4 Del. Ch. 274 | New York Court of Chancery | 1871
The Court of Chancery has exercised its. power for the removal of trustees appointed by will or deed very sparingly. The principle maintained is, that there must be a clear necessity for its interference, in order to secure the trust fund against loss or misapplication. The instances of removal furnished by adjudged cases are found, on examination, to proceed upon grounds, such as these, Viz :—Some personal disability to execute the office, such as arises from ill health, old age, mental infirmity, removal abroad, or marriage of a female trustee. So, also, abandonment or neglect of the trust, to the jeopardy of the interests involved, bankruptcy of the trustee; also, such acts of misconduct as show mala fides and personal unfitness on the part of the trustee for the confidence reposed in him. Lewin on Trusts, (711); 2 Sto. Eq. Jur. 1287, &c.; Hill on Trustees (191) n. There have been some other special grounds of interference by the Court, but they are all of such nature as to involve a total disqualification for the useful discharge of the trust as the case of Uvedale vs. Ettrick, 2 Cha., Cas. 130, in which a joint trustee was removed, though without any personal default, becuuse of such hostile relations between the trustees that they could not act together, so that the interposition of the Court became necessary for the safety of the fund, and the due execution of the trust or, as in the cases, A. G. vs. Pearson, 7 Sim. 290 and A. G. vs. Shore, 6 lb. 460, trustees of a religious charity, holding different opinions from those of the founder, were removed because they were thereby disqualified to administer the charity usefully for the purposes intended. But, on the other hand, the Court will not remove a trustee for error or°misjudgment in some special transactions, or even for a breach of trust. There must be such gross negligence or miscon
The principle which governs the Court is best illustra- ' ted, for the purposes of the present case, by the cases cited from 19 Vesey and 2 Keen, In the former, A. G. vs. The Coopers' Company, a charity school having been founded by will for the teaching of poor children, gratis, in a building to be erected as was specially provided by the will, the master had, as the Court considered, very materially departed from the purposes of the founder particularly by removing the school out of the original building, and converting the building into a dwelling house ; also by taking pupils for private tuition. Lord Eldon, upon an information filed for the better regulation of the charity, decreed accordingly ; but he refused a prayer for the removal of the Master, observing that “it is not the habit of this Court “ to remove where there has been any misunderstanding “as to the duty.” In the case of A. G. vs. Cains College,
We may then proceed to the question which, under the rule thus settled, becomes the material one in the present case, viz : Has there been proved such wilful misconduct on the part of this trustee, as to impeach his fidelity, showing him to be unworthy of confidence and rendering the fund unsafe in his hand ? I put the question as one of positive misconduct, because there is not the slightest impeachment of the trustee’s capacity for business, or of his pecuniary responsibility ; nor is negligence imputed. The charge is of wilful misconduct.
This charge embraces two particulars, which need to to be separately considered.
First, It is alleged that the trustee has attempted to call in the trust fund from an investment made pursuant to the will, under which the principal was amply secure and the income promptly and regularly paid;for the purpose of using the money in his private business. Such a use of the fund, contrary to the express provision of the will for investment, would be a grave breach of trust. But whether a purpose, yet unexecuted, so to use the fund would be a sufficient ground for removing the trustee, depends upon the circumstances. If the circumstances
Now it will be found, on examination of the testimony to the charge under consideration, that the utmost departure from the direction given in the bill for investment on bond and mortgage which the trustee seems to have meditated, was to let his son have the money, when collected, as a loan from himself, and to secure it to the objects of the trust by a first mortgage on his own farm, which farm appears, upon other testimony, to have been of ample value to secure the trust fund. According to the testimony of Thomas Draper, one of Stout’s testamentary sureties, the trustee appears to have had such a disposal of the money under consideration. Draper states that, in his conversation with Stout, he alluded to a report that Stout “was going to let his son have the money to use in “ the mercantile business at Magnolia;” that Stout, in reply, did not say whether such was or was not his intention, but, after speaking of the probability of his building a store for his son at Magnolia, remarked that, “if he did “let his son have the money he should lend it to him as his “ (Stout’s)own money, and that he would secure it by a first “ mortgage on his own farm.” This is all the testimony in the cause, tending to show that the trustee contemplated any unauthorized use of the money. For it will be observed that this charge of the bill, of an intention to use the trust fund in the trustee’s business, rests wholly upon
