By the Court.
Several objections are made to the decree of the surrogate, which I will proceed to consider.
It is said that the surrogate erred in charging the appellant with commissions, taxes, and expenses.
By the will of the testator the executors were to make the investment of the legacy bequeathed to Rachel S. Lansing, and to keep the same invested until she arrived at the age of twenty-one years, or until her death. ' The executors were to apply the interest, or so much as they deemed proper, towards her support and education, and upon her arriving at the age of twenty-one years, they were to pay her the legacy and the accumulated interest, except so far as the use thereof was necessary, and deemed proper by said executors for the education and support of said Rachel. The rest, residue, and remainder of the estate is also disposed of subject to the previous payment of the legacies and investments by the executors.
It is very evident from the will that there was no trust created in the hands of the executors, distinct and separate from their duties as such. The testator does not name them as trustees, and manifests no intention that they should act otherwise than as executors, with instruction to perform certain duties by virtue of their powers as executors. Without proper words to establish a trust it cannot be inferred. The fund in the hands of the executor for the benefit of Rachel S. Lansing, was held by him in his character as an executor, and [284]*284the trust created thereby was a part and portion of the duties. imposed upon him as an executor, and not distinctly and separately as a trustee. See Drake v. Price, 5 N. Y. [1 Seld.], 430; Valentine v. Valentine, 2 Barb. Ch., 430, 438 & 9 ; Westerfield v. Westerfield, 1 Barb., 198.
Acting then, as executor, and not as trustee, in the. investment and management of the legacy, the executor was entitled to a commission of one per cent, upon the interest or increase of the fund, instead of five per cent., which was erroneously allowed him. This increase was not a separate and distinct receipt of money independent df what had been previously received, but merely an addition to the principal fund of the estate. This is expressly held in 5 N. Y. [1 Seld.], 430, and 2 Barb. Ch., 430, before cited, and is well settled law. By statute the executor is only entitled to one per cent, for receiving and paying out sums over ten thousand dollars (Session Laws of 1863, 608, § 8), and the estate here showed assets to the amount of fifteen thousand dollars.
The suggestion that the executor was entitled to full commissions upon the principle of annual rests, has no application to a case like this. 5 N. Y. [1 Seld.], 430, was similar in most of its leading features to the present case, and that disposes of the question the other way.
Whether this commission should be taken out of the fund itself, or with the taxes and expenses be deducted from and. chargeable on the general estate is another and a different question, which must be determined by looking, at the provisions of the will and ascertaining so far as possible what the testator really intended.
It appears that the legatee was to receive the legacy upon attaining her majority, and such interest as remained after paying for her support and education.
The amount was specific, and it was subject to this deduction alone without any reference to commissions and taxes, and hence, it is claimed that it cannot be complied with, by the payment of anything less. It is true this is the only exception made, but it must be taken into consideration, that thia amount was specially set apart by itself, as a fund for the benefit of the legatee, and as such it had a distinct character. It was taken out of the estate for a specific purpose, and the [285]*285legatee was to enjoy the interest, so'far as it might be necessary, until she became of age.
It is quite possible that the residue of the estate may have been distributed before the time arrived when the legacy was due. Had such been the case, would the executor have been authorized to have retained an uncertain amount in his hands to meet the taxes and expenses?'
This would scarcely have been considered as within the meaning and intention of the testator. He evidently meant to set apart this amount as a specific sum, th’e increase of which should be appropriated for the support and maintenance of his grandchild, and whatever remained to be re-invested, and the principal and interest paid over at the proper time; and did not contemplate a resort to the estate generally to keep down the taxes and commissions. When a fund is thus situated, and the party only entitled to the income, the authorities would appear to hold that it is subject to taxes and commissions. In 5 N. Y. [1 Seld.], 430, before cited, where the facts bear a striking similarity to the present case, it was conceded that a commission of only one per cent, was chargeable against the fund set apart.
In Pinckney v. Pinckney (1 Bradf., 269) a testator gave to his wife the use and income of his real estate, and the interest of a specified sura, and it was held, that the taxes and expenses were chargeable upon the fund, and not upon the estate generally. The Court say, “The bequest should bear its own burden ; if the testator had intended these charges to be paid out of the general fund, he would have said so; and there is no presumption of law in favor of the doctrine contended for. The widow is not to be paid a certain fixed sum annually, nor are the executors to invest such an amount as will produce a clear net income, but she is to receive the income of a particular specified property, and the interest of an investment of some thousand dollars, and the rest of the estate cannot be taxed so that she can obtain the gross instead of the net income.
