Stevens v. Melcher

The will of Paran Stevens, out of which this litigation grows, was executed July 10, 1869, and admitted to probate shortly after the testator’s death, which occurred April 25, 1872. Such portions of it as are essential to a consideration of the questions presently to be discussed will now be stated. The first clause contains a bequest to the testator’s wife, Marietta R. Stevens, of $100,000, “ to be paid to ber out of my estate as soon as practicable after my decease.” The fifth clause contains, among other provisions, the following: “I give and devise unto Charles G. Stevens, of Clinton, in the state of Massachusetts, and George E. Richardson, of Lowell, in said state, and to the survivor of them, the sum of one million dollars, in which sum, however, shall be included, at their fair value, at my decease, the premises known as the ‘No. 1 Store, State Street Block,’ on State street, in the city of Boston, Massachusetts, now held in trust by said Charles G. Stevens, in trust, nevertheless, to hold, invest, and manage the same as a trust fund and estate for the benefit of my said wife during her natural life, and to collect the income and receipts therefrom, and pay the same over to my said wife into her own proper band, and upon her sole receipt, and, upon ber decease, to divide the principal of said fund and estate among my children in equal proportions, the issue of any deceased child to take the share their parent would have taken if living.”

The testator left, Mm surviving, bis widow, Marietta R. Stevens, and three children, Ellen -S. Melcher, Mary Eislce Stevens (since intermarried with Arthur E. Paget), and Henry Leiden Stevens, who died in-the year 1885,, without issue, but leaving a will. Other provisions of the will of Paran Stevens preceding the eleventh clause gave certain legacies which are not of moment in this controversy, and therefore need not be referred to; but the last named clause directed, in effect, that the rest, residue, and

The eightenth clause declared that: “ The provisions herein made for the benefit of my said wife are to be, and are to be accepted by her, in lieu and stead of all dower and thirds and right of dower and thirds in my estate.”

• Before the widow elected to take under the will, a suit was brought in this court for a construction of it, which resulted in an adjudication that the will authoi’ized the executors to retain the hotel interests, an'd continue the portion of the estate invested therein, if they should elect so to do. He had a ten-twentieths interest in the firm of Darling, Griswold & Co., proprietors of the Fifth Avenue Hotel, in the city of New York; six-sixteenths in the firm of Wetherbee, Chapin & Co., as proprietors of the Revere and Tremont Hoüses, in the city of Boston; and seven-sixteenths in the firm of J. E. Kingsley & Co., as proprietors of the Continental Hotel, in the city of Philadelphia. These hotel interests, the court found; yielded a very large income in proportion to their pecuniary value, greatly in excess of the income of any real estate of Paran Stevens; and it was decreed that, should the rest of the estate meet the other requirements of the testator’s will and codicil, such hotel interests “should be held by them for the benefit of his residuary estate, which, by the terms of his will, is divided into three parts, in trust, respectively, for the benefit of his said three children; and that during the lifetime of such children the profits realized from the said hotel interests should be treated as income, and as such, by the terms of his will, go to his said children.” At the time of his death, the testator was engaged in erecting the “ Stevens Apartment House,” at Twenty-seventh street and Fifth avenue, New York, on account of which there was an indebtedness of about $200,000; and it was determined that his personal estate was probably sufficient to pay that and other indebtedness and all of the specific legacies of the will, except the trust legacy of $1,000,000. The hotel interests, therefore, could not be retained by the executors, unless under the will the million trust should either be set up in real estate, or enough of it sold to realize a sufficient sum for that purpose. The court held that, under a proper construction of the will, either might be done, and the judgment of the court on that subject reads as .follows: “That it was the intention of the said Paran Stevens, by his said, will, to permit the trustees of the several trusts thereby created, including the said trustees of the said million of dollars left for the benefit of his widow, the said Marietta R Stevens, and thatitis the true interpretation and construction there

This was followed by a provision referring the cause, to a referee to fix and determine the valuation of the real estate of Paran Stevens for the requirements of his will and codicil, and directing that, upon the confirmation of the referee’s report, the Boston store should be allotted on account of said million trust, the widow to receive the income to be thereafter realized. It further provided for the application to the million trust legacy of any surplus moneys from the personal estate, not including t.he hotel interests, if the executors should elect to retain themj and not including the personal property specifically bequeathed by said will: “That, after providing for all other'provisions of the said will, the said executors may convey to the .trustees of the said residuary trust estates created by the said will any balance of real estate which may remain at the valuation which shall be thus established, either in divided or undivided interests, as they shall agree.”

