Under the terms of the policy the assured has agreed to pay to the beneficiaries named in the policy the sum of money stipulated in the policy. No conditions are attached to that promise and the beneficiaries are entitled to demand payment immediately. The policy, however, grants "optional methods of settlement" and provides that "if it is so elected the whole or any part of the net proceeds of this policy payable as a claim by death * * * will be retained by the Company and settled in accordance with the provisions stated below. * * * Option 1. The Company will make monthly interest payments on the sum retained during the life time of the payee or for a specified period at such rate as the Company may declare for each year, but never less than the equivalent of the yearly rate of three per cent.; * * *."
By exercise of that option a beneficiary may obtain an investment which he could obtain in no other way and *Page 107 which in the opinion of the beneficiary may be more advantageous than any other investment which the beneficiary can make. Before determining whether to exercise such an option, a prudent person would weigh the comparative advantages of that investment and investments of other kinds. Larger income return might perhaps be obtained from other investments, but at a risk which a prudent investor might not desire to take. Other investments equally safe might return a smaller income. Choice of investment may depend upon the knowledge and care of the investor and upon the comparative importance to the investor of safety and size of return. A contractual right to make an investment not otherwise obtainable is valuable to an investor who prefers such investment to any other investments that he might make.
In the investment of trust funds a fiduciary is not entirely free to weigh and balance conflicting considerations of safety and size of return. His choice of investments is limited by statute. The Legislature has specified "those types of investments which to the Legislature seem to afford a maximum of safety." Investment of trust funds by a fiduciary in manner not authorized by the statute may be regarded as a devastavit. (Delafield v. Barret, 270 N.Y. 43, 48.) Concededly the statute does not permit a guardian to place moneys of an infant on deposit with an insurance company; concededly, if the insurance company had paid the amount of the policy to the guardian of the infant the guardian would not under the statute have been permitted to hand back the moneys to the insurance company to be held upon the terms specified in the option. That would have constituted an unauthorized investment; but it is said that here there has been no investment because the choice or option granted to the beneficiary by contract is whether to receive immediately the amount due under the policy or to direct the company to "retain" the money due at interest. Because there has been no money paid to the guardian there has been, it is said, no investment by the guardian. *Page 108
A direction to a debtor to "retain" at interest for a definite time moneys presently due which the debtor is ready to pay is, aside from purely technical distinctions which carry no practical consequences, an investment of the moneys. The application of safeguards provided by the Legislature for the protection of trust funds should not depend upon technical distinctions without practical consequences. The same considerations which might properly induce the Legislature to limit investment of trust funds to those types of investment which seem to afford a maximum of safety apply with equal force to a direction to a debtor to retain moneys presently payable to a fiduciary as part of a trust fund. There is no analogy here to those cases where a testator or settlor places in a trust fund property which a trustee would not be free to purchase as a proper investment of the trust fund. In such case the powers of the trustee are derived from the trust instrument; the creator of the trust fund has chosen the property which should be held by the trustee. In this case the assured has made no such choice. Under the contract made by the assured the beneficiaries are entitled to payment of a sum of money. Because the beneficiaries are infants the moneys are payable to their guardian. He is under a duty to invest the moneys received in accordance with the statute. The policy confers a right to direct the insurance company to retain the money at interest. Beneficiaries who are free to invest their moneys as they choose can avail themselves of this contractual right. The assured has not expressly or by fair implication indicated that if the beneficiaries should be infants at the time when the moneys become payable their guardian should have the same choice as to the manner in which the trust funds should be invested as adult beneficiaries would have had. The purpose of the statute is to guide a guardian and other fiduciaries in the investment of trust funds. Freedom to reject such guidance may not be conferred by the courts or based upon doubtful implications. The infant beneficiaries are entitled to receive the moneys immediately payable under the policy. Acceptance of an *Page 109 obligation from the debtor to hold at interest for a definite term moneys presently payable in settlement or substitution of an obligation to pay the moneys, is an investment of the fund as much as if the moneys had been paid and then used to purchase a similar obligation. To hold otherwise is to disregard the substance and to give effect to form alone. To hold that the guardian may use his judgment as to whether an obligation by the insurance company to retain at interest moneys due is the most desirable form of investment of moneys belonging to an infant is to reject the command of the Legislature that only specified types of investment, selected because of safety, shall be treated as proper investment of such funds.
The judgment should be affirmed.
CRANE, Ch. J., O'BRIEN, HUBBS, LOUGHRAN and RIPPEY, JJ., concur with FINCH, J.; LEHMAN, J., dissents in opinion.
Judgment accordingly. *Page 110