XXI. On said sums held by Clarence H. Kelsey, as such administrator, specified in finding XVII, interest has accrued amounting on September 27, 1922, to the sum of $773.69, and it is stipulated that he should pay 9473.49/ 55130.88 of said $773.69, to wit, the sum of $132.95, to Emery J. Thomas, as administrator of Grace Watt Thomas, deceased, less his commissions, and the balance of such interest, amounting to $640.74, to Julia Watt Lawrence, less his commissions. It is further stipulated that any subsequent interest which may accrue on said sums aggregating $55,130.88 up to the date of the decree to be entered herein, said Clarence H. Kelsey, as such administrator, should pay to Emery J. Thomas, as administrator of Grace Watt Thomas, deceased, and to Julia Watt Lawrence, in the same proportion as such sum of $773.69. XXII. It is stipulated that the Mechanics & Metals National Bank, as substituted trustee, should pay to Emery J. Thomas, as administrator of Grace Watt Thomas, deceased, 7642.49/43016.67 of all income that has accrued, on the date of the decree to be entered herein, on said bonds, which are to be received by it, as aforesaid, under the above finding XIX, when such income is received by it, less its commissions as such trustee for receiving and paying out the same.

The referee's conclusions of law are as follows:

I. That the proper method of calculation by which to determine what portion of the various items specified in findings XIV, XV, and XVII of this report constitutes principal is to calculate, as to each item, what sum, if put out at interest on December 8, 1908, at the rate of 5 per cent. per annum, would aggregate, with accrued interest, to the amount of such item on the date of its receipt as specified in the said findings.

II. That the proper method of calculation by which to determine what portion of each of the said items constitutes income is to subtract from the amount of each item the amount so determined to be principal and the balance will be income.

III. Where income, so calculated, is to be divided between the representative of Grace Watt Thomas and Julia Watt Lawrence, the proper method by which to apportion such income is to divide the same, pro rata, by days, one share to the representative of Grace Watt Thomas from December 8, 1908, to August 15, 1914, and the other share to Julia Watt Lawrence from August 15, 1914, to the said specified date of the receipt of such item.

IV. That the report and opinion of the referee in the former proceeding is not binding upon me, nor res adjudicata, as to any method of calculating the apportionment of principal and income.

V. The Mechanics & Metals National Bank of the City of New York, as substituted trustee aforesaid, should be directed to hold the sum of $238,255.49 specified in finding XIV, and to account for the same as principal of the Lawrence trust, and should be directed to pay to Julia Watt Lawrence the sum of $150,189.04, specified in the said finding XIV, less its commissions of 1 per cent. thereon for receiving and paying out the same.

VI. The United States Mortgage & Trust Company, as substituted trustee aforesaid, should be directed to pay to the Mechanics & Metals National Bank, as provided in conclusion VIII, the sum of $26,881.66, specified in finding XVI, to be held and accounted for by the Mechanics & Metals National Bank as principal of the Lawrence Trust, and should be directed to pay to Emery J. Thomas, as administrator of Grace Watt Thomas, deceased, the sum of $7,642.49, specified in the said finding XVI, and to Julia Watt Lawrence the sum of $8,492.52, specified in the said finding XVI, less its commissions on all the three amounts for receiving and paying out the same.

VII. Clarence H. Kelsey, as administrator aforesaid, should be directed to pay to the Mechanics & Metals National Bank the sum of $33,321.54 specified in finding XVIII, to be held and accounted for by the Mechanics & Metals National Bank as principal of the Lawrence trust, and should be directed to pay to Emery J. Thomas, as administrator of Grace Watt Thomas, deceased, the sum of $9,473.49 specified in said finding XVIII, and to Julia Watt Lawrence the sum of $12,335.85, specified in said finding XVIII, less his commission on all three amounts for receiving and paying out the same.

(202 N.Y.S.)

VIII. That the amounts aggregating $43,016.67, which have been received by the United States Mortgage & Trust Company, as such trustee, as set forth in finding XV, have been invested by said trustee, and now exist in its possession in the form of

Cash ....

United States Liberty Loan 44%, par value...

....

$ 81.58 $46,050.00

and that the United States Mortgage & Trust Company, as such substituted trustee, should be directed to convert into cash such part of said bonds as may be necessary to enable the payment of the said sums to Emery J. Thomas, as administrator of Grace Watt Thomas, deceased, and to Julia Watt Lawrence, and its commissions, and to deliver the remainder of said bonds, and to pay any balance of cash to the said bank as such substituted trustee.