The report of the referee valued the Boston store at $105,000, and placed a valuation upon each of the other pieces of property, which need not be referred to in detail at this point. The report was duly confirmed by a special term of this court. The order of confirmation specifically authorized the executors and trustees, after applying the surplus cf personalty to the million trust legacy, to set up the rest of it in re.ti estate, agreed upon between them, at a valuation reported by the referee. Subsequently, the executors determined to retain the hotel interests for the benefit of the residuary estate, and Mrs. Stevens elected to take under the will; so it became the duty of the executors to convey to the trustees, if the trust was to be set up in realty, valued by the referee at $895,000, being the total sum of $1,000,000 less $105,000, at which the Bostón store was valued in the report of the referee. October 28, 1873, an agreement was entered into between the executors and trustees under the fifth clause of the will -and Mrs. Stevens, providing for an immediate conveyance to the trustees, on account of the million trust, of the apartment house, Boston store, stable No. 3 East Twenty-Eighth street, and Nos. 228 and 230 Fifth avenue, New York; “the said property to be applied

1. The referee found that:

“The sum of $33,707.31, paid by the executors to the plaintiffs for the extraordinary repairs on the apartment house, was a payment on account of the principal of the. million trust as of the dates when the several items composing that sum were paid.”

When the apartment house was set.apart to the trustees of the million trust (October 28,1873), there existed serious latent defects in the construction of the building, unknown to any of the parties to the transaction,—defects of such a character as rendered the building unsafe. Indeed, they seriously threatened the fall of .the building, and made it a menace to the public, as well as to its occupants. Knowledge of the defects coming to the building department of the city, formal notice was given that the repairs should be made. An investigation disclosed that the south wall had been laid on a soft,, muddy bottom, without sufficient support to prevent it from sinking when burdened with the weight of the superstructure. Now, the building department having notified the parties that the defect should-be remedied and the building made safe, it became necessary for some one to take steps in that direction; otherwise the city had authority to make the repairs,, the expense constituting a lien upon the land. The trustees, having no money for the purpose, applied to the executors, who advanced it, under an understanding that the question whether the estate, the million trust, or the income should be charged with the expense should be. left open for judicial determination. The referee held that it should be charged to the capital of the trust. This Mrs. Stevens insists is wrong. She urges, and rightly, that the effect of it is to reduce the income and receipts which the testator in tended for her benefit and support by more than $2,'j)00, annually, and to such extent is his purpose defeated and his will*thwarted; and that such a result is accomplished, if at all, without fault either on her part or that of her trustees; that all were without blame, the executors as well as the trustees and life tenant. In good faith, a conveyance of the property was made to the trustees, at a valuation established by a decree of the court,—a decree made in a suit to which all persons interested were not only parties, but appeared, and therefore it became binding upon them, and must sotoontinue so long as it stands without being vacated, modified, or reserved. As to these parties, the valuation put upon the apartment house was and is as conclusive as any other part of the judgment. The trustees could not in this suit secure an additional contribution to the trust by proving that the property conveyed was of less value than was decreed, nor could the executors, by furnishing proof that the property was worth a far greater sum, obtain an adjudica

The executors insist that it has not been shown that the property was worth a less sum than the adjudged value, plus the cost of making the improvements ; but that question need not be considered, because it was passed upon in the construction action, and cannot now be subjected to another and different determination. Unless, then, there was an agreement on the part of the executors to pay the cost of the repairs, or the conveyance contained a covenant broad enough to cover such an expense, there would seem to be no basis whatever for imposing the charge upon the estate. The correspondence had at about the time the making of the repairs was undertaken shows that the executors did not agree that the estate should bear the expense, and that it was not understood otherwise by the other parties interested ; and the deed not only did not contain a covenant of warranty, but absolutely no covenant whatever. Whether the cost of the repairs should be charged to the capital of the trust or to the income was the remaining question as to this item, and the referee rightly, we think, disposed of it. There was no obligation on the part of the remainder-men to make the repairs, for remainder-men are not liable to make repairs when not in possession, unless under express agreement to do so; nor was the tenant for life bound to meet out of her income this compulsory expenditure. Confronted with this situation, -and unable to reach an agreement as to the proper party or fund to bear the expense, it was finally understood that the repairs should be made, and that the charge therefor should fall according to their legal rights. This question is submitted to a court of equity, and its proper solution would seem to be to distribute it in such a manner as shall require those who receive the benefit to pay the .cost. The remainder-men were benefited, because the expenditure prevented the whole or partial destruction of income-producing property. The cost should therefore fall on both in proportion to their interests, and this is effected by charging the capital with the expense, on the same principle.that assessments for permanent improvements are charged against the capital of an estate. Lewin, Trusts (9th Eng. ed., 1891) 643; Ferguson v. Ferguson, L. R. Ir. 17 Ch. Div. 552.

