(dissenting)
The executors filed their accounts-and applied for judicial Settlement. Objections having been filed, a refereé was appointed to ■examine the accounts'and determine the questions arising and report. The decree, follows and confirms the report, and upon further evidence taken before the. surrogate ‘fixed the commissions of the ■executors.
The. principal item surcharged is a judgment for $10,423,55 recovered by the widow of the testator. It Was recovered on a reference by the surrogate' under section 2718 of the' Code of Civil' Procedure of a claim- filed by her against the estate which- the executors rejected and consented to refer. The claim,was for $3,000 .-alleged to have' .been advanced by her to her litisband in January, 1896,-and for $6,000, the alleged value and avails of a farm in Plain-: field, N.- J., alleged to have been intrusted' to him for disposal, making,$9,000^, which it is stated in her claim “ were so-intrusted to-the said Joseph Corbit fOr investment and to be dealt with by him for” her benefit, less $1,500, the valué of the equity in property which he transferred to her, leaving a balance of $7,500.
'' The testator was seventy-two years of age when lie' married, and was conducting a real estate and -brokerage business in the city Of New York, under the name of' j. Corbit & Co. He had for some years left the management of his business, including his pri-' •vote and business bank- account, almost' "exclusively to the appellant *555Watson, his confidential agent and bookkeeper, whom he appointed -one of his three executors.
The judgment was conclusive on the executors and against the •estate until annulled for fraud or collusion or vacated by the Supreme •Court; and with the consent of the surrogate execution could be issued thereon against the personal estate, or it would have to be allowed on distribution (Code Civ. Proc. §§ 1825, 2743), but on the accounting the executors could be charged with the amount of the judgment upon proof that the claim was in fact invalid and that they were guilty of negligence or collusion in defending the ■estate against it. (Matter of Saunders Estate, 4 Misc. Rep. 28.) 'The correctness of that part of the decree surcharging the executors with the judgment and interest thereon, therefore, depends upon whether it has been shown both that the claim was invalid and that ■the executors were guilty of negligence or collusion in allowing a recovery thereon ; and the burden of establishing these facts was on the contestants. ■ If the claim was valid and enforcible -they could ■not be surcharged therewith, even though they were guilty of negligence or collusion in allowing the recovery of the judgment-; but •if it was invalid they were properly surcharged with the judgment =and interest if they did not employ a competent attorney to defend the estate, or did not inform him of all the material facts within their knowledge or discoverable by reasonable diligence, and did not -exercise due care in having the same presented to the court. In the absence of fraud or collusion, if they employed a competent .attorney and in good faith took and acted upon his advice, they fshould not be held responsible for his failure to object to incompetent evidence or to present competent evidence which they ■fully brought to his attention. It appears that they were represented by an attorney on the hearing before the referee to whom "the claim was referred. The widow, however, was permitted to testify without objection in support of her claim to personal trans.-actions between herself and her husband. The executor Watson, a -competent witness, also gave material testimony tending to support her -claim ; but he was not fully interrogated concerning all the material ■facts within his knowledge and without the incompetent testimony -of the widow her claim, as to the $3,000 at least, was not established.
Upon the hearing before the referee on the accounting some of *556.the material testimony given by Watson before the referee on the hearing of the widow’s claim was received, and afterwards stricken, out as incompetent under section 829 of the Code of Civil Procedure. I am of opinion that it was incompetent. The widow’s claim had then merged in the judgment which had been paid; but this resulted in making the executors directly interested as they were, seeking to sustain their right to be reimbursed for- the judgment. (Matter of Smith, 153 N. Y. 124.) At first blush 'this, rule of evidence may seem unjust and unsound, but it has been clearly established-nevertheless and on reflection it will be seen that Iwhere the> validity of a claim against an estate depends on the personal knowledge of an executor or administrator he may protect himself by not voluntarily settling the claim. If it should be established onv the-acconnting before the surrogate where interested parties can be= heard (Code Civ. Proc. §§ 1822, 2743); or if an action be brought or a reference had of the claim, which becomes an action, and the-claim be established by his evidence which is then competent, he-cannot be charged with negligence and the claim cannot be disallowed on the accounting even though, because established by judgment, he has then become an interested party and an incompe- ■ tent witness. (Code Civ. Proc. § 2743.) Other exceptions to the admission and rejection of evidence were taken but they , do not-require special consideration in view of the rule that a decree of a*. Surrogate’s Court may not be reversed for errors in receiving or-re jecting evidence unless “ necessarily ” prejudicial. (Code Civ.. Proc. § 2545 ; Matter of Miner, 146 N. Y. 121.)