IX. The account of the United States Mortgage & Trust Company, as such substituted trustee, covering the funds referred to in findings XV and XIX, for the period from December, 1917, to August 30, 1922, should be approved as filed, and the decree to be entered herein should provide that upon complying with the directions as to payments herein contained as they shall be set forth in the decree, said United States Mortgage & Trust Company shall be relieved from all further responsibility or liability to any person interested thereunder as to all matters contained in its said account.

X. That the United States Mortgage & Trust Company, as such substituted trustee, has received income on the amounts aggregating $43,016.67, received by it as specified in finding XV, which income on August 25, 1922, amounted to $2,736.14, and that it should be directed to pay $486.11 of said income to Emery J. Thomas, as administrator of Grace Watt Thomas, deceased, less its commissions for receiving and paying out the same; that said substituted trustee has overpaid Julia Watt Lawrence on account of said income and after making said payment to Emery J. Thomas, as administrator of Grace Watt Thomas, deceased, it is entitled to reimburse itself out of any income in its possession, or which may come into its possession to which Julia Watt Lawrence is entitled; and that any and all other income that the United States Mortgage & Trust Company, as such substituted trustee, may receive from August 25, 1922, to the date of the decree to be entered herein, on said sums amounting to $43,016.67, it should be directed to pay to Emery J. Thomas, as administrator of Grace Watt Thomas, deceased, and to Julia Watt Lawrence, in the same proportion as said sum of $2,736.14 is apportioned.

XI. That of the interest amounting to $773.69 that has accrued on the sums aggregating $55,130.88, which is held by Clarence H. Kelsey, as administrator aforesaid, as part of the fund of the Thomas trust, as specified in finding XVII, he should be directed to pay the sum of $132.95 to Emery J. Thomas, as administrator of Grace Watt Thomas, deceased, less his commissions, and that the remainder of such interest, amounting to $640.74, he should be directed to pay to Julia Watt Lawrence, less his commissions; and that any subsequent interest which may accrue on said sums up to the date of the decree to be entered herein, said Clarence H. Kelsey, as such administrator, should be directed to pay to Emery J. Thomas, as administrator of Grace Watt Thomas, deceased, and to Julia Watt Lawrence, less his commissions, in the same proportion as said sum of $773.69 is apportioned.

XII. That the Mechanics & Metals National Bank, as substituted trustee aforesaid, should be directed to pay to Emery J. Thomas, as administrator of Grace Watt Thomas, deceased, 7642.49/43016.67 of all income that has accrued on the date of the decree to be entered herein, on the bonds, which are to be received by it, when such income is received by it, less its commission as such trustee for receiving and paying out the same.

The following is the opinion of the referee:

This is a special proceeding brought by Julia Watt Lawrence for the apportionment of three funds, aggregating over $486,500, consisting of proceeds of sales of real estate, constituting part of the residuary estate of Mary G.

Pinkney, deceased, and for a decree awarding to Mrs. Lawrence so much thereof as shall be found to be income belonging to her as beneficiary of certain trusts created by Miss Pinkney's will.

Mary G. Pinkney died on December 8, 1908. She divided her residuary estate into fourths and eighths, but, because of the fact that one Archibald Watt predeceased her, the division became thirds and sixths. Thus she gave one-third of her residuary estate to her executors, in trust, to pay over the income to Mrs. Lawrence during her life, and upon her death to distribute the principal among her descendants (“the Lawrence trust"). She gave onesixth of her residuary estate to her executors, in trust, to pay over the income to Grace Watt Thomas during her life, and, upon her death, in case she should die without issue, to distribute the principal, one-half to Thomas L. Watt, or his representatives, and one-half to the trustee of the Lawrence trust ("the Thomas trust").

Mrs. Thomas died intestate and without issue on August 15, 1914, so that the Thomas trust terminated on that date.

Miss Pinkney left an estate consisting largely of unproductive real property. It was not possible for those charged with the administration of her estate to sell the whole, or a substantial part thereof, at or immediately after Miss Pinkney's death, except at an undue sacrifice, and they therefore postponed such sale. A large part thereof still remains unsold.

There has been considerable litigation under Miss Pinkney's will. The leading case is Lawrence v. Littlefield, 215 N. Y. 561, 109 N. E. 611. In that case the Court of Appeals decided that Miss Pinkney intended that any proceeds of sales of this unproductive real estate, "thus and when realized," should be apportioned between income, payable from the time of Miss Pinkney's death to the life beneficiary, and principal, belonging to the remaindermen, and that she did not intend that such proceeds, "thus realized," should be treated wholly as principal, with income payable thereon to the life beneficiary only from the date of actual conversion.

