This action was brought in 1903 by the trustees under the last will and testament of John T. Farish to have their accounts settled: The controverted questions upon this accounting related to dividends upon stocks bequeathed to the trustees in trust for the testator’s widow and as to the commissions to" which the trustees, were entitled. The trust was created by the 6th clause of the will of John T. Farish, and is as follows:
“ Sixth.- I give and bequeath to Charles M. Fi-y, Alexander F. Robertson and my wife, Martha Gr. Farish, and the survivors and survivor.of them and to the successor or successors of such survivor Twenty-five hundred (2,500) shares of the capital stock of the Mew York and Harlem Railroad Company, One thousand (1,000) shares of.the capital stock of the Mew York Central and'Hudson River Railroad Company (consolidated), and One thousand. (1,000) shares of the capital stock of the Chicago,. Rock Island and Pacific Railway Company, also Twenty thousand dollars ($20,000) at the’ par value of the consolidated bonds of the Erie and Pittsburg Railroad Company, Fifty thousand dollars ($50,000) at the par value of the consolidated bonds of the Chicago and Morthwestern Railway Company, and Thirty thousand dollars ($30,000) at the par value of the first mortgage bonds of the Louisiana and Missouri River Railroad Company, together with all interest accrued on said above described .bonds at the time of my death and all interest accruing thereon thereafter, and also évery and all dividends which may be declared on the above described stocks subsequent to my death, in trust-nevertheless, to receive the incorne and profits thereof and apply the same to the use of my said wife, Martha Q-. Farish, during the term of her natural life, and I hereby authorize and empower my said trustees, if it shall seem advisable to them so to do, to sell and dispose of any or all of the aforesaid shares of stock and bonds, and to invest and reinvest the proceeds in such securities as to them may seem advisable, and to apply the income arising -therefrom as above provided,.
“ Upon the death of' my said wife I give and bequeath all of the above mentioned shares of stock and bonds, or the proceeds of such as shall'have been previously sold,, to such persons. as would have inherited the same under the laws of the State of Mew York, if the-*885same were real estate and I had died intestate and unmarried, at the same time as my said wife and in such proportions as they would have inherited the same respectively.”
The testator died, a resident of the city of Hew York, on the 13th day of May, 1891. He left him surviving his widow, but no children, his next of kin being a brother and sisters, all of whom are now dead. Those who are his present next of kin are the descendants of two sisters, who are parties to this action.
The first questions to be considered relate to a dividend declared on September 19, 1899, by the Hew York and Harlem Railroad Company which amounted to $31,250; to a dividend of 100 shares of stock declared as a stock dividend upon the stock of the Chicago, Rock Island and Pacific Railway Company held by the trustees, and to the amount realized by the trustees for the sale of rights to subscribe for certain additional stock of the Chicago, Rock Island and Pacific Railway Company and the Hew York Central Railroad Company and the allowance of commissions.
Before discussing the question relating to these dividends, we will consider the intention of the testator relating to this trust as disclosed by the will- The testator, leaving a large" estate, made provision for his wife. . He gave her $100,000 in cash, a stable and his horses, carriages, furniture and household articles, and created for her benefit this trust consisting of securities of the par value of $425,000. This trust consisted of $325,000 of stock of three railroad companies and $100,000 of railroad bonds. These specific securities having been bequeathed to his trustees for the benefit of his wife, he also bequeathed to them “ all interest accrued on said above described bonds at the timé of my death and all interest accruing thereon thereafter, and also every and all dividends which may he declared on the above described stocks subsequent to my death.” The bequest was in trust, “ to receive the income and profits thereof and apply the same to the use of my said wife, Martha Gr. Parish, during the term of her natural life,” with a power to the trustees to sell any or all of these securities, “ and to invest and reinvest the proceeds ■ in such securities as to them may seem advisable and to apply the income arising therefrom as above provided,” viz., to the use of his wife during the term of her natural life. Having thus disposed of what should accrue upon tírese *886securities by way of income and profits during the life of his wife, u-pon the death of his wife he bequeathed “ all of the above mentioned shares of stock ’ and bonds, or the proceeds of such as shall have been previously sold, to such persons as would have inherited the same undpr the laws of the Statp of New York, if the same were real estate and I had died intestate and unmarried, at the same time' as my said wife and in such proportions as they would have inherited the same respectively.”
