Nat. Bank v. Bumster
| Decision Date | 04 March 1948 |
| Docket Number | 158/409. |
| Citation | 57 A.2d 525 |
| Parties | LAMBERVILLE NAT. BANK v. BUMSTER et al. |
| Court | New Jersey Court of Chancery |
Suit by the Lambertville National Bank, as trustee under the last will of James I. Bumster, deceased, against Alva Bumster and others, for authority to sell corporate stock belonging to trust estate and to reinvest the proceeds in securities in which trust funds may be invested under authority of statutory law.
Decree advised for complainant in accordance with opinion.
Syllabus by the Court.
1. Within the original inherent jurisdiction of the Court of Chancery abides its administrative and supervisory jurisdiction over the management and preservation of trusts. The court is also vested with a statutory jurisdiction of the subject. R.S. 3:16-17 and 18, N.J.S.A.
2. In a proper case, this court may authorize and direct trustees to pursue a course or perform acts which they are not permitted to do under the terms of the trust.
3. The inherent power of the court, in the present field of inquiry, may be legitimately described as a power which may only be exercised in situations of emergency and reasonable necessity, and then only for the preservation of the trust estate and the protection of the cestuis.
4. Held, under the circumstances, a decree will be advised authorizing the trustee in the exercise of its discretion to sell certain designated stocks, bonds, and securities of a speculative nature and quality, and to re-invest the proceeds in securities in which trust funds may be invested under the authority of our statute law.
J. Conner French, of Trenton (Nicholas F. Gallicchio, of Lambertville, of counsel), for complainant.
Rudolph A. Socey, of Trenton, for defendants Alva Bumster, and Anna M. Behan.
Backes & Backes, of Trenton (William Wright Backes, of Trenton, of counsel), for Catholic Church of St. John the Evangelist, Lambertville.
JAYNE, Vice Chancellor.
The complainant presents this bill of complaint in its fiduciary capacity as the trustee under the last will and testament of James I. Bumster, who died a resident of Lambertville, Hunterdon County, on December 28, 1945.
The complainant assumed its duties as testamentary trustee of the decedent's estate on April 10, 1947, and in the pursuit of its administration it now finds itself in a somewhat perverse and intractable situation by reason of the directions embodied in the testator's will:
‘4. All of the rest, remainder and residue of my estate, real, personal and mixed, whatsoever and wheresoever situate, I direct that my Executors hereinafter named, give and convey to The Lambertville National Bank, in trust, however, for the following uses and purposes:
‘(b) I direct my Trustee, The Lambertville National Bank, hereinafter named, to invest in legal trust securities, all moneys accruing from these investments, when these investments shall have been paid upon maturity, or in case payment is made upon them after default.’
The bill charges and the proofs render it evident that a relatively large portion of the corpus of the trust is composed of stocks and bonds of a manifestly speculative nature and quality, the market values of which have already declined since the death of the testator. The prognosis concerning them is unfavorable, and the complainant apprehends that unless it is authorized to convert such insecure and precarious assets into investments of a lawfully recognized class, the objects and purposes of the trust may be in part defeated and the interests of the beneficiaries impaired. All of the defendants acknowledge the alleged circumstances and unite with the complainant in its prayer for authority to accomplish the desired transition.
I shall assume that the complainant in quest of the desired authorization invokes not only the inherent power of this court, but also the statutory jurisdiction conferred by R.S. 3:16-17 and 18, N.J.S.A.
Within the original inherent jurisdiction of the Court of Chancery abides its administrative and supervisory jurisdiction over the management and preservation of trusts. Indeed, this court may authorize and direct trustees to pursue a course or perform acts which they are not permitted to do under the terms of the trust. 2 Scott, Trusts, § 167 et seq.; 3 Boggert on Trusts, § 562 et seq.; 2 Perry, Trusts, 7th Ed. § 764; 1 Restatement, Trusts, § 167.
The power, however, is not illimitable. For example, it does not envelop cases where the terms of the trust are created by legislative enactment. Cf. Dodd v. Una, 40 N.J.Eq. 672, 5 A. 155.
It is also qualified by the fundamental and salutary principle that in ordinary conditions and circumstances the trustee is obliged to respect and comply with the terms of the trust. It is not the province of this court arbitrarily to thwart the expressed will of the creator of a trust and thereby to allow trustees experimentally to adventure and speculate in lively securities in expectation of either increased income or accretion of principal. Nor has the court in ordinary circumstances the right to clear the way for the substitution of its preferences to those of the settlor of the trust concerning the mode of investing. Hence, the inherent power of this court in which the complainant is presently interested may be legitimately described as a power which may only be exercised in situations of emergency and reasonable necessity, and then only for the preservation of the trust estate and the protection of the cestuis. Oliver v. Oliver, 3 N.J.Eq. 368; Quick's Ex'rs v. Fisher, 9 N.J.Eq. 802; Newark Savings Institution Case, 28 N.J.Eq. 552; Fidelity Ins. Trust & Safe-Deposit Co. of City of...
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