Walker v. James

• Citation: 85 S.W.2d 876,337 Mo. 750
• Parties: Paris M. Walker, Nancy Hagood, Jessie Franks as Trustees and as Beneficiaries Under a Trust Established by the Will of James D. Lankford, Appellants, v. A. Lamkin James, Administrator of the Estate of Albert R. James
• Decision Date: 03 September 1935
• Court: United States State Supreme Court of Missouri

85 S.W.2d 876

337 Mo. 750

Paris M. Walker, Nancy Hagood, Jessie Franks as Trustees and as Beneficiaries Under a Trust Established by the Will of James D. Lankford, Appellants, v. A. Lamkin James, Administrator of the Estate of Albert R. James

Supreme Court of Missouri

September 3, 1935

Appeal from Pettis Circuit Court; Hon. Dimmit Hoffman Judge.

Affirmed.

Thomas Hackney and Glenn R. Donaldson for appellant.

(1) The defendant below by his acceptance of his selection as one of the trustees and his acceptance of the office of manager of the trust estate, became and thereafter acted as the sole executive and managing trustee. The sole custody of the property of the trust estate and management of the trust was by the will, committed to his active discretion and control. Himself a lawyer, he was also the sole legal adviser of the trustees. He assumed and alone exercised the entire execution of the testamentary trust. He alone was therefore responsible for the losses flowing from his own acts and also responsible for losses flowing from the acts of those to whom he delegated his discretionary powers and duties in making loans and investments. 1 Perry on Trusts (4 Ed.), sec. 415, pp 522-3, sec. 417, p. 525; 2 Story's Equity Jurisprudence (10 Ed.), sec. 1280; Purdy v. Lynch, 145 N.Y. 462, 40 N.E. 234; Colburn v. Grant, 181 U.S. 601, 21 S.Ct. 739. (2) Defendant having assumed the power of sole management and control of the trust estate in making loans and investments became liable for losses flowing from his negligence or improper acts. It is no defense that the plaintiffs as trustees or beneficiaries or both failed to exercise any power they may have had to restrain him from committing acts injurious to the trust estate; nor that the will did not invest him with the powers assumed by him. Daugherty v. Poundstone, 120 Mo.App. 300; American Bonding Co. v. Richardson, 214 F. 901. (3) Defendant, as managing trustee, could employ agents to discharge, under his supervision, ministerial duties only. It was a gross breach of his trust to invest Whale, Cox & Albin with discretionary powers to make loans of, and pay out, trust funds without restriction supervision, or control by defendant. He thereby became guarantor of the Durant, Oklahoma, loans. Meck v. Barens, 141 Wash. 676, 252 P. 91; McCallister v. Bishop, 78 Minn. 228, 80 N.W. 1118; U. S. F. & G. Co. v. Taggart, 194 S.W. 482; 1 Perry on Trusts (4 Ed.), sec. 402, p. 512. (4) Whale, Cox & Albin were the agents of defendant in making the Durant, Oklahoma, loans. They received their appointment, instructions and authority from him. They took loans in his name as manager, and were accountable to and did account to him as their principal. They were not constructive trustees. 1 Perry on Trusts, sec. 246, p. 326, also Vol. 2, sec. 813, p. 454. (5) Defendant failed to exercise that high degree of care and diligence required of him under the will and the law regarding loans and investment of trust funds. 1 Perry on Trusts (4 Ed.), sec. 458, p. 579; In re Burl's Estate, 211 Mich. 124, 178 N.W. 651; Cornet v. Cornet, 269 Mo. 298; Carrier v. Carrier, 226 N.Y. 114, 123 N.E. 138. (6) Purchase of Cook notes illegal and void as against public policy. The purchases of the two $ 1000 Cook notes by the defendant on behalf of the trust estate -- one from himself as guardian of Mary Boatright, the other from himself personally, or as agent for another, were void as against public policy and gross breaches of trust. Meek v. Hurst, 223 Mo. 698; Montgomery v. Hundley, 205 Mo. 148; Cornet v. Cornet, 269 Mo. 323; Connor v. Black, 119 Mo. 134; Chapman v. Currie, 51 Mo.App. 43. (7) Purchase of all Adams notes void as against public policy. Authorities under Point 5. (8) The court's judgment requiring defendant to refund commission received in purchase of $ 1700 Adams notes did not purge the transaction of its illegality nor deprive plaintiffs of their rights to repudiate the purchase. (9) Madison-Clark bonds were not secured by mortgage on real estate, but only on a leasehold estate which is personal property. Their purchase was not an investment authorized by the will. The lease was simply personal property. Orchard v. Store Co., 255 Mo. 414; Springfield & S. Ry. Co. v. Schweitzer, 246 Mo. 130; Thornton v. Mehring, 117 Ill. 55. In all other respects these bonds were purchased under conditions similar to the purchase of the Kenshire Bonds next hereafter discussed, and what is said there is applicable here. (10) The purchase of the worthless Kenshire bonds without investigation was a gross breach of duty by the defendant. The slightest investigation at Chicago would have readily disclosed to the defendant that the building was far from completed; was subject to mechanic's lien claims for large sums; that insolvency and receivership were inevitable; that the whole enterprise was highly speculative and only a promotion scheme; and that the $ 800,000 issue of bonds never had any substantial value. Such an investment of trust funds is condemned by all the authorities on that subject. 1 Perry on Trusts (4 Ed.), sec. 458, p. 579; Cornet v. Cornet, 269 Mo. 298; In re Buhl's Estate, 211 Mich. 124; Carrier v. Carrier, 226 N.Y. 114, 123 N.E. 138. (11) Recital in the abstracts held in the estate with the loan papers, were notice to the defendant and his agents of the purchase price paid by the mortgagors for the lands mortgaged shortly after purchase. Stump v. Marshall, 266 S.W. 481; Burkholder v. Henderson, 78 Mo.App. 294; Anderson v. Cole, 234 Mo. 4; Tydings v. Pitcher, 82 Mo. 384; Gross v. Watts, 206 Mo. 394; Patterson v. Booth, 103 Mo. 414; Case v. Goodman, 250 Mo. 115. (12) The evidence was wholly insufficient to support the defense of estoppel, authorization, ratification or acquiescence by plaintiffs with respect to the acts of maladministration of his trust by defendant. (a) There was no estoppel shown by the evidence. Wilkinson v. Lieberman, 327 Mo. 420; Woodside v. Durham, 317 Mo. 34; Grafeman Dairy Co. v. Bank, 315 Mo. 859. (b) There was no authorization shown by the evidence. (c) There were not sufficient facts shown by the evidence to constitute acquiescence, or ratification. Tennant v. Union Cen. Life Ins. Co., 133 Mo.App. 362; Grafeman Dairy Co. v. Bank, 315 Mo. 871; Hodge v. Mackintosh, 143 N.E. 45, 248 Mass. 181; Adar v. Brimmer, 74 N.Y. 539; 1 Perry on Trusts (4 Ed.), sec. 467, p. 595; 2 Perry on Trusts (4 Ed.), secs. 850, 851, p. 50.

