By the Court,
Sutherland, J.
The thirteenth and fourteenth findings of fact appear to be authorized by the evidence, and being so, I cannot doubt that the first conclusion of law is correct. Indeed, in the case of Anna Henrietta King, the defendants do not appear to question the correctness of either of these findings of fact, or of the first conclusion of law.
The eighth finding of fact, to the effect that the stocks and bonds in which the investments were made, were in good repute, and were considered safe and desirable investments, and that the investments were made in good faith, the defendants having invested their own funds in similar stocks, is not inconsistent with the personal liability declared in the last clause of the second conclusion of law, and in the first sentence of the fourth conclusion of law, provided the investments were unauthorized and a breach of trust. It is true a breach of trust, though in good faith, and without any actual or criminal intent to defraud the cestui que trust, is in equity a constructive fraud upon the cestui que trust, but it is plain that the judge in wording the eighth finding of fact, had not in his mind a constructive fraud, but fraud in fact, or fraudulent intent as distinguished from good faith, or an honest intent.
If the investments in the stocks and bonds mentioned in [480]*480the fifth and twelfth findings of fact were unauthorized, and a breach of trust, and invalid, considering that the trust was not only for investment of the plaintiff’s legacy, but also for the accumulation of any surplus interest not required for her maintenance and education, I am not willing to hold that the direction to charge the defendants with the amount of the plaintiff’s legacy, with interest to be computed with annual rests, was erroneous or inconsistent with the finding before referred to ; that the investments were made in good faith. I see no other way in which the plaintiff could be fully and correctly indemnified for the consequences of the breach of trust.
The cases referred to by the counsel for the plaintiff in his fifth point, seem to establish the principle that where a trustee fails to execute a trust to invest money, for the maintenance of an infant during minority and to accumulate the' surplus income of the investments, equity will charge interest against him with rests, though he may not have used the trust money, and independent of any question of intention.
This principle appears to have been acknowledged by Justice Miller, in Lansing v. Lansing, (45 Barb. 190,) he says, “ The will required that the interest should he invested, and if it had been made to appear, in any way, that the executor had neglected to perform the duty enjoined upon him in this respect, and that the fund had suffered by reason of it, or that more could have been realized than was done, then he should be liable for compound interest.”
The defendants cannot complain, and do not complain, that they were charged with interest from the end of a year after the testator’s death, and not from the day of his death; but the plaintiff does complain of this, and there are cross-appeals.
The general rule is no doubt as the counsel for the plaintiff states it, “ that when a parent bequeaths a sum of money to a child and provides for its maintenance out of the [481]*481interest of such legacy, and makes no other provision for. its maintenance, such legacy will carry interest from the testator’s death but considering the situation of the testator’s estate in this case at the time of his death, and sometime after, and other undisputed circumstances, I do not think the judgment should be modified, so as to favor the plaintiff in this respect.
I do not see ho^ the accounting could have started from the 1st day of April, 1850, (when the stocks and bonds mentioned in the fifth finding of fact were set apart for the children,) on the theory that the defendants then accounted for, or settled, or paid the interest on the legacies up to that date, without ignoring the principle that it was the duty of the defendants to have invested the legacies and any surplus interest before that time.
Without noticing especially the exceptions to some subordinate rulings of the judge, and of the referee who took the account, it follows, from what has been said, that I am of the opinion that the judgment should be affirmed, unless the plaintiff was bound to accept the stocks and bonds nominally or formally transferred to her by the defendant Talbot, as or for her legacy with its accumulations ; that is, unless the defendants were authorized in the execution of their trust, to make such investment of the trust fund. The judge held they were not, and that the plaintiff was not obliged to accept the stocks and bonds.
Charles W. King, the testator, died the 26th of September, 1845, leaving three children, all minors, the plaintiff being some months over five years of age. By his will he gave to each of his three children “ the sum of $15,000, the interest on the same, so far as required to be applied to their maintenance and education, and the principal, with the accumulations thereof, to be paid to them severally on their majority.” He appointed five executors, “entrusting to their discretion the settlement of my affairs, and the invest[482]*482ment of my estate for the benefit of my heirs.” The defendants, two of the executors named, qualified.
