Marshall v. Frazier

• Decision Date: 14 June 1938
• Citation: 80 P.2d 42,159 Or. 491
• Parties: MARSHALL ET AL. <I>v.</I> FRAZIER
• Court: Oregon Supreme Court

159 Or. 491

80 P.2d 42

MARSHALL ET AL.

v. FRAZIER

Supreme Court of Oregon.

Argued February 3, 1938.

Modified June 14, 1938.

Rehearing denied July 12, 1938.

Trusts — Interest on trust funds

1. Where trustee received payment on indebtedness to trust estate and did not deposit payment as part of trust estate funds or invest it for benefit of trust estate, trustee was chargeable with amount of payment and interest thereon from date of receipt thereof.

Trusts — Indemnity to trustee

2. On accounting by trustee, trustee was entitled to credit for amount of his own funds which were inadvertently deposited in trust account, and for interest thereon during period when such funds were invested for benefit of trust beneficiaries.

Appeal and error — Equity

3. On appeal of suit in equity, cause is tried de novo, and supreme court may consider entire record to ascertain whether result reached by trial court is substantially correct.

Appeal and error — Decree

4. The supreme court may not enter a decree more favorable to a party who has not appealed than that rendered in trial court.

Appeal and error — Decree

5. In a suit for accounting, the supreme court, if it finds that trial court disallowed certain items which should have been allowed or allowed other items which should have been disallowed, may readjust the entire result, although it may not grant more to non-appealing party than was given him by decree appealed from.

Trusts — Diligence of trustee

6. A trustee must take such care of trust assets as ordinary prudent man would take if he were minded to make an investment for the benefit of others for whom he felt morally bound to provide.

Trusts — Investments

7. If trustee acts within his power, good faith is a defense to a charge of mistake in judgment, and, if trust provision gives trustee wide powers of investment, he may exercise his sound discretion within those limits, and his actions are not to be tested by considerations of "hindsight" judgment.

Trusts — Investments

8. Discretion to a trustee does not mean arbitrary or unlimited or absolute discretion, but a reasonable one, and trustee must use judgment and prudence, and, if no limits are placed on his discretion, must nevertheless invest funds according to approved rules for trust investments.

Trusts — Investments

9. Good faith alone will not protect a trustee, but he must also exercise diligence, prudence and absolute fidelity, as respects investments.

Trusts — Investments

10. The test of whether trustee has acted properly in investing trust funds is not degree of care which particular trustee exercises in his own affairs of a like sort or in business matters generally.

Trusts — Investments

11. As respects investments, utmost good faith is required of trustee.

Trusts — Investments

12. In determining whether trustee has used sound discretion in investment of trust funds, court must place itself in trustee's position at time of investment.

Trusts — Loans

13. A trustee who lends trust money without security therefor is to be regarded as not exercising sound discretion.

Trusts — Loans

14. Reasonable diligence must be exercised by a trustee to ascertain whether security is adequate when it is accepted for loan of trust funds.

Trusts — Loans

15. A trustee was chargeable with amount of loans of trust funds, without security, to trustee's mother, another individual, and corporation.

Trusts — Loans

16. A trustee was chargeable with amount of loan on trust funds which trustee made to his personal friend, where trustee accepted mortgage on realty without state wherein trust was being administered, and had no personal knowledge concerning realty or its value, and security proved inadequate.

Trusts — Loans

17. A trustee was chargeable with amount of trust funds used to purchase debentures which were in effect nothing more than unsecured loans to corporation, especially where trustee purchased debentures from himself as his mother's guardian, at price which he had originally paid for debentures as guardian, although market price was considerably lower.

Trusts — Interest of trustee

18. A trustee, even though acting in good faith, cannot invest trust funds in securities owned by himself in his individual capacity.

Trusts — Investments — Corporate stocks

19. A trustee was chargeable with amount of investment of trust funds in stock of private corporations, including corporations engaged in drilling for oil, corporation which was not a going concern, and corporation which became bankrupt a comparatively short time after stock was paid for, notwithstanding that trustee, under trust deed, had discretion to invest trust funds as he should "deem best".

