That is as follows:
“Fourteenth. And I hereby direct that while such business is being carried on by my Trustees as aforesaid, and while the shares or portions set aside for my daughters remain in said business as aforesaid, the sum of Twenty-five thousand dollars ($25,000) in half-yearly payments shall be yearly paid to each of my daughters out of said business, the sum of Twenty-five thousand dollars ($25,000) in half-yearly payments shall be yearly paid to my wife also out of said business. The said yearly payments of Twenty-five thousand dollars ($25,000) to each of my daughters as aforesaid and Twenty-five thousand dollars ($25,000) to my wife are to be made in lieu of profits and interest and irrespective of what the profits of the business are, that is to say, in the event of the profits of the business in any year being in excess of the aggregate of said yearly payments to my wife and daughters, such payments shall not be increased; and on the other hand, should the profits of the business be less than the aggregate of said yearly payments to my wife and daughters, such payments shall not be decreased — they shall be maintained, and I so direct, and in the event of there being a deficit, that is to say, if the profits of the business do not equal the aggregate of the payments to be made to my wife and daughters as aforesaid, then, in that event, such deficit shall be made good out of the residue of my estate, which for the time being is invested in such business.
. “ Fifteenth. When in the judgment and discretion of my Trustees, they think it advisable that the said business should be sold, then, in that event, I hereby restrict the investment of the proceeds received from the sale of said business or from the sale or conversion of any of my property, real or personal, to investments in which by law Trustees may invest. There[17]*17afterwards the income paid half-yearly to my wife and daughters as aforesaid, shall of course be limited to the net income arising from such investments, and the said yearly payments of Twenty-five thousand dollars ($25,000) to my wife and daughters respectively as aforesaid shall thereupon cease.”
The business was to be carried on by the trustees, but was charged with the payment of the annuities in favor of his wife and daughters, but it was not to be carried on solely for that purpose, nor was the time when it should be sold measured by the ability to produce sufficient to pay the annuities. It was to be continued so long as in the discretion of the trustees they considered it to be of benefit to the estate.
The estate to which reference is made was the residuary estate which was in the. hands of the trustees, all of which the testator designed to be distributed to his three daughters equally, charged with the annuity for the wife. It was clearly provided that after the erection of the trusts the residue should be divided between his children, share and share alike. Identical provisions were made for each child, for annual and periodic payments.
As each child and the wife were to receive the sum of $25,000 per annum, not out of the income or profits of any particular portion of the business segregated and set apart for them, nor necessarily from the profits of the business, but a fixed sum “ in lieu of profits and interest and irrespective of what the profits of the business are,” no purpose would be served in setting apart and labeling that portion of the whole with the name of any particular beneficiary. Inasmuch as the whole was held by the trustee for the benefit of all equally, charged only with the payment of the annuities, such, to my mind, was the intention of the testator so long as the investment was to continue in the business. When the business was sold he does not revert to the plan outlined in the 8th clause of the will in its entirety. There is no fixed sum to be paid annually in all events as provided in the 8th clause, but the sums are to be paid out of and are limited to the income from the separate trust funds. At that time there will be no difficulty in fixing a portion sufficient for the [18]*18purpose of producing an income of $25,000 annually, with reasonable certainty of its continuance, and to paying from the capital the $100,000 payments when they come due When this is done the balance of the residuary estate could be distributed to the children, share and share alike, as also would be distributed the share or portion held for the wife upon her death and the share or portion of any of the daughters who die without issue. The share of the child dying leaving issue would go to such issue per stirpes.
By this interpretation of the will his main purpose is accomplished, his wife and daughters are assured of an annual income in the amount he desired them to have, and in all things there is an equality of distribution among his daughters, and the issue of a daughter, if any, will take only their parent’s share upon the death of the daughter. In this manner force and effect are given to each clause of the will, and in my opinion the intention of the testator is given effect.
The question then arises, does this construction run counter to any provision of the law? In my opinion it does not. First. In the construction of the will if there is a conflict between the provisions of the 8th and those of the 14th and 15th clauses, which should be given preference?
