The accounting in this ease embraces four trust years, July 1, 1908, to June 30, 1912, inclusive, and is presented by the trustees under section 1699, Code of Civil Procedure.

The trust was established and adjudicated by a decree of final distribution, dated June 14, 1901 (filed June 21, 1901) in this court, Department 9, in the proceeding 23,482, probate, entitled, “In the Matter of the Estate of Francis Henry Woods, also known as and called Frank H. Woods and Francis H. Woods, and F. H. Woods, Deceased.” No appeal-'was ever taken, nor any attempt at an appeal from this decree, and it therefore became final, and it was consented to by Harry F. Woods, who was and is the sole heir at law of said decedent and testator, and the only person who eould ’have objected to said decree to which he expressly consented, ásdsrecited by the court therein. In and by that decree all the-residue of the estate of the decedent testator, after payment of said legacies, was distributed to Harry F. Woods, Edward Barry, Timothy J. Lyons and C. G. Minifie, and their successors in the trust, as trustees upon the trust, and for the uses and purposes set forth in said decree. That immediately ¿port *454 the entry of said decree the property distributed thereunder to the said four trustees was delivered to and taken possession of by them as such trustees, and pursuant to and in acceptance of the trusts declared by said decree, whereupon the said trustees entered upon and in the performance and discharge of their duties as such trustees and the administration of said trust, and continued therein until the resignation of the said C. G. Minifie as one of said trustees and the appointment (by order dated October 21, 1904) in his place of S. B. Cushing, by this court in the above proceeding (the-first of the three “successors or alternates” in trust, as adjudicated in the aforesaid decree of final distribution) following which appointment and the qualification of said Cushing as a trustee, the administration of said trust was carried on and performed by said Harry F. Woods, Edward Barry, Timothy J. Lyons, and S. B. Cushing, as trustees of said trust, until the death of the trustee Edward Barry on September 23, 1909 (except that from the date May 17, 1909, the three trustees, Harry. F. Woods, and Edward Barry and Timothy J. Lyons alone acted as trustees, under order of this court of said date, May 17, 1909, the trustee, S. B. Cushing, being unable to act, by reason of sickness). That one week subsequent to the death of said Edward Barry, the trustee S. B. Cushing died, to wit, on September 30, 1909. That thereafter, the remaining trustees, Harry F. Woods and Timothy J. Lyons, presented to this court their petition in the above-entitled proceeding (dated October 5, 1909, and filed herein October 6, 1909), praying for the induction of the second “successor or alternate” in the trust, as named and adjudged in the aforesaid decree of final distribution, namely H. A. Hedger, and further praying that the court further adjudge the membership of the trust, and setting forth and alleging in that behalf that the third “successor or alternate” in the trust, as named and adjudged in said decree of final distribution (following the will of the trustor), namely, George P. Bowman, had “died in the lifetime of the trustor Frank H. Woods,” and that “the membership of the trustees of said Frank H. Woods *455 Trust consisted of three persons only, namely, Harry F. Woods, Timothy J. Lyons and H. A. Hedger”; annexed to which petition the said H. A. Hedger certified to the court in writing his “willingness, consent and desire to act as one of the trustees of the aforesaid Frank H. Woods Trust, pursuant to my right and title set forth in the foregoing petition.” Thereafter, due proceedings being had, the said H. A. Hedger was inducted into the office of trustee in pursuance of said petition, and has ever since acted as such in association with the surviving original trustees, Harry F. Woods and Timothy J. Lyons ■ and these three now constitute the trustees of the trust created by the will of the decedent trustor, which trust, as adjudicated by the decree of final distribution in clause sixth is as follows: That as to all the rest and residue of the property and estate of the aforesaid decedent and testator, Francis Henry Woods (also known as and called Frank H. Woods and Francis H. Woods, and F. H. Woods), which rest and residue are hereinafter particularly described, and also any and all other property, estate, rights and claims of said decedent and testator, if any such there be, not now known or discovered, the same and every part thereof, are hereby distributed, in accordance with the last will, and codicils thereto, of said decedent and testator, unto Harry F. Woods and Edward Barry, and Charles G. Minifie and Timothy J. Lyons, as trustees (and their successors or alternates in the trust), in trust, however, upon and for the following uses and purposes, that is to say:

As to this last clause it was determined by the said decree as follows: “That as to the annuity aforesaid, provided in testator’s will to be paid to Mrs. H. E. Robinson, to wit: Fifty ($50.00) dollars per month during her widowhood, the same and the payment thereof are a first charge upon and against the net income derivable from the aforesaid trust.” (See pages 13 and 14, Decree of Distribution.)