2. We shall next consider whether the expense incurred in adding at least $90,000 to the value of a portionEof the property set up in the million trust should be charged to the capital of the trust, or to Mrs. Stevens individually. She is charged with $130,-000, moneys actually paid out of the funds of the estate for the permanent improvement of the.property. The referee says in his opinion that it is not clear upon the proofs that the building constructed was such as will be a permanent improvement to the amount of $130,000 of the premises when it comes into possession of the remainder-men; but he does find as a fact that the building erected at such an expense “ became an important part of the apartment house, and largely increased its revenue, and added at least $90,000 to the value at that time of said premises.” Tt is not clear but the referee would have been justified in finding that the

An examination of the executors’ account discloses that during the period of one year and six days immediately preceding the 1st of May, 1873,—the date as of which the property was treated as a part of the million trust,—the expense for interest, taxes, and repairs on these properties had exceeded the income by $9,573.75. It is clear, therefore, that had it been the intention of the parties that this property should be set up as a part of the trust, with the expectation that there was to be no money expended upon it, in order to enhance its income productiveness, the trust would have been greatly injured. It was a leading purpose of the trust to produce revenue for the.benefit of the cestui que trust, not to take

Whether, within the rules established by courts of equity, these moneys, which were originally contributed for the purpose, out of the funds of the estate, with the knowledge of .all the executors, can be charged to the capital trust, instead of to Mrs. Stevens individualty, we will now consider. In passing to that question, we may briefly refer to the evidence in support of the assertion that the money was contributed from the estate with the knowledge of the executors touching the purpose for which it was to be used. The active executors were Mrs. Stevens and Melcher, the husband of the only remainder-man, who objects to charging the capital of the trust with, the sum in question. Immediately after making the provisional agreement of May 9tb, the work of tearing down the buildings was commenced ; and a few days thereafter, about May 24th, the agreement with the contractor for the erection of the new building was entered into. Melcher actively superintended the work of tearing down the buildings'and the construction of a new one. That he promised to furnish from the estate funds necessary to do the work appears not only from the testimony of Mrs. Stevens, but also from a letter written by him to her. The letter was written July 11th, some little time after the contractor had commenced to put up the structure. In it he said: “ "What is the use of your fretting your life out about money matters? All the money needed shall be provided and shall be forthcoming when needed; only it is not necessary to provide it before it is needed. You have nearly a year before you before the addition must be paid for, and a little money will keep contractors along. Do not fret for I pledge you I will find it, and not sacrifice property. * * * If we get the rent, $48,000, and the balance beyond mortgage on 1170, $40,000, with what money you have, it will pay all the extension, and allow us time to negotiate on Forty-fourth street.”

The moneys were in fact furnished as he promised, and the

Ford v. Knapp, 102 N. Y. 135 , while not a case in point, maybe profitably considered, because it manifests the tendency of courts of equity to make those do equity who seexs its aid. In that case defendants were tenants in comrhon with W. in a mill property. The interest of W. was sold on a judgment against him, and bid in by defendants. After such purchase, defendants expended large sums in repairs and improvements, thereby restoring the property to its original usefulness, and greatly increasing ■its value. Thereafter plaintiff, as a subsequent creditor of W., redeemed and brought an action for partition, and the property was sold under the judgment therein. It was held that the co-tenant, out of the actual occupation, having asked aid of a court of equity for partition, was entitled to relief only on condition that the equity should be taken into account, and that the defendants were entitled to an allowance out of the proceeds of sale for the enhanced value of the property resulting from the repairs and improvements. The court distinquished Scott v. Guernsey, 48 N. Y. 106 , cited on this appeal, and, in the discussion, employed language so entirely applicable to this situation that a brief quotation from it will not be out of place: “To a share of that increased value neither the debtor, nor his creditors have any equitable right. They never earned it or paid for it. If the redeeming creditors get the full one-half value of the property as that value exists, unincreased by the improvements, they get every dollar to which they have a just and equitable right. The rule which takes from one eotenant the fruit .of his thrift and enterprise, and adds it to the unthrift and neglect of the other, which loads upon industry and ability the losses and burdens of idleness or ill fortune, which ties up property from improvement, and looks contented upon rot and decay, is a rule which sometimes the rigid and inelastic jurisdiction of a court of law may adopt from necessity, but is without excuse in a court of equity, in which this action is pending” -

In this case there is present a basis on which to work out this undoubted equity in favor of Mrs. Stevens, provided the trustees had legal power under the will and the judgment in the construction action to increase the trust fund by building upon property set apart for the purpose of establishing the trust. The trustees made a contract for the erection of the building, and the contractor was paid by moneys furnished by the executors out of the estate, with full knowledge on the part of all of them that it was being applied to such purpose, and of that fact the trustees were also informed. Some effort has been indulged in to avoid the effect of the pregnant fact that the trustees were parties to this contract, by insisting that their legal relation was otherwise, because of a guaranty indorsed upon the contract and executed by Mrs. Stevens, which reads as follows: “ In consideration that the said

