Obrázky stránek
PDF
ePub

appointed a successor. But these conditions do not exist. They never resigned their duties, they never asked the court to appoint some person in their stead, and the court never made any such order. We, therefore, cannot

Trusts-effect of knowledge that trustee had turned over

property.

management of hold that the matter stands as though the trustees had resigned and the court had appointed the Title Trust Company in their stead.

We now notice cross appellant's contentions. The appraised value of the separate property of the deceased, at the time the property was turned over to the Title Trust Company on November 6, 1913, appears to have been a little over $45,000, and of the community property, a little more than $183,000. We shall adopt these figures as the real value of the estate at that time, since it is as near the real value as the record enables us to now determine. Cross appellant's interest was then one twenty-eighth in the $45,000 in value of the separate property of the estate, and one twenty-eighth in one-half of the $183,000 in value of the community property of the estate, subject to the specific bequests, expense of administration, and debts. It is impossible to determine her then net interest in the estate so valued, with mathematical accuracy. We conclude, however, to fix it at $4,500 as the nearest possible approximation of the then value, from this involved record. pears from the evidence that on November 6, 1913, that being the date of entering into the contract, the estate of the deceased was practically settled and ready for distribution, and that at or about that time the trustees, but for the making of the contract, would have come into possession of the interest belonging to cross appellant. The argument in her behalf is that she is entitled to the value of her net interest in the property of the estate at the time the trustees so surrendered their power over her property, with legal interest thereon

It ap

from that date, less such amounts as have been paid to her by the appellant trustees.

-surrender of

liability.

The authorities seem to be practically harmonious in holding that, when a trustee unlawfully delegates and surrenders his discretionary powers to someone else, with reference to the control and manage- propertyment of the trust property, he becomes a guarantor and is responsible for any loss that may have resulted, whether or not such loss can be shown to be the result of the delegation of power; the theory being that it is against public policy for one to delegate powers which have been intrusted to him alone, and that the trustee who has placed the trust property in the hands of others will not, after the property has been lost, be heard to say that the delegation of power was not responsible for the loss, and that if he had performed his duties, as the law required, the loss would also have occurred. The cases to which we refer are, for the most part, where money has come into the possession of a trustee, and he has agreed with his bondsman that money which has been deposited in a bank may not be drawn out except on the check of both the officer and the bondsman. Upon these facts it is held that the officer becomes a guarantor and is liable to the cestui que trust for any loss on account of the failure of the bank, regardless of the direct cause of the loss. The question seems to have been first considered in the House of Lords, in 1835, in the case of White v. Baugh, 9 Bligh, N. R. 181, 5 Eng. Reprint, 1261, wherein this view of the law was learnedly expounded and announced.

So far as we are advised, the first case on the subject in this country is McCollister v. Bishop, 78 Minn. 228, 80 N. W. 1118. 228, 80 N. W. 1118. There, Justice Mitchell, speaking for the court, said: "The principle invoked is that, if a trustee enters into any arrangement with reference to the trust funds which surrenders or

(- Wash. 252 Pac. 91.)

limits his control over them, he is guarantor of the fund, irrespective of his motives, or whether his surrender of control was the cause of the loss. This undoubtedly is the rule, and it is an eminently salutary one."

After a thorough examination of the question by the court, in Re Wood, 159 Cal. 466, 36 L.R.A. (N.S.) 252, 114 Pac. 992, the doctrine above announced was followed. The syllabus in the L.R.A. report of the case well states, as follows, the substance of the opinion: "A guardian who permits his surety to have control over his ward's deposit account, by requiring all checks to be countersigned by the surety before they will be honored, is liable for loss of the funds through failure of the bank, whether or not the arrangement with the surety was the cause of the loss."

In the case of United States Fidelity & G. Co. v. Taggart, Tex. Civ. App., 194 S. W. 482, the same conclusion was reached, where the court said: "That appellant and his surety are unconditionally liable for the loss to the estate due to the failure of the bank, because of the act of the guardian in placing joint control of the ward's money with his surety, since fiduciaries who enter into an arrangement by which they surrender or limit their control of the trust fund become guarantors thereof, irrespective of their motives or whether their action was the cause of the loss."

Upon similar facts and after an elaborate discussion the supreme court of Georgia came to the same conclusion in the case of Fidelity & D. Co. v. Butler, 130 Ga. 225, 16 L.R.A. (N.S.) 994, 60 S. E. 851. See, also, to the same effect, 1 Lewin, Trusts, 417, and 1 Perry, Trusts, 6th ed. § 443. No cases have been cited holding a contrary doctrine.

It is quite true that the facts of the cases cited are different from those involved here, but the principle is the same. In those cases, as here, the trustee surrendered pos

session of and control over the property which he alone was bound to look after. Following the reasoning of these authorities, it seems plain that when appellants delegated their powers -extent of liato the Title Trust bility for surCompany, they at render of proponce and thereby

erty.

became guarantors, and are liable for the value of the property as of that date, together with the legal rate of interest thereon from that time, to wit, November 6, 1913.