This finding and decree eliminates from further consideration the items as to this annuity, as clearly chargeable upon the net income.' It appears, however, that some portion of this annuity was paid by the trustees out of the capital, and the explanation of this partial payment is made on pages 154 and 155:

*460 Trustee Hedger is right in this regard. The ruling of the court’ in view of the decree of final distribution, was clearly contrary to the terms of the trust as defined in said decree, and was a judicial inadvertence based upon the fact that at the time of the settlement of said account there was no controversy ás to the items thereof; and, while it is final as to that account, it is not now binding upon the court. It was erroneous, but, having been acquiesced in by the parties to the settlement, it is not now a subject of review, except for the püfipóse of correction in the account now before the court. It may’ be said, in this connection, that while such accounts unchallenged at the time are unaffected after the term for appeal therefrom has passed, yet finality as to the adjudication of such former accounts may not be predicated with reference to their effect upon the future. Such settlements affected only the items contained in the accounts for the period. The accounts were unopposed, agreed to by all concerned-, and the court had a right, if it was not its duty, to assume their accuracy and rely upon the good faith of the attorney, himself a trustee, under whose direction the accounts were prepared, and who framed the decree and procured the signature of the judge thereto. No finality attached to this act, except as to the contents of the particular account, for it-is a settled rule of law, as Mr. Lyons says on page 36 of his oral argument, that a judgment in one proceeding cannot control judicial action—the judgment—in another and independent action or proceeding; and manifestly every separate accounting is an independent proceeding, distinct from every other accounting, past or future (Estate Marshall, 118 Cal. 381 , 50 Pac. 540 , McFarland, J.; Estate Grant, 131 Cal. 429 , 63 Pac. 731 ); but, even if this were not so, the attorney insérted industriously a provision to this effect, in several accounts:

Even if this provision were not inserted in the decree the law would have read it in, for the supreme court has so decided; and that point is not here contested by the third trustee, for he asserts no right to question any expenditure, or any act, that has been already approved by the court;' but he claims to be entirely within his rights to refuse to accede to any item or act of the other trustees, so far as these accounts are concerned, that he deems to be prejudicial to any beneficiary of the trust, and he does not consider as a sufficient reason why he should do so the fact that similar accounts may have passed the court on a former settlement when no opposition was made and no controversy had, in the matter now before the court, which should be free from any complication or confusion by reason of former adjudications which applied solely to the matters then cognizable by the court. The items to which he particularly objects as proposed to be charged against the capital which he thinks would be improperly so charged are as follows:

The third trustee insists that so far as this court has upon any of its previous settlements ruled approving the charge of any of these different items, it has done so without the presentation of any controversy upon the subject, and, as before stated, upon the express reservation that the question should not be thereby foreclosed against discussion upon any subsequent settlement.

Mr. Lyons, in his oral argument, admits that it is true that this provision that the court should not be bound in any future accounting by its decision upon the particular account then settled; but, he says, that such a provision is merely ex industria, and indicates nó more than a not uncommon superfluity having its origin in overabundant caution; for taking the provision as a whole, it merely states an established principle of law, as hereinabove recited; and he imputes'argumentatively another possible intention to this provision.

In order to make clear this phase of Mr. Lyons ’ argument, it is here transcribed from pages 36, 37, and part of 38:

As to the special agreement alluded to in the foregoing-extract, and also referred to in the same argument on page 4, as a “solemn contract” between the then trustees and the *465 income beneficiary, as approved by this court in the settlement of the fifth, sixth, and seventh annual accounts of the trustees of this trust I have failed to find in the record any authenticated executed instrument constituting a solemn contract ; but, there is what purports to be a quotation therefrom on pages 10 and 11 of the argument, copied from pages 30 and 31 of the Report to the Seventh Annual Account, as follows:

Mr. Lyons says, in his argument, “as will be noted in the quotation just made, the agreement of the trustees of this trust with the income beneficiary, Mr. Woods (approved and acted upon by this court, as already noted), is clear in its terms, and specific as to its intent as regards the income beneficiary. It involved the obligation of the trust and the stipulation of the trustees that said beneficiary’s income rights in the properties so held should be deemed preserved and protected, the amount of such income rights from time to time— annually or otherwise—to be fixed or adjusted between the trustees and the beneficiary, or by or with the advice of this honorable court.”