It would seem that the testator intended by this bequest to dispose of all these securities, including any income that was received during the continuance of the trust and what would be left of the trust upon the death of his wife. He disposed of the “income and profits ” of the securities received during the life of his wife by directing that they should be applied to her -use. What he directed should pass upon the death of his wife was “ the above mentioned shares of' stock and bonds or the proceeds of such as shall have been previously sold ” — an indication, it seems to me, that what the testator understood would remain -undisposed of at the death of his wife were these specific shares of stock as they then stood, or the proceeds remaining in the hands of the trustees in the event that such shares had been sold by the trustees under the power given to them: There was no expressed intention that any dividends or interest that had been received by the trustees upon the shares of stock or-bonds should be held by the trustees and turned over to those entitled to the remainder. This provision for the wife was to be in lieu and bar of all dower and right'of dower and of any other claim or interest whatsoever that she might have in his estate, real or. personal, or any part thereof. There is certainly in this will no indication that it was the intent of the testator that there should be anything deducted from the sums received by the trustees in the way of dividends, income or profits to be accumulated by them to prevent any deterioration or depreciation in the value of the stock and bonds during the continuance of the trust. The primary object, was to make provision for his wife during her life, and, subject to that provision, what was left at her death was to be. disposed of. as indicated. There was bequeathed by the testator to these trustees^ as a part of the trust property, 2,500 shares of the capital stock of the New York and Harlem Railroad Company.
*887On September 19, 1899, the directors of the New York and Harlem Railroad Company passed the following resolution : “ Whereas, it appears from the Treasurer’s report that the Company’s cash surplus now amounts to upwards of $2,500,000 over and above all claims and obligations, existing and contingent, and that the same is now available for distribution among the stockholders. It is further resolved that the sum of $2,500,000 of the said surplus be distributed at the rate of $12.50 per share to all stockholders' of record at .the close of business on the 23d day of September, 1899, and that the Treasurer be and he is hereby authorized and directed to make such payment on the 2nd day of October next.” The amount of this dividend was $31,250, which was received by the trustees and retained by them, and the first question presented is whether this amount is to be retained by the trustees as capital of the trust, or whether it belongs to the widow as beneficiary, for life.
The New York and Harlem Railroad Company was the owner of a steam railroad, and was also' the owner of a street railroad, in the city of New York. Long prior to the death of the testator the steam railroad had been leased to"the New York Central and Hudson River Railroad Company, which agreed to pay the New York and Harlem Railroad Company as rent eight per cent per annum upon its stock. At the death of the testator the New York and Harlem Railroad Company operated its line of street'railroad, and the profits of that line were divided among its stockholders. The company also owned several parcels of real estate in the city of New York. After the death of the testator the New York and Harlem Railroad Company leased its city line of railroad to the Metropolitan Street Railway Company. There was evidence that after this lease certain real estate that belonged to the Harlem Railroad Company, and which was not needed in its business, was sold, and it would appear that the particular money used in paying this dividend was partly the proceeds of the sale of this real estate. The amount distributed as a dividend, however, was surplus which represented the accumulation of profits of the company in the past, either from its operation or from the increase in the value of its real estate, and this distribution was simply a distribution of surplus profits of the company realized from its operations, and which were *888not needed in the conduct of the company’s business. The profits as such were realized when the company’s real estate- was sold. It then became money in its possession as' surplus profits, and was distributed by the company among its stockholders as such. The trustees, therefore, received from the Hew York and Harlem Railroad Company a dividend-of twelve dollars and fifty cents a share as a distribution by the company of its surplus. The testator had directed the trustees to receive the income and profits of these securities and to. apply the same to the use of his wife during her life.