There is no doubt ‘that trustees are not liable for any loss arising from an investment according to a direction in the trust instrument “ as to the particular mode and nature of the investment.” (Hill on Trustees, 368 )
There is no doubt, that it is a settled rule of the English court of chancery, when the cestuis que trust are adults, that the investment must be made in the public funds, or in real estate securities, though the trust instrument, as in this case expressly commits_ the investment to the discretion of the trustee. (See Sill on Trustees, 363, 369, 378, 395, and the English cases cited by the counsel for the plaintiff in his fourth point.)
The result of the English cases, is, where the investment is left to the general discretion of the trustee, that nevertheless, the investment must be made within the rule requiring the investment to be made in the public funds, or in real estate securities. (See Hill on Trustees, 368, 369, and the English cases cited in subd. 3, of the fourth point of the counsel for the plaintiff.)
It seems to be the settled rule of the English courhof chancery,1 “and one that is never varied without special circumstances,” that trust money belonging to an infant must be invested “in three per cents.” (Hill on Trust. 369. Norbury v. Norbury, 4 Mad. 191.)
In Hew Jersey, the English rule requiring the investment to he in real or public securities, would appear to have been adopted by analogy. (Gray v. Fox, Saxton Rep. 259.) So also in Pennsylvania. (Hemphill’s appeal, 18 Penn. Rep. 303. Worral’s appeal, 23 id. 44.)
In Massachusetts, the English rule was discussed by Chief Justice Shaw, in Lovell v. Minot, (20 Pick. 119,) and he seemed to think that the rule was not adapted to this country.
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By the Court,
Sutherland, J.
The thirteenth and fourteenth findings of fact appear to be authorized by the evidence, and being so, I cannot doubt that the first conclusion of law is correct. Indeed, in the case of Anna Henrietta King, the defendants do not appear to question the correctness of either of these findings of fact, or of the first conclusion of law.
The eighth finding of fact, to the effect that the stocks and bonds in which the investments were made, were in good repute, and were considered safe and desirable investments, and that the investments were made in good faith, the defendants having invested their own funds in similar stocks, is not inconsistent with the personal liability declared in the last clause of the second conclusion of law, and in the first sentence of the fourth conclusion of law, provided the investments were unauthorized and a breach of trust. It is true a breach of trust, though in good faith, and without any actual or criminal intent to defraud the cestui que trust, is in equity a constructive fraud upon the cestui que trust, but it is plain that the judge in wording the eighth finding of fact, had not in his mind a constructive fraud, but fraud in fact, or fraudulent intent as distinguished from good faith, or an honest intent.
If the investments in the stocks and bonds mentioned in [480]*480the fifth and twelfth findings of fact were unauthorized, and a breach of trust, and invalid, considering that the trust was not only for investment of the plaintiff’s legacy, but also for the accumulation of any surplus interest not required for her maintenance and education, I am not willing to hold that the direction to charge the defendants with the amount of the plaintiff’s legacy, with interest to be computed with annual rests, was erroneous or inconsistent with the finding before referred to ; that the investments were made in good faith. I see no other way in which the plaintiff could be fully and correctly indemnified for the consequences of the breach of trust.
The cases referred to by the counsel for the plaintiff in his fifth point, seem to establish the principle that where a trustee fails to execute a trust to invest money, for the maintenance of an infant during minority and to accumulate the' surplus income of the investments, equity will charge interest against him with rests, though he may not have used the trust money, and independent of any question of intention.
This principle appears to have been acknowledged by Justice Miller, in Lansing v. Lansing, (45 Barb. 190,) he says, “ The will required that the interest should he invested, and if it had been made to appear, in any way, that the executor had neglected to perform the duty enjoined upon him in this respect, and that the fund had suffered by reason of it, or that more could have been realized than was done, then he should be liable for compound interest.”
The defendants cannot complain, and do not complain, that they were charged with interest from the end of a year after the testator’s death, and not from the day of his death; but the plaintiff does complain of this, and there are cross-appeals.
