Cross-appeals from a final judgment in- an action brought by one of the trustees under the last will and testament of Marshall O. Roberts, deceased, from an intermediate accounting. By the 2d clause of his will the'' testator gave to his widow, the defendant Vivian, “ the use and enjoyment for and during her life ” of the family residence ón Fifth avenue, including two houses and the adjoining grounds and stable, together with the household furniture, books, pictures, silver, jewelry, etc.; and the' horses and stable furniture. By the 5th clause of the will he directed his executors out of his estate and the rents and profits thereof to keep said premises in suitable and proper repair, and to keep the houses, stables and personal property insured during the life of the wife so that she should not be at any. expense on account thereof. He also directed the executors to pay all taxes and assessments which might *602' “ be assessed upon or be chargeable upon the said real estate and upon the pictures and other personal property in the said houses and stables during the same time.” By the 6th clause of his will he directed his executors to set apart out of the principal of his estate sufficient to produce an annual income of $40,000, which he bequeathed to them in trust to pay the income thereof to his wife in lieu of dower. By the 7th clause, as modified by the codicil, he gave the residue of his estate to his executors in trust during the life of his widow and a daughter, Mary M. Roberts, annually to pay out of the income thereof a stated sum to three children, By the 8th clause he directed that in case the net income of his .estate, after paying taxes, assessments, etc., was insufficient to provide the last named sums there should be a pro rata deduction therefrom ; and that, if there should be a surplus, it should be divided in the manner stated. By the 9tli clause he gave the residence and personal property, referred to in the 2d clause, to his executors in trust, subject to the life estate of the wife, to hold the saíne during the life of the daughter, Mary M. Roberts, upon the trusts described in the 8th clause, with a direction that the trustees or trustee “ who may then survive,” sell and dispose of the personal property or such portion thereof as in- their or his judgment may properly be sold and dis-' posed of. By the 11th clause of his will he gave his executors power of sale in their discretion “as to any property-over which they,- in that character and capacity, are given the control and management.”
The widow remarried.and took up her residence in England, and the question then arose what disposition should be made of the family residence and the personal property of which she was given the life'use. A friendly suit was brought in 1893 for the instruction of the court and for a decree authorizing the sale of the peisonal property. All parties appeared in that action, the infant son, Marshall O. Roberts, by guardian ad litem. A decision was made in which it was found that it was for the interest of all parties that a sale be had, and “ thereby the estate of the infant will be relieved from its share of the expenses of maintaining the property in.its present condition, and said infant will, upon the final distribution of the estate, receive a larger sum than if the said property be held until the death of the life- tenant,” and that all except the
*603infant assented thereto. A judgment was entered upon that decision directing, a sale of the property and the investment of the proceeds in the kind of securities directed by the testator for the investment of his estate; the payment of the income so invested to the defendant Vivian during her life, and the distribution of the principal upon her death according to the terms of the will. The personal property was sold, realizing net the sum of $57,704.77; $55,000 of that was invested by the trustees in their name in a real estate mortgage; the balance was deposited in a ' bank. The mortgagor made default, the mortgage was foreclosed, and the mortgaged property, two houses referred to in the record as the West End avenue houses, was bid in by and-in the name of the trustees for $50,000, and a deficiency judgment was taken against the mortgagor for $11,299.17. That judgment is worthless. The property was left vacant until it could be rented upon suitable terms, and substantial repairs had to be made, with the result that on the date taken for the settlement of the trustees’ accounts, the total rents received were $5,007.55 less than the payments for expenses, taxes, insurance and repairs; that deficit had been made good by the trustees from the principal of the general estate. In 1899 another friendly suit was brought for the purpose of procuring a sale of the family residence. In that, as in the other suit, all appeared, the infant by guardian ad litem, and-^a somewhat similar decision was made, vhich recited that the defendant Vivian was given the use and enjoyment of said real estate during her life, and that the executors were directed to keep the premises in repair and to pay all taxes and assessments thereon ; that it was for the interest of all parties that the premises be sold; that all except the infant defendant assented thereto, and that by a sale and the investment of the proceeds “ the estate of the infant will be relieved from its share of the expense of maintaining the .property.” It was also found that the property could then be sold to a better advantage than at a later period, and that “ such sale will relieve the estate from a large expense for care and maintenance thereof.” Upon that decision a judgment was entered, authorizing and directing a sale of the property for $500,000, and the investment of the proceeds of the sale in the kind of securities directed by the testator for the investment of his estate; the payment of income thereon to the defendant Vivian *604. for and during her life, and upon her death, the distribution of the principal according to the terms of the will. The judgment in that action did not purport to construe the will. A contract of purchase and sale had theretofore been made by the executors with one Corn, but he refused to take title without an adjudication that the executors had the power to. sell, whereupon another action was brought, the same persons being parties, which resulted in a judgment construing the will and adjudging that the executors did have the power of sale of the remainder and the defendant Vivian the power to sell her life estate, and directing that a sale be made and that the proceeds-be invested in the'manner prescribed in the will, and -that “ the net income thereof ” be paid to the defendant Vivian during her life, and upon her death that the principal should be distributed in the manner provided by the will. A sale was made for ■ $500,000, which, together with the sum of $300,000 from the general estate, was invested by the trustees in an $800,000 bond and mortgage, taken in their name. In her answer, filed in the suit last above mentioned, the defendant Vivian alleged “ that the care of said premises, including the necessary insurance thereorij the keeping of the same in repair, and the payment of taxes thereon,.is a source of large expense to the estate of said Marshall O. Roberts.”