It appears that cross appellant, during the years 1913 to 1919, inclusive, received from her trustees, appellants, sums aggregating $574. Deducting this amount from her net interest of $4,500 value in the estate on November 6, 1913, leaves due her as of that date from her trustees, appellants, the sum of $3,926, upon which she is entitled to interest at the legal rate of 6 per cent per annum from that date. We are fully conscious of the fact that we have not measured the amount of cross appellant's rightful claim against appellants with any sort of mathematical accuracy. Indeed, it is impossible to do so from the much involved record before us. We are, however, well satisfied with our announcement of the controlling principles of law applicable to such determination. Appellants are in no position to complain of want of exactness in measuring their liability.

The decree is set aside upon the cross appeal of the plaintiff, Ruth Tyler Meck, and the cause remanded to the Superior Court, with direction to render a money judgment in her favor and against her trustees Behrens, Newell, and Cavanaugh, and each of them, in the sum of $3,926, with 6 per cent interest per annum thereon, but not compounded, up to the time of the entry of such judgment. Such judgment may be satisfied in part by payment from moneys belonging to cross complaint now in the hands of appellants, and further enforced by ex

[blocks in formation]

Liability of testamentary trustee as affected by attempt to delegate powers. [Trusts, § 101.]

[merged small][ocr errors]

The rule laid down by the English House of Lords in White v. Baugh (1835) 9 Bligh, N. R. 181, 5 Eng. Reprint, 1261, that a fiduciary who makes an unlawful agreement with his surety that money of the estate shall be drawn from a depositary only upon check, draft, or order countersigned by the surety becomes responsible for all losses to the trust estate, regardless of whether the losses can be traced to the arrangement, seems, as pointed out in the reported case (MECK V. BEHRENS, ante, 207), to be well established. See Re Wood (1911) 159 Cal. 466, 36 L.R.A. (N.S.) 252, 114 Pac. 992; Fidelity & D. Co. v. Butler (1908) 130 Ga. 225, 16 L.R.A. (N.S.) 994, 60 S. E. 851. The present annotation does not, however, purport to discuss this question of the liability of a trustee who surrenders such partial control over his trust funds, but is limited to the closely analogous question of liability where the trustee has undertaken to delegate the powers given him by the will, as distinguished from the case where he has attempted to delegate partial control over the payment of funds from the trust estate.

The reported case (MECK V. BEHRENS) holds, following the rule of the Baugh Case (Eng.) supra, that a

testamentary trustee who attempts to make an unlawful delegation of his powers becomes guarantor of those to whom the powers are delegated, and liable for the trust estate as of the date of the attempted delegation. This ruling is supported by McCollister v. Bishop (1899) 78 Minn. 228, 80 N. W. 1118 (quoted in the BEHRENS CASE), although in the latter case it was held that the fact did not bring the case within the rule. The theory is that, as it is against public policy for a trustee to delegate powers intrusted to him alone, he cannot, after he has, in violation of his trust, placed the trust estate in the hands of another, be heard to say that the delegation of powers was not responsible for the loss.

In Brown v. Phelps (1888) 48 Hun, (N. Y.) 219, affirmed without opinion in (1889) 113 N. Y. 658, 21 N. E. 415, it was held that, since an executor could not delegate his powers as such, he would be liable to the beneficiary under a legacy in the will, notwithstanding that he had transferred the entire assets to the residuary legatee, who had agreed to pay, and had in fact paid, debts of the testator to an amount which, if added to the amount of debts paid by the executor before the transfer, would exceed the value of the personal estate coming into his hands as executor, inasmuch as these payments did not inure to the executor's benefit against the legatee. The court, after observing that this method of discharging the duties of execu

tor and trustee was novel, and not to be commended, states: "If that method of disposing of a trust estate were to be upheld, a most dangerous precedent would be established. These legatees may have paid themselves and other creditors the amount claimed, but the executor has not. Nor has the executor passed upon the justice or validity of these claims.

It may be that these claims were just and valid, and would have been allowed and paid by the executor if they had been properly presented to him and he had remained at his post of duty. They were, however, neither allowed nor paid by him. They were voluntarily paid by these legatees."

It has been held that an executor cannot relieve himself from responsibility as to investments directed in a will by intrusting the whole duty to his coexecutor. Strong's Appeal (1894) 160 Pa. 13, 28 Atl. 480. And if, by the terms of a marriage settlement upon two trustees, each trustee was bound, upon declining the trust, or retiring therefrom, to transfer the trust estate to the continuing trustee, and a new trustee was to be appointed in his place, and one of the trustees, desiring to retire, assigns the trust to the continuing trustee alone, and the latter, in abuse of his trust, disposes of it, and the retiring trustee is answerable, notwithstanding that he may have acted with perfect integrity and with the best of intentions. Wilkinson v. Parry (1828) 4 Russ. Ch. 272, 38 Eng. Reprint, 808. To the same effect, is Hulme v. Hulme (1872) 2 Myl. & K. 682, 39 Eng. Reprint, 1105.

