The Surrogate.—The following questions are presented in this matter for determination.
First, whether- the executors, as such, on this accounting, should include all their proceedings as the repre[193]*193sentatives of this estate, notwithstanding the will denominates them trastees as well, and they have assumed, in the latter capacity, to deal with the estate under the provisions of the will, and have commenced an action in the Supreme Court for an accounting as trustees, making all the persons interested therein, parties ; and that action is now pending therein.
Second, whether the executors rightfully appropriated the sum above stated, as for their commissions, or on account thereof; and if not, what, if any, interest thereon should be charged against them.
Third, whether the profits made on the sale of the Mew York Central Railroad stock, which was a part of the principal sum set apart by the executors, under the sixth clause of the will, and the codicil increasing the same, for the benefit of decedent’s daughter Emeline, was properly paid to her as the life-tenant, or belonged and should have been added to the principal.
In respect to the first point, inasmuch as the executors have not included tlieir proceedings under what *hey claim to be their functions as trustees, as contra-distinguished from their executorship, and as a requisition to include such proceedings, by way of a supplementary account, would involve the expense and delay of another reference and contest; and as the Supreme Court has taken jurisdiction of their accounting as trustees, which embraces the same matters which the contestants claim should have been included in this accounting, and as the latter court has confessedly jurisdiction of the parties and subject matter, I do not deem it my duty to impose such additional delay and expense upon this estate, though I might differ with the Supreme Court, as to the [194]*194propriety of its taking cognizance of the case, or as to their liability to account as trustees, before they shall have accounted in this court as executors : especially as this court had control of, and was proceeding in, their accounting in the latter capacity, when the executors, claiming to be trustees, initiated their proceedings in that court.
But it is- my duty to say that where executors are charged with trust duties, they should, as a general rule, when finally accounting as executors, include all their proceedings in their administration of the estate, in whatever capacity they have acted, for, until they have so accounted and been discharged, they may reasonably be assumed to have acted in their capacity of executors, under the authority of their letters, aad I am not prepared to say, that in this case, a different rule should be adopted.
It is urged, with great earnestness, by the counsel for the executors, that by the sixteenth clause of the will they are charged with so much of the estate as was partitioned, by the commissioners appointed for that purpose, pursuant to that clause, and that they derived a title thereto under the conveyance of said commissioners, and not under the will of the testator directly. This seems to me a forced and unnatural suggestion. For, while that clause does, in terms, empower said commissioners to set apart, by deed, the shares in severalty to the trustees, yet I do not understand that the commissioners are, by the terms of that clause, vested with any title to the property, but that they are simply the instruments or agents of the parties' interested, for the purpose of making the division. As well might it be said that, by the language of the section, when the com[195]*195missioners were directed, in case they could not partition the property equally, to make up for the inequality in value by means of the personal estate, they were vested with authority over the personal estate for that purpose. The rational construction is, that they should fix the difference in value, and the executors, who are vested with the control of the personalty, should equalize the shares therewith.
In Wheelright v. Wheelright (2 Redf., 501), the question. of the right of executors to voluntarily appropriate the funds of the estate, on account of their commissions, without any settlement of their account, or allowance of such commissions, by the Surrogate, was carefully considered ; and it ivas held that they had no such authority, and that, as a general rule, they are chargeable with interest on the amount thus appropriated, to the time when the account was settled. But in that case, under-special circumstances, they were exonerated from paying interest. In this case, there seem to be no circumstances to justify such exoneration. Such appropriation must be held to have been a misappropriation of the funds of the estate, to the personal use of the executors. But, as there seems to be no proof, in this case, of gross delinquency, or intentional violation of duty, I am of the opinion that they are not properly chargeable with compound interest. (Tucker v. McDermott, 2 Redf., 312, and cases there cited.)
