298 Mass. 469 | Mass. | 1937
This is an appeal from a decree of the Probate Court for the county of Essex allowing the substituted final account for the period from September 8, 1928, to July 6, 1935, of the sole surviving trustee under the fifth clause of the will of Paul Nelson Spofford, late of Portchester, New York — filed and recorded in said court as a foreign will — for the benefit of Joseph Eugene Spofford and Paul Cecil Spofford, life beneficiaries, and others. The appellants are these life beneficiaries and the succeeding trustee. There is a report of material facts, but the evidence is not reported. The judge also filed a document entitled “Rulings.”
The appellants object only to items in the account for premiums paid for fire insurance on buildings on the premises held in trust under said fifth clause of the will,
The decree allowing the account imports a finding that the payment of premiums for fire insurance as shown therein was not improper because excessive in amount. The question presented for decision on appeal is whether this finding
With respect to the fire insurance on the buildings the following facts appear: The “policies of fire insurance procured to be written upon the trust property by the accountant conformed to the Massachusetts standard form of fire insurance policy.” “In determining the amount of fire insurance that should be carried upon the property the accountant tried to ascertain the insurable value of the buildings.” (The judge defined “insurable value,” as here used, as “the cost of replacing the buildings less any depreciation that should be allowed because of their age or condition of repair.”) “The amount so determined varied at different times as the cost of construction varied. . . . The accountant placed the fire insurance with the purpose of carrying a sufficient amount to replace the property in case it was destroyed by fire. He made inquiries of the tenant who had leased the inn for many years. He requested the insurance agent to have the buildings examined to ascer
No part of the premiums paid for fire insurance on buildings as shown in the account is to be disallowed on the ground that the amounts paid were excessive if, according to the standard of conduct applicable generally to the management of the affairs of the trust, the payments were made in good faith and in the exercise of sound discretion, that is, in the exercise of reasonable skill, prudence and judgment. The trustees cannot be held for the consequences of an error in judgment unless the error is such as to show either that they acted in bad faith or that they failed to exercise sound discretion. Pine v. White, 175 Mass. 585, 590. Taft v. Smith, 186 Mass. 31, 32. Kimball v. Whitney, 233 Mass. 321, 331. State Street Trust Co. v. Walker, 259 Mass. 578, 583. The specific facts reported
That the facts reported support the conclusion that the trustees acted in good faith requires no discussion. The principal contention of the appellants is that the premiums paid for fire insurance were excessive because the buildings were insured for a greater amount than could be recovered if they were destroyed by fire. Obviously the trustees were not required, in the exercise of sound discretion, to determine at their peril the precise amount which could be recovered on the policies in the event of total destruction of the buildings or which would be the basis for recovery in the event of partial destruction thereof. Nor is it essential to a decision of this case to determine that amount. This contention of the appellants is met if the amount for which the buildings were insured did not exceed the amount which might reasonably be anticipated as the amount of recovery in the event of total destruction of the buildings or the basis for recovery in the event of partial destruction thereof.
Each policy — which was in the standard form prescribed by G. L. (Ter. Ed.) c. 175, § 99— provided that the company “shall not be liable beyond the actual value of the property at the time any loss or damage happened,” and that the amount of loss or damage by fire was to “be established according to the actual value of the property at the time any loss or damage happens.” The first of these provisions merely embodies the provision of G. L. (Ter. Ed.) c. 175, § 96, that if “buildings within the commonwealth insured against loss by fire are totally destroyed by fire, the company shall not be liable beyond the actual value of the insured property at the time of the loss or damage.” See King v. Niagara Fire Ins. Co. 234 Mass. 301, 306-307. G. L. (Ter. Ed.) c. 175, § 95, prohibits a company from issuing any insurance “of an amount which, with any existing insurance thereon, exceeds the fair value of the property.”
