Caldwell v. Graham
| Decision Date | 23 February 1911 |
| Citation | 80 A. 839,115 Md. 122 |
| Parties | CALDWELL v. GRAHAM. |
| Court | Maryland Court of Appeals |
Appeal from Circuit Court, Cecil County, in Equity; James A. Pearce Philemon B. Hopper, and Wm. H. Adkins, Judges.
Action by Eliza J. Graham against Charles C. Caldwell, surviving trustee under the will of James T. Graham, deceased. From a judgment for plaintiff, defendant appeals. Affirmed.
Argued before BOYD, C.J., and BRISCOE, SCHMUCKER, THOMAS, PATTISON and URNER, JJ.
Frederick T. Haines, for appellant.
Albert Constable and James J. Archer, for appellee.
This is an appeal by a surviving trustee from an order overruling his exceptions to an auditor's account charging him for misappropriation of trust funds by his cotrustee. The trust was created by the will of James T. Graham, of Cecil county who died in the year 1896. The testator devised and bequeathed his residuary estate to his executors, John S Wirt and Charles C. Caldwell, in trust for the benefit of his mother, Eliza J. Graham, for life, with remainder to his brother and sisters or their issue, the share of the brother to be held in further trust for his benefit for life and to be distributed to his surviving children after his death. By their second account, filed on May 11, 1898, the executors charged themselves with a balance of $11,909.98. This represented all the personalty belonging to the trust and included shares of stock in various corporations, mortgages taken as investments after the testator's death, and cash. There was some real estate embraced in the trust consisting of three small houses and lots and one unimproved lot in the village of Perryville. At the time of the filing of their second account in the orphans' court the executors, in the capacity and designation of trustees, also stated in the same court their first account of the income derived from the trust estate. This was followed by successive annual accounts of like character until the death of Mr. Wirt in 1904. It was then discovered that he had converted to his own use a considerable part of the trust funds, and that investments mentioned in the income accounts as outstanding had been collected and the proceeds misappropriated. The net amount of the deficiency thus produced, after crediting a dividend from the insolvent estate of the deceased trustee, was eventually ascertained to be $4,109.71, and for this the surviving trustee was held personally liable by the court below upon the ground that his conduct, while above reproach so far as his integrity was concerned, had been such as to facilitate the devastavit by his cotrustee.
It appears from the testimony of the appellant that at the inception of the trust he entered into an arrangement with his associate, Mr. Wirt, by which the latter was to have exclusive management of the personal estate, while the appellant was to have charge of the real property; that he accordingly left the entire administration of the personalty to his cotrustee, and took no part in the duties of the trust, except as to the renting and repair of the three houses belonging to the estate and the collection of income from that source, which he regularly remitted to Mr. Wirt; that he permitted his cotrustee to make investments upon his sole discretion, never asked to see any of the securities, and did not know whether any were taken; that Mr. Wirt sent him at his request in 1901 a statement purporting to show investments of the personal estate, but he made no further inquiry after that time; that he joined in releasing mortgages, but did not receive any of the money repaid, and knew nothing about its further disposition; that the bank account of the trust was kept in the name of Mr. Wirt as executor and was checked on by him exclusively, this being done by virtue of a written authorization from the appellant addressed to the bank; that he never examined the bank account or the checks drawn upon it, or the income accounts filed by Mr. Wirt in the orphans' court in the joint names of the trustees; and that, if he had inspected the latter accounts, he would have observed discrepancies which would have caused him to believe that the estate was being improperly administered. He testified that there was no loss, to his knowledge, from unsuitable investments, but that the amount represented by the deficiency was squandered by his cotrustee. He also stated that he received commissions on the income from the whole estate, except the receipts indicated in the trustee's fifth account. His candor with respect to his attitude towards the trust is illustrated by the following quotation from his cross-examination:
The appellant contends, however, that under the circumstances of the case "he is not liable," to use the language of his brief, "for the acts of his cotrustee, particularly in view of the fact that he acted with perfect good faith without any connivance in or knowledge of the wrongdoing of his cotrustee, and in strict conformity with what he conscientiously believed to be his strict duty under the will." He testified that because of strained relations between the beneficiaries and himself he thought of resigning as one of the executors, but Mr. Wirt requested him to act, and he consented to do so with the understanding already stated as to the division of duties. He had no communication on this subject with any of the persons interested under the will. He felt justified in reposing implicit confidence in his cotrustee because of the high respect in which the latter was held as a lawyer of ability and integrity down to the time of his death. It was urged by the appellant that the allotment to Mr. Wirt of the exclusive administration of the personal assets of the trust was natural and proper...
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