It is clear, therefore, argues this counsel, that the previous court adjustment of $32,850 per annum, would be prima facie, applicable as a proper “adjustment” of income rights for the four trust years of the present accounting. Indeed, the amount of the former “adjustment” might properly be increased to a considerable sum in excess of $32,850 per annum, if the equities of the “facts and circumstances” of the four years of the present accounting are considered in any " adjustment, ’ ’ as they must be if the agreement be insisted upon by the income beneficiary—for any “adjustment” must be predicated upon the “equities” apparent during any trust year or trust years, as in no other way may the rights of the income beneficiary, in view of his agreement with the trustees, be arrived at; and it may be noted that, under the terms of the agreement the adjustment could be had directly between the “trustees” and the “income beneficiary,” but, as also provided by the agreement it might be left to the court itself, viz., “to be fixed or adjusted between the trustees and the beneficiary, or by or with the advice of the court. ’ ’

The “adjustment” was left to the court on the previous accounting, by mutual consent of the (then) four trustees of the trust, and the beneficiary; as it is now likewise left, as to the present accounting, by the majority trustees and the beneficiary (there being now but three trustees, the third and minority trustee having become a trustee since said previous accounting).

*468 The “equities” disclosed by the present accounting, for determination or “adjustment” of income rights, as per said agreement, are set forth in the typed “Report” of the majority trustees, not merely specifically as to the facts and circumstances of the trust affairs during the four years’ period of this accounting, and before that, covering the period beginning with execution of the agreement—immediately following the disaster of April 18-21, 1906—but with the greatest elaboration as to those facts and circumstances.

The burden of this argument rests upon the validity, tenor, force and effect of the special agreement which the majority trustees claim has at all times to this date been in force and acted upon and is conclusive upon this court, according to its repeated rulings, in former accounts. Trustee Hedger says that this agreement so called is at best vague in its terms and, therefore, not legally or equitably enforceable for any precise or fixed quantity, figure or percentage, and, quoting from Trustee Hedger, on pages 195 and 196 of the typewritten report to the present accounting, assuming that the agreement, as made, was within the powers of the trustees and properly made by them in the best interest of the trust, nevertheless the' income beneficiary has, before this, received full and complete compensation for everything due him under the agreement pursuant to its spirit.

In this regard it must be borne in mind that the disaster of 1906 destroyed a large portion of the capital of the property;'and although this portion of the capital destroyed was all of the income-producing part of the real property, and a greater loss therefore to income than to capital, it was nevertheless at the same time a reduction of the capital to the extent of the property destroyed, and it resulted also in a change of conditions to which no measure of antedisaster conditions could be applied. In the then unusual condition of.affairs, the income beneficiary was entitled, as a matter of course, to call upon the trustees to sell or mortgage some part of the trust property for the purpose of improving other parts, or investing the proceeds in income-producing property; but *469 these rights on the part of the income beneficiary were not absolute to the extent of requiring an immediate sacrifice of any of the capital; and if they had been, it would have resulted in further loss to the income interests as well as further loss to the capital interests; and refraining from sale at a time when a sale could not have been made without a sacrifice (assuming this to have been the case),~ was therefore not only something which it was the trustees’ duty to do, having regard to the interests of income and capital alike, but which the income beneficiary would necessarily have approved, if only as a measure in his own interest. Taking compensation, therefore, from the capital interests, for his consent to an act, which act was the duty of the trustees without reference to his consent, is asking something from the capital for which it has not received any consideration from him. If the contrary view be considered the correct one, then we have only to reflect for a moment to see that, if the agreement had not been made, and the beneficiary had insisted upon an immediate sale of a portion of the real property and the devotion of its proceeds to the improvement of the remainder, he would not have received any income whatever until that improvement had been accomplished, and his income then would have been on a very materially diminished quantity of capital. Either this is so, or the benefit claimed to have been gained by the capital has not resulted from his agreement.

Mr. Lyons says, on pages 33, 34 and 35 of his oral argument that the answer to this suggestion of vagueness in the terms of the agreement is obvious and conclusive.

It is found, first, in the plain terms of the agreement, already quoted, apart from its object, intent and purpose, which give its clear interpretation if there were any vagueness in its terms; and, second, in the action of this court in the settlement of the seventh annual account, which forecloses any suggestion of vagueness in its terms or any misunderstanding as to its object, intent and purpose.

*470 The answer to the other suggestion for disregarding the agreement is equally obvious and conclusive. What the income beneficiary has received “before this,” “under the agreement,” was received under the court’s settlement of said seventh annual account. That settlement only related to the period to which it referred, the two trust years July 1, 1906, to June 30, 1908, inclusive, immediately following the disaster. It could not relate, and did not, of course, purport to relate, to any subsequent period, as any such subsequent period was not and could not have been before the court on the settlement of the seventh annual account.

