App. Div.] First Department, April, 1910. O. Roberts." If I am correct in the views already expressed that the "Homestead Fund" is held by Mr. Patterson and Mrs. Vivian, as custodians appointed by the court, and not as executors and trustees under the will of Marshall O. Roberts, and that the fund, or at least Mrs. Vivian's life estate in it, constitutes no present part of the estate of the testator, it is not included in terms in the assessment, and as the assessable estate, outside of the " Homestead Fund," is much larger than the amount of the assessment, there is no presumption that that assessment included the "Homestead Fund." The same considerations lead to the conclusion that the income of the general estate should bear and pay the taxes and insurance upon the property in which the " Furniture Fund" has now, perforce, been invested. The will, however, does not provide for payment by the general estate of the necessary repairs upon the furniture and personal property and such repairs upon the property representing the furniture should not be charged against that estate. The judgment appealed from should, therefore, be reversed, with costs and disbursements to all parties payable out of the estate, and the matter remitted to the Special Term to recast the accounts in conformity to this opinion. INGRAHAM, P. J., and LAUGHLIN, J., concurred; CLARKE and MILLER, JJ., dissented. MILLER, J. (dissenting): Cross-appeals from a final judgment in an action brought by one of the trustees under the last will and testament of Marshall O. Roberts, deceased, from an intermediate accounting. By the 2d clause of his will the testator gave to his widow, the defendant Vivian, "the use and enjoyment for and during her life" of the family residence on Fifth avenue, including two houses and the adjoining grounds and stable, together with the household furniture, books, pictures, silver, jewelry, etc., and the horses and stable. furniture. By the 5th clause of the will he directed his executors out of his estate and the rents and profits thereof to keep said premises in suitable and proper repair, and to keep the houses, stables and personal property insured during the life of the wife so that she should not be at any expense on account thereof. He also directed the executors to pay all taxes and assessments which might First Department, April, 1910. [Vol. 137. "be assessed upon or be chargeable upon the said real estate and upon the pictures and other personal property in the said houses and stables during the same time." By the 6th clause of his will he directed his executors to set apart out of the principal of his estate sufficient to produce an annual income of $40,000, which he bequeathed to them in trust to pay the income thereof to his wife in lieu of dower. By the 7th clause, as modified by the codicil, he gave the residue of his estate to his executors in trust during the life of his widow and a daughter, Mary M. Roberts, annually to pay out of the income thereof a stated sum to three children. By the 8th clause he directed that in case the net income of his estate, after paying taxes, assessments, etc., was insufficient to provide the last named sums there should be a pro rata deduction therefrom; and that, if there should be a surplus, it should be divided in the manner stated. By the 9th clause he gave the residence and personal property, referred to in the 2d clause, to his executors in trust, subject to the life estate of the wife, to hold the same during the life of the daughter, Mary M. Roberts, upon the trusts described in the 8th clause, with a direction that the trustees or trustee "who may then survive," sell and dispose of the personal property or such portion thereof as in their or his judgment may properly be sold and disposed of. By the 11th clause of his will he gave his executors power of sale in their discretion "as to any property over which they, in that character and capacity, are given the control and management." The widow remarried and took up her residence in England, and the question then arose what disposition should be made of the family residence and the personal property of which she was given the life use. A friendly suit was brought in 1893 for the instruction of the court and for a decree authorizing the sale of the personal property. All parties appeared in that action, the infant son, Marshall O. Roberts, by guardian ad litem. A decision was made in which it was found that it was for the interest of all parties that a sale be had, and "thereby the estate of the infant will be relieved from its share of the expenses of maintaining the property in its present condition, and said infant will, upon the final distribution of the estate, receive a larger sum than if the said property be held until the death of the life tenant," and that all except the App. Div.] First Department, April, 1910. infant assented thereto. A judgment was entered upon that decision directing a sale of the property and the investment of the proceeds in the kind of securities directed by the testator for the investment of his estate; the payment of the income so invested to the defendant Vivian during her life, and the distribution of the principal upon her death according to the terms of the will. The personal property was sold, realizing net the sum of $57,704.77; $55,000 of that was invested by the trustees in their name in a real estate mortgage; the balance was deposited in a bank. The mortgagor made default, the mortgage was foreclosed, and the mortgaged property, two houses referred to in the record as the West End avenue houses, was bid in by and in the name of the trustees for $50,000, and a deficiency judgment was taken against the mortgagor for $11,299.17. That judgment is worthless. The property was left vacant until it could be rented upon suitable terms, and substantial repairs had to be made, with the result that on the date taken for the settlement of the trustees' accounts, the total rents received were $5,007.55 less than the payments for expenses, taxes, insurance and repairs; that deficit had been made good by the trustees from the