Mayer v. Mordecai
| Decision Date | 28 March 1870 |
| Citation | 1 S.C. 383 |
| Parties | RACHEL M. MAYER v. BENJAMIN MORDECAI AND OTHERS. |
| Court | South Carolina Supreme Court |
By deed made in May, 1860, three bonds, secured by mortgages of real estate, were assigned to B., in trust, to invest the proceeds, as soon as received, " in such manner as the said B. may think proper, on consultation with" the cestuis que trust , and then to permit them to receive the income. The cestuis que trust removed shortly afterwards, from South Carolina, where the trust was created, to New York, and remained there during the war with the Confederate States. In 1862 and 1863, B. collected the bonds in Confederate Treasury notes, then much depreciated and invested the proceeds in bonds of the Confederate States without consultation with the cestuis que trust with whom it was, at that time, impracticable to communicate Held , That B. committed a breach of trust in receiving payment of the bonds in Confederate Treasury notes, and investing the proceeds in bonds of the Confederate States, and that he was liable to account to the cestuis que trust for the sums received.
Held, further , That the obligors in the bonds were not liable to account to the cestuis que trust , for that they were discharged by their payments to B.
BEFORE CARROLL, CH., AT CHARLESTON, MARCH, 1868.
Under proceedings in the Court of Equity for Charleston District, one of the Masters, by deed, dated 29th May, 1860, assigned to the defendant, Benjamin Mordecai, five bonds, secured by mortgages of real estate, amounting, in the aggregate, to $8,000, and upwards, and about $4,000 in cash, to be held by him " in trust, to invest the cash aforesaid, and the proceeds of the bonds aforesaid, as soon as received, in such manner as the said Benjamin Mordecai may think proper, on consultation with the said Maurice Mayer and Rachel M., his wife, and the same being so invested, then in trust to permit the said Maurice Mayer and Rachel M., his wife, to receive the interest and income of the said settled property" for their use " during their joint lives," with limitations over.
Thomas J. Kerr, Moses Goldsmith and Alonzo J. White, respectively, were the parties obliged, in three of the five bonds, and these three bonds, amounting, in the aggregate, to about $5,000, were paid to Mordecai, in the years 1862 and 1863, in Confederate Treasury notes; and he invested the proceeds in bonds of the Confederate States of America. Kerr, Goldsmith and White were made parties defendant to the bill, and its object was to compel Mordecai to account to the plaintiff, Rachel M. Mayer, wife of Maurice Mayer, deceased, for the amount of the three bonds paid to him as aforesaid; and, also, to obtain a decree setting up the bonds and mortgages given by Kerr, Goldsmith and White as valid and subsisting securities in favor of the plaintiff.
The other facts of the case are stated in the Circuit decree and the judgment of this Court; the Circuit decree being as follows:
CARROLL, Ch.
In February, 1860, the defendant, Benjamin Mordecai, became the trustee of the plaintiff, Rachel M. Mayer, by appointment of this Court. The entire trust estate that passed into his hands consisted of a sum in ready money, and certain bonds well secured by real estate in the city of Charleston. Under the order settling that property upon Mrs. Mayer, James Tupper, one of the Masters of this Court, on the 29th day of May, 1860, executed a deed conveying the same to the defendant, Mordecai, and declaring the trusts and limitations upon which it should be held.
In the course of the year 1860, Mayer and wife removed their residence to the city of New York, and there remained until the close of the recent war between the United States and the late Confederate States of America. After June, 1861, and while the war continued, all communication between the belligerent sections was cut off. During this period the defendant, Mordecai collected three of the bonds held by him as trustee, amounting, in the aggregate, to more than $5,000, and accepted payment in Confederate Treasury notes. The great bulk of the moneys so collected he received during the year 1863, and $1,940.58 of that amount as late as the 10th of November of that year. The proceeds of the bonds so received by him he invested in the public securities of the late Confederate States, $3,600 on the 23d July, 1863, in their 7-30 per cent. Treasury notes, and $2,000 on the 10th November, 1863, in their 8 per cent. Treasury bonds.
