App. Div.]

First Department, May, 1909.

try, but merely regulates it. The difference between actual prohibition and reasonable regulation which does not prohibit, is very broad.

We have assumed that steamship companies and their agents and National and State banks and trust companies are actually excepted by the law under consideration. If it is necessary, however, to point out any distinction, it will be observed that drafts, money orders and travelers' checks only are excepted, and not the general business of receiving deposits of money for the purpose of transmitting the same or its equivalent to foreign countries, which is specified in the body of the law. The buying of a draft or money order is not, strictly speaking, the same as receiving money for transmission. The actual money can be shipped to its destination, or, for his own convenience, the person receiving the deposit can buy a bill of exchange or draft, as he sees fit. Technically speaking, there is a marked distinction between issuing a draft or traveler's check and receiving money for transmission, but interpreting the law as applying to the same thing in both instances, we do not think the exemption is fatal.

The respondent also relies upon People ex rel. Valentine v. Berrien Circuit Judge (124 Mich. 664; 83 N. W. Rep. 594), decided by the Supreme Court of Michigan. Even though that case be directly in point, it can only be said that, however great our respect for any decision of that court may be, we do not feel justified in following it in the present instance.

The complaint alleges that the bond was given in pursuance of the statute, and nothing is disclosed in the pleadings as to whether or not the defendant voluntarily executed the bond in behalf of its principal, or whether it did so for a consideration. If Ferrara desired to comply with the law, whether it was constitutional or unconstitutional, and for that purpose applied to the defendant to execute the bond and paid it a consideration therefor, there might be a very grave question as to whether the defendant was in a position. to take advantage of its unconstitutionality if it were unconstitutional. In view of these facts not appearing, however, in the pleading, that question is not before us.

The law in our opinion being constitutional, it follows that the APP. DIV.- VOL. CXXXII. 20

First Department, May, 1909.

[Vol. 132. judgment of the Special Term overruling the plaintiff's demurrer to the defendant's separate answer should be reversed, with costs, and the demurrer sustained, with costs, with leave to the defendant to serve an amended answer within twenty days upon payment of costs of this court and of the court below.

PATTERSON, P. J., MCLAUGHLIN, LAUGHLIN and SCOTT, JJ. concurred.

Judgment reversed, with costs, and demurrer sustained, with costs, with leave to defendant to amend on payment of costs.

In the Matter of the Judicial Settlement of the Account of JAMES G. WAGNER, as One of the Executors of and Trustees under the Last Will and Testament of STEPHEN H. MARTLING, Deceased, and CECILIA G. WAGNER, Sole Executrix, etc., of ARNOLD H. WAGNER, Deceased, Who Was One of the Executors of and Trustees under the Last Will and Testament of STEPHEN H. MARTLING, Deceased, Appellants.

FARMERS' LOAN AND TRUST COMPANY, as Administrator with the Will Annexed, etc., of STEPHEN H. MARTLING, Deceased, Respondent.

First Department, May 14, 1909.

Executors and administrators when trustee not chargeable with income on principal paid to life beneficiary — failure to pay tax on lands - liability on allowing mortgagor to make default - primary liability of coexecutor intrusted with property — costs.

Where a will appointed the testator's wife and another coexecutors and trustees to pay the entire net income to the widow until a son should arrive at the age of twenty-one years, and thereafter to divide the income equally between the son and widow, it is improper to charge the widow's cotrustee with interest on the amount of principal paid over to the widow during the son's minority, for whether in possession of the principal or not, she was entitled to the income. After the son became of age the trustee is chargeable with one-half of the interest to which the son was entitled, but is not chargeable with the half payable to the widow.

Where such trustees permit taxes on real estate to become in arrears they should be charged therewith on an accounting, because it was their duty to see that taxes were paid before the life tenant took income from the property.

App. Div.]

First Department, May, 1909.

Although trustees and executors holding mortgages have permitted the mortgagors to make default in the payment of taxes and have bought in the property on foreclosure or otherwise, they are not liable to the estate if no part of the investment was lost by the negligent acts.

Where the trustee allowed arrears of taxes to accumulate on real property and paid over to his cotrustee, who was life beneficiary, the gross income without making deduction for taxes, he should not be charged with the taxes unless the same cannot be collected from the life beneficiary, and the same is true as to principal paid over.

Where an executor and trustee, who has been removed, did not use the estate to his personal advantage, but merely trusted the property to his coexecutor, he is not personally chargeable with the costs of an accounting, but they should be paid by the estate.

APPEAL by James G. Wagner, as one of the executors, etc., and another, from a decree of the Surrogate's Court of the county of New York, entered in said Surrogate's Court nunc pro tunc as of the 6th day of September, 1907.

Austen G. Fox, for the appellants.

