Kimball v. Reding

Woods, C. J.

It may not be necessary in determining the questions which this cause presents, to review the large list of cases contained in the books, in which the duties, responsibilities and discretion of trustees have been discussed and ascertained. They are very numerous, embracing the various means by which, and the objects for which trusts have been created, to meet the infinitely diversified wTants of the authors of them. A great many of these cases turn upon expressions contained in the deeds, wills or other instru *372 ments founding ihe trusts, intended by the parties to limit or to enlarge the discretion of the trustee, or to direct it in some peculiar manner in the pursuit of the general objects of his office,.so that their value and pertinency in establishing general rules on the subject, are not proportioned to the ability and learning with which the particular questions involved in them have been examined and settled. That remark is applicable to some of the eases cited in the argument.

The case of Harvard College v. Amory, 9 Pick. 446 , bearing in some particulars a resemblance to the one before us, as it respects the legal discretion of the trustee in making investments of the trust fund, turns upon expressions in the will of the testator indicating with a good deal of clearness what kind of stocks and securities he considered proper investments of the money. They were intrusted with the fund, with discretions “ to loan the same upon ample and sufficient security, or to invest the same in safe and productive stock, either in the public funds, bank shares or other stocks, according to their best judgment and discretion,” &c., with the further power and direction to sell and reinvest as exigencies might require. And the court, in delivering their opinion, expressly base their conclusions in favor of the trustees upon these expressions in the will. “ It is argued for the appellants,” says Mr. Justice Putnam, “ that the trustees have not loaned the money upon good security. The answer is found in the authority which the testator gave to them. They were to loan or to invest the sum in stocks. They preferred the latter.” And when the judge proceeds to remark that “ all that can be required in such cases is, that the trustee shall conduct himself faithfully, and exercise a sound discretion,” we are bound to understand the remark, not as containing or intending to enunciate as a general rule, that trustees may, in all cases left to their legal discretion, invest in the kind of stocks there described— bank, factory, insurance or public stocks; but only as confirming the old doctrine, that a trustee is protected who dis *373 charges with honesty and a legal discretion the trust, whether a large and liberal or a close and limited one, that has actually been conferred upon him ; reference being in all cases had to the instrument creating it, and to the general rules of law for ascertaining the extent of the confidence reposed, and the limits clearly assigned to his discretion.

By the will of Obadiah Swasey, three thousand dollars were directed to be paid to Mr. Southard, to be by him “ invested and improved according to his best skill and judgment.” That was the first matter entrusted to him. The second was to pay the same to Benjamin M. Swasey, “ at such times and in such sums as he,” the trustee, “shall judge for my son’s interest during his natural life,” and afterwards to the heirs of that son. The appeal requires of us an examination of the conduct of the trustee in each of these articles.

I. The duty of a trustee, to whom money is conveyed for any of the various objects of the charity, benevolence or affection of the donor, when no express or implied directions can be legally derived from the donor himself on the subject, qualifying the general requirements of the law, is to invest the money in good and safe securities. Willis on Trustees, 125.

A considerable number of the cases have turned, as has been said, upon acts or expressions of the testator or other author of the fund, which have been adjudged to have qualified the general duties of the trustee ; and a common question has been, upon the effect of certain words in the instrument itself. As to which, it will suffice for the present occasion to say, that where the trustee is directed to use his best skill and judgment, his powers and discretion are not enlarged by the use of those words. The law itself exacts of those who have pledged their faith to the helpless by accepting the care of their funds, the best use of their judgment and skill. And it is equally well settled that the ac *374 tual and bona fide exercise of those faculties affords no protection whatever to the trustee who has in fact gone beyond the limit of his powers, and assumed a discretion or an option not fairly conferred upon him by the terms of the instrument, in their legal sense and import.

As to what securities are to be regarded as safe for the purposes of a trust investment, the trustee has not, in this country, the advantage of a precise standing rule, which has been long since adopted by the English courts, indicating particular securities as safe ones, in the choice of which the trustee will be protected against all losses. But, on the other hand, he is supposed to have the benefit of a somewhat more lenient rule pursued by our courts generally, in revising his faithful but unfortunate proceedings. Such, at least, is the impression to be gathered from the remarks of the Chancellor in Smith v. Smith, 4 Johns. Ch. Rep. 281, and from the judgment of the court in Lovell v. Minot, 20 Pick. 116 . In both of these cases, the question as to what are good and proper securities is left somewhat at large, and must be conceded to be not without its difficulties.

¥e think, however, that some general rules on the subject may be propounded, that cannot well be controverted, as just and reasonable, and which must settle the present case, so far as it respects the item of one thousand dollars invested in the stock of the Boston, Concord and Montreal Railroad.