The agreement has remained in force during the entire period of the four trust years of the present accounting, and the holding, handling and administration of the trust properties during those four trust years have been in accordance with and in enforcement of the rights of the trustees stipulated by the income beneficiary under that special agreement with him. All this has been attempted to be brought to the attention of the court by what has been stated hereinabove; and the truth of it has been fully set forth, explained, and illustrated in the majority report of the trustees, and the elaborate statement of facts and circumstances in that connection. No denial of the statements in the last two sentences may be justly made by anyone—trustee, beneficiary, or other ■ and if there be anything in the report of the minority trustee which may be construed as a denial it is not in conformity with the verities of the matter.

Therefore, if it was proper by this court on the settlement of the seventh annual account of the trustees—the last preceding accounting—to accept and adopt the said special agreement with the income beneficiary, as the basis for the determination and “adjustment” of his income rights, it is equally proper for the period of this accounting to make a determination and an “adjustment” of the rights of the income beneficiary on the same basis of that special agreement.

*471 It is proper to note here that the necessity for action by the court on this special agreement will cease on the present accounting; for it is stated in the majority report to this accounting that “normal conditions” have apparently been reached, as to the real assets, at the terminating date of the present accounting, June 30, 1912.

Trustee Hedger, as already indicated, also opposes the correctness of the presentation of income rights apart from said special agreement. This is the presentation made in the account itself—the schedules to the account, pp. 142, 143— already noted as made in accordance with the uniform rulings of this court, beginning with the decree of settlement of the first annual account up to the time of the said disaster, the settlement of the fifth annual account (following which the said special agreement became operative). His opposition in this regard, is as unfounded, it is respectfully submitted, as is his attempt to have the court disregard the said special agreement with the income beneficiary. The desire, or at least the contention, of Trustee Hedger, is that the solemn adjudications of this court, beginning with the settlement of the first annual account and reaffirmed in the settlement of the four succeeding annual accounts—following which the “Special Agreement” intervened and “normal conditions” were suspended—should be now disregarded and set aside, so far as those five separate adjudications determined the method for determining “net income.”

It is submitted that Trustee Hedger’s attempt just stated should be judicially considered as exceeding any just expecta- _ tion of successful accomplishment. The five separate adjudications of the court referred to—which, of course only concerned “normal conditions”—should be sufficient as establishing a rule in this trust for the determination of “net income” under “normal conditions”; especially when the matter is presented to the same judge who has considered and decided every question arising in the trust affairs during the eleven years’ existence and administration of the trust. These five separate adjudications must certainly be considered *472 as laying down a settled rule for “normal conditions,” as to the method of arriving at “net income,” where the character of items involved in that question is the same as those passed upon in each of those five adjudications, namely, the classification of items specifically defined and distinguished by the court, and hereinabove set forth.

The court has been liberal in making quotations from the two reports and from the oral argument in support of the report of the majority trustees in order to present fully, and at the same time as concisely as possible, the essential elements of the differences which the court is requird to dispose of in connection with the settlement of the present account, these differences comprising the effect of the agreement or arrangement, between the trustees on the former accountings and the income beneficiary; and the apportionment of certain expenses as between capital and income. The views of the majority trustees have been set forth, as their counsel says, with the greatest elaboration as to all the facts and circumstances. Indeed, it is difficult to imagine any presentation more elaborate and analytical than the statement of the report of the majority trustees and the oral argument in support thereof, which deserve the commendation in the letter to Mr. Lyons from the income beneficiary and cotrustee, in which after stating shortly his view of his rights and his sacrifices on behalf óf the capital, he says (p. 220, Report):

This letter, in connection with the report of the majority trustees and the oral argument of their attorney, exhibits one *473 of the difficulties in dealing with this subject matter. The income beneficiary, a trustee, and Ms attorney, also a trustee, who was also the attorney for the board of trustees on former accounts, and on this accounting the attorney for the majority, consisting of the income beneficiary and himself, occupying a position that may conflict with the interest of the remaindermen. To say that this condition is not probable in this case is not to the purpose, for it is possible in this, as in any other case. The mere fact that the income beneficiary is the sole heir at law and that the remaindermen are his children, does not alter the legal situation. In his letter, already quoted from, he says:

The suggestion in tMs letter as to the writer’s embarrassment in making up his mind whether he should insist on his strict rights, under the special agreement, is in accord with the intimation of the majority trustees on page 176 of their *474 report, that it may be that the income beneficiary will be reluctantly forced “to claim his technical rights under his agreement aforesaid with the trustees, providing ‘that said beneficiary’s income rights . . . should be deemed preserved and protected. ’ ” • It is pointed out by the minority trustee that while the income beneficiary, in his capacity as such, and himself and his cotrustee as such, deny the right to question the binding effect of former adjudications, they assert his and their right to disregard such adjudications if they can give the agreement a meaning and effect which would yield him larger results. There might seem to be some inconsistency in this attitude of the majority trustees, one of whom is the income beneficiary and the other his attorney and' co-trustee. Trustee Woods, who is also the income beneficiary, prays for the settlement of the account as presented, and yet, in his letter, says that he does not mean to waive his greater rights under the special agreement made between the trustees and himself following the fire.