We may, then, return to the testimony of Draper, and take up, as the only evidence in the cause bearing upon the intention of the trustee in calling in this fund, what he said respecting a loan of it to his son. The whole effect of this testimony is, that Stout was then holding under consideration a loan of the money to his son, the same to be secured to the objects of the trust by a first mortgage of his own farm, a property of sufficient value. Now, although this was not a proper investment of the trust fund, the fact that the trustee had such an investment of it under consideration, does not impeach his bona fides\ for he may have honestly supposed that he could lend his money to his son and secure it on his own farm. This is
There was no apparent effort at concealment from Draper ; and when the latter suggested a doubt whether such an arrangement could be made, Stout promptly replied that it could, and Draper says he himself agreed that, so far as concerned the safety of the fund, it would be as secure on his farm as it was on Chambers’. Further, it does appear that Stout, if he seriously entertained this purpose, abandoned it, a result which the doubt suggested-by Draper would naturally explain: for, in the conversation between Stout and Wilson, a year after the one with Draper, no allusion is made on either side to any loan of the money to Stout’s son, but Stout expressed his intention to bé to invest the money “somewhere where it “ would be safe and he could have better control of it.” His language implies that no particular place of investment was, at this time, contemplated. Taking the whole of these conversations with Draper and Wilson, together, their bearing upon the question of Stout’s honesty of motive is favorable to him ; and although it is from Stout’s own declarations respecting his purposes that we draw this conclusion, still, the complainants having put these declarations in evidence, must abide by them as a whole. The Court cannot accept them so far as they might serve to charge Stout, and reject their bearing in his favor,
The other ground for the removal of the trustee, alleged in the bill, maybe briefly disposed of. It is charged— and such is the fact—that the trustee, when paying over to Hester Ann Massey, one of the cestuis que trust, her semiannual income in July, 1864, and in several instances after-wards, retained a small sum out of each payment. There is some discrepancy of evidence as to the amounts retained, but that is immaterial. The receipts show the following to have been the sums retained, and upon what grounds, viz. ; July, 1864, $1.00, for collecting and paying over the interest and passing receipts ; January, 1865, $1,00, for the same services ; January, 1866, $2.35 as a commission of 5 per ct. for the same services, and in July, 1866, January, 1867 and July, 1867, the like sum of $2.35 as a commission for the same services. These deductions were illegal. The trustee, by his answer, alleges that they were made by him in ignorance of the law ; and he submits himself to the order of the Court. I am disposed to accept the explanation of the answer to this extent, inasmuch as the motive of the trustee enters essentially into the charge, so that the explanation is responsive to the bill, and what was the motive of a party in a particular transaction is known only to himself.
I am not satisfied that these charges were made dishonestly or oppressively; and full justice may be done, by a decree that the trustee reimburse the amounts retained, with interest.
This disposes of the prayer for the removal of the trustee. There remains, however, a question raised by the argument, whether, even although the proof fails to convict the trustee of a purpose to use the trust fund in his business, the Court will not take into consideration the fact that the fund is now securely invested, and that the
It will restrain a change of securities, when attempted for dishonest purposes, or to the jeopardy of the fund. But where neither mala fides nor danger to the fund appears, the trustee will be left at liberty to call it in and re-invest it according to his own judgment, or even to suit his personal convenience or preference, the re-investment being, of course, made in accordance with such mode as the instrument creating the trust may prescribe. If, thereby, needless expense is incurred, the trustee will be charged with it. If changes of investment should be persisted in to a wanton and wasteful extent, the Court would then interfere ; but such a case is not the one before me. Here, no mala fides appears, not the slightest danger to the fund is apprehended, the personal responsibility of the trustee and his business capacity being unquestioned ; and this being the first attempt to call in the fund during a series of years, it cannot be pronounced capricious or wanton.
My conclusion is, that the bill must be dismissed, so far as it prays the removal of the trustee, and the injunction dissolved. But I may, under the prayer for general relief, if the complainant, Hester Ann Massey so desire, decree the reimbursement to her of the amounts retained by the trustee out of her semi-annual income, with interest.