Much of the reasoning here employed is applicable to the present case. The interest was to be paid, as provided, for certain purposes, and, at a specified period, the principal. Ho provision is made that any charges upon the fund should be [286]*286paid out of the general estate, and why should not the' legacy he chargeable with these expenses? .
In Lawrence v. Holden (3 Bradf., 142), where a testator gave his wife, by his will, the use of a dwelling house for life free and clear of all incumbrances, and in case she requested it, directed the property to be sold, and the proceeds invested, and the interest, income and dividends, applied to her use, it was held that the executors were not bound to pay the current taxes and assessments out of- the testator’s general estate.
In Booth v. Ammerman, (4 Bradf., 129), the testator gave to his sister, the interest upon fifteen hundred dollars,. in case she should become a widow, during her widowhood, payable annually, and it was held that taxes and commissions were chargeable upon the trust fund. The Court say, “The taxes which thb executor may be compelled to pay, and also the commissions on the interest payable annually to the legatee, must come out of the interest, and are not chargeable upon the general estate.”
The effect of the authorities cited clearly is, that a fund thus set apart where the income is given, without any particular amount being specified, is chargeable with commissions and taxes.
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By the Court.
Several objections are made to the decree of the surrogate, which I will proceed to consider.
It is said that the surrogate erred in charging the appellant with commissions, taxes, and expenses.
By the will of the testator the executors were to make the investment of the legacy bequeathed to Rachel S. Lansing, and to keep the same invested until she arrived at the age of twenty-one years, or until her death. ' The executors were to apply the interest, or so much as they deemed proper, towards her support and education, and upon her arriving at the age of twenty-one years, they were to pay her the legacy and the accumulated interest, except so far as the use thereof was necessary, and deemed proper by said executors for the education and support of said Rachel. The rest, residue, and remainder of the estate is also disposed of subject to the previous payment of the legacies and investments by the executors.
It is very evident from the will that there was no trust created in the hands of the executors, distinct and separate from their duties as such. The testator does not name them as trustees, and manifests no intention that they should act otherwise than as executors, with instruction to perform certain duties by virtue of their powers as executors. Without proper words to establish a trust it cannot be inferred. The fund in the hands of the executor for the benefit of Rachel S. Lansing, was held by him in his character as an executor, and [284]*284the trust created thereby was a part and portion of the duties. imposed upon him as an executor, and not distinctly and separately as a trustee. See Drake v. Price, 5 N. Y. [1 Seld.], 430; Valentine v. Valentine, 2 Barb. Ch., 430, 438 & 9 ; Westerfield v. Westerfield, 1 Barb., 198.
Acting then, as executor, and not as trustee, in the. investment and management of the legacy, the executor was entitled to a commission of one per cent, upon the interest or increase of the fund, instead of five per cent., which was erroneously allowed him. This increase was not a separate and distinct receipt of money independent df what had been previously received, but merely an addition to the principal fund of the estate. This is expressly held in 5 N. Y. [1 Seld.], 430, and 2 Barb. Ch., 430, before cited, and is well settled law. By statute the executor is only entitled to one per cent, for receiving and paying out sums over ten thousand dollars (Session Laws of 1863, 608, § 8), and the estate here showed assets to the amount of fifteen thousand dollars.
The suggestion that the executor was entitled to full commissions upon the principle of annual rests, has no application to a case like this. 5 N. Y. [1 Seld.], 430, was similar in most of its leading features to the present case, and that disposes of the question the other way.
Whether this commission should be taken out of the fund itself, or with the taxes and expenses be deducted from and. chargeable on the general estate is another and a different question, which must be determined by looking, at the provisions of the will and ascertaining so far as possible what the testator really intended.
It appears that the legatee was to receive the legacy upon attaining her majority, and such interest as remained after paying for her support and education.
The amount was specific, and it was subject to this deduction alone without any reference to commissions and taxes, and hence, it is claimed that it cannot be complied with, by the payment of anything less. It is true this is the only exception made, but it must be taken into consideration, that thia amount was specially set apart by itself, as a fund for the benefit of the legatee, and as such it had a distinct character. It was taken out of the estate for a specific purpose, and the [285]*285legatee was to enjoy the interest, so'far as it might be necessary, until she became of age.
It is quite possible that the residue of the estate may have been distributed before the time arrived when the legacy was due. Had such been the case, would the executor have been authorized to have retained an uncertain amount in his hands to meet the taxes and expenses?'