In this connection, incidentally, it may be serviceable to advert to the distinction drawn by Mr. Lyons in his oral argument between an income beneficiary and a life tenant. The court has just described the children as remaindermen, which, technically, means those who are entitled to the remainder of the estate after a particular estate carved out of it has expired, so that strictly this may be a misnomer; so with the term “life tenant.” On pages 39 and 40 of Mr. Lyons’ oral argument, in commenting upon the position of Trustee Hedger as to income rights, he says that it would seem to rest upon the rule for determining net income in the case of a life tenant of a legal estate—for his separate report refers to the income beneficiary, Mr. Woods, throughout, as a “life tenant.” But the case at bar as to income rights is not that of a “life tenant,” much less that of a life tenant of a legal estate. We have here a “trust”—a statutory trust, and the simple fact of such a trust stands opposed to any theory involved in the rights of a life tenant of a legal estate. The latter has powers and rights, and an estatet *475 which is not at all predicable of the income beneficiary of a statutory trust. A legal life tenant has not only an actual estate against all the world, in the property or properties of which he is life tenant, but the nature of his estate is such that he is in effect the owner of the properties during his life, excepting that he cannot dispose of them. And so he has unrestricted power and right to manage and handle the properties as he sees fit, save only that he cannot commit waste as to the inheritance. On the other hand, an income beneficiary of a statutory trust is destitute of any estate, and of any such powers and rights of ownership. He has “no estate or interest in the property, but may enforce the performance of the trust.” (Civ. Code, 863.) And of course he has no power of any kind in the management or handling of the trust properties, or the administration of the trust or its affairs; and while he may complain, if he deems the occasion requires, that the trustees are not carrying out the “trust” in accordance with, or having just regard, for his rights, and may invoke the court’s aid to “enforce the performance of the trust,” the “performance” still remains with the trustees—the management and handling of the trust assets, and the administration of the trust and trust affairs generally, and in every particular.

In answer to the assertion that this is not a case of life tenant and remainderman, and that the rules applicable to such relation are not to be applied here, attention is called to the language of the trustees in their fifth report, page 31, wherein the income beneficiary is described as in effect a life tenant. It should seem, therefore, that the majority trustees hitherto have drawn no such distinction as is now asserted, in principle, between the income beneficiary and a life tenant, but, on the contrary, have treated both, for the purpose of these accountings, as the same; and one of the authorities, cited by the attorney for the majority trustees, seems to support the view that the terms, if not identical, may sometimes be used synonymously, for that authority says:

Reverting to the special agreement so repeatedly asserted by the majority trustees as affirmed and ratified and adjudicated by the court, and thereby constituting a rule of decision for all subsequent accountings during the existence of certain conditions referred to therein and described as a solemn contract between the trustees and the income beneficiary of an inviolable character, and so in effect determined by this court in the settlement of the fifth, sixth and seventh annual accounts of the trustees of this trust, the power of the trustees to engage in any such agreement or arrangement as it is described by the attorney in his oral argument, and on page 136 of the majority report, may be questioned. So far as the court recalls, no formal document of the character described was ever submitted to the court, and assuming that they had the right to enter into any such arrangement or agreement, there is no explicit evidence of its contents and execution, except the fact that its supposed substance was adopted and ratified by the court in the settlement of several accounts. See page 48 of the Report of the Majority Trustees on this account. See, also, pages 10 and 11 of Mr. Lyons’ oral argument, in which he says that this agreement, approved and acted upon by this court, is clear in its terms, and specific as to its intent as regards the income beneficiary; and that it involved the obligation of the trust and the stipulation of the trustees that said beneficiary’s income rights in the properties so held should be deemed preserved and protected, the amount of such income rights from time to time—annually or otherwise—to be fixed or adjusted between the trustees and the beneficiary, or by or with the advice of this honorable court.