By the judgment appealed from, the personal taxes paid by the trustees were apportioned between the general estate and the special trust fund of $500*000, which has been styled for convenience the “.homestead fund; ” the taxes assessed on the real property, purchased on the foreclosure of the $55,000 mortgage, amounting to $5,504.27, and the premiums for insurance thereon, amoiinting to $292.50, were charged to the income of the special trust, created by the sale of the personal property, styled for convenience the “personal property fund ; ” the amount taken from the principal of the general estate to make good the deficit of receipts from the personal property .fund was directed to be repaid, $2,375.52 from the principal of -the personal property fund and $2,632.06 from the income of that fund as realized.
The personal assessment was against both trustees as such for an amount at all times less than one-half the amount of personal property assessable against the resident trustees. The trustees paid the taxes without objection eácli year.
*605The judgment undertakes to provide a basis of apportioning-between principal and income the proceeds realized in case of a future sale of the houses, belonging to the personal property fund".
The testator owned an unimproved tract of land on Columbus avenue in the city of Hew York, worth $22,600 at the time of his death, which was retained by his executors until 1902, and then sold for $200,000. Meanwhile, taxes. thereon amounting to $24,344..0’7 had been paid from the general income.
All but one of the questions presented on this appeal may easily be disposed of.
The Columbus avenue lots formed a part of the general estate of the testator, left to his executors in trust with the power of sale to' be exercised in their discretion, and until sdld remained a part of the capital of the estate. Appreciation in value is not income. The cestuis que trustent have not contributed the taxes, as is contended) because they were entitled only to" what was left after the payment of such taxes. There is no question but that the discretion of the executors has been wisely exercised and, as a result, such cestuis que trustent will ■ now receive an income of $200,000. Cases arising upon investments made by trustees have no application. The-appellants Yan Wart and Roberts cite Matter of Rogers (22 App. Div. 428), and rely upon certain expressions in the opinion of Cullen, J., wholly apart from their context. That case dealt with the distribution among stockholders of certain assets of a dissolved corporation and of the stock of a new corporation organized to take over the plant and the business of the old one. The nature of the transaction itself, rather than the will of the testator, determined whether the distribution was of capital or income.
There was no basis for apportioning between principal and income a paper loss, sustained upon the foreclosure of the $55,000 mortgage or for dividing the proceeds of a sale which has not yet occurred. The foreclosure of the mortgage resulted merely in a change of the form of the investment. In place of the mortgage, the trustees have real estate and a deficiency judgment. Whether there will be a loss or a gain can be determined only wh'en the property is sold, and it will be time enough then to make an appointment. It was' stipulated that the referee should determine all questions raised by the answer of the appellant Yivian; but *606before making an apportionment, he had to decide the preliminary question whether one should be attempted at all.
