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the life-tenant is to receive the income. In the management of real estate, when permanent improvements are placed thereon, these are a proper charge of the capital, while usual and ordinary repairs, when made, are a deduction from the income. Parsons v. Winslow, 16 Mass. 361. If a trustee purchases shares in the capital stock in a bank, inasmuch as the remainder-man will receive exactly that which is purchased, the tenant for life should receive the full income thereof undiminished. Such was the course pursued by the trustee in the case at bar, in regard to the bank shares purchased by it. Now, does it become the duty of the trustee to sell such shares, should they appreciate in value, after he has invested in them, and pay over to the tenant for life the amount which they have increased in value? If it becomes necessary to sell such shares in the proper administration of the trust estate, the gain or loss is that of the capital of the estate, and the sum recovered constitutes a new principal.

The tenant for life does not seek any order by which the bonds, the interest on which is here under discussion, are to be sold or the investments changed; nor can it be contended that these securities are not of a class in which trustees may invest, if due care has been used in the selection. The rule "that no investment can be considered safe or can be approved by a probate court or court of equity, except in public securities, however weil supported by authorities," says Chief Justice SHAW, "as a rule well established in English courts of equity, is wholly inapplicable and untenable in this country." Lovell v. Minot, 20 Pick. 116. While there are now many more public securities than those which existed when this remark was made, investments cannot be confined to them. A loan at a fixed rate of interest, even if secured by the stock of a manufacturing or other business corporation as collateral security, if proper security is taken against fluctuations, is not necessarily injudicious. Brown v. French, 125 Mass. 410. There are many stocks under public supervision-bonds of corporations-where there is sufficient capital to insure their safety which, with bonds of municipalities, loans secured by mortgage, constitute proper investments. The purchase of the bonds by the trustee appears to have been judiciously made. Substantially all have appreciated in value, and they are of the class of securities contemplated as investments by the statute under which the trustee does its business. St. 1869, c. 182, § 5; St. 1871, c. 142; P. S. c. 116, § 20.

Assuming that the purchase of bonds even at a premium, was safe, prudent, and such as judicious men would make in the conduct of their affairs, which is substantially the rule heretofore laid down, the question arises: Inasmuch as it is certain that the corpus of the fund is to be diminished if this investment is permanent, whether the trustee may retain such sums annually as will restore to the fund at its maturity exactly what was taken therefrom at the time of the purchase? This is what the trustee has undertaken to do. If, as suggested in argument, there is any inaccuracy in the calculation by which this result is reached, this is a subordinate matter, to be determined by more accurate accounting should it be required, not necessary now to be discussed. That which

is really income from a bond purchased at a price above par, say 120, and payable in 10 years, is not the amount received in interest annually, but that amount deducting therefrom the sum necessary to restore at the end of the 10 years the $20 premium. No prudent man would treat as income from his property the whole amount received when there was thus to be a diminution of his principal, amounting at the end of the 10 years to this premium, and steadily tending to this during the entire period. To deal with interest thus received as income purely, would, to the extent of the premium, exhaust the capital. The premium paid is no more than an advance from capital, which the remainder-man is entitled to have repaid if he is entitled to receive the capital intact. If, in such a case, the tenant for life should die before the maturity of the bond, and thus the whole advance not then be repaid, he would have paid no more than his just proportion. Unless the premium is to be restored, it is not easy to see how investments in bonds having a premium can be made in justice to the remainder-man, whose property (where a bond is kept to maturity) is diminished solely for the benefit of the tenant for life. Into the question how much income an investment, at a premium, in a bond, payable at a fixed future time, produces, the loss of the premium at that time necessarily enters as a factor. The bonds purchased by the trustee have substantially all appreciated in value; and this, to such an extent that if they were now sold, the surplus beyond the sum which would be necessary to restore to the capital all that was paid at the time of purchase by way of premium would enable the trustee to pay the tenant for life the deductions that have heretofore been made in order to repair the principal at the maturity of the bond. The life-tenant, therefore, insists that the trustee should now be ordered to pay to her those sums, as, if a sale were made at this moment, they would not be needed to repair any deficiency in the principal.