The general rule is no doubt as the counsel for the plaintiff states it, “ that when a parent bequeaths a sum of money to a child and provides for its maintenance out of the [481]*481interest of such legacy, and makes no other provision for. its maintenance, such legacy will carry interest from the testator’s death but considering the situation of the testator’s estate in this case at the time of his death, and sometime after, and other undisputed circumstances, I do not think the judgment should be modified, so as to favor the plaintiff in this respect.
I do not see ho^ the accounting could have started from the 1st day of April, 1850, (when the stocks and bonds mentioned in the fifth finding of fact were set apart for the children,) on the theory that the defendants then accounted for, or settled, or paid the interest on the legacies up to that date, without ignoring the principle that it was the duty of the defendants to have invested the legacies and any surplus interest before that time.
Without noticing especially the exceptions to some subordinate rulings of the judge, and of the referee who took the account, it follows, from what has been said, that I am of the opinion that the judgment should be affirmed, unless the plaintiff was bound to accept the stocks and bonds nominally or formally transferred to her by the defendant Talbot, as or for her legacy with its accumulations ; that is, unless the defendants were authorized in the execution of their trust, to make such investment of the trust fund. The judge held they were not, and that the plaintiff was not obliged to accept the stocks and bonds.
Charles W. King, the testator, died the 26th of September, 1845, leaving three children, all minors, the plaintiff being some months over five years of age. By his will he gave to each of his three children “ the sum of $15,000, the interest on the same, so far as required to be applied to their maintenance and education, and the principal, with the accumulations thereof, to be paid to them severally on their majority.” He appointed five executors, “entrusting to their discretion the settlement of my affairs, and the invest[482]*482ment of my estate for the benefit of my heirs.” The defendants, two of the executors named, qualified.
There is no doubt ‘that trustees are not liable for any loss arising from an investment according to a direction in the trust instrument “ as to the particular mode and nature of the investment.” (Hill on Trustees, 368 )
There is no doubt, that it is a settled rule of the English court of chancery, when the cestuis que trust are adults, that the investment must be made in the public funds, or in real estate securities, though the trust instrument, as in this case expressly commits_ the investment to the discretion of the trustee. (See Sill on Trustees, 363, 369, 378, 395, and the English cases cited by the counsel for the plaintiff in his fourth point.)
The result of the English cases, is, where the investment is left to the general discretion of the trustee, that nevertheless, the investment must be made within the rule requiring the investment to be made in the public funds, or in real estate securities. (See Hill on Trustees, 368, 369, and the English cases cited in subd. 3, of the fourth point of the counsel for the plaintiff.)
It seems to be the settled rule of the English courhof chancery,1 “and one that is never varied without special circumstances,” that trust money belonging to an infant must be invested “in three per cents.” (Hill on Trust. 369. Norbury v. Norbury, 4 Mad. 191.)
In Hew Jersey, the English rule requiring the investment to he in real or public securities, would appear to have been adopted by analogy. (Gray v. Fox, Saxton Rep. 259.) So also in Pennsylvania. (Hemphill’s appeal, 18 Penn. Rep. 303. Worral’s appeal, 23 id. 44.)
In Massachusetts, the English rule was discussed by Chief Justice Shaw, in Lovell v. Minot, (20 Pick. 119,) and he seemed to think that the rule was not adapted to this country. ' (See also Harvard College v. Amory, 9 Pick. 446.)
[483]*483As to New York, in Smith v. Smith, (4 John. Ch. 284,) Chancellor Kent, without adopting the English rule, or laying down any rule, said “ I have no doubt it is a wise and excellent general rule, (referring to the English rule,) that a trustee loaning money, must require adequate.real security, or resort to the public funds.” (See also King v. King, 3 John. Ch. 552.)
I think it may be said that the English rule was adopted, by analogy, in Ackerman v. Emott, (4 Barb. 626,) and that a rule was laid down in that case, that in the absence of specific directions in the trust instrument, trust funds must be loaned on or invested in real estate securities, or invested in government securities or stock. Judge Strong says, (p. 648 ;) “ That (the English rule) would sanction the investment of the moneys of the the cestui gue trust in loans on real security, or in the public stocks of this state, or of the United States, and also, under the rules of this court, in loans to the New York Life Insurance and Trust Company.”