On the other hand, counsel for the minority trustee characterizes this arrangement as vague and ambiguous, even if it *477 were within the power of the parties to undertake to make the “income rights” of the beneficiary any greater than they already were under the law and the terms of the instrument creating the trust. This counsel asserts that so far as this agreement being clear and specific in its terms, and as to its intent, there is nowhere any explicit statement of such terms, but everywhere the same vague, elastic description of it as an “arrangement and agreement” under which “the trustees were and are enabled to hold ‘ said properties until such time (if possible) as normal conditions’ might come about,” and which “involved” somehow “the obligation” somehow created “of the trust, and the stipulation of the trustees” that the income rights, whatever they are or may be, “should be deemed preserved and protected”—something, of course, legally obligatory on the trustees without any express stipulation therefor on their part. The agreement referred to is stated to have been an agreement that certain properties should be withheld from sale at a sacrifice and that in the meantime the life beneficiary’s “income rights” should be preserved. In his points and authorities, this counsel says, that no attempt is made in the agreement to define these “income rights,” but it is assumed, in the majority report, that they included the right to insist upon an immediate sale at a sacrifice of all the unproductive property, and the- investment of the proceeds in productive property. He asserts that it was shown on the oral argument that no such right as this existed, and that the assumption of its existence was fallacious, as were also other assumptions of the majority report, in the same connection, to wit, that the proceeds of sales would not have been judiciously invested; that sales could have been made and proceeds invested without loss of time, if insisted on by the income beneficiary; that such a course would have been of advantage to the income beneficiary, and would have placed him in the continued receipt of the income enjoyed before the fire; that the existence of the agreement was entitled to credit for the improvement in the value of the Spring Valley stock, any more than for the *478 loss in valúe' on securities of Ocean Shore or United Railroads.

This counsel claims also that the agreement or- arrangement had been at least fully performed on the trustees’ part, and that the income beneficiary has received more than all he could possibly claim thereunder, and in support of this assertion, he adduces certain figures which need not be here repeated. He admits that the payment of what the income beneficiary has received before this has been approved by the court’s decrees of settlement of the accounts showing such payments; but the quantity and sufficiency of such payments remain the same nevertheless; and if the income beneficiary has been' thereby already overpaid, that is not a good reason why such overpayment should be continued.

With reference to the finality of the former accounts, as to the items contained therein, sufficient has been said by the court, and the court does not understand that counsel disputes its conclusions or denies the appositeness of the authorities cited.

The only questions reserved in this accounting are concern- ■ ing the alleged agreement between the trustees and the income beneficiary, and the apportionment of certain expenses between capital and income.

It is strenuously contended by the majority trustees, as such, and by the income beneficiary, as such, and their counsel, as such, that this court is irrevocably committed by its settled rulings to the legal validity, virtue and effect of that agreement, according to their construction, and that they had a right to fix and adjust the amount of the income rights—from time to time—either between themselves, or by or with the advice of the court. This contention involves the assumption that they need not have recourse to the court in the first instance, but may act of their own motion in making an oral or written agreement affecting the terms of the testamentary trust, which is the sole source of their exist-' enee, authority and power, and a limitation upon their official faculties, relying upon the subsequent sanction or ratifica *479 tion of their act by the court, under whose supervision they are supposed by the law to conduct their trust. The justification for this assumption is based upon the unusual conditions which followed the fire of 1906, which brought into operation considerations of equity on account of the great losses suffered by the income beneficiary, in the deprivation of his revenue under the trust, and that, therefore, the trustees had the right to agree with him so as to restore, as far as possible, his losses. The equitable considerations, upon which the judgment of the court is now invoked, and which are said to have influenced its rulings on the former accounts, are set forth at some length in the oral argument of Mr. Lyons, on pages 18 to 21. The losses incurred by the income beneficiary were those suffered by all the people and property holders of this city, in a common calamity, and involved many trust interests, life tenants, income beneficiaries, remaindermen, as well as individual proprietors; but these incidents of the disaster did not change the rules of law respecting species of tenure. There is no reason why, in the estimation of this court, any rule should apply to one case rather than to the others, unless there be some exception based upon the language of the instrument upon which the rights of the claimant are dependent; that instrument is incorporated in the decree of final distribution in the estate out of which this testamentary trust arises, which decree, in so many words, gives the income beneficiary the entire net amount of the rents, issues, profits and income of said real and personal property, and of, to wit, the trust properties and estate as they may exist at any- and all times during his natural life; and also with respect to the personal property hereinafter described (including any and all changes thereof, by investment, reinvestment, exchange or otherwise) to pay to or apply to the use of said Harry F. Woods, such amount or amounts from or out of the principal or capital thereof, as the trustees of the trust may determine, at any time, to be necessary for any special purpose personal to said Harry F. Woods; their *480 determination as to such necessity at any time to be in the unrestricted and absolute discretion of said trustees.

