The main, question to be determined upon this appeal is wtiether the accounts of the executors should be surcharged with the judgment for $10,423.55 recovered by the widow of the testator. *316Upon the former appeal the finding of the referee was that the said $6,000 never passed from her hands into those of the testator; that there is no competent or sufficient proof of the payment of the $3,000 to the' testator. Upon this new trial, however, the learned referee found that she paid over the $3,000 to the testator in the month of January, 1896, and that her farm at Oak Tree was paid to Bitzmann as $6,000 of the purchase price of Bo. 106 Eighth avenue. His conclusion of law, however, notwithstanding this finding; was that the judgment obtained npon the claim “ was obtained by the. negligence or collusion of the executors and affords no justification for or legal defense to the payment thereof by them; ” and also that the claim “ was not a legal and valid claim against the estate of her husband, Joseph Corbit.”
While the referee does not specifically fijid the fact or state the conclusion, it is sufficiently apparent from the reading of his decision that because the opposition to the claim on the reference to prove it was merely formal, and because the executors neglected to bring but fully all the facts.with reference to the real estate transactions between the widow and her husband he. finds the executors guilty of negligence or collusion, and upon all the facts as now appearing he concluded against the existence or validity of that claim. This charge of negligence or collusion based on the failure to more strenuously oppose the claim, or in not bringing out more fully the facts about the real estate transactions is susceptible of explanation by the fact, fairly to be inferred, that with full knowledge of all the facts the executors believed the claim to be just and that it should be paid. Possibly their actions in consenting to a reference and not then aggressively fighting the claim will prevent their getting any benefit from the judgment which they paid. But we can look at the question as though the claim had been paid on presentation, without a reference.
The referee arrived at his decision, not because the widow had not given to her husband for investment — just as she claimed •— the $9,000, but because as the result of the transactions in the exchange of properties by which she finally obtained the legal title to the Bmetieth street house, she had been paid and her claim satisfied, and, therefore,- there was nothing due her from her husband at the time of Ms death. He decides that — although she gave her *317husband §9,000, and although all she ever actually received back in money was the $171.21, which resulted from the sale of the property at No. 172 East Ninetieth street, which stood in her name — the acceptance by her of the $171.21 resulted legally in the discharge and payment of her claim. As to the correctness of this conclusion a brief reference to the evidence is profitable, especially for the light it throws upon the question of the good faith of the executors and the problem which confronted them.
When the widow presented her claim she was dissatisfied with the provision made for her in the will and had expressed an intention of contesting it unless she received back $7,500 of the $9,000, which she claimed her husband had received from her. It may be that had she — in an action for an accounting during.the lifetime of her husband or in an action for money had and received — sought to recover back the $9,000, she would have been defeated upon the ground that legally there had been an adjustment and settlement of the claim, and that her dealings with her husband were such that whatever the result may have been in loss to her, she could not establish her claim. We cannot, however, overlook the fact that these were not transactions between people who were dealing at arms’ length, but were between husband and wife, transactions in which trust and confidence were reposed in the husband, and in which, as shown, his business judgment determined the investments into which their joint property was invested. There is no evidence that she ever formally assented to any arrangement by which, she released the claim which she subsequently asserted to be reimbursed and have returned to her the money and the value of the farm which she had subjected to the control and disposition of her husband. In the will the testator does say that he conveyed the Ninetieth street property to his wife, “ 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.” This, however, is neither binding nor conclusive on the wife, and regardless of his intention she had the right to retain this property as security or for what it was worth, and for the balance look to her husband for payment.
It may be, however, that, notwithstanding their relation as hus*318band and wife, the effect of her conduct in permitting the money and property to go first into a leasehold and subsequently into the two Ninetieth street houses, one of which was placed in her name, resulted legally in a discharge and satisfaction of her claim.
This, however, would not necessarily be conclusive upon the question of the executors’ liability, because, in making the payment, they may have acted in good faith believing the claim to be just, and in the exercise of reasonable diligence and prudence. We say this would not be conclusive, because the rule has never been- so rigidly applied as to hold an executor to be an insurer of the validity of every claim presented against an estate and paid by him. The general rule undoubtedly is," that 'if an executor or administrator assumes to pay a demand'which has no legal foundation and. could not have been recovered,, the claim may properly be disallowed on his accounting. (Dye v. Kerr, 15 Barb. 444.) And if he negligently allows an invalid claim to go to judgment without employing counsel to; attend the trial or take an appeal, he may be charged! with the amount paid on the judgment. (Matter of Saunders' Estate, 4 Misc. Rep. 28.). ■ ' ■
This general rule of liability it will be noticed involves the element of negligence or bad faith as the basis of the rule, and in defending the estate against the payment of unjnst claims or in-collecting the assets of the estate, he is held to that degree of diligence, intelligence and care which an ordinarily prudent man should observe in the conduct of his.own affairs.
While we have not found a case directly affecting the payment of Claims, the rule as to the obligation which rests upon the executors, we take it, is the same whether applied to-payments out of the estate’s money, or in seeing to it that the property belonging to the estate is collected and held for those entitled to it. As to the duty resting upon an executor or administrator in the latter contingency, we have the rule.thus stated in McCabe v. Fowler (84 N. Y. 318), wheré it was sought to hold an executor for bonds which he should have reduced to possession : “ An executor or trustee is not a guarantor for the safety of the securities which are committed to his .charge, and does not warrant such safety under any and all circumstances, and against all contingencies, accidents or misfortunes. The true rule which should govern his conduct is, that he is bound *319to employ such prudence and such diligence in the care and management of the estate or property as in general prudeut men of discretion and intelligence employ in their own like affairs. (King v. Talbot, 40 N. Y. 76.)” And in Hollister v. Burritt (14 Hun, 293) it Was said: “ Certainly an executor or administrator cannot complain if he is held to that amount of care and diligence in the management of the estate committed to him as a reasonably prudent person would employ in the management of his own affairs.”