Judge Strong does not say, neither did Vice Chancellor Parker in his opinion say, that the adoption and enforcement of.the English rule in this state, so far as applicable, or as political circumstances here would allow, would exclude an investment in Ohio or Virginia stocks, or in the stocks of any state except New York, but my inference from the opinions is, that they meant to approve of.a rule whioh, as to public stocks, would exclude an investment in the stocks of any other state.
Perhaps Ackerman v. Emott should be regarded as recognizing the former adoption in this state of the principle of the English rule, and the necessity for some rule.
In many of the United States, there are statutes authorizing the investment of trust funds in particular stocks. In Pennsylvania, by act of 29 th March, 1832, where an executor, guardian, or trustee has trust moneys waiting investment, he may apply by petition, stating the circumstances, to the orphans' court of the proper county, and the court may order [484]*484the moneys to he invested in the stocks or public debt of the United States, in the public debt of the commonwealth, or of the city of Philadelphia, or on real securities. By subsequent acts, passed in 1838, 1850 and 1851, the provisions of the act of 1832, were extended to certain other stocks.
In Maine, (B. 8. ch. 3, § 11,) the court of probate and Supreme Court may authorize the investment of trust moneys in real estate, or in any manner most for the interest of all concerned. There are similar provisions in the Vermont and New Hampshire Eevised Statutes.
In Georgia, (Cobb’s New Dig. 333,) the investment may be made in stocks, bonds, or other securities issued by the state. (And see Bev. Code of Neto Jersey, 209, &c.; B. 8. of Missouri, 551; and B. 8. of Michigan, 301.)
Some of these statutory provisions would seem to indicate the policy of controlling even the discretion of courts as to the investment of trust funds, and all of them would seem to indicate the necessity of some rule, and the policy of not permitting trustees to deal with trust funds as with their own.
Upon the whole, I am not willing to hold that the defendants were authorized to invest in the stocks and bonds mentioned in the fifth and twelfth findings of fact, and that the plaintiff was bound to accept' the stocks and bonds mentioned in the twelfth finding of fact as or for investments of her legacy, with its accumulations of interest.
The discretion given to the executors by the will, was the discretion of trustees over a trust fund to be invested for the benefit of infants, and they were to be maintained and educated out of interest, not out of dividends ; and any surplus income to be accumulated, was surplus of interest, not of dividends.
It will not do to say, that a trustee can deal with trust funds as with his own, and that he is to be excused if he invests them as he does his own, in railroad, petroleum, or [485]*485mining stocks, though the investment is left by the trust instrument, to his discretion generally.
[New York General Term,
November 4, 1867.
It is not true, either in morals or law, that a trustee is not bound to take greater care of trust funds than he takes of his own. The confidence put in him obliges him morally; and legally to take greater care of trust funds entrusted to I him than he takes of his own. He has no right to speculate j with trust funds ; and every investment in stocks of a rail- i road, mining, banking, or other private corporation must be | looked upon as an adventure.
I do not think railroad bonds, though nominally secured ' by mortgage on track and rolling stock, should be regarded j as real security within any rule adopted, or to be adopted. * The payment of interest upon them is dependent upon the • successful operation of the road ; and the successful operation of the road is dependent in a great measure upon its management; and in case of foreclosure, the small bondholders usually become the victims of the management and combinations of a few of the large bondholders. Besides, railroad charters, like other private charters, are liable to be forfeited, and most of those given by this state are liable at any time to be arbitrarily repealed by the legislature.
My conclusion is, that the judgment should be affirmed, without costs to either party, on these cross-appeals." .
I should have' been quite as well satisfied with the interlocutory decree, if it had directed the interest, in taking the •account, to be calculated-at six per cent, with annual rests. But no- doubt our decision will be reviewed, and perhaps it is better that the Court of Appeals should modify the decree in that respect, if it thinks proper to do so.
The other two cases, of Charlotte E. King against the same defendants, and of Arthur King against same defendants, are substantially like this, and I think the same order should be made in both those cases.
Leonard, Clerke and Sutherland, Justices.]