Cosden v. Mercantile-Safe Deposit & Trust Co.

Thompson, J., delivered the opinion of the Court. We are concerned with whether or not the Mercantile-Safe Deposit and Trust Company, as Trustee under the will of ⁵²¹ William R. Hammond, should be surcharged for a breach of trust in selling the grounds upon which Pimlico Race Track is located for an inadequate price. There are also questions concerning the proper allowance and allocation of the Trustee’s commissions and of counsel fees. The case was last before this Court in 1975, Madden v. Mercantile-Safe Deposit and Trust Co., 27 Md. App. 17 , 339 A. 2d 340 (1975).

We there summarized the relevant facts as follows: “William R. Hammond became the owner, in 1905, of some 78 acres of land, with improvements, known as Pimlico Race Track, then located in Baltimore County but which, by later annexation, became a part of the City of Baltimore. The entire property was leased to The Maryland Jockey Club of Baltimore City, which conducted horse racing there. Mr. Hammond, then a widower, died in 1909. His will left the Pimlico property and other assets to Safe Deposit and Trust Company of Baltimore, now Mercantile-Safe Deposit and Trust Company, 1 in trust, and provided, with minor exceptions not now material, that the income be paid to his only child, a daughter, Audrey F. Hammond, for her life.

The daughter later became Mrs. Audrey Hammond Madden. In his will the testator gave his daughter a power of appointment, and provided that if she did not exercise the power, the principal of the trust would, at her death, go to the persons who would be entitled to it as if he had died intestate. “Through successive leases negotiated between them from time to time, the Pimlico property held by Mercantile, enlarged by the later acquisition of certain contiguous parcels, was continuously leased to the Jockey Club, until August 1947. Under an agreement of sale dated 30 April 1947, the Trustee ⁵²² sold the Pimlico property which it held to the Jockey Club for $1,115,000. Settlement of that sale in August 1947 terminated the lease which, by its terms, would have ended in 1949. “Mrs. Madden, in 1943, irrevocably released the power of appointment she had under her father’s will.

The legal effect of that release was determined by the Court of Appeals in Madden v. Mercantile-Safe Deposit and Trust Co., 262 Md. 406 , 278 A. 2d 55 (1971). Her release of the power of appointment, thus rendering impossible a divestiture of the remainder, which she could have accomplished by an exercise of the power, did not, as she contended, merge the remainder with her life estate, on the ground that she was the sole person who would have been entitled to take if Mr. Hammond had died intestate. On the contrary, said the Court of Appeals, the class of persons entitled to the remainder was to be determined at the time of Mrs. Madden’s death, and would be those persons who then would have been entitled, according to the law in effect in 1909, to take Mr. Hammond’s estate had he died intestate. “To continue this narrative, we quote from the opinion in Madden v. Cosden, 271 Md. 118 , 314 A. 2d 128 (1974), an earlier appeal from an order entered in the present case, where the Court of Appeals said, at 119-20: ‘Mrs. Madden died on 4 January 1972, survived by three daughters, Audrey Cosden, Anne M. Hallenbeck, and Jane M. Humphreys, each of whom have descendents, and by three grandchildren, Peter H. Madden, Michael J. Madden and Christina Little Madden, the children of Mrs. Madden’s only son, James H. Madden, who had died in 1953. ‘Immediately following Mrs. Madden’s death, Mercantile-Safe Deposit and Trust ⁵²³ Company (the Mercantile), trustee of the trust estate created by Mr. Hammond’s will, caused to be prepared a schedule of the assets then comprising the trust, which had a value of some $3,000,000.00, and of a proposed distribution, under which Mrs. Cosden, Mrs. Hallenbeck and Mrs. Humphreys, daughters of Mrs. Madden and granddaughters of Mr. Hammond, would each receive one-fourth of the trust assets, and Peter H. Madden, Michael J. Madden and Christina Little Madden, grandchildren of Mrs. Madden and great-grandchildren of Mr. Hammond, would each receive one-twelfth of the trust assets, since they shared equally the one-fourth share which would have passed to their father, if living. 'When it became apparent that all of the children of James H. Madden were not willing to acquiesce in the proposed distribution, the Mercantile in June, 1972, filed in the Circuit Court of Baltimore City a bill of complaint which recited the circumstances; asked that the court assume jurisdiction of the trust, and determine the proper distribution of the trust estate. “The issue presented and decided in Madden v. Cosden, supra, was the validity of Mrs. Madden’s second marriage, following a Nevada divorce, and whether Mrs. Hallenbeck and Mrs. Humphreys, children of that second marriage, were entitled, as lawful heirs and next of kin of Mr. Hammond, to share in the distribution. The Court of Appeals held that they were. “The Present Case in the Circuit Court “Mercantile’s bill of complaint to determine the ⁵²⁴ proper distribution of the trust was filed in the Circuit Court of Baltimore City on 23 June 1972.