This would scarcely have been considered as within the meaning and intention of the testator. He evidently meant to set apart this amount as a specific sum, th’e increase of which should be appropriated for the support and maintenance of his grandchild, and whatever remained to be re-invested, and the principal and interest paid over at the proper time; and did not contemplate a resort to the estate generally to keep down the taxes and commissions. When a fund is thus situated, and the party only entitled to the income, the authorities would appear to hold that it is subject to taxes and commissions. In 5 N. Y. [1 Seld.], 430, before cited, where the facts bear a striking similarity to the present case, it was conceded that a commission of only one per cent, was chargeable against the fund set apart.
In Pinckney v. Pinckney (1 Bradf., 269) a testator gave to his wife the use and income of his real estate, and the interest of a specified sura, and it was held, that the taxes and expenses were chargeable upon the fund, and not upon the estate generally. The Court say, “The bequest should bear its own burden ; if the testator had intended these charges to be paid out of the general fund, he would have said so; and there is no presumption of law in favor of the doctrine contended for. The widow is not to be paid a certain fixed sum annually, nor are the executors to invest such an amount as will produce a clear net income, but she is to receive the income of a particular specified property, and the interest of an investment of some thousand dollars, and the rest of the estate cannot be taxed so that she can obtain the gross instead of the net income.
Much of the reasoning here employed is applicable to the present case. The interest was to be paid, as provided, for certain purposes, and, at a specified period, the principal. Ho provision is made that any charges upon the fund should be [286]*286paid out of the general estate, and why should not the' legacy he chargeable with these expenses? .
In Lawrence v. Holden (3 Bradf., 142), where a testator gave his wife, by his will, the use of a dwelling house for life free and clear of all incumbrances, and in case she requested it, directed the property to be sold, and the proceeds invested, and the interest, income and dividends, applied to her use, it was held that the executors were not bound to pay the current taxes and assessments out of- the testator’s general estate.
In Booth v. Ammerman, (4 Bradf., 129), the testator gave to his sister, the interest upon fifteen hundred dollars,. in case she should become a widow, during her widowhood, payable annually, and it was held that taxes and commissions were chargeable upon the trust fund. The Court say, “The taxes which thb executor may be compelled to pay, and also the commissions on the interest payable annually to the legatee, must come out of the interest, and are not chargeable upon the general estate.”
The effect of the authorities cited clearly is, that a fund thus set apart where the income is given, without any particular amount being specified, is chargeable with commissions and taxes.
The objection made to the allowance for. highway taxes, is founded upon the ground that the executor personally worked out the taxes. The commissions for moneys received and paid out are in lieu .of all personal services of the executor or administrator, and he will not be allowed any further compensation for his trouble or loss (D. Sur., 496).
Is the charge made in violation of this rule ? We must assume that the road-taxes were imposed upon the fund, and -that .the executor was liable and bound to pay them. Instead of paying the money or licensing a person to do the work, he performed the service personally.
He paid it in that way. The amount was fixed. and settled, and the estate legally obliged to pay it. It could make no difference whether paid in that way or by money. It is the same thing as if he had paid the money. He paid it by work instead of money, and it presents a case entirely different from one where services for which no compensation is fixed are rendered for the benefit of an estate, and a charge made for such services. There an opportunity is furnished to make out [287]*287charges and audit them, while here the estate must pay a certain sum. I think that a rendition of the service must be considered as a liquidation and payment of the tax, for which the executor should be allowed.
It is said that the surrogate erred in excusing the executor from an investment of the interest upon the interest, annually. The will required that the interest should be invested, and if it had been made to appear in any way that the executor has neglected to perform the duty enjoined upon'him in this respect, and that the fund has suffered by reason of it, or that more could have been realized than was done, then he should be held liable for compound interest. In his account filed with the surrogate he states, “ that he has tried to keep the fund, together with the accrued and ’ accumulated interest, invested and re-invested, as required by the will, and that he has not been able to do any better than is stated in the account. This account is rendered under oath, and prima facie must be considered as mainly correct, until assailed or impugned. It presents the facts, however, from which some adequate judgment may be formed as to the propriety of his conduct in the disposition of the fund. Row it is somewhat manifest that it would not be a very easy matter, at the expiration of each year, to re-invest the precise amount of compound interest received, so as to keep the fund in the process of constant accumulation, and, hence, to charge him with a strict accountability might inflict severe and unnecessary hardship.
