Adams, P. J.:
Upon the foregoing facts, and such additional ones as will be referred to later on, the learned surrogate found, as matter of law, that it was the duty of the executors, as soon as possible after their qualification, to exercise their option to declare due the entire principal of the Morrison notes and to proceed promptly to collect the amount owing thereon. He also found that the executors were guilty of gross negligence in their management of the Morrison loans, in consequence of which they were not entitled to credit, as against the contestants, for any portion of the loss arising therefrom, nor for any items paid out by them on account of such loans subsequent to the 22d day of October, 1892.
After a careful examination of the record presented upon this appeal, we find ourselves unable to acquiesce in these conclusions; for while the executors’ management of the Morrison loans has resulted in a substantial loss to the estate, for which devastavit, under some circumstances, they would undoubtedly be held liable, it is to be remembered that the investments with which they had to deal were made, not by the executors themselves, but by the testator in his lifetime; and under these circumstances the law only required of the former that they should act in perfect good faith and exercise a reasonable degree of judgment in the performance of their duty. (Matter of Porter's Estate, 25 N. Y. Supp. 822; S. C., 5 Misc. Rep. 274; O'Conner v. Gifford, 117 N. Y. 275.) It is undoubtedly the rule that a trustee who invests trust funds in real estate securities beyond his jurisdiction does so at the peril of being held responsible for the security of the investment (Ormiston v. Olcott, 84 N. Y. 339; Matter of Denton v. Sanford, 103 id. 607); but this rule cannot with any propriety or justice be invoked in the present instance, for the very obvious reason, as has just been stated, that the investments were not made by the executors. On. the contrary, they found the securities representing such investments among the assets of the estate which came into their hands ; and in these circumstances they were justified in assuming that they had been made by the testator deliberately and with full knowledge of the situation, condition and value of the mortgaged property.
It is true that the mortgagors had failed to meet the first payment of interest when it became due, and that the same remained unpaid [288]*288at the time when-the executors took possession of the estate. This circumstance, it may be claimed, should have aroused .some anxiety in the mind of the latter lest the securities were not as desirable as the testator had supposed them to be, and doubtless it did, for it appears that the executors at once communicated with the attorneys in St. Paul through whom the loans had been obtained, and were informed by them that it would be advisable to foreclose the interest only, as the mortgages were ample security for the loan.
This information and advice would naturally tend to allay any anxiety which may have arisen, and we think, in view of the fact that it came from attorneys who represented the testator and in whom he had apparently reposed entire confidence, that the executors were fully justified in accepting it and acting upon it. That the information proved unreliable and the advice absolutely wrong, are circumstances to be regretted, inasmuch as they are probably responsible for a. good share of the loss which followed; but they do not necessarily tend to impeach the good faith of the executors who, so far from being hound to know the law of another State, had a right to assume that lawyers residing in that State who had been employed and trusted by their testator were sufficiently learned therein to render their advice and counsel a safe guide to follow. (Merchants' Bank of New York v. Spalding, 9 N. Y. 53 ; Stedman v. Davis, 93 id. 32.)
Action taken upon the advice of counsel, when such advice has been sought for and obtained in good faith, tends to establish a defense in certain classes of actions (Hazzard v. Flury, 120 N. Y. 223; Laird v. Taylor, 66 Barb. 143); and wé think should operate as some protection to trustees, who are generally dependent upon such advice, for a mistake of law if not for an error of judgment. (1 Am. & Eng. Ency. of Law [2d ed.], 907.)
The case of Matter of Westerfield (53 N. Y. Supp. 25, 39; S. C., 32 App. Div. 324) is so distinctive in its circumstances as to require the application of a different rule of law from the ease we now have under review; and consequently it cannot be regarded as of any authoritative force so far as the present proceeding is concerned,
We have thus far considered questions which are incidental and in' a large measure subsidiary to the one which is apparently regarded by the learned counsel for the respondents as decisive of the liability [289]*289of the executors for a devastavit of the estate represented by them, and that is their refusal to accept what counsel term an offer upon the part of Dow Morrison to pay the mortgages in full.