In respect to the profit realized on the sale of the Hew York Central Railroad stock, I am of the opinion that as the same is in no sense income or dividend of stock, or otherwise, on the principal sum invested for the benefit of Emeline Dore during her life, and bequeathed [196]*196to remaindermen, the profit so made did not belong to the life-tenant as income, but to the principal fund, in which she was entitled to the interest, income or dividends. The counsel seeking to sustain the payment to the life-tenant, cites numerous authorities, which appear to turn upon the use, in the will, of the term “dividends,” and which hold that- such term includes ordinary, and, in some cases, extraordinary dividends. The proceedings of said railroad company, declaring an extra stock dividend, are cited, doubtless, for the purpose of showing that the profit realized on such sale was in consequence of such extra dividend. But those proceedings were had many months after the sale of the stock'in question ; and I am not able to perceive what this could have had to do with the sale of the stock long previous. See Matter of Pollock (3 Redf., 101), commencing at page 108, where the authorities upon the question are fully considered.
But, it is claimed by the respective counsel for the parties excepting to the disallowance, by the auditor, of the payment, that the submission of the question to Mr. Paris, the then counsel for the estate, was under the eighteenth clause of the will, and that his decision was therefore conclusive upon all of the parties. I am inclined to the opinion, that this position cannot be sustained, for two reasons. First, because it appears that Mr. Paris was then the counsel for the executors representing all the interests under the will. It does not seem to me that he could have been an impartial arbiter between the executors, so representing all the interests, and a legatee who made a claim to the fund in .question in hostility to the rights of the remainderman. Second, [197]*197because while I entertain no doubt of the validity of the submission, though made by parol (see Wells v. Lain, 15 Wend., 99 ; Diedrick v. Richley, 2 Hill, 271; Valentine v. Valentine, 2 Barb. Ch., 430), yet, I am of the opinion, that there was not such a submission of the question, as was contemplated by the will. For the evidence shows that Mr.
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The Surrogate.—The following questions are presented in this matter for determination.
First, whether- the executors, as such, on this accounting, should include all their proceedings as the repre[193]*193sentatives of this estate, notwithstanding the will denominates them trastees as well, and they have assumed, in the latter capacity, to deal with the estate under the provisions of the will, and have commenced an action in the Supreme Court for an accounting as trustees, making all the persons interested therein, parties ; and that action is now pending therein.
Second, whether the executors rightfully appropriated the sum above stated, as for their commissions, or on account thereof; and if not, what, if any, interest thereon should be charged against them.
Third, whether the profits made on the sale of the Mew York Central Railroad stock, which was a part of the principal sum set apart by the executors, under the sixth clause of the will, and the codicil increasing the same, for the benefit of decedent’s daughter Emeline, was properly paid to her as the life-tenant, or belonged and should have been added to the principal.
In respect to the first point, inasmuch as the executors have not included tlieir proceedings under what *hey claim to be their functions as trustees, as contra-distinguished from their executorship, and as a requisition to include such proceedings, by way of a supplementary account, would involve the expense and delay of another reference and contest; and as the Supreme Court has taken jurisdiction of their accounting as trustees, which embraces the same matters which the contestants claim should have been included in this accounting, and as the latter court has confessedly jurisdiction of the parties and subject matter, I do not deem it my duty to impose such additional delay and expense upon this estate, though I might differ with the Supreme Court, as to the [194]*194propriety of its taking cognizance of the case, or as to their liability to account as trustees, before they shall have accounted in this court as executors : especially as this court had control of, and was proceeding in, their accounting in the latter capacity, when the executors, claiming to be trustees, initiated their proceedings in that court.
But it is- my duty to say that where executors are charged with trust duties, they should, as a general rule, when finally accounting as executors, include all their proceedings in their administration of the estate, in whatever capacity they have acted, for, until they have so accounted and been discharged, they may reasonably be assumed to have acted in their capacity of executors, under the authority of their letters, aad I am not prepared to say, that in this case, a different rule should be adopted.
