In re Adams' Estate
| Decision Date | 27 April 1908 |
| Docket Number | 82,81 |
| Citation | 70 A. 436,221 Pa. 77 |
| Parties | Adams's Estate |
| Court | Pennsylvania Supreme Court |
Argued April 1, 1908
Appeals, Nos. 81 and 82, Jan. T., 1908, by Clara H. Adams and Martha A. Moran, from decree of O.C. Phila. Co., Jan. T 1894, No. 378, dismissing exceptions to adjudication in estate of Robert Adams, deceased. Reversed.
Exceptions to adjudication. The orphan's court in an opinion by ASHMAN, P.J., dismissed the exceptions to the adjudication PENROSE, J., and DALLETT, J., dissenting.
The facts are stated in the opinion of the Supreme Court.
Errors assigned were in dismissing the exceptions of Clara H. Adams and Martha A. Moran to the refusal of the court to surcharge H. Carlton Adams, surviving trustee, with securities misappropriated by his cotrustee, Robert Adams, Jr.
The decree of the court below is reversed, and the record is remitted with directions to restate the account in accordance with this opinion.
Joseph De F. Junkin, with him Charles Sinnickson and Frederick C. Newbourg, Jr., for appellants. -- The fund was awarded to H. Carlton Adams and his cotrustee, jointly, and they received it jointly, and each is responsible for the acts of the other. Such responsibility cannot be shifted by delegation of authority: Wayman v. Jones, 4 Md. Ch. 500; Monell v. Monell, 5 John. Ch. (N.Y.) 283; Hughlett v. Hughlett, 24 Tenn. 453; Lewis v. Nobbs, L.R. 8 Ch. Div. 591; Fesmire's Est., 134 Pa. 67; In re Evans, 2 Ash. 470; Glenn v. McKim, 3 Gill (Md.), 366; Fox v. Tay, 89 Cal. 339; 1 Perry on Trusts, sec. 418; Colburn v. Grant, 181 U.S. 601 (21 S.Ct. Repr. 737); Laroe v. Douglass, 13 N.J. Eq. 308; Schenck v. Schenck, 16 N.J. Eq. 174; Ringgold v. Ringgold, 1 Har. & G. (Md.) 11; Crane v. Hearn, 26 N.J. Eq. 378; Smith v. Pettigrew, 34 N.J. Eq. 216; Crane v. Howell, 35 N.J. Eq. 374; In re Nills, 113 N.Y. 547 (21 N.E. Repr. 687); Meldon v. Devlin, 31 A.D. 146; aff'd, 167 N.Y. 573 (60 N.E. 1116); Weetjen v. Vibbard, 5 Hun (N.Y.), 265; Clark v. Clark, 8 Paige (N.Y.) 152; McMurray v. Montgomery, 32 Tenn. 374; Matter of Westerfield, 32 A.D. 324; s.c., 61 A.D. 617; Wilmerding v. McKesson, 103 N.Y. 329 (8 N.E. Repr. 665).
Where there has been a joint account and adjudication thereon, and award to joint trustees to hold assets, there is a joint possession of such assets and each trustee is severally liable therefor. And if one trustee commits a devastavit with respect thereto, in consequence of the other having trusted him to deal with them, then that other is liable; for the rule is, that he who confides, shall suffer by a breach of the trust: Ducommun's Appeal, 17 Pa. 268; Hengst's App., 24 Pa. 413; Lightcap's App., 95 Pa. 455; Pim v. Downing, 11 S. & R. 66; Evans's Est., 2 Ashmead, 470; Donnelly's Est., 11 Pa. Dist. Rep. 211; DeHaven v. Williams, 80 Pa. 480; Weldy's App., 102 Pa. 454; Strong's Est., 160 Pa. 13.
If a trustee becomes aware of any fact tending to show that his cotrustee is committing a breach of trust, or learns of any fact endangering the trust, he must communicate it to his cotrustee, or make application to the court and take active measures to protect the fund, or he will be liable: Stell's App., 10 Pa. 149; Wilson's App., 115 Pa. 95; Hilles's Est., 13 Phila. 402; Evans's Est., 2 Ashmead, 470; Hall v. Boyd, 6 Pa. 267; Myer v. Myer, 187 Pa. 247; Fesmire's Est., 134 Pa. 67; Irvine's Est., 203 Pa. 602; Beatty's Est., 214 Pa. 449.