Safety is the primary object to be secured in an investment of this kind, and the trustee is not chargeable with an income that cannot be realized without hazard to the fund. And we think, therefore, that an investment is not to be deemed safe without evidence that it is so, and that the trustee ought to be able to point out some ruling feature to distinguish it from a mere adventure. If he invests in property, it ought to be property which yields an actual income, and which has a valuation, in the general sense of the community, founded on that income, and not upon remote *375 eventualities and a succession of contingencies. If his discretion under the trust extends to the buying of stocks at all, as to which the case does not call for our opinion, his purchases should be limited to such as have avalué in market based upon a regular income, or, at least, upon an income that, upon an average for a considerable period, may fairly be deemed equivalent. If he lends the money, he ought to be prepared to show that the borrower was, at the time, possessed of property, and in good credit, and that he has taken security in the names of persons of like standing, or, what is less open to question, in property of value, according to the usual tests of value.

We mean that the trustee should show that he has endeavored to keep within these rules, so that the loss, if any, has been in spite of these endeavors, and by reason of causes which have baffled them, whether by misleading his honest judgment as to the actual character of the property or of the individuals at the time, or by effecting an actual change and prostration of them since.

Now it seems to us that the building of a railroad must, from the very inherent nature of the enterprise, have at all times been regarded by prudent men as a doubtful adventure. It is necessarily one, with regard to which no favorable inference arises in any strength, from the profitable results of similar undertakings; for each one must have its peculiar features. The face of the country, the character of the climate, the density of the population and their pursuits, the termini to be connected by the road, are among the elements necessarily peculiar to each, so obvious to the apprehension of every person, and yet so impossible to be estimated, that we cannot entertain a doubt as to the view that ought to be taken of such enterprises in this connection.

That the trustee in the present case honestly believed that the investment of the fund in the Boston, Concord and Montreal Railroad would some day turn out to be a good one, it is not our province, nor is it our disposition, to ques *376 tion. But that as an investment it had any of the features of safety which we have described, or that the trustee could for a moment have imputed to it those qualities, is too plain for doubt.

Nor do we think that he stands relieved, in this particular, by the evidence which has been adduced, that the investment was advised and approved by the friends and relatives of the cestui que trust, and by judicious and prudent men whom the trustee consulted. There are cases in which a trustee, acting under legal advice, is protected against an innocent mistake in a doubtful point of law. Vez v. Emery, 5 Vesey 142. But in the departure which the trustee in this case has made from the legal course of his duty, he has not been misled by the advice of legal men as to what the law exacted of one standing in his place; so the case does not fall within the principle. Neither does it appear that he was deceived by the representations of his advisers as to any facts respecting the character of the security. No one represented the stock as different from what it was. All understood it to be an adventure; and the high expectation that was entertained in its favor did not tend to change its character as a mere adventure, or to clothe it with any of the elements of actual property; The case is a proper one for the application of an observation of Lord Redesdale, in Doyle v. Blake, 2 Scho. & Lef. 243. “ The court must proceed, not upon the improper advice under which he has acted, but upon the acts which he has done. If, under the best advice which he could procure, he acts wrong, it is his misfortune.”

We are therefore of the opinion that the item of $>1000 invested in the stock of the Boston, Concord and Montreal Railroad, claimed by the appellant in discharge, and disallowed by the court of probate, was properly disallowed.

II. In addition to keeping and investing the fund, this trustee was charged, by the will of the testator, with the duty of paying the same to the cestui que trust, at such *377 times, and in such sums as the trustee might judge to be for the interest of the son during his natural life, and afterwards to the heirs of that son.

The intention of the testator as to the manner in which this trust should be executed appears to be pretty clearly disclosed in the words of the will itself. The evidence reported may properly be considered in connection with those words, so far, at least, as it regards the character of the cestui que trust, and the impressions of the testator as to the provision that would best suit his condition.

The cestui que trust is not a minor, or non compos, nor has he, for any cause, been subjected to the condition of a ward. He is of the age of about fifty-five years, and was esteemed by his father, the testator, as an industrious person, and in other respects worthy. But his appreciation of money, his habits of occasional excess in the use of stimulants, and bis ductile and confiding temper, rendered him, in the opinion of his father, unfit to have the control of the portion of the estate which he intended to leave him.

The trustee, who had for many years lived a neighbor to the testator, and his intimate friend, was chosen by him to take care of the son’s portion, and to pay the same over to him, at such times and in such sums as he should judge for the son’s interest while he lived.

