46 Cal. App. 2d 418 | Cal. Ct. App. | 1941
On October 3, 1929, one James White was indebted to respondent Citizens National Trust and Savings Bank of Los Angeles in the sum of $13,000, which amount was subsequently reduced by payments made thereon to the sum of $4,500. On that date he assigned and transferred certain real and personal property to respondent bank in trust, primarily for the purpose of securing that indebtedness. The trust was merely a “holding trust” during the lifetime of the trustor with no active duties imposed upon the trustee, but upon the trustor’s death the trustee was to assume full management and control of the corpus of the trust. The purposes for which the trust was created were generally 1 ‘ for the security of any notes, loans or advancements made by the Trustee to the Trustor. ... To hold title to said property with no other duties during the lifetime of the Trustor or until the revocation of this trust. ... In the event this trust is not revoked . . . during his lifetime, any property upon
As can be seen from an examination of this paragraph, upon the death of the trustor, the trustee was to assume the management of the property and hold the same for the benefit of the trustor’s beneficiaries designated in the trust. This clause further provided for the appointment of J. Loren White, the trustor’s son, as agent for the properties, and it was further agreed between the trustor and the trustee that the trustee should not be responsible or liable for any acts of J. Loren White incurred in the performance of his duties in and about the management of the properties. The trustee was directed to disburse the net income, after the death of the trustor, as follows: one-twelfth to Margaret White, granddaughter of the trustor, until she attains the age of 43 years; one-twelfth to Eugene Loren White, grandson, until he attains the age of 45 years; five-twelfths to J. Loren White, son, during his life, and upon his death to his wife Grace B. White, if living, or if she be dead, then to Eugene and Margaret, grandchildren; five-twelfths to Daisy Florence Smith, daughter, during her life.
Included in the trust was certain real property designated therein as parcels one to nine. Four parcels of this property were lost through foreclosure. There were included in the corpus of the trust a few items of personal property, but there were no items of furniture referred to therein. The trustor, James White, died on November 17, 1931. For several years immediately preceding his death, J. Loren White, his son, had assumed all the care and control of the properties, including the collection of the rents therefrom. January 5, 1931, trus
Appellants in their complaint sought an accounting and asked that the trustee be compelled to restore to the trust estate the properties that were lost through foreclosure, together with the rents, issues and profits therefrom, and in the event that the said property could not be restored to the trust estate, that the court determine the market value thereof and enter judgment for appellants in that amount. After a trial the court found that the trustee had rendered a full, complete and true accounting, which accounting showed that the appellants were not entitled to recover anything whatsoever either for themselves or for the benefit of the trust estate; that the trustee was not indebted to the appellants in any amount; that the trust estate was indebted to the trustee for the balance of principal due on its promissory note, advances, trust deeds, fees and interest, in the total sum of $11,342.70. The court further found that the allegations contained in the third separate defense to the complaint setting forth the defense of estoppel were true. Judgment upon these findings was subsequently entered by the court and this appeal is taken from that judgment. The gist of appellant’s contention is that the trustee was guilty
Many cases are cited to the effect that a violation by a trustee of a duty which equity lays upon him, whether fraudulent or through negligence, or arising through mere oversight or forgetfulness, is a breach of trust, and the trustee may be charged with the rents, profits and income which he never in fact received, but which he might and should have received by the exercise of due and reasonable care and diligence. (Gaver v. Early, 58 Cal. App. 736 [209 Pac. 394]; Bone v. Hayes, 154 Cal. 759 [99 Pac. 172]; Ellig v. Naglee, 9 Cal. 683; Hayden Plan Co. v. Wood, 97 Cal. App. 1 [275 Pac. 248]; Saunders v. Webber, 39 Cal. 287.)