The surrogate and Mr. Justice Merrell give effect to the 8th clause and eliminate the 14th and 15th clauses, while in the construction above set forth precedence is given to the latter clauses. While in my opinion there is not so great a dissimilarity in these provisions that the alternative is presented of adopting one and wholly excluding the other, yet if these clauses were irreconcilable and one or the other would have to be excluded, effect would have to be given to the 14th and 15th clauses in preference to the 8th clause. As was said by Judge Rapallo : “ The testator has declared both intents in language plain and unambiguous in itself, and I see no solution of the difficulty except by the application of the rule that when two clauses in a will are irreconcilable, so that they cannot possibly stand together, .the one which is posterior in position shall be considered as indicating a subsequent intention, and prevail, unless the general scope of the will leads to a contrary conclusion.” (Van Nostrand v. Moore, 52 N. Y. 12, 20.) Therefore, if the clauses of the will are [19]*19irreconcilable it is the 8th clause that must be eliminated and not the subsequent 14th and 15th clauses. But in my opinion neither clause need be eliminated. It is only when the real intent of the testator cannot be gathered from the general scope of the will or otherwise, and when the two provisions are wholly irreconcilable and cannot possibly stand together, that resort is had to this rule. (Adams v. Massey, 184 N. Y. 62, 69.) As I have already stated, the 8th clause was intended to apply to one condition that might arise, and the others to another condition. If the trustees decided not to continue the business and investments of the testator, it was his intention to secure the payment of the sums annually and periodically to the wife and daughters, and separate funds were to be established to provide the means of making such payments. If, however, the trustees decided to carry on the business these annuities were to be a charge upon and paid from the business. The trustees, exercising the discretion vested in them, decided to carry on the business. Therefore, the provision of clauses 14 and 15 became operative. There was no change in the result the testator wished to accomplish of providing definite amounts to be paid at stated periods to the subjects of his bounty. In the one case, the payment was to be made from a capital fund created out of the residuary estate and separately set apart and invested in various securities for each annuitant, while in the latter all were to be paid out of the estate invested in the business, not from a separate and distinct part appropriated to each, but from the whole thereof. In case of a deficiency of income sufficient to pay the annual charge, in the first, resort could not be had to the share set apart for another, nor could it be supplied from the remaining portion of the residuary estate, for -under the terms of the will, that remainder would have been distributed. Resort would of necessity have to be made to a possible accumulation, or to the capital of the particular fund, while in the second, it is expressly provided that if the profits of the business should be less than the aggregate of the yearly payments, the deficit shall be made good out of the residue of his estate which was for the time being invested in such business. I have used the word “ annuity ” in referring to the annual and periodical payments to be made under both provisions of [20]*20the will, for ás I have heretofore stated, in my opinion the provisions are for trusts to pay annuities and not to pay out of income. The learned surrogate held that the payments authorized by the 8th clause of the will were trusts for the payment out of income and not annuities, his principal argument being that at common law a trust could not be authorized for the payment of annuities because, if there was a deficiency the trustee would be required to encroach on the principal, which the trustee of an- express trust may not do, and that the use of the common-law term “ annuities ” in our statutes to denote annual payments derived from trust funds is incorrect and confusing. It is a sufficient reply to state that the common-law terms “ annuity ” and “ rent charge,” have long since lost their primary meanings and nice distinction. An annuity no longer means a yearly payment of a certain sum of money granted to another in fee or for life or for years and chargeable only on the person of the grantor. Surrogate Bradford more than sixty years ago gave the definitions of and the distinction between annuities and an annual payment out of profits which has been cited with approval by the courts of this and many other States, in Booth v. Ammerman (4 Bradf. 129, 133): " An annuity is a stated sum per annum, payable annually unless otherwise directed. It is not income or profits, nor indeterminate in amount varying according to the income or profits, though a certain fund may be provided, out of which it is to be payable. * * * The income or interest of a certain fund is not an annuity,' but simply profits of certain property, to be earned, which may vary more or less.” And prior to the enactment of the Real Property Law of 1896 which the learned surrogate says caused the confusion in our law of trusts in this regard, the Court of Appeals held that express trusts.for the payment of annuities could be established under the Revised Statutes (1 R. S. 728, § 55, subd. 3, as amd. by Laws of 1830, chap. 320, § 10), whether the corpus be real or personal property. (Cochrane v. Schell, 140 N. Y. 516. See Gen. Laws, chap. 46 [Laws of 1896, chap. 547], § 76; Consol. Laws, chap. 50 [Laws of 1909, chap. 52], § 96.) In the case which the surrogate cites as applicable to and governing in the decision of this case (Spencer v. Spencer, 38 App. Div. 403), the will provided [21]*21explicitly that the executors should set apart a certain portion of the testator’s real estate, in their judgment sufficient to yield a net income of $25,000 per annum and out of the income pay $25,000 per annum to his widow for life. The italicised words show that this was a trust to pay out of income, and not an annuity, which distinguishes it from the instant case. There can be no question but that the provision for the payment out of the business provides for the payment of an annuity, and for the