As already said, the charge of negligence and collusion rests upon the failure of the executors to strenuously contest the claim upon the reference, and for failure to bring out all the facts as to the real estate transactions between the testator and his widow. We must assume that they are chargeable with such knowledge as inquiry and diligence would have elicited and in the light of such knowledge we are to determine whether or not they were guilty of bad faith, negligence or collusion in paying the claim.
When the widow’s claim was presented — so far as appears in. good faith on her part — the' executor Watson knew without the necessity of inquiry all the facts that she liad given to her husband in cash and property the equivalent of $9,000, and that as the result of their dealings she had received hack but $171.21; and he also knew that she had threatened to contest the will unless the claim was paid. The responsibility as to what disposition to make of the claim rested upon him. Hot wishing in the first instance to pay it he rejected it with the understanding, undoubtedly, that it should be referred, and upon it being supported before a referee that it should be paid. It is not claimed that he was responsible for the presentation of the claim, nor can we find evidence to support the view that there was any collusion by way of instigating the presentation of the claim or advising its being pressed against the estate. All that we have as bearing upon that subject, as well as supporting the charge of negligence, is in the failure to bring out in detail all the facts as to the dealings between the widow and her husband, and in not maintaining that the result of her finally accepting the ninetieth street property was a release and extinguishment of her claim. It may be that such would be the legal effect of her accepting the ninetieth street property, but this we do not decide, preferring to rest our decision upon the view that whether he was legally right or *320not in Iris conclusion that the claim was still valid and subsisting, he should not, because mistaken upon a question of law, be mulcted with a judgment which, in one view of the evidence, we think was paid in good faith.
In paying this claim the executors in no. way profited, and the estate was benefited to the extent at least of averting a threatened contest of the will; and while we do not go so far as to hold that an argument could not be supported as against the executors, we are still of opinion that the evidence does not support the conclusion that the executors were guilty of' negligence or collusion.
As said in our former opinion (Matter of Watson, 101 App. Div. 551)': “ The rule is settled that where inferences are equally consistent with innocence or guilt; equally consistent with good faith or bad, or equally consistent with the view that one upon whom a duty is placed has or has not performed it, we are required to draw those inferences which are consistent with innocence, with good faith, with diligence and performance of duty, rather than the opposing inferences. I think that, without doing violence to any of the inferences that should fairly be drawn from the facts surrounding the obtaining and paying of the judgment by the. executors, an argument could be built up in support of the view, equally as cogent and logical as that presented against it,, that, so far as the executors are concerned, there is no reason for holding that by any collusion with the widow, or through any fraud upon the estate of tyhich they are trustees, they entered into any arrangement, or were guilty of bad faith or were negligent in permitting the judgment to be obtained. ...
“ It must be conceded that there was a question as to whether the widow had or had not a valid claim against the estate. She had asserted it and was engaged in pressing it, and, in addition, she had a right and had shown an inclination to contest the validity of the will itself. The executor Watson, who had been the private secretary and business manager of the testator, and who was entirely familiar with the merits of the claim, as well as with what were the .chances of success had the widow contested the will, is not to be charged with bad faith or want of diligence if, in his best judgment, ho concluded that it would be better to avoid the contest of the will and pay the claim of the widow if it could be established.”
*321This opinion rendered on the former appeal must be regarded, so far as applicable, as the law of this case, and we think that if it had been applied to the facts which were established by the findings of the referee, and which in all things support the claim of the widow as to the payment of the money and delivery of the property to the husband, it would relieve the executors of the charge of negligence of collusion in not having more stubbornly contested the claim. What we therein said we again repeat, that “ it would seem to be a harsh and unjust rule to apply or surcharge the executors with this judgment. It is only, as said, by resolving against the appellantss inferences, equally as consistent with their good-faith and honesty as with bad faith and fraud,, that the conclusion can be reached that the claim of the widow, which was reduced to judgment and which was admittedly paid by the executors, is not a proper credit to allow them.”
In reaching this conclusion we have not overlooked the finding of the referee based upon the devise in the testator’s will to his wife, which he found to be a devise “ in lieu of dower, thirds and quarantine.” As correctly contended by appellant and supported by the cases referred to on the brief, “ a devise or bequest in lieu of dower, thirds and quarantine is not a devise in lien of debts. In order to raise a case for an election under a will, a clear and decisive intention of the testator must be manifested by the will itself to dispose unconditional! / of that which did not belong to him. If his expressions will admit of being restricted to some interest in property belonging to or disposable by the testator, they will not be held to apply to that over which he had no disposing power.” With respect to the other items, for interest paid on mortgages and the question of the amount of commissions due the executors, we agree with the learned referee and think that his conclusions are right.■ The principal item, however, which we. have, referred to, namely, the payment of the judgment recovered by the widow, we think the referee erred in disallowing, and his conclusion upon this item should be reversed and the claim allowed.
The decree should accordingly be modified by allowing the executors the amount paid on such judgment, and as so modified the decree should be'affirmed, without costs.
Ingraham, J., concurred.