Counsel for respondent have no quarrel with the authorities cited, but contend that they have no application to the instant case, and contend that the rule is that if the beneficiary seeks to surcharge a trustee for negligence the burden rests upon the beneficiary to establish such negligence, citing Wheeler v. Bolton, 92 Cal. 159, 171 [28 Pac. 558], It is first argued that the clear and precise language of the declaration of the trust itself absolves the trustee from any liability for the acts of the agent J. Loren White, wherein it is provided that “said trustee shall not, however, be responsible or liable for any act of said agent in the performance of his duties aforesaid. ’ ’
Respondent recognizes the general rule that such language as this applies generally to the torts of an agent committed against third persons, and that the trustor, either singly or in conjunction with the trustee, cannot in any manner limit the liability of the trustee for his torts as to third persons. (Restatement of the Law, Trusts, sec. 264, subparagraph d.) It is argued, however, that the most reasonable and logical interpretation is to construe this clause to mean that the trustee shall not be liable to the beneficiaries for any act of the agent appointed by the trustor and that the trustor has an absolute
In construing this provision of the trust, the trial court in a well considered opinion said: “There is as much difference between this trust and its background of fact, on the one hand, and another and common type of trust and the factual set-pp involved, on the other hand, as there is between two wills, drawn under entirely different circumstances and to accomplish entirely different purposes. . . . The primary purpose of the trust in question, in the intention of both the trustor and the trustee, was to give the trustee security for an indebtedness owing to it from the trustor. Thus it was purely a holding trust as long as the trustor lived, and the latter reserved to himself the management of the estate. Naturally that arrangement could not continue after his death, but he made as close an approach to such a continuation as possible by including in the trust agreement the provisions of paragraph ‘thirdly’ with respect to his son J. Loren White. What he intended to say, and what he did say, in my opinion, in effect was this: ‘When I am dead, I want my son to take my place in the management of the estate and to carry on as I have done and intend to do until that event. If the trustee will execute this request, it is m37 direction that the responsibility for the performance of his duties will rest with my son exclusively, just as it will with me until my demise, and that the same relationship with respect to responsibility shall exist between the Trustee and my son, to the extent of his duties undertaken, as will exist between the Trustee and myself until my death.’ ” ,
It is respondent’s contention that, irrespective of the provisions of the declaration of trust just referred to, the trustee was not guilty of negligence; and that the respondent trustee used ordinary care and diligence in the execution of the trust and was not guilty of any breach of trust, citing Estate of Cousins, 111 Cal. 441 [44 Pac. 182]; Civ. Code, sec. 2259.
At the outset, J. Loren White, father of appellants, was not a party plaintiff. He was joined as a party defendant.
An expert witness for respondent bank testified that the reasonable and fair amount of rentals that should have been received from the properties in question, over the period of time involved, was much less than that testified to by White;
Regardless of the conflict and correctness of the amount of rentals received, under the undisputed evidence the trust was still indebted to the trustee in the sum of $11,-342.70, as an offset. The trustee, under the terms of the trust, could have at any and all times, appropriated any and all income earned by the trust in satisfaction of the bank’s note and the trustee’s advances. Therefore, no damages could be awarded under either estimate. It is evident that the trustor, the father of J. Loren White, trustee, had great confidence in his son. There was no apparent reason why the trustee should not have the same confidence in him at the time he was selected to act as agent under the terms of the trust. Appellants cannot successfully complain that respondents were negligent in selecting him as such agent. (Donaldson v. Allen, 182 Mo. 626 [81 S. W. 1151].) The trial court’s interpretation of the trust agreement above quoted receives ample support in the record and the findings fully support the judgment as to the questions above presented.
Appellants next complain of the trial court’s action in allowing, during the course of the trial, an amendment to the answer as a defense, i. e., that appellants were estopped, by their actions, from asserting any claim against respondent. It is argued that they were taken by surprise and were not afforded time to meet the issue then presented. There is no merit to this argument. The record shows that the trial judge, upon the filing of the amendment, stated to counsel for appellants: “if it appears at the end of this trial that you need more time I will give it to you.” No request was made for any additional time. The rules of law covering such cases are so well and thoroughly settled that it seems hardly necessary to cite authorities in support thereof. (Mills v. Jackson, 19 Cal. App. 695 [127 Pac. 655]; 21 Cal. Jur. p. 205, sec. 141.)
Judgment affirmed.
Appellants’ petition for a hearing by the Supreme Court was denied October 2, 1941.