A contract of fire insurance is a contract of indemnity, so far as direct loss or damage is concerned. Hewins v. London Assurance Corp. 184 Mass. 177, 179. “It is well
The words “actual value” in the policies and in the statute are to be interpreted in the light of the nature of the insurance contract as a contract of indemnity. They import that recovery for loss cannot be based upon a value dependent upon fanciful considerations (compare Wall v. Platt, 169 Mass. 398, 407), and that recovery cannot be had for incidental loss or damage resulting from fire, such, for example, as “interruption of business, loss of profits or even loss of rents.” Hewins v. London Assurance Corp. 184 Mass. 177, 179. But the words “actual value” do not import that recovery is limited to market value. The words “actual value” as commonly used'and as used in the policies and in the statute are not synonymous with the words “market value” (see Woonsocket Machine & Press Co. v. New York, New Haven & Hartford Railroad, 239 Mass. 211, 214), though the actual value of property and its market value are frequently the same. Furthermore, “market value does not in all cases afford a correct measure of indemnity .... In some cases there is no market value, properly speaking, and in others, if there is, it plainly would not of itself afford full indemnity.” Wall
On the other hand, even where market value will not afford the indemnity for which the contract of insurance provides, the cost of replacement, less depreciation, is not conclusive as to the actual value of a building destroyed or damaged by fire, according to which value the amount recoverable as indemnity for loss so sustained is to be determined. But it is important evidence of such value to be considered with other evidence. See Washington Mills Emery Manuf. Co. v. Weymouth & Braintree Mutual Fire Ins. Co. 135 Mass. 503, 505-506, 507; Wall v. Platt, 169 Mass. 398, 406; McAnarney v. Newark Fire Ins. Co. 247 N. Y. 176, 184-186. The cases of Second Society of Universalists in Boston v. Royal Ins. Co. Ltd. 221 Mass. 518, and King v. Niagara Fire Ins. Co. 234 Mass. 301, relied on by the appellants, are not authorities to the contrary. In each of these cases the replacement cost which was held to be immaterial was the cost of replacing a building totally destroyed by fire by a building of different character where the building laws did not permit replacement by a building of the same character. See also Brinley v. National Ins. Co. 11 Met. 195, 198. Compare, however, Hewins v. London Assurance Corp. 184 Mass. 177, where an insured building was only partially destroyed. These decisions do not require that, in determining the value of a building either totally or partially destroyed by fire, the cost of replace
G. L. (Ter. Ed.) c. 175, § 95, is not a limitation upon the amount recoverable under a policy though the policy is issued in violation thereof. G. L. (Ter. Ed.) c. 175, §§ 193, 194. Hewins v. London Assurance Corp. 184 Mass. 177, 183-184. Austin v. Dixie Fire Ins. Co. 232 Mass. 214, 216-218. Harwood v. Security Mutual Life Ins. Co. 263 Mass. 341, 348.
We think that, in the light of the governing principles of law, on the facts reported, the trustees might reasonably have anticipated recovery on the policies, in the event of loss or damage by fire, of an amount established according to a value greater than the “market or fair value” — “fair value” evidently being used here as synonymous with “market . . . value” — of the buildings as found by the probate judge, based wholly or partly on replacement cost, less depreciation. Consequently, the facts reported support the conclusion that, so far as the propriety of the payments of premiums depends upon the amount which would be recoverable under the policies, the trustees exercised sound discretion.
The appellants suggest further that the amounts paid for premiums were excessive because constituting so large a part of the income of the trust. The payments are not to be disallowed on this ground. The duty of the trustees was to manage the trust in accordance with the intention of the testator as disclosed by the will and with due regard to the respective interests of the successive beneficiaries. Am. Law Inst. Restatement: Trusts, § 232. While the testator may have expected that the trust would yield a reasonable income for the life beneficiaries his primary purpose, as disclosed by the will, was to preserve for “the Spofford family” the greater part of the real estate devised in trust. This primary purpose was to be carried out even if the fife beneficiaries did not receive as much income as a trust having no such primary purpose would normally produce. The facts reported show that it was important
The ruling or finding that “it was the duty of the trustee to insure the buildings in such sums as would suffice to replace the buildings if destroyed by fire” clearly refers to replacement cost, less depreciation. It necessarily imports a ruling or finding that it would be an exercise of sound discretion to insure the buildings in such amounts. We need not consider the rulings requested by the appellants which the probate judge declined to make. Even so far as they stated the law correctly, in a case like this, failure to make them is not a ground for reversing the decree. Worcester Bank & Trust Co. v. Ellis, 292 Mass. 88, 94.
The appellants, though including the small item for premiums paid for rent insurance among the items to which they object (an item which the probate judge found to be a proper expenditure reasonable in amount), make no argument in support of the objection. This objection is treated as waived. See Commissioner of Banks v. Cosmopolitan Trust Co. 247 Mass. 334, 346.
Decree affirmed.
The will of the testator is set out in full in the report of material facts. By the fifth clause thereof the testator devised to trustees “My land known as ‘Bald Pate’ and lands adjoining thereto hereinafter in this article described in Georgetown, and Boxfoed, in said Commonwealth with the Inn thereon, the bungalow, stable, and other buildings and all my furniture therein [here follows a description of the land devised] ... to hold, manage, and maintain the same and from time to time to lease the Bald Pate Inn, and any or all the foregoing trust lands immediately adjacent thereto in the discretion of the trustee for the time being hereunder for an Inn in a manner similar to that under which said property has been carried on,” and to pay the net income thereof to or for the benefit of the named life beneficiaries and for a