Combined answers, cross-claims, and counterclaims filed by Peter H. Madden on 21 August and 23 August were later stricken, apparently for reasons of form, and on 26 December 1972, with leave of court, he filed an amended counterclaim, naming as counter-defendants Mercantile, in its trust capacity and in its individual capacity, and, as an added party, the Jockey Club. Leave to bring in the Jockey Club as a counter-defendant was later granted. At the same time he filed his answer to Mercantile’s complaint Peter H. Madden filed the cross-claim against his codefendants which raised the issue decided in Madden v. Cosden, supra. “On 10 April 1973, with leave of court, Peter H. Madden filed a second amended counterclaim, in which Audrey Cosden joined. On 17 May 1973, with leave of court, a third amended counterclaim, in which Michael Madden and Christina Madden also joined as counter-complainants, was filed. “The Counterclaim alleged that in selling the Pimlico Race Track to the Jockey Club in 1947, Mercantile had breached its fiduciary duty in numerous ways, resulting in the disposition of a trust asset for an inadequate price.

It sought to surcharge Mercantile for the difference between the sale price and the actual value, or, in the alternative, to rescind the sale.” 27 Md. App. at 20-24 . At the close of appellants’ case on the surcharge counterclaim the chancellor granted Mercantile’s motion to dismiss under Rule 535. In reversing that ruling we pointed out that such a motion tests the legal sufficiency of the evidence. We then discussed the evidence adduced by the appellants on each of their theories of breach of trust.

We said: “In the case before us the contentions of the appellants cover the full range of breach of fiduciary ⁵²⁵ duty, from bad faith and self dealing, to precipitous action, lacking the required diligence, and taken by the exercise of poor and uninformed judgment and without exploiting potential offers to buy at a higher price. “We lay aside ‘self dealing’ in the strict sense. Appellants misuse the term, we think, in characterizing Mercantile’s actions. When a person, natural or corporate, is a party to or otherwise profits from a transaction with a trust or other estate of which he is a fiduciary, as when he buys from or sells to the trust, or acts as a broker in the sale, he is self dealing. The courts generally hold that such a transaction, in the absence of full disclosure and consent of all beneficiaries, is voidable by the beneficiaries, with no need to show unfairness.

McDaniel v. Hughes, 206 Md. 206 , 111 A. 2d 204 (1955); Schockett v. Tublin, 170 Md. 117 , 183 A. 521 (1936); Mangels v. Tippett, 167 Md. 290 , 173 A. 191 (1934). “Mercantile did not buy the Pimlico Race Track property from the Hammond Trust, nor otherwise profit from the sale, except for its commissions as trustee. The sale did not involve any self dealing. “Appellants point to evidence that several members of the Board of Directors of Mercantile had other connections which, appellants contend, showed or raised a presumption that each was subject to conflicting interest which destroyed or impaired his ability to act in the best interest of the Hammond Trust. “Charles E. Rieman was the president of Western National Bank, which was the Jockey Club’s principal depository, and which at times made substantial loans to the Jockey Club. “F. Granger Marburg was a partner in the brokerage firm of Alex. Brown & Sons, and as such ⁵²⁶ was a partner of W. Wallace Lanahan. Mr. Lanahan was a member of the board and executive committee of the Jockey Club, and was one of the Jockey Club’s two negotiators for the purchase of the Pimlico Race Track.

