(dissenting). This is an appeal by the trustees of the estate of Peter Doelger from a decree in an accounting proceeding surcharging them with the loss resulting from certain investments in real estate, bank stocks, second mortgages and other securities not legal investments for trust estates.
The late Peter Doelger owned a prosperous brewing business and he also had large amounts of money invested in real estate, bonds, his private home, mortgages and selected common stocks. It was his desire to set up various trust estates for his children and for their descendants. The residue of the estate was left to trustees, but there was a contingent clause in the will. The testator said: “ Should I, at the time of my decease, be engaged on my individual account in the brewing business in which I am engaged at the date of this my last will and testament, I direct my executors to continue the same after my decease, and I also direct them forthwith, and during the lifetimes of the two youngest children of mine, living at the time of my decease, to form a corporation under the name of the Peter Doelger Brewing Company, of which my executors shall be the directors, with such capital stock as they may deem proper, and to convey, assign, transfer and set over to such corporation, all the rest, residue and remainder of my estate, of whatever kind or nature the same may be, whether real or personal and wherever situate, including the good will of such brewing business and receive in exchange therefor the entire capital stock of such corporation.”
The testator then specified that any real estate conveyed should be subject to any incumbrances, and conveyance of the family residence was subject to the life estate conveyed to his wife. It *190was further provided that, if any legacies bequeathed by the will were unpaid at the time of the transfer of the estate to the corporation, the corporation should assume the payment and make it.
It is clear from this direction in the will (which is the only authority under which the trustees may act as directors of a corporation) that the object of the corporation was “ to continue the same [the brewing business] after my decease.” In fact, the entire scheme of a corporate administration was made expressly dependent upon his personally being in the brewing business at the time of his death. This corporation was, therefore, (1) to continue the brewing business as a part of the trust estate for a limited time, and (2) as a co-ordinate duty, to manage such part of the estate as is not necessary for the brewing business as trustees are expected to manage trust estates. The reference to the continuance of the corporation “ during the lifetimes of the two youngest children of mine, living at the time of my decease ” is not in the will for the purpose of measuring the trusts, since the trusts set up are all legal in themselves as to duration. The reference to the two younger children is meaningless unless it refers to the expected life of this corporation.
The general idea that the testator had in mind is made very clear from paragraph fifteenth of the will, which discusses another contingency. The testator said: “ Should I, prior to my decease, have already conveyed my said brewing business to a corporation organized by me for the purpose of continuing such business, then the shares of the capital stock of said corporation which I may hold and the remainder of my residuary estate shall be divided into eight equal shares, each to be held in the same manner and upon the same trusts hereinabove respectively provided for in the eleventh paragraph hereof.”
The testator thought of his brewing business and the necessary capital to run it as a separate item apart from his residuary estate. As appears from the accounting made in 1924, the trustees and directors also had such a separation in mind. The brewing business was capitalized at $200,000 and the residue of the property transferred to the corporation must have constituted a surplus. In 1929, when the business was sold, it brought $200,000, so that there was no nominal capital loss in disposing of the brewing business. The practical construction of the trustees and directors, therefore, has been to keep the business separate from the investments of the residue.
Had he ceased to be in this business or had he incorporated this company before he died and had paragraph fifteenth come into effect, obviously the assets of the estate not represented by the *191stock of the brewery would have been kept either in the condition received or reinvested in legal securities. It cannot fairly be said that this testator’s entire plan as to the investment of his estate not employed in the brewery business was to be controlled by the circumstance that his brewery business was incorporated before or after his death, i. e., that if it was incorporated before his death, a conservative investment of his other assets was contemplated, while, if it was incorporated after his death, his estate was to be subject to the perils of unrestricted speculative investments.
Further light on the testator’s intention is furnished by some of the by-laws which the will directed should be adopted. Of these, No. IV is particularly significant. It reads as follows: “ IV. That the proceeds realized from the sale of any real property of said corporation (other than such family residence and grounds) shall be again invested in real property appropriate for the business of the said corporation, or else in such manner and in such securities as may be permitted by law to an executor for investment.”
The “ business of the said corporation,” as used in this section, is the business of running a brewery which was the only business which was permitted under the will. It is stated in the briefs and is a matter of common knowledge that there was considerable competition between breweries in the acquisition of fee and leasehold interests suitable for saloons. By this section permission is granted to the trustees in the management of the brewery business to reinvest the proceeds of the sale of real estate in other real estate appropriate for the needs of the business. The testator, however, was careful to indicate that in the event such proceeds are not reinvested in real estate necessary for the conduct of the brewery business they should be invested “ in such manner and in such securities as may be permitted by law to an executor for investment.” There is thus expressed in this will a clear, consistent testamentary scheme. The testator intended that his brewery business should be continued and that the part of his estate which was not involved in that business should be conservatively invested in legal securities.
The testator’s conservative attitude is again reflected in by-law No. V where he directs that the existing indebtedness against properties held by the corporation should be reduced at the rate of five per cent a year, thus indicating a purpose that, after the period fixed for the life of the corporation, they might be ready for distribution free and clear of debt.
In 1929 the necessity arose of disposing of the brewery business and discontinuing the one business which the trustees were authorized to conduct. The business was sold and that part of the *192administration of these trusts, which involved the active conduct of a going business, was ended. The duty of the trustees from that time on involved nothing more than the simple administration of a testamentary trust. The fact that the assets of the trust were held by a corporation and their ownership was represented by stock did not change the essentials of the situation or enlarge their powers of investment. There was no authority whatever to change the certificate of incorporation of the brewing company and to reorganize the corporation so as to permit the trustees and directors to conduct any form of business.