There is nothing in the evidence to indicate that this dividend was a distribution of the capital of the railroad company, as the witnesses all testify, and the referee finds, that the capital of the company was intact after the payment of the dividends,.and--that the property of the company was largely in' excess of its indebtedness and capital stock. Of late years this question has been much discussed, and there is now a settled distinction between a case where Specific securities consisting of stock and bonds are bequeathed to-a trustee, with a direction to pay the income and profits of these specific securities to a life beneficiary, and where á sum of money is bequeathed to trustees, with directions to invest that sum of money and to pay the income of the amount so bequeathed and invested to a beneficiary. In the latter case the trustees are bound,'whaff ever the form of the investment may be, to preserve intact the capital of the trust bequeathed to them.; and while, if in case of unexpected decline in the value of the securities, or for any other reason, the capital becomes impaired, where the trustees have acted -in good faith and observed the rules of law in carrying out the. trust, they are not required to make up such deficiency from the income, still, when they purchase securities at a high premium, they are justified in applying a part of the income or dividends to prevent a depreciation in the value of the securities where such interest Or dividends, represent in part a premium which they have paid; b.ut a different situation, is presented where a person bequeaths to trustees specific securities and diretits that the income- and profits of. such securities be paid to a beneficiary for life, with a bequest over- of such securities at the termination of the life estate. In the latter case- it is the income or profits that the trustees received from the securities to *889which the life beneficiary is entitled, not the income of a specific fund which represents the value of the securities at the time of the testator’s death, and I think it is now established that when^ the profits or surplus of a corporation which it has earned or realized in the management of its business are paid to its stockholders by way of dividends, whether such profits or surplus has been earned before or after the creation of the trust, so long as the amount that is actually distributed is actual surplus earned, or income or profits made by the corporation in its business and distributed as such, it is income or profits which go to the life tenant.
The first case to which I will call attention is Matter of Kernochan (104 N. Y. 618). In that case the trustees were authorized to receive the “rents, interest and income” of property given to them in trust and to apply the net amount of such rents, interest and income to the use of the widow during her life, and after her death to divide his estate among his surviving daughters and the issue, if any, of such as may have died. Among the personal property left to the trustees was 5,000 shares of the capital stock of the Panama Railroad Company. It seems that this stock was, subsequent to the death of the testator, sold to the Panama Canal Company at something over $265 per share. As a part of the agreement of sale it was provided that all earnings of the railroad company to and including June, 1881, and all moneys and other' effects not by that agreement to be left with the railroad company, should be transferred by the railroad company to a trustee for the benefit of all the existing stockholders and belong to and be divided among the shareholders who are such at the time of the declaration o£ such dividend or transfer of the railroad company.” It appeared that these assets were subsequently sold to a syndicate for an amount which equalled twenty-four dollars and twenty-six cents on each share of the capital stock of the company, and on June 30,1881, a dividend* of twenty-four dollars and t\Venty-sixcents on each share of the capital stock of the company was declared. It also appeared that the assets which formed the consideration of the payment by the syndicate were accumulated net earnings, represented -by cash or securities calling for cash. The remaindermen objected, that this sum should not be credited to the income, but should have been held as capital. The referee found that the *890•amount after the death of the testator1 was income, but that earned ' before the death of the testator was principal. Judge Danfobth, delivering the opinion of the court, said: “ I find nothing in the •will which indicates that the testator intended any such investigation Or, division, or that, any other than the ordinary rule, which' gives cash dividends declared from ■ accumulated earnings-or profits to the life, tenant, should be applied. * * .* Brorn the shares in • questionmo income could .accrue*, no profits arise to the holder until ascertained and declared by the company and allotted to the shareholder, and that act should be deemed to have been in the mind of the testator and not the earnings or profits as ascertained by a third ■ person or a court upon an investigation of the business and allairs of the company, either upon' an inspection of their books or otherwise.” Then,, after examining the authorities, the learned' judge continued : “ In this case no portion of the earnings which entered, into the dividend had been capitalized by the company and, therefore, the inquiry, when the profits were earned, out of which it was to be paid, "was. immaterial. It. is not claimed that the declaration of the dividend, as dividend from profits was ultra vires, and whenever earned they were not profits until the directors so declared,” •and quoting with approval from Sproule v. Bouch (L. R. 29 Ch. Div. 635) as follows .: “ The general principle applicable to the first of these inquiries may, in our opinion, be thus stated: When-a testator or settlor directs or permits the subject of his disposition to- remain as •shares. or stock in a company • which has the power either of distributing its profits as dividend, or of converting them into -capital*, and the company validly exercises ■ this power, such exercise of its power is binding on all persons interested' under him, the testator Or settlor,, in the. shares,, and consequently what is-paid by tide company as dividend goes to the- tenant for life, and what is'paid by the company to the shareholder as capital, or appropriated as an increase of the capital stock in the concern, enures to the benefit of all who are interested in the capital. In a- word, what the. company says is income, shall be income, and what it says* is capital, shall be capital.” _ ■
The next case to which I wish to call attention is McLouth v. Hunt (154 N. Y. 179). In that case the estate of the testatrix was bequeathed to -the trustees with a provision that her executors pay *891• over to the use and benefit of each of her grandsons respectively from and after the arrival at age of 'her said grandsons respectively» the full income of one of the said parts. A portion of the estate which the executors received in trust was 254 shares of the capital stock of the Western Union Telegraph Company upon which the trustees received a stock dividend of ten per cent represented by certificates issued to them for 25 f10 additional shares. This dividend was declared from the surplus earnings of the corporation, and it was claimed by the trustees that these stock dividends upon the Western Union stock was not income payable to the life tenants, ' but an accession to the capital which went to the remaindermen. The court held that what the corporation really did was to issue to the shareholders its own obligations in the form of stock certificates against the accumulated earnings which it had on hand, and these certificates having a market value could readily be converted into money by the shareholders, so that the transaction was in substance a distribution of profits, and that in that case the stock dividend represented income and properly belonged to the life tenant.