There was also evidence to indicate that Alex. Brown & Sons owned 350 shares of stock of the Jockey Club, but there was further evidence that the stock had been acquired for Alfred Gwynn Vanderbilt and had been transferred to him. “Edwin F. A. Morgan was a partner in the law firm of Semmes, Bowen and Semmes, and as such was a partner of Lawrence Perm, and shared with him in the fees received by the law firm for its representation of the Jockey Club. Mr. Perin was a member of the board and executive committee of the Jockey Club, and was the Jockey Club’s other negotiator for the purchase of the Pimlico Race Track. “J. Edward Johnston personally owned 100 shares of stock of the Jockey Club. “Messrs. Rieman, Marburg, Morgan, and Johnston were members of Mercantile’s board of directors.

Messrs. Rieman and Johnston were members and Messrs. Marburg and Morgan were associate members of the executive and of the trust investment committees. “There was evidence that Mercantile held, in various trusts or in agency accounts, some 950 shares of stock of the Jockey Club. Mr. Vanderbilt owned a majority of the Jockey Club’s 4,540 outstanding shares. “The evidence showed that in 1946 a question which had become of significant importance was the adequacy of the physical facilities at Pimlico, and the feasibility of improving them, or of moving to a different location.

The then current lease would have expired in 1949. The Jockey Club suggested that it would purchase the property from Mercantile, and suggested a price of $700,000.00. Mercantile ⁵²⁷ informed Mrs. Madden, the life beneficiary, who was then thought by some to be the sole party in interest, because of her renunciation of the power of appointment in her father’s will. Her personal attorney was also kept informed.

She declined to consider the offer of $700,000.00. “Later in 1946 Mercantile arranged to have a Mr. Gilbert, a well known real estate appraiser in Baltimore, appraise the land. He valued it at $540,000.00. A Philadelphia engineering firm, suggested by Mrs. Madden’s attorney, made a study primarily to determine what it would cost the Jockey Club to relocate its racing operation, and to duplicate Pimlico’s physical facilities at a new location. One of the conclusions of that study was that the improvements at Pimlico could be reproduced new at a cost of approximately $1,600,000.00, and that their current depreciated value was $1,000,000.00.

Mercantile noted that the value of the Pimlico property, at least by one approach, was indicated to be $1,540,000.00. “Mercantile also approached the question of value in other ways. It made studies by capitalizing rents, adjusted for what it considered to be valid factors, using several different assumed rates of return. Possible values ranged up to a figure in excess of $2,000,000.00. There was other evidence at the trial indicating even higher values.

Mercantile concluded that $1,500,000.00 was a reasonable value. It put that figure to the Jockey Club as an asking price. “Other factors affecting value which were shown by the evidence were that the Jockey Club, not the trust, owned the names of several well known stakes races run at Pimlico, most famous of which was the Preakness. The Jockey Club, not the trust, was the licensee for conducting horse racing at Pimlico. State laws then in effect froze major racing at mile tracks in Maryland at the existing four locations, so that ⁵²⁸ each party was, in many ways, compelled to deal only with the other. “The General Assembly session of 1947 saw indications of change.

A bill was introduced which would authorize any of the four major licensees to conduct racing at a different location, but which would still limit the number of licensees to four. The parties met as adversaries in the lobbies and halls of the State House. Intensive lobbying activities were conducted on behalf of each. As the session was nearing its end, the lobbyists for Mercantile were successful in bringing about an amendment [the Miles Amendment] to the bill which would permit a licensee to relocate, but would then permit racing at five locations.

The amendment was passed by the Senate on second reading by a vote of 15 to 13. “It was clear that if that amendment became a part of the law, the owner of Pimlico Race Track would have to deal with a tenant which had alternatives. The Jockey Club could stay, under a new lease, or it could relocate. If it relocated, the trust would be required to seek another operator, one which could obtain a license, and which could then conduct horse racing at Pimlico. Pimlico would then be one of five, rather than four, major tracks in Maryland.