And if a trustee of a legacy (which authorized the sale of the securities in which it was invested) permits a third party to receive and retain the proceeds of the sale of the property, and such third party during many years is dealt with by the legatee, who is not aware of the investment of the legacy or the sale of the securities, as the only person accountable to her for the money, the trustee continues accountable for the securities, notwithstanding the dealings on part of the

legatee. Adams v. Clifton (1826) 1 Russ. Ch. 297, 38 Eng. Reprint, 115.

But it has been said that the rule that the powers of trustees involving the exercise of discretion and judgment cannot be delegated or transferred to another, either by the trustee or by the courts, resting, as it does, upon the ground that the selection of the trustee implies a personal confidence in his discretion and judgment, cannot be applied to the case of a corporation, because the element of trust in the judgment and discretion of an individual is entirely wanting. See Chicago Title & T. Co. v. Zinser (1914) 264 Ill. 31, 105 N. E. 718, Ann. Cas. 1915D, 931. Assuming this to be true, a corporation which acts as testamentary trustee would probably not be subjected, in event it delegated its powers, to the strict rule of liability as guarantor for the acts of those to whom the powers were delegated, applied in the reported case (MECK v. BEHRENS, ante, 207), although it would not, of course, be relieved from using reasonable care and diligence in the selection of those to whom the powers were delegated, or from seeing that they exercised due diligence in carrying out those powers.

It has been held that the judges of the county court who, by a will bequeathing a fund for the education of the poor of the county, are made trustees of the fund as judges, and not as mere private trustees selected on account of the special confidence of the creator of the trust in their fitness to administer the trust, may rightfully employ an agent to handle the fund; and if they employ one whose experience, reputation, and financial standing suggest that he is a proper and suitable person, they will not be responsible for misappropriations by him, but will be deemed to have performed their full duty when they placed the fund in his hands. Anderson v. Roberts (1898) 147 Mo. 486, 48 S. W. 847. The court said: "It is a general rule that trustees must retain custody of trust funds and execute the trust, themselves, and not through the instrumentality of an

[ocr errors]

agent, or, as it is sometimes said, they cannot delegate their powers. But there are exceptions to the rule, arising from necessity or from the common custom of mankind, in which the trustee is entitled to employ an agent, and will not be liable for losses occurring from the acts of the agent, if the selection was a proper one."

It is, however, permissible for a trustee to employ an agent to perform ministerial duties connected with the execution of the trust. As the court observes in Dodge v. Stickney (1882) 62 N. H. 330, if a trustee cannot in the exercise of due caution, employ agents, and rely on their judgment and honesty in the transaction of business matters pertaining to the trust, without being held responsible for a successful issue in every instance, many estates would remain unsettled for want of sufficiently courageous trustees; and it was held in this case that an executor who, in the exercise of ordinary care and prudence in the management of the estate, employed a firm of attorneys to collect certain assets of the estate, could not be held liable for losses occurring through their fraud. The court states: "The general rule of law that an executor cannot delegate his office to others is unquestioned, but like most legal principles it is bounded and defined by reason. applied with little precision in all cases, it might become inconvenient and burdensome, or obsolete and useless; if understood and interpreted in the light of what is reasonably proper and necessary to be done under the circumstances of each case, it furnishes a sufficient protection to trust estates and a practical method for their administration and settlement. It might be difficult to assign a good reason for the proposition that an executor is to be held responsible in the settlement of his estate for doing what other ordinarily prudent and sagacious men would have done; or the converse, that this action or nonaction is to be commended, when men in general would have done otherwise in the prosecution of their personal affairs. If it is reasonably necessary

If

for a trustee to employ agents or attorneys, and if he uses ordinary care in their selection and a proper supervision over the business intrusted to them, he cannot be held liable for their indiscretion, resulting without fault on his part."

But the trustee becomes liable for misappropriations of the funds of the trust estate by an agent whom he has employed to collect rents, etc., for the estate. Dillivan v. German Sav. Bank (1910) Iowa, —, 124 N. W. 350. Even though a trustee may be justified in employing an agent whom the testator had recommended to him as worthy of full confidence, and in relying upon his representation to some extent, he cannot devest himself of full responsibility for the investment of the trust fund as directed by the testator, by employing such an agent. Cheever v. Ellis (1903) 134 Mich. 645, 96 N. W. 1067.

In McClure v. Middletown Trust Co. (1920) 95 Conn. 148, 110 Atl. 838, it was said that a trustee must frequently act through attorneys or agents; but this is not a delegation of powers, for he remains responsible for the reasonable diligence of his agent or attorney. And it was held that a trustee, though reasonably diligent in selecting an attorney to whom to intrust the matter of enforcing the liability of the surety on the bond of his predecessor, which was the only asset of the estate, could not thereby relieve itself of all further supervision over the attorney, but must use reasonable diligence to see that the attorney was carrying out the duties intrusted to him-obtain knowledge of what steps he was taking, and use due care to have him fulfil his employment; that, although it might leave investigation, decision, and action to the attorney, when it did leave these matters to him, it became responsible for his decision, his act, and his neglect, and, if the attorney failed to present the claim against the estate of the surety with reasonable diligence, the trustee was charged with his failure, and became liable therefor.

If a trustee employs an agent to invest the money of a cestui que trust,

« PředchozíPokračovat »