#### Estate of Eugene Keteltas.

*(Surrogates Court, New York County,*

*Filed May 20, 1889.)*

1. Will—Construction op—Trustees under—Power op investment— In what securities should be made.

The will of the decedent created a specific trust for the benefit of an insane son, authorizing the trustees therein named, “to collect the income * * * and apply the same to the use of my said son during his natural life. * * And I do hereby authorize and empower the said .trustees, and their survivors * * - at any time * * * whenever they shall in their discretion, deem it proper to do so, to sell, lease, mortgage or convey all or any portion of the said property * * * and execute any assignment, etc., and invest and re invest the same in such manner, and unon such securities as to them shall seem advisable.” The trustees *330invested a portion'of the estate in the bonds of certain railroad companies (which defaulted in the payment of interest), and in other securities of a miscellaneous character. Upon the filing of the account of the trustees, it was referred to a referee. Exception was taken before the referee to the illegal character of these investments, and he was asked to direct the sale of all these securities and that the trustees he required to make good any deficiency in the capital. The referee, however, reported that under the general power conferred upon the *trustees*by the will, they had power to make the inve-tments objected to. *Reid,*1. That the referee was in error; that the language of this will did not enlarge the powers of the trustees with reference to the investment of the funds of this trust; that in making permanent investments, trustees can *only*loan the trust funds on real estate or on state or United States bonds.

2. Same—Language giving discbetionaby poweb must be explicit and CLEAB.

The language used by the testator, giving a discretionary power as to the kind of securities in which investments are to be made, must be explicit and clear, beyond a doubt as to the testator’s intention.

3. Same—Accounting oe tbustees—What items impbopebly admitted.

An item of the account for which the trustees charged themselves was a legacy made to the same trustees under a similar trust by an uncle of the *cestui que trust.*The item having no connection with this will, was improperly admitted into the account and should he stricken out.

Hearing of exceptions to the referee’s report.

*John JS.*Parsons, for petitioner; *Benjamin T.*Kissam, for Henry Keteltas.

Ransom,

S.—This was an accounting by trustees of a specific trust created by the will of the decedent for the benefit of an insane son. The trustees received from the estate various securities, the face value of which is something over $27,000. About $4,000 in amount of these identical securities are still retained by the trustees, the interest being paid regularly. The trustees, prior to 1884, invested in certain railroad bonds. Three thousand dollars of these, the Houston, Texas and Central, have defaulted in interest since 1884. The investments in railroad bonds are objected to, and the contestant claims that the trustees should bo required to sell the securities and make good any deficiency in the capital.

In addition to the investments heretofore stated, they have invested accumulations of interest and money received on redeemed bonds, and on other securities of a similar character. These investments have been made upon miscellaneous securities. Upon this question of the legality or the illegality of the investments made by the trustees, a very close case is presented. Much, of course, will depend upón the peculiar language used by the testator in creating the trust and defining the power of the trustees with reference to sales and investments. The language of the will is as follows: *“*To collect the income * * * and apply the same to the use of my said son during his natural life * * * And I do hereby authorize and empower the said trustees (naming them) and their survivors * * * at any time * * * whenever they shall, in their discretion, deem it proper to do so *331to sell, lease, mortgage or convey all or any portion of the said property * * * and execute any assignment, etc., * * * and invest and re-invest the same in such manner and upon such securities as to them shall seem advisable.”

The referee held that this general authority conferred upon the trustees power to make the investments objected to. He, also, finds that such investments have benefited the estate, their present value, with the interest which has been received, being considerably greater than the sum of the invested amounts, with interest thereon at trust company rates, or upon bond and mortgage.

The leading case in this state upon the subject is *King*v. *Talbot*(40 N. Y., 76), where the testator gave his estate to the executors, “ intrusting to their discretion its investment for the benefit of my heirs.” The court of appeals held that this did not in any wise enlarge the powers of the executor with reference to the investment of trust funds.

In making permanent investments as trustees, executors can • only loan on real estate, or on state or United States bonds. *King*v. *Talbot (supra).*

The language used by the testator, giving a discretionary power as to the kind of securities in which investments are to be made, must be explicit and clear beyond a doubt as to the testator’s intention. *Matter of*Cant, 5 Dem., 270.

In this last case the will directed the executor to -invest the funds “ in such suitable manner as may be for the best interests of my estate, to be determined by my said executor.” Surrogate" Rollins held that this language did not give any broader discretionary authority than was conferred by the will under consideration in *King*v. *Talbot.*In his opinion he refutes the provisions of several wills where clauses of this description have been the subject of criticism, and held upon the facts there—a loan to an individual upon his promissory note—that the investment was illegal, and not justified by the language quoted.

The foregoing and many other authorities upon this subject are collected in McClellan’s Surr. Pr., at page 285, *et seq.*

The matter should be sent back to the referee for the reason that the parties interested can claim the benefit of an appreciation where such occurs, and throw the loss on the trustees where loss has occurred. *Gillespie*v. Brooks, 2 Redf., 349.

It appears that on October 24, 1883, the trustees bought §3,000 of Louisville and Nashville Railroad bonds with funds received from the estate of William A. Eeteltas, an uncle of the *cestui qui trust.*The sixth objection relates to this item, and is sound. There is no explanation, either in the account or the testimony, why this money was received by the trustees, as such, under the will of this decedent, or why they should account for the same herein. Certainly, upon the face of the account, it has no con*332nection "with this trust. The finding of the referee in this regard is erroneous.

In all other respects the referee’s report is confirmed.