I am of the opinion that the contestants fairly sustained the bur- . den of showing, both that the widow’s claims were not enforcible- and also either collusion or negligence on the part of the executors-in allowing the recovery of the judgment.
According to the claim filed by the widow neither the $3,000 nor-the proceeds of her New Jersey farm was loaned to her husband and yet the judgment she recovered went upon that theory for she» was allowed interest upon both. Her -formal claim was, as has been ■ seen, that she turned the money and property over to him “ for-investment, and to be dealt with by him for the benefit of this claimant.” .In the absence of negligence or mismanagement, therefore,, she would only be entitled to an accounting for the property into» *557•which her money and property went provided that original understanding was not altered. Her testimony before the referee was in accordance with this construction of her claim. She was not cross-examined. The executor Watson was called as a witness in her "behalf and he was cross-examined but apparently with a view to establishing rather than disproving her claim. The undisputed evidence of the transactions between the claimant and her husband shows That these were not loans and that her property, so far as. it was ■used, was invested together with property of her husband, and "by their mutual consent and co-operation as joint ventures and that The property was in fact ultimately partitioned and divided between them equitably and substantially in accordance with their respective ■'interests. Her farm instead of being sold for $6,000 and the proceeds turned over to her husband and invested by him.— as the referee was given to understand by her testimony and that of the ■executor Watson —was exchanged for a long-term lease of premises 3STo. 106 Eighth avenue, blew York city. A contract for the ■exchange was first negotiated and made in her name, and, by her written direction, the lease was assigned, not to her husband, but to him and herself. The purchase price of the leasehold was $27,250, .■and the equity therein of the assignor was $14,750. Title was Taken subject to the incumbrances, and the husband paid the entire •consideration for the equity with the exception of his wife’s farm which was turned in át a valuation of $6,000. It is claimed that ■Corbit received $3,000 through his wife which was used in paying This consideration. Upon the reference of her claim she was permitted to testify, without objection to her competency, that in the month of January, 1896, her husband collected $3,000 owing to her from her father’s estate and never accounted therefor; and the •executor Watson, who it appears had no personal knowledge of the ¡source from which the testator obtained the money, except that it had not been received from his business, testified that there was ■deposited to the credit of the testator in his private bank account The sum of $2,000 on January 2, and $1,000 on January 4, 1896. It is, therefore, claimed that even though the widow may have ibeen a competent witness on the accounting, on account of the fact That her claim has been finally settled, that since this has resulted rfrorn the neglect of the executors to object to her incompetent testi*558inony on the reference of. her claim, without which evidence the claim as to the $3,000 was not established, that her evidence should receive no consideration. As I view the case, it is unnecessary to-decide this question, for, assuming that her farm and $3,000 went into this trade, yet I think she has been fully paid, by receiving and accepting property, which at the time both she and her husband believed to be more than her equity, whether it be-treated as a loan' qr an investment or as a joint speculation. On this basis her in vest-; inent in the leasehold aggregated $9,000 and that of her husband $5,750. The leasehold was exchanged by her consent for premise® Nos. 170 and 172 East Ninetieth street, which-at the time were of abotit equal value. The husband took the title to No. 170, which was subject to incumbrances aggregating $27,000, and the wife took title to No. 172, which was then subject to incumbrances aggregating $27,500, but the husband subsequéntly paid off $2,500 of the incumbrances thereon, making the principal amounts invested by him $8,250, and leaving his premises No.. 170 subject to incumbrances for $2,000 more than her premises No. 172,' of supposed equal value. It appears that the husband received and appropriated to his own use all of the rents of these respective parcels,, btit it is not clear that they exceeded the expendituresand, as the-learned referee well states, the presumption is that he accounted to his wife therefor, and that presumption is not overcome by the; testimony of the executor Watson that she did not receive any of the moneys. Moreover, it appears that Corbit, after paying off a $4,000 mortgage on the premises 170- East Ninetieth street,, exchanged the same for premises 132 West Fifteenth street, which-he devised to his wife. There was a second mortgage of $6,700-v upon these premises, which the executor Watson, with funds of the-. testator, paid off about three weeks before the latter’s death, and after knowledge concerning the provision of the will devising this. property. ' Watson testified that the testator directed this payment to be made; but the testator, .then nearly seventy-nine years of age, was on his death bed, and, according to' the general testimony of Watson, was in a comatose or semi-comatose condition. The provision of the will devising this and other property to the widow is. followed by a reference to their business dealings concerning hen New Jersey farm, and is as follows: .