The next case is Matter of Rogers (161 N. Y. 108). In that case the testator created three separate trusts for the benefit of his children during their lives, with remainders to their issues. A part of ' the principal devised to the trustees were shares of the capital stock of the Rogers Locomotive and Machine Works. The testator died in 1868. .The capital stock of the corporation was then $300,000, . and this stock was appraised at $125 per share. The corporation continued business until 1893, paying dividends each year. In 1893 it sold its plant for the sum of $2,750,000, to be paid in stock of a new corporation known as the Rogers Locomotive Company, whose capital stock "was $3,000,000. The stock of the new company obtained from the sale of the plant of the old company was divided among the stockholders of -the old company in proportion of ten shares of new stock to one share of old stock. After this sale .the old company remained in possession of other property which it had accumulated, consisting of capital on hand, bills receivable, real estate, go-vern-inent bonds and stock of other -companies amounting in round numbers to $3,000,006. This'property the officers of the corporation converted into -money "and distributed it among its *892stockholders. The question arose as to whom this belonged, whether to the life tenants or to the remaindermen^ The court said : “ As ' we have seen, the surrogate held that all that was received upon the sale of the plant should be retained by the trustees as capital, and this included that which had been paid out for raw material. He also held that the first cash dividend made on tire liquidation of $100 per' share should also be retained by them as capital; ” and that the balance of the $3,000,000 that was divided among the stockholders of the old company was income to go to the life tenant. This determination was affirmed upon the ground that this $100 per share, represented what was reserved for working Capital by the new company, and was, therefore, capital, and that the balance was profits which being properly 'distributed as such, went to the life tenants. Here was property represéntihg accumulated surplus which was distributed upon the winding up of á corporation; yet where it was distributed as surplus profits and not as a part of the plant or working capital of the company, it was held to go to the life tenants, although apparently it was realized from real estate, government bonds and stock in railroad corporations, cash on hand and bills receivable.
The next, case is Lowry v. Farmers’ Loan & Trust Co. (172 N. Y. 137). In that case the testator died in 1895. ■ He gave one-fourth of his residuary estate to trustees to apply the -rents,' issues and profits thereof to the use of the testator’s Avife until ■ her death or remarriage, in either of which events the trust prop.erty-should go to increase- the portion of the estate held in trust for the benefit of his children. As a part of this trust there was stock of the Pullman Palace Oar Company, eight shares of which formed a part of the trust estate held for the plaintiff. That company declared a dividend of fifty per cent, payable in certificates of stock at par value. This dividend was declared and obtained from the accumulations of net surplus as the same appeared in the aecountsof the company, and it Avas held that, síich a transaction although in the form of an issue of stock certificates, was a distribution of the profits-, and. what the stockholders got represented income and was income. ' The rule, is that “ where a corporation has declared a dividend upon its capital stock, payable in new stock certificates, if it is based upon an accumulation of earnings, or profits, by. their die*893tribntion in that manner, the stockholders receive the representative of income and not of capital; ” that “ while the corporate action may not be, necessarily, conclusive upon the court, with respect to the question, if it is based upon facts, and is not purely arbitrary, it will, and should, be controlling.” The court then goes on to say: “ It is true enough, as the appellant argues, that the testator, at the time of his death, owned the right to share in. the assets of the corporation, proportionately to the amount of stock which he held; but it does not, therefore, follow that dividends, thereafter made from the accumulations of earnings, must be regarded and treated as additions to the capital of the trust estate. All stockholders are interested in the operation of the property of a corporation and their shares of stock represent individual interests in the corporate enterprise, in its capital, as in its net earnings; but the corporation itself has the legal title to. all the properties and holds them for their benefit. They have a right to dividends only as the corporate agents, in the exercise of'their discretion, may declare them, * * * The declaration of a dividend by a corporation in active operation is the appropriation of a portion of the assets, which represented the net earnings of the corporation, for the use of the stockholders, and pro tcmto, the assets are diminished. The stock no longer represents them. The capital is unchanged, but the value in the market of the shares may be affected by the diminution in the amount of the corporate assets. That the value of the shares of stock has been lessened by a dividend is a fact of no relevancy in determining the question of whether the dividend is to be regarded as income to the life tenant or as capital for the remainderman. That question will be determined by the origin of the dividend. In this case a fund had been created by an accumulation of the net earnings of the corporation and it remained a part of the general assets, until, in the judgment of the directors, the time came when it was proper and prudent to distribute it among-the stockholders. That which the directors of the corporation dis-tribute among its stockholders, without intrenching upon capital, must be comprehended within the, term £ profits,’ and we should assume that the testator intended that what might be paid in that way should belong to the beneficiary. There is no question- of ■ diminishing the capital, nor of increasing the capital for any cor*894porate purpose or need. It was simply a mode of distributing the profits earned by the employment of the capital.”