It will be observed that this was a personal indemnity intended for the individual protection of the persons who had been appointed by the will trustees of this trust. There is not a word in it which suggests that it was the intention of Mrs. Stevens, who executed it, that the trust should be indemnified against all liability on account of the contract. The reason why the trustees insisted upon this personal indemnity is obvious. It had been provisionally agreed, fifteen days prior to the making of the contract, that the property to which it related, together with other property, should be conveyed to the trust, in pursuance of the judgmenhin the construction action. But .the property had not yet been conveyed, nor had the formal agreement therefor been executed, nor was it done for nearly five months thereafter. The title, then, not being in the trustees, the ordinary dictates of prudence prompted them to insist upon a personal indemnity. Thereafter, and long before any considerable amount of money had been paid to the contractor, the formal contract of October 28th was made. A little later, in pursuance of it, the property was conveyed by the executors to the trustees. But in the meantime the trustees expressed considerable anxiety because of the expenditure of so much money before the title to the property had become vested in them. October 2, 1873, Trustee Richardson wrote Mrs. Stevens : ■“ You are expending money in building in connection with the apartment house, and yet I do not know that the trustees have got any title to it, never having seen any conveyance. Let us have the deeds made' of such of the property as we can now.”

Six days later he wrote: “ I never have seen any deed executed of the lot on which you are putting up your building. I think it is very wrong not to get that done at once. You are investing your money there, and title is not passed. * * * As trustee I can do nothing. The executors, of which you are one, must have the conveyance made; and then, if the trustees don’t do their duty, you can properly blame them. See to the conveyance at once.”

t After the deed was executed, the building was completed, and ■the payments finally made. As it was the trustees’ contract, and the moneys which paid for it came from the estate, which still owed the trust a very large amount of money, the capital of the trust should be charged with it, unless the trustees were without authority to erect the building.

The learned referee decided that a court of equity could not allow such an expenditure by the trustees, assigning several grounds as a basis for his conclusion. One was -that: “ Serious

This objection, it- seems to us, would have furnished good reason for the refusal on the part of the trustees to accept the property as a part of the trust, but not one for making such improvements as would change it from a burden to a profit to the trust.

Again, he said: “ In nearly all the cases where the court has sanctioned similar expenditures, the trustee or life tenant was in possession of a fund of money, either resulting from, the conversion of a part of the land into money, or of money which was applicable to the purpose of purchasing real estate.”

But there was at the time of making this contract, and months later, after the property affected was conveyed to the trustees, $445,000 due from the estate to the trust. Of this large amount, $90,000 could well be expended, provided it added that amount or more to the permanent value of the property, and at the same time increased its annual revenues, as it is demonstrated this expenditure did.

A further ground assigned was that: “ It is not clear upon the proofs that the building constructed was such as will be a permanent improvement to the amount of $130,000 of the premises, when it comes into possession of the remaindermen.”

This may be so, but Mrs. Stevens does not ask that the capital of the trust be charged with the $130,000 which she expended, but only with the $90,000 which the referee finds as a fact was added to the permanent value of the property by her expenditure. There seems to be no special reason applicable to this situation which should lead a court of equity to refuse to allow this expenditure. If denied at all, it must be on the ground that under no circumstances were the trustees authorized to use the moneys of the trust to erect a building upon trust property. That position cannot be successfully asserted. Authority was given by the judgment in the construction action to set up the trust fund in real estate. The will confers upon the trustees power to change investments; and it does not make any difference whether, in re-investing “ in other real estate in the states of New York and Massachusetts,” property be purchased which has been improved, or property improved which has already been purchased. Mr. Perry, in his work on Trusts (§ 552) asserts the general rule to be that trustees cannot raise any sum out of, or make any charge upon, the corpus of the estate itself for repairs, however the want of such repairs may be occasioned. This rule has been so far modified that the power of the court .to charge upon the capital of the trust estate a sum compulsory expended, and first the subject of discussion in this opinion, has not been questioned. Mr. Perry, in the same section, observes an exception, in these words: “ But, where trustees are directed to purchase or invest in real estate, they may put such estate in tenant-able repair, and the expense of such repair will be chargeable to the trust fund as part of the purchase money.”

The same judge, in a later case (Drake v. Trefusis, 10 Ch. App. 364-366), said: “ That the expending of money in building a house on a vacant piece of ground, forming part of the settled property, is, in substance, the same thing as buying a house.”

