Buckle v. Marshall

• Decision Date: 05 September 1940
• Docket Number: Record No. 2253.
• Court: Virginia Supreme Court
• Parties: SALLIE MARTIN BUCKLE, ET ALS. v. FRANK MARSHALL, ADM'R C.T.A., D.B.N. OF THE ESTATE OF BETHENIA PANNILL MARTIN, AND FRANK MARSHALL IN HIS OWN RIGHT, ET ALS.

Page 139

176 Va. 139

SALLIE MARTIN BUCKLE, ET ALS. v. FRANK MARSHALL, ADM'R C.T.A., D.B.N. OF THE ESTATE OF BETHENIA PANNILL MARTIN, AND FRANK MARSHALL IN HIS OWN RIGHT, ET ALS.

Record No. 2253.

Supreme Court of Virginia, Staunton.

September 5, 1940.

Present, Campbell, C.J., and Holt, Hudgins, Gregory, Eggleston and Spratley, JJ.

1. REFERENCE AND COMMISSIONERS — Review — Report Prima Facie Correct. — The report of a master in chancery, except as to errors appearing on its face, is prima facie correct when the evidence is conflicting.

2. EXECUTORS AND ADMINISTRATORS — Accounting — Failure to Render Annual Account — Furnishing Information to Attorney for Beneficiary No Defense — Case at Bar. — The instant case was a suit to surcharge and falsify the accounts of an administrator. The trial court ordered that the cause be referred to a commissioner in chancery, as a special master, to take, state and settle an account of the transactions of the administrator, showing a full and comprehensive statement of his transactions from the time he assumed his duties, and pursuant thereto the commissioner filed his report. The administrator made no annual report between 1931 and 1935, and he testified that his failure to do so was because the investments of the estate were unchanged and little or no income was received from them. He said that he kept in touch with the attorney who represented the principal beneficiary and furnished him with copies of the accounts filed and with such further information as he requested.

Held: That the defense made by the administrator would not be satisfactory if the estate suffered a loss through the failure of his duty.

3. TRUSTS AND TRUSTEES — Duties and Liabilities — Test of Liability. — The inquiry in every case in which it is sought to fix a liability upon a fiduciary is: 1. Did he act within the scope of his powers and duties? 2. Did he act in good faith? 3. Did he act with ordinary prudence? If he did so act, he is not responsible for the consequences of the act, though it result in the loss of the trust fund, or some part of it.

4. TRUSTS AND TRUSTEES — Investments — Statute Furnishes Immunity — Statute Not Mandatory. — Section 5431 of the Code of 1936, listing the type of securities in which fiduciaries may invest, is a statute furnishing immunity to those who invest according to the provisions of the statute; but the provisions of the statute are purely permissive and not mandatory.

5. TRUSTS AND TRUSTEES — Duties and Liabilities — Standard of Conduct Required. — The standard of conduct required of a fiduciary is the exercise, in the light of conditions obtaining before him, of the caution, care and prudence to be expected of the average prudent man in the management of his own affairs.

6. TRUSTS AND TRUSTEES — Encroachment upon Corpus of Estate — Payment to Beneficiary of Sum Erroneously Credited to Principal Account — Case at Bar. — In the instant case, a suit to surcharge and falsify the accounts of an administrator, the bill alleged that the administrator had taken $500 from the principal account and paid this money to the principal beneficiary and that this payment constituted an unauthorized transfer of principal to income. The evidence showed that at the time the administrator assumed his duties he had recovered as assets for the estate a certain sum from the estate of the former administrator, that he had erroneously credited more than $500 properly belonging to income to the principal account and that it was this money he had paid out.

Held: That there was no merit in the contention of appellant.

7. TRUSTS AND TRUSTEES — Encroachment upon Corpus of Estate — General Rule. — As a general rule, the principal of a trust fund must be preserved intact, according to the terms of the instrument creating the fund, and, when it is clearly provided that the payments may be made to a beneficiary only from the income of the trust fund, the trustee may not break into the principal.

8. TRUSTS AND TRUSTEES — Encroachment upon Corpus of Estate — Restoring to Income Account Funds Erroneously Carried to Principal Account. — The general rule that the principal of a trust fund must be preserved intact does not prevent the correction of an error, and if funds belonging to an income account are arbitrarily or erroneously carried to the principal account, the rule is not violated by an act restoring them to the proper account. No continuance of the original error can change the nature of the fund or the right of the person entitled to it.

