Lovell v. Minot

37 Mass. 116 | Mass. | 1838

Shaw C. J.

delivered the opinion of the court. The merits of this case depend upon the question, whether the loan to an individual, upon his promissory note, with a pledge of shares in a manufacturing company as collateral security, was a suitable and proper investment for a guardian to make, or whether it was so unsuitable as to make the guardian personally responsible for the loss.

It is not suggested in the facts, nor in the argument, that any neglect or want of good judgment was chargeable to the respondent, other than what may be inferred from the fact of making such an investment. The rule claimed by the appellant, that no investment can be considered safe or can be approved by a probate court or court of equity, except in public securities, however well supported by authorities, as a rule established in English courts of equity, is wholly inapplicable to this country, and untenable. In fact there are no public securities in this country, which would answer these requisitions of an English court of equity. The rule was well laid down in Harvard College v. Amory, 9 Pick. 461, that “ all that can be required in such cases is, that the trustee shall conduct himself faithfully, and exercise a sound discretion ; ” and by this rule the Court are of opinion, that the present case must be governed. Such is the variety of stocks and funds, including loans on mortgages, in which prudent and discreet men matte investments, and those intended to he, to a considerable degree, permanent, and such is the fluctuating character of all funds, that it seems difficult if not impossible to lay down any rule, at once just, and practicable, and broad enough to meet all the cases. See Case of Calhoun’s Estate, 6 Watts’s R. 185 ; Knight v. Earl of Plymouth, 3 Atk 480; Thompson v. Brown, 4 Johns. Ch. R. 628.

Taking this to be the rule, the Court are of opinion that the guardian acted in good faith, and with sound discretion, in making the investment which he did. He took the note of a person then in good credit, with a pledge of stock as collateral security, at the rate of about three quarters of ts par value, an" less than three quarters of its market value.

It was objected that this was an injudicious and indiscreet investment, because it exposed the funds to the risks and hazards of trade, and the rule was cited and relied on, that if a trustee puts the trust fund into trade, he shall account for the profit if any is made, and shall make good the capital, if any portion of it is lost. There would have been more ground for this argument, had the money been invested in the manufacturing stock, in which case the profits would have been contingent. But it was not so ; it was a loan at a fixed interest of six per cent., and the transaction no further exposed the capital to the hazards of trade, than as it affected the value of the pledge. But at the rate at which these shares were taken as collateral security, there was room for great fluctuation, and they might fall twenty-five per cent, without leaving the loan insecure.

The subsequent transaction in the sale of these shares, is open to the same considerations ; it was conducted with good faith and sound discretion, and though, as events turned out, in consequence of the failure of the purchaser, and of his two indorsers, and of the debtor on the mortgage given for collat eral security, it would have been better and for the interest of the ward, if the shares had not been sold, yet this could no be foreseen, and is no proof of negligence or want of sound discretion.

The Court are therefore of opinion, that there was no error in the decree of the Probate Court, allowing the respondent’s charge of $1333-33, as cash invested, and in this respect, the decree of that court is affirmed