The earlier .English cases were generally in accord with the rule asserted by Mr. Perry, supra;-but latterly their tendency has been in the other direction, the more recent cases agreeing that power to invest and reinvest in land implies power to build and to rebuild delapidated and ruinous structures when the trust estate will be substantially benefited by the expenditures. A review of the cases will not be indulged in, but some of them can be cited: Hibbert v. Cooke, 1 Sim. & S. 552; Caldecott v. Brown, 2 Hare, 144; Bridge v. Brown, 2 Younge & C. Ch. 181; Bowes v. Strathmore, 8 Jur. 92; Hood v. Bridport, 16 Jur. 560: In re Davis' Estate, 3 De Gex & J. 144; In re Barrington's Settlement, 1 Johns. & H. 142; Dent v. Dent, 30 Beav. 363; In re Dummer's Will, 2 De Gex, J. & S. 515; In re Johnson's Settlements, L. R., 8 Eq. 348; In re Lord Hatham’s Trusts, L. R., 12 Eq. 76; Ex parte Rector of Shipton-under- Wychwood, 19 Wkly. Rep. 549; Frith v. Cameron, Id. 886; In re Pearson's Trust, 28 Law T. (N. S.) 57; Ex parte Rector of Claypole, L. R., 16 Eq. 574; In re Newman's Settled Estates, 9 Ch. App. 681; Drake v. Trefusis, 10 Ch. App. 364; In re Lee’s Trusts, 32 Law T. 298; In re Speer's Trusts, 3 Ch. Div. 262. Among the cases cited contra are Green v. Winter, 1 Johns. Ch. 26 ; Bellinger v. Shafer, 2 Sandf. Ch. 293 ; Hassard v. Rowe, 11 Barb. 22 ; Copley v. O’Neill, 57 Barb. 299 ; Dickinson v. Coniff, 65 Ala. 581 ; Scott v. Guernsey, 48 N. Y. 106 . The latter case was distinguished in Ford v. Knapp, supra. The improvements were not made by trustees having the legal title, with .moneys of the trust estate, but were made under a special agreement with the tenant for life, the owner of the improvements receiving, before the termination of the life estate, full compensation for his expenditures. Under these circumstances, it was held that the improvements drew with them no equitable right to compensation. In Green v. Winter the court refused to allow the trustees for expenses incurred in improving the trust estate by erecting a-house, building mills, and clearing land, although done in good faith, upon the ground that the expediture was not within the provision of the trust, which only authorized the trustees to sell land to raise money to make the payments provided, and to preserve the residue of the estate. It was found as a fact that the expenditures were of no real or substantial value to the trust property. The court remarked that to permit the trustees to wander or deviate from the terms of the trust would be creating a most dangerous precedent. In Bellinger v. Shafer, L. and his wife conveyed a farm to trustees for the support, maintenance, and education of his grandchildren. The father of the beneficiaries, with the trustees’ consent, and while their tenant, made permanent improve-

It .would be a most absurd result if the court were obliged to hold that, under this will and the judgment in the construction action, the trustees could accept, as part of the trust, real estate burdened with mortgages, the interest upon which, together with taxes, insurance, assessments, and ordinary repairs, far exceeded its gross income, and yet would be without authority to use trust funds for the purpose of making such improvements as would result in an annual profit, instead of an annual loss. The authorities do not require the court to so decide. Under this will it was clearly within the power of the trustees to made such improvements as they in fact contracted for, and to he allowed, at least, such portion of the sum expended as added to the permanent value of the trust. In view of their contract, therefore, and the fact, found by the referee, that the value of the property was increased at least $90,000 by the expenditure made, that sum should have been charged to the capital of the million trust, and not to Mrs. Stephens personally. *

3. By an instrument in writing, dated September 1, 1872, the apartment house was leased to Mark M. Stanfield for a period of 10 years; the trustees of the million trust legacy, Henry Leiden Stevens, individually, Alfred Paget, and Henry Leiden Stevens, as trustees for Mary Fiske Paget and Marietta B. Stevens, joining in the lease. The other remainderman, Mrs. Melcher, refused to join in its execution, although the lease was a most advantageous one, securing to the trustees an annual income of $70,000, instead of the insignificant sum which the property had netted to them, each year during the nearly seven years that it had constituted a part of the million trust. By its terms the lessee was authorized to make certain repairs in the nature of permanent improvements. This he subsequently did, expending for that purpose at least $75,000. In order to induce Stanfield to lease the property, Mrs. Stevens purchased, at the price of $41,800, a lot of land known as “ 1146 Broadway,” immediately adjoining the apartment house, on a part of which is the dining room which is used in connection with the apartment house, and all together at present known as the “ Victoria Hotel.” Mrs. Stevens insists that the decree of the court should, in effect, say to the trustees, “ The rent of the life tenant paid for these improvements; and, having used the rent in enhancing the permanent value of the trust estate, the trust must reimburse her.” The first answer which the trustees make to this contention is that, while the referee has found that the cost of the improvements made by Stanfield was $75,000, he has also found that it was not shown to what extent such expenditures perma