Much that has already been said applies with equal force to this proposition ; but in this connection it becomes especially important to again bear in mind that the loans had been made by the testator in his lifetime, presumably upon security which he deemed entirely satisfactory, and which his attorneys repeatedly informed the executors was ample; and it is hardly necessary to suggest, had this information proved more reliable, the investments would certainly have been most desirable, inasmuch as they bore interest at the rate of eight per cent per annum. It is likewise to be remembered that at the time Wheeler & Howell wrote the letter of inquiry to ascertain whether the executors would accept payment in full, the notes and mortgages had still about four years to run. In these circumstances, the executors would hardly have been justified in accepting payment of the same before their maturity, especially as the money realized therefrom would necessarily have lain idle in their hands, or at all events have earned but a comparatively small rate of interest, until the termination of a litigation involving the estate which was then pending would permit a settlement of the estate. Indeed, had they accepted payment under these conditions it is quite supposable that they might have been compelled to account for any loss of interest which the estate would have sustained in consequence thereof. Aside from these considerations, however, it appears that before declining to consider this proposition the executors had laid the matter before their home counsel and were advised by him that it would be unwise to take the money before it was due; they also consulted one or more persons interested in the estate, each of whom not only gave the same advice, but expressed a desire to take these very investments to apply on his share of the estate; and' as at this time there had not been the slightest intimation of any danger of redemption by a junior incumbrancer, we are unable to discover anything in the conduct of the executors, so far as their réfusal to accept payment of these securities is concerned; which is inconsistent with the utmost good faith. In the light of subsequent events it appears that it would have been for the interest of the [290]
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Adams, P. J.:
Upon the foregoing facts, and such additional ones as will be referred to later on, the learned surrogate found, as matter of law, that it was the duty of the executors, as soon as possible after their qualification, to exercise their option to declare due the entire principal of the Morrison notes and to proceed promptly to collect the amount owing thereon. He also found that the executors were guilty of gross negligence in their management of the Morrison loans, in consequence of which they were not entitled to credit, as against the contestants, for any portion of the loss arising therefrom, nor for any items paid out by them on account of such loans subsequent to the 22d day of October, 1892.
After a careful examination of the record presented upon this appeal, we find ourselves unable to acquiesce in these conclusions; for while the executors’ management of the Morrison loans has resulted in a substantial loss to the estate, for which devastavit, under some circumstances, they would undoubtedly be held liable, it is to be remembered that the investments with which they had to deal were made, not by the executors themselves, but by the testator in his lifetime; and under these circumstances the law only required of the former that they should act in perfect good faith and exercise a reasonable degree of judgment in the performance of their duty. (Matter of Porter's Estate, 25 N. Y. Supp. 822; S. C., 5 Misc. Rep. 274; O'Conner v. Gifford, 117 N. Y. 275.) It is undoubtedly the rule that a trustee who invests trust funds in real estate securities beyond his jurisdiction does so at the peril of being held responsible for the security of the investment (Ormiston v. Olcott, 84 N. Y. 339; Matter of Denton v. Sanford, 103 id. 607); but this rule cannot with any propriety or justice be invoked in the present instance, for the very obvious reason, as has just been stated, that the investments were not made by the executors. On. the contrary, they found the securities representing such investments among the assets of the estate which came into their hands ; and in these circumstances they were justified in assuming that they had been made by the testator deliberately and with full knowledge of the situation, condition and value of the mortgaged property.
It is true that the mortgagors had failed to meet the first payment of interest when it became due, and that the same remained unpaid [288]*288at the time when-the executors took possession of the estate. This circumstance, it may be claimed, should have aroused .some anxiety in the mind of the latter lest the securities were not as desirable as the testator had supposed them to be, and doubtless it did, for it appears that the executors at once communicated with the attorneys in St. Paul through whom the loans had been obtained, and were informed by them that it would be advisable to foreclose the interest only, as the mortgages were ample security for the loan.
This information and advice would naturally tend to allay any anxiety which may have arisen, and we think, in view of the fact that it came from attorneys who represented the testator and in whom he had apparently reposed entire confidence, that the executors were fully justified in accepting it and acting upon it. That the information proved unreliable and the advice absolutely wrong, are circumstances to be regretted, inasmuch as they are probably responsible for a. good share of the loss which followed; but they do not necessarily tend to impeach the good faith of the executors who, so far from being hound to know the law of another State, had a right to assume that lawyers residing in that State who had been employed and trusted by their testator were sufficiently learned therein to render their advice and counsel a safe guide to follow. (Merchants' Bank of New York v. Spalding, 9 N. Y. 53 ; Stedman v. Davis, 93 id. 32.)
Action taken upon the advice of counsel, when such advice has been sought for and obtained in good faith, tends to establish a defense in certain classes of actions (Hazzard v. Flury, 120 N. Y. 223; Laird v. Taylor, 66 Barb. 143); and wé think should operate as some protection to trustees, who are generally dependent upon such advice, for a mistake of law if not for an error of judgment. (1 Am. & Eng. Ency. of Law [2d ed.], 907.)
The case of Matter of Westerfield (53 N. Y. Supp. 25, 39; S. C., 32 App. Div. 324) is so distinctive in its circumstances as to require the application of a different rule of law from the ease we now have under review; and consequently it cannot be regarded as of any authoritative force so far as the present proceeding is concerned,
We have thus far considered questions which are incidental and in' a large measure subsidiary to the one which is apparently regarded by the learned counsel for the respondents as decisive of the liability [289]*289of the executors for a devastavit of the estate represented by them, and that is their refusal to accept what counsel term an offer upon the part of Dow Morrison to pay the mortgages in full.