*559“ Second. I give, ■ devise and bequeath unto my beloved wife Mary Elmer Corbit my farm at Rahway in the State of New Jersey,, together with all the buildings and improvements thereon, and all the stocks, crops, farming implements and household furniture thereat; also the real estate, consisting of an apartment house and lot of land situate on the south side of West 15th street between 6th and 7th avenues, in the Borough of Manhattan, in the City and County of New York, known as number 132 West 15th street in said city, to have and to hold the same unto her ■and her heirs forever absolutely. I also. give , and bequeath unto my said wife the sum of $3,000 in cash, and all of the furniture in the bedroom occupied by her and myself at Number 433 West 23d street in said city and borough, together with each and every article and thing she may have brought there or which belonged to her. I also give and devise unto my said wife a grave for the interment of her body in my plot in Greenwood Cemetery..
“ The above devises and legacies are given to my said wife and to be accepted by lier'in lieu and stead of all her dower and right of dower and rights and interests in and to my real and personal estate. ,■ “ I have heretofore given and caused to be conveyed unto my said wife the real estate, consisting of an apartment house and lot of land, known as number 172 East 90th street in said city and borough, it being my intention at the time to give said property unto her in the place and stead of her farm at Oak Tree, New Jersey, which was sold by her and the proceeds in part used in the purchase of said last-named real estate.”
■ The executors were aware of the husband’s claim as stated in his will concerning these matters, but they neither attempted to establish nor brought to the attention of the referee the principal facts tending to sustain it, although such facts were all known to the executor Watson. The executors, instead of presenting-the facts concerning the widow’s claim to an attorney and asking his advice thereon, reported to their attorneys and informed them “ that they had examined the claim and they knew that it was correct; that the money was owing to,Mrs. Corbit, but that they desired to have .her make formal proof so that they would, be held harmless in case'anybody would object to the payment on the accounting,” and they were advised to make formal objection to the claim and that *560"the- matter would then be referred to a-referee before whom she; •and whoever else knew about it, could testify, and that, if the referee :found the evidence sufficient,, judgment would be entered in the 'Supreme Court and they would be justified in paying the -claim. 'The claim was then formally rejected and referred. On the réfer•ence "the executors were represented' by the managing clerk of the ■attorneys who, however, had, in the capacity of a managing clerk, practiced liis profession five of six years.- -They stipulated that each ■party should bear onekalf the expenses of the reference and that no ■costs should be recovered.. It was a perfunctory hearing and the referee would have been justified in concluding, .and doubtless did, "that it was only a formal friendly hearing and-that there was no real ■opposition to the claim or "question presented for serious consideration.