4. Mrs. Stevens’ contention that the referee erred in applying moneys received by her as executrix in payment of the principal of the $100,000 legacy, in advance of the interest upon the million trust legacy, under the peculiar circumstances of this case, does not seem to be well founded. In her capacity as executrix she received a large amount of money, and the referee was required to determine whether the moneys in her hands should be first applied in payment of the legacy, or of interest on the unset-up portion of the $100,000 legacy. There was no suggestion that Mrs. Stevens had made any election as to the order of their application. The question, therefore, was, how should the law apply them ? The referee properly, as we think, reached the conclusion that they should be applied on the legacy to her, for the reason which we quote from his opinion : “ It seems to me that, as she received the moneys in a trust capacity, she should be held to have applied them' most beneficially for the estate, of which she was the trustee.”

5. The claim is further made that the referee erred in refusing to find the sixth conclusion of law requested by counsel for Mrs. Stevens, to the effect that the estate is not entitled to charge Mrs. Stevens with interest upon any sums received by and charged to her by two decrees of the surrogate’s court, made in 1876 and 1885, respectively, pursuant to an account rendered by the executors. That interest could, only be computed by balances found

6. The referee determined that Mrs. Stevens was entitled to interest on the unset-up portion of the million trust at the rate of 7 per cent until January 1, 1890, and thereafter at the rate of 6 per cent. It is urged that the contract of October 28, 1873, fixes the rate of interest to be paid on the unset-up portion of the legacy, and is therefore within the protection of the saving clause of the act, which provides that it shall not affect any contract or obligation made before its passage. But, as we read the contract, it does not fix the rate of interest to be paid at 7 per cent. It says: “Mrs. Stevens meantime to receive the interest to which in law she is entitled on the unpaid part of her trust legacy.” The reasonable construction of this provision seems to us to be that the parties intended to provide that, pending the final payment to the trustees of the sum required to make the legacy, Mrs. Stevens should receive such interest as the law would award her, which after January 1, 1880, was 6 per cent.

7. The referee charged the entire amount paid for insurance to the life tenant, including the necessary premiums to keep in force policies upon the apartment house, amounting to $235,000, which were made payable, in case of loss, to the mortgagees. The life tenant insists that as the insurance was affected for the benefit of' the remainder-men, as well as the life tenant, the expense of it should be apportioned between them; that this would be effected by deducting it from the body of the trust estate, so that the life tenant should bear the interest thereon, and the remainder-men should ultimately bear the principal thereof. If this were an open question in this state, an interesting proposition would be presented; but we regard it as settled by authority in favor of the appellants. In Peck v. Sherwood, 56 N. Y. 617 , there was a devise of a life estate, with remainder to an executor in trust.

It is urged that the court has since held otherwise in relation to the cost of insurance, in Re Albertson, 113 N.Y. 434 ; 22 St. Rep. 728 . The result of that decision was undoubtedly to charge the life tenant with insurance premiums paid, as well as with the taxes, interest on mortgages, and repairs. While such was the effect of the decision, it should be observed: (1) That the counsel for the appellants did not make the point that the law recognizes any distinction between insurance premiums and ordinary repairs and taxes. (2) That the court did not appreciate that the question whether the cost of insurance should be apportioned was involved is shown by. the fact that nowhere in the very careful opinion delivered by the court was the word “ insurance ” even used. (3) That such was the fact is further shown by the omission of the court to allude to Peck v. Sherwood, a recognized authority upon that question. (4) The court nowhere purports to lay down any rule touching the liability of life tenants or of remainder-men for insurance premiums. But what it did undertake to do was to construe a will and determine what expenses the life tenant, by by reason of its provision, should be required to pay. It was subsequently cited in Woodward v. James, 115 N. Y. 346 ; 26 St. Rep. 147 , which also involved questions of construction. Whether the life tenant or remainderman, or both, should bear the expense of insurance premiums, was neither before the court nor considered in that case. It is. not suggested that this subject has been special considered by the court of appeals since Peck v. Sherwood, was decided. We are not authorized in holding, therefore, that the authority of that case has been shaken. IE this

8. The referee charged Mrs. Stevens which having received, on account of her income on the million trust legacy, certain items of hotel capital and profits. These items came to her in her capacity as executrix, and are embraced in the surrogate’s decree of 1885. They are as follows:

1875, March 6. Darling, Griswold & Co.