The case of Chester v. Buffalo Car Mfg. Co. (70 App. Div. 443) is entirely in line with these decisions, for there the court said: “ While it is subject to modification and variation, the natural and fundamental idea of life income payable under a will is of that current income which accrues and becomes payable from time to time during the life tenancy upon a principal fixed as of the time when the trust took effect and remaining substantially unchanged.”
The fact that the particular money that was used in the payment of this dividend was from the sale of real estate seems to me entirely unimportant. The company had been in operation for many years. It had from time to time moved its depot as its business required. It had invested money in the real estate necessary for its new depot, and when the old real estate became unnecessary it was sold and the proceeds of such sale became money of the company to be distributed if it was not needed for the business of the company. It represented surplus profits just as much as if the money invested in the new real estate had been kept in its possession and this real estate exchanged for the new real estate required for the new depot. In this case, as in Lowry v. Farmers’ Loan & Trust Co (supra), “a fund had been created by an accumulation of the net earnings of the corporation, and it remained a part of the general assets Until, in the judgment oE the directors, the time came when it was proper and prudent to distribute it among the stockholders,” and “ that which the directors of the corporation distribute among its stockholders, without intrenching upon capital, must be comprehended within the term ‘ profits,’ and we should assume that the testator intended that what might be paid in that way should belong to the beneficiary.” It follows that the learned referee Was wrong in holding that this dividend was a part of the capital, and that the judgment should be modified by directing it to be paid- to the life tenant.
The second question presented is as to the 100 shares of the capital stock of the Chicago, Bock Island and Pacific Bailway Company, and as to certain cash dividends paid upon the stock held by the trustees. The same principle that we have before discussed in regard to the dividend of the Harlem Bailroad Company *895determines this question, and the referee was clearly right in holding that these dividends belonged to the life tenant.
The ne;xt question is as to the proceeds of the sale of rights to subscribe to stock in the Chicago, Bock Island and Pacific Bail way Company and the Hew York Central Bailroad Company. We think the referee was right in respect to this question, and that the amount realized was a part of the-'capital of the estate. When the corporation gave to the existing stockholders a right to subscribe to its capital stock at a price fixed, there was nothing in this right of the nature of a dividend or distribution of profits. It was a right which accrued to the owners of the stock as an incident to its owner- - ship. If the owner of the stock had accepted the option and had subscribed to the stock, the stock so subscribed and paid for out of the capital of the trust would be clearly a part of the trust property, and any increase in the value of that stock after its subscription would accrue to the capital of the trust. The trustees not being in a position to make these subscriptions, sold the right to subscribe, and the proceeds realized from a sale of this right was a part of the capital of the trust. This question is presented in Matter of Kernochan (104 N. Y. 618), and that case is controlling upon this point.
The next question is as to the necessity of establishing a sinking fund to provide for any depreciation in the value of the securities which form a part of the trust estate. This question is also settled by the authorities that we have before considered. It is now settled that where specific securities are devised, with a direction to pay the income and interest of those securities, the beneficiary is entitled to all the interest, even though the payment of all the interest would tend to reduce. the selling value of the securities. (McLouth v. Hunt, supra; Matter of Rogers, 22 App. Div. 428.)