There has also been a proceeding to apportion and recover the proceeds of a series of sales of this unproductive real estate. That proceeding was referred to an unusually competent referee, and his decision was duly affirmed by the Surrogate's Court and by the Appellate Division, and applications for leave to appeal to the Court of Appeals were denied.

The present proceeding before me is an application to apportion and recover the proceeds of a second series of sales made subsequent to the former referee's decision, to wit, to apportion proceeds of sales variously held by Clarence H. Kelsey, as administrator, with Miss Pinkney's will annexed, foi the benefit of the Thomas trust, by the Lincoln Trust Company (now the Mechanics & Metals National Bank), as trustee under the Lawrence trust, and by the United States Mortgage & Trust Company, as trustee under the Thomas trust. In other words, the former referee duly made an apportionment between principal and income of the proceeds of the first series of sales, and the object of the present proceeding is to have me, as referee, make a similar apportionment of the proceeds of the second series of sales.

[1] The parties stipulate that the rate of interest to be used as a basis of calculation should be the same as that before the former referee, to wit, 5 per cent. Needless to say, the former decisions, in so far as they decide any issue raised before me, are binding upon me and are res judicata.

Under Miss Pinkney's will, and because of Archibald Watt's death, the primary division of all sales was into thirds. There is, then, a second division as to the third receivable by Mrs. Thomas, one half going to her representative outright, and the other half going to the trustee of the Thomas trust for her life, with remainders over. This would naturally lead to the assumption that I have before me a petition for the distribution of one-sixth of the proceeds of each sale; but, as a matter of fact, the petition relates to only one-twelfth of the proceeds of each fund. In other words, those charged with the administration of Miss Pinkney's estate have, since Mrs. Thomas' death, paid over one-half of one-sixth upon a private arrangement between the representatives of Thomas L. Watt and Mrs. Thomas' representative as to the proper division between principal and income. The result is that,

(202 N.Y.S.)

in all calculations before me, I am to treat all Thomas funds as though Miss Pinkney had given such fund, in trust, for Mrs. Thomas, during her life, and then for Mrs. Lawrence during her life, with remainders over. I, of course, have no jurisdiction, except to distribute the one-twelfth which has been brought before me, and no one before me questions the propriety of the distribution of the other one-twelfth by those charged with the administration of Miss Pinkney's will.

[2] Towards the close of the reference before me, there remained only one question to be decided. Counsel for the remaindermen and for Mrs. Lawrence urged one method of apportionment of the funds held for Mrs. Thomas and Mrs. Lawrence. Counsel for Mrs. Thomas' representatives urged an alternative method of apportionment and also urged that the decision of the former referee is res judicata upon the method of apportionment which they asserted he adopted. I have decided that the method urged by counsel for the remaindermen and for Mrs. Lawrence is correct. I have also held that the former referee, whose figures are concededly supplied to him by counsel for Mrs. Lawrence, did not adopt either of the two methods of apportionment urged by counsel, and that the result of the figures which counsel supplied to him was to employ both methods of calculation. For that reason I have held that his decision is not res judicata as to either method of calculation, but that, on the contrary, I concededly and obviously must adopt one or other of the two methods of apportionment, so that the parties will have a definite rule for this case, and also for all future sales. It is therefore of grave importance that this question be definitely settled for all time, if, indeed, it has not already been decided by the Court of Appeals in Lawrence v. Littlefield.

[3] As above stated, I decided the question upon the reference; but it is so involved that I deem it my duty to write this opinion, so as to fully acquaint the court with the exact situation and enable the court to review my decision, without resort to the voluminous documents in the case for its information as to facts, figures and calculations. The apportionment of the funds held by the Lincoln Trust Company, as trustee under the Lawrence trust, presents no difficulty. These funds are held by it as trustee for the benefit of Mrs. Lawrence during her life, with remainders over. This is a single trust. The only dates to be considered are December 8, 1908, the date of Miss Pinkney's death, and the respective dates on which the proceeds of sales were received by the trustee. The rate is 5 per cent. The computation is merely to ascertain as to each receipt what sum, if put out at interest at 5 per cent. on December 8, 1908, would amount on the date of such payment to the amount received by the trustee. These figures have been duly fixed by consent.

