Fox v. Harris

Adkins, J., delivered the opinion of the Court. Dr. James H. Harris of Baltimore City, who died on or about December 12th, 1910, by his last will and testament cheated a trust for the benefit of his wife and seven children with certain alternative beneficiaries in the event of the death of certain children, and appointed Charles O. Harris, his eldest son, and John B. Thomas, husband of his eldest daughter, trustee©. This son and daughter were the only children by his first wife. In this trust was included all testator’s property of every kind except household furniture.

The trust was to continue for the life of the widow and “until such time as in their (the trustees’) judgment it is to the advantage of all interested to sell the real estate of which T may die seized and possessed, the net income in the- meantime to be divided into seven equal parts, one of which parts T direct shall be paid over to each of my seven children, Charles C. Harris, Effie P. Thomas, M. Alice Jenkins, James Edward ⁴⁹⁷ Harris, Xaimie G. Darby, Ella H. Steel and John C. Harris, or their heirs,” and during the life of the widow, she was to have the entire net income. The will further directs the trustees “immediately upon a sale of my real estate by them to divide the proceeds arising therefrom as well as all other property which may come into their hands, into seven, equal parts.” Two of these parts were then to go absolutely to his eldest children, Charles C. Harris and Effie P. Thomas, respectively, and as to the other five parts the trust was to continue during the respective lives of his other five children. .After their respective deaths, their respective portions were to go absolutely to their respective children or to some one child or person specifically mentioned. The portion of his son, James Edward Harris, after his death, was to go to his daughter, Katherine II. Harris, who married Francis J. Fox, and who is the plaintiff in the cross-bill filed in this case.

The power given the trustees as to sale and re-investment of the property is as follows: “They shall have full power to sell or dispose of all my property, real, personal and mixed, and to invest and reinvest the proceeds arising therefrom in good, safe securities.” The same persons named as trustees were also appointed executors, Elizabeth A. Harris, the widow, died on or about January 18th, 1918, and James Edward Harris on or about April 8th, 1913. The personal property distributed by the executors to the trustees, which had been held by the testator, consisted of a mortgage of $1,400; a $300 bond United Ry. Funding 5’s, appraised at $249; 20 shares of stock of Piedmont Land and Manufacturing Company of Roanoke, Ya., appraised at $10; 10 shares of .stock of Baltimore Investment Company, appraised as without value; 10 shares of preferred stock of Baltimore Pearl Hominy Co., and 5 shares of common stock of said company, appraised at. $10; and $4,639.01 in cash ⁴⁹⁸ The real estate consisted of eight lots, some of them improved, all situated in the town of Harrisonburg, Virginia. In addition to the above there appears to have come into the hands of said trustees 1 68/100 shares of the common stock of the Consolidated Coal Company, as stock dividend; a $250 scrip certificate of preferred stock dividend of Baltimore Pearl Hominy Company; and 39 shares, holders’ rights to subscribe to the preferred tock of the Houston Oil Company.

On April 28th, 1920, Charles C. Harris, individually, and Charles C. Harris and John B. Thomas as trustees, filed a hill of complaint, in which the other parties in interest were named as defendants', alleging, among other things that the widow was dead; that the trustees had sold all the real estate; setting out all the investments then held by them, and praying the court to assume jurisdiction of the trusts created by the will, to interpret the will, to supervise the distribution of the estate, and to advise and direct the trustees in the execution and administration of the several trusts. All the defendants answered, and all admitted the facts stated in the bill and consented to the granting of the relief prayed, except Katherine P. Harris Fox, the appellant. She substantially admitted all the facts, hut averred the investments made by the trustees were recklessly and improvidently made in securities of a highly speculative nature, and that most of them had resulted in heavy losses to the estate', and that in making said investments the trustees violated the duty imposed upon them and the confidence reposed in them by the testator. Subsequently she filed a petition asking leave to file a cross-bill.

