Brown v. French

125 Mass. 410 | Mass. | 1878

Gray, C. J.

In the leading case of Harvard College v. Amory, 9 Pick. 446, the testator directed his trustees to lend the trust fund upon ample and sufficient security, “ or to invest the same in safe and productive stock, either in the public funds, bank shares or other stock, according to their best judgment and discretion, hereby enjoining on them particular care and attention in the choice of funds, and in the punctual collection of the dividends, interest and profits thereof, and authorizing them to sell out, reinvest and change the said loans and stocks from time to time, as the safety and interest of said trust fund may in their judgment require.” The court, in a thoroughly considered opinion, delivered by Mr. Justice Putnam, held that the trustees were authorized to invest in stocks of manufacturing corpora^ tians or incorporated insurance companies; and, after observing that the English rule, which requires trustees to invest in public funds only, had never been recognized here, laid down this general rule: “ All that can be required of a trustee to invest is that he shall conduct himself faithfully and exercise a sound discretion. He is to observe how men of prudence, discretion and intelligence manage their own affairs, not in regard to speculation, but in regard to the permanent disposition of their funds, considering the probable income, as well as the probable safety of the capital to be invested.” 9 Pick. 461.

The rule thus judicially declared nearly half a century ago has been since constantly adhered to in this Commonwealth, and has been applied to cases in which the terms of the trust contained no special provisions upon the subject. Lovell v. Minot, 20 Pick. 116. Kinmonth v. Brigham, 5 Allen, 270, 277. Clark v. Garfield, 8 Allen, 427. If a more strict and precise rule should be deemed expedient, it must be enacted by the Legislature. It cannot be introduced by judicial decision without working great hardship and injustice.

In the case before us, the testator expressly gave his trustees the largest discretion to use their own judgment as to investing the trust fund: While he recommended to them the propriety

of keeping at least one half thereof invested on mortgage of real estate, he did not command them to do so, and in fact no part of the fund was so invested at the time of the appellee’s appointment. The investments objected to were in Portland and Ogdensburg Railroad bonds at eighty-five per cent, of their par value; and in a promissory note of an individual, secured by pledge of twice its amount of such bonds. The question of the lawfulness and fitness of the investments is to be judged as of the time when it was made, and not by subsequent facts which could not then have been anticipated.

The circumstances existing at that time are fully stated in the report, and may be summed up as follows: These bonds were payable in gold in twenty years, or at the option of the obligor after five years, with coupons attached for the payment in gold of interest semiannually at six per cent., and were secured by a first mortgage upon the franchises and property of three railroad corporations, the whole of whose stock had been actually paid in in cash and was equal in amount to the whole of the bonds which have been sold by the trustees to whom they were originally issued, and whose roads formed part of a continuous and direct line from Portland in the State of Maine to Ogdensburg in the State of New York, and themselves formed a line of about a hundred and twenty miles in the State of Vermont, half of which was already complete and in operation, and the rest of which was in the course of completion under very favorable contracts. The roads were in the management of men who possessed in a high degree the confidence of the community for integrity and business ability; and the bonds were selling in the market at from eighty to ninety per cent, of their par value, according to the size of the lots sold, and were regarded as a first-class investment, and were purchased, by persons of reputed good judgment, for perraa nent investment. The appellee had had experience in making investments for himself and others, including banks in which he was an officer, and made the investments now in question after advising with various persons reputed of good judgment in financial matters, and after himself making careful inquiries and investigations, the result of which was to satisfy his mind that the investments were safe and prudent ones at the time.

Neither the fact that the whole line of railroads was outside this Commonwealth, nor the fact that the money applied to this investment was derived from the sale of bonds of the United States, is sufficient to control the effect of the other facts reported.

The appellant does not charge any dishonest or fraudulent intent on the part of the appellee, but concedes that, in making the investments objected to, he honestly and in truth believed that they were safe and proper investments for him to make in his capacity as trustee. Upon the only question reserved (which is a question of fact rather than of law) we do not share the doubts of the justice of this court before whom the hearing was had, but are clearly of opinion that, under all the circumstances stated in the report, the trustee acted with the sound discretion that the law required of him.

Decree of Probate Court affirmed.