Opinion
March 20, 1925.
Appeal from Surrogate's Court of the County of New York.
Beekman, Bogue, Clark Griscom [ William L. Bainton of counsel], for the appellants.
Maxwell S. Harris, for the respondents.
While from the record before us we are convinced (and the special guardian concedes) that the trustees acted in good faith and for what they regarded to be the best interests of the estate in all these transactions, we are agreed that the investments made by the trustees in the securities enumerated under the heading "Sales of reinvestments of proceeds of sale of Brighton Mills stock" in Schedule A, section 2, of the account, and those enumerated in Schedule C of the account, are unauthorized either by law or by the will of the testator, and likewise, that the formation of the Scotia Realty Co., Inc., and the holding and handling by it of the property of the estate were unauthorized. The ruling of the surrogate as to these matters was proper.
The decree properly provided that if the trustees fail to convert the investment in the unlawful securities into legal investments as therein provided the trustees be surcharged with the full amount thereof and upon payment thereof they be individually vested with the title to said securities. The decree further provides: "that upon their full compliance with the foregoing directions [as to the return of the investments held by the Scotia Realty Co., Inc.] they [the trustees] be individually vested with the title to the one-half of the capital stock of the Scotia Realty Co., Inc., now held by said trustees for the estate herein." The stock, however, does not represent all the claims against the Scotia Realty Co., Inc. It appears from the account filed by the trustees that on November 30, 1921, the Scotia Realty Co., Inc., owed the estate a balance due for money loaned of $32,487.50. Inasmuch as the trustees are ordered to pay into the estate the money loaned to the Scotia Realty Co., Inc., remaining unpaid, they are entitled to the claims of the estate against the Scotia Realty Co., Inc., for money loaned.
The trustees are entitled to a decree authorizing them to transfer to themselves individually all of the claims of the estate against the Scotia Realty Co., Inc., when they shall have complied with the decree and paid the surcharges.
Where a trustee has invested the trust estate in unauthorized securities a decree charging him with the amount so invested should transfer such securities to him to enable him to make payment out of the proceeds, as otherwise he might be rendered incapable of complying with the decree.
So also where a trustee invested an estate in mortgages or real estate without any authority in the will, a decree charging him with the cash amount of such investment should vest title to it in him individually so that he may, if necessary, make use of the mortgages in order to comply with the decree. ( Matter of Ryer, 94 App. Div. 449, 451, 452; affd., 180 N.Y. 532; Matter of Maitland, 81 App. Div. 633; affd., 178 N.Y. 612; Matter of Niles, 113 id. 547, 553, 554; Furniss v. Zimmerman, 90 Misc. 138, 141, 142.)
The decree should be modified by inserting a clause therein as follows: "The trustees are authorized and empowered to transfer to themselves individually all of the claims of the estate against the Scotia Realty Co., Inc., upon compliance by said trustees with all of the directions and requirements of the decree and paying the amounts surcharged against them under the terms thereof," and, as so modified, the decree should be affirmed, with costs to both parties payable out of the trust estate.
DOWLING, MERRELL, McAVOY and MARTIN, JJ., concur.
Decree affirmed, with costs to both parties payable out of the trust estate.