According to the plain and unambiguous import of the trust deed, the bonds referred to were not to be treated by the trustee as permanent investments. The primary trust declared is, that he shall invest " the cash aforesaid, and the proceeds of the bonds aforesaid, as soon as received." Such proceeds-the interest as well as the principal-were to form parcel of the corpus or capital of the trust fund. If the attention is confined solely to the provisions of the deed, the trustee, in collecting the bonds, was acting within the strictest line of his duty. But it is objected that he could rightfully call in the money only for the purpose of investing it, and that the investment directed was impracticable, for any consultation with Mayer and wife had then become impossible. The investment contemplated was to be made in " such manner as he, the said Benjamin Mordecai, may think proper, on consultation with the said Maurice Mayer, and Rachel Mayer, his wife." It was provided that Mrs. Mayer and her husband should be consulted by the trustee before making the investments directed, in the confidence, doubtless, that he would pay due regard to their wishes and suggestions in the matter. But no more than this seems to have been designed. The final decision, respecting the investments, is to be made, not by them, but by him, " as he may think proper."
It was, undoubtedly, for her benefit, primarily and principally, that the settlement had been ordered. Contingent interests, it is true, are given to the issue, and the husband, in the event of his surviving her. But such provisions are incidental merely to the wife's equity to a settlement, when recognized and asserted in this Court. By the terms of the trust, no beneficial enjoyment could accrue to Mrs. Mayer, or her husband, in respect of the bonds referred to, until the investment, as directed, of the proceeds. The trustee, Mordecai, under such circumstances, might well have deemed it his duty not to be dilatory in collecting those securities, and investing the proceeds so that the income contemplated might be produced with all convenient dispatch for her use and benefit. If, through unforeseen events, the investment of those funds could not be effected in the mode prescribed, yet, if the trustee conformed to it as far as was practicable, he can scarcely be held to have failed in his duty.
If the investment by the trustee, Mordecai, in Confederate securities, cannot be sustained as coming within the description of the investments mentioned in the trust deed, they may yet be held justified upon another ground. It was no breach of trust, looking merely to the trust deed, for Mordecai to receive payment of the bonds referred to. If, in good faith, he collected them for the purpose of letting the proceeds to interest at a higher rate, and upon what he deemed higher security, he was in no fault, though such disposition of the money may not have conformed to the permanent investment contemplated by the trust deed. Having a trust fund in his charge, which he could not dispose of as directed by that instrument, he was, for the time, substantially in the condition of a trustee with funds as to the investment of which the deed creating the trust gives no directions at all. But, in such case, it is the trustee's duty to invest the fund. He is bound to make it productive to the beneficiaries, and, if he fail to do so, he becomes personally responsible.- Hill's Trusts, 375. " When the trust money cannot be applied, either immediately or by a short day, to the purposes of the trust, it is the duty of the trustee to make the fund productive to the cestui que trust by the investment of it in some proper security." -Lewin on Trusts, 337. The investments in question, being readily convertible into money, may, therefore, be sustained as investments temporary and provisional, operating merely to render the fund productive until it should become practicable to transfer it into the more fixed and permanent investment provided for by the trust deed.
But the plaintiff further contends that, though the trustee, Mordecai, may have had the abstract right to collect the bonds in question, and to invest their proceeds, yet that his acts, in receiving payment in the treasury notes, and in making investments in the public securities of the late Confederate States, were utterly inconsistent with ordinary prudence and circumspection. It is in proof that, in 1862 and 1863, Confederate treasury notes were the sole currency of the country, and, though depreciated, were then " commonly received," and " commonly taken in payment; " that " gold and silver were not used in the payment of debts, and were sold as merchandise; " and that " many persons received payment of bonds held by them in Confederate money, and invested in Confederate bonds." In 1863, we are informed by the testimony that " investments were daily and freely made in Confederate securites; " that " some of the best judges sold real estate, and invested in them; " that Confederate bonds varied in their market value, and " sometimes advanced to a premium of from 43 to 45 per cent.; " and that, in November, 1863, " Confederate securities were highly esteemed-Confederate bonds then at a premium."
It should also be borne in mind that, in ...
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