McClure v. Middletown Trust Co.

• Decision Date: 20 July 1920
• Citation: 110 A. 838,95 Conn. 148
• Court: Connecticut Supreme Court
• Parties: McCLURE et al. v. MIDDLETOWN TRUST CO.

110 A. 838

95 Conn. 148

McCLURE et al. v. MIDDLETOWN TRUST CO.

Supreme Court of Errors of Connecticut.

July 20, 1920

Appeal from Superior Court, Middlesex County; William M. Maltbie Judge.

Action by Charles T. McClure, executor, and others, against the Middletown Trust Company. From a judgment for plaintiffs defendant appeals. Error in part; judgment in favor of one plaintiff reversed, and in favor of the others affirmed.

Action by plaintiffs to recover damages for negligence of defendant trustee for loss of their distributive shares in the trust estate in its hands, tried to the court. This case is a companion case to that of McClure v. Northrop, 93 Conn. 558 106 A. 504. The facts essential upon this appeal are:

Charles Brewer deceased in 1860, and by his will created a trust fund to be held in trust during the lives of his five sons and of their widows for their use, and at the death of the last life tenant to be distributed to the surviving issue of the sons. One Northrop succeeded to this trusteeship in 1884, and so continued until removed on July 24, 1911, whereupon defendant was appointed his successor. Prior to 1897 Northrop had misappropriated the entire trust fund, and at the time of his removal was not financially responsible.

Northrop, upon his appointment in 1884, filed a probate bond, with Clarissa L. Northrop, Ettie M. Northrop, and Arthur B. Calef as sureties. Clarissa Northrop deceased prior to 1911, and her estate was distributed to D. Ward Northrop and Ettie M.Northrop, principal and surety on this bond. Ettie M. Northrop is living, and was the wife of D. Ward Northrop, and at the time of defendant's appointment had equity in real estate of the value of over $1,300. Arthur B. Calef had deceased in 1900, and his estate been distributed in 1901 to his four sons, only two of whom, J. Francis Calef and Arthur B. Calef, Jr., were financially responsible in July, 1911. J. Francis Calef had at the date of appointment of defendant attachable property of the value of at least his distributive share, $3,300, of the estate of his father. Arthur B. Calef, Jr., deceased in 1912, leaving an estate inventoried at $8,178.50, but no return of claims was ever made. The distributive share of Arthur B. Calef, Jr., in the estate of his father, was something over $3,300.

The defendant duly made demand on Northrop prior to August 14, 1911, for the trust fund, but he neglected and failed to turn over said fund. It thereupon referred the whole matter of this trust to Mr. Pearne, a competent attorney at law and its regular attorney, to handle in any way he saw fit. Pearne made some investigation of the matter. There were no funds in the estate to pay for a thorough investigation, or to pay the expenses of litigation against the sureties on the bond or their representatives. Pearne advised defendant that it was under no obligation to expend its own funds in making investigation or in pursuing the litigation.

Thereupon defendant requested Mrs. Fox and Mrs. North, upon whose application defendant had been appointed and who had pressed defendant to take action, to advance to the trustee $150 to $200 to cover the expenses of this investigation and litigation. They offered to pay $25, which defendant refused to accept, and the matter was dropped. There were seven other beneficiaries of this trust fund, but defendant never made request of any of them for any sum with which to pay for such investigation and litigation. The defendant had made no inventory of the trust estate, nor rendered an account of its doings to the probate court, nor made demand upon Esther M. Northrop, nor presented any claim against the estate of Arthur B. Calef, nor made any demand upon his legal representative or his distributees, nor made any investigation of or communicated with the beneficiaries of the trust estate, except Mrs. Fox and Mrs. North, nor done anything to preserve or possess the estate except as above stated.

At the time of his removal, Northrop was making payment of arrears of income to one of the beneficiaries of the trust, Susan Brewer, who died February 26, 1913, and who was the last survivor of the life beneficiaries under the trust. Between the date of its appointment and February 26, 1913, the husband of Jennie Blinn, daughter of Susan Brewer, acting for his wife, called on defendant, and on one occasion informed defendant that Northrop was making said payments to Susan Brewer, and that his wife did not desire action taken against him so long as he continued said payments, or so long as Susan Brewer lived. Another beneficiary, William Brewer, informed Pearne, shortly after defendant's appointment, that he desired that no action be instituted to recover the trust estate.

