in re Day's Estate

• Decision Date: 17 June 1903
• Parties: Appeal of DAVIS. In re DAY'S ESTATE.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

183 Mass. 499

67 N.E. 604

Appeal of DAVIS. In re DAY'S ESTATE.

Supreme Judicial Court of Massachusetts, Suffolk.

June 17, 1903

COUNSEL

R. D. Weston-Smith and Chas. Walcott, for appellant.

Roger F. Sturgis, guardian ad litem.

OPINION

MORTON J.

The first question in this case is whether, in the investment of the trust funds in the stock and bonds of the Atchison Topeka & Santa Fé Railroad Company, to the extent to which they invested in them, the trustees manifested the sound judgment and reasonable discretion and prudence which is required of trustees in such matters. The question is to be determined as of the time when the investments were made. There is also a question whether the general rule is affected by the language creating the trust. It is agreed that the purchases were made in perfect good faith, and that before making them the trustee took the advice of persons on whose opinion he thought he was entitled to rely as to the value of the securities. It is also agreed that at the time of the purchases he had invested his own money, to a considerable amount, in stock and bonds of the company.

The trust estate consisted of a fund of $30,000 bequeathed by the testator to the trustees in trust to invest the same and pay over the income to the testator's daughter during her life, and upon her death to distribute and pay over the principal to and amongst her children. From 1883 to 1887 inclusive, the trustees invested in the stock and bonds of the Atchison, Topeka & Santa Fé Railroad Company upwards of $12,000 of the trust funds, as follows: On January 15, 1883 they purchased $2,000 of the 6 per cent. sinking-fund bonds issued by that company, and secured by mortgage bonds of various railroad companies whose lines formed a part of the Atchison System. On December 11, 1885, they purchased 5 shares of the stock; on December 24, 1886, 45 shares of stock; on February 17, 1887, 6 shares of the stock; on June 18, 1887, $5,000 collateral trust bonds issued by it, and secured by mortgage bonds of various railroads; and on December 28, 1887, 2 shares of the stock. Prior to the last purchase of bonds and the last two purchases of stock, between a quarter and a fifth of the trust property had been invested in the stock and bonds of the company. The probate court disallowed the last purchase of bonds and the last two purchases of stock, and allowed the other investments. In Dickinson, Appellant, 152 Mass. 184, 25 N.E. 99, 9 L. R. A. 279, where the facts in regard to the situation of the corporation whose stock was purchased were very similar to the facts in this case, the decision was, in effect, that so much of the investment as was in excess of a quarter to a fifth of the whole trust fund could not be sustained, as made in the exercise of a sound discretion. The court declined to say that the trustee had so far failed to exercise a sound discretion that the investments should be held to be wholly unauthorized, but disallowed them in part. We do not see how this case can be fairly distinguished from that; the fact that the investment was partly in stock and partly in bonds of the company not being sufficient, it seems to us, to distinguish it. And while we recognize in this case, as the...