Profits......................... $7,000 00

1876, Oct. 6. Darling, C. & Co. Profits. Id,000 00

1877, Jan. 3. Do..................... 2,697 92

Total profits................................ $23,697 92

1879, Jan. 1. Cash notes of H. Hitchcock. $23,500 00

1879, March 19. Cash from H. Hitchcock. 23,817 00

Total ...!................................ $17,347 00

Total of all the items........................ $71,011 92

The decree expressly reserved for further adjudication all questions relating to the application of the proceeds to the $100,000 legacy and the million trust legacy. The referee finds as a fact that the moneys paid by Hitchcock, being in all $17,347, were for two shares of the capital stock of the Fifth avenue Hotel, sold to him by Mrs. Marietta E. Stevens, as executrix; and that the three sums first mentioned were paid on account of the profits of the business of the Fifth Avenue Hotel. By the terms of the judgment in the construction action, the executors were authorized, if they should so elect, to treat the principal of the hotel interests as belonging to the trustees of the residuary estate, and to pay the profits to the legatees or cestuis que trustent of such residuary estates. It was contended before the referee that, in view of these, facts, the estate was not entitled to demand of Mrs. Stevens that she turn over to the executors thereof such moneys; that should she make payment, even in pursuance of a decree in this suit, it would not protect her should an action be brought by the trustees of the residuary estate to recover the amount received on account of the principal of the hotel interests, nor from a suit brought by the cestuis que trustent of the residuary estates for the items of in•come. The record shows that the executors of Henry Leiden Stevens, one of the residuary legatees, commenced a suit, which is still pending, to recover these moneys from Mrs. Stevens and the executors of Paran Stevens. The referee, however, found that these sums were applied by Mrs. Stevens “to her own use, in payment of her legacy of $100,000 and interest thereon, and of interest on the unpaid portion of the million trust legacy, and are included in the amount charged to her, and found to have been so used, in and by the decree aforesaid of December 5, 1885.” In making this finding, the referee apparently overlooked the express terms of the reservation in such respect contained in the

The effect of the decision and reservation, as embodied in the judgment, was to compel Mrs. Stevens to pay over this large sum of money to the estate (for she was found to have sufficient moneys in hand for the purpose), and, in the event of her being compelled by judgment to turn over such moneys to the parties interested in the residuary trusts, secured the right only to get it back in any way open to her. In view of the fact that a suit was and is pending in which the question can be finally disposed of, it would have been but reasonable had the decree also provided for a stay as to such payment for a sufficient length of time to permit the disposition of the matter by a diligent prosecution. While we assent to the contention of the appellants that the reservation, in view of the other provisions of the judgment, was not fully adequate to the exigency which prompted it, still the changed situation caused by the modification now to bo made in respect to the $90,000 charged to Mrs. Stevens, which should have been charged to the capital of the million trust, makes the reservation clause sufficiently effective. She was charged with an excess of receipts over, expenditures in an amount sufficient to call for the payment by her of the receipts from the hotel properties to the estate; but, as it will stand after the modification, there will not be due to the estate anything from her. A modification of the decree in such respect is therefore unnecessary.

9. Complaint is made that the provision of the contract of October 28th, dating its effect back to April 26tlT and May 1st, was improvident, illegal, and not sustained by any prior agreement. It provides that Mrs. Stevens’ trustees should be allowed for the rent of the property from May 1st, to be responsible for repairs made after April 26th, the property to apply as of May 1st, on

In connection with his discussion of this question, counsel calls attention to two exceptions taken to the refusal of the referee to admit in evidence two letters written by the executor Melcher to Mr. Parsons, the counsel for all the parties, shortly before the execution of the contract of October 28th. It is urged that the letters were competent evidence to show that, prior to the 28th day of October, there was no agreement binding upon Mrs. Stevens to take the property burdened with the relation back to April 26th in one respect, and to May 1st in all others. If it should be assumed that the letters were competent evidence of, the fact which they were offered to prove, .still, as we shall show, a little later, they could not have had the effect to produce a different finding than that made by the referee. For that reason the question of their admissibilitj^ need not be considered Before referring to the fact which supports the decision of the referee in sustaining this provision, it may be said that the informal agreement touching the transfer of the real estate to the million trust was made May 9, 1873. It consisted of a- letter from Mr. Parsons, the counsel of all parties, to Mrs. Stevens, advising her' of the basis upon which the executor Melcher would agree to convey the real estate subsequently conveyed to the trust, and advising her to sign the memorandum, and give it to Messrs. Bichardson and Stevens, the trustees of the million trust. This she did. The memorandum signed by her reads as follows: “Messrs. Bichardson and Stevens, as my trustees, will please arrange as above.” Below this indorsement, Trustee Bichardson wrote as follows: “To make up the balance of her trust prop' erty, Mrs. Stevens may take other property at the appraisal, instead of having a sale; her election to be made within ten days.” The formal contract embodying this arrangement between the parties was not executed, it is true, until October 28th, following; but the parties to it took immediate action under this informal agreement. On the basis of it, and under the guidance of Mr. Melcher and Mrs. Stevens, the buildings on 228 and 230 Fifth avenue were at once torn down, and as early as May 24th the contract-was made for the erection of new buildings, which has already received some consideration. But, assuming that the contract of October 28th represented the first and only .agreement between the parties touching the conveyanceof the property to the trust, we are unable to discover any basis upon which