The majority trustees, in their report, on page 151, say, that upon the settlement of the first annual report of the trustees, this court was called upon to determine what were the income rights of the income beneficiary under the trust, “which provides that he shall receive all the income of the trust properties and trust estate, subject to the annuity of fifty dollars per month to Mrs. Robinson.” There is an inaccuracy in this quotation. The trust does not provide that the income beneficiary shall receive all the income, nor does the decree so recite, but, by its exact terms, distributes the property to the trustees, in trust, to pay or apply “the entire net amount of the rents, issues, profits and income,” to the use of the income beneficiary. Instead of receiving the gross, or all the income, the trust provided he should receive the net income only, and it was conceded in the oral discussion that if the word “net” had been omitted, he would still be entitled to no more than the net income. Net income is “the income derived from the whole property, less the necessary expenses incurred in its management, and disbursements incurred on account thereof”: 29 Cyc. 671. This correction is necessary in order to emphasize the distinction between the terms said to be responsible for this controversy.

The majority trustees, on page 176 of their report, after presenting the case for the income beneficiary, and the figures which show the great loss that would occur to him if their suggestions should not be adopted by this court, say that the views outlined by them, on page 134 of their report, speak now with imperative force, so that the court may, of its own motion, deem it proper to take charge of the matter, in the interests of justice to the income beneficiary, and then there is an implied intimation that unless the court acts upon this suggestion, the income beneficiary will pursue a course in his own behalf to secure the rights to which he believed he is entitled.

*481 This plea, presented so forcibly and imperatively, by the majority trustees, and emphasized by their attorney in behalf of the income beneficiary, would seem to leave no alternative to the court but to adopt the theory of the trustee beneficiary and the trustee attorney, and to confirm the agreement under consideration. It might be remarked collaterally that the remainderman should also be considered as included within the interests of justice, for the majority report seems to be devoted mainly to the rights of the income beneficiary, and the agreement, which the court is called upon finally to uphold, as protecting those income rights. What those income rights were and are must be determined by the instrument creating the trust, and although the court may heretofore have been induced in the absence of contest to pass an account or sign a decree seeming to accept such agreement, such judicial act has no force and effect beyond the settlements which have become final by operation of law, and which did not extend to the accounting now presented, in which it is an open question.

This agreement, presumably the composition of the attorney for the trustees, himself being a trustee, and included in the reports accompanying the other accounts, if approved and acted upon by this court, was so approved and acted upon, as in the case of other matters contained in the reports and accounts, by reason of its faith in the attorney and its confidences in the trustees, and the lack of any controversy as to its validity. In the opinion of the court the agreement was not conclusively acted upon, nor finally ratified, and there was nothing concluded except as to the accounts then presented and settled.

By that agreement, so far as the court understands its terms, it undertook to vary the testamentary trust in an important particular, thus departing from the decree of distribution which established and adjudicated that trust, and which conferred no power to alter it in any particular. Notwithstanding the unusual conditions so insistently relied upon by the majority trustees, it was not 'competent for anyone to *482 do this, for, if it could be done to any degree or extent, it might be carried further, and because of circumstances unanticipated and unapprehended by the trustor might lead to the defeat of his intention and the destruction of the trust so carefully designed by him. That this is possible may be illustrated by calculation of the financial effect consequent upon the continuance of the situation now presented to the court for a period within the. rules of mortality, which might bring about the absorption of the principal in payment of income on the basis of this agreement; then what would remain for the children ?

The discretion which the majority trustees claim was given them by the trust did not extend so far, and the court has no right or power, no more than have the trustees, to invite such a result.

This view of the court renders unnecessary any further consideration of this agreement or arrangement, in connection with this accounting, and brings us to the apportionment of certain expenses as between capital and income, which is the only remaining question.

The agreement aside, all that the income beneficiary can now receive is the net income of the trust property. We have already attempted to define what is meant by “net income, ’ ’ but that definition is sought to be limited or extended by the majority trustees and their counsel, who contend that previous court adjustments would be prima facie applicable as a proper “adjustment” of income rights for the four trust, years of the present accounting.

This phrase “net income rights,” so much used by the-majority trustees, has no significance beyond the import of the expression used by the trustor in his testament and in the decree of distribution. The simple terms “net income”' need no gloss or comment to explain their meaning. It is, simply “net,” not “gross,” income, and that is what the. income beneficiary derived through the testamentary trust, and no former adjustment, even if not now reviewable, as to-the previous accounts, although they were left to the court, *483 by the mutual consent of the then four trustees of the trust and the income beneficiary, can relieve the court in the present instance of the duty of meeting the issue for the first time presented in a seriously contested form.

