188 Mass. 510 | Mass. | 1905
The rule that a trustee in the management of property held by him in trust shall not be permitted directly or indirectly to derive any personal advantage from its use or sale, but must act solely for the interests of those beneficially interested, has often been referred to, and approved by this court. Jennison v. Hapgood, 7 Pick. 1. Ball v. Carew, 13 Pick. 28. Hayward v. Ellis, 13 Pick. 272. Litchfield v. Cudworth, 15 Pick. 23, 31. Shelton v. Homer, 5 Met. 462, 467. Parker v. Nicker-son, 112 Mass. 195. Dyer v. Shurtleff, 112 Mass. 165, 168. Brown v. Cowell, 116 Mass. 461, 465. Bowen v. Richardson, 133 Mass. 293, 296. Morse v. Hill, 136 Mass. 60. Parker v. Nickerson, 137 Mass. 487. See also Davoue v. Fanning, 2 Johns. Ch. 252, 256, 257; Fox v. Mackreth, 2 Bro. Ch. 400; White & Tudor’s Lead. Cas. in Eq. (4th Am. ed.) 115, note 148; Michoud v. Girod, 4 How. 503.
The foundation of this rule has been said to be the presumption that the trustee in dealing with the trust estate, where by its purchase his pecuniary interest is concerned, will not be disinterested. If permitted to expose himself to this temptation ordinarily he would consider his own advantage, and not that of those who are dependent upon his integrity and sound judgment for the wise and proper administration of the trust property. Aberdeen Railway v. Blakie, 1 Macq. 461, 478, 479.
But where trust property is sold under a decree, the court determines and directs the manner of its sale, and permission to bid is sometimes given to the trustee, but only after notice, upon hearing all parties interested, and when it appears that such a course will be advantageous to the trust. Colgate v. Colgate, 8 C. E. Green, 372, 383.
With this exception sales either to himself, or to others upon
They may resort to a court of equity either to compel a reconveyance upon payment of the purchase price, or to require the property to be resold, or upon their affirmation of the sale if the trustee has sold it in excess of the price paid by him he must account for the proceeds, or if unsold they may charge him in his accounts with its actual value at the time of sale. Morse v. Hill, ubi supra. Rotch v. Morgan, 105 Mass. 426, 430.
In the present case George S. Hall by the declaration of trust is shown to have founded it for his own benefit as beneficiary for life, with remainder for life to his sons, their wives, and to his grandchildren, who also were to take the principal. The board of trustees consisted of himself, his son George F. Hall, and Joseph K. Hayes, Jr., who was the only person outside of the family connected with its administration. They had not given bonds, nor were they required to render any account of their trusteeship, neither was there any provision in the instrument for the filling of vacancies caused by death or resignation. Apparently the management of the estate had not been entirely satisfactory to Hayes, for upon filing his account, in which all the trustees must be deemed to have joined, he asked permission to resign, though subsequently this request was withdrawn. See Dodd v. Winship, 133 Mass. 359, 361.
The Superior Court, under its general equity jurisdiction, had authority to receive and pass upon their accounts as rendered, and to make all proper orders and decrees. R. L. c. 147, § 5. Bowditch v. Banuelos, 1 Gray, 220. Bradstreet v. Butterfield, 129 Mass. 339.
Thereupon that court directed that the accounts be referred to a master for examination, whose report and the exceptions of George F. Hall thereto raise the questions presented for our decision.
Among the assets of the trust which the settlor delivered to the trustees was a pi’omissory note for $74,279.85, made by-George F. Hall, and secured by a mortgage of his real estate on
After this decision had been reached, George F. Hall, without the knowledge of Hayes, who appears to have been the only one of the remaining trustees competent at the time to act, procured one Vialle to attend the sale and purchase the property, to whom it was conveyed for the amount of his bid subject to accrued taxes, making the entire consideration §150,000.
In procuring the attendance of Vialle, who subsequently conveyed the property thus bought to Mary S. Hall, the wife of George F. Hall, the latter contends that he acted solely at her request, and that the purchase in reality was made for her with money she borrowed for this purpose. The performance of this service, and nothing more, simply made him a messenger, and might be found consistent with his duty. But if as her agent, and husband, his purpose was to procure the property either for her or his own benefit at the lowest possible price, then his conduct would be antagonistic to the performance of the duties of his trusteeship, which required him to realize the highest obtainable price.
It is urged that the intimate character of the marital relation is such as generally to exclude the conception that the husband would act disinterestedly, and without regard to the financial interests of his wife. But we now are not called upon-to decide whether under all circumstances a purchase by and conveyance to her of property held in trust by her husband would be held voidable when paid for out of her separate estate, even where the trustee himself was not authorized to buy. See Dundas’s appeal, 64 Penn. St. 325; Tyler v. Sanborn, 128 Ill. 136.
The trustee seriously contends that as the sale was made by a
In the practical application of this rule it makes no difference that the purchase was made under a foreclosure sale at public auction held by a first mortgagee, of property on which at the time there was a valid outstanding second mortgage held by the trustees, and forming a very considerable part of the assets of the trust estate. Marshall v. Carson, 11 Stew. 250, 255.
The wrong would be none the less grievous, or the loss less appreciable if through his co-operation a junior incumbrance which otherwise would be valuable is made worthless, when accomplished indirectly under a sale by a mortgagee, than where it is brought about directly by a sale on the part of the trustee himself. Morse v. Hill, Dyer v. Shurtleff and Marshall v. Car-son, ubi supra.
Any assent that may have been given by the other beneficiaries to the course pursued was not binding upon Henry F. Hall, or his wife Marian E. Hall, who contend that by reason of his conduct George F. Hall must be held accountable as trustee for the difference between the purchase price and the value of the mortgaged property.
They apparently do not wish to redeem, or to demand a resale of the equity of redemption, but electing to affirm the foreclosure, claim that he should be charged in the settlement of the accounts with this difference. Morse v. Hill, ubi supra.
Under the master’s finding that his associate trustees did not join with him, but were ignorant of the course pursued, if it was determined to be wrongful they would not be chargeable at common law with the loss incurred. Ames v. Armstrong, 106 Mass. 15. Abbott v. Fisher, 124 Mass. 414, 417. Brice v. Stokes, 11 Ves. 314.
We cannot, however, properly assume in favor of the contestants as the master leaves the case, that Hall should be deemed guilty of unfaithful administration, and therefore accountable for the depletion of the trust estate.
To correctly determine the true character of his participation in the transaction there should be a full inquiry as to all the circumstances attending the purchase of the property at the second foreclosure. When this has been done, and the facts have been
By the terms of the reservation under which the case is before us the first exception to the master’s report must be sustained.
Decree accordingly.