226 Pa. 244 | Pa. | 1910
Opinion by
We are not inclined to disturb the rule announced by Chief Justice Black more than half a century ago in Hemphill’s App., 18 Pa. 303, and since recognized and followed by this court. In delivering the opinion in that case the Chief Justice said (p. 305): “ In England it has been held for more than a century past to be settled law, that a trustee can only protect himself from risk, when he invests the trust fund in real or government securities or makes the investment in pursuance of an order by the court. . . . The same rule has been adopted in its whole length and breadth by the courts of New York and New Jersey. ... In Pennsylvania this doctrine does not appear ever to have been either affirmed or denied. . . . But the time has come when the interests and rights of trustees, as well as orphans, married women and insane persons, demand the settling of it, and we think the rule here ought to be as it is elsewhere.” In Worrell’s App., 23 Pa. 44, Knox, J., delivering the opinion said (p. 48): “It may now be considered as settled law, that in Pennsylvania an investment by a guardian or other trustee, unless authorized by the deed of trust, in the stock of an incorporated company, whether a bank, railroad, canal, manufacturing, or mining corporation, cannot be made at the risk of a ward or other cestui que trust. It is unnecessary to repeat the reasons which are the foundation of this rule. In England and in this country the adoption of the rule has been found essentially necessary for the protection of those who could not protect them-selves. It will not do to say that because prudent men sometimes invest their own money in such stocks, guardians may legally invest the estate of their wards in like manner.” About thirty years later after full argument and due consideration, we recognized and enforced the rule announced in those cases in Frankenfield’s App., 11 W. N. C. 373. It was said (p. 374): “This being so, the law regulating investments by committees of lunatics becomes applicable to the case and controls it. The act of June 12, 1836, sec. 25, expressly directs that such investments must be made under the direction of the court of common pleas, and only exempts the com
The doctrine thqs firmly established in this state prohibits a trustee from investing the estate of his cestui que trust in the bonds or stocks of a private corporation. The people of the commonwealth have attempted to enforce the rule by art. Ill, sec. 22, of the present constitution, which prohibits the general assembly from authorizing the investment of trust funds by a trustee in the bonds or stocks of any private corporation. Time has tested the wisdom of the rule, and, as our cases declare, it is firmly established in this commonwealth.
The legislature has provided that trustees may invest their funds on real estate security or in securities of certain public corporations by consent of the court, and that the trustee shall then be exempt from liability for loss on such investment. In addition to that legislation, the general assembly passed the Act of June 13,1836, P. L. 597, 2 Purd. (13th ed) 2396, sec. 34 of which provides: “It shall be lawful for any committee as aforesaid, by the leave and under the direction of the court of common pleas having jurisdiction, as aforesaid, to invest the money of a lunatic or habitual drunkard, in such stocks or upon such security as shall be approved of by such court; and if such investment be made bona fide, the committee making the same shall not be liable for any loss that may arise thereby.”
The committee of the lunatic in the present case invested part of the funds of the ostaté in first mortgage bonds of the Beaver Valley Brewing Company, a private corporation, and it appears that the company has become bankrupt. The beneficiary objected to allowing the committee a credit in his account for the bonds. The auditor and the learned court below refused to allow the credit, and the committee has appealed. Under our authorities, it is apparent that the investment was illegal and the committee had no right to make it. This is so well settled by the decisions we have cited above that a dis
The court properly refused to ratify the investment on the application of the committee. As we have seen, the committee should not have invested the funds of the lunatic in the bonds of the brewing company, a private corporation, and at the time the application was made for the ratification of the investment, the brewing company was insolvent and in bankruptcy. The application was four years after the investment had been made, and after the auditor had held that the investment was illegal and surcharged the committee. To grant the application and approve the investment nunc pro tunc as of the time it was made, would, under the circumstances of the case, encourage injudicious and illegal investments of the estates of cestuis que trust. We are all of opinion that the learned judge did not commit error in declining to ratify the investment.
The assignments of error are overruled and the decree of the court below is affirmed.