J. T. Montgomery and W. T. Bellamy for respondent.

(1) Plaintiffs as trustees and sole beneficiaries, and being the sole and exclusive owners of the property involved, are estopped by their conduct from charging the defendant with any violation of his duty toward plaintiffs. 4 Pomeroy's Equity Jurisprudence (4 Ed.), sec. 1083; 1 Perry on Trusts (4 Ed.), sec. 417; 1 Perry on Trusts (7 Ed.), secs. 402, 404 408, 409, 411; 39 Cye., p. 390; Cardwell v. Graham, 115 Md. 122, 38 L. R. A. (N. S.) 1029; Market v. Peck, 144 Mo.App. 701; Graham v. King, 50 Mo. 22; Bales v. Perry, 51 Mo. 541; State ex rel. Townsend v. Meagher, 44 Mo. 363. (2) The defendant being a cotrustee with the plaintiffs can have no greater liability than the plaintiffs as trustees, absent bad faith or fraud, which is not charged. 26 R. C. L., p. 1334, sec. 198, also, pp. 1336, 1339; Hopard Ins. Co. v. Chase, 72 U.S. 508; 4 Pomeroy's Equity Jurisprudence (4 Ed.), sec. 1082, pp. 2489-90. (3) As a general rule, trustees cannot act separately, but must act as a unit if the instrument creating the trust so declares. However, where trustees delegate their authority to their cotrustee, such delegation of authority prevents them from maintaining a bill of relief arising out of such delegation of authority. Anderson v. Roberts, 147 Mo. 493; 39 Cyc. 307; Vandeventer's Appeal, 8 Watts & Serg. 405; Greble's Estate, 16 Pa. Supr. Ct. 42; 2 Story's Equity Jurisprudence (13 Ed.), sec. 1269. (4) A beneficiary or trustee who acquiesces or ratifies the acts of a cotrustee cannot maintain a bill for relief as against such cotrustee. Authorities under Point 1. (5) Evidence conclusively shows H. L. Cox of Whale, Cox & Albin of Durant, Oklahoma, was the agent of the trustees and not of the defendant, and therefore plaintiffs' bill for relief fails as to Durant, Oklahoma, loans. (6) Purchase of Cook and Adams notes not void as against public policy. Evidence conclusively shows defendant had no personal interest whatever in these notes at any time. (7) Evidence shows Madison-Clark and Kenshire Apartment bonds were purchased after due investigation and with a reasonable degree of prudence and care, and it was the plaintiffs themselves who lulled the defendant into the belief that they, as the only ones interested in the estate, were satisfied with and approved of his management, and would abide by any acts he might perform and after knowledge thereof accepted income therefrom without objection to such investment and are not now estopped to deny that such purchase was wrongful. Authorities under Point 1. (8) The consideration expressed in a deed is no evidence of value of property conveyed. 18 C. J., sec. 220, pp. 220, 221, 222, 223, 265; Diggs v. Henson, 181 Mo.App. 34; Kelly v. Power, 2 Ball & B. 236. (9) The appellants have failed to comply with Rule 15 of this court in that the statement in said brief fails to distinctly allege the errors committed by the trial court, and fails to make a fair, concise, and understandable statement of the facts of the case. Evans v. General Explosives Co., 239 S.W. 487, 293 Mo. 364; Crockett v. K. C. Rys. Co., 243 S.W. 902; Kirby v. Balke, 266 S.W. 704, 306 Mo. 109. (10) Appellants have failed to comply with Rule 15 of this court in failing to set out a statement concerning the judgment of the trial court upon which they...