Crayton v. Fowler

• Citation: 139 S.E. 161
• Decision Date: 26 August 1927
• Docket Number: (No. 12257.)
• Parties: CRAYTON. v. FOWLER.
• Court: United States State Supreme Court of South Carolina

139 S.E. 161

CRAYTON.
v.
FOWLER.

(No. 12257.)

Supreme Court of South Carolina.

Aug. 26, 1927.

[139 S.E. 161]

Cothran, J., and Watts, C. J., dissenting.

Appeal from Common Pleas Circuit Court of Anderson County; S. W. G. Shipp, Judge.

Suit by Sallie C. Crayton against J. S. Fowler, individually and as trustee. Decree for plaintiff, and defendant appeals. Affirmed.

The following is the decree of Judge Shipp:

" * * * It appears from the testimony and is undisputed, that on January 11, 1919, the defendant, J. S. Fowler, as trustee, invested the sum of $11,000 in a note secured by a real estate mortgage.

"On January 11, 1919, Anderson Real Estate & Investment Company executed and delivered to C. E. Pilgrim its note for the sum of $11,000, payable 3 years after date, to the order of C. E. Pilgrim, with interest from date at 7 per cent. per annum, payable semiannually on May 1st and November 1st of each year, unpaid interest to bear interest at the same rate, and providing for the usual 10 per cent. attorney's fee in case of collection by suit or attorney. This note was secured by a mortgage on 236¹/₃ acres of land, situate in Williainston township, county and state aforesaid. On the same date the said C. E. Pilgrim transferred and assigned this note and mortgage, without recourse, to J. S. Fowler, as trustee, who thereupon paid over to the said C. E. Pilgrim the sum of $11,000 in consideration of the assignment of the said note and mortgage.

"On November 28, 1919, the Anderson Real Estate & Investment Company conveyed to one J. B. Spearman a tract of land contain ing 111¹/₃ acres, which was a portion of the tract of 236¹/₃ acres covered by said mortgage, in consideration of the sum of $7,210, and J. S. Fowler, as trustee, released said tract of 111% acres from the lien of the mortgage which had been assigned to him by C. E. Pilgrim, as aforesaid—thus leaving a tract of only 125 acres as security for the payment of the trust fund of $11,000 which he had invested in the purchase of said note and mortgage. Subsequently it became necessary for J. S. Fowler, as trustee, to foreclose said real estate mortgage, and in the decree in this foreclosure proceeding he was given judgment for the sum of $13,657.65 against the said Anderson Real Estate & Investment Company and E. R. Horton, who had indorsed and guaranteed payment of said note, and on sales day in May, 1925, said tract of land, which, after the release of the Spearman tract, contained only 125 acres, was sold by the probate judge as special referee, and was bid off by J. F. Mauldin for the sum of $7,000—Mr. Mauldin paying $3,000 cash and giving to the said J. S. Fowler, trustee, his note for the sum of $4,000, payable December 1, 1925, with interest from date at the rate of 7 per cent. per annum, secured by a mortgage on said tract of land. Said judgment was credited with the sum of $6,397.20, the net proceeds of said sale, thus leaving a deficit of $7,260.45, and it appears that both the said Anderson Real Estate & Investment Company and E. R. Horton are now insolvent, and the judgment for said deficit uncollectable, thus causing a loss to the corpus of the trust estate of a sum in excess of $7,000. The defendant claims that he acted in good faith, and as he thought for the best interest of the beneficiaries of the trust estate when he invested the trust fund of $11,000 in the purchase of said note and mortgage, but the court holds that when he made such investment he departed from the express direction of the deed creating the trust as to the mode of investment of the proceeds of the sale of the trust property conveyed to him by said trust deed; and although he is exonerated from any moral turpitude in the matter, it is clear under the law and the facts of the case that he must be held personally responsible for said loss. It is a general rule of law that when a trustee departs from the directions contained in the trust instrument he is liable for any loss occasioned, irrespective of good faith or his best judgment. 26 R. C. L. 1307, 1308; 44 L. R. A. (N. S.) 876; Womack v. Austin, 1 S. C. 421; Sanders v. Rogers, 1 S. C. 452; Klugh v. Seminole Securities Co., 103 S. C. 120, 87 S. E. 644; 2 Perry on Trusts, § 847.

"The defendant, J. S. Fowler, claims that the plaintiff acquiesced in the investment of said trust fund in the note and mortgage referred to, but the evidence upon this point does not satisfy the court that plaintiff should be held to have acquiesced in such transaction. Neither is the testimony sufficient to sustain the contention of the defendant, J. S. Fowler, as trustee, that plaintiff should be barred from the relief sought herein on account of the release which she signed on April 2, 1920. It appears that at that time and prior thereto certain other matters were at issue between...