If the amendment failed of final passage, the owner of Pimlico would have little more than a piece of real estate, appraised at slightly over one half of a million dollars. “Before the Senate Bill came up for third reading, a memorandum of agreement was reached by negotiators for the Jockey Club and Mercantile. The Jockey Club would buy the property for $1,115,000.00. “There was evidence that Mercantile did little or nothing to find or interest other possible purchasers. There was evidence that it did little or nothing to exploit indications of interest from other sources. ⁵²⁹ “[Tjhere was evidence at the trial which, viewed most favorably to the counter-complainants, coupled with reasonable inferences from the evidence, could have permitted a trier of fact to find the fair value of the asset sold to be within a wide range of indicated values. There was evidence from which a trier of fact could find that Mercantile used due diligence and exercised good judgment under all the circumstances, but the evidence would likewise permit finding that Mercantile failed to use the required diligence and good judgment in selling the trust asset.

There was evidence of potential for conflicts of interest, from which a trier of fact might infer that conflicts did, or might infer that they did not, result in a less than adequate price by affecting the quality of diligence and judgment with which the sale was made. “In short, the critical decision in this case was for the trier of the facts, and could not be resolved on the basis of sufficiency as a matter of law. We hold that the chancellor erred in granting Mercantile’s motion to dismiss.” (Emphasis added.) 27 Md. App. at 32-36, 40-41 . After remand for further proceedings, the chancellor permitted the counter-complainants to reopen their case on a restricted basis as follows: “[T]he petition of the counter-complainant, Peter Madden, to proffer newly-discovered evidence and the petition of the other counter-complainants to reopen their case in chief for the purpose of the introduction of additional evidence is granted, i.e. the counter-complainants shall be permitted to reopen their case in chief at the resumption of trial for the purpose of offering the following into evidence: One, evidence with respect to valuation of Pimlico Racetrack, including without limitation, expert testimony and documentary evidence. Two, evidence ⁵³⁰ of — strike that — evidence bearing on the issue of laches in bringing the within action.

Three, evidence relating to the release of the power of appointment by the life tenant of the trust. Four, further testimony from Mr. Frederick and Mr. Opie, and five, evidence as to the identification of the true or real owners of the stock of the Maryland Jockey Club, held by Mercantile-Safe Deposit and Trust Company or its then predecessor, in the name or names of a nominee or nominees. “This ruling in no manner relates to the admissibility into evidence of any items covered in the foregoing categorical descriptions, but bears only on the right of the counter-complainants to reopen their case in chief for the purpose of offering evidence within those categories. “Except to the extent provided expressly by the foregoing ruling, the counter-complainants may not reopen their case in chief.” After both sides had introduced such evidence as they desired, the trial judge found that Mercantile used due diligence and exercised good judgment under all the circumstances and that the alleged conflicts of interest did not result in Mercantile obtaining a less than adequate price for the property. As we indicated in our prior opinion, there was already in the record sufficient evidence to support these findings. Nothing produced on retrial has altered this situation.

Therefore, we are required under Md. Rule 1086 to affirm. In ordinary circumstances we would terminate this portion of our opinion at this point. In view of the extraordinary expense and effort devoted by the parties to these proceedings, we will discuss the appellants’ specific arguments briefly. Breach of Trust In our prior opinion the major question before us was whether the appellants had adduced sufficient evidence to ⁵³¹ survive a motion to dismiss under Md. Rule 535.

Such a motion tests the legal sufficiency of the evidence and requires that it be viewed in the light most favorable to the non-moving party. In the present appeal, we are called upon to review the chancellor’s findings of fact and his application of the law to those findings. The scope of our review is now governed by Maryland Rule 1086 which requires that we view the evidence and all reasonable inferences drawn therefrom in the light most favorable to the prevailing party and that we affirm the decree unless we find the chancellor’s factual conclusions clearly erroneous or that he misapplied the law. If there was substantial evidence presented which supports the chancellor’s findings they must be affirmed.

Delmarva Drill Co., Inc. v. Tuckahoe Shopping Center, Inc., 268 Md. 417 , 302 A. 2d 37 (1973); Moon v. Weeks, 25 Md. App. 322 , 333 A. 2d 635 (1975). Appellants’ major contention is that the Trustee, Mercantile, breached its duty to the Hammond Trust in the sale of Pimlico because it acted with divided loyalty, in that it held in other fiduciary accounts a significant portion of the Jockey Club’s stock; because certain of its directors had interests conflicting with those of the trust; and because it failed to exercise the diligence and prudence required of it in marketing the racetrack. Through all of these allegations there runs a common thread: the question of the adequacy of the sale price. Each of appellants’ theories of breach of trust depends on whether the sale price was fair and adequate.

