Kimball v. Whitney
Decision Date | 26 June 1919 |
Citation | 123 N.E. 665,233 Mass. 321 |
Parties | KIMBALL v. WHITNEY. SAME v. BATES. |
Court | United States State Supreme Judicial Court of Massachusetts Supreme Court |
OPINION TEXT STARTS HERE
Report from Supreme Judicial Court, Suffolk County.
Petition by Benjamin Kimball, trustee under the will of Mary Bates, for allowance of his account, opposed by Harriet A. Whitney and by Mary E. Bates. From a decree allowing the modified first account, opponents appealed to the Supreme Judicial Court. On report by a single justice for the consideration of the Full Court. Decree of probate court affirmed.
John Noble, of Boston, for appellants.
Warner, Stackpole & Bradlee, of Boston (John G. Palfrey and Howland Twombly, both of Boston, of counsel), for appellee.
These are two appeals from a decree of the probate court allowing an account of a trustee under the will of Mary Bates. The matters now in controversy relate to certain aspects of the propriety of an investment made by the trustee in February, 1903, of a part of the principal of the trust in so-called preferred shares of the Massachusetts Electric Companies at the market price then prevailing, and to the retention of this investment to the end of the period of the account in 1917. The case comes before us by report upon agreed facts. The facts now pertinent to the decision are that the Massachusetts Electric Companies was an unincorporated association organized and existing under a written instrument entitled ‘Agreement and Declaration of Trust,’ dated in June, 1899. The general features of this agreement were similar to those which have come before the court in numerous cases. Property is transferred to trustees, who hold the legal title to all the assets belonging to the trust and exercise the exclusive management and control of it under the terms of the agreement. Certificates of part ownership, resembling shares of stock in a corporation, are issued to those who are the ultimate owners of the property. See Peabody v. Treas. & Recvr. General, 215 Mass. 129, 102 N. E. 435, and cases there collected, and Kennedy v. Hodges, 215 Mass. 112, 114, 102 N. E. 432.
The Massachusetts Electric Companies acquired all or a large and controlling majority of the capital stock of thirty-six street railway and electric light corporations in Massachusetts, Rhode Island and New Hampshire. Regular dividends out of earnings at the rate of 4 per cent per annum were paid on these shares to and including July 1, 1904. After that none were paid until January, 1909, and since July 1, 1910, in general they have been paid at the rate of 2 per cent. In 1912 an issue of new preferred shares was made to take up 17 3/4 per cent of dividends then accumulated. The market value has much diminished.
The rule of law in this commonwealth governing the conduct of trustees in the investment of the principal of their funds was stated in these words in 1830 in Harvard College v. Amory, 9 Pick. 446, 461:
Good faith and sound discretion, as these terms ought to be understood by reasonable men of good judgment, were thus made the standard by which the conduct of trustees is to be measured. That is a comprehensive principle. It is wide in its scope. It is not limited to a particular time or a special neighborhood. It is general and inclusive, so that while remaining itself fixed, it may continue to be a safe guide under new financial institutions and business customs, changed commercial methods and practices, altered monetary usages and investment combinations. It avoids the inflexibility of definite classification of securities, it disregards the optimism of the promoter, and eschews the exuberance of the speculator. It holds fast to common sense and depends on practical experience. It is susceptible of being adapted to whatever conditions may arise in the evolution of society and the progress of civilization. Although more liberal to investing trustees than the law of some states and countries, it has frequently been reaffirmed and never doubted in this jurisdiction. Lovell v. Minot, 20 Pick. 116,32 Am. Dec. 206;Brown v. French, 125 Mass. 410, 28 Am. Rep. 254;Pine v. White, 175 Mass. 585, 590, 56 N. E. 967;Green v. Crapo, 181 Mass. 55, 62 N. E. 956;Corkery v. Dorsey, 223 Mass. 97, 101, 111 N. E. 795.
In the application of this rule to varying facts it often has been held that, while some investment of trust funds in certain securities might be justified, a disproportionate amount of the total ought not to be embarked in a single kind of stock or bonds. Dickinson, Applt., 152 Mass. 184, 25 N. E. 99,9 L. R. A. 279;Davis, Appeal of, 183 Mass. 499, 67 N. E. 604. That particular point is not within the present report and therefore is not before us. Several cases have arisen where the facts showed improper investments in improvements upon real estate. Brigham v. Morgan, 185 Mass. 27, 69 N. E. 418;Warren v. Pazolt, 203 Mass. 328, 89 N. E. 381. In Taft v....
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