164 Mich. 395 | Mich. | 1911
Lead Opinion
(after stating the facts).
It is general doctrine, accepted everywhere, that a trustee must show the utmost good faith. He must exercise in the execution of the trust the degree of care and diligence which a man of ordinary prudence would exercise in the management of his own affairs. In respect to the investment of trust funds, in the absence of express directions from the settlor and of statute directions, courts have not infrequently been called upon to determine whether particular investments evidenced the exercise by the trustee of ordinary prudence. However conflicting in some respects the decisions may appear to be, in one respect they are reasonably uniform. It is a generally accepted rule that it is not prudent to invest trust funds in unsecured notes of an individual or of a partnership. We have found no decision which announces a contrary rule where the trust contemplated an investment of a permanent nature. This rule condemns the defendant trustees, and, if applied, obliges them to account to the cestui que trust for the fund.
It is said by the trustees that the investment was approved by the settlor, and it ought not to be considered
It is said in the brief for the Corning executors:
“We repeat again, the trustees did not invest the money in this note. The note was assigned to them by a decree of the probate court. True, it was at the suggestion of the executors (not the trustees), but the probate court was not bound by their suggestion. The testimony of Judge Crane shows that the order was made upon his own judgment, after considering the pecuniary standing of the makers of the note, and the fact that Mrs. Bartlett made, the investment herself and renewed the note, without indorsement, from time to time until her death. The executors had a right to ask for instructions, and it was the duty of the probate court, upon application, to give them directions. If the probate court made a mistake in so doing, and complainant was dissatisfied, it should have appealed.”
In the brief for defendant Lemke, counsel asserting that the probate court had statutory jurisdiction in that behalf, the following argument is made:
“ Assuredly the fact that there were trust legacies to be assigned did not lessen the conceded jurisdiction of that court to assign the residue, nor the force of the decree entered. If it should be thought that the probate • court ought to have so construed this will as to require tbe executors to pay this legacy to the trustees in cash, still, that question is barred by the decree, and not open to review in this collateral suit. Those courts have the fullest jurisdiction over the construction of wills under such circumstances.”
And again:
“It is manifest that he [the probate judge] intended that the notes should be held as these investments, and*404 that he knew they were not assets belonging to the beneficiaries. There is nothing in the decree or record anywhere in conflict with this, nor is there the slightest pretext for calling these notes assets after they came to the trustees. They were no doubt assets of Mrs. Bartlett’s estate until they were assigned to the trustees, and then they at once became investments, for such was that court’s decree. For another clear and conclusive reason these notes were not assets: They never belonged to the beneficiaries at all, until they were assigned to the trustees by the probate court’s decree, and then that decree fixed their status as being not debts to be collected, but as legacy investments to be held for them. Without intending to make any admission, we might admit that it is the duty of the fiduciary to promptly collect ordinary assets in the form of notes and the like. But we deny that that rule, if right, applies here.”
There was no occasion to construe the will, and the probate court was not asked to and did not construe it. The trustees were not appointed by the court, but by the will. Gibney v. Allen, 156 Mich. 301 (120 N. W. 811); Wooden v. Kerr, 91 Mich. 188 (51 N. W. 937). Nor did they ask the court for instructions.
Counsel for appellants construe the order of the court as either a direction to invest or an approval of an investment already made. It is not necessary to give it a construction favorable to either theory. In terms it approves and confirms the provision agreed upon by the executors and the trustees for paying certain legacies, not in money, but in notes. It refers to the receipts, and if they are again examined it will appear that certain notes belonging to the estate have been “accepted in satisfaction ” of legacies bequeathed by the will to be invested. The record does not support the assumption that the probate court understood that the notes so accepted were to remain uncollected and represent, for an indefinite period, the trust fund. But whatever the real intention of the trustees and the court may have been, the result must be the same. The proceedings to administer an estate are essentially proceedings in rem. There is no residue of an es
We notice, in passing, that the receipt of the trustees to which the order of the probate court as well as the petition of the executors refers, describes a note for $10,000, made by the A. F. Bartlett Company, due two years after date, and a note of Alexander M. Lemke for $5,000, due two years after date, as two of the notes accepted in satisfaction of legacies. Neither note appears in the inventory of the estate of Mrs. Bartlett, and the note of Lemke does not appear in the inventory of the trust estate which the trustees filed in compliance with the statute.. Instead, this inventory describes a note of the A. F. Bartlett Company for the same amount. The receipt states, also, that the Ross Bros, notes which have been accepted are each payable to the order of A. M. Lemke. Without explanation, one would suppose that these notes were, or were to be, indorsed by the payee. The inventory of the trust estate does not so designate the notes. Complainant is not concerned with these facts except as they indicate, or
It may be added, in conclusion, that we are not prepared to hold that there is authority, statute or other, for substituting, in the first instance, the discretion and prudence of a court for that of a trustee charged by the terms of a will with the proper investment of funds.
Mr. Corning states, in a letter appearing in the record, written after the failure of Ross Bros., that he has been advised that it should not so have been paid.
The court below reached the right conclusion, and the decree is affirmed, with costs to complainant.
Concurrence Opinion
I concur in the conclusion reached in this case by Mr. Justice Ostrander, but I am of the opinion that the delinquency which should charge the trustees personally with the payment of the trust fund is their undue renewals and extension of the note, and their failure to collect it at the proper time.