Without pursuing further the argument of counsel, it may be said that its foundation is defective, in that it necessarily assumes that Mrs.' Stevens’ act, at most, amounted only to a ratification of the wrongful conduct of her trustees. To ratify is to sanction an act already done. In a legal sense, it means that a party, having knowledge of a defect in an act done, and of his right to ratify or reject it, "concluded to confirm it, In such a case the rule is that a party, relying upon a ratification of his neglectful or .wrongful act to protect him, must show that it was made with full knowledge- of all the material facts and circumstances; and when the party sought to be affected is a cestui que trust, as in this case, it is also necessary to áhow that she was fully appraised of the effect of the acts ratified, and of her legal rights in. respect thereto. Had the trustees made this contract without reference to the wishes of the cestui que trust, and were now relying upon evidence tending to show that she had confirmed the act which has resulted not very favorably to her, the rule would apply. But that is not this case. No step was taken leading to the acquisition of this property by the trustees as a part of the million trust that she did not advise. From the moment that it was informally agreed that the property should be conveyed, which later was, she pushed on the improvements. Five months before the formal contract was executed, under her direction, and' with the approval of Melcher, the buildings were torn down on two of the lots, and the erection of new once commenced. She was steadily in advance of Per trustees, .guiding at times their uncertain and faltering steps with sharp jerks upon their leading strings. While she blundered in consenting that the million trust be set up in real estate, she has made no other mistakes in relation to it. A property which for a number of years yielded not a dollar of net income has, throught her foresight, persistence and courage, become, not only income producing property, but of very largely enhanced pecuniary value, But the trustees are entitled to but little credit for it. The idea of the improvements did not originate with them. When the plans were presented to them by Mrs. Stevens, they universally opposed them, arid “ advised her ” that they be not carried out. in the end,' however fortunately for the million

10. The referee’s nineteenth finding of fact justifies his conclusion of law that Mrs. Stevens, as executrix, is not entitled to commissions ; and, after ah attentive examination of the subject, we are convinced that, within the rules which govern this court in reviewing the findings of fact of a trial court, this finding cannot be reversed.

It is strongly urged by the cestui que trust that the referee erred in his allowance of commissions to the trustees of the million trust; but the findings of fact of the referee touching the manner in which they have discharged their duties as trustees justify an allowance to them of such commissions as the law provides. An examination of the manner in which the commissions were computed by the referee satisfies us that the law was accurately complied with.

We have not omitted consideration of the contention of Mrs. Stevens that the trustees should not have been allowed commissions upon receipts from the apartment house between May, 1873, and October, 1879, which passed directly to her, and were never'' in the actual possession of the trustees; but we are of the opinion that the agreement under which she obtained the right to personally receive and disburse the income of the apartment house during that period justified an allowance-of commissions to them on such receipts and disbursements. There are several provisions of the agreement which have a bearing upon this question. Reference will be made to but one, which reads as follows: “ That, with reference to all questions affecting the trusteeship of said trustees and the settlement of their accounts, the receipts and expenditures of the said property from the 1st day of May, 1873, shall be regarded as passing through their hands.”

11. The executors and residuary trustees seek a review of the referee’s fourteenth conclusion of iaw, which holds that Mrs. Stevens is entitled to interest on the $100,000 legacy from the death of the testator. It is the general rule that interest on a general

We think the exception is not well taken.

12. Duclos v. Benner, 136 N. Y. 560 ; 49 St. Rep. 690 , is cited by the executors as authority for the proposition that, until Mrs. Stevens made her election to take under the provisions of the will, she was not entitled to interest on it, and her election, when made, did not relate back; in other words, that, for so long as she postponed her election, she waived the right to interest. No other case was cited in support of that position, nor do we think could have been. We shall not attempt a review of Duclos v. Benner, for the purpose of showing its applicability to the present case, but shall content ourselves with the remark that no such proposition was before the court, nor did it attempt to pass upon it.

The judgment should be modified : (1) By deducting $90,000 from the amount charged against Mrs. Stevens, and charging the same to the capital of the million trust. (2) By deducting from the sum charged against Mrs. Stevens the several amounts paid to secure insurance on the buildings belonging to the million trust, and charging the same to the capital of the trust. (3) ?>y striking out the tenth adjudication in the judgment. (4) By striking out the eleventh adjudication in the judgment. (5) The twenty-third adjudication in the judgment should also be modified in accordance with this opinion.

The' judgment, as so modified, should be affirmed, without costs. All concur.