In re the Estate of Cant

The referee to whom this executor’s account and the objections thereto were lately submitted has filed a report, to the confirmation of which certain exceptions have been interposed in behalf of the various parties to the controversy. One of these exceptions presents the question, whether a loan of about $6,000 made by the executor from the funds of the estate to G-roht & McLaren, a firm of commission merchants in this city, upon no other security than their promissory notes, was, as the referee has pronounced a and investment.

This loan was made in May, 1883, and the Groht & Mc-Laren notes were, from time to time, renewed until, in July, 1884, the firm became insolvent and the notes worthless. Now, it is insisted by counsel for the contestants, and is indeed conceded by his adversary, that unless this executor was vested by his testator’s will with extraordinary authority in the choice of investments, the loan here in question was unauthorized and the loss occasioned by the failure of Groht & McLaren must be borne by the accounting party alone. The doctrine that except under special circumstances an executor has no right to risk, upon mere Eersonal security, funds that his testator has entrusted to is management, and that an investment upon such security, constitutes a breach of trust for which the executor is personally chargeable, is as wóll settled as any in the whole range of equity jurisprudence. Perry on Trusts (3d ed.), sections 453, 460; Hill on Trustees, 378, 379; Holmes v. Dring, 2 Cox, 1; Bogart v. Van Velsor, 4 Edwards’ Ch., 719; LeFevre v. Hasbrouck, 2 Dem., 567 ; Mills v. Hoffman, 26 Hun, 594 ; Judd v. Warner, 2 Dem., 104 .

But it is insisted that by the will of this testator his executor is given absolute discretion and authority in the choice of investments, and the referee has so found.

The will directs that the executor shall invest the funds that may come to his hands, “in such suitable manner as' may be for the best interests of my estate, to be determined by my said executor.” How can this language be fairly construed as giving any broader discretionary authority than was conferred upon the executors of Mr. King, whose will was under consideration in King v. Talbot ( 40 N. Y., 76 ).

The referee in the case at bar lays special stress upon the word “determined” which is employed by the testator in his direction touching investments; but the testator uses another word not inferior in importance, and that is the word “suitable.” It is true that the executors are to determine what form of investments may be for the best interests of the testator’s estate, but the investments are, nevertheless, to be made in a suitable manner. In Wilkes v. Stewart (Cooper’s Rep., 6), executors were directed by their testator’s will to lay out a legacy in public funds, “or in such other good security as they can procure and think safe.” The selection of personal security was condemned by Sir Willliam Grant, M. R., as not being authorized by the will.

In Pocock v. Beddington (5 Ves., 794), an investment upon personal security was held indefensible where directed to convert the estate entrusted to their care “ into ready money, and place the same out at interest in their discretion.”

In Adair v. Brimmer ( 74 N. Y., 539 ), executors were directed by their testator’s will to invest the proceeds of the' estate in “lands, buildings, bonds and mortgages, or in such other securities as they shall deem safe and for the greatest benefit of my daughters.” This was certainly very broad language, but not broad enough, it was held, to authorize the executors to make investments in mortgage bonds of a coal mining company.

The authorities above cited fairly support the proposition, that in the absence of specific express direction allowing a trustee to invest trust funds upon personal security, such investment is improper, and if made at all is made at the peril of the trustee to respond in case of loss, as the Yice Chancellor said in Bogart v. Van Velsor (supra): “Good faith and honest intentions will protect men in the performance of a trust, when they depart from prudential rules which the experience of others in similar transactions has' approved as the only safe guides.”

The contestant’s exceptions as regards the Groht & Mc-Laren loans must be sustained.