The most which could be done under such circumstances, would be to fix a certain amount which had accumulated, and charge interest upon that sum. This also would be a difficult matter to carry out practically, and in the absence of any evidence to contradict or dispute the statement of the executor, to the effect that he has done the best he could, it would be unjust to charge him with compound interest annually. If there was any evidence to prove that the excuse offered was not a valid one, or any aspect of the case which indicated neglect, misconduct, or a want of good faith, there .would be the strongest reason for holding him to the most rigid .accountability. Those intrusted with the charge of trust funds, under no circumstances should be permitted to use them for their own profit and pecuniary advantage, and whenever they thus violate their obligations, the courts' should see that they account Strictly for their [288]*288misconduct. They should require at their hands the greatest diligence and fidelity. An executor, administrator, or trustee is not allowed to make any gain, profit, or advantage from the use of the trust, funds. If he negligently suffer the trust moneys to lie idle he is chargeable with simple interest. If he convert the trust moneys to his own use, and employ them in his business or trade, he is chargeable with compound interest (Scheifflien v. Stewart, 1 Johns. Ch., 620).
In Ackerman v. Emott (4 Barb., 626), Strong, J., lays down the rule that compound interest is only allowed in cases of gross delinquency or of an intentional violation of duty (see also Utica Ins. Co. v. Lynch, 11 Pa., 520; Garness v. Gardner, 1 Edw. Ch., 128; Willard’s Eq. Jurisp., 614; 2 Kent Com., 302, 231; T. & B. Law of Trusts, &c., 594, 595).
If we apply these principles to the case at bar, I think a case is not made out within the rule laid down. It is not claimed that the executor used the funds in his own business, in trade, or that he made any particular profit from their use, nor is there anything to establish that he was guilty of any gross delinquency or violation of duty. In fact, he presents a statement, which, if it can be relied upon, will exonerate him from any charge of wilful omission of duty or misfeasance.
While trustees are held to great strictness in the management of trust funds, the court will deal leniently with them when it appears they have acted.in good faith, and if no improper motive can be attributed to the trustee, the court will excuse the apparent breach of trust, unless the negligence is very gross (see T. & B. Law of Trusts & Trustees, 599, and authors there cited). As this case does not present features which indicate a departure from any settled rule of law, or bad faith on the part of the executor, I think that the objection is not available.
It is further urged that the surrogate erred in excusing the executor’s deposit of funds in the savings bank at an interest of five per cent., payable semi-annually. By the will the executor was required to invest in real estate securities. It is not denied that it was difficult at the time when the money was paid into his hands to find securities of this character. Where special directions are given, they should be pursued if possible. If they cannot be followed, then the executor should look out for such other securities as the Court is known to have adopted, and when it has authorized and sanctioned any particular fund as [289]*289a safe investment, he would he justified in making the investment there.
In Ackerman v. Emott (4 Barb., 626), it was held that under the general power to make investments, the Court would sanction any investment by executors and trustees in loans on real security, or in public stocks of the State, or of the United States, or in the loans of the Hew York Life and Trust Company. It was said in this case that the law regarded the certainty of an income more than its magnitude. Parker, V. C., who originally heard the case, and from whose decision an appeal was taken, remarks: “ The Court approves of a deposit in the Hew York Life and Trust Company, until a safe investment can be made on bond and mortgage.” The executor, here being unable to invest upon real estate security, was bound to dispose of the fund in the best manner which was practicable under the circumstances existing. He would have been justified in'depositing it with the Hew York Life and -Trust Company; and in placing it elsewhere than in such securities as were sanctioned by the Court, he incurred the hazard of being made responsible in case of any loss. He put it in an institution where the rate of interest was quite as large as it would have been if deposited in the Hew York Life and Trust Company.
It would have brought a larger income if invested in government securities, but as it has turned out it would have been no safer than where it was. ^
It appears that the executor exercised a sound discretion in thus disposing of it, and as he has acted honestly, and as it does not appear that he could in any other way have disposed of the money so as to have it in his power to' invest it in real estate securities, and as no such securities were offered, I think he was justified in the course which he pursued. He-might, it is true, have made an application to the court for instructions, but he was under no obligation to incur such an expense, and was not bound to do so.
A trustee or executor is required in making investments to conduct himself faithfully, arid to exercise a sound discretion, and when he observes that prudence and intelligence which is demanded of a man in the management of his own affairs, not in reference to large gains, but the safety of the principal, and its probable income, he should be sustained.
I think the surrogate erred in directing the payment of the [290]*290sum due to the appellant, with interest at five per cent. There is no good reason why the amount should not draw interest at the usual legal rate from the time of the decree, and in this respect his decree should be corrected.
With the views I havó expressed, it is not important to examine some other questions raised on the argument.
The proceedings must he remitted to the surrogate, with directions to correct the decree in the particulars named, with costs of appeal against the estate of the testator,
Order accordingly.
Present Hogeboom, Miller and Ingalls, JJ.