Much that has already been said applies with equal force to this proposition ; but in this connection it becomes especially important to again bear in mind that the loans had been made by the testator in his lifetime, presumably upon security which he deemed entirely satisfactory, and which his attorneys repeatedly informed the executors was ample; and it is hardly necessary to suggest, had this information proved more reliable, the investments would certainly have been most desirable, inasmuch as they bore interest at the rate of eight per cent per annum. It is likewise to be remembered that at the time Wheeler & Howell wrote the letter of inquiry to ascertain whether the executors would accept payment in full, the notes and mortgages had still about four years to run. In these circumstances, the executors would hardly have been justified in accepting payment of the same before their maturity, especially as the money realized therefrom would necessarily have lain idle in their hands, or at all events have earned but a comparatively small rate of interest, until the termination of a litigation involving the estate which was then pending would permit a settlement of the estate. Indeed, had they accepted payment under these conditions it is quite supposable that they might have been compelled to account for any loss of interest which the estate would have sustained in consequence thereof. Aside from these considerations, however, it appears that before declining to consider this proposition the executors had laid the matter before their home counsel and were advised by him that it would be unwise to take the money before it was due; they also consulted one or more persons interested in the estate, each of whom not only gave the same advice, but expressed a desire to take these very investments to apply on his share of the estate; and' as at this time there had not been the slightest intimation of any danger of redemption by a junior incumbrancer, we are unable to discover anything in the conduct of the executors, so far as their réfusal to accept payment of these securities is concerned; which is inconsistent with the utmost good faith. In the light of subsequent events it appears that it would have been for the interest of the [290]*290estate for them to have accepted such payment if it had been tendered ; and it may, therefore, be said perhaps that they erred in their judgment, hut to say that, under all the circumstances, they were grossly negligent, or that they exercised a judgment which was .unreasonable, even if it subsequently proved to be erroneous, would, in our opinion, be subjecting them to a rule which would be more -rigid than just.
Our discussion of this feature of the case up to the present time has been upon the assumption that a Iona fide. offer was actually made to pay off the mortgage and that the samé had been refused ; but the facts of the case will by no means warrant such an assumption. It seems that the letter of Wheeler & Howell amounted to •no more than an inqhiry as to whether a proposition to pay would, be entertained; ánd it now appears that had it been, in all probability nothing would have come from it, as Dow Morrison was in no position to make good the offer, even if the executors had signified their willingness to accept it. As a matter of fact, both he and his brother were at that very time upon the verge of insolvency, and while it is undoubtedly true that some little .effort was being made by them to obtain a loan which would enable them to pay up the mortgage, the effort, such as it was, proved utterly futile and was speedily abandoned.
, As already suggested, the management- of this estate by the executors has been attended with misfortune from the outset, so far as these particular loans áre concerned; and, as a consequence, not only has the greater part of the money invested therein been lost, butr that which was used in an effort to prevent such loss has met with a similar fate. It does not follow, however, that the misfortune, serious as it is, is chargeable to the negligence of the executors, or either of them. , On the contrary, it appears that as soon as they, were informed of the mistake made by Wheeler &- Howell and of the advantage which the bank proposed to take of that mistake, one of the executors went to St. -Paul, examined the mortgaged property and inquired of the president of the Produce Exchange and-several other parties concerning its value. He was informed by them that while real estate was somewhat stagnant, this particular-piece of property was worth -twice the amount gf his claim ; that- it-:had once sold for $28,000, and was .assessed for $13,600. Under [291]*291these circumstances it is not surprising that he thought it worth while to attempt to save the estate's claim, even if it were necessary to hold the property until better prices ruled. But just here the spectre of misfortune assumed a new form. A financial panic, which no one had foreseen, was precipitated upon the country, and one which proved especially disastrous to those western States where land speculations had been the leading industry. As a consequence, lands which were supposed to be immensely valuable suddenly became comparatively worthless, and those which were relied upon as security for the Morrison loans were no exception to the rule; for the “West St. Paul” enterprise suddenly collapsed, and the two blocks'which at one time brought $28,000 were ultimately sold under the hammer for $1,000. -
It is a very easy matter now to see how the disaster which has befallen the estate of Edwin J. Dixon might have been somewhat mitigated, if not entirely avoided. Of course, if the loans had not been made by the testator there would have been no loss.' If his St. Paul attorneys had not made the mistake they did in advising a foreclosure for interest only, or if the executors had not acted upon such advice, it is possible that the entire premises might have been sold for a sum which would have been sufficient to pay the mortgage notes. This, however, is a matter of conjecture only, for it is not altogether improbable that if the executors had availed themselves of their option and foreclosed for the full amount of their mortgages, they would still have been unable to dispose of the property before its value was affected by the panic. But, be this as it may, in view of all the circumstances of the case, we find ourselves unable to reach the conclusion that the executors should be held liable for a devastavit of an estate in which their interest was quite equal ¿0 that of the contestants without more evidence of bad faith than was made to appear in the .present proceeding.
The decree of the Surrogate’s Court should be reversed and the proceeding remitted to that court for a further hearing, with costs of this appeal to the appellants to abide the event.
All" concurred.
Decree of Surrogate’s Court reversed and proceedings remitted to that court for a rehearing, with costs to appellants to abide event.