We do not say that either the design of the testator, or the peculiar circumstances of the case, were such as to exempt this trustee entirely from the control of the court, in exercising this branch of his office. Had the son been an infant of tender years, or of infirm health, the exigencies of his case would perhaps have imposed a constraint upon the trustee, to make provision for his support or education. Had he had a wife and children, the education of the latter might have required an appropriation of a part of the fund ; and in either of these eases, or in any other case as plain, the court would, no doubt, upon proper application of the trustee for directions, have made a decree accordingly,

*378 Perhaps, too, in a case of gross neglect or refusal of the trustee to pay over money at such times and in such sums as the interest of the son clearly required, the court might interpose in behalf of the cestui que trust, upon his own application, or upon that of his friends.

There have been cases in which executors and others vested with a broad discretion in the apportionment of a fund among several persons, or a class of persons named in the will, have been compelled by the court to make a substantial apportionment to each of the parties, where its interposition has been invoked as a precautionary measure against fraud or collusion; and its direction' has been in other cases obtained by the trustees themselves upon application made for that purpose. 2 Fonb. Eq. 199, and cases cited; Sugden on Powers 495.

But no one of the cases supposed is now before the court; and they are put, not for the purpose of declaring opinions which the questions before us do not call for, but for the purpose of suggesting that there are ways and means by which parties interested to have the trust safely and legally executed, may attain that reasonable object, other than by invoking the censure of the court upon the past acts of the trustee, and upon his foregone errors.

In reviewing his conduct in the particular under discussion, it must be remembered that the money was intended by the testator as a benefit to the son personally, to be enjoyed by him as his interests might require. It was bestowed upon the trustee, not for the mere purpose of being hoarded up for old age that might never come, and for heirs that might be strangers to his house, but to be dispensed in sums and at times and for purposes that might seem reasonable, according to the amount of the money, and the condition, character and wants of the party to be benefitted.

Whether after some sixteen years of frugality, in which the cestui que trust had had few occasions to call for any ¡part of that which was in a just sense his own, the gratifi *379 cation of his desire to travel was sufficiently for his interest to justify the trustee in dispensing to him a small part of the accumulated interest of the fund for that purpose, was a question fairly addressed to the discretion of the trustee, and which the confidence reposed in him by the will authorized him to decide.

He might, in the first place weigh the expenditure of a small sum of money against the mere gratification of the wishes of his ward. He might, moreover, have hoped much from the influence of a change of scene, climate and occupation ; and more than all, perhaps, absence from the companions whose example had aided to debase the habits of the cestui que trust. He might have considered, also, that he was sending him to a part of the country where the rewards of labor have sometimes been extremely high, and in which the stimulus of that reward might possibly restore him to habits of industry.

From the evidence it appears that the mind of the trustee for some time vacillated upon the subject, and it does not appear distinctly what finally settled it, unless it was the persistence of Swasey, manifested as it often is in persons of his temper and habits, by a more abandoned indulgence than usual in intoxication. Whatever in fact were the motives which prevailed upon the trustee, it was certainly a case in which, so far as Swasey was himself concerned, there was not much to be risked. A life devoted to the pernicious indulgencies which have been described is worth but little to society, and cannot be of long duration, or productive of much happiness to the party himself; and it is not easy to say that, upon the best views which could have been taken of the circumstances at the time, the trustee did not act wisely under the counsels of the judicious friend whom he consulted.

Nor can we, in view of the consequences, say that his decision was not a good one. The sickness occasioned by the voyage, the climate or other exposures, was but an ordinary *380 incident of travel, to all who adventure upon it. The expenditure of money does not clearly appear to have been greater than might have reasonably sufficed for the occasions of a prudent person on so long a journey, and through so much sickness.

But the money was easily spared, and sickness has left him life and a constitution not impaired by it,,as it would seem. Above all, something has caused him to abandon his habits of intemperance, and to resume those of industry and sobriety, to a degree to elicit from his friends and the appellee himself the confession that the money, if not wisely, was fortunately expended.

Considering, therefore, the large discretion vested in the trustee by the words of the will, his personal relations with the testator himself, the amount of the fund, accumulated in 1850 to some §5,000, the very complicated state of the circumstances that might have influenced his mind and determined his purpose, and finally the beneficent results of the expedition, in some way brought about upon Swasey himself, we cannot bring ourselves to the conclusion that if he did not act with the greatest wisdom, he has transcended his powers or abused his trust, in the matter of the “ California outfit,” as it has been termed.

The decree of the court of probate was therefore upon this point erroneous, and must be reversed.

As to the small item of forty dollars the decree is affirmed. There was no evidence on which it could have been allowed.

We order no costs for either party. Both are trustees, and neither has wholly prevailed.

Decree accordingly.