The only remaining question is as to the right of the trustees to one-half commissions for receiving the entire trust property. I think we must treat this question without reference to the,fact that the executors and trustees were the same persons. Whether or not the executors were entitled to commissions is not before us. The will bequeathed certain property to the trustees in trust, and it has been.received by them and is now held by them under the provisions of the will; and these trustees are entitled to such a com*896mission- as the law allows to .trustees who have, received .bequests of' personal property in trust, to hold it during the life of the beneficiaries and to pay the income and proceeds thereof during her life to the beneficiary, and upon her death to deliver the securities over to the remaindermen. Upon this appeal we aré not concerned with the right to commissions upon the income which was received by the trustees and paid to the life tenant, as. by ah express stipulation that question has been arranged by -private agreement between the life tenants and the trustees.
Section 2802 of the Code of Civil Procedure provides for a voluntary accounting before a surrogate by a trustee created by a last will and testament. ' It provides that.a surrogate before whom such an accounting may be had “ shall allow to. the trustee or trustees the same-compensation for his or their services by way of commission, as are allowed by law to executors and administrators, besides their just and reasonable expenses therein.”' By section 2730 of the Code the commissions of an executor or administrator are fixed as a percentage. “for receiving and paying oUt all sums of' money.” ' The question as to trustees’ commissions was presented to the Court of Appeals in Phoenix v. Livingston (101 N. Y. 451):, where the main portion of the trust property consisted of real estate. In discussing whether or not the trustees were entitled to commissions upon the real estate held by them it is said : “ Sums received and paid out are made the basis of computation. It has, nevertheless, been held that securities received by an executor, and by him turned over, to the parties entitled, might be treated as money received and paid out for the purpose of computing commissions. This was itself an extension of the authority of the statute, justified by the consideration that what was accepted as money by 'the parties interested might well be treated as'such for purposes of compensation. But we are asked now to take1 a step further arid give a new. extension - to the act, which does violence to its language, and makes land, in no just sense received or transferred, constructively money. * * * They were authorized to sell and to rent the real estate. Upon all sums of money thus realized'and passing through their hands they were entitled to commissions ; but the unsold lands,, at the close of the trust, passed to the possession of the remaindermen, not through any title derived from the trustees, but *897by force of the original devise. The trustees transferred no land, but simply refrained from exercising their power of converting it into money. And so they not only'never paid it out even constructively by any grant or conveyance, but never even received the absolute fee which all the time was a vested interest in remainder. Their estate was simply commensurate with their trust, bounded as to the duration by the terms of the trust, and as to the unsold lands never equalling in value that of the fee. We must, therefore, adhere to the statutory basis of computation and decline to advance further in a construction which steadily departs- frorq a plain and unambiguous enactment having a definite purpose and meaning.”
In McAlpine v. Potter (126 N. Y. 285), which seems to have been decided under section 2802 of the Code of Civil Procedure, as it now exists, and section 58 of title 8 of chapter 6 of part 2 of the Revised Statutes (2 R. S. 93, § 58, as amd. by Laws of 1863, chap. 362, § 8, and partly repealed by Laws of 1880, chap. 245, § 1, subd. 2, 3), the will gave to the trustees the remainder of property to hold the same in trust, with a power to lease, sell, assign, transfer and convey the same, collect, invest and reinvest the proceeds thereof as they should deem best for the interests of the estate. From this income there was to bé paid an annuity of $200 to a beneficiary named during her life, and the balance of the income was divided into six parts, one part to be paid to a beneficiary named during her life. In considering this question the court say: 66 A further quéstion is raised over the allowance to the executors of half commissions for receiving the funds of the estate. The law allows a specific rate for.6 receiving and paying out all sums of money.’ The statute indicates no division of the commissions which should apportion one-half to the receiving and the balance to the paying out, though the courts have allowed it in proper cases. But the allowance here was premature. The bulk of the estate came to the executors already invested and, in the form of securities which have not been turned into money. Eo law justifies the allowance of one-half commissions upon their estimated value in advance of their conversion into money or its equivalent. ’ It was proper enough to allow, one-half commissions upon all sums of money received, but until the securities become *898sums of money, either by conversion into cash, or by their acceptance as cash by those entitled, the allowance is premature.' The ' computation of the commissions at an earlier period pays for services before they are rendered and rests upon estimates of value which may be very different from the sums of money actually received and paid out. A' time will come when the allowance may be entirely just and proper. That will be when the securities .have ■ been turned into money for the purpose of payment, or have been accepted by the legatees as cash without being converted. The allowance upon the-securities was premature and without a.statutory basis and must be reversed,” That case was followed by the General Term in the first department, affirming the report of a referee - partly upon his opinion. (Linsly v. Bogert, 87 Hun, 137; 67 N. Y. St. Repr. 653; affd., 152 N. Y. 646, on opinion below.) The opinion of the referee is reported in 67 New York State Reporter 654.
