66 Vt. 70 | Vt. | 1893
It was held in this case, reported in 63 Vt. 661, that after the ascertainment of the amount of the residuum of the estate of Edmund Hodges, and the decree of the probate court leaving it in the hands of Smith Hodges, the executor, to be applied to the use of the widow, Polly Hodges, in accordance with the provisions of the will, the executor was under the obligations,of a trustee as completely as if so named in the will and appointed by the court. On this basis he is to account for the income of the trust fund, to which the widow was entitled.
The executor contends that he should not be charged with the interest on the fund lost by the loan to Joseph Ford. A trustee is bound to act with good faith. He is not to use the trust property in his own private business, nor is he to make any incidental profits for himself in its management, nor is he to acquire pecuniary gains from his fiduciary position. An important duty of good faith prohibits the trustee from mixing the trust property and his own property together in one amount, the depositing trust moneys in his own personal account with his own moneys in bank, and all similar modes of combining or failing to distinguish between the two funds. This rule is designed to protect the trustee from temptation, from the hazard of loss, and of being a possible defaulter, as well as to protect the trust fund. Whatever may be the reason or motive that prompts it, if the trustee commingles the trust property with his own, and the mingling is followed by actual loss, accidental or otherwise, the trustee must make good, not only the principal sum lost, but also the interest. 2 Pom. Eq. Juris. (1st Ed.) s. 1076; Farwell v. Steen, 46 Vt. 678; McClosky v. Gleason, 56 Vt. 264. This is the only safe rule for the administration of trusts. It was held otherwise in Barney v. Parsons, 54 Vt. 624, but in so
Smith Hodges, by loaning Ford one thousand dollars of the trust fund and four hundred eighty-three dollars of his own money, and taking Ford’s note for the whole amount, payable to himself, personally, commingled the trust fund with his own, and he must make good the interest lost by that transaction.
The commissioner finds that the executor commingled the entire trust funds with his own, during the greater portion of the time covered by the accounting, and neglected to keep any separate account of the same or of the,interest received thereon. He must, therefore, be charged with the highest legal rate of interest on the entire fund, and can be allowed nothing for his services in caring for the same. McCloskey v. Gleason, 56 Vt. 264.
It is objected that Smith Hodges was not a competent witness upon any matter in this accounting. By the provisions of R. L., s. 2105 and s. 2490, it is made the duty of the probate court to examine every executor and administrator and guardian, upon oath, as to the correctness of his account, before the same is allowed by the court, except when no objection is made to its allowance and its correctness is satisfactorily established by competent testimony. R. L., s. 2298, imposes the same dutjr as to the examination of a trustee, as to the correctness of his account, before its allowance by the court. In cases of this kind, the county court is an appellate probate court. R. L., s. 2268. Under these statutory provisions, Smith Hodges was a competent witness upon all questions and matters touching his management of the trust fund and the disposal of the same, or the income thereof, by him. All the findings of the commissioner, necessary for the final disposition of the case, are made, either upon testimony of Smith Hodges admissible
The commissioner has not made a formal statement of the trustee’s account, but he has reported such facts as enable this court to determine what judgment is to be rendered. The account is to be adjusted with annual rests, as indicated by the commissioner. The trustee is to be credited each year with the sum allowed him by the commissioner, and as no objection is made to allowing him the sums he paid out for the funeral charges of Polly Hodges and for gravestones for her, he is to be allowed for the same in this accounting, but we express no opinion whether these two items are technically allowable in this accounting, if objected to. He is to be charged each year with the interest on the entire fund, and upon" any balance of such interest remaining in his hands at the end of each year, after deducting the sum allowed him for each year. On this basis, allowing the funeral charges and cost of gravestones, as paid May 20, 1888, the date of the death of Polly Hodges, there was then due from the trustee the sum of five hundred fifty-six dollars and ninety-eight cefits.
The judgment of the county court is reversed, and the balance of, the income payable to Polly Hodges, due and tmpaid, is adjudged to be fve hundred fifty-six dollars and ninety-eight cents, and interest thereon from May 20, 1888. To be certified to the probate court, with costs below and in this court to the appellant.