The controversial question arises as to the apportionment of the funds held for the Thomas trust. In this instance there are two succeeding trusts, one for the life of Mrs. Thomas, which expired upon her death on August 15, 1914; then a trust for the life of Mrs. Lawrence, with remainders over. As above stated, there are two different methods for making this computation, which will bring about radically different figures. The method of computation which I have adopted is to start with the various dates when each sum of proceeds of sales was received, and to first determine, as of those dates, under the rule laid down by the Court of Appeals, what sum, if put out at interest at 5 per cent. on December 8, 1908, would amount on the dates of such receipts to the amounts received by the trustee. This would fix the amount of the principal as of Miss Pinkney's death, as of Mrs. Thomas' death, and of the date of the receipt of the cash-one principal and only one principal. The income may then be readily divided between Mrs. Thomas and Mrs. Lawrence, pro rata, by the number of days, first, between December 8, 1908, and August 15, 1914; and second, between August 15, 1914, and the date of such receipt of cash.

The other method of calculation is to assume that which is not a fact, to wit, that the money was received on August 15, 1914, and to first ascertain, as to each receipt, what sum, if put out at interest at 5 per cent. on December 8, 1908, would amount on August 15, 1914, to the amount received. This

would fix one principal as of August 15, 1914, and give all the balance to Mrs. Thomas as being income. This calculation, however, would not be final, because it would neither determine the amount of principal as of the date of the receipt of the payment nor the Lawrence income. It would require a second calculation, to wit, to ascertain what sum, if put out at interest at 5 per cent. on August 15, 1914, would amount, on the date the money was actually received by the trustee, to the amount of this "principal" No. 1. The amount so ascertained would be principal No. 2 as of the day of payment. The balance would be Lawrence income.

It has been urged before me that the method of calculation was determined by the former referee and that his decision is res judicata. I have found against that claim. This particular question as to method of calculation, which has assumed first importance upon the present reference, was, because of Mrs. Thomas' recent death, of comparatively small importance upon the last reference, and it has been frankly admitted by counsel for Mrs. Lawrence, without dispute, that he prepared the figures which were submitted to the learned referee, and they were incorporated in his report without change. At that time these figures were not controversial, and were not questioned by any one, either before the surrogate or on appeal. As the late Justice Gaynor used frequently to say, they were "inadvertent." Furthermore, and more important, it conclusively appears that these figures do not embody either method of calculation which could be the basis of a plea of res judicata. The figures themselves demonstrate that the figures involved both methods of calculation, and did not follow either the one or the other; so that I am absolutely constrained to disregard the former report, in order to decide which one of the two intermingled calculations is correct.

This is important; so let me make it entirely clear. Take, for example, the first payment passed upon by the former referee. This first appears in conclusion III of his report, at page 82, folio 244, of the printed record in the Appellate Division. It reads as follows: "$1,000 (received February 7, 1916); principal (as of August 15, 1914), $736.14; income, $221.30." Note, first, that if we add $736.14 and $221.30, the total is not $1,000, but $957.44! What has become of the balance? Let us, in the first instance, calculate this $1,000 item under each of the two methods of calculation:

(a) Under the first method of calculation, starting with February 7, 1916, the date the trustee received this $1,000, the amount of principal would be $736.14, and the amount of income to be divided between the two beneficiaries would be the balance, amounting to $263.86. Between December 8, 1908, and August 15, 1914, there are 2,076 days, and between August 15, 1914, and February 7, 1916, there are 541 days. The item $263.86 divided pro rata, by days, between Mrs. Thomas' representative and Mrs. Lawrence, amounts to $209.31 and $54.55, respectively.

(b). Then, taking the second method of calculation, by assuming a fiction that the $1,000 was received on August 15, 1914, instead of February 7, 1916, the amount of principal as of August 15, 1914, would be, not $736.14, but $778.70 (a figure which had to be determined in this calculation, but which nowhere appears in the report), and the balance, as of August 15, 1914, would be $221.30. In other words, referring to conclusion III, the item $736.14 therein stated to be principal was obviously found by the first method of calculation, and the item $221.30 therein stated to be Thomas income was obviously found by the second method of calculation.

The same series of items are set forth in conclusion V at page 83 of the printed record (folio 248), which read as follows:

Here, again, the item of principal was found by the first method, and the item of Thomas interest by the second method. How was the amount of Lawrence interest found? A. By a wholly arbitrary subtraction. What was subtracted from what? A. Curiously enough, this item of income, $42.56, may be arrived at either by subtracting the principal of $736.14, as calculated un