After sections 2730 and' 2802 of the Code of Civil Procedure were both in force,- this question was again presented in Matter of Johnson (57 App. Div. 494). .In that case the testator gave to his executors a certain sum of .money, the income to be paid to. his daughter during her life and the court said: “The decree of the Surrogate’s Court awarded to the trustees commissions for receiving the corpus of the trust estate.. In this we find no error/ Commissions are usually awarded on. the settlement of the accounts of executors or trustees. * * Where the latter are managing an estate which must continue for years, it is not expected that before they can receive any compensation for their services they must wait the termination of the trust. In this case they had performed the functions pf trustees for years. They had managed the trust - property with thrift and good judgment, It was well invested and was approved on an accounting by Jhe surrogate, and it was their right to be paid for receiving this property. The commissions to be. awarded upon- distributing the principal of the fund must be deferred .until the moneys are paid over, but the compensation for receiving is a distinctive one -and has been earned. Again, it is Urged that, the trustees are not entitled to commissions on the. securities which came from the testator and which they have not converted, into cash,, but have retained^ a§. *899'they were first-class securities. The whole scope of the trusteeship is to keep the money invested in securities of this kind in order to bear an income, and ihe executors might properly be condemned if they had parted with safe mortgage investments which the testator had carefully made,” and as a result the court held that each trustee was entitled to “ one-lialf of the commissions allowed by said section * for ‘ receiving and paying out ’ and which is to be computed on the' entire principal which came into their custody as trustees, keeping in view, however, the separate trust funds.” There was an appeal in this case to the Court of Appeals (170 N. Y. 139), and in considering this question it was said: “ While in this case the same trustees were appointed for each of the trusts', that does not affect •the meaning of the statute which would be the same if different trustees had been selected' fqr each trust,” and it was held that each of the respondents as trustees was not entitled to full commissions, but- only to one-third thereof, but affirmed the judgment allowing the trustees commissions upon the securities which had come- into their hands, but which had not been sold by them, although the point was taken by the'appellants in their brief that awarding to the trustees commissions in the proceeding was error, citing McLouth v. Hunt (supra).
In Matter of Notman (103 App. Div. 520) We held that a committee of an incompetent was entitled to one-half commissions for receiving the securities of which the estate of which they were a committee consisted, although they had not sold or disposed of those securities, but retained them in the condition in- which they were at the time they received them. After considering the authorities the court said: “We are of opinion, therefore, that the committee of the property of an incompetent person- is to be compensated for receiving and holding property which it does not become his duty to convert into cash, and that such compensation is not to' be made upon the theory that these are ewt/ra services in addition to those which would be required to be performed by an • executor or administrator and for which the court may make a spe.cial allowance, but "upon the theory that they correspond within the fair intent and meaning of section 2338 of the Code of Civil Procedure with *900' the services of an executor or'administrator id -converting, property into cash. It follows that the committee should have been allowed one-half commissions,”
After the rule had'thus been'settled the Legislature, by chapter 755 of the Laws of 1904, amended section'3320 of the Code by adding the following provision: “ A trustee of -an express trust is entitled ' * •* * ás ■ compensation-for'services as such,, over and above expenses, to commissions, as follows: For receiving and paying out .all sums of principal not exceeding one thousand dollars, at the rate ■ of five per centum. For receiving and paying out any additional sums of principal not exceeding ten thousand dollars, at the rate of two and one-half per centum. For receiving and paying out all sums of principal above eleven thousand dollars, at the rate of one per centum. And for receiving and paying out income in each year, at-the like rates. * * * If the value of the principal of the trust estate or fund equals or exceeds one hundred thousand dollars, -each such trustee is entitled to the full Commission, on principal andón income for each year to which a sole trüsteeis entitled,” etc. And in considering this .provision- of the "Code we should-give weight to the change in phraseology, between- -this provision and the section of the Code which previously fixed the commissions. In section 2730 -of the ■ Code, commissions are fixed' as a percentage, for receiving - and -paying -out “ sums of money; ” - and in Phoenix v. Livingston and McAlpine v. Potter (supra) it was "finally-settled that where specific propertywas received by a trustee,, an allowance'for commissions , is-premature until the- property-has' been in some way turned into money or-accepted by the remainder-men as money. Thus," in the latter case, it is said: “A time will come when the-allowance may be entirely, j.ust-and proper.