reason above given, the annual payments to be made under the 8th clause were also annuities. If this be so the only change was that in one contingency a separate fund was to be established for each, out of which the annuities were to be paid, and in the other they were to be paid out of the business as a whole. I cannot find any statement that would justify the inference of Mr. Justice Merrell that it was intended that the business was to be carried on by the trustees, under the provisions of sections 14 and 15, only until the estate could be administered. On the contrary, by the 12th clause of the will the trustees are expressly authorized and empowered “ to continue any business now ovrned and' carried on by me * * * during such period of time as in their discretion they consider it to be of benefit to my estate.” This is more than a power to continue the business for administration purposes. If that had been the intention the business should have been closed or sold during the period in which the estate was being administered and by the executors whose duty it was to” administer the estate and turn over the residue to the trustees. The will gives the trustees power to carry on the business for an indefinite time wdthin their discretion, limited only by the duration of the trust. The will has been construed to require the setting up of the separate trust for each daughter and upon the surrogate’s suggestion the trustees have attempted to comply with that requirement. They have by bookkeeping entries apportioned the valuation of the physical residuary estate as it was received into four parts and entered upon their books the amount thereof in cash, as follows: The wddow’s share or portion is stated at $881,831.24, and each daughter’s share at $1,182,028.89. The trustees asserted that the aforesaid sums were necessary in order to produce an income [22]*22sufficient, at three and one-half per cent, to pay the annuities of $25,000 per year and the periodic payments of $100,000. This is done upon the theory that when the business is sold, ■ the share or portion of each is to be invested in such investments as trustees are permitted by law to make. Such investments are eminently safe, but as a rule produce a small percentage of income, and the trustees are required to set up a sum which in their judgment would be sufficient to take care of the annual payments of the sums that the testator considered a proper income for the support of his wife and daughters during their fives, and periodic payments from capital of $900,000 to the daughters. If they had under the 8th clause of the will immediately set aside these sums for investment in such securities as the law allows, the court would not have deemed that an abuse of their discretion. A large degree of latitude must, of necessity, be allowed them. They were to set aside a sum sufficient at all hazards that would produce a given result. If they have erred on the side of safety and experience proves that a larger income will result than necessary, the law will take care of the surplus and direct its distribution. Criticism is made that the apportionment should have been made on the present productive value of the shares or portions now invested in the business, and the profits of the business treated as the income on the shares. That, however, is expressly prohibited by the 14th clause of the mil.
Stress is laid upon the expressions “ If the shares or portions Set aside for my daughters as.hereinbefore directed are already invested in such business, then it is my desire that they so remain until the business is sold,” in the 13th clause, and “while the shares or portions set aside for my.daughters remain in said business,” in the 14th clause. From this it is argued, first, it was the intention of the testator that the first duty of the trustees was to segregate from the residuary estate the share or portion for each daughter and then apply the income derived from that share-to the annuitant. This construction admittedly is impossible if effect is to be given to the testator’s plan that the investment in the business should be continued as such and the trustees were to carry on the business and sell the same at public or private sale. If the profits of the business were to be distributed to the beneficiaries [23]*23as income on their share, a much smaller amount of capital would be required to set up the trusts than would be the case if the amount was measured by that sufficient to produce the necessary income from trustees’ investments as prescribed by law. There would then be a “ balance or residuary estate remaining ” which under the 18th clause of the will would have to be distributed, and as all of the testator’s businesses have been incorporated such distribution would have to be made in stock certificates, which would be held absolutely by the residuary legatees, and could be sold by them to third parties. This might lead to endless complication and be destructive of the testator’s plan to have the business continued by the'trustees and the payments made out of the business, and not from a segregated part thereof. If it was their duty to have done it then it was their duty to do it at the time they did. A mere failure to perform a duty does not absolve the trustees from the obligation imposed. It is suggested because such “ shares or portions ” were not ascertained and established, that it cannot be said that they were invested in the business. But the whole, out of which the parts had to be taken, is so invested, and the whole includes all the parts or portions thereof. It may be said that the actual physical appropriation of specific shares of stock might not have been necessary, and with that contention I agree. The only alternative, as it seems to me, was that adopted by the trustees of making a separation by means of bookkeeping entries. It may well be that the business when sold will produce a larger corpus for the trust than the total estimated value of these shares or portions, when the separate investment of the proceeds of the sale is made in the securities in which trustees may legally invest and the trusts are created. If that be the case the surplus will be distributable. In my opinion the method adopted by the trustees was the correct method of dealing with the situation and the one most likely to enable them to carry out each and every requirement of the will.