If this view be correct, then the contention of the majority trustees cannot be sustained by the court; for if the disbursements excepted to by the minority trustee are to be properly considered as necessary expenses incurred in the management of the property, or incurred on account thereof, as distinguished from investments in the property itself, or changes in the character of the capital, then they should be deducted from the gross income to ascertain the net; otherwise not.

We have already dealt with the annuity as determined by the decree of distribution itself.

It is conceded that the taxes upon the unimproved property which produces no income should be paid out of the corpus of the estate; but the ordinary taxes of property in which there is a life estate, and the ordinary expense of the care and management of the principal, are charges upon the life estate, to be paid out of the income: Peirce v. Burroughs, 58 N. H. 302. It is laid down by the authorities that the insurance is a proper deduction from income: 2 Perry on Trusts, 5th ed., sec. 553.

A life tenant is not bound to insure the interest of the remainderman, but each may insure his own interest: Harrison v. Pepper, 166 Mass. 288 , 55 Am. St. Rep. 404 , 44 N. E. 222 , 33 L. R. A. 239; De Witt v. Cooper, 18 Hun (N. Y.), 67. A trustee who holds the legal title for both has the duty of insuring; and accordingly insurance premiums paid by a trustee would probably be universally treated as an ordinary expense of holding and managing the property, and so payable out of income: Bridge v. Bridge, 146 Mass. 373 , 15 N. E. 899 . The general practice of trustees is to charge insurance premiums to income: Loring’s Trustee’s Handbook, 2d ed., p. 116.

All of these propositions are simply elementary.

*484 -As to the administrative expenses of the trust, to wit: Court and legal costs and expenses, office expenses and office administration, and salaries, trustees’ compensation, it is almost universally decided that the expenses of managing a trust should come out of current income. It was held in Spangler's Estate, 21 Pa. St. 335, that the interest and not the principal of a trust fund must bear the expense of administering it. Were it otherwise, the entire principal might be absorbed.in paying the trustee’s commissions upon income. A trustee is entitled to a reasonable compensation for his .services as they are rendered, and unless a contrary intention appear, the compensation must come out of the income of the fund in the administration of which it is earned: Butterbaugh’s Appeal, 98 Pa. St. 351.

..It. was argued in the last cited case and by implication sustained, that as the intention of the trust was to sustain the estate intact for the children, the charges for administration .of the trust and for taxes on money at interest should therefore be .paid out of the income. If such payments be made opt of the capital, the latter will be gradually consumed, and the time may come when there may be no fund left, and consequently no annual income. The children may then claim the whole corpus of the fund and the decree entered in the court below would afford the trustee no protection: Spangler’s Estate, 21 Pa. St. 335.

The question as to the payment of the interest on the trust indebtedness, which it is proposed to charge against capital entirely, is not correctly so chargeable, according to the authorities, as the court reads them, for the rule is stated that the equitable tenant for life must pay the interest upon all encumbrances upon the estate, to the extent of the rents and profits: Perry on Trusts, sec. 553.

.. Interest on an encumbrance on the property, for example a mortgage, must be paid by a life tenant, although it would not be safe for a remainderman as against the mortgagee to rely on the liability of the life tenant to pay the interest: Martin v. Martin, 146 Mass. 517 , 16 N. E. 413 ; Plympton v. *485 Boston Dispensary, 106 Mass. 544 . Similarly, a trustee who places an encumbrance on property, or allows one to remain, should pay the interest out of income. If the trustee pays off the principal of the encumbrance he should pay it out of the principal of the trust fund of which both the life tenant and remainderman are beneficiaries: Martin v. Martin, 146 Mass. 517 , 16 N. E. 413 ; Plympton v. Boston Dispensary, 106 Mass. 544 .

If a remainderman pays off the encumbrance, the life tenant must continue to pay interest to the remainderman, or,' what is more usual, must pay to the remainderman the present worth of an annuity equal to the annual interest running during the number of years which constitute the expectancy of life of the tenant for life: Moore v. Simonson, 27 Or. 117 , 39 Pac. 1105 ; Plympton v. Boston Dispensary, 106 Mass. 544 ; 4 Kent, 14th ed., p. *74; Stevens v. Melcher, 152 N. Y. 551 , 46 N. E. 965 .

In accordance with the principles stated in the foregoing opinion, a decree settling the accounts in question was filed on the 6th day of October, 1914.

Memorandum.—The item of interest on trust indebtedness, $30,927.62, was corrected by the court by subtracting therefrom $2,253.89, making the true sum chargeable in that behalf, $28,673.73.