' Doubtless, the trustees could have been required to pay only one-half of the personal taxes assessed against them, as one was a nonresident. Refusal to pay, however, might have invited a closer scrutiny by the taxing officers and have resulted in an increase of the assessment. The .trustees, believing it to be for the interests of their estate, paid the taxes as assessed without question. Common experience indicates that they were prudent, and they should not be. penalized for it. The fact that they might successfully have resisted the payment of one-half of the taxes assessed in any given year does not establish that, as between them and the estate, the payment without objection was wrongful, or that the estate, thereby ultimately suffered a loss.
The testator did not direct his executors to make repairs to the household furniture. Upon no theory, therefore, could they be justified in using either principal or income of the general estate to make repairs to the West End avenue houses, belonging, to the special personal property trust, and it is immaterial now whether such repairs weré betterments or ordinary repairs, because neither principal nor income of the general trust estate created by the testator can be used for ordinary repairs or betterments to real property belonging to a special trust, created apart from and independent of the will. When the property is sold or when the -trust terminates it will be time enough to determine the equities between the principal and income.
The accounts of. the executors were adjusted as of the 1st day of January, 1907. The real property belonging to the personal property fund produces a gross income of $3,700 a year. The question of the repayment to the general fund of $2,632.06, directed to be paid out of the income of the personal property fund,, is apparently of no' importance now; and it is unnecessary to consider whether the appellant Vivian should have been required personally to make the general estate good.
We come now to the only difficult question ini the case. Must the two special trusts bear their own burdens, or are the faxes and insurance premiums to be paid out of the general estate? A preliminary question is presented whether the personal assessment *607against the executors and trustees under the will of Marshall O. Roberts, deceased, covers or includes the $500,000 special trust fund. " Vo doubt, as the appellant Vivian-contends, that trust was created apart from the will, and other trustees might have been selected. ■ But in fact the executors -and trustees under the last will and testament of Marshall O. Roberts, deceased, were nominally as such designated as trustees of the special trusts. It is immaterial that that may have been merely descriptio personarum. By that name they held the legal title to the mortgage given to secure the $500,000 . fund, as well as the $300,000 belonging to the general estate. They were, therefore, assessable as such, both for the special trust fund and the personal property belonging to the general estate, and while - we cannot know precisely what items of property the assessors considered, in legal contemplation the assessment must be deemed to have been made on account of all the property for which the trustees as such were liable to assessment.
Another contention of the appellant Vivian may also be dismissed, viz., that the payment of the taxes, etc., on the special trust funds was required by the 8th clause of the will. Plainly, that clause was intended only .to provide for a possible deficiency or surplus of income, required by the 7th clause. Standing alone, it could refer only to the general-estate, and by no permissible construction could it require the payment from the general income of taxes otherwise chargeable on the life tenant. (See De Witt v. Cooper, 18 Hun, 67; Matter of Shipman, 82 id. 108,116; Matter of Albertson, 113 N. Y. 434; Amory v. Lowell, 104 Mass. 265.)
Vo doubt the- defendant Vivian was given a life estate in the real and personal property in question, and the general estate was charged with the payment of- taxes and insurance thereon, and with the maintenance in repair of the real property. She could have occupied or leased the property, and she could have sold her interest therein, the purchaser taking it freed from the burden of taxes, etc. So much, in legal contemplation, the testator must have known, although it is reasonably plain that he charged his general estate with the payment of taxes, etc., for the purpose of enabling her to occupy the family residence without intrenching upon her income of $40,000. That he expected her to occupy the residence and use the furniture may be inferred, and he said that he did not wish her *608to be at any expense on account thereof; in other words, he wished ' to free her from the necessity of using any part of her $40,000 income to maintain.the' property in which he gave her a life estate. His direction was that the executors pay the taxes assessed on specific property, i. e., “ said real estate and upon the pictures and other personal property in the said houses and stables,” and he expected that specific property to remain a part of his estate until the termination of the life estate.