The trustee is to manage the fund in his hands, not for the purpose of speculation, "but in regard to the permanent disposition of the fund." Harvard College v. Armory, 9 Pick. 461; Lovell v. Minot, 20 Pick. 116. The argument of the tenant for life, that the practice of holding securities until their maturity would deprive him of the "every care and ability in the management of the trust, for which he pays compensation to the trustee," can readily be pressed so far as to sanction the practice of trading and trafficking in trust securities, which would be attended with dangerous results to the trust fund. Investments carefully and judiciously made are not, as a general rule, to be disturbed. The argument of the tenant asserts that the income obtained for the tenant is less than one-half of that which might be obtained on absolutely safe mortgages. The case affords no evidence of this, nor in this proceeding, which only concerns the account of the trustee, and the amount of his payments to the tenant, could it be settled whether, in this view, the trustee should be ordered to dispose of the securities.

But, if the securities were sold and a larger sum realized than would be necessary to restore to the corpus of the estate that which was taken from it when they were purchased, the question would still be whether

the appreciation of the securities in market value was the property of the tenant for life or of the remainder-man. There is no ground on which it can be contended to belong to the tenant for life, unless he is also to be made responsible where loss occurs in the purchase and subsequent sale of securities. There cannot be this chance of profit for him unless there is to be a corresponding risk in such transactions. If the rule that when a security is kept to maturity, income is to be paid only to such an extent as shall leave the corpus of the estate at that time intact by restoring to it the premium paid at the time of purchase, be just, it is equally just that the gain or loss that occurs by a sale thereof, if for any cause one shall become necessary while it is running, should be that of the corpus of the fund. The estate of the tenant for life will be unaffected thereby, except so far as it may be altered when a change is made in securities by the increase or diminution of the sum to be reinvested. To expose the estate of the tenant for life to any risk beyond what is involved in this, and, because there may be a possible chance for gain under some circumstances by changes in investments, to subject it to the loss which occurs, when, for any cause, it becomes necessary to sell, at a diminished price, securities purchased for the trustestate, would be to defeat the object for which tenancies for life are in most cases created.

In Parsons v. Winslow, ubi supra, there had been a loss to the trustestate by the defalcation of the trustee, whose successor had been able to recover from him in value only a portion of the property originally intrusted to him. It was held that the diminished fund thus received would constitute a new principal, and that the loss would thus "be apportioned in the same manner as if it had arisen from the fall in the price or value of any public stocks or of any land in which the fund should have been invested according to the provisions of the will." It is said by Mr. Justice JACKSON:

"It would be unjust and contrary to the manifest intent of the testator, if the tenant for life, on the one hand, should continue to receive the whole amount of the interest on the original fund after the principal had been thus reduced; or if, on the other hand, the income should be applied to replace the principal. In the one case, the tenant for life would be left for an indefinite period without any support or benefit from the intended bounty of the testator; and in the other, the remainder-man might lose all that was intended for him."

It has been suggested that a suspense account might be kept by the trustee, to which sums, such as have in the case at bar been retained, might be carried; and if hereafter the bonds should be sold before maturity at an advance, the life-tenant would be entitled to receive therefrom all that was not required to restore the capital originally invested. This suggestion is based upon the theory that any possible profit made by the sale of securities belongs to the tenant for life, and still involves the idea that he must bear the possible loss. We cannot consider this, except so far as his estate is affected by the increase or diminution of the sum to be reinvested. Such a suggestion would require, as a corresponding duty, that when a bond was depreciating in value there should be retained from the life-tenant's income such sums as would be necessary to

repair the loss to the capital of the estate by such depreciation, should it be sold before maturity.