Testimony was given upon the trial tending to show that an investment of $199,114.79, invested at three and one-half per cent would by the accumulations of income furnish a sum sufficient to pay to the daughter Olga $100,000 in each [24]*24of the three ten-year periods, and that a less sum would be sufficient to provide for payments to the other daughters. Those who argue from these facts that the trustees have allotted a larger sum than is necessary for the purpose have overlooked the fact that these payments must be made out of capital, for accumulations of income except during the minority of the beneficiary for the purpose of paying the same over to the beneficiary at a time subsequent to arriving at majority would be void. (Pers. Prop. Law, § 16, as amd. by Laws of 1915, chap. 670; Real Prop. Law, § 61, as amd. by Laws of 1915, chap. 670.) This brings up for consideration the argument that has been made that as the profits of the business in the past years have exceeded the amount necessary to meet the required annual payments, there has been an unlawful accumulation of profits which by virtue of section 63 of the Real Property Law (as amd. by Laws of 1916, chap. 364) should be distributed to the presumptive taker of the next eventual estate.
In considering this question we must bear in mind that the accumulations are not out of income from a specific trust fund, but are surplus profits of the business, arising out of the capital invested in the business, and the successful prosecution of the business enterprise by the trustees. It has never been questioned, so far as I have been able to ascertain, that a testator could direct his executors to carry on his business after his death, in conjunction with partners, if the business had been carried on as a copartnership prior thereto, or solely if he alone had conducted it. Certain rules relating to such transactions of the business by the executors or trustees have become well established and fixed. While these propositions of law are not directly involved in the case under consideration, a reference to them will, in my opinion, throw light upon the question that is involved here. First, it is only that portion of the testator’s estate that is invested in the business at the time of his death that can be appropriated to business purposes. The executor cannot invest the general assets of the estate in such business, and as a corrolary of this rule the general assets of the estate are not liable for the debts contracted by the executors in the conduct of the business. The liability is the individual liability of the executor, and his recourse is to the assets invested in the [25]*25business for recoupment. (Ex parte Garland, 10 Ves. Jr. 110, 118; Burwell v. Mandeville’s Executor, 2 How. [U. S.] 560, 576; Delaware, L. & W. R. R. Co. v: Gilbert, 44 Hun, 201; affd., on opinion below, 112 N. Y. 673; Willis v. Sharp, 113 id. 586, 590; Saperstein v. Ullman, 168 id. 636.)
Where a testator authorizes the continuance of the business, that portion of the assets of the estate which is invested therein is subjected to the hazards of the business obligations to be incurred, which of necessity have to be met from the pro.ceeds of the business, otherwise the capital investment of the estate would soon be dissipated, and the enterprise brought to ruin. No prudent man would undertake an expensive business without a fund by which expenses and credits are supported. If all the profits of the business should be distributed annually, there would be left no fund to which resort could be had to meet the possible future exigencies of the business. Certainly it would be 'proper business sagacity to hold a surplus reserve from prosperous years to meet the necessities of years when profits were small and possibly loss instead of profit might result. The Court of Appeals has held this to be within the discretion of the trustees. (Thorn v. De Breteuil, 179 N. Y. 64, 78.) Charles Kohler foresaw these contingencies. He realized that although the business had prospered under his management, direction and control, he was authorizing it to be carried on by others; that when the man whose skill, business judgment and foresight had built up the business could no longer direct its affairs, a profitable business enterprise might well be not alone less profitable but that losses and disaster might be the result, and he makes provisions in view of such possibilities. First, he provides in the 12th clause of the will, “ should the continuing * * * of my said business by my said trustees as aforesaid, prove to be .unprofitable to my estate, I hereby direct that upon no account shall they be held hable for any loss or damage my estate may sustain by reason of such continuance.” Again in the 14th clause, “ should the profits of the business be less than the aggregate of said yearly payments to my wife and daughters, such payments shall not be decreased — they shall be maintained, * * * such deficit shall be made good out of the residue of my estate, which for [26]*26the time being is invested in such business.” Not alone was that portion of the estate which was invested in business subject to the hazard of business, but it was charged with tne annuities to the wife and daughters, which it was the testator’s expressed intention should be maintained at all hazard. Therefore, while there lías been an accumulation of profits in the time during which it has been operated by the trustees, when we consider that such period has been one of unusual activity and large profits resulting from the inflation of currency, sudden accumulations of wealth by many individuals, conditions arising out of the World War, can we say that the holding of the sum to meet the business depression, which has always heretofore followed such a period of expansion when conditions are being readjusted to their normal course, is unjustifiable and without reason?