principal of the general estate. In 1899 another friendly suit was brought for the purpose of procuring a sale of the family residence. In that, as in the other suit, all appeared, the infant by guardian ad litem, and a somewhat similar decision was made, which recited that the defendant Vivian was given the use and enjoyment of said real estate during her life, and that the executors were directed to keep the premises in repair and to pay all taxes and assessments thereon; that it was for the interest of all parties that the premises be sold; that all except the infant defendant assented thereto, and that by a sale and the investment of the proceeds "the estate of the infant will be relieved from its share. of the expense of maintaining the property." It was also found that the property could then be sold to a better advantage than at a later period, and that "such sale will relieve the estate from a large expense for care and maintenance thereof." Upon that decision a judgment was entered, authorizing and directing a sale of the property for $500,000, and the investment of the proceeds of the sale in the kind of securities directed by the testator for the investment of his estate; the payment of income thereon to the defendant Vivian First Department, April, 1910. [Vol. 137. for and during her life, and upon her death, the distribution of the principal according to the terms of the will. The judgment in that action did not purport to construe the will. A contract of purchase and sale had theretofore been made by the executors with one Corn, but he refused to take title without an adjudication that the executors had the power to sell, whereupon another action was brought, the same persons being parties, which resulted in a judgment construing the will and adjudging that the executors did have the power of sale of the remainder and the defendant Vivian the power to sell her life estate, and directing that a sale be made and that the proceeds be invested in the manner prescribed in the will, and that "the net income thereof" be paid to the defendant Vivian during her life, and upon her death that the principal should be distributed in the manner provided by the will. A sale was made for $500,000, which, together with the sum of $300,000 from the general estate, was invested by the trustees in an $800,000 bond and mortgage, taken in their name. In her answer, filed in the suit last above mentioned, the defendant Vivian alleged "that the care of said premises, including the necessary insurance thereon, the keeping of the same in repair, and the payment of taxes thereon, is a source of large expense to the estate of said Marshall O. Roberts." By the judgment appealed from, the personal taxes paid by the trustees were apportioned between the general estate and the special trust fund of $500,000, which has been styled for convenience the "homestead fund;" the taxes assessed on the real property, purchased on the foreclosure of the $55,000 mortgage, amounting to $5,504.27, and the premiums for insurance thereon, amounting to $292.50, were charged to the income of the special trust, created by the sale of the personal property, styled for convenience the " personal property fund;" the amount taken from the principal of the general estate to make good the deficit of receipts from the personal property fund was directed to be repaid, $2,375.52 from the principal of the personal property fund and $2,632.06 from the income of that fund as realized. The personal assessment was against both trustees as such for an amount at all times less than one half the amount of personal property assessable against the resident trustees. The trustees paid the taxes without objection each year. App. Div.] First Department, April, 1910. The judgment undertakes to provide a basis of apportioning between principal and income the proceeds realized in case of a future sale of the houses, belonging to the personal property fund. The testator owned an unimproved tract of land on Columbus avenue in the city of New York, worth $22,500 at the time of his death, which was retained by his executors until 1902, and then sold for $200,000. Meanwhile, taxes thereon amounting to $24,344.07 had been paid from the general income. All but one of the questions presented on this appeal may easily be disposed of. The Columbus avenue lots formed a part of the general estate of the testator, left to his executors in trust with the power of sale to be exercised in their discretion, and until sold remained a part of the capital of the estate. Appreciation in value is not income. The cestuis que trustent have not contributed the taxes, as is contended, because they were entitled only to what was left after the payment of such taxes. There is no question but that the discretion of the executors has been wisely exercised and, as a result, such cestuis que trustent will now receive an income of $200,000. Cases arising upon investments made by trustees have no application. The appellants Van Wart and Roberts cite Matter of Rogers (22 App. Div. 428), and rely upon certain expressions in the opinion of CULLEN, J., wholly apart from their context. That case dealt with the distribution among stockholders of certain assets of a dissolved corporation and of the stock of a new corporation organized to take over the plant and the business of the old one. The nature of the transaction itself, rather than the will of the testator, determined whether the distribution was of capital or income. There was no basis for apportioning between principal and income a paper loss, sustained upon the foreclosure of the $55,000 mortgage or for dividing the proceeds of a sale which has not yet occurred. The foreclosure of the mortgage resulted merely in a change of the form of the investment. In place of the mortgage, the trustees have real estate and a deficiency judgment. Whether there will be a loss or a gain can be determined only when the property is sold, and it will be time enough then to make an appointment. It was stipulated that the referee should determine all questions raised by the answer of the appellant Vivian; but |