- That will-be when the securities have been turnéd into money for the purpose of payment, or have been accepted by the legatees as cash without' being converted.” With -this construction- of section-2730 .of the-Code;, the Legislature passed the act of 1904 which in express -terms ' awarded t-o trustees of express trusts commissions, and instead-of using the language which had before been used in relation to executors’ commissions and which the Court-of Appeals have construed'so as to award commissions-only when the-property had- been- received and" turned into money, or accepted' by the residuary legatee as money, it *901provided that a trustee of an exjxress trust is entitled, as compensation for services as such, over and above" .expenses, to commissions as follows : “For receiving and paying out all sums of principal,” etc. “ All sums of principal ” would apply as well to securities in bulk as it would to money received. ' The princiiial of the trust consists of the securities in which the trust is invested, and whether they are turned over to the-trustees in specie or money, it seems to me that in either "case the trustees have received the principal of the estate, and as the section gives to a trustee of an express trust commissions based upon the' sums of principal, it would seem that he is entitled to one-half commissions for receiving the securities in which the estate is to remain invested immediately iqpon their receipt.
Considering the services that the trustees render for which they are entitled to this commission, I think this jnovision a reasonable one. When the' securities are turned over to the trustees, they must see that they are properly transferred so as to protect the estate and that arrangements are definitely made for the" continuance of the trust. The trust then continues without further action by the trustees so far as these securities are concerned, the trustees merely receiving in the meantime the interest and turning it over to those entitled to it until the termination of the trust, when the securities have to be .transferred to those entitled to them. The mere fact that a reinvestment may be necessary during the continuance of the trust, the securities being paid off, or of its being necessary to sell them and reinvest the proceeds, would not, of course, entitle the trustees to any additional compensation, that being incident to the proper performance of the duties of the trust. I think, therefore, that in view of what has been said in the cases before cited, under section 3320 of the Code, as amended by chamber 105 of the Laws of 1904, where specific .personal property has been given to a trustee in trust, to receive the rents and profits for the benefit of a life beneficiary, and such securities are received and held by the trustees, the trustees are entitled to one-half commissions for receiving it immediately upon the receipt of the property, out of the corpus of the estate.
The remaining question presented is, whether the life beneficiary can act as trustee of this trust so as to be entitled to commissions. The general rule is undisputed that a beneficiary of a trust cannot *902be at the same time a trustee; but it is also recognized that where other trust duties are devolved- upon trustees than those which merely relate to the performance of trusts for the benefit of a beneficiary, the beneficiary can act as trustee for’ -the others interested in the éstate. This trust is personal property. Thte trustees are bound to hold it and preserve it for the benefit of those to whom it goes at the termination of the trust. There is- thus an active duty imposed upon the trustees for the benefit of the remaindermen, and for their benefit the life beneficiary can act as trustee'. ISTor do I think that "the question of the right of the life beneficiary to act as trustee is before us on this appeal. It appears that by the decree of the surrogate she was recognized as a trustee, and the trust property was turned over to her with her cotrustees, and she has performed the' duties required of her as trustee. She would clearly be responsible to the remaindermen for any neglect id the performance of her duties as trustee, and is entitled to the compensation allowed for the performance of such duties.
I‘think, therefore^ that the life beneficiary is entitled to act as trustee for the benefit of the remaindermen and, as such, is charged-with an active duty of receiving and preserving the trust property and is entitled to commissions as trustee.
The views before expressed will require a modification of this judgment, and the judgment is so modified, and asx. modified affirmed, with costs to all parties payable out'of the principal of the trust.
O’Brien, P. J., Patterson, Laughlin and Clarke, JJ., concurred, j ' .
Judgment modified as directed in opinion, and as modified, affirmed, with costs to all parties payable out of the principal of the estate. Settle order .on. notice.
Code Civ. Proc. § 3730,— [Rep,