Heither the testimony of the claimant nor of Watson was techni-eally accurate, and their, testimony Was misleading in that they stated that the farm was sold and her husband received the proceeds, and they neither offered the records of the real estate transactions in evidence "nor testified, to the- facts which woúld .have shown an adjustment "between the parties-substantially as recited in the. will. Mbreover," it appears that the widow has accepted all the property •devised- and bequeathed to. her and effect should be given to the provisions of the will that it is in lieu not only of dower but of all -clainqs against .his personal” estate." Since the only other claim she ■could have against his personal estate would be as a creditor, this .-should be construed as an-intention on his part to be in payment of •any claim she might have against his estate. and she should be • estopped from asserting a claim inconsistent with-a provision made ■for her benefit in the will which she has elected to accept. • She was .allowed to recover ás for $9,0.00 'loaned, less-an, admitted credit of $1,500, the amount realized for her equity in the premises 172 East "¡Ninetieth street on a sale after her husband’s.death. It thus fairly . appears, I think, that her claim- was not enforcible and. that' they ■knew it. It was their duty not only to reject the claim but upon the trial to show the facts which were known, to themlconstituting a -defense thereto, (Schutz v. Morette, 146. N. Y.. 137; Butler v. Johnson, 111 id. 204, and cases cited.) This they failed to do and tinder all the circumstances they were properly chargeable with negligence. Whether the tender consideration shown the widow in the. *561■enforcement of this claim — horn of a desire on her part to obtain a greater share in her husband’s estate than he intended she should have — was owing to collusion or their attitude toward it was influenced by the abandonment on her part of opposition to the probate of the will which for a time she threatened, need not be •determined. It is sufficient that they neglected their duty to the residuary legatees whose legacies could only be paid in part, if they be credited with the payment of this judgment.
The account was surcharged $906.49 which the executors paid to ■certain devisees to whom specific parcels of land were devised to reimburse them for interest accrued on mortgages on the lands from the last precéding interest day until the death .of the testator on the theory that it was apportion able from day to day. As between the •devisees and the personal representatives of the testator these were not proper charges against the estate. (Real Prop. Law [Laws of 1896, chap. 547], § 215; House v. House, 10 Paige, 158; Taylor v. Wendel, 4 Bradf. 324.) The fact that on the appraisal for the purpose of levying the collateral inheritance tax these items of interest were reported as charges against the' estate "and that the ■surrogate confirmed the report cannot affect the question as now presented.
It was stipulated that no experts’should be called as to the value •of the services of the attorneys for the executors but that counsel might make suggestions concerning the same. The referee deducted from the charges for attorneys’ services contained in the account the sum of $600 and interest thereon, estimated to be the amount included for services in connection with the unfounded claim, and $250 charged for clerical services of their managing clerk in drafting the account and checking up the vouchers and interest thereon, upon the ground that such services are taxed as costs and included in the ten-dollar per diem allowance given by section 2562 of the •Code of Civil Procedure. We think these questions were properly decided. The testator was conducting business as a real estate agent and he bequeathed the business to a firm to be composed of' two .of bis executors and the son of the third, giving the executors ten-sixteenths of the profits. The firm was formed accordingly and took ■over the business. The executors employed the firm to collect rents *562on certain- premises' left by the testator and not specifically devised. The extra commissions on these were charged in the account* Objection was made to ten-sixteenths of the charge which went to-the two executors and it. was properly sustained. ' .
The executors were, only allowed one commission. They claim they should have been allowed three, upon the theory that the value bf the personal property amounted to' $100,000- or more over and above all debts. (Code Civ. Proc. § 2730.) If that which is real estate at the testator’s death may be considered at all for the purpose of applying this statute, il is evident. that, only his^ equities in real estate directed to be converted into personalty under a power' of sale may be-considered, and that all valid liens must be deducted. The commissions ■ are to be allowed at a time when the value is known and it is manifest that- it is the actual realized value and -not the inventoried value that is controlling. Applying these tests; the personal estate was less than $100,000, and, therefore, the surrogate was right in allowing only -one Commission. - • The decree should, therefore, be affirmed, with separate bills of. costs to the respondents appearing separately payable -by the appellants individually.
Decree- reversed and a new hearing had before another referee, with costs to appellants to abide event.