Gilbert v. Kolb

Russum, ]., delivered the opinion of the Court. William Kolb,.of Frederick County, died in .1889, leaving a will by which inter alia he bequeathed to his son, David Kolb, who was also one of the executors named in the will, fifteen thousand dollars, “ in trust to invest the same in some safe security or securities, either public or private, with full power in said trustee to reinvest-the same from time to time as the exigencies of the trust may re-' quire,” the income to be paid to his daughter, Alice Virginia Gilbert, the appellant, during her .life, and after her death, the corpus of the estate to be paid to her children then- living’ and to the descendants of any child or children who may be living-at her death, to be equally divided between them per stirpes. There was a mill property known as the “ New London Mills,” which belonged to the testator’s estate, which the executors, in September, 1889, sold .to one Keller, for $3.50°. No part of the purchase money was paid, but the executors conveyed-the property to Keller, and took from him.a mortgage thereon for the entire purchase money at ⁶³³ 5 per cent, interest, and also a mortgage on a farm of 52 acres, subject to a prior mortgage of $1,200, bearing 6 per cent, interest.

Keller, the mortgagor, died in 1894, and the trustee, on March 16th, 1895, filed his petition, ex parte, asking the Circuit Court for Frederick County, in Equity, to take jurisdiction of the trust and approve his investments, which was done. Afterwards, the trustee and mortgagee foreclosed the mortgage and sold both properties, buying them in as-trustee, the mill for $2,000, and the farm for $260, subject to the prior mortgage of $1,200. After the foreclosure proceedings were completed, the trustee filed his petition asking to be relieved of the trust, and filed therewith a statement showing a loss of $1,392,1:0 the trusj: estate. On this petition the Court passed- an order releasj ing the trustee from the further execution of the .trust,-and Hammond Urner was substituted as trustee,, upon the petition of the appellant, and the trust estate .transferred to him, except the investment in the Keller mortgage, in relation to which testimony was ordered to be taken; so that the sole question before us is in relation to the Keller investment.

The learned and distinguished Judge who decided this case in the Court below, after referring to the difference which may exist between the discretion possessed by a testamentary and a conventional trustee — that is, a trustee appointed under a decree, clearly and correctly lays down the legal principles which control it as follows : “ Generally speaking, where there are no restrictions imposed by the testator, a trustee named by him is vested with a discretion which a conventional trustee does not ordinarily possess, and where a discretion is expressly conferred by will, its exercise in good faith and with proper diligence, though resulting in a pecuniary loss, presents quite a different situation from that which would arise were the loss to follow from an unauthorized act, or from the exercise of an assumed discretion not entrusted to a- conventional trustee. And this is so because the power of the one is broader than the power of the other, and the accountability of each ⁶³⁴ is measured by a totally different standard. Loss resulting from an act of a conventional trustee, though the act were done in the utmost good faith, if it were not an act permitted by the instrument creating or defining the trust, or were done without proper judicial sanction, would fall on the trustee, who having no discretion at all, or a very limited one, is justly held to a rigid accountability without the slighest regard to the motives that may have influenced his action, or the prudence he displayed in performing it. Zimmerman v Fraley, 70 Md. 561 .

But where the testator has selected a particular person as trustee, and has clothed him with a discretion in regard to making investments, and confided in this behalf to his judgment and integrity, and such trustee in good faith, and with diligence, makes an investment of trust funds, strictly in accordance with the power conferred upon him, or in any way that a Court of Equity would have sanctioned at the time, if advised of the circumstances as the trustee then knew or honestly believed them to be, will be exonerated should a loss ensue, though he failed to invoke the guidance of the Court, or to procure its subsequent ratification of the step he took. Tyson v. Mickle, 2 Gill, 376 ; Cunningham v. Schley, 6 Gill, 208 ; Gray v. Lynch, 8 Gill, 403 .” In applying