Trusts — Investments

20. A trustee was required to use judgment and prudence in investing trust funds, notwithstanding that, under trust deed, trustee had discretion to make investments as he should "deem best".

Trusts — Investments — Corporate stocks

21. A trustee was chargeable with amount of investment of trust funds in stocks which were not listed on any exchange and which amounted to certificates of participation in pool made up of stocks of numerous corporations, which pool was not controlled by owners of certificates.

Trusts — Investments

22. A trustee should not invest trust funds so as to effect delegation of trustee's duties to others.

Trusts — Investments

23. Statutes governing investment of trust funds held for charitable or educational purposes and governing investments by trust companies may be understood as indicative generally of the kinds of investments regarded by the legislature as safe and suitable for trust funds not specifically directed by trust instrument to be otherwise invested, notwithstanding that such statutes do not apply to trustees of private trusts.

Trusts — Advances by trustee

24. Where trustee advanced trust funds for taxes, street assessments and improvements on realty in another state, attorney's fees, and costs of administration of estates of testator and his wife, under "understanding" with beneficiary who was entitled to realty under will and trust deed, whereby beneficiary allegedly was to convey interest in realty to trustee, and beneficiary's note to trustor, held by trust beneficiaries, was to be canceled, trustee made no investigation of value of realty, and did not require that "understanding" be reduced to writing, and trust realized nothing from realty, trustee was chargeable with amount of advances, but not with amount of note.

Trusts — Interest on funds

25. On accounting by trustee, trustee was chargeable with interest at 6 per cent on all items charged to his account, and should

be credited with interest received on account of any of such items and paid into trust fund, and interest paid on notes which were payable to trustee and another and which were turned over to trust estate.

Trusts — Compensation of trustee

26. Where it was impossible to determine value of trust corpus during period between April 1, 1918, and June 30, 1934, because of lack of proper bookkeeping, and trust estate included realty in different parts of the state to be managed by trustee, trustee was allowed 5 per cent of gross income of trust as compensation for such period.

Trusts — Compensation of trustee

27. The amount of compensation to be allowed trustees depends to a large extent on the particular facts of each case.

Trusts — Compensation of trustee

28. Where trustee was unsuccessful in resisting beneficiaries' efforts, in suit for accounting, to surcharge trustee's account with large sums of money, trustee was not entitled to extra fees for his services in connection with such suit.

Trusts — Compensation of trustee

29. In suit for accounting against trustee, allowance to trustee for compensation should be treated as credit on his account with beneficiaries, and not as direction for payment to trustee in cash.

Trusts — Costs and expenses

30. Where trustee was unsuccessful in resisting beneficiaries' efforts, in suit for accounting, to surcharge trustee's account with large sums of money, trustee was not entitled to allowance for attorney's fees.

Trusts — Accounts of trustee

31. Where trustee was unsuccessful in resisting beneficiaries' efforts, in suit for accounting, to surcharge trustee's account with large sums of money, and trustee desired to resign, trustee should be given reasonable time in which to put his accounts in order, and should then be required to resign, and a substitute trustee named.

Trusts — Interest on estate funds

32. A trustee was chargeable with interest on items with which his account was surcharged, where it appeared that trustee had used trust funds as though funds were his own.

Trusts — Interest on estate funds

33. In all instances of surcharging a trustee's account the beneficiaries are not necessarily entitled to interest but whether interest shall be charged depends upon the peculiar facts of each case.

Trusts — Interest — Rate

34. Where interest is allowed against a trustee it is to be charged at the legal rate unless the funds warrant a higher rate or justify a lower one.

Stipulations — Trusts — Accounting

35. A stipulation of parties in suit for accounting by trustee to effect that trial court might, if it found that trustee was entitled to any compensation for his services, determine the amount to which he was entitled, did not constitute agreement by parties to be bound by whatever amount the trial judge might determine so as to preclude parties, on appeal, from questioning amount allowed by trial court.

Trusts — Interest on estate funds

36. A trustee was chargeable with interest on the balance unaccounted for by him on a mortgage belonging to trust estate from date on which trustee satisfied the mortgage of record where record was silent as to date on which trustee received amount with which he was charged, since it was presumed that he had received the balance of the mortgage on or before the...