It is urged, with great earnestness, by the counsel for the executors, that by the sixteenth clause of the will they are charged with so much of the estate as was partitioned, by the commissioners appointed for that purpose, pursuant to that clause, and that they derived a title thereto under the conveyance of said commissioners, and not under the will of the testator directly. This seems to me a forced and unnatural suggestion. For, while that clause does, in terms, empower said commissioners to set apart, by deed, the shares in severalty to the trustees, yet I do not understand that the commissioners are, by the terms of that clause, vested with any title to the property, but that they are simply the instruments or agents of the parties' interested, for the purpose of making the division. As well might it be said that, by the language of the section, when the com[195]*195missioners were directed, in case they could not partition the property equally, to make up for the inequality in value by means of the personal estate, they were vested with authority over the personal estate for that purpose. The rational construction is, that they should fix the difference in value, and the executors, who are vested with the control of the personalty, should equalize the shares therewith.
In Wheelright v. Wheelright (2 Redf., 501), the question. of the right of executors to voluntarily appropriate the funds of the estate, on account of their commissions, without any settlement of their account, or allowance of such commissions, by the Surrogate, was carefully considered ; and it ivas held that they had no such authority, and that, as a general rule, they are chargeable with interest on the amount thus appropriated, to the time when the account was settled. But in that case, under-special circumstances, they were exonerated from paying interest. In this case, there seem to be no circumstances to justify such exoneration. Such appropriation must be held to have been a misappropriation of the funds of the estate, to the personal use of the executors. But, as there seems to be no proof, in this case, of gross delinquency, or intentional violation of duty, I am of the opinion that they are not properly chargeable with compound interest. (Tucker v. McDermott, 2 Redf., 312, and cases there cited.)
In respect to the profit realized on the sale of the Hew York Central Railroad stock, I am of the opinion that as the same is in no sense income or dividend of stock, or otherwise, on the principal sum invested for the benefit of Emeline Dore during her life, and bequeathed [196]*196to remaindermen, the profit so made did not belong to the life-tenant as income, but to the principal fund, in which she was entitled to the interest, income or dividends. The counsel seeking to sustain the payment to the life-tenant, cites numerous authorities, which appear to turn upon the use, in the will, of the term “dividends,” and which hold that- such term includes ordinary, and, in some cases, extraordinary dividends. The proceedings of said railroad company, declaring an extra stock dividend, are cited, doubtless, for the purpose of showing that the profit realized on such sale was in consequence of such extra dividend. But those proceedings were had many months after the sale of the stock'in question ; and I am not able to perceive what this could have had to do with the sale of the stock long previous. See Matter of Pollock (3 Redf., 101), commencing at page 108, where the authorities upon the question are fully considered.
But, it is claimed by the respective counsel for the parties excepting to the disallowance, by the auditor, of the payment, that the submission of the question to Mr. Paris, the then counsel for the estate, was under the eighteenth clause of the will, and that his decision was therefore conclusive upon all of the parties. I am inclined to the opinion, that this position cannot be sustained, for two reasons. First, because it appears that Mr. Paris was then the counsel for the executors representing all the interests under the will. It does not seem to me that he could have been an impartial arbiter between the executors, so representing all the interests, and a legatee who made a claim to the fund in .question in hostility to the rights of the remainderman. Second, [197]*197because while I entertain no doubt of the validity of the submission, though made by parol (see Wells v. Lain, 15 Wend., 99 ; Diedrick v. Richley, 2 Hill, 271; Valentine v. Valentine, 2 Barb. Ch., 430), yet, I am of the opinion, that there was not such a submission of the question, as was contemplated by the will. For the evidence shows that Mr. Lore, one of the executors, assumed to act in the double capacity of executor and agent for his wife, the life tenant, with no positive evidence of his authority so to act, except, perhaps, such as is furnished by her acceptance of the fund under a favorable decision. I am entirely clear in the opinion that Mr. Lore could not legally occupy the anomalous position of plaintiff and defendant.