It is to be noted, first, that there is no direction in this will for an accumulation of profits; second, that the annuities are not *to be paid out of profits. These two considerations distinguish the case under consideration from Thorn v. De Breteuil (179 N. Y. 64). Nor can any intention that the income shall be accumulated to-be paid over at some future time to beneficiaries be implied from the terms of this will, which would render the provision therefor void (Cochrane v. Schell, 140 N. Y. 516), for the reason that the annuity is not to be paid out of income or profits of the business but from the business.
In my opinio.n, section 63 of the Real Property Law, which by section 11 of the Personal Property Law is made applicable to estates in personal property (Matter of Harteau, 204 N. Y. 292, 300), does not apply to the facts of this case. Here there is no limitation of an expectant estate, and no suspension of the power of alienation or of the ownership. The trustees are to carry on the business for such time as they deem for the best interest of the estate, with full power of sale thereof at any time in their discretion. The business is vested in the trustees without limitation over to any person. The testator contemplated the sale of the business during the lifetime of the annuitants, for in the 15th clause of the will he provided that when the trustees should sell, then he restricted the investment of the proceeds from the sale to investments in which by-law trustees [27]*27may invest. There is added this very significant phrase: “ Thereafterwards the income paid half yearly to my wife and daughters as aforesaid, shall of course be limited to the net income arising from such investments.” The amount of the profits arising from the business would be problematical, and it would have been difficult, if not impossible, to set aside an aliquot part of the business investment, which would in all events produce the sum of $25,000 annually. When the investment was in such securities as trustees are allowed to invest, the income is fixed and such division can easily be made. Therefore, the testator provided an annuity charged upon the business as a whole while that was being carried on by the trustees. On the sale of the business he directed trusts to be established in which the amount was to be paid out of income or profits, which according to well-settled principles of law heretofore discussed would limit the amount to be paid to the beneficiaries to the net income arising from such investment. Then under the 18th clause of the will if there should be any balance of the residuary estate remaining, after the trusts were created, that would be divided between his children share and share alike. The power of alienation of the assets in the business was not suspended, because at all times the trustees had an absolute power of sale, the exercise of which would not contravene, but on the contrary be in furtherance of the terms of the trust. What is meant by the “ suspension of the power of alienation ” in the statutory provision against perpetuities, was clearly explained by Chief Judge Andrews : “ But the mere creation of a trust, does not, ipso facto, suspend the power of alienation. It is only suspended by such a trust, where a trust term is created, either expressly or by implication during the existence of which, a sale by the trustee, would be in contravention of the trust. Where the trustee is empowered to sell the land, without restriction as to time, the power of alienation is not suspended, although the alienation in fact may be postponed, by the non-action of the trustee, or, in consequence of a discretion reposed in him, by the creator of the trust. The Statute of Perpetuities is pointed only to the suspension of the power of alienation, and not at all to the time of its actual exercise, and when a trust for sale and distribution is made [28]*28without restriction as to time, and the trustees are empowered to receive the rents and profits pending the sale for the benefit of beneficiaries, the fact that the interest of the beneficiaries is inalienable by statute, during the existence of the trust, does not suspend the power of alienation, for the reason that the trustees are persons in being, who can, at any time, convey an absolute fee in possession.” (Robert v. Corning, 89 N. Y. 225, 235. See 1 R. S. 723, §§ 14-16; now Real Prop. Law [Consol. Laws, chap. 50; Laws of 1909, chap. 52], § 42; 1 R. S. 730, § 63; now Real Prop. Law, § 103.)
In my opinion, Charles Kohler intended primarily to secure an annual income for his wife and daughters of $25,000 each at all hazards. To accomplish this purpose, he first authorized his trustees to create out of his residuary estate from trust funds sufficient for the purpose from which such annual income should be paid. But if the trustees decided to exercise the discretion which he gave them of continuing the business, then the payments of $25,000 to each annually should be a charge on the business until the trustees should exercise the power of sale, absolutely given to them by his will, in which event the trustees were to create the trusts sufficient for the purposes, invest the same in such securities as trustees are allowed to invest in by law, and thereafter the annuities were to cease and the amounts payable were to be paid out of income and were limited by income. If there was a deficiency of income, the payment to the beneficiary would be reduced. If there was a surplus, it would be distributable to the presumptive takers of the next eventual estate. This construction, in my opinion, carries into effect the intention of the testator and makes effective each and every portion of the will, and does not contravene any rule of law.
The trustees having exercised their discretion and continued the business, any portion of the residuary estate that was not invested in the business at the time of the testator’s death should be distributed to the residuary legatees.
The decree should be modified to conform to this opinion and, as modified, affirmed.
Clarke, P. J., and Laughlin, J., concur; Smith and Merrell, JJ., dissent.