After the sale of the brewery, nevertheless, the trustees sought to use the corporate form as authority for activities similar to those of an investment trust. They amended the charter of the corporation by expressly eliminating all the provisions authorizing the conduct of a brewery and substituted provisions so broad as to authorize almost any known business excepting a bank or an insurance company. They then proceeded to invest in bank stocks, second mortgages, real estate and similar speculative enterprises. Authority for this is said to be found in the simple fact that the testator sought, by using the corporate form, to insure the continuation of his brewery business. If the contention of the trustees is sustained, it must be deemed that, although the brewery business ends, there is still to be found in the corporate shell authority for activities involving such a radical departure from the normal conduct of trustees as may not readily be assumed to have been within the testator’s intention. Such activities were certainly not possible under the certificate of incorporation as originally drawn and are clearly not within the powers conferred by this will.
Under the circumstances, the trustees must account to the estate for their conduct in the management of the corporate affairs of a company in which the principal of the trust is invested. (Matter of Auditore, 249 N. Y. 335; Matter of Gerbereux, 148 Misc. 461; Matter of Kinreich, 137 id. 735; Matter of Pulitzer, 139 id. 575.) In Matter of Gerbereux (supra) the court in its opinion said (p. 466):
“ The surrogate has jurisdiction to inquire into the conduct of executors or trustees herein as directors of the corporation, and to hold them liable for any injury done the estate. (Matter of Auditore, 249 N. Y. 335; Matter of Kinreich, 137 Misc. 735; Matter of Pulitzer, 139 id. 575; Matter of Boyle, 140 id. 523.) * * *
“ The internal corporate management may be scanned where its treatment by an executor or trustee is questioned and such executor or trustee is a director whose responsibility to the estate is questioned, not for the purpose of dealing with the corporation, *193but to determine whether the fiduciary’s acts have resulted in a depreciation of the stockholdings of the estate.”
The rules by which the conduct of trustees acting as directors of corporations in which the principal of the trust has been placed must be judged are the same as those which would be applicable to their conduct had the principal of the trust remained in their immediate custody. If the trust res had remained in their immediate custody, there is no question but that the general provisions would prohibit investments such as are involved here.
The appellants claim that any restriction upon the investment by the trustees as directors must be expressly stated in the will, otherwise the directors are at liberty to invest in anything that offers the inducement of unusual profit regardless of how hazardous the venture may be or how disastrous its consequences. No statement of restrictions upon investments is required when the principal of the trust remains in the hands of the trustee. The statute supplied that. Why then should there be a different rule when the relation remains the same with a single exception that the res is held by a corporation and its investment is made by the trustees in their capacity as directors.
Where all the assets of a trust that are being given to a corporation are not necessary for the purposes of running the business of that corporation, it surely is the duty of testamentary fiduciaries to invest the balance of the funds in securities authorized for trust investments by the statutes of the State. Only to the extent that the tenor of the will demonstrates that the testator desired to vest in trustees a broader discretion will the trustees be protected and even then only in so far as they strictly conform to the authority bestowed. (Denike v. Harris, 84 N. Y. 89; Matter of Hall, 164 id. 196.)
In arguing to the contrary, namely, that anything can be done with a corporation unless a prohibition in words can be found against it in the will, appellants rely principally upon Boyle v. Boyle & Co., Inc., Nos. 1 & 2 (136 App. Div. 367; affd., without opinion, 200 N. Y. 597). The facts of the Boyle case are entirely unlike those involved here. No question of investment in defiance of the statute was involved. What was involved therein was simply a conflict between what the plaintiff claimed due under the will and what was claimed to be necessary to carry out the provisions of the will which directed the continuation of the testator’s business in corporate form.
The irrelevance of the Boyle case to the present issue is demonstrated by the opinion of Bijur, J., in Farmers’ Loan & Trust Co. *194v. Pierson (130 Misc. 110), a case extremely significant in a consideration of the responsibility of the appellants. Pertinent statements from the opinion of Judge Bijttr are as follows:
“ I come, then, to ask the significance of the particular claim made before me by these trustees who wish it decreed that in their accounting they stop at the point where they have become directors of a corporation. I lay aside for the moment the fact of the identity of persons, although it is not, I think, to be wholly disregarded in the final outcome. What meaning has their statement that they are directors of a corporation? Is this directorate a form of immunity? Is this position something within a £ veil? ’ It seems to me that no one of the purposes or functions legitimately included in the general scope of incorporation has any relevancy to an accounting by these trustees. If the testator considered it useful or convenient to avail himself of any corporate faculties in the conduct of his business, I see no reason why that consideration should be allowed to interfere with his declared purpose to have his property cared for after his death by trustees for the benefit of certain named beneficiaries according to the ordinary rules relating to trusts. * * *
“ There is nothing to the contrary in Boyle v. Boyle & Co., Inc., Nos. 1 & 2 (136 App. Div. 367). There the court pointed out that instead of submitting to and obeying the will the plaintiffs were trying to disregard what the will had instructed them to do. There is a statement in the opinion substantially to the effect that testamentary instructions cannot supersede positive mandates of the corporation laws — a conclusion with which all must agree, but which is wholly irrelevant to the instant case.”
The decree of the surrogate should be affirmed.
Decree reversed in so far as it directs a sale of the challenged investments and surcharges the appellants and the matter remitted to the Surrogate’s Court for further action in accordance with opinion. Settle order on notice.