Said J. Francis Calef and Arthur B. Calef, executors of the estate of Arthur B. Calef, Sr., were alive on July 24, 1911, but the defendant neglected to present a claim against said estate within six months after the claim of the trust estate accrued on August 14, 1911, or at any other time. As a consequence of the failure to present said claim the estate of Arthur B. Calef, Sr., and the distributees thereof were discharged from liability as sureties on said bond. None of the plaintiffs, excepting William Brewer, who defaulted, acquiesced in defendant's failure to present and prosecute such claim.

The defendant by due diligence would have collected from Esther M. Northrop and from the distributees of the estate of Arthur B. Calef, Sr., the sum, after deducting all reasonable charges and expenses, of $5,500; and defendant could have settled the trust estate and distributed the fund on or before July 1, 1913, which would have been a reasonable time from the date of death of the last surviving life tenant for this purpose.

Alvan Waldo Hyde, of Hartford, and Ernest A. Inglis, of Middletown, for appellant.

George W. Crawford and Charles T. McClure, both of New Haven, for appellees Blinn and others.

Bertrand E. Spencer, of Middletown, for appellee, North.

WHEELER, J.

The defendant challenges the right of the court to render judgment against it upon the facts found, because its insists that it has fulfilled all of its obligation as trustee, and has not become liable through its negligence to the plaintiff beneficiaries. Determination of this question requires, primarily, consideration of the proper measure of care owed by the defendant trustee in the administration of its trust, and then ascertainment whether the measure of care applied by the court squared with this standard.

The defendant's duty was limited to the exercise of due diligence in the light of the particular circumstances surrounding the administration of this trust. What ordinary prudence would do under these circumstances this defendant must do, and need do no more. New Haven Trust Co. v. Doherty et al., 75 Conn. 555, 560, 54 A. 209, 96 Am.St.Rep. 239.

Upon qualification as trustee the first duty resting upon the defendant was to secure possession of all the assets of the trust estate. Perry on Trusts (6th Ed.) § 438. In the performance of this duty the defendant was under no absolute duty to secure possession of the assets, but merely to exercise due care in the preservation of the trust assets. Hence it follows that a trustee is not negligent in failing to secure assets where there was no reasonable chance of securing them.

And hence, too, it follows that due diligence on his part does not require that he advance his own funds, or incur expense or liability in the collection of assets for the trust estate. Green v. Gaskill, 175 Mass. 265, 56 N.E. 560; 39 Cyc. 322. There were no assets in the hands of the defendant trustee. Before it could pursue a thorough investigation of the liability of the sureties upon this bond, or embark in litigation, it had the right to demand of the beneficiaries indemnity for the expenses attendant upon the undertaking. Perry on Trusts (6th Ed.) § 909. In the event of a refusal or neglect of the beneficiaries to respond to this demand, the defendant need go no further.

While the trustee may delegate his duties and powers to others, it is obvious that he must act frequently through agents or attorneys. This is not a delegation of his powers, for the trustee remains responsible for the reasonable diligence of his agent or attorney. He must select his agents with reasonable care, and he must supervise their acts with the same care. Donaldson v. Allen, 182 Mo. 626, 650, 81 S.W. 1151.

Whether in a given case the trustee will be justified in intrusting a specific part of the administration of the trust to an agent must depend upon whether such act would be the act of the reasonably prudent trustee in a similar situation.

The necessities of the trust may require the services of an agent, on account of the complexity or extent of the business or the special expert knowledge required. This is especially true in a case such as this, where the question of liability of the sureties, and of who the beneficiaries of the trust fund were, depended upon a careful investigation by a competent attorney of a difficult legal problem; and to this was added the practical consideration of how the trustee should finance the expense, and whether the results would warrant the outlay.

All of these were questions for a lawyer, which the trustee would not be expected to solve, and should not attempt to solve, without the service and decision of competent legal counsel. The questions were not plain, and were peculiarly within the lawyer's skill. New Haven Trust Co. v. Doherty et al., 75 Conn. 555, 573, 54 A. 209, 96 Am.St.Rep. 239.

There is no question of the diligence of the defendant in selecting Judge Pearne as the attorney to intrust this matter to. But reasonable...