Therefore, for the sake of convenience, we will discuss that aspect of the case first. Much has been said in the briefs concerning the burden of proof relative to the fairness of the purchase price. In our view, the appellee has met the most stringent burden which the law applicable to this case has placed upon it. Harlan v. Lee, 174 Md. 579 , 199 A. 862 (1938) provides us with the standard applicable where it appears that a fiduciary may have acted out of divided loyalty.

In that case a single individual served both as executor of an estate and as trustee of one-third of the estate for the benefit of one of its three distributees. At a public sale, an undisclosed agent of the ⁵³² executor, acting for him in his capacity as trustee, purchased certain ground rents owned by the estate. Thus, the executor-trustee, acting in a dual fiduciary capacity, both sold and purchased the property. An objection to the validity of the sale was raised by those entitled to that share of the estate not subject to the trust.

The Court held that where the dual fiduciary was acting as a trustee, and not for his own account, the mere fact that he was both the seller and the purchaser of the property would not, of itself, invalidate the sale. The Court went on to point out that because there was also a claim that the asset was sold for an inadequate price, “the objection to the sale would be sustained if the executor failed to establish by a clear preponderance of testimony that the sales of the ground rents were fairly made, in good faith and for an adequate price.” 174 Md. at 594 . Although the potential for conflicting loyalties in the present case is not as obvious and direct as it was in Harlan , we nevertheless conclude that such potential did exist and therefore we will apply the same burden of proof. 1 Thus, the relevant question, so far as proving the adequacy of the price is concerned, is whether it was shown “by a clear preponderance of the testimony that the [sale was] fairly made ... and for an adequate price.” The evidence showed that in an attempt to ascertain the value of the land and improvements owned by the Hammond Trust at Pimlico, Mercantile obtained an appraisal of the land from one Harry E. Gilbert, a qualified real estate appraiser, and an estimáte from the engineering firm of Day and Zimmermann of what it would cost to reproduce the improvements and various facilities then existing on the Pimlico property. Day and Zimmermann included a ⁵³³ computation of the cost of replacing the Pimlico improvements less depreciation.

The Gilbert appraisal together with the latter figure from Day and Zimmermann yielded an estimated value of land and improvements of $1,540,000.00. These reports were competent evidence of the fair market value of the Pimlico property and improvements owned by the Hammond Trust at the time of the sale. Appellants have attacked the reliability of the reports but their arguments go only to the weight to be given to the evidence. The chancellor was well within his discretion in relying on the figures compiled by Gilbert and Day and Zimmermann.

Evidence of value also included the testimony of Mr. Philip E. Klein, a qualified expert in the appraisal of real estate. Mr. Klein stated that in this opinion the 1947 value of the land and improvements at Pimlico, assuming its continued use as a racetrack, was $1,532,000.00. He further stated that the value of the property at its highest and best use other than for racetrack purposes was $532,000.00. Again, appellants attack Mr. Klein’s testimony with arguments that go to its weight; but this was a matter for the chancellor to determine and we see no reason to conclude that he was erroneous in accepting, as he did, the testimony of Mr. Klein.

We come now to what is perhaps the most crucial consideration bearing on the value of the property sold. The evidence shows that in 1947 the Maryland Jockey Club was seriously considering moving its operations to a new location. A measure then pending in the legislature, Senate Bill 101, would have permitted such a move and very likely would have left Pimlico unavailable as a racetrack. The result would have been a substantial reduction in the value of the property, and the imminence of this threat would have had an injurious effect on the value of the property.

The trustee fought the passage of Senate Bill 101 quite aggressively through the services of a highly regarded lobbyist hired for that specific purpose. An amendment [Miles Amendment] to the Bill, which would have permitted racing to continue at Pimlico if the Jockey Club had moved, was adopted on its second reading in the Senate by a margin of one vote. The war in the ⁵³⁴ legislature was not won, however, with the tentative adoption of the compromise amendment. The evidence was quite clear that opposition to the amendment was still strong and that numerable opportunities still existed for the adoption of Senate Bill 101 as originally proposed.