9. TRUSTS AND TRUSTEES — Duties and Liabilities — Keeping Trust Assets in Individual Name. — A trustee who keeps trust assets in his individual name and without any trust earmarks, bears the risk of any loss of such property.

10. TRUSTS AND TRUSTEES — Duties and Liabilities — Preservation and Distribution of Estate — Records and Accounts. — A trustee or fiduciary must exercise the utmost good faith and reasonable diligence in preserving a trust estate in his care, keep complete and accurate records, make, state and report his accounts as required by law, and distribute such estate only to the persons entitled thereto.

11. EXECUTORS AND ADMINISTRATORS — Duties and Liabilities — Effect of Instructions in Will as to Care of Estate and Keeping Records — Case at Bar. — In the instant case, a suit to surcharge and falsify the accounts of an administrator, the will directed that special care be taken to secure safe and profitable investments and that the executors keep a clear, concise and separate record of all transactions.

Held: That the directions of the will were but an expression of the general principles of a trustee's duty and were in accord with the requirements of the law, and furnished no ground for an extended liability.

12. EXECUTORS AND ADMINISTRATORS — Compensation — Circumstances Justifying Refusal to Deny Commissions — Case at Bar. — In the instant case, a suit to surcharge and falsify the accounts of an administrator, the bill prayed that the administrator be denied compensation for administering the estate because of his improper acts and his negligence in failing to perform the duties of his trust, but the evidence showed that he had honestly accounted for all assets coming into his hands and had by diligent efforts brought additional funds to those assets, that he had invested the funds in investments which prudent and cautious business men deemed to be sound and safe, and that the depreciation in the value of the investments was due to circumstances beyond human control, that he stood ever ready to make a statement of his accounts and no loss was suffered by his failure to make or state any of his accounts, or by his method of making the statements, and further that the interested beneficiaries for many years silently acquiesced in the manner in which the accounts were stated. When certain coupon bonds belonging to the estate, payable to bearer, were called in exchange for registered bonds, the administrator had them registered in his name, rather than as administrator, but he testified that he wrote on them that they belonged to the estate and that he kept them so earmarked in an envelope separate from other assets in his possession. The trial court refused to deny commissions to the administrator.

Held: No error.

13. TRUSTS AND TRUSTEES — Compensation — Discretion of Court. — Section 5409 of the Code of 1936, which provides for the forfeiture of commissions to fiduciaries, has consistently been construed to leave the allowance or disallowance of commissions within the sound judicial discretion of the Chancellor.

Appeal from a decree of the Corporation Court of the city of Danville. Hon. H. C. Leigh, judge presiding.

The opinion states the case.

W. G. Vansant and W. C. Thompson, for the appellants.

Crews & Clement, for the appellees.

SPRATLEY, J., delivered the opinion of the court.

The purposes of this suit are to surcharge and falsify the accounts of Frank Marshall, administrator, c.t.a., d.b.n. of the estate of Bethenia Pannill Martin, to hold him personally liable for losses incurred through investments of the assets of the estate and to deprive him of compensation for his services as administrator.

Mrs. Bethenia Pannill Martin died, testate, in 1918, and her will was probated in Pittsylvania county. James L. Tredway, one of the executors nominated in her will, was duly appointed and qualified as sole executor of her estate. Tredway died in 1921, and Frank Marshall was, on the 5th day of July, 1921, appointed administrator d.b.n., c.t.a. of the said estate by the clerk of the Circuit Court of Pittsylvania county. Marshall immediately qualified as executor, giving bond with the United States Fidelity and Guaranty Company, as his surety, and entered into the performance of the duties of his trust.

Mrs. Martin, in paragraph four of her will, bequeathed and devised her property as follows:

"In trust, for my daughter Mrs. Sallie Martin Buckle now living at Newark, New Jersey, my entire estate, real, personal and mixed during her life which shall be a trust fund for her benefit and kept invested in some safe interest bearing loans or securities, the net income of which shall be paid to my daughter for her use and support. I desire and direct that this trust shall run during the lifetime of my said daughter and at her death or as soon thereafter as is practicable the said trust shall be disposed of as provided in Section 5 next following."

Paragraphs five and six provided substantially that upon the death of her daughter, Sallie Martin Buckle, the estate should be divided into four parts, a one-fourth part to go to each of her four daughters; namely, Ruth Buckle Adams, Virginia Buckle Beattie (now Miller) Georgiana Buckle (now Settle) and Sallie Martin Buckle, with the further provision that the share of Sallie Martin Buckle, II, should be held in trust for her benefit during her lifetime and, upon her death,...