Suppose, as an illustration, that he had been the sole surviving executor and trustee, is it possible that he would then be permitted to act for the estate, representing the interest of all the parties, and also for a legatee, making a claim against him as such representative in hostility to other beneficiaries whose interests he, as such representative, was bound to protect ?
I am therefore of the opinion, that for the reasons above stated, the- auditor’s report should be confirmed, with the modification above suggested, that the executors be charged interest upon the sum which they assumed to appropriate for their commissions without authority, from the 23d of April, 1861, and the 26th of February, 1862, the dates when it was so taken, to the time of the entry of the decree herein.
Ordered accordingly.
[198]*198Subsequently, upon the presentation of the final decree in this matter, certain amendments were proposed, which were disposed of as follows:
The Subrogate.—The first amendment proposed to the decree, submitted by the executors’ counsel, should be, in my opinion, substantially approved. There seems to be no doubt that the executors joined in the misapplication of the assets of the estate denominated by them commissions. They were all privy to the proceeding, and participated in it, instead of any remonstrating against it. (Sutherland v. Brush, 7 Johns. Ch., 17; Manahan v. Gibbons, 19 Johns., 427; Mesick v. Mesick, 7 Barb., 120; Wood v. Brown, 34 N. Y., 837, 343; 2 Williams on Ex., 1548.)
In Johnson v. Corbett, 11 Paige, 265, it was held that an administrator who suffered or permitted his co-administrator to misapply the funds of the estate when he had the power to prevent it, was liable in equity for such misapplication. (Brown’s Acc’ng, 16 Abb. Pr. N. S., 457.) In Adair v. Brimmer, 74 N. Y., 539, at p. 566, Judge Rapallo cites Clark v. Clark, 8 Paige, 153, to the point that, when an executor, by his negligence, suffers his co-executor to receive and waste the estate, being able to prevent it, he is liable to the beneficiaries for the waste. Williamson Executors, p. 828, holds that the indemnity clause in the will does not exonerate the co-trustee or executor.
These authorities leave no doubt in my mind, that the fund-withdrawn as commissions, should be returned as assets of the estate, together with the interest thereon, and that if any failure to reimburse the surviving executors for the sum so misappropriated “by the deceased executors ” shall result, the survivors must be held lia[199]*199ble therefor. Nevertheless, they will be entitled to reimburse themselves' to the extent of any sum which shall be awarded to the representatives of said deceased executors, by way of commissions.
On the question as to the rate of interest, I see no reason to change my view, as suggested in the opinion already handed down. The rule is universal that administrators, executors and trustees are chargeable, with the full rate of interest on the funds of the estate which they mingle with their own funds, and subject to the hazards of their individual business.
What was the appropriation of the funds of this estate, by the respective executors, under the guise of commissions, but a conversion of such funds to their use ?
If they had withdrawn so much of the funds, and invested them for the benefit of the estate, in apparent good faith, though on inadequate securities, the principle would be different, for then it would not be subjected to the jeopardy of their respective business enterprises, or appropriated as them own.
The suggestion of the insolvency of some of the estates of the deceased executors, is the most apt enforcement of the fact of the impropriety of this unlawful jeoparding of the estate.
My attention has been called to cases in which trustees have been charged a reduced rate of interest.
The leading case in this country is King v. Talbot (40 N. Y., 76). An examination of it will distinguish it from the one under consideration in a material respect. That was a case where trustees, had invested trust funds in securities disapproved by the court, and the court charged the executors six per cent., with annual rests, [200]*200upon the ground that it appeared that they had acted in good faith, but made an honest mistake. This case was followed by the Court of Appeals, in Adair v. Brimmer, above cited. It is suggested that the fact that the current rate of interest is now but six per cent, in this state, should induce the charge of a less rate of interest than seven per cent. But the answer to that is, if I am right in holding that the executors unlawfully misappropriated the so-called commissions, their liability for repayment with the current rate of interest immediately attached, and must continue until the liability is discharged.