It was under the threat of this legislation that Mercantile sold the property to the Jockey Club for $1,115,000.00. In making their arguments, appellants completely downgrade the legislative situation and its effect on value. They overlook that the amendment had been adopted by one vote in the Senate and could easily have been removed before the legislature adjourned; in which event the Pimlico real estate would have been worth, according to one appraisal, only slightly more than half a million dollars. As pointed out in our prior opinion, even with the amendment the Jockey Club had the alternative to relocate and if it did so Mercantile would have been required to seek another operator who could obtain a license and conduct horse racing at Pimlico.

In addition, Pimlico then would have been one of five, rather than four, major tracks in Maryland. In ignoring this situation, the appellants, and indeed their witnesses below, tend to grossly overvalue the assets which were sold. We reject appellants’ argument that in the valuation of land and improvements the chancellor failed to consider all elements of value owned by the Hammond Trust with respect to Pimlico. On the evidence presented, we have no basis to conclude that the chancellor committed error in excluding the various elements of value which appellants suggest were a part of the Hammond Trust assets.

With respect to the alleged “good will” of the location and name of Pimlico, the chancellor remarked as follows: “Going now to some of the principal facts bearing on value, ■ the evidence shows Pimlico had an excellent location. It shows that Pimlico was steeped in tradition, but the imponderable question is how much Of that tradition attached to the site or the name of the site and how much attached to the Maryland Jockey Club-and the Preakness. The ⁵³⁵ evidence also shows that Pimlico’s improvements were very old and, although well-maintained, they were obsolescent and well below standard for a modern racetrack operation in the post-World War II era.” (Emphasis added.) On the evidence, the chancellor was not clearly wrong in concluding that this question was indeed “imponderable” and, accordingly, he was correct in excluding it from his determination of value. Appellants’ attempts at valuation consisted in the main of capitalizing the income earned over a number of years by the Maryland Jockey Club.

Alternatively, they also capitalized rents paid by the Jockey Club to the Trust over a similar period. The chancellor was not required to rely on this method of valuation. See Brinsfield v. Mayor and City Council of Baltimore, 236 Md. 66 , 202 A. 2d 335 (1964); State Roads Commission v. Novosel, 203 Md. 619 , 102 A. 2d 563 (1954). The fact that the trustee was not selling a horse racing business as a going concern but simply the land and improvements where it was conducted was sufficient justification for the chancellor’s decision to prefer Mercantile’s approach over that of the appellants.

It should be noted here also that the major part of the yearly rent was a percentage of gross earnings. Capitalization of the earnings of a business conducted upon land may reflect the efficiency of management and other aspects of the business operation rather than the value of the land itself. Accordingly, it is not. always the most reliable method of valuation. In this case particularly there was evidence to indicate that the profitability of the business conducted by the Jockey Club was due to its tradition, management and assets rather than anything which the property owned by the trust may have contributed.

There was also evidence that the years over which earnings were capitalized by appellants’ expert were atypical and there was a serious question whether any racetrack business would continue on the site. Appellants also attempted to prove value through reference to 1947 tax assessments and insurance valuations. ⁵³⁶ Both of these figures were of doubtful worth in proving the market value of the property. As the chancellor noted, “they are at best hearsay opinions, and in this case we are not even certain, to some extent, whose opinions they are.” In view of the above discussion, which only summarizes the voluminous evidence contained in this record concerning value, we cannot say that the chancellor committed error in concluding that “the evidence is clear and convincing that the price was adequate.” Having established the validity of the chancellor’s finding that the sale price was adequate, we now move to a discussion of the specific theories of breach of trust advanced by the appellants. It is argued first that Mercantile owed a duty of complete loyalty to the Hammond Trust and that such duty was breached when the Trustee sold trust assets to a corporation in which it held approximately a 20% interest in other trust or fiduciary accounts.

We note at the outset, as we did in our prior opinion, that this circumstance does not create a case of “self dealing” in the strict sense. The trustee did not deal with itself for its own advantage or profit from the transaction. Accordingly, we find the strict principles applied in self dealing cases are not applicable here. Appellant Cosden argues that because of this relationship, and because of the various direct and indirect relationships between directors of Mercantile and the Jockey Club in 1947, which we discuss below, the Trustee was required to prove not only the fairness of the sale but also that all the beneficiaries of the Hammond Trust were fully informed of all the facts concerning the property and the transaction and freely consented thereto.