On August 30th, 1920, the cross-bill was filed, with allegations substantially the same as in her answer, and asking for process against the trustees and all the other parties in interest, and praying that before distribution of the assets of the estate the trustees he required to make good the losses resulting from improper investments. The answer of Charles C. Harris, individually, and of the ⁴⁹⁹ trustees, averred, among other things, that in making investments the trustees only exercised the power conferred upon them by tbe testator; that they had no personal interest in the said purchases and received no benefit, and would receive none therefrom, excepting such only as might be enjoyed by the said Charles C. Harris, individually, as. a beneficiary under the will; that said purchases were made in good faith by the trustees, and in the honest and reasonable exercise of their judgment and discretion under the authority conferred upon them by the will, and therefore they are not bound or liable for any alleged loss or losses occasioned by depreciation in tbe value of the securities purchased; they also deny the authority or right of the court, under all the circumstances of the case, to order or direct a sale of said securities only for the purpose of ascertaining the alleged loss or losses from depreciation, as prayed in the cross-bill. All the other defendants in their answers repudiate the action of the plaintiff in filing the cross-bill, and express entire confidence in the trustees and satisfaction with their management, of the- estate. Testimony was taken, and at the conclusion thereof the learned court below dismissed the cross-bill, and from that decree this appeal was. taken.

Before considering the facts, of the case, it may be well to review the law as established in this State, and in many other jurisdictions, in reference to the discretion permitted to testamentary trustees in making investments under powers contained in wills, and the rules as to responsibility for losses where the discretion given is exercised reasonably and in good faith. In Gray v. Lynch, 8 Gill, 403 , the will authorized investment in “.some safe and profitable stock.” They invested money in the old United States Bank, and when Congress refused to renew the charter of tho bank, tbe trustees invested the same amount in the new United States Bank at Philadelphia, which subsequently failed. In that case Doesev. ⁵⁰⁰ C. J., quotes with, approval from a number of authorities as follows: In Thompson v. Brown, 4 Johns Ch. R.

(N. Y.) 628, Chancellor Kent said: “This court has always treated trustees, acting in good faith with great tenderness.” In Knight v. The Earl of Plymouth, 1 Dickens, 126, it was said: “A trustee having in his hands a considerable sum of money, places it out for the benefit of the cestui que trust, in the-funds which afterwards sink in their value, or on a. security, at the time apparently good, and which afterwards turns, out not to be so, was there ever an instance of the trustees being-made to answer for the actual sums so, placed out? I answer-no. If there was no mala, fides, nothing wilful in the- conduct of the trustee, the court will always favor him. For as a trust is an office necessary in tire concerns between man and man, and which, if faithfully discharged, is attended .with no small degree of trouble and anxiety, it is an act of great, kindness in any one to accept it.

To add hazard or risk to that trouble, would be a manifest hardship, and would be. deferring everyone from accepting so necessary an office.” Lord Eldon, in Massey v. Banner, 3 Jac. & Walk. 241, said: “Trustees, agents, &c., are expected to- take the same care of the trust-funds as a reasonable attention to their own affairs would dictate to them to take of their own property.” Chancellor Kent, in Osgood v. Franklin, 2 John Ch. Rep. 1, said: “A trustee is not chargeable with more than he has received of' the trust estate, unless there is evidence of very gross negligence, amounting to wilful default.” Again, quoting from JrsTicE Stout : “The true result of the considerations- here-suggested, would seem to he, that where a trustee has acted with good faith in the exercise of a fair discretion, and in the same maimer a,s ho would ordinarily do in regard to his- own property, he ought not to he held responsible for any losses accruing in the management of the- trust, property.” ' In McCoy v. Horwitz, Admr. c. t. a., 62 Md. 188 , the- testator appointed his wife and son executors, and directed that, there should he paid to each of his four grandsons the sum of $3,000 upon his arrival at the age of twenty-one years,, ⁵⁰¹ and 'that his executors should set aside some security or asset of his, valued by them at $1,000 (with power to them and their successors to invest and reinvest and sell), the income from which should be applied for the uses and support of 'said grandsons during their minority, the principal to be paid to them as they respectively attained the age of twenty-one years. The son renounced and the widow administered alone. Instead of selecting investments already in the estate, she invested $1,000 in gas stock, and said stock having shrunk in value to about one-third of the amount invested, one of the grandsons, after the death of the administratrix, sought to hold her estate for the loss.

It was admitted that the administratrix had acted in good faith in purchasing the stock. This Court, after commenting on the confidence reposed in his wife’s judgment and discretion manifest from the entire will, and upon the admission of good faith on her part, said : “Unless there be some rule of law operative in Maryland to fetter her discretion, notwithstanding its honest exercise, and make that honest act a breach of trust, the decree of the court below dismissing the bill must be sustained. The general rule applying to discretionary trusts is, that if trustees exercise discretionary powers conferred on them in. good faith and without fraud or collusion, courts of equity will not underlake to control their discretion. Perry on Trusts, secs. 510 and 513.

" "" * In respect to the rule