Thomas Leaming, for appellee. -- The finding of the fact by the court below that H. Carlton Adams was not guilty of negligence should not be reversed because of the episode of July 8, 1896, which was fully considered. H. Carlton Adams bestowed precisely the same degree of care upon his own vested interest in the estate and upon his own private securities, both of which were stolen, as he did upon his step-relative's interests. A trustee is liable for negligence alone, and the measure of his duty is that he shall exercise such care as reasonable men use in their own affairs. This the learned auditing judge and the court in banc have found as a fact was done: Fesmire's Est., 134 Pa. 67; Graham's Est., 218 Pa. 344; Jones's App., 8 W. & S. 143.
This is not a case where one of two innocent persons must suffer. All must suffer, no matter who prevails in this appeal, because all have been robbed.
Before MITCHELL, C.J., MESTREZAT, POTTER, ELKIN and STEWART, JJ.
The duties and liabilities of cotrustees in Pennsylvania are well settled. A trustee is not an insurer of trust funds against the possibility of loss nor a surety for his cotrustee. His undertaking is personal, requiring of him good faith and reasonable diligence, and if these requirements be met, he is not liable for losses occasioned by the bad faith or embezzlement of his cotrustee: Fesmire's Estate, 134 Pa. 67. The law requires of the trustee fidelity to the trust, and the exercise of the same measure of diligence that a man of ordinary prudence may be expected to exercise in the care of his own property under the same circumstances: Jones's Appeal, 8 W. & S. 143. While as a general rule a trustee is not liable for trust funds received by his cotrustee, yet he is required to exercise a general superintendence and care over the trust. If he hear of any fact tending to call his attention to the mismanagement or misapplication of the trust funds by his cotrustee it is his duty to intervene and prevent a devastavit. His failure to do so would be a breach of trust imposing liability upon him for the loss. Mr. Perry in his work on trusts, section 419, says: "In all cases, if a trustee becomes aware of any fact tending to show that his cotrustee is committing a breach of trust, or if he learns any fact endangering the trust funds, he must communicate it to his cotrustees or make application to the court, and take active measures to protect the fund, or he will be personally liable for its loss." In effect the same doctrine is announced in Pim v. Downing, 11 S. & R. 66, where TILGHMAN, C.J., said (p. 71): "It is clear enough, that where one who does not receive the money consents that the other should misapply it, particularly where he has it in his power to secure it, he is responsible."
The joint receipt by cotrustees of trust funds imposes a joint liability. The obligation rests upon each trustee to exercise good faith and use reasonable diligence in executing the trust. If through the negligence or default of either trustee, the other trustee is permitted to dissipate the funds or convert them to his own use, he is responsible for the loss. The possession of the trust funds is joint, and it is the duty of each trustee to the trust funds is joint, and it is the duty of each trustee to exercise good faith and reasonable care to protect the trust funds against his cotrustee as well as against others.
The trust funds in the Adams estate were awarded to the three trustees, sons of the testator, on June 4, 1895. They accepted the funds jointly and proceeded to administer them jointly. Within a year one of the three trustees was discharged. The other two trustees retained joint possession of the funds and distributed the income as required by the trust. The securities in which the trust funds were invested were kept in a box in the Western National Bank of Philadelphia to which each of the trustees had access. On July 8, 1896, H. Carlton Adams, the surviving and accounting trustee, knowing that his cotrustee's financial condition was bad, visited the box alone and discovered that all of the securities had been removed. This greatly troubled him and naturally aroused his suspicions. He called upon his brother, Robert Adams, Jr., the other trustee, who admitted that he had taken the securities from the box and requested Robert to return them by the following day, which he did. The trust funds in the box consisted of unregistered securities, coupon bonds, etc., which could be negotiated by either of the trustees. At the time the accounting trustee discovered the removal of the securities from the box and requested his brother to return them, it does not appear what, if anything, was said why they were removed without the knowledge of the cotrustee, or what purpose Robert had in removing them. In a subsequent conversation between the accounting trustee and Mrs. Moran, one of the cestuis que trustent, in 1897 or 1898, he told the latter, as she testifies, that the securities had been taken by his brother and put up as collateral; that he had compelled him to return the securities and that she need have no further anxiety about it; that he had arranged at the bank that both executors must be present when the box was opened. The testimony of the appellee's wife tended to show that the accounting trustee told Mrs. Moran that the securities had simply been placed in another box. The trustees agreed that each should have access to the box containing the securities of the estate and visit the box together, but, as the auditing judge found, there was no evidence showing the bank to have been a party to the agreement or that any notice had been served upon the bank that the trustees had made any such agreement between themselves.
In 1904 H. Carlton Adams, the accounting trustee, became an invalid and has continued such to this time. The auditor found that he was He also found "that, as a rule, his answers were more or less exact when, under agreement of counsel, his depositions were taken at his present place of abode."
The last joint visit of the two trustees to the box containing the...
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