The case relied on for this proposition is McDaniel v. Hughes, 206 Md. 206 , 111 A. 2d 204 (1955), which, of course, is a self dealing case and, therefore, not applicable here. The rule applicable to this situation is the more flexible standard used in viewing transactions between trusts with a common trustee. It is the same standard discussed in Harlan v. Lee, supra; that is, where a common fiduciary deals for and between two different trusts or fiduciary accounts the transaction will be sustained if it is shown to have been fairly ⁵³⁷ made, in good faith and for an adequate price. This view is in accordance with that generally accepted by most authorities.

See French v. Hall, 198 Mass. 147 , 84 N. E. 438 (1908); In re Binder’s Estate, 137 Ohio St. 26 , 27 N.E.2d 939 (1940); In re Rees’ Estate, 53 Ohio Abs. 385 , 85 N.E.2d 563 (1949); In re Saeger’s Estate, 340 Pa. 73 , 16 A. 2d 19 (1940); Restatement (Second) Trusts, § 170, comment r (1959); II Scott, Trusts (3d. ed. 1967) § 170.16; Prochnow, “Conflict of Interest and the Corporate Trustee,” 22 Bus. Law. 929 (1967); Comment, “Corporate Trustees Conflict of Interest,” 25 U.Chi.L.Rev. 382 (1958). The practical advantage of this approach is that it avoids imposing undue restrictions on business trustees which may handle a large number of trust accounts. There may be circumstances in which it is to the best advantage of two trusts to deal with each other even though they are administered by a common trustee.

The instant case is a particularly good example of such a situation. The dangers of divided loyalty are sufficiently guarded against by imposing the burden on the trustee to prove that the transaction was made in good faith and for an adequate price as required by Harlan v. Lee, supra. We have already expressed our view on the price issue. The evidence likewise supports the conclusion that the sale was made in good faith.

The record shows that the negotiations between the trustees and the Jockey Club, for the sale of the Pimlico property, were not merely at arms length but were indeed vigorously and hotly contested by both sides. It was the Jockey Club which approached the Trustee; first in 1938 with an offer to purchase Pimlico for $800,000, and then in 1946 with an offer to purchase for $700,000. Both of these offers were rejected. After the second offer, negotiations continued and became progressively more serious.

Mercantile employed Gilbert and Day and Zimmermann not only to determine the value of the assets in question but also the costs to the Jockey Club of relocating. This latter piece of information was used as a bargaining tool to demonstrate to the Jockey Club the advantage of remaining at Pimlico. Mr. Henry A. Parr, III, an officer and director of the Jockey ⁵³⁸ Club at the time in question, testified through deposition that the negotiations over the sale of Pimlico were hard fought on both sides. Mr. Lawrence Perm, who in 1947 was also a director of the Jockey Club and its chief attorney, testified at the trial that the position of Mercantile’s president and chief Pimlico negotiator, Mr. Thomas B. Butler, was “adamant” and “hard boiled” with respect to the sale.

Perm also testified that at the time he felt Mercantile was demanding too high a price for the property. We note further that the legislative situation described above also tends to support the wisdom and bona fides of the sale; especially when one considers the Trustee’s efforts to fend off the threat posed by Senate Bill 101. These references to the evidence are but a slight sketch of the mass of data contained in the record tending to show the fairness and good faith of the transaction. There is substantial support for the chancellor’s findings that “the evidence... is clear and convincing that no conflicts, potential or otherwise, had any effect on the sale of the Pimlico land and improvements owned by the trustee...”, and that, “there was no bad faith or disloyalty to the trust on the part of any employee, officer or director of the trustee.” Appellants next argue that the various direct and indirect relationships between certain of Mercantile’s directors and the Jockey Club also created a conflict of interest affecting the adequacy of the purchase price and the good faith of the transaction.

We have already pointed out that the chancellor was correct in concluding that the purchase price was adequate and we are likewise persuaded that he was correct in concluding that the subject relationships had no effect on the transaction. His findings on this aspect of the case were as follows: “The evidence