He disposed of the property in question as follows: A life estate to the wife, remainder in trust to the executors, the ultimate,remainder in fee to persons named. The general power of sale to the executors was of all property over which they, were given control and management; plainly, they had no control/ or management of this property during the life term, and there "was a specific direction with reference to a sale of the personal property given to the trustees or trustee “who may then survive,” obviously referring to the termination of the life estate. In case of any sale by the life tenant. or by the ultimate remaindermen, or by both together, which the testator could have contemplated, the specific property upon which the testator directed taxes to be paid would, because of the intermediate trust estate, have remained subject to the direction for the paymént of taxes, etc., until the termination of the life estate. He did not provide for the making of repairs to, or the payment of taxes on, substituted property. He did not authorize, but may well have supposed that he had effectually prevén ted, a substitution. However, if the adjudication) assented to by the parties for the purpose of a sale, that the executors had the power to sell during the life term, be regarded as a binding adjudication, in the light of which every provision of the will must be construed, still the appellant is no better off, for then, though a substitution of property was contemplated by thé testator, he confined his direction to specified property. A direction to pay taxes on household furniture cannot be construed as. a direction to pay taxes on improved real property; and a direction to make repairs to, and-to pay taxes on, the family residence, cannot be construed as a direction to pay taxes on a real estate mortgage or to make repairs to any sort of property which might belong to a trust created on á sale of such residence. Upon the sale of the residence in this case the trustees *609took an $800,000 building loan mortgage on the property, the grantee erecting in place of the house a fourteen-story building. Five hundred thousand dollars of that mortgage belongs to the special trust and $300,000 to the general estate. Suppose, that mortgage should have to be foreclosed and the property bid in, is it conceivable that the special trust would be entitled to its proportionate share of rents, freed from any burden of maintenance, simply because the testator directed that the family residence be kept in repair, insured, and the taxes on it paid, so that the wife should not be put to any expense on account thereof ? In place of occupying the residence and using the furniture, the widow now has a handsome income from two special trusts in addition to the $40,000 income secured to her by the testator. The fact that the internal evidence of the will plainly shows that the testator’s purpose in making the direction in question was to enable the widow to have the personal use of the residence, furniture, etc., without intrenching upon her $40,000 income, is a cogent, if not a controlling reason for not extending that direction to a case which the testator did not contemplate or contemplating did not provide for.
The' parties having seen fit to create a situation apart from the will, their rights must be determined by the acts creating that situation, to be construed no doubt in the light of the will. As shown by the pleadings and the findings, referred to in the statement of facts, one of the reasons for a sale was that thereby the' general estate would be relieved of the burden of care and maintenance; and the only burden of care and maintenance on the general estate was that imposed, by the direction in question. Care and maintenance as interpreted by the defendant Yivian in her answer, filed in the last suit, included the payment of taxes and insurance premiums. The final judgment directed the payment of “ net income.” It cannot be assumed that the word “net” was used by mistake or inadvertence. Moreover, the income of a trust, payable to the cestui que trust, means what is left of receipts after meeting the. expenses of the trust; and if the word “net” had not been used, the word “income,” construed with reference to the declared purpose of freeing the general estate from the burden of care and maintenance, could only mean such income as is ordinarily paid to a cestui que *610trust; i. e., “ net income.” JSTo doubt, as the appellant contends, for the purpose of ultimate distribution, the property belonging to the special trusts is to be deemed as substituted for the' property specifically devised by the testator. But it by no means follows that there has been a substitution for all the purposes of the will. In fact, there has not been; The life estate has been extinguished. The appellant is now a cestui que trust, entitled to the income of a trust fund created wholly apart from the will. She is no longer a life tenant by virtue of the provisions of the will. In fact, she has sold her life estate for the income of a trust, and the purchase price, Which she has stipulated for, must be deemed to have been intended as the purchase price of her entire interest, which was the right to the life use of the property, freed from the burden of paying taxes.
So far as she is concerned, the case is the same as though she had sold her life estate for a lump sum. It is unnecessary to decide what the situation would have been in the case of an involuntary sale of the property; e. g., the foreclosure of a mortgage, executed by the testator, assuming there- was one, leaving a surplus, paid over to the life tenant upon her giving security, because we havé no such case. Here, the rights of the parties have been fixed by their voluntary agreement; If the appellant desired gross income, she should have exacted it. In place of doing that, she has assented to the sale of the property and the payment to her of the net income of trust funds,- upon the ground, among others, that the general estate will thereby be freed from the burden of care and maintenance, i. e., of carrying out the direction contained in the 5th clause of the will.
So much of the judgment as undertakes to apportion, between principal and income the sum to be realized on a sale of the West End avenue houses should' be stricken out and, as thus modified, the judgment should be affirmed, with costs to all parties to the appeal payable out of the estate.
Clarke, J., concurred.
Judgment reversed, with costs to all parties out of the estate, and case remitted to Special Term, as stated in opinion.