In re Hall

• Decision Date: 02 October 1900
• Citation: 58 N.E. 11,164 N.Y. 196
• Parties: In re HALL et al.
• Court: New York Court of Appeals Court of Appeals

164 N.Y. 196

58 N.E. 11

In re HALL et al.

Court of Appeals of New York.

Oct. 2, 1900.

Appeal from supreme court, appellate division, Second department.

Judicial settlement of the accounts of Albert C. Hall and Thomas G. Ritch as trustees under the last will and testament of Alvah Hall, deceased. From a judgment of the appellate division of the supreme court affirming a decree of the surrogate (62 N. Y. Supp. 888) holding the trustees liable for trust funds lost in a hazardous investment, the trustees appeal. Modified and affirmed.

Parker, C. J., and Vann, J., dissenting.

WILLS-TRUSTEES-INVESTMENT OF TRUST FUNDS-LIABILITY FOR LOSS.

1. Testator, who was in the umbrella business, after directing that his interest in the business be closed, directed his trustees ‘to reinvest the proceeds of such sale in any security, real or personal, which they may deem for the benefit of my estate, and calculated to carry out the intention of this, my last will.’ Held, that a reinvestment of the funds arising from the sale of testator's business in the preferred stock of a corporation organized to conduct the manufacture and sale of umbrellas, which had no real estate or plant, and no established business, was beyond the scope of the trustees' authority, and they were liable for the loss resulting therefrom.

WILLS-TRUSTEES-INVESTMENT OF TRUST FUNDS-LIABILITY FOR LOSS.

2. Where several of the life tenants had consented to an investment by the trustees of trust funds, which were subsequently lost, they could not thereafter question the propriety of the investment.

C. N. Bovee, Jr., for appellants.

William C. Cammann, for respondents.

CULLEN, J.

The question in the case is as to the liability of the appellants, as trustees, for an investment of $25,000 in the debenture stock of the umbrella company. The authority given the appellants by the will is: ‘I hereby give my said executors and trustees hereinbefore named full power to reinvest the proceeds of such sale or other act as aforesaid in any security, real or personal, which they may deem for the benefit of my estate, and calculated to carry out the intention of this, my last will.’ The testator himself had been in the umbrella business, and by the sixth clause of his will he directed that his interest in the business be closed on the 1st day of July or the 1st of January immediately following his decease. The referee acquitted the appellants of any bad faith, but held them liable on the ground that the character of the investment was illegal. This report was confirmed by the surrogate, and the surrogate's decree unanimously affirmed by the appellate division, which, while it held that under the will the trustees were not limited to what might be called ordinary trust investments, was of opinion that the investment was speculative, and hazardous, and therefore improper. With this view we agree. As there was a unanimous affirmance below, unless we are prepared to decide that good faith exonerates the trustees from liability, no matter how speculative, hazardous, or unwise the investment may have been, we must affirm the judgment, and cannot look into the evidence to see how speculative or unreasonable the investment was. The investment in the case at bar was in the preferred stock of a corporation organized to conduct the manufacture and sale of umbrellas, and formed by the consolidation of several firms at the time engaged in that business. The corporation had no real estate or plant. The preferred or debenture stock was issued for merchandise, fixtures, and book accounts of the firms, while the common stock was issued for the supposed good will of those firms. While the money was not paid on an original subscription of stock, but the stock was bought from a holder, still it was during the very first days of the existence of the company, and before experience had shown that it could achieve any success or stability. After doing business for a short time, the corporation failed, and two-thirds of the investment of $25,000 was lost. One of the firms from the consolidation of which the corporation sprang was that of the appellant...