There can ordinarily be no better test of the income which a sum of money will produce, having regard to the rights of both the tenant for life and the remainder-man, than the interest which can be received from a bond which sells above par, and is payable at the termination of a fixed term, deducting from such interest as it becomes due such sums as will at maturity efface the premium. If such a bond has increased in value since its purchase, assuming it to have been an entirely safe investment, and none other should have been made, it has been because a change in the rates of interest, or some similar cause, has altered market values. There would be no reason to suppose that such a bond could be sold, and the amount received reinvested at any higher rate of interest, unless at the sacrifice of some safeguard in the investment. The investments of trust property should be made with a view to permanency, and not in any spirit of speculation; nor should changes be made except after much inquiry and circumspection, and ordinarily with an immediate and advantageous reinvestment in contemplation. In making such changes the trustees are not entitled so to exercise their authority as to vary or affect the relative rights of the cestuis que trust. Hill, Trusts, 483. The only case in this country which we have found, or to which we have been referred, deciding the question we have considered, is Farwell v. Tweddle, 10 Abb. N. C. 94, in which it was held that a course similar to that pursued by the trustee in this case was correct and proper. Not much assistance was to be expected from the English cases, as until 22 & 23 Vict. c. 35, § 32, authorizing investments in East India stock, only one security, the 3 per cent. consols, bank stock, was there recognized as proper for trust-estates. An investment in the 3 per cents, which it is not contemplated will ever be paid, and the holders of which have been considered as perpetual annuitants, has been deemed the only safe investment, and peculiarly adapted for the purpose, as, until a recent period, they have been below par. The principle is well established by all the English cases that the corpus of the trust capital is to be kept intact, so that the remainder-man may thus receive it, while, in justice to the life-tenant, it must be kept in income-producing property. When the testator makes a general gift of his estate to, or in trust. for, a person for life, with remainder over, so much of the property as consists of leaseholds, terminable annuities, or other interests of a perishable nature, must be converted and invested in these permanent securities. As they are permanent, whether purchased above or below par, the life-tenant receives the full income, the remainder-man receives undiminished that which has been purchased, and no adjustment of the relative rights of the cestuis que trustent has been necessary. It is contemplated that there may be specific gifts of terminable or perishable securities which shall show an intention on the part of the testator that the life-tenant may exhaust or consume them, in which case reinvestment would not be required, nor indeed proper. In the absence of these, if, in contradiction of the general rule, the trustees suffer the tenant for life to receive the whole income arising

from such securities, he will be decreed to refund what he may have received, over and above what he would have received if the conversion had been only made and the proceeds invested in the 3 per cents. This difference is treated as capital to be invested for the benefit of all parties entitled, and the tenant for life is bound to make it good in the first instance. On his failure, the trustees are responsible therefor. Hill, Trusts, § 386, and Perry, Trusts, § 547.

The same principles have been applied since investments of trust funds were, by the statute of 22 & 23 Vict. c. 35, permitted to be made in East India stock, which is a security that, as well as certain other stocks named, may be redeemed. The courts have constantly refused to allow any investments to be made therein, unless there were peculiar reasons for favoring the life-tenant, or at the request and on the application of the settler of the trust. Equitable Rev. Int. Soc. v. Fuller, 1 Johns. & H. 379; Hemenway v. Hemenway, 134 Mass. 446. In such cases the direction has sometimes been that the investment should not be made unless the stock could be purchased at par. Waite v. Littlewood, 41 L. J. (N. S.) Ch. 636. One reason given in Cockburn v. Peel, 3 De Gex, F. & J. 170, for refusing to permit a purchase of East India stock, was that it must be purchased at an advance, and that there was no provision in the act for any sinking fund by which the deficiency made could be supplied.

In Hume v. Richardson, 4 De Gex, F. & J. 29, it was held that for the period between the death of the testator and the passing of the statutes 22 & 23 Vict. c. 35, the life-tenant was entitled only to such income as she would have received had the stock been converted and invested in consols; and that although, after the passage of this statute, she was entitled to the whole income, yet the trustees were only justifiable in keeping the East India stock until a suitable investment could be made in land, in which, by the will, the trustees were directed to invest.

Brown v. Gellatly, L. R. 2 Ch. 751, decides no more on this subject than that when the testator authorizes investments as permanent, which would otherwise be unauthorized, the life-tenant has the full income. This authority, given by the will, indicated a preference of the life-tenant to this extent, which took the case out of the ordinary rule. "I understand," says the chancellor, "the words of the will as amounting to the constitution by the testator of a larger class of authorized securities than the court would have approved of, and the court has merely to follow his directions, and treat the income accordingly as being the income of authorized securities." Other securities not coming within this class were ordered by the chancellor to be converted as soon as possible, and until this could be done the life-tenant would be entitled thereon "to the dividends on so much 3 per cent. stock as would have been produced by the conversion and investment of the property at the end of the year."

The method in which the English courts deal with leasehold estates, a common species of terminable securities not known in the same form in the United States, when they are settled in trust for life, with remainders over, under such circumstances that the settler must have regarded them as continuing interests for all the beneficiaries of the trust, includ

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