J. Van Vechten Olcott, for the respondent.

HOUGHTON, J.:

Stephen II. Martling died leaving a last will and testament of which he appointed his wife, Anna M. Martling, and Arnold II. Wagner and James G. Wagner executors and trustees. All of them qualified on probate of the will and entered upon the discharge of their duties. After they had acted for some years proceedings were instituted by residuary beneficiaries for their removal. A decree removing them was made, and the respondent, the Farmers' Loan and Trust Company, was appointed administrator with the will annexed, and trustee in their stead. During the pendency of the proceedings Arnold H. Wagner died, and his executrix was made a party to this proceeding for an accounting. The Wagners filed a joint account, and Mrs. Martling filed a separate one. Objections were filed to both accounts, and after hearing both were largely surcharged, and the Wagners bring this appeal.

It is unnecessary to state the details of the controversy further than to refer to such parts of the decree as we deem erroneous. By the will of the deceased the testator's widow was given the entire net income of the estate until the son should arrive at the age

First Department, May, 1909.

[Vol. 132.

of twenty-one years, which occurred on the 23d of May, 1905, after which time such income was equally divided between them.

By the decree appealed from the account of the Wagners is sur charged by amounts of principal paid by them to the widow aggregating $5,275, and also with interest thereon amounting to $3,227.85. They are also charged with certain taxes and penalties thereon, which they negligently permitted to accumulate on real property owned by the estate as well as upon real property on which the estate held mortgages which were subsequently foreclosed or voluntarily deeded without foreclosure by the mortgagors to the extent of $6,210.15. For the purpose of liquidating these back taxes they are directed to pay over to the respondent, the administrator with the will annexed, the surplus income found to be in their hands, amounting to $3,485.76, as well as the sum of $2,724.39, to make up the deficiency. Costs of the accounting are charged against them personally, and James C. Wagner was denied commissions, the will having provided by legacy for compensation to Arnold H. Wagner as counsel and executor.

It was manifestly improper to charge the Wagners with interest on the amount of principal which they paid over to Mrs. Martling, the life tenant. Whether she was in possession of the principal or not, she was entitled to the income, and if the Wagners had held the principal in their hands they must have paid the interest to her. The fact that she held the principal did not deprive her of the right to the interest. All that the Wagners were called upon to do on their accounting was to make good the corpus of the estate. After the 23d day of May, 1905, when the son became of age, up to the time of the decree, they were chargeable with one-half the interest, which the son was entitled to, but not to the half which the widow was entitled to. The decree, therefore, should be modified by striking therefrom all interest on the $5,275 of principal paid by the Wagners to the widow up to the 23d day of May, 1905, from which date there should be charged against them only one-half the interest thereon for the benefit of the son Stephen V. R. Martling.

The Wagners permitted taxes to become in arrears on property known as No. 227 West One Hundred and Twentieth street, title to which was held by the testator at the time of his death. It was proper that they should be charged with these taxes and accu

App. Div.]

First Department, May, 1909.

mulated penalties because it was their duty to see that they were paid before the life tenant took the income therefrom. Instead of paying the taxes they permitted her to take the gross rentals and leave them unpaid. With respect to Nos. 231 and 233 West One Hundred and Twentieth street and Nos. 242, 246 and 248 West One Hundred and Twenty-first street the situation is quite different. One of these parcels was sold by the executors and they took back a purchase-money mortgage. All the others had been sold by the testator in his lifetime and purchase-money mortgages taken back by him, which mortgages passed to his estate. The charge against the Wagners is that they permitted the mortgagors to default in the taxes, thus crowding out the security of the mortgage. There is, however, no proof in the record that the security was impaired by this negligence or that the estate lost anything either by buying the property on foreclosure or taking deeds voluntarily given by the mortgagors, as was done in some cases. All that the estate was entitled to, and all that the Wagners were responsible for, was the amount of the various mortgages. If the property taken over at the time it was taken or bought on foreclosure was of the value of the mortgage, together with the accumulated interest and accumulated taxes, the estate lost nothing, and the negligence of the Wagners, therefore, did no harm. They appear to have been arbitrarily charged without proof that loss occurred through their acts. This branch of the controversy should be remitted to the surrogate for further proof and determination. The decree made on the accounting of the coexecutrix, Mrs. Martling, appears in the record although she does not appeal, and she is charged for the benefit of the residuary estate with substantially the same items charged against the Wagners. It was her duty before appropriating to herself the gross rentals of the real property held by the estate to pay the taxes thereon. She is an accounting party in the Surrogate's Court, and that court has jurisdiction over her acts and can determine what shall be paid to her, and we see no reason why it cannot compel her to apply her current income to the liquidation of the back taxes which she should have paid. In any event the decree against the Wagners should provide that, as to No. 227 West One Hundred and Twentieth street, they should not be compelled to pay the arrears of taxes